LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made July 31
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199k between the Borrower
and Lender identified in the attached Authorization issued by the U.S.
Small Business Administration ("SBA")to Lender, dated July 15 1998
("Authorization")
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SBA has authorized a guaranty of a loan from Lender to Borrower for the amount
and under the terms stated in the attached Authorization (the "Loan").
In consideration of the promises in this Agreement and for other good and
valuable consideration, Borrower and Lender agree as follows:
1. Subject to the terms and conditions of the Authorization and SBA's
Participating Lender Rules as defined in the Guarantee Agreement
between Lender and SBA, Lender agrees to make the Loan if Borrower:
a. Provides Lender with all certifications, documents, or other
information Lender is required by the
Authorization to obtain from Borrower or any third party;
b. Executes a note and any other documents required by Lender; and
c. Does everything necessary for Lender to comply with the terms and
conditions of the Authorization
("Borrower's Obligations").
2. The terms and conditions of this Agreement:
a. Are binding on Borrower and Lender and their successors and
assigns;
b. Will remain in effect after the closing of the Loan,
3 Failure to abide by any of the Borrower's Obligations or terms of the
Authorization that pertain to the Borrower nstitute an eve of default under
er the note and other loan documents.
Lender:
BancFirst Commercial Capital
000 X. Xxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
SBA approves, under Section 7(a) of the Small Business Act as amended,
Lender's application, received 7-8-98, for SBA to guarantee 75% of a loan
("Loan') in the amount of $l,000,000,00 to assist:
Borrower:
I. Ethos communications Corp. 00000 Xxxx Xxxx
Xxxxxx, XX 00000
A. THE GUARANTEE FEE IS $25,937.50. Lender must pay the guarantee fee
within 90 days of the date of this Authorization or immediately after
initial disbursement, whichever comes first. The 90-day deadline may not
be extended. Lender must send the guarantee fee to the Small Business
Administration, Xxxxxx, XX 00000-0000. Lender may collect this fee from
Borrower after initial disbursement of Loan. Borrower may use Loan
proceeds to pay the fee. No part of the guarantee fee is refundable if
Lender has made any disbursement.
B. ONGOING SERVICING FEE - Lender agrees to pay an ongoing fee equal
to one-half of one percent per year of the guaranteed portion of the
outstanding balance. Lender may not charge this fee to Borrower.
C. IT IS LENDER'S SOLE RESPONSIBILITY TO:
1. Close the Loan in accordance with the terms and conditions of this
Authorization.
2. Obtain valid and enforceable Loan documents, including obtaining
the signature or written consent of any obligor's spouse if such
consent or signature is necessary to bind the marital community or
create a valid lien on marital property.
3. Retain all Loan closing documents. Lender must submit these
documents, along with other required documents, to SBA for review if Lender
requests SBA to honor its guarantee on the Loan, or at anytime SBA requests
the documents for review.
i. Lender may use its own forms except as otherwise instructed in this
AuthOriZatiOn. Lender must use the
following SBA forms for the Loan:
SBA Form 147, Note
SBA Form 1050, Settlement Sheet, for each disbursement SBA Form 159,
Compensation Agreement, for each representative SBA Form 2004, Lender's
Certification SBA Form 722, Equal Opportunity Poster SBA Form 793, Notice to New
Borrowers SBA Form 148, Guarantee
2. Lender may use computer-generated versions of mandatory SBA Forms,
as long as these versions are exact reproductions.
3. Lenders must submit completed SBA Forms 159 and 2004 for non-PLP
loans to the SBA immediately after
final disbursement.
E. CONTINGENCIES - SBA issues this Authorization in reliance on representations
in the Loan application, including supporting documents. The guarantee Is
contingent upon Lender:
i. Complying with the current SBA Standard Operating Procedures (SOP)
and SBA Loan Guarantee Agreement (SBA Form 750, dated 7-2-90), and any
supplemental agreements, between Lender and SBA;
2. Making initial disbursement of the Loan no later than 12 months, and
completing disbursement no later than 12 months, from the date of this Author
zation, unless SBA extends the time in writing;
3. Having no evidence since the date of the Loan application, or any
preceding disbursement, of any unremedied adverse change in the financial
condition, organization, operations. or fixed assets of Borrower which
would warrant withholding or not making any further disbursement, and;
4 satisfying all of the conditions in this Authorization.
F. NOTE TERMS:
i. Maturity: This Note will mature in 7 year(s) from date of Note.
2 Repayment Terms: Lender must insert onto SBA Note, Form 147, to be executed by
Borrower, the following repayment terms, without modification. Lender must
complete all blank terms on the Note at time of closing:
The interest rate on this Note will fluctuate. The initial interest rate is 11%
per year. This initial rate is the prime rate on the date SBA received the loan
application, plus 2.5%.
Borrower must pay principal and interest payments of SI 7,123.00 every month,
beginning one month from the month of this Note; payments must be made on the 31
st calendar day in the months they are due.
Lender will apply each installment payment first to pay interest accrued to the
day Lender receives the payment, then to bring principal current, then to pay
any late fees, and will apply any remaining balance to reduce pnncipal.
Lender may adjust the interest rate for the first time no earlier than the first
calendar day of the first month after initial disbursement. The interest rate
will then be adjusted quarterly (the "change period').
The `Prime Rate" is the prime rate published in the Wall Street Journal, in
effect on the first business day of the month in which a change occurs.
The adjusted interest rate will be 2.5% above the Prime Rate. Lender will adjust
the interest rate on the first calendar day of each change period. The change in
interest rate is effective on that day whether or not Lender gives Borrower
notice of the change.
Lender must adjust the payment amount at least annually as needed to amortize
principal over the remaining term of the note.
If SBA purchases the guaranteed portion of the unpaid principal balance, the
interest rate becomes fixed at the rate in effect at the time of the earliest
uncured payment default. If there is no uncured payment default, the rate
becomes fixed at the rate in effect at the time of purchase.
All remaining principal and accrued interest is due and payable 7 year(s) from
date of Note.
Borrower agrees that if default occurs on this Note or on any other outstanding
SBA or SBA-guaranteed loan, Lender has the option to make this Note and such
other loans immediately due and payable.
G. USE OF PROCEEDS
I. Si ,000,000.00 to purchase the business known as Ethos Communications Corp.,
according to the executed Purchase Agreement dated 6-1 1-98.
All amounts listed above are approximate, Lender may not disburse Loan proceeds
solely to pay the guarantee fee. Lender may disburse to Borrower, as working
capital only, funds not spent for the listed purposes as long as these funds do
not exceed 10% of the specific purpose authorized or S 10,000.00, whichever is
less. An Eligible Passive Company may not receive working capital funds.
Lender must complete SBA Form 1050, Settlement Sheet, for each disbursement and
retain these forms in its Loan file. Lender must document that Borrower used the
loan proceeds for the purposes stated in this Authorization
Lender must obtain a lien on 100% of the interests in the following collateral
and properly perfect all lien positions:
First Perfected Security Interest, subject to no other liens, in the following
personal property, whether now owned or later acquired, wherever located, and
the proceeds therefrom: Equipment; Fixtures; Inventory; Accounts; Instruments;
Chattel Paper; General Intangibles;
a. Lender must obtain a written agreement from all Lessors (including
sublessors) agreeing to: (1) Subordinate to Lender Lessor's interest, if any, in
this property; (2) Provide Lender written notice of default and reasonable
opportunity to cure the default; and (3) Allow Lender the right to take
possession and dispose of or remove the collateral.
b. Lender must obtain a list of all equipment and fixtures that are collateral
for the Loan. For items with a unit value of $500 or more, the list must include
a description and serial number, if applicable.
c. Lender must obtain an appropriate Uniform Commercial Code lien search
evidencing all required lien positions. If UCC search is not available, another
type of lien search may be substituted.
2. Guarantee on SBA Form 148, by Xxxxxx X. Xxxxx, resident in
Oklahoma.
The following language must appear in all lien instruments including Mortgages,
Deeds of Trust, and Security Agreements:
"The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners. If the United Slates is seeking to enforce this document, then
under SBA regulations.
a) When SBA is the holder of the Note, this document and all documents
evidencing or securing this Loan will be construed in accordance with federal
law.
b) Lender or SBA may use local or state procedures for purposes such as filing
papers, recording documents, giving notice, foreclosing liens, and other
purposes. By using these procedures, SBA does not waive any federal immunity
from local or state control, penalty, tax or liability. No Borrower or Guarantor
may claim or assert against SBA any local or state law to deny any obligation of
Borrower, or defeat any claim of SBA with respect to this Loan.
ADDITIONAL CONDITIONS
Insurance Requirements
Prior to disbursement, Lender must require Borrower to obtain the following
insurance coverage and maintain this coverage for the life of Loan:
a. Flood Insurance. If FEMA Form 81-93 reveals that any portion of the
collateral is located in a special flood hazard zone, Federal flood insurance or
other appropriate special hazard insurance in amounts equal to the lesser of the
insurable value of the property or the maximum limit of coverage available is
required. (Borrower will be ineligible for any future SBA disaster assistance or
business loan assistance if Borrower does not maintain flood insurance for the
entire term of the Loan.)
b. Personal Property Hazard Insurance coverage on all equipment, fixtures or
inventory that is collateral for the Loan, in the amount of full replacement
costs. If full replacement cost insurance is not available, coverage should be
for maximum insurable value. This policy must contain a LENDERS LOSS PAYABLE
CLAUSE in favor of Lender. This clause must provide that any act or neglect of
the debtor or owner of the insured property will not invalidate the interest of
Lender. The policy or endorsements must provide for at least 10 days prior
written notice to Lender of policy cancellation.
c. Life Insurance, satisfactory to Lender: (1) on the life of Xxxxxx X. Xxxxx in
the amount of $1,000,000.00.
Lender must obtain a collateral assignment of each policy with Lender as
assignee which provides that Insurer will give Lender at least 30 days written
notice of payment default and a right to cure. Lender must also obtain
acknowledgment of the assignment by the Home Office of the Insurer.
2.Borrower, Guarantor and Operating Company Documents
a.Prior to closing, Lender must obtain from Borrower, Guarantor and Operating
Company a current copy of each of the following as appropriate: (1)Corporate
Documents - Articles or Certificate of Incorporation (with amendments), any
By-laws, Certificate of Good Standing (Or equivalent), Corporate Borrowing
Resolution, and, if a foreign corporation, current authority to do business
within this state.
(2)LImited Liability Company (LLC) Documents - Articles of Organization (with
amendments), Fact Statement or Certificate of Existence, Operating Agreement,
Borrowing Resolution, and evidence of any state-required registration.
(3) General Partnership Documents
(6) Trustee Certification - A Certificate from the trustee warranting that:
(a) The trust will not be revoked or substantially amended for the term of the
Loan without the consent of SBA; (b) The trustee has authority to act; (c) The
trust has the authority to borrow funds, guarantee loans, and pledge trust
assets, (d) If the trust is an Eligible Passive Company, the trustee has
authority to lease the property to the
Operating Company;
(e) There is nothing in the trust agreement that would prevent Lender from
realizing on any security interest in trust assets;
(f) The trustee has provided accurate, pertinent language from the trust
agreement confirming the above; and (g) The trustee has provided and will
continue to provide SBA with a true and complete list of all trustors and
donors.
3. Operating Information
Prior to any disbursement of Loan proceeds, Lender must obtain:
a. Verification of Financial Information.. Lender must submit IRS Form 4506 to
the Internal Revenue Service to obtain federa] income tax information on
Borrower for the last three (3) years (unless Borrower is a startup business).
If the business has been operating for less than 3 years Lender must obtain the
information for all years in operation. This requirement does not include tax
information for the most recent fiscal year if the fiscal year-end is within 6
months of the application date. Lender must compare the tax data received from
the IRS with the financial data or tax returns submitted with the Loan
application, and relied upon in approving the loan. Borrower must resolve any
significant differences to the satisfaction of Lender and SBA before Lender
disburses Loan proceeds.
x.Xxxxx Name - Evidence Borrower has complied with state requirements for
registration of Borrower's trade name (or fictitious name),
c.Authority to Conduct Business - Evidence that the Borrower has an Employer
Identification Number and all insurance, licenses, permits and other
approvals necessary to lawfully operate the business.
x. Xxxxx Hazard Determination - A completed Standard Flood Hazard Determination
(FEMA Form 81-93).
e. Lease - Current lease(s) on all business premises where collateral is located
with term, including options, at least as long as the term of the Loan,
4. Certifications and Agreements
Lender must require Borrower to certify:
a.Child Support - That no principal who owns at least 50% of the voting
Interest of the company is delinquent more than 60 days under the terms of
any (I) administrative order, (2) court order, or (3) repayment agreement
requiring payment of child support.
b. Current Taxes - Borrower is current on all federal, state, and local
taxes, including but not limited to income taxes, payroll taxes, real
estate taxes, and sales taxes.
c. That Borrower will: (1) Reimbursable Expenses- Reimburse Lender for expenses
incurred in the making and administration of the Loan. (2) Books, Records, and
Reports- (a) Keep proper books of account in a manner satisfactory to Lender;
(b) Furnish year-end statements to Lender within 60 days of fiscal year end; (c)
Furnish additional financial statements or reports whenever Lender requests
them; (d)Allow Lender or SBA, at Borrower's expense, to:
Inspect and audit books, records and papers relating to Borrower's financial or
business condition; and Inspect and appraise any of Borrower's assets; and
Allow all government authorities to furnish reports of examinations, or any
records pertaining to Borrower, upon request by Lender or SBA.
(3)Equal Opportunity - Post SBA Form 722, Equal Opportunity Poster, where it is
clearly visible to employees, applicants for employment and the general public,
and comply with the requirements of SBA Form 793, Notice to New SBA Borrowers.
(4)American-made Products - To the extent feasible, purchase only American-made
equipment and products with the proceeds of the Loan.
(5)Taxes - Pay all federal, state, and local taxes, including income, payroll,
real estate and sales taxes of the business when they come due.
d. That Borrower will not, without Lender's prior written consent:
(1)Distributions- Make any distribution of company assets that will adversely
affect the financial condition of Borrower.
(2)Ownership Changes - Change the ownership structure or interests in the
business during the term of the Loan.
(3)Transfer of Assets - Sell, lease, pledge, encumber (except by purchase
money liens on property acquired after the date of the Note), or otherwise
dispose of any of
Borrower's property or assets, except in the ordinary course of business.
Borrower acknowledges that:
I. Borrower has received a copy of this Authorization and SBA Form 793, Notice
to New SBA Borrower, from Lender.
2. SBA requires the above conditions to guarantee Loan. 3. This Authorization is
a commitment by Lender to make a loan to Borrower;
4. This Authorization is between Lender and SBA and creates no third party
rights or benefits to Borrower;
5. The Loan Note will require Borrower to give Lender prior notice of intent to
prepay.
6. If Borrower defaults on Loan, SBA may be required to pay Lender under the SBA
guarantee. SBA may then seek recovery of these funds from Borrower. Under SBA
regulations, 13 CFR Part 101, Borrower may not claim or assert against SBA any
immunities or defenses available under local law to defeat, modify or otherwise
limit Borrower's obligation to repay to SBA any funds advanced by Lender to
Borrower.
7. Payments by SBA to Lender under SBA's guarantee will not apply to the Loan
account of Borrower, or diminish the indebtedness of Borrower under its Note or
the obligations of any personal guarantor of the Note.
