EXHIBIT 10.2
LOAN AND SECURITY AGREEMENT
Between
TEXTRON FINANCIAL CORPORATION
As Lender
and
Z-TEL COMMUNICATIONS, INC.;
Z-TEL TECHNOLOGIES, INC.;
Z-TEL, INC.;
Z-TEL BUSINESS NETWORKS, INC.;
Z-TEL NETWORK SERVICES, INC.;
Z-TEL HOLDINGS, INC.;
Z-TEL COMMUNICATIONS OF VIRGINIA, INC.;
Z-TEL INVESTMENTS, INC.;
TOUCH-1 COMMUNICATIONS, INC.;
DirecTEL, INC.;
direcCONNECT, INC. and
Z-TEL CONSUMER SERVICES, LLC
As Borrower
Dated as of April 22, 2004
TABLE OF CONTENTS
Page
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DEFINITIONS 1
ARTICLE I - LOANS, RENEWAL AND TERMINATION 15
1.1 CREDIT FACILITY 15
1.2 BORROWING PROCEDURES 15
1.3 INTEREST 15
1.4 CHARGES TO LOAN ACCOUNT 16
1.5 ALLOCATION OF PAYMENTS AND LIMIT OF INTEREST 16
1.6 RENEWAL AND TERMINATION 16
ARTICLE II - FEES 17
2.1 ANNUAL FACILITY FEE 17
2.2 UNUSED LINE FEE 17
2.3 COLLATERAL SERVICING FEE 17
2.4 WIRE TRANSFER FEE 17
2.5 FIELD EXAMINATION FEE 18
2.6 EARLY TERMINATION FEE 18
2.7 COSTS AND EXPENSES 18
ARTICLE III - GRANT OF SECURITY INTEREST 18
3.1 GRANT OF SECURITY INTEREST 18
3.2 CONTINUED PRIORITY OF SECURITY INTEREST 19
ARTICLE IV - PROCEEDS OF COLLATERAL, RECEIVABLES AND
COLLECTIONS 20
4.1 BORROWER'S PROCEEDS OF COLLATERAL 20
4.2 COLLECTION OF RECEIVABLES AND OTHER COLLATERAL 21
ARTICLE V - REPRESENTATIONS AND WARRANTIES 21
5.1 EXISTENCE, POWER AND AUTHORITY; BORROWER AFFILIATES 21
5.2 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAW 22
5.3 ABSENCE OF LITIGATION 22
5.4 TAXES AND RETURNS 22
5.5 LIEN PRIORITY AND NATURE OF CERTAIN COLLATERAL 22
5.6 PRINCIPAL PLACE OF BUSINESS 23
5.7 ENVIRONMENTAL COMPLIANCE 23
5.8 PROPRIETARY RIGHTS 24
5.9 TRADE NAMES 24
5.10 EMPLOYEE RELATIONS 24
5.11 EMPLOYEE PENSION BENEFIT PLANS 24
5.12 BANK ACCOUNTS 24
5.13 ACCURACY AND COMPLETENESS OF INFORMATION 24
5.14 SOFTWARE LICENSE COMPLIANCE 25
5.15 REDEEMABLE SECURITIES 25
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5.16 SURVIVAL OF WARRANTIES; CUMULATIVE 25
ARTICLE VI - AFFIRMATIVE COVENANTS 25
6.1 FINANCIAL STATEMENTS 25
6.2 BOOKS AND RECORDS 26
6.3 ADDITIONAL DOCUMENTATION 26
6.4 EXISTENCE, NAME, ORGANIZATION AND CHIEF EXECUTIVE OFFICE 26
6.5 COMPLIANCE WITH LAWS AND TAXES 26
6.6 PERFORMANCE OF OBLIGATIONS 27
6.7 REPORTING AS TO REVENUES, RECEIVABLES AND INVENTORY 27
6.8 OVER-ADVANCE 28
6.9 BREACH OR DEFAULT 28
6.10 MAINTENANCE OF ASSETS 28
6.11 INSURANCE 28
6.12 USE OF PROCEEDS 29
6.13 DISCLOSURE 29
6.14 PLAN REGARDING REDEMPTION OF SECURITIES 29
6.15 FURTHER ASSURANCES 29
6.16 BROKERAGE COMMISSIONS 29
ARTICLE VII - BORROWER'S NEGATIVE COVENANTS 30
7.1 BUSINESS, MANAGEMENT AND ORGANIZATION 30
7.2 DISPOSITION OF ASSETS 30
7.3 LOANS AND GUARANTEES 30
7.4 INVESTMENTS 30
7.5 DISTRIBUTIONS AND SALARIES 30
7.6 FINANCIAL COVENANTS 31
7.7 CHANGE OF CONTROL 31
7.8 LIMITATION ON INDEBTEDNESS FOR MONEY BORROWED 31
7.9 MERGERS; CONSOLIDATIONS; ACQUISITIONS 32
7.10 SUBSIDIARIES 32
7.11 FISCAL YEAR 32
7.12 AFFILIATE TRANSACTIONS 32
7.13 SUBORDINATED INDEBTEDNESS 32
ARTICLE VIII - CONDITIONS PRECEDENT 32
8.1 INITIAL CREDIT 32
8.2 INITIAL AND SUBSEQUENT CREDIT 34
ARTICLE IX - EVENTS OF DEFAULT; REMEDIES 34
9.1 EVENTS OF DEFAULT 34
9.2 LENDER'S REMEDIES 36
ARTICLE X - JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
AND GOVERNING LAW 38
10.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF
PROCESS; JURY TRIAL WAIVER 38
10.2 WAIVER OF CERTAIN CLAIMS AND COUNTERCLAIMS 39
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10.3 INDEMNIFICATION 39
ARTICLE XI - MISCELLANEOUS 39
11.1 POWER OF ATTORNEY 39
11.2 OUTSTANDING LOAN BALANCE 40
11.3 MODIFICATIONS AND COURSE OF DEALING 40
11.4 ASSIGNMENT AND PARTICIPATION 40
11.5 DELEGATION OF DUTIES 40
11.6 NOTICES 40
11.7 EXPENSES 40
11.8 ASSIGNMENT OF RECEIVABLES AND INVENTORY 41
11.9 BINDING EFFECT; SEVERABILITY 41
11.10 FINAL AGREEMENT 41
11.11 COUNTERPARTS 41
11.12 CAPTIONS 41
11.13 BORROWER'S REPRESENTATIVE 41
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LOAN AND SECURITY AGREEMENT
Dated as of April _____, 2004
Z-TEL COMMUNICATIONS, INC., a Delaware corporation; Z-TEL TECHNOLOGIES,
INC., a Delaware corporation; Z-TEL, INC., a Nevada corporation; Z-TEL BUSINESS
NETWORKS, INC., a Delaware corporation; Z-TEL NETWORK SERVICES, INC., a Delaware
corporation; Z-TEL HOLDINGS, INC., a Florida corporation; Z-TEL COMMUNICATIONS
OF VIRGINIA, INC., a Virginia corporation; Z-TEL INVESTMENTS, INC., a Delaware
corporation; TOUCH-1 COMMUNICATIONS, INC., an Alabama corporation; DirecTEL,
INC., an Alabama corporation; direcCONNECT, INC., an Alabama corporation; and
Z-TEL CONSUMER SERVICES, LLC, an Alabama limited liability company (individually
and/or collectively, "Borrower"), and TEXTRON FINANCIAL CORPORATION, a Delaware
corporation ("Lender"), agree as follows:
DEFINITIONS
As used in this Agreement:
"Account" or "Accounts" means all now owned or hereafter acquired
right, title and interest in all accounts, as such term is defined in the UCC,
and any and all supporting obligations with respect to any of the foregoing.
"Account Debtor" means a Person to whom Borrower sells inventory, goods
or services in the ordinary course of business, including without limitation,
each Person who is obligated on a Receivable.
"Additional Documents" has the meaning set forth in Section 3.2(d).
"Adjusted Tangible Net Worth" means, with respect to Borrower, the sum
of (i) stockholder's equity determined in accordance with GAAP and (ii)
Subordinated Indebtedness, minus (a) Intangible Assets and (b) all loans or
advances to Affiliates of Borrower or any other third party.
"Affiliate" means, with respect to a Person, (a) any partner, officer,
shareholder or member (if holding more than 5% of the outstanding interest in
such Person), director or managing agent of such Person, and (b) any other
Person (other than a Subsidiary) that, (i) directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such given Person, (ii) directly or indirectly beneficially owns or holds
10% or more of any class of voting stock or partnership or other voting interest
of such Person or any Subsidiary of such Person, or (iii) 5% or more of the
voting stock or partnership or other voting interest of which is directly or
indirectly beneficially owned or held by such Person or a Subsidiary of such
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities or partnership or other
voting interest, by contract or otherwise.
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"Agreement" means this Loan and Security Agreement, including all
Schedules, exhibits and other attachments hereto, as the same may be amended,
supplemented, extended or restated from time to time.
"Agreement Date" means the date as of which this Agreement is dated.
"Annual Facility Fee" means the fee referred to in Section 2.1.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of governmental bodies and orders and
decrees of courts and arbitrators.
"Asset Disposition" means the disposition of any asset of Borrower or
any of its Subsidiaries, other than sales of Inventory in the ordinary course of
business.
"Availability" means at any time (a) the amount of the Borrowing Base
at such time minus (b) the aggregate principal amount of Revolving Loan
Advances.
"Availability Reserve" means a reserve based on the requirement that
excess Availability under the Revolving Credit Facility be in an amount of not
less than $750,000.00, or such other amount as Lender may require in the
exercise of its discretion, after accommodation for the payment of accounts
payable over sixty (60) days past due has been made to the satisfaction of
Lender.
"Bankruptcy Code" means the United States Bankruptcy Code, as in effect
from time to time.
"Board" means the duly elected and serving members of the Board of
Directors of Borrower.
"Borrower" means Borrower as defined in the preamble.
"Borrowing" means a borrowing of Revolving Loan Advances.
"Borrowing Base" means, with respect to Borrower, an amount in dollars
equal to the lesser of (a) the Revolving Credit Limit, or (b) the sum, without
duplication, of: (i) up to eighty percent (80%) of the net amount of the
Eligible Receivables; plus (ii) the lesser of (a) $3,500,000.00 or (b) fifty
percent (50%) of the Eligible Unbilled Accounts Receivable; minus (iii) the
Availability Reserve; and minus (iv) other Reserves, if any.
"Borrowing Base Certificate" means the Borrowing Base Certificate
referred to in Section 1.2 in the form attached hereto as Exhibit A.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in Providence, Rhode Island are authorized or required to close.
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"Capital Expenditures" means the aggregate of all expenditures made and
liabilities incurred that, in accordance with GAAP, are required to be included
in or reflected by the property, plant, equipment or similar fixed assets
accounts.
"Capitalized Lease" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"Change of Control" means the occurrence of any of the following
events: (i) the sale or transfer of all or substantially all of the assets of
Borrower as an entirety to any person or related group of persons other than an
Affiliate or Affiliates of Borrower; (ii) Z-Tel Technologies, Inc. shall cease
to control Borrower; or (iii) Borrower is liquidated, dissolved, or adopts a
plan of liquidation pursuant to the Bankruptcy Code or any other bankruptcy law.
"Closing Date" means the date of the funding of an initial Loan under
this Agreement.
"Collateral" means all of Borrower's personal property, including,
without limitation, all of the following property and interests in property of
Borrower, wherever located and whether now or hereafter existing or now owned or
hereafter acquired or arising: (i) all Receivables; (ii) all Inventory; (iii)
all Equipment; (iv) all Contract Rights; (v) all General Intangibles; (vi) all
Investment Property; (vii) each Deposit Account and all certificates of deposit
maintained with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a certificate of deposit that
is an instrument under the UCC; (viii) all goods and other property, whether or
not delivered, (a) the sale or lease of which gives or purports to give rise to
any Receivable, including, but not limited to, all merchandise returned or
rejected by or repossessed from customers, or (b) securing any Receivable,
including, without limitation, all rights as an unpaid vendor or lienor
(including, without limitation, stoppage in transit, replevin and reclamation)
with respect to such goods and other property; (ix) all mortgages, deeds to
secure debt and deeds of trust on real or personal property, guaranties, leases,
security agreements, and other agreements and property which secure or relate to
any Receivable or other Collateral, or are acquired for the purpose of securing
and enforcing any item thereof; (x) all documents of title, policies and
certificates of insurance, securities, chattel paper (including electronic
chattel paper and tangible chattel paper) and other documents and instruments;
(xi) all other goods and personal property, whether tangible or intangible,
wherever located, including money, supporting obligations, letters of credit,
and each Letter-of-credit right; (xii) all files, correspondence, computer
programs, tapes, discs and related data processing software which contain
information identifying or pertaining to any of the Receivables, or any Account
Debtor, or showing the amounts thereof or payments thereon or otherwise
necessary or helpful in the realization thereon or the collection thereof;
(xiii) any "commercial tort claims" as that term is defined in the UCC, as set
forth on Schedule 1 attached hereto; (xiv) all Intellectual Property; and (xv)
any and all products and proceeds of the foregoing (including, but not limited
to, any claim to any item referred to in this definition, and any claim against
any third party for loss of, damage to or destruction of any or all of, the
Collateral or for proceeds payable under, or unearned premiums with respect to,
policies of insurance) in whatever form, including, but not limited to, cash,
negotiable instruments and other instruments for the payment of money, chattel
paper, security agreements and other documents.
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"Contract Rights" means any rights under contracts not yet earned by
performance and not evidenced by an instrument or chattel paper.
"Covenant Compliance Certificate" means the Covenant Compliance
Certificate referred to in Section 6.1.
"Credit Facility" means the total credit facility established under
this Agreement in an aggregate amount outstanding at any one time not to exceed
the Maximum Credit.
"Credit Support Document" means each Guaranty, letter of credit or
other undertaking of any Guarantor or other party given for the benefit of
Lender relating to the Obligations.
"Default" shall mean an event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, become an Event
of Default.
"Deposit Account" has the meaning given to it in the UCC.
"Deposit Account Control Agreement" means the Deposit Account Control
Agreement among Borrower, Lender and the bank named therein, pursuant to which
Lender shall have been granted a first priority lien and security interest in
all deposit account(s) of Borrower as more particularly described therein.
"Dollar" and "$" means freely transferable United States dollars.
"Early Termination Fee" means the fee referred to in Section 2.6.
"East Coast Time" means the time in Providence, Rhode Island.
"EBITDA" means, for any period, the sum of the amounts for such period
of (a) Net Income, (b) Interest Expense, (c) taxes imposed on or measured by
income or excess profits (for such period and without regard to any prior
periods), and (d) the amount of all depreciation and amortization allowances and
other non-cash expenses of Borrower.
"Eligible Receivable" means any Receivable of Borrower that consists of
the unpaid portion of the obligation stated on the invoice issued to an Account
Debtor with respect to Inventory sold and shipped to or services performed for
such Account Debtor in the ordinary course of business, net of any commissions
payable by the Borrower to third parties, that Lender determines in its sole and
good faith discretion, based on credit policies, market conditions, Borrower's
business and other criteria, is eligible. A Receivable shall not be an Eligible
Receivable unless such Receivable (i) is subject to Lender's perfected first
priority security interest and no other Lien, (ii) is evidenced by an invoice or
other documentary evidence satisfactory to Lender that has been sent to the
Account Debtor, (iii) is unconditionally due and payable in Dollars, and (iv)
conforms to the warranties regarding Accounts and Receivables contained in this
Agreement. Eligible Receivables shall not include any of the following:
(a) a Receivable that is unpaid more than 60 days after the original
invoice date thereof;
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(b) a Receivable due from an Account Debtor or an affiliated group of
Account Debtors where any of the Receivables due from such Account Debtor or
affiliated group of Account Debtors is not an Eligible Receivable pursuant to
clause (a) above;
(c) a Receivable owed by an Account Debtor, or affiliated group of
Account Debtors, which is obligated to Borrower respecting Receivables, the
aggregate unpaid balance of which exceeds (i) five percent (5%) (unless
otherwise agreed to in writing by Lender) of the aggregate unpaid balance of all
otherwise Eligible Receivables owed to Borrower at such time by such Account
Debtors, but only to the extent of such excess or (ii) in the case of
Receivables due from Sprint Corp. or any Account Debtor affiliated with Sprint
Corp., twenty percent (20%) (unless otherwise agreed to in writing by Lender) of
the aggregate unpaid balance of all otherwise Eligible Receivables owed to
Borrower at such time by Sprint Corp. and such affiliated Account Debtors, but
only to the extent of such excess.
(d) a Receivable that (i) arises from uncompleted performance on the
part of Borrower, (ii) constitutes a progress billing, advance billing, any
retention amount, or retainage, (iii) is a guaranteed sale, a sale and return,
or other repurchase or return basis; or (iv) is a "xxxx and hold" or involves a
sale of goods, and all such goods have not been lawfully shipped and invoiced to
the Account Debtor (or if requested by Lender, copies of all invoices, together
with all shipping documents and delivery receipts evidencing such shipment have
not been delivered to Lender);
(e) a Receivable with respect to which the Account Debtor is either (i)
the United States or any department, agency, or instrumentality of the United
States (other than Receivables with respect to which Borrower has complied, to
the satisfaction of Lender, with the Assignment of Claims Act of 1940, as
amended), or (ii) any state of the United States (other than (y) Receivables
owed by any state that does not have a statutory counterpart to the Assignment
of Claims Act or (z) Receivables owed by any state that has a statutory
counterpart to the Assignment of Claims Act as to which Borrower has complied to
Lender's satisfaction);
(f) a Receivable that arises from an Account Debtor that is a creditor
of the Borrower, has or has asserted a right of setoff, has disputed its
liability or has made any claim with respect to its obligation to pay, or an
account that is subject to a levy, prior assignment, claim, lien, subrogation
right or security interest;
(g) a Receivable that is subject to any credit or contra;
(h) that portion of any Receivable that consists of a local exchange
carrier fee;
(i) a Receivable if, to the extent, and for so long as such Receivable
secures the Touch-1 Indebtedness;
(j) a Receivable created or generated by an Affiliate of Borrower or
from an Interested Party;
(k) a Receivable for which the Account Debtor is an Interested Party or
Borrower Affiliate;
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(l) a Receivable that arises from an Account Debtor (i) that is subject
to an Insolvency Proceeding, is not solvent or has gone out of business; (ii) to
whom goods are being shipped on a "cash on delivery" or C.O.D. basis; or (iii)
as to which Lender or Borrower is aware of an imminent Insolvency Proceeding or
a material impairment of the financial condition;
(m) a Receivable with respect to which the Account Debtor is located in
the states of New Jersey, Minnesota, or West Virginia (or any other state that
requires a creditor to file a business activity report or similar document in
order to bring suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such state), unless the
Borrower has qualified to do business in New Jersey, Minnesota, West Virginia,
or such other states, or has filed a business activities report with the
applicable division of taxation, the department of revenue, or with such other
state offices, as appropriate, for the then-current year, or is exempt from such
filing requirement;
(n) a Receivable that is evidenced by any chattel paper, promissory
note, payment instrument or written agreement;
(o) a Receivable that arises from an Account Debtor whose chief
executive office or place of organization is outside the United States or any of
the following provinces of Canada: Ontario, Alberta, Manitoba, Saskatchewan,
British Columbia, Xxxxxx Xxxxxx Island and the Yukon Territory, unless (i) the
payment for such Receivable is assured by an irrevocable letter of credit
payable in United States dollars satisfactory to Lender (as to form, substance,
issuer and domestic confirming bank), the proceeds of which have been assigned
to Lender and the original letter of credit has been delivered to Lender and
directly drawable by Lender, or (ii) the payment for such account is insured by
foreign credit insurance acceptable to Lender, such credit insurance has been
collaterally assigned to Lender in form satisfactory to Lender, and Lender has
been named beneficiary with respect thereto; or
(p) a Receivable for which Lender has notified the Borrower that the
Receivable or the Account Debtor is unsatisfactory or unacceptable (which Lender
reserves the right to do in its sole good faith discretion at any time).
For purposes of this definition, any Receivable that at any time is or
becomes an Eligible Receivable, but which subsequently fails to meet any of the
requirements of this definition, shall cease to be an Eligible Receivable (but
shall continue to be part of the Collateral) for so long as the same fails to
meets such requirements.
"Eligible Unbilled Accounts" means all Receivables which meet the
requirements of Eligible Receivables, but due to the Borrower's normal business
practice of only invoicing Account Debtors once each month, the invoice or other
documentary evidence of such Receivable has not been sent to the Account Debtor.
If at any time the Borrower becomes aware that any unbilled accounts reported as
Eligible Unbilled Accounts will not be billed within forty-one (41) days after
the service was provided, the Borrower agrees to immediately notify Lender
thereof and remove such unbilled accounts from Eligible Unbilled Accounts.
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"Environmental Laws" means all federal, state, local and foreign laws
now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes, and all
regulations, notices or demand letters issued, entered, promulgated or approved
thereunder.
"Equipment" has the same meaning given to it in the UCC.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
"Event of Default" means an event described in Section 9.1 of the
Agreement.
"Existing Lender" means RFC Capital Corporation.
"Financing Statements" has the same meaning given to it in the UCC.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Borrower that ends on the last
day of December of each year.
"Fixed Charge Coverage Ratio" means, for any period, on a consolidated
basis, the ratio of (i) Borrower's EBITDA minus Unfunded Capital Expenditures
minus distributions and dividends paid by Borrower in cash minus taxes actually
paid by Borrower in cash, to (ii) Borrower's Interest Expense plus principal
payments made on Indebtedness for Money Borrowed, in each case for such period,
reviewed from time to time.
"GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and, when used with
reference to Borrower or any Subsidiary of Borrower, consistent with the prior
financial practices of Borrower.
"General Intangibles" has the same meaning given to it in the UCC.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
governmental bodies, whether federal, state, local or foreign national or
provincial and all agencies thereof.
"Guarantor" or "Guarantors" means each Person, if any, guaranteeing to
Lender all or part of the Obligations.
"Guaranty" or "Guaranties" means any guaranty executed and delivered by
a Guarantor in favor of Lender, in each case in form and substance satisfactory
to Lender.
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"Indebtedness" of any Person means, without duplication, all
Liabilities of such Person, and to the extent not otherwise included in
Liabilities, the following: (a) all obligations for Money Borrowed or for the
deferred purchase price of property or services, (b) all obligations (including,
during the noncancellable term of any lease in the nature of a title retention
agreement, all future payment obligations under such lease discounted to their
present value in accordance with GAAP) secured by any Lien to which any property
or asset owned or held by such Person is subject, whether or not the obligation
secured thereby shall have been assumed by such Person, (c) all obligations of
other Persons which such Person has guaranteed, including, but not limited to,
all obligations of such Person consisting of recourse liability with respect to
accounts receivable sold or otherwise disposed of by such Person, and (d) in the
case of Borrower (without duplication) all Obligations under the Loan Documents.
"Initial Term" means the thirty-six (36) month period commencing on the
Agreement Date.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state
or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Intangible Assets" means, with respect to any Person, that portion of
the book value of all of such Person's assets that would be treated as
intangibles under GAAP.
"Intellectual Property" means all now owned or hereafter acquired
right, title and interest in trade names, trademarks, trade secrets, 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,
together with (a) all income, royalties, damages, claims and payments now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past and future infringements thereof, (b)
rights to xxx for past, present and future infringements thereof, and (c) all
rights corresponding to any of the foregoing throughout the world.
"Interest Expense" means for any period as determined in conformity
with GAAP, total interest expense, whether paid or accrued or due (including
without limitation, in respect of the Loans and subordinated debt, if any) and
payable, including without limitation, the interest component of Capital Lease
obligations for such period, all bank fees, and net costs under interest rate
contracts.
"Interest Rate" means a variable rate, adjusted monthly, equal to the
Prime Rate plus two percent (2.00%).
"Interested Party" means any employee, agent, owner, partner, member,
or shareholder of Borrower.
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"Internal Revenue Code" means the Internal Revenue Code of 1986, as in
effect from time to time.
"Inventory" has the same meaning given to it in the UCC.
"Investment" means, with respect to any Person; (a) the acquisition or
ownership by such Person of any share of capital stock, evidence of Indebtedness
(which shall not include funds on deposit in demand deposit accounts) or other
security issued by any other Person, other than stock or other securities
received in settlement or replacement in bankruptcy of a debt that was created
in the ordinary course of business; (b) any loan, advance or extension of credit
to, or contribution to the capital of, any other Person, excluding advances to
employees in the ordinary course of business for business expenses, (c) the
obligations of any other Person that are guaranteed by such Person, (d) any
other investment in any other Person, and (e) any commitment or option to make
any of the investments listed in clauses (a) through (d) above.
"Investment Property" has the meaning given to it in the UCC.
"Lender" shall mean Textron Financial Corporation, a Delaware
corporation.
"Letter-of-credit right" has the same meaning given to it in the UCC.
"Liabilities" of any Person means all items (except for items of
capital stock, additional paid-in capital or retained earnings, or of general
contingency or deferred tax reserves) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Liabilities are to be
determined.
"Lien" as applied to the property of Borrower or any Person means: (a)
any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest, security title or encumbrance
of any kind in respect of any property of such Person, or upon the income or
profits therefrom, (b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person, and (c) the filing of, or any agreement to give, any
financing statement under the Uniform Commercial Code or its equivalent in any
jurisdiction, excluding informational financing statements relating to property
leased by such Person.
"Loan Documents" means collectively this Agreement, the Security
Documents, the Credit Support Documents, the Subordination Agreement, and each
other instrument, agreement or document executed by Borrower, a Guarantor, or
any other Person in connection with this Agreement, whether prior to, on or
after the Agreement Date.
"Loans" means, individually and collectively, a Revolving Loan Advance.
9
"Lockbox" means each United States Post Office Box specified in the
Lockbox Agreement.
"Lockbox Agreement" means the agreement between Borrower and a bank (or
other party engaged in providing such services) concerning the establishment of
the Lockbox and related bank deposit account(s) for the collection of and
remittance to Lender of Receivables.
"Materially Adverse Effect" means a material adverse effect on (a) the
business, assets, properties, financial condition, contingent liabilities or
material agreements of Borrower and its Subsidiaries taken as a whole, (b) the
value of the Collateral, (c) the Security Interest or the priority of the
Security Interest, (d) the respective ability of Borrower or any other obligor
to perform any material obligations under this Agreement or any other Loan
Document, or (e) the rights of or benefits available to Lender under, or the
validity or enforceability of, any Loan Document.
"Maximum Credit" means the amount of $25,000,000.00, or such lesser or
greater amount as shall be agreed upon from time to time in writing by Lender
and Borrower.
"Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness
for money borrowed, (b) Indebtedness, whether or not in any such case the same
was for money borrowed, (i) represented by notes payable, and drafts accepted,
that represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid or that was issued or assumed as full or partial
payment for property (other than trade credit that is incurred in the ordinary
course of business), (c) Indebtedness that constitutes a Capitalized Lease
Obligation, and (d) Indebtedness that is such by virtue of clause (c) of the
definition thereof, but only to the extent that the obligations guaranteed are
obligations that would constitute Indebtedness for Money Borrowed.
"Net Income" means, as applied to any Person, the net income (or net
loss) of such Person for the period in question after giving effect to deduction
of or provision for all operating expenses, all taxes and reserves (including
reserves for deferred taxes) and all other proper deductions, all determined in
accordance with GAAP, provided that there shall be excluded: (a) the net income
(or net loss) of any Person accrued prior to the date it becomes a Subsidiary
of, or is merged into or consolidated with, the Person whose Net Income is being
determined or a Subsidiary of such Person, (b) the net income (or net loss) of
any Person in which the Person whose Net Income is being determined or any
Subsidiary of such Person has an ownership interest, except, in the case of net
income, to the extent that any such income has actually been received by such
Person or such Subsidiary in the form of cash dividends or similar
distributions, (c) any restoration of any contingency reserve, except to the
extent that provision for such reserve was made out of income during such
period, (d) any net gains or losses on the sale or other disposition, not in the
ordinary course of business, of Investments, business units and other capital
assets, provided that there shall also be excluded any related charges for taxes
thereon, (e) any net gain arising from the collection of the proceeds of any
insurance policy, (f) any write-up of any asset, and (g) any other extraordinary
item.
10
"Net Proceeds" means proceeds received by Borrower or any of its
Subsidiaries in cash from any Asset Disposition (including, without limitation,
payments under notes or other debt securities received in connection with any
Asset Disposition), net of: (a) the transaction costs of such sale, lease,
transfer or other disposition; (b) any tax liability arising from such
transaction; and (c) amounts applied to repayment of Indebtedness (other than
the Obligations) secured by a Lien on the asset or property disposed.
"Notice of Borrowing" means a telephonic or electronic notice followed
by a confirming same-day written notice requesting a Borrowing, which is given
by telex or facsimile transmission in accordance with the applicable provisions
of this Agreement and which specifies (i) the amount of the requested Borrowing,
and (ii) the date of the requested Borrowing.
"Obligations" means, in each case whether now in existence or hereafter
arising, (a) the principal of, and interest and premium, if any, on, the Loans,
and (b) all indebtedness, liabilities, obligations, covenants and duties of
Borrower to Lender of every kind, nature and description arising under this
Agreement, or any of the other Loan Documents, or in connection with the Credit
Facility, whether direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money, including
without limitation, fees and expenses required to be paid or reimbursed pursuant
to this Agreement.
"Obligor" means Borrower and any Person who may now or in the future
guaranty the payment and performance of the whole or any part of the
Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.
"Permitted Investments" means Investments of Borrower in: (a)
negotiable certificates of deposit or time deposits issued by a state bank or by
any United States bank or trust company having capital, surplus and undivided
profits in excess of $1,000,000.00; (b) any direct obligation of the United
States of America or any agency or instrumentality thereof which has a remaining
maturity at the time of purchase of not more than one year and repurchase
agreements relating to the same; (c) other than in the ordinary course of
Borrower's business, advances or extensions of credit made by Borrower not to
exceed $100,000.00 in the aggregate outstanding at any time; (d) Investments in
existing Subsidiaries described on Schedule 1(C), and (e) Investments in new
Subsidiaries the creation or acquisition of which is not prohibited by Section
7.10 hereof.
"Permitted Liens" means: (a) Liens securing taxes, assessments and
other governmental charges or levies (excluding any Lien imposed pursuant to any
of the provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, but (i) in all cases only if payment shall not
at the time be required to be made or which are being contested in good faith by
appropriate proceedings and, in the case of those being contested, as to which
the principal amount shall not exceed the sum of $100,000.00 in the aggregate at
any time, and to which Borrower shall have set aside on its books adequate
reserves, which reserves shall be derived from sources other than directly from
Lender, and/or Lender shall have set aside Reserves that Lender deems adequate,
11
and (ii) in the case of warehousemen or landlords, only if such liens are junior
to the Security Interest in any of the Collateral, (b) Liens consisting of
deposits or pledges made in the ordinary course of business in connection with,
or to secure payment of, obligations under workers' compensation, unemployment
insurance or similar legislation or under payment or performance bonds, (c)
other Liens on real property owned by Borrower in the nature of zoning
restrictions, easements, and rights or restrictions of record on the use of real
property, which do not materially detract from the value of such property or
impair the use thereof in the business of Borrower, (d) purchase money Liens,
(e) Liens shown on Schedule 1, (f) Liens pursuant to writs of attachment,
garnishment execution, distraint or similar process the issuance of which do not
create an Event of Default under Section 9.1(f) hereof, and (g) Liens of Lender
arising under this Agreement and the other Loan Documents.
"Person" means any individual, limited liability company, corporation,
partnership, association, trust or unincorporated organization, or a government
or any agency or political subdivision thereof.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which Borrower or any Affiliate of Borrower is, or within
the immediately preceding six years was, an "employer" as defined in Section
3(5) of ERISA.
"Prime Rate" means for any month the rate of interest per annum
announced or quoted by JPMorgan Chase Bank on the last day of the preceding
month as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by JPMorgan Chase Bank to its most preferred borrower, and,
if such prime rate for commercial loans is discontinued by JPMorgan Chase Bank
as a standard, a comparable reference rate designated by Lender as a substitute
therefor shall be the Prime Rate.
"Proprietary Rights" means all of Borrower's now owned and hereafter
arising or acquired patents, patent applications, inventions and improvements,
copyrights, copyright applications, literary rights, trademarks, trademark
applications, trade names, trade secrets, service marks, data bases, computer
software and software systems, including the source and object codes,
information systems, discs, tapes, customer lists, telephone numbers, credit
memoranda, goodwill, licenses, and other intangible property, and all other
rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing, all
income, royalties, damages, claims and payments now or hereafter due and/or
payable under or with respect thereto, including without limitation, damages and
payments for past and future infringement thereof, and all rights to xxx for
past, present and future infringement of any of the foregoing.
"Receivable" means and includes (a) any and all rights to the payment
of money or other forms of consideration of any kind (whether classified under
the UCC as Accounts, contract rights, chattel paper, general intangibles, or
otherwise) including, but not limited to, Accounts, Letters-of-credit rights,
chattel paper, tax refunds, insurance proceeds, Contract Rights, notes, drafts,
instruments, documents, acceptances, and all other debts, obligations and
liabilities in whatever form from any Person, (b) all guarantees, security and
Liens for payment thereof, (c) all goods, whether now owned or hereafter
acquired, and whether sold, delivered, undelivered, in transit or returned,
12
which may be represented by, or the sale or lease of which may have given rise
to, any such right to payment or other debt, obligation or liability, and (d)
all proceeds of any of the foregoing.
"Receivable Turnover" means the average number of days Receivables are
outstanding, calculated as follows: 365 divided by (net sales of the Borrower
for the period tested divided by average Receivables outstanding during such
period).
"Renewal Term" means the extension of this Agreement beyond the Initial
Term, as provided for in Section 1.6.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA, but shall not include a Reportable Event as to which the provision for
thirty (30) days notice to the PBGC is waived under applicable regulations.
"Reserves" means reserves established against the amount of the
Revolving Loan Advances, which Lender in the exercise of its credit judgment and
discretion, deems necessary to ensure payment of the Obligations.
"Revenues" shall mean all money, funds, cash, proceeds, or payments of
any kind received by Borrower from all sources, including without limitation,
all proceeds of Collateral, including Net Proceeds, insurance proceeds, and all
proceeds from the sale of Inventory or other Collateral, whether received in
cash, by check, by other instrument, or otherwise.
"Revolving Credit Facility" means that portion of the Credit Facility
established under this Agreement consisting of the Revolving Loan Advances in an
aggregate amount outstanding at any one time not to exceed the Revolving Credit
Limit.
"Revolving Credit Limit" means the revolving credit facility
established under this Agreement in an aggregate principal amount outstanding at
any one time not to exceed $25,000,000.00, or such lesser or greater amount as
shall be agreed upon from time to time in writing by Lender and Borrower.
"Revolving Loan Advance" means a revolving loan made to Borrower
pursuant to this Agreement and "Revolving Loan Advances" means more than one
Revolving Loan Advance and, collectively, all Revolving Loan Advances.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Security Documents" means each of the following: (a) the Financing
Statements, (b) the Deposit Account Control Agreement, and (c) each other
writing executed and delivered by Borrower or any other Obligor securing the
Obligations or any part thereof.
"Security Interest" means the Liens of Lender on and in the Collateral
created or effected hereby or by any of the Security Documents or pursuant to
the terms hereof or thereof.
13
"Subordinated Indebtedness" means any Indebtedness for Money Borrowed
of Borrower that is consented to in writing in advance by Lender from time to
time and that is expressly subordinated to the Obligations pursuant to a
subordination upon terms substantially the same as in the Subordination
Agreement.
"Subordination Agreement" means that certain subordination agreement
now existing or entered into in the future, by and among Borrower, Lender, and a
third party creditor of Borrower, said Subordination Agreement being
substantially in the form as shown on Exhibit B hereto.
"Subsidiary" means, (a) when used to determine the relationship of a
Person to another Person, a Person of which an aggregate of fifty percent (50%)
or more of the stock of any class or classes or fifty percent (50%) or more of
other ownership interests is owned of record or beneficially by such other
Person, or by one or more Subsidiaries of such other Person, or by such other
Person and one or more Subsidiaries of such Person, (i) if the holders of such
stock, or other ownership interests, (A) are ordinarily, in the absence of
contingencies, entitled to vote for the election of a majority of the directors
(or other individuals performing similar functions) of such Person, even though
the right so to vote has been suspended by the happening of such a contingency,
or (B) are entitled, as such holders, to vote for the election of a majority of
the directors (or individuals performing similar functions) of such Person,
whether or not the right so to vote exists by reason of the happening of a
contingency, or (ii) in the case of such other ownership interests, if such
ownership interests constitute a majority voting interest, and (b) when used
with respect to a Plan, ERISA or a provision of the Internal Revenue Code
pertaining to employee benefit plans, any other corporation, trade or business
(whether or not incorporated) which is under common control with Borrower and is
treated as a single employer with Borrower under Section 414(b) or (c) of the
Internal Revenue Code and the regulations thereunder.
"Termination Date" means the earliest to occur of: (a) the end of the
Initial Term, or such later date as to which the same may be extended pursuant
to the provisions of Section 1.6, (b) such date as the Obligations shall have
been accelerated pursuant to the provisions of Section 9.2, or (c) such date as
all Obligations shall have been irrevocably paid in full and the Revolving
Credit Facility shall have been terminated.
"Termination Event" means (a) a Reportable Event, or (b) the filing of
a notice of intent to terminate a Plan, or the treatment of a Plan amendment as
a termination, under Section 4041(c) of ERISA, or (c) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or the
appointment of a trustee to administer any Plan.
"Touch 1 Indebtedness" shall mean, individually and collectively, that
certain Indebtedness for Money Borrowed as described in the following
instruments, to wit: Promissory Note dated September 10, 1999 from Touch 1
Communications, Inc. to Xxxxx X. Xxxxxx in the original principal amount of
$290,276.00; Promissory Note dated September 10, 1999 from Touch 1
Communications, Inc. to Xxxxxxx X. Xxxxxx (First Revocable Trust) in the
original principal amount of $859,363.72; Promissory Note dated September 10,
1999 from Touch 1 Communications, Inc. to Xxxxxx Elegre Capital in the original
principal amount of $13,850,000.00; Promissory Note dated September 10, 1999
from Touch 1 Communications, Inc. to Franklin VI, Ltd. in the original principal
14
amount of $774,593.00; Promissory Note dated September 10, 1999 from Touch 1
Communications, Inc. to Franklin VIII, Ltd. in the original principal amount of
$5,190,100.00; and Promissory Note dated September 10, 1999 from Touch 1
Communications, Inc. to First National Bank in the original principal amount of
$800,000.00, and all other documents and instruments describing or securing the
foregoing.
"Trademark Agreement" means the Patent, Copyright and Trademark
Collateral Assignment and Security Agreement, dated on or about the Agreement
Date, made by Borrower to Lender.
"Unfunded Capital Expenditures" means Capital Expenditures paid by
Borrower in cash and not from any other source.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the state of Rhode Island.
General. Unless otherwise defined, all terms used in this Agreement
that are defined in the UCC shall have the meaning give them in the UCC. All
terms of an accounting nature not specifically defined in this Agreement shall
have the meaning ascribed them by GAAP. References to any legislation or statute
or code, or to any provision thereof, shall include any modification or
reenactment of, or any legislative, statutory or code provision substituted for,
such legislation, statute or code or provision thereof. References to any Person
include its successor or permitted substitutes and assigns.
ARTICLE I - LOANS, RENEWAL AND TERMINATION
1.1 Credit Facility. Lender agrees, for so long as no Default or
Event of Default exists and subject to the terms of this Agreement, to make
Loans and other financial accommodations to Borrower in an amount equal to the
lesser of: (a) the Maximum Credit; or (b) the amount of the Borrowing Base at
such time.
1.2 Borrowing Procedures
(a) Subject to the provisions of Section 8.1 of this Agreement, and
provided that there does not then exist a Default or an Event of Default,
Borrower may, from time to time, request that Lender make Revolving Loan
Advances to Borrower in accordance with the terms of this Agreement. Lender
shall fund Borrower's request for Revolving Loan Advances as follows: (i) by the
close of business on the day such request is received if the request is received
prior to 2:00 p.m. East Coast time; and (ii) by the close of the next Business
Day if the request is received after that time.
(b) Each request for a Revolving Loan Advance shall be made by
transmission to Lender of a Notice of Borrowing and shall, if requested by
Lender or required pursuant to Section 6.7, be accompanied by a complete and
accurate Borrowing Base Certificate, and shall be confirmed by Borrower with
Lender by telephone; provided, that Lender shall at any time have the right to
review and adjust, in the exercise of its reasonable discretion, any calculation
set forth in the Borrowing Base Certificate or the Notice of Borrowing (i) to
reflect Lender's reasonable estimate of declines in value of any of the
15
Collateral described in such Borrowing Base Certificate, and (ii) to the extent
such calculation is not in accordance with this Agreement. Borrower shall make
no more than two (2) requests for Revolving Loan Advances per calendar week.
(c) Borrower shall reimburse Lender and hold Lender harmless from
any loss or expense that Lender may sustain or incur as a consequence of the
failure of Borrower to borrow additional Loans after Borrower has requested (or
is deemed to have requested) such additional Loans, including any such loss or
expense arising from the liquidation or re-employment of funds obtained by
Lender to maintain the Loans or from fees payable to terminate the deposits from
which such funds were obtained.
(d) It is expressly understood and agreed that Lender intends to use
the Borrowing Base as a maximum ceiling on Revolving Loan Advances to Borrower;
provided, however, that it is agreed that should the Revolving Loan Advances
ever exceed the ceiling so determined or any other limitation set forth in this
Agreement, such Revolving Loan Advances shall nevertheless constitute
Obligations secured by the Security Interest of Lender and, as such, shall be
entitled to all benefits thereof and security therefor. Under the Revolving
Credit Facility, Borrower from time to time may borrow, repay, prepay and
reborrow the Revolving Loan Advances pursuant to the terms of this Agreement.
1.3 Interest.
(a) Interest shall accrue on the outstanding principal balance of
the Loans at the Interest Rate. All interest accrued on the outstanding
principal balance of the Loans shall be calculated on the basis of a year of
three hundred sixty (360) days and the actual number of days elapsed in each
month. Accrued interest shall be added to the outstanding principal balance of
the Loans on the first Business Day of each calendar month following the month
in which such interest accrues.
(b) Upon the occurrence and during the continuation of an Event of
Default, which Event of Default is not cured to the satisfaction of Lender
within twenty (20) days from the date such Event of Default first occurred, the
unpaid principal balance of the Revolving Loan Advances shall bear interest at a
per annum rate equal to the Interest Rate plus three hundred (300) basis points
effective as of and from the date such Event of Default first occurred, as
determined by Lender.
1.4 Charges to Loan Account. At Lender's option, exercised in
Lender's sole discretion, Lender may (a) deduct the aggregate amount of
principal, interest, fees, costs, expenses, and other charges and amounts
provided for in this Agreement or in any other Loan Documents from any Revolving
Loan Advance on the due date thereof, (b) treat such amounts as a Revolving Loan
Advance or (c) disburse such amount by way of direct payment, which such
disbursement shall be deemed to be a Revolving Loan Advance.
1.5 Allocation of Payments and Limit of Interest. Prior to the
occurrence of an Event of Default, all Revenues received by Lender from Borrower
shall be applied pro tanto to the Obligations as follows: first to pay any fees
16
and expenses then due to Lender under the Loan Documents, until paid in full,
and second, to repay the principal amount of all outstanding Obligations until
paid in full. Upon the occurrence and during the continuance of an Event of
Default, all Revenues received by Lender from Borrower shall be applied pro
tanto to the Obligations in such manner as Lender shall determine in its sole
discretion. Lender does not intend to charge interest at a rate in excess of the
highest rate permitted by Applicable Law. Interest on any outstanding principal
balance shall be spread over the entire period that such principal balance is
outstanding. Any excess interest charges paid by Borrower to Lender shall be
applied to reduce the outstanding principal balance of the Obligations.
1.6 Renewal and Termination.
(a) This Agreement shall expire on the Termination Date. This
Agreement shall be automatically renewed for additional one (1) year periods
upon expiration of the Initial Term and each successive Renewal Term unless
terminated by Lender or Borrower as provided in this Section 1.6. Borrower may
terminate this Agreement at the expiration of the Initial Term or at the end of
each Renewal Term by giving written notice of such termination to Lender at
least ninety (90) days prior to the effective date of such termination, and, if
such termination date is on a date other than the end of the Initial Term or a
Renewal Term, by payment to Lender of the Early Termination Fee as provided in
Section 2.6 hereof. Lender may terminate this Agreement (i) at the expiration of
the Initial Term or at the end of each Renewal Term by giving written notice of
such termination to Borrower at least ninety (90) days prior to the effective
date of such termination, and (ii) at any time during the existence of an Event
of Default.
(b) Upon the termination of this Agreement for any reason as herein
provided, Borrower shall be required to pay, discharge and satisfy, no later
than the effective date of such termination, the Loans, all accrued and unpaid
interest and fees, any Early Termination Fee, and all other non-contingent
Obligations outstanding.
(c) All undertakings, agreements, covenants, warranties and
representations of Borrower contained in this Agreement and the other Loan
Documents shall survive any such termination, and Lender shall retain each and
every Security Interest, and all other rights and remedies of Lender under this
Agreement and the other Loan Documents, notwithstanding such termination until
Borrower has paid the amounts described in Section 1.6(b).
(d) Notwithstanding the payment in full of the Loans, all accrued
and unpaid interest and fees, any Early Termination Fee, and all other
non-contingent Obligations outstanding, Lender shall not be required to
terminate its Security Interests unless, with respect to any loss or damage
Lender may incur as a result of dishonored checks or other items of payment
received by Lender from Borrower or any Account Debtor and applied to the
Obligations, Lender shall (i) have received a written agreement, executed by
Borrower and by any Person whose loans or other advances to Borrower are used in
whole or in part to satisfy the Obligations, indemnifying Lender from any such
loss or damage; or (ii) have retained such monetary reserves and its Security
Interest for such period of time as Lender, in its reasonable discretion, may
deem necessary to protect Lender from any such loss or damage.
17
ARTICLE II - FEES
2.1 Annual Facility Fee. In order to induce Lender to enter into
this Agreement and to make the Loans, Borrower agrees to pay to Lender an Annual
Facility Fee in an amount equal to (a) one percent (1%) of the Maximum Credit
for the first year of this Agreement and (b) one and one-half of one percent
(1.5%) of the Maximum Credit for each year thereafter. The Annual Facility Fee
for the first year shall be due and payable upon the Closing and thereafter the
Annual Facility Fee shall be due and payable on each anniversary date of this
Agreement, and shall be fully earned by Lender as of each due date thereof.
2.2 Unused Line Fee. Borrower shall pay to Lender a fee at the end
of each month for the unused portion of the Credit Facility, to be determined by
multiplying the difference between (i) the Maximum Credit, and (ii) the sum, for
said month, of the average daily balance of Revolving Loan Advances, by one-half
of one percent (0.5%) per annum for the number of days in said month.
2.3 Collateral Servicing Fee. Borrower shall pay to Lender on the
first day of each month a Collateral Servicing Fee in an amount equal to
$1,000.00, which Collateral Servicing Fee shall be fully earned by Lender as of
each due date thereof.
2.4 Field Examination Fee. For each field examination of the books,
records and other assets of Borrower performed by one or more employees or
agents of Lender, Borrower shall pay to Lender a field examination fee in an
amount equal to $850.00 (or such other amount as Lender shall establish from
time to time on notice to Borrower) for each day spent by each such employee or
agent in performing and/or summarizing the results of such examination
(including all necessary travel time) plus all reasonable "out-of-pocket"
expenses. Field examinations shall be performed by Lender no less frequently
than quarterly and each field examination fee shall be payable by Borrower to
Lender on the date on which such field examination is performed.
2.5 Wire Transfer Fee. For each wire transfer initiated by Lender to
or for the benefit of Borrower, Borrower shall pay to Lender a fee of $25.00 or
such higher amount as Lender shall reasonably establish from time to time.
2.6 Early Termination Fee. If for any reason this Agreement is
terminated by Borrower prior to the end of the Initial Term or any Renewal Term
of this Agreement, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of lost profits of Lender as a result thereof, Borrower
agrees to pay to Lender, upon the effective date of such termination, an Early
Termination Fee in an amount equal to the following percentage of the amount of
the Credit Facility corresponding to the period in which the termination date
occurs:
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Percentage of Revolving Credit Period
------------------------------ ------
Facility
--------
3% From Agreement Date to and including the first
anniversary of the Agreement Date
2% From the first anniversary of the Agreement Date
to and including the second anniversary of the
Agreement Date
1% From and after second anniversary of the Agreement
Date and thereafter
The Early Termination Fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination, and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to the Early Termination Fee upon the termination of
this Agreement by Lender on account of any Event of Default as provided in
Section 9.2 or the occurrence of an Event of Default described in Section
9.1(h). The Early Termination Fee shall be deemed included in the Obligations.
2.7 Costs and Expenses. Borrower agrees to reimburse Lender for all
reasonable out-of-pocket expenses incurred by Lender in connection with the
Loans, including, but not limited to, filing fees, tax, lien and judgment search
fees, fees of outside auditors, bank fees, outside attorneys' fees, and any
other reasonable fees or expenses.
ARTICLE III - GRANT OF SECURITY INTEREST
3.1 Grant of Security Interest. To secure the payment, performance
and observance of the Obligations, Borrower grants, and hereby assigns,
mortgages, and pledges, to Lender all of the Collateral, and grants to Lender a
continuing security interest in, and a Lien upon, and a right of set off
against, all of the Collateral.
3.2 Continued Priority of Security Interest.
(a) The Security Interest granted by Borrower shall at all times be
valid, perfected and enforceable against Borrower and all third parties in
accordance with the terms of this Agreement, as security for the Obligations,
and the Collateral shall not be at any time subject to any Liens that are prior
to, or on parity with or junior to the Security Interest, other than Permitted
Liens. Borrower represents and warrants to Lender that none of the lenders
holding a Permitted Lien has a security interest in the Collateral superior in
priority to the Lien of Lender granted under this Agreement, except for that
portion of the Collateral that secures the Touch-1 Indebtedness and except for
purchase money Liens that are Permitted Liens.
(b) Borrower shall, at it sole cost and expense, take all action
that may be necessary or desirable, or that Lender may reasonably request, so as
at all times to maintain the validity, perfection, enforceability and rank of
19
the Security Interest in the Collateral in conformity with the requirements of
Section 3.2 (a), or to enable Lender to exercise or enforce its rights
hereunder.
(c) Borrower covenants and agrees with Lender that from and after
the Agreement Date and until the Termination Date:
i. In the event that any Collateral, including proceeds, is
evidenced by or consists of negotiable collateral (including without
limitation letters of credit, Letter-of-credit rights, instruments,
promissory notes, draft documents or chattel paper (including
electronic and tangible chattel paper)), and if and to the extent that
perfection or priority of Lender's security interest is dependent on or
enhanced by possession, Borrower, immediately upon the request of
Lender, shall endorse and deliver physical possession of such
negotiable collateral or chattel paper to Lender.
ii. Borrower shall take all steps reasonably necessary to
grant Lender control of all electronic chattel paper in accordance with
the UCC and all "transferable records" as defined in each of the
Uniform Electronic Transaction Act and the Electronic Signatures in
Global and National Commerce Act; and
iii. If Borrower retains possession of any chattel paper or
instruments with Lender's consent, such chattel paper and instruments
shall be marked with the following legend: "This writing and the
obligations evidenced or secured thereby are subject to the security
interest of Textron Financial Corporation."
(d) At any time upon the request of Lender, Borrower shall execute
(or cause to be executed) and deliver to Lender, any and all financing
statements, original financing statements in lieu of continuation statements,
fixture filings, security agreements, pledges, assignments, endorsements of
certificates of title, and all other documents (the "Additional Documents") upon
which Borrower's signature may be required that Lender may request in its
discretion, in form and substance satisfactory to Lender, to perfect and
continue the perfection of or better perfect Lender's Liens in the Collateral
(whether now owned or hereafter arising or acquired), and in order to consummate
fully all of the transactions contemplated hereby and under the other Loan
Documents. To the maximum extent permitted by Applicable Law, Borrower
authorizes Lender to execute any such Additional Documents in Borrower's name
and authorizes Lender to file such executed Additional Documents in any
appropriate filing office. In addition, on such periodic basis as Lender shall
require, Borrower shall (a) provide Lender with a report of all new patentable,
copyrightable, or trademarkable materials acquired or generated by Borrower
during the prior period, (b) cause all patents, copyrights, and trademarks
acquired or generated by Borrower that are not already the subject of a
registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in a
manner sufficient to impart constructive notice of Borrower's ownership thereof,
and (c) cause to be prepared, executed, and delivered to Lender supplemental
schedules to the applicable Loan Documents to identify such patents, copyrights,
and trademarks as being subject to the security interests created thereunder.
Borrower authorizes Lender to transmit, communicate or, as applicable, file any
financing statement under the UCC, record, in-lieu financing statement,
20
amendment, correction statement, continuation statement, termination statement
or other instrument, including those describing the Collateral as "all personal
property of Debtor" or "all assets of Debtor" or words of similar effect, in
such jurisdictions and in such filing offices as Lender may deem necessary or
desirable in order to perfect any security interest granted by Borrower under
this Agreement and the other Loan Documents without signature. Borrower hereby
ratifies, to the extent necessary, Lender's authorization to file a financing
statement, if such financing statement has been pre-filed by Lender prior to the
Agreement Date. Prior to repayment in full and final discharge of the
Obligations, Borrower shall not terminate, amend or file a correction statement
with respect to any financing statement filed pursuant to this Section 3.2(d)
without Lender's prior written consent.
(e) Borrower shall promptly notify Lender in writing upon incurring
or otherwise obtaining a commercial tort claim, as that term is defined in the
UCC, after the date hereof against any third party and, upon request of Lender,
promptly amend Schedule 1 to this Agreement, authorize the filing of additional
or amendments to existing financing statements and do such other acts or things
deemed necessary or desirable by Lender to give Lender a security interest in
any such commercial tort claim.
(f) Borrower shall xxxx its books and records as directed by Lender
and as may be necessary or appropriate to evidence, protect and perfect the
Security Interest and shall cause its financial statements to reflect the
Security Interest.
ARTICLE IV - PROCEEDS OF COLLATERAL, RECEIVABLES AND
COLLECTIONS
4.1 Borrower's Proceeds of Collateral. Borrower shall pay to Lender
all proceeds of Collateral, including Net Proceeds, immediately upon Borrower's
receipt thereof. The receipt of any payment item by Lender (whether from
transfers to Lender pursuant to the Lockbox Agreement or otherwise) shall not be
considered a payment on account unless such payment item is a wire transfer of
immediately available federal funds made to Lender's account or unless and until
such payment item is honored when presented for payment. Anything to the
contrary contained in this Agreement notwithstanding, any payment item shall be
deemed received by Lender only if it is received into Lender's account on a
Business Day on or before 11:00 a.m. East Coast Time. From and after the Closing
Date, Lender shall be entitled to charge Borrower for one (1) Business Day of
"clearance" or "float" at the Interest Rate on all collections that are received
(regardless of whether forwarded by the deposit banks to Lender). This clearance
or float charge on all collections is acknowledged by the parties to constitute
bargained for consideration of the pricing of the financing of Borrower and
shall apply irrespective of whether or not there are any outstanding monetary
Obligations.
4.2 Collection of Receivables and other Collateral.
(a) Borrower shall establish and maintain, at its expense, a
Lockbox, in the sole discretion of Lender, with such banks as are acceptable to
Lender pursuant to documentation satisfactory to Lender, in its discretion, into
which Borrower shall promptly deposit or cause to be deposited all Revenues.
Borrower shall direct and instruct all of its Account Debtors to directly remit
21
to such Lockbox all payments on Receivables and all other payments constituting
Revenues, in the identical form in which such payments are made, whether by
cash, check or other manner of payment. If, notwithstanding such instructions,
Borrower receives any Revenues, and upon receipt by Borrower of any such
Revenues, Borrower shall receive such payments as Lender's trustee, and Borrower
within one (1) Business Day deliver such payments to Lender in their original
form duly endorsed in blank. Borrower agrees that all payments made to the
Lockbox or other funds received and collected by Lender, whether in respect of
the Receivables, as other Revenues, or otherwise, shall be subject to Lender's
sole control and shall be treated as payments to Lender in respect of the
Obligations and therefore shall constitute the property of Lender to the extent
of the amount of the outstanding Obligations.
(b) Lender or its designee may, in Lender's sole discretion, at any
time during which an Event of Default exists, notify Account Debtors of the
Security Interest and collect Receivables directly from Account Debtors and
charge the collection costs and expenses to Borrower as additional Loans.
Whether or not a Default or an Event of Default has occurred, any of Lender's
officers, employees or agents shall have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender, or Borrower, to verify
the validity, amount or any other matter relating to any Receivables by mail,
telephone, electronic communication or otherwise. Borrower shall cooperate fully
with Lender in an effort to facilitate and promptly conclude any such
verification process.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender, as of the date of this
Agreement and at all times that Lender makes Loans to Borrower, as follows:
5.1 Existence, Power and Authority; Borrower Affiliates.
(a) Organization; Qualification. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, as identified in Schedule 1, having the corporate
power and authority to own its properties and to carry on its business as now
being and hereafter proposed to be conducted, and Borrower is duly qualified and
authorized to do business in the jurisdictions listed on Schedule 1 and in each
jurisdiction in which the nature of its business or the ownership and
characteristics of its property requires such qualification or authorization,
except where the failure to be so qualified would not have a Materially Adverse
Effect. The jurisdictions in which Borrower is qualified to do business as a
foreign entity are listed on Schedule 1.
(b) Power. Borrower has the right and power, and has taken all
necessary action to authorize it, to execute, deliver and perform the Loan
Documents in accordance with their respective terms. Each of the Loan Documents
has been duly executed and delivered by the duly authorized officers of Borrower
and each is, or each when executed and delivered in accordance with this
Agreement will be, a legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms. All of the
transactions contemplated under the Loan Documents are within Borrower's powers
and are not in contravention of law or the terms of Borrower's certificate of
incorporation, articles of incorporation, by-laws, or other organizational
22
documentation, or any material agreement or undertaking to which Borrower is a
party or by which Borrower or its property is bound, and does not result in the
creation or imposition of any lien, charge or encumbrance upon any assets of
Borrower, other than the Lien of Lender.
(c) Borrower Affiliates. Borrower has no Affiliates or Subsidiaries
except as set forth on Schedule 1.
(d) Capitalization. The outstanding shares of capital stock or
membership interests of Borrower have been duly and validly issued and are fully
paid and nonassessable, and the number and owners of such stock or membership
interests of Borrower are set forth on Schedule 1. Except as set forth on
Schedule 1, there are no existing warrants, options, or commitments of any kind
or nature convertible into capital stock or membership interests of any class of
Borrower.
(e) Business. Borrower is engaged principally in the business(es)
described on Schedule 1.
5.2 Compliance with Other Agreements and Applicable Law. Except as
set forth on Schedule 1, Borrower is not in default under, or in violation in
any respect of, any material agreement, contract, instrument or other commitment
to which Borrower is a party or by which Borrower or its property is bound, and
Borrower is in compliance in all material respects with all Governmental
Approvals applicable to or required in connection with the conduct of Borrower's
business and affairs, and Borrower is otherwise in compliance in all material
respects with all Applicable Laws.
5.3 Absence of Litigation. Except as set forth on Schedule 1, there
are no actions, proceedings or investigations pending or threatened against
Borrower, or any of its assets, which, if adversely determined against Borrower
can reasonably be expected to have a Materially Adverse Effect on the assets,
financial condition or business prospects of Borrower.
5.4 Taxes and Returns. Except as set forth on Schedule 1, Borrower
has timely filed all tax returns which Borrower is required by law to file or
has obtained valid extensions, and all taxes and other sums related to the
payment of taxes owing by Borrower to any governmental authority have been fully
paid and Borrower maintains adequate reserves to pay such tax liabilities as
they accrue.
5.5 Lien Priority and Nature of Certain Collateral.
(a) Liens. Lender has a perfected first priority security interest
in the Collateral (other than that portion of the Collateral securing the
Touch-1 Indebtedness and other than purchase money Liens that are Permitted
Liens) and, except for the Liens described on Schedule 1 and the other Permitted
Liens, none of the properties and assets of Borrower is subject to any Lien.
Other than the Financing Statements of Lender pursuant to this Agreement, no
financing statement under the Uniform Commercial Code of any state or other
instrument evidencing a Lien that names Borrower as debtor has been filed (and
has not been terminated) in any state or other jurisdiction, and no Borrower has
23
signed any such financing statement or other instrument or any security
agreement authorizing any secured party thereunder to file any such financing
statement or instrument, except to perfect the Liens listed on Schedule 1 and
the other Permitted Liens.
(b) Title. Except as set forth on Schedule 1, Borrower has valid and
legal title to, leasehold interest in, or license to use, all personal property,
real property, and other assets used in its business.
(c) Receivables. Each Eligible Receivable has arisen from the sale
and delivery of goods or from services rendered by Borrower, is genuine,
complete and, in all other respects, what it purports to be, and is not
otherwise ineligible under the standards set forth in this Agreement.
(d) Inventory. All Inventory is located on the premises set forth on
Schedule 1 or is Inventory in transit to one of such locations, except as
otherwise disclosed in writing to Lender. Borrower has not, within the twelve
(12) months preceding the Agreement Date, located any Inventory at premises
other than those set forth on Schedule 1.
(e) Equipment. All Equipment is in good order and repair in all
material respects, normal wear and tear excepted, and is located on the premises
set forth on Schedule 1. Borrower has not, within the twelve (12) months
preceding the Agreement Date, located any Equipment at premises other than those
set forth on Schedule 1.
(f) Real Estate. Borrower owns or leases no real property other than
that described on Schedule 1.
(g) Corporate and Fictitious Names. Except as otherwise disclosed on
Schedule 1, during the five-year (5) period preceding the Agreement Date,
neither Borrower nor any predecessor of Borrower has been known as or used any
corporate or fictitious name other than the name of Borrower as first set forth
in this Agreement.
5.6 Principal Place of Business. Borrower's principal places of
business or, if Borrower has more than one principal place of business,
Borrower's chief executive office, is located at the address set forth on the
signature page of this Agreement. All books and records pertaining to the
Collateral are kept by Borrower at its principal place of business or, if
Borrower has one, its chief executive office.
5.7 Environmental Compliance. Except as set forth on Schedule 1, to
the best of Borrower's knowledge, (i) none of Borrower's properties or assets
has ever been used by Borrower or by any previous owner or operator of such
properties or assets, in violation of any Environmental Laws; (ii) none of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any Environmental Laws as a hazardous substance or materials
disposal site, or a candidate for closure pursuant to any Environmental Laws;
(iii) no liens arising under any Environmental Laws has attached to any Revenues
or to any real or personal property owned or operated by Borrower; (iv) Borrower
has not received a summons, citation, notice or directive from any federal or
24
state governmental agency concerning any action or omission by Borrower
resulting from the violation of any Environmental Laws; (v) Borrower is now in
compliance with all Environmental Laws; and (vi) all material Governmental
Approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrower under any Environmental Laws have
been obtained, and all Governmental Approvals and similar authorizations are
valid and in full force and effect in all respects.
5.8 Proprietary Rights. A correct and complete schedule of all of
Borrower's trademarks, trademark applications, registered copyrights, copyright
applications, patents, patent applications, and service marks is set forth in
Schedule 1 and none of such rights is subject to any licensing agreement or
similar arrangement, except as set forth on Schedule 1 or as entered into in the
ordinary course of Borrower's business. To the best knowledge of Borrower none
of the Proprietary Rights of Borrower infringes on the valid trademark, trade
name, copyright, or patent right of any other person or entity, and no other
person's or entity's property infringes on the Proprietary Rights, in any
material respect. The Proprietary Rights of Borrower on Schedule 1 constitute
all of the property of such type necessary to the current and anticipated future
conduct of the business of Borrower.
5.9 Trade Names. All trade names or styles under which Borrower
sells Inventory or Equipment or creates Accounts, or to which instruments in
payment of Accounts are made payable, are listed on Schedule 1.
5.10 Employee Relations. Borrower has a stable work force in place
and Borrower is not, except as disclosed on Schedule 1, party to any collective
bargaining agreement nor has any labor union been recognized as the
representative of Borrower's employees, and Borrower knows of no pending,
threatened, or contemplated strikes, work stoppage or other labor disputes
involving any of Borrower's employees.
5.11 Employee Pension Benefit Plans. Each Plan meets the minimum
funding standards of Section 302 of ERISA, if applicable, and no Termination
Event has occurred with respect to any Plan of Borrower.
5.12 Bank Accounts. The information on Schedule 1 is a complete and
correct list of all checking accounts, deposit accounts, and other bank accounts
maintained by Borrower.
5.13 Accuracy and Completeness of Information. All representations
and warranties set forth in this Article V, and all statements and other
information furnished by or on behalf of Borrower in connection with this
Agreement or any of the Loan Documents are true and correct in all material
respects and do not omit any material fact. Each financial statement furnished
by or on behalf of Borrower presents fairly the financial condition of Borrower
as of the date of such statement and for the relevant period(s) then ended.
5.14 Software License Compliance. Borrower warrants and represents
that all software used by Borrower on any of Borrower's computers is either
Borrower's proprietary software or is duly licensed, maintained and operated in
compliance with the software owner's license terms and conditions.
25
5.15. Redeemable Securities. Borrower currently has certain redeemable
securities issued and outstanding, all as set forth in more detail on Schedule
5.15.
5.16 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Loan Documents shall
survive the execution and delivery of this Agreement, any investigation made by
or on behalf of Lender, or any Borrowing hereunder, and shall be deemed to have
been made again to Lender on the date of each additional Borrowing or other
credit accommodation under this Agreement, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall have been true and accurate on
and as of such earlier date) or have been subsequently expressly amended (in
which case such representations and warranties shall have been true and accurate
from and after the date of such amendment), and shall be conclusively presumed
to have been relied on by Lender regardless of any investigation made or
information possessed by Lender. The representations and warranties set forth in
this Agreement and in the other Loan Documents shall be cumulative and shall be
in addition to any other representations or warranties which Borrower shall now
or hereafter give, or cause to be given, to Lender.
ARTICLE VI - AFFIRMATIVE COVENANTS
Until this Agreement has been terminated and all Obligations have been
paid in full, Borrower covenants and agrees with Lender as follows:
6.1 Financial Statements. Borrower shall deliver to Lender, within
one hundred twenty (120) days following the close of each Fiscal Year,
Borrower's audited financial statements, certified by a recognized firm of
certified public accountants acceptable to Lender as having been prepared in
accordance with GAAP and as presenting fairly the financial condition of
Borrower as of the date thereof and for the period then ended (and including a
management letter to Borrower from such accountants, if prepared by such
accountants at Borrower's request, to be delivered not later than thirty (30)
days thereafter). Borrower shall deliver to Lender such other financial
information as Lender shall reasonably request, including, (i) within thirty
(30) days after the close of each month, reasonably detailed monthly and fiscal
year-to-date financial statements, including income statement, balance sheet,
and statement of cash flow, prepared in accordance with GAAP (subject to the
absence of notes and to annual audit adjustment), certified by the chief
executive officer or chief financial officer or other authorized individual of
Borrower as presenting fairly the financial condition of Borrower, (ii) within
forty-five (45) days following the close of each Fiscal Quarter, reasonably
detailed quarterly financial statements, including income statement, balance
sheet, and statement of cash flow, prepared in accordance with GAAP (subject to
the absence of notes and to annual audit adjustment), certified by the chief
executive officer or chief financial officer or other authorized individual of
Borrower as presenting fairly the financial condition of Borrower as of the date
thereof and for the period then ended, which, for the end of each such Fiscal
Quarter, shall also include a Covenant Compliance Certificate, setting forth a
calculation of the financial covenants described in Section 7.6 below, and the
26
status of all other monetary covenants set forth in this Agreement, and (iii) at
least thirty (30) days prior to the end of Borrower's Fiscal Year an annual
operating budget showing a projected income statement, balance sheet and cash
flows as of each Fiscal Quarter end for the forthcoming Fiscal Year.
6.2 Books and Records. Borrower shall keep accurate and complete
records of the Collateral and shall, at reasonable times and upon reasonable
notice, permit Lender to: (a) visit Borrower's business locations at intervals
to be determined by Lender; and (b) inspect, audit and make extracts from or
copies of Borrower's books, records, journals, receipts, computer tapes and
disks. The parties expressly acknowledge and agree that notice of twenty-four
(24) hours or more shall be reasonable in the event Borrower is not in default
of any of the Obligations at the time such inspection is requested, and that
prior notice shall not be required in the event Borrower is in default under any
of the Obligations at the time any such inspection is requested. All
governmental authorities are authorized to furnish Lender with copies of reports
of examinations of Borrower made by such parties. Banks, Account Debtors and
other third parties (without waiving any attorney-client privilege) with whom
Borrower has contractual relationships pertaining to the Collateral or the Loan
Documents, are authorized to furnish Lender with copies of such contracts and
related materials. Lender is authorized, in its own name or any other name, to
communicate with Account Debtors in order to verify the existence, amount and
terms of any Receivable.
6.3 Additional Documentation. Borrower shall execute and deliver to
Lender all additional documents that Lender may, from time to time, reasonably
determine are necessary or appropriate to evidence the Loans or to continue or
perfect Lender's Security Interest in the Collateral.
6.4 Existence, Name, Organization and Chief Executive Office.
Borrower shall maintain its existence in good standing and shall deliver to
Lender written notice, at least sixty (60) days in advance, of any proposed
change in Borrower's state of incorporation, a change in Borrower's name or
organizational identification number, a change in the use of any trade name, new
trade names, fictitious name or new fictitious names, Borrower's business
locations, the location of Borrower's principal place of business or chief
executive office, the mailing address of Borrower, the location of any Inventory
or Equipment, or the location of Borrower's books and records, and shall execute
or cause to be executed any and all documents that Lender reasonably requests in
connection therewith, including, in the case of any new location of Inventory
that is not owned by Borrower, a waiver and consent from the lessor of such
premises in form and substance acceptable to Lender.
6.5 Compliance with Laws and Taxes. Borrower shall comply in all
material respects with all Applicable Laws. Borrower shall promptly deliver to
Lender, upon request, an executed copy of any document filed or submitted to any
governmental body pursuant to Applicable Laws, each copy certified by Borrower
to be a true and correct copy thereof. Borrower 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; provided, however, that Borrower shall not be
27
required to pay any such tax, assessment, or charge so long as validity thereof
shall be actively contested in good faith by appropriate proceedings, the amount
of such taxes, assessments or charges in dispute do not exceed the sum of
$100,000.00 in the aggregate at any time, Borrower shall have set aside on its
books adequate reserves, which reserves shall be derived from sources other than
directly from Lender, and Borrower shall have reported same on an amended
Covenant Compliance Certificate reviewed and approved by Lender; but provided
further that any such tax, assessment, or charge shall be paid forthwith upon
the commencement of proceedings to foreclose any lien securing the same.
Borrower shall promptly deliver to Lender, upon request, receipted bills
evidencing payment of such taxes and assessments.
6.6 Performance of Obligations. Borrower shall perform, in a timely
manner, all of its obligations pursuant to all 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, except only, and to the extent
that, the amount of any such debt and claims is being contested by Borrower in
good faith by appropriate proceedings and Borrower maintains on its books
reasonable reserves therefor in accordance with GAAP.
6.7 Reporting as to Revenues, Receivables and Inventory.
(a) With such frequency as Lender shall direct, Borrower
shall deliver to Lender such information as Lender shall request with respect to
the Revenues, Receivables and Inventory, including, but not limited to:
i. no later than 5:00 p.m. East Coast time on the
first to occur of (A) the day on which Borrower requests a Revolving
Loan Advance or (B) Wednesday of each week, a weekly Borrowing Base
Certificate based on the Receivables and Inventory as of the end of the
preceding week, together with a detailed summary of sources of all of
the Revenues, including sales of Inventory, and credits and collections
associated with Receivables.
ii. no later than the fifteenth (15th) day of each
month, a Borrowing Base Certificate based upon the Receivables and
Inventory as of the end of the preceding month, together with a
detailed summary of the sources of all of the Revenues, including sales
of Inventory and credits and collections associated with Receivables,
for the preceding month;
iii. no later than the fifteenth (15th) day of each
month, detailed schedules showing the aging of Receivables and
Borrower's accounts payable as of the end of the preceding month;
iv. On a daily basis, an invoice register or sales
journal describing all sales of Borrower for the immediately preceding
day, in form and substance acceptable to Lender;
28
v. no later than ten (10) days following Lender's
request therefore, a complete and updated list of Borrower's customers,
not including consumer or residential customers, which list shall
include the name, address and telephone number of each such customer;
and
vi. any other reports reasonably requested by Lender
including, but not limited to, dilution analysis, origination reports
and default/charge-off reports, in form and substance acceptable to
Lender.
b. Borrower shall notify Lender promptly if:
i. Borrower enters into a long-term contract with
the United States of America, and, if requested by Lender, Borrower
shall execute all instruments and take all steps necessary to insure
that all amounts due and to become due under such long-term contract
are properly assigned to Lender pursuant to the Assignment of Claims
Act of 1940 or otherwise;
ii. Borrower receives information with regard to any
type or item of Collateral which might have in any way a Materially
Adverse Effect on the value of the Collateral as a whole or the rights
and remedies of Lender with respect thereto; and
iii. any accounts due and owing in which amounts in
excess of $20,000 are in dispute by any single Account Debtor on an
Eligible Receivable ($500,000 in the aggregate in the case of carrier
disputes in the ordinary course of business), and/or any accounts due
and owing which jeopardizes any contract or agreement then in effect,
and Borrower shall explain in detail the reason for the dispute, all
claims related to the dispute, and the amount in controversy;
6.8 Over-Advance. If, at any time, the aggregate unpaid principal
amount of any of the Loans, including without limitation, all amounts deemed to
be Revolving Loan Advances in accordance with Section 1.4, exceeds any
applicable limit set forth in this Agreement, Borrower shall immediately pay to
Lender the amount of any such excess and all accrued interest and other charges
owing to Lender with respect thereto.
6.9 Breach or Default. Borrower shall notify Lender immediately upon
the occurrence of any circumstance which: (a) makes any representation or
warranty of Borrower contained in this Agreement or any other Loan Document
incorrect or misleading in any material respect; or (b) constitutes an Event of
Default.
6.10 Maintenance of Assets. Borrower shall maintain all of its real
and personal property in good repair, working order and condition, normal wear
and tear excepted, shall make all necessary replacements to such property so
that the value and the operating efficiency of such property will be preserved,
shall prevent any personal property from becoming a fixture to real estate
(unless owned by Borrower and encumbered by a mortgage, deed of trust, security
deed or similar agreement in favor of Lender), and will pay or cause to be paid
all rental or mortgage payments due on its real property.
29
6.11 Insurance. Borrower shall procure and continuously maintain: (a)
"All Risk Extended Coverage" property insurance covering Borrower's tangible
personal property for the full replacement value thereof; (b) "All Risk Extended
Coverage" business interruption insurance in an amount acceptable to Lender; (c)
liability insurance in an amount acceptable to Lender; and (d) such other
customary insurance coverages as are reasonably specified by Lender from time to
time. Each property and business interruption insurance policy shall contain a
standard Lender's Loss Payable Endorsement in favor of Lender, providing for,
among other things, thirty (30) days prior written notice to Lender of any
cancellation, non-renewal or modification of such coverage. Borrower shall
deliver to Lender certified copies of such policies and all required
endorsements, or other evidence of such insurance acceptable to Lender. All
amounts received by Lender from any such insurance policies may be applied by
Lender to the Obligations. If Borrower fails to procure required insurance or
such insurance is canceled or otherwise lapses, Lender may procure such
insurance and add the cost of such insurance to the principal balance of the
Loans.
6.12 Use of Proceeds. Borrower shall use the proceeds of all
Revolving Loan Advances and all other loans or accommodations made by Lender for
Borrower for legal and proper business purposes, and only for those purposes
described on Schedule 1, and not for any personal, family or household purposes
or for any purpose prohibited by law or by the terms and conditions of this
Agreement or any of the Loan Documents.
6.13 Disclosure. Promptly and in no event later than five (5)
Business Days after obtaining knowledge thereof, Borrower shall (i) notify
Lender if any written information, exhibit, or report furnished to Lender
contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which made, and (ii) correct any defect or
error that may be discovered therein or in any Loan Document or in the
execution, acknowledgment, filing, or recordation thereof.
6.14. Plan Regarding Redemption of Securities. Borrower shall cause
its parent, Z-Tel Technologies, Inc., to deliver to Lender, no later than July
18, 2006, a written plan detailing, in form and substance acceptable to Lender,
the source of funds available to Borrower with which Borrower shall redeem the
securities described in Section 5.15 above to be redeemed prior to the
termination hereof, without such redemption resulting in a Default or Event of
Default hereunder.
6.15 Further Assurances. Borrower will promptly cure, or cause to be
cured, defects in the execution and delivery of the Loan Documents (including
this Agreement), resulting from any act or failure to act by Borrower or any of
the employees or officers thereof. Borrower, at its expense, will promptly
execute and deliver to Lender, or cause to be executed and delivered to Lender,
all such other and further documents, agreements, and instruments in compliance
with or accomplishment of the covenants and agreements of Borrower in the Loan
Documents, including this Agreement, or to correct any technical omissions in
the Loan Documents, or to obtain any consents that are necessary in connection
with or in accomplishment of the covenants and agreements of Borrower, all as
may be necessary or appropriate in connection therewith as may be requested by
Lender.
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6.16 Brokerage Commissions. Borrower shall pay any and all brokerage
commission or finders fees incurred in connection with or as a result of
Borrower's obtaining financing from Lender under this Agreement. Borrower agrees
to indemnify, defend, and hold Lender harmless from and against any claim of any
broker or finder arising out of Borrower's obtaining financing from Lender under
this Agreement.
ARTICLE VII - BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees with Lender as follows:
7.1 Business, Management and Organization. Borrower shall not: (a)
make any material change in its management, which includes the following: the
removal of Xxxxxx "Xxxx" Xxxxx, III and/or D. Xxxxxxx Xxxxx, and a replacement
officer acceptable to Lender, in its sole discretion is not named by Borrower
within ninety (90) days from the date of such removal; (b) make any material
change in the nature of the business that Borrower presently conducts; (c)
change its name except after first complying with Section 6.4 of this Agreement;
(d) change its state of incorporation or its type of organization (that is, from
a corporation); or (e) merge or consolidate with any Person or purchase any
stock or assets of any other Person, other than assets used by Borrower in the
ordinary course of its business, other than Permitted Investments, or other than
as provided in section 7.9 hereof.
7.2 Disposition of Assets. Borrower shall not: (a) encumber the
Collateral in favor of any party other than Lender, whether voluntarily or
involuntarily, other than the Permitted Liens; or (b) sell, consign, lease or
remove from Borrower's business locations any of Borrower's assets except that,
until Lender gives Borrower notice to the contrary during the existence of any
Event of Default, Borrower may (i) sell Inventory in the ordinary course of its
business (any sale or exchange of Inventory in satisfaction of indebtedness of
Borrower shall not be deemed a sale of Inventory in the ordinary course of
business); (ii) sell or dispose of obsolete assets that constitute Collateral
which Borrower has determined, in good faith, not to be useful in the conduct of
its business and which, in any Fiscal Year, do not have an aggregate fair market
value in excess of $100,000.00; (iii) sell or dispose of obsolete assets that do
not constitute Collateral which Borrower has determined, in good faith, not to
be useful in the conduct of its business; and (iv) sell or dispose of accounts
in the course of collection in the ordinary course of business, so long as any
accounts sold or disposed of shall not be included in the Borrowing Base, and
any and all payments for such accounts shall be treated as set forth in
Paragraph 4.2 of this Agreement.
7.3 Loans and Guarantees. Borrower shall not make any loan or
contribute money, goods or services to, or guaranty or agree to become liable
for any obligation of, any other Person, including any Affiliates of Borrower or
any Interested Party, other than: (a) loans to employees of Borrower for
reimbursable expenses incurred by such employees in the normal course of
Borrower's business; (b) sales of Inventory in the ordinary course of business;
(c) guaranties and endorsements made in connection with the deposit of
negotiable instruments and other items for collection or credit in the ordinary
course of business, and (d) Permitted Investments.
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7.4 Investments. Borrower shall not make any Investment other than
Permitted Investments.
7.5 Distributions and Salaries. Borrower shall not, without
Lender's written consent:
(a) make any dividend, distribution or payment on or with respect to
any shares, or purchase, redeem or otherwise acquire or retire any of its stock
except (i) distributions of cash in an aggregate amount not to exceed $50,000 in
any Fiscal Year and distributions of shares, each in connection with the
conversion of existing shares into other shares of stock, (ii) repurchases of
stock from former employees or directors of Borrower under the terms of
applicable repurchase agreements or otherwise, such repurchases not to exceed in
the aggregate $50,000.00 in any Fiscal Year, (iii) in respect of redemption of
the securities described in Schedule 5.15 hereof (provided that no Default or
Event of Default is created hereunder by such redemption), or (iv) dividends or
distributions to a Borrower.
(b) increase, whether by election, promotion or otherwise, the
aggregate salaries and other compensation paid to existing officers of Borrower
by more than ten percent (10%) in the aggregate in any Fiscal Year.
7.6 Financial Covenants.
(a) Borrower shall not permit the Fixed Charge Coverage Ratio to be
less than (1.29) to 1.0 as of the end of the Fiscal Quarter ending June 30,
2004, nor less than (0.28) to 1.0 as of the end of the Fiscal Quarter ending
September 30, 2004, nor less than 1.12 to 1 as of the end of the Fiscal Quarter
ending December 31, 2004, nor less than 1.0 to 1.0 for the immediately preceding
rolling six-month period ending March 31, 2005, nor less than 1.0 to 1.0 for the
immediately preceding rolling nine-month period ending June 30, 2005, and nor
less than 1.0 to 1.0 for the immediately preceding rolling twelve-month period
ending September 30, 2005, and thereafter.
(b) Borrower shall not permit Receivable Turnover to exceed 50 days
during any rolling twelve-month period.
(c) Borrower shall not permit Unfunded Capital Expenditures to
exceed $9,000,000 per year during the term of this Agreement.
All amounts referenced in this Section shall be determined in
accordance with GAAP.
7.7 Change of Control. Borrower shall not cause, permit, or suffer,
directly or indirectly, any Change of Control.
7.8 Limitation on Indebtedness for Money Borrowed. Borrower shall
not create or suffer to exist any Indebtedness for Money Borrowed except: (i)
the Indebtedness for Money Borrowed by Borrower to Lender under this Agreement
and the Loan Documents; (ii) Indebtedness for Money Borrowed outstanding as of
the Closing Date and listed on Schedule 1(T); (iii) Indebtedness for Money
Borrowed secured by Permitted Liens; (iv) other Indebtedness for Money Borrowed
in an aggregate amount not to exceed $100,000.00; and (v) Subordinated
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Indebtedness. Notwithstanding the foregoing, any Indebtedness for Money Borrowed
created or incurred after the Closing Date (other than Indebtedness secured by
purchase money Liens which are Permitted Liens) shall (i) be expressly
subordinate to the Credit Facility; (ii) contain a maturity date that is
subsequent to the Termination Date; (iii) not require any payment other than
accrued interest during the term of the Facility; (iv) expressly provide that
upon the occurrence and during the continuation of an Event of Default, no
payment shall be required with respect to such Indebtedness.
7.9 Mergers; Consolidations; Acquisitions. Borrower shall not (i)
merge or consolidate, or permit any Subsidiary of Borrower to merge or
consolidate, with any other Person, except that Borrower or any Subsidiary may
merge or consolidate with another Person with the prior written consent of
Lender, nor (ii) acquire, or permit any of its Subsidiaries to acquire, all or
any substantial part of the properties and assets or Securities of any Person
(other than from Borrower or a Subsidiary), other than assets used by Borrower
or the Subsidiary in the ordinary course of its business and other than
Permitted Investments, except that Borrower or any Subsidiary may acquire such
property of any other Person with the prior written consent of Lender.
7.10 Subsidiaries. After the Closing Date, Borrower shall not create
any Subsidiary nor transfer any assets to any Subsidiary, except with the prior
written consent of Lender.
7.11 Fiscal Year. Borrower shall not change its Fiscal Year end for
accounting purposes.
7.12 Affiliate Transactions. Borrower shall not enter into or be a
party to any agreement or transaction with any Affiliate except (i) in the
ordinary course of Borrower's business and upon fair and reasonable terms that
are no less favorable to Borrower than it would obtain in a comparable arms
length transaction with a Person not an Affiliate of Borrower, and on terms
consistent with the business relationship of Borrower and such Affiliate prior
to the Agreement Date, if any, and fully disclosed to Lender, and (ii)
transactions in the ordinary course of Borrower's business for the provision or
receipt of services of an administrative, support, or other similar nature.
7.13 Subordinated Indebtedness. Upon the occurrence and during the
continuation of an Event of Default, no Borrower shall make any payment with
respect to any Subordinated Indebtedness or amend any document relating to the
Subordinated Indebtedness.
ARTICLE VIII - CONDITIONS PRECEDENT
8.1 Initial Credit. The obligation of Lender to extend any credit
under this Agreement is subject to the fulfillment to Lender's satisfaction of
all of the following conditions:
(a) All legal matters incidental to the extension of credit by
Lender shall be satisfactory to counsel of Lender.
(b) Lender shall have received, in form and substance satisfactory
to Lender, each of the following, duly executed:
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i. This Agreement;
ii. The Trademark Agreement;
iii. Borrower's borrowing resolutions, together with a
secretary's certificate;
iv. UCC-1 Financing Statements;
v. An opinion of Borrower's counsel;
vi. The Deposit Control Agreement;
vii. Lockbox Agreement;
viii. A Landlord Waiver and Consent from each of Borrower's
landlords;
ix. All releases, terminations, agreements and other
documents as Lender may request to effect and
evidence termination of the existing financing
arrangements of Borrower and the interests of any
other lender or lenders pursuant to any such
financing arrangements in any assets and properties
of Borrower;
x. A Borrowing Base Certificate dated as of the
Agreement Date;
xi. The payoff letter from the Existing Lender; and
xii. Such other documents as Lender may require under this
Agreement.
(c) Lender shall have received evidence of insurance and loss payee
endorsements and/or certificates of insurance naming Lender as loss payee, as
required under this Agreement, in form and substance satisfactory to Lender, at
Borrower's cost and expense.
(d) Lender shall have completed a field review of the records and
other information with respect to the Collateral as Lender may require, the
results of which (including evidence of segregation and identification of
Collateral) shall be satisfactory to Lender in its discretion.
(e) Lender shall have received and reviewed UCC search results for
all jurisdictions in which assets of Borrower are located in the United States,
in form and substance satisfactory to Lender.
(f) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first security
interest in all of the Collateral except as otherwise permitted under this
Agreement.
(g) Lender shall have completed its business, legal and collateral
due diligence, including a collateral audit and review of Borrower's books and
records, contracts with Account Debtors conducted by Lender and verification of
34
Borrower's representations and warranties to the Lender, the results of which
shall be satisfactory to Lender.
(h) Lender shall have completed background checks with respect to
certain principal owners and managers of Borrower, the results of which shall be
satisfactory to Lender in its sole discretion.
(i) Lender shall be satisfied in its sole discretion that there are
no offset arrangements between the Borrower and Account Debtors, including any
related buy-back agreements.
(j) No Default or Event of Default shall have occurred and be
continuing.
(k) All representations and warranties of Borrower set forth in this
Agreement shall be true and correct in all material respects.
(l) The Parties shall have completed or delivered, as applicable, all
items on the checklist of closing items in connection with this Agreement, each
to the satisfaction of Lender in its discretion.
8.2 Initial and Subsequent Credit. The obligation of Lender to make
each extension of credit requested by Borrower under this Agreement, including
without limitation, the initial Revolving Loan Advance and any subsequent
Revolving Loan Advance shall be subject to the fulfillment to Lender's
satisfaction of all of the following conditions:
(a) The representations and warranties contained in this Agreement
and in each of the other Loan Documents shall be true on and as of the date of
the signing of this Agreement and on the date of each extension of credit or the
making of any Loans by Lender pursuant to this Agreement, with the same effect
as though such representations and warranties had been made on and as of each
such date, and on each such date, no Event of Default, and no condition, event
or act which with the giving of notice or the passage of time or both would
constitute an Event of Default, shall have occurred and be continuing or shall
exist.
(b) Lender shall have received all additional documents that Lender
may require in connection with such extension of credit, in form and substance
satisfactory to Lender.
(c) There shall be no material adverse change, as determined by
Lender in its discretion, since December 31, 2003, in the financial condition or
business of Borrower or any Guarantor, nor any material decline, as determined
by Lender in its discretion, in the market value of any Collateral or a
substantial or material portion of the assets of Borrower or any Guarantor.
ARTICLE IX - EVENTS OF DEFAULT; REMEDIES
9.1 Events of Default. The occurrence or existence of any one or
more of the following events or conditions, whether voluntary or involuntary,
shall constitute an Event of Default.
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(a) Borrower fails to pay when due (whether due at stated maturity,
on demand, upon acceleration or otherwise) any installment of principal, over
advance, interest, premium, if any, and fees on any of the Loans, or otherwise
owing under this Agreement.
(b) Borrower fails to pay any of the other Obligations on the due
date thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise) and such failure shall continue for a period of ten (10) days after
Lender's giving Borrower written notice thereof;
(c) Borrower or any other Obligor fails or neglects to perform, keep
or observe any covenant contained in this Agreement or the other Loan Documents
(other than a covenant which is dealt with specifically elsewhere in this
Section 9.1) and the breach of such other covenant in this Agreement or the
other Loan Documents is not cured within twenty (20) days after the sooner to
occur of Borrower's or such other Obligor's receipt of notice of such breach
from Lender or the date on which such failure or neglect first becomes known to
any officer of Borrower or such other Obligor;
(d) Any representation or warranty made by or on behalf of Borrower
or any other Obligor, or other information provided by or on behalf of Borrower
or any other Obligor to Lender, was incorrect or misleading in any material
respect at the time it was made or provided;
(e) Borrower or Borrower Affiliate defaults: (i) as primary or
secondary obligor, in the payment of any principal or interest on any
Indebtedness for Money Borrowed (other than the Obligations) in excess of
$100,000.00, or in the payment of any portion of the Touch 1 Indebtedness, and
such default continues beyond any applicable grace period or, if such
Indebtedness is payable on demand, fails to pay such Indebtedness upon demand;
or (ii) in the observance of any covenant, term or condition contained in any
agreement evidencing, securing or relating to any Indebtedness for Money
Borrowed (other than the Obligations) in excess of $100,000.00, or in the
observance of any covenant, term or condition contained in any document
evidencing any portion of the Touch 1 Indebtedness, if the effect of such
default is to cause, or to permit any other party to such Indebtedness to cause,
all or part of such Indebtedness to become due before its stated maturity;
(f) A writ of attachment, garnishment execution, distraint or
similar process in excess of $100,000.00 is issued against Borrower, any
Borrower Affiliate, or any of its respective properties except for any such writ
of attachment, garnishment execution, distraint or similar process that is
subject to a bona fide dispute by Borrower, is properly contested by appropriate
proceedings promptly instituted and diligently conducted, and Borrower shall
have set aside on its books reserves of at least one hundred twenty-five percent
(125%) of the face amount of such writ of attachment, garnishment execution,
distraint or similar proceeding, which reserves shall be derived from sources
other than directly from Lender, and/or Lender shall have set aside Reserves
that Lender deems adequate;
(g) Lender determines, in its reasonable discretion, that a
Materially Adverse Effect has occurred;
36
(h) Borrower becomes insolvent or bankrupt; makes an assignment for
the benefit of creditors or consents to the appointment of a trustee or
receiver; a trustee or a receiver is appointed for Borrower or for a significant
portion of Borrower's assets; bankruptcy, reorganization or insolvency
proceedings are instituted by or against Borrower; or if any of the foregoing
occurs with respect to any guarantor or other party liable for any of Borrower's
obligations owing to Lender;
(i) Any judgment or order for the payment of money in excess of
$100,000.00, or in excess of $300,000.00 in the aggregate for all such judgments
or orders, is entered against Borrower, unless the same shall be (i) fully
covered by insurance and the issuer of the applicable policy shall have
acknowledged full coverage in writing within thirty (30) days of judgment, or
(ii) vacated, stayed, bonded, paid or discharged within a period of thirty (30)
days from the date of such judgment or order, or (iii) Borrower shall have set
aside on its books reserves of at least one hundred twenty-five percent (125%)
of the face amount of such judgment or order, which reserves shall be derived
from sources other than directly from Lender, and/or Lender shall have set aside
Reserves that Lender deems adequate;
(j) Any Loan Document is terminated other than as provided for in
this Agreement or becomes void or unenforceable, or any Security Interest ceases
to be a valid and perfected first priority security interest in any portion of
the Collateral, other than as a result of the Permitted Liens;
(k) Borrower conceals, removes, or permits to be concealed or
removed, any of its assets with the intent to hinder, delay or defraud Lender or
any of any Borrower's other creditors;
(l) A Guarantor, surety or endorser for any of the Obligations
revokes, terminates or fails to perform any of the terms of any Guaranty,
endorsement or other agreement of such party in favor of Lender, or
prospectively terminates or revokes such Guaranty or surety;
(m) Any Guarantor or any general partner of any Guarantor dies and,
such Guarantor or general partner has not been replaced within forty-five (45)
days of the death of that person by another Person creditworthy in Lender's
reasonable judgment as the original Guarantor or general partner;
(n) Any loss, theft, damage or destruction of any item of Collateral
or other property of Borrower which has a Materially Adverse Effect;
(o) There is filed against Borrower or any guarantor or other party
liable for any of Borrower's Obligations any civil or criminal action, suit or
proceeding under any federal or state racketeering statute (including, without
limitation, the Racketeer Influenced and Corrupt Organization Act of 1970),
which action, suit or proceeding could result in the confiscation or forfeiture
of any material portion of the Collateral;
(p) Any Termination Event with respect to any Plan shall have
occurred; or a decision shall have been made by Borrower or Borrower Affiliate,
or any member of the "controlled group of corporations"(as defined in Section
37
1563(a)(4) of the Internal Revenue Code determined without regard to Sections
1563(a) and (e)(3)(c) of such Code) of which Borrower or Borrower Affiliate is a
party, to terminate, file a notice of termination with respect to, or withdraw
from, any Plan; and
(q) Any default, event of default, or breach occurs with respect to
any real property lease for any of Borrower's business locations, and is not
cured within any applicable grace or cure periods.
9.2 Lender's Remedies. In addition to any other rights and remedies
that Lender may have, upon the occurrence and during the continuance of an Event
of Default, Lender may:
(a) Without notice to, or demand upon, Borrower:
i. discontinue making any further Loans;
ii. terminate this Agreement;
iii. declare all Obligations to be immediately due and
payable;
iv. take possession of all or any portion of the Collateral,
wherever located, and enter on any of the premises where any of the
Collateral may be and remove, repair and store any of the Collateral
until it is sold or otherwise disposed of (Lender shall have the right
to store, without charge, all or any portion of the Collateral at any
of Borrower's business locations);
v. use, without charge, Borrower's Proprietary Rights,
advertising materials, or any property of a similar nature, in
advertising for sale and selling any of the Collateral; and
vi. renew, modify or extend any Receivable, grant waivers or
indulgences with respect to any Receivable, accept partial payments on
any Receivable, release, surrender or substitute any security for
payment of any Receivable, or compromise with, or release, any party
liable on any Receivable in such a manner as Lender may, in its sole
discretion deem advisable, all without affecting or diminishing
Borrower's Obligations to Lender.
(b) With notice to Borrower:
i. require Borrower, at Borrower's expense, to assemble the
Collateral and make the Collateral available to Lender at locations
reasonably convenient to Lender and Borrower; and
ii. sell or otherwise dispose of all or any portion of the
Collateral at public or private sale for cash or credit, with such
notice as may be required by law (in the absence of any contrary
requirement, Borrower agrees that ten (10) days prior notice of a
public or private sale of the Collateral is reasonable), in lots or in
bulk, all as Lender, in its sole discretion, may deem advisable. Lender
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shall have the right to conduct any such sales, without charge, at
Borrower's business locations. Lender may purchase all or any portion
of the Collateral at public sale and, if permitted by law, at private
sale and, in lieu of actual payment of the purchase price, may offset
the amount of such price against the outstanding amount of the Loans
and any other amounts owing from Borrower to Lender. Proceeds realized
from the sale of any Collateral will be applied in the following order:
(a) to the reasonable costs, expenses and attorneys' fees incurred by
Lender in connection with the collection, acquisition, protection and
sale of the Collateral; (b) to any accrued and unpaid interest owing
from Borrower to Lender; and (c) to any other amounts owing from
Borrower to Lender. Borrower agrees that Borrower will remain fully
liable for any deficiency owing to Lender after the proceeds of the
Collateral have been applied to the Loans and all other amounts owing
from Borrower to Lender.
(c) If any of the Collateral shall require repairing, maintenance,
preparation, or the like, or is in process or other unfinished state, Lender
shall have the right, but not the obligation, to repair or perform such
maintenance, preparation, processing or completion of manufacturing to place the
same in such saleable condition as Lender shall deem appropriate, but Lender
shall have the right to sell or dispose of such Collateral with or without such
processing.
ARTICLE X - JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; AND GOVERNING LAW
10.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver
(a) The provisions of this Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island, without
reference to applicable conflict of law principles.
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of Rhode Island Courts in connection with the
resolution of any disputes relating to this Agreement or the other Loan
Documents. Borrower irrevocably waives any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Loan Documents, or in any way connected with or
related or incidental to the dealings of the parties in respect of this
Agreement or the other Loan Documents or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agrees that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or otherwise
enforce its rights against Borrower or its property, or any guarantor of the
Obligations.
(c) Borrower waives personal service of any and all process upon it
and consents that all such service of process may be made by registered mail
(return receipt requested) directed to Borrower at the address set forth below
and service so made shall be deemed to be completed five (5) Business Days after
the same shall have been so deposited in the United States mails. Nothing
39
contained in this Agreement shall affect the right of Lender to serve legal
process by any other manner permitted by law.
(d) BORROWER AND LENDER EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THIS AGREEMENT IN RESPECT OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE RELATED TRANSACTIONS, INCLUDING
WITHOUT LIMITATION, THE OBLIGATIONS OF BORROWER AND ANY GUARANTOR, THE
COLLATERAL, OR ANY INSTRUMENT, DOCUMENT OR GUARANTY DELIVERED PURSUANT TO THIS
AGREEMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION,
COLLECTION OR ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
WHETHER NOW EXISTING OR HEREAFTER ARISING, WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE. BORROWER AND LENDER EACH HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF
THEIR RIGHT TO A TRIAL BY JURY.
(e) Borrower hereby releases and exculpates Lender, its officers,
employees and designees, and Lender shall not have any liability to Borrower
(whether in contract, tort, equity or otherwise) for losses suffered by Borrower
in connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted at all times in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.
10.2 Waiver of Certain Claims and Counterclaims. In no event shall
Lender have any liability to Borrower for lost profits or other special,
consequential, incidental, exemplary or punitive damages in connection with this
Agreement or any of the other Loan Documents or the transactions contemplated
hereby or thereby, and Borrower expressly waives any and all right to assert any
such claims. Borrower further waives all rights to interpose any claims,
deductions, setoffs, recoupment, or counterclaims of any nature (other than
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto. No officer of Lender has any authority to waive,
condition, or modify the provisions of this section.
10.3 Indemnification. Borrower agrees to indemnify, save and hold
harmless Lender and its directors, officers, agents, attorneys and employees
from and against: (i) the use or contemplated use of the proceeds of any of the
Loans, any transaction contemplated by this Agreement or the other Loan
Documents, or any relationship with Borrower or any other party to this
40
Agreement or the other Loan Documents; (ii) any administrative or investigative
proceeding by any governmental agency arising out of or related to a claim,
demand, action or cause of action described in clause (i) above; and (iii) any
and all liabilities, losses, costs or expenses (including reasonable attorneys'
fees and disbursements and other professional services) that any party
indemnified hereunder suffers or incurs as a result of any foregoing claim,
demand, action or cause of action; provided, however, that no such indemnitee
shall be entitled to indemnification for any loss caused by its own gross
negligence or willful misconduct. Any obligation or liability of Borrower to any
such indemnitee under this section shall survive the expiration or termination
of this Agreement and the repayment of the Loans and performance of all
Obligations.
ARTICLE XI - MISCELLANEOUS
11.1 Power of Attorney. Borrower irrevocably appoints Lender, and any
person designated by Lender, as Borrower's true and lawful attorney-in-fact to:
(a) endorse for Borrower, in Lender's or Borrower's name, any draft or other
order for the payment of money payable to Borrower; and (b) execute and file or
submit for recording, in Lender's or Borrower's name, Financing Statements
describing the Collateral. Lender shall not be liable to Borrower for any action
taken by Lender or its designee under this power of attorney, except to the
extent that such action was taken by Lender in bad faith or with gross
negligence or willful misconduct. Borrower agrees that a carbon, photographic or
other reproduction of a Financing Statement or this Agreement may be filed by
Lender as a Financing Statement.
11.2 Outstanding Loan Balance. 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.
11.3 Modifications and Course of Dealing. This Agreement constitutes
the entire agreement of Borrower and Lender 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 any
of the Loan Documents 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.
11.4 Assignment and Participation. Borrower may not assign or
transfer any of its rights or delegate any of its obligations under this
Agreement or any of the other Loan Documents. Lender shall have the right, from
time to time, without notice to Borrower, to sell, assign or otherwise transfer
all or any part of its interest in this Agreement, the other Loan Documents, and
the Loans to any other party, or enter into participation arrangements with any
other party. Borrower authorizes Lender to deliver to potential assignees or
participants Borrower's financial information and all other information
delivered to Lender in furtherance of or pursuant to the terms of this
Agreement.
41
11.5 Delegation of Duties. Lender may execute any of its duties under
this Agreement or the other Loan Document by or through agents, employees or
attorneys-in-fact. Lender shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact selected by Lender as long as such
selection was made without gross negligence or willful misconduct.
11.6 Notices. Except as otherwise provided herein, whenever any
notice, demand, request or other communication shall or may be given to or
served upon any party by any other party, or whenever any party desires to give
or serve upon any other party any communication with respect to this Agreement,
each such communication shall be in writing and shall be deemed to have been
validly served, given or delivered (a) upon the earlier of actual receipt and
five (5) Business Days after deposit in the United States mail, registered or
certified mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States mail as otherwise provided in this Section
11.6), (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid or (d) when hand-delivered, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number indicated in the signature page to this Agreement or to such other
address (or facsimile number) as may be substituted by the giving of notice of
such substitution. Delivery of a copy of any notice under this Section 11.6 to
an individual designated on the signature page as "with a copy to" shall not be
deemed notice to a party.
11.7 Expenses. Borrower agrees to pay, and to hold Lender harmless
from and against, all reasonable out-of-pocket expenses incurred by Lender
(including allocated costs of staff counsel) in connection with any amendments,
waivers or consents relating to this Agreement or any of the other Loan
Documents. Borrower further agrees to pay any reasonable fees, costs, or
expenses incurred by Lender arising in connection with Lender's enforcement or
preservation of its rights under this Agreement or any other Loan Document, or
in the collection of any of the Loans, including without limitation, attorneys'
fees (including allocated costs of staff counsel), expert fees, and legal costs.
Borrower also agrees to pay or reimburse Lender for the costs of conducting the
appraisal of Borrower's Inventory.
11.8 Assignment of Receivables and Inventory. This Agreement may be
supplemented by separate assignments of Receivables and Inventory and, if such
assignments are executed, the rights and interests given by Borrower pursuant to
such assignments shall be in addition to, and not in limitation of, the rights
and security interests given by Borrower under this Agreement. Lender will not
be responsible for the safekeeping of any Inventory delivered to Lender, for the
collection of proceeds of any of the Collateral, or for losses of collected
proceeds held by Borrower in trust for Lender.
11.9 Binding Effect; Severability. 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 and
Lender. All of Borrower's obligations under this Agreement are absolute and
unconditional and 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
42
unenforceability without in any manner effecting the validity or enforceability
of the remaining provisions of this Agreement.
11.10 Final Agreement. This Agreement and the other Loan Documents are
intended by Borrower and Lender 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 provision of any of the other Loan Documents shall be made,
except by a written agreement signed by Borrower and a duly authorized officer
of Lender.
11.11 Counterparts. This Agreement may be executed in any number of
counterparts, and by Lender and Borrower in separate counterparts, each of which
shall be an original, but all of which shall taken together constitute one and
the same agreement. The parties hereby acknowledge and agree that facsimile
signatures of this Agreement shall have the same force and effect as original
signatures.
11.12 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.
11.13 Borrower's Representative. Borrower hereby appoints and
authorizes Xxxxxx "Xxxx" Xxxxx, III to act as its representative and agent
hereunder to issue notices and other communications on its behalf (the "Borrower
Representative"). Notwithstanding any provision herein to the contrary, Lender
agrees that any notice or other communication issued by an authorized
representative on behalf of Borrower Representative shall be acknowledged as a
notice or other communication properly issued by Borrower and that it shall not
recognize any notice or other communication that was not issued by Borrower
Representative as a properly authorized notice or other communication from
Borrower.
The undersigned, pursuant to due authority, have caused this Agreement
to be executed as of the date set forth above.
BORROWER:
Z-TEL COMMUNICATIONS, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
43
Z-TEL TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
Z-TEL NETWORK SERVICES, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
Z-TEL BUSINESS NETWORKS, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
44
Z-TEL, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
Z-TEL HOLDINGS, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
Z-TEL COMMUNICATIONS OF
VIRGINIA, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Trey" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
45
Z-TEL INVESTMENTS, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
TOUCH-1 COMMUNICATIONS, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
DirecTEL, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
46
direcCONNECT, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------------
Title: Treasurer and Chief Financial
Officer
----------------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
Z-TEL CONSUMER SERVICES, LLC
By: TOUCH-1 COMMUNICATIONS, INC.,
its sole member
By: /s/ Xxxx Xxxxx
-------------------------------
Name: Xxxxxx X. "Xxxx" Xxxxx, III
-----------------------------
Title: Treasurer and Chief
Financial Officer
-----------------------------
000 X. Xxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. "Xxxx" Xxxxx, III
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxxx
Holland & Knight, LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000-0000
X.X. Xxx 0000 (33601-1288)
Facsimile: (000) 000-0000
47
LENDER:
TEXTRON FINANCIAL CORPORATION
By: /s/ Xxx Xxxxxxx
-------------------------------------
Name: Xxx Xxxxxxx
-----------------------------------
Title: Vice President
----------------------------------
00000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: SVP-ABLG Portfolio Mgmt
Facsimile: (000) 000-0000
with a copy to: Xxxxxx Xxxxxx, Esq.
Textron Financial Corporation
00000 Xxxxx Xxx Xxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
48
< STATE OF GEORGIA )
) ACKNOWLEDGEMENT
COUNTY OF XXXXXX )
The undersigned, a notary public for the State of Georgia, hereby
certifies that Xxx Xxxxxxx, Vice President of TEXTRON FINANCIAL CORPORATION,
personally appeared before me this day and acknowledged the due execution of the
foregoing instrument.
Witness my hand and official seal this
28th of April, 2004.
/s/ Xxxxxxx X. Xxxx
-------------------
Notary Public for the State of Georgia
My Commission Expires: July 2, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of Z-TEL COMMUNICATIONS, INC.,
personally appeared before me this day and acknowledged the due execution of the
foregoing instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of Z-TEL TECHNOLOGIES, INC.,
personally appeared before me this day and acknowledged the due execution of the
foregoing instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of Z-TEL NETWORK SERVICES, INC.,
personally appeared before me this day and acknowledged the due execution of the
foregoing instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of Z-TEL BUSINESS NETWORKS, INC.,
personally appeared before me this day and acknowledged the due execution of the
foregoing instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of Z-TEL, INC., personally appeared
before me this day and acknowledged the due execution of the foregoing
instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of Z-TEL HOLDINGS, INC., personally
appeared before me this day and acknowledged the due execution of the foregoing
instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of Z-TEL COMMUNICATIONS OF VIRGINIA,
INC., personally appeared before me this day and acknowledged the due execution
of the foregoing instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of Z-TEL INVESTMENTS, INC.,
personally appeared before me this day and acknowledged the due execution of the
foregoing instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of TOUCH 1 COMMUNICATIONS, INC.,
personally appeared before me this day and acknowledged the due execution of the
foregoing instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of DirecTEL, Inc., personally
appeared before me this day and acknowledged the due execution of the foregoing
instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO of direcCONNECT, Inc., personally
appeared before me this day and acknowledged the due execution of the foregoing
instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 0000
XXXXX XX XXXXXXX )
) ACKNOWLEDGEMENT
COUNTY OF ESCAMBIA )
The undersigned, a notary public for the State of Alabama, hereby
certifies that Xxxx Xxxxx, Treasurer & CFO Touch-1 Communications, Inc., sole
member of Z-TEL CONSUMER SERVICES, LLC, personally appeared before me this day
and acknowledged the due execution of the foregoing instrument.
Witness my hand and official seal this
22nd day of April, 2004.
/s/ Xxxxx Xxxxx
---------------
Notary Public for the State of Alabama
My Commission Expires: October 8, 2006
EXHIBIT A
FORM OF
BORROWING BASE CERTIFICATE
See Attached
EXHIBIT B
FORM OF
SUBORDINATION AGREEMENT
See Attached
SCHEDULE 1
(A) Commercial Tort Claims [Definitions]
(B) Organization; Qualification [Section 5.1(a)]
(C) Borrower Affiliates [Section 5.1(C)]
(D) Capitalization [Section 5.1(d)]
(E) Business of Borrower [Section 5.1(e)]
(F) Compliance with Other Agreements [Section 5.2]
(G) Litigation [Section 5.3]
(H) Taxes and Returns [Section 5.4]
(I) Permitted Liens [Section 5.5(a)]
(J) Title [Section 5.5(b)]
(K) Inventory [Section 5.5(d)]
(L) Equipment [Section 5.5(e)]
(M) Real Property [Section 5.5(f)]
(N) Corporate and Fictitious Names [Section 5.5(g)]
(O) Environmental Compliance [Section 5.7
(P) Proprietary Rights [Section 5.8]
(Q) Trade Names [Section 5.9]
(R) Employee Relations [Section 5.10]
(S) Bank Accounts [Section 5.12]
(T) Use of Proceeds [Section 6.13]
(U) Permitted Indebtedness [Section 7.8(d)]
