FINOVA
Loan and Security Agreement
Borrower: INTELLICALL, INC.
Address: 0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000-0000
Date: November 13, 1996
THIS LOAN AND SECURITY AGREEMENT ("Agreement") dated the date set forth above,
is entered into by and between the Borrower named above (the "Borrower"), whose
address is set forth above and FINOVA Capital Corporation ("FINOVA"), whose
address is 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
1. LOANS.
1.1 Total Facility. Upon the terms and conditions set forth herein and provided
that no Event of Default or event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, FINOVA shall, upon Borrower's request, make advances
to Borrower from time to time in an aggregate outstanding principal amount not
to exceed the Total Facility amount (the "Total Facility") set forth on the
schedule hereto (the "Schedule"), subject to deduction of reserves for accrued
interest and such other reserves, including, without limitation, to the extent
not already taken into account in determining the advance rate or determination
of Eligible Receivables reserves with respect to (i) past due federal excise
taxes, state taxes or public utility charges; (ii) billing and collection
charges payable to Eligible LECs, OAN or Integretel, Inc.; (iii) other sums
chargeable against Borrower's Loan Account as Revolving Loans under any section
of this Agreement; (iv) untrued up volume by Eligible LECs; (v) LEC access
charges; (vi) up to three (3) months of any sums due and owing to any landlord
or mortgage from whom FINOVA has not obtained a landlord's or mortgage's waiver:
and (vii) such other matters, events, conditions, or contingencies as to as
FINOVA deems proper from time to time in its reasonable credit judgment, and
less amounts FINOVA may be obligated to pay in the future on behalf of Borrower.
The Schedule is an integral part of this Agreement and all references to
"herein", "herewith" and words of similar import shall for all purposes be
deemed to include the Schedule.
1.2 Loans. Advances under the Total Facility ("Loans") shall be comprised of the
amounts and at the advance rates shown on the Schedule. FINOVA may, during the
continuance of an Event of Default, in its sole discretion, adjust the advance
rates set forth on the Schedule.
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1.3 Overadvance. If at any time or for any reason the outstanding amount of
advances made pursuant hereto exceeds any of the dollar or percentage
limitations contained in the Schedule (any such excess, an "Overadvance"), then
Borrower shall, upon FINOVA's demand, immediately pay to FINOVA, in cash, the
full amount of such Overadvance. Without limiting Borrower's obligation to repay
to FINOVA on demand the amount of any Overadvance, Borrower agrees to pay FINOVA
interest on the outstanding principal amount of any Overadvance, on demand, at
the rate set forth on the Schedule.
1.4. Loan Account. All advances made hereunder shall be added to and deemed part
of the Obligations when made. FINOVA may from time to time charge all
Obligations of Borrower to Borrower's loan account with FINOVA when due.
2. CONDITIONS PRECEDENT.
2.1 Initial Advance. The obligation of FINOVA to make the initial advance
hereunder (the "Initial Advance") is subject to the fulfillment and satisfaction
of FINOVA and its counsel, of each of the following conditions on or prior to
the date set forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following Loan
Documents: (i) the Secured Revolving Credit Note, in such amount and on
such terms and conditions as FINOVA shall specify, executed by Borrower;
(ii)such security agreements, intellectual property assignments and deeds
of trust as FINOVA may require with respect to this Agreement, executed by
each of the parties thereto and, if applicable, duly acknowledged for
recording or filing in the appropriate governmental offices; (iii)no
offset agreements from Integretel, Inc. and Plymouth Capital; (iv) such
Blocked Account or Dominion Account agreements as FINOVA shall determine;
and (v) such other documents, instruments and agreements in connection
herewith as FINOVA shall require, executed, certified and/or acknowledged
by such parties as FINOVA shall designate;
(b) Terminations by Existing Lender(s). Borrower's existing lender(s) shall
have executed and delivered UCC termination statements and other
documentation evidencing the termination of its liens and security
interests in the assets of Borrower;
(c) Charter Documents. FINOVA shall have received copies of Borrower's
By-laws and Articles or Certificate of Incorporation, as amended, modified,
or supplemented to the Closing Date, certified by the Secretary of
Borrower;
(d) Good Standing. FINOVA shall have received a certificate of corporate
status with respect to Borrower, dated within ten (10) days of the Closing
Date, by the Secretary of State of the state of incorporation of Borrower,
which certificate shall indicate that Borrower is in good standing in such
state;
(e) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to Borrower dated within ten (10) days of the
Closing Date, issued by the Secretary of State of each state in which such
party's failure to be duly qualified or licensed would have a material
adverse effect on its financial condition or assets indicating that such
party is in good standing;
(f) Authorizing Resolutions and Incumbency. FINOVA shall have received a
certificate from the Secretary of Borrower attesting to (i) the adoption of
resolutions of Borrower's Board of Directors and/or shareholders, as
appropriate, authorizing the execution and delivery of this Agreement and
the other Loan Documents to which Borrower is a party, and authorizing
specific officers of Borrower to execute same, and (ii) the authenticity of
original specimen signatures of such officers;
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(g) Insurance. FINOVA shall have received the insurance certificates and
certified copies of policies required by Section 4.4 hereof, all in form
and substance satisfactory to FINOVA and its counsel;
(h) Title Insurance. Not Applicable.
(i) Searches; Certificates of Title. FINOVA shall have received searches
reflecting the filing of its financing statements and fixture filings in
such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been
duly executed in a manner sufficient to perfect all of the security
interests granted to FINOVA;
(j) Landlord and Mortgagee Waivers. FINOVA shall have received landlord,
warehouseman and mortgagee waivers from the lessors and mortgagees of all
locations where any Collateral is located.
(k) Fees. Borrower shall have paid all fees payable by it pursuant to this
Agreement on the earlier of the date of the Initial Advance or November 30,
1996;
(l) Opinion of Counsel. FINOVA shall have received an opinion of Borrower's
counsel covering such matters as FINOVA shall determine in its sole
discretion;
(m) Officer Certificate. FINOVA shall have received a certificate of the
President and the Chief Financial Officer or similar official of Borrower,
attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(n) Solvency Certificate. If requested by FINOVA, a signed certificate of
the Borrower's duly elected Chief Financial Officer concerning the solvency
and financial condition of Borrower, on FINOVA's standard form;
(o) Blocked Account/Dominion Account. The Blocked Account or Dominion
Account referred to in Section 7.3 hereof shall have been established to
the satisfaction of FINOVA in its sole discretion;
(p) Environmental Assessment. Borrower shall have provided FINOVA with a
Phase I Environmental Assessment conducted in 1994 on the real property of
Borrower located in McAllen, Xxxxxxx County, Texas all at Borrower's own
expense. Such assessment(s) shall have been conducted by an environmental
engineer acceptable to FINOVA and the results of such assessment(s) site
inspection shall be in form and substance acceptable to FINOVA in its sole
discretion. Such assessment(s) shall have included, in FINOVA's discretion,
core samplings, and shall have been conducted by an environmental engineer
acceptable to FINOVA;
(q) Environmental Certificate. FINOVA shall have received an Environmental
Certificate from Borrower, in form and substance satisfactory to FINOVA in
its sole and absolute discretion, with respect to all locations of
Collateral; and
(r) Other Matters. All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed or recorded and shall be in form and substance satisfactory to
FINOVA and its counsel.
2.2 Subsequent Advances. The obligation of FINOVA to make any advance hereunder
shall be subject to the further conditions precedent that, on and as of the date
of such advance:
(a) the representations and warranties of Borrower set forth in this
Agreement shall be accurate in all material respects, before and after
giving effect to such advance or issuance and to the application of any
proceeds thereof provided that any representation or warranty which
represents or warrants as to matters as of a specific date shall only be
required to be true as of that date;
(b) no Event of Default and no event which, with notice or passage of time
or both, would constitute an Event of Default has occurred and is
continuing, or would result from such advance or issuance or from the
application of any proceeds thereof;
(c) no material adverse change has occurred since September 30, 1996 in the
Borrower's business, operations, financial condition, or assets (not
including any provision for Inventory losses); and
(d) FINOVA shall have received such other approvals, opinions or documents
required hereunder.
(e) in the event that all parties to Validity and Support Agreements have
terminated their employment with or are terminated by Borrower, the
individual(s) assuming the responsibilities of such individual(s) shall
have executed and delivered a Validity and Support Agreement(s) in
substantially the same form to FINOVA.
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3. INTEREST RATE AND OTHER CHARGES.
3.1 Interest; Fees. Borrower shall pay FINOVA interest on the daily outstanding
balance of Borrower's loan account at the per annum rate set forth on the
Schedule. Borrower shall also pay FINOVA the fees set forth on the Schedule.
3.2 Default Interest Rate. Upon the occurrence and during the continuation of an
Event of Default, Borrower shall pay FINOVA interest on the daily outstanding
balance of Borrower's loan account at a rate per annum which is two percent (2%)
in excess of the rate which would otherwise be applicable thereto pursuant to
the Schedule. All such default interest shall be payable upon demand of FINOVA.
3.3 Examination Fees. Borrower agrees to pay to FINOVA an examination fee in the
amount set forth on the Schedule in connection with each audit or examination of
Borrower performed by FINOVA prior to or after the date hereof.
3.4 Excess Interest. The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the following: (i)the
interest rate set forth on the Schedule, calculated and applied to the principal
balance of the Obligations in accordance with the provisions of this Agreement;
(ii)interest after an Event of Default, calculated and applied to the amount of
the Obligations in accordance with the provisions hereof; and (iii)all
Additional Sums (as herein defined), if any. Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. The examination fees, attorneys' fees, expert witness fees, letter of
credit fees, collateral monitoring fees, closing fees, facility fees,
Termination Fees, Minimum Interest Charges, Unused Line fees, other charges,
goods, things in action or any other sums or things of value paid or payable by
Borrower (collectively, the "Additional Sums"), whether pursuant to this
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law
may be deemed to be interest with respect to this lending transaction, for the
purpose of any applicable law that may limit the maximum amount of interest to
be charged with respect to this lending transaction, shall be payable by
Borrower as, and shall be deemed to be, additional interest and for such
purposes only, the agreed upon and "contracted for rate of interest" of this
lending transaction shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
It is the intent of the parties to comply with the usury laws of the State of
Arizona (the "Applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Agreement, or in any of
the documents securing payment hereof or otherwise relating hereto, in no event
shall this Agreement or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "Maximum Interest Rate"). In the event (a)any such
excess of interest otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the loan evidenced hereby, (b)the
maturity of the Obligations is accelerated in whole or in part, or (c)all or
part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1)the provisions of this paragraph shall govern
and control, (2)neither Borrower nor any other person or entity now or
hereafter liable for the payment of the Obligations shall be obligated to pay
the amount of such interest to the extent that it is in excess of the Maximum
Interest Rate, (3)any such excess which may have been collected shall be either
applied as a credit against the then unpaid principal amount of the Obligations
or refunded to Borrower, at FINOVA's sole option, and (4)the effective rate of
interest shall be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x)all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y)in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise falls below the Maximum Interest Rate, to the extent that interest
paid to the date of calculation does not exceed the Maximum Interest Rate, until
the entire amount of interest which would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law has been paid in full.
Borrower further agrees that should the Maximum Interest Rate be increased at
any time hereafter because of a change in the Applicable Usury Law, then to the
extent not prohibited by the Applicable Usury Law, such increases shall apply to
all indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the Maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
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4. COLLATERAL.
4.1 Security Interest in the Collateral. To secure the payment and performance
of the Obligations when due, Borrower hereby grants to FINOVA a first priority
security interest in all of Borrower's now owned or hereafter acquired or
arising Inventory, Equipment, Receivables, and General Intangibles, including,
without limitation, all of Borrower's Deposit Accounts, money, any and all
property now or at any time hereafter in FINOVA's possession (including claims
and credit balances), and all proceeds (including, without limitation, proceeds
of any insurance policies, proceeds of proceeds and claims against third
parties), all products and all books and records related to any of the foregoing
(all of the foregoing, together with all other property in which FINOVA may be
granted a lien, mortgage or security interest including, but not limited to, the
stock of ILD Communications, Inc. (the "ILD Stock") and that certain note
receivable from Xxxxxxx Xxxxxx & Associates in favor of Borrower (the "Xxxxxxx
Note") is referred to herein, collectively, as the "Collateral").
4.2 Perfection and Protection of Security Interest. Borrower shall, at its
expense, take all actions reasonably requested by FINOVA at any time to perfect,
maintain, protect and enforce FINOVA's security interest and other rights in the
Collateral and the priority thereof from time to time, including, without
limitation, (i) executing and filing financing or continuation statements and
amendments thereof and executing and delivering such documents and titles in
connection with motor vehicles as FINOVA shall require, all in form and
substance satisfactory to
FINOVA, (ii) maintaining a perpetual inventory reporting system and complete and
accurate stock records, (iii)delivering to FINOVA warehouse receipts covering
any portion of the Collateral located in warehouses and for which warehouse
receipts are issued, and, after an Event of Default, transferring Inventory to
warehouses designated by FINOVA, (iv) placing notations on Borrower's books of
account to disclose FINOVA's security interest therein, and (v) delivering to
FINOVA all letters of credit on which Borrower is named beneficiary. FINOVA may
file, without Borrower's signature, one or more financing statements disclosing
FINOVA's security interest under this Agreement. Borrower agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. If any Collateral
constituting Eligible Inventory or after the occurrence of an Event of Default
any Collateral is at any time in the possession or control of any warehouseman,
bailee or any of Borrower's agents or processors, Borrower shall upon any
request by FINOVA notify such Person of FINOVA's security interest in such
Collateral and, upon FINOVA's request, instruct them to hold all such Collateral
for FINOVA's account subject to FINOVA's instructions. From time to time,
Borrower shall, upon FINOVA's request, execute and deliver confirmatory written
instruments pledging the Collateral to FINOVA, but Borrower's failure to do so
shall not affect or limit FINOVA's security interest or other rights in and to
the Collateral. Until the Obligations have been fully satisfied and FINOVA's
obligation to make further advances hereunder has terminated, FINOVA's security
interest in the Collateral shall continue in full force and effect.
4.3 Preservation of Collateral. FINOVA may, in its sole discretion, at any time
discharge any lien or encumbrance on the Collateral which is not a Permitted
Encumbrance or bond the same, pay any insurance, maintain guards, pay any
service bureau, obtain any record or take any other action to preserve the
Collateral and charge the cost thereof to Borrower's loan account as an
Obligation.
4.4 Insurance. Borrower will maintain and deliver evidence to FINOVA of such
insurance required, written by insurers and in amounts satisfactory to FINOVA.
All premiums shall be paid by Borrower as and when due. Accurate and complete
copies of the policies shall be delivered by Borrower to FINOVA. If Borrower
fails to do so, FINOVA may (but shall not be required to) procure such insurance
at Borrower's expense and charge the cost thereof to Borrower's loan account as
an obligation. Each policy shall include a provision requiring thirty days'
prior written notice to FINOVA of any cancellation or substantial modification.
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5. EXAMINATION OF RECORDS; FINANCIAL REPORTING.
5.1 Examinations. FINOVA shall at all times have full access to and the
right to examine, audit, make abstracts and copies from and inspect Borrower's
records, files, books of account and all other documents, instruments and
agreements relating to the Collateral and the right to check, test and appraise
the Collateral. Borrower shall deliver to FINOVA any instrument necessary for
FINOVA to obtain records from any service bureau maintaining records for
Borrower. All instruments and certificates prepared by Borrower showing the
value of any of the Collateral shall be accompanied, upon FINOVA's request, by
copies of related purchase orders and invoices. FINOVA may, at any time during
the continuance of an Event of Default, remove from Borrower's premises
Borrower's books and records (or copies thereof) or require Borrower to deliver
such books and records or copies to FINOVA. FINOVA may, without expense to
FINOVA, use such of Borrower's personnel, supplies, copiers, facsimiles, other
equipment, and premises as may be reasonably necessary for maintaining or
enforcing FINOVA's security interest and rights hereunder.
5.2 Reporting Requirements. Borrower shall furnish FINOVA, upon request,
such information and statements as FINOVA shall reasonably request from time to
time regarding Borrower's business affairs, financial condition and the results
of its operations. Without limiting the generality of the foregoing, Borrower
shall provide FINOVA with (i) upon request, copies of sales invoices, customer
statements and credit memoranda issued, remittance advices and reports and
copies of deposit slips, daily; (ii) upon request, copies of shipping and
delivery documents, upon request; (iii) on or prior to the date set forth on the
Schedule, monthly agings and reconciliations of Receivables with listings of
concentrated accounts, payables reports, inventory reports and unaudited
financial statements with respect to the prior month prepared on a basis
consistent with such statements prepared in prior months and otherwise in
accordance with generally accepted accounting principles, consistently applied;
(iv) audited annual consolidated and consolidating financial statements,
prepared in accordance with generally accepted accounting principles applied on
a basis
consistent with the most recent Prepared Financials provided to FINOVA
by Borrower, including balance sheets, income and cash flow statements of
Borrower and its subsidiaries, accompanied by the unqualified (other than a
qualification which would result in a positive adjustment to Borrower's
financial statement) report thereon of independent certified public accountants
acceptable to FINOVA as soon as available, and in any event, within ninety (90)
days after the end of each of Borrower's fiscal years; and (v) such certificates
relating to the foregoing as FINOVA may reasonably request, including, without
limitation, a monthly certificate from the president and the chief financial
officer of Borrower showing Borrower's compliance with each of the financial
covenants set forth in this Agreement, and stating whether any Event of Default
has occurred or event which, with giving of notice or the passage of time, or
both, would constitute an Event of Default, and if so, the steps being taken to
prevent or cure such Event of Default.
6. COLLATERAL REPORTING; INVENTORY.
6.1 Invoices. Borrower shall not re-date any invoice or sale from the original
date thereof or make sales on extended terms beyond those customary in
Borrower's industry, or otherwise extend or modify the term of any Eligible
Receivable existing on the Closing Date or of any Receivable thereafter created,
except in connection with the disposition of slow moving or obsolete Inventory.
If Borrower becomes aware of any matter materially affecting the enforceability
or collectability of any Eligible Receivable existing on the Closing Date or of
any Receivable thereafter created, in an amount greater than $25,000 in the
aggregate, including information adversely affecting the credit of the account
debtor thereon, Borrower shall promptly notify FINOVA in writing.
6.2 Instruments. In the event any Receivable is or becomes evidenced by a
promissory note, trade acceptance or any other instrument for the payment of
money, Borrower shall immediately deliver such instrument to FINOVA
appropriately endorsed to FINOVA and, regardless of the form of any presentment,
demand, notice of dishonor, protest or notice of protest with respect thereto,
Borrower shall remain liable thereon until such instrument is paid in full.
6.3 Physical Inventory. Borrower shall conduct a physical count of the Inventory
at such intervals as its auditors require, but not less than annually and after
the occurrence of an Event of Default as requested by FINOVA, promptly supply
FINOVA with a copy of such accounts accompanied by a report of the value
(calculated at the lower of cost or market value on a first in, first out basis)
of the Inventory and such additional information with respect to the Inventory
as FINOVA may request from time to time.
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6.4 Returns. For so long as no Event of Default has occurred and is continuing
and subject to the provisions of Section 9.4, if any account debtor returns any
Inventory to Borrower in the ordinary course of its business with an aggregate
value greater than $10,000, Borrower shall promptly determine the reason for
such return and, if appropriate, promptly issue a credit memorandum to the
account debtor (sending a copy to FINOVA) in the appropriate amount. In the
event any attempted return occurs after the occurrence of any Event of Default,
Borrower shall (i)hold the returned Inventory in trust for FINOVA,
(ii) segregate all returned Inventory from all of Borrower's other property,
(iii) conspicuously label the returned Inventory as FINOVA's property, and
(iv) immediately notify FINOVA of the return of any Inventory, specifying the
reason for such return, the location and condition of the returned Inventory,
and on FINOVA's request deliver such returned Inventory to FINOVA. Borrower
shall not consign any Eligible Inventory.
7. PRINCIPAL PAYMENTS; PROCEEDS OF COLLATERAL.
7.1 Principal Payments. Except where evidenced by notes or other instruments
issued or made by Borrower to FINOVA specifically containing payment provisions
which are in conflict with this Section 7.1 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), that
portion of the Obligations consisting of principal payable on account of
Revolving Loans shall be payable by Borrower to FINOVA immediately upon the
earliest of (i) the receipt by FINOVA or Borrower of any proceeds of any of the
Collateral, to the extent of said proceeds, (ii) the occurrence of an Event of
Default in consequence of which FINOVA elects to accelerate the maturity and
payment of such loans, or (iii) any termination of this Agreement pursuant to
Section 16 hereof; provided, however, that any Overadvance shall be payable on
demand pursuant to the provisions of Section 1.3 hereof.
7.2 Collections. Until FINOVA notifies Borrower to the contrary after the
Initial Advance hereunder, Borrower may make collection of all Receivables for
FINOVA and shall receive all payments as trustee of
FINOVA at all times after the Initial Advance hereunder and immediately deliver
all payments to FINOVA in their original form as set forth below, duly endorsed
in blank. FINOVA or its designee may, at any time after the Initial Advance
hereunder, pursuant to a Notice of Assignment in the form attached hereto as
Exhibit "7.2", notify account debtors and LECs that the Receivables have been
assigned to FINOVA and of FINOVA's security interest therein, and may collect
the Receivables directly and charge the collection costs and expenses to
Borrower's loan account. Borrower agrees that, solely for the purpose of
computing the charges under this Agreement, all items of payment shall be deemed
applied by FINOVA on account of the Obligations two (2) Business Days after
receipt by FINOVA of good funds which have been finally credited to FINOVA's
account, whether such funds are received directly from Borrower or from the
Blocked Account bank or the Dominion Account bank, pursuant to Section 7.3
hereof. FINOVA may charge Borrower's loan account for the amount of any item of
payment which is returned to FINOVA unpaid. In this Agreement or in any Loan
Document, whenever, there is a reference to "receipt by FINOVA of funds," or
language of similar effect regarding the receipt of funds by FINOVA, in order to
be credited to the applicable account on the date that good funds were received
by FINOVA (either directly or through a bank account or lockbox arrangement,
etc. ...) the funds must reach FINOVA no later than 2:00 p.m., Philadelphia,
Pennsylvania time, on that date. Any funds reaching FINOVA after 2:00 p.m.,
Philadelphia, Pennsylvania time, will be credited to the applicable account on
the next immediately following Business Day.
7.3 Establishment of a Lockbox Account or Dominion Account. At all times after
the Initial Advance hereunder, all proceeds of Collateral shall, at the
direction of FINOVA, be deposited by Borrower into a lockbox account, or such
other "blocked account" as FINOVA may require (each, a "Blocked Account")
pursuant to an arrangement with such bank as may be selected by Borrower and be
acceptable to FINOVA. At all times after the Initial Advance hereunder, Borrower
shall issue to any such bank an irrevocable letter of instruction directing said
bank to transfer such funds so deposited to FINOVA, either to any account
maintained by FINOVA at said bank or by wire transfer to appropriate account(s)
of FINOVA. All funds deposited in a Blocked Account shall immediately become the
sole property of FINOVA and Borrower shall obtain the agreement by such bank to
waive any offset rights against the funds so deposited. FINOVA assumes no
responsibility for any Blocked Account arrangement, including, without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder. Alternatively, FINOVA may, after the
Initial Advance hereunder, establish depository accounts in the name of FINOVA
at a bank or banks for the deposit of such funds (each, a "Dominion Account")
and Borrower shall deposit all proceeds of Receivables and all cash proceeds of
any sale of Inventory or, to the extent permitted herein, Equipment, or cause
same to be deposited, in kind, in such Dominion Accounts of FINOVA in lieu of
depositing same to Blocked Accounts.
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7.4 Payments Without Deductions. Borrower shall pay principal, interest, and all
other amounts payable hereunder, or under any related agreement, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
7.5 Collection Days Upon Repayment. In the event Borrower repays the Obligations
in full at any time hereafter, such payment in full solely for the purpose of
computing charges under this Agreement shall be credited (conditioned upon final
collection) to Borrower's loan account two (2) Business Days after FINOVA's
receipt thereof.
7.6 Monthly Accountings. FINOVA shall provide Borrower with an account of
advances, charges, expenses and payments and other transactions made pursuant to
this Agreement on a monthly basis. Such account shall be deemed correct,
accurate and binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by FINOVA),
unless Borrower notifies FINOVA in writing to the contrary within forty-five
(45) days after each account is rendered, describing the nature of any alleged
errors or admissions.
7.7 Collections and Administration. FINOVA may, after the date of the Initial
Advance, whether or not an Event of Default has occurred, without notice to or
assent of Borrower, (i) notify any account debtor of the fact that the Accounts
and other Collateral have been assigned to FINOVA by Borrower and that payment
thereof is to be made to the order of and directly to FINOVA, and after the
occurrence of an Event of Default (ii) demand, collect or enforce payment of any
Accounts or such other Collateral, but without any duty to do so, and FINOVA
shall not be liable for any failure to collect or enforce payment thereof. After
the date of the Initial Advance, at FINOVA's request, all invoices, or bills and
statements sent to any account debtor, other
obligor or bailee, shall state that the Accounts and such Collateral shall have
been assigned to FINOVA and are payable directly and only to FINOVA. FINOVA
shall have the right, after the date of the Initial Advance, in FINOVA's name or
in the name of a nominee of the FINOVA, to verify the validity, amount or any
other matter relating to the Accounts or the other Collateral, by mail,
telephone or otherwise.
8. POWER OF ATTORNEY.
After the date of the Initial Advance Borrower irrevocably appoints FINOVA and
its officers, agents and designees as Borrower's attorney, with the power to
endorse Borrower's name on any checks, notes, acceptances, money orders or other
forms of payment or security that come into FINOVA's possession; to sign
Borrower's name on any invoice or xxxx of lading relating to any Receivable, on
drafts against customers, on assignments of Receivables, on notices of
assignment, financing statements and other public records, on verifications of
accounts and on notices to customers or account debtors; to send requests for
verification of Receivables to customers or account debtors; and after the
occurrence of any Event of Default, to notify the post office authorities to
change the address for delivery of Borrower's mail to an address designated by
FINOVA and to open and dispose of all mail addressed to Borrower, provided that
FINOVA shall within one business day of receipt forward all mail other than
checks and other items of payment to Borrower; and to do all other things FINOVA
deems necessary or desirable to carry out the terms of this Agreement. Borrower
hereby ratifies and approves all acts of such attorney. Neither FINOVA nor any
of its officers, agents and designees shall be liable for any acts or omissions
nor for any error of judgment or mistake of fact or law while acting as
Borrower's attorney other than matters constituting gross negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable until the
Obligations have been fully satisfied and FINOVA's obligation to provide loans
hereunder shall have terminated.
9. RECEIVABLES AND INVENTORY.
9.1 Representations and Warranties.
(a) Receivables. Borrower hereby represents and warrants to FINOVA that:
(i) each existing Eligible Receivable represents, and each future
Receivable will represent, a bona fide sale or lease and delivery of goods
or services by Borrower, in the ordinary course of Borrower's business
except for Receivables resulting from the sale of excess or slow moving
inventory not made in the ordinary course of Borrower's business; (ii) each
existing Eligible Receivable is, and each future Receivable will be, for a
liquidated amount payable by the account thereon on the terms set forth in
the invoice therefor or in the schedule thereof delivered to FINOVA, and to
the extent such Receivable is an Eligible Receivable is and will be without
offset, deduction, defense, right of return, lien, encumbrance,
counterclaim or other condition except commissions payable in the ordinary
course of Borrower's business to owners of coin operated telephones;
(iii) no payment will be received with respect to any
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Receivable, and no credit, discount (other than those discounts given in
the ordinary course of business), or extension, or agreement therefor will
be granted on any Receivable, except as reported to FINOVA to the extent
required in accordance with this Agreement; (iv) each copy of an invoice
delivered to FINOVA by Borrower will be a genuine copy of the original
invoice sent to the account debtor named therein; and (v) all goods
described in each invoice will have been delivered to the account debtor
and all services of Borrower described in each invoice will have been
performed.
(b) Invoices. Borrower represents and warrants that Borrower shall not
re-date any invoice or sale or for Receivables, make sales on extended
dating beyond that customary in Borrower's business or extend or modify any
Eligible Receivable existing on the Closing Date or of any Receivable
thereafter created. If Borrower becomes aware of any matter materially
affecting the enforceability or collectibility of any Eligible Receivable
existing on the Closing Date or of any Receivable thereafter created, in an
amount greater than $25,000 in the aggregate, including, without
limitation, information regarding the account debtor's creditworthiness,
Borrower will immediately so advise FINOVA in writing.
9.2 Inventory. With respect to Inventory, Borrower represents and warrants
to FINOVA that FINOVA may rely, in determining which items of Inventory
constitute Eligible Inventory, on all statements and representations made by
Borrower with respect to any Inventory and that: (a) all Eligible Inventory is
presently and will continue to be located at Borrower's places of business
listed at Section 12.16 of the Schedule; (b) no Eligible Inventory is now, nor
shall any Eligible Inventory at any time or times hereafter be, stored with a
bailee, warehouseman or similar party without FINOVA's prior written consent
and, if FINOVA gives such consent, Borrower will concurrently therewith cause
any such bailee, warehouseman, or similar party to issue and
deliver to FINOVA, in form and substance acceptable to FINOVA, warehouse
receipts therefor in FINOVA's name; (c) except as permitted in Section 6.4, no
Eligible Inventory is or will be consigned to any Person without FINOVA's prior
written consent, and, if such consent is given, Borrower shall, prior to the
delivery of any Eligible Inventory on consignment: (I) provide FINOVA with all
consignment agreements to be used in connection with such consignment, all of
which shall be acceptable to FINOVA; (II) prepare, execute and file appropriate
financing statements with respect to any consigned Inventory, showing FINOVA as
assignee; (III) conduct a search of all filings made against the consignee in
all jurisdictions in which any consigned Inventory is to be located and deliver
to FINOVA copies of the results of all such searches and (IV) notify, in
writing, all the creditors of the consignee which are or may be holders of liens
in the Inventory to be consigned that Borrower expects to deliver certain
Inventory to the consignee, all of which Inventory shall be described in such
notice by item or type; and (d) no Inventory is or will be produced in violation
of the Fair Labor Standards Act.
9.3 Breach of Warranty or Representation.
(a) If any representation or warranty herein or in any report submitted to
FINOVA is breached as to any Receivable or any Receivable ceases to be an
Eligible Receivable for any reason other than payment thereof, and FINOVA
has reason to believe that the representation or warranty may have been
breached as to other Receivables owing by that account debtor, then FINOVA
may, in addition to its other rights hereunder, designate any and all
Receivables owing by that account debtor as not Eligible Receivables;
provided, that FINOVA shall in any such event retain its security interest
in all Receivables, whether or not Eligible Receivables, until the
Obligations have been fully satisfied and FINOVA's obligation to provide
loans hereunder has terminated.
(b) If any representation or warranty herein or in any report submitted to
FINOVA is breached as to any Inventory or any Inventory ceases to be
Eligible Inventory for any reason other than sale thereof in the ordinary
course, then FINOVA may, in addition to its other rights hereunder,
designate any and all of such Inventory as not Eligible Inventory;
provided, that FINOVA shall in any such event retain its security interest
in all Inventory, whether or not Eligible Inventory, until the Obligations
have been fully satisfied and FINOVA's obligation to provide loans
hereunder has terminated.
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9.4 Disputes. Borrower shall notify FINOVA promptly of all disputes or
claims relating to any Eligible Receivable existing on the Closing Date or
of any Receivable thereafter created, which involve an amount in
controversy greater than $25,000 and settle or adjust such disputes or
claims at no expense to FINOVA, but no discount, credit or allowance shall
be granted to any account debtor obligated on an Eligible Receivable and no
returns of merchandise shall be accepted by Borrower without FINOVA's
consent, except for discounts, credits and allowances made or given in the
ordinary course of Borrower's business. Borrower shall if requested by
FINOVA send FINOVA a copy of each credit memorandum related to a Receivable
in excess of $25,000 as soon as issued or as soon as known by Borrower (not
withstanding Section 5.2(i)). FINOVA may, at any time after the occurrence
of an Event of Default, settle or adjust disputes or claims directly with
account debtors for amounts and upon terms which FINOVA considers advisable
in its reasonable credit judgment and, in all cases, FINOVA shall credit
Borrower's loan account with only the net amounts received by FINOVA in
payment of any Receivables.
10. EQUIPMENT.
Borrower shall keep and maintain the Equipment in good operating condition
and repair and make all necessary replacements thereto to maintain and preserve
the value and operating efficiency thereof at all times consistent with
Borrower's past practice, ordinary wear and tear excepted. Borrower shall not
permit any item of Equipment to become a fixture (other than a trade fixture) to
real estate or an accession to other property.
11. OTHER LIENS; NO DISPOSITION OF COLLATERAL.
Borrower represents, warrants and covenants that (a) all Collateral is and shall
continue to be owned by it free and clear of all liens, claims and encumbrances
whatsoever (except for FINOVA's security interest, Permitted Encumbrances, and
such other liens, claims and encumbrances as may be permitted by FINOVA in its
sole discretion from time to time in writing), and (b) Borrower shall not while
any Loan is outstanding, without FINOVA's prior written approval, sell, encumber
or dispose of or permit the sale, encumbrance or disposal of any Eligible
Receivables or Inventory, or any interest of Borrower therein, except for
(i) the sale of Inventory or the sale of Receivables to Eligible LECs
and to billing aggregators such as Integretel and OAN in the ordinary course of
Borrower's business, provided that any such sale of Receivables shall be subject
to FINOVA's security interest in the Receivables sold to the extent the
Receivable is due from an End User, provided that FINOVA shall agree that its
interest in such Receivable shall be subordinate to any interest of the LEC or
billing aggregator which has purchased such Receivable at all times while such
LEC or billing aggregator is attempting to collect payment of such Receivable
from the End User and that FINOVA shall take no action with respect to its lien
until such time as such Eligible Receivable has been returned to Borrower, or
(ii) the sale of obsolete Equipment in the ordinary course of Borrower's
business. While any Loans are outstanding, the proceeds of any such sales shall
be remitted to FINOVA pursuant to this Agreement for application to the
Obligations. Provided that no Event of Default has occurred which is continuing,
and if Loans are then outstanding, the proceeds of such sale have been paid to
FINOVA, upon the sale of any Collateral permitted hereunder, FINOVA shall
execute such UCC-3 Termination Statements, lien releases and other instruments
as Borrower shall reasonably request to evidence the termination of FINOVA's
liens and security interests in such Collateral.
12. GENERAL REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
12.1 Due Organization. It is a corporation duly organized, validly existing
and in good standing under the laws of the State set forth on the Schedule,
is qualified and authorized to do business and is in good standing in all
states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite
power and authority to conduct its business as presently conducted, to own
its property and to execute and deliver each of the Loan Documents to which
it is a party and perform all of its Obligations thereunder;
12.2 Other Names. It has not, during the preceding five (5) years, been
known by or used any other corporate or fictitious name except as set forth
on the Schedule, nor has it been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any
person during such time except as set forth on the Schedule;
12.3 Due Authorization. The execution, delivery and performance by Borrower
of the Loan Documents to which it is a party have been authorized by all
necessary corporate action and do not and shall not constitute a violation
of any applicable law or of Borrower's Articles or Certificate of
Incorporation or By-Laws or any other document, agreement or instrument to
which Borrower is a party or by which Borrower or its assets are bound;
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12.4 Binding Obligation. Each of the Loan Documents to which Borrower is a
party is the legal, valid and binding obligation of Borrower enforceable
against Borrower in accordance with its terms;
12.5 Intangible Property. Borrower possesses adequate assets, licenses,
permits, approvals, patents, patent applications, copyrights, trademarks,
trademark applications and trade names for the present and planned future
conduct of its business without any known conflict with the rights of
others, and each is valid and has been duly registered or filed with the
appropriate governmental authorities;
12.6 Capital. Borrower has capital sufficient to conduct its business and
is able to pay its debts as they mature and owns property having a fair
salable value greater than the amount required to pay all of its debts
(including contingent debts);
12.7 Material Litigation. Except as disclosed on Exhibit "12.7" attached
hereto, Borrower has no pending or overtly threatened litigation, actions
or proceedings which would materially and adversely affect its business,
assets, operations, prospects or condition, financial or otherwise, or the
Collateral or any of FINOVA's interests therein;
12.8 Title; Security Interests of FINOVA. Borrower has good, indefeasible
and merchantable title to the Collateral and, upon the filing of UCC-1
Financing Statements, the initial advance of Loans, the assignment of
Borrower's intellectual property rights and the recording of any mortgages
or deeds of trust with respect to real property, in each case in the
appropriate offices, this Agreement and such documents shall create valid
and perfected first priority liens in the Collateral, subject only to
Permitted Encumbrances;
12.9 Restrictive Agreements; Labor Contracts. Except with respect to
agreements which will terminate simultaneously with the initial advance of
the Loans hereunder, Borrower is not a party or subject to any contract or
subject to any charge, corporate restriction, judgment, decree or order
materially and adversely
affecting its business, assets, operations, prospects or condition,
financial or otherwise, or which restricts its right or ability to incur
Indebtedness, and it is not party to any labor dispute except as disclosed
on the Schedule. In addition, no labor contract is scheduled to expire
during the Initial Term of this Agreement, except as disclosed to FINOVA in
writing prior to the date hereof.
12.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or
its business, assets, operations, prospects or condition, financial or
otherwise;
12.11 Consents. Borrower has obtained or caused to be obtained or issued
any required consent of a governmental agency or other Person in connection
with the financing contemplated hereby;
12.12 Defaults. Borrower is not in default in any material respect with
respect to any note, indenture, loan agreement, mortgage, lease, deed or
other material agreement to which it is a party or by which it or its
assets are bound, nor has any event occurred which, with the giving of
notice or the lapse of time, or both, would cause such a default;
12.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of such
other Persons described therein as of the date thereof; there are no
material omissions from the Prepared Financials or other facts or
circumstances not reflected in the Prepared Financials; and there has been
no material and adverse change in such financial condition or operations
since the date of the initial Prepared Financials delivered to FINOVA
hereunder;
12.14 ERISA. Neither Borrower, any ERISA Affiliate, or any Plan is or has
been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has Borrower or any ERISA Affiliate
received any notice to such effect. No notice of intent to terminate a Plan
has been filed under Section 4041 of ERISA, nor has any Plan been
terminated under ERISA. The PBGC has not instituted proceedings to
terminate, or appointed a trustee to administer, a Plan. No lien upon the
assets of Borrower has arisen with respect to a Plan. No prohibited
transaction or Reportable Event has occurred with respect to a Plan.
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Neither Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each ERISA
Affiliate have made all contributions required to be made by them to any
Plan or Multiemployer Plan when due. There is no accumulated funding
deficiency in any Plan, whether or not waived;
12.15 Taxes. Borrower has filed all tax returns and such other reports as
it is required by law to file and has paid or made adequate provision for
the payment on or prior to the date when due of all taxes, assessments and
similar charges that are due and payable;
12.16 Locations. Borrower's chief executive office and the offices and
locations where it keeps the Collateral (except for Inventory in transit
and consigned Inventory or Inventory delivered to a processor or to a
customer on approval not to exceed at any time in the aggregate $1,000,000
which in each case is not Eligible Inventory) are at the locations set
forth on the Schedule, except to the extent that such locations may have
been changed after notice to FINOVA in accordance with Section 13.5 below;
12.17 Business Relationships. To Borrower's knowledge on the closing date,
there exists no actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship
between Borrower and any customer or any group of customers whose purchases
individually or in the aggregate are material to the business of Borrower,
or with any material supplier; and
12.18 Reaffirmations. Each request for a loan made by Borrower pursuant to
this Agreement shall constitute (i) an automatic representation and
warranty by Borrower to FINOVA that there does not then exist any Event of
Default and (ii) a reaffirmation as of the date of said request that each
of the representations and warranties of Borrower contained in this
Agreement and the other Loan Documents is accurate in all material
respects.
12.19 Deferred Compensation. As of the Closing Date, Borrower owes no
deferred compensation to any of its officers or directors.
13. AFFIRMATIVE COVENANTS.
Borrower covenants that, so long as any Obligation remains outstanding and this
Agreement is in effect, it shall:
13.1 Expenses. Promptly reimburse FINOVA for all costs, fees and expenses
incurred by FINOVA in
connection with the negotiation, preparation, execution, delivery,
administration and enforcement of each of the Loan Documents, including,
but not limited to, the attorneys' and paralegals' fees of outside counsel,
expert witness fees, lien, title search and insurance fees, appraisal fees,
all charges and expenses incurred in connection with any and all
environmental reports and environmental remediation activities, and all
other costs, expenses, taxes and filing or recording fees payable in
connection with the transactions contemplated by this Agreement, including
without limitation all such costs, fees and expenses as FINOVA shall incur
or for which FINOVA shall become obligated in connection with (i) any
inspection or verification of the Collateral (subject to the limitations
set forth in the Schedule), (ii) any proceeding relating to the Loan
Documents or the Collateral, (iii) actions taken with respect to the
Collateral and FINOVA's security interest therein, including, without
limitation, the defense or prosecution of any action involving FINOVA and
Borrower or any third party, (iv) enforcement of any of FINOVA's rights and
remedies with respect to the Obligations or Collateral, and
(v) consultation with FINOVA's attorneys and participation in any workout,
bankruptcy or other insolvency or other proceeding involving any Loan Party
or any Affiliate, whether or not suit is filed, where FINOVA in its
reasonable discretion believes that the outcome of such proceeding, if
adversely determined, would have a material adverse effect on Borrower or
the Collateral, Borrower shall also pay all FINOVA charges in connection
with bank wire transfers, forwarding of loan proceeds, deposits of checks
and other items of payment, returned checks, establishment and maintenance
of lockboxes and other Blocked Accounts, and all other bank and
administrative matters, in accordance with FINOVA's schedule of bank and
administrative fees and charges in effect from time to time with respect to
its customers generally;
13.2 Taxes. File all tax returns and pay or make adequate provision for the
payment of all taxes, assessments and other charges on or prior to the date
when due;
13.3 Notice of Litigation. Promptly notify FINOVA in writing of any
litigation, suit or administrative proceeding which is reasonably expected
to materially and adversely affect the Collateral or Borrower's business,
assets, operations, prospects or condition, financial or otherwise, whether
or not the claim is covered by insurance;
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13.4 ERISA. Notify FINOVA in writing (i) promptly upon the occurrence of
any event described in Section 4043 of ERISA, other than a termination,
partial termination or merger of a Plan or a transfer of a Plan's assets
and (ii) prior to any termination, partial termination or merger of a Plan
or a transfer of a Plan's assets;
13.5 Change in Location. Notify FINOVA in writing forty-five (45) days
prior to any change in the location of Borrower's chief executive office or
the location of any Collateral, other than consigned Inventory or Inventory
delivered to a processor or to a processor or to a customer on approval not
to exceed at any time in the aggregate $1,000,000, which in each case is
not Eligible Inventory or Borrower's opening or closing of any other place
of business;
13.6 Corporate Existence. Maintain its corporate existence and its
qualification to do business and good standing in all states necessary for
the conduct of its business and the ownership of its property and maintain
adequate assets, licenses, patents, copyrights, trademarks and trade names
for the conduct of its business;
13.7 Labor Disputes. Promptly notify FINOVA in writing of any labor dispute
to which Borrower is or may become subject and the expiration of any labor
contract to which Borrower is a party or bound;
13.8 Violations of Law. Promptly notify FINOVA in writing of any violation
of any law, statute, regulation or ordinance of any governmental entity, or
of any agency thereof, applicable to Borrower which may materially and
adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
13.9 Defaults. Notify FINOVA in writing within five (5) Business Days of
Borrower's default under any material provision of any note, indenture,
loan agreement, mortgage, lease or other material agreement to which
Borrower or any of its Subsidiaries is a party or by which Borrower or any
of its Subsidiaries is bound, or of any other default under any
Indebtedness of Borrower for more than $10,000;
13.10 Capital Expenditures. Promptly notify FINOVA in writing of the making
of any Capital Expenditure not permitted hereunder materially affecting
Borrower's business, assets, prospects, operations or condition, financial
or otherwise;
13.11 Books and Records. Keep adequate records and books of account with
respect to its business activities in which proper entries are made in
accordance with generally accepted accounting principles consistently
applied, reflecting all of its financial transactions;
13.12 Leases; Warehouse Agreements. Provide FINOVA with (i) copies of all
agreements between Borrower and any landlord or warehouseman which owns any
premises at which any Collateral may, from time to time, be located, other
than any location where Borrower only stores Ineligible Inventory and (ii)
without limiting the landlord and mortgagee waivers to be provided pursuant
to Section 2.1(j) above, landlord and mortgagee waivers in form acceptable
to FINOVA with respect to all locations where any Collateral is hereafter
located;
13.13 Additional Documents. At FINOVA's request, promptly execute or cause
to be executed and delivered to FINOVA any and all documents, instruments
or agreements deemed necessary by FINOVA to facilitate the collection of
the Obligations or the Collateral or otherwise to give effect to or carry
out the terms or intent of this Agreement or any of the other Loan
Documents. Without limiting the generality of the foregoing, if any of the
Receivables with a face value in excess of $25,000, individually or in the
aggregate, arises out of a contract with the United States of America or
any department, agency, subdivision or instrumentality thereof, Borrower
shall promptly notify FINOVA of such fact in writing and shall execute any
instruments and take any other action required or requested by FINOVA to
comply with the provisions of the Federal Assignment of Claims Act; and
13.14 Financial Covenants. Comply with the financial covenants set forth on
the Schedule.
13.15 OAN Acknowledgement Letter. Borrower shall use its best efforts to
obtain from OAN, Inc. an acknowledgement and no offset letter in form and
substance reasonably acceptable to FINOVA and its counsel within 45 days
after the closing date. In the event Borrower is unable to obtain such
letter, and OAN, Inc. at any time thereafter is no longer a wholly owned
subsidiary of EDS Borrower shall cease using OAN, Inc. to provide billing
services on behalf of Borrower.
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14. NEGATIVE COVENANTS.
Without FINOVA's prior written consent, which consent FINOVA may withhold
in its sole discretion, so long as any Obligation remains outstanding and this
Agreement is in effect, Borrower shall not:
14.1 Mergers. Merge or consolidate with or acquire any other Person;
14.2 Loans. Make advances, loans or extensions of credit to, or invest in,
any Person other than Permitted Investments;
14.3 Dividends. Declare or pay cash dividends upon any of its stock or
distribute any of its property or redeem, retire, purchase or acquire
directly or indirectly any of its stock or make any other distributions;
14.4 Adverse Transactions. Knowingly enter into any transaction which with
the knowledge that it will materially and adversely affect the Collateral
(excluding Eligible Receivables existing on the Closing Date) or its
ability to repay the Obligations in full as and when due;
14.5 Indebtedness of Others. Become directly or contingently liable for the
Indebtedness of any Person except (i) by endorsement of instruments for
deposit; (ii) prior to the date of the Initial Advance, Indebtedness
pursuant to that certain Note Purchase Agreement dated August 11, 1994
between Borrower and Nomura Holding America, Inc., and all instruments and
agreements related thereto (the "Nomura Debt"); and (iii) other contingent
liabilities not exceeding $25,000, individually or in the aggregate, at any
one time;
14.6 Repurchase. Make a sale to any customer on a xxxx-and-hold, guaranteed
sale, sale and return, sale on approval, consignment, or any other
repurchase or return basis;
14.7 Name. Use any corporate or fictitious name other than its corporate
name as set forth in its Articles or Certificate of Incorporation on the
date hereof or as set forth on the Schedule;
14.8 Prepayment. Prepay any Indebtedness other than trade payables, the
Nomura Debt with the proceeds of the Initial Advance and the Obligations;
14.9 Capital Expenditure. Make or incur any Capital Expenditure if, after
giving effect thereto, the aggregate amount of all Capital Expenditures by
Borrower in any fiscal year would exceed the amount set forth on the
Schedule;
14.10 Compensation. Intentionally omitted;
14.11 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness (including Indebtedness in connection with Capital Leases) in
excess of the amount set forth on the Schedule, other than (i) the
Obligations, (ii) other Indebtedness existing on the date of this Agreement
and reflected in the Prepared Financials (except Indebtedness paid on the
date of this Agreement from proceeds of the initial advances hereunder),
(iii) from the date hereof until the date of the Initial Advance the Nomura
Debt and (iv) Indebtedness issued through Banca Del Gottardo in the
principal amount of up to $15,000,000;
14.12 Affiliate Transactions. Except as set forth below, or disclosed in
writing to Lender prior to the date hereof, sell, transfer, distribute or
pay any money or property to any Affiliate, or invest in (by capital
contribution or otherwise) or purchase or repurchase any stock or
Indebtedness, or any property, of any Affiliate, or become liable on any
guaranty of the indebtedness, dividends or other obligations of any
Affiliate. Notwithstanding the foregoing, Borrower may pay compensation to
employees who are Affiliates and, if no Event of Default has occurred,
Borrower may engage in transactions with Affiliates in the normal course of
business, in amounts and upon terms which are fully disclosed to FINOVA if
they are no less favorable to Borrower than would be obtainable in a
comparable arm's length transaction with a Person who is not an Affiliate;
14.13 Nature of Business. Enter into any new business other than the
delivery of telecommunications services and the manufacture and sale of
telecommunications products in each case similar to those currently
manufactured or sold by Borrower to End Users and other providers of
telecommunications services or make any material change in any of
Borrower's business objectives, purposes or operations;
14.14 FINOVA's Name. Use the name of FINOVA in connection with any of
Borrower's business or activities, except in connection with internal
business matters or as required in dealings with governmental agencies and
financial institutions or with trade creditors of Borrower, solely for
credit reference purposes; or
14.15 Margin Security. Own, purchase or acquire (or enter into any contract
to purchase or acquire) any "margin security" as defined by any regulation
of the Federal Reserve Board as now in effect or as the same may hereafter
be in effect.
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15. ENVIRONMENTAL MATTERS.
15.1 Definitions. The following definitions apply to the provisions of this
Section 15:
(a) The term "Applicable Law" shall include, but shall not be limited
to, each statute named or referred to in this Section 15.1 and all
rules and regulations thereunder, and any other local, state and/or
federal laws, rules, regulations or ordinances, whether currently in
existence or hereafter enacted, which govern, to the extent applicable
to the Property or to Borrower, (i) the existence, cleanup and/or
remedy of contamination on real property; (ii) the protection of the
environment from soil, air or water pollution, or from spilled,
deposited or otherwise emplaced contamination; (iii) the emission or
discharge of hazardous substances into the environment; (iv) the
control of hazardous wastes; or (v) the use, generation, transport,
treatment, removal or recovery of Hazardous Substances;
(b) The term "Hazardous Substance" shall mean (i) any oil, flammable
substance, explosives, radioactive materials, hazardous wastes or
substances, toxic wastes or substances or any other wastes, materials
or pollutants which either pose a hazard to the Property or to persons
on or about the Property or cause the Property to be in violation of
any Applicable Law; (ii) asbestos in any form which is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment which contain dielectric fluid containing levels of
polychlorinated biphenyls, or radon gas; (iii) any chemical, material
or substance defined as or included in the definition of "hazardous
substances," "waste," "hazardous wastes," "hazardous materials,"
"extremely hazardous waste," "restricted hazardous waste," or "toxic
substances" or words of similar import under any Applicable Law,
including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 USC 9601 et
seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 USC 6901
et seq.; the Hazardous Materials Transportation Act, 49 USC 1801 et
seq.; the Federal Water Pollution Control Act, 33 USC 1251 et seq.;
(iv) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority which
may or could pose a hazard to the health or safety of the occupants of
the
Property or the owners and/or occupants of property adjacent to or
surrounding the Property, or any other person coming upon the Property
or adjacent property; and (v) any other chemical, materials or
substance which may or could pose a hazard to the environment; and
(c) The term "Property" shall mean all real property, wherever
located, in which Borrower has any right, title or interest, whether
now existing or hereafter arising, and including, without limitation,
as owner, lessor or lessee.
15.2 Covenants and Representations.
(a) Borrower represents and warrants that there have not been during
the period of Borrower's possession of any interest in the Property
and, to the best of its knowledge after reasonable inquiry, except as
provided on Exhibit 15.2 attached hereto, there have not been at any
other times, any activities on the Property involving, directly or
indirectly, the use, generation, treatment, storage or disposal of any
Hazardous Substances except in material compliance with Applicable Law
(i) under, on or in the land included in the Property, whether
contained in soil, tanks, sumps, ponds, lagoons, barrels, cans or
other containments, structures or equipment, (ii) incorporated in the
buildings, structures or improvements included in the Property,
including any building material containing asbestos, or (iii) used in
connection with any operations on or in the Property.
(b) Except as provided on Exhibit 15.2 attached hereto, without
limiting the generality of the foregoing and to the extent not
included within the scope of this Section 15.2, Borrower represents
and warrants that it is in full compliance with Applicable Law and has
received no notice from any person or any governmental agency or other
entity of any violation by Borrower or its Affiliates of any
Applicable Law.
(c) Borrower agrees to indemnify FINOVA, protect and defend FINOVA
with counsel and experts reasonably acceptable to FINOVA, and hold
FINOVA harmless from and against any claims, actions, administrative
proceedings, judgments, damages, punitive damages, penalties, fines,
costs, liabilities (including sums paid in settlements of claims),
interest or losses, attorneys' fees (including any fees and expenses
incurred in enforcing this indemnity), consultant fees, expert fees,
and other out-of-pocket costs or expenses actually incurred by FINOVA
(collectively, the "Environmental Costs"), that may, at any time or
from time to time, arise directly or indirectly from or in connection
with: (i) the presence, suspected presence, release or suspected
release of any Hazardous Substance whether into the air, soil, surface
water or groundwater of or at the Property, or any other violation of
Applicable Law, or (ii) any breach of the foregoing representations
and covenants; except to the extent any of the foregoing result from
the actions of FINOVA, its employees, agents and representatives. All
Environmental Costs incurred or advanced by FINOVA shall be deemed to
be made by FINOVA in good faith and shall constitute Obligations
hereunder.
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16. TERM; TERMINATION.
16.1 Term. The initial term of this Agreement shall be as set forth on
the Schedule (the "Initial Term") and may, in the sole discretion of
FINOVA, be renewed for successive periods of one (1) year (each, a
"Renewal Term"), unless earlier terminated as provided herein.
16.2 Prior Notice. Each party shall have the right to terminate this
Agreement at the end of the Initial Term or at the end of any Renewal
Term by giving the other party written notice not less than sixty (60)
days prior to the effective date of such termination, by registered or
certified mail.
16.3 Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
16.4 Early Termination; Termination Fee. In addition to the procedure
set forth in Section 16.2, Borrower may terminate this Agreement at
any time but only upon not less than fifteen (15) days' prior written
notice and prepayment of the Obligations in full in immediately
available funds. Upon any such early termination by Borrower or any
termination of this Agreement by FINOVA upon the occurrence of an
Event of Default, then, and in any such event, Borrower shall pay to
FINOVA upon the effective date of such termination a fee (the
"Termination Fee") in an amount equal to the amount shown on the
Schedule.
17. DEFAULT.
17.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
(b) Borrower or any other Loan Party fails or neglects to
perform, keep, or observe any term,
provision, condition, covenant or agreement contained in any Loan
Document to which Borrower or such other Loan Party is a party,
and with respect to Sections 13.2, 13.6, 13.11 and 13.12 only if
such failure is not cured within fifteen (15) days after Borrower
becomes aware of or FINOVA notifies Borrower of such failure;
(c) The value or priority of FINOVA's security interest in a
portion of the Collateral with a value in excess of $75,000 is
impaired;
(d) Any material portion of Borrower's assets is seized,
attached, subjected to a writ or distress warrant, is levied upon
or comes into the possession of any judicial officer;
(e) Borrower shall generally not pay its debts as they become due
or shall enter into any agreement (whether written or oral), or
offer to enter into any agreement, with all or a significant
number of its creditors regarding any moratorium or other
indulgence with respect to its debts or the participation of such
creditors or their representatives in the supervision, management
or control of the business of Borrower;
(f) Any bankruptcy or other insolvency proceeding is (i)
commenced by Borrower, or (ii) commenced against Borrower and
remains undischarged or unstayed for sixty (60) days from the
date of the involuntary petition;
(g) Any notice of lien, levy or assessment other than a Permitted
Encumbrance is filed of record with respect to the Collateral and
such lien, levy or assessment has not been discharged within
fifteen (15) days after such filing;
(h) Any final non-appealable judgments in an aggregate amount
exceeding $100,000 which are not covered by insurance are entered
against Borrower;
(i) Any default by Borrower shall occur under any capital lease
or loan, between Borrower and any third party which would result
in a right by such third party to accelerate the maturity of any
Indebtedness of Borrower to such third party unless cured during
any applicable grace period, provided however, that if the amount
outstanding under such capital lease or loan shall be less than
Two Hundred Fifty Thousand Dollars ($250,000), Borrower shall
have thirty (30) days from the date of such default to cure such
default(s) so that such third party shall no longer have a right
to accelerate the maturity of the related indebtedness.
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(k) Any representation or warranty made or deemed to be made by
Borrower or any Affiliate in any Loan Document or any other
statement, document or report made or delivered to FINOVA in
connection therewith shall prove to have been misleading in any
material respect;
(l) Any Prohibited Transaction or Reportable Event shall occur
with respect to a Plan which could have a material adverse effect
on the financial condition of Borrower; any lien upon the assets
of Borrower in connection with any Plan shall arise; Borrower or
any of its ERISA Affiliates shall fail to make full payment when
due of all amounts which Borrower or any of its ERISA Affiliates
may be required to pay to any Plan or any Multiemployer Plan as
one or more contributions thereto; Borrower or any of its ERISA
Affiliates creates or permits the creation of any accumulated
funding deficiency, whether or not waived; or
(m) Any person or group (as defined in Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934) shall become the
direct or indirect beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934 of more than 40% of the
total voting power of all classes of capital stock then
outstanding of Borrower entitled (without regard to the
occurrence of any contingency) to vote in elections of directors
of Borrower; (m) The Initial Advance has not been made on or
before November 30, 1996.
17.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may, at
its option and in its sole discretion and in addition to all of its other
rights under the Loan Documents, terminate this Agreement and declare all
of the Obligations to be immediately payable in full. FINOVA shall also
have all of its rights and remedies under applicable law, including,
without limitation, the default rights and remedies of a secured party
under the Code. Further, FINOVA may at any time during the continuance of
an Event of Default take possession of the Collateral and keep it on
Borrower's premises, at no cost to FINOVA, or remove any part of it to such
other place(s) as FINOVA may desire, or Borrower shall during the
continuance of an Event of Default, upon FINOVA's demand, at Borrower's
sole cost, assemble the Collateral and make it available to FINOVA at a
place reasonably convenient to FINOVA. During the continuance of an Event
of Default, FINOVA may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at
such prices and upon such terms as FINOVA deems advisable, at FINOVA's
discretion, and may, if FINOVA deems it reasonable, postpone or adjourn any
sale of the Collateral by an announcement at the time and place of sale or
of such postponed or adjourned sale without giving a new notice of sale.
Borrower agrees that FINOVA has no obligation to preserve rights to the
Collateral or xxxxxxxx any Collateral for the benefit of any Person. FINOVA
is hereby granted a license or other right to use, without charge during
the continuance of an Event of Default, Borrower's labels, patents,
copyrights, name, trade secrets, trade names, trademarks and advertising
matter, or any similar property, in completing production, advertising or
selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to FINOVA's benefit. Any requirement of
reasonable notice shall be met if such notice is mailed postage prepaid to
Borrower at its address set forth in the heading to this Agreement at least
ten (10) days before sale or other disposition. The proceeds of sale shall
be applied, first, to all attorneys fees and other expenses of sale, and
second, to the Obligations in such order as FINOVA shall elect, in its sole
discretion. FINOVA shall return any excess to Borrower and Borrower shall
remain liable for any deficiency to the fullest extent permitted by law.
FINOVA shall also have the right during the continuance of an Event of
Default to reduce the Total Facility amount, the Borrowing Base or any
portion thereof or the advance rates or to modify the terms and conditions
upon which FINOVA is willing to consider making advances under the Total
Facility or to take additional reserves in the Borrowing Base for any
reason.
17.3 Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially
reasonable (but other conduct by FINOVA, including, but not limited to,
FINOVA's use in its sole discretion of other or different times, places and
manners of noticing and conducting any disposition of Collateral shall not
be deemed unreasonable): Any public or private disposition as to which on
no later than the fifth calendar day prior thereto written notice thereof
is mailed or personally delivered to Borrower and, with respect to any
public disposition, on no later than the tenth calendar day prior thereto
notice thereof describing in general non-specific terms, the Collateral to
be disposed of is published once in a newspaper of general circulation in
the county where the sale is to be conducted. The public disposition shall
be at any place designated by FINOVA, with or without the Collateral being
present, and which commences at any time between 8:00 a.m. and 5:00 p.m.
(provided that no notice of any public or private disposition need be given
to the Borrower if the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market).
Without limiting the generality of the foregoing, Borrower expressly agrees
that, with respect to any disposition of accounts, instruments and general
intangibles, it shall be commercially reasonable for FINOVA to direct any
prospective purchaser thereof to ascertain directly from Borrower any and
all information concerning the same, including, but not limited to, the
terms of payment, aging and delinquency, if any, the financial condition of
any obligor or account debtor thereon or guarantor thereof, and any
collateral therefor.
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18. DEFINITIONS.
18.1 Defined Terms. As used in this Agreement, the following terms have the
definitions set forth below:
"Affiliate" means any Person controlling, controlled by or under common
control with Borrower. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of any Person, whether through
ownership of common or preferred stock or other equity interests, by
contract or otherwise. Without limiting the generality of the foregoing,
each of the following shall be an Affiliate: any officer, director,
employee or other agent of Borrower, any shareholder or subsidiary of
Borrower, and any other Person with whom or which Borrower has common
shareholders, officers or directors.
"Billing Contract" means any agreement for billing and/or collection
services by and between any LEC and Borrower, and any tariff of any LEC for
billing and/or collection services pursuant to which Borrower directly
receives billing and/or collection services.
"Billing Services Agreements" means the billing services agreements in the
form delivered by Borrower to FINOVA prior to the date hereof, executed and
delivered and by and between Borrower and certain billing aggregators
acceptable to FINOVA (such as Integretel, Inc. or OAN), as the same may
from time to time be amended, with such changes therein as shall be
acceptable to FINOVA, and any other billing services agreement between
Borrower and an Eligible LEC entered into after the date hereof.
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"Billing Tape" means a billing tape in EMI or other format designated by an
Eligible LEC and presentable to billing aggregator or LEC in accordance
with the applicable Billing Contract.
"Business Day" means any day on which commercial banks in both
Philadelphia, Pennsylvania and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities incurred
for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one
year and including, without limitation, those arising in connection with
Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in accordance
with generally accepted accounting principles, should be capitalized for
financial reporting purposes and reflected as a liability on the balance
sheet of Borrower.
"Closing Date" means the date on which this Agreement is executed.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 4.1 above.
"Current Assets" at any date means the amount at which the current assets
of Borrower would be shown on a balance sheet of Borrower as at such date,
prepared in accordance with generally accepted accounting principles,
provided that amounts due from Affiliates and investments in Affiliates
shall be excluded therefrom.
"Current Liabilities" at any date means the amount at which the current
liabilities of Borrower would be shown on a balance sheet of Borrower as at
such date, prepared in accordance with generally accepted accounting
principles, but excluding current maturities on long-term Indebtedness and
the Receivable Loans.
"Deposit Accounts" has the meaning set forth in Section 9105 of the Code.
"Direct Billed Receivables" means any Receivable which is invoiced or
billed solely by Borrower to an End User.
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"Earnings Before Interest and Taxes" for any fiscal period of Borrower
means the net income of Borrower for such fiscal period, plus interest
expense and provision for income taxes for such fiscal period, and minus
non-recurring miscellaneous income and expenses, all calculated in
accordance with generally accepted accounting principles, consistently
applied.
"Eligible LEC" means any LEC set forth on Exhibit "A" attached hereto and
incorporated herein by reference and any other LEC hereafter expressly
approved by FINOVA in writing.
"Eligible Inventory" means such Inventory of Borrower which FINOVA, in its
reasonable discretion based on such credit and collateral considerations as
FINOVA deems appropriate deems to be Eligible Inventory. Without limiting
the generality of the foregoing, no Inventory shall be Eligible Inventory
unless it (i) is calculated on the basis of the lower of cost or market and
on a first-in, first-out basis; (ii) is not obsolete or unmerchantable;
(iii) conforms in all respects to the warranties and representations set
forth in Section 9.2 hereof; (iv) is at all times subject to FINOVA's duly
perfected, first priority security interest and no other Lien; and (v) is
presently and will continue to be situated at a location set forth at
Section 12.6 of the Schedule and is not in-transit. In addition, no
Inventory shall be Eligible Inventory if it consists of work in process,
packaging materials, overhead allocated to raw materials (excluding freight
charges related thereto), and slow-moving goods (which shall include,
without limitation, the lower of (A) the amount of reserves for slow moving
items as set forth in Borrower's financial statements as delivered to
FINOVA hereunder; or (B) the Borrower's internal report which reflects
quantities of Inventory which are at any time in excess of past three
years' running usage, as measured on a month to month basis), all as
determined by FINOVA in its sole and absolute discretion.
"Eligible Lease Contracts" means: leases arising in the ordinary course of
Borrower's business from the lease of pay telephones, network equipment and
software which FINOVA, shall reasonably deem eligible based on such credit
and collateral, considerations as FINOVA may from time to time deem
reasonably appropriate. Without limiting the foregoing, a lease shall not
be deemed to be an Eligible Lease Contract if (i) two or more payments
under the lease are past due or the lessee is otherwise in default under
the lease (ii) the lessee has failed to pay more than twenty-five percent
(25%) of all amounts owed to Borrower under all of such lessee's leases
with Borrower within ninety (90) days after such amounts become due and
owing (iii) the
lessee is an Affiliate of Borrower; (iv) the lessee is not located in the
United States or Canada, unless the lease is supported by a letter of
credit or other form of guaranty or security, in each case in form and
substance satisfactory to FINOVA; (v) the lessee is the United States or
any department, agency or instrumentality thereof or any state, city or
municipality of the United States; (vi) Borrower is or may become liable to
the lessee for goods sold or services rendered by the lessee to Borrower to
the extent of such offset; (vii) the total obligations of the lessee to
Borrower exceed the greater of $250,000 or twenty-five (25%) of all
obligations to Borrower under Eligible Lease Contracts to the extent of
such excess; (viii) the lessee disputes liability or makes any claim with
respect thereto (up to the amount of such liability or claim), or is
subject to any insolvency or bankruptcy proceeding, or becomes insolvent,
fails or goes out of a material portion of its business; (ix) the
obligations of the lessee thereunder consists of late charges or finance
charges; (x) the net book value of the payments due Borrower thereunder
exceeds $50,000, unless accompanied by evidence of shipment and lessee's
acceptance of the goods relating thereto satisfactory to FINOVA in its sole
discretion; (xi) all or a portion of the payments due thereunder consists
of a finance, interest or late charges, to the extent thereof; (xii) the
lease payments are payable in any manner other than lawful money of the
United States; (xiii) such lease is subject to any offset, deduction,
counterclaim, rights of return, cancellation, or other condition to the
extent of such offset; (xiv) such lease relates to goods not yet delivered
and accepted by lessee; (xv) FINOVA is not in possession of the sole
original lease, or, if a lease consists of a Master Lease Agreement and
specific schedules which describe the terms of any specific items to be
leased pursuant to such schedule, the sole original schedule, provided that
the terms of the Master Lease Agreement make it clear that the sole
original schedule is a separate loan for and "Chattel Paper" purposes under
the UCC and possession of such schedule constitutes possession of "Chattel
Pager" under the UCC; or (xvi) with respect to the lessee, Borrower has
entered into any agreement which provides, directly or indirectly, for the
crediting of any of Borrowers obligations or liabilities to such lessee
against future rentals accruing under the lease with the exception of
commissions payable to owners of coin operated telephones in the ordinary
course of Borrower's business to the extent of such credit;
"Eligible Receivables" means: a LEC Receivable due from an Eligible LEC, an
OAN Receivable, an Integretel Receivable or a Direct Billed Receivable in
each case arising in the ordinary course of the "0+", "1+" or operator
services rendered by Borrower which FINOVA reasonably deems to be an
Eligible Receivable based on such credit and collateral considerations as
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FINOVA deems reasonably appropriate; provided, however, that no such
Receivable shall be an Eligible Receivable if: (i) such Receivable arises
out of the rendering of services by Borrower to an Affiliate of Borrower or
by Borrower to a Person controlled by an Affiliate of Borrower; or (ii)
such LEC Receivable, OAN Receivable, or Integretel Receivable, is unpaid
more than ninety (90) days after the date of the applicable Billing Tape or
such Direct Billed Receivable is unpaid more than sixty (60) days from the
invoice date; or (iii) with respect to LEC Receivables from a particular
LEC, if twenty-five percent (25%) or more of the LEC Receivables from the
LEC that is the account debtor are not deemed Eligible Receivables of such
LEC hereunder; or (iv) any covenant, representation or warranty contained
in this Agreement with respect to such Receivable has been breached; or (v)
the LEC has disputed liability with respect to a Receivable or has made any
claim with respect to any other LEC Receivable due from the LEC to Borrower
(whether with respect to a LEC Billed Receivable or Integretel Receivable
or OAN Receivable) to the extent of any dispute or claim, or (vi) such
Receivable is due from or processed by an account debtor that has commenced
a voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or made assignment for the benefit of creditors, or a
decree or order for relief has been entered by a court having jurisdiction
over such account debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
petition or other application for relief under the federal bankruptcy laws
has been filed against the account debtor, or if the account debtor has
failed, suspended business, ceased to be solvent, or consented to or
suffered a receiver, trustee, liquidator, or custodian to be appointed for
it or for all or a significant portion of its assets or affairs; or (vii)
FINOVA believes, in its reasonable judgment, that collection of such
Receivable is insecure or that payment thereof is doubtful or will be
delayed by reason of the LEC's, OAN's or Integretel's or other account
debtors financial condition; or (viii) the Receivable is subject to a Lien
other than FINOVA's; or (ix) the Receivable is evidenced by chattel paper
or an instrument of any kind or has been reduced to judgment; or (x)
Borrower has made any agreement with a LEC, OAN, Integretel any other
account debtors for any deduction therefrom, except for post-billing
adjustments which are made in the ordinary course of business and except as
provided in the applicable Billing
Contract, but only to the extent of such deduction; or (xii) Borrower has
made an agreement with the LEC to extend the time of payment thereof,
unless, notwithstanding such agreement, payment is made within ninety (90)
days of the Billing Tape date or with respect to a Direct Billed Receivable
sixty (60) days from the invoice date; or (xiii) such Receivable is subject
to setoff, carve-out or other adjustment under a contract other than a
Billing Contract or telecommunications service contract with an End User;
or (xiv) such Receivable is a duplicate billing; or (xv) such Receivable
has not been confirmed by a billing agent.
"Eligible Trade Receivables" means Receivables arising in the ordinary
course of Borrower's business from the sale of parts, repairs and Inventory
including pay telephones, retrofit kits, various component parts and
Intelligent Network Platform systems, prepaid phone cards, and parts
repairs which FINOVA, based on such credit and collateral considerations as
FINOVA deems appropriate, reasonably deems to be an Eligible Trade
Receivable. Without limiting the foregoing, a Receivable shall not be
deemed to be an Eligible Trade Receivable if (i) the account debtor has
failed to pay the Receivable within a period of ninety (90) days after
invoice date, to the extent of any amount remaining unpaid after such
period; (ii) the account debtor has failed to pay more than twenty-five
percent (25%) of all outstanding Receivables owed by it to Borrower within
ninety (90) days after invoice date; (iii) the account debtor is an
Affiliate of Borrower; (iv) the goods relating thereto are placed on
consignment, guaranteed sale or other terms pursuant to which payment by
the account debtor may be conditional; (v) the account debtor is not
located in the United States or Canada, unless the Receivable is supported
by a letter of credit or other form of guaranty or security, in each case
in form and substance satisfactory to FINOVA; (vi) the account debtor is
the United States or any department, agency or instrumentality thereof or
any state, city or municipality of the United States; (vii) Borrower is or
may become liable to the account debtor for goods sold or services rendered
by the account debtor to Borrower; (viii) the total obligations of the
account debtor to Borrower exceed fifteen percent (15%) of all Eligible
Receivables, to the extent of such excess; (ix) the account debtor disputes
liability or makes any claim with respect thereto (up to the amount of such
liability or claim), or is subject to any insolvency or bankruptcy
proceeding, or becomes insolvent, fails or goes out of a material portion
of its business; (x) the amount thereof consists of late charges or finance
charges; (xi) the amount thereof consists of a credit balance more than
ninety (90) days past due; (xii) the face amount thereof exceeds $50,000,
unless accompanied by evidence of shipment of the goods relating thereto
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satisfactory to FINOVA in its sole discretion; (xiii) all or a portion of
such Receivable consists of a finance, interest or late charges, to the
extent thereof; (xiv) the Receivable is payable in any manner other than
lawful money of the United States; (xv) such Receivable is subject to any
offset, deduction, counterclaim, rights of return, cancellation, or other
condition; (xvi) such Receivable consists of a deposit for goods not yet
delivered, warranty charges or relates to a demonstration; or (xvii) such
Receivable does not result from a bona fide sale and delivery by Borrower
of the goods by Borrower in the ordinary course of its business.
"End Users" means Persons to whom Borrower renders telecommunication
services.
"End User Accounts" means Accounts arising from services rendered by the
Borrower to End Users of telecommunications services, which accounts have
been processed and formatted for billing on a Billing Tape to be submitted
to a LEC. Each End User Account shall cease to be an End User Account and
become a LEC Receivable upon its sale, assignment, or transfer by Borrower
to a LEC for billing and collection pursuant to a Billing Contract.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods
and other tangible personal property (other than Inventory) of every kind
and description used in Borrower's operations or owned by Borrower and any
interest in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions or improvements to any
of the foregoing, wherever located.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not incorporated
and whether or not foreign) which is or may hereafter become a member of a
group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 17.1 of
this Agreement.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, any moneys due or to become due and other sums due Borrower
from any LEC under any Billing Contract or from any billing company
(including, without limitation, Integretel, Inc. and OAN) under a Billing
Services Agreement, with which Borrower is now or may hereafter contract
with, all choses in action, rights under judgments, rights under tort
claims, causes of action, corporate or other business records (including,
without limitation, Billing Tapes), Deposit Accounts, inventions, designs,
drawings, blueprints, patents, patent applications, trademarks and the
goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, security and other deposits, rights in all litigation
presently or hereafter pending for any cause or claim (whether in contract,
tort or otherwise), and all judgments now or hereafter arising therefrom,
all claims of Borrower against FINOVA, rights to purchase or sell real or
personal property, rights as a licensor or licensee of any kind, royalties,
telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation credit,
liability, property and other insurance) tax refunds and claims, computer
programs, discs, tapes and tape files, claims under guaranties, security
interests or other security held by or granted to Borrower to secure
payment of any of the Receivables by an account debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or
otherwise, however evidenced, created, incurred, acquired, owing or
arising, whether under written or oral agreement, operation of law or
otherwise, and includes, without limiting the foregoing (i) the
Obligations, (ii) obligations and liabilities of any Person secured by a
lien, claim, encumbrance or security interest upon property owned by
Borrower, even though Borrower has not assumed or become liable therefor,
(iii) obligations and liabilities created or arising under any lease
(including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower,
even though the rights and remedies of the lessor, seller or lender are
limited to repossession, (iv) all unfunded pension fund obligations and
liabilities, and (v) deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
21
(page 21 continued)
"Integretel Receivables" means Receivables due from or processed by
Integretel, Inc.
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials,
work in process, finished goods and materials and supplies of any kind,
nature or description which are or might be used or consumed in Borrower's
business or used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, merchandise or other
personal property, and all documents of title or other documents
representing them.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"LEC" means any Regional Xxxx Operating Company, Xxxx Operating Company,
independent local exchange company, credit card company or provider of
local telephone services which is a party to any Billing Contract.
"LEC Receivables" - shall mean all Receivables, General Intangibles for
money due or to become due, debts and any other amounts payable to Borrower
by any LEC pursuant to any Billing Contract.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower and payable to FINOVA, and any other agreement entered
into in connection with this Agreement, together with all alterations,
amendments, changes, extensions, modifications, refinancings, refundings,
renewals, replacements, restatements, or supplements, of or to any of the
foregoing.
"Loan Party" means Borrower, each Subordinating Creditor and each other
party (other than FINOVA) to any Loan Document.
"Month-end Reports" means all reports prepared by Borrower on a monthly
basis, which reports shall include, without limitation, general ledger,
trial balance, financial statements, Receivables and accounts payable
agings, agings of accounts payable accruals and sales
and cash receipts journals and a monthly reconciliation of Receivables and
accounts payable and cash.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees
of Borrower or any ERISA Affiliate.
"Net Worth" at any date means the Borrower's net worth as determined in
accordance with generally accepted accounting principles, consistently
applied.
"Notice of Assignment" shall mean, with respect to any Billing Contract, a
letter, in the form attached as Exhibit 7.2 sent to the applicable LEC, in
which the LEC is notified with respect to the assignment and grant of a
security interest by Borrower to FINOVA of and in all of Borrower's right,
title, and interest in and to all LEC Receivables relating to such Billing
Contract and directing such LEC to make all payments to the lockbox or
Dominion Account.
"OAN Receivables" means Receivables due from or processed by OAN, Inc.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time
owing by Borrower to FINOVA, whether evidenced by this Agreement, any note
or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
FINOVA in Borrower's debts owing to others), absolute or contingent, due or
to become due, including, without limitation, all interest, charges,
expenses, fees, attorney's fees, expert witness fees, examination fees,
letter of credit fees, Collateral Monitoring Fees, Closing Fees, Facility
Fees, Termination Fees, Minimum Interest Charges, Unused Line Fees,
Commitment Fee and any other sums chargeable to Borrower hereunder or under
any other agreement with FINOVA.
"Overadvance" has the meaning set forth in Section 1.3 hereof.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Schedule and incorporated herein by
this reference.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
limited liability entity, government, or any agency or political division
thereof, or any other entity.
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(page 22 continued)
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
"Prepared Financials" means the balance sheets of Borrower as of the date
set forth in the Schedule, and as of each subsequent date on which audited
balance sheets are delivered to FINOVA from time to time hereunder, and the
related statements of operations, changes in stockholder's equity and
changes in cash flow for the periods ended on such dates.
"Prohibited Transaction" means any transaction described in Section 406 of
ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC.
"Receivable Loans" has the meaning set forth on the Schedule.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance or processed and formatted
for billing), proceeds of any letters of credit naming Borrower as
beneficiary, contract rights, chattel paper, instruments, documents and all
other forms of obligations at any time owing to Borrower, all guaranties
and other security therefor, whether secured or unsecured, all merchandise
returned to or repossessed by Borrower, and all rights of stoppage in
transit and all other rights or remedies of an unpaid vendor, lienor or
secured party.
"Renewal Term" has the meaning set forth on the Schedule.
"Reportable Event" means a reportable event described in Section 4043 of
ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section
4068(f) of ERISA.
"Shareholder" means any Person who is an owner of any of Borrower's stock.
"Subordinated Debt" means liabilities of Borrower the repayment of which is
subordinated, to the payment and performance of the Obligations pursuant to
an agreement or language in the instrument evidencing such Subordinated
Debt.
"Subordinating Creditor" means the Persons set forth on the Schedule.
"Total Facility" has the meaning set forth on the Schedule.
18.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in
accordance with generally accepted accounting principles, consistently
applied. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
19. MISCELLANEOUS.
19.1 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination
of this Agreement; recourse to security shall not be required at any time.
Borrower waives presentment and protest of any instrument and notice
thereof, notice of default and, to the extent permitted by applicable law,
all other notices to which Borrower might otherwise be entitled.
19.2 No Waiver by FINOVA. Neither FINOVA's failure to exercise any right,
remedy or option under this Agreement, any supplement, the Loan Documents
or other agreement between FINOVA and Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver
by FINOVA shall affect its right to require strict performance of this
Agreement. FINOVA's rights and remedies shall be cumulative and not
exclusive. 19.3 Binding on Successor and Assigns. All terms, conditions,
promises, covenants, provisions and warranties shall inure to the benefit
of and bind FINOVA's and Borrower's representatives, successors and
assigns.
19.4 Severability. If any provision of this Agreement shall be prohibited
or invalid under applicable law, it shall be ineffective only to such
extent, without invalidating the remainder of this Agreement.
23
(page 23 continued)
19.5 Amendments; Assignments. This Agreement may not be modified, altered
or amended, except by an agreement in writing signed by Borrower and
FINOVA. Borrower may not sell, assign or transfer any interest in this
Agreement or any other Loan Document, or any portion thereof, including,
without limitation, any of Borrower's rights, title, interests, remedies,
powers and duties hereunder or thereunder. Borrower hereby consents to
FINOVA's participation, sale, assignment, transfer or other disposition, at
any time or times hereafter, of this Agreement and any of the other Loan
Documents, or of any portion hereof or thereof, including, without
limitation, FINOVA's rights, title, interests, remedies, powers and duties
hereunder or thereunder. In connection therewith, FINOVA may disclose all
documents and information which FINOVA now or hereafter may have relating
to Borrower's businesses. To the extent that FINOVA assigns its rights and
obligations hereunder to a third party, FINOVA shall thereafter be released
from such assigned obligations to Borrower and such assignment shall effect
a novation between Borrower and such third party; provided however, that at
any time other than in connection with the sale of FINOVA, the sale of a
portfolio of loans or the securitization of the Loan and other than during
an Event of Default, FINOVA shall obtain the prior written consent of
Borrower to such assignment of rights and obligations, which consent shall
not be unreasonably withheld..
19.6 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire understanding
of the parties with respect to the transactions contemplated hereby.
19.7 Governing Law; Waivers. THIS AGREEMENT SHALL BE INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF
THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE. BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MARICOPA, THE STATE OF
ARIZONA OR, AT THE SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH
FINOVA SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY TO THE EXTENT NECESSARY
TO PURSUE ITS REMEDIES WITH RESPECT TO BORROWER OR ANY COLLATERAL. BORROWER
WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND VENUE. BORROWER WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE IN THE MANNER SET FORTH IN SECTION 19.13 HEREOF
FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES ANY RIGHT IT MAY
OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT.
19.8 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and
acceptance of this Agreement by the parties. No termination of this
Agreement or of any guaranty of the Obligations shall affect or impair the
powers, obligations, duties, rights, representations, warranties or
liabilities of the parties hereto and all shall survive any such
termination.
19.9 Evidence of Obligations. Each Obligation may, in FINOVA's discretion,
be evidenced by notes or other instruments issued or made by Borrower to
FINOVA. If not so evidenced, such Obligation shall be evidenced solely by
entries upon FINOVA's books and records.
19.10 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, (i)
exchange, enforce, waive or release any of the Collateral, (ii) apply
Collateral and direct the order or manner of sale thereof as it may
determine, and (iii) settle, compromise, collect or otherwise liquidate any
Collateral in any manner without affecting its right to take any other
action with respect to any other Collateral.
19.11 Application of Collateral. FINOVA shall have the continuing and
exclusive right to apply or reverse and re-apply any and all payments to
any portion of the Obligations. To the extent that Borrower makes a payment
or FINOVA receives any payment or proceeds of the Collateral for Borrower's
benefit which is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or any other party under any bankruptcy law, common
law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by FINOVA.
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(page 24 continued)
19.12 Loan Requests. Each oral or written request for a loan by any Person
who purports to be any employee, officer or authorized agent of Borrower
shall be made to FINOVA on or prior to 11:00 a.m., Philadelphia time, on
the Business Day on which the proceeds thereof are requested to be paid to
Borrower and shall be conclusively presumed to be made by a Person
authorized by Borrower to do so and the crediting of a loan to Borrower's
operating account shall conclusively establish Borrower's obligation to
repay such loan. Unless and until Borrower otherwise directs FINOVA in
writing, all loans shall be wired to Borrower's operating account set forth
on the Schedule.
19.13 Notices. Any notices or consents required or permitted by this
Agreement shall be deemed given if delivered in person with receipt, sent
by telegram (with messenger service specified) or sent by nationally
recognized overnight courier service, or sent by certified or registered
mail postage prepaid, return receipt requested, or sent by facsimile
transmission as follows, unless such address is changed by written notice
hereunder:
If to FINOVA:
FINOVA Capital Corporation
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxx xx Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
FAX: 610/000-0000
FINOVA Capital Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Xxxx Xxxxxx
FAX: 213/000-0000
FINOVA Capital Corporation
0000 X. Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attn: Xxxxxx X'Xxxxx, Esq.
FAX: 602/000-0000
With copies to:
Blank Rome Xxxxxxx & XxXxxxxx
0000 Xxxx Xxxx Xxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxx, XX, Esquire
FAX: 215/000-0000
If to Borrower:
Intellicall, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000-0000
Attn: Xxxx Xxxxxxxxx
FAX: 972/000-0000
with copies to: Gardere & Xxxxx, LLP
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx, Esquire
FAX: 214/000-0000
19.14 Brokerage Fees. Borrower represents and warrants to FINOVA that, with
respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission and Borrower agrees to
pay any fee or commission due to such Person and to indemnify and hold
FINOVA harmless against any and all such claims.
19.15 Disclosure. No representation or warranty made by Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading.
19.16 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the
consummation of this transaction and the aggregate amount thereof.
19.17 Captions. The Section titles contained in this Agreement are without
substantive meaning and are not part of this Agreement.
19.18 Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its Obligations under this
Agreement, any remedy at law may prove to be inadequate relief to FINOVA.
Therefore, FINOVA, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of
proving actual damages.
25
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19.19 Counterparts. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
19.20 Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
amendments or exhibits hereto.
19.21 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
19.22 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against FINOVA, or any of FINOVA's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or
any other transaction contemplated hereby or thereby or relating hereto or
thereto, or any other matter, cause or thing whatsoever, whether or not
relating hereto or thereto, occurred, done, omitted or suffered to be done
by FINOVA, or by FINOVA's directors, officers, employees, agents,
accountants or attorneys, whether sounding in contract or in tort or
otherwise, shall be barred unless asserted by Borrower by the commencement
of an action or proceeding in a court of competent jurisdiction by the
filing of a complaint within one year after Borrower discovers or should
have discovered, the occurrence or omission upon which such claim or cause
of action, or any part thereof, is based and service of a summons and
complaint on an officer of FINOVA or any other person authorized to accept
service of process on behalf of FINOVA, within 60 days thereafter. Borrower
agrees that such one-year period of time is a reasonable and sufficient
time for Borrower to investigate and act upon any such claim or cause of
action. The one-year period provided herein shall not be waived, tolled, or
extended except by a specific written agreement of FINOVA. This provision
shall survive any termination of this Loan Agreement or any other
agreement.
19.23 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable
for any indirect, special, incidental or consequential damages in
connection with any breach of contract, tort or other wrong relating to
this Agreement or the Obligations or the establishment, administration or
collection thereof (including without
limitation damages for loss of profits, business interruption, or the
like), whether such damages are foreseeable or unforeseeable, even if
FINOVA has been advised of the possibility of such damages. Neither FINOVA,
nor any FINOVA Affiliate shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by the
Borrower through the ordinary negligence of FINOVA, or any FINOVA
Affiliate. "FINOVA Affiliate" shall mean FINOVA's directors, officers,
employees, agents, attorneys or other person or entity affiliated with or
representing FINOVA.
19.24 Notice of Breach by FINOVA. Borrower agrees to give FINOVA written
notice of (i) any action or inaction by FINOVA or any attorney of FINOVA in
connection with any Loan Documents that may be actionable against FINOVA or
any attorney of FINOVA or (ii) any defense to the payment of the
Obligations for any reason, including, but not limited to, commission of a
tort or violation of any contractual duty or duty implied by law. Borrower
agrees that unless such notice is fully given as promptly as possible (and
in any event within thirty (30) days) after Borrower has knowledge, or with
the exercise of reasonable diligence should have had knowledge, of any such
action, inaction or defense, Borrower shall not assert, and Borrower shall
be deemed to have waived, any claim or defense arising therefrom.
19.25 Withholding and Other Tax Liabilities: FINOVA shall have the right to
refuse to make any advances from time to time unless Borrower shall, at
FINOVA's request, have given to FINOVA evidence, reasonably satisfactory to
FINOVA, that Borrower has properly deposited or paid, as required by law,
all withholding taxes and all federal, state, city, county or other taxes
due up to and including the date of the loan. Until all of Borrower's
liabilities and obligations to FINOVA have been indefeasibly paid and
satisfied in full, FINOVA shall be entitled to continue to hold any and all
of the Collateral until Borrower has given to FINOVA evidence, reasonably
satisfactory to FINOVA, that Borrower has properly deposited or paid, as
required by law, all federal withholding taxes due up to and including the
date of such expiration or termination. Copies of validated deposit slips
showing payment shall likewise constitute satisfactory evidence for such
purpose. In the event that any lien, assessment or tax liability against
26
(page 26 continued)
Borrower shall arise in favor of any taxing authority, whether or not
notice thereof shall be filed or recorded as may be required by law, FINOVA
shall have the right (but shall not be obligated, nor shall FINOVA hereby
assume the duty) upon reasonable prior notice to Borrower to pay any such
lien, assessment or tax liability by virtue of which such charge shall have
arisen; provided, however, that FINOVA shall not pay any such tax,
assessment or lien if the amount, applicability or validity thereof is
being contested in good faith and by appropriate proceedings by Borrower
and further provided that Borrower's title to and its right to use, the
Collateral is not adversely affected and FINOVA's lien and priority in the
Collateral are not affected, altered or impaired thereby. In order to pay
any such lien, assessment or tax liability, FINOVA shall not be obliged to
wait until said lien, assessment or tax liability is filed before taking
such action as hereinabove set forth. Any sum or sums which FINOVA shall
have paid for the discharge of any such lien shall be added to the
Revolving Loans and shall be paid by Borrower to FINOVA with interest
thereon, upon demand, and FINOVA shall be subrogated to all rights of such
taxing authority against Borrower. FINOVA may establish reserves against
the Borrowing Base for any amounts paid by FINOVA pursuant to this
paragraph or for any amounts being contested in good faith under this
paragraph.
19.26 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; (ii) ANY
OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND
BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR BORROWER OR
ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH FINOVA OR BORROWER; IN EACH OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
Borrower:
INTELLICALL, INC.
By /s/ Xxxxxxx X. Xxxx date signed
President 11/13/96
By /s/ Xxxxxxx X. Xxxxxx date signed
Secretary 11/13/96
Tax I.D. No. 751993841
FINOVA CAPITAL CORPORATION
By /s/ Xxxx X. Xxxxxx date signed
11/13/96
Title: Vice President
27
FINOVA
Schedule to
Loan and Security Agreement
Borrower: INTELLICALL, INC.
Address: 0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000-0000
Date: November 13, 1996
This Schedule forms an integral part of the Loan and Security Agreement
between the above Borrower and FINOVA Capital Corporation ("FINOVA") dated the
above date, and all references herein and therein to "this Agreement" shall be
deemed to refer to said Agreement and to this Schedule.
TOTAL FACILITY (Section 1.1):
TWELVE MILLION DOLLARS ($12,000,000)
LOANS (Section 1.2):
Revolving Loans: a revolving line of credit consisting of loans against
Borrower's Eligible Receivables ("Receivable Loans") in an aggregate outstanding
principal amount not to exceed the lesser of:
(a) an amount equal to the amount of the Total Facility, or
(b) the sum of an amount equal to (i) seventy five percent (75%)
of Eligible Trade Receivables; plus (ii) the LEC Advance Percentage of
the net amount of Eligible LEC receivables; plus (iii) the Integretel
Advance percentage of the net amount of Eligible Integretel
Receivables; plus (iv) the OAN Advance percentage of the net amount of
Eligible OAN Receivables; plus (v) the Direct Billed Advance
Percentage of all Eligible Direct Billed Receivables; plus (vi) the
lesser of (A) sixty percent (60%) of the net book value of Eligible
Lease Contracts or (B) Five Hundred Thousand Dollars ($500,000); plus
(vii) the lesser of (A) fifty percent (50%) of Borrower's Eligible
Inventory or (B) the difference between (I) One Million Five Hundred
Thousand Dollars ($1,500,000) and (II) the product of One Hundred
Thousand Dollars ($100,000) multiplied by the number of calendar
months that have expired, rounded down to the nearest whole number,
since the Closing Date, provided that, in no event, shall such product
exceed One Million Five Hundred Thousand Dollars ($1,500,000) (the
"Borrowing Base").
S-1
For the purposes of this section, absent an Event of Default, the LEC
Advance Percentage shall be eighty five percent (85%). Provided, however, that
for every increase in the LEC Dilution Factor by one percentage point (1.0%) in
excess of fifteen percent (15%), the LEC Advance Percentage shall decrease by up
to two percentage points (2.0%).
For the purposes of this section, absent an Event of Default, the
Integretel Advance Percentage shall be eighty five percent (85%). Provided,
however, that for every increase in the Integretel Dilution Factor by one
percentage point (1.0%) in excess of fifteen percent (15%), the Integretel
Advance Percentage shall decrease by up to two percentage points (2.0%).
For the purposes of this section, absent an Event of Default, the OAN
Advance Percentage shall be eighty five percent (85%). Provided, however, that
for every increase in the OAN Dilution Factor by one percentage point (1.0%) in
excess of fifteen percent (15%), the OAN Advance Percentage shall decrease by up
to two percentage points (2.0%).
For the purposes of this section, absent an Event of Default, the Direct
Billed Advance Percentage shall be eighty five percent (85%). Provided, however,
that for every increase in the Direct Billed Dilution Factor by one percentage
point (1.0%) in excess of fifteen percent (15%), the Direct Billed Advance
Percentage shall decrease by up to two percentage points (2.0%).
In addition, FINOVA shall determine the LEC Dilution Factor, the Integretel
Dilution Factor, the OAN Dilution Factor and the Direct Billed Dilution Factor,
in its reasonable discretion, based on the results of its periodic field
examinations or on such other information as may be available to FINOVA from
time to time.
CONDITIONS PRECEDENT (Section 2.1):
The obligation of FINOVA to make the initial advance hereunder is subject
to the fulfillment, to the satisfaction of FINOVA and its counsel, of each of
the following conditions, in addition to the conditions set forth in Sections
2.1 and 2.2 of the Agreement: (a) Borrower shall have excess borrowing
availability under the Borrowing Base of not less than $750,000, after giving
effect to the initial advance hereunder and after having paid in full or making
provision for payment in full of all of Borrower's accounts payable outstanding
beyond their due date and all book overdrafts; (b) Borrower shall have delivered
to FINOVA that certain Validity and Support Agreement in form and substance
satisfactory to FINOVA signed by Xxxxxxx Xxxxxx; (c) FINOVA must have reviewed
all Billing Contracts and related arrangements and found such contracts and
arrangements satisfactory in form and substance, including but not limited to
confirming that (i) Integretel and OAN are billing and collection agents of
Borrower; and (ii) the cash collected by Integretel and OAN pursuant to such
contracts is deposited into dominion bank accounts, and the cash in such bank
accounts is the property of Borrower and, if applicable, other providers for
whom Integretel and OAN provide billing services; (d) there shall have been no
material adverse change in the business, operations, profits or prospects of
Borrower, or in the condition of the assets of Borrower as represented by the
financial information, dated September 30, 1996, delivered by Borrower to Lender
and the Closing Date; (e) Borrower shall have caused Nomura Holding America,
Inc. ("Nomura") to have returned to
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FINOVA all UCC Termination Statements previously delivered to Nomura in
escrow; (f) Borrower shall have provided FINOVA with evidence of an additional
$5,000,000 in Subordinated Debt from Banca Del Gottardo; and (g) Nomura shall
have provided its consent to Borrowers entering into the Agreement and shall
have been paid in full, released its liens and security interests and provided
FINOVA with or agreed to provide FINOVA with all appropriate UCC termination
statements and other documents deemed reasonably necessary by FINOVA to evidence
such termination. Borrower shall cause the conditions precedent set forth in
Section 2.1 of this Agreement and set forth above in this Schedule to be
satisfied on or before the date of the initial advance hereunder.
INTEREST AND FEES (Section 3.1):
Interest. Borrower shall pay FINOVA interest on the daily outstanding
balance of Borrower's Revolving Loans at the "Contract Rate." The Contract Rate
shall equal one and three-quarters percentage points (1.75%) in excess of the
Base Rate. The Base Rate shall equal the "prime rate" of Citibank, N.A. as
announced from time to time by Citibank, N.A. as its "prime rate". The interest
rate chargeable hereunder shall be increased or decreased, as the case may be,
without notice or demand of any kind, upon any change in the Base Rate. Each
change in the Base Rate shall be effective hereunder on the day of any such
change. Interest charges and all other fees and charges herein shall be computed
on the basis of a year of 360 days and actual days elapsed and shall be payable
to FINOVA in arrears on the first day of each month. Upon the occurrence and
continuance of an Event of Default, interest shall accrue at two percentage
points (2.0%) in excess of the rate set forth above.
Provided however, if Borrower's interim financial statements for any month
reflect EBITDA greater than or equal to Three Million Dollars ($3,000,000) for
the trailing twelve months on a cumulative basis, the Contract Rate shall be
reduced during such month to one and one-half points (1.50%) in excess of the
Base Rate. If Borrower's interim financial statements for any month reflect
EBITDA greater than or equal to Five Million Dollars ($5,000,000) for the
trailing twelve months on a cumulative basis, the Contract Rate shall be reduced
during such month to one and one-quarter percentage points (1.25%) in excess of
the Base Rate. Any reduction in the Contract Rate is further conditioned on the
following: (i) FINOVA's review of and satisfaction with such interim financial
statements, which review shall be completed within forty-five (45) days of
FINOVA's receipt of such interim financial statements; and (ii) the absence of
any Event of Default having occurred during the Initial Term, which has not been
waived. Borrower hereby expressly permits FINOVA to contact its accountants
directly to discuss any information contained in the interim financial
statements delivered by Borrower to FINOVA and Borrower shall cause its
accountants to cooperate with FINOVA and to provide FINOVA with answers to any
questions FINOVA may have regarding the interim financial statements. The
reduction in the Contract Rate shall be effective upon the earlier of: (i)
forty- five (45) days from the date of Borrower's delivery of the interim
audited financial statement; or (ii) the date of a letter from FINOVA to
Borrower expressly reducing the Contract Rate.
Minimum Interest Charge. With respect to each calendar month or portion
thereof during the term of this Agreement (excluding the calendar month in which
this Agreement is executed), Borrower shall also pay Finova, on the first day of
the next month, as a minimum charge, the
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amount by which accrued interest pursuant to the section above for such month or
portion thereof is less than $4,000 (the "Minimum Interest Charge").
Notwithstanding the occurrence of any Event of Default hereunder or termination
of this Agreement by FINOVA as a result thereof, the Minimum Interest Charge
shall be paid by Borrower for the unexpired portion of the Initial Term or any
Renewal Term of this Agreement.
Unused Line Fee. Borrower shall pay to FINOVA an unused line fee equal to
one- quarter of one percent (.25%) per annum of the unused portion of the Total
Facility. The unused line fee shall be deemed fully earned at the time when due
and is payable monthly commencing upon the first day of the month after the date
of this Agreement and continuing on the first day of every month thereafter.
Facility Fee. Borrower shall pay to FINOVA a facility fee in an amount
equal to One Hundred Twenty Thousand Dollars ($120,000) payable at the Closing
and an annual fee equal to one-half of one percent (0.50%) per annum of the
amount of the Total Facility payable on the first anniversary of the date of
this Agreement and on each subsequent anniversary thereof.
Examination Fees. Borrower agrees to pay to FINOVA a fee in the amount of
Five Hundred Dollars ($500) per person per day, (absent the occurrence of an
Event of Default limited to $30,000 in any calendar year) plus all costs and
expenses of such persons, in connection with each examination, audit or
visitation by FINOVA prior to or after the date hereof.
REPORTING REQUIREMENTS (Section 5.2):
1. Borrower shall provide FINOVA with monthly accounts receivable
agings aged by invoice date and reconciliations of Receivables within
ten (10) days after the end of each month.
2. Borrower shall provide FINOVA with monthly accounts payable
agings aged by invoice date, and outstanding or held check registers
within fifteen (15) days after the end of each month. If such monthly
accounts payable agings do not breakout accounts payable by LEC,
Borrower shall provide a supplementary report which shall reflect such
information together with the regular monthly accounts payable agings
report.
3. Borrower shall provide FINOVA with monthly inventory reports
for the Inventory valued on a first-in, first-out basis at the lower
of cost or market (in accordance with general accepted accounting
principles), and such inventory reports as are reasonably requested by
FINOVA, all within fifteen (15) days after the end of each month.
Borrower shall also provide FINOVA with copies of Borrower's annual
physical inventory counts within fifteen (15) days after such counts
are tabulated and reconciled to the general ledger.
4. Borrower shall provide FINOVA with internally prepared monthly
unaudited consolidated and consolidating financial statements within
thirty (30) days after the end of each month.
5. Borrower shall provide FINOVA with annual operating budgets
(including income statements, balance sheets and cash flow statements,
by month, together with a list of all
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material assumptions made by Borrower in preparing such annual
operating budgets) for the upcoming fiscal year of Borrower upon
approval of Borrower's Board of Directors, not more than thirty (30)
days after the end of each fiscal year of Borrower.
6. Borrower shall, upon FINOVA's request, provide FINOVA with
certified Federal excise tax receipts and state and local utility tax
receipts.
7. Borrower shall, upon FINOVA's request, provide FINOVA with
copies of all information and reports received from or submitted to
Integretel or OAN including, but not limited to backup copies of
Billing Tapes.
BORROWER INFORMATION:
Borrower's State of Incorporation (Section 12.1):
Fictitious Names/Prior Corporate Names/Mergers (Section 12.2):
Borrower and Collateral Locations (Section 12.16):
Permitted Encumbrances (Section 18.1):
FINANCIAL COVENANTS (Section 13.14):
Borrower shall comply with all of the following covenants. Compliance shall
be determined as of the end of each quarter, except as otherwise specifically
provided below:
Net Worth. Borrower shall have and maintain at all times a Net Worth greater
than the following amounts as of the end of each of the following
calendar quarters.
Amount Time Period
8,300,000 4th Quarter 1996
7,500,000 1st Quarter 1997
7,700,000 2nd Quarter 1997
8,300,000 3rd Quarter 1997
9,500,000 4th Quarter 1997 and all times
thereafter
Calculation of Net Worth shall be performed quarterly and
shall exclude provisions net of applicable income tax benefits
for slow moving and obsolete Inventory.
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Total Debt Service Coverage Ratio.
----------------------------------
Borrower shall have and maintain at all times a Total Debt
Service Coverage ratio greater than the ratio set forth below for
the periods corresponding thereto:
Ratio Time Period
0.50 to 1.00 3rd Quarter 1997
1.00 to 1.00 4th Quarter 1997 and at all times
thereafter
For the purposes of this section, the calculation of Total Debt
Service Coverage Ratio shall equal the ratio of (A) Operating
Cash Flow- Actual; to (B) Total Debt Service.
The calculation of Total Debt Service Coverage Ratio shall be
performed quarterly on a twelve (12) month rolling basis. All
calculations shall be based on the profit and loss statements of
Borrower, prepared in accordance with generally accepted
accounting principles.
Current Ratio
Borrower shall have and maintain at all times a Current Ratio
greater than 2.25 to 1.0. For the purposes of this section, the
calculation of the Current Ratio shall equal the ratio of (A)
Current Assets to (B) Current Liabilities.
NEGATIVE COVENANTS (Section 14):
Capital Expenditures:
Borrower shall not make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital
Expenditures by Borrower in any fiscal year would exceed
$800,000.
Indebtedness:
Borrower shall not, other than as permitted in Section 14.11 of
the Agreement, create, incur, assume or permit to exist any
additional Indebtedness (including Indebtedness in connection
with Capital Leases).
TERM (Section 16.1):
The initial term of this Agreement shall be three (3) years from the date
hereof (the "Initial Term") and may automatically be renewed for successive
periods of one (1) year each upon the express written agreement of FINOVA (each,
a "Renewal Term"), unless earlier terminated as provided in Section 16 or 17
above or elsewhere in this Agreement.
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TERMINATION FEE (Section 16.4):
The Termination Fee provided in Section 16.4 shall be an amount equal to
the following percentage of the Total Facility:
(i) two and one half percent (2.5%), if such termination occurs
prior to the first anniversary of this Agreement;
(ii) one and one half percent (1.5%), if such termination occurs
on or after the first anniversary of this Agreement but prior to the
second anniversary of this Agreement; and
(iii) one half percent (.05%), if such termination occurs on or
after the second anniversary of this Agreement but prior to the third
anniversary of this Agreement.
ADDITIONAL DEFINITIONS (Section 18.1):
"Direct Billed
Dilution Factor"
means the average, as calculated by FINOVA, of the dilution
factors attributable to the Direct Billed Receivables, calculated
as a percentage, (a) the numerator of which is all non-cash
reductions to Direct Billed Receivables made by Borrower; (b) the
denominator of which is equal to gross xxxxxxxx to the Direct
Billed Receivable account debtors.
"EBITDA"
means the following, without duplication, for any period, each
calculated for such period: (A) net income plus (B) any provision
for (or less any benefit from ) income and franchise taxes
included in the determination of net income; plus (C) interest
expense deducted in the determination of net income; plus (D)
amortization and depreciation deducted in the determination of
net income; plus (E) losses (or less gains) from asset
dispositions or other non-cash items (excluding sales, expenses
or losses related to Current Assets) included in the
determination of net income; less (F) after tax extraordinary
gains (or plus after tax extraordinary losses), each of the above
as calculated in accordance with generally accepted accounting
principles, consistently applied.
"Fiscal Year"
Borrower's fiscal years each ending December 31.
"GAAP"
means generally accepted accounting principles as set forth in
statements from Auditing Standards No. 69 entitled "The Meaning
of "Present Fairly in Conformance with Generally Accepted
Accounting Principles in the Independent Auditors Reports" issued
by the Auditing Standards Board of the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or any successor
authority) that are applicable to the circumstances as of the
date of determination.
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"Integretel
Dilution Factor"
means the average, as calculated by FINOVA, of the dilution
factors charged by Integretel to Borrower (or passed through by
Integretel to Borrower from the LECs), calculated as a
percentage, (a) the numerator of which is all non- cash
reductions to Integretel Receivables made by Integretel; (b) the
denominator of which is equal to gross xxxxxxxx under the Billing
Tapes transmitted to Integretel.
"Investment"
means, with respect to any Person, any loan, advance, extension
of credit, capital contribution to, investment in or purchase of
the stock or other securities of, or interests in, any other
Person; provided, that "Investment" shall not include current
customer and trade accounts which are payable in accordance with
customary trade terms.
"LEC Dilution
Factor"
means the average, as calculated by FINOVA, of the dilution
factors charged by LECs to Borrower, calculated as a percentage,
(a) the numerator of which is all non-cash reductions to LEC
Receivables made by LECs; (b) the denominator of which is equal
to confirmed xxxxxxxx under the Billing Tapes transmitted by
Borrower directly to LECs.
"Lien"
means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary
(including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to
give any security interest).
"OAN Dilution
Factor"
means the average, as calculated by FINOVA, of the dilution
factors charged by OAN to Borrower (or passed through by OAN to
Borrower from the LECs), calculated as a percentage, (a) the
numerator of which is all non-cash reductions to OAN Receivables
made by OAN; (b) the denominator of which is equal to gross
xxxxxxxx under the Billing Tapes transmitted to OAN.
"Operating Cash
Flow-Actual"
for any period, Borrower's EBITDA less (A) all Capital
Expenditures actually made by Borrower during such period not
financed; and (B) any income or franchise taxes actually paid by
Borrower.
"Permitted
Encumbrances"
means the following types of Liens:
(a) Liens or deposits for taxes, assessments or other
governmental charges not yet due and payable or, if due and
payable, which are being contested in good faith and for which
adequate reserves have been established in accordance with GAAP
but only if such Liens have not been filed or recorded;
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(b) Statutory Liens of landlords, carriers, warehouseman,
mechanics, materialmen and other similar liens imposed by law,
which are incurred in the ordinary course of business for sums
not more than thirty (30) days delinquent or which are being
contested in good faith; provided, that a reserve or other
appropriate provision, if any, as shall be required by GAAP,
shall have been made therefor;
(c) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety,
stay, customs and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(d) Deposits, in an aggregate amount not to exceed $100,000
made in the ordinary course of business to secure liability to
insurance carriers;
(e) Liens for purchase money obligations permitted hereunder
not to exceed $500,000 in the aggregate;
(f) Leases or subleases granted to others and licenses of
intellectual property granted to others, in any such case not
interfering in any material respect with the business or property
of any Loan Party;
(g) Easements, rights-of-way, restrictions, zoning
restrictions, encroachments, protrusions and other similar
charges or encumbrances or other Liens which appear on the title
policies, commitments or surveys delivered to and approved by
FINOVA, with respect to easements, rights of way, restrictions,
encroachments, protrusions, other similar charges or
encumbrances, which are hereafter replaced on the property, in
each case (i) not interfering in any material respect with the
ordinary conduct of the business of any Loan Party or the value
of any collateral, (ii) not affecting the perfection or the
priority of the Liens granted in favor of FINOVA, and (iii)
otherwise not interfering in any material respect with the Liens
granted in favor of FINOVA.
(h) Liens securing the Nomura Debt, prior to the initial
advance of Loans hereunder provided such Liens are terminated on
or before November 30, 1996;
(i) Any interest or title of a lessor or sublessor under any
lease permitted by this Agreement; and
(j) Liens arising from filing Uniform Commercial Code
financing statements regarding leases permitted by this
Agreement.
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"Permitted
Investments"
means (a) readily marketable direct obligations of the United
States of America (or investments in mutual funds or similar fund
which invest solely in such obligations), (b) fully insured time
deposits and certificates of deposit with maturities of one year
or less of any commercial bank operating in the United States
having capital and surplus in excess of $50,000,000, (c)
commercial paper of a domestic issuer if at the time of purchase
such paper is rated in one of the two highest ratings categories
of Standard and Poor's Corporation or Xxxxx'x Investors Service
(d) any Investment in lease receivables, and (e) other
Investments; provided, that, the aggregate amount of all other
Investments made pursuant to this clause (e) outstanding at any
time shall not exceed $500,000.
"Prepared
Financials"
means the balance sheets of Borrower as of September 30, 1996,
and as of each subsequent date on which audited balance sheets
are delivered to FINOVA from time to time hereunder, and the
related statements of operations, changes in stockholder's equity
and changes in cash flow for the periods ended on such dates.
"Senior Debt
Service"
for any period, the sum of payments made or required to be made
by Borrower during such period for the following (i) interest on
the Revolving Loans; (ii) fees payable to FINOVA pursuant to this
Loan Agreement; and (iii) payments associated with a Capital
Lease.
"Subordinating
Creditors"
means Banca Del Gottardo and Xxxxxxx Investments.
"Total Debt
Service"
for any period, the sum of payments made (or, as to clause (i) of
this sentence, required to be made) by Borrower during such
period for the following: (i) Senior Debt Service and (ii)
principal and interest payments on the Subordinated Debt; and
(iii) dividends on preferred capital stock of Borrower.
DISBURSEMENT (Section 19.12):
Unless and until Borrower otherwise directs FINOVA in writing, all loans
shall be wired to Borrower's following operating account: Bank One, Texas, N.A.,
0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000, ABA #111 000 614, Account #1884830264, To
Credit INTELLICALL, INC.
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Borrower:
INTELLICALL, INC.
By: /s/ Xxxxxxx X. Xxxx date signed
President 11/13/96
By: /s/ Xxxxxxx X. Xxxxxx date signed
Secretary 11/13/96
Borrower's Tax I.D. No.: 751993841
FINOVA CAPITAL CORPORATION
By: /s/ Xxxx X. Xxxxxx date signed
11/13/96
Title: Vice President
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