FUNDING AGREEMENT
This Funding Agreement ("Agreement") is made as of November 9 , 1999,
between Data Transmission Network Corporation, a Delaware corporation ("DTN"),
and Xx0.Xxx, Inc., a Wyoming corporation ("Ag1").
WITNESSETH:
WHEREAS, Ag1 and DTN entered into a nonbinding letter of intent dated
September 27, 1999 (the "Acquisition Proposal"), which contemplates the
acquisition (the "Acquisition") by DTN of a controlling equity interest in Ag1.
WHEREAS, the Acquisition Proposal also contemplates a working capital
agreement pursuant to which DTN would provide working capital funds to Ag1 upon
terms mutually agreeable to DTN and Ag1.
WHEREAS, the parties desire to enter into this Agreement for the
purpose of agreeing upon the terms and conditions of funding by DTN for Ag1
during the period in which Ag1 and DTN negotiate, document and consummate the
Acquisition.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, it is agreed as follows:
1. The Advances. Commencing on November 1, 1999, and continuing until
the earlier of May 31, 2000 or the closing of the Acquisition (the "Term"), DTN
will make advances to Ag1, subject to the terms and conditions contained in this
Agreement. Upon receipt of an application for an advance complying with Section
4, DTN will make advances (collectively called the "Operational Advances" and
individually called an "Operational Advance) to Ag1 which in the aggregate will
not exceed Five Hundred Twenty Five Thousand Dollars ($525,000). Upon receipt of
an application for an advance complying with Section 4, DTN will make advances
(collectively called the "Construction Advances" and individually called a
"Construction Advance") for capital expenditures relating to the tenant finish,
trade fixtures and equipment to be included in Ag1's leased office facility (the
"Project") which are in accordance with the Plans approved by DTN as provided in
Section 4(a). The Construction Advances in no event shall exceed One Million Six
Hundred Thousand Dollars ($1,600,000) in the aggregate. The Operational Advances
and Construction Advances sometimes will be referred to in this Agreement
collectively as the "Advances" and individually as an "Advance". All Operational
Advances shall be utilized solely to satisfy the working capital needs
(exclusive of capital expenditures) of Ag1 in operating its business in the
ordinary course consistent with past practices. All Construction Advances shall
be utilized solely for payment of the costs of constructing the improvements and
equipping the Project in substantial compliance with the Plans for the Project
approved by DTN as provided in Section 4(a). Ag1 shall in no event divert funds
for any other purpose. The Advances do not constitute revolving credit, and once
an Advance has been repaid, DTN is not obligated to make the Advance again. All
Advances shall be subject at all times to all maximum limits and conditions set
forth in this Agreement. The Advances shall be evidenced by Ag1's promissory
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note (the "Note") in the form set forth as Exhibit "A" hereto, with appropriate
insertions. All Advances made by DTN to Ag1 pursuant to this Agreement and all
payments of principal shall be evidenced by DTN on the schedule attached to the
Note, which schedule shall be rebuttable presumptive evidence of the subject
matter thereof.
2. Interest Charges. The unpaid principal amount of the Advances shall
bear interest from time to time prior to maturity at a rate per annum (the
"Interest Rate) which is one-half a percentage point (.005) above the rate
announced from time to time in the "Money Rates" section of The Wall Street
Journal as the "prime rate" (the base rate on corporate loans at large U.S.
money center commercial banks). The initial Interest Rate shall be the Interest
Rate most recently announced prior to the date of this Agreement, and such
Interest Rate shall be adjusted upward or downward on each date such rate
changes. The unpaid principal amounts of the Advances which are not paid when
due shall bear interest accruing from and including the date such amount shall
have become due to the date of payment thereof in full at the rate per annum
which is four percentage points above the Interest Rate in effect on such date.
3. Payments of Principal and Interest. If the Term expires upon the
closing of the Acquisition, then Ag1 and DTN agree that the principal of and
interest on the Advances shall be applied to the working capital funds to be
provided by DTN to Ag1 pursuant to the documentation for the Acquisition as
contemplated by the Acquisition Proposal. If the Term expires without the
closing of the Acquisition, then Ag1 agrees (i) to pay to DTN within ten (10)
days of the expiration of the Term all unpaid interest on the Advances accrued
through May 31, 2000, (ii) to repay the entire principal amount of the Advances
to DTN in twenty-four (24) equal monthly payments commencing on June 30, 2000,
and continuing on the last day of each calendar month thereafter, and (iii) to
pay to DTN the interest on the unpaid Advances accruing after May 31, 2000, at
the Interest Rate in effect from time to time as provided in Section 2, in
monthly payments in arrears commencing on June 30, 2000, and continuing on the
last day of each calendar month thereafter until paid in full. All payments
hereunder shall first be applied to accrued and unpaid interest and the
remainder shall be applied to the unpaid principal balance of the Advances.
Interest after maturity shall be payable on demand. Interest on the unpaid
principal amount of the Advances shall be computed on the basis of a year
consisting of 360 days and paid for actual days elapsed.
4. Disbursement of Advances. DTN's obligation to make Advances under
this Agreement shall be subject to there being at the time of such Advance no
condition which is or with the passage of time would be an event of default
under this Agreement. DTN's obligation to make Construction Advances under this
Agreement also shall be subject to the fulfillment to DTN's satisfaction of all
of the following conditions:
(a) DTN shall have approved in writing a complete set of plans and
construction and purchase contracts (the "Plans") for all
improvements and equipment for the Project and the construction
thereof, and Ag1 shall have furnished to DTN upon request copies
of all permits and requisite approvals of any governmental body
necessary for the construction and use of the Project.
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(b) All work for which a Construction Advance is requested (other
than the application for a Construction Advance for the initial
deposit to be given the general contractor of the Project or
other deposits required under the Plans) shall have been done in
a good and workmanlike manner and all materials, fixtures and
equipment related to such Construction Advance shall have been
furnished and installed, all in compliance with the Plans. Ag1
shall also have furnished to DTN such proofs as DTN may require
to establish the progress of the work, compliance with applicable
laws, freedom from liens, and the basis for the Construction
Advance.
(c) Ag1 shall have obtained and attached to each application for a
Construction Advance, executed acknowledgments of payments of all
sums due and releases of mechanic's and materalmen's liens,
satisfactory to DTN, from any party having lien rights, which
acknowledgments of payment and releases of liens shall cover all
work, labor, equipment, materials done, supplied, performed, or
furnished prior to such application for the Construction Advance.
Each application for an Advance shall be on a form approved by DTN, executed by
Ag1, and supported by such evidence as DTN shall reasonably require. Each
application for an Advance shall be deemed a certification of Ag1 that as of the
date of such application, all representations and warranties contained in this
Agreement are true and correct, and that Ag1 is in compliance with all of the
provisions of this Agreement. With respect to Construction Advances, other than
the application for a Construction Advance for the initial deposit to be given
the general contractor of the Project or other deposits required under the
Plans, Ag1 shall apply only for disbursement with respect to work actually done
and for materials and equipment actually incorporated into the Project. At the
sole option of DTN, Construction Advances may be paid in the joint names of Ag1
and the general contractor, subcontractor(s) or supplier(s) in payment of sums
due in connection with the Project.
5. Security. All Advances shall be secured by a first lien security
interest on all of the collateral granted to DTN by Ag1 under that Security
Agreement executed concurrently herewith (the "Security Agreement") and by the
Assignment of Lease to be executed by Ag1 and its landlord within thirty days
after the date of this Agreement in a form approved by DTN (the "Assignment of
Lease"). Ag1 shall comply with all the terms and conditions of the Security
Agreement, the Assignment of Lease, and any other instruments and documents now
or hereafter delivered in connection herewith or therewith.
6. Default. Each of the following shall constitute an event of default
under this Agreement:
(a) if any representation or warranty made by Ag1 proves to be untrue
in any material respect;
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(b) Ag1's default in the due observance or performance of any of the
terms, conditions or agreements herein or under the terms,
conditions or agreements contained in the Note, Security
Agreement or Assignment of Lease;
(c) the financial condition of Ag1 or the security for the Advances
is materially affected in any adverse manner;
(d) the filing by or against Ag1 of any petition in bankruptcy or
insolvency or for reorganization, or for appointment of a
receiver, liquidator, or trustee, or the making of an assignment
for the benefit of creditors or the filing of a petition for an
arrangement;
(e) a change deemed by DTN to be material or substantial occurs in
the assets or net worth or credit standing of Ag1;
(f) any judgment is rendered against Ag1 which in the sole discretion
of DTN constitutes a material impairment of Ag1's credit
standing; or
(g) a default by Ag1 occurs under the Security Agreement, the
Assignment of Lease or any other instrument securing the Note and
Ag1 has not cured such default within the applicable cure period
set forth in the Security Agreement, the Assignment of Lease or
such other instrument, if any.
7. Remedies on Default. If any event of default occurs, DTN may, but
shall not be required to, disburse or cause to be disbursed part or all of the
Advances to observe or perform all or portions of Ag1's obligations hereunder or
under the Security Agreement or the Assignment of Lease. If any event of default
occurs, DTN, at its option, may declare all outstanding indebtedness under the
Note, together with all accrued but unpaid interest thereon, immediately due and
payable without presentation, demand, protest, or further notice of any kind,
and DTN may then proceed to enforce each and every remedy provided for herein or
in the Security Agreement or the Assignment of Lease either at law or in equity
for the collection of the indebtedness. All rights and remedies herein expressed
are cumulative and not exclusive of any right or remedy DTN may have either at
law or in equity and are in addition to those rights set forth in the Security
Agreement and the Assignment of Lease.
8. Ag1's Representations, Warranties and Covenants. To induce DTN to
make the Advances provided for herein, Ag1 represents and warrants (as of the
date of this Agreement and as of the date of each Advance), covenants and agrees
:
(a) That Ag1 has all requisite power and authority to enter into this
Agreement and all documents relative hereto to which it is a
party and to perform its duties hereunder, and has taken all
actions necessary and proper in order to exercise such power and
authority; that this Agreement and the Funding Documents (as
hereinafter defined) have been duly authorized, executed and
delivered and constitute valid and legally binding obligations of
Ag1 and are enforceable according to their terms; that Ag1 is not
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in breach of or in default of any regulation, order, injunction,
rule or decree of any governmental authority or court or of any
agreement or instrument to which it is a party and that the
execution hereof will not cause any such breach or default; and
that no proceeding at law or in equity or before any
administrative body is pending or threatened which would prevent
Ag1 from entering into or carrying out its duties under this
Agreement or any of the other Funding Documents.
(b) To keep or cause to be kept in full force and effect all
insurance required by the Security Agreement and the Assignment
of Lease.
(c) To fully observe and perform all of the terms, covenants, and
conditions of this Agreement, the Note, the Security Agreement,
the Assignment of Lease and such other documents as are executed
between the parties as of the date hereof, which documents are
referred to collectively herein as the "Funding Documents".
(d) To promptly pay and discharge or cause to be paid and discharged
all lawful applicable taxes and assessments, if any, whether they
are imposed upon Ag1's personal property and improvements or upon
Ag1; to pay promptly for all labor, services and materials and to
prevent the filing of liens or claims therefor against the
property of Ag1.
(e) To use the Advances hereunder solely for the purposes set forth
in paragraph 1 hereof.
(f) To permit DTN and DTN's agents at all reasonable times to inspect
the books and records and the physical assets of the business of
Ag1.
(g) Not to assign this Agreement nor any interest in disbursements or
Advances to be made hereunder. Not to transfer, convey or
encumber the property which is security for the Advances, except
sale of the inventory in the ordinary course of business.
(h) To execute, deliver and record where appropriate all Funding
Documents.
9. No Solicitation of Transactions. The stockholders of Ag1 executing
this Agreement for the purpose of making the covenants set forth is this
paragraph (the "Stockholders") and Ag1 agree that during the Term none of them
shall, and that they shall cause their subsidiaries and representatives not to,
directly or indirectly, initiate, solicit or encourage any inquiries or the
making of any proposal or offer with respect to a sale, transfer, exchange,
merger, reorganization, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Ag1, or any purchase
or sale of all or any significant portion of the assets of Ag1 and its
subsidiaries, taken as a whole, or fifteen percent (15%) of more of the equity
securities of Ag1 (any such proposal or offer being hereinafter referred to as a
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"Competing Transaction"). The Stockholders and Ag1 further agree that neither of
them shall, and that they shall cause their subsidiaries and representatives not
to, directly or indirectly, have any discussion with or provide any confidential
information or data relating to Ag1 or any of it subsidiaries to any person or
entity relating to a Competing Transaction or engage in any negotiations
concerning a Competing Transaction, or otherwise facilitate any effort or
attempt to make or implement a Competing Transaction or accept a Competing
Transaction. The Stockholders and Ag1 agree that they will take the necessary
steps to promptly inform each of their subsidiaries and representatives of the
obligations undertaken in this paragraph. Effective as of the date hereof, the
Stockholders and Ag1 shall terminate and cause their subsidiaries and
representatives to terminate any existing activities, discussions or
negotiations with any third parties that may be ongoing with respect to any
Competing Transaction and shall request that all confidential information
previously furnished to any such third parties be returned promptly. The
Stockholders represent and warrant to DTN that together they are the owners of
more than ninety percent (90%) of the equity securities of Ag1.
10. Conduct of Business of Ag1. During the Term, Ag1 shall (i) conduct
its business and operations according to its ordinary course of business
consistent with past practice, except as otherwise provided in this Agreement
and (ii) use its reasonable best efforts to preserve intact its business
organization and its relationship with licensors, suppliers, distributors,
employees, customers and others having business relationships with them, except
as may otherwise be agreed by Ag1 and DTN. Without limiting the generality of
the foregoing, during the Term, without the prior written consent of DTN (which
consent will not be unreasonably withheld so long as the act to be consented to
is within the ordinary course of business of Ag1), Ag1 shall not:
(a) change or amend its Articles of Incorporation or By-laws (or
similar governing documents);
(b) create, incur or assume any debt, liability or obligation, direct
or indirect, whether accrued, absolute, contingent or otherwise,
other than obligations incurred in the ordinary course of
business consistent with past practice, or assume, guarantee,
endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any
other person, or make any loans or advances to any person, except
in the ordinary course of business consistent with past practice;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof)
in respect of the capital stock of Ag1, or redeem or otherwise
acquire any of the capital stock of Ag1 or split, combine or
otherwise similarly change the capital stock of Ag1 or authorize
the creation or issuance of or issue or sell any shares of its
capital stock or any securities or obligations convertible into
or exchangeable for, or giving any person any right to acquire
from it, any shares of its capital stock, or agree to take any
such action;
(d) change in any manner the rate or terms of compensation or bonus
payable or to become payable to any director, officer or employee
or change in any manner the rate or terms of any insurance,
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pension, severance, or other employee benefit plan, payment or
arrangement made to, for or with any employees;
(e) enter into any agreement or commitment for any capital
expenditure in excess of $50,000, individually or in the
aggregate, or enter into any agreement or commitment for any
borrowing or capital financing;
(f) sell, lease, transfer or dispose of any of its properties or
assets, waive or release any rights of material value, or cancel,
compromise, release or assign any indebtedness owed to it or any
claims held by it in each case other than in the ordinary course
of business consistent with past practice;
(g) make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfers
or otherwise, or by the purchase of any material property or
assets of any other individual, firm, corporation or entity; or
(h) enter into an agreement to do any of the things described in
clauses (a) through (g) above.
11. Definitive Purchase Agreement. DTN, Ag1 and the Stockholders agree
to negotiate in good faith to complete and execute a definitive purchase and
sale agreement consistent with the terms of the Acquisition Proposal (the
"Purchase Agreement") on or before December 31, 1999. The Purchase Agreement
shall contain customary representations, warranties and indemnifications by Ag1
and the Stockholders as are appropriate to the Acquisition. The Purchase
Agreement shall also contain customary conditions precedent to the obligations
of the parties to consummate the Purchase Agreement, including, but not limited
to, the due diligence, lien searches, litigation and proceedings, environmental
matters, taxes and other liabilities of Ag1 being satisfactory to DTN and
receipt of all approvals and consents of all necessary regulatory authorities.
In addition to such customary conditions precedent, the obligations of DTN to
consummate the Acquisition shall be conditioned upon the approvals (the
"Approvals") of the Purchase Agreement and the Acuqisition by DTN's Board of
Directors and the lenders under DTN's credit facilities. If the Purchase
Agreement is executed, but the closing of the Purchase Agreement does not occur
on or before May 31, 2000, due to the breach of the Purchase Agreement by DTN or
due to the failure of DTN to obtain the Approvals (but not due to failure to
satisfy the customary conditions precedent referred to above or the failure of
the parties to the Purchase Agreement other than DTN), then (i) one-half of the
aggregate amount of Operational Advances outstanding on May 31, 2000 shall be
deemed forfeited by DTN and (ii) DTN and its subsidiaries will not engage in the
business of selling agricultural inputs (such as seed, fertilizer, and
chemicals), crop insurance or agricultural financing in competition with the
business of Ag1 during the one year period commencing June 1, 2000 and ending
May 31, 2001; provided, however, such non-compete provision shall not preclude
DTN or its subsidiaries from furnishing agricultural information in a manner
similar to its existing business.
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12. Miscellaneous.
(a) Time is of the essence of this Agreement.
(b) No delay on the part of either party in exercising any rights or
remedies of such party under this Agreement shall operate as a
waiver nor shall any partial exercise or any partial waiver of
any such right, remedy or privilege preclude any subsequent
exercise of such right, remedy, or privilege hereunder or
otherwise.
(c) This Agreement shall bind and inure to the benefit of the parties
hereto, their respective heirs, legal representatives, successors
and, subject to the provisions hereof, assigns, and shall remain
in full force and effect so long as any obligation of Ag1 under
this Agreement or under any of the Funding Documents remains
unfulfilled.
(d) This Agreement shall be governed in all respects by the laws of
the State of Nebraska without regard to choice of laws or
conflict of laws provisions thereof.
(e) This Agreement may be executed in any number of counterparts and
signatures may be delivered by facsimile, each of which shall be
enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one
instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
DATA TRANSMISSION NETWORK
CORPORATION, a Delaware corporation
By:/s/ Xxxx X. Xxxxx
-----------------------------
Xxxx X. Xxxxx
Title: President and COO
XX0.XXX, INC., a Wyoming corporation
By:/s/ Xxxxxxx X. Xxxx
-----------------------------
Xxxxxxx X. Xxxx
Title:CEO
The following persons or entities execute this Agreement for the sole
purpose of making the representations, warranties and covenants set forth in
Paragraphs 9 and 11 thereof.
/s/ Xxxxxxx X. Xxxx
------------------------------
Xxxxxxx X. Xxxx
/s/Xxxxxx X. Xxxxxx
------------------------------
Xxxxxx X. Xxxxxx
/s/Xxxxx Xxxxx
------------------------------
Xxxxx Xxxxx
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Exhibit "A"
PROMISSORY NOTE
$2,125,000 Date:November 8, 1999
1. Ag1's Promise to Pay Principal and Interest. For value received, the
undersigned maker ("Ag1") promises to pay to Data Transmission Network
Corporation ("Holder"), a Delaware corporation, at its corporate office at 0000
Xxxx Xxxxx Xxxx, Xxxxx 000, Xxxxx, Xxxxxxxx, or at such other place as the
Holder of this Note may from time to time designate, the principal sum of Two
Million One Hundred Twenty-Five Thousand Dollars ($2,125,000), or such lesser
amount as may be the aggregate unpaid principal amount of the Advances, as such
term is defined in the Funding Agreement referred to below, advanced to Ag1
pursuant to such Funding Agreement. Ag1 promises to pay interest on the unpaid
principal amount of the Advances from time to time outstanding from the date of
their advance until payment in full at the rates per annum which shall be
determined in accordance with the provisions of the Funding Agreement. Ag1
promises to pay the principal amount of the Advances from time to time
outstanding and any interest thereon in accordance with the provisions of the
Funding Agreement. Such payments of principal and interest shall be payable on
each date and in such manner as provided for in the Funding Agreement; provided,
however, that any payment which is not paid when due shall be payable on demand.
If not sooner paid, the principal balance, together with all interest and other
sums due under this Note, shall be paid in full on or before May 31, 2002.
2. Funding Agreement. This instrument is the Note referred to in, and
is subject to the terms and provisions of, the Funding Agreement of even date
herewith (as the same may be amended, modified or supplemented from time to
time, herein called the "Funding Agreement") between Xx0.Xxx, Inc. and Data
Transmission Network Corporation, to which Funding Agreement reference is hereby
made for a statement of such terms and provisions.
3. Grid Schedule. All advances made by the Holder under this Note, and
all payments made by Ag1 on account of the unpaid principal amount hereof, shall
be recorded on the schedule attached to this Note, and Ag1 agrees that in any
action or proceeding instituted to collect or enforce collection of this Note,
the amount shown as owing on this Note on the schedule attached hereto shall be
deemed prima facie correct.
4. Default by Ag1. Should default be made in the payment of any
installment of principal or interest when due, or if an event of default has
occurred as provided in the Funding Agreement, the whole sum of principal and
interest shall become immediately due at the option of the Holder and regardless
of any prior forbearance. Interest shall accrue following any default hereunder
at the default rate provided for in the Funding Agreement.
5. Prepayment Privilege. The principal amount due on this Note may be
prepaid in whole or in part at any time. All payments shall first be applied to
interest and then to principal.
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6. Governing Law. This Note shall be construed under and governed by
the substantive laws of the State of Nebraska, but not the choice of law rules
thereof.
7. Obligations of Persons Under this Note. In this Note, the singular
shall include the plural and this Note shall be the joint and several obligation
of each Maker.
8. Assumability of this Note. This Note may not be assumed or assigned
by Ag1 without the express written consent of the Holder hereof, which consent
may be withheld in Holder's sole and absolute discretion.
9. Maximum Interest. In no event whatsoever shall the amount paid, or
agreed to be paid, to the Holder for the use, forbearance, or retention of the
money to be loaned hereunder ("Interest") exceed the maximum amount permissible
under applicable law. If the performance or fulfillment of any provision hereof
shall result in Interest exceeding the limit for interest prescribed by law,
then the amount of such Interest shall be reduced to the maximum rate which may
lawfully be charged or collected by the Holder. If, from any circumstances
whatsoever, the Holder should receive as Interest an amount which would exceed
the highest lawful rate, the amount which would be excessive Interest shall be
applied to the reduction of the principal balance owing hereunder (or, at the
option of the Holder, be paid over to Ag1) and not to the payment of Interest.
10. Costs of Collection. Ag1 promises to pay: (a) all costs and
expenses of collection, including without limitation, attorneys' fees, in the
event this Note or any portion of this Note is placed in the hands of attorneys
for collection and such collection is effected without suit; (b) attorneys'
fees, as determined by the judge of the court, and all other costs, expenses,
and fees incurred by the Holder in the event suit is instituted to collect this
Note or any portion of this Note; (c) all costs and expenses incurred by or on
behalf of the Holder in connection with collecting or otherwise enforcing any
right of the Holder under this Note or any other instrument given as security
for this Note; and (d) all costs and expenses, including, without limitation,
attorneys' fees, incurred by the Holder in connection with any bankruptcy,
insolvency, or reorganization proceeding or receivership in which Ag1 is
involved, including, without limitation, attorneys' fees incurred in making any
appearances in any such proceeding or in seeking relief from any stay or
injunction issued in or arising out of any such proceeding.
11. Certain Waivers. Ag1 waives diligence, grace, demand, presentment
for payment, exhibition of this Note, protest, notice of protest, notice of
dishonor, notice of demand, notice of nonpayment, and any and all exemption
rights against the indebtedness evidenced by this Note, and agrees to any and
all extensions or renewals from time to time without notice and to any partial
payments of this Note made before or after maturity and that no such extension,
renewal, or partial payment shall release Ag1 from the obligation of payment of
this Note or any installment of this Note.
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EXECUTED as of November 8, 1999.
XX0.XXX, INC., a Wyoming
corporation
By:/s/ Xxxxxxx X. Xxxx
--------------------------
Xxxxxxx X. Xxxx
Title:CEO
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