[EXECUTION]
LOAN AGREEMENT
July 1, 1996
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
President
CapRock Fiber Network, Ltd.
Two Galleria Tower
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
This Loan Agreement (the "LOAN AGREEMENT") will serve to set forth the
terms of the financing transactions by and between CAPROCK FIBER NETWORK, LTD.
("BORROWER"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION ("BANK"):
1. CREDIT FACILITY. Subject to the terms and conditions set forth in this
Loan Agreement and the other agreements, instruments and documents evidencing,
securing, governing, guaranteeing and/or pertaining to the Loans, as hereinafter
defined (collectively, together with the Loan Agreement, referred to hereinafter
as the "LOAN DOCUMENTS"), Bank hereby agrees to make advances to Borrower, on a
non-revolving basis from time to time during the period commencing on the date
hereof and continuing through and including 11:00 a.m. (Central time) on
December 31, 1996, an aggregate amount not to exceed $10,000,000 (the "MAXIMUM
LOAN AMOUNT") in a single advance or in multiple advances, as may be requested
by Borrower from time to time. Each advance must be greater than or equal to
$100,000 or must equal the unadvanced portion of the Maximum Loan Amount.
Borrower shall give prior written notice, or telephonic notice, of any requested
advance. Each written request must be made in the form of Exhibit B, duly
completed, and accompanied by copies of billing statements, vouchers, or
invoices evidencing the obligation of Borrower to pay amounts in excess of
$10,000 per statement for services rendered or materials actually acquired or
furnished in connection with the construction of the Network (as defined below).
Bank reserves the right to require Borrower to give Bank not less than one (1)
business day prior notice of each requested advance. Each telephone request
shall be deemed a representation, warranty, agreement and acknowledgment by
Borrower as to the matters which are to be set out in a written confirmation.
All advances to Borrower hereunder shall be collectively called the "LOAN". All
sums advanced under the Loan shall be for construction, start-up and related
expenses of a fiber optic network from Corpus Christi to Houston, Texas (the
"NETWORK").
2. PROMISSORY NOTE. The Loan shall be evidenced by a promissory note
(together with any renewals, extensions, modifications and increases thereof,
the "NOTE") duly executed by Borrower and payable to the order of Bank, in the
form of Exhibit A attached hereto and incorporated herein by reference. Interest
on the Note shall accrue at the rate set forth
CapRock Fiber Network, Ltd.
July 1, 1996
Page 2
therein. The principal of and interest on the Note shall be due and payable in
accordance with the terms and conditions set forth in the Note and in this
Loan Agreement.
3. ORIGINATION FEE. On the date hereof, Borrower will pay to Bank an
origination fee in the amount of $100,000.
4. COLLATERAL. Collateral and security for the indebtedness evidenced by
the Note and any and all other indebtedness or obligations from time to time
owing by Borrower to Bank includes (i) the Deed of Trust, Mortgage, Security
Agreement and Assignment of Rents effective as of June 26, 1996 (the "Mortgage")
from Borrower for the benefit of Bank covering certain real and personal
property (the "Mortgage Collateral") therein described and referred to and (ii)
the Securities Pledge Agreement of even date herewith (the "Securities Pledge")
from ▇▇▇▇ ▇▇▇▇▇▇▇▇ for the benefit of Bank covering a securities account
established with Banc One Securities Corporation (the "Securities Collateral").
Borrower agrees to execute such further security agreements, assignments, deeds
of trust and other agreements and documents as Bank shall deem appropriate and
necessary from time to time to more fully create and perfect Bank's lien and
security interests in the Mortgage Collateral and the Securities Collateral.
5. GUARANTORS. As a condition precedent to Bank's obligation to make the
Loan to Borrower, Borrower agrees to cause (i) CapRock Systems, Inc., ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇., and ▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "UNLIMITED GUARANTORS") to each execute
and deliver to Bank contemporaneously herewith an unlimited, continuing guaranty
agreement, in form and substance satisfactory to Bank, and (ii) ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇., The Hayden Company, The Florida Company, and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
(the "LIMITED GUARANTORS", together with the Unlimited Guarantors, sometimes
collectively referred to herein as the "GUARANTORS") to each execute and deliver
to Bank contemporaneously herewith a limited guaranty agreement (collectively
with the guaranties executed by the Unlimited Guarantors, the "GUARANTIES"), in
form and substance satisfactory to Bank.
6. COMPLETION OF THE NETWORK. Promptly following completion of the
Network, Borrower shall provide to Lender a "Completion Certificate" in the form
of Exhibit C, duly completed. The Completion Certificate shall be accompanied by
copies of any billing statements, vouchers or invoices (not previously provided
to Lender) of Borrower for amounts in excess of $10,000 per statement for
services rendered or materials actually acquired or furnished in connection with
the construction of the Network. In addition to the foregoing, Borrower shall
also provide to Lender true, correct and complete copies of the notification by
Sprint Communications Company L.P. of its acceptance of the Network.
CapRock Fiber Network, Ltd.
July 1, 1996
Page 3
The Guaranties of the Limited Guarantors shall be automatically terminated
upon the occurrence of the following: (i) receipt by Bank of a Completion
Certificate and written notification of acceptance of the Network by Sprint
Communications Company LP. (ii) the continuous operation of the Network for a
period of three (3) consecutive months after the date of the Completion
Certificate (the "Operational Period'), (iii) at the end of the Operational
Period, no Event of Default (as defined below) shall be continuing with respect
to the covenants set forth in Section 12 hereof and (iv) no Event of Default
other than (a) those described in the immediately preceding clause (iii) or (b)
an Event of Default resulting from a breach of the covenants of ▇▇▇▇ ▇▇▇▇▇▇▇▇
set forth in Section 10 of his Guaranty shall have occurred during the
Operational Period. Promptly thereafter, Bank shall prepare and deliver at
Borrower's expense a termination of the Guaranty of each Limited Guarantor in
the form attached hereto as Exhibit D.
7. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants, and upon each request for an advance under the Loan further represents
and warrants, to Bank as follows:
(a) EXISTENCE. Borrower is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Texas
and all other states where it is doing business, and has all requisite
power and authority to execute and deliver the Loan Documents.
(b) BINDING OBLIGATIONS. The execution, delivery, and performance of
this Loan Agreement and all of the other Loan Documents by Borrower have
been duly authorized by all necessary action by Borrower, and constitute
legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms, except as limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies may generally
be limited by equitable principles.
(c) NO CONSENT. The execution, delivery and performance of this Loan
Agreement and the other Loan Documents, and the consummation of the
transactions contemplated hereby and thereby, do not (i) conflict with,
result in a violation of, or constitute a default under (A) any provision
of its partnership agreement or any agreement or other instrument binding
upon Borrower, or (B) any law, governmental regulation, court decree or
order applicable to Borrower, or (ii) require the consent, approval or
authorization of any third party.
(d) FINANCIAL CONDITION. Each financial statement of Borrower
supplied to the Bank truly discloses and fairly presents Borrower's
financial condition as of the
CapRock Fiber Network, Ltd.
July 1, 1996
Page 4
date of each such statement in every material respect. There has been no
material adverse change in such financial condition or results of
operations of Borrower subsequent to the date of the most recent financial
statement supplied to the Bank.
(e) LITIGATION. There are no actions, suits or proceedings, pending
or, to the knowledge of Borrower, threatened against or affecting Borrower
or the properties of Borrower, before any court or governmental department,
commission or board, which, if determined adversely to Borrower, would have
a material adverse effect on the financial condition, properties, or
operations of Borrower.
(f) TAXES; GOVERNMENTAL CHARGES. Borrower has filed all federal,
state and material local tax reports and returns required by any law or
regulation to be filed by it and has either duly paid all taxes, duties and
charges indicated due on the basis of such returns and reports or is
contesting the payment thereof in good faith and by proper proceedings, or
made adequate provision for the payment thereof, and the assessment of any
material amount of additional taxes in excess of those paid and reported is
not reasonably expected.
8. CONDITIONS PRECEDENT TO MAKING THE LOAN. Bank's obligation to make any
advance (including the first) under this Loan Agreement and the other Loan
Documents shall be subject to the conditions precedent that, as of the date
hereof after giving effect to such advance the following conditions have been
met:
(a) DOCUMENTS TO BE DELIVERED. Bank shall have received all of the
following, at Bank's offices in Dallas, Texas, duly executed and delivered
and in form, substance and date satisfactory to Lender:
(i) The Note.
(ii) The Mortgage.
(iii) The Guaranties.
(iv) The Securities Pledge.
(v) An "Omnibus Certificate" of the Secretary of CapRock
Systems, Inc., the general partner of Borrower ("GENERAL PARTNER"),
which shall contain the names and signatures of the officers of
General Partner authorized to execute Loan Documents and which shall
certify to the truth, correctness and completeness of the following
exhibits attached thereto: (1) a copy of
CapRock Fiber Network, Ltd.
July 1, 1996
Page 5
resolutions duly adopted by the Board of Directors of General
Partner and in full force and effect at the time this Agreement is
entered into, authorizing the execution of this Agreement and the
other Loan Documents delivered or to be delivered in connection
herewith and the consummation of the transactions contemplated
herein and therein, (2) a copy of the charter documents of Borrower
and General Partner and all amendments thereto, certified by the
appropriate official of Borrower's and General Partner's states of
organization, and (3) a copy of any bylaws of General Partner.
(vi) A certificate (or certificates) of the due formation,
valid existence and good standing of Borrower in its state of
organization, issued by the appropriate authorities of such
jurisdiction.
(vii) A favorable opinion of (i) ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., special
counsel for Borrower, General Partner and Guarantors, substantially in
the form of Exhibit E-1 and (ii) ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel for
Borrower and General Partner, substantially in the form of Exhibit
E-2.
(viii) Documents similar to those specified in subsections (v)
and (vi) of this section with respect to each Guarantor which is a
trust, partnership, limited liability company or corporation.
(ix) A Notice of Final Agreement in the form attached as
Exhibit
(x) The Agreement executed by Sprint Communications Company
L.P. in the form attached as Exhibit G.
(b) ADDITIONAL CONDITIONS PRECEDENT. Bank has no obligation to make
any advance (including the first) unless the following conditions precedent
have been satisfied:
(i) all representations and warranties made to Bank in this
Loan Agreement and the other Loan Documents shall be true and correct,
as of and as if made on the date of such advance.
(ii) No material adverse change in the financial condition of
Borrower since the effective date of the most recent financial
statements furnished to Bank by Borrower shall have occurred and be
continuing.
CapRock Fiber Network, Ltd.
July 1, 1996
Page 6
(iii) No event has occurred and is continuing, or would result
from making such advance, which with notice or lapse of time, or both,
would constitute an Event of Default (as hereinafter defined).
(iv) No Guarantor providing an unlimited guaranty is in default
in the terms of any agreement governing indebtedness of such Guarantor
in excess of $100,000 between Guarantor and Bank, or between Guarantor
and any third party.
(v) No litigation or proceedings shall be pending or
threatened which may reasonably be expected to materially adversely
affect Borrower's financial condition.
(vi) The making of such advance shall not be prohibited by any
law or any regulation or order of any court or governmental agency or
authority and shall not subject Bank to any penalty or other onerous
condition under or pursuant to any such law, regulation or order.
(vii) All legal matters relating to the Loan Documents and the
consummation of the transactions contemplated thereby shall be
satisfactory to ▇▇▇▇▇▇▇▇ & Knight, P.C., counsel to Bank.
9. AFFIRMATIVE COVENANTS. Until (i) the Note and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Bank has no further
commitment to lend hereunder, Borrower agrees and covenants that it will, unless
Bank shall otherwise consent in writing:
(a) ACCOUNTS AND RECORDS. Maintain its books and records in
accordance with generally accepted accounting principles.
(b) RIGHT OF INSPECTION. Permit Bank to visit its properties and
installations and to examine, audit and make and take away copies or
reproductions of Borrower's books and records, at all reasonable times.
(c) RIGHT TO ADDITIONAL INFORMATION. Furnish Bank with such
additional information and statements, lists of assets and liabilities, tax
returns, and other reports with respect to Borrower's financial condition
and business operations as Bank may reasonably request from time to time.
CapRock Fiber Network, Ltd.
July 1, 1996
Page 7
(d) COMPLIANCE WITH LAWS. Perform and comply, in all material
respects, with all statutes, rules, regulations and/or ordinances imposed
by any governmental unit upon Borrower its businesses, operations and
properties (including without limitation, all applicable environmental
statutes, rules, regulations and ordinances).
(e) TAXES. Pay and discharge when due all of its indebtedness and
obligations, including without limitation, all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on
which penalties would attach, and all-lawful claims that, if unpaid, might
become a lien or charge upon any of Borrower's properties, income, or
profits; provided, however, Borrower will not be required to pay and
discharge any such assessment, tax, charge, ▇▇▇▇, ▇▇▇▇ or claim so long as
(i) the legality of the same shall be contested in good faith by
appropriate judicial, administrative or other legal proceedings, and (ii)
Borrower shall have established on its books adequate reserves with respect
to such contested assessment, tax, charge, ▇▇▇▇, ▇▇▇▇ or claim in
accordance with generally accepted accounting principles, consistently
applied.
(f) INSURANCE. Maintain insurance on all property of a character
usually insured by entities engaged in the same or similar business
similarly situated against loss or damage of the kinds and in the amounts
customarily insured against by such entities.
(g) NOTICE OF INDEBTEDNESS. Promptly inform Bank of the creation,
incurrence or assumption by Borrower of any actual or contingent
liabilities not permitted under this Loan Agreement
(h) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notify Bank of all actions, suits and proceedings before any court or any
governmental department, commission or board affecting Borrower or any of
its properties which could reasonably be expected to materially adversely
affect the financial condition of Borrower.
(i) NOTICE OF MATERIAL ADVERSE CHANGE. Promptly inform Bank of (i)
any and all material adverse changes in Borrower's financial condition, and
(ii) all claims made against Borrower which could reasonably be expected to
materially adversely affect the financial condition of Borrower.
(j) ADDITIONAL DOCUMENTATION. Execute and deliver, or cause to be
executed and delivered, any and all other agreements, instruments or
documents
CapRock Fiber Network, Ltd.
July 1, 1996
Page 8
which Bank may reasonably request in order to give effect to the
transactions contemplated under this Loan Agreement and the other Loan
Documents. Borrower agrees to deliver to further secure the Loan when
requested by Lender in its sole and absolute discretion, deeds of trust,
mortgages, security agreements and financing statements in form and
substance satisfactory to Lender for the purpose of granting, confirming,
and perfecting first and prior liens or security interest in any real or
personal property now owned or hereafter acquired by Borrower.
(k) SOUTHWESTERN ▇▇▇▇ AGREEMENT. Within sixty (60) days from the date
hereof, deliver to Lender a copy of the Agreement between Southwestern ▇▇▇▇
Communications and Borrower, certified by Borrower as being a true, correct
and complete copy.
10. NEGATIVE COVENANTS. Until (i) the Note and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) the Bank has no further commitment to
lend hereunder, Borrower will not, without the prior written consent of Bank:
(a) NATURE OF BUSINESS. Make any material change in the nature of its
business as carried on as of the date hereof.
(b) LIQUIDATIONS MERGERS CONSOLIDATIONS. Liquidate, merge or
consolidate with or into any other entity.
(c) SALE OF ASSETS. Sell, transfer or otherwise dispose of any of its
assets or properties, other than in the ordinary course of business.
(d) LIENS. Create or incur any lien or encumbrance on any of its
assets, other than (i) liens and security interests securing indebtedness
owing to Bank, (ii) liens for taxes, assessments or similar charges which
are: (1) not yet due or (2) being contested in good faith by appropriate
proceedings and for which Borrower has established adequate reserves, (iii)
liens and security interest existing as of the date hereof which have been
disclosed to and approved by the Bank in writing, (iv) as to property which
is not Mortgage Collateral, liens and security interests securing
indebtedness described in Section 10(e)(iii), (v) liens imposed by
mandatory provisions of law such as for materialmen's, mechanic's,
warehousemen's and other liens arising in the ordinary course of business,
securing obligations whose payment is not yet due, and (vi) encumbrances
consisting of zoning restrictions, easements, or other restrictions on the
use of real property, provided that such items do not impair the use of
such property for the purposes intended, and none of which is violated by
CapRock Fiber Network, Ltd.
July 1, 1996
Page 9
existing or proposed structures or land use, unless such violation would
not be reasonably be expected to have a material adverse effect on the
financial condition of Borrower or the completion of the Network.
(e) INDEBTEDNESS. Create, incur or assume any indebtedness for
borrowed money or issue or assume any other note, debenture, bond or other
evidences of indebtedness, or guarantee any such indebtedness or such
evidences of indebtedness of others, other than (i) borrowings from Bank,
(ii) borrowings outstanding on the date hereof and disclosed in writing to
Bank and (iii) miscellaneous items of indebtedness not described in clauses
(i) and (ii) of this subsection (e) which do not in the aggregate exceed
$50,000 at any one time outstanding.
(f) TRANSFER OF OWNERSHIP. Permit the sale, pledge or other transfer
of any of the ownership interest in Borrower (i) to any person who is not a
partner of Borrower on the date hereof (other than by will, devise or
intestacy) or (ii) which has the net effect of reducing the ownership
interest of any Unlimited Guarantor (other than in accordance with the
terms of the limited partnership agreement of Borrower).
(g) CHANGE IN MANAGEMENT. Permit a change in the senior management of
Borrower.
(h) LOANS. Make any loans to any person or entity.
(i) TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property
or the rendering of any service, with any Affiliate (as hereinafter
defined) of Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to Borrower than would be obtained in a comparable
arm's-length transaction with a person or entity not an Affiliate of
Borrower. As used herein, the term "AFFILIATE" means any individual or
entity directly or indirectly controlling, controlled by, or under common
control with, another individual or entity.
(j) DIVIDENDS. Borrower agrees not to make any Distributions except
for cash Distributions to the partners of Borrower for the payment by such
partner or partners of federal or state income taxes on such partner or
partners' proportionate share of Borrower's taxable income. In the event
Borrower makes any Distributions pursuant to the immediately preceding
sentence, Borrower will provide to Bank a certificate of the Chief
Financial Officer of General Partner certifying that such Distribution was
made in compliance with this Section 10(j). Borrower shall also
CapRock Fiber Network, Ltd.
July 1, 1996
Page 10
provide Bank with a copy of the K-1 Supplemental Exhibit to Internal
Revenue Service Form 1065 relating to such partner or partners at the
same time the K-1 is made available to the partner or partners. As used
herein, "DISTRIBUTIONS" shall mean all distributions made by Borrower to
its partners, other than salary, bonuses and other compensation for
services. Notwithstanding the foregoing, at any time after December 31,
1997, so long as the fixed charge ratio of Borrower calculated in
accordance with Section 11(c) below for the then most recently ended
period of four consecutive fiscal quarters is greater than 1.3 to 1.0,
Borrower may pay commitment fees to the Guarantors, provided that all
such guaranty commitment fees may be made only out of Excess Cash flow
(as defined in the Note) remaining after the payment by Borrower of all
required Excess Cash Flow Payments (as defined in the Note) and provided
further that both prior to and immediately after giving effect to, the
payment of such guaranty commitment fees (i) no Event of Default has
occurred and is continuing and (ii) the fixed charge ratio of Borrower
calculated in accordance with Section 11(c) is greater than 1.1 to 1.0.
11. FINANCIAL COVENANTS. Until (i) the Note and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) the Bank has no further commitment to
lend hereunder, Borrower will maintain the following financial covenants:
(a) CASH RESERVES. Borrower will maintain, at all times from and
after December 31, 1996, cash reserves in an amount not less than $100,000.
(b) DEBT TEST. Borrower's Debt to Adjusted Income shall not be
greater than (A) 5.0 to 1.0 as of December 31, 1997, (B) 4.5 to 1.0 as of
March 31, 1998 and as of each fiscal quarter thereafter through December
31,1998, (C) 4.0 to 1.0 as of March 31, 1999 and as of each fiscal quarter
through December 31, 1999, (D) 3.5 to 1.0 as of March 31, 2000 and as of
each fiscal quarter through December 31, 2000, and (E) 3.0 to 1.0 as of
March 31, 2001 and as of each fiscal quarter thereafter. As used in this
subsection, the term "BORROWER'S DEBT TO ADJUSTED INCOME" means as of the
end of any fiscal quarter, a ratio of (a) the then outstanding principal
amount of the Loan to (b) the net income of Borrower before Tax
Distributions (as defined below) plus interest expenses, depreciation,
amortization and other non-cash expenses of Borrower for the then most
recently ended period of four consecutive fiscal quarters. The term "TAX
DISTRIBUTIONS" means for any period, the amount of Distributions for the
payment by the partner or partners of Borrower of federal or state income
taxes on such partner or partners' proportionate share of Borrower's
taxable income, provided that for purposes of the calculation of the
financial
CapRock Fiber Network, Ltd.
July 1, 1996
Page 11
covenants set forth in this Section 11, a forty percent (40%) tax rate
for each such partner shall be assumed.
(c) FIXED CHARGE RATIO. Borrower will maintain, as of December 31,
1997 and as of each fiscal quarter thereafter, a ratio of (a) net income of
Borrower after Tax Distributions plus depreciation, amortization and other
non-cash expenses and interest expenses for the then most recently ended
period of four consecutive fiscal quarters to (b) interest expense and
current maturities of long-term debt of Borrower for such period plus
capital expenditures permitted by Section 11 (e) and actually made by
Borrower during such four quarter period of not less than 1.1 to 1.0.
(d) NET INCOME. Beginning with the fiscal quarter ending March
31,1997, and for each fiscal quarter thereafter, Borrower's net income
after Tax Distributions for any fiscal quarter will not be less than
$1,000.
(e) CAPITAL EXPENDITURES. Borrower will not make capital expenditures
in excess of $10,000 during any fiscal year, commencing with the fiscal
year ending December 31, 1997, without prior written approval of Bank which
shall not be unreasonably withheld.
Unless otherwise specified, all accounting and financial terms and covenants set
forth above are to be determined according to generally accepted accounting
principles, consistently applied.
12. REPORTING REQUIREMENTS. Until (i) the Note and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Bank has no further
commitment to lend hereunder, Borrower will, unless Bank shall otherwise consent
in writing, furnish to Bank:
(a) As soon as available, and in any event within thirty (30) days
after the end of each month, a balance sheet, income statement and cash
flows of Borrower as of the end of such month, all in form and substance
and in reasonable detail satisfactory to Bank and duly certified (subject
to year-end review adjustments) by the President and/or Chief Financial
Officer of General Partner (i) as being true and correct in all material
aspects to the best of his or her knowledge and (ii) as having been
prepared in accordance with generally accepted accounting principles,
consistently applied;
(b) As soon as available and in any event within one hundred-twenty
(120) days after the end of each fiscal year of Borrower, financial
statements of Borrower
CapRock Fiber Network, Ltd.
July 1, 1996
Page 12
as of the end of such fiscal year, in each case audited by independent
public accountants of recognized standing reasonably acceptable to Bank.
These financial statements shall contain a consolidated balance sheet as
of the end of such fiscal year and consolidated statements of earnings,
of cash flows, and of changes in partners' capital for such fiscal year,
each setting forth in comparative form the corresponding figures for the
preceding fiscal year;
(c) A certificate in the form of Exhibit I signed by the President
and Chief Financial Officer of General Partner, within thirty (30) days
after the end of each month, stating that Borrower is in full compliance
with all of its obligations under this Loan Agreement and all other Loan
Documents (except as set forth therein) and is not in default of any term
or provisions hereof or thereof (except as set forth therein), and
demonstrating compliance with all financial ratios and covenants set forth
in this Loan Agreement;
(d) Promptly after the receipt thereof by Borrower, a copy of any
management letter delivered to Borrower by its independent accountants;
(e) As soon as available and in any event within thirty days prior to
the beginning of each fiscal year of Borrower, annual projections of
Borrower in a form satisfactory to and reasonably acceptable to Bank;
(f) Promptly inform Bank of the creation, incurrence or assumption by
Borrower of any actual or contingent liabilities not permitted under this
Loan Agreement;
(g) Promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or any governmental department,
commission or board affecting Borrower or any of its properties which could
reasonably be expected to materially adversely affect the financial
condition of Borrower;
(h) Promptly inform Bank of (i) any and all material adverse changes
in Borrower's financial condition, and (ii) all claims made against
Borrower which could materially affect the financial condition of Borrower;
and
(i) Such other information respecting the business, properties or
condition or the operations, financial or otherwise, of Borrower as Bank
may from time to time reasonably request.
CapRock Fiber Network, Ltd.
July 1, 1996
Page 13
13. EVENTS OF DEFAULT. Each of the following shall constitute an "Event
of Default" under this Loan Agreement:
(a) The failure, refusal or neglect of Borrower to pay within two (2)
days after the date when due, any part of the principal of, or interest on,
the Note or any other indebtedness or obligations owing to Bank by Borrower
from time to time.
(b) The failure of Borrower or any Obligated Party (as defined below)
to timely and properly observe, keep or perform any covenant, agreement,
warranty or condition required herein or in any of the other Loan
Documents, provided that (i) with respect to any default under Section 9,
other than defaults under Section 9(d) and (f), Borrower shall have (15)
calendar days from the date of the occurrence of such default to cure such
default before it is deemed to be an Event of Default hereunder and (ii)
with respect to any default under Sections 9(d) and 9(f), Borrower shall
have fifteen (15) calendar days from the earlier of the date it becomes
aware of a default or the receipt of written notice from Bank of a default
to cure such default before it is deemed to be an Event of Default
hereunder.
(c) The occurrence of an event of default under any of the other Loan
Documents or under any other agreement now existing or hereafter arising
between Bank and Borrower.
(d) Any representation contained herein or in any of the other Loan
Documents made by Borrower or any Obligated Party is false or misleading in
any material respect when or as of which made.
(e) The occurrence of any event which permits the acceleration of the
maturity of any indebtedness owing by Borrower to any third party under any
agreement or understanding.
(f) If Borrower or any Obligated Party: (i) becomes insolvent, or
makes a transfer in fraud of creditors, or makes an assignment for the
benefit of creditors, or admits in writing its inability to pay its debts
as they become due; (ii) generally is not paying its debts as such debts
become due; (iii) has a receiver, trustee or custodian appointed for, or
take possession of, all or substantially all of the assets of such party,
either in a proceeding brought by such party or in a proceeding brought
against such party and such appointment is not discharged or such
possession is not terminated within sixty (60) days after the effective
date thereof or such party consents to or acquiesces in such appointment or
possession; (iv) files a petition for relief under the United States
Bankruptcy Code or any other present or future federal or state
CapRock Fiber Network, Ltd.
July 1, 1996
Page 14
insolvency, bankruptcy or similar laws (all of the foregoing hereinafter
collectively called "APPLICABLE BANKRUPTCY LAW") or an involuntary petition
for relief is filed against such party under any Applicable Bankruptcy Law
and such involuntary petition is not dismissed within sixty (60) days after
the filing thereof, or an order for relief naming such party is entered
under any Applicable Bankruptcy Law, or any composition, rearrangement,
extension, reorganization or other relief of debtors now or hereafter
existing is requested or consented to by such party; (v) fails to have
discharged within a period of sixty (60) days any attachment, sequestration
or similar writ levied upon any property of such party; or (vi) fails to
pay within sixty (60) days any final money judgment against such party.
(g) If Borrower or any Obligated Party is an entity, the liquidation,
dissolution, merger or consolidation of any such entity.
Nothing contained in this Loan Agreement shall be construed to limit the
events of default enumerated in any of the other Loan Documents and all such
events of default shall be cumulative. The term "OBLIGATED PARTY", as used
herein, shall mean any party other than Borrower who secures, guarantees
and/or is otherwise obligated to pay all or any portion of the indebtedness
evidenced by the Note.
14. REMEDIES. Upon the occurrence of any one or more of the foregoing
Events of Default, (a) the entire unpaid balance of principal of the Note,
together with all accrued but unpaid interest thereon, and all other
indebtedness owing to Bank by Borrower under the Loan Documents at such time
shall, at the option of Bank, become immediately due and payable without
further notice, demand, presentation, notice of dishonor, notice of intent to
accelerate, notice of acceleration, protest or notice of protest of any kind,
all of which are expressly waived by Borrower, and (b) Bank may, at its
option, cease further advances under any of the Note; PROVIDED, HOWEVER,
concurrently and automatically with the occurrence of an Event of Default
under SUBPARAGRAPH (f)(iii) or SUBPARAGRAPH (f)(iv) in the immediately
preceding paragraph 13 further advances under the Note shall cease, and (ii)
the Note and all other indebtedness owing to Bank by Borrower under the Loan
Documents at such time shall, without any action by Bank, become due and
payable, without further notice, demand, presentation, notice of dishonor,
notice of acceleration, notice of intent to accelerate, protest or notice of
protest of any kind, all of which are expressly waived by Borrower. All
rights and remedies of Bank set forth in this Loan Agreement and in any of
the other Loan Documents may also be exercised by Bank, at its option to be
exercised in its sole discretion, upon the occurrence of an Event of Default.
15. INDEMNITY. Borrower agrees to indemnify Bank, upon demand, from and
against any and all liabilities, obligations, claims, losses, damages,
penalties, fines, actions,
CapRock Fiber Network, Ltd.
July 1, 1996
Page 15
judgments, suits, settlements, costs, expenses or disbursements (including
reasonable fees of attorneys, accountants, experts and advisors) of any kind
or nature whatsoever (in this paragraph collectively called "liabilities and
costs") which to any extent (in whole or in part) may be imposed on, incurred
by, or asserted against Bank growing out of, resulting from or in any other
way associated with any of the Loan Documents, or the transactions and events
(including the enforcement or defense thereof) at any time associated
therewith or contemplated therein (including any violation or noncompliance
with any Environmental Laws by Borrower). THE FOREGOING INDEMNIFICATION SHALL
APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS IN ANY WAY OR TO ANY EXTENT
ARISE UNDER ANY THEORY OF STRICT LIABILITY OR ARE CAUSED, IN WHOLE OR IN
PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY BANK, provided only
that Bank shall be not entitled under this section to receive indemnification
for that portion, if any, of any liabilities and costs which is proximately
caused by its own individual gross negligence or willful misconduct, as
determined in a final judgment. If any Person (including Borrower or any of
its affiliates) ever alleges such gross negligence or willful misconduct by
Bank, the indemnification provided for in this paragraph shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement, until such
time as a court of competent jurisdiction. enters a final judgment as to the
extent and effect of the alleged gross negligence or willful misconduct. As
used in this section the term "Bank" shall refer not only to the Person
designated as such in the introduction paragraph but also to each director,
officer, agent, attorney, employee, representative and affiliate of such
Person. For purposes of this paragraph, the term "Environmental Laws" means
any and all federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, decrees, permits or other governmental restrictions
relating to the environment. The term "Person" means any individual,
corporation, partnership, limited liability company or any other legally
recognizable entity.
16. RIGHTS CUMULATIVE. All rights of Bank under the terms of this Loan
Agreement shall be cumulative of, and in addition to, the rights of Bank
under any and all other agreements between Borrower and Bank (including, but
not limited to, the other Loan Documents), and not in substitution or
diminution of any rights now or hereafter held by Bank under the terms of any
other agreement.
17. WAIVER AND AGREEMENT. Neither the failure nor any delay on the part
of Bank to exercise any right, power or privilege herein or under any of the
other Loan Documents shall operate as a waiver thereof, nor shall any single
or partial exercise of such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. No waiver of any provision in this Loan Agreement or in any of the
other Loan Documents and no departure by Borrower therefrom shall be
effective unless the same shall be in writing and signed by Bank, and then
shall be effective only in the
CapRock Fiber Network, Ltd.
July 1, 1996
Page 16
specific instance and for the purpose for which given and to the extent
specified in such writing. No modification or amendment to this Loan
Agreement or to any of the other Loan Documents shall be valid or effective
unless the same is signed by the party against whom it is sought to be
enforced.
18. BENEFITS. This Loan Agreement shall be binding upon and inure to
the benefit of Bank and Borrower, and their respective successors and
assigns, provided, however, that neither Bank nor Borrower may, without the
prior written consent of the other, assign any rights, powers, duties or
obligations under this Loan Agreement or any of the other Loan Documents.
19. NOTICES. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery service
with proof of delivery, or (iii) United States mail, postage prepaid,
registered or certified mail, return receipt requested, sent to the intended
addressee at the address set forth on the signature page hereof and shall be
deemed to have been received either, in the case of personal delivery, as of
the time of personal delivery, in the case of expedited delivery service, as
of the date of first attempted delivery at the address and in the manner
provided herein, or in the case of mail, upon deposit in a depository
receptacle under the care and custody of the United States Postal Service.
Either party shall have the right to change its address for notice hereunder
to any other location within the continental United States by notice to the
other party of such new address at least ten (10) days prior to the effective
date of such new address.
20. CONSTRUCTION. This Loan Agreement and the other Loan Documents have
been executed and delivered in the State of Texas, shall be governed by and
construed in accordance with the laws of the State of Texas, and shall be
performable by the parties hereto in the county in Texas where the Bank's
address set forth on the signature page hereof is located.
21. INVALID PROVISIONS. If any provision of this Loan Agreement or any
of the other Loan Documents is held to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable and the
remaining provisions of this Loan Agreement or any of the other Loan
Documents shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance.
22. EXPENSES. Borrower shall pay all reasonable out-of-pocket costs and
expenses (including, without limitation, reasonable attorneys' fees) in
connection with (i) any action required in the course of administration of
the indebtedness and obligations evidenced by
CapRock Fiber Network, Ltd.
July 1, 1996
Page 17
the Loan Documents, and (ii) any action in the enforcement of Bank's rights
upon the occurrence of Event of Default.
23. ENTIRE AGREEMENT. This Loan Agreement (together with the other
Loan Documents) contains the entire agreement among the parties regarding the
subject matter hereof and supersedes all prior written and oral agreements
and understandings among the parties hereto regarding same.
24. CONFLICTS. In the event any term or provision hereof is
inconsistent with or conflicts with any provision of the other Loan
Documents, the terms and provisions contained in this Loan Agreement shall be
controlling.
25. COUNTERPARTS. This Loan Agreement may be separately executed in
any number of counterparts, each of which shall be an original, but all of
which, taken together, shall be deemed to constitute one and the same
instrument.
26. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF BORROWER AND
BANK HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY: (a)
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR
INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH,
BEFORE OR AFTER MATURITY; (b) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES; (c) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (d) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS PARAGRAPH.
[The remainder of this page intentionally left blank]
CapRock Fiber Network, Ltd.
July 1, 1996
Page 18
If the foregoing correctly sets forth our mutual agreement, please so
acknowledge by signing and returning this Loan Agreement to the undersigned.
Very truly yours,
BANK ONE, TEXAS, NA.
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Bank's Address:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Corporate Lending
ACCEPTED as of the date first
written above.
BORROWER: Borrower's Address:
CAPROCK FIBER NETWORK, LTD. Two Galleria Tower
13455 ▇▇▇▇ Road, Ste. 1925
By: CapRock Systems, Inc., ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
President
