SECOND AMENDMENT TO SECURITY AGREEMENT
SECOND AMENDMENT TO SECURITY AGREEMENT ("Amendment") dated as of
November 15, 1996, by and among LYON CREDIT CORPORATION ("Secured Party"),
AMERICAN NETWORK EXCHANGE, INC. ("ANEI") and CRESCENT PUBLIC COMMUNICATIONS INC.
("Crescent" and ANEI are collectively herein, the "Borrower" ).
RECITALS
WHEREAS, the undersigned are parties to a certain Security Agreement
No. 001 dated as of October 4, 1995 (the "Original Security Agreement"),
pursuant to which, among other things and subject to the terms thereof, the
Borrower granted to the Secured Party a first security interest in the
Collateral (as such term is defined in the Security Agreement) for purposes of
securing payment on that certain Promissory Note, cated as of October 4, 1995,
in the original stated amount of $2,500,000.00 executed by Borrower and payable
to Secured Party ("First Note") and each promissory note made by the Borrower in
favor of the Secured Party and all other indebte!dness of the Borrower to the
Secured Party; and
WHEREAS, Secured Party advanced further funds to Borrower pursuant to
that Promissory Note, dated as of December 28, 1995, in the original stated
principal amount of $500,000.00 ("Second Note"). In connection with this
additional funding, the parties amended the Original Security Agreement in
accordance with that Amendment to Security Agreement, dated as of December 28,
1995 ("First Amendment") and other related amendment and loan documents; and
WHEREAS, simultaneously herewith, Borrower is refinancing the First
Note and Seconcl Note and receiving additional funds under a new Consolidated,
Renewed and Restated Promissory Note in the original stated principal amount of
$7,000,000.00 executed by Borrower in favor of the Secured Party (such
refinancing and additional funding being sometimes hereinafter referred to as
the "Loan") and other related amendment and loan documents; and in connection
therewith, the undersigned desire to amend the Original Security Agreement as
amended by the First Amendment to incorporate therein certain new conditions,
terms and additional collateral.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the undersigned hereby agree as follows:
1. The recitals set forth above are incorporated herein for all
purposes.
2. Except as otherwise provided herein, all capitalized terms used
herein without definition shall have the meanings ascribed to them in the
Security Agreement. "Security Agreement" as used herein shall mean the Original
Security Agreement as amended by the First Amendment and as amended by this
Amendment.
3. Schedule No. 1 to the Original Security Agreement was wholly
restated and revised by Schedule No. 2 executed in connection with and as part
of the First Amendment. Schedule No. 2 is hereby wholly restated and replaced by
Schedule No. 3 attached hereto and incorporated herein for all purposes. It is
understood and agreed that only Schedule No. 3 shall serve as Collateral under
the Security Agreement.
4. "Note" as used in the Security Agreement shall include, without
limitation, that certain Consolidated, Renewed and Restated Promissory Note
dated as of November 15, 1996, in the original stated principal amount of
$7,000,000.00, which note shall be included, without limitation, within the
Indebtedness secured by the Security Agreement.
5. Clause (i) under Section 1 of the Security Agreement which reads as
follows "(i) each unit of property (such unit, an "Item") described in a
Schedule in the form attached hereto as Exhibit "B" (a "Schedule") and each unit
of property constituting Replacement Equipment as defined in Section 9 hereof,"
is replaced with the following:
(i) each unit of property (such unit, an "Item") having the
location and phone number set forth on and as further
described on Schedule No. 3 attached hereto ("Schedule") and
each Item constituting Replacement Equipment as defined in
Section 9 hereof ("Item" as used herein shall mean the
applicable pay telephone, together with any telephone booths,
enclosures, stations, pedestals, apparatus, circuit boards,
coin banks and any other equipment physically connected to or
installed in or with such telephones located at the addresses
set forth on the Schedule),
6. Section 5 of the Security Agreement is hereby amended to read in its
entirety as follows:
5. Liens: Borrower shall keep the Collateral free and clear
from all liens, charges, encumbrances and security interests
of any kind ("Liens"), except for (i) the Lien of Secured
Party, as provided in this Security Agreement, (ii) Liens for
taxes either not yet due or being contested by Crescent in
good faith with due diligence and by appropriate proceedings,
so long as such proceedings do not, in the opinion of Secured
Party, involve any material danger of sale, forfeiture or loss
of Collateral or any part thereof or title thereto or interest
therein, and (iii) inchoate materialmen's, mechanics',
workmen's, repairmen's, employees', carriers', warehousemen's
or other like Liens arising in the ordinary course of business
of Crescent and not delinquent and Crescent shall be
maintaining adequate reserves therefor. No additional Liens on
the Collateral shall be permitted for the benefit of any third
party or in connection with any other third party financing.
Secured Party shall, at its own cost and expense, promptly
take such action as may be necessary to discharge duly all
Secured Party's Liens upon full payment and satisfaction of
all Indebtedness. Secured Party expressly acknowledges and
agrees that for purposes of this Security Agreement including
but not limited to the provisions of this Section 5, the
Collateral consists only of 3500 Items and associated
Contracts, Proceeds and Additions as more fully defined and
2
described in Section 1 hereof and the Schedule dated as of
even date herewith attached hereto as Schedule No. 3.
7. The references to "1866" appearing in clause (a) of Section 6 and
clause (a) of Section 9 of the Security Agreement are hereby amended to read
"3500."
8. Clause (x) of Section 17 of the Security Agreement is hereby
revised to read as follows:
(x) the related Contracts for at least 3500 of the Items have terms,
including automatic renewals thereof, of at least sixty (60) months
from the date hereof;
9. The following phrase is hereby deleted from Section 17 (v) "except
as otherwise provided in Section 5 hereof."
10. Clause (viii) of Section 17 of the Security Agreement is hereby
revised to read as follows:
(viii) each of the Contracts is, by its terms, assignable by Crescent
(except for Contracts covering approximately 65 Items which are
maintained in hospitals, which assignments are subject to the consent
of such hospitals and subject to applicable laws and regulations), and
no Contract provides for any claim (other than a claim for non-payment
of commissions due thereunder) or lien by the owner of the premises on
which any Item is located on any such Item, and each Contract (other
than 2 of the Contracts) allows Crescent to remove the Collateral from
the premises whenever Crescent or its assigns feels it is necessary to
do so to prevent the deterioration of the Collateral without liability
or accountability to such owner;
11. The Security Agreement is hereby amended by adding Sections 22, 23,
24, 25, 26, 27 and 28 as set forth below (currently Section 21 is the
Miscellaneous Section as the prior Section 21 "Release of Collateral" was
deleted in the First Amendment):
22. Xxxxxxx Money Fee. Borrower paid a refundable xxxxxxx
money fee (the "EMF") in the amount of $70,000.00 upon
Borrower's execution of the proposal to make the Loan. The EMF
shall be returned to Borrower within 30 days after the Loan
proceeds have been funded to Borrower (less any Expenses
incurred by Secured Party in connection with making the Loan).
Expenses as used in this Section 22 shall include, but not be
limited to, all costs of recording of liens, UCC searches,
reasonable attorneys' fees and expenses, appraisals,
reasonable travel expenses and other fees incidental to
closing of the Loan. In the event the Loan should not close
due to rejection by Borrower and/or its parent company of the
financing contemplated hereunder, Borrower acknowledges and
agrees that the EMF was fully earned by Secured Party and was
not contingent upon the execution of the Second Amendment to
Security Agreement or the making of any advance thereunder.
3
23. Prepayment Fee: Loan Fee. Concurrently with the execution
of the Agreement, Borrower shall pay a non-refundable fee
("Fee") in the amount of Seventy Thousand
and No/100 Dollars ($70,000.00) to Secured Party. Borrower
acknowledges and agrees that the Fee was fully earned upon
Borrower's execution of this Agreement, and shall not be
subject to proration or rebate upon the termination of this
Agreement or repayment of the Loan. A portion of the Fee, the
calculation of which shall be determined by Secured Party, is
payable to Secured Party in connection with the prepayment
premium due to Secured Party under the First Note and Second
Note. The remainder of the Fee shall be payment to Secured
Party as consideration for making the loan and shall also
compensate Secured Party for the cost associated with the
origination, structuring, processing, approving and closing of
the transactions contemplated herein, including, but not
limited to, Secured Party's administrative, out-of-pocket,
general overhead and lost opportunity costs, but not including
any expenses for which Borrower has agreed to reimburse
Secured Party pursuant to this Security Agreement .
24. Right to Participate. Borrower acknowledges that it has
been informed that Secured Party intends to sell participation
interests in the Indebtedness to other financial institutions.
To the extent that any such participants should find
typographical, word processing or other similar errors,
Borrower agrees to correct such matters.
25. No Additional Debt on Coastal Transaction. Without
limiting Borrower's rights to use any non-Collateral property
for security for new debt for future acquisitions or
otherwise, Borrower agrees and represents and warrants to
Secured Party that no additional debt, whether through seller
financing, third party financing, or whether secured or
unsecured, shall be entered into or incurred in connection
with the purchase of the assets of Coastal Telecom Payphone
Company, Inc., BEK Tel, Inc., and Garden State Telephone
Installation & Service Co., Inc. as originally set forth in
that certain Asset Purchase Agreement, dated as of November 8,
1996.
26. Inadvertent Replacement. Without limiting or waiving any
of the other affirmative obligations of Borrower as to
maintaining the Collateral herein, Borrower agrees that the
Items of Collateral hereunder shall be maintained at the 3500
level and should Borrower have been mistaken (such mistake
must be inadvertent and in good faith) as to the term of, or
automatic renewals of, any of the Contracts causing such to
terminate prior to the maturity of the Note, Borrower shall
within ten (10) Business Days of such termination cause such
to be replaced in accordance with Section 9 (c) of this
Security Agreement.
27. Copies of Contracts. Borrower represents and warrants that
it has available in its files the Contracts and that such
shall be held in trust by Borrower for the benefit of Secured
Party. Borrower agrees that within ten (10) business days
after request by Secured Party after an Event of Default, it
shall provide the Contracts to Secured Party.
4
28. Cash Flow Ratio. AMNEX, INC. is a guarantor of the
Indebtedness and parent company to each corporation comprising
Borrower. As a condition and inducement to Secured Party
refinancing and providing additional funds to Borrower,
Borrower agrees that it shall be a covenant hereunder
applicable to Borrower that AMNEX, Inc. maintain a Cash Flow
Ratio (as hereafter defined) of not less than 1.25 to 1.0.
Borrower shall provide annual certifications to Secured Party
(such shall be delivered along with the annual reports
provided under Section 8 (iv)). "Cash Flow Ratio" as used
herein is derived by dividing Net Cash Flow (as hereafter
defined) by Current Maturities of Long Debt (as hereafter
defined). "Net Cash Flow" shall mean the sum of net after tax
income (but excluding any condemnation or insurance proceeds
payable), depreciation, and amortization of intangible assets.
"Current Maturities of Long Term Debt" shall mean the sum of
the current portion of long term debt and capital leases
payable in the twelve months following the fiscal year end.
12. Borrower remakes its representations and warranties set forth in
the Security Agreement as of the date of this Amendment and reaffirms and
remakes all of its covenants and agreements as of the date of this Amendment.
13. Secured Party agrees within thirty (30) days after funding the Loan
to type legends on the First Note and Second Note stating that such have been
consolidated, renewed and restated in the Consolidated, Renewed and Restated
Note, dated as of November 15, 1996 and to provide a copy of same to Borrower or
AMNEX, Inc. but the First Note and Second Note shall be, as so marked, retained
by Secured Party until the Loan shall have been paid in full. Secured Party
intends to file new UCC-1s in connection with the Loan and agrees after receipt
of the recorded new UCC-1s to file UCC terminations as to the UCC-1s filed in
connection with Original Security Agreement and the First Amendment.
14. Except as expressly amended herein, the terms and conditions of the
Security Agreement shall remain in full force and effect without waiver or
modification of the rights of any party thereto.
15. This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts each of which, when so
executed and delivered, shall be an original, and all such counterparts shall
together constitute one of the same instrument.
[THE REMAINDER OF PAGE IS INTENTIONALLY BLANK]
5
IN WITNESS WHEREOF, each of the parties hereto has caused this Second
Amendment to Security Agreement to be executed on its behalf by an officer
thereunto duly authorized as of the date first above written.
BORROWER:
CRESCENT PUBLIC COMMUNICATIONS INC.
By:/s/
Xxxxxxx X. Xxxxxx, Chairman
ATTEST:/s/
Xxxxx X. Xxxxxxxx, Secretary
AMERICAN NETWORK EXCHANGE, INC.,
By: /s/
Xxxxxxx X. Xxxxxx, Chairman
ATTEST:/s/
Xxx X. Xxxxx, Secretary
SECURED PARTY:
LYON CREDIT CORPORATION
By:/s/
Printed Name:Xxxxxxx X. House
Title:VP/Division Manager
6
Schedule No, 3
to Security Agreement
SCHEDULE NO. 3 TO SECURITY AGREEMENT
Description of Collateral: 3500 Pay Telephones as outlined on Schedule "A"
attached hereto and made a part hereof.
Cost of Collateral: $7,000,000.00
Collateral be located at: See Schedule "A" attached hereto and made a part
hereof.
Reference is rnade to that certain Security Agreernent No. 001, dated as
of October 4, 1995, as amended by that certain Amendment to Security Agreement,
dated as of December 28, 1995 and that certain Second Amendment to Security
Agreement, dated as of November 15, 1996 (as it may be modified or amended, now
or hereafter, called the "Security Agreement") between Lyon Credit Corporation
("Secured Party") and American Network Exchange, Inc. and Crescent Public
Communications Inc. ("Borrower").
All of the terms and provisions of the Security Agreernent are hereby
incorporated by reference into and made part of this Schedule to the same extent
as if fully set forth herein. Borrower and Secured Party hereby agree to be
bound by the terms and provisions, and hereby make, as if made as of the date
hereof, the representations and warranties contained in the Security Agreement
as each relates to the Collateral described above.
7
IN WITNESS WHEREOF, the parties hereto have executed this Schedule as of
the 15th day of November, 1996.
AMERICAN NETWORK EXCHANGE, INC.,
as Borrower
Attest: /s/ By:/s/
Printed Name: Xxx X. Xxxxx Xxxxxxx X. Xxxxxx
Title: Secretary
CRESCENT PUBLIC COMMUNICATIONS INC.
as Borrower
Attest:/s/ By:/s/
Printed Name: Xxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxx, Chairman
Title:Secretary
LYON CREDIT CORPORATION
as Secured Party
By:/s/
Title: V.P. Division Manager
8
SCHEDULE A
Reference is made to that certain Security Agreement No. 001 dated as of October
4, 1995 as amended by the Amendment to Security Agreement, dated as of December
28, 1995, and Second Amendment to Security Agreement, dated as of November 15,
1996 (collectively, the "Security Agreement") by and among Lyon Credit
Corporation (together with its successors and assigns, if any, "Secured Party"),
American Network Exchange, Inc. ("ANEI") and Crescent Public Communications Inc.
("Crescent", and collectively with ANEI, the "Borrower"), pursuant to which
Borrower granted and conveyed to Secured Party a first security interest in, and
mortgaged and collaterally assigned to Secured Party, (i) each unit of property
(such unit, an "Item") having the location and phone number set forth on and as
further described on Attachment 1 attached hereto ("Schedule") and each Item
constituting Replacement Equipment as defined in Section 9 of the Security
Agreement ("Item" as used herein shall mean the applicable pay telephone,
together with any telephone booths, enclosures, stations, pedestals, apparatus,
circuit boards, coin banks and any other equipment physically connected to or
installed in or with such telephones located at the addresses set forth on the
Schedule), (ii) each Pay Telephone Location Agreement between Crescent and the
owner or lessee of any location on which any Item may be located, and (iii) all
products and proceeds of each Item, if any, which Crescent may be entitled to
receive, i.e., excluding any and all non-coin revenues but including commissions
receivable on non-coin revenues and any coin revenues derived from an Item, all
additions, attachments, accessories and accessions thereto and any and all
substitutions, replacements or exchanges thereto, and any and all insurance
proceeds thereof, including, but not limited to, every permitted lease or
sublease, however designated, covering all or any part thereof, (all of the
foregoing hereinafter collectively called the "Collateral").
9
