EXHIBIT 10.25
CREDIT AGREEMENT
$25,000,000 LOAN FACILITY
dated as of November 30, 1995
AMONG
EQUALNET HOLDING CORP.,
as Borrower;
COMERICA BANK-TEXAS,
as Agent and as a Lender;
AND
THE OTHER LENDERS NOW OR HEREAFTER
PARTIES HERETO
TABLE OF CONTENTS
PAGE
1. DEFINITIONS............................................................ 1
1.1 CERTAIN DEFINED TERMS.......................................... 1
1.2 MISCELLANEOUS.................................................. 13
2. COMMITMENTS AND LOANS.................................................. 14
2.1 LOANS.......................................................... 14
2.2 LETTERS OF CREDIT.............................................. 15
2.3 TERMINATIONS OR REDUCTIONS OF COMMITMENTS...................... 18
2.4 FEES........................................................... 18
2.5 SEVERAL OBLIGATIONS............................................ 18
2.6 THE NOTES...................................................... 19
2.7 USE OF PROCEEDS................................................ 19
2.8 DOMINION OF FUNDS LOANS........................................ 19
3. BORROWINGS AND PREPAYMENTS............................................. 20
3.1 BORROWINGS OTHER THAN DOMINION OF FUNDS LOANS.................. 20
3.2 PREPAYMENTS.................................................... 20
4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC........................ 21
4.1 PAYMENTS....................................................... 21
4.2 PRO RATA TREATMENT............................................. 22
4.3 CERTAIN ACTIONS, NOTICES, ETC.................................. 22
4.4 NON-RECEIPT OF FUNDS BY THE AGENT.............................. 23
4.5 SHARING OF PAYMENTS, ETC....................................... 23
5. CONDITIONS PRECEDENT................................................... 24
5.1 INITIAL LOANS AND LETTERS OF CREDIT............................ 24
5.2 ALL LOANS AND LETTERS OF CREDIT................................ 25
6. REPRESENTATIONS AND WARRANTIES......................................... 26
6.1 ORGANIZATION................................................... 26
6.2 FINANCIAL STATEMENTS........................................... 26
6.3 ENFORCEABLE OBLIGATIONS; AUTHORIZATION......................... 26
6.4 OTHER DEBT..................................................... 27
6.5 LITIGATION..................................................... 27
6.6 TITLE.......................................................... 27
6.7 TAXES.......................................................... 27
6.8 REGULATIONS G, U AND X......................................... 27
6.9 SUBSIDIARIES................................................... 27
6.10 NO UNTRUE OR MISLEADING STATEMENTS............................. 27
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6.11 ERISA.......................................................... 28
6.12 INVESTMENT COMPANY ACT......................................... 28
6.13 PUBLIC UTILITY HOLDING COMPANY ACT............................. 28
6.14 SOLVENCY....................................................... 28
6.15 FISCAL YEAR.................................................... 28
6.16 COMPLIANCE..................................................... 28
6.17 ENVIRONMENTAL MATTERS.......................................... 28
6.18 CERTIFICATE OF TITLE PROPERTY.................................. 29
7. AFFIRMATIVE COVENANTS.................................................. 29
7.1 TAXES, EXISTENCE, REGULATIONS, PROPERTY, ETC................... 29
7.2 FINANCIAL STATEMENTS AND INFORMATION........................... 29
7.3 FINANCIAL TESTS................................................ 30
7.4 INSPECTION..................................................... 30
7.5 FURTHER ASSURANCES............................................. 31
7.6 BOOKS AND RECORDS.............................................. 31
7.7 INSURANCE...................................................... 31
7.8 NOTICE OF CERTAIN MATTERS...................................... 31
7.9 CAPITAL ADEQUACY............................................... 32
7.10 ERISA INFORMATION AND COMPLIANCE............................... 32
7.11 BANK ACCOUNTS.................................................. 33
7.12 LOCKBOX........................................................ 33
7.13 ADDITIONAL GUARANTIES AND SECURITY............................. 33
7.14 ACCOUNTS AUDITS................................................ 33
8. NEGATIVE COVENANTS..................................................... 34
8.1 INDEBTEDNESS................................................... 34
8.2 LIENS.......................................................... 34
8.3 CONTINGENT LIABILITIES......................................... 34
8.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND ACQUISITIONS
OF ASSETS..................................................... 35
8.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS........................ 35
8.6 NATURE OF BUSINESS............................................. 35
8.7 TRANSACTIONS WITH RELATED PARTIES.............................. 35
8.8 LOANS AND INVESTMENTS.......................................... 35
8.9 ORGANIZATIONAL DOCUMENTS....................................... 36
8.10 UNFUNDED LIABILITIES........................................... 36
8.11 FISCAL YEAR.................................................... 36
8.13 SUBORDINATE INDEBTEDNESS....................................... 36
8.14 KEY AGREEMENT AMENDMENTS....................................... 36
9. DEFAULTS............................................................... 36
9.1 EVENTS OF DEFAULT.............................................. 36
9.2 RIGHT OF SETOFF................................................ 39
9.3 COLLATERAL ACCOUNT............................................. 40
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9.4 PRESERVATION OF SECURITY FOR UNMATURED REIMBURSEMENT
OBLIGATIONS................................................... 40
9.5 REMEDIES CUMULATIVE............................................ 41
10. THE AGENT.............................................................. 41
10.1 APPOINTMENT, POWERS AND IMMUNITIES............................. 41
10.2 RELIANCE....................................................... 42
10.3 DEFAULTS....................................................... 42
10.4 RIGHTS AS A LENDER............................................. 43
10.5 INDEMNIFICATION................................................ 43
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS........................ 43
10.7 FAILURE TO ACT................................................. 44
10.8 RESIGNATION OR REMOVAL OF AGENT................................ 44
10.9 NO PARTNERSHIP................................................. 44
11. MISCELLANEOUS.......................................................... 45
11.1 WAIVER......................................................... 45
11.2 NOTICES........................................................ 45
11.3 EXPENSES, ETC.................................................. 45
11.4 INDEMNIFICATION................................................ 46
11.5 AMENDMENTS, ETC................................................ 46
11.6 SUCCESSORS AND ASSIGNS......................................... 47
11.7 LIMITATION OF INTEREST......................................... 49
11.8 SURVIVAL....................................................... 50
11.9 CAPTIONS....................................................... 50
11.10 COUNTERPARTS................................................... 51
11.11 GOVERNING LAW.................................................. 51
11.12 SEVERABILITY................................................... 51
11.13 TAX FORMS...................................................... 51
11.14 VENUE.......................................................... 51
11.15 WAIVER OF JURY TRIAL........................................... 52
ANNEXES
1 - Interest Rate Provisions
EXHIBITS
A - Security Agreement-Accounts,
Inventory and General Intangibles
B - Borrowing Base Certificate
C - Request for Extension
D - Form of the Note
E - Compliance Certificate
F - Assignment and Acceptance
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into as of November 30, 1995
(the "EFFECTIVE DATE"), by and among EQUALNET HOLDING CORP., a Texas corporation
(the "BORROWER"); each of the lenders which is or may from time to time become a
party hereto (individually, a "LENDER" and, collectively, the "LENDERS"), and
COMERICA BANK-TEXAS ("COMERICA"), a Texas banking association, as agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"AGENT").
The parties hereto agree as follows:
1. DEFINITIONS.
1.1 CERTAIN DEFINED TERMS.
Unless a particular term, word or phrase is otherwise defined or the
context otherwise requires, capitalized terms, words and phrases used herein or
in the Loan Documents (as hereinafter defined) have the following meanings (all
definitions that are defined in this Agreement in the singular to have the same
meanings when used in the plural and VICE VERSA):
ACCOUNTS, EQUIPMENT, GENERAL INTANGIBLES and INVENTORY shall have the
respective meanings assigned to them in the Texas Business and Commerce Code in
force on the Effective Date.
ADDITIONAL SECURITY AGREEMENT shall mean, with respect to any Person, a
security agreement substantially in the form of EXHIBIT A hereof and otherwise
in Proper Form, in favor of the Agent covering the Accounts, Inventory and
General Intangibles of such Person, as security for such Person's obligations
under a Guaranty, together with all related Financing Statements as the Agent
may reasonably require.
AFFILIATE shall mean any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "CONTROL"
(including "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.
AGREEMENT shall mean this Credit Agreement, as it may from time to time be
amended, modified, restated or supplemented.
ANNUAL AUDITED FINANCIAL STATEMENTS shall mean the annual consolidated
financial statements of a Person, including all notes thereto, which statements
shall include a balance sheet as of the end of such fiscal year and an income
statement and a statement of cash flows for such fiscal year, all setting forth
in comparative form the corresponding figures from the previous fiscal
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year, all prepared in conformity with GAAP, and without expressing any doubt as
to such Person's ability to continue as a going concern, and accompanied by a
report and opinion of Ernst & Young L.L.P. or any other independent certified
public accountants satisfactory to the Agent, which shall state that such
financial statements, in the opinion of such accountants, present fairly the
financial position of such Person as of the date thereof and the results of its
operations for the period covered thereby in conformity with GAAP. Such
statements shall be accompanied by, if requested by the Agent, a certificate of
such accountants that in making the appropriate audit and/or investigation in
connection with such report and opinion, such accountants did not become aware
of any Default relating to the financial tests set forth in SECTION 7.3 or, if
in the opinion of such accountant any such Default exists, a description of the
nature and status thereof.
APPLICATIONS shall mean all applications and agreements for Letters of
Credit, or similar instruments or agreements, in Proper Form, now or hereafter
executed by any Person in connection with any Letter of Credit now or hereafter
issued or to be issued under the terms hereof at the request of any Person.
ASSIGNMENT AND ACCEPTANCE shall have the meaning ascribed to such term in
SECTION 11.6.
BANKRUPTCY CODE shall mean the United States Bankruptcy Code, as amended,
and any successor statute.
BORROWING BASE shall mean, as at any date, the amount of the Borrowing
Base shown on the Borrowing Base Certificate then most recently delivered
pursuant to SECTION 7.2 hereof, determined by calculating the amount equal to
85% of the aggregate amount of the Eligible Accounts of the Borrower and its
Subsidiaries at said date. In the absence of a current Borrowing Base
Certificate, the Agent shall determine the Borrowing Base from time to time in
its reasonable discretion, taking into account all information reasonably
available to it, and the Borrowing Base from time to time so determined shall be
the Borrowing Base for all purposes of this Agreement until a current Borrowing
Base Certificate, in Proper Form, is furnished to and accepted by the Agent.
BORROWING BASE CERTIFICATE shall mean a certificate, duly executed by the
chief executive officer, chief financial officer, president, treasurer or
controller of the Borrower, appropriately completed and in substantially the
form of EXHIBIT B hereto. Each Borrowing Base Certificate shall be effective
only as accepted by the Agent (and with such revisions, if any, as the Agent may
reasonably require as a condition to such acceptance).
BUSINESS DAY shall mean any day other than a day on which commercial banks
are authorized or required to close in Houston, Texas.
CAPITAL EXPENDITURES shall mean expenditures in respect of fixed or
capital assets by a Person, including the capital portion of lease payments made
in respect of Capital Lease Obligations, but EXCLUDING expenditures for the
restoration, repair or replacement of any fixed or capital asset which was
destroyed or damaged, in whole or in part, to the extent financed by the
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proceeds of an insurance policy maintained by such Person. Expenditures in
respect of replacements and maintenance consistent with the business practices
of such Person in respect of plant facilities, machinery, fixtures and other
like capital assets utilized in the ordinary course of business are not Capital
Expenditures to the extent such expenditures are not capitalized in preparing a
balance sheet of such Person in accordance with GAAP.
CAPITAL LEASE OBLIGATIONS shall mean, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board, as amended) and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13). Capital Lease Obligations shall not include the interest
component of any applicable rental payment.
CASH FLOW shall mean, without duplication, for any period the sum of (a)
Net Income AFTER taxes and less non-cash income and (b) the sum of (i) Interest
Expense for such period, (ii) amortization of goodwill and other non-cash
expenses and intangibles (including, without limitation, deferred financing
costs and debt discount) deducted in determining such Net Income and (iii)
depreciation, depletion and obsolescence of Property, in each case, determined
in accordance with GAAP.
CEILING RATE shall have the meaning assigned to it in the Interest Rate
Annex.
CODE shall mean the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
COLLATERAL shall mean all Property, tangible or intangible, real, personal
or mixed, now or hereafter subject to the Security Documents.
COMMITMENT shall mean, as to any Lender, the obligation, if any, of such
Lender to make Loans and incur Letter of Credit Liabilities in an aggregate
principal amount at any one time outstanding up to (but not exceeding) the
amount, if any, set forth opposite such Lender's name on the signature pages
hereof under the caption "Commitment", or otherwise provided for in an
Assignment and Acceptance Agreement (as the same may be reduced from time to
time pursuant to SECTION 2.3).
COMMITMENT PERCENTAGE shall mean, as to any Lender, the percentage
equivalent of a fraction the numerator of which is the amount of such Lender's
Commitment and the denominator of which is the aggregate amount of the
Commitments of all Lenders.
COMPLIANCE CERTIFICATE shall have the meaning given to it in SECTION 7.2.
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CONTRIBUTION AGREEMENT shall mean that certain Contribution Agreement of
even date herewith, by and among the Borrower and the Current Guarantors, as the
same may be amended, modified, supplemented, restated and joined in pursuant to
a Joinder Agreement, from time to time.
CONTROLLED GROUP shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
CORPORATION shall mean corporations, limited liability companies,
partnerships, joint ventures, joint stock associations, business trusts and
other business entities.
COVER for Letter of Credit Liabilities shall mean the payment to the Agent
in immediately available funds, to be held by the Agent in a collateral account
maintained by the Agent at its Principal Office and collaterally assigned as
security by the Borrower for the financial accommodations extended pursuant to
this Agreement using documentation satisfactory to the Agent, in the amount
required by any applicable provision hereof. Such amount shall be retained by
the Agent in such collateral account until such time as in the case of the Cover
being provided pursuant to SECTIONS 2.2(A) or 9.3, the applicable Letter of
Credit shall have expired and the Reimbursement Obligations, if any, with
respect thereto shall have been fully satisfied; PROVIDED, HOWEVER, that at such
time if a Default or Event of Default has occurred and is continuing, the Agent
shall not be required to release such amount in such collateral account.
CURRENT ASSETS shall mean all assets of a Person which under GAAP would be
classified as current assets (including cash, marketable securities,
receivables, inventory and prepaid expenses).
CURRENT GUARANTORS shall mean EqualNet Corporation, a Delaware corporation
and TeleSource, Inc., a Texas corporation, and any and all of their respective
successors and assigns
CURRENT LIABILITIES shall mean all liabilities of a Person (including tax
and other proper accruals) which under GAAP would be classified as current
liabilities.
CURRENT RATIO shall mean, as of any day, the ratio of Current Assets to
Current Liabilities, determined as of such day.
DEBT TO EBITDA RATIO shall mean, as of any day, the ratio of (a) the
outstanding balance of Indebtedness on such date to (b) EBITDA for the Rolling
Four Quarters as of such date.
DEFAULT shall mean an Event of Default or an event which with notice or
lapse of time or both would, unless cured or waived, become an Event of Default.
DOLLARS and $ shall mean lawful money of the United States of America.
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DOMINION OF FUNDS LOAN DOCUMENTS shall mean one of more "Dominion of Funds
Processing Account Agreements" or similar agreements between the Borrower and
Guarantors and Comerica, together with any and all related documents, agreements
and notes related thereto, and any and all amendments, modifications,
extensions, renewals, rearrangements and replacements therefor and substitutions
of any thereof.
DOMINION OF FUNDS LOANS shall mean the loans made by Comerica pursuant to
SECTION 2.8.
EBITDA shall mean, without duplication, for any period the sum of (a) Net
Income BEFORE taxes and less non-cash income and (b) the sum of (i) Interest
Expense for such period, (ii) amortization of goodwill and other non-cash
expenses and intangibles (including, without limitation, deferred financing
costs and debt discount) deducted in determining such Net Income and (iii)
depreciation, depletion and obsolescence of Property, in each case, determined
in accordance with GAAP.
ELIGIBLE ACCOUNTS shall mean, as at any date of determination thereof,
each Account of the Borrower or any of its Subsidiaries which is subject to a
Security Document and on which the Agent shall have a first-priority perfected
Lien which is at said date payable to the Borrower or any of its Subsidiaries
and which complies with the following requirements: (a) the subject goods have
been sold to an account debtor on an absolute sale basis on open account and not
on consignment, on approval or on a "sale or return" basis or subject to any
other repurchase or return agreement and no material part of the subject goods
has been returned, rejected, lost or damaged, the Account is stated to be
payable in Dollars and is not evidenced by chattel paper or an instrument of any
kind and said account debtor is not insolvent or the subject of any bankruptcy
or insolvency proceedings of any kind; (b) the account debtor must be located in
the United States; (c) it is a valid obligation of the account debtor thereunder
and is not subject to any offset or other defense on the part of such account
debtor or to any claim on the part of such account debtor denying liability
thereunder; (d) it is subject to no Lien whatsoever, except for the Liens
created or permitted pursuant to the Security Documents; (e) it is evidenced by
an invoice submitted to the account debtor in timely fashion and in the normal
course of business; (f) it has not remained unpaid beyond 90 days after the date
of the invoice; (g) it does not arise out of transactions with an employee,
officer, agent, director or stockholder of the Borrower or any of its
Subsidiaries or any Affiliate of the Borrower or any of its Subsidiaries, other
than Accounts approved in writing by the Agent; (h) the applicable account
debtor is not one who the Agent has, in the exercise of its sole discretion,
determined to be (based on such factors as the Agent deems appropriate), and has
given notice of such determination to the Borrower, an ineligible account
debtor; PROVIDED, HOWEVER, than any such notice shall not apply as to any
Account of such account debtor which has been included on a Borrowing Base
Certificate prior to the giving of such notice by Agent and which meets each and
every other requirement under this Agreement for the denomination of such
Account as an "Eligible Account," and (i) each of the representations and
warranties set forth in the Security Documents executed by the Borrower and its
Subsidiaries with respect thereto is true and correct in all material respects
on such date. In the event of any dispute under the foregoing criteria, about
whether an Account is or has ceased to be an Eligible Account, the decision of
the Agent, made in good faith, shall be conclusive and binding, absent manifest
error.
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ENVIRONMENTAL CLAIM means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture, processing, distribution
in commerce or use of Hazardous Substances. An "ENVIRONMENTAL CLAIM" includes a
common law action, as well as a proceeding to issue, modify or terminate an
Environmental Permit, or to adopt or amend a regulation to the extent that such
a proceeding attempts to redress violations of an applicable permit, license, or
regulation as alleged by any Governmental Authority.
ENVIRONMENTAL LIABILITIES includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise: remedial, removal, response,
abatement, investigative, monitoring, personal injury and damage to property or
injuries to persons, and any other related costs, expenses, losses, damages,
penalties, fines, liabilities and obligations, and all costs and expenses
necessary to cause the issuance, reissuance or renewal of any Environmental
Permit including reasonable attorneys' fees and court costs.
ENVIRONMENTAL PERMIT means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or Hazardous Substances.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the U.S. Department
of Labor thereunder.
EVENT OF DEFAULT shall have the meaning assigned to it in SECTION 9.
EXPIRING CREDIT FACILITY shall mean the revolving credit facility
established under that certain Revolving Credit Loan Agreement dated as of
October 8, 1993, between Equal Net Communications, Inc., and Comerica, as the
same has been renewed, extended, increased, amended and modified from time to
time prior to the date hereof.
FEDERAL FUNDS RATE shall have the meaning assigned to it in the Interest
Rate Annex.
FINANCING STATEMENTS shall mean all such Uniform Commercial Code financing
statements as the Agent shall require, in Proper Form, duly executed by the
Borrower or others to give notice
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of and to perfect or continue perfection of the Agent's Liens in all Collateral,
as any of the foregoing may from time to time be amended, modified, supplemented
or restated.
FIXED CHARGE COVERAGE RATIO shall mean, as of any day, the ratio of (a)
Cash Flow for the Rolling Four Quarters as of such day to (b) Fixed Charges for
such Rolling Four Quarters.
FIXED CHARGES shall mean (without duplication), for any period, (a) the
amounts of scheduled principal payments made or to be made during such period
with respect to Funded Indebtedness (but excluding any of the Obligations), PLUS
(b) payments made or required to be made during such period with respect to the
Capital Lease Obligations with unrelated third parties, PLUS (c) non-financed
Capital Expenditures made during such period, PLUS (d) Interest Expense for such
period.
FUNDED INDEBTEDNESS means all Indebtedness which by its terms matures more
than one year from the date as of which any calculation of Funded indebtedness
is made, and any Indebtedness maturing within one year from such date which is
renewable at the option of the obligor to a date beyond one year from such date.
GAAP shall mean, as to a particular Person, such accounting practice as,
in the opinion of independent certified public accountants of recognized
national standing regularly retained by such Person and acceptable to the Agent,
conforms at the time to generally accepted accounting principles, consistently
applied. GAAP means those principles and practices (a) which are recognized as
such by the Financial Accounting Standards Board; and (b) which are consistently
applied for all periods after the Effective Date so as to reflect properly the
financial condition, and results of operations and changes in financial
position, of such Person. If any change in any accounting principle or practice
is required by the Financial Accounting Standards Board in order for such
principle or practice to continue as a GAAP or practice, all reports and
financial statements required hereunder may be prepared in accordance with such
change.
GOVERNMENTAL AUTHORITY shall mean any foreign governmental authority, the
United States of America, any State of the United States and any political
subdivision of any of the foregoing, and any central bank, agency, department,
commission, board, bureau, court or other tribunal having jurisdiction over the
Agent, any Lender, the Borrower, any of the Borrower's Subsidiaries or their
respective Property.
GUARANTIES shall mean that certain Master Guaranty of even date herewith
by and among the Current Guarantors, as amended, supplemented, modified, joined
in pursuant to a Joinder Agreement and restated from time to time, and each and
every other guaranty executed from time to time in respect of this Agreement.
GUARANTORS shall mean each and every Person executing a guaranty from time
to time guaranteeing the Indebtedness of the Borrower owing from time to time to
the Lenders pursuant to this Agreement or the Notes, including the Current
Guarantors.
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HAZARDOUS SUBSTANCE shall mean petroleum products, and any hazardous or
toxic waste or substance defined or regulated as such from time to time by any
law, rule, regulation or order described in the definition of "Requirements of
Environmental Law".
INDEBTEDNESS shall mean and include (a) all items which in accordance with
GAAP would be included on the liability side of a balance sheet on the date as
of which Indebtedness is to be determined (excluding capital stock, surplus,
surplus reserves and deferred credits); (b) all guar anties, letter of credit
contingent reimbursement obligations, endorsements and other contingent
obligations in respect of, or any obligations to purchase or otherwise acquire,
Indebtedness of others, and (c) all Indebtedness secured by any Lien existing on
any interest of the Person with respect to which Indebtedness is being
determined in Property owned subject to such Lien whether or not the
Indebtedness secured thereby shall have been assumed; PROVIDED, that the term
"Indebtedness" shall not mean or include any Indebtedness of the type described
in CLAUSE (A) of this definition in respect of which monies sufficient to pay
and discharge the same in full (either on the expressed date of maturity thereof
or on such earlier date as such Indebtedness may be duly called for redemption
and payment) shall be deposited with a depository, agency or trustee acceptable
to the Agent in trust for the payment thereof.
INTEREST EXPENSE shall mean, for any period, the sum of (a) the cash
interest payments by an obligor made or accrued in accordance with GAAP during
such period in connection with all of its interest-bearing Indebtedness and (b)
the interest component of any Capital Lease Obligations.
INTEREST RATE ANNEX shall mean ANNEX I, as it may from time to time be
amended, modified, restated or supplemented.
INVESTMENT shall mean the purchase or other acquisition of any securities
or Indebtedness of, or the making of any loan, advance, transfer of Property or
capital contribution to, or the incurring of any liability, contingently or
otherwise, in respect of the Indebtedness of, any Person.
ISSUER shall mean, with respect to any Letter of Credit, the issuer of
such Letter of Credit under this Agreement.
JOINDER AGREEMENT shall mean any agreement, in Proper Form, executed by a
Subsidiary of the Borrower from time to time, pursuant to which such Subsidiary
joins in the execution and delivery of a Guaranty and the Contribution
Agreement.
KEY AGREEMENTS shall mean all contracts and agreements between the
Borrower and AT&T Communications, Inc., Sprint Communications Company, L.P., any
Affiliate of either thereof, or any other telecommunications access providers,
and any and all renewals, extensions and modifications of any thereof.
LEGAL REQUIREMENT shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, or regulation (or interpretation of any of
the foregoing) of, and the terms of any
8
license or permit issued by, any Governmental Authority, whether presently
existing or arising in the future.
LETTER OF CREDIT shall have the meaning assigned to such term in SECTION
2.2.
LETTER OF CREDIT LIABILITIES shall mean, at any time and in respect of any
Letter of Credit, the sum of (i) the amount available for drawings under such
Letter of Credit PLUS (ii) the aggregate unpaid amount of all Reimbursement
Obligations at the time due and payable in respect of previous drawings made
under such Letter of Credit. For the purpose of determining at any time the
amount described in clause (i), in the case of any Letter of Credit payable in a
currency other than Dollars, such amount shall be converted by the Agent to
Dollars by any reasonable method, and such converted amount shall be conclusive
and binding, absent manifest error.
LETTER OF CREDIT TERMINATION DATE shall mean the Termination Date.
LIEN shall mean any mortgage, pledge, charge, encumbrance, security
interest, collateral assignment or other lien or restriction of any kind,
whether based on common law, constitutional provision, statute or contract, and
shall include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions and other title exceptions.
LOANS shall mean the loans provided for by SECTION 2.1.
LOAN AVAILABILITY PERIOD shall mean, for each Lender, the period from and
including the Effective Date to (but not including) the Termination Date.
LOAN DOCUMENTS shall mean, collectively, this Agreement, the Notes, all
Applications, the Contribution Agreement, the Security Documents, the Notice of
Entire Agreement, all instruments, certificates and agreements now or hereafter
executed or delivered to the Agent or any Lender pursuant to any of the
foregoing or in connection with the Obligations or any commitment regarding the
Obligations, and all amendments, modifications, renewals, extensions, increases
and rearrangements of, and substitutions for, any of the foregoing.
MAJORITY LENDERS shall mean, at any time while no Loans are outstanding,
Lenders having greater than 75% of the aggregate amount of Commitments.
MATERIAL ADVERSE EFFECT shall mean a material adverse effect on the
business, condition (financial or otherwise), operations or Properties of the
Borrower and its Subsidiaries, taken as a whole, or on the ability of any of
them to perform their respective obligations under any Loan Document to which
any of them is a party.
MATURITY DATE shall mean the maturity of the Notes, December 1, 1997, as
the same may hereafter be accelerated pursuant to the provisions of any of the
Loan Documents.
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MAXIMUM LOAN AVAILABLE AMOUNT shall mean, at any date, an amount equal to
the lesser of (i) the aggregate of the Commitments or (ii) the Borrowing Base.
MONTHLY FINANCIAL STATEMENTS shall mean the calendar monthly financial
statements of a Person, including all notes thereto, which statements shall
include a balance sheet as of the end of such calendar month and an income
statement for such calendar month, and for the fiscal year to date, subject to
normal year-end adjustments, all setting forth in comparative form the
corresponding figures for the corresponding calendar month of the preceding
year, prepared in accordance with GAAP and certified as true and correct by the
chief financial officer or other authorized officer of such Person.
NET INCOME shall mean gross revenues and other proper income credits, less
all proper income charges (including taxes on income), all determined in
accordance with GAAP; PROVIDED, that there shall not be included in such
revenues (a) any equity in the undistributed earnings of any Person which is not
a Subsidiary; (b) any gains resulting from the write-up of assets; (c) any
proceeds of any life insurance policy, or (d) any gain which is classified as
"extraordinary" in accordance with GAAP; and PROVIDED FURTHER, that capital
gains may be included in revenues only to the extent of capital losses.
NET WORTH shall mean total assets (valued at cost less normal
depreciation), LESS all liabilities (excluding contingent and indirect
liabilities), all determined in accordance with GAAP.
NOTES shall have the meaning assigned to such term in SECTION 2.6.
NOTICE OF ENTIRE AGREEMENT shall mean a notice of entire agreement, DTPA
waiver and release of claims, in Proper Form, executed by the Borrower, the
Agent and each other Party, as the same may from time to time be amended,
modified, supplemented or restated.
OBLIGATIONS shall mean, as at any date of determination thereof, the sum
(without duplication) of the following: (i) the aggregate principal amount of
Loans outstanding hereunder, PLUS (ii) the aggregate amount of the Letter of
Credit Liabilities hereunder, PLUS (iii) all other liabilities, obligations and
indebtedness of any Party under any Loan Document.
ORGANIZATIONAL DOCUMENTS shall mean, with respect to a Corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
Corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture, and with respect to a trust,
the instrument establishing such trust; in each case including any and all
modifications thereof as of the date of the Loan Document referring to such
Organizational Document and any and all future modifications thereof.
PARTIES shall mean all Persons other than the Agent or any Lender
executing any Loan Document.
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PAST DUE RATE shall mean, on any day, a rate per annum equal to the lesser
of (i) the Ceiling Rate for that day or (ii) the Base Rate (as defined in the
Interest Rate Annex) plus five percent (5%).
PBGC shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
PERMITTED INVESTMENTS shall mean: (a) readily marketable securities issued
or fully guaranteed by the United States of America with maturities of not more
than one year; (b) commercial paper rated "Prime 1" by Xxxxx'x Investors
Service, Inc. or "A-1" by Standard and Poor's Corporation with maturities of not
more than 180 days, and (c) certificates of deposit or repurchase obligations
issued by any U.S. domestic bank having capital surplus of at least $100,000,000
or by any other financial institution acceptable to the Agent, all of the
foregoing not having a maturity of more than one year from the date of issuance
thereof.
PERMITTED LIENS shall mean: (a) Liens and encumbrances in favor of the
Agent; (b) Liens for taxes, assessments or other governmental charges incurred
in the ordinary course of business and not yet past due or being contested in
good faith by appropriate proceedings and, if requested by the Agent, bonded in
a manner satisfactory to the Agent; (c) Liens not delinquent created by statute
in connection with worker's compensation, unemployment insurance, social
security and similar statutory obligations; (d) Liens of mechanics, materialmen,
carriers, warehousemen or other like statutory or common law liens securing
obligations incurred in good faith in the ordinary course of business that are
not yet due and payable; and (e) Encumbrances consisting of zoning restrictions,
rights-of-way, easements or other restrictions on the use of real property, none
of which materially impairs the use of such property by the Borrower or any of
its Subsidiary in the operation of the business for which it is used and none of
which is violated in any material respect by any existing or proposed structure
or land use.
PERSON shall mean any individual, Corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.
PLAN shall mean an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code and is either (a) maintained by the Borrower or any member of the
Controlled Group or (b) maintained pursuant to a collective bargaining agreement
or any other arrangement under which more than one employer makes contributions
and to which the Borrower or any member of the Controlled Group is then making
or accruing an obligation to make contributions or has within the preceding five
plan years made contributions.
PRINCIPAL OFFICE shall mean the principal office of the Agent, presently
located at 000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx 00000.
PROPER FORM shall mean in form and substance reasonably satisfactory to
the Agent.
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PROPERTY shall mean any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
QUARTERLY DATES shall mean the last day of each March, June, September and
December, PROVIDED that if any such date is not a Business Day, then the
relevant Quarterly Date shall be the next succeeding Business Day.
REGULATORY CHANGE shall mean with respect to any Lender, any change on or
after the date of this Agreement in any Legal Requirement (including Regulation
D) or the adoption or making on or after such date of any interpretation,
directive or request applying to a class of financial institutions including
such Lender under any Legal Requirements (whether or not having the force of
law) by any Governmental Authority.
REIMBURSEMENT OBLIGATIONS shall mean, as at any date, the obligations of
the Borrower then outstanding, or which may thereafter arise, in respect of
Letters of Credit under this Agreement, to reimburse the applicable Issuers for
the amount paid by such Issuers in respect of any drawing under such Letters of
Credit, which obligations shall at all times be payable in Dollars
notwithstanding any such Letter of Credit being payable in a currency other than
Dollars.
REQUEST FOR EXTENSION OF CREDIT shall mean a request for extension of
credit duly executed by the chief executive officer, chief financial officer,
president, treasurer or controller of the Borrower, appropriately completed and
substantially in the form of EXHIBIT D.
REQUIREMENTS OF ENVIRONMENTAL LAW means all requirements imposed by any
law (including for example and without limitation The Resource Conservation and
Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability Act), rule, regulation, or order of any federal, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority in effect at the applicable time which relate to (i) noise; (ii)
pollution, protection or clean-up of the air, surface water, ground water or
land; (iii) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) regulation of the manufacture, processing,
distribution in commerce, use, discharge or storage of Hazardous Substances.
ROLLING FOUR QUARTERS shall mean, as of any day, the then most recently
ended four (4) quarter period of the Borrower.
SECRETARY'S CERTIFICATE shall mean a certificate, in Proper Form, of the
Secretary or an Assistant Secretary of a Corporation as to (a) the resolutions
of the Board of Directors of such Corporation authorizing the execution,
delivery and performance of the documents to be executed by such Corporation;
(b) the incumbency and signature of the officer of such Corporation executing
such documents on behalf of such Corporation, and (c) the Organizational
Documents of such Corporation.
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SECURITY AGREEMENTS shall mean, collectively, (i) the Security Agreements
dated as of the Effective Date executed among the Borrower and the Agent
covering the Borrower's Accounts and Inventory and securing the Obligations,
(ii) the Security Agreement dated as of the Effective Date executed among the
Subsidiaries and the Agent covering their respective Accounts and Inventory, and
securing the Obligations arising under their respective Guaranties, and (iii)
any and all security agreements now or hereafter executed by any Party in favor
of the Agent, as any of them may from time to time be amended, modified,
restated or supplemented.
SECURITY DOCUMENTS shall mean, collectively, this Agreement, the Security
Agreements, the Guaranties, the Joinder Agreements and any and all other
agreements, deeds of trust, mortgages, chattel mortgages, security agreements,
pledges, guaranties, assignments of production or proceeds of production,
assignments of income, assignments of contract rights, assignments of
partnership interest, assignments of royalty interests, assignments of
performance, completion or surety bonds, standby agreements, subordination
agreements, undertakings and other instruments and Financing Statements now or
hereafter executed and delivered by any Party, as any of them may from time to
time be amended, modified, restated or supplemented.
SUBSIDIARY shall mean, as to a particular parent Corporation, any
Corporation of which more than 50% of the indicia of equity rights (whether
outstanding capital stock or otherwise) is at the time directly or indirectly
owned by, such parent Corporation.
TANGIBLE NET WORTH shall mean the Net Worth less all intangibles, all
determined in accordance with GAAP.
TERMINATION DATE shall mean the earlier of (a) the Maturity Date or (b)
the date specified by the Agent in accordance with SECTION 9.1.
TEXAS CREDIT CODE shall mean Title 79, Texas Revised Civil Statutes, 1925,
as amended.
UNFUNDED LIABILITIES shall mean, with respect to any Plan, at any time,
the amount (if any) by which (a) the present value of all benefits under such
Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent actuarial valuation report
for such Plan, but only to the extent that such excess represents a potential
liability of any member of the Controlled Group to the PBGC or a Plan under
Title IV of ERISA. With respect to multi-employer Plans, the term "Unfunded
Liabilities" shall also include contingent liability for withdrawal liability
under Section 4201 of ERISA to all multi-employer Plans to which Borrower or any
member of a Controlled Group for employees of Borrower contributes in the event
of complete withdrawal from such Plans.
1.2 MISCELLANEOUS. Except where specifically otherwise provided:
(a) The symbol "$" and the word "dollars" shall mean lawful money of the
United States of America.
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(b) Any accounting term not otherwise defined shall have the meaning
ascribed to it under GAAP.
(c) Unless otherwise expressly provided, any accounting concept and all
financial covenants shall be determined on a consolidated basis, and financial
measurements shall be computed without duplication.
(d) Wherever the term "including" or any of its correlatives appears in
the Loan Documents, it shall be read as if it were written "including (by way of
example and without limiting the generality of the subject or concept referred
to)".
(e) Wherever the word "herein," "hereof" or "hereunder" is used in any
Loan Document, it is a reference to that entire Loan Document and not just to
the subdivision of it in which the word is used.
(f) References in any Loan Document to Section numbers are references to
the Sections of such Loan Document.
(g) References in any Loan Document to Exhibits and Annexes are to the
Exhibits and Annexes to such Loan Document, and they shall be deemed
incorporated into such Loan Document by reference.
(h) Any term defined in the Loan Documents which refers to a particular
agreement, instrument or document shall also mean, refer to and include all
modifications, amendments, supplements, restatements, renewals, extensions and
substitutions of the same; PROVIDED that nothing in this subsection shall be
construed to authorize any such modification, amendment, supplement,
restatement, renewal, extension or substitution except as may be permitted by
other provisions of the Loan Documents.
(i) All times of day used in the Loan Documents mean local time in
Houston, Texas.
The words "HEREOF," "HEREIN," "HERETO" and "HEREUNDER" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not any particular provision of this Agreement.
2. COMMITMENTS AND LOANS.
2.1 LOANS. Each Lender severally agrees, subject to all of the terms and
conditions of this Agreement (including SECTIONS 5.1 and 5.2), to make Loans
from time to time on or after the Effective Date and during the Loan
Availability Period, each Lender shall make loans under this Section to the
Borrower in an aggregate principal amount at any one time outstanding (including
its Commitment Percentage of all Dominion of Funds Loans and all Letter of
Credit Liabilities at such time) up to but not exceeding such Lender's
Commitment Percentage of the Maximum Loan Available Amount. Subject to the
conditions in this Agreement, any such Loan repaid prior to the
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Termination Date may be reborrowed pursuant to the terms of this Agreement;
PROVIDED, that any and all such Loans shall be due and payable in full at the
end of the Loan Availability Period. The Borrower, the Agent and the Lenders
agree that Chapter 15 of the Texas Credit Code shall not apply to this
Agreement, the Notes or any Obligation. Except in the case of the Dominion of
Funds Loans, the aggregate of all Loans to be made by the Lenders in connection
with a particular borrowing shall be equal to $100,000 or a multiple of $10,000
in excess of $100,000.
2.2 LETTERS OF CREDIT.
(a) LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, and on the condition that aggregate Letter of Credit Liabilities
shall never exceed $500,000, the Borrower shall have the right to, in addition
to Loans provided for in SECTION 2.1, utilize the Commitments from time to time
during the Loan Availability Period by obtaining the issuance of standby letters
of credit for the account of the Borrower and on behalf of the Borrower or any
of the Guarantors as herein provided if the Borrower shall so request in the
notice referred to in SECTION 2.2(I) (such standby letters of credit as any of
them may be amended, supplemented, extended or confirmed from time to time,
being herein collectively called the "LETTERS OF CREDIT"). Upon the date of the
issuance of a Letter of Credit, the applicable Issuer shall be deemed, without
further action by any party hereto, to have sold to each Lender, and each such
Lender shall be deemed, without further action by any party hereto, to have
purchased from such Issuer, a participation, to the extent of such Lender's
Commitment Percentage, in such Letter of Credit and the related Letter of Credit
Liabilities. No Letter of Credit shall have an expiry date later than eighteen
(18) calendar months after the earlier of (1) the date of issuance and (2) the
Letter of Credit Termination Date. Any Letter of Credit that shall have an
expiration date after the end of the Loan Availability Period shall be fully
Covered or backed by a standby letter of credit in form and substance, and
issued by a Person, acceptable to the Agent in its sole discretion.
(b) ADDITIONAL PROVISIONS. The following additional provisions shall apply
to each Letter of Credit:
(i) The Borrower shall give the Agent notice requesting each
issuance of a Letter of Credit hereunder as provided in SECTION 4.3 and
shall furnish such additional information regarding such transaction as
the Agent may reasonably request. Upon receipt of such notice, the Agent
shall promptly notify each Lender of the contents thereof and of such
Lender's Commitment Percentage of the amount of such proposed Letter of
Credit and whether Comerica will require that the applicable Letter of
Credit be issued severally by all of the Lenders.
(ii) No Letter of Credit may be issued if after giving effect
thereto the sum of (A) the aggregate outstanding principal amount of Loans
plus (B) the aggregate Letter of Credit Liabilities would exceed the
Maximum Loan Available Amount. On each day during the period commencing
with the issuance of any Letter of Credit and until such Letter of Credit
shall have expired or been terminated, the Commitment of each Lender shall
be deemed to be utilized for all purposes hereof in an amount equal to
such Lender's
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Commitment Percentage of the amount then available for drawings under such
Letter of Credit.
(iii) Upon receipt from the beneficiary of any Letter of Credit of
any demand for payment thereunder, Issuer shall promptly notify the Agent
and, thereafter, the Agent shall promptly notify the Borrower and each
Lender as to the amount to be paid as a result of such demand and the
payment date. If at any time any Issuer shall have made a payment to a
beneficiary of a Letter of Credit in respect of a drawing or in respect of
an acceptance created in connection with a drawing under such Letter of
Credit, each Lender will pay to the Agent immediately upon demand by such
Issuer at any time during the period commencing after such payment until
reimbursement thereof in full by the Borrower, an amount equal to such
Lender's Commitment Percentage of such payment, together with interest on
such amount for each day from the date of demand for such payment (or, if
such demand is made after 11:00 a.m. on such date, from the next
succeeding Business Day) to the date of payment by such Lender of such
amount at a rate of interest per annum equal to the Federal Funds Rate for
such period.
(iv) The Borrower shall be irrevocably and unconditionally obligated
forthwith to reimburse the Agent for any amount paid by any Issuer upon
any drawing under any Letter of Credit, without presentment, demand,
protest or other formalities of any kind, all of which are hereby waived.
Such reimbursement may, subject to satisfaction of the conditions in
SECTIONS 5.1 and 5.2 and to the Maximum Loan Availability Amount (after
adjustment in the same to reflect the elimination of the corresponding
Letter of Credit Liability), be made by the borrowing of Loans. Agent will
pay to each Lender such Lender's Commitment Percentage of all amounts
received from the Borrower for application in payment, in whole or in
part, of the Reimbursement Obligation in respect of any Letter of Credit,
but only to the extent such Lender has made payment to Agent in respect of
such Letter of Credit pursuant to CLAUSE (III) above.
(v) The Borrower will pay to the Agent at the Principal Office for
the account of each Lender a letter of credit fee with respect to each
Letter of Credit equal to the greater of (x) $250 or (y) an amount,
calculated on the basis of the face amount of such Letter of Credit
available for drawings under such Letter of Credit, in each case for the
period from and including the date of issuance of such Letter of Credit to
and including the date of expiration or termination thereof at one percent
(1%) (on a per annum basis), such fee to be due and payable in advance on
the date of the issuance thereof. The Agent will pay to each Lender,
promptly after receiving any payment in respect of letter of credit fees
referred to in this CLAUSE (V), an amount equal to the product of such
Lender's Commitment Percentage TIMES the amount of such fees. The Borrower
shall pay to the Issuer on the date of issuance of each applicable Letter
of Credit an administration and issuance fee in an amount agreed upon by
the Issuer and the Borrower. Such administration and issuance fee shall be
retained by the Issuer.
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(vi) The issuance by the applicable Issuer of each Letter of Credit
shall, in addition to the conditions precedent set forth in SECTION 5, be
subject to the conditions precedent (A) that such Letter of Credit shall
be in such form and contain such terms as shall be reasonably satisfactory
to the Agent, and (B) that the Borrower shall have executed and delivered
such Applications and other instruments and agreements relating to such
Letter of Credit as the Agent shall have reasonably requested and are not
inconsistent with the terms of this Agreement. In the event of a conflict
between the terms of this Agreement and the terms of any Application, the
terms hereof shall control.
(c) INDEMNIFICATION; RELEASE. The Borrower hereby indemnifies and holds
harmless the Agent, each Lender and each Issuer from and against any and all
claims and damages, losses, liabilities, costs or expenses which the Agent, such
Lender or such Issuer may incur (or which may be claimed against the Agent, such
Lender or such Issuer by any Person whatsoever), REGARDLESS OF WHETHER CAUSED IN
WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, in
connection with the execution and delivery of any Letter of Credit or transfer
of or payment or failure to pay under any Letter of Credit; PROVIDED that the
Borrower shall not be required to indemnify any party seeking indemnification
for any claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (i) the willful misconduct or gross negligence
of the party seeking indemnification, or (ii) by the failure by the party
seeking indemnification to pay under any Letter of Credit after the presentation
to it of a request required to be paid under applicable law. The Borrower hereby
releases, waives and discharges the Agent, each Lender and each Issuer from any
claims, causes of action, damages, losses, liabilities, costs or expenses which
the Agent, such Lender or such Issuer, as the case may be, may incur, REGARDLESS
OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE
INDEMNIFIED PARTIES, by reason of or in connection with the failure of any other
Lender to fulfill or comply with its obligations to the Agent, such Lender or
such Issuer, as the case may be, hereunder (but nothing herein contained shall
affect any rights the Borrower may have against such defaulting Lender). Nothing
in this SECTION 2.2 is intended to limit the obligations of the Borrower under
any other provision of this Agreement.
(d) ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. If as a result of
any Regulatory Change there shall be imposed, modified or deemed applicable any
tax, reserve, special deposit or similar requirement against or with respect to
or measured by reference to Letters of Credit issued or to be issued hereunder
or participations in such Letters of Credit, and the result shall be to increase
the cost to any Lender of issuing or maintaining any Letter of Credit or any
participation therein, or reduce any amount receivable by any Lender hereunder
in respect of any Letter of Credit or any participation therein (which increase
in cost, or reduction in amount receivable, shall be the result of such Lender's
reasonable allocation of the aggregate of such increases or reductions resulting
from such event), then such Lender shall notify the Borrower through the Agent,
and upon demand therefor by such Lender through the Agent, the Borrower shall
pay to such Lender, from time to time as specified by such Lender, such
additional amounts as shall be sufficient to compensate such Lender for such
increased costs or reductions in amount. A statement as to such increased costs
or reductions in amount incurred by such Lender, submitted
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by such Lender to the Borrower, shall be conclusive as to the amount thereof,
absent manifest error, and may be computed using any reasonable averaging and
attribution method. Each Lender will notify the Borrower through the Agent of
any event occurring after the date of this Agreement which will entitle such
Lender to compensation pursuant to this Section as promptly as practicable after
it obtains knowledge thereof and determines to request such compensation, and
(if so requested by the Borrower through the Agent) will designate a different
lending office of such Lender for the issuance or maintenance of Letters of
Credit by such Lender or will take such other action as the Borrower may
reasonably request if such designation or action is consistent with the internal
policy of such Lender and legal and regulatory restrictions, can be undertaken
at no additional cost, will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender (PROVIDED that such Lender shall have no
obligation so to designate a different lending office which is not located in
the United States of America).
2.3 TERMINATIONS OR REDUCTIONS OF COMMITMENTS.
(a) MANDATORY. On the Termination Date, all Commitments shall be
terminated in their entirety.
(b) OPTIONAL. The Borrower shall have the right to terminate or reduce the
unused portion of the Commitments at any time or from time to time, PROVIDED
that (i) the Borrower shall give notice of each such termination or reduction to
the Agent as provided in SECTION 4.3 and (ii) each such partial reduction shall
be in an aggregate amount of at least $500,000.
(c) NO REINSTATEMENT. Any termination or reduction of the Commitments may
not be reinstated without the written approval of the Agent and the Lenders.
2.4 FEES.
(a) The Borrower shall pay to the Agent for the account of each
Lender revolving loan commitment fees for the period from the Effective
Date to and including the Termination Date at a rate per annum equal to
0.25%. Such revolving loan commitment fees shall be computed (on the basis
of the actual number of days elapsed in a year composed of 360 days) on
each day and shall be based on the excess of (x) the aggregate amount of
each Lender's Commitment for such day over (y) the sum of (i) the
aggregate unpaid principal balance of such Lender's Note (including the
amount of any participation of Dominion of Funds Loans) on such day PLUS
(ii) the aggregate Letter of Credit Liabilities as to such Lender for such
day. Accrued revolving loan commitment fees shall be payable on the
Quarterly Dates prior to the Termination Date and on the Termination Date.
(b) All past due fees payable under this Section shall bear interest
at the Past Due Rate.
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2.5 SEVERAL OBLIGATIONS. The failure of any Lender to make any Loan to be
made by it on the date specified therefor shall not relieve any other Lender of
its obligation to make its Loan on such date, but neither the Agent nor any
Lender shall be responsible or liable for the failure of any other Lender to
make a Loan to be made by such other Lender or to participate in, or co-issue,
any Letter of Credit. Notwithstanding anything contained herein to the contrary,
(a) no Lender shall be required to make or maintain Loans at any time
outstanding if as a result the total Obligations to such Lender shall exceed the
lesser of (1) such Lender's Commitment Percentage of all Obligations and (2)
such Lender's Commitment Percentage of the Maximum Loan Available Amount, and
(b) if a Lender fails to make a Loan as and when required hereunder, then upon
each subsequent event which would otherwise result in funds being paid to the
defaulting Lender, the amount which would have been paid to the defaulting
Lender shall be divided among the non-defaulting Lenders ratably according to
their respective Commitment Percentages until the Obligations of each Lender
(including the defaulting Lender) are equal to such Lender's Commitment
Percentage of the total Obligations.
2.6 THE NOTES. The Loans made by each Lender shall be evidenced by a
single Note of the Borrower (each, together with all renewals, extensions,
modifications and replacements thereof and substitutions therefor, a "NOTE,"
collectively, the "THE NOTES") in substantially the form of EXHIBIT E hereto,
payable to the order of such Lender in a principal amount equal to the
Commitment of such Lender, and otherwise duly completed. Each Lender is hereby
authorized by the Borrower to endorse on the schedule (or a continuation
thereof) that may be attached to each Note of such Lender, to the extent
applicable, the date, amount, type of and the applicable period of interest for
each Loan made by such Lender to the Borrower hereunder, and the amount of each
payment or prepayment of principal of such Loan received by such Lender,
PROVIDED, that any failure by such Lender to make any such endorsement shall not
affect the obligations of the Borrower under such Note or hereunder in respect
of such Loan.
2.7 USE OF PROCEEDS. The proceeds of the Loans shall be used by the
Borrower to refinance amounts payable by the Borrower owed to Comerica under the
Expiring Facility and to finance general corporate purposes of the Borrower,
including (but subject to the limitations set forth elsewhere herein) the
financing of the acquisition of stock and assets of Persons engaged in similar
businesses to those businesses of the Borrower and its Subsidiaries. No proceeds
of the Loans will be used for any purpose which would violate any applicable
Legal Requirement.
2.8 DOMINION OF FUNDS LOANS. Pursuant to the terms and conditions of the
Dominion of Funds Loan Documents, from time to time on or after the Effective
Date and during the Loan Availability Period, Comerica shall make loans (the
"DOMINION OF FUNDS LOANS") in such amounts as shall be determined by Comerica.
Dominion of Funds Loans shall constitute "LOANS" for all purposes hereunder, and
they shall be considered a utilization of the Commitment of any Lender.
Notwithstanding the foregoing sentence, the aggregate amount of all Dominion of
Funds Loans together with the other Loans shall not at any time exceed the
Maximum Loan Available Amount. Upon the making of a Dominion of Funds Loan, each
Lender (other than Comerica) shall be deemed to have purchased a participating
interest in such Dominion of Funds Loan in an amount equal to its Commitment
Percentage of such Dominion of Funds Loan. Within two (2) business
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days after the end of each calendar week, Comerica shall determine the NET
amount of each other Lender's participations in Dominion of Funds Loans
outstanding at the end of such week and each other Lender's Commitment
Percentage of any accrued and paid interest related to such Dominion of Funds
Loans and will distribute to such Lender its participating interest in such
amount; PROVIDED, HOWEVER, that in the event that such payment received by
Comerica is required to be returned, such Lender will return to Comerica any
portion thereof previously distributed by Comerica to it. Each Lender's
obligation to purchase such participating interests shall be absolute and
unconditional and shall not be affected by any circumstance, including (i) any
set-off, counterclaim, recoupment, defense of other right which such Lender or
any other Person may have against Comerica or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default or Event of Default
or the termination of any Commitment; (iii) any adverse change in the condition
(financial or otherwise) of the Borrower, any of its Subsidiaries or any other
Lender; (iv) any breach of this Agreement or any other Loan Document by the
Borrower, any of its Subsidiaries or any other Lender, or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing. The Borrower, the Agent and the Lenders agree that Chapter 15 of
the Texas Credit Code shall not apply to the any Dominion of Funds Loan.
3. BORROWINGS AND PREPAYMENTS.
3.1 BORROWINGS OTHER THAN DOMINION OF FUNDS LOANS. The Borrower shall give
the Agent notice of each borrowing (other than in the case of a Dominion of
Funds Loan) to be made hereunder as provided in SECTION 4.3. Not later than
11:00 a.m. on the date specified for each such borrowing hereunder, each Lender
shall make available the amount of the Loan (other than a Dominion of Funds
Loan), if any, to be made by it on such date to the Agent, at its Principal
Office, in immediately available funds, for the account of the Borrower. Such
amounts received by the Agent will be held in an account maintained by the
Borrower with the Agent. The amounts so received by the Agent shall, subject to
the terms and conditions of this Agreement, be made available to the Borrower by
wiring or otherwise transferring, in immediately available funds, such amount to
an account designated by the Borrower and maintained with Agent in Houston,
Texas.
3.2 PREPAYMENTS.
(a) OPTIONAL PREPAYMENTS. Subject to the terms of the Interest Rate Annex,
the Borrower shall have the right to prepay, on any Business Day, in whole or in
part, without the payment of any penalty or fee, Loans at any time or from time
to time, PROVIDED that the Borrower shall give the Agent notice of each such
prepayment as provided in SECTION 4.3. Each optional prepayment on a Loan shall
be in an amount at least equal to the lesser of $100,000 or the unpaid principal
balance of the Note evidencing such Loan.
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(b) MANDATORY PREPAYMENTS. The Borrower shall from time to time on demand
by the Agent prepay the Loans (or provide Cover for Letter of Credit
Liabilities) in such amounts as shall be necessary so that at all times the
aggregate outstanding amount of all Obligations (including all Dominion of Funds
Loans) shall be less than or equal to the Maximum Loan Available Amount.
(c) DOMINION OF FUNDS LOAN MANDATORY PREPAYMENTS. The Borrower shall from
time to time prepay the Dominion of Funds Loans in accordance with the terms and
conditions of the Dominion of Funds Loan Documents. The provisions of this
subsection are cumulative of and in addition to the requirements of SUBSECTION
3.2(B) above.
4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.
4.1 PAYMENTS.
(a) INTEREST PAYMENTS. Accrued and unpaid interest on the unpaid
principal balance of the Notes shall be due and payable on the Interest Payment
Dates (as defined in the Interest Rate Annex).
(b) PAYMENTS; INTEREST RATE ANNEX. The Borrower shall pay all
amounts required to be paid pursuant to the Interest Rate Annex, the Notes and
the other Loan Documents as and when due.
(c) PAYMENTS AND INTEREST ON REIMBURSEMENT OBLIGATIONS. The Borrower
will pay to the Agent for the account of each Lender the amount of each
Reimbursement Obligation promptly upon its incurrence. The amount of any
Reimbursement Obligation may, if the applicable conditions precedent specified
in SECTIONS 5.1 and 5.2 have been satisfied, be paid with the proceeds of Loans.
Subject to SECTION 11.7, the Borrower will pay to the Agent for the account of
each Lender interest at the applicable Past Due Rate on any Reimbursement
Obligation and on any other amount payable by the Borrower hereunder to or for
the account of such Lender (but, if such amount is interest, only to the extent
legally allowed), which shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise), for the period commencing on the due
date thereof until the same is paid in full.
(d) PAYMENT IN DOLLARS; TIMES. Except to the extent otherwise
provided herein, all payments of principal, interest, Reimbursement Obligations
and other amounts to be paid by the Borrower hereunder, under the Notes and
under the other Loan Documents shall be made in Dollars, in immediately
available funds, to the Agent at the Principal Office (or in the case of a
successor Agent, at the principal office of such successor Agent in the United
States), not later than 10:00 a.m. on the date on which such payment shall
become due (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Business Day). The Agent, or any Lender
for whose account any such payment is made, may (but shall not be obligated to)
debit the amount of any such payment which is not made by such time to any
ordinary deposit account of the Borrower with the Agent or such Lender, as the
case may be.
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(e) PAYMENTS SPECIFIED. The Borrower shall, at the time of making
each payment hereunder, under any Note or under any other Loan Document, specify
to the Agent the Loans or other amounts payable by the Borrower hereunder or
thereunder to which such payment is to be applied. Each payment received by the
Agent hereunder, under any Note or under any other Loan Document for the account
of a Lender shall be paid promptly to such Lender, in immediately available
funds.
(f) PAYMENTS ON BUSINESS DAYS. If the due date of any payment
hereunder or under any Note falls on a day which is not a Business Day, the due
date for such payments (except as otherwise provided in the Interest Rate Annex)
shall be extended to the next succeeding Business Day and interest shall be
payable for any principal so extended for the period of such extension.
4.2 PRO RATA TREATMENT. Except to the extent otherwise provided herein:
(a) each borrowing from the Lenders under SECTION 2 shall be made ratably from
the Lenders on the basis of their respective Commitments, each payment of
commitment fees shall be made for the account of the Lenders, and each
termination or reduction of the Commitments of the Lenders under SECTION 2.3
shall be applied, PRO RATA, according to the Lenders' respective Commitments;
(b) each payment by the Borrower of principal of or interest on the Loans shall
be made to the Agent for the account of the Lenders PRO RATA in accordance with
the respective unpaid principal amounts of such Loans held by the Lenders, and
(c) if Comerica is the sole Issuer of a Letter of Credit or, in the case of a
Dominion of Funds Loan, the Lenders (other than Comerica) shall purchase from
Comerica participations in such Letter of Credit to the extent of their
respective Commitment Percentages.
4.3 CERTAIN ACTIONS, NOTICES, ETC. Notices to the Agent of any termination
or reduction of Commitments and of borrowings and prepayments of Loans and
requests for issuances of Letters of Credit shall be irrevocable and shall be
effective only if received by the Agent not later than 10:00 a.m. on the number
of Business Days prior to the date of the relevant termination, reduction,
borrowing and/or prepayment specified below:
NUMBER OF
NOTICE BUSINESS DAYS PRIOR
Termination or
Reduction of Commitments 5
Borrowing at the Base Rate same day
(as defined in the Interest
Rate Annex)
Borrowing at the Eurodollar 3 Eurodollar Business Days (as
Rate (as defined in the defined in the Interest Rate
Interest Rate Annex) Annex)
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Letter of Credit issuance 5
Loan (other than a Dominion of
Funds Loan) repayment same day
Each such notice of termination or reduction shall specify the aggregate amount
of the Commitments to be terminated or reduced. Each such notice of borrowing or
prepayment shall specify the amount of the Loans to be borrowed or prepaid and
the date of borrowing or prepayment (which shall be a Business Day). The Agent
shall promptly notify the affected Lenders of the contents of each such notice.
Any selection of a Eurodollar Rate (as defined in the Interest Rate Annex) with
respect to a Loan shall be subject to the advance notice requirements set forth
in the Interest Rate Annex.
4.4 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall have been
notified by a Lender or the Borrower (the "PAYOR") prior to the date on which
such Lender is to make payment to the Agent of the proceeds of a Loan (or
funding of a drawing under a Letter of Credit or reimbursement with respect to
any drawing under a Letter of Credit) to be made by it hereunder or the Borrower
is to make a payment to the Agent for the account of one or more of the Lenders,
as the case may be (such payment being herein called the "REQUIRED PAYMENT"),
which notice shall be effective upon receipt, that the Payor does not intend to
make the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required Payment to the
Agent, the recipient of such payment (or, if such recipient is the beneficiary
of a Letter of Credit, the Borrower and, if the Borrower fails to pay the amount
thereof to the Agent forthwith upon demand, the Lenders ratably in proportion to
their respective Commitment Percentages) shall, on demand, pay to the Agent the
amount made available by the Agent together with interest thereon in respect of
the period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to the
Federal Funds Rate for such period or (if the recipient is the Borrower) the
Past Due Rate.
4.5 SHARING OF PAYMENTS, ETC. If a Lender shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement, on any
Reimbursement Obligation or on other Obligation then due to such Lender
hereunder, through the exercise of any right of set-off (including any right of
setoff or lien granted under SECTION 9.2), banker's or other lien, counterclaim
or similar right, or otherwise, it shall promptly purchase from the other
Lenders participations in the Loans made, Reimbursement Obligations or other
Obligations held, by the other Lenders in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that all the
Lenders shall share the benefit of such payment (net of any expenses which may
be incurred by such Lender in obtaining or preserving such benefit) PRO RATA in
accordance with the unpaid principal and interest on the Obligations then due to
each of them. To such end all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. The Borrower agrees, to the
fullest extent it may effectively do so under applicable law, that any
23
Lender so purchasing a participation in the Loans made, Reimbursement
Obligations or other Obligations held, by other Lenders may exercise all rights
of set-off, bankers' or other lien, counterclaim or similar rights with respect
to such participation as fully as if such Lender were a direct holder of Loans,
Reimbursement Obligations or other Obligations in the amount of such
participation. Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower.
5. CONDITIONS PRECEDENT.
5.1 INITIAL LOANS AND LETTERS OF CREDIT. The obligation of each Lender or
any Issuer to make its initial Loans or issue or participate in a Letter of
Credit (if such Letter of Credit is issued prior to the funding of the initial
Loans) hereunder is subject to the following conditions precedent, each of which
shall have been fulfilled or waived to the satisfaction of the Agent:
(a) CORPORATE ACTION AND STATUS. The Agent shall have received from
the appropriate Governmental Authorities certified copies of the Organizational
Documents (other than bylaws) of the Borrower and each of the Current
Guarantors, and evidence satisfactory to the Agent of all corporate action taken
by the Borrower and each of the Current Guarantors authorizing the execution,
delivery and performance of the Loan Documents and all other documents related
to this Agreement to which it is a party (including a certificate of the
secretary of each such party setting forth the resolutions of its Board of
Directors authorizing the transactions contemplated thereby and attaching a copy
of its bylaws), together with such certificates as may be appropriate to
demonstrate the qualification and good standing of and payment of taxes by the
Borrower and each of the Borrower's Subsidiaries in each state where the failure
in which to qualify would have a Material Adverse Effect.
(b) INCUMBENCY. The Borrower, the Current Guarantors and each other
Party shall have delivered to the Agent a certificate in respect of the name and
signature of each of the officers (i) who is authorized to sign on its behalf
the applicable Loan Documents related to any Loan or the issuance of any Letter
of Credit and (ii) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
any Loan or the issuance of any Letter of Credit. The Agent and each Lender may
conclusively rely on such cer tificates until they receive notice in writing
from the Borrower or any of its Subsidiaries or the appropriate Party to the
contrary.
(c) THE NOTES. The Agent shall have received the appropriate the
Notes of the Borrower for each Lender, duly completed and executed.
(d) LOAN DOCUMENTS. The Borrower, the Current Guarantors and each
other Party shall have duly executed and delivered the Loan Documents to which
it is a party (in such number of copies as the Agent shall have requested) and
each such Loan Document shall be in form satisfactory to Agent. Each such Loan
Document shall be in substantially the form furnished
24
to the Lenders prior to their execution of this Agreement, together with such
changes therein as the Agent may approve.
(e) SECURITY MATTERS. All such action as the Agent shall have
requested to perfect the Liens created pursuant to the Security Documents shall
have been taken, including the delivery to the Agent of all property with
respect to which possession is necessary for the purpose of perfecting such
Liens, together with the filing of appropriately completed and duly executed
Uniform Commercial Code financing statements with appropriate Governmental
Authorities. The Agent shall also have received evidence satisfactory to it that
the Liens created by the Security Documents constitute first priority Liens,
except for the exceptions expressly provided for herein, including Uniform
Commercial Code search reports, satisfactory title evidence in form and
substance acceptable to the Agent, and executed releases of any prior Liens
(except as permitted by SECTION 8.2).
(f) FEES AND EXPENSES. The Borrower shall have paid to the Agent all
unpaid fees in the amounts previously agreed upon in writing among the Borrower
and the Agent; and shall have in addition paid to the Agent all amounts payable
under SECTION 11.3, on or before the date of this Agreement.
(g) INSURANCE. The Borrower shall have delivered to the Agent
certificates of insurance satisfactory to the Agent evidencing the existence of
all insurance required to be maintained by the Borrower by this Agreement and
the Security Documents.
(h) OPINION OF COUNSEL. The Agent shall have received an opinion of
Xxxx Xxxxxx, counsel to the Borrower, in form and substance reasonably
satisfactory to the Agent.
(i) CONSENTS. The Agent shall have received evidence satisfactory to
it that all material consents of each Governmental Authority and of each other
Person, if any, reasonably required in connection with (a) the Loans and the
Letters of Credit and (b) the execution, delivery and performance of this
Agreement and the other Loan Documents have been satisfactorily obtained.
(j) OTHER DOCUMENTS. The Agent shall have received such other
documents consistent with the terms of this Agreement and relating to the
transactions contemplated hereby as the Agent may reasonably request.
5.2 ALL LOANS AND LETTERS OF CREDIT. The obligation of each Lender to make
any Loan to be made by it hereunder or to issue or participate in any Letter of
Credit is subject to (a) the accuracy, in all material respects, on the date of
such Loan or such issuance of all representations and warranties of the
Borrower, its Subsidiaries and any other Party contained in this Agreement and
the other Loan Documents; (b) to the performance by the Borrower, its
Subsidiaries and each other Party of its respective obligations under the Loan
Documents, and (c) the Agent shall have received the following, all of which
shall be duly executed and in Proper Form: (1) (except in the case of a Dominion
of Funds Loan) a Request for Extension of Credit as to the Loan or the Letter
25
of Credit, as the case may be, no later than 10:00 a.m. on the Business Day on
which such Request for Extension of Credit must be given under SECTION 4.3, (2)
in the case of a Letter of Credit, an Application, and (3) such other documents
as the Agent or any Lender may reasonably require; (d) prior to the making of
such Loan or the issuance of such Letter of Credit, there shall have occurred no
event which has had a Material Adverse Effect; (e) no Default or Event of
Default shall have occurred and be continuing; (f) the making of such Loan or
the issuance of such Letter of Credit shall not be illegal or prohibited by any
Legal Requirement, (g) in the case of a request for a Loan or the issuance of a
Letter of Credit only, on or immediately prior to the date of such borrowing or
issuance the Borrower shall have delivered to the Agent a Borrowing Base
Certificate in accordance with SECTION 7.2 hereof; and (h) the Borrower shall
have paid all fees and expenses of the type described in SECTION 11.3 and all
other fees, which are owed to the Agent or any other Lender under the Loan
Documents and accrued and unpaid through the date of such Loan or such issuance.
6. REPRESENTATIONS AND WARRANTIES.
To induce the Lenders to enter into this Agreement and to make the Loans
and issue or participate in the Letters of Credit, the Borrower represents and
warrants (such representations and warranties to survive any investigation and
the making of the Loans and the issuance of any Letters of Credit) to the
Lenders and the Agent as follows:
6.1 ORGANIZATION. Each of the Borrower and its Subsidiaries (a) is duly
organized, validly existing and in good standing under the laws of the state of
its organization; (b) has all necessary corporate power and authority to conduct
its business as presently conducted, and (c) is duly qualified to do business
and in good standing in the State of its organization and in all jurisdictions
in which the failure to so qualify would have a Material Adverse Effect.
6.2 FINANCIAL STATEMENTS. The financial statements (including a balance
sheet) as to the Borrower and its Subsidiaries on a consolidated basis which
were most recently delivered to Comerica under the Expiring Credit Facility or
hereunder fairly present, in accordance with GAAP, the financial condition and
the results of operations of the Borrower and its Subsidiaries as at the dates
thereof. No events, conditions or circumstances have occurred from the date that
the financial statements were delivered to Comerica through the Effective Date
which would cause said financial statements to be misleading in any material
respect. There are no material instruments or liabilities which should be
reflected in such financial statements provided to the Agent which are not so
reflected.
6.3 ENFORCEABLE OBLIGATIONS; AUTHORIZATION. The Loan Documents are legal,
valid and binding obligations of the Parties, enforceable in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency and
other similar laws and judicial decisions affecting creditors' rights generally
and by general equitable principles. The execution, delivery and performance of
the Loan Documents (a) have all been duly authorized by all necessary corporate
action; (b) are within the corporate power and authority of the Parties; (c) do
not and will not contravene or violate any Legal Requirement applicable to the
Parties or the Organizational
26
Documents of the Parties, the contravention or violation of which could have a
Material Adverse Effect on the business, condition (financial or otherwise),
operations or Properties of any Party; (d) do not and will not result in the
breach of, or constitute a default under, any material agreement or instrument
by which the Parties or any of their respective Property may be bound or
affected, and (e) do not and will not result in the creation of any Lien upon
any Property of any of the Parties, except in favor of the Agent or as expressly
contemplated therein. All necessary permits, registrations and consents for such
execution, delivery and performance have been obtained. Except as otherwise
expressly stated in the Security Documents, the Liens of the Security Documents
constitute valid and perfected first and prior Liens on the Property described
therein, subject to no other Liens whatsoever.
6.4 OTHER DEBT. Neither the Borrower nor any of the Borrower's
Subsidiaries is in default in the payment of any other Indebtedness or under any
agreement, mortgage, deed of trust, security agreement or lease to which it is a
party and which default could have a Material Adverse Effect.
6.5 LITIGATION. Except as described on SCHEDULE 6.5, there is no
litigation or administrative proceeding pending or, to the knowledge of the
Borrower or any of the Borrower's Subsidiaries, threatened against, nor any
outstanding judgment, order or decree affecting, the Borrower or any of the
Borrower's Subsidiaries before or by any Governmental Authority. Neither the
Borrower nor any of the Borrower's Subsidiaries is in default with respect to
any judgment, order or decree of any Governmental Authority where such default
would have a Material Adverse Effect.
6.6 TITLE. The Borrower and each of the Borrower's Subsidiaries has good
and indefeasible title to the Collateral pledged (or purported to be pledged)
thereby pursuant to the Security Documents and all of its other material
Property, free and clear of all Liens other than those permitted under SECTION
8.2.
6.7 TAXES. The Borrower and the Borrower's Subsidiaries each has filed all
tax returns required to have been filed and paid all taxes shown thereon to be
due, except those for which extensions have been obtained and those which are
being contested in good faith and for which adequate reserves have been
established.
6.8 REGULATIONS G, U AND X. None of the proceeds of any Obligation will be
used for the purpose of purchasing or carrying directly or indirectly any margin
stock or for any other purpose would constitute this transaction a "purpose
credit" within the meaning of Regulation G, U and X of the Board of Governors of
the Federal Reserve System, as either of them may be amended from time to time.
6.9 SUBSIDIARIES. The Borrower has no Subsidiaries except EqualNet
Corporation, a Delaware corporation, and TeleSource, Inc., a Texas corporation.
27
6.10 NO UNTRUE OR MISLEADING STATEMENTS. No representation or warranty
made by the Borrower or any of its Subsidiaries in any Loan Document and no
document, instrument or other writing furnished to the Lenders by or on behalf
of the Borrower, any of its Subsidiaries or any other Party in connection with
the transactions contemplated in any Loan Document does or will contain any
untrue material statement of fact or will omit to state any such fact (of which
the Borrower, any of its Subsidiaries or any other Party has knowledge)
necessary to make the representations, warranties and other statements contained
herein or in such other document, instrument or writing not misleading.
6.11 ERISA. With respect to each Plan, the Borrower and each member of the
Controlled Group have fulfilled their obligations, including obligations under
the minimum funding standards of ERISA and the Code and are in compliance in all
material respects with the provisions of ERISA and the Code. No event has
occurred which could result in a liability of the Borrower or any member of the
Controlled Group to the PBGC or a Plan (other than to make contributions and pay
related expenses in the ordinary course). Since the effective date of Title IV
of ERISA, there have not been any nor are there now existing any events or
conditions that would cause the Lien provided under Section 4068 of ERISA to
attach to any property of the Borrower or any member of the Controlled Group.
There are no Unfunded Liabilities with respect to any Plan. No "prohibited
transaction", within the meaning of Section 4975 of the Code, has occurred with
respect to any Plan which is not exempt and which would result in any material
liability of the Borrower.
6.12 INVESTMENT COMPANY ACT. Neither the Borrower nor any of the
Borrower's Subsidiaries is an investment company within the meaning of the
Investment Company Act of 1940, as amended, or, directly or indirectly,
controlled by or acting on behalf of any Person which is an investment company,
within the meaning of said Act.
6.13 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Borrower nor any of the
Borrower's Subsidiaries is an "affiliate" or a "subsidiary company" of a "public
utility company," or a "holding company," or an "affiliate" or a "subsidiary
company" of a "holding company," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended.
6.14 SOLVENCY. The Borrower and its Subsidiaries on a consolidated basis
are not "insolvent," as such term is used and defined in (i) the Bankruptcy Code
and (ii) the Texas Uniform Fraudulent Transfer Act, Tex. Bus. & Com. Code Xxx.
ss. 24.001 et seq., as amended from time to time.
6.15 FISCAL YEAR. The fiscal year of the Borrower ends on or about June
30.
6.16 COMPLIANCE. The Borrower and the Borrower's Subsidiaries are each in
compliance with all Legal Requirements applicable to it, except to the extent
that the failure to comply therewith does not or would not have a Material
Adverse Effect.
28
6.17 ENVIRONMENTAL MATTERS. The Borrower and the Borrower's Subsidiaries
have obtained and maintained in effect all Environmental Permits (or the
applicable Person has initiated the necessary steps to transfer the
Environmental Permits into its name or obtain such permits), the failure to
obtain which could reasonably be expected to have a Material Adverse Effect. The
Borrower and the Borrower's Subsidiaries and their Properties, business and
operations have been and are in compliance with all applicable Requirements of
Environmental Law and Environmental Permits failure to comply with which could
reasonably be expected to have a Material Adverse Effect. The Borrower and the
Borrower's Subsidiaries and their Properties, business and operations are not
subject to any (A) Environmental Claims or (B), to the best of their respective
officers' knowledge (after making reasonable inquiry of the personnel and
records of their respective Corporations), Environmental Liabilities, in either
case direct or contingent, arising from or based upon any act, omission, event,
condition or circumstance occurring or existing on or prior to the Effective
Date which could reasonably be expected to have a Material Adverse Effect. None
of the officers of any of the Borrower and the Borrower's Subsidiaries has
received any notice of any violation or alleged violation of any Requirements of
Environmental Law or Environmental Permit or any Environmental Claim in
connection with its Properties, liabilities, condition (financial or otherwise),
business or operations which could reasonably be expected to have a Material
Adverse Effect. The Borrower does not know of any event or condition with
respect to currently enacted Requirements of Environmental Laws presently
scheduled to become effective in the future with respect to any of its
Properties or the Properties of any of the Borrower's Subsidiaries which could
reasonably be expected to have a Material Adverse Effect, for which the Borrower
or the applicable Subsidiary of the Borrower has not made good faith provisions
in its business plan and projections of financial performance.
6.18 CERTIFICATE OF TITLE PROPERTY. None of the Collateral is subject to
certificate of title laws.
7. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees with the Agent and the Lenders that
prior to the termination of this Agreement it will do, and cause each of the
Borrower's Subsidiaries to do, and if necessary cause to be done, each and all
of the following:
7.1 TAXES, EXISTENCE, REGULATIONS, PROPERTY, ETC. At all times (a) pay
when due all taxes and governmental charges of every kind upon it or against its
income, profits or Property, unless and only to the extent that the same shall
be contested diligently in good faith and reserves deemed adequate by the
independent certified public accounting firm used by the Borrower to prepare the
Annual Audited Financial Statements of the Borrower and the Borrower's
Subsidiaries have been established therefor; (b) do all things necessary to
preserve its corporate existence, qualifications, rights and franchises in all
States where such failure to qualify would have a Material Adverse Effect; (c)
comply with all applicable Legal Requirements (including Requirements of
Environmental Law) in respect of the conduct of its business and the ownership
of its Property, the noncompliance with which could have a Material Adverse
Effect; and (d) cause
29
its Property to be protected, maintained and kept in good repair and make all
replacements and additions to its Property as may be reasonably necessary to
conduct its business properly and efficiently.
7.2 FINANCIAL STATEMENTS AND INFORMATION. Furnish to the Agent and the
Lenders one copy of each of the following: (a) as soon as available and in any
event within 90 days after the end of each fiscal year of the Borrower,
beginning with the fiscal year 1995, Annual Audited Financial Statements of the
Borrower and the Borrower's Subsidiaries together with unaudited consolidating
financial statements of the Borrower and its Subsidiaries; (b) as soon as
available and in any event within 45 days after the end of each calendar month
of each fiscal year of the Borrower, Monthly Financial Statements of the
Borrower and the Borrower's Subsidiaries; (c) concurrently with the financial
statements provided for in SUBSECTIONS 7.2(A) and (B), such schedules,
computations and other information, in reasonable detail, as may be required by
the Agent or any Lender to demonstrate compliance with the covenants set forth
herein or reflecting any non-compliance therewith as of the applicable date, all
certified and signed by the president, chief financial officer or treasurer of
the Borrower (or other authorized officer approved by the Agent) as true,
correct and complete and, a compliance certificate ("COMPLIANCE CERTIFICATE") in
the form of EXHIBIT F hereto, duly executed by such authorized officer, (d) (1)
as of the Effective Date and (2) within 30 days after (i) the end of each
calendar month or (ii) receipt of a request therefor (which may be given from
time to time) from the Agent, a Borrowing Base Certificate as at the Effective
Date or the last day of such calendar month or the date of such receipt, as the
case may be, together with such supporting information as the Agent may
reasonably request; (e) (1) as of the Effective Date and (2) within 30 days
after (i) the end of each calendar month or (ii) receipt of a request therefor
(which may be given from time to time) from the Agent, (y) a listing and aging
of the Accounts of the Borrower and its Subsidiaries and (z) a listing and aging
of the accounts payable of the Borrower and its Subsidiaries, in each case, as
of the end of the most recently ended calendar month, prepared in reasonable
detail and containing such other information as the Agent may request; and (f)
such other information relating to the condition (financial or otherwise),
operations, prospects or business of any of the Borrower and its Subsidiaries as
from time to time may be reasonably requested by the Agent. Each delivery of a
financial statement pursuant to this SECTION 7.2 shall constitute a
republication of the representations contained in SECTION 6.2.
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7.3 FINANCIAL TESTS. Have and maintain on a consolidated basis:
(a) MAINTAIN DEBT TO TANGIBLE NET WORTH RATIO. A ratio of
Indebtedness (including all Obligations) to Tangible Net Worth of not more than
5.00 to 1.00 at all times.
(b) MAINTAIN DEBT TO NET WORTH RATIO. A ratio of Indebtedness
(including all Obligations) to Net Worth of not more than 1.50 to 1.00 at all
times.
(c) MAINTAIN CURRENT RATIO. A Current Ratio of not less than 1.10 to
1.00 at all times.
(d) FIXED CHARGE COVERAGE RATIO. A Fixed Charge Coverage Ratio of
not less than 1.50 to 1.00 on June 30, 1996 and at all times thereafter.
(e) DEBT TO EBITDA RATIO. A Debt to EBITDA Ratio of not less than
4.00 to 1.00 on June 30, 1996 and at all times thereafter.
7.4 INSPECTION. Permit the Agent UPON 3 DAYS' PRIOR NOTICE (unless a
Default or an Event of Default has occurred which is continuing, in which case
no prior notice is required) to inspect its Property, to examine its files,
books and records except privileged communication with legal counsel and
classified governmental material, and make and take away copies thereof, and to
discuss its affairs with its officers and accountants, all during normal
business hours and at such intervals and to such extent as the Agent may
reasonably desire.
7.5 FURTHER ASSURANCES. Promptly execute and deliver, at the Borrower's
expense, any and all other and further instruments which may be reasonably
requested by the Agent to cure any defect in the execution and delivery of any
Loan Document in order to effectuate the transactions contemplated by the Loan
Documents, and in order to grant, preserve protect and perfect the validity and
priority of the security interests created by the Security Documents.
7.6 BOOKS AND RECORDS. Maintain books of record and account in accordance
with GAAP.
7.7 INSURANCE. Maintain insurance with such insurers, on such of its
Property, with responsible companies in such amounts, with such deductibles and
against such risks as are usually carried by owners of similar businesses and
properties in the same general areas in which the Borrower and the Borrower's
Subsidiaries operate or as the Agent may otherwise reasonably require (including
business interruption insurance), and furnish the Agent satisfactory evidence
thereof promptly upon request. These insurance provisions are cumulative of the
insurance provisions of the Security Documents. The Borrower shall cause the
Agent to be named as a beneficiary of such insurance and shall provide the Agent
with copies of the policies of insurance and a certificate of the insurer that
the insurance required by this Section may not be canceled, reduced or affected
in any material manner without thirty (30) days' prior written notice to the
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Agent. Wherever applicable, such insurance shall name the Agent as loss payee
and/or mortgagee insured.
7.8 NOTICE OF CERTAIN MATTERS. Give the Agent prompt written notice of the
following:
(a) the issuance by any Governmental Authority of any injunction, order or
other restraint prohibiting, or having the effect of prohibiting, the
performance of this Agreement, any other Loan Document, or the making of the
Loans or the initiation of any litigation, or any claim or controversy which
might result in the initiation of any litigation, seeking any such injunction,
order or other restraint;
(b) the filing or commencement of any action, suit or proceeding, whether
at law or in equity or by or before any court or any Federal, state, municipal
or other Governmental Authority which may reasonably be expected to materially
impair the right or the ability of either the Borrower or any of its
Subsidiaries to perform its obligations under the Loan Documents or to carry on
their business substantially as then conducted or materially and adversely
affect the business, assets, properties, operations or condition (financial or
otherwise) of the Borrower or any of the Borrower's Subsidiaries;
(c) any Event of Default or Default, specifying the nature and extent
thereof and the action (if any) which is proposed to be taken with the respect
thereto; and
(d) any development in the business or affairs of the Borrower or any of
the Borrower's Subsidiaries which has had or which could have, in the reasonable
judgment of the Borrower a Material Adverse Effect.
The Borrower will also notify the Agent in writing at least 30 days prior to the
date that any Party changes its name or the location of its chief executive
office or principal place of business or the place where it keeps its books and
records.
7.9 CAPITAL ADEQUACY. Agrees that if any Lender shall have determined that
the adoption after the Effective Date or effectiveness after the Effective Date
(whether or not previously announced) of any applicable law, rule, regulation or
treaty regarding capital adequacy, or any change therein after the Effective
Date, or any change in the interpretation or administration thereof after the
Effective Date by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Lender with any request or directive after the Effective Date regarding capital
adequacy (whether or not having the force of law) of any such Governmental
Authority, central bank or comparable agency has or would have the effect of
reducing the rate of return on such Lender's capital as a consequence of its
obligations hereunder, under the Letters of Credit, the Notes or other
Obligations held by it to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, upon satisfaction of the
conditions precedent set forth in this SECTION 7.9, upon demand by such
32
Lender (with a copy to the Agent), the Borrower (subject to SECTION 11.7) shall
pay to such Lender such additional amount or amounts as will compensate such
Lender for such reduction. The certificate of any Lender setting forth such
amount or amounts as shall be necessary to compensate it and the basis thereof
shall be delivered as soon as practicable to the Borrower and shall be
conclusive and binding, absent manifest error. The Borrower shall pay the amount
shown as due on any such certificate within ten (10) Business Days after the
delivery of such certificate. In preparing such certificate, a Lender may employ
such assumptions and allocations of costs and expenses as it shall in good xxxxx
xxxx reasonable and may use any reasonable averaging and attribution method.
7.10 ERISA INFORMATION AND COMPLIANCE. Promptly furnish to the Agent (i)
immediately upon receipt, a copy of any notice of complete or partial withdrawal
liability under Title IV of ERISA and any notice from the PBGC under Title IV of
ERISA of an intent to terminate or appoint a trustee to administer any Plan,
(ii) if requested by the Agent, promptly after the filing thereof with the
United States Secretary of Labor or the PBGC or the Internal Revenue Service,
copies of each annual and other report with respect to each Plan or any trust
created thereunder, (iii) immediately upon becoming aware of the occurrence of
any "reportable event," as such term is defined in Section 4043 of ERISA, for
which the disclosure requirements of Regulation Section 2615.3 promulgated by
the PBGC have not been waived, or of any non-exempt "prohibited transaction," as
such term is defined in Section 4975 of the Code for which the Borrower would
have any liability, in connection with any Plan or any trust created thereunder,
a written notice signed by the President or the principal financial officer of
the Borrower or the applicable member of the Controlled Group specifying the
nature thereof, what action the Borrower or the applicable member of the
Controlled Group is taking or proposes to take with respect thereto, and, when
known, any action taken by the PBGC, the Internal Revenue Service or the
Department of Labor with respect thereto, (iv) promptly after the filing or
receiving thereof by the Borrower or any member of the Controlled Group of any
notice of the institution of any proceedings or other actions which may result
in the termination of any Plan, and (v) each request for waiver of the funding
standards or extension of the amortization periods required by Sections 303 and
304 of ERISA or Section 412 of the Code promptly after the request is submitted
by the Borrower or any member of the Controlled Group to the Secretary of the
Treasury, the Department of Labor or the Internal Revenue Service, as the case
may be. To the extent required under applicable statutory funding requirements,
the Borrower will fund, or will cause the applicable member of the Controlled
Group to fund, all current service pension liabilities as they are incurred
under the provisions of all Plans from time to time in effect, and comply with
all applicable provisions of ERISA. The Borrower covenants that it shall and
shall cause each member of the Controlled Group to (1) make contributions to
each Plan in a timely manner and in an amount sufficient to comply with the
contribution obligations under such Plan and the minimum funding standards
requirements of ERISA; (2) prepare and file in a timely manner all notices and
reports required under the terms of ERISA including annual reports; and (3) pay
in a timely manner all required PBGC premiums.
7.11 BANK ACCOUNTS. The Borrower will not, and will not permit any of its
Subsidiaries to, maintain any accounts with any bank or other financial
institution except for accounts with a
33
bank or other financial institution (other than a Lender) containing funds which
do not exceed $100,000 in the aggregate, and except for the accounts with a
Lender.
7.12 LOCKBOX. Simultaneously herewith, the Borrower shall execute and
maintain, and shall cause each of the Current Guarantors to execute and
maintain, with the Agent (a) a lockbox agreement in Proper Form, pursuant to
which, among other things, the Borrower and the Current Guarantors agree to
direct the payment of all Accounts payable to the Current Guarantors to an
account established at the Agent, and (b) any and all related documents as the
Agent may require in its sole discretion.
7.13 ADDITIONAL GUARANTIES AND SECURITY. Promptly cause each Corporation
which becomes a Subsidiary of the Borrower after the date hereof to execute and
deliver to the Agent for the benefit of the Lenders a Guaranty or a Joinder
Agreement and an Additional Security Agreement (or, in the case of a Subsidiary
organized under the laws of a jurisdiction other than the United States, a
guaranty and a security agreement (or similar type agreement), each enforceable
under the laws of such jurisdiction and in the jurisdictions in which the assets
of such Subsidiary are located and otherwise in Proper Form), together with such
related certificates, opinions and documents as the Agent or any Lender may
reasonably require.
7.14 ACCOUNTS AUDITS. Permit the Agent or its designee to, from time to
time, conduct (but, so long as no Default has occurred which is still
continuing, no more often than once during any fiscal year) an audit of the
Accounts of the Borrower and its Subsidiaries. Prior to the occurrence of a
Default or an Event of Default, such audits shall be at the expense of the
Lenders. After the occurrence of a Default or an Event of Default and so long as
it is occurring, such audits shall be at the expense of the Borrower. The
Borrower further covenants and agrees that it will cooperate, and will cause its
Subsidiaries to cooperate, with the Agent or such designee and provide the Agent
or such designee access to all records, books and other information reasonably
requested by Bank in connection with the Borrower and its Subsidiaries'
Accounts.
8. NEGATIVE COVENANTS.
The Borrower covenants and agrees with the Agent and the Lenders that
prior to the termination of this Agreement it will not, and will not suffer or
permit any of the Borrower's Subsidiaries to, do any of the following:
8.1 INDEBTEDNESS. Create, incur, suffer or permit to exist, or assume or
guarantee, directly or indirectly, or become or remain liable with respect to
any Indebtedness, whether direct, indirect, absolute, contingent or otherwise,
except the following: (a) the Obligations, (b) indebtedness subordinated to the
prior payment in full of the Indebtedness upon terms and conditions approved in
writing by the Agent and the Majority Lenders, (c) purchase money Indebtedness
to acquire or lease Equipment not exceeding, in the aggregate at any time
outstanding $5,000,000 which is owed directly to the vendor or supplier of such
Equipment and which has not been assigned to a third-party lender, (d) existing
indebtedness to the extent set forth on SCHEDULE 8.1 or SCHEDULE 8.3, and all
renewals and extensions thereof (but not increases therein), (e) trade
34
indebtedness incurred and paid in the ordinary course of business, (f)
contingent indebtedness to the extent permitted by SECTION 8.3, (g) Indebtedness
secured by Permitted Liens, and (h) unsecured owner financing Indebtedness
associated with the acquisition of new Subsidiaries to the extent that such
Indebtedness would not cause the Borrower to violate the restrictions set forth
in SECTION 8.4.
8.2 LIENS. Create or suffer to exist any Lien upon any of its Property now
owned or hereafter acquired, or acquire any Property upon any conditional sale
or other title retention device or arrangement or any purchase money security
agreement; or in any manner directly or indirectly sell, assign, pledge or
otherwise transfer any of its Accounts or General Intangibles; PROVIDED,
HOWEVER, that the Borrower or any of its Subsidiaries may create or suffer to
exist: (a) Permitted Liens; (b) Liens securing purchase money Indebtedness
permitted under SECTION 8.1(C) and covering only the property so purchased or
leased; (c) the Liens described on SCHEDULE 8.2 hereof, and (d) extensions,
renewals and replacements of Liens referred to in paragraphs (a) and (b) of this
Section; PROVIDED that any such extension, renewal or replacement Lien shall be
limited to the Property or assets covered by the Lien extended, renewed or
replaced and that the Indebtedness secured by any such extension, renewal or
replacement Lien shall be in an amount not greater than the amount of the
Indebtedness secured by the Lien extended, renewed or replaced.
8.3 CONTINGENT LIABILITIES. Directly or indirectly guarantee the
performance or payment of, or purchase or agree to purchase, or assume or
contingently agree to become or be secondarily liable in respect of, any
obligation or liability of any other Person except for (a) the endorsement of
checks or other negotiable instruments in the ordinary course of business; (b)
obligations disclosed on SCHEDULE 8.3 (but not increases of such obligations
after the Effective Date); (c) those liabilities permitted under SECTION 8.1,
and (d) liabilities to AT&T Communications, Inc., Sprint Communications Company,
L.P., any Affiliate of either thereof, or any other telecommunications access
providers, with respect to agreements between such providers and any Subsidiary
acquired subsequent to the Effective Date which are in effect on the date of
acquisition of such Subsidiary, and which obligate such Subsidiary to purchase a
minimum amount of access time (but not increases or renewals of such obligations
after the Effective Date).
8.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND ACQUISITIONS OF ASSETS.
In any single transaction or series of transactions, directly or indirectly: (a)
liquidate or dissolve; (b) be a party to any merger or consolidation unless and
so long as (i) no Default or Event of Default has occurred that is then
continuing, (ii) immediately thereafter and giving effect thereto, no event will
occur and be continuing which constitutes a Default, (iii) the Borrower or a
Subsidiary of the Borrower (which must also be a Guarantor) is the surviving
Person; (iv) the surviving Person ratifies and assumes each Loan Document to
which any party to such merger was a party, and (v) the Agent is given at least
30 days' prior notice of such merger or consolidation; (c) sell, convey or lease
all or any substantial part of its assets, except for sale of Inventory in the
ordinary course of business and except for sales of Property (other than
Inventory) in the ordinary course of the Borrower's or the applicable Borrower's
Subsidiary's business; (d) pledge, transfer or otherwise dispose of any shares
of capital stock of any Subsidiary of the Borrower or any Indebtedness of any
Subsidiary of the Borrower, or permit any such Subsidiary to issue any
additional shares of
35
capital stock other than to the Borrower or to acquire any shares of capital
stock of the Borrower or any Subsidiary of the Borrower, or (e) acquire all or
substantially all of the assets of any Person or (except as expressly permitted
by SECTION 8.8) any shares of stock of or similar interest in any other Person,
in either case, for cash or for a note if the aggregate cash and note portion of
the acquisition price related to any one or a series of related transactions is
greater than $2,500,000, of if the aggregate amount of the cash and note portion
of all such acquisitions during any fiscal year of the Borrower would be in
excess of $10,000,000.
8.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS. At any time: (a) redeem,
retire or otherwise acquire, directly or indirectly, any shares of its capital
stock; (b) pay any dividend or (c) make any other distribution of any Property
or cash to stockholders as such.
8.6 NATURE OF BUSINESS. Change the nature of its business or enter into
any business which is substantially different from the business in which it is
presently engaged.
8.7 TRANSACTIONS WITH RELATED PARTIES. Enter into any transaction or
agreement with any officer, director or holder of any outstanding capital stock
of the Borrower or any of its Subsidiaries (or any Affiliate of any such Person)
unless the same is upon terms substantially similar to those obtainable from
wholly unrelated sources.
8.8 LOANS AND INVESTMENTS. Make any loan, advance, extension of credit or
capital contribution to, or make or have any Investment in, any Person, or make
any commitment to make any such extension of credit or Investment, except (a)
Permitted Investments and (b) normal and reasonable advances in the ordinary
course of business to officers and employees.
8.9 ORGANIZATIONAL DOCUMENTS. Amend, modify, restate or supplement any of
its Organizational Documents if such action could reasonably be expected to
materially and adversely affect any Collateral, Loan or Obligation or the
abilities of any of the Parties to perform their respective Obligations under
any Loan Document, unless such action shall be consented to in writing by the
Agent.
8.10 UNFUNDED LIABILITIES. Incur any Unfunded Liabilities or allow any
Unfunded Liabilities to arise or exist.
8.11 FISCAL YEAR. Change (and will not permit any of the Borrower's
Subsidiaries to change) its fiscal year.
8.12 CAPITAL EXPENDITURES. Make Capital Expenditures on a consolidated
basis in excess of $8,500,000 during any fiscal year of the Borrower beginning
with the Borrower's 1996 fiscal year.
8.13 SUBORDINATE INDEBTEDNESS. Subordinate any indebtedness due to it from
a Person to Indebtedness of other creditors of such Person.
36
8.14 KEY AGREEMENT AMENDMENTS. Amend, modify or grant a waiver of any
provision of any of the Key Agreements if such amendment, modification or waiver
could have a material adverse effect, in the opinion of the Majority Lenders, on
the Lenders, any Collateral, any Loan or Letter of Credit or on the ability of
the Borrower to perform its obligations under this Agreement, the Notes or any
of the other Loan Documents unless the same is consented to in writing by the
Agent and the Majority Lenders.
9. DEFAULTS.
9.1 EVENTS OF DEFAULT. If any one or more of the following events (herein
called "EVENTS OF DEFAULT") shall occur, then the Agent may (and at the
direction of the Majority Lenders, shall) do any or all of the following: (1)
without notice to the Borrower or any other Person, declare the Commitments
terminated (whereupon the Commitments shall be terminated) and/or accelerate the
Termination Date to a date as early as the date of termination of the
Commitments; (2) declare the principal amount then outstanding of and the unpaid
accrued interest on the Loans and Reimbursement Obligations and all fees and all
other amounts payable hereunder, under the Notes and under the other Loan
Documents to be forthwith due and payable, whereupon such amounts shall be and
become immediately due and payable, without notice (including notice of
acceleration and notice of intent to accelerate), presentment, demand, protest
or other formalities of any kind, all of which are hereby expressly waived by
the Borrower; PROVIDED that in the case of the occurrence of an Event of Default
with respect to the Borrower or any of its Subsidiaries referred to in CLAUSE
(F), (G) OR (H) of this SECTION 9.1, the Commitments shall be automatically
terminated and the principal amount then outstanding of and unpaid accrued
interest on the Loans and the Reimbursement Obligations and all fees and all
other amounts payable hereunder, under the Notes and under the other Loan
Documents shall be and become automatically and immediately due and payable,
without notice (including notice of acceleration and notice of intent to
accelerate), presentment, demand, protest or other formalities of any kind, all
of which are hereby expressly waived by the Borrower, and (3) exercise any or
other rights and remedies available to the Agent or any of the Lenders under the
Loan Documents, at law or in equity:
(a) PAYMENTS - the Borrower or any other Party fails to make any
payment or required prepayment of principal or accrued interest with
respect to the Loans, any Reimbursement Obligation or any other fee or
amount under the Notes, this Agreement or the other Loan Documents when
due; or
(b) OTHER OBLIGATIONS - the Borrower or any of the Borrower's
Subsidiaries shall default in the payment when due of any principal of or
interest on any Indebtedness having an outstanding principal amount of at
least $50,000 (other than the Loans and Reimbursement Obligations) and
such default shall continue beyond any applicable period of grace; or any
event or condition shall occur which results in the acceleration of the
maturity of any such Indebtedness or enables (or, with the giving of
notice or lapse of time or both, would enable) the holder of any such
Indebtedness or any Person acting on such
37
holder's behalf to accelerate the maturity thereof and such event or
condition shall not be cured within any applicable period of grace; or
(c) REPRESENTATIONS AND WARRANTIES - any representation or warranty
made or deemed made by or on behalf of the Borrower, any of the Borrower's
Subsidiaries or any other Party in this Agreement or any other Loan
Document or in any writing, statement, certificate or data furnished or
made by the Borrower, such Subsidiary or any other Party to the Agent or
the Lenders in connection herewith or therewith shall prove to have been
incorrect, false or misleading in any material respect as of the date
thereof or as of the date as of which the facts therein set forth were
stated or certified; or
(d) AFFIRMATIVE COVENANTS - (i) default shall be made in the due
observance or performance of any of the covenants or agreements contained
in SECTIONS 7.3, 7.4 OR 7.8, (ii) the Borrower or any of the Borrower's
Subsidiaries shall permit any of the insurance required under the Loan
Documents to lapse, or (iii) default is made in the due observance or
performance of any of the other covenants and agreements contained in
SECTION 7 or any other affirmative covenant of the Borrower, any of the
Borrower's Subsidiaries or any other Party contained in this Agreement or
any other Loan Document and such default continues unremedied for a period
of five (5) Business Days after (x) notice thereof is given by the Agent
to the Borrower (such grace period to run concurrently with, and not in
addition to, any other grace periods provided for in any of the other Loan
Documents with respect to the same Default) or (y) such default otherwise
becomes known to the Borrower, whichever is earlier; or
(e) NEGATIVE COVENANTS - default is made in the due observance or
performance by the Borrower or any other Party of any of the other
covenants or agreements contained in SECTION 8 of this Agreement or of any
other negative covenant of the Borrower or any other Party contained in
this Agreement or any other Loan Document; or
(f) INVOLUNTARY BANKRUPTCY OR RECEIVERSHIP PROCEEDINGS - a receiver,
conservator, liquidator or trustee of the Borrower or any of the
Borrower's Subsidiaries or of any of its Property is appointed by the
order or decree of any court or agency or supervisory authority having
jurisdiction, and such decree or order remains in effect for more than 30
days; or the Borrower or any of the Borrower's Subsidiaries is adjudicated
bankrupt or insolvent; or any of such Person's property is sequestered by
court order and such order remains in effect for more than 30 days; or a
petition is filed against the Borrower or any of the Borrower's
Subsidiaries under any state or federal bankruptcy, reorganization,
arrangement, insolvency, readjustment or debt, dissolution, liquidation or
receivership law or any jurisdiction, whether now or hereafter in effect,
and is not dismissed within 30 days after such filing; or
(g) VOLUNTARY PETITIONS OR CONSENTS - the Borrower or any of the
Borrower's Subsidiaries commences a voluntary case or other proceeding or
order seeking liquidation, reorganization, arrangement, insolvency,
readjustment of debt, dissolution, liquidation or
38
other relief with respect to itself or its debt or other liabilities under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property,
or consents to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or fails generally to, or cannot, pay its debts
generally as they become due or takes any corporate action to authorize or
effect any of the foregoing; or
(h) ASSIGNMENTS FOR BENEFIT OF CREDITORS OR ADMISSIONS OF INSOLVENCY
- the Borrower or any of the Borrower's Subsidiaries makes an assignment
for the benefit of its creditors, or admits in writing its inability to
pay its debts generally as they become due, or consents to the appointment
of a receiver, trustee, or liquidator of the Borrower or such Subsidiary
or of all or any substantial part of its Property; or
(i) UNDISCHARGED JUDGMENTS - a final judgment or judgments for the
payment of money exceeding, in the aggregate, $100,000 is rendered by any
Governmental Authority against the Borrower or any of the Borrower's
Subsidiaries and the Borrower or such Subsidiary does not discharge the
same or provide for its discharge in accordance with its terms, or procure
a stay of execution thereof within 30 days from the date of entry thereof;
or
(j) SECURITY DOCUMENTS - any Security Document for any reason ceases
to create a valid and perfected first-priority Lien on any of the
Collateral purported to be covered thereby, or the Borrower or any of the
Borrower's Subsidiaries (or any other Person who may have granted or
purported to grant such Lien) will so state in writing; or
(k) COLLATERAL - the sale, encumbrance or abandonment (except as
otherwise expressly permitted by this Agreement or any Security Document)
of any of the Collateral; or the making of any levy, seizure or attachment
of or on any material portion of the Collateral if such levy, seizure or
attachment is not released or effectively stayed within 10 days after its
effectiveness; or the loss, theft, substantial damage or destruction of
any material portion of the Collateral not covered by insurance; or
(l) ATTACHMENT - the Borrower or any of the Borrower's Subsidiaries
shall suffer any writ of attachment or execution or any similar process to
be issued or levied against it or any substantial part of its Property
which is not released, stayed, bonded or vacated within 30 days after its
issue or levy; or
(m) CONCEALMENT - the Borrower or any of the Borrower's Subsidiaries
shall have concealed, removed, or permitted to be concealed or removed,
any part of its Property, with intent to hinder, delay or defraud its
creditors or any of them, or made or suffered a transfer of any of its
Property which may be fraudulent under any bankruptcy, fraudulent
conveyance, insolvency or similar law; or shall have made any transfer of
its
39
Property to or for the benefit of a creditor at a time when other
creditors similarly situated have not been paid; or
(n) CHANGE OF CONTROL - Any two of Xxxx Xxxxx, Xxxx Xxxxxxx and
Xxxxxxx Xxxxxx shall cease to serve as officers of the Borrower in
substantially the same capacities as they are presently serving.
(o) NO LOSS - the Borrower and its Subsidiaries on a consolidated
basis shall have a net loss (determined in accordance with GAAP) from
operations for any fiscal quarter of the Borrower.
9.2 RIGHT OF SETOFF. Upon the occurrence and during the continuance of any
Event of Default, the Lenders each are hereby authorized at any time and from
time to time, without notice to the Borrower or any of the Guarantors by their
execution of a Guaranty or a Joinder Agreement) (any such notice being expressly
waived by the Borrower and the Guarantors), to setoff and apply any and all
deposits (general or special, time or demand, provisional or final (but
excluding the funds held in accounts clearly designated as escrow or trust
accounts held by the Borrower or such Guarantor for the benefit of Persons which
are not Affiliates of the Borrower or any of the Guarantors, whether or not such
setoff results in any loss of interest or other penalty, and including all
certificates of deposit) at any time held, and any other funds or property at
any time held, and other Indebtedness at any time owing by such Lender to or for
the credit or the account of the Borrower or any such Guarantor against any and
all of the Obligations irrespective of whether or not such Lender or the Agent
will have made any demand under this Agreement, the Notes or any other Loan
Document. Each of the Borrower and the Guarantors (by their execution of a
Guaranty or a Joinder Agreement) also hereby grants to each of the Lenders a
security interest in and hereby transfers, assigns, sets over, and conveys to
each of the Lenders, as security for payment of all Loans and Reimbursement
Obligations, all such deposits, funds or property of the Borrower. Should the
right of any Lender to realize funds in any manner set forth hereinabove be
challenged and any application of such funds be reversed, whether by court order
or otherwise, the Lenders shall make restitution or refund to the Borrower or
the applicable Guarantor PRO RATA in accordance with their Commitments. Each
Lender agrees to promptly notify the Borrower or the applicable Guarantor and
the Agent after any such setoff and application, provided that the failure to
give such notice will not affect the validity of such setoff and application.
The rights of the Agent and the Lenders under this Section are in addition to
other rights and remedies (including without limitation other rights of setoff)
which the Agent or the Lenders may have. This Section is subject to the terms
and provisions of SECTIONS 4.5 and 11.7.
9.3 COLLATERAL ACCOUNT. The Borrower hereby agrees, in addition to the
provisions of SECTION 9.1, that upon the occurrence and during the continuance
of any Event of Default, it shall, if requested by the Agent or the Majority
Lenders (through the Agent), pay to the Agent an amount in immediately available
funds equal to the then aggregate amount available for drawings under all
Letters of Credit issued for the account of the Borrower, which funds shall be
held by the Agent as Cover.
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9.4 PRESERVATION OF SECURITY FOR UNMATURED REIMBURSEMENT OBLIGATIONS. In
the event that, following (i) the occurrence of an Event of Default and the
exercise of any rights available to the Agent or any Lender under the Loan
Documents, and (ii) payment in full of the principal amount then outstanding of
and the accrued interest on the Loans and Reimbursement Obligations and fees and
all other amounts payable hereunder and under the Notes and all other amounts
secured by the Security Documents, any Letters of Credit shall remain
outstanding and undrawn upon, the Agent shall be entitled to hold (and the
Borrower hereby or by its execution of a Loan Document grant and convey to the
Agent a security interest in and to) all cash or other property ("PROCEEDS OF
REMEDIES") realized or arising out of the exercise by the Agent of any rights
available to it under the Loan Documents, at law or in equity, including the
proceeds of any foreclosure, as collateral for the payment of any amounts due or
to become due under or in respect of such Letters of Credit. Such Proceeds of
Remedies shall be held for the ratable benefit of the Lenders. Such Proceeds of
Remedies shall constitute "Collateral" for all purposes under the terms and
provisions of the Security Documents, and the rights, titles, benefits,
privileges, duties and obligations of Agent with respect thereto shall be
governed by the terms and provisions of this Agreement and, to the extent not
inconsistent with this Agreement, the Security Documents. The Agent may, but
shall have no obligation to, invest any such Proceeds of Remedies in such manner
as the Agent, in the exercise of its sole discretion, deems appropriate. Such
Proceeds of Remedies shall be applied to Reimbursement Obligations arising in
respect of any such Letters of Credit and/or the payment of any Lender's
obligations under any such Letter of Credit when such Letter of Credit is drawn
upon. The Borrower agrees to execute and deliver (or cause to be executed and
delivered) to the Agent and the Lenders such security agreements, pledges or
other documents as the Agent or any of the Lenders may, from time to time,
require to perfect the pledge, Lien and security interest in and to any such
Proceeds of Remedies provided for in this Section. Nothing in this Section shall
cause or permit an increase in the maximum amount of the Obligations permitted
to be outstanding from time to time under this Agreement.
9.5 REMEDIES CUMULATIVE. No remedy, right or power conferred upon the
Agent or any Lender is intended to be exclusive of any other remedy, right or
power given hereunder or now or hereafter existing at law, in equity, or
otherwise, and all such remedies, rights and powers shall be cumulative.
10. THE AGENT.
10.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder, under the
Letters of Credit and under the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms hereof and thereof, together
with such other powers as are reasonably incidental thereto. The Agent (the
"Agent" as used in this SECTION 10 shall include reference to its Affiliates and
its own and its Affiliates' respective officers, shareholders, directors,
employees and agents) (a) shall not have any duties or responsibilities except
those expressly set forth in this Agreement, the Letters of Credit, and the
other Loan Documents, and shall not by reason of this Agreement or any other
Loan Document be a trustee or fiduciary for any Lender; (b) shall not be
responsible to any Lender for any recitals, statements, representations or
warranties contained in this Agreement, the
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Letters of Credit or any other Loan Document, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement, the Letters of Credit or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability, execution, filing,
registration, collectibility, recording, perfection, existence or sufficiency of
this Agreement, the Letters of Credit, or any other Loan Document or any other
document referred to or provided for herein or therein or any property covered
thereby or for any failure by any Party or any other Person to perform any of
its obligations hereunder or thereunder, and shall not have any duty to inquire
into or pass upon any of the foregoing matters; (c) shall not be required to
initiate or conduct any litigation or collection proceedings hereunder or under
the Letters of Credit or any other Loan Document except to the extent requested
by the Majority Lenders; (d) shall not be responsible for any mistake of law or
fact or any action taken or omitted to be taken by it hereunder or under the
Letters or Credit or any other Loan Document or any other document or instrument
referred to or provided for herein or therein or in connection herewith or
therewith, INCLUDING, WITHOUT LIMITATION, PURSUANT TO ITS OWN NEGLIGENCE, EXCEPT
FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT; (e) shall not be bound by or
obliged to recognize any agreement among or between the Borrower or any other
Party and any Lender, regardless of whether the Agent has knowledge of the
existence of any such agreement or the terms and provisions thereof; (f) shall
not be charged with notice or knowledge of any fact or information not herein
set out or provided to the Agent in accordance with the terms of this Agreement
or any other Loan Document; (g) shall not be responsible for any delay, error,
omission or default of any mail, telegraph, cable or wireless agency or
operator, and (h) shall not be responsible for the acts or edicts of any
Governmental Authority. The Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Without in any way
limiting any of the foregoing, each Lender acknowledges that the Agent shall
have no greater responsibility in the operation of the Letters of Credit than is
specified in the Uniform Customs and Practice for Documentary Credits (1993
Revision, International Chamber of Commerce Publication No. 500). In any
foreclosure proceeding concerning any Collateral, each holder of an Obligation
if bidding for its own account or for its own account and the accounts of other
Lenders is prohibited from including in the amount of its bid an amount to be
applied as a credit against the Obligations held by it or the Obligations held
by the other Lenders; instead, such holder must bid in cash only. However, in
any such foreclosure proceeding, the Agent may (but shall not be obligated to)
submit a bid for all Lenders (including itself) in the form of a credit against
the Obligations, and the Agent or its designee may (but shall not be obligated
to) accept title to such collateral for and on behalf of all Lenders.
10.2 RELIANCE. The Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telex,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel (which may be counsel for the Borrower),
independent accountants and other experts selected by the Agent. The Agent shall
not be required in any way to determine the identity or authority of any Person
delivering or executing the same. As to any matters not expressly provided for
by this Agreement, the Letters of Credit, or any other Loan Document, the Agent
shall in all cases be fully protected in acting, or in
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refraining from acting, hereunder and thereunder in accordance with instructions
of the Majority Lenders, and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders. Pursuant to instructions of the Majority
Lenders, the Agent shall have the authority to execute releases of the Security
Documents on behalf of the Lenders without the joinder of any Lender. If any
order, writ, judgment or decree shall be made or entered by any court affecting
the rights, duties and obligations of the Agent under this Agreement or any
other Loan Document, then and in any of such events the Agent is authorized, in
its sole discretion, to rely upon and comply with such order, writ, judgment or
decree which it is advised by legal counsel of its own choosing is binding upon
it under the terms of this Agreement, the relevant Loan Document or otherwise;
and if the Agent complies with any such order, writ, judgment or decree, then it
shall not be liable to any Lender or to any other Person by reason of such
compliance even though such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, set aside or vacated.
10.3 DEFAULTS. The Agent shall not be deemed to have knowledge of the
occurrence of a Default (other than the non-payment of principal of or interest
on Loans or Reimbursement Obligations) unless it has received notice from a
Lender or the Borrower specifying such Default and stating that such notice is a
"NOTICE OF DEFAULT." In the event that the Agent receives such a Notice of
Default, the Agent shall give prompt notice thereof to the Lenders (and shall
give each Lender prompt notice of each such non-payment). The Agent shall
(subject to SECTION 10.7) take such action with respect to such Notice of
Default as shall be directed by the Majority Lenders and within its rights under
the Loan Documents and at law or in equity, PROVIDED that, unless and until the
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, permitted
hereby with respect to such Notice of Default as it shall deem advisable in the
best interests of the Lenders and within its rights under the Loan Documents, at
law or in equity.
10.4 RIGHTS AS A LENDER. With respect to its Commitments and the Loans
made and Letter of Credit Liabilities, Comerica in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting in its agency capacity,
and the term "LENDER" or "LENDERS" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. The Agent may (without
having to account therefor to any Lender) accept deposits from, lend money to
and generally engage in any kind of banking, trust, letter of credit, agency or
other business with the Borrower (and any of its Affiliates) as if it were not
acting as the Agent, and the Agent may accept fees and other consideration from
the Borrower (in addition to the fees heretofore agreed to between the Borrower
and the Agent) for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders.
10.5 INDEMNIFICATION. The Lenders agree to indemnify the Agent each (to
the extent not reimbursed under SECTION 2.2(C), SECTION 11.3 or SECTION 11.4,
but without limiting the obligations of the Borrower under said SECTIONS 2.2(C),
11.3 and 11.4), ratably in accordance with the sum of the Lenders' respective
Commitments, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature
43
whatsoever, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE
NEGLIGENCE OF ANY INDEMNIFIED PARTIES, which may be imposed on, incurred by
or asserted against the Agent in any way relating to or arising out of this
Agreement, the Letters of Credit or any other Loan Document or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including, without limitation, the costs and
expenses which the Borrower is obligated to pay under SECTIONS 2.2(C), 11.3 and
11.4, interest, penalties, attorneys' fees and amounts paid in settlement, but
excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents; PROVIDED that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified. The obligations of the Lenders under
this SECTION 10.5 shall survive the termination of this Agreement and the
repayment of the Obligations.
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it
has received current financial information with respect to the Borrower and that
it has, independently and without reliance on the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and decision to enter into this Agreement
and that it will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any of the other Loan Documents. The Agent
shall not be required to keep itself informed as to the performance or
observance by any Party of this Agreement, the Letters of Credit or any of the
other Loan Documents or any other document referred to or provided for herein or
therein or to inspect the properties or books of the Borrower or any Party.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Agent hereunder, under the
Letters of Credit or the other Loan Documents, the Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower or any
other Party (or any of their Affiliates) which may come into the possession of
the Agent.
10.7 FAILURE TO ACT. Except for action expressly required of the Agent
hereunder, under the Letters of Credit or under the other Loan Documents, the
Agent shall in all cases be fully justified in failing or refusing to act
hereunder and thereunder unless it shall receive further assurances to its
satisfaction by the Lenders of their indemnification obligations under SECTION
10.5 against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.
10.8 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Lenders and the Borrower, and the Agent may
be removed at any time with or without cause by the Majority Lenders. Upon any
such resignation or removal, (i) the Majority Lenders without the consent of the
Borrower shall have the right to appoint a successor Agent so long as such
successor Agent is also a Lender at the time of such appointment and (ii) the
Majority Lenders
44
shall have the right to appoint a successor Agent that is not a Lender at the
time of such appointment so long as the Borrower consents to such appointment
(which consent shall not be unreasonably withheld). If no successor Agent shall
have been so appointed by the Majority Lenders and accepted such appointment
within 30 days after the retiring Agent's giving of notice of resignation or the
Majority Lenders' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent. Any successor Agent shall be a
bank which has an office in the United States and a combined capital and surplus
of at least $250,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder and under any other Loan Documents. Such successor Agent
shall promptly specify by notice to the Borrower its Principal Office referred
to in SECTION 3.1 and SECTION 4. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this SECTION 10 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent.
10.9 NO PARTNERSHIP. Neither the execution and delivery of this Agreement
nor any of the other Loan Documents nor any interest the Lenders, the Agent or
any of them may now or hereafter have in all or any part of the Obligations
shall create or be construed as creating a partnership, joint venture or other
joint enterprise between the Lenders or among the Lenders and the Agent. The
relationship between the Lenders, on the one hand, and the Agent, on the other,
is and shall be that of principals and agent only, and nothing in this Agreement
or any of the other Loan Documents shall be construed to constitute the Agent as
trustee or other fiduciary for any Lender or to impose on the Agent any duty,
responsibility or obligation other than those expressly provided for herein and
therein.
11. MISCELLANEOUS.
11.1 WAIVER. No waiver of any Default or Event of Default shall be a
waiver of any other Default or Event of Default. No failure on the part of the
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under any Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law or in equity.
11.2 NOTICES. All notices and other communications provided for herein
(including any modifications of, or waivers or consents under, this Agreement)
shall be given or made by telex, telegraph, telecopy (confirmed by mail), cable
or other writing and telexed, telecopied, telegraphed, cabled, mailed or
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof (or provided for in an Assignment and
Acceptance); or, as to any party, at such other address as shall be designated
by such party in a notice to the Borrower and the Agent given in accordance with
this SECTION 11.2. Except as otherwise provided in this Agreement, all such
notices or communications shall be deemed to have
45
been duly given when (i) transmitted by telex or telecopier, delivered to the
telegraph or cable office, (ii) personally delivered (iii) one Business Day
after deposit with an overnight mail or delivery service, postage prepaid or
(iv) three Business Days' after deposit in a receptacle maintained by the United
States Postal Service, postage prepaid, registered or certified mail, return
receipt requested, in each case given or addressed as aforesaid.
11.3 EXPENSES, ETC. Whether or not any Loan is ever made or any Letter of
Credit ever issued, the Borrower shall pay or reimburse on demand (a) the Agent
for paying the reasonable fees and expenses of legal counsel to the Agent,
together with the reasonable fees and expenses of each local counsel to the
Agent, in connection with the preparation, negotiation, execution and delivery
of this Agreement (including the exhibits, annexes and schedules hereto), the
Security Documents and the other Loan Documents and the making of the Loans and
the issuance of Letters of Credit hereunder, and any modification, supplement or
waiver of any of the terms of this Agreement, the Letters of Credit or any other
Loan Document; (b) the Agent for any lien search fees, collateral audit fees,
appraisal fees, survey fees, environmental study fees, and title insurance costs
and premiums required in connection with any of the Loan Documents; (c) the
Agent for reasonable out-of-pocket expenses incurred in connection with the
preparation, documentation, administration and syndication of the Loans or any
of the Loan Documents (including the advertising, marketing, printing,
publicity, duplicating, mailing and similar expenses) of the Loans and Letter of
Credit Liabilities; (d) the Agent or any Lender for paying all transfer, stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement, any Letter of
Credit or any other Loan Document or any other document referred to herein or
therein; (e) the Agent or any Lender for paying all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
this Agreement, any Security Document or any document referred to herein or
therein, and (f) any Lender or the Agent for paying all amounts reasonably
expended, advanced or incurred by such Lender or Agent to satisfy any obligation
of the Borrower under this Agreement or any other Loan Document, to protect the
Collateral, to collect the Obligations or to enforce, protect, preserve or
defend the rights of such Lender or Agent under this Agreement or any other Loan
Document, including reasonable fees and expenses incurred in connection with
such Lender's or Agent's participation as a member of a creditor's committee in
a case commenced under the Bankruptcy Code or other similar law, fees and
expenses incurred in connection with lifting the automatic stay prescribed in
ss. 362 of the Bankruptcy Code and fees and expenses incurred in connection with
any action pursuant to ss. 1129 of the Bankruptcy Code and all other customary
out-of-pocket expenses incurred by such Lender or Agent in connection with such
matters, together with interest thereon at the Past Due Rate on each such amount
until the date of reimbursement to such Lender or Agent.
11.4 INDEMNIFICATION. The Borrower shall indemnify each of the Agent, the
Lenders, and each affiliate thereof and their respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims or damages to which any of them may become subject,
REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY
INDEMNIFIED PARTIES, insofar as such losses, liabilities, claims or damages
arise out of or result from any (i) actual or proposed use by the
46
Borrower of the proceeds of any extension of credit (whether a Loan or a Letter
of Credit) by any Lender hereunder; (ii) breach by the Borrower of this
Agreement or any other Loan Document or the breach by any other Party of any
Loan Document; (iii) violation by the Borrower or any other Party of any Legal
Requirement; (iv) investigation, litigation or other proceeding relating to any
of the foregoing, and the Borrower shall reimburse the Agent, each Lender, and
each Affiliate thereof and their respective directors, officers, employees and
agents, upon demand for any reasonable expenses (including reasonable legal
fees) incurred in connection with any such investigation or proceeding, or (v)
taxes (excluding income taxes and franchise taxes) payable or ruled payable by
any Governmental Authority in respect of the Obligations or any Loan Document,
together with interest and penalties, if any; PROVIDED, HOWEVER, that the
Borrower shall not have any obligations pursuant to this Section with respect to
any losses, liabilities, claims, damages or expenses incurred by the Person
seeking indemnification by reason of the gross negligence or willful misconduct
of that Person. Nothing in this Section is intended to limit the obligations of
the Borrower under any other provision of this Agreement.
11.5 AMENDMENTS, ETC. No amendment or modification of this Agreement, the
Notes or any other Loan Document shall in any event be effective against the
Borrower unless the same shall be agreed or consented to in writing by the
Borrower. No amendment, modification or waiver of any provision of this
Agreement, the Notes or any other Loan Document, nor any consent to any
departure by the Borrower therefrom, shall in any event be effective against the
Lenders unless the same shall be agreed or consented to in writing by the
Majority Lenders, and each such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; PROVIDED, that
no amendment, modification, waiver or consent shall, unless in writing and
signed by each Lender affected thereby, do any of the following: (a) increase
any Commitment of any of the Lenders or subject the Lenders to any additional
obligations; (b) reduce the principal of, or interest on, any Loan,
Reimbursement Obligation or fee hereunder; (c) postpone or extend the Maturity
Date, the Termination Date, the Loan Availability Period or any scheduled date
fixed for any payment of principal of, or interest on, any Loan, Reimbursement
Obligation, fee or other sum to be paid hereunder or waive any Event of Default
described in SECTION 9.1(A); (d) change the percentage of any of the Commitments
or of the aggregate unpaid principal amount of any of the Loans and Letter of
Credit Liabilities, or the number of Lenders, which shall be required for the
Lenders or any of them to take any action under this Agreement; (e) change any
provision contained in SECTIONS 2.2(C), 7.9, 11.3 OR 11.4 or this SECTION 11.5;
(f) increase any of the fixed percentages to be multiplied by the aggregate
amounts of the components comprising the Borrowing Base that are described in
(i) and (ii) of the definition of Borrowing Base herein; (g) release any
Guarantor from any Guaranty; (h) change the definition of "Majority Lenders"
contained herein, or (i) release any material portion of the security for the
Obligations. To the extent that the Agent requests in writing any Lender to
agree or consent in writing to a proposed amendment, modification or waiver of
any provision of this Agreement, the Notes or any Loan Document or to a consent
to any departure by the Borrower therefrom, such Lender shall have 15 Business
Days from the date of the Agent's giving of such request in accordance with
SECTION 11.2 to give to the Agent its approval or disapproval in writing of such
proposed amendment, modification, waiver or consent. Notwithstanding anything in
this
47
SECTION 11.5 to the contrary, no amendment, modification, waiver or consent
shall be made with respect to SECTION 10 without the consent of the Agent to the
extent it affects the Agent.
11.6 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Agent and the Lenders and their respective successors and assigns;
PROVIDED, HOWEVER, that the Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of all of the
Lenders, and any such assignment or transfer without such consent shall be null
and void. Each Lender may sell participations to any Person in all or part of
any Loan, or all or part of its the Notes or Commitments, to another bank or
other entity, in which event, without limiting the foregoing, the provisions of
the Loan Documents (including the Interest Rate Annex) shall inure to the
benefit of each purchaser of a participation; PROVIDED, HOWEVER, the PRO RATA
treatment of payments, as described in SECTION 22, shall be determined as if
such Lender had not sold such participation. Any Lender that sells one or more
participations to any Person shall not be relieved by virtue of such
participation from any of its obligations to Borrower under this Agreement
relating to the Loans. In the event any Lender shall sell any participation,
such Lender shall retain the sole right and responsibility to enforce the
obligations of the Borrower relating to the Loans, including the right to
approve any amendment, modification or waiver of any provision of this Agreement
other than amendments, modifications or waivers with respect to (i) any fees
payable hereunder to the Lenders, (ii) the amount of principal or the rate of
interest payable on, or the dates fixed for the scheduled repayment of principal
of, the Loans and (iii) the release of the Liens on any of the Collateral.
(b) Each Lender may assign to one or more Lenders or any other Person all
or a portion of its interests, rights and obligations under this Agreement;
PROVIDED, HOWEVER, that (i) the aggregate amount of the Commitments of the
assigning Lender subject to each such assignment shall in no event be less than
$5,000,000 (or such other amount the Borrower and the Majority Agents may
agree); (ii) other than in the case of an assignment to another Lender (that is,
at the time of the assignment, a party hereto) or to an Affiliate of such Lender
or to a Federal Reserve Bank, the Agent and, so long as no Event of Default
shall have occurred and be continuing, the Borrower must each give its prior
written consent, which consents shall not be unreasonably withheld, and (iii)
the parties to each such assignment shall execute and deliver to the Agent, for
its acceptance an Assignment and Acceptance in the form of EXHIBIT G hereto
(each an "ASSIGNMENT AND ACCEPTANCE") with blanks appropriately completed,
together with any Note or the Notes subject to such assignment. Upon such
execution, delivery and acceptance, from and after the effective date specified
in each Assignment and Acceptance, (A) the assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and (B) the Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto). Notwithstanding anything contained in this Agreement to the contrary,
any Lender may at any time assign all or any portion of its rights under this
Agreement and the
48
Notes issued to it as collateral to a Federal Reserve Bank; provided that no
such assignment shall release such Lender from any of its obligations hereunder.
(c) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the representation
and warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, such Lender assignor makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any of the other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any of the other Loan Documents or any other instrument or document furnished
pursuant thereto; (ii) such Lender assignor makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in SECTION 6.2 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such Lender assignor or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents; (v) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all obligations that by the terms
of this Agreement and the other Loan Documents are required to be performed by
it as a Lender.
(d) The entries in the records of the Agent as to each Assignment and
Acceptance delivered to it and the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans owing to, each Lender from
time to time shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Lenders may treat each Person the name of which is
recorded in the books and records of the Agent as a Lender hereunder for all
purposes of this Agreement and the other Loan Documents.
(e) Upon the Agent's receipt of an Assignment and Acceptance executed by
an assigning Lender and the assignee thereunder, together with any Note or the
Notes subject to such assignment and the written consent to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed with blanks
appropriately filled, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in its records and (iii) give prompt notice
thereof to the Borrower. Within five (5) Business Days after receipt of notice,
the Borrower, at its own expense, shall execute and deliver to the Agent in
exchange for the surrendered the Notes new the Notes to the order of such
assignee in an amount equal to the Commitments assumed by
49
it pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained Commitments hereunder, new the Notes to the order of the assigning
Lender in an amount equal to the Commitment retained by it hereunder. Such new
the Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered the Notes, shall be dated the effective
date of such Assignment and Acceptance and shall otherwise be in substantially
the form of the respective Note. Thereafter, such surrendered the Notes shall be
marked renewed and substituted and the originals thereof delivered to the
Borrower (with copies, certified by the Borrower as true, correct and complete,
to be retained by the Agent).
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this SECTION 11.6, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower.
11.7 LIMITATION OF INTEREST. The Borrower and the Lenders intend to
strictly comply with all applicable federal and Texas laws, including applicable
usury laws (or the usury laws of any jurisdiction whose usury laws are deemed to
apply to the Notes or any other Loan Documents despite the intention and desire
of the parties to apply the usury laws of the State of Texas). Accordingly, the
provisions of this SECTION 11.7 shall govern and control over every other
provision of this Agreement or any other Loan Document which conflicts or is
inconsistent with this Section, even if such provision declares that it
controls. As used in this Section, the term "interest" includes the aggregate of
all charges, fees, benefits or other compensation which constitute interest
under applicable law, PROVIDED that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread, in equal parts during the full term of the Obligations. In
no event shall the Borrower or any other Person be obligated to pay, or any
Lender have any right or privilege to reserve, receive or retain, (a) any
interest in excess of the maximum amount of nonusurious interest permitted under
the laws of the State of Texas or the applicable laws (if any) of the United
States or of any other state, or (b) total interest in excess of the amount
which such Lender could lawfully have contracted for, reserved, received,
retained or charged had the interest been calculated for the full term of the
Obligations at the Ceiling Rate. On each day, if any, that the interest rate
(the "STATED RATE") called for under this Agreement or any other Loan Document
exceeds the Ceiling Rate, the rate at which interest shall accrue shall
automatically be fixed by operation of this sentence at the Ceiling Rate for
that day, and shall remain fixed at the Ceiling Rate for each day thereafter
until the total amount of interest accrued equals the total amount of interest
which would have accrued if there were no such ceiling rate imposed by this
sentence. Thereafter, interest shall accrue at the Stated Rate unless and until
the Stated Rate again exceeds the Ceiling Rate, in which case, the provisions of
the immediately preceding sentence shall again automatically operate to limit
the interest accrual rate to the Ceiling Rate. The daily interest rates to be
used in calculating interest at the Ceiling Rate shall be determined by dividing
the applicable Ceiling Rate per annum by the number of days in the calendar year
for which such calculation is being made. None of the terms and provisions
contained in this Agreement or in
50
any other Loan Document (including SECTION 9.1) which directly or indirectly
relate to interest shall ever be construed without reference to this SECTION
11.7, or be construed to create a contract to pay for the use, forbearance or
detention of money at an interest rate in excess of the Ceiling Rate. If the
term of any Obligation is shortened by reason of acceleration of maturity as a
result of any Default or by any other cause, or by reason of any required or
permitted prepayment, and if for that (or any other) reason any Lender at any
time, including the stated maturity, is owed or receives (and/or has received)
interest in excess of interest calculated at the Ceiling Rate, then and in any
such event all of any such excess interest shall be canceled automatically as of
the date of such acceleration, prepayment or other event which produces the
excess, and, if such excess interest has been paid to such Lender, it shall be
credited PRO TANTO against the then-outstanding principal balance of the
Borrower's obligations to such Lender, effective as of the date or dates when
the event occurs which causes it to be excess interest, until such excess is
exhausted or all of such principal has been fully paid and satisfied, whichever
occurs first, and any remaining balance of such excess shall be promptly
refunded to its payor.
11.8 SURVIVAL. The obligations of the Borrower under SECTIONS 2.2(C),
2.2(D), 7.9, 11.3 AND 11.4 and all other obligations of the Borrower in any
other Loan Document (to the extent stated therein), and the obligations of the
Lenders under SECTION 10.5 and 11.7, shall survive the repayment of the Loans
and Reimbursement Obligations and the termination of the Commitments and the
Letters of Credit.
11.9 CAPTIONS. Captions and section headings appearing herein are included
solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
11.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.11 GOVERNING LAW. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED) THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
APPLICABLE LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE STATE OF TEXAS
AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
11.12 SEVERABILITY. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid, illegal
or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of such Loan Document shall not
be affected or impaired thereby.
11.13 TAX FORMS. With respect to each Lender which is organized under the
laws of a jurisdiction outside the United States, on the day of the initial
borrowing from each such Lender hereunder and from time to time thereafter if
requested by the Borrower or the Agent, such Lender
51
shall provide the Agent and the Borrower with the forms prescribed by the
Internal Revenue Service of the United States certifying as to such Lender's
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to such Lender hereunder or other
documents satisfactory to the Lender and the Agent indicating that all payments
to be made to such Lender hereunder are subject to such tax at a rate reduced by
an applicable tax treaty. Unless the Borrower and the Agent shall have received
such forms or such documents indicating that payments hereunder are not subject
to United States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty, the Borrower or the Agent shall withhold taxes from
such payments at the applicable statutory rate in the case of payments to or for
any Lender organized under the laws of a jurisdiction outside the United States.
11.14 VENUE. The Borrower hereby irrevocably (a) agrees that any legal
proceeding against the Agent or any Lender arising out of or in connection with
the Loan Documents shall be brought in the district courts of Xxxxxx County,
Texas, or in the United States District Court for the Southern District of
Texas, Houston Division (collectively, the "HOUSTON COURTS"); (b) submits to the
non-exclusive jurisdiction of the Houston Courts; (c) agrees and consents that
service of process may be made upon it in any proceeding arising out of the Loan
Documents or any transaction contemplated thereby by service of process as
provided by Texas law; (d) WAIVES, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of any Loan Document or the transactions
contemplated thereby in the Houston Courts; and (e) WAIVES any claim that any
such suit, action or proceeding in any Houston Court has been brought in an
inconvenient forum. All of the obligations of the Borrower under the Loan
Documents are performable in Xxxxxx County, Texas. Nothing herein shall affect
the right of the Agent or any Lender to commence legal proceedings or otherwise
proceed against the Borrower in any jurisdiction or to serve process in any
manner permitted by applicable law. The Borrower agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions in any manner provided by law.
11.15 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY IRREVOCABLY
WAIVE THE RIGHT TO TRAIL BY JURY WITH RESPECT TO ANY AND ALL ACTIONS OR
PROCEEDINGS AT ANY TIME IN WHICH BORROWER AND BANK ARE PARTIES ARISING OUT OF
THIS AGREEMENT.
52
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
EQUALNET HOLDING CORP.
By: /s/ XXXX XXXXXXX
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
Address for Notices:
EqualNet Plaza
0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Telecopy No.: (713)
53
COMERICA BANK-TEXAS, a Texas banking
association, as Agent and as a Lender
By: /s/ XXXX X. XXXXXXXX
Name: Xxxx X. Xxxxxxxx
Title: Vice President
Address for Notices:
Commitment: 000 Xxxxxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
$18,000,000 Attention: Xxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Comerica Bank - Texas
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 000000
Attention: Xxxx X. Xxx, Executive Vice President
FIRST INTERSTATE BANK OF TEXAS,
N. A., a national banking association
By: /s/ XXXXXXX XXXXXXX
Name: Xxxxxxx Xxxxxxx
Title: Vice President
Address for Notices:
Commitment: 0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
$7,000,000
AMENDMENT TO SECURED LOAN AGREEMENT
THIS AMENDMENT TO SECURED LOAN AGREEMENT (hereinafter referred to as the
"AMENDMENT") is made and entered into on this 21st day of February 1996, to be
effective as of February 21, 1996 by and between EQUALNET HOLDING CORP., a
Texas (hereinafter referred to as "BORROWER"), and COMERICA BANK-TEXAS, a Texas
state banking association, as agent for the Lenders (hereinafter referred to as
"BANK").
RECITALS
A. Borrower and Bank have entered into (i) that certain Secured
Loan Agreement, dated November 30, 1995, (hereinafter collectively referred to
as the "AGREEMENT".
B. Borrower and Bank desire to amend the Agreement as hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 10.1. DEFINITIONS. Capitalized terms used in this Amendment,
to the extent not otherwise defined herein, shall have the same meaning as in
the Agreement, as amended hereby.
ARTICLE II
AMENDMENTS
Section 2.01. AMENDMENT TO PARAGRAPH (A) OF SECTION 2.2. Paragraph
(a) of SECTION 2.2 of the Agreement is hereby amended by deleting therefrom the
dollar amount "$500,000" and substituting therefor the dollar amount
"$1,500,000."
ARTICLE III
CONSIDERATIONS PRECEDENT
Section 3.01 CONDITIONS. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent, unless specifically
waived by Bank:
(a) Bank shall have received from Borrower duly executed copies of this
Amendment, in form and substance satisfactory to Bank, in its sole discretion;
1
(b) The representations and warranties contained herein, in the
Agreement, as amended hereby, and/or in each other document, instrument
and agreement executed in connection with or relating to the Agreement
or this Amendment (hereinafter individually referred to as a "LOAN
DOCUMENT" and collectively referred to as the "LOAN DOCUMENTS") shall be
true and correct as of the date hereof, as if made on the date hereof;
(c) No Event of Default shall have occurred and be continuing and no
Default shall exist, unless such Event of Default or Default has been
specifically waived in writing by Bank; and
(d) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto, shall be satisfactory to Bank.
ARTICLE IV
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
Section 4.01. RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the other Loan
Documents are ratified and confirmed and shall continue in full force and
effect. Borrower and Bank agree that the Agreement, as amended hereby, and the
other Loan Documents shall continue to be legal, valid, binding and enforceable
in accordance with their respective terms.
Section 4.02. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to the Bank that (i) the execution, delivery and performance of
this Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Articles of Incorporation or
Bylaws of Borrower, (ii) the representations and warranties contained in the
Agreement, as amended hereby, and any other Loan Document are true and correct
on and as of the date hereof as though made on and as of the date hereof, except
to the extent such representations and warranties relate to an earlier date,
(iii) Borrower is in full compliance with all covenants and agreements contained
in the Agreement, as amended hereby, and (iv) Borrower has not amended its
Articles of Incorporation or Bylaws since the date of execution of the
Agreement.
2
ARTICLE V
MISCELLANEOUS
Section 5.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in the Agreement or any other document or
documents relating thereto, including, without limitation, any Loan Document
furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation by
Bank or any closing shall affect the representations and warranties or the right
of Bank to rely upon them.
Section 5.02. REFERENCE TO AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement, as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement, as amended hereby.
Section 5.03. EXPENSES OF BANK. As provided in the Agreement, Borrower
agrees to pay on demand all reasonable costs and expenses incurred by Bank in
connection with the preparation, negotiation and execution of this Amendment and
the other Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the
reasonable costs and fees of Bank's legal counsel, and all reasonable costs and
expenses incurred by Bank in connection with the enforcement or preservation of
any rights under the Agreement, as amended hereby, or any other Loan Document,
including, without limitation, the reasonable costs and fees of Bank's legal
counsel.
Section 5.04. SEVERABILITY. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
SECTION 5.05. APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN DALLAS, TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 5.06. SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of Bank and Borrower and their respective successors
and assigns, except Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of Bank.
3
Section 5.07. COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the same
instrument.
Section 5.08. EFFECT OF WAIVER. No consent or waiver, express or
implied, by Bank to or for any breach of or deviation from any covenant or
condition of the Agreement shall be deemed a consent or waiver to or of any
other breach of the same or any other covenant, condition or duty.
Section 5.09. HEADINGS. The headings, captions, and arrangements used
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
Section 5.10. FINAL AGREEMENT. THE AGREEMENT, AS AMENDED HEREBY AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, Borrower and Bank have caused this Amendment to be
executed on the date first written above by their duly authorized officers.
4
BORROWER:
EQUALNET HOLDING CORP.
By: XXXX XXXXXXX
--------------------------
Xxxx Xxxxxxx
Chief Executive Officer
BANK:
COMERICA BANK - TEXAS
By: XXXX X. XXXXXXXX
---------------------------
Xxxx X. Xxxxxxxx
Vice President
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: XXXXXXX X. XXXXXXX
---------------------------
Xxxxxxx X. Xxxxxxx
Vice President
5
SECOND AMENDMENT TO
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is made and
entered into as of March 20, 1996, by and among EQUALNET HOLDING CORP., a Texas
corporation (the "BORROWER"); each of the lenders which is or may from time to
time become a party hereto (individually, a "LENDER" and, collectively, the
"LENDERS"), and COMERICA BANK-TEXAS, a Texas banking association, as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the "AGENT").
RECITALS:
A. Borrower, Agent and Lenders entered into a Credit Agreement dated as of
November 30, 1995 (as the same may have heretofore been amended, restated,
modified or supplemented, the "CREDIT AGREEMENT").
B. Borrower has requested Agent and Lenders to amend the Maximum Loan
Available Amount definition contained in the Credit Agreement to include the
value of the investment securities contained in an trading account at Xxxxxxx
Xxxxx Xxxxxx Xxxxxx & Xxxxx Incorporated owned by Xxxx Xxxxxxx and wife, Xxxx
Xxxxxxx (the "PLEDGORS").
C. Borrower, Agent and Lenders now enter into this Amendment to evidence
their agreements as the matters described above, all of which is more fully
described hereinbelow, which such provisions contained below shall control over
any inconsistencies with the foregoing recitals.
AGREEMENTS:
In consideration of the premises and the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
1. MAXIMUM LOAN AVAILABLE AMOUNT AMENDED. The definition of Maximum Loan
Available Amount contained in Section 1.1 of the Credit Agreement is hereby
amended in its entirety to be and read as follows:
"MAXIMUM LOAN AVAILABLE AMOUNT shall mean, at any date, an amount equal to
the lesser of (i) the aggregate of the Commitments or (ii) the sum of the
Borrowing Base PLUS the lesser of (1) the Pledged Account Value and (2)
$500,000; all as of such date."
2. SECURITY AGREEMENTS AMENDED. The definition of Security Agreements
contained in Section 1.1 of the Credit Agreement is hereby amended in its
entirety to be and read as follows:
1
"SECURITY AGREEMENTS shall mean, collectively, (i) the Security Agreements
dated as of the Effective Date executed among the Borrower and the Agent
covering the Borrower's Accounts and Inventory and securing the
Obligations, (ii) the Security Agreement dated as of the Effective Date
executed among the Subsidiaries and the Agent covering their respective
Accounts and Inventory, and securing the Obligations arising under their
respective Guaranties, (iii) any and all security agreements now or
hereafter executed by any Party in favor of the Agent, as any of them may
from time to time be amended, modified, restated or supplemented, and (iv)
the Security Agreement dated as of March 20, 1996, executed and delivered
by Xxxx Xxxxxxx and wife, Xxxx Xxxxxxx, covering, among other property
more fully described therein, the Pledged Account, together with any and
all account control agreements executed in connection with said Security
Agreement, and all substitutions for and replacements of any of the
foregoing."
3. DEFINITIONS ADDED. Section 1.1 of the Credit Agreement is hereby
amended by adding thereto the following definition:
"PLEDGED ACCOUNT" shall mean that certain trading account number 443-27939
maintained by Xxxx Xxxxxxx and wife, Xxxx Xxxxxxx, with Xxxxxxx Xxxxx
Xxxxxx Xxxxxx & Xxxxx Incorporated.
"PLEDGED ACCOUNT VALUE shall mean, as of any date of determination, the
sum of (a) 95% of the market value of the CMA Account in the Pledged
Account PLUS (b) 80% of the market value of municipal bonds in the Pledged
Account rated "AAA" by Standard and Poor's Corporation PLUS 70% of market
value of all equity securities in the Pledged Account traded on the New
York Stock Exchange PLUS 60% of the market value of equity securities in
the Pledged Account traded on NASDAQ; all as of such date."
4. NO DEFAULT. Borrower hereby warrants and represents to Agent and
Lenders that no Default or Event of Default has occurred and is continuing.
5. CERTAIN DEFINITIONS AND REFERENCES. Terms used but not herein which are
defined in the Credit Agreement (as amended hereby) or in the other Loan
Documents shall have the meanings herein ascribed to them therein. The term
"Agreement" as used in the Credit Agreement and the term "Credit Agreement," as
used in the other Loan Documents or any other instrument, document or writing
furnished to Agent or any Lender by Borrower shall mean the Credit Agreement as
hereby amended.
6. EXPENSES; INDEMNIFICATION. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW, BORROWER WILL PAY ALL COSTS AND EXPENSES AND REIMBURSE AGENT AND LENDERS
FOR ANY AND ALL EXPENDITURES OF EVERY CHARACTER INCURRED OR EXPENDED FROM TIME
TO TIME, REGARDLESS OF WHETHER A DEFAULT HAS OCCURRED, IN CONNECTION WITH THE
PREPARATION, NEGOTIATION,
2
DOCUMENTATION, RECORDING, CLOSING, RENEWAL, REVISION, MODIFICATION, INCREASE,
REVIEW OR RESTRUCTURING OF THIS AMENDMENT.
7. NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in the Credit Agreement as amended by this Amendment, the
Notes or any of the other Loan Documents, it is expressly provided that in no
case or event shall the aggregate of (i) all interest on the unpaid balance of
the Notes, accrued or paid from the date hereof and (ii) the aggregate of any
other amounts accrued or paid pursuant to the Notes or any of the other Loan
Documents, which under applicable laws are or may be deemed to constitute
interest upon the indebtedness evidenced by the Notes ever exceed the Ceiling
Rate. In this connection, the parties hereto expressly stipulate and agree that
it is their common and overriding intent to contract in strict compliance with
the applicable usury laws. In furtherance thereof, none of the terms of the
Notes or any of the other Loan Documents shall ever be construed to create a
contract to pay, as consideration for the use, forbearance or detention of
money, interest at a rate in excess of the Ceiling Rate. Borrower or other
parties now or hereafter becoming liable for payment of the indebtedness
evidenced by the Notes shall never be liable for interest in excess of the
Ceiling Rate. If, for any reason whatever, the interest paid or received on any
Note during its full term produces a rate which exceeds the Ceiling Rate, the
holder of such Note shall credit against the principal of such Note (or, if such
indebtedness shall have been paid in full, shall refund to the payor of such
interest) such portion of said interest as shall be necessary to cause the
interest paid on such Note to produce a rate equal to the Ceiling Rate. All sums
paid or agreed to be paid to the holder of any Note for the use, forbearance or
detention of the indebtedness evidenced thereby shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of such Note, so that the interest rate is uniform
throughout the full term of such Note. The provisions of this paragraph shall
control all agreements, whether now or hereafter existing and whether written or
oral, among Borrower and Agent and Lenders.
8. BUSINESS LOANS. Borrower warrants and represents to Agent and Lenders
and all other holders of the Notes that all loans evidenced by the Notes are and
will be for business, commercial, investment or other similar purpose and not
primarily for personal, family, household or agricultural use, as such terms are
used in Chapter One.
9. LIEN CONTINUATION; MISCELLANEOUS. The Liens are hereby ratified and
confirmed as securing and continuing to secure the payment of the Notes, as if
it were originally described as "Indebtedness" (as defined in and) under each of
the Security Agreements. Nothing herein shall in any manner diminish, impair or
extinguish the Notes, any of the other Loan Documents or the Liens. The Liens
are not waived. To the extent of any conflict between the Notes or any of the
other Loan Documents (or any earlier modification of any of them) and this
Amendment, this Amendment shall control. Except as hereby expressly modified,
all terms of the Notes and the other Loan Documents (as any of them may have
been previously modified by any written agreement) remain in full force and
effect. This Amendment (a) shall bind and benefit Borrower and, except as herein
expressly limited, Agent and Lenders, and their respective receivers, trustees,
successors and assigns (PROVIDED, that Borrower may not assign its rights
hereunder
3
without the prior written consent of Agent and Lenders); (b) may be modified or
amended only by a writing signed by each party; (c) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE
UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT; (d) may be executed in
several counterparts, and by the parties hereto in separate counterparts, and
each counterpart, when executed and delivered, shall constitute an original
agreement enforceable against all who signed it without production of or
accounting for any other counterpart, and all separate counterparts shall
constitute the same agreement and (e) embodies the entire agreement and
understanding between the parties with respect to modifications of instruments
provided for herein and supersedes all prior conflicting or inconsistent
agreements, consents and understandings relating to such subject matter.
Borrower acknowledges and agrees that there are no oral agreements among any of
them with respect to the transactions contemplated by the Loan Documents which
have not been incorporated in this Amendment or in the Loan Documents. If any
provision of this Amendment should be determined by any court of competent
jurisdiction to be illegal, invalid or unenforceable under present or future
laws, the legality, validity and enforceability of the remaining provisions of
this Amendment shall not be affected thereby. Each waiver in this Amendment is
subject to the overriding and controlling rule that it shall be effective only
if and to the extent that (a) it is not prohibited by applicable law and (b)
applicable law neither provides for nor allows any material sanctions to be
imposed against Agent and Lenders for having bargained for and obtained it.
Wherever the term "including" or a similar term is used in this Amendment, it
shall be read as if it were "including by way of example only and without in any
way limiting the generality of the clause or concept referred to." Any exhibits,
appendices and annexes described in this Amendment as being attached to it are
hereby incorporated into it. The headings in this Amendment shall be accorded no
significance in interpreting it. EACH OF BORROWER AND GUARANTORS, BY THEIR
JOINDER HEREIN, HEREBY RELEASES, DISCHARGES AND ACQUITS FOREVER AGENT AND
LENDERS AND ITS OFFICERS, DIRECTORS, TRUSTEES, AGENTS, EMPLOYEES AND COUNSEL (IN
EACH CASE, PAST, PRESENT AND FUTURE) FROM ANY AND ALL CLAIMS EXISTING AS OF THE
DATE HEREOF (OR THE DATE OF ACTUAL EXECUTION HEREOF BY THE APPLICABLE PERSON OR
ENTITY, IF LATER). AS USED HEREIN, THE TERM "CLAIM" SHALL MEAN ANY AND ALL
LIABILITIES, CLAIMS, DEFENSES, DEMANDS, ACTIONS, CAUSES OF ACTION, JUDGMENTS,
DEFICIENCIES, INTEREST, LIENS, COSTS OR EXPENSES (INCLUDING BUT NOT LIMITED TO
COURT COSTS, PENALTIES, ATTORNEYS' FEES AND DISBURSEMENTS, AND AMOUNTS PAID IN
SETTLEMENT) OF ANY KIND AND CHARACTER WHATSOEVER, INCLUDING BUT NOT LIMITED TO
CLAIMS FOR USURY, BREACH OF CONTRACT, BREACH OF COMMITMENT, NEGLIGENT
MISREPRESENTATION OR FAILURE TO ACT IN GOOD FAITH, IN EACH CASE WHETHER NOW
KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, ASSERTED OR UNASSERTED OR PRIMARY OR
CONTINGENT, AND WHETHER ARISING OUT OF WRITTEN
4
DOCUMENTS, UNWRITTEN UNDERTAKINGS, COURSE OF CONDUCT, TORT, VIOLATIONS OF LAWS
OR REGULATIONS OR OTHERWISE.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN CREDIT AGREEMENT WHICH REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EQUALNET HOLDING CORP., a Texas corporation
By:
Name:
Title:
5
COMERICA BANK-TEXAS, a Texas banking
association, as Agent and as a Lender
By:
Name:
Title:
0
XXXXX XXXXXXXXXX XXXX XX XXXXX,
X. A., a national banking association
By:
Name:
Title:
7
GUARANTORS' CONSENTS
Guarantors hereby join in this Amendment to evidence Guarantors' consent to
execution by Borrower and the Agent and Lenders of this Amendment, to confirm
that the Guaranties apply and shall continue to apply to the Credit Agreement
(as amended hereby), and the other Loan Documents and to acknowledge that
without such consent and confirmation, Agent and Lenders would not execute this
Amendment or otherwise consent to the amendments set forth herein.
EXECUTED effective as of the date first set forth above.
EQUALNET CORPORATION, a Delaware corporation
By:
Name:
Title:
TELESOURCE, INC., a Texas corporation
By:
Name:
Title:
8
THIRD AMENDMENT TO
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is made and
entered into as of , 1996, by and among EQUALNET HOLDING CORP., a Texas
corporation (the "BORROWER"); each of the lenders which is or may from time to
time become a party hereto (individually, a "LENDER" and, collectively, the
"LENDERS"), and COMERICA BANK- TEXAS, a Texas banking association, as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the "AGENT").
RECITALS:
A. Borrower, Agent and Lenders entered into a Credit Agreement dated as of
November 30, 1995 (as the same may have heretofore been amended, restated,
modified or supplemented, the "CREDIT AGREEMENT").
B. Borrower has requested Agent and Lenders to (a) waive defaults under
certain covenants set forth in the Credit Agreement, (b) permanently reduce the
aggregate amount of the Commitments, (c) modify the definitions of Eligible
Accounts, Maximum Loan Available Amount and Borrowing Base and other provisions
related to the determination of the Borrowing Base, (d) modify the right of the
Borrower to request the issuance of Letters of Credit, (e) modify the rate at
which interest on the Indebtedness evidenced or governed by the Loan Documents
accrues, including elimination of Eurodollar Rate option, (f) modify certain
financial covenants, (g) delete certain definitions and add others, and (h) make
certain other changes to the Credit Agreement and the other Loan Documents.
C. Borrower, Agent and Lenders now enter into this Amendment to evidence
their agreements as the matters described above, all of which is more fully
described hereinbelow, which such provisions contained below shall control over
any inconsistencies with the foregoing recitals.
AGREEMENTS:
In consideration of the premises and the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
1. COMMITMENTS REDUCED. Each Lender's Commitment is hereby irrevocably
reduced to the amount set forth opposite such Lender's name on the signature
pages hereof.
2. MAXIMUM LOAN AVAILABLE AMOUNT AMENDED. The definition of Maximum Loan
Available Amount contained in Section 1.1 of the Credit Agreement is hereby
amended in its entirety to be and read as follows:
1
"MAXIMUM LOAN AVAILABLE AMOUNT shall mean, at any date, an amount equal to
the lesser of (i) the aggregate of the Commitments or (ii) the Borrowing
Base."
3. BORROWING BASE AMENDED. The definition of Borrowing Base contained in
Section 1.1 of the Credit Agreement is hereby amended by deleting the phrase
"85% of" where it appears therein and substituting therefor the phrase "the
Applicable Borrowing Base Percentage as of such date times."
4. ELIGIBLE ACCOUNTS AMENDED. The definition of Eligible Accounts
contained in Section 1.1 of the Credit Agreement is hereby amended in its
entirety to be and read as follows:
"ELIGIBLE ACCOUNTS shall mean, as at any date of determination thereof,
each Account of the Borrower or any of its Subsidiaries which is subject
to a Security Document and on which the Agent shall have a first-priority
perfected Lien, which Account is at said date payable to the Borrower or
any of its Subsidiaries and which complies with the following
requirements: (a) the subject goods have been sold to an account debtor on
an absolute sale basis on open account and not on consignment, on approval
or on a "sale or return" basis or subject to any other repurchase or
return agreement and no material part of the subject goods has been
returned, rejected, lost or damaged, the Account is stated to be payable
in Dollars and is not evidenced by chattel paper or an instrument of any
kind and said account debtor is not insolvent or the subject of any
bankruptcy or insolvency proceedings of any kind; (b) the account debtor
must be located in the United States; (c) it is a valid obligation of the
account debtor thereunder and is not subject to any offset or other
defense on the part of such account debtor or to any claim on the part of
such account debtor denying liability thereunder; (d) it is subject to no
Lien whatsoever, except for the Liens created or permitted pursuant to the
Security Documents; (e) it is evidenced by an invoice submitted to the
account debtor in timely fashion and in the normal course of business; (f)
it has not remained unpaid beyond 90 days after the date of the applicable
invoice; (g) if such date is on or after August 5, 1996, and if the
applicable account debtor is one which is no longer being serviced by the
Borrower, the applicable account debtor does not have any other Accounts
owed to the Borrower or any of its Subsidiaries which remain unpaid beyond
90 days after the date of the applicable invoice; (h) not more than (1)
75% (if such date is on or after July 5, 1996 but prior to August 5,
1996), (2) 50% (if such date is on or after August 5, 1996 but prior to
September 5, 1996) or (3) 25% (if such date is on or after September 5,
1996), of the other Accounts of the applicable account debtor or any of
its Affiliates owed in the aggregate to the Borrower or any
2
of its Subsidiaries fail to satisfy all of the requirements of an
"Eligible Account"; (i) it does not arise out of transactions with an
employee, officer, agent, director or stockholder of the Borrower or any
of its Subsidiaries or any Affiliate of the Borrower or any of its
Subsidiaries, other than Accounts approved in writing by the Agent; (j)
the applicable account debtor is not one who the Agent has, in the
exercise of its sole discretion, determined to be (based on such factors
as the Agent deems appropriate), and has given notice of such
determination to the Borrower, an ineligible account debtor; PROVIDED,
HOWEVER, than any such notice shall not apply as to any Account of such
account debtor which has been included on a Borrowing Base Certificate
prior to the giving of such notice by Agent and which meets each and every
other requirement under this Agreement for the denomination of such
Account as an "Eligible Account," and (k) each of the representations and
warranties set forth in the Security Documents executed by the Borrower
and its Subsidiaries with respect thereto is true and correct in all
material respects on such date. In the event of any dispute under the
foregoing criteria, about whether an Account is or has ceased to be an
Eligible Account, the decision of the Agent, made in good faith, shall be
conclusive and binding, absent manifest error."
5. INTEREST RATES AMENDED.
(a) The option of the Borrower to have the unpaid principal balance
of the Loans bear interest at the Eurodollar Rate is hereby irrevocably
terminated. Upon the expiration of any Eurodollar Rate Borrowing Interest
Period currently in effect on the date hereof, the applicable Eurodollar
Rate Borrowing shall automatically be converted to a Base Rate Borrowing.
(b) The definition of Base Rate contained in the Interest Rate Annex
is hereby amended effective as of June 1, 1996, by deleting therefrom
clause (1) of the first sentence thereof and substituting therefor the
following:
"(1) the Prime Rate for that day plus three percent (3%) and".
6. DEFERRED INTEREST PAYMENTS. Notwithstanding anything contained in the
Credit Agreement, as amended hereby, to the contrary, on each Interest Payment
Date (as that term is defined in the Interest Rate Annex) occurring after May
31, 1996 and prior to October 1, 1996 (and subject to Section 11.7 of the Credit
Agreement), payments of interest on Base Rate Borrowings shall be made as if the
Base Rate in effect on each day during the calendar month to which such Interest
Payment Date relates was equal to the Prime Rate for such day plus one percent
(1%). All interest so deferred which has accrued to October 1, 1996 and which
has not otherwise been paid shall be due and payable on such day.
3
7. DELIVERY TIMES EXTENDED. Section 7.2(d) of the Credit Agreement is
hereby amended by deleting therefrom the number "30" where it appears therein
and substituting therefor the number "35".
8. LETTER OF CREDIT FACILITY AMENDED. Section 2.2(a) of the Credit
Agreement is hereby amended to provide that the aggregate Letter of Credit
Liabilities shall never exceed $250,000 after the date hereof. In addition,
Section 2.2(b) of the Credit Agreement is hereby amended to provide that any and
all Letters of Credit issued by the Issuer after the date hereof shall be fully
Covered or backed by a standby letter of credit in form and substance, and
issued by a Person, acceptable to the Agent in its sole discretion.
9. DEFINITION ADDED. Section 1.1 of the Credit Agreement is hereby amended
by adding thereto the following definition:
"APPLICABLE BORROWING BASE PERCENTAGE shall mean on any day occurring on
or prior to October 5, 1996, 85%, on any day occurring after October 5,
but prior to or on November 5, 1996, 80%, and on any day thereafter, 75%."
10. DEFINITIONS DELETED. Section 1.1 of the Credit Agreement is hereby
amended by deleting therefrom the definitions of "Pledged Account" and "Pledged
Account Value."
11. FINANCIAL TESTS AMENDED. Section 7.3 of the Credit Agreement is hereby
amended in its entirety to be and read as follows:
"7.3 FINANCIAL TESTS. Have and maintain on a consolidated basis:
"(a) MAINTAIN DEBT TO TANGIBLE NET WORTH RATIO. A ratio of
Indebtedness (including all Obligations) to Tangible Net Worth of not more
than (i) 13.00 to 1.00 at all times on or before Xxxxx 00, 0000, (xx)
12.00 to 1.00 at all times from and including May 1, 1996 through and
including May 31, 1996, (iii) 10.00 to 1.00 at all times from including
June 1, 1996 through and including June 30, 1996, (iv) 9.00 to 1.00 at all
times from and including July 1, 1996 through and including July 31, 1996,
and (v) 8.00 to 1.00 from including August 1, 1996 and at all time
thereafter.
"(b) MAINTAIN DEBT TO NET WORTH RATIO. A ratio of Indebtedness
(including all Obligations) to Net Worth of not more than 1.90 to 1.00
prior to and on September 30, 1996 and 1.50 to 1.00 at all times
thereafter.
"(c) MAINTAIN CURRENT RATIO. A Current Ratio of not less than 1.10
to 1.00 at all times. For purposes of calculation of the Current Ratio,
Current
4
Liabilities shall not include any of the Indebtedness arising pursuant to
or under the Credit Agreement and the other Loan Documents.
"(d) FIXED CHARGE COVERAGE RATIO. A Fixed Charge Coverage Ratio of
not less than 0.275 to 1.00 at all times prior to and on September 30,
1996 and 1.50 to 1.00 at all times thereafter.
"(e) DEBT TO EBITDA RATIO. A Debt to EBITDA Ratio of not more than
12.25 to 1.00 prior to and on September 30, 1996 and 4.00 to 1.00 at all
times thereafter."
12. PURCHASE MONEY INDEBTEDNESS; SECURITY. Section 8.1 of the Credit
Agreement is hereby deemed amended to provide that after the date hereof, the
Borrower shall not, and shall not permit any of its Subsidiaries to, incur any
additional purchase money indebtedness after the date of this Amendment. In
addition, clause (b) of Section 8.2 of the Credit Agreement is hereby deemed
amended to provide that no additional Liens may be granted to secure purchase
money security indebtedness not already in existence as of the date of this
Amendment.
13. NO CASH ACQUISITIONS. Section 8.4 of the Credit Agreement is hereby
amended by deleting therefrom clause (e) in its entirety.
14. NO LOSS DEFAULT AMENDED. Section 9.1(o) of the Credit Agreement is
hereby amended in its entirety to be and read as follows:
"(o) NO LOSS - the Borrower and its Subsidiaries on a consolidated basis
shall have a net loss (determined in accordance with GAAP) from operations
for the six (6) consecutive calendar months ending on September 30, 1996
in excess of $1,900,000 in the aggregate, or shall have a net loss
(determined in accordance with GAAP) from operations for any fiscal
quarter of the Borrower ending thereafter."
15. WAIVER OF CERTAIN DEFAULTS. The Bank hereby waives the occurrence of
any Default or Event of Default which has occurred through April 30, 1996 (but
not thereafter) and of which the Bank has received written notice from the
Borrower, under the provisions of Section 7.3 or Section 9.1(o) of the Credit
Agreement.
16. JOINDER EFFECTED. Pursuant to Section 7.13 of the Credit Agreement,
the Borrower shall cause, simultaneously with its execution and delivery of this
Amendment, EqualNet Wholesale Services, Inc. ("WHOLESALE"), a Delaware
corporation, a Subsidiary of the Borrower, to execute and deliver to the Agent a
Joinder Agreement and an Additional Security Agreement, in Proper Form, together
with any and all related Financing Statements, certificates of the
5
Secretary or Assistant Secretary of Wholesale as to the execution and delivery
thereof and any and all other related documents required by the Agent.
17. RESTRUCTURE FEE. In consideration, among other consideration, for the
Agent and the Banks entering into this Amendment, the Borrower hereby agrees to
pay to the Agent for distribution to the Lenders a restructure fee in the amount
of $50,000, which shall be due and payable on the date hereof. Upon receipt of
said restructure fee, the Agent shall distribute the same to Lenders in
accordance with their respective Commitment Percentages.
18. VENUE. Section 11.14 of the Credit Agreement as well as each other
provision relating to venue contained in any of the other Loan Documents is
hereby amended by deleting the reference to "Xxxxxx County, Texas" wherever it
appears and substituting therefor "Dallas County, Texas" in each instance, and,
FURTHER, by deleting therefrom the reference to Southern District of Texas,
Houston Division" wherever it appears therein and substituting therefor in each
instance "Northern District of Texas, Dallas Division".
19. NO OTHER DEFAULT. Borrower hereby warrants and represents to Agent and
Lenders that no Default or Event of Default has occurred and is continuing which
has not been disclosed in writing to the Agent and the Lenders and waived
pursuant hereto.
20. CONDITIONS. No part of this Amendment shall become effective until the
Borrower shall have delivered (or shall have caused to be delivered) to the
Agent each of the following, in Proper Form:
(a) certificates dated as of the date hereof of the Secretary or any
Assistant Secretary of the Borrower and each of the Guarantors
(including, without limitation, Wholesale) as of the date hereof,
authorizing the execution, delivery and performance of this
Amendment, the Loan Documents described in SECTION 16 hereof, and
such other related documents and information as the Lenders may
request;
(b) an Additional Security Agreement and a Joinder Agreement, each of
even date herewith, each executed and delivered by Wholesale;
(c) certificates issued by the appropriate governmental authorities from
the States of Delaware and Texas as to the existence, good standing
and qualification to do business in Texas of the Borrower and the
Guarantors;
(d) copies of all billing contracts between the Borrower or any of its
Subsidiaries and third-party billing services (including, without
limitation, ACUS, Claremont and Centillion), certified by the
Secretary or Assistant Secretary of the Borrower or
6
such Subsidiary (as the case may be) as being true, correct and
complete copies of all such contracts;
(e) a listing and aging of accounts receivable of the Borrower and its
Subsidiaries as of the date of this Amendment;
(f) a Notice of Entire Agreement executed by the Company and each of the
Guarantors as of the date hereof;
(g) the Lenders' restructuring fee in the amount of $50,000; and
(h) evidence of the payment of any and all legal fees and expenses
incurred to date by the Agent and the Lenders in connection with
this Amendment (including, without limitation, the negotiation and
preparation of this Amendment and the related Loan Documents).
21. CERTAIN DEFINITIONS AND REFERENCES. Terms used herein but not defined
herein which are defined in the Credit Agreement (as amended hereby) or in the
other Loan Documents shall have the meanings herein ascribed to them therein.
The term "Agreement" as used in the Credit Agreement and the term "Credit
Agreement," as used in the other Loan Documents or any other instrument,
document or writing furnished to Agent or any Lender by Borrower shall mean the
Credit Agreement as hereby amended.
22. EXPENSES; INDEMNIFICATION. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW, BORROWER WILL PAY ALL COSTS AND EXPENSES AND REIMBURSE AGENT AND LENDERS
FOR ANY AND ALL EXPENDITURES OF EVERY CHARACTER INCURRED OR EXPENDED FROM TIME
TO TIME, REGARDLESS OF WHETHER A DEFAULT HAS OCCURRED, IN CONNECTION WITH THE
PREPARATION, NEGOTIATION, DOCUMENTATION, RECORDING, CLOSING, RENEWAL, REVISION,
MODIFICATION, INCREASE, REVIEW OR RESTRUCTURING OF THIS AMENDMENT.
23. NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in the Credit Agreement as amended by this Amendment, the
Notes or any of the other Loan Documents, it is expressly provided that in no
case or event shall the aggregate of (i) all interest on the unpaid balance of
the Notes, accrued or paid from the date hereof and (ii) the aggregate of any
other amounts accrued or paid pursuant to the Notes or any of the other Loan
Documents, which under applicable laws are or may be deemed to constitute
interest upon the indebtedness evidenced by the Notes ever exceed the Ceiling
Rate. In this connection, the parties hereto expressly stipulate and agree that
it is their common and overriding intent to contract in strict compliance with
the applicable usury laws. In furtherance thereof, none of the terms of the
Notes or any of the other Loan Documents shall ever be construed to create a
contract to pay, as consideration for the use, forbearance or detention of
money, interest at a rate in excess of the Ceiling Rate. Borrower or other
parties now or hereafter becoming liable for payment of the
7
indebtedness evidenced by the Notes shall never be liable for interest in excess
of the Ceiling Rate. If, for any reason whatever, the interest paid or received
on any Note during its full term produces a rate which exceeds the Ceiling Rate,
the holder of such Note shall credit against the principal of such Note (or, if
such indebtedness shall have been paid in full, shall refund to the payor of
such interest) such portion of said interest as shall be necessary to cause the
interest paid on such Note to produce a rate equal to the Ceiling Rate. All sums
paid or agreed to be paid to the holder of any Note for the use, forbearance or
detention of the indebtedness evidenced thereby shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of such Note, so that the interest rate is uniform
throughout the full term of such Note. The provisions of this paragraph shall
control all agreements, whether now or hereafter existing and whether written or
oral, among Borrower and Agent and Lenders.
24. BUSINESS LOANS. Borrower warrants and represents to Agent and Lenders
and all other holders of the Notes that all loans evidenced by the Notes are and
will be for business, commercial, investment or other similar purpose and not
primarily for personal, family, household or agricultural use, as such terms are
used in Chapter One.
25. LIEN CONTINUATION; MISCELLANEOUS. The Liens are hereby ratified and
confirmed as securing and continuing to secure the payment of the Notes, as if
it were originally described as "Indebtedness" (as defined in and) under each of
the Security Agreements. Nothing herein shall in any manner diminish, impair or
extinguish the Notes, any of the other Loan Documents or the Liens. The Liens
are not waived. To the extent of any conflict between the Notes or any of the
other Loan Documents (or any earlier modification of any of them) and this
Amendment, this Amendment shall control. Except as hereby expressly modified,
all terms of the Notes and the other Loan Documents (as any of them may have
been previously modified by any written agreement) remain in full force and
effect. This Amendment (a) shall bind and benefit Borrower and, except as herein
expressly limited, Agent and Lenders, and their respective receivers, trustees,
successors and assigns (PROVIDED, that Borrower may not assign its rights
hereunder without the prior written consent of Agent and Lenders); (b) may be
modified or amended only by a writing signed by each party; (c) SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF
TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT; (d) may be
executed in several counterparts, and by the parties hereto in separate
counterparts, and each counterpart, when executed and delivered, shall
constitute an original agreement enforceable against all who signed it without
production of or accounting for any other counterpart, and all separate
counterparts shall constitute the same agreement and (e) embodies the entire
agreement and understanding between the parties with respect to modifications of
instruments provided for herein and supersedes all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Borrower acknowledges and agrees that there are no oral agreements among
any of them with respect to the transactions contemplated by the Loan Documents
which have not been incorporated in this Amendment or in the Loan Documents. If
any provision of this Amendment should be determined by any court of competent
jurisdiction to
8
be illegal, invalid or unenforceable under present or future laws, the legality,
validity and enforceability of the remaining provisions of this Amendment shall
not be affected thereby. Each waiver in this Amendment is subject to the
overriding and controlling rule that it shall be effective only if and to the
extent that (a) it is not prohibited by applicable law and (b) applicable law
neither provides for nor allows any material sanctions to be imposed against
Agent and Lenders for having bargained for and obtained it. Wherever the term
"including" or a similar term is used in this Amendment, it shall be read as if
it were "including by way of example only and without in any way limiting the
generality of the clause or concept referred to." Any exhibits, appendices and
annexes described in this Amendment as being attached to it are hereby
incorporated into it. The headings in this Amendment shall be accorded no
significance in interpreting it.
26. RELEASE. EACH OF BORROWER AND GUARANTORS, BY THEIR JOINDER HEREIN,
HEREBY RELEASES, DISCHARGES AND ACQUITS FOREVER AGENT AND LENDERS AND ITS
OFFICERS, DIRECTORS, TRUSTEES, AGENTS, EMPLOYEES AND COUNSEL (IN EACH CASE,
PAST, PRESENT AND FUTURE) FROM ANY AND ALL CLAIMS EXISTING AS OF THE DATE HEREOF
(OR THE DATE OF ACTUAL EXECUTION HEREOF BY THE APPLICABLE PERSON OR ENTITY, IF
LATER). AS USED HEREIN, THE TERM "CLAIM" SHALL MEAN ANY AND ALL LIABILITIES,
CLAIMS, DEFENSES, DEMANDS, ACTIONS, CAUSES OF ACTION, JUDGMENTS, DEFICIENCIES,
INTEREST, LIENS, COSTS OR EXPENSES (INCLUDING BUT NOT LIMITED TO COURT COSTS,
PENALTIES, ATTORNEYS' FEES AND DISBURSEMENTS, AND AMOUNTS PAID IN SETTLEMENT) OF
ANY KIND AND CHARACTER WHATSOEVER, INCLUDING BUT NOT LIMITED TO CLAIMS FOR
USURY, BREACH OF CONTRACT, BREACH OF COMMITMENT, NEGLIGENT MISREPRESENTATION OR
FAILURE TO ACT IN GOOD FAITH, IN EACH CASE WHETHER NOW KNOWN OR UNKNOWN,
SUSPECTED OR UNSUSPECTED, ASSERTED OR UNASSERTED OR PRIMARY OR CONTINGENT, AND
WHETHER ARISING OUT OF WRITTEN DOCUMENTS, UNWRITTEN UNDERTAKINGS, COURSE OF
CONDUCT, TORT, VIOLATIONS OF LAWS OR REGULATIONS OR OTHERWISE.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EQUALNET HOLDING CORP., a Texas corporation
By: /s/ XXXX XXXXXXX
Name: Xxxx Xxxxxxx
Title: President
9
COMERICA BANK-TEXAS, a Texas banking association, as Agent
and as a Lender
By: /s/ XXXX X. XXXXXXXX
Name: Xxxx X. Xxxxxxxx
Title: Vice President
Commitment:
$9,000,000
00
XXXXX XXXXXXXXXX XXXX XX XXXXX, N. A., a national banking
association
By: /s/ XXXXXXX XXXXXXX
Name: Xxxxxxx Xxxxxxx
Title: Vice President
Commitment:
$3,500,000
12
GUARANTORS' CONSENTS
Guarantors hereby join in this Amendment to evidence Guarantors' consent to
execution by Borrower and the Agent and Lenders of this Amendment, to confirm
that the Guaranties apply and shall continue to apply to the Credit Agreement
(as amended hereby), and the other Loan Documents and to acknowledge that
without such consent and confirmation, Agent and Lenders would not execute this
Amendment or otherwise consent to the amendments set forth herein.
EXECUTED effective as of the date first set forth above.
EQUALNET CORPORATION, a Delaware corporation
By: /s/ XXXX XXXXXXX
Name: Xxxx Xxxxxxx
Title: President
TELESOURCE, INC., a Texas corporation
By: /s/ XXXX XXX XXXX
Name: Xxxx Xxx Xxxx
Title: President
13
