EXHIBIT 10.14
MASTER LOAN AND SECURITY AGREEMENT
THIS AGREEMENT dated as of September 1, 1997, is made by Pilot Network
Services, Inc. (the "Borrower"), a California corporation having its principal
place of business and chief executive office at 0000 Xxxxxx Xxxxxxx Xxxxxxx,
Xxxxxxx, XX, 00000 in favor of Transamerica Business Credit Corporation, a
Delaware corporation (the "Lender"), having its principal office at Riverway II,
West Office Tower, 0000 Xxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000.
WHEREAS, the Borrower has requested that the Lender make Loans to it
from time to time; and
WHEREAS, the Lender has agreed to make such Loans on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings,
and shall be equally applicable to both the singular and plural forms of the
terms defined:
Agreement shall mean this Master Loan and Security Agreement together with all
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any other
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or public holiday
or the equivalent for banks in New York City.
Code shall have the meaning specified in Section 8(d).
Collateral shall have the meaning specified in Section 2.
Collateral Access Agreement shall mean any landlord waiver, mortgagee waiver,
bailee letter, or similar acknowledgement of any warehouseman or processor in
possession of any Equipment, in each case substantially in the form of Exhibit
A.
Effective Date shall mean the date on which all of the conditions specified in
Section 3.3 shall have been satisfied.
Equipment shall have the meaning specified in Section 2.
Event of Default shall mean any event specified in Section 7.
Financial Statements shall have the meaning specified in Section 6.1.
GAAP shall mean generally accepted accounting principles in the United States of
America, as in effect from time to time.
Loans shall mean the loans and financial accommodations made by the Lender to
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the Borrower in accordance with the terms of this Agreement and the Notes.
Loan Documents shall mean, collectively, this Agreement, the Notes, and all
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other documents, agreements, certificates, instruments, and opinions executed
and delivered in connection herewith and therewith, as the same may be modified,
extended, restated, or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a material
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adverse change in the business, operations, results of operations, assets,
liabilities, or condition (financial or otherwise) of such Person taken as a
whole.
Material Adverse Effect shall mean, with respect to any Person, a material
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adverse effect on the business, operations, results of operations, assets,
liabilities, or condition (financial or otherwise) of such Person taken as a
whole.
Note shall mean each Promissory Note made by the Borrower in favor of the
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Lender, as amended, supplemented, or otherwise modified from time to time, in
each case substantially in the form of Exhibit B.
Obligations shall mean all indebtedness, obligations, and liabilities of the
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Borrower under the Notes and under this Agreement, whether on account of
principal, interest, indemnities, fees (including, without limitation,
attorneys' fees, remarketing fees, origination fees, collection fees, and all
other professionals' fees), costs, expenses, taxes, or otherwise.
Permitted Liens shall mean such of the following as to which no enforcement,
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collection, execution, levy, or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments, and other governmental charges or
levies or the claims or demands of landlords, carriers, warehousemen, mechanics,
laborers, materialmen, and other like Persons in the ordinary course of business
for sums which are not yet due and payable, or liens which are being contested
in good faith by appropriate proceedings diligently conducted and with respect
to which adequate reserves are maintained to the extent required by GAAP; (b)
deposits or pledges to secure the payment of worker's compensation, unemployment
insurance, or other social security benefits or obligations, public or statutory
obligations, surety or appeal bonds, bid or performance bonds, or other
obligations of a like nature incurred in the ordinary course of business; (c)
licenses, restrictions, or covenants for or on the use of the Equipment which do
not materially impair either the use of the Equipment in the operation of the
business of the Borrower or the value of the Equipment; and (d) attachment or
judgment liens that do not constitute an Event of Default; and (e) any liens
specifically permitted in writing by the Lender.
Person shall mean any individual, sole proprietorship, partnership, joint
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venture, trust, unincorporated organization, association, corporation,
institution, entity, party, or government (including any division, agency, or
department thereof), and the successors, heirs, and assigns of each.
Schedule shall mean each Schedule in the form of Schedule A hereto delivered by
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the Borrower to the Lender from time to time.
Solvent means, with respect to any Person, that as of the date as to which such
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Person's solvency is measured:
(a) the fair saleable value of its assets is in excess of the total
amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in Section 5.5.
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SECTION 2. CREATION OF SECURITY INTEREST: COLLATERAL. The Borrower
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hereby assigns and grants to the Lender a continuing general, first priority
lien on, and security interest in, all the Borrower's right, title, and interest
in and to the collateral described in the next sentence (the "Collateral") to
secure the payment and performance of all the Obligations. The Collateral
consists of all equipment set forth on all the Schedules delivered from time to
time under the terms of this Agreement (the "Equipment"), together with all
present and future additions, parts, accessories, attachments, substitutions,
repairs, improvements, and replacements thereof or thereto, and any and all
proceeds thereof, including, without limitation, proceeds of insurance and all
manuals, blueprints, know-how, warranties, and together with all substitutes for
any of the foregoing.
SECTION 3. THE CREDIT FACILITY.
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SECTION 3.1. BORROWINGS. Each Loan shall be in an amount not
less than $100,000, and in no event shall the sum of the aggregate Loans made
exceed the amount of the Lender's written commitment to the Borrower in effect
from time to time. Notwithstanding anything herein to the contrary, the Lender
shall be obligated to make the initial Loan and each other Loan only after the
Lender, in its sole discretion exercised in good faith, determines that the
applicable conditions for borrowing contained in Sections 3.3 and 3.4 are
satisfied. The timing and financial scope of Lender's obligation to make Loans
hereunder are limited as set forth in a commitment letter executed by Lender and
Borrower, dated as of July 9, 1997 and attached hereto as Exhibit C (the
"Commitment Letter").
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall not
directly or indirectly use any proceeds of the Loans, or cause, assist, suffer,
or permit the use of any proceeds of the Loans, for any purpose other than for
the purchase, acquisition, installation, or upgrading of Equipment or the
reimbursement of the Borrower for its purchase, acquisition, installation, or
upgrading of Equipment.
SECTION 3.3. CONDITIONS TO INITIAL LOAN.
(a) The obligation of the Lender to make the initial Loan is subject
to the Lender's receipt of the following, each dated the date of the initial
Loan or as of an earlier date acceptable to the Lender, in form and substance
satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11) listing
all effective Uniform Commercial Code financing statements naming the
Borrower as debtor and all tax lien, judgment, and litigation searches
for the Borrower as the Lender shall deem necessary or desirable (to
be completed by the Lender);
(ii) Uniform Commercial Code financing statements (Form UCC-1)
duly executed by the Borrower (naming the Lender as secured party and
the Borrower as debtor and in form acceptable for filing in all
jurisdictions that the Lender deems necessary or desirable to perfect
the security interests granted to it hereunder) and, if applicable,
termination statements or other releases duly filed in all
jurisdictions that the Lender deems necessary or desirable to perfect
and protect the priority of the security interests granted to it
hereunder in the Equipment related to such initial Loan;
(iii) a Note duly executed by the Borrower evidencing the amount
of such Loan;
(iv) a Collateral Access Agreement duly executed by the lessor
or mortgagee, as the case may be, of each premises where the Equipment
is located;
(v) -certificates of insurance required under Section 5.4 of
this Agreement together with loss payee endorsements for all such
policies naming the Lender as lender loss payee and as an additional
insured;
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(vi) a copy of the resolutions of the Board of Directors of the
Borrower (or a unanimous consent of directors in lieu thereof)
authorizing the execution, delivery, and performance of this
Agreement, the other Loan Documents to which the Borrower is a party,
and the transactions contemplated hereby and thereby, attached to
which is a certificate of the Secretary or an Assistant Secretary of
the Borrower certifying (A) that the copy of the resolutions is true,
complete, and accurate, that such resolutions have not been amended or
modified since the date of such certification and are in full force
and effect and (B) the incumbency, names, and true signatures of the
officers of the Borrower authorized to sign the Loan Documents to
which it is a party;
(vii) a copy of the Borrower's audited financial statements for
the fiscal year ended March 3l, 1997 and a copy of the Borrower's
internally-prepared financial statements for the quarter ended June
30, 1997; and
(viii) such other agreements and instruments as the Lender deems
necessary in its commercially reasonable judgment in connection with
the transactions contemplated hereby.
(b) There shall be no pending or, to the knowledge of the Borrower,
threatened litigation, proceeding, inquiry, or other action (i) seeking an
injunction or other restraining order, damages, or other relief with respect to
the transactions contemplated by this Agreement or the other Loan Documents to
which the Borrower is a party or (ii)which affects or could affect the business,
prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not reasonably be
expected to have a Material Adverse Effect.
(c) The Borrower shall have paid all fees and expenses required to be
paid by it to the Lender as of such date.
(d) The security interests in the Equipment related to the initial
Loan granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens, except with respect to
Permitted Liens.
SECTION 3.4. CONDITIONS PRECEDENT TO EACH LOAN. The obligation
of the Lender to make each Loan is subject to the satisfaction of the following
conditions precedent:
(a) the Lender shall have received the documents, agreements, and
instruments set forth in Section 3.3(a)(i) through (v) applicable to such Loan,
each in form and substance reasonably satisfactory to the Lender and its counsel
and each dated the date of such Loan or as of an earlier date acceptable to the
Lender;
(b) the Lender shall have received a Schedule of the Equipment
related to such Loan, in form and substance satisfactory to the Lender and its
counsel, and the security interests in such Equipment related to such Loan
granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens, except with respect to
Permitted Liens;
(c) all representations and warranties by the Borrower contained in
this Agreement and the other Loan Documents shall be true and correct on and as
of the date of such Loan as if then made, other than representations and
warranties that expressly relate solely to an earlier date, in which case they
shall have been true and correct as of such earlier date; and
(d) no Event of Default or event which with the giving of notice or
the passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
as of the date of such request.
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SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
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SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The
Borrower (a)is duly organized, validly existing, and in good standing under the
laws of the State of its organization, (b) has the power and authority to own
its properties and assets and to transact the businesses in which it is
presently, or plans to be, engaged, and (c) is duly qualified and authorized to
do business and is in good standing in every jurisdiction in which the failure
to be so qualified could have a Material Adverse Effect on (i) the Borrower,
(ii) the Borrowers ability to perform its obligations under the Loan Documents,
or (iii) the rights of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery, and
performance by the Borrower of each of the Loan Documents to which it is a party
are within the powers of the Borrower, do not contravene the charter documents,
if any, of the Borrower, and do not (a) to the knowledge of the Borrower violate
in any material respect any law or regulation, or any order or decree of any
court or governmental authority, (b) in any material respect, conflict with or
result in a breach of, or constitute a default under, any material indenture,
mortgage, or deed of trust or any material lease, agreement, or other instrument
binding on the Borrower or any of its properties, or (c) require the consent,
authorization by, or approval of or notice to or filing or registration with any
governmental authority or other Person. This Agreement is, and each of the other
Loan Documents to which the Borrower is or will be a party, when delivered
hereunder or thereunder, will be, the legal, valid, and binding obligation of
the Borrower enforceable against the Borrower in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, or similar
laws affecting creditors' rights generally and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent and
will be Solvent upon the completion of all transactions contemplated to occur
hereunder (including, without limitation, the Loan to be made on the Effective
Date); the security interests granted herein constitute and shall at all times
constitute the first liens on the Collateral other than Permitted Liens; and the
Borrower is, or will be at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer, and create a security interest therein, free and clear of any and all
claims or liens in favor of any other Person other than the Lender and other
than Permitted Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are
outstanding against the Borrower nor is there now pending or, to the Borrower's
knowledge, threatened any litigation, contested claim, or governmental
proceeding by or against the Borrower except judgments and pending or threatened
litigation, contested claims, and governmental proceedings which would not, in
the aggregate, have a Material Adverse Effect on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in material
default or has not received a notice of default under any contract, lease, or
commitment to which it is a party or by which it is bound. The Borrower knows of
no dispute regarding any contract, lease, or commitment which could have a
Material Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof, each
item of the Collateral is located at the place of business specified in the
applicable Schedule.
SECTION 4.7. NO EVENTS OF DEFAULT. To the knowledge of the
Borrower, no Event of Default has occurred and is continuing nor has any event
occurred which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. Except as
permitted herein, none of the Collateral is subject to contractual obligations
that may restrict or inhibit the Lender's rights or abilities to sell or dispose
of the Collateral or any part thereof after the occurrence of an Event of
Default.
SECTION 4.9. PERFECTION AND PRIORITY OF SECURITY INTEREST. The
Borrower has not knowingly taken any action which would prevent this Agreement
from creating a valid and, upon completion of all
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required filings of financing statements, perfected first priority and exclusive
security interest in the Collateral (other than Permitted Liens), securing the
payment of all the Obligations.
SECTION 4.10. MODEL AND SERIAL NUMBERS. The Schedules set forth
the true and correct model number and serial number of each item of Equipment
that constitutes Collateral.
SECTION 4.11. ACCURACY AND COMPLETENESS OF INFORMATION. All
data, reports, and information heretofore, contemporaneously, or hereafter
furnished by or on behalf of the Borrower in writing to the Lender or for
purposes of or in connection with this Agreement or any other Loan Document, or
any transaction contemplated hereby or thereby, are or will be true and accurate
in all material respects to the Borrower's knowledge on the date as of which
such data, reports, and information are dated or certified and not incomplete by
omitting to state any material fact known to the Borrower and necessary to make
such data, reports, and information not misleading at such time.
SECTION 4.12. PRICE OF EQUIPMENT. To the Borrower's knowledge,
the cost of each item of Equipment does not exceed the fair and usual price for
such type of equipment purchased in like quantity and reflects all discounts,
rebates and allowances for the Equipment (including, without limitation,
discounts for advertising, prompt payment, testing, or other services) given to
the Borrower by the manufacturer, supplier, or any other person.
SECTION 5. COVENANTS.
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SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a) maintain
its existence, (b) maintain in full force and effect all licenses, bonds,
franchises, leases, trademarks, patents, contracts, and other rights reasonably
necessary for the conduct of its business unless the failure to do so could not
reasonably be expected to have a Material Adverse Effect on the Borrower, (c)
continue in the same general lines of business as those presently conducted by
it, and (d) comply with all applicable laws and regulations of any federal,
state, or local governmental authority, except for such laws and regulations the
violations of which would not, in the aggregate, have a Material Adverse Effect
on the Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible, and in
any event within ten business days after the Borrower learns of the following,
the Borrower will give written notice to the Lender of (a) any proceeding
instituted or threatened to be instituted by or against the Borrower in any
federal, state, local, or foreign court or before any commission or other
regulatory body (federal, state, local, or foreign) which would have a Material
Adverse Affect on the Borrower, (b) the occurrence of any Material Adverse
Change with respect to the Borrower, and (c) the occurrence of any Event of
Default or event or condition which, with notice or lapse of time or both, would
constitute an Event of Default, together with a statement of the action which
the Borrower has taken or proposes to take with respect thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The Borrower
will maintain books and records pertaining to the Collateral in such detail,
form, and scope as the Lender shall require in its commercially reasonable
judgment. The Borrower agrees that the Lender or its agents may enter upon the
Borrower's premises upon reasonable notice at any time and from time to time
during normal business hours, and at any time upon the occurrence and
continuance of an Event of Default, for the purpose of inspecting the Collateral
and any and all records pertaining thereto.
SECTION 5.4. INSURANCE. The Borrower will maintain insurance on
the Collateral under such policies of insurance, with such insurance companies,
in such amounts, and covering such risks as are at all times reasonably
satisfactory to the Lender. All such policies shall be made payable to the
Lender, in case of loss, under a standard non-contributory "lender" or "secured
party" clause and are to contain such other provisions as the Lender may
reasonably require to protect the Lender's interests in the Collateral and to
any payments to be made under such policies. Certificates of insurance policies
are to be delivered to the Lender, premium prepaid, with the loss payable
endorsement in the Lender's favor, and shall provide for not less than thirty
days' prior written notice to the Lender, of any alteration or cancellation of
coverage. If the Borrower fails to maintain such insurance,
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the Lender may arrange for (at the Borrower's expense and without any
responsibility on the Lender's part for) obtaining the insurance. In such case,
unless the Lender shall otherwise agree with the Borrower in writing, the Lender
shall have the sole right, in the name of the Lender or the Borrower, to file
claims under any insurance policies, to receive and give acquittance for any
payments that may be payable thereunder, and to execute any endorsements,
receipts, releases, assignments, reassignments, or other documents that may be
necessary to effect the collection, compromise, or settlement of any claims
under any such insurance policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all taxes,
assessments, and other similar charges ("Taxes") lawfully levied or assessed
against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof and is not contested in good faith by appropriate
proceedings diligently pursued, or if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS; FEES
ON COLLATERAL. The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not knowingly permit any notice creating or otherwise relating
to liens on the Collateral or any portion thereof to exist or be on file in any
public offer other than Permitted Liens. Except where failure to do so would not
have a Material Adverse Effect on the Borrower, the Borrower shall promptly pay,
when payable, all transportation, storage, and warehousing charges and license
fees, registration fees, assessments, charges, permit fees, and taxes
(municipal, state, and federal) which may now or hereafter be imposed upon the
ownership, leasing, renting, possession, sale, or use of the Collateral, other
than taxes on or measured by the Lender's income and fees, assessments, charges,
and taxes which are being contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate reserves are maintained
to the extent required by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION, STRUCTURE, OR IDENTITY. The
Borrower will not (a) change the location of its chief executive office without
providing prompt notice of such change to Lender or (b) move or permit the
movement of any item of Collateral from the location specified in the applicable
Schedule, except that the Borrower may change its chief executive office and
keep Collateral at other locations within the United States provided that the
Borrower has delivered to the Lender (i) prior written notice thereof and (ii)
duly executed financing statements and other agreements and instruments (all in
form and substance satisfactory to the Lender) necessary or, in the reasonable
opinion of the Lender, desirable to perfect and maintain in favor of the Lender
a first priority security interest in the Collateral. Notwithstanding anything
to the contrary in the immediately preceding sentence, the Borrower may keep any
Collateral consisting of motor vehicles or rolling stock at any location in the
United States provided that the Lender's security interest in any such
Collateral is conspicuously marked on the certificate of title thereof and the
Borrower has complied with the provisions of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The
Collateral shall be tolerated by competent, qualified personnel in connection
with the Borrower's business purposes, for the purpose for which the Collateral
was designed and in accordance with applicable operating instructions, laws, and
government regulations in all material respects, and the Borrower shall use
every reasonable precaution to prevent loss or damage to the Collateral from
fire and other hazards. The Collateral shall not be used or operated for
personal, family, or household purposes. The Borrower shall procure and maintain
in effect all orders, licenses, certificates, permits, approvals, and consents
required by federal, state, or local laws or by any governmental body, agency,
or authority in connection with the delivery, installation, use, and operation
of the Collateral, except where failure to do so would not have a Material
Adverse Effect on the Borrower. The Borrower shall keep all of the Equipment in
a satisfactory state of repair and satisfactory operating condition in
accordance with industry standards, subject to normal wear and tear, and will
make all repairs and replacements when and where necessary and practical. The
Borrower will not waste or destroy the Equipment or any part thereof, and will
use reasonable care in the use thereof. The Equipment shall not be annexed or
affixed to or become part of any realty without the Lender's prior written
consent.
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SECTION 5.9. FURTHER ASSURANCES. The Borrower will, promptly
upon request by the Lender, execute and deliver or use good faith efforts to
obtain any document reasonably required by the Lender (including, without
limitation, warehouseman or processor disclaimers, mortgagee waivers, landlord
disclaimers, or subordination agreements with respect to the Obligations and the
Collateral), give any notices, execute and file any financing statements, or
other documents (all in form and substance satisfactory to the Lender), xxxx any
chattel paper, deliver any chattel paper or instruments to the Lender, and take
any other actions that are necessary or, in the opinion of the Lender, desirable
to perfect or continue the perfection and the first priority of the Lender's
security interest in the Collateral, to protect the Collateral against the
rights, claims, or interests of any Persons, or to effect the purposes of this
Agreement. A carbon, photographic, or other reproduction of this Agreement or
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all reasonable costs
incurred in connection with any of the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower will
not in any way hypothecate or create or permit to exist any lien, security
interest, charge, or encumbrance on or other interest in any of the Collateral,
except for the lien and security interest granted hereby and Permitted Liens,
and the Borrower will not sell, transfer, assign, pledge, collaterally assign,
exchange, or otherwise dispose of any of the Collateral. In the event the
Collateral, or any part thereof, is sold, transferred, assigned, exchanged, or
otherwise disposed of in violation of these provisions, the security interest of
the Lender shall continue in such Collateral or part thereof notwithstanding
such sale, transfer, assignment, exchange, or other disposition, and the
Borrower will hold the proceeds thereof in a separate account for the benefit of
the Lender. Following such a sale, the Borrower will transfer such proceeds to
the Lender in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. The Borrower
will not enter into any contractual obligations which may restrict or inhibit
the Lender's rights or ability to sell or otherwise dispose of the Collateral or
any part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the
Borrower, the Lender shall have the right at any time to make any payments (if
an Event of Default has occurred and is continuing) and do any other acts the
Lender may deem necessary to protect its security interests in the Collateral,
including, without limitation, the rights to satisfy, contest, or compromise any
encumbrance, charge, or lien which, in the reasonable judgment of the Lender,
appears to be prior to or superior to the security interests granted hereunder,
and appear in, and defend any action or proceeding purporting to affect its
security interests in, or the value of, any of the Collateral. The Borrower
hereby agrees to reimburse the Lender for all payments made and reasonable out-
of-pocket expenses incurred under this Agreement including fees, expenses, and
disbursements of attorneys and paralegals (including the allocated costs of in-
house counsel) acting for the Lender, including any of the foregoing payments
under, or acts taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this 'Agreement, and agrees it
shall be bound by any payment made or act taken by the Lender hereunder absent
the Lender's gross negligence or willful misconduct. The Lender shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a) promptly
after its receipt thereof, deliver to the Lender any documents or certificates
of title issued with respect to any property included in the Collateral, and any
promissory notes, letters of credit or instruments related to or otherwise in
connection with any property included in the Collateral, which in any such case
come into the possession of the Borrower, or shall cause the issuer thereof to
deliver any of the same directly to the Lender, in each case with any necessary
endorsements in favor of the Lender and (b) deliver to the Lender as soon as
available copies of any and all press releases and other similar communications
issued by the Borrower to the public.
SECTION 5.14. NAMECHANGE. The Borrower shall give Lender prompt
notice of amendment or modification of its name, and in connection with such
change deliver executed Uniform Commercial Code financing statements (in form
and substance satisfactory to the Lender).
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SECTION 5.15. ADDITIONAL REQUIREMENTS. The Borrower shall take
all such further actions and execute all such further documents and instruments
as the Lender may reasonably request.
SECTION 5.16. CONFIDENTIALITY. Each of the Lender and the
Borrower shall at all times keep confidential and not disclose to third parties
any information identified as confidential and/or proprietary.
SECTION 5.17. QUIET ENJOYMENT. The Lender shall use commercially
reasonable efforts to take no action which could reasonably be expected to
interfere with Borrower's quiet enjoyment of the Equipment.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction
--------------------
in full of all Obligations, the Borrower shall deliver to the Lender the
following financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as available,
but not later than 120 days after the end of each fiscal year of the Borrower
and its consolidated subsidiaries, the consolidated balance sheet, income
statement, and statements of cash flows and shareholders equity for the Borrower
and its consolidated subsidiaries (the "Financial Statements") for such year,
reported on by independent certified public accountants without an adverse
qualification; and
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as
available, but not later than 60 days after the end of each of the first three
fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments
and excluding notes thereto).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the following
-----------------
events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five days after
receipt of written notice of such failure to pay when due any amounts required
to be paid by the Borrower under any Note and this Agreement;
(b) any representation or warranty made by the Borrower under
any Loan Document shall prove to have been false or incorrect in any manner when
made which has a Material Adverse Effect on the Lender's rights under any Note
or this Agreement;
(c) the Borrower shall fail to perform or observe any term,
covenant, or agreement contained in any Loan Document (other than the other
Events of Default specified in this Section 7) in any manner which has a
Material Adverse Effect on the Lender's rights under any Note or this Agreement
and such failure remains unremedied for the earlier of thirty days from (A) the
date on which the Lender has given the Borrower written notice of such failure
and (B) the date on which the Borrower had actual knowledge of such failure;
(d) dissolution, liquidation, winding up, or cessation of the
Borrower's business, failure of the Borrower generally to pay its debts as they
mature, admission in writing by the Borrower of its inability generally to pay
its debts as they mature, or calling of a meeting of the Borrower's creditors
for purposes of compromising any of the Borrower's debts;
(e) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
sixty days following the commencement thereof, or any action by the Borrower is
taken authorizing any such proceedings;
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(f) an assignment for the benefit of creditors is made by the
Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;
(g) there shall be an event of default by the Borrower under
any indebtedness for borrowing in excess of $100,000 (other than the
Obligations) beyond the period of cure, if any, provided in the instrument or
agreement under which such indebtedness was created and the holder of such
indebtedness has taken action to cause such indebtedness to become due prior to
its stated maturity;
(h) any material tax lien, other than a Permitted Lien, is
filed of record against the Borrower and is not bonded or discharged within
fifteen Business Days;
(i) any judgment which has had or could reasonably be
expected to have a Material Adverse Effect on the Borrower and such judgment
shall not be satisfied, stayed, vacated, bonded, or discharged within sixty
days;
(j) the Borrower shall deny or disaffirm the Obligations
under any of the Loan Documents or any liens granted in connection therewith; or
any liens granted on any of the Collateral in favor of the Lender shall be
determined to be void, voidable, or invalid, or shall not be given the priority
contemplated by this Agreement (except if caused by a filing error by the
Lender) and is not repaired to the satisfaction of the Lender; or
(k) there is a change, other than a change which results from
a merger or from the sale of newly issued securities to investors, in more than
40% of the ownership of any equity interests of the Borrower on the date hereof
or more than 40% of such interests become subject to any contractual, judicial,
or statutory lien, charge, security interest, or encumbrance.
SECTION 8. REMEDIES. If any Event of Default shall have occurred and
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be continuing:
(a) The Lender may, without prejudice to any of its other
rights under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(e) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.
(b) The Lender may take possession of the Collateral and, for
that purpose may enter, with the aid and assistance of any person or persons,
any premises where the Collateral or any part hereof is, or may be placed, and
remove the same.
(c) The obligation of the Lender, if any, to make additional
Loans or financial accommodations of any kind to the Borrower shall immediately
terminate.
(d) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a secured
party under the applicable Uniform Commercial Code (the "Code") whether or not
the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and upon
request of the Lender forthwith, assemble all or part of the Collateral as
directed by the Lender and make it available to the Lender at a place to be
designated by the Lender that is reasonably convenient to both parties and
(ii)without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Lender's
offices or elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Lender may deem commercially reasonable. The Lender shall
provide Borrower at least ten days' notice to the Borrower of the time and place
of any public sale or the time after which any private sale is to be made. The
Lender shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to
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which it was so adjourned.
(e) All cash proceeds received by the Lender in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for (to the extent that such proceeds held as collateral do not
exceed the amount of the Obligations), or then or at any time thereafter applied
in whole or in part by the Lender against, all or any part of the Obligations in
such order as the Lender shall elect. Any surplus of such cash or cash proceeds
held by the Lender and remaining after the full and final payment of all the
Obligations shall be paid over to the Borrower or to such other Person to which
the Lender may be required under applicable law, or directed by a court of
competent jurisdiction, to make payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
------------------------
SECTION 9.1. NOTICES. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mall,
postage prepaid, if to the Lender, then to Transamerica Technology Finance
Division, 00 Xxxxxxxxx Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000, Attention:
Assistant Vice President, Lease Administration, with a copy to the Lender at
Riverway II, West Office Tower, 0000 Xxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx
00000, Attention: Legal Department, and if to the Borrower, then to Pilot
Network Services, Inc., 0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxxxx, XX 00000,
Attention: Chief Financial Officer or such other address as shall be designated
by the Borrower or the Lender to the other party in accordance herewith. All
such notices and correspondence shall be effective when received.
SECTION 9.2. HEADINGS. The headings in this Agreement are for
purposes of reference only and shall not affect the meaning or construction of
any provision of this Agreement.
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the right
to assign any Note or this Agreement or any interest therein unless the Lender
shall have given the Borrower prior written consent and the Borrower and its
assignee shall have delivered assignment documentation in form and substance
satisfactory to the Lender in its sole discretion. The foregoing sentence shall
apply even if such assignment occurs by operation of law, as in the case of a
merger of the Borrower with or into another entity. The Lender may assign its
rights and delegate its obligations under any Note or this Agreement; provided,
however, that such assignment will not relieve Lender of its obligations to
Borrower and will not change Borrower's obligations or rights under any Note or
this Agreement or increase the burdens or risks imposed on Borrower.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any amendment
or waiver of any provision of this Agreement and any consent to any departure by
the Borrower or Lender from any provision of this Agreement shall be effective
only by a writing signed by the Lender and the Borrower and shall bind and
benefit the Borrower and the Lender and their respective successors and assigns,
subject to the first sentence of Section 9.3.
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the
essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in a Note shall have the meaning set forth in the
applicable Code, except where the context otherwise requires. To the extent a
term or provision of this Agreement conflicts with any Note, or any term or
provision thereof, and is not dealt with herein with more specificity, this
Agreement shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant in determining the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement shall
create a continuing security interest in the Collateral and shall (i)remain in
full force and effect until the indefeasible payment in full of the Obligations,
(ii) be binding upon the Borrower and its successors and assigns and (iii)
inure,
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together with the rights and remedies of the Lender hereunder, to the benefit of
the Lender and its successors, transferees, and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by law,
this Agreement and the rights and powers granted to the Lender hereunder and
under the Loan Documents shall continue to be effective or be reinstated if at
any time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations,
warranties, and covenants of the Borrower contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Borrower of the Obligations secured
hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to indemnify
and hold harmless the Lender and its directors, officers, agents, employees, and
counsel from and against any and all costs, expenses, claims, or liability
incurred by the Lender or such Person hereunder and under any other Loan
Document or in connection herewith or therewith, unless such claim or liability
shall be due to willful misconduct or gross negligence on the part of the Lender
or such Person.
SECTION 9.10. COUNTERPARTS; TELECOPIED SIGNATURES. This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which shall together constitute one
and the same instrument. This Agreement and each of the other Loan Documents and
any notices given in connection herewith or therewith may be executed and
delivered by telecopier or other facsimile transmission all with the same force
and effect as if the same was a fully executed and delivered original manual
counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or
obligation under this Agreement or any Note or any other Loan Document shall be
invalid, illegal, or unenforceable in any jurisdiction, the validity, legality,
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or
omission of the Lender to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Lender of any right or remedy shall
preclude any other or further exercise thereof, or preclude any other right or
remedy.
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the Lender
agree that this Agreement, the Schedule hereto, and the Commitment Letter are
the complete and exclusive statement and agreement between the parties with
respect to the subject matter hereof, superseding all proposals and prior
agreements, oral or written, and all other communications between the parties
with respect to the subject matter hereof. Should there exist any inconsistency
between the terms of the Commitment Letter and this Agreement, the terms of this
Agreement shall prevail.
SECTION 9.14. SETOFF. In addition to and not in limitation of
all rights of offset that the Lender may have under Applicable Law, and whether
or not the Lender has made any demand or the Obligations of the Borrower have
matured, the Lender shall have the right to appropriate and apply to the payment
of the Obligations of the Borrower-all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.
SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
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COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.16. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
SECTION 9.17. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN XXXX COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (a)ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (b)THE RIGHT TO
INTERPOSE ANY NONCOMPULSORY SETOFF, COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO
RIGHTS AND REMEDIES.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Agreement
to be duly executed and delivered by its proper and duly authorized officer as
of the date first set forth above.
PILOT NETWORK SERVICES, INC.
By: /s/ M. Xxxxxxxx Xxxxxxx
-----------------------------
Name: M. Xxxxxxxx Xxxxxxx
Title: President & CEO
Federal Tax ID:00-0000000
Accepted as of the
____ day of ______, 1997
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:_____________________________________
Name:
Title:
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