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EXHIBIT 10.51(b)
SECURITY AGREEMENT
USTEL, INC., a Minnesota corporation, with its principal office at
0000 Xxxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxx, XX 00000, (the "Debtor"), and WORLDCOM
NETWORK SERVICES, INC. fka WILTEL, INC., ("WorldCom"), a Delaware corporation,
with its principal office at Xxx Xxxxxxxx Xxxxxx, Xxxxx, Xxxxxxxx 00000
("Secured Party"), agree as follows:
SECTION 1. CREATION OF SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest in the
property described in Section 2 of this Agreement (the "Collateral") to secure
performance and payment of (i) that certain Promissory Note dated September 10,
1996 in the amount of $3,860,275.11, (ii), and all other obligations and
indebtedness of Debtor to Secured Party of whatever kind and however created,
whether presently existing or hereafter arising. All of the foregoing
obligations and indebtedness described in this Section 1 shall hereinafter be
referred to as the "Secured Indebtedness", and the Note and all other documents
evidencing or giving rise to the Secured Indebtedness shall hereinafter be
referred to collectively as the "Security Instruments."
SECTION 2. COLLATERAL
As collateral for the Secured Indebtedness, Debtor hereby assigns and
grants to Secured Party a lien and security interest in all of the Debtor's
following property, wherever located, and whether now owned or hereafter
acquired or created:
(a) Accounts, accounts receivable, reimbursements, notes, contracts,
contract rights, chattel paper, cash, checks, drafts, documents, instruments,
all rights of Debtor to receive payment in money or kind, and other evidence of
indebtedness owned to Debtor;
(b) Customer lists, all documents containing names, addresses,
telephone numbers, and other information regarding the Debtor's customers,
subscribers, tapes, programs, printouts, disks, and other material and
documents relating to the recording, billing or analyzing of any of the
foregoing, and any other right to payment;
(c) Any and all contract and lease rights, including network contracts,
customer contracts for the furnishing by Debtor of telecommunications services,
and billing and collection contracts, whether evidenced by a document or
otherwise;
(d) All telephone accounts and accounts receivable arising from
telecommunication services rendered to an end user prior to the sale,
assignment, or transfer of such account (collectively, the "End User Accounts")
to a regional Xxxx operating company, a Xxxx operating company, local exchange
company; credit card company or provider of local telephone services (each a
"LEC") for billing and collection; and rights in and to any of the telephone
receivables, debts, and other amounts payable to the Debtor by any LEC, and all
cash and non-cash proceeds of the foregoing;
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(e) All records and documents relating to any and all of the foregoing
including, without limitation, records of accounts whether in the form of
writing, microfilm, microfiche, tape, or electronic media; and
(f) All products and proceeds (cash and non-cash) of all of the
foregoing, and increases, accessions, renewals, replacements and substitutions
of all of the foregoing.
The inclusion of proceeds in this Agreement does not authorize Debtor to sell,
dispose of or otherwise use the Collateral in any manner not specifically
authorized by this Agreement.
SECTION 3: DEBTOR'S REPRESENTATIONS AND WARRANTIES
Debtor hereby represents and warrants to Secured Party as follows:
3.1 Clear Title To Collateral. Debtor is the sole owner of the
Collateral, having good and marketable title thereto, free and clear of any and
all liens, encumbrances, claims, or rights of others created by any acts or
omissions of Debtor, except for the security interest granted to Secured Party.
3.2 First Priority Lien. This Agreement constitutes a valid and
continuing lien on and security interest in the Collateral in favor of Secured
Party, prior to all other liens, encumbrances, security interests and rights of
others arising from any acts or omissions of Debtor, and is enforceable as such
as against creditors of and purchasers from Debtor, except as provided in
Section 3.3 Subordination.
3.3 Subordination. Coast Business Credit, 00000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, XX 00000, (the "Creditor") holds or may hold a security
interest (the "Creditor Lien") in some or all of the assets which comprise the
WorldCom Collateral (collectively, the "Creditor Collateral") to secure payment
of certain indebtedness now or hereafter owed to Creditor by Debtor (the
"Creditor Debt"). That portion of the WorldCom Collateral which also comprises
the Creditor Collateral shall hereinafter be referred to as the "Subordinated
Collateral." WorldCom hereby subordinates the WorldCom Lien in the Subordinated
Collateral to the Creditor Lien in the Subordinated Collateral, and agrees that
the WorldCom Lien is fully subordinate, second and junior to Creditor's
security interest in the Subordinated Collateral, regardless of the order in
which financing statements with respect to the Subordinated Collateral may be
filed and irrespective of the priorities as would otherwise be determined under
the Uniform Commercial Code or other applicable law.
SECTION 4. EVENTS OF DEFAULT
The following events are Events of Default:
4.1 Failure to Pay. The Debtor does not pay when due any amount due
under any of the Security Instruments or the Debtor otherwise breaches the
provisions thereof, and the Debtor fails to cure such nonpayment or other
breach within any cure period provided thereunder.
4.2 Limitations Regarding Collateral. The Debtor sells, transfers,
leases or otherwise disposes of any of the Collateral, or attempts, offers or
contracts to do so, or Debtor creates, permits
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or suffers to exist any lien, security interest, encumbrance, claim or right in
or to the Collateral other than those in favor of Secured Party (the "Other
Encumbrances"). Debtor will, at Debtor's sole expense, defend the Collateral
against and take such other action as is necessary to remove such Other
Encumbrances and defend the right, title and interest of Secured Party in and
to any of Debtor's rights to the Collateral, including without limitation any
proceeds and products thereof, against the claims and demands of all persons.
4.3 Misrepresentation. Any representation or warranty made by the
Debtor herein or in any of the Security Instruments proves to have been untrue
in any material respect, or any representation, statement (including Financial
Statements), certificate or data furnished or made by the Debtor (or any
officer, accountant or attorney of the Debtor) hereunder or under any of the
Security Instruments proves to have been untrue in any material respect, as of
the date as of which the facts therein set forth were stated or certified.
4.4 Impairment of Collateral. Secured Party, in good faith,
considers any Collateral to be unsafe or in such danger of misuse that Secured
party's prospect of or right to payment or performance under this Agreement or
any instrument or agreement required hereunder or under any other agreement
between Secured Party and Debtor is materially impaired.
4.5 Cross Default. The Debtor breaches, defaults, or commits an
event of default under any other agreement, document or instrument between
Secured Party and Debtor and Debtor fails to cure such breach, default or event
of default within any cure period provided thereunder.
4.6 Change of Name or Chief Executive Office. Debtor changes its
name, or its Chief Executive Office, or changes its corporate structure in any
way that would make filed financing statements misleading without giving
Secured Party at least thirty (30) days advance written notice of such change
or move, and ensuring that any steps necessary to continue the perfection and
priority of Secured Party's security interest in the Collateral shall have been
taken, all at Debtor's expense.
4.7 Opportunity to Cure. Any Event of Default described in Section
4.2 and 4.4 may be cured within five (5) calendar days after notice by Secured
Party, which notice to Debtor may be verbal or written.
SECTION 5. SECURED PARTY'S RIGHTS
5.1 Rights of Secured Party Upon Default. If there is an Event of
Default which the Debtor fails to cure within any applicable cure period, the
Secured Party may, at its option and at any time thereafter:
(a) Declare the entire aggregate amount of the Secured
Indebtedness then outstanding and the interest and other fees
and expenses accrued thereon, and all other obligations of
Debtor to Secured Party to be immediately due and payable
without notice and without presentment, demand, protest, notice
of protest, or other notice of default or dishonor of any kind,
all of which are hereby expressly waived by the Debtor; (b)
require Debtor to assemble the Collateral, including any books
and records pertaining to the Collateral, and make them
available to Secured Party at a place designated by
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Secured Party; (c) notify any account debtor, any buyers of the
Collateral, and any other person of Secured Party's interest in
the Collateral; (d) request confirmation from any account debtor
of the status of the account upon which the account debtor is
obligated; (e) without prior notice to Debtor, demand and
collect any payments and proceeds of the accounts directly from
the account debtors; (f) require Debtor to obtain Secured
Party's prior written consent to any sale, agreement to sell, or
other disposition of any Collateral; (g) remedy any default or
waive any default without waiving the default remedies and
without waiving any other prior or subsequent default; (h) take
such measures as Secured Party may deem necessary or advisable
to take possession of, hold, preserve, process, assemble,
insure, collect on, prepare for sale or lease, market for sale
or lease, sell or lease, or otherwise dispose of any Collateral;
(i) endorse or sign the name of Debtor on all checks, drafts,
collections, receipts and other documents, and take possession
of and open the mail addressed to Debtor and remove therefrom
any payments and proceeds of the Collateral; (j) use or
transfer, without any additional consideration to Debtor, any of
Debtor's rights and interests in any intellectual property,
including but not limited to patents, now owned or hereafter
acquired by Debtor, if Secured Party deems such use or transfer
necessary or advisable in order to take possession of, hold,
preserve, process, assemble, prepare for sale or lease, market
for sale or lease, or otherwise dispose of, any Collateral; and
(k) have a receiver appointed by any court of competent
jurisdiction to take possession of and protect the value of the
Collateral.
Debtor hereby constitutes and appoints Secured Party as Debtor's
attorney-in-fact to perform all acts and execute all documents in connection
with the remedies described in this Agreement. This power of attorney is
coupled with an interest and shall be irrevocable.
5.2 Further Documentation; Pledge of Instruments. At any time and
from time to time, upon the written request of Secured Party, and at the sole
expense of Debtor, Debtor promptly and duly shall execute, deliver and record
any documents, instruments, agreements and amendments, and take all such further
action as Secured Party may reasonably deem desirable in obtaining the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing statements or
amendments under the applicable Uniform Commercial Code. Debtor also hereby
authorizes Secured Party to file any such financing statement or amendment
thereto, without the signature of Debtor, or with a copy or telecopy of Debtor's
signature, to the extent permitted by applicable law, or to execute any
financing statement or amendment thereof on behalf of Debtor as Debtor's
attorney-in-fact.
5.3 Rights Under Uniform Commercial Code. Without limiting any of
Secured Party's rights and remedies under this Agreement, Secured Party may
enforce the security interests and other liens given hereunder, and under all
Security Instruments and documents referred to herein or contemplated hereby,
pursuant to the applicable Uniform Commercial Code and any other applicable law
including all legal and equitable remedies available to lenders generally.
5.4 Payments of Taxes and Insurance. If Debtor fails to pay any
taxes, assessments, insurance premiums, or other amounts due to third parties
as required by Debtor on the Collateral, Secured Party may in its discretion,
and without prior notice to Debtor make any such payment. Any
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payments made by Secured Party under this paragraph shall not constitute (i) an
agreement by Secured Party to make similar payments in the future, or (ii) a
waiver by Secured Party of any Event of Default under this Agreement. Secured
Party need not inquire as to, or contest the validity of, any such expense,
tax, security interest, encumbrance or lien, and the receipt of the notice for
the payment thereof shall be conclusive evidence that the same was validly due
and owing. Debtor agrees to pay Secured Party, on demand, each payment made by
Secured Party under this paragraph together with a late fee, if any, provided
in the Service Agreement.
5.5 Rights and Remedies are Cumulative. All rights and remedies
provided herein are cumulative and may be exercised singly or concurrently, and
are not exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude the
further exercise thereof or the exercise of any other right or remedy.
5.6 Self-Help Remedies. SECURED PARTY MAY ENFORCE ITS RIGHTS UNDER
THIS AGREEMENT WITHOUT RESORT TO PRIOR JUDICIAL PROCESS OR JUDICIAL HEARING,
AND DEBTOR EXPRESSLY WAIVES, RENOUNCES, AND KNOWINGLY RELINQUISHES ANY LEGAL
RIGHT WHICH MIGHT OTHERWISE REQUIRE SECURED PARTY TO ENFORCE ITS RIGHTS BY
JUDICIAL PROCESS. NOTHING IN THIS AGREEMENT IS INTENDED TO PREVENT DEBTOR OR
SECURED PARTY FROM RESORTING TO JUDICIAL PROCESS AT SUCH PARTY'S OPTION.
5.7 Sale or Disposition of Collateral. Without limiting the
generality of the foregoing, if there is an Event of Default which the Debtor
fails to cure within any applicable cure period, the Secured Party may, at its
option and at any time thereafter, without further demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place and public or private sale) to or upon Debtor or any
other person (all and each of which demands, advertisements and/or notices are
hereby expressly waived), may forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or sell or otherwise dispose
of and deliver said Collateral (or contract to do so), or any part thereof, in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or at any of Secured Party's offices or elsewhere at such prices
as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. Secured Party shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of said Collateral so
sold, free of any right or equity of redemption in Debtor. To the extent
permitted by applicable law, Debtor waives all claims, damages, and demands
against Secured Party arising out of the lawful repossession, retention or sale
of the Collateral in accordance with the terms hereof.
5.8 Notice of Sale. Debtor agrees that Secured Party need not give
more than ten (10) days' notice of the time and place of any public sale or of
the time after which a private sale may take place and that such notice is
reasonable notification of such matters.
5.9 Application of Sale Proceeds. Secured Party shall apply the
net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care, safekeeping or otherwise of
any or all of the Collateral or in any way relating to the rights of Secured
Party hereunder, including reasonable
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attorneys' fees and legal expenses, to the payment in whole or in part of the
Secured Indebtedness to Debtor, in such order as Secured Party may elect,
Debtor remaining liable for any deficiency remaining unpaid after such
application and the reasonable fees of any attorneys employed by Secured Party
to collect such deficiency, and only after so applying such net proceeds and
after the payment by Secured Party of any other amount required by any
provision of law, including Section 9-504(1) of the Uniform Commercial Code,
need Secured Party account for the surplus, if any, to Debtor.
5.10 Inspection Records. Secured Party and any of its employees and
agents may enter upon Debtor's premises at any reasonable time to inspect
Debtor's books and records pertaining to the Collateral.
5.11 No Consequential Damages. SECURED PARTY SHALL NOT BE LIABLE
FOR ANY CONSEQUENTIAL, SPECIAL, INDIRECT OR INCIDENTAL DAMAGES IN CONNECTION
WITH THIS AGREEMENT OR THE COLLATERAL.
SECTION 6. ADDITIONAL PROVISIONS
6.1 Notices. Any communications between the parties hereto to be
given in writing shall be given by mailing the same, postage prepaid, or by
telex, cable, facsimile, overnight courier, or personal delivery, to each party
their addresses set forth below or to such other addresses as either party may
in writing hereafter indicate. Any communication shall be effective upon the
earlier of delivery or five (5) days after sending.
Addresses for Notices and Communications Are:
If to the Secured Party:
Xxxxxx X. Vetera, Corporate Director of Credit
WorldCom Network Services, Inc. fka WilTel, Inc.
Xxx Xxxxxxxx Xxxxxx, X-00
Xxxxx, Xxxxxxxx 00000
If to the Debtor:
Xxxxxx X. X. Xxxxxx, President/CEO
USTEL, INC.
0000 Xxxxx Xxxxxxx Xxxx.
Xxx Xxxxx, XX 00000
or at such other address as any party may hereafter designate for itself by
written notice to the other party in the manner herein described.
6.2 No Waiver; Cumulative Remedies. Secured Party shall not by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Secured Party. A waiver by Secured Party of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
Secured
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Party would otherwise have had on any future occasion. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law.
6.3 Successors and Assigns. All covenants and agreements herein
contained by or on behalf of the Debtor shall bind its successors and assigns
and shall inure to the benefit of the Secured Party and its successors and
assigns. Secured Party's rights under this Agreement or the indebtedness
hereby secured may be assigned from time to time, and in any such case the
assignee shall be entitled to all of the rights, privileges and remedies
granted in this Agreement to Secured Party. Debtor may not assign this
Agreement or any instruments or documents executed in connection herewith or
any of the rights of Debtor hereunder without the prior written consent of
Secured Party.
6.4 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Oklahoma, without regard to the
conflict of law provisions.
6.5 Severability. In the event any one or more of the provisions
contained in this Agreement, the Security Instruments, or in any other
instrument or document referred to herein or executed in connection with or as
security for the Service Agreement, shall, for any reason, be held to be
invalid, illegal or unenforceable, such provision(s) shall not affect any other
provision of this Agreement, the Service Agreement, the Security Instruments,
or any other instrument or document referred to herein or executed in
connection with or as security for the Service Agreement.
6.6 Defined Terms. Unless otherwise defined in this Agreement,
terms used in this Agreement which are defined in the applicable Uniform
Commercial Code are used with the meanings as therein defined.
6.7 Entire Agreement. This Agreement and all instruments,
agreements and documents attached hereto, referred to herein or executed in
connection herewith, integrate all the terms and conditions mentioned herein or
incidental hereto, constitute the entire agreement between the parties with
respect to the subject matter thereof, and supersede all prior discussions,
negotiations and communication whether oral or written. Neither Secured Party
nor Debtor shall be bound by any promises, representations, warranties, or
affirmations not contained in this Agreement, in an agreement, instrument, or
document attached hereto or referred to herein or executed in connection
herewith.
6.8 Paragraph Headings. Paragraph headings are for reference only
and shall not affect the interpretation or meaning of any provision of this
Agreement.
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6.9 Attorneys' Fees. In the event Secured Party retains the
services of an attorney to enforce any provision of the Service Agreement, this
Agreement, or any other obligation of Debtor to Secured Party, Debtor agrees to
pay reasonable attorneys' fees and other costs, expenses, and disbursements
incurred by Secured Party in connection therewith.
EXECUTED as of the 19th day of September, 1996.
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DEBTOR:
USTEL, INC.
BY: /s/ XXXXXX X. X. XXXXXX
------------------------------------
XXXXXX X. X. XXXXXX, PRESIDENT/CEO
ATTEST:
BY: /s/ WOUTER VAN BIENE
---------------------------------
PRINTED NAME: Wouter van Biene
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TITLE: ASST. SECRETARY
[SEAL]
SECURED PARTY:
WORLDCOM NETWORK SERVICES, INC. FKA
WILTEL, INC.
BY:
------------------------------------
XXXXXX X. VETERA
CORPORATE DIRECTOR OF CREDIT
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