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SURETYSHIP AGREEMENT
THIS SURETYSHIP AGREEMENT (THIS "AGREEMENT"), is entered into as of
March 14, 1997, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), on the one hand, and, on the other hand, MIDCOM COMMUNICATIONS
INC., a Washington corporation ("Midcom"), ADVAL, INC., an Oregon corporation
("AdVal"), ADVAL DATA CORPORATION, an Oregon corporation ("AdVal Data"),
ADVANCED NETWORK DESIGN, a California corporation ("A.N.D."), CEL-TECH
INTERNATIONAL CORP., a Washington corporation ("Cel-Tech"), and PACNET INC., a
Washington corporation ("PacNet"; collectively, with Midcom, AdVal, AdVal Data,
A.N.D., and Cel-Tech, the "Debtors") with reference to the following facts:
A. Foothill, as lender, and the Debtors, as borrowers, have
entered into that certain Loan and Security Agreement (the
"Loan Agreement") dated as of February 27, 1997;
B. In order to induce Foothill to enter into the Loan Agreement,
and in consideration thereof, and in consideration of any loan
or other financial accommodations hereinafter extended by
Foothill to the Debtors, whether pursuant to the Loan
Agreement or otherwise, the Debtors have agreed to enter into
this Agreement; and
C. Any and all initially capitalized terms used herein and not
defined herein shall have the meaning ascribed thereto in the
Loan Agreement.
NOW THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Foothill and the Debtors hereby agree as
follows:
1. SURETYSHIP WAIVERS AND CONSENTS.
1.1 The Debtors each are, and at all times shall be, jointly and
severally liable for each and every one of the Obligations under the Loan
Agreement and the Loan Documents (as defined in the Loan Agreement), regardless
of which Debtor or Debtors requested, received, used, or directly enjoyed the
benefit of, the extensions of credit hereunder. Unless otherwise expressly set
forth to the contrary in any of the Loan Documents, all of the Collateral shall
secure all of the Obligations. Each Debtor's Obligations under the Loan
Agreement are independent Obligations and are absolute and unconditional. Each
Debtor, to the extent permitted by law, hereby waives any defense to
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such Obligations that may arise by reason of the disability or other defense or
cessation of liability of any other Debtor for any reason other than payment in
full. Each Debtor also waives any defense to such Obligations that it may have
as a result of Foothill's election of or failure to exercise any right, power,
or remedy, including the failure to proceed first against another Debtor or any
security it holds from such other Debtor. Without limiting the generality of the
foregoing, each Debtor expressly waives all demands and notices whatsoever
(except for any demands or notices, if any, that such Debtor expressly is
entitled to receive pursuant to the terms of any Loan Document), and agrees that
Foothill may, without notice (except for such notice, if any, as such Debtor
expressly is entitled to receive pursuant to the terms of any Loan Document) and
without releasing the liability of such Debtor, extend for the benefit of any
other Debtor the time for making any payment, waive or extend the performance of
any agreement or make any settlement of any agreement for the benefit of any
other Debtor, and may proceed against each Debtor, directly and independently of
any other Debtor, as Foothill may elect in accordance with the Loan Agreement.
1.2 Each Debtor acknowledges that the Obligations undertaken herein or
in the other Loan Documents, and the grants of security interests and liens by
such Debtor to secure Obligations of the other Debtors, could be construed to
consist, at least in part, of the guaranty of Obligations of the other Debtors
and, in full recognition of that fact, each Debtor consents and agrees as
hereinafter set forth in the balance of this Section 1. The consents, waivers,
and agreements of the Debtors that are contained in the balance of this Section
1 are intended to deal with the suretyship aspects of the transactions evidenced
by the Loan Documents (to the extent that a Debtor may be deemed a guarantor or
surety for the Obligations of another Debtor) and thus are intended to be
effective and applicable only to the extent that any Debtor has agreed to answer
for the Obligation of another Debtor or has granted a lien or security interest
in Collateral to secure the Obligation of another Debtor; conversely, the
consents, waivers, and agreements of the Debtors that are contained in the
balance of this Section 1 shall not be applicable to the direct Obligation of a
Debtor with respect to credit extended directly to such Debtor, and shall not be
applicable to security interests or liens on Collateral of a Debtor given to
directly secure direct Obligations of such Debtor where no aspect of guaranty or
suretyship is involved. Each Debtor consents and agrees that Foothill may, at
any time and from time to time, without notice or demand, whether before or
after any actual or purported termination, repudiation or revocation of the Loan
Agreement by any one or more Debtors, and without affecting the enforceability
or continuing effectiveness hereof as to such Debtor, in accordance with the
terms of the Loan Documents:
(a) with respect to any other Debtor, supplement, restate,
modify, amend, increase, decrease, extend, renew, accelerate or otherwise change
the time for payment or the terms of the Obligations of such other Debtor or any
part thereof, including
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any increase or decrease of the rate(s) of interest thereon with the agreement
of such other Debtor;
(b) supplement, restate, modify, amend, increase, decrease or
waive, or enter into or give any agreement, approval or consent with respect to,
the Obligations or any part thereof, or any of the Loan Documents or any
security or guarantees granted or entered into by any Person(s) other than such
Debtor, or any condition, covenant, default, remedy, right, representation or
term thereof or thereunder;
(c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Obligations or any part thereof;
(d) accept partial payments on the Obligations;
(e) receive and hold additional security or guarantees for the
Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon, fail to
perfect, subordinate, exchange, substitute, transfer or enforce any security or
guarantees, and apply any security and direct the order or manner of sale
thereof as Foothill in its sole and absolute discretion may determine;
(g) release any other Person (including, without limitation,
any other Debtor) from any personal liability with respect to the Obligations or
any part thereof;
(h) with respect to any Person other than such Debtor
(including, without limitation, any other Debtor), settle, release on terms
satisfactory to Foothill or by operation of applicable laws or otherwise
liquidate or enforce any Obligations and any security therefor or guaranty
thereof in any manner, consent to the transfer of any security and bid and
purchase at any sale; or
(i) consent to the merger, change or any other restructuring
or termination of the corporate or partnership existence of any other Debtor or
any other Person, and correspondingly agree, in accordance with all applicable
provisions of the Loan Documents, to the restructure of the Obligations, and any
such merger, change, restructuring or termination shall not affect the liability
of any Debtor or the continuing effectiveness hereof, or the enforceability
hereof with respect to all or any part of the Obligations.
1.3 Upon the occurrence and during the continuance of any Event of
Default,
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Foothill may enforce the Loan Documents independently as to each Debtor and
independently of any other remedy or security Foothill at any time may have or
hold in connection with the Obligations, and it shall not be necessary for
Foothill to marshal assets in favor of any Debtor or any other Person or to
proceed upon or against or exhaust any security or remedy before proceeding to
enforce the Loan Agreement. Each Debtor expressly waives any right to require
Foothill to marshal assets in favor of any Debtor or any other Person or to
proceed against any other Debtor, any other Person, or any collateral provided
by any Person, and agrees that Foothill may proceed against any Debtor, any
other Person, or any collateral in such order as it shall determine in its sole
and absolute discretion.
1.4 Foothill may file a separate action or actions against any Debtor,
whether such action is brought or prosecuted with respect to any security or
against any other Person, or whether any other Person is joined in any such
action or actions. Each Debtor agrees, for itself, that Foothill and any other
Debtor, or any Affiliate of any other Debtor (other than such Debtor itself),
may deal with each other in connection with the Obligations or otherwise, or
alter any contracts or agreements now or hereafter existing between any of them,
in any manner whatsoever, all without in any way altering or affecting the
continuing efficacy as to such Debtor of the Loan Documents.
1.5 The rights of Foothill created or granted herein with respect to
any Debtor and the enforceability of the Loan Documents as to any Debtor at all
times shall remain effective to cover the full amount of all the Obligations
even though the Obligations, including any part thereof or any other security or
guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against any other Debtor and whether or not any other Debtor
shall have any personal liability with respect thereto.
1.6 To the maximum extent permitted by applicable law, each Debtor, for
itself, expressly waives any and all defenses now or hereafter arising or that
otherwise might be asserted by reason of
(a) any disability or other defense of any other Debtor with
respect to the Obligations, or with respect to the enforceability of Foothill's
security interest in or lien on any collateral securing any of the Obligations
(including, without limitation, the Collateral),
(b) the unenforceability or invalidity of any security or
guaranty for the Obligations or the lack of perfection or continuing perfection
or failure of priority of any security for the Obligations,
(c) the cessation for any cause whatsoever of the liability of
any other
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Debtor (other than by reason of the full payment and performance of all
Obligations),
(d) any failure of Foothill to marshal assets in favor of any
Debtor or any other Person,
(e) any failure of Foothill to give notice of sale or other
disposition of collateral to any other Debtor or any other Person other than
such waiving Debtor, or any defect in any notice that may be given to any other
Debtor or any other Person other than such waiving Debtor, in connection with
any sale or disposition of any collateral securing the Obligations or any of
them (including, without limitation, the Collateral),
(f) any failure of Foothill to comply with applicable law in
connection with the sale or other disposition of any collateral or other
security for any Obligation that is owned by another Debtor or by any other
Person other than such waiving Debtor, including any failure of Foothill to
conduct a commercially reasonable sale or other disposition of any such
collateral or other security for any Obligation,
(g) any act or omission of Foothill or others that directly or
indirectly results in or aids the discharge or release of any other Debtor, or
the Obligations of any other Debtor, or any security or guaranty therefor, by
operation of law or otherwise,
(h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation,
(i) any failure of Foothill to file or enforce a claim in any
bankruptcy or other proceeding with respect to any Person other than such
waiving Debtor,
(j) the election by Foothill of the application or
non-application of Section 1111(b)(2) of the Bankruptcy Code,
(k) any extension of credit or the grant of any lien under
Section 364 of the Bankruptcy Code,
(l) any use of cash collateral under Section 363 of the
Bankruptcy Code,
(m) any agreement or stipulation with respect to the provision
of adequate protection in any bankruptcy proceeding of any Person,
(n) the avoidance of any lien in favor of Foothill for any
reason, or
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(o) any action taken by Foothill that is authorized by this
section or any other provision of any Loan Document. Until such time, if any, as
all of the Obligations have been paid and performed in full and no portion of
any commitment of Foothill to any Debtor under any Loan Document remains in
effect, no Debtor shall have any right of subrogation, contribution,
reimbursement or indemnity, and each Debtor expressly waives any right to
enforce any remedy that Foothill now has or hereafter may have against any other
Person and waives the benefit of, or any right to participate in, any collateral
now or hereafter held by Foothill. Except to the extent expressly provided for
in any Loan Document, each Debtor expressly waives, to the maximum extent
permitted by applicable law, all rights or entitlements to presentments, demands
for payment or performance, notices of nonpayment or nonperformance, protests,
notices of protest, notices of dishonor and all other notices or demands of any
kind or nature whatsoever with respect to the Obligations, and all notices of
acceptance of the Loan Documents or of the existence, creation or incurring of
new or additional Obligations.
1.7 In the event that all or any part of the Obligations at any time
should be or become secured by any one or more deeds of trust or mortgages or
other instruments creating or granting liens on any interests in real property,
each Debtor authorizes Foothill, upon the occurrence of and during the
continuance of any Event of Default, at its sole option, without notice or
demand except as is or may be expressly required by the terms of any Loan
Document or by the provisions of any applicable law, to foreclose any or all of
such deeds of trust or mortgages or other instruments by judicial or nonjudicial
sale, without affecting or diminishing, except to the extent of the effect of
the application of the proceeds realized therefrom, and except to the extent
mandated by any non-waivable provision of applicable law, the Obligations of any
Debtor (other than the Obligations of a grantor of a foreclosed deed of trust,
mortgage, or other instrument, to the extent, if any, that applicable law
affects or diminishes the Obligations of such grantor), the enforceability of
the Loan Agreement or any other Loan Document, or the validity or enforceability
of any remaining security interests or liens of, or for the benefit of, Foothill
on any collateral.
1.8 To the fullest extent permitted by applicable law, each Debtor
expressly waives any defenses to the enforcement of the Loan Agreement, or to
the enforcement of any other Loan Document, or to any rights of Foothill created
or granted hereby or thereby, or to the recovery by Foothill against any Debtor
or any other Person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale of any collateral, whether real or personal,
from time to time securing any of the Obligations, even though such a
foreclosure or sale may impair the subrogation rights of one or more of the
Debtors and may preclude one or more of the Debtors from obtaining reimbursement
or contribution from other Debtors. To the fullest extent permitted by
applicable law, each Debtor expressly waives any defenses or benefits that may
be derived from California
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Code of Civil Procedure SectionSection 580a, 580b, 580d or 726, or comparable
provisions of the laws of any other jurisdiction, and all other suretyship
defenses it otherwise might or would have under California law or other
applicable law. To the fullest extent permitted by applicable law, each Debtor,
for itself, expressly waives any right to receive notice of any judicial or
nonjudicial foreclosure or sale of any real property or interest therein of
another Debtor that is subject to any such deeds of trust or mortgages or other
instruments, and any Debtor's failure to receive any such notice shall not
impair or affect such Debtor's obligations or the enforceability of the Loan
Documents or any rights of Foothill created or granted hereby or thereby.
1.9 Each Debtor hereby agrees to keep each other Debtor fully apprised
at all times as to the status of its business, affairs, finances, and financial
condition, and its ability to perform its Obligations under the Loan Documents,
and in particular as to any adverse developments with respect thereto. Each
Debtor hereby agrees to undertake to keep itself apprised at all times as to the
status of the business, affairs, finances, and financial condition of each other
Debtor, and of the ability of each other Debtor to perform its Obligations under
the Loan Documents, and in particular as to any adverse developments with
respect to any thereof. Each Debtor hereby agrees, in light of the foregoing
mutual covenants to inform each other, and to keep themselves and each other
informed as to such matters, that Foothill shall have no duty to inform any
Debtor of any information pertaining to the business, affairs, finances, or
financial condition of any other Debtor, or pertaining to the ability of any
other Debtor to perform its Obligations under the Loan Documents, even if such
information is adverse, and even if such information might influence the
decision of one or more of the Debtors to continue to be jointly and severally
liable for, or to provide Collateral for, Obligations of one or more of the
other Debtors. To the fullest extent permitted by applicable law, each Debtor
hereby expressly waives any duty of Foothill to inform any Debtor of any such
information.
1.10 Debtors and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy, or otherwise adversely affect rights that Debtors otherwise
may have against other Debtors, Foothill, or others, or against Collateral, and
that, under the circumstances, the waivers and consents herein given are
reasonable and not contrary to public policy or law. If any of the waivers or
consents herein are determined to be contrary to any applicable law or public
policy, such waivers and consents shall be effective to the maximum extent
permitted by law.
1.11 Anything to the contrary in this Agreement notwithstanding,
nothing in this Agreement shall constitute a waiver or relinquishment by any
Debtor (a) of any right to notice from Foothill expressly provided for in favor
of such Debtor in any Loan
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Document, or (b) of any duty or obligation of Foothill expressly provided for in
favor of such Debtor in any Loan Document.
2. MISCELLANEOUS.
2.1 Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire agreement.
2.2 This Agreement shall bind and inure to the benefit of the
respective successors and permitted assigns of each of the parties.
2.3 Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Foothill or any Debtor, whether under any
rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.
2.4 Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
2.5 This Agreement can only be amended by a writing signed by both
Foothill and the Debtors.
2.6 This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver a manually executed counterpart of this Agreement but the failure
to deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
2.7 This Agreement is a Loan Document.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
MIDCOM COMMUNICATIONS INC.,
a Washington corporation
By_________________________
Title:_____________________
ADVAL, INC.,
an Oregon corporation
By_________________________
Title:_____________________
ADVAL DATA CORPORATION,
an Oregon corporation
By_________________________
Title:_____________________
ADVANCED NETWORK DESIGN,
a California corporation
By_________________________
Title:_____________________
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CEL-TECH INTERNATIONAL CORP.,
a Washington corporation
By___________________________
Title:_______________________
PACNET INC.,
a Washington corporation
By___________________________
Title:_______________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By___________________________
Title:_______________________
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