Exhibit 10.13
SECOND AMENDED AND RESTATED
EQUIPMENT LOAN AND SECURITY AGREEMENT
This SECOND AMENDED AND RESTATED EQUIPMENT LOAN AND SECURITY AGREEMENT
("Agreement"), dated as of January 28, 1998, is by and between the
following parties:
LENDER/SECURED PARTY: NTFC CAPITAL CORPORATION, a Delaware corporation
with offices at 000 Xxxxxx Xxx, Xxxxxxxxx,
Xxxxxxxxx 00000 ("Lender")
ECONOPHONE/BORROWER/DEBTOR: ECONOPHONE, INC., a New York corporation with
its principal place of business at 00 Xxxxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 ("Borrower"), and such
successors and assigns as may be permitted
hereunder.
This Agreement amends and restates that certain Equipment Loan and Security
Agreement dated as of May 28, 1996, between Econophone and Lender, as first
amended by that certain letter agreement dated November 18, 1996, and as
subsequently amended and restated and joined in by American Telemedia, Ltd.
("ATL") as of March 27, 1997, and further amended by that First Amendment to
Amended and Restated Equipment Loan and Security Agreement dated as of April
24, 1997, by that Second Amendment to Amended and Restated Equipment Loan and
Security Agreement dated as of June 26, 1997, by that Third Amendment to
Amended and Restated Equipment Loan and Security Agreement, dated as of August
7, 1997, and by that Fourth Amendment to Amended and Restated Loan and
Security Agreement, dated as of December 31, 1997, includes the general terms
and conditions contained herein and all the exhibits and schedules attached
hereto, all of which are incorporated herein. In the event of a conflict
between the general terms and conditions and any schedule, the additional
terms and conditions stated in the schedule shall control.
By executing this Agreement, Lender agrees to make loans to Borrower, and
Borrower agrees to borrow from Lender and to provide collateral to secure such
loans, all on the terms and conditions set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives:
LENDER: BORROWER:
------ ---------
NTFC CAPITAL CORPORATION ECONOPHONE, INC.
BY: /s/ Xxxxxxxx Xxxxxxxxx BY: /s/ XXXXXXX X. XXXXXXX, XX.
TITLE:__________________ TITLE: Senior Vice President and General
Cousel
DATE: January 28, 1998 DATE: January 28, 1998
AMERICAN TELEMEDIA, LTD.
BY: /S/ XXXXXX XXXX
TITLE: Chief Executive Officer
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS 1
1.01. Certain Definitions 1
1.02. Accounting Principles; Subsidiaries 9
1.03. UCC Terms 10
1.04. General Construction; Captions 10
1.05. References to Documents and Laws 10
ARTICLE 2: LOANS 10
2.01. Commitment 10
2.02. Note and Payment Terms 10
2.03. Procedures for Borrowing 12
2.04. Prepayments 13
2.05. Computation of Interest 13
2.06. Payments 13
2.07. Indemnity 14
2.08. Use of Proceeds 14
2.09. Fees 14
2.10. Lender's Expenses 14
ARTICLE 3: COLLATERAL AND SECURITY AGREEMENT 15
3.01. Grant of Security Interest 15
3.02. Priority of Security Interests 16
3.03. Further Documentation; Pledge of Instruments 16
3.04. Further Identification of Collateral 16
3.05. Remedies 16
3.06. Standard of Care 16
3.07. Advances to Protect Collateral 16
3.08. License to Use 17
3.09 Priority of Security Interests and/or Liens on Equipment
located outside of the United States 17
ARTICLE 4: REPRESENTATIONS AND WARRANTIES 17
4.01. Organization and Qualification 17
4.02. Authority and Authorization 17
4.03. Execution and Binding Effect 17
4.04. Governmental Authorizations 18
4.05. Regulatory Authorizations 18
4.06. Material Agreement; Absence of Conflicts 18
4.07. No Restrictions 18
4.08. Financial Statements 18
4.09. Financial Accounting Practices 18
4.10. Accurate and Complete Disclosure 19
4.11. No Event of Default; Compliance with Material Agreements 19
4.12. Litigation 19
4.13. Rights to Property 19
4.14. Financial Condition 19
ii
4.15. Taxes 19
4.16. No Material Adverse Change 20
4.17. No Regulatory Event 20
4.18. Trade Relations 20
4.19. No Brokerage Fees 20
4.20. Margin Stock; Regulation U 20
4.21. Investment Company; Public Utility Holding Company 20
4.22. Personal Holding Company 20
4.23. ERISA 20
4.24. Environmental Warranties 21
4.25. Security Interests 21
4.26. Place of Business 21
4.27. Location of Collateral 21
4.28. Clear Title To Collateral 21
4.29. Assumed Names 21
4.30. [INTENTIONALLY OMITTED] 21
4.31. NTI Purchase Agreement 22
ARTICLE 5: CONDITIONS OF CLOSING 22
5.01 Initial Closing 22
5.02 Tranche 3 Closing 23
ARTICLE 6: CONDITIONS OF LENDING 24
6.01. Conditions for Initial Advance 24
6.02. Conditions for All Advances 25
6.03. Affirmation of Representations and Warranties 26
6.04. Deadline for Funding Conditions 26
ARTICLE 7: AFFIRMATIVE COVENANTS 26
7.01. Reporting and Information Requirements 27
7.02 Other Notices 28
7.03. Notice of Pension-Related Events 28
7.04. Inspection Rights 28
7.05. Preservation of Corporate Existence and Qualification 29
7.06. Continuation of Business 29
7.07. Insurance 29
7.08. Payment of Taxes, Charges, Claims and Current
Liabilities 30
7.09. Financial Accounting Practices 31
7.10. Compliance with Laws 31
7.11. Use of Proceeds 31
7.12. Government Authorizations; Regulatory Authorizations, Etc 31
7.13. Contracts and Franchises 31
7.14. Consents 31
7.15. Financial Covenants 31
7.16. Construction and Storage 31
7.17. Upgrade NTI Equipment 32
ARTICLE 8: NEGATIVE COVENANTS 32
iii
8.01. Additional Indebtedness 32
8.02. Restrictions on Liens and Sale of Collateral 32
8.03. Limitation on Contingent Obligations 33
8.04. Fees and Commissions 33
8.05. Prohibition of Mergers, Acquisitions, Name, Office or
Business Changes 33
8.06. Limitation on Equity Payments 33
8.07. Limitation on Investments, Advances and Loans 34
8.08. Capital Expenditures 34
8.09. Limitation on Leases 34
8.10. Transactions with Affiliates 34
8.11. Termination of NTI Purchase Agreement 34
8.12. Removal of Collateral 34
8.13. Assumed Names 35
ARTICLE 9: EVENTS OF DEFAULT 35
9.01. Events of Default 35
9.02. Consequences of an Event of Default 38
9.03. Exercise of Rights 38
9.04. Rights of Secured Party 38
9.05. Notices, Etc. Waived 38
9.06. Additional Remedies 39
9.07. Application of Proceeds 39
9.08. Discontinuance of Proceedings. 39
9.09. Power of Attorney 39
9.10. Regulatory Matters 40
ARTICLE 10: GENERAL CONDITIONS/MISCELLANEOUS 41
10.01. Modifications and Waivers 41
10.02. Advances Not Implied Waivers 41
10.03. Deviation from Covenants 41
10.04. Holidays 42
10.05. Records 42
10.06. Notices 42
10.07. FCC and PUC Approval 42
10.08. Lender Sole Beneficiary 43
10.09. Lender's Review of Information 43
10.10. No Joint Venture 43
10.11. Severability 43
10.12. Rights Cumulative 43
10.13. Duration; Survival 43
10.14. Governing Law 43
10.15. Counterparts 43
10.16. Successors and Assigns 44
10.17. Participation 44
10.18. Time of Essence 44
10.19. Disclosures and Confidentiality 44
10.20. Jurisdiction and Venue 46
10.21. Jury Waiver 46
iv
10.22. Limitation on Liability 46
10.23. Borrower Waivers 46
10.24. Schedules 47
10.25. Agreement to Govern 47
10.26. Entire Agreement 47
v
SCHEDULES TO EQUIPMENT LOAN AND SECURITY AGREEMENT
Schedule 1 Borrower Information and Defined Terms
Schedule 2.01 Maximum Loan Amount
Schedule 2.02 Payment Terms and Governing Law
Schedule 2.09 Fees
Schedule 4.04 Required Consents
Schedule 4.05 Regulatory Authorizations
Schedule 4.07 Restrictions on Loans
Schedule 4.08 Financial Statements
Schedule 4.12 Pending Litigation
Schedule 4.25 UCC Filing Offices
Schedule 4.26 Principal Offices and Location of Collateral
Schedule 4.29 Assumed Names
Schedule 4.31 NTI Purchase Agreement
Schedule 6.02 Post-Closing Items
Schedule 7.07 Insurance
Schedule 7.15 Financial Covenants
Schedule 8.01 Permitted Specific Indebtedness
Schedule 8.02 Permitted Specific Encumbrances
Schedule 8.06 Permitted Equity Payments
EXHIBITS TO EQUIPMENT LOAN AND SECURITY AGREEMENT
Exhibit A Form of Note
Exhibit B Form of Borrowing Certificate
Exhibit C Form of Opinion of Counsel for Borrower
Exhibit D [INTENTIONALLY OMITTED]
Exhibit E Form of Landlord's Consent
Exhibit F Certificate of Financial Condition
Exhibit G Form of Guaranty
Exhibit H Form of Indenture
Exhibit I Form of Memorandum Draft
vi
SECOND AMENDED AND RESTATED
EQUIPMENT LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED EQUIPMENT LOAN AND SECURITY AGREEMENT
("Agreement") dated as of January 28, 1998, is by and among ECONOPHONE, INC.,
a New York corporation ("Econophone"), AMERICAN TELEMEDIA, LTD, an English
corporation ("ATL") and wholly owned subsidiary of Econophone (Econophone and
ATL each a "Borrower" and, collectively with such additional subsidiaries of
Econophone as may become a Borrower pursuant to Section 2.11, the "Borrowers")
and NTFC CAPITAL CORPORATION, a Delaware corporation ("Lender"), with offices
at 000 Xxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxx 00000.
B A C K G R O U N D:
A. Econophone has entered into a certain purchase agreement with
Northern Telecom Inc., as described on Schedule 1 hereto, providing for the
purchase of certain telecommunications equipment and the license of associated
software, all as described therein, and has requested Lender to extend credit
to the Borrowers to finance such purchase and license, as described on
Schedule 1 hereto.
B. Econophone, ATL and Lender previously entered into the Original Loan
Agreement, pursuant to which the Lender agreed to loan Econophone up to Five
Million Dollars ($5,000,000) subject to the terms and conditions stated in the
Original Agreement, and
C. Econophone and ATL have requested Lender to amend and restate the
Original Loan Agreement and all amendments thereto pursuant to this Agreement
to extend additional credit subject to the terms and conditions set forth in
this Agreement, and Lender is willing to extend such credit upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE 1: DEFINITIONS
1.01. Certain Definitions. Certain terms are defined on Schedule 1
hereto. In addition to other words and terms defined in the preamble hereof
or elsewhere in this Agreement, or on the Schedules hereto, the following
words and terms shall have the following meanings unless the context otherwise
clearly requires:
"Additional Equipment": any equipment and/or Software purchased by a
Borrower in furtherance of or in connection with the Description of Business
set forth on Schedule 1, other than the purchase of the Equipment or Software
with the Advances.
"Additional Borrower Obligations": in the case of any Borrower other than
Econophone, all Indebtedness, liabilities and obligations of such Borrower to
Lender of any class or nature, whether arising under or in connection with
this Agreement and/or the other Loan Documents or otherwise, whether now
existing or hereafter incurred, direct or indirect, absolute or contingent,
secured or unsecured, matured or unmatured, joint or several, whether for
principal, interest, fees, expenses, lease obligations indemnities or
otherwise, including, without limitation, future advances of any sort, all
future
advances made by Lender for taxes, levies, insurance and/or repairs to or
maintenance of the Collateral, the unpaid principal amount of, and accrued
interest on, each Note executed by such Borrower, and any expenses of
collection or protection of Lender's rights, including reasonable attorneys'
fees.
"Advance(s)": any advance or loan of funds made by Lender to a Borrower
pursuant to this Agreement.
"Affiliate": as applied to any Person, any second Person directly or
indirectly controlling, controlled by, or under common control with that
Person, or related to such Person by blood, marriage or adoption. For purposes
of this definition and the definition of "Subsidiary", a Person shall be
deemed to control another Person if such first Person possesses, directly or
indirectly, the power to direct, or to cause the direction of, the management
and policies of such other Person, whether through ownership of voting
securities, by contract or otherwise.
"Affiliate Transaction": the merger of a Borrower with an Affiliate of
a Borrower or a Subsidiary thereof, whether the Borrower, such Affiliate of
a Borrower or a Subsidiary thereof, or another entity is the surviving entity,
or other combination involving a Borrower and Affiliate, provided that (i)
such Affiliate Transaction does not cause a Change of Control of Econophone;
(ii) the surviving corporation is a Subsidiary of Econophone and assumes the
obligations of such Borrower hereunder in writing reasonably satisfactory to
Lender; (iii) on or before the consummation of such transaction, Lender
receives an opinion of counsel to the surviving company with respect to such
matters as Lender deems reasonably necessary (including, but not limited to,
the validity and enforceability of the written assumption by such successor
and the continued priority and perfection of the security interests on the
Collateral in favor of the Lender); and (iv) immediately prior to, and after
giving effect to, such merger or consolidation and any assumption by such
successor of such Borrower's obligations hereunder, there shall not exist a
Default or Event of Default.
"Basic Agreements": a collective reference to this Agreement, each Note,
and the Security Documents.
"Borrowing Certificate": a certificate substantially in the form of
Exhibit B hereto designating the applicable Borrower hereunder, and executed
by Econophone and the applicable Borrower, if other than Econophone.
"Borrower": Econophone, ATL and such additional Subsidiaries of
Econophone as may become a Borrower pursuant to Section 2.11 of this
Agreement.
"Borrowing Date": any Business Day on which an Advance is made to a
Borrower hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks in Nashville, Tennessee are authorized or required by law to
close.
"Calendar Quarter": each three month period starting on each January 1,
April 1, July 1, and October 1, during the term of this Agreement.
"Cash": at any time, the cash, cash equivalents or marketable investment
grade securities held by Econophone or its Subsidiaries free of any claims or
encumbrances.
2
"Cash Flow": during any fiscal period of Econophone, the sum (on a
consolidated basis) of (i) net income (or loss) (which may be a positive or
negative number) for such period, plus (ii) all non-cash items deducted in
determining such net income (or loss), minus (iii) all non-cash items added
in determining such net income (or loss) during such period, less (iv) any
Equity Payments pursuant to Section 8.06 hereof or payments on Subordinated
Indebtedness made during such period.
"Certificate of Financial Condition": a certificate in the form of
Exhibit F hereto, executed by Borrower.
"Change in Control": means such time as (i) (a) prior to the
occurrence of a Public Market, a "person" or "group" (within the meaning of
Section 13(d) or 14(d)(2) under the Exchange Act) becomes the ultimate
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934 (the "Exchange Act") of voting stock representing a greater
percentage of the total voting power of the voting stock of Econophone, on
a fully diluted basis, than is held by the Existing Stockholders and their
Affiliates on such date and (b) after the occurrence of a Public Market, a
"person" or "group" (within the meaning of Section 13(d) or 14(d)(2) under
the Exchange Act) of more than 35% of the total voting power of the voting
stock of Econophone on a fully diluted basis and such ownership represents
a greater percentage of the total voting power of the voting stock of
Econophone, on a fully diluted basis, than is held by the Existing
Stockholders and their Affiliates on such date; or (ii) individuals who on
the Tranche 3 Closing Date constitute the board of directors (together with
any new directors whose election by the board of directors or whose
nomination for election by Econophone's stockholders was approved by a vote
of at least two-thirds of the members of the board of directors then in
office who either were members of the board of directors on the Tranche 3
Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of
the Board of Directors then in office.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": as defined in Section 3.01 hereof and any other property
granted as security to Lender for Obligations hereunder.
"Commitment": the Tranche 1 Commitment, the Tranche 2 Commitment, and
the Tranche 3 Commitment, as defined in Section 2.01 hereof.
"Communications Law": any and all of (i) the Communications Act of
1934, as amended, and any similar or successor federal statute, and the
rules and regulations of the FCC thereunder, (ii) any state law governing
the provision of telecommunications services, and the rules and regulations
of the PUC, all as the same may be in effect from time to time.
"Consent": a consent to a collateral assignment of the NTI Purchase
Agreement and Landlord Consents.
"Contingent Obligation": as to any Person, any obligation of such
Person guaranteeing, directly or indirectly, any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or
not contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or
3
equity capital of the primary obligor or otherwise to maintain the net worth
or solvency of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof.
"Debt Service": for any fiscal period of Econophone, the sum of all
principal and interest payments that Econophone is required to make during
such period on a consolidated basis on account of all of Indebtedness
including, without limitation, (a) amounts due during such period on account
of capitalized leases, (b) the then current portion of any long-term
Indebtedness, (c) amounts due on short-term Indebtedness, and (d) amounts due
under this Agreement and each Note.
"Debt Service Coverage Ratio": at the end of any fiscal period, the ratio
of Cash Flow for such fiscal period to Debt Service for such fiscal period.
"Default": any of the conditions or occurrences specified in
Section 9.01, whether or not any requirement for the giving of notice, the
lapse of time, or both, or any other condition has been satisfied.
"Default Rate": a rate of interest equal to the lesser of (i) three
percent (3%) over the Interest Rate, or (ii) the maximum permissible rate
under applicable law in effect at any time.
"EBITDA": for any fiscal period, on a consolidated basis, Econophone's
actual operating earnings from ongoing operations and before interest, taxes,
depreciation and amortization for such fiscal period.
"Econophone Obligations": all indebtedness, liabilities and obligations
of Econophone to Lender of any class or nature, whether arising under or in
connection with this Agreement and/or the other Loan Documents or otherwise
, whether now existing or hereafter incurred, direct or indirect, absolute or
contingent, secured or unsecured, matured or unmatured, joint or several,
whether for principal, interest, fees, expenses, lease obligations,
indemnities or otherwise, including, without limitation, future advances of
any sort, all future advances made by Lender for taxes, levies, insurance
and/or repairs to or maintenance of the Collateral, the unpaid principal
amount of, and accrued interest on, each Note executed by Econophone, the
Guaranty and any expenses of collection or protection of Lender's rights,
including reasonable attorneys' fees.
"Environmental Law": any current or future federal, state and local law
(including common law), statute, regulation, ordinance, rulings, codes,
judicial order, administrative order or terms of licenses or permits
applicable to environmental conditions (including without limitation
conditions relating to ambient air, surface water, groundwater, land surface
or subsurface strata), including without limitation all such laws governing
employment, the generation, use, storage, disposal or transportation of toxic
or hazardous substances or wastes (including, without limitation, asbestos and
petroleum products), the Comprehensive Environmental Response, Compensation
and Liability Act, the Resource Conservation and Recovery Act, the Superfund
Amendment and Reauthorization Act of 1986, the Toxic Substances Control Act,
the Clean Air Act, the Water Pollution Control Act, the Hazardous Waste
Management Act, the Mineral Lands and Leasing Act, the Surface Mining Control
and Reclamation Act, U.S. Department of Transportation Regulations, and all
similar state and local laws, regulations, all as now or hereafter amended.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statute.
4
"Equipment": as defined in Section 3.01 hereof.
"Equity Payment": any distribution of earnings or capital to any Owner
with respect to such Owner's stock or other equity ownership interests, or any
redemption of stock or other equity ownership interests, either directly or
indirectly, whether in cash or property or in obligations of Econophone or any
of its Subsidiaries.
"Event of Default": any of the events specified in Section 9.01 hereof,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, under Section 9.01 or otherwise, has been
satisfied.
"Existing Stockholders" means Xxxxxx Xxxx, Xxxxxx Xxxx and any spouse or
lineal descendant thereof or any estate thereof or any trust of which any of
the foregoing are the exclusive beneficiaries.
"FCC": the Federal Communications Commission of the United States of
America, and any successor, in whole or in part, to its jurisdiction.
"Financing Termination Date": the Tranche 1, Tranche 2 or Tranche 3
Financing Termination Date.
"GAAP": subject to Section 1.02 hereof, generally accepted accounting
principles in the United States of America (as such principles may change from
time to time) applied on a consistent basis (except for changes in application
in which Econophone's independent certified public accountants concur),
applied both to classification of items and amounts.
"General Intangibles": as defined in Section 3.01 hereof.
"Governmental Actions": actions by any Governmental Authority.
"Governmental Authority": the federal government, any state or political
subdivision thereof, any city or municipal entity, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guaranty": the guaranty dated the date hereof in favor of Lender
executed by Econophone in the form of Exhibit G.
"High Yield Notes": $155,000,000 principal amount (or such higher amount
as may be issued) of Econophone's Senior Notes, which are issued pursuant to
the Indenture, containing such terms and conditions therein and as may be
contained in the documents referred to therein, and in any case (i) which are
unsubordinated and unsecured (except for approximately $55,000,000 (or such
proportionately higher amount in the event greater than $155,000,000 principal
amount of High Yield Notes are issued) of net proceeds from the issuance of
the High Yield Notes and accompanying warrants that will be pledged as
security for the payment of the first six scheduled interest payments due on
the High Yield Notes) obligations of Econophone, with a maturity date not
earlier than 2007, (ii) on which interest will be payable semi-annually in
arrears, and which will be subject to no put rights or redemption rights,
except for (w) upon the occurrence of asset sales under certain circumstances,
(x) an optional right of redemption by Econophone no earlier than January 1,
2002, (y) a right of Econophone to redeem up to 35% of the aggregate principal
amount of High Yield Notes, exercisable no later than July 15, 2000, with the
5
proceeds of Public Equity Offerings, as such term is defined in the
Indenture as it exists on the date hereof, and (z) an obligation of
Econophone to offer to purchase the High Yield Notes at a price equal to
101% of the aggregate principal amount thereof, plus any accrued interest,
upon the occurrence of a Change in Control, as such term is defined in the
Indenture as it exists on the date hereof. The term "High Yield Notes"
shall also include any securities issued to replace, renew, or refinance,
in whole or in part, any High Yield Notes so long as such securities
contain maturity, subordination and interest payment terms no less
favorable to Lender than the terms contained in clauses (i) and (ii) above.
"High Yield Period": the time during which High Yield Notes are issued
and outstanding.
"Indebtedness": as to any Person, at a particular time, (a)
indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which such Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which such Person otherwise assures a creditor against loss, (b)
obligations under leases which shall have been or should be, in accordance
with GAAP, recorded as capital leases in respect of which obligations such
Person is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations such Person assures a
creditor against loss, (c) obligations of such Person to purchase or
repurchase accounts receivable, chattel paper or other payment rights sold
or assigned by such Person, and (d) indebtedness or obligations of such
Person under or with respect to letters of credit, notes, bonds or other
debt instruments, but (e) excluding Indebtedness constituting trade
payables incurred by Borrower in the ordinary course of business.
Indenture: that certain Indenture dated as of July 1, 1997, between
the Borrower and The Bank of New York as trustee, pursuant to which
Borrower's High Yield Notes are issued.
"Initial Payment Date": either a Tranche 1, Tranche 2 or Tranche 3
Initial Payment Date.
"Interest Payment Date": either a Tranche 1, Tranche 2 or Tranche 3
Interest Payment Date.
"Interest Rate": either a Tranche 1, Tranche 2, or Tranche 3 Interest
Rate, in each case as defined in Schedule 2.02 hereto.
"Landlord Consent": a consent substantially in the form of Exhibit E
hereto or in other form acceptable to Lender, to be executed by the
owner/landlord, sublessor and/or licensor (including carriers) of any real
property where any of the Collateral is to be located.
"Law": any law (including common law), constitution, statute,
regulation, rule, ordinance, order, injunction, writ, decree or award of
any governmental body or court of competent jurisdiction or of any
arbitrator (including but not limited to ERISA, the Code, the UCC, any
applicable tax law, product safety law, occupational safety or health law,
Communications Law, Environmental Law and/or securities laws).
"Lender's Expenses": as defined in Section 2.10 hereof.
"Lien": any mortgage, pledge, hypothecation, lien (statutory or
other), judgment lien, security interest, security agreement, charge or
other encumbrance, or other security arrangement of any nature whatsoever,
including, without limitation, any installment contract, conditional sale
or other title retention arrangement, any sale of accounts receivable or
chattel paper, and any assignment, deposit arrangement or lease intended
as, or having the effect of, security and the filing of any financing
statement under the
6
UCC or comparable law of any jurisdiction.
"Loan": Any loan made pursuant to the Tranche 1 Commitment, the Tranche
2 Commitment or the Tranche 3 Commitment.
"Loan Documents": a collective reference to this Agreement, each Note,
the Guaranty, the Security Documents, and all other documents, instruments,
agreements and certificates evidencing or securing any advance hereunder or
any obligation for the payment or performance thereof and/or executed and
delivered in connection with any of the foregoing.
"Mandatory Prepayments: as defined in Section 2.04(b) hereof.
"Material Adverse Effect" or "Material Adverse Change": a material
adverse effect on, or material adverse change in, (i) the business, operations
or financial condition of Econophone and its Subsidiaries taken as a whole,
(ii) the ability of Econophone to perform its obligations under this Loan
Agreement, any Note, or the other Loan Documents, or (iii) the Lender's
ability to enforce the rights and remedies granted under this Agreement or the
other Loan Documents, in all cases whether attributable to a single
circumstance or event or an aggregation of circumstances or events.
"1996 Flexible Incentive Plan": the 1996 Flexible Incentive Plan of
Econophone, as amended from time to time, pursuant to which options for shares
of common stock of Econophone may from time to time be granted or sold to key
employees of Econophone and its Subsidiaries and other third parties in order
to retain or to create an incentive for such key employees and other third
parties.
"Note": collectively, the Tranche 1 Note, the Tranche 2 Note, the Tranche
3 Note and any other promissory notes issued by a Borrower to Lender pursuant
to this Agreement, and all extensions, renewals, modifications, replacements,
amendments, restatements and refinancings thereof.
"NTI": Northern Telecom Inc., a Delaware corporation.
"NTI Equipment": the equipment and licensed or sub-licensed software
manufactured or supplied by NTI to Econophone (or to another Borrower with
respect to which Advances hereunder are used directly or indirectly to finance
the acquisition cost thereof upon the satisfaction of the requirements of
Section 3.09) at any time pursuant to the NTI Purchase Agreement or any
purchase order issued by Econophone to NTI (or such other Borrower), including
installation and construction services provided by NTI pursuant thereto.
"NTI Purchase Agreement": the NTI Purchase Agreement identified on
Schedule 4.31 hereto, together with any amendments or supplements thereto, and
any other purchase agreement between NTI and Econophone (or with any other
Borrower covering NTI Equipment for which Advances hereunder are used directly
or indirectly to finance the acquisition cost thereof upon the satisfaction
of the requirements of Section 3.09) and all purchase orders and invoices
issued pursuant thereto, all as approved by Lender.
"Obligations": all Econophone Obligations and Additional Borrower
Obligations.
"Organizational Documents": with respect to a corporation, the articles
of incorporation and by-laws of such corporation; with respect to a
partnership, the certificate of partnership (or limited
7
partnership, as applicable) and partnership agreement, together with the
analogous documents for any corporate or partnership general partner; with
respect to a limited liability company, the articles of organization and
operating agreement of such limited liability company; and in any case, any
other document governing the formation and conduct of business by such entity,
in each case as may be in effect from time to time.
"Original Loan Agreement": that certain Equipment Loan and Security
Agreement, dated as of May 28, 1996 between Econophone and Lender, as first
amended by that certain Letter Agreement dated as of November 18, 1996
extending the funding date, and as subsequently amended and restated and
joined in by ATL. as of March 27, 1997, and further amended by that First
Amendment to Amended and Restated Equipment Loan and Security Agreement dated
as of April 24, 1997, by that Second Amendment to Amended and Restated
Equipment Loan and Security Agreement dated as of June 26, 1997, by that Third
Amendment to Amended and Restated Equipment Loan and Security Agreement, dated
as of August 7, 1997 and by that Fourth Amendment to Amended and Restated Loan
and Security Agreement, dated as of December 31, 1997.
"Owners": all presently existing and future shareholders of Borrower and
all other Persons with ownership interests in Borrower.
"Payment Date": as defined on Schedule 2.02 hereto.
"Payment Schedule": either the Tranche 1, Tranche 2 or Tranche 3 Payment
Schedule.
"PBGC": the Pension Benefit Guaranty Corporation established under Title
IV of ERISA or any other governmental agency, department or instrumentality
succeeding to its functions.
"Permits": all consents, licenses, notices, approvals, authorizations,
filings, orders, registrations, and permits required by any Governmental
Authority for the construction and operation of the Equipment (excluding
Regulatory Authorizations), issued or obtained as and when required in
accordance with all Requirements of Law.
"Permitted Encumbrances": the Liens permitted under Section 8.02 hereof.
"Permitted Investments": (a) direct obligations of, or obligations for
the timely payment of the principal of and interest of which is fully and
unconditionally guaranteed by, the United States of America, (b) certificates
of deposits of national or state banks, certificates of deposit of federal
savings and loan associations and state building and loan associations which
deposits are fully insured by the Federal Deposit Insurance Corporation; (c)
bankers acceptances drawn on and accepted by commercial banks having a
combined capital and surplus of not less than $100,000,000 and rated "Aa" or
higher by Xxxxx'x Investor Service, and "AA" or higher by Standard & Poors
Corporation; (d) obligations of any agency or instrumentality of the United
States of America that are backed by the full faith and credit of the United
States of America; (e) notes or commercial paper (of entities other than
Borrower or related entities) rated in either of the two highest rating
categories by Xxxxx'x Investors Services and Standard & Poors Corporation; (f)
repurchase agreements with banking or financial institutions having a combined
capital and surplus of not less than $100,000,000, with respect to and fully
secured by obligations described in (a) or (d) above, and rated "Aa" or higher
by Xxxxx'x Investors Service and "AA" or higher by Standard & Poors
Corporation; (g) money market mutual funds which invest solely in investments
meeting the criteria of Permitted Investments; and (h) during the High Yield
Period, Temporary Cash
8
Investments, as such term is defined in the Indenture as it exists on the date
hereof.
"Person": an individual, corporation, limited liability company,
partnership, business or other trust, unincorporated association, joint
venture, joint-stock company, Governmental Authority or any other entity.
"Plan": any employee pension benefit plan to which Section 4021 of ERISA
applies and (i) which is maintained for employees of Econophone or (ii) to
which Econophone made, or was required to make, contributions at any time
within the preceding five (5) years.
"Preferred Stock": the Twelve Percent (12%) Redeemable Convertible
Preferred Stock of Econophone issued initially to Princes Gate Investors II,
L.P. (the "Investor"), pursuant to the Securities Purchase Agreement dated as
of November 1, 1996, between Borrower and Investor, the Securityholders
Agreement dated as of November 1, 1996, among Borrower, Investor and Xx.
Xxxxxx Xxxx, and the Amendment of the Certificate of Incorporation dated as
of November 1, 1996 amending Econophone's Certificate of Incorporation (as
amended, the "Amended Certificate of Incorporation") relating to the
authorization and issuance of the Preferred Stock to Investor.
"Proceeds": as defined in Section 3.01 hereof.
"Public Equity Offering": an underwritten primary public offering of
common stock of Econophone pursuant to an effective registration statement
under the Securities Act of 1933.
"Public Market": (i) a Public Equity Offering has been consummated and
(ii) at least 15% of the total issued and outstanding Common Stock of
Econophone has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"PUC": the public utilities commission for the state or any other
jurisdiction in which the Borrower operates its telecommunications business
or any portion of the Equipment is located, or any successor agency, and any
successor, in whole or in part, to its functions or jurisdictions, and any
other Persons specified as such on Schedule 1 hereto.
"Regulatory Authorizations": all approvals, authorizations, licenses,
filings, notices, registrations, consents, permits, exemptions, registrations,
qualifications, designations, declarations, or other actions or undertakings
now or hereafter made by, to or in respect of any telecommunications
governmental or other regulatory authority, including, without limitation, any
certificates of public convenience and all grants, approvals, licenses,
filings and registrations from or to the FCC or PUC or under any
Communications Law necessary in order to enable Econophone or its Subsidiaries
to own, construct, maintain and operate the Equipment, and any authorizations
specified on Schedule 1 hereto.
"Regulatory Event": any of the following events: (i) Lender becomes
subject to regulation as a "carrier," a "telephone company," a "common
carrier," a "public utility" or otherwise under any applicable law or
governmental regulation, federal, state or local, solely as a result of the
transactions contemplated by this Agreement and the other Loan Documents, or
(ii) Econophone or any Subsidiary becomes subject to regulation by any
Governmental Authority in any way that is materially different from the
regulation existing at the Tranche 3 Closing Date and that could materially
adversely affect Econophone's ability to perform its material obligations
under the Loan Documents or Lender's rights thereunder or the Collateral, or
(iii) the FCC or PUC issues an order revoking, denying or refusing to
9
renew, or recommending the revocation, denial or non-renewal of, any
Regulatory Authorization.
"Reportable Event": (i) a reportable event described in Section 4043 of
ERISA and regulations thereunder, (ii) a withdrawal by a substantial employer
from a Plan to which more than one employer contributes, as referred to in
Section 4063(b) of ERISA, or (iii) a cessation of operations at a facility
causing more than twenty percent (20%) of Plan participants to be separated
from employment, as referred to in Section 4062(f) of ERISA.
"Required Consents": the Governmental Authority approvals or consents of
other Persons required with respect to the Borrower's execution, delivery and
performance of this Agreement and the other Loan Documents, as described in
Section 4.04 hereto.
"Requirement of Law": as to any Person, the Organizational Documents of
such Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its properties or transactions or to
which such Person or any of its property or transactions is subject, including
without limitation, all applicable common law and equitable principles, all
provisions of all applicable state and federal constitutions, statutes, rules,
regulations and orders of governmental bodies, all Permits or Regulatory
Authorizations issued to Econophone or its Subsidiaries, all Communications
Laws, and all Environmental Laws.
"Responsible Officer": with respect to a corporation, its President or
any Vice President or Treasurer; with respect to a partnership, its general
partner (or the President, any Vice President or Treasurer of any corporate
general partner, as applicable); with respect to a limited liability company,
a member or manager (or the President, any Vice President or Treasurer of any
corporate member or manager), or the President or any Vice President of any
other Person.
"Restricted Subsidiary": means any Subsidiary of Econophone other than
an Unrestricted Subsidiary.
"Security Documents": this Agreement, the Consents, all financing
statements, all documents and instruments executed and/or delivered by or on
behalf of any Borrower in favor of Lender granting and perfecting liens and
security interests on NTI Equipment and related Software to be installed in
the United Kingdom, Belgium, France, the Netherlands, Germany and such other
locations outside the United States as Lender may approve and any other
documents granting, evidencing, or perfecting any security interest or Lien
with respect to or securing any of the Obligations.
"Site(s)": any of the sites where Equipment is or is to be located.
"Software" and "Software Licenses": any software now or hereafter owned
by, or licensed to, Econophone or any of its Subsidiaries or with respect to
which Econophone or any of its Subsidiaries has or may have license or use
rights.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a contingency)
to elect a majority of the board of directors or other managers of such
corporation, partnership, limited liability company, or other entity, are at
the time owned, or the management of which is otherwise
10
controlled, directly or indirectly, through one or more intermediaries, or
both, by such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of Econophone.
"Subordination Agreement": one or more subordination agreements
reasonably acceptable to Lender.
"Subordinated Indebtedness": Indebtedness of any Borrower for money
borrowed for the use of such Borrower, payment of which is fully
subordinated to the payment of all Additional Borrower Obligations or
Econophone Obligations, as applicable, upon terms and provisions set forth
in a Subordination Agreement.
"System": Econophone's complete telecommunications network or system
constructed and/or operated by Econophone and its Subsidiaries, of which
the Equipment forms a part.
"Tranche 1 Closing Date": as defined in Schedule 1 hereto.
"Tranche 2 Closing Date": as defined in Schedule 1 hereto.
"Tranche 3 Closing Date": as defined in Schedule 1 hereto.
"Tranche 1 Commitment": as defined in Section 2.01 hereof.
"Tranche 2 Commitment": as defined in Section 2.01 hereof.
"Tranche 3 Commitment": as defined in Section 2.01 hereof.
"Tranche 1 Financing Termination Date": as defined in Schedule 2.02
hereto.
"Tranche 2 Financing Termination Date": as defined in Schedule 2.02
hereto.
"Tranche 3 Financing Termination Date": as defined in Schedule 2.02
hereto.
"Tranche 1 First Borrowing Date": the date of the first borrowing by
Borrower hereunder for Advances made prior to the Tranche 2 Closing Date.
"Tranche 2 First Borrowing Date": the date of the first borrowing by
Borrower hereunder for Advances made on or after the Tranche 2 Closing
Date, but before the Tranche 3 Closing Date.
"Tranche 3 First Borrowing Date": With respect to each Borrower, the
date of the first borrowing by such Borrower hereunder for Advances made on
or after the Tranche 3 Closing Date.
"Tranche 1 Initial Payment Date": as defined on Schedule 2.02 hereto.
"Tranche 2 Initial Payment Date": as defined on Schedule 2.02 hereto.
"Tranche 3 Initial Payment Date": as defined on Schedule 2.02 hereto.
11
"Tranche 1 Interest Payment Date": as defined on Schedule 2.02 hereto.
"Tranche 2 Interest Payment Date": as defined on Schedule 2.02 hereto.
"Tranche 3 Interest Payment Date": as defined on Schedule 2.02 hereto.
"Tranche 1 Interest Rate": as defined in Schedule 2.02 hereto.
"Tranche 2 Interest Rate": as defined in Schedule 2.02 hereto.
"Tranche 3 Interest Rate": as defined in Schedule 2.02 hereto.
"Tranche 1 Maturity Date": the date defined on Schedule 2.02 hereto, on
which all principal, interest, premium, expenses, fees, penalties and other
amounts due under the Tranche 1 Note shall be finally due and payable.
"Tranche 2 Maturity Date": the date defined on Schedule 2.02 hereto, on
which all principal, interest, premium, expenses, fees, penalties and other
amounts due under the Tranche 2 Note shall be finally due and payable.
"Tranche 3 Maturity Date": the date defined on Schedule 2.02 hereto, on
which all principal, interest, premium, expenses, fees, penalties and other
amounts due under the Tranche 3 Note shall be finally due and payable.
"Tranche 1 Note": that certain promissory note dated as of May 28, 1996
in the original principal amount of up to $2,000,000 executed by Econophone
in favor of Lender pursuant to this Agreement evidencing loans under the
Tranche 1 Commitment, and all extensions, renewals, modifications,
replacements, amendments, restatements and refinancings thereof.
"Tranche 2 Note": that certain promissory note dated as of March 27,
1997 in the original principal amount of up to $3,000,000 executed by
Econophone and by ATL as joint and several obligors in favor of Lender and any
other promissory notes issued by Econophone to Lender pursuant to this
Agreement evidencing loans under the Tranche 2 Commitment, and all extensions,
renewals, modifications, replacements, amendments, restatements and
refinancings thereof.
"Tranche 3 Note": one or more promissory notes in an aggregate principal
amount of up to $19,000,000 executed by Econophone and one or more other
Borrowers as joint and several obligors in favor of Lender and any other
promissory notes issued by a Borrower to Lender pursuant to this Agreement
evidencing loans under the Tranche 3 Commitment, and all extensions, renewals,
modifications, replacements, amendments, restatements and refinancings
thereof.
"Tranche 1 Payment Schedule": as defined on Schedule 2.02 hereto.
"Tranche 2 Payment Schedule": as defined on Schedule 2.02 hereto.
"Tranche 3 Payment Schedule": as defined on Schedule 2.02 hereto.
"UCC": the Uniform Commercial Code as the same may from time to time be
in effect in the
00
Xxxxx xx Xxx Xxxx, or the Uniform Commercial Code of another jurisdiction, to
the extent it may be required to apply to any item or items of Collateral.
"Unrestricted Subsidiary": (i) any Subsidiary of Econophone that at the
time of determination shall be designated an Unrestricted Subsidiary by the
board of directors of Econophone in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The board of directors of
Econophone may designate any Restricted Subsidiary (including any newly
acquired or newly formed Subsidiary of Econophone) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, Econophone or any Restricted Subsidiary; provided
that (A) any Guarantee by Econophone or any Restricted Subsidiary of any
Indebtedness of the Subsidiary being so designated shall be deemed an
"Incurrence" of such Indebtedness and an "Investment" by Econophone or such
Restricted Subsidiary (or both, if applicable) at the time of such
designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 4.04 of the
Indenture as it exists on the date hereof and (C) if applicable, the
Incurrence of Indebtedness and the Investment referred to in clause (A) of
this proviso would be permitted under Sections 4.03 and 4.04 of the Indenture
as they exist on the date hereof. The board of directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that
immediately after giving effect to such designation (x) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately after
such designation would, if Incurred at such time, have been permitted to be
incurred for all purposes of the Indenture and (y) no Default or Event of
Default shall have occurred and be continuing. Any such designation by the
Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation
and an Officers' Certificate certifying that such designation complied with
the foregoing provisions. Capitalized terms used in this definition which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture as it exists on the date hereof.
"Wholly Owned": with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person. Capitalized terms used in this definition which
are defined in the Indenture shall have the meanings assigned to them in the
Indenture as it exists on the date hereof.
1.02. Accounting Principles; Subsidiaries. Except as otherwise
provided in this Agreement, all computations and determinations as to
accounting or financial matters and all financial statements to be delivered
pursuant to this Agreement shall be made and prepared in accordance with GAAP
(including principles of consolidation where appropriate), consistently
applied, and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP. If at any time Borrower has any Subsidiaries,
all accounting and financial terms herein shall be deemed to include
references to consolidated and consolidating principles.
1.03. UCC Terms. Except as otherwise provided herein, terms used in
this Agreement that are defined in the UCC shall have the same meanings
herein.
1.04. General Construction; Captions. All definitions and other terms
used in this Agreement shall be equally applicable to the singular and plural
forms thereof, and all references to any gender shall include all other
genders. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section,
subsection, schedule and exhibit references are to this Agreement unless
13
otherwise specified. The captions and table of contents in this Agreement and
the other Loan Documents are for convenience only, and in no way limit or
amplify the provisions hereof.
1.05. References to Documents and Laws. All defined terms and
references in this Agreement or the other Loan Documents with respect to any
agreements, notes, instruments, certificates or other documents shall be
deemed to refer to such documents and to any amendments, modifications,
renewals, extensions, replacements, restatements, substitutions and
supplements of and to such documents. All references to statutes and related
regulations shall include any amendments thereof and any successor statutes
and regulations.
ARTICLE 2: LOANS
2.01. Commitment. (a) Subject to the terms and conditions herein
provided, and so long as no Event of Default has occurred and is continuing
hereunder, Lender agrees to lend to Econophone, from time to time from and
after the Tranche 1 Closing Date and before the Tranche 1 Financing
Termination Date, an aggregate principal amount not to exceed the amount set
forth on Schedule 2.01 hereto as the maximum principal amount (the "Tranche
1 Commitment"), solely for the purpose set forth on Schedule 2.01.
(b) Subject to the terms and conditions herein provided, and so long as
no Event of Default has occurred and is continuing hereunder, Lender agrees
to lend to the Borrowers, from time to time from and after the Tranche 2
Closing Date and before the Tranche 2 Financing Termination Date, an aggregate
principal amount not to exceed the amount set forth on Schedule 2.01 hereto
as the maximum principal amount (the "Tranche 2 Commitment"), solely for the
purpose set forth on Schedule 2.01.
(c) Subject to the terms and conditions herein provided, and so long as
no Event of Default has occurred and is continuing hereunder, Lender agrees
to lend to the Borrowers, from time to time from and after the Tranche 3
Closing Date and before the Tranche 3 Financing Termination Date, an aggregate
principal amount not to exceed the amount set forth on Schedule 2.01 hereto
as the maximum principal amount (the "Tranche 3 Commitment"), solely for the
purpose set forth on Schedule 2.01.
2.02. Note and Payment Terms.
(a) Promissory Note. The Loans shall be evidenced by one or more
Notes substantially in the form of Exhibit A hereto, with appropriate
insertions. Each Note shall be executed by the applicable Borrower,
payable to the order of Lender, and shall evidence the obligation of such
Borrower to repay all principal amounts advanced under or pursuant to
this Agreement, together with interest and all other amounts due
thereunder. All Loans made under the Tranche 1 Commitment ("Tranche 1
Loans") shall be evidenced by the Tranche 1 Note originally dated May 28,
1996, and all such Tranche 1 Loans shall have a stated maturity that is
the Tranche 1 Maturity Date, and will bear interest at the Tranche 1
Interest Rate from and including the borrowing date of such Tranche 1
Loan until such Tranche 1 Loan or any
14
amount thereof is paid in full (whether on the Tranche 1 Maturity Date,
by acceleration or otherwise). All Loans made under the Tranche 2
Commitment ("Tranche 2 Loans") shall be evidenced by the Tranche 2 Note,
originally dated March 27, 1997, and all such Tranche 2 Loans shall have
a stated maturity that is the Tranche 2 Maturity Date, and will bear
interest at the Tranche 2 Interest Rate from and including the Tranche
2 First Borrowing Date until Tranche 2 Note or any amount thereof is paid
in full (whether on the Tranche 2 Maturity Date, by acceleration or
otherwise). All Loans made pursuant to the Tranche 3 Commitment
("Tranche 3 Loans") shall be evidenced by one or more Tranche 3 Notes
which will have a stated maturity that is the Tranche 3 Maturity Date,
and bear interest at the Tranche 3 Interest Rate from and including the
borrowing date of such Tranche 3 Loan until such Tranche 3 Loan or any
amount thereof is paid in full (whether on the Tranche 3 Maturity Date,
by acceleration or otherwise). All schedules attached to any Note shall
be deemed a part thereof. Any such schedule may be amended by Lender from
time to time to reflect changes in the amounts includable thereon, but
the failure to attach or amend any schedule shall not diminish the
obligation of the applicable Borrower to repay all amounts due hereunder
or on any Note.
(b) Interest Payments. Interest shall continue to accrue on the
principal amount outstanding on any Note at the applicable Interest Rate
and shall be payable, in arrears, on each applicable Interest Payment
Date. Interest shall not accrue with respect to principal that is repaid
on any date if such principal shall have been repaid prior to 1:00 p.m,
New York time, on such date. All accrued interest shall be payable, in
arrears, with the principal payments described below.
(c) Principal Payments. (i) All Tranche 1 Loans are term loans and
all principal amounts due with respect to Tranche 1 Loans shall be
payable in installments in accordance with the Tranche 1 Payment Schedule
set forth on Schedule 2.02 hereto, commencing on the Tranche 1 Initial
Payment Date and on each Payment Date thereafter until the Tranche 1
Maturity Date. The amount of each such principal installment payment
shall be calculated, at the outset, by taking the applicable percentage
(as described on Schedule 2.02 hereto) of the amount of all principal
amounts outstanding on the Tranche 1 First Borrowing Date; provided,
however, that the principal payment amounts shall be recalculated by
Lender each time Advances are made hereunder after the Tranche 1 First
Borrowing Date but prior to the Tranche 2 Closing Date, based on the
aggregate amount of all Advances made under the Tranche 1 Commitment at
any time. Borrower and Lender understand that this payment schedule is
intended to amortize fully the principal amount advanced under the
Tranche 1 Commitment in equal monthly payments from the date of such
Advance to the Tranche 1 Maturity Date and any other principal and
interest amounts outstanding representing amounts owed under Advances
made prior to the Tranche 2 Closing Date will be added to the final
payment on the Tranche 1 Maturity Date. In any event, the entire
outstanding principal amount of all Tranche 1 Loans and all accrued but
unpaid interest and all other outstanding amounts due with respect
thereto shall be paid on the Tranche 1 Maturity Date.
(ii) All Tranche 2 Loans are term loans, and all principal amounts due
with respect to the Tranche 2 Loans shall be payable in installments in
accordance with the Tranche 2 Payment Schedule set forth on Schedule 2.02
hereto, commencing on the Tranche 2 Initial Payment Date and on each
Payment Date thereafter until the Tranche 2 Maturity Date. The amount of
each such principal installment payment shall be calculated, at the
outset, by taking the applicable percentage (as described on Schedule
2.02 hereto) of the amount of all principal amounts outstanding on the
Tranche 2 First Borrowing Date; provided, however, that the principal
payment amounts shall be recalculated by Lender each time Advances are
made hereunder after the Tranche 2 Closing Date and before the Tranche
3 Closing Date, based on the aggregate amount of all Advances made under
the Tranche 2 Commitment at any time. Borrower and Lender understand that
this payment schedule is intended to amortize fully the principal amount
15
advanced under the Tranche 2 Commitment in equal monthly payments from
the date of such Advance to the Tranche 2 Maturity Date and any other
principal and interest amounts outstanding representing amounts owed
under Advances after the Tranche 2 Closing Date and before the Tranche
3 Closing Date will be added to the final payment on the Tranche 2
Maturity Date. In any event, the entire outstanding principal amount of
all Tranche 2 Loans and all accrued but unpaid interest and all other
outstanding amounts due with respect thereto shall be paid on the Tranche
2 Maturity Date.
(iii) Tranche 3 Loans are term loans, and all principal amounts due with
respect to the Tranche 3 Loans shall be payable in installments in
accordance with the Tranche 3 Payment Schedule set forth on Schedule 2.02
hereto, commencing on the Tranche 3 Initial Payment Date and on each
Payment Date thereafter until the Tranche 3 Maturity Date. The amount of
each such principal installment payment shall be calculated, at the
outset, by taking the applicable percentage (as described on Schedule
2.02 hereto) of the amount of all principal amounts outstanding on the
Tranche 3 First Borrowing Date; provided, however, that the principal
payment amounts shall be recalculated by Lender each time Advances are
made hereunder after the Tranche 3 Closing Date, based on the aggregate
amount of all Advances made under the Tranche 3 Commitment at any time.
Borrower and Lender understand that this payment schedule is intended to
amortize fully the principal amount advanced under the Tranche 3
Commitment in equal monthly payments from the date of such Advance to the
Tranche 3 Maturity Date and any other principal and interest amounts
outstanding representing amounts owed under Advances after the Tranche
3 Closing Date will be added to the final payment on the Tranche 3
Maturity Date. In any event, the entire outstanding principal amount of
all Tranche 3 loans and all accrued but unpaid interest and all other
outstanding amounts due with respect thereto shall be paid on the Tranche
3 Maturity Date.
(d) Late Payments and Default Rate. Notwithstanding the foregoing,
if a Borrower shall fail to pay within ten (10) days after the due date
any principal amount or interest or other amount payable under this
Agreement or under any Note, such Borrower shall pay to Lender, to defray
the administrative costs of handling such late payments, an amount equal
to interest on the amount overdue and unpaid, to the extent permitted
under applicable law, at the Default Rate (instead of the applicable
Interest Rate), from and including the due date until such overdue
principal amount, interest or other unpaid amount is paid in full (both
before and after judgment) whether or not any notice of default in the
payment thereof has been delivered under Section 9.01 hereof. In
addition, but without duplication, upon the occurrence and during the
continuance of an Event of Default, all outstanding amounts hereunder
shall bear interest at the Default Rate (instead of the Interest Rate)
until such amounts are paid in full or such Event of Default is cured by
a Borrower or is waived in writing by Lender.
(e) Excess Interest. Notwithstanding any provision of any Note,
this Agreement or any other Loan Document to the contrary, it is the
intent of Lender and Borrowers that Lender or any subsequent holder of
any Note shall never be entitled to receive, collect, reserve or apply,
as interest, any amount in excess of the maximum rate of interest
permitted to be charged by applicable Law, as amended or enacted from
time to time. In the event Lender, or any subsequent holder of any Note,
ever receives, collects, reserves or applies, as interest, any such
excess, such amount which would be excessive interest shall be deemed a
partial prepayment of principal and treated as such, or, if the principal
indebtedness and all other amounts due are paid in full, any remaining
excess funds shall immediately be applied to any other outstanding
indebtedness of the
16
applicable Borrower due to Lender, and if none is outstanding, shall be
paid to the applicable Borrower. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the
highest lawful rate, each Borrower and Lender shall, to the maximum
extent permitted under applicable law, (a) exclude voluntary prepayments
and the effects thereof as it may relate to any fees charged by Lender,
and (b) amortize, prorate, allocate, and spread, in equal parts, the
total amount of interest throughout the entire term of the indebtedness;
provided that if the indebtedness is paid and performed in full prior to
the end of the full contemplated term hereof, and if the interest
received for the actual period of existence hereof exceeds the maximum
lawful rate, Lender or any subsequent holder of any Note shall refund to
the applicable Borrower the amount of such excess or credit the amount
of such excess against the principal portion of the indebtedness, as of
the date it was received, and, in such event, Lender shall not be subject
to any penalties provided by any laws for contracting for, charging,
reserving or receiving interest in excess of the maximum lawful rate.
2.03. Procedures for Borrowing.
(a) Timing of Advances. Advances shall not be made more than once
per calendar month, and all Advances in any calendar month shall be made
on the same Borrowing Date. Each Advance (other than the last Advance)
shall be in an aggregate principal amount of not less than $25,000. No
amounts may be borrowed under the Tranche 1, Tranche 2, or Tranche 3
Commitment on or after the Financing Termination Date for such tranche.
Lender is hereby authorized to retain from each Advance all amounts of
Lender's Expenses that are accrued and unpaid and for which invoices have
been sent to Econophone at least five (5) Business Days before such
Advance. In any event, all outstanding Lender's expenses consisting of
legal fees, charges and expenses not paid prior to any Borrowing Date
shall be paid before any Advance is made or concurrently with such
Advance.
(b) Borrowing Certificates. To request an Advance hereunder, a
Borrower shall send to Lender, at least five (5) Business Days prior to
the requested Borrowing Date, a completed Borrowing Certificate, along
with invoices and such other supporting documentation as Lender may
reasonably request. Lender is hereby authorized to add to any Borrowing
Certificate all amounts payable by Borrower to Lender in respect of
Lender's expenses consisting of legal fees, charges and expenses arising
or incurred by Lender, to the extent such fees, charges and expenses have
then been incurred or charged and may be paid from proceeds of the Loan.
(c) Transmission of Advances. Advances shall be made by wire
transfer to the account(s) specified in the applicable Borrowing
Certificate, except that (i) proceeds of the Loans may be transmitted,
at Lender's option, directly to an NTI account for payment of any unpaid
NTI invoices, and (ii) Advances shall be transmitted to Borrower only to
the extent that Borrower provides Lender with satisfactory evidence that
the amount of such Advance has been paid to NTI or such other payee for
a purpose permitted under Section 2.01. No further authorization shall
be necessary for any such direct disbursements, and each such Advance
shall satisfy pro tanto the obligations of the Lender under this
Agreement.
(d) Borrowing Dates. Advances shall be made by Lender on the
Borrowing Date specified in the applicable Borrowing Certificate if all
conditions for such Advance have been satisfied, or on such later
Business Date as all conditions for such Advance shall have been
satisfied, as reasonably determined by Lender.
17
(e) Advances After Default. At its option, after the occurrence and
continuance of a Default, Lender may but shall not be obligated to make
advances of portions of the Loan proceeds to any Person (including
without limitation NTI, suppliers, sub-contractors and materialmen) to
whom Lender in good faith determines payment is due with respect to the
Equipment, and any proceeds so disbursed by Lender shall be deemed
disbursed as of the date on which the Person to whom payment is made
receives the same. No further authorization from a Borrower shall be
necessary to warrant such direct advances, and the execution of this Loan
Agreement by Econophone and borrowings hereunder by any Borrower shall,
and hereby do, constitute an irrevocable authorization and power of
attorney so to advance proceeds hereunder. All such Advances shall
satisfy pro tanto the obligations of Lender hereunder and shall be
secured by the Security Documents as fully as if made directly to such
Borrower.
2.04. Prepayments.
(a) Voluntary Prepayments. Econophone may, at its option, at any
time, prepay and cause the other Borrowers to prepay the Loans, in whole
but not in part, upon at least thirty (30) Business Days prior written
notice to Lender specifying the date and amount of prepayment, plus the
premium described below, and all accrued but unpaid interest thereon.
Such notice shall be irrevocable and the principal amount shall be due
and payable on the date specified together with accrued interest on the
amount prepaid. Any such prepayment shall be subject to a prepayment
premium equal to the sum of (i) the amount of additional interest (if
any) that would have been payable by Borrowers under the Tranche 3 Loans
had the Tranche 3 Rate Adjustment been fixed at three hundred ninety five
basis (395) points during the entire term of the Tranche 3 Loans and not
subject to adjustment as provided in Schedule 2.02, plus (ii) a
percentage of the amount prepaid as follows: three percent (3%) if the
prepayment is made not more than one year after the date hereof; two
percent (2%) if the prepayment is made more than one (1), but not more
than two (2) years after the date hereof, one percent (1%) if the
prepayment is made more than two (2), but not more than three (3) years
after the date hereof, and zero percent (0%) if the prepayment is made
more than three (3) years after the date hereof. Amounts prepaid may not
be reborrowed and shall be applied as provided in Section 2.04(c).
Mandatory Prepayments, excess interest payments under Section 2.02(g) or
prepayments made from insurance proceeds pursuant to Section 6.03 or with
any condemnation proceeds may be made in accordance with and subject to
the terms, conditions and limitations hereof and shall not be subject to
a prepayment premium.
(b) Mandatory Prepayment. Upon Lender's demand, upon the
occurrence of any event pursuant to which the Preferred Stock may be
redeemed (other than any special optional redemption of the Preferred
Stock under Section 7(a) of Article Fourth of the Amended Certificate of
Incorporation), Borrower shall immediately prepay the loans in full,
including all principal, accrued interest and expenses (the "Mandatory
Prepayments").
(c) Application of Prepayments. Any prepayments shall be applied
first to interest, then to premium, then to expenses, and then to the
installments of principal in reverse chronological order.
2.05. Computation of Interest. Interest shall be calculated daily on
the basis of a 360-day year for the actual days elapsed in the period during
which it accrues.
18
2.06. Payments. All payments and prepayments to be made in respect
of principal, interest, prepayment premiums or other amounts due from any
Borrower hereunder or under any Note shall be payable on or before 1:00 p.m.,
Nashville time, on the day when due, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue. Such payments shall be made to Lender at
Lender's office at 000 Xxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxx 00000-0000, or such
other location specified in writing by Lender, in immediately available funds,
without setoff, recoupment, counterclaims or any other deduction of any
nature.
2.07. Indemnity. Econophone hereby indemnifies Lender against any
losses, claims, penalties, expenses, actions, suits, obligations, liabilities
and Liens (and all costs and expenses, including reasonable attorneys' fees
incurred in connection therewith), that Lender has sustained or incurred or
may sustain or incur in connection with any of the Collateral, or the
enforcement, performance or administration of the Loan Documents, or as a
consequence of any default by any Borrower in the performance or observance
of any covenant or condition contained in this Agreement or the Loan
Documents, including without limitation, the breach of any representation or
warranty, any failure of any Borrower to pay when due (by acceleration or
otherwise) any principal, interest, fee or any other amount due hereunder or
under any Note, and any failure of any Borrower to comply with all applicable
Requirements of Law (collectively, "Claims") except to the extent of any
Claims caused solely by Lender's gross negligence or willful misconduct.
Econophone's obligations under this Section 2.07 shall be part of the
Obligations and shall be secured by the Collateral. Econophone agrees that
upon written notice by Lender of the assertion of any Claims, Econophone
shall, at Lender's option, either assume full responsibility for, or reimburse
Lender for the reasonable costs and expenses of, the defense thereof. Lender
shall have no liability for consequential or incidental damages of any nature.
The provisions of this Section 2.07 shall survive the termination of this
Agreement and payment of the Obligations.
2.08. Use of Proceeds. The proceeds of the Advances hereunder shall
be used by the Borrowers only for the purposes and in the amounts described
in Section 2.01 hereof, and no amounts repaid may be reborrowed.
2.09. Fees. Econophone shall pay Lender the fees described on
Schedule 2.09 hereto in connection with this Agreement.
2.10. Lender's Expenses. Econophone agrees (a) to pay or reimburse
Lender for all its reasonable costs, fees, charges and expenses incurred or
arising in connection with the negotiation, review, preparation and execution
of this Agreement, the Loan Documents, any commitment or proposal letter, or
any amendment, supplement, waiver, modification to, or restructuring of this
Agreement, the Obligations or the other Loan Documents, including, without
limitation, reasonable outside counsel legal fees and disbursements, expenses,
document charges and other charges and expenses of Lender, (b) to pay or
reimburse Lender for all its reasonable costs, fees, charges and expenses
incurred in connection with the administration of the Loans or the
enforcement, protection or preservation of any rights under or in connection
with this Agreement or any other Loan Documents, including, without
limitation, reasonable outside counsel legal fees and disbursements, audit
fees and charges, and all out-of-pocket expenses, (c) to pay, indemnify, and
to hold Lender harmless from, any and all recording and filing fees and taxes
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes (excluding income and franchise taxes
and taxes of similar nature), if any, which may be payable or determined to
be payable in connection with the execution and delivery or recordation or
filing of, or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement and the other Loan
19
Documents. All of the amounts described in this Section are referred to
collectively as the "Lender's Expenses", shall be payable upon Lender's
demand, and shall accrue interest at the Interest Rate in effect when such
demand is made from five (5) days after the date of demand until paid in full.
All Lender's Expenses, and interest thereon, shall be part of the Obligations
and shall be secured by the Collateral. The agreements in this Section 2.10
shall survive repayment of the Obligations. All Lender's Expenses that are
outstanding on any Borrowing Date shall be paid before or with such advance.
If Econophone has not paid to Lender the amount of all Lender's Expenses
billed to Econophone at least five (5) Business Days before such Borrowing
Date, Lender shall be authorized to retain from any Advance on such Borrowing
Date the amount of such Lender's Expenses that remain unpaid. Econophone's
obligation to pay Lender's Expenses shall not be limited by any limitation on
the amount of the Commitment that may be designated as available for such
purposes, and any amounts so designated shall be used to pay Lender's Expenses
accrued at the time of any Advance before any of Econophone's legal fees or
similar expenses.
2.11 Additional Borrowers. Lender acknowledges and agrees that subject
to compliance with the terms and conditions of this Agreement (including but
not limited to Section 3.09), the Borrowers in respect of the Tranche 2 and
Tranche 3 Loans made hereunder may include Econophone, ATL and other foreign
or domestic Subsidiaries of Econophone that are designated in a Borrowing
Certificate delivered pursuant to Section 2.03(b) hereof. The Borrowers agree
that, prior to making any Advance in accordance with the terms hereof to any
Borrower other than Econophone or ATL, such Borrower shall execute and deliver
to Lender a written acknowledgement, in form reasonably satisfactory to Lender
of such Borrower's assumption of the terms of this Agreement insofar as such
terms are applicable to such Borrower together with a Note evidencing the
amount of the Advance made to such Borrower.
ARTICLE 3: COLLATERAL AND SECURITY AGREEMENT
3.01. Grant of Security Interest. As security for the Obligations,
in the case of Econophone and for the Additional Borrower Obligations in the
case of any other Borrower, each Borrower (as debtor) hereby assigns to Lender
as collateral, and grants to Lender (as secured party), a continuing security
interest in and to, all of the Borrower's right, title and interest in and to
the following kinds and types of property, whether now owned or hereafter
acquired or arising, wherever located, together with all substitutions
therefor and all accessions, replacements and renewals thereof, and in all
proceeds and products thereof (collectively, the "Collateral"):
(a) All the NTI Equipment, all third party equipment, including
all replacements and expansions, financed by Lender and any and all
additions, substitutions, and replacements to or of any of the foregoing,
together with all attachments, components, parts, improvements, upgrades,
and accessions installed thereon or affixed thereto (collectively,
"Equipment") and each Borrower's rights under the NTI Purchase Agreement;
(b) All (i) general intangibles and intangible property
constituting part of, or provided by or through NTI in connection with,
the Equipment and (ii) general intangibles and intangible property
constituting part of, or provided by or through NTI in connection with,
the System which is necessary for the proper operation of the Equipment
by a Person other than such Borrower, including in clauses (i) and (ii)
without limitation, insurance policies, licenses, license rights, rights
in intellectual property, software, software licenses, computer
programming (including source codes, object codes and all other
embodiments of computer programming or information), refunds, warranties
and indemnification rights, and all amounts owed at any time
20
to such Borrower by Lender or NTI, but excluding any general intangibles
or intangible property not financed by Lender that is used by any
Borrower in its business for a purpose exclusive of the operation of the
Equipment (collectively, "General Intangibles"); and
(c) All proceeds and products of any of the foregoing, including
without limitation (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to the Borrower from time to time with
respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to such Borrower from time to time
in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any Governmental
Authority (or any Person acting under color of governmental authority),
and (iii) any and all cash proceeds and non-cash proceeds in the form of
equipment, inventory, contracts, accounts, general intangibles, chattel
paper, documents, instruments, securities, or other proceeds
(collectively, "Proceeds").
3.02. Priority of Security Interests. The security interests granted
by the Borrowers to Lender are and shall be continuing and indefeasible
security interests in the Collateral, subject to no Liens except for Liens
permitted under Section 8.02 hereof.
3.03. Further Documentation; Pledge of Instruments. At any time and
from time to time, upon the written request of the Lender, and at the sole
expense of the applicable Borrower, each Borrower shall promptly execute,
deliver and record any documents, instruments, agreements and amendments, and
take all such further action, as the Lender may reasonably deem desirable in
obtaining the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing
statements or amendments under the UCC. The Borrowers also hereby authorize
the Lender, during the existence of an Event of Default or Default, to file
any such financing statement or amendment thereto, without the signature of
the applicable Borrower, or with a copy or telecopy of the Borrower's
signature, to the extent permitted by applicable law, or to execute any
financing statement or amendment thereof on behalf of the applicable Borrower
as such Borrower's attorney-in-fact. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument or any certificated securities, such note,
instrument or certificate shall be immediately pledged and delivered to the
Lender hereunder, duly endorsed in a manner satisfactory to the Lender.
3.04. Further Identification of Collateral. Each Borrower shall
furnish to the Lender from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Lender may reasonably request, all in reasonable
detail.
3.05. Remedies. Lender shall have all the rights and remedies of a
secured party under the UCC, and shall be entitled to exercise any and all
remedies available under Article 9 hereof or otherwise available at law or in
equity upon the occurrence of an Event of Default.
3.06. Standard of Care. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral in
its possession if it takes such action for that purpose as any Borrower
requests in writing, but Lender's failure to comply with any such request
shall not of itself be deemed a failure to exercise reasonable care, and no
failure of Lender to preserve or protect any rights with respect to such
Collateral against prior parties, or to do any act with respect to the
preservation of such Collateral not so requested by a Borrower, shall be
deemed a failure to exercise reasonable care in the custody or preservation
of such Collateral.
21
3.07. Advances to Protect Collateral. All insurance expense and all
reasonable expenses of protecting, storing, warehousing, insuring, handling,
maintaining and shipping the Collateral (including, without limitation, all
rent payable by the Borrowers to any landlord of any premises where any of the
Collateral may be located), and, any and all taxes shall be borne and paid by
the Borrowers. After the occurrence and during the continuance of a Default,
Lender may (but shall not be obligated to) make advances to preserve, protect
or obtain any of the Collateral, including advances to cure defaults under any
of the System agreements or advances to pay taxes, insurance and the like, and
all such advances shall become part of the Obligations owing to Lender
hereunder and shall be payable to Lender on demand, with interest thereon from
the date of such advance until paid at the Default Rate in effect on the date
of such advance.
3.08. License to Use. Lender is hereby granted a license or other
right to use, without charge, but solely following the occurrence of an Event
of Default and in connection with Lender's exercise of remedies hereunder
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, tradenames, trademarks and advertising matter, or any tangible or
intangible property or rights of a similar nature, as it pertains to the
Collateral, in advertising for sale and selling any Collateral during the
continuance of an Event of Default and thereafter if Lender is attempting to
sell Collateral which it has acquired from the Borrowers by way of foreclosure
or deed in lieu of foreclosure, and Borrowers' rights under all licenses and
franchise agreements with respect to the Collateral shall inure to Lender's
benefit.
3.09 Priority of Security Interests and/or Liens on Equipment located
outside of the United States. Lender and the Borrowers acknowledge that
Advances (i) under the Tranche 2 Commitment may be used by a Borrower to
acquire NTI Equipment and related Software which will be installed in London,
England, Brussels, Belgium and/or Paris, France and (ii) under the Tranche 3
Commitment may be used by a Borrower to acquire NTI Equipment and related
Software which will be installed in the United States or the United Kingdom,
Belgium, France, the Netherlands, Germany or such other location outside the
United States as Lender may approve. As a condition to any Advance by Lender
to a Borrower to finance the acquisition of NTI Equipment to be located
outside the United States, such Borrower shall (i) deliver a list identifying
all NTI Equipment and specifying where in such country such NTI Equipment will
be located, (ii) at the sole expense of such Borrower, execute, deliver and
record any documents, instruments, agreements and amendments, and take all
such further action as Lender may reasonably deem desirable, to grant and
perfect a security interest and/or lien on the Collateral in favor of Lender
under the laws of such country where such NTI Equipment will be located, which
security interest and/or lien will be enforceable against Borrower and third
parties in accordance with its terms, and subject to no other liens or
security interest other than Permitted Encumbrances, and (iii) deliver an
opinion of counsel in favor of Lender, in form and substance to the reasonable
satisfaction of the Lender, confirming that (x) all steps have been taken to
grant and perfect the security interest and/or lien in such Collateral in
favor of Lender which is enforceable against Borrower and third parties in
accordance with its terms, subject to no other liens or security interests,
and (y) compliance with all regulatory requirements in such jurisdiction for
the installation and operation of the Collateral in such jurisdiction and the
right of Lender to exercise foreclosure or repossession remedies without the
necessity of regulatory approval or licensing.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES
Econophone hereby represents and warrants to Lender as follows:
4.01. Organization and Qualification. Each Borrower and its
Subsidiaries is duly organized,
22
validly existing and in good standing as a corporation or other business
entity under the laws of its jurisdiction of organization. Each Borrower and
its Subsidiaries is duly qualified to do business and in good standing in each
jurisdiction in which the failure to receive or retain such qualification
would have a Material Adverse Effect.
4.02. Authority and Authorization. Each Borrower has all requisite
corporate right, power, authority and legal right to execute and deliver and
perform its obligations under this Agreement, to make the borrowings provided
for herein, and to execute and deliver and to perform its obligations under
each Note. Each Borrower's execution, delivery and performance of the Basic
Agreements to which such Borrower is a party has been duly and validly
authorized by all necessary corporate proceedings on the part of such
Borrower.
4.03. Execution and Binding Effect. All Basic Agreements have been
or will be duly and validly executed and delivered by the applicable
Borrowers, and constitute or, when executed and delivered will constitute, the
legal, valid and binding obligations of the applicable Borrower enforceable
in accordance with their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other laws affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding at law or in equity).
4.04. Governmental Authorizations. Except for the consents identified
on Schedule 4.04 hereto (the "Required Consents"), and such consents with
respect to which the failure to obtain will not have a Material Adverse
Effect, no authorization, consent, approval, license, exemption or other
action by, and no registration, qualification, designation, declaration or
filing with, any Governmental Authority (other than the filing of financing
statements and continuation statements) is or will be necessary in connection
with execution and delivery of this Agreement, each Note or any other Loan
Documents by any Borrower or any Subsidiary thereof, consummation of the
transactions herein or therein contemplated, performance of or compliance by
any Borrower or any Subsidiary thereof with the terms and conditions hereof
or thereof or the legality, validity and enforceability hereof or thereof.
4.05. Regulatory Authorizations. Other than for authorizations,
permits and licenses with respect to which the failure to obtain will not have
a Material Adverse Effect, the Borrowers hold, directly or through
Subsidiaries, all authorizations, permits and licenses required by the FCC or
the PUC or any Communications Law for the construction and operation of the
System, and all such Regulatory Authorizations are in full force and effect,
are subject to no further administrative or judicial review and are therefore
final. Lender will not by reason of the execution, delivery and performance
(other than the enforcement of remedies) of any of the Loan Documents, be
subject to the regulation or control of either the FCC or the PUC. The
Regulatory Authorizations are described on Schedule 4.05.
4.06. Material Agreement; Absence of Conflicts. The execution and
delivery of this Agreement, each Note and the other Loan Documents, the
consummation of the transactions herein or therein contemplated and the
performance of or compliance with the terms and conditions hereof or thereof
by any Borrower will not (a) materially violate any applicable Law;
(b) conflict with or result in a material breach of or a default under the
Organizational Documents of any Borrower or of any Subsidiary thereof or any
agreement or instrument to which any Borrower is a party or by which any
Borrower or any Subsidiary or any of their respective properties is bound; or
(c) result in the creation or imposition of any Lien upon any property (now
owned or hereafter acquired) of any Borrower or any Subsidiary thereof except
as otherwise permitted by this Agreement.
23
4.07. No Restrictions. Neither the Borrowers nor any Subsidiary
thereof is a party or subject to any contract, agreement, or restriction in
its Organizational Documents that materially and adversely affects its
business or the use or ownership of any of its properties or operation of its
business. Neither the Borrowers nor any Subsidiary thereof is a party or
subject to any contract or agreement which restricts its right or ability to
incur Indebtedness hereunder, other than as set forth on Schedule 4.07, none
of which prohibit the Borrower's execution of or compliance with this
Agreement. Neither the Borrowers nor any Subsidiary has agreed or consented
to cause or permit in the future (upon the happening of a contingency or
otherwise) any of the Collateral, whether now owned or hereafter acquired, to
be subject to a Lien that is not a Permitted Encumbrance.
4.08. Financial Statements. Econophone has furnished to Lender the
most recent annual or quarterly financial statements of Econophone, certified
by a Responsible Officer of Econophone, including balance sheets and related
statements of income, retained earnings and cash flow statements, as described
on Schedule 4.08 hereof. Such financial statements (including the notes
thereto) present fairly the financial condition of Econophone on a
consolidated basis as of the end of such fiscal period and the results of its
operations and the changes in its financial position for the fiscal period
then ended (except that quarterly financial statements may be subject to
normal year end adjustments), all in conformity with GAAP applied on a basis
consistent with that of the preceding fiscal period.
4.09. Financial Accounting Practices. Each Borrower and its
Subsidiaries has made and kept books, records and accounts which, in
reasonable detail, accurately and fairly reflect its respective transactions
and dispositions of its assets, and each Borrower and its Subsidiaries shall
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (a) transactions are executed in accordance with
management's general or specific authorization, (b) transactions are recorded
as necessary (i) to permit preparation of financial statements in conformity
with GAAP and (ii) to maintain accountability for assets, (c) access to assets
is permitted only in accordance with management's general or specific
authorization and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
4.10. Accurate and Complete Disclosure. No representation or warranty
made by Borrower under this Agreement and no statement made by Borrower in any
financial statement, certificate, report, exhibit or document furnished by
Borrower to Lender pursuant to or in connection with this Agreement (including
without limitation any filings with the Securities Exchange Commission, the
FCC or the PUC) is or was false or misleading as of the date made in any
respect (including by omission of information necessary to make such
representation, warranty or statement not misleading), other than which are
unintentional and do not have a Material Adverse Effect. There are no facts
known to Borrower that constitute a Material Adverse Effect, or, in Borrower's
reasonable estimation, will constitute a Material Adverse Effect, which has
not been set forth in the financial statements referred to in Section 4.08
hereof or otherwise disclosed in writing to the Lender prior to the date
hereof.
4.11. No Event of Default; Compliance with Material Agreements. No
event has occurred and is continuing and no condition exists which constitutes
a Default or an Event of Default after giving effect to the first Advance to
be made on or after the Tranche 3 Closing Date. As of the date hereof, no
Borrower nor any Subsidiary thereof is in violation of any material term of
its material agreements or instruments to which it is a party or by which it
or its properties is bound.
4.12. Litigation. Except as set forth in Schedule 4.12, there is no
pending action, suit or to Econophone's knowledge threatened proceeding by or
before any Governmental Authority against or
24
affecting any Borrower, any Subsidiary thereof or any of their respective
properties, rights or licenses which if adversely decided would have a
Material Adverse Effect.
4.13. Rights to Property; Intellectual Property. Econophone or, to
the extent permitted by Section 3.09, such other Borrower has good and
marketable title, subject only to the Permitted Encumbrances, (i) to the
Collateral acquired with proceeds of an Advance to such party and (ii) to all
personal and real property purported to be owned by it as reflected in the
most recent balance sheet referred to in Section 4.08 hereof (except as sold
or otherwise disposed of in a manner permitted by this Agreement or as no
longer used or useful in the conduct of the business which sales or other
disposals in the aggregate do not have a Material Adverse Effect on such
financial statements). Econophone (either directly or through its
Subsidiaries) owns or possesses the right to use all patents, trademarks,
service marks, trade names, copyrights, know-how, franchises, software and
software licenses necessary for the operation of its business, free from
burdensome restrictions.
4.14. Financial Condition. Econophone's financial condition is
accurately described in the Certificate of Financial Condition executed by
Econophone pursuant hereto.
4.15. Taxes. Econophone's federal tax identification number is set
forth on Schedule 1 hereto. With respect to the United States (whether
federal, state or local), (i) all tax returns required to be filed by each
Borrower have been properly prepared, executed and filed other than for such
failure to file that will not have a Material Adverse Effect, and (ii) all
taxes, assessments, fees and other governmental charges upon Borrower or upon
any of its respective properties, incomes, sales or franchises which are shown
to be due and payable thereon have been paid, other than taxes or assessments
the validity or amount of which Borrower is contesting in good faith. The
reserves and provisions for taxes on the books of Borrower are adequate for
all open years and for its current fiscal period. With respect to obligations
outside the United States, all tax returns required to be filed by Econophone
or by any of its Subsidiaries have been properly prepared, executed and filed
and all taxes, assessments, fees and other governmental charges upon Borrower
or upon a Subsidiary or upon any of their respective properties, incomes,
sales or franchises which would be due and payable thereon have been paid,
other than taxes or assessments the validity or amount of which Borrower or
such Subsidiary is contesting in good faith and other than taxes, assessments
or returns, with respect to which the failure to pay or prepare, execute and
file, as the case may be, do not and will not have, in the aggregate, a
Material Adverse Effect.
4.16. No Material Adverse Change. Since the date of the financial
statements referenced in Section 4.08, there has been no Material Adverse
Change.
4.17. No Regulatory Event. No Regulatory Event has occurred and is
continuing.
4.18. Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Econophone or any of its Subsidiaries and
any carrier, any labor organization, any customer any supplier or any group
thereof whose agreements with Econophone or any such Subsidiary or use of the
Equipment individually or in the aggregate are material to the business of
Econophone and its Subsidiaries on a consolidated basis and which would have
a Material Adverse Effect, and there exists no present condition or state of
facts or circumstances which would have a Material Adverse Effect or prevent
Borrower from conducting its business (either directly or through a
Subsidiary) after the consummation of the transactions contemplated by this
Agreement.
25
4.19. No Brokerage Fees. No brokerage or other fee, commission or
compensation is to be paid by any Borrower to any Person other than Lender in
connection with the loans to be made hereunder. Econophone hereby indemnifies
Lender against any claims brought against Lender for brokerage fees or
commissions of any Person based on an agreement with any Borrower and agrees
to pay all expenses incurred by Lender in connection with the defense of any
action or proceeding brought to collect any such brokerage fees or
commissions.
4.20. Margin Stock; Regulation U. No Borrower is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock. The making of the Advances
and the use of the proceeds thereof will not violate Regulations G, U or X of
the Board of Governors of the Federal Reserve System.
4.21. Investment Company; Public Utility Holding Company. No Borrower
is an "investment company" or a "company controlled by an investment company"
within the meaning of the Investment Company Act of 1940, as amended, or a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of
1935, as amended.
4.22. Personal Holding Company. No Borrower is a "personal holding
company" as defined in Section 542 of the Code.
4.23. ERISA. Except as would not have a Material Adverse Effect, (i)
With respect to any Plan, there is no Reportable Event currently under
consideration by the PBGC which may reasonably result in any material
liability to the PBGC with respect to any Plan, (ii) no Plan has been
terminated, (iii) no trustee has been appointed by any United States District
Court to administer any Plan, (iv) the PBGC has not instituted proceedings to
terminate any Plan or to appoint a trustee to administer any such Plan, (v)
neither Econophone nor any Affiliate has withdrawn, completely or partially,
from any Plan and (vi) neither Econophone nor any Affiliate has incurred
secondary liability for withdrawal liability payments under any Plan.
4.24. Environmental Warranties. Each Borrower and its Subsidiaries
are in compliance with all Environmental Laws applicable to it or its business
or to the real or personal property owned, leased or operated by it, with
respect to which noncompliance would have a Material Adverse Effect. Neither
Borrower nor any Subsidiary has received notice of, or is aware of, any
violations or alleged violations, or any liability or asserted liability,
under any such Environmental Laws, with respect to it or its business or its
properties.
4.25. Security Interests. The provisions of Article 3 hereof are
effective to create in favor of Lender a legal, valid and enforceable Lien on
or security interest in all of the Collateral, and, when the recordings and
filings described on Schedule 4.25 hereto have been effected in the public
offices listed on said Schedule 4.25, this Agreement will create a perfected,
first priority security interest in all right, title, estate and interest of
the Borrowers in the Collateral subject to no Liens except for Permitted
Encumbrances. All action necessary or desirable to protect and perfect such
security interest in each item of the Collateral will have been duly taken
prior to the First Borrowing Date, except to the extent permitted to take
place thereafter by operation of Section 3.09 or Schedule 6.02. The recording
and filings shown on Schedule 4.25 are all the actions (other than the
periodic filing of continuation statements) necessary or advisable in order
to establish, protect and perfect the interest of Lender in the Collateral as
of the date hereof.
26
4.26. Place of Business. The chief executive offices of Econophone
are identified on Schedule 4.26 hereto. Each Borrower's principal place of
business in the state(s) where the Equipment is located is identified on
Schedule 4.26 hereto or on a supplemental schedule delivered pursuant to
Section 3.09. The Borrowers' records concerning the Collateral are kept at one
or both of these addresses.
4.27. Location of Collateral. The Collateral is and will be kept at
the locations identified on Schedule 4.26 hereto or such other locations as
may be indicated pursuant to Section 3.09 or permitted under Section 8.12.
Notwithstanding any other provision of this Agreement, Equipment may not be
relocated from any location identified on Schedule 4.26 or on a supplemental
schedule delivered pursuant to Section 3.09 (or such other location as may be
permitted after compliance with Section 8.12) to any other location identified
on Schedule 4.26 or on a supplemental schedule delivered pursuant to Section
3.09 (or such other location to which Collateral has been relocated after
compliance with Section 8.12) without first complying again with the
requirements of Section 8.12 in connection with each relocation.
4.28. Clear Title To Collateral. The applicable Borrower is, or will
be, upon purchase pursuant to the NTI Purchase Agreement or otherwise the sole
owner of each item of the Collateral acquired with proceeds of such Advance
borrowed by such Borrower, having good and insurable title thereto, free and
clear of any and all Liens, claims, or rights of others, except for the
security interest granted to the Lender herein (or in a separate agreement
between such Borrower and Lender) and the other Permitted Encumbrances.
4.29. Assumed Names. Except as set forth on Schedule 4.29 hereto,
none of the Borrowers conducts business under any assumed names or trade
names, and has not conducted business under any other names, or any assumed
names or trade names, at any time prior to the date hereof.
4.30. [INTENTIONALLY OMITTED].
4.31. [INTENTIONALLY OMITTED].
ARTICLE 5: CONDITIONS OF CLOSING
5.01 Tranche 1 and Tranche 2 Closings. On or before the Tranche 1
Closing Date and the Tranche 2 Closing Date, the conditions set forth in the
Original Loan Agreement for such closings shall have been satisfied. Lender
acknowledges that all such conditions have been satisfied as of the date
hereof.
5.02 Amendment and Restatement. Except as provided in Schedule 6.02, on
or before the Tranche 3 Closing Date and the date hereof, the following
conditions shall have been satisfied:
(a) A certificate of Econophone signed by a duly authorized
Responsible Officer, certifying as to (i) true copies of Organizational
Documents of Econophone in effect on such date; (ii) true copies of all
corporate action taken by Econophone relative to this Agreement, each Note and
the other Loan Documents; (iii) the names, true signatures and incumbency of
the Responsible Officers of Econophone authorized to execute and deliver this
Agreement, each Note and the other Loan Documents; (iv) a Certificate of Good
Standing (or equivalent certificate) for Econophone, duly issued by the
Secretary of State of (A) each state in which the Borrower intends to locate
Equipment and (B) each state in which the failure to be so qualified would
have a Material Adverse Effect; and (v) such other matters as Lender
27
shall reasonably request.
(b) A certificate of ATL signed by a duly authorized Responsible
Officer, certifying as to (i) true copies of Organizational Documents of ATL
in effect on such date; (ii) true copies of all corporate action taken by ATL
relative to this Agreement, each Note and the other Loan Documents to which
it is a party; (iii) the names, true signatures and incumbency of the
Responsible Officers of ATL authorized to execute and deliver this Agreement,
each Note and the other Loan Documents to which it is a party; (iv) a
Certificate of Good Standing (or equivalent certificate) for ATL, duly issued
by the appropriate government office of the United Kingdom; and (v) such other
matters as Lender shall reasonably request.
(c) Opinions of Counsel. Lender shall have received the following
opinions, all dated as of the date hereof and all in form and substance
satisfactory to Lender:
(i) A written opinion of counsel to Borrower substantially in the
form of Exhibit C-1 hereto; and
(ii) A written opinion of counsel to ATL substantially in the form
of Exhibit C-2 hereto; and
(iii) A written opinion of regulatory counsel for Econophone,
substantially in the form of Exhibit D hereto.
(d) Closing Documents. Lender shall have received the following
documents, all in form and substance satisfactory to Lender:
(i) Agreement. This Agreement, duly executed by Econophone and ATL;
(ii) Guaranty. An Guaranty Agreement duly executed By Econophone
unconditionally guaranteeing all amounts advanced hereunder;
(iii) Financing Statements. Except as provided in Schedule 6.02,
all UCC-1 financing statements necessary to perfect the Liens granted
hereby, each duly executed by the appropriate Borrower, and duly recorded
in all the offices identified on Schedule 4.25 hereto;
(iv) Insurance. Except as provided in Schedule 6.02, Policies and
certificates of insurance required by Section 7.07, accompanied by
evidence of the payment of the premiums therefor;
(v) Financial Statements. The financial statements described in
Section 4.08 hereto;
(vi) Balance Sheet. A balance sheet of Econophone, dated as of
September 30, 1997, certified by a Responsible Officer as fairly
presenting the financial condition of the Borrower.
ARTICLE 6: CONDITIONS OF LENDING
28
6.01. Conditions for Initial Advance. Except as provided in Schedule
6.02, on or before the Tranche 3 First Borrowing Date, the following
conditions shall have been met to Lender's satisfaction:
(a) Post-Closing Lien Searches. Lender shall have received
satisfactory results of Lien searches in all jurisdictions reasonably
determined by Lender to be appropriate, reflecting the filing of
financing statements on the Collateral other than security interests in
favor of Lender pursuant hereto and no other Liens other than Permitted
Encumbrances.
(b) Required Consents. Lender shall have received satisfactory
evidence of the Borrowers' obtaining the Required Consents.
(c) Fees. Lender shall have received the fee(s) described in
Section 2.09 hereof.
(d) Maintenance Agreement. [INTENTIONALLY OMITTED]
6.02. Conditions for All Advances. Except as provided in Schedule
6.02, the obligation of Lender to make any Advance hereunder is subject to the
Borrower's performance of its obligations hereunder on or before the date of
such Advance, and to the satisfaction of the following further conditions on
or before the Borrowing Date for any Advance, including the first Advance:
(a) Filings, Registrations and Recordings. Any financing statements
or other recordings required hereunder shall have been properly filed,
registered or recorded in each office in each jurisdiction required in
order to create in favor of the Lender a perfected first-priority Lien
on the Collateral, subject to no other Lien (other than Permitted
Encumbrances); the Lender shall have received acknowledgment copies of
all such filings, registrations and recordations stamped by the
appropriate filing officer; and Lender shall have received results of
searches of such filing offices, and satisfactory evidence that any other
Liens (other than Permitted Encumbrances) on the Collateral have been
duly released, that all necessary filing fees, recording fees, taxes and
other expenses related to such filings, registrations and recordings have
been paid in full.
(b) Borrowing Certificate and Note. Lender shall have received a
duly executed Borrowing Certificate in the form of Exhibit B, including
a detailed itemization of all costs of goods and services to be paid with
the proceeds of the Advance and accompanied by supporting documentation
reasonably satisfactory to Lender, together with a Note executed by such
Borrower in the principal amount of the Advance requested evidencing the
Loan under the applicable tranche.
(c) Reporting Requirements. The Borrowers shall have provided
Lender with all relevant reports and information required under Article
7 hereof.
(d) No Regulatory Event. No Regulatory Event (in the reasonable
determination of Lender or any Borrower) shall have occurred and be
continuing or would exist upon the consummation of transactions to occur
on such Borrowing Date.
(e) No Default or Event of Default. No Default or Event of Default
shall have
29
occurred and be continuing or would exist upon the consummation of
transactions to occur on such Borrowing Date.
(f) No Material Adverse Change. No Material Adverse Change shall
have occurred, or would occur after giving effect to such Advance, since
the date of the last financial statements delivered to Lender pursuant
to Section 4.08 or 7.01 hereof.
(g) Representations and Warranties. The representations and
warranties contained in Article 4 hereof shall be true on and as of the
date of each such Advance hereunder.
(h) Lender's Expenses. All closing costs, and other Lender's
Expenses shall have been paid in full (or shall be paid first from such
Advance), subject to and as provided in Section 2.03 hereof.
(i) Opinions. Lender shall have received from the applicable
Borrower (if requested) such opinions of counsel for such Borrower as may
be reasonably acceptable to Lender in form and substance with respect to
the perfection and priority of the Liens created by the Security
Documents in each such jurisdictional location and the enforceability of
the written acknowledgement such Borrower's assumption of the terms of
this Agreement insofar as such terms are applicable to such Borrower and
the Note evidencing the amount of the Advance made to such Borrower.
(j) Details, Proceedings and Documents. All legal details and
proceedings in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory to Lender and Lender shall
have received all such counterpart originals or certified or other copies
of such documents and proceedings in connection with such transactions,
in form and substance reasonably satisfactory to Lender, as Lender may
from time to time request.
(k) Post-Closing Items. The post-closing items described on
Schedule 6.02 hereto, if any, shall have been completed in the time
permitted, and Borrower shall have provided Lender with satisfactory
evidence thereof.
(l) Advances for NTI Equipment and Related Software to be located
outside the United States. In the event the proceeds of an Advance are
to be used for the purchase of NTI Equipment and related Software to be
located outside the United States, the Borrowers shall have complied with
the requirements of Section 3.09 of this Agreement.
(m) Consents. Lender shall have received Consents duly executed
by all necessary parties and in form satisfactory to Lender.
(n) NTI Purchase Agreement. Lender shall have received a copy of
the executed NTI Purchase Agreement with respect to which proceeds of an
Advance shall be used to acquire NTI Equipment, and Lender's shall have
reviewed and approved the NTI Equipment to be acquired with proceeds of
an Advance.
(o) Minimum Financial Performance. For any Advance occurring after
December 31, 1997 or that would cause total Advances under the Tranche
3 Commitment to be in excess of
30
$5,000,000, Econophone must have satisfied the minimum financial
performance requirement set forth in Schedule 6.02 during the time
periods set forth therein.
6.03. Affirmation of Representations and Warranties. Any Borrowing
Certificate or other request for any Advance hereunder shall constitute a
representation and warranty that (a) the representations and warranties
contained in Article 4 hereof are true and correct on and as of the date of
such request with the same effect as though made on and as of the date of such
request, and (b) on the date of such request no Default or Event of Default
has occurred and is continuing or exists or will occur or exist after giving
effect to such Advance (for this purpose such Advance being deemed to have
been made on the date of such request). Failure of Lender to receive notice
from Borrower to the contrary before such Advance is made shall constitute a
further representation and warranty by Borrower that (x) the representations
and warranties of Borrower contained in the first sentence of this
Section 6.03 are true and correct on and as of the date of such Advance with
the same effect as though made on and as of the date of such Advance, and (y)
on the date of the Advance no Default or Event of Default has occurred and is
continuing or exists or will occur or exist after giving effect to such
Advance.
6.04. Deadline for Funding Conditions. Lender shall have no
obligation to make any Advances hereunder if all of the conditions set forth
in Article 5 and in Sections 6.01 and 6.02 hereof have not been fully
satisfied and in any event after the Financing Termination Date.
ARTICLE 7: AFFIRMATIVE COVENANTS
Econophone hereby agrees that as long as the commitment hereunder remains
in effect, any Note remains outstanding or unpaid or any other amount is owing
to Lender hereunder or under any of the Loan Documents, Econophone shall keep
and perform fully each and all of the following covenants:
7.01. Reporting and Information Requirements.
(a) Annual Audit Reports. Within three (3) months after the close
of each fiscal year of Econophone, Econophone shall furnish or cause to
be furnished to Lender audited statements of income, retained earnings
and statements of cash flows for such fiscal year and the Econophone's
balance sheet as of the close of such fiscal year, and notes to each, all
in reasonable detail, and beginning with Econophone's second full fiscal
year setting forth in comparative form the corresponding figures for the
preceding fiscal year, with such statements and balance sheet to be
certified without qualification by independent certified public
accountants of recognized regional or national standing selected by
Econophone and reasonably satisfactory to Lender.
(b) Quarterly Reports. Within forty-five (45) days after the end
of the first three fiscal quarters, Econophone shall furnish to Lender
(i) unaudited consolidated statements of income and retained earnings and
cash flow statements for Econophone for such quarter and for the period
from the beginning of Econophone's then current fiscal year to the end
of such quarter, and an unaudited consolidated balance sheet of
Econophone as of the end of such month, all in reasonable detail and
certified by a Responsible Officer of Econophone as presenting fairly the
financial position of Econophone as of the end of such quarter and the
results of its operations and the changes in its financial position for
such quarter, in conformity with GAAP (except for accompanying notes
thereto), subject to year-end audit adjustments, and (ii) upon Lender's
request, an aging of accounts payable and accounts receivable.
31
(c) Compliance Certificates. Within sixty (60) days after the end
of each Calendar Quarter, Econophone shall deliver to Lender a
certificate dated as of the end of such period, signed on behalf of
Econophone by a Responsible Officer of Econophone: (i) stating that as
of the date thereof no Event of Default has occurred and is continuing
or exists, or if an Event of Default has occurred and is continuing or
exists, specifying in detail the nature and period of existence thereof
and any action with respect thereto taken or contemplated to be taken by
Econophone; (ii) stating that the signer has personally reviewed this
Agreement and that such certificate is based on an examination made by
or under the supervision of the signer sufficient to assure that such
certificate is accurate; (iii) calculating and certifying Econophone's
compliance with the financial covenants set forth in Section 7.15 hereof;
and (iv) certifying an attached aging schedule of Econophone's accounts
receivables and trade payables for the period then ended.
(d) [INTENTIONALLY DELETED].
(e) [INTENTIONALLY OMITTED]
(f) Other Reports and Information. Promptly upon their becoming
available to Econophone, Econophone shall deliver to Lender copies of (i)
all regular or special reports or effective registration statements which
Econophone shall file with the Securities and Exchange Commission (or any
successor thereto) or any securities exchange, (ii) financial statements,
material reports, and other information distributed by Econophone to its
creditors or the financial community in general, (iii) all press releases
issued by or concerning Econophone or the System, and (iv) during the
High Yield Period, all material reports and other information distributed
to the trustee for the High Yield Notes pursuant to the Indenture (as
defined in the indenture as it exists on the date hereof).
(g) Further Information. Econophone will promptly furnish to Lender
such other information (including any report by independent auditors) in
such form as Lender may reasonably request.
7.02 Other Notices. Promptly upon a Responsible Officer of Econophone or
any other Borrower becoming aware of any of the following, Econophone or such
other Borrower shall give Lender notice thereof, together with a written
statement of a Responsible Officer of Econophone or such other Borrower
setting forth the details thereof and any action with respect thereto taken
or contemplated to be taken by Econophone or such other Borrower:
(a) a Default or Event of Default;
(b) any Material Adverse Change;
(c) a material default or breach by Econophone or any of its
Subsidiaries under any other contractual obligation to which it is a
party or by which it or its properties is bound, if the consequences of
such breach of default are material to the business, operations or
financial condition of Econophone on a consolidated basis;
(d) any event that Econophone or such other Borrower reasonably
determines would constitute a Regulatory Event;
32
(e) the commencement, existence or threat of any proceeding by or
before any Governmental Authority against Econophone or any of its
Subsidiaries which, if adversely decided, would have a Material Adverse
Effect;
(f) Econophone's or any Subsidiary's receipt of any notice of
violation of, or liability under, any Environmental Laws affecting
Econophone, a Subsidiary or any of their respective properties; or
(g) any Change in Control or any material change in the management
of Borrower.
7.03. Notice of Pension-Related Events. Econophone shall promptly
furnish Lender with written notice upon the receipt by Econophone or the
administrator of any Plan of any notice, correspondence or other communication
from the PBGC, the IRS, the Secretary of Treasury, the Department of Labor,
or any other Person, as the case may be, relating to (i) any Reportable Event,
(ii) any funding deficiency in excess of $50,000 (or $250,000 during any High
Yield Period) with respect to any Plan, (iii) any liability, either primary
or secondary, with respect to complete or partial withdrawal from any Plan,
(iv) proceedings to terminate any Plan or (v) the appointment of a trustee for
any Plan. Such notice shall be accompanied by any pertinent documents
including, but not limited to, the relevant notice, correspondence or other
communication and a statement of a Responsible Officer of Econophone
describing the event or the action taken and the reasons therefor.
7.04. Inspection Rights. Econophone shall upon reasonable notice
permit (and shall cause its Subsidiaries to permit) such persons as Lender may
designate to visit and inspect the Collateral or any other properties of
Econophone and its Subsidiaries, to examine its books and records and take
copies and extracts therefrom and discuss its respective affairs with its
officers, employees and independent engineers at such times and as often as
Lender may reasonably request. Econophone hereby authorizes (and shall cause
its Subsidiaries to authorize) such officers, employees, and independent
engineers to discuss with Lender the affairs of Econophone and its
Subsidiaries. Lender agrees that it will not use any such confidential
information in a manner prohibited by law or, directly or indirectly, disclose
to any third party confidential information of Econophone obtained by it
pursuant to the exercise of such inspection rights, provided, however, this
Section 7.04 shall not restrict the disclosure by Lender of information if
such disclosure is required by law, by order of any court or by the order,
rule or regulation of any administrative agency, including without limitation
any requirements of the FCC, any PUC, or any state or federal securities
commissions. Further, the disclosure of information will not be restricted
hereunder if such information (i) has been or becomes published or is now, or
in the future, in the public domain through (A) no fault of Lender, (B)
disclosure other than unauthorized disclosure by Lender or (C) disclosure to
third parties by Econophone without similar restrictions; (ii) subsequent to
disclosure to Lender, is lawfully received from a third party having rights
therein without restriction of the third party's or Lender's rights to
disseminate the information and without notice of any restriction against its
further disclosure; (iii) is disclosed with the written approval of
Econophone; or (iv) is or becomes publicly available free of any obligation
to keep it confidential.
7.05. Preservation of Corporate Existence and Qualification.
Econophone shall (and shall cause each other Borrower) maintain its existence,
good standing and rights in full force and effect in its jurisdiction of
organization and shall (and shall cause each other Borrower to) qualify to do
business and remain qualified and in good standing and shall obtain all
necessary authorizations to do business in each jurisdiction in which failure
to receive or retain such would have a Material Adverse Effect, provided
however, that nothing in this Section 7.05 shall prohibit any Borrower or any
Subsidiary thereof from
33
entering into an Affiliate Transaction.
7.06. Continuation of Business. Econophone shall continue to engage
solely in the business described on Schedule 1 hereto, and shall acquire and
maintain in full force and effect all material rights, privileges, franchises
and licenses necessary for the operation and maintenance of the System
(including, without limitation any license or authorization required by the
FCC or any PUC).
7.07. Insurance.
(a) Econophone shall provide and maintain and cause to be
maintained at all times insurance in such forms and covering such risks
and hazards and in such amounts and with an insurance corporation with
a Best Rating of "A-" or above, licensed to do business in the states
where the Equipment and any Borrower are located, as may be reasonably
satisfactory to Lender, as shown on Schedule 7.07 hereto, and otherwise
as may be required by the Security Documents.
(b) Econophone shall cause (i) all liability insurance policies
covering any premises in which Collateral is located and all policies
insuring against liability arising from the Borrowers' operation of the
Collateral to name Lender as an additional insured, (ii) all physical
damage insurance policies to contain a lender's or mortgagee's loss
payable provision acceptable to Lender with respect to the Collateral,
(iii) all liability and physical damage insurance policies described in
clauses (i) and (ii) to provide that no assignment, cancellation,
modification, reduction in amount or adverse change in coverage thereof
shall be effective until at least thirty (30) days after receipt by
Lender of written notice thereof, (iv) all insurance policies to insure
the interests of Lender with respect to the Collateral regardless of any
breach of or violation by Econophone of any warranties, declarations or
conditions contained therein and (v) all liability and physical damage
insurance policies described in clauses (i) and (ii) to provide that
Lender shall have no obligation or liability for premiums, commissions,
assessments or calls in connection with such insurance. Lender shall be
under no obligation to verify the adequacy or existence of any insurance
coverage. Except as set forth in Schedule 6.02, Econophone shall furnish
Lender copies of, or acceptable certificates with respect to, all such
policies prior to the date hereof, and shall provide to Lender, at least
thirty days prior to each policy expiration date, evidence of the
insurance being maintained by Econophone in compliance with this
Section 7.07(b). Certificates for insurance required under subsection (i)
above shall be in XXXXX Form 27 (attached hereto at Schedule 7.07), and
all certificates shall be satisfactory in form and substance to Lender.
(c) If the Collateral is partially or totally damaged or destroyed,
Econophone shall give prompt notice to Lender, and all insurance
proceeds, less the costs of collection thereof, shall be paid to or
retained by Lender. Settlements, adjustments or compromises of any claims
for loss, damage or destruction to the Collateral shall be made by
Econophone and Lender as long as no Event of Default has occurred and is
continuing, and otherwise shall be made solely by Lender. Borrower hereby
authorizes and directs any affected insurance company to pay such
proceeds directly to Lender, and to rely on Lender's statement as to
whether an Event of Default has occurred. Borrower shall pay all costs
of collection of insurance proceeds payable on account of such damage or
destruction. If no Default or Event of Default has occurred and is
continuing on the date the Collateral is partially or totally damaged or
destroyed, Lender shall make available to Borrower the proceeds of any
physical damage insurance actually paid to Lender in respect of such
damage or destruction of the Collateral (after deducting therefrom any
sums
34
retained by Lender in reimbursement for costs of collection) to pay the
cost of restoration, and Borrower shall proceed promptly with the work
of restoration of the Collateral and shall pursue the work of restoration
diligently to completion. If any Default or Event of Default has occurred
and is continuing either on the date of such damage or destruction or on
the date such insurance proceeds are paid, or if any Default or Event of
Default shall occur prior to completion of such work of restoration, then
Lender, at its option, may apply such insurance proceeds in payment of
any of the Obligations, in such order as Lender may elect in its sole
discretion. Any insurance proceeds remaining after completion of work or
restoration shall, at Lender's election, be applied in accordance with
Section 2.04(c) hereof (but without prepayment premium), or paid over to
Borrower. Upon completion of any restoration, Borrower shall deliver to
Lender a certificate stating that the restoration has been duly completed
and accounting for the use of any insurance proceeds in such restoration.
7.08. Payment of Taxes, Charges, Claims and Current Liabilities.
Econophone shall pay or discharge:
(a) on or prior to the date on which penalties thereto accrue, all
taxes, assessments and other government charges or levies imposed upon
it or any of its properties or income (including such as may arise under
Section 4062, Section 4063 or Section 4064 of ERISA, or any similar
provision of law);
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, and other like persons
which could result in creation of a Lien (other than a Permitted
Encumbrance) upon any such property;
(c) on or prior to the date when due, all other lawful claims
which, if unpaid, might result in the creation of a Lien upon any such
property (other than Permitted Encumbrances) or which, if unpaid, might
give rise to a claim entitled to priority over general creditors of a
Borrower in a case under Title 11 (Bankruptcy) of the United States Code,
as amended, or in any insolvency proceeding or dissolution or winding-up
involving Borrower; and
(d) all other current liabilities so that no amount, individually
or in the aggregate greater than $250,000, is overdue more than ninety
(90) days.
Notwithstanding the foregoing, the Borrowers shall be entitled to contest
or appeal the requirements of any Law or Governmental Authority or the payment
of any tax, assessment, charge, levy, claim or other liability, or any
judgment entered against a Borrower (collectively, in this Section 7.08, the
"requirements"), as long as (i) such requirements are being contested in good
faith by appropriate proceedings diligently conducted; (ii) for any such
requirement with which the failure to comply may have a Material Adverse
Effect, Econophone has given Lender written notice of such requirements and
its intent to contest them, with supporting reasons for such contest, before
the addition of any interest or penalties that may accrue on such
requirements; (iii) the applicable Borrower maintains adequate cash reserves
and makes other appropriate provisions as may be required by GAAP to provide
for any liability arising from such requirements; (iv) the contesting of, or
failure to comply with, such requirements does not in any way jeopardize such
Borrower's ability or authority to operate all or any part of the Collateral
or the continuing priority of Lender's security interests in the Collateral;
(v) the contesting of, or failure to comply with, such requirements does not
have a Material Adverse Effect; and (vi) any foreclosure, attachment,
execution, sale or similar proceeding against a Borrower or any of its
properties in connection
35
with any such requirements is duly stayed by posting of a bond or security
deposit or by other action sufficient under applicable law to stay such
foreclosure, attachment, execution, sale or other proceedings.
7.09. Financial Accounting Practices. Econophone shall make and keep
books, records and accounts which, in reasonable detail, accurately and fairly
reflect its transactions and dispositions of its assets and maintain a system
of internal accounting controls sufficient to provide reasonable assurances
that (a) transactions are executed in accordance with management's general or
specific authorization, (b) transactions are recorded as necessary (i) to
permit preparation of financial statements in conformity with GAAP and (ii)
to maintain accountability for assets, (c) access to assets is permitted only
in accordance with management's general or specific authorization and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
7.10. Compliance with Laws. The Borrowers shall comply in all
respects with all Laws applicable to the Borrowers, provided that the
Borrowers shall not be deemed to be in violation of this Section 7.10 as a
result of any failure to comply which would not result in any direct liability
or exposure to Lender or any fines, penalties, injunctive relief or other
civil or criminal liabilities which, in the aggregate, would have a Material
Adverse Effect.
7.11. Use of Proceeds. The Borrowers shall use the proceeds of
Advances hereunder only as set forth in Section 2.01 hereof.
7.12. Government Authorizations; Regulatory Authorizations, Etc.
Other than for any matter in which the failure to comply with this covenant
will not have a Material Adverse Effect, the Borrowers shall at all times
obtain and maintain in force all Regulatory Authorizations and all other
authorizations, permits, consents, approvals, licenses, exemptions and other
actions by, and all registrations, qualifications, designations, declarations
and other filings with, any Governmental Authority necessary in connection
with execution and delivery of this Agreement or any Note, consummation of the
transactions herein or therein contemplated, performance of or compliance with
the terms and conditions hereof or thereof or to ensure the legality, validity
and enforceability hereof or thereof.
7.13. Contracts and Franchises. The Borrowers shall comply with all
agreements or instruments to which it is a party or by which it or any of its
properties (now owned or hereafter acquired) may be subject or bound and shall
maintain any and all franchises it may have or hereafter acquire, provided
that the Borrowers shall not be deemed to be in violation of this Section 7.13
as a result of any failure to comply with any agreement if such failure would
not have Material Adverse Effect.
7.14. Consents. The Borrowers shall obtain such Landlord's Consents,
and other third party consents as Lender shall reasonably request to protect
its Liens and its access to the Collateral.
7.15. Financial Covenants. Econophone shall comply with the financial
covenants set forth on Schedule 7.15 hereto.
7.16. Construction and Storage. The Collateral shall be installed and
equipped in full compliance with the Requirements of Law affecting the
Collateral except to the extent a failure to so comply would not have a
Material Adverse Effect. All Equipment financed with the proceeds of the Loan
shall be safeguarded and stored until installed in appropriate storage
facilities owned or leased by Econophone or any other Borrower. In the event
of any cessation of construction for more than fifteen
36
(15) successive calendar days, Econophone or such other Borrower shall make
adequate provision, reasonably acceptable to Lender, for the protection of all
materials stored on site against deterioration, loss or damage.
7.17. Upgrade NTI Equipment. Econophone shall update the software
customarily used in equipment of the same type as the Equipment within two
releases of the most current batch change supplement release. The Borrowers
shall maintain the Equipment in good working order in accordance with
established maintenance procedures such that the Equipment performs to
published specifications and shall upgrade its functionality to include batch
change supplements releases generally available to NTI customers and batch
change supplements upgrades included in the original purchase price of the NTI
Purchase Agreement in the form in effect on the Tranche 3 Closing Date.
ARTICLE 8: NEGATIVE COVENANTS
Econophone hereby agrees that so long as the Commitment hereunder remains
in effect or any Note remains outstanding and unpaid or any other amount is
owing to Lender hereunder or under any of the Loan Documents, Econophone shall
not, and shall not permit any Subsidiary to, directly or indirectly without
prior written consent of Lender, do or permit to exist any of the following:
8.01. Additional Indebtedness. Create, incur, assume or suffer to
exist at any one time any Indebtedness in excess of $250,000 in the aggregate
except for (a) trade payables incurred in the ordinary course of business, and
(b) any Indebtedness described on Schedule 8.01 hereto.
8.02. Restrictions on Liens and Sale of Collateral. Create or suffer
to exist any Lien on the Collateral or on any other property of Econophone or
its Subsidiaries, or any part thereof, whether superior or subordinate to the
Lien of the Security Documents, or assign, convey, sell or otherwise dispose
of or encumber its interest in the Collateral, or any part thereof (including,
without limitation, execution of any lease), nor permit any such action to be
taken, except for the following permitted dispositions and encumbrances (the
"Permitted Encumbrances"): (i) the Lien created hereby and any purchase money
Liens in favor of NTI created by the NTI Purchase Agreement; (ii) Liens for
taxes not yet due, or which are being contested in good faith and by
appropriate proceedings in accordance with Section 7.08 hereof; (iii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
like Liens arising in the ordinary course of business which are overdue for
a period not longer than thirty (30) days or which are being contested in good
faith and by appropriate proceedings in accordance with Section 7.08 hereof;
(iv) pledges or liens in connection with workers' compensation, unemployment
insurance and other social security legislation; (v) deposits to secure the
performance of bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business; (vi)
easements, rights-of-way, restrictions and other similar encumbrances that are
not substantial in amount, and which do not in any case materially detract
from the value of the property subject thereto or interfere with the ordinary
conduct of the business of Econophone or such Subsidiary; (vii) judgment liens
with respect to which execution has been stayed within ten (10) days by
appropriate judicial proceedings and the posting of adequate security which
may not be any of the Collateral; and (viii) specific liens identified on
Schedule 8.02 hereto. Any of the Liens described in the second clause of
subparagraph (ii), the second clause of subparagraph (iii), and subparagraph
(vii) above shall remain "Permitted Encumbrances" as long as they are being
contested by Econophone or such Subsidiary in compliance with Section 7.08
hereof.
37
8.03. Limitation on Contingent Obligations. Agree to, or assume,
guarantee, endorse or otherwise in any way be or become responsible or liable
for, directly or indirectly, any Contingent Obligation except for those
created or contemplated by the Loan Documents, except for (i) Indebtedness
permitted under Section 8.01 and guarantees thereof or (ii) Indebtedness of
any Subsidiary of which Borrower beneficially owns a majority of the
outstanding capital stock engaged principally in the business of Borrower as
currently being conducted or otherwise in the telecommunications business.
8.04. [INTENTIONALLY OMITTED]
8.05. Prohibition of Mergers, Acquisitions, Name, Office or Business
Changes, Etc. Except in connection with an Affiliate Transaction,
(a) Enter into or become the subject of, any transaction of merger,
acquisition or consolidation or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, transfer
or otherwise dispose of, in one transaction or a series of transactions,
all or any substantial part of such Borrower's business or assets,
whether now owned or hereafter acquired.
(b) Change its name or corporate structure without giving Lender
at least thirty (30) days advance written notice of such change, and
ensuring that any steps that Lender may deem necessary to continue the
perfection and priority of Lender's security interests in the Collateral
shall have been taken.
(c) Change the fiscal year end of Econophone from December 31,
except with the prior written consent of Lender, which consent shall not
be unreasonably withheld.
(d) Other than in connection with the issuance of preferred or
common stock that does not result in a Change of Control of Borrower,
amend, restate or otherwise modify, or violate any terms of, its
Organizational Documents in any manner that affects the Lender without
the prior written consent of Lender, which consent will not be
unreasonably withheld.
(e) Become or agree to become a general or limited partner in any
general or limited partnership, or a member in a limited liability
company or a joint venturer in any joint venture not engaged principally
in the business of Econophone or its Subsidiaries as currently conducted
or related to the telecommunications industry.
(f) Acquire or purchase substantially all of the stock,
partnership, membership or other ownership interests in, or substantially
all of the business, assets, customers or operations of, any other entity
not engaged principally in the business of Econophone or its Subsidiaries
as currently conducted or related to the telecommunications industry.
(g) Enter into any new business other than those related to the
telecommunications industry.
8.06. Limitation on Equity Payments. Make any Equity Payment, except
that, as long as no Default or Event of Default has occurred and is
continuing, or would be caused thereby, and if no other provision contained
herein will be violated by the disbursement of such Equity Payment, Borrower
may make Equity Payments described on Schedule 8.06 hereto. Before making any
Equity Payment in
38
accordance with this Section 8.06, Borrower shall deliver to Lender a
certificate of a Responsible Officer of Borrower, setting forth in detail the
calculation supporting the Borrower's compliance with the financial covenants
in Schedule 7.15, stating that no Material Adverse Change has occurred since
the date of the latest financial statement delivered pursuant to
Section 7.01(a), and stating that no Default or Event of Default has occurred
and is continuing or will be caused by such Equity Payment.
8.07. Limitation on Investments, Advances and Loans. (i) Organize,
create, acquire, capitalize or own any Subsidiaries not engaged principally
in the business of Econophone or its Subsidiaries as currently conducted or
as otherwise in the telecommunications business without Lender's prior written
consent, or (ii) make or commit to make any advance, loan, guarantee of any
Indebtedness, extension of credit or capital contribution to, or hold or
invest in or purchase or otherwise acquire any stock, bonds, notes, debentures
or other securities of, or make any other investment in, any Person (x) not
engaged principally in the business of Econophone or its Subsidiaries as
currently conducted or otherwise in the telecommunications business (other
than Permitted Investments) without Lender's prior written consent, and (y)
other than on terms no more onerous to Econophone or its Subsidiaries than if
negotiated on an arms-length basis with an unrelated person.
8.08. Capital Expenditures. Directly or indirectly make or commit to
make any expenditure in excess of $250,000 in the aggregate in any fiscal year
in respect of the purchase or other acquisition (including installment
purchases or capital leases) of fixed or capital assets, except for capital
expenditures in accordance with the business of Econophone and its
Subsidiaries as currently conducted or otherwise in the telecommunications
business and normal replacements and maintenance which are properly charged
to current operations; provided that the limitations of this section shall not
apply during the High Yield Period.
8.09. Limitation on Leases. Enter into any agreement, or be or become
liable under any agreement, not in existence as of the date hereof and
reflected on Econophone's financial statements, for the lease, hire or use of
any real or personal property in excess of $250,000 in the aggregate,
including, without limitation, capital or operating leases, except that
Econophone and its Subsidiaries Borrower or such Subsidiary may, in the
ordinary course of business and on term standard in the industry, enter into
leases or agreements (i) for the use of real property for the System or sales
offices, (ii) for office space, office equipment, vehicles or tools, (iii) for
the location and storage of the Collateral, and (iv) for the use of capacity
in communication transmission facilities, such as but not limited to cables
and satellites; provided that the limitations of this section shall not apply
during the High Yield Period.
8.10. Transactions with Affiliates. In the case of Econophone and
Restricted Subsidiaries directly or indirectly, enter into, renew or extend
any transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any
holder (or any Affiliate of such holder) of 5% or more of any class of capital
stock of Econophone or with any Affiliate of Econophone or any Restricted
Subsidiary, except upon fair and reasonable terms no less favorable to
Econophone or such Restricted Subsidiary than could be obtained, at the time
of such transaction or, if such transaction is pursuant to a written
agreement, at the time of the execution of the agreement providing therefor,
in a comparable arm's-length transaction with a Person that is not such a
holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
board of directors of Econophone or (B) for which the Econophone or a
Restricted Subsidiary delivers to the Lender a written opinion of a nationally
recognized
39
investment banking firm stating that the transaction is fair to Econophone or
such Restricted Subsidiary from a financial point of view, (ii) any
transaction solely between Econophone and any of its Wholly Owned Restricted
Subsidiaries or solely between Wholly Owned Restricted Subsidiaries, (iii) the
payment of reasonable and customary regular fees to directors of the Borrower
who are not employees of Econophone, (iv) any payments or other transactions
pursuant to any tax-sharing agreement between Econophone and any other Person
with which Econophone files a consolidated tax return or with which Econophone
is part of a consolidated group for tax purpose, (v) any Restricted Payments
not prohibited by Section 4.04 or 4.05 of the Indenture as it exists on the
date hereof, (vi) employment agreements with, and loans and advances to,
officers and employees of Econophone and its Restricted Subsidiaries, in each
case in the ordinary course of business, (vii) customary indemnification
arrangements in favor of directors and officers of Econophone and its
Restricted Subsidiaries, (viii) transactions in accordance with the provisions
of the Preferred Stock of Econophone as set forth in the Certificate of
Incorporation of the Borrower on the date of the issuance of the High Yield
Notes or (ix) those matters listed on Schedule 8.10 hereto. Notwithstanding
the foregoing, during the High Yield Period, any transaction covered by the
first paragraph of this Section 8.10 and not covered by clauses (ii) through
(vi) of this paragraph, the aggregate amount of which exceeds $3,000,000 in
value, must be approved or determined to be fair in the manner provided for
in clause (i)(A) or (B) above.
8.11. Termination of NTI Purchase Agreement. Fail to satisfy its
purchase obligations under the NTI Purchase Agreement, or terminate the NTI
Purchase Agreement prior to the earlier of (i) completion of and acceptance
of the NTI Equipment to be acquired thereunder, or (ii) the Financing
Termination Date.
8.12. Removal of Collateral. Remove any material part of the
Collateral (except for sales or leases of Inventory in the ordinary course of
business) from the locations identified on Schedule 4.26, without giving
Lender thirty (30) days prior written notice of such move and ensuring that
any steps the Lender may deem necessary to continue the perfection and
priority of Lender's security interest in the Collateral shall have been
taken. Notwithstanding the terms of any other section of this Agreement, no
part of any Collateral may be removed from locations identified on Schedule
4.26 (or such other location as may be permitted after compliance with Section
8.12), to any other location identified on Schedule 4.26 (or such other
location to which such Collateral has been relocated after compliance with
Section 8.12) without first complying again with the requirements of Section
8.12 in connection with each relocation.
8.13. Assumed Names. Without giving Lender at least thirty (30) days
advance written notice of such change and ensuring that any steps that Lender
may deem necessary to continue the perfection and priority of Lender's
security interests in the Collateral shall have been taken, transact or engage
in business under any assumed name, fictitious name, tradestyle or "d/b/a,"
except those identified on Schedule 4.29, and provided further that this
limitation does not apply to any Subsidiary of Borrower.
8.14. Employment of, or Competition by, Key Employees. (i) Cease to
employ on a full time basis Xxxxxx Xxxx (other than by reason of his death or
disability) or (ii) suffer to exist any material competition by any of Xxxx
Xxxxx, Xxxxxx Xxxx or Xxxxxx Xxxx with the business conducted now or hereafter
by Econophone directly or through a Subsidiary.
40
ARTICLE 9: EVENTS OF DEFAULT AND REMEDIES
9.01. Events of Default. An Event of Default shall mean the
occurrence or existence of one or more of the following events or conditions
(whatever the reason for such Event of Default and whether voluntary,
involuntary or effected by operation of Law):
(a) Payment Default. If a Borrower fails to pay any sum, whether
of principal or interest on any Note or any prepayment premiums, or
any other amount due hereunder or under any Note within ten (10)
calendar days after such amount becomes due; or
(b) False Statement. If any statement, representation or
warranty made by any Borrower in any Loan Document or made in any
financial statement, certificate, report, exhibit or document
furnished to Lender pursuant to any Loan Document, proves to have been
untrue, incomplete, false or misleading in any material respect as of
the time when made and shall not have been corrected or remedied to
the satisfaction of Lender within twenty (20) calendar days after the
earlier of Borrower's knowledge thereof or receipt of written notice
thereof from Lender; or
(c) Covenant Defaults. If Borrower defaults in the performance
or observance of any covenant or agreement in this Agreement, and such
default continues for a period of twenty (20) calendar days after the
earlier of Borrower's knowledge thereof or receipt of written notice
from Lender thereof, except for violations of Section 7.08(d), which
shall become an Event of Default at the end of the sixty (60) day
period stated therein and except for specific Defaults listed
elsewhere in this Section 9.01, as to which no notice or cure period
shall apply unless specified; or
(d) [INTENTIONALLY OMITTED]
(e) Undischarged Judgments. If one or more judgments for the
payment of money has been entered against Econophone or any Subsidiary
in an amount in excess of $1,000,000, and such judgment or judgments
have remained undischarged and unstayed for a period of thirty (30)
calendar days, unless the validity thereof is contested in compliance
with Section 7.08 hereof; or
(f) Attachments, etc. If one or more writs or warrants of
attachment, garnishment, execution, distraint or similar process with
respect to obligations of Econophone or any Subsidiary in excess of
$250,000 individually or in the aggregate have been issued against
Econophone or any Subsidiary or any of their respective properties
which have remained undischarged and unstayed for a period of thirty
(30) consecutive days and are not being contested in compliance with
Section 7.08 hereof; or
(g) Default Under Third Party Agreements. If one or more
defaults, or events or conditions which with notice or lapse of time
or both would become a default, occur that give(s) the creditor the
right to accelerate in respect of any other obligation(s) of
Econophone or any Subsidiary for borrowed money (including lease
obligations) in the amount of $1,000,000 individually or in the
aggregate; or
41
(h) Dissolution; Discontinuance of Business, Etc. Econophone or
any other Borrower discontinues its usual business, dissolves, has its
Organizational Document revoked, winds up or liquidates itself or its
business, except as such acts may occur in connection with an
Affiliate Transaction; or
(i) Involuntary Bankruptcy or Receivership Proceedings. If a
receiver, custodian, liquidator, or trustee of Econophone or any
Subsidiary or of any substantial part of its respective property is
appointed by the order or decree of any court or agency or supervisory
authority having jurisdiction; or an order is entered adjudicating
Econophone or any Subsidiary as bankrupt or insolvent; or any
substantial part of the property of Econophone or any Subsidiary is
sequestered by court order; or a petition is filed against any
Borrower under any state or federal bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution,
liquidation, or receivership law of any jurisdiction, whether now or
hereafter in effect and such petition is not dismissed within 30 days
of filing; or
(j) Voluntary Bankruptcy. If Econophone or any Subsidiary takes
affirmative steps to prepare to file, or files, a petition in
voluntary bankruptcy or to seek relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution, or liquidation law of any jurisdiction, whether now
or hereafter in effect, or consents to the filing of any petition
against it under any such law; or
(k) Assignments for Benefit of Creditors, Etc. If Econophone or
any Subsidiary makes an assignment for the benefit of creditors, or
admits in writing its inability to pay its debts generally as they
become due, or consents to the appointment of a receiver, trustee, or
liquidator of itself or of all or any part of its properties; or
(l) Non-compliance with Governmental Requirements. If Econophone
or any Subsidiary fails to comply with any requirement of any
Governmental Authority within twenty (20) calendar days after notice
in writing of such requirement shall have been given to Borrower by
such Governmental Authority, or such longer period of time permitted
Borrower by such Governmental Authority, unless the effect of such
noncompliance in Lender's sole judgment would not have a Material
Adverse Effect; or
(m) Regulatory Authorizations. If any Regulatory Authorization
in connection with this Agreement or any other Loan Document or any
such Regulatory Authorization now or hereafter necessary or advisable
to make this Agreement or the other Loan Documents legal, valid,
enforceable and admissible in evidence or to permit Borrower or
American Telemedia, Ltd. to conduct its business is not obtained or
has ceased to be in full force and effect or has been modified or
amended or has been held to be illegal or invalid or is revoked or
terminated and, after notice from Lender, is not being contested by
Econophone in compliance with Section 7.08 hereof and Lender has
reasonably determined in good faith (which determination shall be
conclusive) that such event or occurrence may have a Material Adverse
Effect; or
(n) Damage or Destruction. If the proceeds of any physical
damage insurance actually paid in respect of the partial or total
damage or destruction of the Collateral, together with any other cash
or other readily available funds, are insufficient to cover the cost
of the restoration thereof or such damage or destruction is so
extensive that repair or restoration reasonably cannot
42
be effected within a time period short enough to prevent a Material
Adverse Effect;
(o) Landlord Waivers. If any Borrower fails to provide the
Landlord Waivers required hereunder and Lender determines in its sole
discretion that such failure results in a material impairment of
Lender's security for the Loans; or
(p) Change in Control. If any Change in Control should occur
without Lender's prior written consent, which may be withheld in
Lender's sole and absolute discretion, or if any Borrower (other than
Econophone) ceases to be a Subsidiary of Econophone; or
(q) ERISA Defaults. Except as does not reject in a Material
Adverse Effect, if, with respect to any Plan, (i) there has occurred a
Reportable Event being considered by the PBGC which may reasonably
result in any material liability to the PBGC with respect to any Plan,
(ii) a Plan has been terminated not in compliance with ERISA, (iii) a
trustee has been appointed by a United States District Court to
administer a Plan, (iv) a PBGC or any other person has instituted
proceedings to terminate a Plan or to appoint a trustee to administer
any such Plan, (v) either the Borrower or any Affiliate has withdrawn,
completely or partially, from any Plan, (vi) either the Borrower or
any Affiliate has incurred secondary liability for withdrawal
liability payments under any Plan or (vii) a Plan has failed to meet
the minimum funding standards established under the Code or ERISA; or
(r) Defaults Under Other Loan Documents. If any default,
misrepresentation or breach should occur under any Security Document
or other Loan Document and is not cured or waived within the time
permitted therein, or any such Loan Documents should cease to be in
full force and effect, or any party thereto should assert any
unenforceability of, or deny liability on, or admit inability to
perform under, any such Loan Document.
9.02. Consequences of an Event of Default. If any Event of Default
shall occur and be continuing or shall exist, Lender shall be under no
further obligation to make Advances hereunder, any remaining commitment
hereunder shall immediately terminate, with no further notice, and Lender
may, by notice to Econophone, as agent for each Borrower, declare the unpaid
principal amount of each Note, interest accrued thereon and all other amounts
owing by such Borrower hereunder or under each Note to be immediately due and
payable without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived, and an action therefor shall
immediately accrue. Such consequences shall occur automatically upon the
occurrence of an Event of Default under Section 9.01 (h), (i), (j) or (k),
without any notice or demand. Upon the occurrence of an Event of Default,
Lender may, in its sole discretion, exercise any and all remedies available
to it under this Article 9 or under any of the Loan Documents or under
applicable law without further notice or period of grace or opportunity to
cure.
9.03. Exercise of Rights. Subject to any requirements for FCC or
other governmental approval upon the occurrence of any Event of Default, the
rights, powers and privileges provided in this Section and all other remedies
available to Lender under this Agreement or by statute or by rule of law may
be exercised by Lender at any time from time to time whether or not the
Obligations shall be due and payable, and whether or not Lender shall have
instituted any foreclosure or other action for the enforcement of this
Agreement or any Note. No failure to exercise nor any delay in exercising on
the part of Lender, any right, remedy, power or privilege hereunder or under
any of the other Loan Documents
43
shall operate as a waiver thereof, nor shall any single or partial exercise
of any right, power or privilege hereunder or thereunder preclude any other
or future exercise thereof or the exercise of any other right, remedy, power
or privilege.
9.04. Rights of Secured Party; Possession or Sale of Collateral.
Without limiting the generality of the foregoing, Lender shall have all the
rights and remedies of a secured party under the UCC, and Lender may, without
demand and without advertisement or notice, except as may be required by
Section 9-504(3) of the UCC, all of which the Borrowers waive, except as may
be required by Section 9-504(3) of the UCC, at any time or times, sell and
deliver any or all Collateral held by or for it at public or private sale,
for cash, upon credit or otherwise, at such prices and upon such terms as
Lender deems advisable, in its sole discretion, and/or collect, or enforce
the collection of, the Collateral. Lender may be the purchaser at any such
sale. Upon the occurrence of an Event of Default and upon Lender's request,
the Borrowers shall assemble, at its own expense, any or all Collateral owned
by such Borrower at a convenient place acceptable to Lender and shall pay to
Lender or reimburse Lender for, on demand, all costs of collection of all
amounts due, and enforcement of all rights hereunder, including reasonable
attorneys' fees and legal expenses, and expenses of any repairs to any realty
or other property to which any of such Collateral may be affixed. Upon an
Event of Default Lender may, to the fullest extent permitted by applicable
law, without notice, advertisement, hearing or process of law of any kind,
enter upon any premises where any of the Collateral may be located and take
possession of and remove such Collateral.
9.05. Notices, Etc. Waived. Except as expressly provided in this
Article 9, the Borrowers hereby expressly waive, to the fullest extent
permitted by applicable law, presentment, demand, protest, any and all
notices of any kind, advertisements, hearing or process of law in connection
with the exercise by Lender of any of its rights and remedies upon the
occurrence of an Event of Default. If any notification of intended
disposition of any of the Collateral is required by law, such notification
shall be deemed reasonably and properly given if given in accordance with
Section 10.06 hereto at least ten (10) days before such disposition.
9.06. Additional Remedies. Lender's remedies upon the occurrence
and during the continuance of an Event of Default shall include, in addition
to, and not in lieu of, such remedies as are available at law or in equity or
provided for in any of the Loan Documents, the following:
(a) Foreclosure; Receivership. Lender shall be entitled to file
one or more suits at law or in equity against the applicable Borrower
to collect such Borrower's Obligations and/or to foreclose on Lender's
Liens on and security interests created by this Agreement or the
Security Documents. Lender may apply or require the Borrowers to apply
for any necessary transfers, assignments, orders, consents or licenses
in connection with the operation or abandonment of the Collateral or
any part thereof, and the Lender shall also be entitled as a matter of
right and without notice and without requiring bond (notice and bond
being hereby waived), without regard to the solvency or insolvency of
the Borrowers at the time of application and without regard to the
value of the Collateral at that time, to have a receiver appointed by
a court of competent jurisdiction in order to manage, protect, and
preserve the Collateral and to continue the operation of the business
of the Borrowers, and to collect all revenues and profits thereof and
apply the same to the payment of all expenses and other charges of
such receivership until the sale or other final disposition of the
Collateral. The Borrowers hereby consent to the appointment of such
receiver.
44
(b) Right to Cure. Following the occurrence and during the
continuance of an Event of Default, if Borrower fails in any material
respect to perform or comply with any of its agreements contained
herein or in any of the other Loan Documents, Lender may take whatever
actions it may deem appropriate to perform or comply or otherwise
cause performance or compliance with such agreement, all at the risk,
cost and expense of Borrower.
(c) Setoff. If the unpaid principal amount of any Note, interest
accrued thereon or any other amount owing by any Borrower hereunder or
under any Note shall have become due and payable (by acceleration or
otherwise), Lender shall have the right, in addition to all other
rights and remedies available to it, without notice to any Borrower,
to setoff against and to appropriate and apply to such due and payable
amounts any debt owing to, and any other funds held in any manner for
the account of, such Borrower by Lender. Such right shall exist
whether or not Lender shall have given notice or made any demand
hereunder or under such Note, whether or not such debt owing to or
funds held for the account of such Borrower is or are matured or
unmatured, and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy available
to Lender. The Borrowers hereby consent to and confirm the foregoing
arrangements and confirms Lender's rights of setoff.
9.07. Application of Proceeds. Any proceeds of any of the
Collateral, received by Lender through sale or disposition of the Collateral
or otherwise, may be applied by Lender toward the payment of the Obligations,
including expenses in connection with the Collateral (including reasonable
fees and legal expenses) in such order of application as Lender may from time
to time elect.
9.08. Discontinuance of Proceedings. If Lender should proceed to
enforce any right or remedy under this Agreement or any other Loan Document,
and then discontinue or abandon such proceeding for any reason, all rights,
powers and remedies of Lender hereunder shall continue as if no such
proceeding had been taken.
9.09. Power of Attorney. For the purpose of carrying out the
provisions and exercising the rights, powers and privileges granted by the
Loan Documents, including, without limitation, this Article 9, the Borrowers
hereby irrevocably constitute and appoint Lender its true and lawful
attorney-in-fact to execute, acknowledge and deliver any instruments and do
and perform any acts such as are referred to in the Loan Documents,
including, without limitation, this Article 9, in the name and on behalf of
such Borrower, from time to time in Lender's reasonable discretion after the
occurrence and during the continuance of an Event of Default, in accordance
with the Loan Documents and any statute or rule of law. This power of
attorney is a power coupled with an interest and cannot be revoked. The
Borrowers hereby ratify all that said attorney-in-fact shall lawfully do or
cause to be done by virtue and in accordance with the terms hereof.
Without limiting the generality of the foregoing, Lender may after the
occurrence and during the continuance of an Event of Default do the following
without notice to or assent by any Borrower to accomplish the purposes of
this Agreement:
(a) upon failure of a Borrower to timely pay or discharge taxes or
Liens levied or placed on or threatened against the Collateral or
maintain insurance on the Collateral, pay and discharge such taxes or
Liens, effect any repairs on the Collateral and/or pay the premiums
for any insurance called for by the terms of this Loan Agreement or
any other Loan Document;
45
(b) (i) direct any party liable for any payment on any Collateral to
make payment of any and all monies due and to become due thereunder
directly to Lender or as Lender shall direct; (ii) in the name of a
Borrower or its own name or otherwise, take possession of and endorse
and collect any checks, drafts, notes, acceptances, or other
instruments for the payment of monies due under, or otherwise receive
payment of and receipt for any and all monies, claims and other
amounts due and to become due at any time in respect of or arising out
of any Collateral; (iii) sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection
with the Collateral; (iv) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction
to collect all or any of the Collateral and to enforce any other right
in respect of any Collateral; (v) defend any suit, action or
proceeding brought against a Borrower with respect to any Collateral;
(vi) settle, compromise or adjust any suit, action or proceeding
described above upon commercially reasonable terms under the
circumstances and, in connection therewith, give such discharges or
releases as Lender may reasonably deem appropriate; and (vii)
generally sell, use, operate, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully
and completely as though Lender were the absolute owner thereof for
all purposes, and, at Lender's option and the applicable Borrower's
expense, at any time or from time to time after the occurrence and
during the continuance of an Event of Default, all other acts and
things that Lender reasonably deems necessary to protect, preserve or
realize upon the Collateral and Lender's security interest therein, in
order to effect the intent of this Agreement and the other Loan
Documents all as fully and effectively as the applicable Borrower
might do.
9.10. Regulatory Matters. Notwithstanding any provision to the
contrary contained herein, Lender will not exercise any right or remedy under
this Agreement that requires prior FCC or PUC approval without first
obtaining such approval. If counsel to Lender reasonably determines that the
consent of the FCC or PUC is required in connection with any of the actions
that may be taken by Lender in the exercise of its rights hereunder or under
any of the other Loan Documents, then the Borrowers, at their sole cost and
expense, agrees to use its best efforts to secure such consent and to
cooperate with Lender in any action commenced by Lender to secure such
consent. Upon the occurrence and during the continuation of an Event of
Default, the Borrowers shall promptly execute and/or cause the execution of
all applications, certificates, instruments and other documents and papers
that may be required in order to obtain any necessary governmental consent,
approval or authorization, and if any Borrower fails or refuses to execute
such documents, the clerk of the court with jurisdiction may execute such
documents on behalf of such Borrower.
ARTICLE 10: GENERAL CONDITIONS/MISCELLANEOUS
The following conditions shall be applicable throughout the term of this
Agreement:
10.01. Modifications and Waivers. This Agreement, the other Loan
Documents, or any provision thereof may not be changed, waived or terminated
orally, but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver or termination is sought. No action or
course of dealing on the part of Lender, its officers, employees,
consultants, or agents, nor any failure or delay by Lender with respect to
exercising any right, power, or privilege of Lender under any Note, this
Agreement, or any other Loan Document shall operate as a waiver thereof,
except as otherwise provided in this Agreement. Any waiver shall be effective
only to the extent and for the instance
46
specifically identified in such writing, and shall not be deemed to imply any
future waivers or other waivers. No amendment to the Loan Documents shall be
effective without written agreement signed by all Borrowers and Lender.
10.02. Advances Not Implied Waivers. No waiver of the requirements
contained in any Loan Document shall be effective unless in writing duly
signed by Lender. No Advance hereunder shall constitute a waiver of any of
the conditions of Lender's obligation to make further Advances nor, in the
event any Borrower is unable to satisfy any such condition, shall any waiver
of such condition have the effect of precluding Lender from thereafter
declaring such inability to be an Event of Default as herein provided. Any
Advance made by Lender and any sums expended by Lender pursuant to the Loan
Documents shall be deemed to have been made pursuant to this Agreement,
notwithstanding the existence of an uncured Default or Event of Default. No
Advance at a time when an Event of Default exists shall constitute a waiver
of any right or remedy of Lender existing by reason of such Event of Default,
including, without limitation, the right to accelerate the maturity of the
Indebtedness evidenced by each Note or to foreclose the Lien on the
Collateral or to refuse to make further advances hereunder.
10.03. Deviation from Covenants. The procedure to be followed by a
Borrower to obtain the consent of Lender to any deviation from the covenants
contained in this Agreement or any other Loan Document shall be as follows:
(a) Such Borrower shall send a written notice to Lender setting
forth (i) the covenant(s) relevant to the matter, (ii) the requested
deviation from the covenant(s) involved, and (iii) the reason for the
requested deviation from the covenant(s); and
(b) Lender, within a reasonable time, will send a written notice
to such Borrower, permitting or refusing the request, but in no event
will any deviation from the covenants of this Agreement or any other
Loan Document be effective without the express prior written consent
of Lender. Lender's failure to provide such written notice shall be
deemed a refusal of such request.
10.04. Holidays. Except as otherwise provided herein, whenever any
payment or action to be made or taken hereunder or under any Note shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension
of time shall be included in computing interest or fees, if any, in
connection with such payment or action.
10.05. Records. From time to time Lender may send a Borrower
statements of the unpaid principal amount of the a Note, the unpaid interest
accrued thereon, the Interest Rate or rates applicable to such unpaid
principal amount, the duration of such applicability, and the amount
remaining available on any Loan, and each statement shall be deemed correct
and conclusively binding on Borrower (absent manifest error) unless a
Borrower notifies Lender of an error in the statement in writing within
thirty (30) days of the date of any such statement is provided to a Borrower.
10.06. Notices. All notices, requests, demands, directions and other
communications (collectively, "notices") required under the provisions of
this Agreement or any other Loan Document shall be in writing (including
communication by facsimile transmission) unless otherwise expressly permitted
hereunder and shall be sent by hand, by registered or certified mail return
receipt requested, by overnight courier service maintaining records of
receipt, or by facsimile transmission with
47
confirmation in writing mailed first-class, in all cases with charges
prepaid, and any such properly given notice shall be effective upon the
earlier of receipt or (i) when delivered by hand, or (ii) the third Business
Day after being mailed, or (iii) the following Business Day if sent by
overnight courier service, or (iv) when sent by facsimile, answer back
received. All notices shall be addressed as follows:
If to Borrower, to the Notice Address set forth on Schedule 1,
with copies, if any, as set forth on Schedule 1.
If to Lender: NTFC Capital Corporation
000 Xxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Legal Department
Telecopy: (000) 000-0000
With a copy to: NTFC Capital Corporation
000 Xxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Manager, Credit
Telecopy: (000) 000-0000
All notices shall be sent to the applicable party at the address stated
above or in accordance with the last unrevoked written direction from such
party to the other party hereto, given in accordance with the terms hereof.
10.07. FCC and PUC Approval. The exercise of any rights or remedies
hereunder or under any other Loan Document by Lender that may require FCC or
PUC approval shall be subject to obtaining such approval. Pending the receipt
of any PUC or FCC approval, the Borrowers shall not do anything to delay,
hinder, interfere with or obstruct the exercise of Lender's rights or
remedies hereunder or the obtaining of such approvals.
10.08. Lender Sole Beneficiary. All conditions of the obligation of
Lender to make any Advances hereunder are imposed solely and exclusively for
the benefit of Lender and its assigns and no other Person shall have standing
to require satisfaction of such conditions in accordance with their terms or
be entitled to assume that Lender will refuse to make any Advances in the
absence of strict compliance with any or all such conditions, and no Person
shall under any circumstances be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Lender at any time if in its sole discretion it deems it advisable to do so.
Inspections and approvals of the System, and the workmanship and materials
used therein impose no responsibility or liability of any nature whatsoever
on Lender, and no Person shall, under any circumstances, be entitled to rely
upon such inspections and approvals by Lender for any reason. Lender's sole
obligation hereunder is to make the Advances if and to the extent required by
this Agreement or any Note.
10.09. Lender's Review of Information. The Borrowers acknowledge and
agree that any review or analysis by Lender of financial information,
operating information, marketing data or other information provided to Lender
by or on behalf of a Borrower at any time is and shall be conducted solely
for Lender's benefit and internal use and that Lender is under no duty or
obligation to make the results of such review or analysis available to the
Borrowers. The Borrowers are not relying, and will not rely, on
48
Lender for financial or business advice.
10.10. No Joint Venture. Nothing in any of the Loan Documents or in
this Agreement shall be deemed to constitute any kind of partnership, joint
venture or fiduciary relationship between the Lender and the Borrowers or
between the Lender and any Owners.
10.11. Severability. The provisions of this Agreement are intended to
be severable. If any provision of this Agreement or the other Loan Documents
shall be held invalid or unenforceable in whole or in part in any
jurisdiction such provision shall, as to such jurisdiction, be ineffective to
the extent of such invalidity or unenforceability without in any manner
affecting the validity or enforceability thereof in any other jurisdiction or
the remaining provisions hereof or thereof in any jurisdiction.
10.12. Rights Cumulative. All rights, powers and remedies herein
given to Lender are cumulative and not alternative, and are in addition to
all statutes or rules of law.
10.13. Duration; Survival. All representations and warranties of the
Borrowers contained herein or made in connection herewith shall survive the
making of and shall not be waived by the execution and delivery of this
Agreement and the other Loan Documents, any investigation by Lender, or the
making of any Advances hereunder. All covenants and agreements of the
Borrowers contained herein shall continue in full force and effect from and
after the date hereof so long as it may borrow hereunder and until payment in
full of each Note, interest thereon, all fees and all other Obligations.
Without limitation, it is understood that all obligations of the Borrowers to
make payments to or indemnify Lender shall survive the payment in full of
each Note and of all other Obligations.
10.14. Governing Law. This Agreement and each Note and each of the
other Loan Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, except to the
extent that the laws of jurisdictions where the Collateral is located may be
required to apply to the Collateral.
10.15. Counterparts. This Agreement may be executed in any number of
counterparts (by facsimile transmission or otherwise) and by the different
parties hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but
one and the same instrument.
10.16. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of Lender and the Borrowers and their respective
successors and assigns; provided, however, that no Borrower may assign or
transfer any of its rights or obligations hereunder or under the other Loan
Documents (in whole or in part), except to its successor in an Affiliate
Transaction, without the prior written consent of Lender. Lender may assign,
transfer or pledge any of its respective rights or obligations hereunder or
under the other Loan Documents without notice to or the prior written consent
of Borrower. Upon receipt of written notice from Lender of such assignment,
the Borrowers shall promptly acknowledge receipt thereof in writing. If
Borrower is given written notice of any assignment, it shall perform its
obligations with respect to this Agreement for the ratable benefit of the
applicable assignee(s), and, if so directed, shall pay all amounts due or to
become due hereunder directly to the applicable assignee(s) or to any other
party designated by such assignee(s). The Borrowers shall not assert against
any such assignee any set-off, defense or counterclaim that the Borrowers may
have against Lender or any person other than such assignee. The Borrowers
shall also execute and deliver to Lender such documentation as any such
assignee may reasonably require, including but not limited to amended
49
promissory notes and acknowledgment of or consent to the assignment which may
require the Borrowers to make certain representations or reaffirmations as to
some of the basic terms and covenants contained herein. Lender shall not be
relieved of its obligations hereunder as a result of any such sale,
assignment, transfer, grant or pledge, unless such assignee specifically
assumes all or part of Lender's future obligations hereunder in a writing, a
copy of which shall be delivered to Borrowers, in which event after the date
of such assignment, Borrowers' obligations to any such assignee shall be
proportionately as set forth herein with respect to Lender, and Borrowers
shall not look to Lender to perform any of such assignee's obligations
hereunder which arise after the date thereof. Any assignee shall be entitled
to rely on Borrowers' agreements as stated herein, as applicable, and shall
be considered a third party beneficiary thereof. Except to the extent
otherwise required by the context of this Agreement, the word "Lender" where
used in this Agreement shall mean and include any holder of any Note
originally issued to Lender hereunder, and any such holder of any Note shall
be bound by and have the benefits of this Agreement the same as if such
holder had been a signatory hereto.
10.17. Participation. Lender shall have the right to enter into one
or more participation agreements, syndication agreements or similar
agreements with one or more participating lenders or other parties approved
by Lender on such terms and conditions as Lender shall deem advisable,
provided that any Person shall invest a minimum amount of $5,000,000. The
Borrowers shall furnish a sufficient number of copies of reports and
certificates to Lender so that Lender and each participating lender shall
receive a copy of each such document.
10.18. Time of Essence. Time is of the essence of this Agreement and
each Note and the other Loan Documents.
10.19. Disclosures and Confidentiality.
(a) Borrower agrees that it will obtain Lender's written consent
before using or generating any press release, advertisement, publicity
materials or other publication in which the name (except as permitted
by Section 10.19(b)) or logo of Lender or any of its Affiliates is
used or may be reasonably inferred, and will not distribute any such
materials in the absence of such prior written approval.
(b) The Borrowers agree that it will not, directly or
indirectly, disclose to any third party the terms of this Agreement or
the other Loan Documents or prior or future correspondence relating
thereto, or the transactions contemplated hereby, or any other
information regarding Lender or its Affiliates learned by Borrower
during the course of negotiation thereof. The term "third party" shall
exclude only the Borrowers, their Affiliates, underwriters,
prospective investors, and prospective lenders, and their respective
attorney(s) and certified public accountant(s). This Section 10.19(b)
shall not restrict the disclosure of information if such disclosure is
required by law, by order of any court or by the order, rule or
regulation of any administrative agency, including without limitation
any requirements of the FCC, any PUC, or any state or federal
securities commissions (the "Commissions"); provided, however, that,
except for disclosures required by the FCC, PUC or Commissions,
Borrower shall provide Lender with advance notice of any such required
disclosure of information so that Lender may seek an appropriate
protective order and/or waive compliance with this Section. Borrower
shall not oppose any action taken by Lender to obtain an appropriate
protective order or other reliable assurance that the information will
be accorded confidential treatment. The obligations set forth in this
Section 10.19(b) shall survive the termination of this Agreement.
50
(c) The disclosure of information by either Lender or the
Borrowers will not be restricted under this Agreement if such
information (i) has been or becomes published or is now, or in the
future, in the public domain through (A) no fault of the parties, (B)
disclosure other than unauthorized disclosure by the party to whom the
information is disclosed, or (C) disclosure to third parties by the
disclosing party without similar restriction; (ii) is property (other
than proposal letters, commitment letters or other correspondence
between Lender and the Borrowers) within the legitimate possession of
the receiving party prior to disclosure hereunder; (iii) subsequent to
disclosure hereunder, is lawfully received from a third party having
rights therein without restriction of the third party's or receiving
party's rights to disseminate the information and without notice of
any restriction against its further disclosure; (iv) is disclosed with
the written approval of the other party; or (v) is or becomes publicly
available free of any obligation to keep it confidential.
(d) The Borrowers authorize Lender to discuss with and furnish
to any Affiliate of the Lender, to any government or self-regulatory
agency with jurisdiction over the Lender, to any other Governmental
Authority or to any assignee, successor, participant, successor, or
prospective assignee, successor or participant, all financial
statements, audit reports and other information pertaining to the
Borrowers and/or their Subsidiaries whether such information was
provided by Borrower or prepared or obtained by the Lender or third
parties. Neither the Lender nor any of its employees, officers,
directors or agents makes any representation or warranty to any
existing or prospective assignee, successor or participant regarding
any audit reports or other analyses of the Borrowers that the Lender
may distribute, whether such information was provided by the Borrowers
or prepared or obtained by the Lender or third parties, nor shall the
Lender or any of its employees, officers, directors or agents be
liable to any Person receiving a copy of such reports or analyses for
any inaccuracy or omission contained in such reports or analyses or
relating thereto.
(e) Every reference in this Agreement to disclosures of the
Borrowers to Lender (except the financial statements), to the extent
that such references refer or are intended to refer to disclosures at
or prior to the execution of this Agreement, shall be deemed strictly
to refer only to written disclosures delivered to Lender concurrently
with the execution of this Agreement and referred to specifically in
the Loan Documents. The parties intend that such disclosures are to be
limited to those presented in an orderly manner at the time of
executing this Agreement and are not to be deemed to include expressly
or impliedly any disclosures that previously may have been delivered
from time to time to Lender, except to the extent that such previous
disclosures are again presented to Lender in writing concurrently with
the execution of this Agreement.
10.20. Jurisdiction and Venue. THE BORROWERS HEREBY IRREVOCABLY
CONSENT TO THE JURISDICTION OF THE COURTS LOCATED IN DAVIDSON COUNTY,
TENNESSEE, INCLUDING WITHOUT LIMITATION FEDERAL COURTS SITTING IN THE MIDDLE
DISTRICT OF TENNESSEE AND THE CHANCERY COURT FOR DAVIDSON COUNTY, TENNESSEE,
FOR ANY SUIT BROUGHT OR ACTION COMMENCED IN CONNECTION WITH THIS AGREEMENT,
THE OTHER LOAN DOCUMENTS, OR THE OBLIGATIONS, AND AGREES NOT TO CONTEST VENUE
IN ANY SUCH COURTS. In any such litigation, the Borrowers waive personal
service of any summons, complaint or other process, and agrees that the
service thereof may be made by certified or registered mail direct to
Borrower at its address set forth in Section 10.06 hereof. Within thirty (30)
days after such mailing, the Borrowers shall appear and answer to such
summons, complaint or other process. Should Borrower fail to appear or answer
within the said 30-day period, then such party shall be deemed
51
in default and judgment may be entered against the Borrowers for the amount
or other relief as demanded in any summons, complaint or other process so
served. In the alternative, in its sole discretion, Lender may effect service
upon the Borrowers in any other form or manner permitted by law. The choice
of forum set forth herein shall not be deemed to preclude the enforcement of
any judgment obtained in such forum or the taking of any action under this
Agreement to enforce the same in any appropriate jurisdiction.
10.21. Jury Waiver. BORROWER AND LENDER HEREBY KNOWINGLY AND
WILLINGLY WAIVE THEIR RIGHTS TO DEMAND A JURY TRIAL IN ANY ACTION OR
PROCEEDING INVOLVING THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, THE
OBLIGATIONS, OR ANY RELATIONSHIP BETWEEN THE LENDER AND BORROWERS. THE
BORROWERS WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS
WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
THE COURT.
10.22. Limitation on Liability. LENDER SHALL HAVE NO LIABILITY UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS FOR
SPECIAL, EXEMPLARY, PUNITIVE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES
OF ANY SORT IN ANY SUIT BROUGHT OR ACTION COMMENCED IN CONNECTION WITH THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE OBLIGATIONS, AND, EXCEPT TO THE
EXTENT PROHIBITED BY LAW, EACH PARTY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH ACTION ANY SPECIAL, EXEMPLARY, PUNITIVE, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY SORT OTHER THAN ACTUAL DAMAGES.
10.23. Borrowers Waivers. To the fullest extent permitted by law, the
Borrowers hereby waive (i) presentment, demand and protest and notice of
presentment, protest, default, non payment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Lender on which the Borrowers may in any way be liable and
hereby ratifies and confirms whatever Lender may do in this regard; (ii)
notice prior to taking possession or control of the Collateral or any bond or
security which might be required by any court prior to allowing Lender to
exercise any of Lender's remedies, including the issuance of an immediate
writ of possession, except as expressly required in any of the Loan
Documents; (iii) any marshalling of assets, or any right to compel Lender to
resort first to any Collateral or other Persons before pursuing the Borrowers
for payment of the Obligations and any defenses based on suretyship or
impairment of Collateral; (iv) the benefit of all valuation, appraisement and
exemption laws; (v) any right to require Lender to terminate its security
interest in the Collateral or in any other property of the Borrowers until
termination of this Agreement and the execution by the Borrower and by any
person whose loans to the Borrowers are used in whole or in part to satisfy
the Obligations, of an agreement indemnifying Lender from any loss or damage
Lender may incur as the result of dishonored or unsatisfied items of any
account debtor applied to the Obligations; and (vi) notice of acceptance
hereof. The Borrowers acknowledge that the foregoing waivers are a material
inducement to Lender's entering into this Agreement and that Lender is
relying upon the foregoing waivers in its future dealings with the Borrowers.
10.24. Schedules. The Schedules and Exhibits attached to this
Agreement are an integral part hereof, and are
52
hereby made a part of this Agreement.
10.25. Agreement to Govern. In case of any conflict between the terms
of this Agreement and any of the other Loan Documents, the terms of this
Agreement shall govern.
10.26. Entire Agreement. This Agreement, the other Loan Documents and
other documents, agreements and certificates executed by the parties
contemporaneously herewith or subsequent hereto constitute the entire
agreement of the parties and supersede all prior understandings and
agreements, written or oral, between the parties hereto relating to the
subject matter hereof. Borrowers are not entering into this Agreement in
reliance on statements or representations made by any Person other than as
set forth herein.
10.27. Several Obligations. The obligations of each Borrower
hereunder and under the other Loan Documents to which such Borrower is a
party shall be several and not joint obligations; provided, however that
notwithstanding the foregoing, Econophone shall be obligated jointly and
severally for all obligations of all other Borrowers hereunder.
10.28. Original Loan Agreement. Borrowers and Lender acknowledge and
agree that the Original Loan Agreement shall be of no further force and
effect and that, effective as of the date hereof, all Notes issued pursuant
to the Original Loan Agreement shall be deemed to be issued hereunder.
[END OF GENERAL TERMS AND CONDITIONS. NEXT PAGE IS SCHEDULE 1.]
[SIGNATURES ARE ON COVER PAGE.]
53
