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Private Client Group
Xxxxxxx Xxxxx Business
Financial Services Inc.
00 Xxxx Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
312/269-1373
FAX 312/000-0000
Xxxxxxx Xxxxx
Xxxx Xxxxxx
Credit Manager
November 5, 1996
VIA FEDERAL EXPRESS
Xx. Xxxx Xxxx
Assistant Treasurer
U.S. Long Distance, Inc.
0000 Xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
RE: CASH FLOW COVENANT (REVISED 11/5/96)
Dear Xxxx,
This letter acknowledges the approved change in the initial calculation of the
Cash Flow Covenant. The original covenant reads as follows:
Minimum Ratio of Cash Flow to Current Portion of Long Term Debt. The ratio of
Customer's "Net Cash Flow" to the current portion of its long term debt, as
shown on Customer's regular books and records, shall be not less than 1.4 to 1
as of the end of each calendar quarter beginning with the calendar quarter
ending December 31, 1996. As used herein, "Net Cash Flow" shall mean the sum of
Customer's net after-tax income for each of the immediately preceding four
calendar quarters, together with depreciation, amortization and any
non-recurring expenses during said period, less any non-recurring income (other
than any gains derived from the sale of individual store locations) and any
cash distributions during said period; all as shown on Customer's regular
financial statements prepared in a manner consistent with the terms hereof.
The change is to the rolling four quarter calculation at the beginning of the
covenant, 12/31/96. The initial calculation will be a two quarter calculation,
i.e. 9/30/96 and 12/31/96. At 3/31/97, a three quarter calculation will be
conducted. Finally at 6/30/97, USLD will follow the original rolling four
quarter covenant as agreed.
Sincerely,
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/S/ XXXX XXXXXX
--------------------
Xxxx Xxxxxx
Credit Manager
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Xxxxxxx Xxxxx
No.9608340801
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WCMA AND TERM WCMA LOAN AND SECURITY AGREEMENT
WCMA AND TERM WCMA LOAN AND SECURITY AGREEMENT ("Loan Agreement") dated as of
August 23, 1996, between U.S. LONG DISTANCE, INC., a corporation organized and
existing under the laws of the State of Texas having its principal office at
0000 Xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000 ("Customer"), and XXXXXXX XXXXX
BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the
laws of the State of Delaware having its principal office at 00 Xxxx Xxxxxx
Xxxxxx, Xxxxxxx, XX 00000 ("MLBFS").
In accordance with that certain WORKING CAPITAL MANAGEMENT ACCOUNT AGREEMENT
NO. 529-07129 ("WCMA Agreement") between Customer and MLBFS' affiliate,
XXXXXXX LYNCH, XXXXXX, XXXXXX & XXXXX INCORPORATED ("MLPF&S"), Customer has
subscribed to the WCMA Program described in the WCMA Agreement. The WCMA
Agreement is by this reference incorporated as a part hereof.
In conjunction therewith, and as part of the WCMA Program, Customer has
requested that MLBFS provide Customer with a commercial line of credit upon the
terms and for the Loan Purpose hereinafter set forth (the "Initial WCMA Line of
Credit").
Customer has further requested that upon the maturity date of the Initial WCMA
Line of Credit, MLBFS make a five-year Term WCMA Loan (the "Loan") in order to
provide term financing of the balance then outstanding under the Initial WCMA
Line of Credit. The Loan is a combination of the equivalent of five successive
one-year term loans, each equal to that portion of the Loan that will be fully
amortized in the ensuing year, with a fully funded line of credit under the WCMA
Program ("Term WCMA Line of Credit") for that portion of the Loan that will not
be amortized in the ensuing year. Subject to the terms hereof, each year after
the initial funding there will be an additional funding on account of the term
portion of the Loan, with the proceeds deposited into Customer's WCMA Account
concurrently with a corresponding reduction in the Term WCMA Line of Credit.
This structure provides Customer with substantially the same initial funding and
loan amortization as a conventional term loan. However, unlike most
conventional term loans, it permits both a prepayment in whole or in part at any
time without penalty, and, subject to the terms and conditions herein set forth,
a re-borrowing on a revolving basis of any such amounts prepaid on account of
the Term WCMA Line of Credit portion of the Loan. The structure of the Loan
therefore enables Customer at its option to use any free cash balances that it
may have from time to time to reduce interest expense on the line of credit
portion of the Loan without impairing its working capital.
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Subject to the terms and conditions hereinafter set forth, MLBFS has agreed to
provide the Initial WCMA Line of Credit and make the Loan.
Accordingly, and in consideration of the premises and of the mutual covenants of
the parties hereto, Customer and MLBFS hereby agree as follows:
Article I. DEFINITIONS
1.1 Specific Terms. In addition to terms defined elsewhere in this Loan
Agreement, when used herein the following terms shall have the following
meanings:
(a) "Activation Date" shall mean the date upon which MLBFS shall cause the
Initial WCMA Line of Credit to be initially activated under MLPF&S' computer
system as part of the WCMA Program.
(b) "Additional Agreements" shall mean all agreements, instruments,
documents and opinions other than this Loan Agreement, whether with or from
Customer or any other party, which are contemplated hereby or otherwise
reasonably required by MLBFS in connection herewith, or which evidence the
creation, guaranty or collateralization of any of the Obligations or the
granting or perfection of liens or security interests upon the Collateral or
any other collateral for the Obligations, and shall include, without
limitation, the Term WCMA Note.
(c) "Business Day" shall mean any day other than a Saturday, Sunday,
federal holiday or other day on which the New York Stock Exchange is regularly
closed.
(d) "Closing Date" shall mean the last to occur of (i) the Initial WCMA
Maturity Date, or (ii) the date upon which all conditions precedent to MLBFS'
obligation to make the Loan shall have been met to the satisfaction of MLBFS.
(e) "Collateral" shall mean all of the Equipment of Customer described on
Exhibit A attached hereto (as said Exhibit A may from time to time hereafter be
amended and/or supplemented), whether now owned or hereafter acquired, and
wherever located; together with all parts thereof (including spare parts), all
accessories and accessions thereto, all replacements therefor, all books and
records (including computer records) directly related thereto, all proceeds
thereof (including, without limitation, proceeds in the form of Accounts and
insurance proceeds), and the additional collateral described in Section 5.6(b)
hereof.
(f) "Commitment Expiration Date" shall mean September 26, 1996.
(g) "Commitment Fee" shall mean a fee of $75,000.00 due to MLBFS in
connection with and as partial consideration for the commitments by MLBFS
under this Loan Agreement.
(h) "General Funding Conditions" shall mean each of the following
conditions to any
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loan or advance by MLBFS hereunder: (i) no Event of Default, or event which
with the giving of notice, passage of time, or both, would constitute an
Event of Default, shall have occurred and be continuing or would result from
the making of any such loan or advance hereunder by MLBFS; (ii) there shall
not have occurred any material adverse change in the business or financial
condition of Customer; (iii) all representations and warranties of Customer
herein or in any Additional Agreements shall then be true and correct in all
material respects; (iv) MLBFS shall have received this Loan Agreement, the
Term WCMA Note and all other Additional Agreements, duly executed and filed
or recorded where applicable, all of which shall be in form and substance
reasonably satisfactory to MLBFS; (v) the Commitment Fee shall have been paid
in full; (vi) MLBFS shall have received evidence reasonably satisfactory to
it of the insurance required hereby or by any of the Additional Agreements;
and (vii) any additional conditions specified in the "Approval of WCMA Line
of Credit Which Converts to Term WCMA Loan" letter executed by MLBFS with
respect to the transactions contemplated hereby shall have been met to the
reasonable satisfaction of MLBFS.
(i) "Increase Funding Conditions" shall mean the conditions precedent to
increasing the Maximum WCMA Line of Credit periodically on and after the
Activation Date prior to the Initial WCMA Maturity Date; to wit: (i) MLBFS
shall have received copies of invoices or other evidence reasonably satisfactory
to it as to the ownership of the specific Collateral reasonably acceptable to
MLBFS which Customer desires to finance with a portion of the Initial WCMA Line
of Credit; (ii) Exhibit A attached hereto shall have been amended to incorporate
such specific Collateral; (iii) MLBFS shall have received evidence reasonably
satisfactory to it as to the perfection and priority of MLBFS' liens and
security interests on such specific Collateral, including, without limitation,
the filing in the appropriate jurisdiction(s) of a form UCC-1 Financing
Statement covering such specific Collateral and a search of the records of said
jurisdiction(s) verifying MLBFS' priority; and (iv) the aggregate cost to
Customer of such specific Collateral shall be not less than $1,000,000.00.
(j) "Initial WCMA Maturity Date" shall mean August 31, 1997.
(k) "Interest Rate" shall mean, with respect the WCMA Line of Credit, a
variable per annum rate of interest equal to the sum of 2.70% and the 30-Day
Commercial Paper Rate. The "30-Day Commercial Paper Rate" shall mean, as of the
date of any determination, the interest rate from time to time published in the
"Money Rates" section of The Wall Street Journal for 30-day high-grade unsecured
notes sold through dealers by major corporations. The Interest Rate will change
as of the -date of publication in The Wall Street Journal of a 30-Day Commercial
Paper Rate that is different from that published on the preceding Business Day.
In the event that The Wall Street Journal shall, for any reason, fail or cease
to publish the 30-Day Commercial Paper Rate, MLBFS will choose a reasonably
comparable index or source to use as the basis for the Interest Rate. The
interest rate applicable to the Term WCMA Loan and Term WCMA Line of Credit
shall be the rate determined in accordance with the provisions of the Term WCMA
Note.
(l) "Loan Purpose" shall mean the purpose for the Initial WCMA Line of
Credit; to
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wit: to finance various items of telecommunications and other equipment and
related software.
(m) "Location of Collateral" shall mean the address of Customer set forth
at the beginning of this Loan Agreement, together with any other address or
addresses set forth on an exhibit hereto as being a Location of Collateral.
(n) "Maximum WCMA Line of Credit" shall with respect to the Initial WCMA
Line of Credit mean an amount lesser of (i) $10,000,000.00, or (ii) 100% of the
aggregate cost to Customer of the Collateral for which each of the Increase
Funding Conditions shall have been met to the reasonable satisfaction of MLBFS
on the Activation Date, and from time to time thereafter prior to the Initial
WCMA Maturity Date (but not more frequently than once in any calendar month).
With respect to the Term WCMA Line of Credit, the Maximum WCMA Line of Credit
shall be an amount equal to the applicable percentage of the Term WCMA Loan
Amount hereinafter specified.
(o) "Obligations" shall mean all liabilities, indebtedness and other
obligations of Customer to MLBFS, howsoever created, arising or evidenced,
whether now existing or hereafter arising, whether direct or indirect, absolute
or contingent, due or to become due, primary or secondary or joint or several,
and, without limiting the foregoing, shall include interest accruing after the
filing of any petition in bankruptcy, and all present and future liabilities,
indebtedness and obligations of Customer under this Loan Agreement, the WCMA
Note included herein, and the Term WCMA Note.
(p) "Permitted Liens" shall mean with respect to the Collateral (i) liens
for current taxes not delinquent, other non-consensual liens arising in the
ordinary course of business for sums not due, and, if MLBFS' rights to and
interest in the Collateral are not materially and adversely affected thereby,
any such liens for taxes or other non-consensual liens arising in the ordinary
course of business being contested in good faith by appropriate proceedings;
(ii) liens which will be discharged with the proceeds of the initial WCMA
Loan; (iii) existing liens, if any, upon Accounts, Chattel Paper, Contract
Rights, Inventory, Equipment (other than the specific Equipment included in
the Collateral) and Fixtures of Customer, together with any future purchase
money liens upon and leases of Equipment and Fixtures (other than such specific
Equipment); and (iv) any other liens expressly permitted in writing by MLBFS.
(q) "Term WCMA Loan Amount" shall mean an amount equal to the lesser of
(i) the WCMA Loan Balance on the Closing Date, or (ii) $10,000,000.00.
(r) "Term WCMA Note" shall mean and refer to the Term WCMA Note executed
by Customer and dated as of the date hereof which incorporates both a WCMA Note
evidencing amounts owing on account of the WCMA Line of Credit portion of the
Loan, and a Term Note evidencing amounts owing on account of the term portion of
the Loan.
(s) "WCMA Account" shall mean and refer to the Working Capital Management
Account of Customer with MLPF&S identified as WCMA Account No. 529-07129.
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(t) "WCMA Loan" shall mean each advance made by MLBFS pursuant to either
the Initial WCMA Line of Credit or Term WCMA Line of Credit.
(u) "WCMA Loan Balance" shall mean the aggregate unpaid principal amount
of all WCMA Loans.
1.2 Other Terms. Except as otherwise defined herein: (i) all terms used
in this Loan Agreement which are defined in the Uniform Commercial Code of
Illinois ("UCC") shall have the meanings set forth in the UCC, and (ii)
capitalized terms used herein which are defined in the WCMA Agreement shall
have the meaning set forth in the WCMA Agreement.
Article II. THE INITIAL WCMA LINE OF CREDIT
2.1 Initial WCMA Promissory Note.
FOR VALUE RECEIVED, Customer hereby promises to pay to the order of MLBFS, at
the times and in the manner set forth in this Loan Agreement, or in such other
manner and at such place as MLBFS may hereafter designate in writing, the
following: (a) on the Initial WCMA Maturity Date, the then WCMA Loan Balance;
and (b) interest at the interest Rate on the outstanding WCMA Loan Balance, from
and including the date on which the first WCMA Loan is made until the date of
payment in full of the WCMA Loan Balance under this Initial WCMA Promissory Note
("Initial WCMA Note"). Customer hereby waives presentment, demand, protest,
notice of protest, notice of dishonor and, except as otherwise expressly set
forth herein, all other notices and formalities in connection with this Initial
WCMA Note and this Loan Agreement.
2.2 WCMA Loans Under the Initial WCMA Line of Credit.
(a) Activation Date. Provided that: (i) the Commitment Expiration Date
shall not then have occurred, and (ii) Customer shall have subscribed to the
WCMA Program and its subscription to the WCMA Program shall then be in effect,
the Activation Date of the Initial WCMA Line of Credit shall occur on or
promptly after the date, following the acceptance of this Loan Agreement by
MLBFS at its office in Chicago, Illinois, upon which each of the General
Funding Conditions and applicable Increase Funding Conditions shall have been
met or satisfied to the reasonable satisfaction of MLBFS. From time to time
thereafter prior to the Initial WCMA Maturity Date (but not more frequently
than once in any calendar month) the Maximum WCMA Line of Credit may be
increased upon the written request of Customer as and when the Increase
Funding Conditions are met to the reasonable satisfaction of MLBFS with
respect to an additional portion of the Collateral. Customer hereby
authorizes MLBFS to directly pay any or all of the invoices (to the extent
Customer has not demonstrated to MLBFS its prior payment thereof) for the
Collateral subject to said Increase Funding Conditions by a charge to
Customer's WCMA Account. No activation by MLBFS of the Initial WCMA Line of
Credit for a nominal amount shall be deemed evidence of the satisfaction of
any
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of the conditions herein set forth, or a waiver of any of the terms or
conditions hereof.
(b) WCMA Loans. Subject to the terms and conditions hereof, during the
period from and after the Activation Date to the Final WCMA Maturity Date (as
hereinafter defined): (i) MLBFS will make WCMA Loans to Customer in such
amounts as Customer may from time to time request in accordance with the
terms hereof, up to an aggregate outstanding amount not to exceed the Maximum
WCMA Line of Credit (including those WCMA Loans made directly by MLBFS to pay
invoices for Collateral, as aforesaid), and (ii) Customer may repay any WCMA
Loans in whole or in part at any time without premium or penalty, and request
a re-borrowing of amounts repaid on a revolving basis. Customer may request
WCMA Loans by use of WCMA Checks, FTS, Visa charges, wire transfers, or such
other means of access to the WCMA Line of Credit as may be permitted by MLBFS
from time to time; it being understood that so long as the WCMA Line of
Credit shall be in effect, any charge or debit to the WCMA Account which but
for the WCMA Line of Credit would under the terms of the WCMA Agreement
result in an overdraft, shall be deemed a request by Customer for a WCMA Loan.
(c) Conditions of WCMA Loans. Notwithstanding the foregoing, MLBFS shall
not be obligated to make any WCMA Loan, and may without notice refuse to honor
any such request by Customer, if at the time of receipt by MLBFS of Customer's
request: (i) the making of such WCMA Loan would cause the Maximum WCMA Line of
Credit to be exceeded; or (ii) the Final WCMA Maturity Date shall have occurred,
or the WCMA Line of Credit shall have otherwise been terminated in accordance
with the terms hereof; or (iii) Customer's subscription to the WCMA Program
shall have been terminated; or (iv) an event shall have occurred and is
continuing which shall have caused any of the General Funding Conditions or
Increase Funding Conditions to not then be met or satisfied to the reasonable
satisfaction of MLBFS. The making by MLBFS of any WCMA Loan at a time when any
one or more of said conditions shall not have been met shall not in any event be
construed as a waiver of said condition or conditions or of any Event of
Default, and shall not prevent MLBFS at any time thereafter while any condition
shall not have been met from refusing to honor any request by Customer for a
WCMA Loan.
(d) Force Majeure. MLBFS shall not be responsible, and shall have no
liability to Customer or any other party, for any delay or failure of MLBFS
to honor any request of Customer for a WCMA Loan or any other act or omission
of MLBFS, MLPF&S or any of their affiliates due to or resulting from any system
failure, error or delay in posting or other clerical error, loss of power,
fire, Act of God or other cause beyond the reasonable control of MLBFS, MLPF&S
or any of their affiliates unless directly arising out of the willful wrongful
act or active gross negligence of MLBFS. In no event shall MLBFS be liable to
Customer or any other party for any incidental or consequential damages arising
from any act or omission by MLBFS, MLPF&S or any of their affiliates in
connection with the WCMA Line of Credit or this Loan Agreement.
(e) Interest. The WCMA Loan Balance with respect to both the initial
WCMA Line of
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of Credit and Term WCMA Line of Credit shall bear interest at the Interest
Rate. Interest shall be computed for the actual number of days elapsed on the
basis of a year consisting of 360 days. Notwithstanding any other provision
in this Loan Agreement or any Additional Agreements to the contrary, in no
event shall the Interest Rate exceed the highest rate permissible under any
applicable law. In the event that any court having jurisdiction determines
that MLBFS has received excess interest hereunder, MLBFS will promptly refund
such excess interest to Customer, without charge or penalty. Except as
otherwise provided herein, accrued and unpaid interest on the WCMA Loan
Balance shall be payable monthly on the last Business Day of each calendar
month, commencing with the last Business Day of the calendar month in which
the Activation Date shall occur. Customer hereby irrevocably authorizes and
directs MLPF&S to pay MLBFS such accrued interest from any available free
credit balances in the WCMA Account, and if such available free credit balances
are insufficient to satisfy any interest payment due, to liquidate any
investments in the Money Accounts (other than any investments constituting
any Minimum Money Accounts Balance under the WCMA Directed Reserve program)
in an amount up to the balance of such accrued interest, and pay to MLBFS the
available proceeds on account thereof. If available free credit balances in
the WCMA Account and available proceeds of the Money Accounts are insufficient
to pay the entire balance of accrued interest, and Customer otherwise fails
to make such payment when due, MLBFS may, in its sole discretion, make a WCMA
Loan in an amount equal to the balance of such accrued interest and pay the
proceeds of such WCMA Loan to itself on account of such interest. The amount
of any such WCMA Loan will be added to the WCMA Loan Balance. If MLBFS
declines to extend a WCMA Loan to Customer under these circumstances, Customer
hereby authorizes and directs MLPF&S to make all such interest payments to
MLBFS from any Minimum Money Accounts Balance. If there is no Minimum Money
Accounts Balance, or it is insufficient to pay all such interest, MLBFS will
invoice Customer for payment of the balance of the accrued interest, and
Customer shall pay such interest as directed by MLBFS within 5 Business Days
of receipt of such invoice.
(f) Payments. All payments required or permitted to be made pursuant to
this Loan Agreement shall be made in lawful money of the United States.
Unless otherwise directed by MLBFS, payments on account of the WCMA Loan
Balance with respect to the Initial WCMA Line of Credit or Term WCMA Line of
Credit may be made by the delivery of checks (other than WCMA Checks), or by
means of FTS or wire transfer of funds (other than funds from the Initial
WCMA Line of Credit or Term WCMA Line of Credit) to MLPF&S for credit to
Customer's WCMA Account. Notwithstanding anything in the WCMA Agreement to
the contrary, Customer hereby irrevocably authorizes and directs MLPF&S to
apply available free credit balances in the WCMA Account to the repayment of
the WCMA Loan Balance prior to application for any other purpose. Payments
to MLBFS from funds in the WCMA Account shall be deemed to be made by
Customer upon the same basis and schedule as funds are made available for
investment in the Money Accounts in accordance with the terms of the WCMA
Agreement. All funds received by MLBFS from MLPF&S pursuant to the aforesaid
authorization shall be applied by MLBFS to repayment of the WCMA Loan
Balance. The acceptance by or on behalf of MLBFS of a check or other payment
for a lesser
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amount than shall be due from Customer, regardless of any endorsement or
statement thereon or transmitted therewith, shall not be deemed an accord and
satisfaction or anything other than a payment on account, and MLBFS or anyone
acting on behalf of MLBFS may accept such check or other payment without
prejudice to the rights of MLBFS to recover the balance actually due or to
pursue any other remedy under this Loan Agreement or applicable law for such
balance. All checks accepted by or on behalf of MLBFS in connection with the
Initial WCMA Line of Credit or Term WCMA Line of Credit or Loan are subject
to final collection.
(g) Exceeding the Maximum WCMA Line of Credit. In the event that the
WCMA Loan Balance shall at any time exceed the Maximum WCMA Line of Credit,
Customer shall within 1 Business Day of the first to occur of (i) any request
or demand of MLBFS, or (ii) receipt by Customer of a statement from MLPF&S
showing a WCMA Loan Balance in excess of the Maximum WCMA Line of Credit,
deposit sufficient funds into the WCMA Account to reduce the WCMA Loan
Balance below the Maximum WCMA Line of Credit.
(h) Statements. MLPF&S will include in each monthly statement it issues
under the WCMA Program information with respect to WCMA Loans and the WCMA
Loan Balance. Any questions that Customer may have with respect to such
information should be directed to MLBFS; and any questions with respect to
any other matter in such statements or about or affecting the WCMA Program
should be directed to MLPF&S.
(i) Use of WCMA Loans; Securities Transactions. Customer warrants that
the proceeds of each WCMA Loan under the Initial WCMA Line of Credit will be
used solely for the Loan Purpose, or, with the prior written consent of MLBFS,
for other lawful business purposes of Customer not prohibited hereby; and that
the proceeds of each WCMA Loan under the Term WCMA Line of Credit will be used
solely for working capital, or, with the prior written consent of MLBFS, for
other lawful business purposes of Customer not prohibited hereby. Customer
agrees that under no circumstances will funds borrowed from MLBFS through the
Initial WCMA Line of Credit or Term WCMA Line of Credit be used: (i) for
personal, family or household purposes of any person whatsoever, (ii) to
purchase, carry or trade in securities, including shares of the Money Accounts,
or (iii) to repay debt incurred to purchase, carry or trade in securities; nor
will any such funds be remitted, directly or indirectly, to MLPF&S or any other
broker or dealer in securities, by WCMA Check, check, FTS, wire transfer, or
otherwise.
2.3 Commitment Fee. In consideration of the agreement by MLBFS to extend
the initial WCMA Line of Credit and make the Loan (including the Term WCMA
Line of Credit) to Customer in accordance with and subject to the terms
hereof, Customer has paid or shall, on or before the Activation Date pay, the
Commitment Fee to MLBFS. Customer acknowledges and agrees that the
Commitment Xxx has been fully earned by MLBFS, and that it will not under any
circumstances be refundable.
Article III. THE LOAN
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3.1 Commitment of Parties. Subject to the terms hereof, on the Closing Date,
MLBFS hereby commits to lend to Customer, and Customer hereby agrees to borrow
from MLBFS, an aggregate amount equal to the Term WCMA Loan Amount. The
proceeds of the Loan will be disbursed and applied in the manner hereinafter set
forth.
3.2 Operation of Loan.
(a) Term WCMA Note. The Loan will be evidenced by and shall be repayable in
accordance with the terms of the Term WCMA Note and this Loan Agreement. The
Term WCMA Note combines two promissory notes, one evidencing the term portion of
the Loan (the "Term Note") and the other evidencing the Term WCMA Line of Credit
portion of the Loan (the "WCMA Note"). The balance owing by Customer on account
of the Loan at any time shall be an amount equal to the sum of the then
outstanding balances under the WCMA Note and the Term Note included in the Term
WCMA Note. The Term WCMA Note is hereby incorporated as a part hereof.
(b) Term Note Principal. The principal balance owing under the Term Note at
any time shall be an amount equal to the difference between (i) the Term WCMA
Loan Amount less the aggregate principal paid by Customer on account of the Term
Note; and (ii) the Term WCMA Line of Credit. So long as there shall be any
moneys owing by Customer to MLBFS hereunder or there shall be a Term WCMA Line
of Credit, no reduction in the unpaid principal balance of the Term Note to zero
shall be deemed a payment of the Term Note in full or an extinguishment of any
of the obligations of Customer thereunder or hereunder.
(c) Term Note Funding. Subject to the terms hereof, the Term Note will be
funded by MLBFS in five annual installments, each equal to one-fifth of the Loan
Amount. The first one-fifth installment funded by MLBFS will be funded on the
Closing Date and applied on account of the Loan Purpose, as aforesaid.
Subsequent installments will be funded on a date chosen by MLBFS in its sole
discretion which will be on or within two weeks before or after each subsequent
anniversary of the last day of the calendar month in which the Closing Date
occurs (each, a "Subsequent Funding Date").
(d) Activation of WCMA Line. On the Closing Date, MLBFS will activate and
make available as an integral part of the Loan the Term WCMA Line of Credit
equal to four-fifths of the Term WCMA Loan Amount. Upon such activation and
consummation of all other transactions herein contemplated to occur on the
Closing Date (including, without limitation, application of the amount funded
on account of the Term Note to the WCMA Loan Balance under the Initial WCMA
Note), all amounts owing under the Initial WCMA Note shall be deemed owing
under the WCMA Note included in the Term WCMA Note, and the Initial WCMA Note
shall be deemed paid and canceled.
(e) Subsequent Fundings. On the first Subsequent Funding Date, concurrently
with MLBFS' funding of the second installment of the debt evidenced by the Term
Note into the WCMA Account, the WCMA Line of Credit will be reduced to an amount
equal to
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three-fifths of the Loan Amount. On the second Subsequent Funding Date, the
WCMA Line of Credit will be reduced to an amount equal to two-fifths of the
Loan Amount; and on the third Subsequent Funding Date the WCMA Line of Credit
will be reduced to an amount equal to one-fifth of the Loan Amount.
(f) WCMA Maturity Date. On the fourth Subsequent Funding Date (the "WCMA
Maturity Date"), the WCMA Line of Credit will be terminated and the WCMA
Account, at the option of Customer, will either be converted to a WCMA Cash
Account (subject to any requirements of MLPF&S) or terminated.
3.3 Conditions Precedent to Closing Date. MLBFS' obligation to make the Loan
on the Closing Date shall be subject to the prior fulfillment of each of the
following conditions to the satisfaction of MLBFS: (a) The Initial WCMA
Maturity Date shall have occurred; and (b) each of the General Funding
Conditions shall have been met or satisfied to the reasonable satisfaction of
MLBFS.
3.4 Failure or Delay of Closing Date. If for any reason other than the sole
fault of MLBFS the Closing Date shall not occur within 10 Business Days after
the Initial WCMA Maturity Date, then, notwithstanding anything herein to the
contrary MLBFS shall be relieved of any further obligation to make the Loan, and
all amounts then outstanding under the Initial WCMA Line of Credit shall be and
become immediately due and payable without notice.
3.5 Conditions of Subsequent Fundings. The obligation of MLBFS to fund
installments of the term portion of the Loan on any Subsequent Funding Date
shall be subject to each of the conditions specified in Section 3.3 hereof being
met at such date, and the further condition that all payments due under the Term
WCMA Note prior to any Subsequent Funding Date shall have been paid in full;
provided, however, that notwithstanding the failure of any such conditions to
have been met, MLBFS may in its sole discretion fund such installment and/or any
other installments, and no such funding shall constitute a waiver by MLBFS of
any of its rights hereunder or under any of the Additional Agreements. Without
limiting the foregoing, it is understood that no funding by MLBFS of any sum
hereunder while an Event of Default shall have occurred and is continuing shall
under any circumstances be deemed a waiver by MLBFS of such Event of Default, or
a waiver of any of MLBFS' rights hereunder.
3.6 Acknowledgments of Customer, Customer acknowledges, covenants and agrees
that:
(a) Payment of WCMA Interest; Additional Deposits. Under the terms of this
Loan Agreement, interest accrued on amounts outstanding on the Term WCMA Line of
Credit each month will, subject to the terms hereof, ordinarily be paid from the
proceeds of a borrowing of an additional sum under the Term WCMA Line of Credit.
Because substantially the entire Term WCMA Line of Credit will ordinarily be
drawn on the Closing Date, Customer agrees that it will, without demand,
invoicing or the request of MLBFS, from time to time make sufficient deposits
into the WCMA Account in order to
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assure that the Maximum
WCMA Line of Credit is not exceeded. Installments of principal and interest
under the Term Note shall be paid directly to MLBFS in accordance with the terms
of the Term Note.
(b) Additional Interest Charges. SUBJECT TO THE TERMS HEREOF, ON EACH
SUBSEQUENT FUNDING DATE MLBFS WILL DEPOSIT THE AMOUNT FUNDED INTO THE WCMA
ACCOUNT. DUE TO POSSIBLE DELAYS IN POSTING AS WELL AS CERTAIN DELAYS IN
RECOGNITION OF DEPOSITS INHERENT IN THE WCMA PROGRAM, CUSTOMER WILL NOT RECEIVE
CREDIT FOR THE AMOUNT DEPOSITED FOR UP TO SEVERAL DAYS THEREAFTER, RESULTING IN
AN INTEREST CHARGE FOR THAT PERIOD OF TIME ACCRUING AND CHARGED IN THE WCMA
ACCOUNT. ON THE OTHER HAND, BECAUSE MLBFS BORROWS ALL OR SUBSTANTIALLY ALL OF
THE FUNDS THAT IT LENDS ON THE DATE OF FUNDING, IT MUST CHARGE INTEREST ON THE
AMOUNT FUNDED ON EACH SUBSEQUENT FUNDING DATE FROM THE DATE OF ITS DEPOSIT INTO
THE WCMA ACCOUNT, WHETHER OR NOT SUCH DEPOSIT IS IMMEDIATELY RECOGNIZED. THE
TIMING DIFFERENCES BETWEEN THE DATE OF DEPOSIT AND DATE OF RECOGNITION OF THE
DEPOSIT IN THE WCMA ACCOUNT WILL THEREFORE RESULT IN EXTRA INTEREST CHARGES TO
CUSTOMER, WHICH CUSTOMER ACKNOWLEDGES ARE AN ADDITIONAL COST OF THE LOAN AND
HEREBY UNCONDITIONALLY AGREES TO PAY.
Article IV. THE TERM WCMA LINE OF CREDIT
4.1 Loan Commitment and Requests. Subject to the terms and conditions
hereof: (a) on the Closing Date, MLBFS shall be deemed to have made a WCMA
Loan to Customer under the Term WCMA Line of Credit in an amount equal to
4/5ths of the then WCMA Loan Balance, as aforesaid; and (b) during the period
from and after the Closing Date to the Final WCMA Maturity Date: (i) Customer
may repay said WCMA Loan and any other WCMA Loans in whole or in part at any
time without premium or penalty, and request a re-borrowing of amounts repaid
on a revolving basis, and (ii) MLBFS will make such additional WCMA Loans as
Customer may from time to time request in accordance with the terms hereof,
provided that, without limiting any of the other conditions hereof, the making
of any such WCMA Loan shall not cause the WCMA Loan Balance to exceed the
Maximum WCMA Line of Credit. Customer may request WCMA Loans by use of WCMA
Checks, FTS, Visa-Registered Trademark- charges, wire transfers, or such other
means of access to the Term WCMA Line of Credit as may be permitted by MLBFS
from time to time; it being understood that so long as the Term WCMA Line of
Credit shall be in effect, any charge or debit to the WCMA Account which but
for the Term WCMA Line of Credit would under the terms of the WCMA Agreement
result in an overdraft, shall be deemed a request by Customer for a WCMA Loan.
4.2 Conditions of WCMA Loans Under the Term WCMA Line of Credit.
Notwithstanding the foregoing, MLBFS shall not be obligated to make any WCMA
Loan
Page 14
under the Term WCMA Line of Credit, and may without notice refuse to honor
any such request by Customer, if at the time of Customer's request: (a) the
making of such WCMA Loan would cause the Maximum WCMA Line of Credit to be
exceeded; or (b) the Final WCMA Maturity Date shall have occurred, or the WCMA
Line of Credit shall have otherwise been terminated in accordance with the terms
hereof; or (c) an event shall have occurred and is continuing which shall have
caused any of the General Funding Conditions to not then be met or satisfied to
the reasonable satisfaction of MLBFS. The making by MLBFS of any WCMA Loan at a
time when any one or more of said conditions shall not have been met shall not
in any event be construed as a waiver of said condition or conditions or of any
Event of Default, and shall not prevent MLBFS at any time thereafter while any
condition shall not have been met from refusing to honor any request by Customer
for a WCMA Loan.
Article V. GENERAL PROVISIONS
5.1 Representations and Warranties.
Customer represents and warrants to MLBFS that:
(a) Organization and Existence. Customer is a corporation, duly organized
and validly existing in good standing under the laws of the State of Texas and
is qualified to do business and in good standing in each other state where the
nature of its business or the property owned by it make such qualification
necessary.
(b) Execution, Delivery and Performance. The execution, delivery and
performance by Customer of this Loan Agreement and such of the Additional
Agreements to which it is a party: (i) have been duly authorized by all
requisite action, (ii) do not and will not violate or conflict with any law or
other governmental requirement, or any of the agreements, instruments or
documents which formed or govern Customer, and (iii) do not and will not breach
or violate any of the provisions of, and will not result in a default by
Customer under, any other agreement, instrument or document to which it is a
party or by which it or its properties are bound.
(c) Notices and Approvals. Except as may have been given or obtained, no
notice to or consent or approval of any governmental body or authority or other
third party whatsoever (including, without limitation, any other creditor) is
required in connection with the execution, delivery or performance by Customer
of such of this Loan Agreement, the Term WCMA Note and the other Additional
Agreements to which it is a party.
(d) Enforceability. This Loan Agreement, the Term WCMA Note and such of the
other Additional Agreements to which it is a party are the legal, valid and
binding obligations of Customer, enforceable against it in accordance with their
respective terms, except as enforceability may be limited by bankruptcy and
other similar laws affecting the rights of creditors generally or by general
principles of equity.
Page 15
(e) Collateral. Subject to any Permitted Liens: (i) Customer has good and
marketable title to the Collateral, (ii) none of the Collateral is subject to
any lien, encumbrance or security interest, and (iii) upon the filing of all
Uniform Commercial Code financing statements executed by Customer with respect
to the Collateral in the appropriate jurisdiction(s) and/or the completion of
any other action required by applicable law to perfect its liens and security
interests, MLBFS will have valid and perfected first liens and security
interests upon all of the Collateral.
(f) Financial Statements. Except as expressly set forth in Customer's
financial statements, all financial statements of Customer furnished to MLBFS
have been prepared in conformity with generally accepted accounting principles,
consistently applied, are true and correct, and fairly present the financial
condition of it as at such dates and the results of its operations for the
periods then ended; and since the most recent date covered by such financial
statements, there has been no material adverse change in any such financial
condition or operation.
(g) Litigation. No litigation, arbitration, administrative or governmental
proceedings are pending or, to the knowledge of Customer, threatened against
Customer, which would, if adversely determined, materially and adversely affect
the liens and security interests of MLBFS hereunder or under any of the
Additional Agreements, the financial condition of Customer or the continued
operations of Customer.
(h) Tax Returns. All federal, state and local tax returns, reports and
statements required to be filed by Customer have been filed with the appropriate
governmental agencies and all taxes due and payable by Customer have been timely
paid (except to the extent that any such failure to file or pay will not
materially and adversely affect either the liens and security interests of MLBFS
hereunder or under any of the Additional Agreements, the financial condition of
Customer, or the continued operations of Customer).
(i) Collateral Location. All of the Collateral is located at a Location of
Collateral.
Each of the foregoing representations and warranties are continuing and shall be
deemed remade by Customer on the Activation Date, on the Closing Date, and
concurrently with each request for a WCMA Loan.
5.2 Financial and Other Information.
Customer shall furnish or cause to be furnished to MLBFS during the term of this
Loan Agreement all of the following:
(a) Annual Financial Statements. Within 120 days after the close of each
fiscal year of Customer, Customer shall furnish or cause to be furnished to
MLBFS a copy of the annual audited financial statements of Customer consisting
of at least a balance sheet as at the close of such fiscal year and related
statements of income, retained earnings and cash flows, certified by its current
independent certified public accountants or other
Page 16
independent certified public accountants reasonably acceptable to MLBFS.
(b) Interim Financial Statements. Within 45 days after the close of each
fiscal quarter of Customer, Customer shall furnish or cause to be furnished to
MLBFS: (i) a statement of profit and loss for the fiscal quarter then ended,
and (ii) a balance sheet as at the close of such fiscal quarter; all in
reasonable detail and certified by its chief financial officer.
(c) Other Information. Customer shall furnish or cause to be furnished to
MLBFS such other information as MLBFS may from time to time reasonably request
relating to Customer or the Collateral.
5.3 Other Covenants. Customer further covenants and agrees during the term
of this Loan Agreement that:
(a) Financial Records; Inspection. Customer will: (i) maintain at its
principal place of business complete and accurate books and records, and
maintain all of its financial records in a manner consistent with the financial
statements heretofore furnished to MLBFS, or prepared on such other basis as may
be approved in writing by MLBFS, and (ii) permit MLBFS or its duly authorized
representatives, upon reasonable notice and at reasonable times, to inspect its
properties (both real or personal), operations, books and records.
(b) Taxes. Customer will pay when due all taxes, assessments and other
governmental charges, howsoever designated, and all other liabilities and
obligations, except to the extent that any such failure to pay will not
materially and adversely affect either the liens and security interests of MLBFS
hereunder or under any of the Additional Agreements, the financial condition of
Customer or the continued operations of Customer.
(c) Compliance With Laws and Agreements. Customer will not violate any law,
regulation or other governmental requirement, any judgment or order of any court
or governmental agency or authority, or any agreement, instrument or document to
which it is a party or by which it is bound, if any such violation will
materially and adversely affect either the liens and security interests of MLBFS
hereunder or under any of the Additional Agreements, or the financial condition
or the continued operations of Customer.
(d) Use of Proceeds; Securities Transactions. The proceeds of each WCMA Loan
under the Initial WCMA Line of Credit will be used solely for the Loan Purpose,
or, with the prior written consent of MLBFS, for other lawful business purposes
of Customer not prohibited hereby. The proceeds of each WCMA Loan under the
Term WCMA Line of Credit will be used solely for working capital, or, with the
prior written consent of MLBFS, for other lawful business purposes of Customer
not prohibited hereby. Customer agrees that under no circumstances will funds
borrowed from MLBFS through the Initial WCMA Line of Credit or Term WCMA Line of
Credit be used: (i) for
Page 17
personal, family or household purposes of any person whatsoever, (ii) to
purchase, carry or trade in securities, including shares of the Money
Accounts, or (iii) to repay debt incurred to purchase, carry or trade in
securities; nor will any such funds be remitted, directly or indirectly, to
MLPF&S or any other broker or dealer in securities, by WCMA Check, check, FTS,
wire transfer, or otherwise.
(e) Continuity. Except upon the prior written consent of MLBFS, which
consent will not be unreasonably withheld: (i) Customer will not be a party
to any merger or consolidation with, or purchase or otherwise acquire all or
substantially all of the assets or stock of, or any material partnership or
joint venture interest in, any person or entity, or sell, transfer or lease
all or any substantial part of its assets if any such action causes a material
change in its control or principal business, or a material adverse change in
its financial condition or operations; (ii) Customer will preserve its
existence and good standing in the jurisdictions of establishment and
operation, and will not operate in any material business other than a business
substantially the same as its business as of the date of application by
Customer for credit from MLBFS; and (iii) Customer will not cause or permit
any material change in its controlling ownership, controlling senior
management or, except upon not less than 30 days prior written notice to
MLBFS, its name or principal place of business.
(f) Tangible Net Worth. The "tangible net worth" of Customer, consisting of
Customer's net worth as shown on Customer's regular financial statements
prepared in a manner consistent with the terms hereof, but excluding an amount
equal to: (i) any assets which are ordinarily classified as "intangible" in
accordance with generally accepted accounting principles, and (ii) any amounts
now or hereafter directly or indirectly owing to Customer by officers,
shareholders or affiliates of Customer, shall at all times exceed $35,000,000.
(g) Minimum Ratio of Cash Flow to Current Portion of Long Term Debt. The
ratio of Customers "Net Cash Flow" to the current portion of its long term
debt, as shown on Customer's regular books and records, shall be not less than
1.4 to 1 as of the end of each calendar quarter beginning with the calendar
quarter ending December 31, 1996. As used herein, "Net Cash Flow" shall mean
the sum of Customer's net after-tax income for each of the immediately
preceding four calendar quarters, together with depreciation, amortization and
any non-recurring expenses during said period, less any non-recurring income
(other than any gains derived from the sale of individual store locations) and
any cash distributions during said period; all as shown on Customer's regular
financial statements prepared in a manner consistent with the terms hereof.
5.4 Collateral
(a) Pledge of Collateral. To secure payment and performance of the
Obligations, Customer hereby pledges, assigns, transfers and sets over to MLBFS,
and grants to MLBFS first liens and security interests in and upon all of the
Collateral, subject only to Permitted Liens.
Page 18
(b) Liens. Except upon the prior written consent of MLBFS, Customer shall
not create or permit to exist any lien, encumbrance or security interest upon
or with respect to any Collateral now owned or hereafter acquired other than
Permitted Liens.
(c) Performance of Obligations. Customer shall perform all of its
obligations owing on account of or with respect to the Collateral; it being
understood that nothing herein, and no action or inaction by MLBFS, under this
Loan Agreement or otherwise, shall be deemed an assumption by MLBFS of any of
Customer's said obligations.
(d) Alterations and Maintenance. Except upon the prior written consent of
MLBFS, Customer shall not make or permit any material alterations to any
Collateral which might materially reduce or impair its market value or utility.
Customer shall at all times keep the Collateral in good condition and repair and
shall pay or cause to be paid all obligations arising from the repair and
maintenance of such Collateral, as well as all obligations with respect to each
Location of Collateral, except for any such obligations being contested by
Customer in good faith by appropriate proceedings.
(e) Location. Except for movements required in the ordinary course of
Customer's business, Customer shall give MLBFS 30 days' prior written notice of
the placing at or movement of any Collateral to any location other than a
Location of Collateral. In no event shall Customer cause or permit any
Collateral to be removed from the United States without the prior written
consent of MLBFS.
(f) Insurance. Customer shall insure all of the Collateral under a policy or
policies of physical damage insurance providing that losses will be payable to
MLBFS as its interests may appear pursuant to a Lender's Loss Payable
Endorsement and containing such other provisions as may be reasonably required
by MLBFS. Customer shall further provide and maintain a policy or policies of
comprehensive public liability insurance naming MLBFS as an additional party
insured. Customer shall maintain such other insurance as may be required by law
or is customarily maintained by companies in a similar business or otherwise
reasonably required by MLBFS. All such insurance shall provide that MLBFS will
receive not less than 10 days prior written notice of any cancellation, and
shall otherwise be in form and amount and with an insurer or insurers reasonably
acceptable to MLBFS. Customer shall furnish MLBFS with a copy or certificate of
each such policy or policies and, prior to any expiration or cancellation, each
renewal or replacement thereof.
(g) Event of Loss. Customer shall at its expense promptly repair all
repairable damage to any Collateral. In the event that any Collateral is
damaged beyond repair, lost, totally destroyed or confiscated (an "Event of
Loss"), then, on or before the first to occur of (i) 90 days after the
occurrence of such Event of Loss, or (ii) 10 Business Days after the date on
which either Customer or MLBFS shall receive any proceeds of insurance on
account of such Event of Loss, or any underwriter of insurance on such
Collateral shall advise either Customer or MLBFS that it disclaims liability in
respect of such Event of Loss, Customer shall, at Customer's option, either
replace the Collateral subject to such Event of Loss with comparable Collateral
free of all liens other than
Page 19
Permitted Liens (in which event Customer shall be entitled to utilize the
proceeds of insurance on account of such Event of Loss for such purpose, and
may retain any excess proceeds of such insurance), or prepay the Loan by an
amount equal to the actual cash value of such Collateral as determined by
either the insurance company's payment (plus any applicable deductible) or, in
absence of insurance company payment, as reasonably determined by MLBFS; it
being further understood that if the Loan has not then been funded, an amount
equal to the actual cash value of such Collateral shall be deposited into the
WCMA Account concurrently with a like permanent reduction in the Initial WCMA
Line of Credit and Term WCMA Loan Amount. Notwithstanding the foregoing, if
at the time of occurrence of such Event of Loss or any time thereafter prior
to replacement or prepayment, as aforesaid, an Event of Default shall occur
hereunder, then MLBFS may at its sole option, exercisable at any time while
such Event of Default shall be continuing, require Customer to either replace
such Collateral or prepay the Loan or make a deposit into the WCMA Account and
reduce the Initial WCMA Line of Credit and Term WCMA Loan Amount, as
aforesaid. Any prepayment of the Loan pursuant to this Section shall be
applied first to installments on account of the then "Term Note Balance" (as
defined in the Term WCMA Note) in inverse order of maturity; with any
prepayment in excess of the then Term Note Balance applied on account of the
WCMA Note concurrently with: (i) a like permanent reduction in the Term WCMA
Line of Credit, and (ii) a like reduction in the obligation of MLBFS to fund
future installments on account of the Term WCMA Note in inverse order of
funding. No amount prepaid pursuant to this Section may be re-borrowed by
Customer.
(h) Notice of Certain Events. Customer shall give MLBFS immediate notice of
any attachment, lien, judicial process, encumbrance or claim affecting or
involving $25,000.00 or more of the Collateral.
(i) Indemnification. Customer shall indemnify, defend and save MLBFS
harmless from and against any and all claims, liabilities, losses, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) of any nature whatsoever which may be asserted against or incurred
by MLBFS arising out of or in any manner occasioned by (i) the ownership,
possession use or operation of any Collateral, or (ii) any failure by Customer
to perform any of its obligations hereunder; excluding, however, from said
indemnity any such claims, liabilities, etc. arising directly out of the
willful wrongful act or active gross negligence of MLBFS. This indemnity
shall survive the expiration or termination of this Loan Agreement as to all
matters arising or accruing prior to such expiration or termination.
5.5 Events of Default.
The occurrence of any of the following events shall constitute an "Event of
Default" under this Loan Agreement:
(a) Failure to Pay. Customer shall fail to pay to MLBFS or deposit into the
WCMA Account when due any amount owing or required to be deposited by Customer
under
Page 20
this Loan Agreement (including the WCMA Note set forth herein) or the Term
WCMA Note, or shall fail to pay when due any other Obligations, and any such
failure shall continue for more than 5 Business Days after written notice
thereof shall have been given by MLBFS to Customer.
(b) Failure to Perform. Customer shall default in the performance or
observance of any covenant or agreement on its part to be performed or observed
under this Loan Agreement, the Term WCMA Note or any of the other Additional
Agreements (not constituting an Event of Default under any other clause of this
Section), and such default shall continue unremedied for 10 Business Days after
written notice thereof shall have been given by MLBFS to Customer.
(c) Breach of Warranty. Any representation or warranty made by Customer
contained in this Loan Agreement, the Term WCMA Note or any of the other
Additional Agreements shall at any time prove to have been incorrect in any
material respect when made.
(d) Default Under Other Agreement. A default or Event of Default by Customer
shall occur under the terms of any other agreement, instrument or document with
or intended for the benefit of MLBFS, MLPF&S or any of their affiliates, and any
required notice shall have been given and required passage of time shall have
elapsed.
(e) Bankruptcy, Etc. A proceeding under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt or receivership law or statute
shall be filed by Customer, or any such proceeding shall be filed against
Customer and shall not be dismissed or withdrawn within 60 days after filing, or
Customer shall make an assignment for the benefit of creditors, or Customer
shall become insolvent or generally fail to pay, or admit in writing its
inability to pay, its debts as they become due.
(f) Material Impairment. Any event shall occur which shall reasonably cause
MLBFS to in good faith believe that the prospect of payment or performance by
Customer has been materially impaired.
(g) Acceleration of Debt to Other Creditors. Any event shall occur which
results in the acceleration of the maturity of any indebtedness of $100,000.00
or more of Customer to another creditor under any indenture, agreement,
undertaking, or otherwise.
(h) Seizure or Abuse of Collateral. The Collateral, or any material part
thereof, shall be or become subject to any material abuse or misuse, or any
levy, attachment, seizure or confiscation which is not released within 10
Business Days.
5.6 Remedies.
(a) Remedies Upon Default. Upon the occurrence and during the continuance of
any Event of Default, MLBFS may at its sole option do any one or more or all of
the
Page 21
following, at such time and in such order as MLBFS may in its sole discretion
choose:
(i) Termination. MLBFS may without notice terminate the Initial WCMA Line of
Credit and terminate its obligation to make the Loan (if the Loan has not then
been made), or terminate its obligation to fund any further amount on account of
the Term WCMA Note, or make or continue to make the Term WCMA Line of Credit
available to Customer, and terminate any obligation to otherwise extend any
credit to or for the benefit of Customer, and upon any such termination MLBFS
shall be relieved of all such obligations.
(ii) Acceleration. MLBFS may declare the principal of and interest on the
Initial WCMA Note or Term Note and WCMA Note included in the Term WCMA Note, as
the case may be, and all other Obligations to be forthwith due and payable,
whereupon all such amounts shall be immediately due and payable, without
presentment, demand for payment, protest and notice of protest, notice of
dishonor, notice of acceleration, notice of intent to accelerate or other notice
or formality of any kind, all of which are hereby expressly waived.
(iii) Exercise Rights of Secured Party. MLBFS may exercise any or all of
the remedies of a secured party under applicable law, including, but not limited
to, the UCC, and any or all of its other rights and remedies under this Loan
Agreement and the Additional Agreements.
(iv) Possession. MLBFS may require Customer to make the Collateral and the
records pertaining to the Collateral available to MLBFS at a place designated by
MLBFS which is reasonably convenient, or may take possession of the Collateral
and the records pertaining to the Collateral without the use of any judicial
process and without any prior notice to Customer.
(v) Sale. MLBFS may sell any or all of the Collateral at public or private
sale upon such terms and conditions as MLBFS may reasonably deem proper. MLBFS
may purchase any Collateral at any such public sale. The net proceeds of any
such public or private sale and all other amounts actually collected or received
by MLBFS pursuant hereto, after deducting all costs and expenses incurred at any
time in the collection of the Obligations and in the protection, collection and
sale of the Collateral, will be applied to the payment of the Obligations, with
any remaining proceeds paid to Customer or whoever else may be entitled thereto,
and with Customer remaining liable for any amount remaining unpaid after such
application.
(b) Set-Off. MLBFS shall have the further right upon the occurrence and during
the continuance of an Event of Default to set-off, appropriate and apply toward
payment of any of the Obligations, in such order of application as MLBFS may
from time to time and at any time elect, any cash, credit, deposits, accounts,
securities and any other property of Customer which is in transit to or in the
possession, custody or control of MLBFS, MLPF&S or any agent, bailee, or
affiliate of MLBFS or MLPF&S, including, without limitation, the WCMA Account
and any Money Accounts, and all cash and
Page 22
securities therein or controlled thereby, and all proceeds thereof. Customer
hereby collaterally assigns and grants to MLBFS a security interest in all
such property as additional Collateral.
(c) Remedies are Severable and Cumulative. All rights and remedies of MLBFS
herein are severable and cumulative and in addition to all other rights and
remedies available in the Term WCMA Note, the other Additional Agreements, at
law or in equity, and any one or more of such rights and remedies may be
exercised simultaneously or successively.
(d) Notices. To the fullest extent permitted by applicable law, Customer
hereby irrevocably waives and releases MLBFS of and from any and all liabilities
and penalties for failure of MLBFS to comply with any statutory or other
requirement imposed upon MLBFS relating to notices of sale, holding of sale or
reporting of any sale, and Customer waives all rights of redemption or
reinstatement from any such sale. Any notices required under applicable law
shall be reasonably and properly given to Customer if given by any of the
methods provided herein at least 5 Business Days prior to taking action. MLBFS
shall have the right to postpone or adjourn any sale or other disposition of
Collateral at any time without giving notice of any such postponed or adjourned
date. In the event MLBFS seeks to take possession of any or all of the
Collateral by court process, Customer further irrevocably waives to the fullest
extent permitted by law any bonds and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession, and any demand for possession prior to the commencement of any suit
or action.
5.7 Miscellaneous.
(a) Non-Waiver. No failure or delay on the part of MLBFS in exercising any
right, power or remedy pursuant to this Loan Agreement, the Term WCMA Note or
any of the other Additional Agreements shall operate as a waiver thereof, and no
single or partial exercise of any such right, power or remedy shall preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy. Neither any waiver of any provision of this Loan Agreement, the Term
WCMA Note or any of the other Additional Agreements, nor any consent to any
departure by Customer therefrom, shall be effective unless the same shall be in
writing and signed by MLBFS. Any waiver of any provision of this Loan
Agreement, the Term WCMA Note or any of the other Additional Agreements and any
consent to any departure by Customer from the terms thereof shall be effective
only in the specific instance and for the specific purpose for which given.
Except as otherwise expressly provided herein, no notice to or demand on
Customer shall in any case entitle Customer to any other or further notice or
demand in similar or other circumstances.
(b) Disclosure. Customer hereby irrevocably authorize MLBFS and each of its
affiliates, including without limitation MLPF&S, to at any time (whether or not
an Event of Default shall have occurred) obtain from and disclose to each other
any and all financial and other information about Customer.
Page 23
(c) Communications. All notices and other communications required or permitted
hereunder or in connection with any of the Additional Agreements shall be in
writing, and shall be either delivered personally, mailed by postage prepaid
certified mail or sent by express overnight courier or by facsimile. Such
notices and communications shall be deemed to be given on the date of personal
delivery, facsimile transmission or actual delivery of certified mail, or one
Business Day after delivery to an express overnight courier. Unless otherwise
specified in a notice sent or delivered in accordance with the terms hereof,
notices and other communications in writing shall be given to the parties hereto
at their respective addresses set forth at the beginning of this Loan Agreement,
or, in the case of facsimile transmission, to the parties at their respective
regular facsimile telephone number.
(d) Costs, Expenses and Taxes. Customer shall upon demand pay or reimburse
MLBFS for (i) all Uniform Commercial Code and other filing and search fees and
expenses incurred by MLBFS in connection with the verification, perfection or
preservation of MLLE'S' rights hereunder or in the Collateral or any other
collateral for the Obligations; (ii) any and all stamp, transfer and other taxes
and fees payable or determined to be payable in connection with the execution,
delivery and/or recording of this Loan Agreement or any of the Additional
Agreements; and (iii) all reasonable fees and out-of-pocket expenses (including,
but not limited to, reasonable fees and expenses of outside counsel) incurred by
MLBFS in connection with the enforcement of this Loan Agreement or any of the
Additional Agreements and the protection of MLBFS' rights hereunder or
thereunder, excluding, however, salaries and expenses of MLBFS' employees. The
obligations of Customer under this paragraph shall survive the expiration or
termination of this Loan Agreement and the discharge of the other Obligations.
(e) Right to Perform Obligations. If Customer shall fail to do any act or
thing which it has covenanted to do under this Loan Agreement or any
representation or warranty on the part of Customer contained in this Loan
Agreement shall be breached, MLBFS may, in its sole discretion, after 5 Business
Days written notice is sent to Customer (or such lesser notice, including no
notice, as is reasonable under the circumstances), do the same or cause it to be
done or remedy any such breach, and may expend its funds for such purpose. Any
and all reasonable amounts so expended by MLBFS shall be repayable to MLBFS by
Customer upon demand, with interest at the Interest Rate during the period from
and including the date funds are so expended by MLBFS to the date of repayment,
and all such amounts shall be additional Obligations. The payment or
performance by MLBFS of any of Customer's obligations hereunder shall not
relieve Customer of said obligations or of the consequences of having failed to
pay or perform the same, and shall not waive or be deemed a cure of any Event of
Default.
(f) Late Charge. Any payment required to be made by Customer pursuant to this
Loan Agreement or any of the Additional Agreements not paid within 10 days of
the applicable due date shall be subject to a late charge in an amount equal to
the lesser of: (i) 5% of the overdue amount, or (ii) the maximum amount
permitted by applicable
Page 24
law. Such late charge shall be payable on demand, or, without demand, may in
the sole discretion of MLBFS be paid by a WCMA Loan and added to the WCMA
Loan Balance in the same manner as provided herein for accrued interest with
respect to the Initial WCMA Line of Credit or Term WCMA Line of Credit.
(g) Further Assurances. Customer agrees to do such further acts and things and
to execute and deliver to MLBFS such additional agreements, instruments and
documents as MLBFS may reasonably require or deem advisable to effectuate the
purposes of this Loan Agreement, the Term WCMA Note or any the other Additional
Agreements, or to establish, perfect and maintain MLBFS' security interests and
liens upon the Collateral, including, but not limited to: (i) executing
financing statements or amendments thereto when and as reasonably requested by
MLBFS; and (ii) if in the reasonable judgment of MLBFS it is required by local
law, causing the owners and/or mortgagees of the real property on which any
Collateral may be located to execute and deliver to MLBFS waivers or
subordinations reasonably satisfactory to MLBFS with respect to any rights in
such Collateral.
(h) Binding Effect. This Loan Agreement, the Term WCMA Note and the other
Additional Agreements shall be binding upon, and shall inure to the benefit of
MLBFS, Customer and their respective successors and assigns. Customer shall not
assign any of its rights or delegate any of its obligations under this Loan
Agreement, the Term WCMA Note or any of the other Additional Agreements without
the prior written consent of MLBFS. Unless otherwise expressly agreed to in a
writing signed by MLBFS, no such consent shall in any event relieve Customer of
any of its obligations under this Loan Agreement, the Term WCMA Note or any of
the other Additional Agreements.
(i) Headings. Captions and section and paragraph headings in this Agreement
are inserted only as a matter of convenience, and shall not affect the
interpretation hereof.
(j) Governing Law. This Loan Agreement, the Term WCMA Note and, unless
otherwise expressly provided therein, each of the other Additional Agreements,
shall be governed in all respects by the laws of the State of Illinois.
(k) Severability of Provisions. Whenever possible, each provision of this Loan
Agreement, the Term WCMA Note and the other Additional Agreements shall be
interpreted in such manner as to be effective and valid under applicable law.
Any provision of this Loan Agreement, the Term WCMA Note or any of the other
Additional Agreements which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Loan Agreement, the Term WCMA Note and the other Additional Agreements or
affecting the validity or enforceability of such provision in any other
jurisdiction.
(1) Term. This Loan Agreement shall become effective on the date accepted by
MLBFS at its offices in Chicago, Illinois, and, subject to the terms hereof,
shall continue in effect so long thereafter as either MLBFS shall be obligated
to make the Loan, or,
Page 25
after the Closing Date, there shall be any moneys outstanding under the Term
Note or WCMA Note included in the Term WCMA Note or under this Loan
Agreement, or there shall be any other Obligations outstanding.
(m) Integration. THIS LOAN AGREEMENT, TOGETHER WITH THE TERM WCMA NOTE AND THE
OTHER ADDITIONAL AGREEMENTS, CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS
THE FULL AND FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN
AGREEMENTS OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. Without
limiting the foregoing, Customer acknowledges that: (i) no promise or commitment
has been made to it by MLBFS, MLPF&S or any of their respective employees,
agents or representatives to make the Loan on any terms other than as expressly
set forth herein and in the Term WCMA Note, or to make any other loan or
otherwise extend any other credit to Customer or any other party; and (ii)
except as otherwise expressly provided herein, this Loan Agreement supersedes
and replaces any and all proposals, letters of intent and approval and
commitment letters from MLBFS to Customer, none of which shall be considered an
Additional Agreement. No amendment or modification of this Agreement or any of
the Additional Agreements to which Customer is a party shall be effective unless
in a writing signed by both MLBFS and Customer.
(n) Jurisdiction; Waiver. CUSTOMER ACKNOWLEDGES THAT THIS LOAN AGREEMENT IS
BEING ACCEPTED BY MLBFS IN PARTIAL CONSIDERATION OF MLBFS' RIGHT AND OPTION, IN
ITS SOLE DISCRETION, TO ENFORCE THIS LOAN AGREEMENT, THE TERM WCMA NOTE AND THE
OTHER ADDITIONAL AGREEMENTS IN EITHER THE STATE OF ILLINOIS OR IN ANY OTHER
JURISDICTION WHERE CUSTOMER OR ANY COLLATERAL FOR THE OBLIGATIONS MAY BE
LOCATED, CUSTOMER CONSENTS TO JURISDICTION IN THE STATE OF ILLINOIS AND VENUE IN
ANY STATE OR FEDERAL COURT IN THE COUNTY OF COOK FOR SUCH PURPOSES, AND CUSTOMER
WAIVES ANY AND ALL RIGHTS TO CONTEST SAID JURISDICTION AND VENUE. CUSTOMER
FURTHER WAIVES ANY RIGHTS TO COMMENCE ANY ACTION AGAINST MLBFS IN ANY
JURISDICTION EXCEPT IN THE COUNTY OF COOK AND STATE OF ILLINOIS. MLBFS AND
CUSTOMER HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST
THE OTHER PARTY WITH RESPECT TO ANY MATTER RELATING TO, ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THE LOAN, THIS LOAN AGREEMENT, THE TERM WCMA NOTE, ANY OTHER
ADDITIONAL AGREEMENTS AND/OR ANY OF THE TRANSACTIONS WHICH ARE THE SUBJECT
MATTER OF THIS LOAN AGREEMENT.
IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year
first above written.
Page 26
U.S. LONG DISTANCE, INC.
By: /S/ XXXX XXXXXX /S/ XXXXX X. XXXXX
-------------------- --------------------
Signature (1) Signature (2)
XXXX XXXXXX XXXXX X. XXXXX
-------------------- --------------------
Printed Name Printed Name
SR. V.P. & CFO PRESIDENT & CEO
-------------------- --------------------
Title Title
Accepted at Chicago, Illinois:
XXXXXXX XXXXX BUSINESS FINANCIAL
SERVICES, INC.
By:
Page 27
EXHIBIT A
ATTACHED TO AND HEREBY MADE A PART OF WCMA AND TERM WCMA LOAN AND SECURITY
AGREEMENT NO. 9608340801 BETWEEN XXXXXXX XXXXX BUSINESS FINANCIAL SERVICES INC.
AND U.S. LONG DISTANCE, INC.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Specific Equipment Included in the Collateral:
(To be amended with each increase in the Initial WCMA Line of Credit)
Locations of Collateral:
Page 28
Xxxxxxx Xxxxx
No.9608340801
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$10,000,000.00 August 23, 1996
TERM WCMAa NOTE
FOR VALUE RECEIVED, U.S. LONG DISTANCE, INC., a corporation organized and
existing under the laws of the State of Texas ("Customer"), hereby promises to
pay to the order of XXXXXXX XXXXX BUSINESS FINANCIAL SERVICES INC., a
corporation organized and existing under the laws of the State of Delaware
("MLBFS"), in lawful money of the United States, the principal sum of
$10,000,000.00, or, if less, an amount equal to the sum of the balances from
time to time outstanding under the "Term Note" and "WCMA Note" included herein.
TERM NOTE
FOR VALUE RECEIVED, Customer hereby promises to pay to the order of MLBFS, in
lawful money of the United States, an amount equal to the difference between (i)
the principal sum of $10,000,000.00 or, if less, the "Term WCMA Loan Amount", as
that term is defined in the "Loan Agreement" described below (the "Funded Loan
Amount"), and (ii) the sum of (x) the aggregate amount paid by Customer on
account of the principal hereof, and (y) the Term WCMA Line of Credit (said
difference being herein called the "Term Note Balance"); together with interest
on the Term Note Balance, from the date of advancement of funds hereunder until
payment, at the "Interest Rate" (as hereinafter defined).
Said indebtedness shall be payable in 60 consecutive monthly installments
commencing on the first day of the calendar month following the calendar month
in which funds are advanced hereunder, and continuing on the first day of each
calendar month thereafter until this Note shall be paid in full. Installments 1
through 59, both inclusive, shall be in an amount equal to the sum of (i)
accrued interest at the Interest Rate and (ii) 1/60th of the Funded Loan Amount,
and the 60th such installment in an amount equal to the then outstanding
principal of and interest on the Funded Loan Amount. Each payment received
hereunder shall be applied first to interest at the Interest Rate, with the
balance applied on account of the Term Note Balance. All sums payable hereunder
shall be payable at the office of MLBFS at 00 Xxxx Xxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000, or at such other place or places as the holder hereof may from
time to time appoint in writing.
Customer may prepay this Term Note at any time in whole or in part without
premium or penalty. Any partial prepayment shall be applied to installments of
the Term WCMA Loan Amount in inverse order of maturity. Customer shall not have
the right to re-borrow amounts prepaid on account of this Term Note.
Page 29
Page 30
WCMA NOTE
FOR VALUE RECEIVED, Customer hereby promises to pay to the order of MLBFS, at
the times and in the manner set forth in the Loan Agreement, or in such other
manner and at such place as MLBFS may hereafter designate in writing, the
following: (a) on the Final WCMA Maturity Date, the then WCMA Loan Balance; and
(b) interest at the Interest Rate on the outstanding WCMA Loan Balance, from and
including the date on which the initial WCMA Loan is made until the date of
payment of all WCMA Loans in full. Interest shall be payable in the manner and
on the dates specified in, or determined in accordance with, the Loan Agreement.
PROVISIONS APPLICABLE TO BOTH TERM NOTE AND WCMA NOTE
As used herein, the term "Interest Rate" shall mean a variable per annum rate
equal to the sum of (i) 2.70%, and (ii) the 30-Day Commercial Paper Rate.
The "30-Day Commercial Paper Rate" shall mean, as of the date of any
determination, the interest rate from time to time published in the "Money
Rates" section of The Wall Street Journal for 30-day high-grade unsecured
notes sold through dealers by major corporations. The Interest Rate will
change as of the date of publication in The Wall Street Journal of a 30-Day
Commercial Paper Rate that is different from that published on the preceding
Business Day. In the event that The Wall Street Journal shall, for any
reason, fail or cease to publish the 30-Day Commercial Paper Rate, MLBFS will
choose a reasonably comparable index or source to use as the basis for the
Interest Rate. Any part of the principal hereof or interest hereon not paid
within 10 days of the applicable due date shall be subject to a late charge
equal to the lesser of (i) 5% of the overdue amount, or (ii) the maximum
amount permitted by law. All interest shall be computed on the basis of
actual days elapsed over a 360-day year.
This Term WCMA Note constitutes and includes both the "Term Note" and the "WCMA
Note" referred to in, and is entitled to all of the benefits of, that certain
WCMA AND TERM WCMA LOAN AND SECURITY AGREEMENT NO. 9608340801 between Customer
and MLBFS (the "Loan Agreement'). Capitalized terms used herein and not defined
herein shall have the meaning set forth in the Loan Agreement. The Loan
Agreement is by this reference hereby incorporated as a part hereof,
If Customer shall fail to pay when due any installment or other sum due
hereunder and any such failure shall continue for more than 5 Business Days
after written notice thereof from the holder hereof to Customer, or if any other
"Event of Default", as that term is defined in the Loan Agreement, shall occur
and be continuing, then at the option of the holder hereof, and in addition to
all other rights and remedies available to such holder under the Loan Agreement
and otherwise, an amount equal to the sum of the WCMA Loan Balance and the Term
Note Balance at such time remaining unpaid, together with accrued interest
thereon and all other sums then owing by Customer under the Loan Agreement, may
be declared to be and thereby become immediately due and payable.
Page 31
It is expressly understood, however, that nothing contained in the Loan
Agreement, any other agreement, instrument or document executed by Customer, or
otherwise, shall affect or impair the right, which is unconditional and
absolute, of the holder hereof to enforce payment of all sums due under this
Term WCMA Note at or after maturity, whether by acceleration or otherwise, or
shall affect the obligation of Customer, which is also unconditional and
absolute, to pay the sums payable under this Term WCMA Note in accordance with
its terms. Except as otherwise expressly set forth herein or in the Loan
Agreement, Customer hereby waives presentment, demand for payment, protest and
notice of protest, notice of dishonor, notice of acceleration, notice of intent
to accelerate and all other notices and formalities in connection with this Term
WCMA Note.
Wherever possible each provision of this Term WCMA Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Term WCMA Note shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Term WCMA Note. Notwithstanding any provision to the
contrary in this Term WCMA Note, the Loan Agreement or any of the "Additional
Agreements" (as defined in the Loan Agreement), no provision of this Term WCMA
Note, the Loan Agreement or any of the Additional Agreements shall require the
payment or permit the collection of any amount in excess of the maximum amount
of interest permitted to be charged by law ("Excess Interest"). If any Excess
Interest is provided for, or is adjudicated as being provided for, in this Term
WCMA Note, the Loan Agreement or any of the Additional Agreements, then: (a)
Customer shall not be obligated to pay any Excess Interest; and (b) any Excess
Interest that MLBFS may have received under this Term WCMA Note, the Loan
Agreement or any of the Additional Agreements shall, at the option of MLBFS, be:
(i) applied as a credit against the then unpaid principal balance of this Term
WCMA Note, or accrued and unpaid interest hereon not to exceed the maximum
amount permitted by law, or both, (ii) refunded to the payor thereof. or (iii)
any combination of the foregoing.
This Term WCMA Note shall be construed in accordance with the laws of the State
of Illinois and may be enforced by the holder hereof in any jurisdiction in
which the Loan Agreement may be enforced.
IN WITNESS WHEREOF, this Term WCMA Note has been executed by Customer as of the
day and year first above written.
U.S. LONG DISTANCE, INC.
By: /S/ XXXX XXXXXX /S/ XXXXX X. XXXXX
-------------------- ----------------------
Signature (1) Signature (2)
XXXX XXXXXX XXXXX X. XXXXX
-------------------- ----------------------
Printed Name Printed Name
Page 32
SR. V.P. & CFO PRESIDENT & CEO
-------------------- ----------------------
Title Title
