BORROWING AGREEMENT
This borrowing agreement (the "Borrowing Agreement") is made as of
September 25, 1998, among: Xxxxxxxx Media Capital L.P., a Washington limited
partnership ("Lender"); Multi-Link Telecommunications, Inc., a Colorado
corporation; Multi-Link Communications, Inc., a Colorado corporation and
majority owned subsidiary of Multi-Link Telecommunications, Inc.; and the
Pledgors and Guarantors hereinafter defined. Multi-Link Telecommunications, Inc.
and Multi-Link Communications, Inc. are oftentimes hereinafter jointly and
severally referred to as "Borrower."
RECITALS
A. Borrower has asked Lender to make a loan to Borrower, to be secured by:
a lien and security interest in all of the assets of Borrower; by the joint and
several personal guaranties of Xxxxx X. Xxxxxxxxx and Xxxxx X. Xxxxxxx; by the
pledges of an aggregate of 1,600,000 of the issued and outstanding voting
capital stock of Multi-Link Telecommunications, Inc. owned beneficially or of
record by Xx. Xxxxxxxxx, Xx. Xxxxxxx or Blackhawk Trust, of which St Helier
Trust Company Ltd. is the sole trustee; and by the pledge of 1,950 of the issued
and outstanding shares of capital stock of Multi-Link Communications, Inc. owned
beneficially or of record by Multi-Link Telecommunications, Inc. As additional
consideration for the Loan, Borrower has also agreed to grant Lender warrants to
purchase shares of the capital stock of Multi-Link Telecommunications, Inc. The
proceeds of the loan will be used by Borrower to refinance existing
indebtedness; to pay transaction costs incurred in connection with the Loan; and
as working capital.
B. Lender is willing to make the loan to Borrower on the terms and
conditions set forth in this Borrowing Agreement and the other Loan Documents.
AGREEMENT
In consideration of the mutual covenants contained in this Borrowing
Agreement, Borrower and Lender agree as follows:
1. Definitions. Most of the capitalized terms used in this Borrowing
Agreement and the other Loan Documents are defined below. Other capitalized
terms are defined elsewhere in this Borrowing Agreement or in other of the Loan
Documents.
1.1 Borrower shall mean, jointly and severally, Multi-Link
Telecommunications, Inc., a Colorado corporation, and Multi-Link
Communications, Inc., a Colorado corporation and majority owned
subsidiary of Multi-Link Telecommunications, Inc. Borrower shall also
mean any successor or assign of Multi-Link Telecommunications, Inc. or
Multi-Link Communications, Inc., including any successor created by
merger, consolidation or other reorganization. Borrower is sometimes
also referred to as Maker or Debtor in other of the Loan Documents.
1.2 Borrowing Agreement shall mean this borrowing agreement as
the same may be supplemented or amended.
1.3 CS Capital shall mean CS Capital Corp., a Colorado
corporation, and a secured creditor of Borrower.
1.4 Cure Period shall mean the period of time Borrower shall have
to cure an Event of Default. If the Event of Default is a monetary
default, the Cure Period shall be ten (10) days from the date Borrower
first receives Notice of such Event of Default. If the Event of
Default is other than a monetary default, the Cure Period shall be
fifteen (15) days from the date Borrower first receives such Notice.
As used herein, a "monetary default" means a failure by Borrower to
make any payment required of it by the Note or any other Loan
Document.
1.5 Event of Default shall mean any of the following events:
(i) if any payment due under the Note or any other Loan
Document is not paid within five (5) days of the date upon which
such payment was due.
(ii) if any representation made in this Borrowing Agreement,
any other Loan Document or any other document, certificate or
report delivered by Borrower in connection with the Loan shall be
false when made or shall be breached in any material respect.
(iii) if Borrower or any Guarantor shall breach any covenant
contained in this Borrowing Agreement or in any other Loan
Document, and such breach is not cured within fifteen (15) days
after notice from Lender specifying the nature of the breach.
(iv) if any of the following shall occur:
(A) Borrower or any Guarantor becomes insolvent, makes
a transfer in fraud to or an assignment for the benefit of
creditors, or admits in writing its inability to pay its
debts as they become due;
(B) A receiver, custodian, liquidator or trustee is
applied for by Borrower or any Guarantor, or is appointed
for all or substantially all of the assets of Borrower or
any Guarantor, or any such receiver, custodian, liquidator
or trustee is appointed in any proceeding brought against
Borrower or any Guarantor, and such appointment is not
contested or is not dismissed or discharged within 60 days
after such appointment, or Borrower or any Guarantor
acquiesces in such appointment; (C) Borrower or any
Guarantor files a petition for relief under the federal
Bankruptcy Code, as amended, or under any similar law or
statute of the United States or any state thereof, or
Borrower or any Guarantor seeks to take advantage of any
insolvency law;
(D) A petition against Borrower or any Guarantor is
filed commencing an involuntary case under any present or
future federal or state bankruptcy or similar law, and such
petition is not dismissed or discharged within 60 days of
filing;
(E) Borrower is dissolved or liquidated, or all or
substantially all of the assets of Borrower are sold or
otherwise transferred; or
(F) Any Guarantor ceases to be employed by or otherwise
affiliated with Borrower.
1.6 Financing Statements shall mean such uniform commercial code
financing statements as Lender may require to perfect any security
interests granted to Lender under any of the Loan Documents.
1.7 Guarantor shall mean each of Xxxxx X. Xxxxxxxxx and Xxxxx X.
Xxxxxxx. Guarantors shall mean the Guarantors collectively.
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1.8 Guaranties shall mean the guaranties in the forms annexed to this
Borrowing Agreement evidencing the Guarantors' personal guarantees of the
payment and performance of Borrower's obligations under the Loan Documents.
Guaranty shall mean the Guaranties singularly.
1.9 Lender shall mean Xxxxxxxx Media Capital L.P., a Washington
limited partnership, acting by and through its general partner, Xxxxxxxx
Media Capital, Inc., a Washington corporation. Lender shall also mean any
successor or assign of Xxxxxxxx Media Capital L.P. Lender is sometimes also
referred to as Holder, Secured Party, Senior Lender or Xxxxxxxx Media in
other of the Loan Documents.
1.10 Loan shall mean the loan made by Lender to Borrower and evidenced
by this Borrowing Agreement and the other Loan Documents.
1.11 Loan Documents shall mean this Borrowing Agreement, the Note, the
Security Agreement, the Financing Statements, the Pledge Agreements, the
Guaranty, the Warrant Certificate and the Subordination Agreement, and any
amendments or supplements to such documents.
1.12 Note shall mean the promissory note in the form annexed to this
Borrowing Agreement evidencing amounts borrowed by Borrower under the Loan
and establishing the terms by which such borrowing shall be repaid. The
term Note also includes any amendment to, or renewal or replacement of such
promissory note.
1.13 Notice shall mean any notice or other communication required or
permitted under this Borrowing Agreement or any of the other Loan
Documents. Notice shall be in writing and shall be deemed sufficiently
given and served for all purposes if hand delivered, if sent by overnight
express mail or if sent by certified United States mail return receipt
requested. If sent to Lender, Notice shall be addressed to Xxxxxxxx Media
Capital L.P., X.X. Xxx 00000, Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxx
Xxxxxx (or if sent by overnight express mail, to Xxxxxxxx Media Capital
L.P., 00000 Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000, Attention:
Xxxx Xxxxxx); if sent to Borrower, Notice shall be addressed to Multi-Link
Telecommunications, Inc., 000 Xxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxx, Xxxxxxxx
00000, Attention: Xxxxx X. Xxxxxxxxx; and if sent to a Guarantor or a
Pledgor, Notice shall be addressed to such Guarantor or Pledgor, in care of
Borrower at the aforementioned address.
1.14 Pledge Agreements shall mean the pledge agreement in the form
annexed to this Borrowing Agreement creating a lien and security interest
in the issued and outstanding shares of voting capital stock of Multi-Link
Telecommunications, Inc. owned beneficially or of record by Xxxxx
Xxxxxxxxx, Xxxxx X. Xxxxxxx and Blackhawk Trust, and the pledge agreement
in the form annexed to this Borrowing Agreement creating a lien and
security interest in the issued and outstanding shares of capital stock of
Multi-Link Communications, Inc. owned beneficially or of record by
Multi-Link Telecommunications, Inc.
1.15 Pledgor shall mean, with respect to the Pledge Agreement covering
the issued and outstanding voting capital stock of Multi-Link
Telecommunications, Inc., each of Xxxxx Xxxxxxxxx, Xxxxx X. Xxxxxxx and
Blackhawk Trust; and, with respect to the Pledge Agreement covering the
issued and outstanding capital stock of Multi-Link Communications, Inc.,
Multi-Link Telecommunications, Inc. Pledgors shall mean all of the Pledgors
collectively.
1.16 Security Agreement shall mean the security agreement in the form
annexed to this Borrowing Agreement creating a first priority security
interest in Borrower's accounts receivable, inventory, equipment, leasehold
interests and the rents therefrom, and the pledged interests, whenever
acquired, under the Uniform Commercial Code of Colorado and such other
states in which such collateral is or may be located.
1.17 Subordination Agreement shall mean the subordination agreement in
the form annexed to this Borrowing Agreement evidencing the subordination
of prior indebtedness held by CS Capital to the Loan.
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1.18 Warrant Certificate shall mean the stock purchase warrant in the
form annexed to this Borrowing Agreement evidencing the grant to Lender of
warrants to purchase up to 250,000 shares of common stock, no par value per
share, of Multi-Link Telecommunications, Inc. at the price of $2.50 per
share over a period of five years.
2. The Loan. Lender shall loan Borrower the principal amount of up to
$2,100,000, and Borrower shall borrow from and repay such amount to Lender, with
interest, as is more fully set forth in the Note.
3. Loan Documents. The Loan will be evidenced, guaranteed and secured by
the Loan Documents, and any other documents which Lender may require, all of
which must be acceptable to Lender in form and content.
4. Loan Fee. In consideration of Lender's execution of this Borrowing
Agreement, evidencing Lender's commitment to make the Loan on the terms and
conditions of this Borrowing Agreement, Borrower shall pay to Lender a loan fee
in the amount of $42,000 (the "Loan Fee"). The Loan Fee shall be fully earned by
Lender upon the execution of this Borrowing Agreement by both parties, and shall
be advanced to Borrower, and simultaneously paid to Lender, as part of the
initial advance under the Note.
5. Transaction Fee. Borrower shall pay to Lender a transaction fee in the
amount of $21,000 (the "Transaction Fee") to reimburse Lender for its legal,
travel, filing, recording and other out-of-pocket costs incurred in connection
with the Loan. The Transaction Fee shall be fully earned by Lender upon the
execution of this Borrowing Agreement by both parties; the sum of $7,500,
representing a portion of the Transaction Fee, is hereby acknowledged as having
been paid; the sum of $13,500, representing the balance of the Transaction Fee,
shall be payable at closing; provided, however, that if Lender elects not to
make the Loan because Borrower has not complied with any of the pre-closing
requirements set forth in Section 7 of this Borrowing Agreement, then Lender
shall not require payment of that portion of the Transaction Fee that has not
theretofore been paid to Borrower.
6. Representations and Warranties. Multi-Link Telecommunications, Inc.,
Multi-Link Communications, Inc. and each Guarantor jointly and severally
represent and warrant to and for the benefit of Lender as follows:
6.1 Organization and Standing. Multi-Link Telecommunications, Inc. and
Multi-Link Communications, Inc. are corporations duly organized, validly
existing and in good standing in the State of Colorado, and are duly
qualified to transact business as foreign corporations in such other
jurisdictions, if any, where such qualification is necessary.
6.2 Certificates and Articles of Incorporation and Bylaws. Multi-Link
Telecommunications, Inc. and Multi-Link Communications, Inc. have made
available to Lender or its counsel true, correct and complete copies of
their respective certificates and articles of incorporation, their bylaws
and any other constating documents or agreements affecting the rights of
their respective shareholders, each as amended or restated to date.
6.3 Power and Authorization. Multi-Link Telecommunications, Inc. and
Multi-Link Communications, Inc. have all requisite power to execute and
deliver this Borrowing Agreement and the other Loan Documents to which it
is a party, and to carry out and perform its obligations under this
Borrowing Agreement and the Loan Documents. All action on the part of
Multi-Link Telecommunications, Inc. and Multi-Link Communications, Inc.,
their respective directors, and, if necessary, their respective
shareholders, for the authorization, execution, delivery and performance of
this Borrowing Agreement and the Loan Documents has been taken or will be
taken prior to closing, and will not be in conflict with, result in a
breach of or constitute a default under any agreement to which either
corporation or any Guarantor is subject. This Borrowing Agreement and the
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other Loan Documents, when executed and delivered by Borrower, Guarantors
and Pledgors, will constitute valid and legally binding obligations of the
parties thereto in accordance with their terms, except to the extent their
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general principles of equity. Xxxxx X. Xxxxxxxxx and Xxxxx
X. Xxxxxxx are executive officers of Multi-Link Telecommunications, Inc.
and Multi-Link Communications, Inc., and have the full right and authority
to execute this Borrowing Agreement and the other Loan Documents on behalf
of such entities. Each Guarantor and Pledgor named in this Borrowing
Agreement and the other Loan Documents has the full right and authority to
execute this Borrowing Agreement and the other Loan Documents to which each
is a party, and to perform his or her obligations as a guarantor and
pledgor thereunder.
6.4 Capitalization. The authorized capital of Multi-Link
Telecommunications, Inc. consists of 20,000,000 shares of common stock, no
par value, and 5,000,000 shares of preferred stock, $.01 par value, of
which 2,496,918 shares of common stock are issued and outstanding; of
these, 1,937,500 shares of common stock, constituting 77.6% of Multi-Link
Telecommunications, Inc.'s issued and outstanding shares of common stock,
are owned beneficially or of record by Xxxxx Xxxxxxxxx, Xxxxx X. Xxxxxxx
and Blackhawk Trust. Other than the Warrants to be issued to Lender at
closing, the Warrant to be issued to CS Capital, and options granted
pursuant to the Multi-Link Telecommunications, Inc. Stock Option Plan,
which authorizes the issuance of up to 400,000 shares of common stock of
the Borrower, there are no options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of capital stock of Multi-Link
Telecommunications, Inc. The authorized capital of Multi-Link
Communications, Inc. consists of 1,000,000 shares of capital stock, of
which 2,000 shares are issued and outstanding; of these, 1,950 shares,
constituting 97.5% of Multi-Link Communications, Inc.'s issued and
outstanding shares, are owned beneficially or of record by Multi-Link
Telecommunications, Inc. There are no options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of capital stock of Multi-Link
Communications, Inc.
6.5 All Approvals and Consents Obtained. The execution, delivery and
performance of the Loan Documents by Borrower and each Guarantor and
Pledgor has been approved or consented to by all persons or entities whose
approval or consent is required. Lender's exercise of any remedies
available to it under the Loan Documents does not require the approval or
consent of any person.
6.6 No Untrue Statements of Material Fact. All information in the Loan
Documents or in connection with such documents given to Lender by Borrower
and each Guarantor and Pledgor, specifically including financial
information concerning Borrower, was true, complete and correct when given
and will be true, complete and correct at closing. No such information
contains any untrue statement of a material fact or omits a material fact
necessary to make such information not misleading.
6.7 Business Operated in Conformance with Laws. Borrower's business
has been operated in material conformance with all applicable laws and
regulations. Borrower has obtained all permits, licenses and authorizations
needed to operate its business. Borrower has not received any opinion or
memorandum or legal advice from any legal counsel to the effect that there
is any liability or disadvantage relating to its business that may be
material to Borrower.
6.8 Environmental Compliance. To the best knowledge of Borrower, no
part of the real property owned or leased by Borrower (all of which is
hereinafter referred to as the "Property") is (i) targeted for clean-up or
remediation of Hazardous Substances (which are hereinafter defined) or (ii)
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otherwise not in compliance with applicable Environmental Laws (which are
also hereinafter defined). To the best knowledge of Borrower, there are no
Hazardous Substances on, in or under the Property or any part thereof which
are in violation of applicable Environmental Laws, and there are no
underground storage tanks on or under the Property. To the best knowledge
of Borrower, each prior owner or lessor of the Property has owned and
operated the Property in compliance with all applicable Environmental Laws.
The term "Hazardous Substance" means any substance or material defined or
designated as hazardous or toxic (or by any similar term) under any
Environmental Law, including petroleum products and friable asbestos. The
term "Environmental Law" means federal, state or local law, ordinance, rule
or regulation relating to pollution or protection of the environment or
actual or threatened releases, discharges or emissions into the
environment.
6.9 Title to Assets. Borrower has good and clear record and marketable
title to its properties and title or valid and subsisting interests in its
other assets. Except as otherwise disclosed to Lender in writing on
Schedule 6.9 attached hereto, such assets are free and clear of liens,
encumbrances and adverse claims. The personal property of Borrower comprise
all of the property that has been used by Borrower for the operation of its
business, and is in good operating condition and repair, subject only to
ordinary normal wear and tear.
6.10 Use of Loan Proceeds. The proceeds of the Loan will be used by
Borrower to refinance existing indebtedness; to pay transaction costs
incurred in connection with the Loan; and as working capital.
7. Pre-Closing Requirements and Initial Advance; Additional Advances.
7.1 Pre-Closing Requirements and Initial Advances. Prior to and as a
condition precedent to the closing of the Loan and the initial advance of
funds under the Note, the conditions set forth below must be met to
Lender's satisfaction. In addition, Borrower must meet to Lender's
satisfaction all other conditions to the closing and initial disbursement
of the Loan as may have been specified in writing by Lender to Borrower
pursuant to a loan commitment, term sheet, exhibit letter or other written
instrument. The term "closing" used in this Borrowing Agreement shall mean
the date the conditions to the initial disbursement of proceeds of the Loan
are satisfied.
7.1.1 Loan Documents. All of the Loan Documents shall have been
executed and delivered to Lender by Borrower, each Guarantor, each
Pledgor and such other persons or entities as Lender may require, as
their interests appear; the Financing Statements and fixture filings
shall have been filed in all places necessary to perfect the liens and
security interests created by the Loan Documents; and any other Loan
Documents to be recorded or filed shall have been duly recorded and
filed in the appropriate offices.
7.1.2 Loan Fee. Borrower shall have paid the Loan Fee.
7.1.3 Transaction Fee. Borrower shall have paid the Transaction
Fee.
7.1.4 UCC Searches. Lender shall have conducted uniform
commercial code searches of Borrower, each Guarantor and such other
persons and entities as Lender may require, and such searches shall
show no filings related to or which could relate to the collateral for
the Loan, other than filings made pursuant to the Loan Documents or
otherwise approved by Lender.
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7.1.5 Financial Condition. Lender shall be satisfied that the
financial condition and credit of Borrower, and all information
relating to its business, is as represented to Lender, without any
material change.
7.1.6 Permits and Licenses. Borrower shall have obtained all
permits and licenses needed to own and operate its business, or shall
have valid and subsisting agreements pursuant to which such permits
and licenses shall be acquired.
7.1.7 Litigation. There shall be no litigation pending against
Borrower or any Guarantor which, in Lender's opinion, could or does
affect Borrower's ability to operate its business, or Borrower's or
such Guarantor's ability to otherwise perform all of the terms and
provisions of this Borrowing Agreement and the other Loan Documents to
which Borrower or such Guarantor is a party.
7.1.8 Restructuring of CS Capital Loan. CS Capital shall have
restructured its loan with Borrower. Such restructuring shall provide
that $300,000 in principal amount of indebtedness owed it by Borrower
shall be converted into equity of Borrower; that the remaining
indebtedness shall not exceed $515,000 in principal amount; that
Borrower shall be required to pay interest only on such indebtedness,
at a rate not to exceed 15% per annum, for a period of not less than
one year; and that principal payments shall be made (i) only from
funds derived from subsequent debt or equity financings of Borrower,
or (ii) on and after October 30, 1999; and that the loan shall be
expressly subordinate to the Loan (as provided in the Subordination
Agreement). In addition, Borrower shall furnish Lender with written
evidence of such restructuring.
7.1.9 Other Conditions. All other provisions of this Borrowing
Agreement or any other Loan Document to be complied with prior to the
closing and initial disbursement of the Loan shall have been complied
with, and all of the representations and warranties of Borrower and
any Guarantor in this Borrowing Agreement and the other Loan Documents
shall be true and correct in all material respects. If Lender
disburses Loan funds without requiring Borrower or any Guarantor to
satisfy each of the foregoing conditions, Borrower's obligation to
meet the unsatisfied conditions shall not be deemed waived (unless
specifically waived in writing by Lender) and Lender may require
compliance with each of such conditions before further Loan
disbursements are made.
7.2 Additional Advances. Prior to and as a condition precedent to each
additional advance of funds under the Note following closing, the
conditions set forth in Sections 7.1.5, 7.1.6, 7.1.7 and 7.1.8 shall have
been satisfied.
8. Covenants of Borrower and each Guarantor. Borrower and each Guarantor
jointly and severally covenant with and for the benefit of Lender as follows.
Such covenants shall continue in effect for so long as any amount remains
outstanding under the Note, or any other obligation under any of the Loan
Documents remains to be performed.
8.1 Financial Reports and Related Information. Borrower shall promptly
furnish to Lender such information with respect to Borrower's business as
Lender may from time-to-time reasonably request, and shall promptly notify
Lender of any material occurrence affecting Borrower's business or its
assets. Without limiting the generality of the foregoing, Borrower shall
provide financial statements to Lender on a quarterly basis and within 30
days of the end of each quarter. Borrower shall also provide Lender, no
less often than monthly, with copies of its bank statements, and no less
often than quarterly shall furnish Lender with a certificate in form and
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substance acceptable to Lender certifying, if true, that it is in
compliance with all of the terms and conditions of the Loan Documents.
Borrower shall also provide Lender with a copy of its annual budgets, when
the same become available, and Borrower and each Guarantor shall each
provide Lender with copies of their respective annual financial statements
(which, in the case of Borrower, shall be audited) within 90 days of the
end of each year. If Borrower or any Guarantor is delinquent in furnishing
Lender with the information specified in this Section 8.1, Borrower agrees
to pay Lender a late fee of $100.
8.2 Compliance with Laws. Borrower shall comply with all applicable
laws and regulations in connection with the operation of its business.
8.3 Maintenance of Liability and Property Insurance. Borrower shall
maintain a policy or policies of general liability insurance naming Lender
as an additional insured and insuring Borrower and Lender against any
liability arising from the conduct of Borrower's business, which insurance
shall be in an amount reasonably acceptable to Lender. In addition,
Borrower shall maintain a policy or policies of insurance naming Lender as
an additional insured and insuring Borrower's physical assets against risk
of damage, loss and destruction in accordance with customary industry
standards, in such amounts and with such insurance company or companies as
Lender reasonably may specify. Each such policy shall provide that it
cannot be canceled or materially altered unless Lender is given at least 30
days' advance written notice.
8.4 Maintenance of Ratios. Borrower shall maintain the following
ratios, on a consolidated basis:
8.4.1 Ratio of Debt to Annualized Cash Flow. Borrower's ratio of
debt to annualized cash flow shall not exceed 3.00 to 1, determined
quarterly in arrears. As used herein, "debt" shall mean unpaid
interest and principal of the Loan and any other indebtedness owed by
Borrower, and "annualized cash flow" shall mean Borrower's annualized
earnings, based on the trailing three months, before deduction for
interest, depreciation, the amortization of goodwill and intangible
assets, and federal and state income taxes.
8.4.2 Ratio of Cash Flow to Interest, Principal and Taxes.
Borrower's ratio of annualized cash flow to interest, principal and
taxes shall not be less than 1.25 to 1, determined quarterly in
arrears, based on the trailing three months' cash flow and interest
expense, principal payments and accrued federal and state income tax
expense during such period.
8.5 Limitations on Indebtedness. Without the written consent of
Lender, Borrower shall incur no indebtedness in any calendar year or
portion thereof other than the Loan; trade payables incurred in the normal
course of business; the indebtedness specified in the Subordination
Agreement; indebtedness to The Associates Capital Corporation incurred in
connection with the purchase of switching equipment (which indebtedness
does not exceed $650,000 in principal amount); and such additional
indebtedness, which, if incurred by Borrower and added to the indebtedness
specified in this Section 8.5, would not cause Borrower's aggregate
indebtedness to exceed three times its annualized cash flow (as defined in
Section 8.4.1).
8.6 Limitations on Capital Expenditures. Without the written consent
of Lender, Borrower shall not incur capital expenditures in excess of the
greater of: $500,000 or 75% of its excess cash flow during any fiscal year.
As used herein, "excess cash" flow shall be defined as cash flow (as
defined in Section 8.4.1) less all scheduled interest and principal
payments with respect to the Loan and any other indebtedness of Borrower
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that are paid or accrued during such year, and state and federal income
taxes, and property taxes, paid or accrued during such year.
8.7 Limitations on Distributions. Without the written consent of
Lender, Multi-Link Telecommunications, Inc. shall neither pay nor declare
any dividends, nor make any other distributions to its shareholders, in any
calendar year, in excess of an amount determined by subtracting from excess
cash flow for such year (as defined in Section 8.6) the amount of capital
expenditures made or accrued during such year; provided, however, that if
Borrower shall pay a dividend or other distribution pursuant to this
Section 8.7, it shall also be required to make a prepayment of the Note,
from excess cash flow, in an amount equal to 50% of such dividend or
distribution.
8.8 Further Assurances. Borrower and each Guarantor shall from
time-to-time perform such further acts, execute such additional documents
or deliver such further assurances as Lender may reasonably request and as
may be necessary to implement the intent of the parties to this Borrowing
Agreement or to create, perfect, maintain or preserve the security
interests created or intended to be created by the Loan Documents.
8.9 Access to Books and Records. Borrower shall permit Lender and its
representatives to review and copy the books and records of Borrower upon
reasonable notice. Lender understands that such books and records may
contain proprietary or confidential information, and agrees to use all
reasonable efforts to maintain the proprietary or confidential nature of
such information.
8.10 No Other Liens or Security Interests. Borrower shall permit no
lien or other encumbrance of its assets, nor grant any security interest
with respect thereto, other than the liens and encumbrances favoring Lender
created by the Security Agreement and the liens and encumbrances set forth
on Schedule 8.10 to this Borrowing Agreement.
9. Closing. The closing of the Loan shall occur as of, and be evidenced by,
the completion of the following events:
9.1 Execution of Loan Documents. Borrower, each Guarantor and each
Pledgor shall sign (and, where appropriate, acknowledge) and deliver to
Lender this Borrowing Agreement and the other Loan Documents each is
required to sign.
9.2 Insurance. If not previously delivered, Borrower shall deliver to
Lender a certificate or certificates evidencing the insurance coverage
specified in Section 8.3 of this Borrowing Agreement.
9.3 Stock Certificates. Xxxxx Xxxxxxxxx, Xxxxx X. Xxxxxxx and
Blackhawk Trust shall deliver to Lender a stock certificate or certificates
evidencing his or its ownership of the shares of voting capital stock of
Multi-Link Telecommunications, Inc. pledged pursuant to the Pledge
Agreement, duly endorsed in blank or accompanied by stock powers duly
executed in blank. In addition, Multi-Link Telecommunications, Inc. shall
deliver to Lender stock certificates evidencing its ownership of the shares
of capital stock of Multi-Link Communications, Inc., duly endorsed in blank
or accompanied by stock powers duly executed in blank.
9.4 Opinion of Borrower's Counsel. Borrower shall deliver to Lender an
opinion of its counsel substantially in the form annexed to this Borrowing
Agreement.
9.5 Funding of Loan. Lender shall advance the sum of $1,800,000 to or
on behalf of Borrower at closing (from which it will pay itself the Loan
Fee and the unpaid portion of the Transaction Fee) against receipt of a
compliance certificate signed by Borrower's president and chief executive
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officer and each Guarantor, signifying that Borrower and each Guarantor is
in full compliance with all of the terms, conditions and covenants this
Borrowing Agreement and the other Loan Documents, and that all of the
representations and warranties of Borrower and each Guarantor were true and
correct when made and are true and correct as of the closing. Such advance
shall be disbursed by Lender, to or for the benefit of Borrower as set
forth on Schedule 9.5-A of this Borrowing Agreement. Borrower shall, in
turn, disburse funds advanced to it in the amounts and to the persons or
entities set forth in Schedule 9.5-B, against receipt of any collateral
held by such recipients (together with any uniform commercial code
termination statements necessary to terminate any financing statements of
record). Borrower shall advance additional sums to Borrower, not to exceed
$300,000 in aggregate principal amount, upon Borrower's written request and
against receipt of an additional or supplementary compliance certificate.
10. Remedies on Default; Right to Cure.
10.1 Remedies on Default. Upon the occurrence of an Event of Default
and the expiration of the applicable Cure Period, Lender, at its option,
may: accelerate all amounts owing on the Note and the other Loan Documents,
in which event such accelerated amounts shall become immediately due and
payable; pursue any one or more of the remedies set forth in this Borrowing
Agreement or in any of the other Loan Documents, either concurrently or
successively; or pursue any and all other remedies available to Lender at
law or in equity. No remedy conferred upon or reserved to Lender in this
Borrowing Agreement, in any other Loan Document or at law or in equity
shall be exclusive of any other remedy available to Lender. To the extent
permitted by applicable law, all such remedies shall be cumulative and in
addition to every other remedy available to Lender.
10.2 Right to Cure. Notwithstanding any other provision of this
Borrowing Agreement or any other Loan Document, Borrower shall have a right
to cure an Event of Default within the applicable Cure Period.
11. Indemnity. Borrower and each Guarantor shall jointly and severally
indemnify and defend Lender against, and hold Lender harmless from, any and all
losses, liability, claims, damages, costs and expenses (including reasonable
attorneys' fees and court costs, including fees and costs associated with any
appeal or any bankruptcy) that Lender may suffer or incur, or to which Lender
may be subjected, by reason of, or directly or indirectly arising out of or in
connection with any actual or alleged default or breach by Borrower or any
Guarantor under any of the Loan Documents. Upon demand by Lender, Borrower shall
promptly defend any action or proceeding brought against Lender in connection
with the foregoing.
12. Special Provisions Regarding the Warrant Certificate.
12.1 Lock-Up Agreement. In the event Multi-Link Telecommunications,
Inc. completes an Initial Public Offering of its capital stock (as such
term is defined in the Warrant Certificate), and in the further event the
stockholders of Multi-Link Telecommunications, Inc. are required by the
underwriter of such offering to enter into a lock-up or similar agreement
restricting their ability to resell their shares of stock following the
Initial Public Offering, then, upon the request of the underwriter, Lender
shall enter into the same or similar lock-up agreement, restricting
Lender's ability to resell the shares of capital stock of Multi-Link
Telecommunications, Inc. obtained upon the exercise of the Warrant
Certificate. The foregoing notwithstanding, Lender shall not be obligated
to enter into any lock-up or similar agreement that would restrict its
ability to resell such stock for a period of more than twelve months from
the effective date of the registration statement filed with the Securities
and Exchange Commission in connection with the Initial Public Offering.
10
12.2 Redemption. In the event Multi-Link Telecommunications, Inc. has
not completed an Initial Public Offering prior to the Expiry Date (as such
term is defined in the Warrant Certificate), then Borrower, upon written
request of Lender, shall be required to repurchase the shares of capital
stock of Multi-Link Telecommunications, Inc. obtained upon the exercise of
the Warrant Certificate at Fair Market Value. As used herein, "Fair Market
Value" shall be: (i) in the event an Initial Public Offering was not
commenced, the value determined by Borrower and Lender; or (ii) in the
event an Initial Public Offering was not commenced and Borrower and Lender
cannot arrive at a determination of value, the value determined by a
qualified appraiser jointly selected by Borrower and Lender (provided
however, that if Borrower and Lender cannot agree on a joint appraiser,
then they shall each select an appraiser, and the average of the two
appraisals shall be controlling; and provided, further, that if the two
appraisals differ by a factor of more than 20%, the two appraisers so
chosen shall select a third appraiser who shall conduct a third appraisal,
in which event Fair Market Value shall be the average of the two appraisals
closest in value (of the three appraisals then prepared).
13. Miscellaneous Provisions.
13.1 Integration; Amendment and Modification. This Borrowing Agreement
and the other Loan Documents constitute the full agreement of the parties
with respect to the Loan and supersede all prior written or oral
negotiations or agreements. This Borrowing Agreement and the other Loan
Documents can be extended, modified or amended only in writing and only if
signed by Lender and each other party thereto.
13.2 Costs and Expenses in Event of Default. Borrower and each
Guarantor jointly and severally agree to pay on demand all costs and
expenses of Lender incurred in connection with an Event of Default,
including all reasonable attorneys' fees and costs incurred by Lender in
enforcing any of the provisions of such Loan Documents or in collecting
payments due under the Note or any other Loan Document through litigation
or other dispute resolution. Such fees, costs and other expenses shall
include all statutory costs and disbursements, all fees and costs
associated with discovery depositions and expert witness fees, and all
out-of-pocket costs incurred by Holder in the prosecution or defense of the
action. For purposes of this section, the phrase "litigation or other
dispute resolution" shall be deemed to include any proceeding commenced in
any court of general or limited jurisdiction, any arbitration or mediation,
any proceeding commenced in the bankruptcy courts of the United States, and
any appeal from any of the foregoing. The amount of all such costs and
expenses shall bear interest at the default rate specified in the Note from
the date of demand and shall be secured by the Loan Documents.
13.3 Assignments. This Borrowing Agreement and the other Loan
Documents may be assigned by Lender, in whole or in part and in its sole
discretion, upon Notice but without the consent or approval of any other
party hereto. Neither this Borrowing Agreement nor the other Loan Documents
may be assigned by Borrower, in whole or in part, without the prior written
consent of Lender, which consent shall not be withheld unreasonably.
13.4 Venue and Applicable Law. This Borrowing Agreement and the other
Loan Documents are made in accordance with, and shall be interpreted and
enforced pursuant to, the laws of the State of Washington, including the
Washington Uniform Commercial Code, and the federal laws of the United
States of America. If any action or other proceeding shall be brought in
connection with this Borrowing Agreement or any other Loan Document, the
venue of such action may, in the discretion of Lender, be in Spokane
County, Washington. Borrower and each Guarantor and Pledgor hereby consents
to the exclusive personal jurisdiction of the Superior Court of Spokane
County and the United States District Court for the Eastern District of
Washington. 13.5 Counterpart Execution. This Borrowing Agreement may be
signed in counterparts and by telefacsimile (to be followed by original
signatures), and the counterparts combined shall constitute a binding
agreement among all parties.
11
13.6 Time of Essence. Time is of the essence of this Borrowing
Agreement and the other Loan Documents.
13.7 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of Borrower and each Guarantor
contained in this Borrowing Agreement and the other Loan Documents shall
survive closing.
13.8 Invalid Provision. If any provision of this Borrowing Agreement
is held to be illegal, invalid or unenforceable under present or future
laws effective during the term of this Borrowing Agreement, such provision
shall be fully severable. This Borrowing Agreement shall be construed and
enforced as if such illegal or otherwise unenforceable provision had never
comprised a part hereof. The remaining provisions of this Borrowing
Agreement shall remain in full force and effect and shall not be affected.
Furthermore, in lieu of such illegal, invalid or unenforceable provision
there shall be added automatically as part of this Borrowing Agreement a
legal, valid and enforceable provision as similar in terms and intent to
such illegal, invalid or unenforceable provision as may be legally
possible.
13.9 Successors. Subject to the provisions of this Borrowing Agreement
restricting assignments, all rights and obligations of the parties
hereunder shall be binding upon and inure to the benefit of their heirs,
personal representatives, successors and assigns.
13.10 Waiver. No right or obligation under this Borrowing Agreement
will be deemed to have been waived unless evidenced by a writing signed by
the party against whom the waiver is asserted, or by its duly authorized
representative. Any waiver will be effective only with respect to the
specific instance involved, and will not impair or limit the right of the
waiving party to insist upon strict performance of the right or obligation
on any other instance, in any other respect, or at any other time. No
failure on the part of Lender to exercise, and no delay in exercising, any
right or obligation under this Borrowing Agreement shall operate as a
waiver thereof.
[The balance of this page has been left blank intentionally.]
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY,
EXTEND CREDIT OR FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties have executed this Borrowing Agreement the
day and year first above written.
LENDER:
Xxxxxxxx Media Capital L.P.,
a Washington limited partnership,
acting by and through its general partner,
Xxxxxxxx Media Capital, Inc.
/s/
-----------------------------------------
Its duly authorized officer
BORROWER:
Multi-Link Telecommunications, Inc.,
a Colorado corporation
/s/
-----------------------------------------
its duly authorized officer
Multi-Link Communications, Inc.,
a Colorado corporation
/s/
-----------------------------------------
its duly authorized officer
GUARANTORS:
/s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxx
Schedule 6.9
Liens and Encumbrances:
1. The lien and security interest of The Associates Capital Corporation.
2. The lien and security interest of Sprint Telemagine
3. The lien and security interest of CS Capital Corp.
Schedule 8.10
Other Permitted Liens:
Schedule 9.5-A
Disbursement of Initial Advance:
1. $844,500 shall be wire transferred to Borrower.
2. $900,000 shall be wire transferred to CS Capital Corp.
3. $55,500 of the initial advance shall be retained by Lender in payment of
the Loan Fee and that portion of the Transaction Fee not theretofore paid.
Schedule 9.5-B
Payments to be Made by Borrower from that Portion of the Initial Advance to
Borrower:
1. $30,000 shall be disbursed to Xxxxxx and Xxxxx Xxxxxxxx in full payment of
amounts owed them by Borrower, against receipt of those shares of
Multi-Link Communications, Inc. held by them as collateral.
2. $25,000 shall be disbursed to Blackhawk Trust in full payment of amounts
owed it by Borrower, against receipt of any collateral held by it.
3. $6,000 shall be paid to Xxxxxx and Xxxxxx Xxxx in full payment of amounts
owed them by Borrower, against receipt of any collateral held by them.
4. $97,000 shall be disbursed to Harbor Settlement in full payment of amounts
owed it by Borrower, against receipt of any collateral held by it.
5. $13,000 shall be disbursed to Xxxxx Xxxxxxx in full payment of amounts owed
him by Borrower, against receipt of any collateral held by him. In
addition, $91,000 shall be advanced to Xx. Xxxxxxx in payment of accrued
salary.
6. $11,000 shall be disbursed to Arcadia Financial in full payment of amounts
owed it by Borrower, against receipt of any collateral held by it.
7. $11,000 shall be disbursed to Arcadia Financial in full payment of amounts
owed it by Borrower, against receipt of any collateral held by it.
8. $178,000 shall be disbursed to Octagon Strategies in full payment of
amounts owed it by Borrower, against receipt of any collateral held by it,
and in payment of accrued consulting fees.
9. $6,000 shall be disbursed to Sprint Telemagine in full payment of amounts
owed it under certain equipment leases, against receipt of any collateral
held by it.
10. $43,000 shall be disbursed to Xxx Xxxxxxx in full payment of amounts owed
him by Borrower, against receipt of any collateral held by him.
