SECURITY AGREEMENT LV ADMINISTRATIVE SERVICES, INC., as Administrative and Collateral Agent THE LENDERS From Time to Time Party Hereto RAPID LINK, INCORPORATED TELENATIONAL COMMUNICATIONS, INC. and ONE RING NETWORKS, INC. Dated: March 31, 2008
Exhibit
10.1
LV
ADMINISTRATIVE SERVICES, INC.,
as
Administrative and Collateral Agent
THE
LENDERS
From Time
to Time Party Hereto
RAPID
LINK, INCORPORATED
TELENATIONAL
COMMUNICATIONS, INC.
and
ONE RING
NETWORKS, INC.
Dated:
March 31, 2008
TABLE OF CONTENTS
|
Page
|
||
|
1.
|
1
|
|
|
2.
|
2
|
|
|
3.
|
5
|
|
|
4.
|
5
|
|
|
5.
|
6
|
|
|
6.
|
8
|
|
|
7.
|
9
|
|
|
8.
|
13
|
|
|
9.
|
▇▇
|
|
|
▇▇.
|
14
|
|
|
11.
|
14
|
|
|
12.
|
16
|
|
|
13.
|
28
|
|
|
14.
|
36
|
|
|
15.
|
37
|
|
|
16.
|
39
|
|
|
17.
|
40
|
|
|
18.
|
40
|
|
|
19.
|
▇▇
|
|
|
▇▇.
|
▇▇
|
|
|
▇▇.
|
▇▇
|
|
|
▇▇.
|
45
|
|
|
23.
|
45
|
|
|
24.
|
46
|
|
|
25.
|
47
|
|
|
26.
|
47
|
|
|
27.
|
47
|
|
|
28.
|
▇▇
|
|
|
▇▇.
|
48
|
|
|
30.
|
49
|
|
|
31.
|
50
|
|
|
32.
|
51
|
|
|
33.
|
51
|
|
|
34.
|
51
|
|
|
35.
|
51
|
|
|
36.
|
51
|
|
|
37.
|
51
|
|
|
38.
|
52
|
|
|
39.
|
52
|
|
|
40.
|
52
|
|
|
41.
|
52
|
|
|
42.
|
53
|
|
EXHIBITS
|
|
|
Exhibit
A
|
Eligible
Subsidiaries
|
|
Exhibit
B
|
Form
of Borrowing Base Certificate
|
|
Exhibit
C
|
Form
of Compliance Certificate
|
|
Exhibit
D
|
Form
of Secured Party ▇▇▇▇ of Sale
|
|
SCHEDULES
|
|
|
Schedule
7(c)
|
UCC-1
Financing Statements and other recorded liens
|
|
Schedule
12(aa)
|
Company
Name, Locations of Offices, Records and Collateral
|
|
Schedule
7(p)
|
Bank
Accounts
|
|
Schedule
7(q)
|
Jurisdictional
Information
|
|
Schedule
12(b)
|
Subsidiaries
|
|
Schedule
12(c)
|
Capitalization;
Voting Rights
|
|
Schedule
12(f)
|
Agreements;
Actions
|
|
Schedule
12(g)
|
Obligations
to Related Parties
|
|
Schedule
12(i)
|
Title
to Properties and Assets; Liens, Etc.
|
|
Schedule
12(j)
|
Intellectual
Property
|
|
Schedule
12(j)(iv)
|
Intellectual
Property Claims
|
|
Schedule
12(l)
|
Litigation
|
|
Schedule
12(m)
|
Tax
Returns and Payments
|
|
Schedule
12(n)
|
Employees
|
|
Schedule
12(o)
|
Registration
Rights and Voting Rights
|
|
Schedule
12(u)
|
SEC
Reports and Financial Statements
|
|
Schedule
12(dd)
|
Telecommunications
Licenses and Telecommunications Contracts
|
|
Schedule
13(l)(i)
|
Required
Approvals
|
|
Schedule
1(1)(A)
|
Commercial
Tort Claims
|
|
Schedule
2
|
Permitted
Liens
|
This
SECURITY AGREEMENT is made as of March 31, 2008 (as amended, restated,
supplemented and/or modified from time to time, this “Agreement”) by and
among the lenders from time to time party hereto (the “Lenders”), LV
ADMINISTRATIVE SERVICES, INC., a Delaware corporation, as administrative and
collateral agent for the Lenders (in such capacity, the “Agent” and together
with the Lenders, the “Creditor Parties”),
Rapid Link, Incorporated, a Delaware corporation (the “Parent”), and each
party listed on Exhibit A attached
hereto (each an “Eligible Subsidiary”
and collectively, the “Eligible
Subsidiaries”; the Parent and each Eligible Subsidiary, each a “Company” and
collectively, the “Companies”).
BACKGROUND
The
Companies have requested that the Lenders make advances available to the
Companies and purchase term notes from the Companies; and
The
Lenders have agreed to make such advances and purchase such notes on the terms
and conditions set forth in this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants and undertakings and the
terms and conditions contained herein, the parties hereto agree as
follows:
1. General Definitions and Terms; Rules of Construction.
(a) General
Definitions. Capitalized terms used in this Agreement shall
have the meanings assigned to them in Annex A.
(b) Accounting
Terms. Any accounting terms used in this Agreement which are
not specifically defined shall have the meanings customarily given them in
accordance with GAAP and all financial computations shall be computed, unless
specifically provided herein, in accordance with GAAP consistently
applied.
(c) Other
Terms. All other terms used in this Agreement and defined in
the UCC, shall have the meaning given therein unless otherwise defined
herein.
(d) Rules of
Construction. All Schedules, Addenda, Annexes and Exhibits
hereto or expressly identified to this Agreement are incorporated herein by
reference and taken together with this Agreement constitute but a single
agreement. The words “herein”, “hereof” and “hereunder” or other
words of similar import refer to this Agreement as a whole, including the
Exhibits, Addenda, Annexes and Schedules thereto, as the same may be from time
to time amended, modified, restated or supplemented, and not to any particular
section, subsection or clause contained in this Agreement. Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter, as the case may be. The term “or” is not
exclusive. The term “including” (or any form thereof) shall not be
limiting or exclusive. The term “$,” “U.S.$” and “Dollars” shall mean
lawful currency of the United States of America. All references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations. All references in this Agreement
or in the Schedules, Addenda, Annexes and Exhibits to this Agreement to
sections, schedules, disclosure schedules, exhibits, and attachments shall refer
to the corresponding sections, schedules, disclosure schedules, exhibits, and
attachments of or to this Agreement. All references to any
instruments or agreements, including references to any of this Agreement or the
Ancillary Agreements shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof.
2.
Loan
Facility.
(a) Revolving
Loans.
(i)
Subject to satisfaction of the Revolving Commitment Conditions and the
terms and conditions set forth herein and in the Ancillary Agreements, each
Lender, severally and not jointly, may make revolving loans (the “Revolving Loans”) to
the Companies from time to time during the Term which, in the aggregate at any
time outstanding, will not exceed such Lender’s Revolving Commitment Percentage
of the lesser of (A) (I) the Capital Availability Amount minus (II) the Reserves
and (B) an amount equal to (I) the Accounts Availability minus (II) the
Reserves. The amount derived at any time from Section 2(a)(i)(B)(I)
minus 2(a)(i)(B)(II) shall be referred to as the “Formula
Amount.” The Companies shall, jointly and severally, execute
and deliver to each Lender on the Closing Date a Secured Revolving Note
evidencing such Lender’s Revolving Commitment Percentage of the Capital
Availability Amount. The Companies hereby each acknowledge and agree
that each Lender’s obligation to purchase a Secured Revolving Note from the
Companies on the Closing Date shall be contingent upon the satisfaction (or
waiver by the Agent) of the items and matters set forth in the closing checklist
provided by the Agent to the Companies on or prior to the Closing
Date. The Companies hereby each further acknowledge and agree that,
immediately prior to each borrowing hereunder and immediately after giving
effect thereto, the Companies shall be deemed to have certified to the Lenders
that at the time of each such proposed borrowing and also after giving effect
thereto (x) there shall exist no Event of Default, (y) all representations,
warranties and covenants made by the Companies in connection with this Agreement
and the Ancillary Agreements are true, correct and complete (other than any
representation, warranty or covenant made as of a specific date, in which case
such representation, warranty or covenant shall have been true, correct and
complete as of such date) and (z) all of each Company’s and its respective
Subsidiaries’ covenant requirements under this Agreement and the Ancillary
Agreements have been met. The Companies hereby agree to provide a
certificate confirming the foregoing concurrently with each request for a
borrowing hereunder.
(ii) Notwithstanding
the limitations set forth above, if requested by any Company, the Agent may
determine in its sole discretion to permit Revolving Loans in excess of the
Formula Amount (the aggregate of Revolving Loans in excess of the Formula Amount
at any time, an “Overadvance”) to be
made and/or to remain outstanding; provided that any
Overadvance made on or after the Specified Assignment Date shall constitute a
Permitted Overadvance. For purposes hereof, “Permitted
Overadvance” means an Overadvance that, as determined by the Agent in its
discretion, acting reasonably, (A) is made solely to maintain, protect or
preserve the Collateral and/or the Lenders’ rights under this Agreement and the
Ancillary Agreements and is necessary in order to avoid a material adverse
effect on the Collateral and/or the Lenders’ rights under this Agreement and the
Ancillary Agreements; (B) does not exceed fifty percent (50%) of the Formula
Amount at any time; and (C) remains outstanding for not more than forty-five
(45) consecutive Business Days, unless in case of this clause (C), the Agent
otherwise agrees. In connection with each such request by one or more
Companies (each, an “Overadvance
Request”), the Companies shall be deemed to have certified, as of the
time of such proposed borrowing and immediately after giving effect thereto, to
the satisfaction of all Overadvance Conditions. For purposes hereof,
“Overadvance
Conditions” means (x) no Event of Default shall exist and be continuing
as of such date; (y) all representations, warranties and covenants made by the
Companies in connection with the Security Agreement and the Ancillary Agreements
shall be true, correct and complete as of such date; and (z) the Companies and
their respective Subsidiaries shall have taken all action necessary to grant the
Agent “control” over all of the Companies’ and their respective Subsidiaries’
Deposit Accounts (the “Control Accounts”),
with any agreements establishing “control” to be in form and substance
satisfactory to the Agent. The Companies hereby agree to provide a
certificate confirming the satisfaction of the Overadvance Conditions
concurrently with the Overadvance Request for same.
(iii) The
Companies acknowledge that the exercise of the Agent’s discretionary rights
hereunder may result during the Term in one or more increases or decreases in
the advance percentages used in determining Accounts Availability and each of
the Companies hereby consent to any such increases or decreases which may limit
or restrict advances requested by the Companies.
(iv) If
any interest, fees, costs or charges payable to the Creditor Parties hereunder
are not paid when due, each of the Companies shall thereby be deemed to have
requested, and each of the Lenders will be deemed to have made and the Agent
will charge to the Companies’ account with a Revolving Loan immediately due and
payable as of such date in an amount equal to such unpaid interest, fees, costs
or charges; provided, however, that the
Agent may elect to extend the maturity of all or a portion of any such Revolving
Loan at any time prior to the Specified Assignment Date to a date that is on or
prior to the maturity of the Loans made other than pursuant to this clause
(iv).
(v) If
any Company at any time fails to perform or observe any of the covenants
contained in this Agreement or any Ancillary Agreement, the Agent may, but need
not, perform or observe such covenant on behalf and in the name, place and stead
of such Company (or, at the Agent’s option, in the Agent’s name) and may, but
need not, take any and all other actions which the Agent may deem necessary to
cure or correct such failure (including the payment of taxes, the satisfaction
of Liens, the performance of obligations owed to Account Debtors, lessors or
other obligors, the procurement and maintenance of insurance, the execution of
assignments, security agreements and financing statements, and the endorsement
of instruments). The amount of all monies expended and all costs and
expenses (including reasonable attorneys’ fees and legal expenses) incurred by
the Agent in connection with or as a result of the performance or observance of
such agreements or the taking of such action by the Agent shall be charged to
the Companies’ account as a Revolving Loan and added to the
Obligations. To facilitate the Agent’s performance or observance of
such covenants by each Company, each Company hereby irrevocably appoints the
Agent, or the Agent’s delegate, acting alone, as such Company’s attorney in fact
(which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of such Company any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by such Company.
(vi) The
Agent will account to Company Agent monthly with a statement of all Revolving
Loans and other advances, charges and payments made pursuant to this Agreement,
and such account rendered by the Agent shall be deemed final, binding and
conclusive absent manifest error unless the Agent is notified by Company Agent
in writing to the contrary within thirty (30) days of the date each account was
rendered specifying the item or items to which objection is made.
(vii) During
the Term, the Companies may borrow, repay, re-borrow and prepay Revolving Loans
in accordance with the terms and conditions hereof.
(viii) If
any Eligible Account is not paid by the Account Debtor within ninety (90) days
after the date that such Eligible Account was invoiced or if any Account Debtor
asserts a deduction, dispute, contingency, set-off, or counterclaim with respect
to any Eligible Account, (a “Delinquent Account”),
the Companies shall jointly and severally (i) reimburse the Lenders for the
amount of the Revolving Loans made with respect to such Delinquent Account plus
an adjustment fee in an amount equal to one-quarter of one percent (0.25%) of
the gross face amount of such Eligible Account or (ii) immediately replace such
Delinquent Account with an otherwise Eligible Account.
(b) Term Loan
A. Subject to the terms and conditions set forth herein and in
the Ancillary Agreements, each Lender shall make a term loan to the Companies in
such Lender’s Term Loan A Commitment Percentage of $1,800,000 (the “Term Loan
A”). Term Loan A shall be advanced on the Closing Date and
shall be, with respect to principal, payable in consecutive monthly installments
of principal commencing on October 1, 2009 and on the first day of each month
thereafter through and including the last day of the term, subject to
acceleration upon the occurrence of an Event of Default or termination of this
Agreement. Term Loan A shall be evidenced by the Secured Term A
Notes. The Companies hereby acknowledge and agree that each Lender’s
obligation to purchase a Secured Term A Note on the Closing Date shall be
contingent upon the satisfaction (or waiver by the Agent) of the items and
matters set forth in the closing checklist provided by the Agent to the
Companies on or prior to the Closing Date.
(c) Term Loan
B. Subject to satisfaction of the Term Loan B Conditions and
the terms and conditions set forth herein and in the Ancillary Agreements, each
Lender shall make a term loan to the Companies in such Lender’s Term Loan B
Commitment Percentage of $1,500,000 (the “Term Loan
B”). Term Loan B shall be advanced on the date on which the
Term Loan B Conditions shall have been satisfied and shall be, with respect to
principal, payable in consecutive monthly installments of principal commencing
on October 1, 2009 and on the first day of each month thereafter through and
including the last day of the term, subject to acceleration upon the occurrence
of an Event of Default or termination of this Agreement. Term Loan B
shall be evidenced by the Secured Term B Notes. The Companies hereby
acknowledge and agree that each Lender’s obligation to purchase a Secured Term B
Note shall be contingent upon the satisfaction (or waiver by the Agent) of the
Term Loan B Conditions and of the items and matters set forth in the closing
checklist provided by the Agent to the Companies on or prior to the Closing
Date.
(d) Deferred Purchase Price
Loan. Simultaneously with the consummation of the Secured
Party Sale Transaction, Companies shall issue to the Secured Party Sale Lenders,
in accordance with their respective Deferred Purchase Loan Commitment
Percentages, a Deferred Purchase Price Note evidencing payment of the purchase
price for the assets conveyed to the Parent or an Eligible Subsidiary in
connection with the Secured Party Sale Transaction. The Deferred
Purchase Price Notes shall be, with respect to principal, payable at maturity,
subject to acceleration upon the occurrence of an Event of Default or
termination of this Agreement.
3.
Repayment of
the Loans. The Companies (a) may prepay the Obligations from
time to time in accordance with the terms and provisions of the Notes (and
Section 18 hereof if such prepayment is due to a termination of this Agreement);
(b) shall repay on the Maturity Date (as defined in the Secured Term Notes) (i)
the then aggregate outstanding principal balance of the Term Loans together with
accrued and unpaid interest, fees and charges; and (ii) all other amounts owed
the Lenders under the Secured Term Notes; (c) shall repay on the expiration of
the Term (i) the then aggregate outstanding principal balance of the Revolving
Loans together with accrued and unpaid interest, fees and charges; and (ii) all
other amounts owed the Creditor Parties under this Agreement and the Ancillary
Agreements; and (d) subject to Section 2(a)(ii), shall repay on any day on which
the then aggregate outstanding principal balance of the Revolving Loans are in
excess of the Formula Amount at such time, the Revolving Loans in an amount
equal to such excess. Any payments of principal, interest, fees or
any other amounts payable hereunder or under any Ancillary Agreement shall be
made prior to 12:00 noon (New York time) on the due date thereof in immediately
available funds.
4.
Procedure for
Revolving Loans. Company Agent may by written notice request a
borrowing of Revolving Loans prior to 12:00 noon (New York time) on the Business
Day of its request to incur, on the next Business Day, a Revolving
Loan. Together with each request for a Revolving Loan (or at such
other intervals as the Agent may request), Company Agent shall deliver to the
Agent a Borrowing Base Certificate in the form of Exhibit B attached
hereto, which shall be certified as true and correct by the Chief Executive
Officer or Chief Financial Officer of Company Agent together with all supporting
documentation relating thereto. All Revolving Loans shall be
disbursed from whichever office or other place the Agent may designate from time
to time and shall be charged to the Companies’ account on the Agent’s
books. The proceeds of each Revolving Loan made by the Lenders shall
be made available to Company Agent on the Business Day following the Business
Day so requested in accordance with the terms of this Section 4 by way of credit
to the applicable Company’s operating account maintained with such bank as
Company Agent designated to the Agent. Any and all Obligations due
and owing hereunder may be charged to the Companies’ account and shall
constitute Revolving Loans.
5.
Interest and
Payments.
(a) Interest.
(i)
Except as modified by Section 5(a)(iii) below, the
Companies shall jointly and severally pay interest at the Contract Rate on the
unpaid principal balance of each Loan until such time as such Loan is collected
in full in good funds in dollars of the United States of America.
(ii) Interest
and payments shall be computed on the basis of actual days elapsed in a year of
360 days. At the Agent’s option, the Lenders may charge the
Companies’ account for said interest.
(iii) Effective
upon the occurrence of any Event of Default and for so long as any Event of
Default shall be continuing, the Contract Rate shall automatically be increased
as set forth in the Notes (such increased rate, the “Default Rate”), and
all outstanding Obligations, including unpaid interest, shall continue to accrue
interest from the date of such Event of Default at the Default Rate applicable
to such Obligations.
(iv) In
no event shall the aggregate interest payable hereunder or under any Note
exceeds the maximum rate permitted under any applicable law or regulation, as in
effect from time to time (the “Maximum Legal Rate”),
and if any provision of this Agreement or any Ancillary Agreement is in
contravention of any such law or regulation, interest payable under this
Agreement and each Ancillary Agreement shall be computed on the basis of the
Maximum Legal Rate (so that such interest will not exceed the Maximum Legal
Rate).
(v) The
Companies shall jointly and severally pay principal, interest and all other
amounts payable hereunder, or under any Ancillary Agreement, without any
deduction whatsoever, including any deduction for any set-off or
counterclaim.
(vi) All
payments made by any Company under this Agreement shall be made free and clear
of, and without deduction or withholding for or on account of, any present or
future Taxes now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, other than Excluded Taxes. If any
Non-Excluded Taxes or Other Taxes are required to be withheld from any amounts
payable to any Creditor Party hereunder, the amounts so payable to such Creditor
Party shall be increased to the extent necessary to yield to such Creditor Party
(after payment of all Non-Excluded Taxes and Other Taxes, including those
imposed on payments made pursuant to this paragraph (vi) of this Section 5(a))
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement, provided, however, that no Company shall be
required to increase any such amounts payable to any Lender with respect to any
Non-Excluded Taxes that are directly attributable to such Lender’s failure to
comply with the requirements of paragraph (ix) of this Section
5(a).
(vii) In
addition, the Companies shall pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.
(viii) Whenever
any Non-Excluded Taxes or Other Taxes are payable by any Company, as promptly as
possible thereafter such Company shall send to the Agent for its own account or
for the account of the relevant Lender, as the case may be, a certified copy of
an original official receipt received by such Company showing payment thereof
(or such other evidence reasonably satisfactory to the Agent). If
such Company fails to pay any Non-Excluded Taxes or Other Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Companies shall indemnify
the Creditor Parties for any incremental taxes, interest or penalties that may
become payable by any Creditor Party as a result of any such
failure.
(ix) Each
Lender (or its assignee) that is not a “United States person,” as defined in
Section 7701(a)(30) of the Code (a “Non-U.S. Lender”)
shall deliver to the Company Agent and the Agent two completed originals of an
appropriate U.S. Internal Revenue Service Form W-8, as applicable, or any
subsequent versions thereof or successors thereto, properly completed and duly
executed by such Non-U.S. Lender. Such forms shall be delivered by
each Non-U.S. Lender on or before the date it becomes a party to this
Agreement. In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered by
such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the
Company Agent at any time it determines that it is no longer in a position to
provide any previously delivered certificate to the Company Agent (or any other
form of certification adopted by the U.S. taxing authorities for such
purpose). Notwithstanding any other provision of this paragraph, a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
paragraph that such Non-U.S. Lender is not legally able to deliver.
(x) The
agreements in this Section shall survive the termination of this Agreement and
the payment of the Loans and all other amounts payable hereunder or under any
other Ancillary Agreement.
(b) Payment; Certain Closing
Conditions.
(i)
Payment. Subject
to the terms of Section 5(b)(ii) below, the Companies shall, jointly and
severally, pay (A) to Valens Capital Management, LLC, the investment manager of
the Specified Lenders (“VCM”), a
non-refundable payment in an amount equal to one and one-half percent (1.50%) of
the aggregate principal amount of the Secured Revolving Notes, Secured Term A
Notes and Secured Term B Notes, plus reasonable expenses
(including reasonable legal fees and expenses) incurred in connection with the
entering into of this Agreement and the Ancillary Agreements, plus expenses
incurred in connection with each of VCM and/or Lenders’ due diligence review of
the Company and its Subsidiaries and all other related matters; (B) to the
Specified Lenders, a non-refundable payment in an amount equal to one percent
(1.00%) of the aggregate principal amount of the Secured Revolving Notes,
Secured Term A Notes and Secured Term B Notes; and (C) to the Specified Lenders,
an advance prepayment discount deposit equal to one percent (1.00%) of the
aggregate principal amount of the Secured Revolving Notes, Secured Term A Notes
and Secured Term B Notes. The payments set forth in clauses (i)(A),
(i)(B) and (i)(C) relating to Secured Term A Notes plus reasonable expenses
(including reasonable legal fees and expenses) incurred in connection with the
entering into of this Agreement and the Ancillary Agreements, plus expenses
incurred in connection with each of VCM and/or Lenders’ due diligence review of
the Company and its Subsidiaries and all other related matters, shall be deemed
fully earned on the Closing Date and shall not be subject to rebate or proration
for any reason. The payments set forth in clauses (i)(A), (i)(B) and
(i)(C) relating to Secured Term A Notes plus reasonable expenses (including
reasonable legal fees and expenses) incurred in connection with the entering
into of this Agreement and the Ancillary Agreements, plus expenses incurred in
connection with each of VCM and/or Lenders’ due diligence review of the Company
and its Subsidiaries and all other related matters (net of any deposits
previously paid by the Companies), shall be paid at closing out of funds held
pursuant to the funds escrow agreement and a disbursement letter executed in
connection herewith. The payments set forth in clauses (i)(A), (i)(B)
and (i)(C) relating to the Secured Revolving Notes and Secured Term B Notes,
shall be deemed fully earned at the time the Revolving Commitment Conditions and
Term Loan B Conditions, respectively, are satisfied. The payments set
forth in clauses (i)(A), (i)(B) and (i)(C) relating to the Secured Revolving
Notes and Secured Term B Notes shall paid at the time the Revolving Commitment
Conditions and Term Loan B Conditions are respectively satisfied, out of funds
held pursuant to a funds escrow agreement and a disbursement letter executed in
connection therewith.
(ii) Overadvance
Payment. Without affecting the Lenders’ rights hereunder, each
Overadvance shall bear additional interest at a rate equal to one percent
(1.00%) per month of the amount of such Overadvance for all times such amounts
shall be in excess of the Formula Amount. All amounts that are
incurred pursuant to this Section 5(b)(ii) shall be due and payable by the
Companies monthly, in arrears, on the first business day of each calendar month
and upon expiration of the Term.
(iii) Financial Information
Default. Without affecting the Lenders’ other rights and
remedies, in the event any Company fails to deliver the financial information
required by Section 11 on or before the date required by this Agreement and
after the lapse of the cure period provided in Section 20(c), the Companies
shall jointly and severally pay each Lender its pro rata share of an aggregate
fee in the amount of $100.00 per week (or portion thereof) for each such failure
until such failure is cured to the Agent’s satisfaction or waived in writing by
the Agent. All amounts that are incurred pursuant to this Section
5(b)(iii) shall be due and payable by the Companies monthly, in arrears, on the
first business day of each calendar month and upon expiration of the
Term.
6. Security
Interest.
(a) To
secure the prompt payment to the Creditor Parties of the Obligations, each
Company hereby assigns, pledges and grants to the Agent, for the ratable benefit
of the Creditor Parties, a continuing security interest in and Lien upon all of
the Collateral. All of each Company’s Books and Records relating to
the Collateral shall, until delivered to or removed by the Agent, be kept by
such Company in trust for the Creditor Parties until the termination of this
Agreement and the payment in full of all Obligations. Each
confirmatory assignment schedule or other form of assignment hereafter executed
by each Company shall be deemed to include the foregoing grant, whether or not
the same appears therein.
(b) Each
Company hereby (i) authorizes the Agent to file any financing statements,
continuation statements or other amendments thereto that (A) indicate the
Collateral (1) as all assets and personal property of such Company or words of
similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the UCC of such jurisdiction,
or (2) as being of an equal or lesser scope or with greater detail, and (B)
contain any other information required by Part 5 of Article 9 of the UCC for the
sufficiency or filing office acceptance of any financing statement, continuation
statement or other amendment and (ii) ratifies its authorization for the Agent
to have filed any initial financial statements, or amendments thereto if filed
prior to the date hereof. Each Company acknowledges that it is not
authorized to file, and will not give any authorization to anyone other than the
Agent (including pursuant to Section 9-509(b) of the UCC) to file, any financing
statement or amendment or termination statement with respect to any financing
statement without the prior written consent of the Agent and agrees that it will
not do so without the prior written consent of the Agent, subject to such
Company’s rights under Section 9-509(d)(2) of the UCC.
(c) Each
Company hereby grants to the Agent, for the ratable benefit of the Creditor
Parties, an irrevocable, non-exclusive, worldwide license without payment of
royalty or other compensation to such Company to upon the occurrence and during
the continuance of an Event of Default use or otherwise exploit in any manner as
to which authorization of the holder of such Intellectual Property would be
required, and to license or sublicense such rights in to and under any
Intellectual Property now or hereafter owned by or licensed to, such Company,
and wherever the same may be located, and including in such license access to
all media in which any of such Intellectual Property may be recorded or stored
and to all software and hardware used for the compilation or printout thereof,
and represents, promises and agrees that any such license or sublicense is not
and will not be in conflict with the contractual or commercial rights of any
third Person and subject, in the case of trademarks and service marks, to
sufficient rights to quality control and inspection in favor of such Company to
avoid the risk of invalidation of said trademarks and service
marks. The foregoing license will terminate on the termination of
this Agreement and the payment in full of all Obligations; provided, however, that any
license, sublicense, or other rights granted by the Agent pursuant to such
license during its term shall remain in effect in accordance with its
terms.
(d) Any
proceeds received by the Agent from the foreclosure, sale, lease or other
disposition of any of the Collateral shall be paid over to the Agent for
application in accordance with Section 21.
7. Representations, Warranties and Covenants Concerning the
Collateral. Each Company represents, warrants (each of which
such representations and warranties shall be deemed repeated upon the making of
each request for a Loan and made as of the time of each and every Loan
hereunder) and covenants as follows:
(a) all
of the Collateral (i) is owned by it free and clear of all
Liens (including any claim of infringement) except those in the
Agent’s favor and Permitted Liens and (ii) is not subject to any agreement
prohibiting the granting of a Lien or requiring notice of or consent to the
granting of a Lien.
(b) it
shall not encumber, mortgage, pledge, assign or grant any security interest in
or Lien upon any Collateral or any other assets to anyone other than the Agent
and except for Permitted Liens.
(c) the
Liens granted pursuant to this Agreement, upon the filing of UCC-1 financing
statements in respect of each Company (or the District of Columbia Recorder of
Deeds Office for each Company that is organized under the laws of a jurisdiction
outside of the United States of America) in favor of the Agent in the applicable
filing office of the state of organization of such Company (or the District of
Columbia Recorder of Deeds Office for each Company that is organized under the
laws of a jurisdiction outside of the United States of America), the recording
of the Liens in favor of the Agent in the U.S. Patent and Trademark Office and
the U.S. Copyright Office, as applicable, the taking of any actions required
under the laws of jurisdictions outside the United States with respect to
Intellectual Property included in the Collateral which is created under such
laws, and the completion of the other filings and actions listed on Schedule 7(c) (which,
in the case of all filings and other documents referred to in said Schedule,
have been delivered to the Agent in duly executed form) constitute valid
perfected security interests in all of the Collateral in favor of the Agent as
security for the prompt payment of the Obligations, enforceable in accordance
with the terms hereof against any and all of its creditors and purchasers and
such security interest is prior to all other Liens in existence on the date
hereof.
(d) no
effective security agreement, mortgage, deed of trust, financing statement,
equivalent security or Lien instrument or continuation statement covering all or
any part of the Collateral is or will be on file or of record in any public
office, except those relating to Permitted Liens.
(e) it
shall not dispose of any of the Collateral whether by sale, lease or otherwise
except for Permitted Liens, the sale of Inventory in the ordinary course of
business and for the disposition or transfer in the ordinary course of business
during any fiscal year of obsolete and worn-out Equipment having an aggregate
fair market value of not more than $35,000 and only to the extent that (i) the
proceeds of any such disposition are used to acquire replacement Equipment which
is subject to the Agent’s first priority security interest or are used to repay
Loans or to pay general corporate expenses, or (ii) following the occurrence of
an Event of Default which continues to exist the proceeds of which are remitted
to the Agent to be held as cash collateral for the Obligations.
(f) it
shall defend the right, title and interest of the Agent in and to the Collateral
against the claims and demands of all Persons whomsoever, and take such actions,
including (i) all actions necessary to grant the Agent “control” of any
Investment Property, Deposit Accounts, Letter-of-Credit Rights or electronic
Chattel Paper owned by it, with any agreements establishing control to be in
form and substance satisfactory to the Agent, (ii) the prompt (but in no event
later than five (5) Business Days following the Agent’s request therefor)
delivery to the Agent of all original Instruments, Chattel Paper, negotiable
Documents and certificated Equity Interests owned by it (in each case,
accompanied by stock powers, allonges or other instruments of transfer executed
in blank), (iii) notification to third parties of the Agent’s interest in
Collateral at the Agent’s request, and (iv) the institution of litigation
against third parties as shall be prudent in order to protect and preserve its
and/or the Agent’s respective and several interests in the
Collateral.
(g) it
shall promptly, and in any event within five (5) Business Days after the same is
acquired by it, notify the Agent of any commercial tort claim (as defined in the
UCC) acquired by it and unless otherwise consented to by the Agent, it shall
enter into a supplement to this Agreement granting to the Agent a Lien in such
commercial tort claim.
(h)
it shall place notations upon its Books and Records and any of
its financial statements to disclose the Agent’s Lien in the
Collateral.
(i) if
it retains possession of any Chattel Paper or Instrument with the Agent’s
consent, such Chattel Paper and Instruments shall be marked with the following
legend: “This writing and the obligations evidenced or secured hereby
are subject to the security interest of LV Administrative Services, Inc., as
agent.” Notwithstanding the foregoing, upon the reasonable request of the Agent,
such Chattel Paper and Instruments shall be delivered to the Agent.
(j)
it shall perform in a reasonable time all other
steps requested by the Agent to create and maintain in the Agent’s favor a valid
perfected first Lien in all Collateral subject only to Permitted
Liens.
(k)
it shall notify the Agent promptly and in any event within
five (5) Business Days after obtaining knowledge thereof (i) of any event or
circumstance that, to its knowledge, would cause the Agent to consider any then
existing Account as no longer constituting an Eligible Account; (ii) of any
material delay in its performance of any of its obligations to any Account
Debtor; (iii) of any assertion by any Account Debtor(s) of any claims, offsets
or counterclaims which exceed $2,500 individually or in the aggregate; (iv) of
any allowances, credits and/or monies granted by it to Account Debtor(s) in
excess of $2,500 individually or in the aggregate; (v) of all material adverse
information relating to the financial condition of an Account Debtor or Account
Debtors owing, individually or in the aggregate, Accounts in excess of $2,500;
(vi) of any material return of goods; and (vii) of any loss, damage or
destruction of any of the Collateral which is valued in excess of $2,500 in the
aggregate.
(l)
all Eligible Accounts (i) represent complete bona fide
transactions which require no further act under any circumstances on its part to
make such Accounts payable by the Account Debtors, (ii) are not subject to any
present, future contingent offsets or counterclaims, and (iii) do not represent
▇▇▇▇ and hold sales, consignment sales, guaranteed sales, sale or return or
other similar understandings or obligations of any Affiliate or Subsidiary of
such Company. It has not made, nor will it make, any agreement with
any Account Debtor for any extension of time for the payment of any Account, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except
(i) a discount or allowance for prompt or early payment allowed by it in the
ordinary course of its business consistent with historical practice and as
previously disclosed to the Agent in writing and (ii) compromises and
settlements which do not exceed $2,500 in the aggregate during any calendar
month.
(m) it
shall keep and maintain its Equipment in good operating condition, except for
ordinary wear and tear, and shall make all necessary repairs and replacements
thereof so that the value and operating efficiency shall at all times be
maintained and preserved. It shall not permit any such items to
become a Fixture to real estate or accessions to other personal
property.
(n)
it shall maintain and keep all of its Books
and Records concerning the Collateral at its executive offices listed in Schedule
12(aa).
(o) except
for the Telecommunications Hardware, it shall maintain and keep the tangible
Collateral at the addresses listed in Schedule 12(aa),
provided, that it may change such locations or open a new location, provided
that it provides the Agent at least thirty (30) days prior written notice of
such changes or new location and (ii) prior to such change or opening of a new
location where Collateral having a value of more than $50,000 will be located,
it executes and delivers to the Agent such agreements as are deemed reasonably
necessary or prudent by the Agent, including landlord agreements, mortgagee
agreements and warehouse agreements, each in form and substance satisfactory to
the Agent, to adequately protect and maintain the Agent’s security interest in
such Collateral.
(p) Schedule 7(p) lists
all banks and other financial institutions at which it maintains deposits and/or
other accounts, and such Schedule correctly identifies the name, address and
telephone number of each such depository, the name in which the account is held,
a description of the purpose of the account, and the complete account
number. It shall not establish any depository or other bank account
with any financial institution (other than the accounts set forth on Schedule 7(p))
without the Agent’s prior written consent.
(q) On
the date hereof, its exact legal name (as indicated in the public record of its
jurisdiction of organization), jurisdiction of organization, organizational
identification number, if any, from the jurisdiction of organization, and the
location of its chief executive office or sole place of business or principal
residence, as the case may be, are specified on Schedule
7(q). It has furnished to the Agent a certified charter,
certificate of incorporation or other organization document and long-form good
standing certificate as of a date which is recent to the date
hereof. It is organized solely under the laws of the jurisdiction so
specified and has not filed any certificates of domestication, transfer or
continuance in any other jurisdiction. Except as otherwise indicated
on Schedule
7(q), the jurisdiction of its organization of formation is required to
maintain a public record showing it to have been organized or
formed. Except as specified on Schedule 7(q), it has
not changed its name, jurisdiction of organization, chief executive office or
sole place of business or its corporate structure in any way (e.g., by merger,
consolidation, change in corporate form or otherwise) within the past five years
and has not within the last five years become bound (whether as a result of
merger or otherwise) as a grantor under a security agreement entered into by
another Person, which has not heretofore been terminated.
(r)
It will not, except upon 30 days’ prior written notice to the Agent
and delivery to the Agent of (i) all additional financing statements and other
documents reasonably requested by the Agent to maintain the validity, perfection
and priority of the security interests provided for herein and (ii) if
applicable, a written supplement to Schedule 12(aa)
showing any additional location at which Inventory or Equipment in excess of
$25,000 in the aggregate shall be kept: (A) change its jurisdiction
of organization or the location of its chief executive office or sole place of
business or principal residence from that referred to in Section 7(q); (B)
change its name, identity or organizational structure; or (C) permit any of the
Inventory or Equipment (other than Telecommunications Hardware) having a value
in excess of $25,000 in the aggregate to be kept at a location other than those
listed on Schedule
12(aa).
8.
Payment of Accounts.
(a) No
later than forty five (45) days following the Closing Date, but on or prior to
the date upon which the Revolving Commitment Conditions shall be satisfied or
otherwise at Agent’s election following the occurrence of an Event of Default
which is continuing, each Company will irrevocably direct all of its present and
future Account Debtors and other Persons obligated to make payments constituting
Collateral to make such payments directly to the lockboxes maintained by such
Company (the “Lockboxes”) with
▇▇▇▇▇ Fargo Bank or such other financial institution accepted by the Agent in
writing as may be selected by such Company (the “Lockbox Bank”)
pursuant to the terms of the certain agreements among one or more Companies, the
Agent and/or the Lockbox Bank in form and substance acceptable to
Agent. No later than forty five (45) days following the Closing Date,
but on or prior to the date upon which the Revolving Commitment Conditions shall
be satisfied or otherwise at Agent’s election following the occurrence of an
Event of Default which is continuing, each Company shall and shall cause the
Lockbox Bank to enter into all such documentation acceptable to the Agent
pursuant to which, among other things, the Lockbox Bank agrees
to: (a) sweep the Lockbox on a daily basis and deposit all checks
received therein to an account designated by the Agent in writing and (b) comply
only with the instructions or other directions of the Agent concerning the
Lockbox. All of each Company’s invoices, account statements and other
written or oral communications directing, instructing, demanding or requesting
payment of any Account of any Company or any other amount constituting
Collateral shall conspicuously direct that all payments be made to the Lockbox
or such other address as the Agent may direct in writing. If,
notwithstanding the instructions to Account Debtors, any Company receives any
payments, such Company shall immediately remit such payments to the Agent in
their original form with all necessary endorsements. Until so
remitted, such Company shall hold all such payments in trust for and as the
property of the Agent for the ratable benefit of the Creditor Parties and shall
not commingle such payments with any of its other funds or
property.
(b) At
the Agent’s election, following the occurrence of an Event of Default which is
continuing, the Agent may notify each Company’s Account Debtors of the Agent’s
security interest in the Accounts, collect them directly and charge the
reasonable collection costs and expenses thereof to Companies’ joint and several
account.
9.
Collection and Maintenance of Collateral.
(a) The
Agent may verify each Company’s Accounts from time to time, but not more often
than once every three (3) months, unless an Event of Default has occurred and is
continuing or Agent believes that such verification is necessary to preserve or
protect the Collateral, utilizing an audit control company or any other agent of
the Agent or the Lenders.
(b) Proceeds
of Accounts received by the Agent will be deemed received on the Business Day
after the Agent’s receipt of such proceeds in good funds in dollars of the
United States of America to an account designated by the Agent. Any
amount received by the Agent after 12:00 noon (New York time) on any Business
Day shall be deemed received on the next Business Day.
(c) As
the Agent receives the proceeds of Accounts of any Company, it shall (i) apply
such proceeds, as required, to amounts outstanding under the Notes, and (ii)
remit all such remaining proceeds (net of interest, fees and other amounts then
due and owing to Creditor Parties hereunder) to Company Agent (for the benefit
of the applicable Companies) upon request (but no more often than twice a
week). Notwithstanding the foregoing, following the occurrence and
during the continuance of an Event of Default, the Agent, at its option, may (A)
apply such proceeds to the Obligations in such order as the Agent shall elect,
(B) hold all such proceeds as cash collateral for the Obligations and each
Company hereby grants to the Agent for the ratable benefit of the Creditor
Parties a security interest in such cash collateral amounts as security for the
Obligations and/or (C) do any combination of the foregoing.
10. Inspections
and Appraisals. At all times during normal business hours, the
Creditor Parties, and/or any agent of any of them shall have the right to (a)
have access to, visit, inspect, review, evaluate and make physical verification
and appraisals of each Company’s properties and the Collateral, (b) inspect,
audit and copy (or take originals if necessary) and make extracts from each
Company’s Books and Records, including management letters prepared by the
Accountants, and (c) discuss with each Company’s directors, principal officers,
and independent accountants, each Company’s business, assets, liabilities,
financial condition, results of operations and business
prospects. Each Company will deliver to the Agent any instrument
necessary for the Agent to obtain records from any service bureau maintaining
records for such Company. If any internally prepared financial
information, including that required under this Section is unsatisfactory in any
manner to the Agent, the Agent may request that the Accountants review the
same.
11. Financial
and Other Reporting. Company Agent will deliver, or cause to
be delivered, to the Creditor Parties each of the following, which shall be in
form and detail acceptable to the Agent:
(a) As
soon as available, and in any event within ninety (90) days after the end of
each fiscal year of the Parent, each Company’s audited financial statements with
a report of independent certified public accountants of recognized standing
selected by the Parent and acceptable to the Agent (the “Accountants”), which
annual financial statements shall be without qualification (other than a “going
concern” qualification) and shall include each of the Parent’s and each of its
Subsidiaries’ balance sheet as at the end of such fiscal year and the related
statements of each of the Parent’s and each of its Subsidiaries’ income,
retained earnings and cash flows for the fiscal year then ended, prepared on a
consolidating and Consolidated basis to include the Parent, each Subsidiary of
the Parent and each of their respective affiliates, all in reasonable detail and
prepared in accordance with GAAP, together with (i) if and when available,
copies of any management letters prepared by the Accountants; and (ii) a
certificate of the Parent’s President, Chief Executive Officer or Chief
Financial Officer stating that such financial statements have been prepared in
accordance with GAAP and whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder and, if so, stating in
reasonable detail the facts with respect thereto;
(b) As
soon as available and in any event within forty five (45) days after the end of
each fiscal quarter of the Parent, an unaudited/internal balance sheet and
statements of income, retained earnings and cash flows of each of the Parent’s
and each of its Subsidiaries’ as at the end of and for such quarter and for the
year to date period then ended, prepared on a consolidating and Consolidated
basis to include the Parent, each Subsidiary of the Parent and each of their
respective affiliates, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end adjustments and
accompanied by a certificate of the Parent’s President, Chief Executive Officer
or Chief Financial Officer, stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit adjustments, and
(ii) whether or not such officer has knowledge of the occurrence of any Default
or Event of Default hereunder not theretofore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto;
(c) As
soon as available and in any event within thirty (30) days after the end of each
calendar month, an unaudited/internal balance sheet and statements of income,
retained earnings and cash flows of each of the Parent and its Subsidiaries as
at the end of and for such month and for the year to date period then ended,
prepared on a consolidating and Consolidated basis to include the Parent, each
Subsidiary of the Parent and each of their respective affiliates, in reasonable
detail and stating in comparative form the figures for the corresponding date
and periods in the previous year, all prepared in accordance with GAAP, subject
to year-end adjustments and accompanied by a certificate of the Parent’s
President, Chief Executive Officer or Chief Financial Officer, stating (i) that
such financial statements have been prepared in accordance with GAAP, subject to
year-end audit adjustments, and (ii) whether or not such officer has knowledge
of the occurrence of any Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable detail the facts with
respect thereto;
(d) Within
thirty (30) days after the end of each month (or more frequently if the Agent so
requests), agings of each Company’s Accounts, unaudited trial balances and their
accounts payable and a calculation of each Company’s Accounts and/or Eligible
Accounts, provided, however, that if the Agent shall request the foregoing
information more often than as set forth in the immediately preceding clause,
each Company shall have fifteen (15) days from each such request to comply with
the Agent’s demand;
(e) Promptly
after (i) the filing thereof, copies of the Parent’s most recent registration
statements and annual, quarterly, monthly or other regular reports which the
Parent files with the Securities and Exchange Commission (the “SEC”), and (ii) the
issuance thereof, copies of such financial statements, reports and proxy
statements as the Parent shall send to its stockholders;
(f) Together
with each delivery of any financial statement pursuant to Section 11(a), 11(b)
or 11(c), a Compliance Certificate duly executed by the President, Chief
Executive Officer or Chief Financial Officer of the Parent that, among other
things, (i) states that such financial statements have been prepared in
accordance with GAAP, subject to year-end audit adjustments and (ii) states that
no Default or Event of Default is continuing as of the date of delivery of such
Compliance Certificate or, if a Default or Event of Default is continuing,
states the nature thereof and the action that the Companies propose to take with
respect thereto; and
(g) Within
fifteen (15) days after the end of each second fiscal quarter of each Company
(or more frequently if the Agent so requests) a listing by location of
Telecommunications Hardware.
(h) Each
Company shall deliver, or cause the applicable Subsidiary of each Company to
deliver, such other information as the Agent shall reasonably
request.
12. Additional
Representations and Warranties. Each Company hereby represents
and warrants to each Creditor Party as follows:
(a) Organization, Good Standing
and Qualification. It and each of its Subsidiaries is a
corporation, partnership or limited liability company, as the case may be, duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. It and each of its Subsidiaries has the
corporate, limited liability company or partnership, as the case may
be, power and authority to own and operate its properties and assets and,
insofar as it is or shall be a party thereto, to (i) execute and deliver this
Agreement and the Ancillary Agreements, (ii) to issue and sell the Notes, (iii)
to issue and sell the Warrants and the shares of Common Stock issuable upon
exercise of the Warrants (the “Warrant Shares”), and
to (iv) carry out the provisions of this Agreement and the Ancillary Agreements
and to carry on its business as presently conducted. It and each of
its Subsidiaries is duly qualified and is authorized to do business and is in
good standing as a foreign corporation, partnership or limited liability
company, as the case may be, in all jurisdictions in which the nature or
location of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so has not had, or could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(b) Subsidiaries. Each
direct and indirect Subsidiary of each Company, the direct owner of such
Subsidiary and its percentage ownership thereof, is set forth on Schedule
12(b).
(c) Capitalization; Voting
Rights.
(i) The
authorized capital stock of the Parent, as of the date hereof consists of
185,000,000 shares, of which 175,000,000 are shares of Common Stock, par value
$0.001 per share, 65,149,522 shares of which are issued and outstanding, and
10,000,000 are shares of preferred stock, par value $0.0001 per share of which
no shares of preferred stock are issued and outstanding. The
authorized, issued and outstanding capital stock of each other Company and each
Subsidiary of each Company is set forth on Schedule
12(c).
(ii) Except
as disclosed on Schedule 12(c), other
than: (A) the shares reserved for issuance under the Parent’s stock
option plans; and (B) shares which may be issued pursuant to this Agreement and
the Ancillary Agreements, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal), proxy
or stockholder agreements, or arrangements or agreements of any kind for the
purchase or acquisition from the Parent of any of its
securities. Except as disclosed on Schedule 12(c),
neither the offer or issuance of any of the Notes or the Warrants, or the
issuance of any of the Warrant Shares, nor the consummation of any transaction
contemplated hereby will result in a change in the price or number of any
securities of the Parent outstanding, under anti-dilution or other similar
provisions contained in or affecting any such securities.
(iii) All
issued and outstanding shares of the Parent’s Common Stock: (A) have
been duly authorized and validly issued and are fully paid and non-assessable;
and (B) were issued in compliance with all applicable state and federal laws
concerning the issuance of such securities.
(iv) The
rights, preferences, privileges and restrictions of the shares of the Common
Stock are as stated in the Parent’s Certificate of Incorporation (the
Certificate of Incorporation and all filed amendments thereto, collectively, the
“Charter”). The
Warrant Shares have been duly and validly reserved for issuance. When
issued in compliance with the provisions of this Agreement and the Parent’s
Charter, the Securities will be validly issued, fully paid and non-assessable,
and will be free of any liens or encumbrances; provided, however, that the
Securities may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed.
(d) Authorization; Binding
Obligations. All corporate, partnership or limited liability
company, as the case may be, action on its and its Subsidiaries’ part (including
their respective officers and directors) necessary for the authorization of this
Agreement and the Ancillary Agreements, the performance of all of its and its
Subsidiaries’ obligations hereunder and under the Ancillary Agreements on the
Closing Date and, the authorization, issuance and delivery of the Notes and the
Warrants has been taken or will be taken prior to the Closing
Date. This Agreement and the Ancillary Agreements, when executed and
delivered and to the extent it is a party thereto, will be its and its
Subsidiaries’ valid and binding obligations enforceable against each such Person
in accordance with their terms, except:
(i)
as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors’ rights; and
(ii) general
principles of equity that restrict the availability of equitable or legal
remedies.
The
issuance of the Notes is not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied
with. The issuance of the Warrants and the subsequent exercise of the
Warrants for Warrant Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with.
(e) Liabilities;
Solvency. (i) Neither it nor any of its Subsidiaries has any
liabilities, except current liabilities incurred in the ordinary course of
business and liabilities disclosed in any Exchange Act Filings and as set forth
on Schedule
12(e).
(ii) Both
before and after giving effect to (A) the Loans incurred on the Closing Date or
such other date as Loans requested hereunder are made or incurred, (B) the
disbursement of the proceeds of, or the assumption of the liability in respect
of, such Loans pursuant to the instructions or agreement of any Company, (C) the
payment and accrual of all transaction costs in connection with the foregoing
and (D) the consummation of the transactions contemplated herein and in the
Ancillary Agreements, each Company and each Subsidiary of each Company, is and
will be, Solvent.
(f) Agreements;
Action. Except as set forth on Schedule 12(f) or as
disclosed in any Exchange Act Filings:
(i)
There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which it or any of
its Subsidiaries is a party or to its knowledge by which it is bound which may
involve: (A) obligations (contingent or otherwise) of, or payments
to, it or any of its Subsidiaries in excess of $50,000 (other than obligations
of, or payments to, it or any of its Subsidiaries arising from purchase or sale
agreements entered into in the ordinary course of business); or (B) the transfer
or license of any patent, copyright, trade secret or other proprietary right to
or from it (other than licenses arising from the purchase of “off the shelf” or
other standard products); or (C) provisions restricting the development,
manufacture or distribution of its or any of its Subsidiaries’ products or
services; or (D) indemnification by it or any of its Subsidiaries with respect
to infringements of proprietary rights.
(ii) Since
October 31, 2007 (the “Balance Sheet Date”),
neither it nor any of its Subsidiaries has: (A) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock; (B) incurred any indebtedness for money
borrowed or any other liabilities (other than the Obligations incurred hereunder
and under the Ancillary Agreements and ordinary course obligations) individually
in excess of $50,000 or, in the case of indebtedness and/or liabilities
individually less than $50,000, in excess of $100,000 in the aggregate; (C) made
any loans or advances to any Person not in excess, individually or in the
aggregate, of $100,000, other than ordinary advances for travel expenses; or (D)
sold, exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its Inventory in the ordinary course of business.
(iii) For
the purposes of subsections (i) and (ii) of this Section 12(f), all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same Person (including Persons it or any
of its applicable Subsidiaries has reason to believe are affiliated therewith or
with any Subsidiary thereof) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
(iv) the
Parent maintains disclosure controls and procedures (“Disclosure Controls”)
designed to ensure that information required to be disclosed by the Parent in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized, and reported, within the time periods specified in the
rules and forms of the SEC.
(v) Each
Company makes and keeps books, records, and accounts, that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of its
assets. Each Company maintains internal control over financial
reporting (“Financial
Reporting Controls”) designed by, or under the supervision of, its
principal executive and principal financial officers, and effected by its board
of directors, management, and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP, including
that:
(1) transactions
are executed in accordance with management’s general or specific
authorization;
(2) unauthorized
acquisition, use, or disposition of the Parent’s assets that could have a
material effect on the financial statements are prevented or timely
detected;
(3) transactions
are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that its receipts and expenditures are being made only
in accordance with authorizations of the Parent’s management and board of
directors;
(4) transactions
are recorded as necessary to maintain accountability for assets;
and
(5) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.
(vi) There
is no weakness in any of its Disclosure Controls or Financial Reporting Controls
that is required to be disclosed in any of the Exchange Act Filings, except as
so disclosed.
(g) Obligations to Related
Parties. Except as set forth on Schedule 12(g),
neither it nor any of its Subsidiaries has any obligations to their respective
officers, directors, stockholders or employees other than:
(i)
for payment of salary for services rendered and for
bonus payments;
(ii)
reimbursement for reasonable expenses incurred on its or its
Subsidiaries’ behalf;
(iii) for
other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by its and its Subsidiaries’ Board of Directors, as applicable);
and
(iv) obligations
listed in its and each of its Subsidiary’s financial statements or disclosed in
any of the Parent’s Exchange Act Filings.
Except as
described above or set forth on Schedule 12(g), none
of its officers, directors or, to the best of its knowledge, key employees or
stockholders, any of its Subsidiaries or any members of their immediate
families, are indebted to it or any of its Subsidiaries, individually or in the
aggregate, in excess of $50,000 or have any direct or indirect ownership
interest in any Person with which it or any of its Subsidiaries is affiliated or
with which it or any of its Subsidiaries has a business relationship, or any
Person which competes with it or any of its Subsidiaries, other than passive
investments in publicly traded companies (representing less than one percent
(1.0%) of such company) which may compete with it or any of its
Subsidiaries. Except as described above or on Schedule 12(g), none of
its officers, directors or stockholders, or any member of their immediate
families, is, directly or indirectly, interested in any material contract with
it or any of its Subsidiaries and no agreements, understandings or proposed
transactions are contemplated between it or any of its Subsidiaries and any such
Person. Except as set forth on Schedule 12(g),
neither it nor any of its Subsidiaries is a guarantor or indemnitor of any
indebtedness of any other Person.
(h) Changes. Since
the Balance Sheet Date, except as disclosed in any Exchange Act Filing or in
any Schedule to this Agreement or to any of the Ancillary Agreements, there has
not been:
(i)
any change in its or any of its Subsidiaries’ business,
assets, liabilities, condition (financial or otherwise), properties, operations
or prospects, which, individually or in the aggregate, has had, or could
reasonably be expected to have, a Material Adverse Effect;
(ii)
any resignation or termination of any of its or its
Subsidiaries’ officers, key employees or groups of employees;
(iii) any
material change, except in the ordinary course of business, in its or any of its
Subsidiaries’ contingent obligations by way of guaranty, endorsement, indemnity,
warranty or otherwise;
(iv) any
damage, destruction or loss, whether or not covered by insurance, which has had,
or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(v)
any waiver by it or any of its Subsidiaries of a
valuable right or of a material debt owed to it;
(vi) any
direct or indirect material loans made by it or any of its Subsidiaries to any
of its or any of its Subsidiaries’ stockholders, employees, officers or
directors, other than advances made in the ordinary course of
business;
(vii) any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder;
(viii) any
declaration or payment of any dividend or other distribution of its or any of
its Subsidiaries’ assets;
(ix) any
labor organization activity related to it or any of its
Subsidiaries;
(x)
any debt, obligation or liability incurred, assumed or
guaranteed by it or any of its Subsidiaries, except those for immaterial amounts
and for current liabilities incurred in the ordinary course of
business;
(xi) any
sale, assignment, transfer, abandonment or other disposition of any Intellectual
Property or other intangible assets owned by the Company or any of its
Subsidiaries;
(xii) any
change in any material agreement to which it or any of its Subsidiaries is a
party or by which either it or any of its Subsidiaries is bound which, either
individually or in the aggregate, has had, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect;
(xiii) any
other event or condition of any character that, either individually or in the
aggregate, has had, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; or
(xiv) any
arrangement or commitment by it or any of its Subsidiaries to do any of the acts
described in subsection (i) through (xiii) of this Section 12(h).
(i) Title to Properties and
Assets; Liens, Etc. Except as set forth on Schedule 12(i), it
and each of its Subsidiaries has good and marketable title to their respective
properties and assets (tangible or intangible), and good title to its leasehold
interests, in each case subject to no Lien, other than Permitted
Liens. All facilities, Equipment, Fixtures, vehicles and other
properties owned, leased or used by it or any of its Subsidiaries are in good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used. Except as set forth on Schedule 12(i), it
and each of its Subsidiaries is in compliance with all material terms of each
lease to which it is a party or is otherwise bound.
(j) Intellectual
Property.
(i) Each
Company and each of its Subsidiaries owns or possesses sufficient legal rights
to use all Intellectual Property necessary for its business as now conducted
and, to the Company’s knowledge, as presently proposed to be
conducted. There are no settlements or consents, covenants not to
▇▇▇, non-assertion assurances, or releases to which any Company or any of its
Subsidiaries is bound which adversely affects its rights to own or use any
Intellectual Property.
(ii) To
each Company’s knowledge, the conduct of such Company’s and each of its
Subsidiaries’ business as now conducted, and as presently proposed to be
conducted, does not (and will not) result in any infringement or other violation
of the rights of others.
(iii) Schedule 12(j) (as
such schedule may be amended or supplemented from time to time) sets forth a
true and complete list of (A) all registrations and applications for
Intellectual Property owned by each Company or any of its Subsidiaries filed or
issued by any Intellectual Property registry and (B) all Intellectual Property
licenses which are either material to the business of any Company or any of its
Subsidiaries or relate to any material portion of a Company’s or any of its
Subsidiaries’ Inventory, including licenses for standard software having a
replacement value of more than $10,000. None of such Intellectual
Property licenses are reasonably likely to be construed as an assignment of the
licensed Intellectual Property to such Company or any of its
Subsidiaries.
(iv) Except
as disclosed on Schedule 12(j)(iv),
there are no claims pending or, to best of any Company’s knowledge, threatened
and neither any Company nor any of its Subsidiaries has received any other
communications, alleging that, any Company or any of its Subsidiaries has
infringed, diluted, misappropriated, or otherwise violated any Intellectual
Property of any other person or entity, nor is any Company aware of any basis
therefore.
(v) No
Company is aware of any infringement diluted, misappropriated, or other
violation of its Intellectual Property by any other person or
entity.
(vi) No
Company nor any of its Subsidiaries utilizes any inventions, trade secrets or
other Intellectual Property of any of its employees, officers or contractors (or
former employees, officers, or contractors) except for inventions, trade secrets
or other Intellectual Property that is owned by a Company or any of its
Subsidiaries as a matter of law or have been rightfully assigned to a Company or
any of its Subsidiaries.
(k) Compliance with Other
Instruments. Neither it nor any of its Subsidiaries is in
violation or default of (i) any term of its Charter, Bylaws or Limited Liability
Company Agreement, or (B) any provision of any indebtedness, mortgage,
indenture, contract, agreement or instrument to which it is party or by which it
is bound or of any judgment, decree, order or writ, which violation or default,
in the case of this clause (y), has had, or could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse
Effect. The execution, delivery and performance of and compliance
with this Agreement and the Ancillary Agreements to which it is a party, and the
issuance of the Notes and the other Securities each pursuant hereto and thereto,
will not, with or without the passage of time or giving of notice, result in any
such material violation, or be in conflict with or constitute a default under
any such term or provision, or result in the creation of any Lien upon any of
its or any of its Subsidiary’s properties or assets (other than the Liens
created by this Agreement and the Ancillary Agreements) or the suspension,
revocation, impairment, forfeiture or non-renewal of any permit, license,
authorization or approval applicable to it or any of its Subsidiaries, their
businesses or operations or any of their assets or properties.
(l)
Litigation. Except
as set forth on Schedule 12(l), there
is no action, suit, proceeding or investigation pending or, to its knowledge,
currently threatened against it or any of its Subsidiaries that prevents it or
any of its Subsidiaries from entering into this Agreement or the Ancillary
Agreements, or from consummating the transactions contemplated hereby or
thereby, or which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect, or could result in
any change in its or any of its Subsidiaries’ current equity ownership, nor is
it aware that there is any basis to assert any of the
foregoing. Neither it nor any of its Subsidiaries is a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by it or any of its Subsidiaries
currently pending or which it or any of its Subsidiaries intends to initiate
other than those relating to collection actions in the ordinary course of its or
its Subsidiaries business.
(m) Tax Returns and
Payments. It and each of its Subsidiaries has timely filed all
tax returns (federal, state and local) required to be filed by
it. All taxes shown to be due and payable on such returns, any
assessments imposed, and all other taxes due and payable by it and each of its
Subsidiaries on or before the Closing Date, have been paid or will be paid prior
to the time they become delinquent. Except as set forth on Schedule 12(m),
neither it nor any of its Subsidiaries has been advised:
(i)
that any of its returns, federal, state or other, have been or
are being audited as of the date hereof; or
(ii) of
any adjustment, deficiency, assessment or court decision in respect of its
federal, state or other taxes.
Neither
it nor any of its Subsidiaries has any knowledge of any liability of any tax to
be imposed upon its properties or assets as of the date of this Agreement that
is not adequately provided for.
(n) Employees. Except
as set forth on Schedule 12(n),
neither it nor any of its Subsidiaries has any collective bargaining agreements
with any of its employees. There is no labor union organizing
activity pending or, to its knowledge, threatened with respect to it or any of
its Subsidiaries. Except as disclosed in the Exchange Act Filings or
on Schedule
12(n), neither it nor any of its Subsidiaries is a party to or bound by
any currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To its knowledge, none of
its or any of its Subsidiaries’ employees, nor any consultant with whom it or
any of its Subsidiaries has contracted, is in violation of any term of any
employment contract, proprietary information agreement or any other agreement
relating to the right of any such individual to be employed by, or to contract
with, it or any of its Subsidiaries because of the nature of the business to be
conducted by it or any of its Subsidiaries; and to its knowledge the continued
employment by it and its Subsidiaries of their present employees, and the
performance of its and its Subsidiaries contracts with its independent
contractors, will not result in any such violation. Neither it nor
any of its Subsidiaries is aware that any of its or any of its Subsidiaries’
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency that would interfere with
their duties to it or any of its Subsidiaries. Neither it nor any of
its Subsidiaries has received any notice alleging that any such violation has
occurred. Except for employees who have a current effective
employment agreement with it or any of its Subsidiaries, none of its or any of
its Subsidiaries’ employees has been granted the right to continued employment
by it or any of its Subsidiaries or to any material compensation following
termination of employment with it or any of its Subsidiaries. Except
as set forth on Schedule 12(n),
neither it nor any of its Subsidiaries is aware that any officer, key employee
or group of employees intends to terminate his, her or their employment with it
or any of its Subsidiaries, as applicable, nor does it or any of its
Subsidiaries have a present intention to terminate the employment of any
officer, key employee or group of employees.
(o) Registration Rights and
Voting Rights. Except as set forth on Schedule 12(o) and
except as disclosed in Exchange Act Filings, neither it nor any of its
Subsidiaries is presently under any obligation, and neither it nor any of its
Subsidiaries has granted any rights, to register any of its or any of its
Subsidiaries’ presently outstanding securities or any of its securities that may
hereafter be issued. Except as set forth on Schedule 12(o) and
except as disclosed in Exchange Act Filings, to its knowledge, none of its or
any of its Subsidiaries’ stockholders has entered into any agreement with
respect to its or any of its Subsidiaries’ voting of equity
securities.
(p) Compliance with Laws;
Permits. Neither it nor any of its Subsidiaries is in
violation of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or any SEC related regulation or
rule or any rule of the Principal Market promulgated thereunder or any other
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which has had, or
could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement or any Ancillary Agreement and the
issuance of any of the Securities, except such as have been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing Date, as will be filed in a timely manner. It and each of its
Subsidiaries has all material franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(q) Environmental and Safety
Laws. There are no pending actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending, or to the knowledge of
any Company threatened against or affecting any Company or any of its
Subsidiaries under Environmental Law. Each Company and each of its
Subsidiaries (i) are and have been in full compliance with Environmental Law and
have no knowledge of any material expenditure that will be required to maintain
such compliance in the future; (ii) have not received any notice or claim
alleging that they are not in full compliance with or otherwise have liability
under Environmental Law; and (iii) have no knowledge of any facts or
circumstances that could reasonably be expected to form the basis of any such
claim. No Hazardous Materials are present or are used or have been
used, stored, or released by any Company or any of its Subsidiaries, or to their
knowledge by any other Person, at any property currently or formerly owned,
leased or operated by any Company or any of its Subsidiaries or disposed of at
any other location by any Company or any of its Subsidiaries except (i) in
compliance with Environmental Law; and (2) in quantities and under circumstances
that would not require investigation or remediation by any Company or any of its
Subsidiaries. No Company nor any of its Subsidiaries has assumed by
contract or by operation of law the liabilities arising under Environmental Law
of any other Person. Each Company and each of its Subsidiaries have
provided to Agent all material reports, audits and assessments in their
possession or control regarding the environmental condition of any property
currently or formerly owned or operated by any Company or any of its
Subsidiaries.
(r) Valid
Offering. Assuming the accuracy of the representations and
warranties of the Lenders contained in this Agreement, the offer and issuance of
the Securities will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and
will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.
(s) Full
Disclosure. It and each of its Subsidiaries has provided the
Lenders with all information requested by the Lenders in connection with the
Lenders’ decision to enter into this Agreement, including all information each
Company and each of its Subsidiaries believe is reasonably necessary to make
such investment decision. Neither this Agreement, the Ancillary
Agreements nor the exhibits and schedules hereto and thereto nor any other
document, including without limitation the responses contained in any
questionnaire provided to any Company by the Agent, delivered by it or any of
its Subsidiaries to the Agent or their attorneys or agents in connection
herewith or therewith or with the transactions contemplated hereby or thereby,
contain any untrue statement of a material fact nor omit to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances in which they are made, not
misleading. Any financial projections and other estimates provided to
the Lenders by it or any of its Subsidiaries were based on its and its
Subsidiaries’ experience in the industry and on assumptions of fact and opinion
as to future events which it or any of its Subsidiaries, at the date of the
issuance of such projections or estimates, believed to be
reasonable.
(t) Insurance. It
and each of its Subsidiaries has general commercial, product liability, fire and
casualty insurance policies with coverages which it believes are customary for
companies similarly situated to it and each of its Subsidiaries in the same or
similar business.
(u) SEC Reports and Financial
Statements. Except as set forth on Schedule 12(u), it
and each of its Subsidiaries has filed all proxy statements, reports and other
documents required to be filed by it under the Exchange Act. The
Parent has furnished the Lenders with copies of: (i) its Annual
Report on Form 10-KSB for its fiscal years ended October 31, 2007 and October
31, 2006; and (ii) its Quarterly Reports on Form 10-QSB for its fiscal quarters
ended January 31, 2008, July 31, 2007, April 30, 2007 and January 31, 2007, and
the Form 8-K filings which it has made during its fiscal year 2008 to date
(collectively, the “SEC
Reports”). Except as set forth on Schedule 12(u), each
SEC Report was, at the time of its filing, in substantial compliance with the
requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Such financial statements have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed)
and fairly present in all material respects the financial condition, the results
of operations and cash flows of the Parent and its Subsidiaries, on a
Consolidated basis, as of, and for, the periods presented in each such SEC
Report.
(v) Listing. The
Common Stock is listed or quoted, as applicable, on the Principal Market and
satisfies all requirements for the continuation of such listing or quotation, as
applicable, and the Parent shall do all things necessary for the continuation of
such listing or quotation, as applicable. The Parent has not received
any notice that its Common Stock will be delisted from, or no longer quoted on,
as applicable, the Principal Market or that its Common Stock does not meet all
requirements for such listing or quotation, as applicable.
(w) No Integrated
Offering. Neither it, nor any of its Subsidiaries nor any of
its Affiliates, nor any Person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement or any Ancillary Agreement to be
integrated with prior offerings by it for purposes of the Securities Act which
would prevent it from issuing the Securities pursuant to Rule 506 under the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will it or any of its Affiliates or Subsidiaries take any action
or steps that would cause the offering of the Securities to be integrated with
other offerings.
(x) Stop
Transfer. The Securities are restricted securities as of the
date of this Agreement. Neither it nor any of its Subsidiaries will
issue any stop transfer order or other order impeding the sale and delivery of
any of the Securities at such time as the Securities are registered for public
sale or an exemption from registration is available, except as required by state
and federal securities laws.
(y) Dilution. It
specifically acknowledges that the Parent’s obligation to issue the shares of
Common Stock upon exercise of the Warrants is binding upon the Parent and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Parent.
(z) Patriot
Act. It certifies that, to the best of its knowledge, neither
it nor any of its Subsidiaries has been designated, nor is or shall be owned or
controlled, by a “suspected terrorist” as defined in Executive Order
13224. It hereby acknowledges that each of the Creditor Parties seeks
to comply with all applicable laws concerning money laundering and related
activities. In furtherance of those efforts, it hereby represents,
warrants and covenants that: (i) none of the cash or property that it
or any of its Subsidiaries will pay or will contribute to any Creditor Party has
been or shall be derived from, or related to, any activity that is deemed
criminal under United States law; and (ii) no contribution or payment by it or
any of its Subsidiaries to any Creditor Party, to the extent that they are
within its or any such Subsidiary’s control shall cause such Creditor Party to
be in violation of the United States Bank Secrecy Act, the United States
International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. It shall promptly notify the Agent if any of these
representations, warranties and covenants ceases to be true and accurate
regarding it or any of its Subsidiaries. It shall provide any
Creditor Party with any additional information regarding it and each Subsidiary
thereof that such Creditor Party deems necessary or convenient to ensure
compliance with all applicable laws concerning money laundering and similar
activities. It understands and agrees that if at any time it is
discovered that any of the foregoing representations, warranties and covenants
are incorrect, or if otherwise required by applicable law or regulation related
to money laundering or similar activities, the Creditor Parties may undertake
appropriate actions to ensure compliance with applicable law or regulation,
including but not limited to segregation and/or redemption of any Lender’s
investment in it. It further understands that the Creditor Parties
may release confidential information about it and its Subsidiaries and, if
applicable, any underlying beneficial owners, to proper authorities if such
Creditor Party, in its sole discretion, determines that it is in the best
interests of such Creditor Party in light of relevant rules and regulations
under the laws set forth in subsection (ii) above.
(aa) Company Name; Locations of
Offices, Records and Collateral. Schedule 12(aa) sets forth
each Company’s name as it appears in official filings in its jurisdiction of
organization, the type of entity of each Company, the organizational
identification number issued by each Company’s jurisdiction of organization or a
statement that no such number has been issued, each Company’s jurisdiction of
organization, and the location of each Company’s chief executive office,
corporate offices, warehouses, other locations of Collateral and locations where
records with respect to Collateral are kept (including in each case the county
of such locations) and, except as set forth in such Schedule 12(aa), such
locations have not changed during the preceding twelve months. As of
the Closing Date, during the prior five years, except as set forth in Schedule 12(aa), no
Company has been known as or conducted business in any other name (including
trade names). Each Company has only one jurisdiction of
organization.
(bb) ERISA. Based
upon the Employee Retirement Income Security Act of 1974 (“ERISA”), and the
regulations and published interpretations thereunder: (i) neither it
nor any of its Subsidiaries has engaged in any Prohibited Transactions (as
defined in Section 406 of ERISA and Section 4975 of the Code); (ii) it and each
of its Subsidiaries has met all applicable minimum funding requirements under
Section 302 of ERISA in respect of its plans; (iii) neither it nor any of its
Subsidiaries has any knowledge of any event or occurrence which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any employee benefit plan(s); (iv) neither it nor any of its
Subsidiaries has any fiduciary responsibility for investments with respect to
any plan existing for the benefit of persons other than its or such Subsidiary’s
employees; and (v) neither it nor any of its Subsidiaries has withdrawn,
completely or partially, from any multi-employer pension plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of
1980.
(cc) Status of
Companies. Unless all of the Obligations are properly
classified as debt for U.S. federal income tax purposes, each Company is a
corporation for U.S. federal income tax purposes.
(dd) Schedule 12(dd) lists
a true and correct description of all Telecommunications Licenses and
Telecommunications Contracts executed by, issued in the name of, or assigned or
transferred to each Company and are in full force and effect and have been duly
and validly executed by, issued in the name of, or validly assigned to, the
applicable Company and true, complete and correct copies of each
Telecommunications License have been delivered to the Agent. None of
the Telecommunications Licenses is subject to any conditions or requirements
that are not generally imposed by the FCC, applicable State PUC, or applicable
Foreign Regulatory Authority upon holders of such Telecommunications
Licenses. None of the Telecommunications Contracts contain any
material terms or conditions that are inconsistent with the requirements of
Sections 251 and 252 of the Telecommunications Act of 1996, 46 USC Section 151
et seq. The Telecommunications Licenses set forth on Schedule 12(dd) are
the only material licenses, permits, authorizations, consents or approvals
required from the FCC, any applicable State PUC, or Foreign Regulatory Authority
for the operation of the telecommunications or communications businesses of the
Company as those businesses are currently conducted.
(ee) Each
Company (i) has duly filed all material reports and other filings which are
required to be filed under the Communications Laws and has paid all fees due to
the FCC, any State PUC or Foreign Regulatory Authority, including but not
limited to the submission of all required FCC Forms 499-A and Forms 499-Q and
the payment of all Universal Service Fund fees, all Telecommunications Relay
Service Fund fees, all North American Numbering Plan Fund fees, all Local Number
Portability Fund fees, all regulatory fees, and all franchise fees and (ii) is
in compliance in all material respects with the Communications
Laws. All information provided by or on behalf of the Company in any
filing with the FCC, any State PUC or Foreign Regulatory Authority was, at the
time of filing, true, correct and complete in all material respects when made,
and the FCC, applicable State PUC, or Foreign Regulatory Authority has been
notified of any material changes in such information as may be required by the
Communications Laws.
(ff) Each
Company has obtained all the prior consents or authorizations of, or made all
required notices to, the FCC, any State PUC or Foreign Regulatory Authority, and
obtained all prior consents to assign or transfer all Telecommunications
Contracts required for the execution and delivery of this Agreement and the
Ancillary Agreements.
(gg) Neither
execution and delivery of this Agreement nor any Ancillary Agreement will (i)
violate or conflict with the Communications Laws; (ii) result in or cause a
forfeiture, suspension, termination, revocation, impairment, adverse
modification or non-renewal of any of the Telecommunications Licenses or
Telecommunications Contracts.
(hh) Except
with respect to general rulemaking and similar proceedings relating generally to
the telecommunications or communications industries, (i) there is no adverse
judgment, decree or order issued against any Company by the FCC, any applicable
State PUC, or Foreign Regulatory Authority; and (ii) there are no proceedings or
investigations pending or, to the knowledge of any Company, threatened from or
before the FCC, a State PUC, or Foreign Regulatory Authority naming any Company,
its Telecommunications Licenses, or its Telecommunications
Contracts.
13. Covenants. Each Company, as applicable, covenants
and agrees with the Creditor Parties as follows:
(a)
Stop-Orders. The
Parent shall advise the Agent, promptly after it receives notice of issuance by
the SEC, any state securities commission or any other regulatory authority of
any stop order or of any order preventing or suspending any offering of any
securities of the Parent, or of the suspension of the qualification of the
Common Stock for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b)
Listing. The
Parent shall promptly secure the listing or quotation, as applicable, of the
shares of Common Stock issuable upon exercise of the Warrants on the Principal
Market upon which shares of Common Stock are listed or quoted, as applicable,
(subject to official notice of issuance) and shall maintain such listing or
quotation, as applicable, so long as any other shares of Common Stock shall be
so listed or quoted, as applicable. The Parent shall maintain the
listing or quotation, as applicable, of its Common Stock on the Principal
Market, and will comply in all material respects with the Parent’s reporting,
filing and other obligations under the bylaws or rules of the Financial Industry
Regulatory Authority (“FINRA”) and such exchanges, as
applicable.
(c)
Market
Regulations. The Parent shall notify the SEC, NASDAQ, FINRA
and applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to the
Lenders and promptly provide copies thereof to the Agent.
(d)
Reporting
Requirements. The Parent shall timely file with the SEC all
reports required to be filed pursuant to the Exchange Act and refrain from
terminating its status as an issuer required by the Exchange Act to file reports
thereunder even if the Exchange Act or the rules or regulations thereunder would
permit such termination.
(e)
Use of
Funds. It shall only use the proceeds of (i) the Revolving
Loans for general working capital purposes, (ii) Term Loan A to fund the
operations of iBroadband Networks, Inc. and iBroadband of Texas, Inc. in
accordance with the terms of the Transition Services Agreement, to refinance
existing indebtedness of the Companies and for general working capital purposes
and (iii) Term Loan B for general working capital purposes.
(f)
Access to
Facilities. It shall, and shall cause each of its Subsidiaries
to, permit any representatives designated by the Agent (or any successor of the
Agent), upon reasonable notice and during normal business hours, at Company’s
expense and accompanied by a representative of Company Agent (provided that no
such prior notice shall be required to be given and no such representative shall
be required to accompany the Agent in the event the Agent believes such access
is necessary to preserve or protect the Collateral or following the occurrence
and during the continuance of an Event of Default), to:
(i)
visit and inspect any of its or any such Subsidiary’s
properties;
(ii)
examine its or any such Subsidiary’s corporate and financial
records (unless such examination is not permitted by federal, state or local law
or by contract) and make copies thereof or extracts therefrom; and
(iii) discuss
its or any such Subsidiary’s affairs, finances and accounts with its or any such
Subsidiary’s directors, officers and Accountants.
Notwithstanding
the foregoing, neither it nor any of its Subsidiaries shall provide any
material, non-public information to the Agent unless the Agent signs a
confidentiality agreement and otherwise complies with Regulation FD, under the
federal securities laws.
(g) Taxes. It
shall, and shall cause each of its Subsidiaries to, promptly pay and discharge,
or cause to be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon it and its
Subsidiaries’ income, profits, property or business, as the case may be;
provided, however, that any such tax, assessment, charge or levy need not be
paid currently if (x) the validity thereof shall currently and diligently be
contested in good faith by appropriate proceedings, (y) such tax, assessment,
charge or levy shall have no effect on the Lien priority of the Agent in the
Collateral, and (z) if it and/or such Subsidiary, as applicable, shall have set
aside on its and/or such Subsidiary’s books adequate reserves with respect
thereto in accordance with GAAP; and provided, further, that it shall, and shall
cause each of its Subsidiaries to, pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor.
(h) Insurance.
(i)
It shall bear the full risk of loss from any loss of any nature
whatsoever with respect to the Collateral and it and each of its Subsidiaries
will, jointly and severally, bear the full risk of loss from any loss of any
nature whatsoever with respect to the assets pledged to the Agent as security
for the Obligations. Furthermore, it will insure or cause the
Collateral to be insured in the Agent’s name as an additional insured and lender
loss payee, as applicable, with an appropriate loss payable endorsement in form
and substance satisfactory to the Agent, against loss or damage by fire, flood,
sprinkler leakage, theft, burglary, pilferage, loss in transit and other risks
customarily insured against by companies in similar business similarly situated
as it and its Subsidiaries including but not limited to workers compensation,
public and product liability and business interruption, and such other hazards
as the Agent shall specify in amounts and under insurance policies and bonds by
insurers acceptable to the Agent and all premiums thereon shall be paid by such
Company and the policies delivered to the Agent. If any such Company
fails to obtain the insurance and in such amounts of coverage as otherwise
required pursuant to this Section (h), the Agent may procure such insurance and
the cost thereof shall be promptly reimbursed by the Companies, jointly and
severally, and shall constitute Obligations.
(ii)
No Company’s insurance coverage shall be impaired or
invalidated by any act or neglect of any Company or any of its Subsidiaries and
the insurer will provide the Agent with no less than thirty (30) days notice
prior of cancellation;
(iii) The
Agent, in connection with its status as a lender loss payee, will be assigned at
all times to a first lien position until such time as all Obligations have been
indefeasibly satisfied in full.
(i) Intellectual
Property. Each Company and each of its
Subsidiaries:
(i)
shall maintain in full force and effect its existence, rights
and franchises and all licenses and other rights to own or use Intellectual
Property including registrations and applications therefore, that are necessary
to the conduct of its business, as now conducted or as presently proposed to be
conducted, and shall not do any act or omit to do any act whereby any of such
Intellectual Property may lapse, or become abandoned, dedicated to the public,
or unenforceable, or the Lien therein in favor of the Agent for the benefit of
the Creditor Parties would be adversely affected;
(ii)
shall report to the Agent (A) the filing of any
application to register a Copyright no later than ten (10) days after
such filing occurs (B) the filing of any application to register any
other Intellectual Property with any other Intellectual Property registry, and
the issuance thereof, no later than thirty (30) days after such filing or
issuance occurs and, in each case, shall, simultaneously with such report,
deliver to the Agent fully-executed documents required to acknowledge, confirm,
register, record or perfect the Lien in such Intellectual
Property. In addition, each Company and each of its Subsidiaries
hereby authorize the Agent to modify this Agreement by amending Schedule 12(j) to
include any registrations or applications for Intellectual Property
inadvertently omitted from such Schedule or filed, registered, acquired by any
Company or any of its Subsidiaries after the date hereof and will cooperate with
the Agent in effecting any such amendment to include any new item of
Intellectual Property included in the Collateral;
(iii) shall,
promptly upon the reasonable request of the Agent, execute and deliver to the
Agent any document or instrument required to acknowledge, confirm, register,
record, or perfect the Lien of the Agent in any part of the Intellectual
Property owned by the Company and its Subsidiaries; and
(iv) shall
not sell, assign, transfer, license, grant any option, or create or suffer to
exist any Lien upon or with respect to Intellectual Property, except for the
Liens in favor of the Agent and Permitted Liens.
(j)
Properties. It
shall, and shall cause each of its Subsidiaries to, keep its properties in good
repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all necessary and proper repairs, renewals, replacements,
additions and improvements thereto; and it shall, and shall cause each of its
Subsidiaries to, at all times comply with each provision of all leases to which
it is a party or under which it occupies property if the breach of such
provision could reasonably be expected to have a Material Adverse
Effect.
(k) Confidentiality. No
Company will, nor will it permit any of its Subsidiaries to, disclose, nor will
it include in any public announcement, the name of any Creditor Party, unless
expressly agreed to by such Creditor Party or unless and until such disclosure
is required by law or applicable regulation, and then only to the extent of such
requirement. Notwithstanding the foregoing, (i) each Company may
disclose any Creditor Party’s identity and the terms of this Agreement and the
Ancillary Agreements to its current and prospective debt and equity financing
sources and (ii) each Company (and each employee, representative, or other agent
of each Company) may disclose to any and all Persons, without limitation of any
kind, the tax treatment and any facts that may be relevant to the tax structure
of the transactions contemplated by this Agreement and the Ancillary Agreements
and the agreements referred to therein; provided, however, that no Company (and
no employee, representative or other agent thereof) shall disclose pursuant to
this clause (ii) any other information that is not relevant to understanding the
tax treatment or tax structure of such transactions (including the identity of
any party or any information that could lead another to determine the identity
of any party); and, provided, further, that no Company shall disclose or permit
any of its Subsidiaries to disclose any information to the extent that such
disclosure could reasonably be expected to result in a violation of any U.S.
federal or state securities law or similar law of another
jurisdiction.
(l)
Required
Approvals. It shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the Agent, (i) create,
incur, assume or suffer to exist any indebtedness (exclusive of trade debt)
whether secured or unsecured other than each Company’s indebtedness to the
Creditor Parties and as set forth on Schedule 13(l)(i)
attached hereto and made a part hereof; (ii) cancel any debt owing to it in
excess of $50,000 in the aggregate during any twelve (12) month period; (iii)
assume, guarantee, endorse or otherwise become directly or contingently liable
in connection with any obligations of any other Person, except the endorsement
of negotiable instruments by it or its Subsidiaries for deposit or collection or
similar transactions in the ordinary course of business; (iv) directly or
indirectly declare, pay or make any dividend or distribution on any class of its
Stock or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any of its or its Subsidiaries’ Stock, or issue any
preferred stock; (v) purchase or hold beneficially any Stock or other securities
or evidences of indebtedness of, make or permit to exist any loans or advances
to, or make any investment or acquire any interest whatsoever in, any other
Person, including any partnership or joint venture, except (A) travel advances,
(B) loans to its and its Subsidiaries’ officers and employees not exceeding at
any one time an aggregate of $25,000, and (C) loans to its existing Subsidiaries
so long as such Subsidiaries are designated as either a co-borrower hereunder or
has entered into such guaranty and security documentation required by the Agent,
including, without limitation, to grant to the Agent a first priority perfected
security interest in substantially all of such Subsidiary’s assets to secure the
Obligations; (vi) create or permit to exist any Subsidiary, other than any
Subsidiary in existence on the date hereof and listed in Schedule 12(b) unless
such new Subsidiary is a wholly-owned Subsidiary and is designated by the Agent
as either a co-borrower or guarantor hereunder and such Subsidiary shall have
entered into all such documentation required by the Agent, including, without
limitation, to grant to the Agent a first priority perfected security interest
in substantially all of such Subsidiary’s assets to secure the Obligations;
(vii) directly or indirectly, prepay any indebtedness (other than to the Agent
and in the ordinary course of business), or repurchase, redeem, retire or
otherwise acquire any indebtedness (other than to the Agent and in the ordinary
course of business) except to make scheduled payments of principal and interest
thereof; (viii) enter into any merger, consolidation or other reorganization
with or into any other Person or acquire all or a portion of the assets or Stock
of any Person or permit any other Person to consolidate with or merge with it,
unless (A) such Company is the surviving entity of such merger or consolidation,
(B) no Event of Default shall exist immediately prior to and after giving effect
to such merger or consolidation, (C) such Company shall have provided the Agent
copies of all documentation relating to such merger or consolidation and (D)
such Company shall have provided the Agent with at least thirty (30) days’ prior
written notice of such merger or consolidation; (ix) materially change the
nature of the business in which it is presently engaged; (x) become subject to
(including, without limitation, by way of amendment to or modification of) any
agreement or instrument which by its terms would (under any circumstances)
restrict its or any of its Subsidiaries’ right to perform the provisions of this
Agreement or any of the Ancillary Agreements; (xi) change its fiscal year or
make any changes in accounting treatment and reporting practices without prior
written notice to the Agent except as required by GAAP or in the tax reporting
treatment or except as required by law; (xii) enter into any transaction with
any employee, director or Affiliate, except in the ordinary course on
arms-length terms; (xiii) ▇▇▇▇ Accounts under any name except the present name
of such Company; (xiv) sell, lease, transfer or otherwise dispose of any of its
properties or assets, or any of the properties or assets of its Subsidiaries,
except for (A) sales, leases, transfer or dispositions by any Company to any
other Company, (B) the sale of Inventory in the ordinary course of business and
(C) the disposition or transfer in the ordinary course of business during any
fiscal year of obsolete and worn-out Equipment and only to the extent that (x)
prior to the occurrence of an Event of Default, the proceeds of any such
disposition are used to acquire replacement Equipment which is subject to the
Agent’s first priority security interest or are used to repay Loans or to pay
general corporate expenses, or (y) following the occurrence of an Event of
Default which continues to exist, the proceeds of which are remitted to the
Agent to be held as cash collateral for the Obligations; (xv) make any payment
or distribution in respect of any subordinated indebtedness of any Company or
any of its Subsidiaries in violation of any subordination or other agreement
made in favor of any Creditor Party; (xvi) make any optional payment or
prepayment on or redemption (including, without limitation, by making payments
to a sinking fund or analogous fund) or repurchase of any indebtedness for
borrowed money other than the Obligations; (xvii) permit Dial Thru International
to, at any time, have any domestic assets of any kind; or (xviii) permit Canmax
or DTI, at any time, to have any assets.
(m) Reissuance of
Securities. The Parent shall reissue certificates representing
the Securities without the legends set forth in Section 41 below at such time
as:
(i)
the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(b)(1)(i) under the Securities Act; or
(ii) upon
resale subject to an effective registration statement after such Securities are
registered under the Securities Act.
The
Parent agrees to cooperate with the Lenders in connection with all resales
pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary to
allow such resales provided the Parent and its counsel receive reasonably
requested representations from the Lenders and broker, if any.
(n) Opinion. On
the Closing Date, it shall deliver to the Creditor Parties an opinion acceptable
to the Agent from each Company’s legal counsel. Each Company will
provide, at the Companies’ joint and several expense, such other legal opinions
in the future as are reasonably necessary for the exercise of the
Warrants.
(o) Legal Name,
etc. It shall not, without providing the Agent with 30 days
prior written notice, change (i) its name as it appears in the official filings
in its jurisdiction of organization, (ii) the type of legal entity it
is, (iii) its organization identification number, if any, issued by its
jurisdiction of organization, (iv) its jurisdiction of organization or (v) amend
its certificate of incorporation, by-laws or other organizational
document.
(p) Compliance with
Laws. The operation of each of its and each of its
Subsidiaries’ business is and shall continue to be in compliance in all material
respects with all applicable federal, state and local laws, rules and
ordinances, including to all laws, rules, regulations and orders relating to
taxes, payment and withholding of payroll taxes, employer and employee
contributions and similar items, securities, employee retirement and welfare
benefits, employee health and safety and environmental matters.
(q) Notices. It
and each of its Subsidiaries shall promptly inform the Agent in writing
of: (i) the commencement of all proceedings and investigations by or
before and/or the receipt of any notices from, any governmental or
nongovernmental body and all actions and proceedings in any court or before any
arbitrator against or in any way concerning any event which could reasonably be
expected to have singly or in the aggregate, a Material Adverse Effect; (ii) any
change which has had, or could reasonably be expected to have, a Material
Adverse Effect; (iii) any Event of Default or Default; and (iv) any default or
any event which with the passage of time or giving of notice or both would
constitute a default under any agreement for the payment of money to which it or
any of its Subsidiaries is a party or by which it or any of its Subsidiaries or
any of its or any such Subsidiary’s properties may be bound the breach of which
would have a Material Adverse Effect.
(r)
Margin
Stock. It shall not permit any of the proceeds of the Loans
made hereunder to be used directly or indirectly to “purchase” or “carry”
“margin stock” or to repay indebtedness incurred to “purchase” or “carry”
“margin stock” within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect.
(s)
Offering
Restrictions. Except as previously disclosed in the SEC
Reports or in the Exchange Act Filings, or stock or stock options granted to its
employees or directors, neither it nor any of its Subsidiaries shall, prior to
the full repayment of the Notes (together with all accrued and unpaid interest
and fees related thereto) and termination of this Agreement, (i) enter into any
equity line of credit agreement or similar agreement with a floorless pricing
feature or (ii) issue, or enter into any agreement to issue, any securities with
a floorless variable/floating conversion and/or pricing feature which are or
could be (by conversion or registration) free-trading securities
(i.e. common stock subject to a registration statement).
(t)
Authorization and
Reservation of Shares. The Parent shall at all times have
authorized and reserved a sufficient number of shares of Common Stock to provide
for the exercise of the Warrants.
(u) FIRPTA. Neither
it, nor any of its Subsidiaries, is a “United States real property holding
corporation” as such term is defined in Section 897(c)(2) of the Code and
Treasury Regulation Section 1.897-2 promulgated thereunder, and it and each of
its Subsidiaries shall at no time take any action or otherwise acquire any
interest in any asset or property to the extent the effect of which shall cause
it and/or such Subsidiary, as the case may be, to be a “United States real
property holding corporation” as such term is defined in Section 897(c)(2) of
the Code and Treasury Regulation Section 1.897-2 promulgated
thereunder.
(v) Investor Relations/Public
Relations. The Parent hereby agrees to incorporate into its
annual budget an amount of funds necessary to maintain a comprehensive investor
relations and public relations program (an “IR/PR Program”),
which IR/PR Program shall incorporate elements customarily utilized by companies
of similar size and in a similar industry as the Parent and its
Subsidiaries.
(w) Prohibition of Amendments to
Subordinated Debt Documentation. It shall not, without the
prior written consent of the Agent, amend, modify or in any way alter the terms
of any of the Subordinated Debt Documentation, except to the extent expressly
permitted by the terms of the applicable Subordination Agreement.
(x) Prohibition of Grant of
Collateral for Subordinated Debt Documentation. It shall not,
without the prior written consent of the Agent, grant or permit any of its
Subsidiaries to grant to any Person any Collateral of such Company or any
collateral of any of its Subsidiaries as security for any obligation arising
under the Subordinated Debt Documentation, except to the extent expressly
permitted by the terms of the applicable Subordination
Agreement.
(y) Prohibitions of Payment
Under Subordinated Debt Documentation. Neither it nor any of
its Subsidiaries shall, without the prior written consent of the Agent, make any
payments in respect of the indebtedness evidenced by the Subordinated Debt
Documentation, except to the extent expressly permitted by the terms of the
applicable Subordination Agreement.
(z) Financing Right of First
Refusal.
(i)
Each Company hereby grants to the Lenders a right of first refusal
to arrange any Additional Financing (as defined below) to be issued by any
Company and/or any of its Subsidiaries (the “Additional Financing
Parties”), subject to the following terms and conditions. From
and after the date hereof, prior to the incurrence of any additional
indebtedness and/or the sale or issuance of any equity interests of the
Additional Financing Parties (an “Additional
Financing”), Company Agent shall notify the Agent of such Additional
Financing. In connection therewith, Company Agent shall submit a
fully executed term sheet (a “Proposed Term Sheet”)
to the Agent setting forth the terms, conditions and pricing of any such
Additional Financing (such financing to be negotiated on “arm’s length” terms
and the terms thereof to be negotiated in good faith) proposed to be entered
into by the Additional Financing Parties. The Lenders shall have the
right, but not the obligation, to deliver to Company Agent their own proposed
term sheet (the “Lender Term Sheet”)
setting forth the terms and conditions upon one or more of the Lenders would be
willing to provide such Additional Financing to the Additional Financing
Parties. The Lender Term Sheet shall contain terms no less favorable
to the Additional Financing Parties than those outlined in Proposed Term
Sheet. The Agent shall deliver to Company Agent the Lender Term Sheet
within ten Business Days of receipt of each such Proposed Term
Sheet. If the provisions of the Lender Term Sheet are at least as
favorable to the Additional Financing Parties as the provisions of the Proposed
Term Sheet, the Additional Financing Parties shall enter into and consummate the
Additional Financing transaction outlined in the Lender Term Sheet.
(ii)
It shall not, and shall not permit its
Subsidiaries to, agree, directly or indirectly, to any restriction with any
Person which limits the ability of any Creditor Party to arrange for the
consummation of an Additional Financing with it or any of its
Subsidiaries.
(aa) Board Observation
Rights. Until such time as all Obligations have been
indefeasibly paid in full, the Creditor Parties will be entitled to the
following board observation rights (“Board Observation
Rights”): each Company shall permit one representative of the
Creditor Parties to attend all meetings of the board of directors of such
Company (the “Board of
Directors”) in a non-voting observer capacity, which observation right
shall include the ability to observe discussions of the Board of Directors, and
shall provide such representative with copies of all notices, minutes, written
consents, and other materials that it provides to members of the Board of
Directors, at the time it provides them to such members. The
observation right may be exercised in person or via telephone or videophone
participation. Each Creditor Party agrees, on behalf of itself and
any representative exercising the observation rights set forth herein, that so
long as it shall exercise its observation right (i) it shall hold in strict
confidence pursuant to a confidentiality and non-disclosure agreement (in form
and substance satisfactory to each Creditor Party) all information and materials
that it may receive or be given access to in connection with meetings of the
Board of Directors and to act in a fiduciary manner with respect to all
information so provided (provided that this shall not limit its ability to
discuss such matters with its officers, directors or legal counsel, as
necessary), and (ii) the Board of Directors may withhold from it certain
information or material furnished or made available to the Board of Directors or
exclude it from certain confidential “closed sessions” of the Board of Directors
if the furnishing or availability of such information or material or its
presence at such “closed sessions” would jeopardize such Company’s
attorney-client privilege or if the Board of Directors otherwise reasonably so
requires. The Board Observation Rights set forth in this Section
shall automatically terminate and be of no further force or effect upon the
indefeasibly payment in full of all Obligations.
(bb) Communications Regulatory
Matters. Each Company, as applicable, shall (i) timely file
all material reports and other filings which are required to be filed under the
Communications Laws and pay all fees due to the FCC, any State PUC or Foreign
Regulatory Authority, including but not limited to the submission of all
required FCC Forms 499-A and Forms 499-Q and the payment of all Universal
Service Fund fees, all Telecommunications Relay Service Fund fees, all North
American Numbering Plan Fund fees, all Local Number Portability Fund fees, all
regulatory and other related fees and taxes; (ii) maintain in full
force and effect all material Telecommunications Contracts; and (iii)
operate its businesses in compliance with the Communications Laws.
(cc) Subsidiaries. No
later than October 31, 2008, the Parent shall deliver to the Agent evidence that
DTI has been dissolved.
(dd) FCC Approval and SPCOA
License. No later than April 10, 2008, Rapid Link or an
Eligible Subsidiary shall have submitted an application to the State PUC of
Texas for a SPCOA and to the FCC for the FCC Approval.
(ee) Notices to
Customers. No later than five (5) Business Days following the
Parent’s or an Eligible Subsidiary’s receipt of the SPCOA and the FCC placing
the Section 214 application for public notice, the Parent or such Eligible
Subsidiary shall send the Customers Notices.
(ff) Interconnection
Agreement. No later than five (5) Business Days following the
Closing Date, the Parent or an Eligible Subsidiary shall enter into negotiations
for an Interconnection Agreement or an assignment of the Embarq Agreement and
shall continue to use its best efforts to obtains such agreement or
assignment.
(gg) Secured Party
Sale. No later than three (3) Business Days following the
satisfaction of the Secured Party Sale Conditions, the Parent or an Eligible
Subsidiary shall consummate the Secured Party Sale Transaction, except to the
extent the Secured Party Sale Lenders have accepted a higher and better offer
pursuant to Section 15(j).
14. Further
Assurances. At any time and from time to time, upon the
written request of the Agent and at the sole expense of Companies, each Company
shall promptly and duly execute and deliver any and all such further instruments
and documents and take such further action as the Agent may request (a) to
obtain the full benefits of this Agreement and the Ancillary Agreements, (b) to
protect, preserve, perfect and maintain the Agent’s rights in the Collateral and
under this Agreement or any Ancillary Agreement, and/or (c) to enable the Agent
to exercise all or any of the rights and powers herein granted or any Ancillary
Agreement.
15. Representations, Warranties and Covenants of
Lenders. Each Lender, severally and not jointly, hereby
represents, warrants and covenants to each Company as follows:
(a)
Requisite Power and
Authority. Such Lender has all necessary power and authority
under all applicable provisions of law to execute and deliver this Agreement and
the Ancillary Agreements and to carry out their provisions. All
corporate action on such Lenders’ part required for the lawful execution and
delivery of this Agreement and the Ancillary Agreements have been or will be
effectively taken prior to the Closing Date. Upon their execution and
delivery, this Agreement and the Ancillary Agreements shall be valid and binding
obligations of such Lender, enforceable in accordance with their terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors’ rights,
and (ii) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
(b)
Investment
Representations. Such Lender understands that the Securities
are being offered pursuant to an exemption from registration contained in the
Securities Act based in part upon such Lenders’ representations contained in
this Agreement, including, without limitation, that such Lender is an
“accredited investor” within the meaning of Regulation D under the Securities
Act. Such Lender has received or has had full access to all the
information it considers necessary or appropriate to make an informed investment
decision with respect to the Notes to be issued to it under this Agreement and
the Securities acquired by it upon the exercise of the Warrants.
(c)
Lender Bears Economic
Risk. Such Lender has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Parent so that it is capable of evaluating the merits and risks of its
investment in the Parent and has the capacity to protect its own
interests. Such Lender must bear the economic risk of this investment
until the Securities are sold pursuant to (i) an effective registration
statement under the Securities Act, or (ii) an exemption from registration is
available.
(d)
Investment for Own
Account. The Securities are being issued to such Lender for
its own account for investment only, and not as a nominee or agent and not with
a view towards or for resale in connection with their distribution.
(e)
Lender Can Protect Its
Interest. Such Lender represents that by reason of its, or of
its management’s, business and financial experience, such Lender has the
capacity to evaluate the merits and risks of its investment in the Notes, and
the Securities and to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Ancillary
Agreements. Further, such Lender is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement
or the Ancillary Agreements.
(f)
Accredited
Investor. Such Lender represents that it is an accredited
investor within the meaning of Regulation D under the Securities
Act.
(g) Shorting. Neither
such Lender nor any of its Affiliates or investment partners has, will, or will
cause any Person, to directly engage in “short sales” of the Parent’s Common
Stock as long as any amounts under the Notes shall remain
outstanding.
(h) Patriot
Act. Such Lender certifies that, to the best of such Lender’s
knowledge, such Lender has not been designated, and is not owned or controlled,
by a “suspected terrorist” as defined in Executive Order 13224. Such
Lender seeks to comply with all applicable laws concerning money laundering and
related activities. In furtherance of those efforts, such Lender
hereby represents, warrants and covenants that: (i) none of the cash
or property that such Lender will use to make the Loans has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (ii) no disbursement by such Lender to any Company to the extent
within such Lender’s control, shall cause such Lender to be in violation of the
United States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. Such Lender shall
promptly notify the Company Agent if any of these representations ceases to be
true and accurate regarding such Lender. Such Lender agrees to
provide each Company any additional information regarding such Lender that each
Company deems necessary or convenient to ensure compliance with all applicable
laws concerning money laundering and similar activities. Such Lender
understands and agrees that if at any time it is discovered that any of the
foregoing representations are incorrect, or if otherwise required by applicable
law or regulation related to money laundering similar activities, such Lender
may undertake appropriate actions to ensure compliance with applicable law or
regulation, including but not limited to segregation and/or redemption of such
Lender’s investment in the Parent. Such Lender further understands
that the Parent may release information about such Lender and, if applicable,
any underlying beneficial owners, to proper authorities if the Parent, in its
sole discretion, determines that it is in the best interests of the Parent in
light of relevant rules and regulations under the laws set forth in subsection
(ii) above.
(i)
Limitation on Acquisition of
Common Stock. Notwithstanding anything to the contrary
contained in this Agreement, any Ancillary Agreement, or any document,
instrument or agreement entered into in connection with any other transaction
entered into by and between such Lender and any Company (and/or Subsidiaries or
Affiliates of any Company), such Lender (and/or Subsidiaries or Affiliates of
such Lender) shall not acquire stock in the Parent (including, without
limitation, pursuant to a contract to purchase, by exercising an option or
warrant, by converting any other security or instrument, by acquiring or
exercising any other right to acquire, shares of stock or other security
convertible into shares of stock in the Parent, or otherwise, and such options,
warrants, conversion or other rights shall not be exercisable) to the extent
such stock acquisition would cause any interest (including any original issue
discount) payable by any Company to a Non-U.S. Lender not to qualify as
portfolio interest, within the meaning of Section 871(h)(2) or Section 881(c)(2)
of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) by reason of
Section 871(h)(3) or Section 881(c)(3)(B) of the Code, as applicable, taking
into account the constructive ownership rules under Section 871(h)(3)(C) of the
Code (the “Stock
Acquisition Limitation”). The Stock Acquisition Limitation
shall automatically become null and void with respect to a Lender, without any
notice to any Company, on and after the first date upon which such Lender and
each of its Affiliates which qualify as a Non-U.S. Lender no longer owns any
indebtedness (including, without limitation, principal, interest, fees and
charges) of any Company.
(j)
Secured
Party Sale Transaction. Upon satisfaction of the Term Loan B
Conditions and the Revolving Commitment Conditions and provided that the Secured
Party Sale Lenders shall not have received and accepted a written offer to
purchase the assets which are the subject of the Secured Party Sale Transaction
through a private foreclosure sale that the Secured Party Sale Lenders determine
to be higher and better offer than the offer proposed by the Companies with
respect thereto, the Secured Party Sale Lenders in accordance with the terms of
the Secured Party ▇▇▇▇ of Sale. If the Secured Party Sale Lenders
receive a written offer from a good faith purchaser to purchase the assets which
are the subject to the Secured Party Sale Transaction that the Secured Party
Sale Lenders reasonably determine to be a higher and better offer than the
purchase of such by Telenational, the Agent shall notify the Parent of such
offer and deliver a copy of such offer to the Parent within three (3) Business
Days of the Secured Party Sale Lenders’ receipt of such offer. If the
Parent delivers to the Agent, within three (3) Business Days of the Parent’s
receipt of such offer, the Parent’s written commitment modifying the terms of
its offer equal or exceed the terms of such offer (without modifying any other
terms of this Agreement), then the Secured Party Sale Lenders shall proceed with
the Secured party Sale Transaction as so amended by such written
commitment. If the Parent does not deliver to the Agent the Parent’s
written commitment as provided above within three (3) Business Days of its
receipt of such offer, then the Secured Party Lenders may, at their election,
sell the assets which are the subject to the Secured Party Sale Transaction to
such good faith purchaser. In the event that the Secured Party
Lenders sell the assets to a good faith purchaser pursuant to a higher better
offer, the Secured Party Lenders agree to reduce the principal amount of Term
Loan A by an amount equal to $300,000 plus the Capital Expenditure Amount;
provided that the Parent or an Eligible Subsidiary shall have provided evidence
to the Agent that it has made all payments due and owing under the Embarq
Agreement.
16. Confidentiality. Each Lender covenants and agrees
with each Company that such Lender will not disclose, and will not include in
any public announcement, the name of such Company, unless expressly agreed to by
such Company or unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such
requirement. Notwithstanding the foregoing, (i) such Lender shall be
permitted to discuss, distribute or otherwise transfer any non-public
information of each Company and its Subsidiaries in such Lender’s possession now
or in the future to (x) its employees, agents, counsel, professional consultants
and accountants who, in each such case, have a specific need to know such
information and (y) potential or actual (A) direct or indirect investors in such
Lender and (B) any assignees or transferees of all or a portion of the
Obligations, to the extent that such investor or assignee or transferee enters
into a confidentiality agreement for such benefit of each Company in such form
as may be necessary to addresses such Company’s Regulation FD requirements; (ii)
such Lender (and each employee, representative, or other agent of such Lender)
may disclose to any and all Persons, without limitation of any kind, the tax
treatment and any facts that may be relevant to the tax structure of the
transactions contemplated by this Agreement and the Ancillary Agreements and the
agreements referred to therein; provided, however, that no Lender (and no
employee, representative or other agent thereof) shall disclose pursuant to this
clause (ii) any other information that is not relevant to understanding the tax
treatment or tax structure of such transactions (including the identity of any
party or any information that could lead another to determine the identity of
any party); and (iii) the Agent or any Affiliate thereof shall be entitled to
post on its website a summary of the transactions contemplated by this
Agreement, including the names of one or more of the Companies and each of their
Subsidiaries.
17. Power of
Attorney. Each Company hereby appoints the Agent, or any other
Person whom the Agent may designate as such Company’s attorney, with power
to: (a)(i) execute any security related documentation on such
Company’s behalf and to supply any omitted information and correct patent errors
in any documents executed by such Company or on such Company’s behalf; (ii) to
file financing statements and other evidence of Liens granted hereunder against
such Company covering the Collateral (and, in connection with the filing of any
such financing statements, describe the Collateral as “all assets and all
personal property, whether now owned and/or hereafter acquired” (or any
substantially similar variation thereof)); (iii) sign such Company’s name on any
invoice or ▇▇▇▇ of lading relating to any Accounts, drafts against Account
Debtors, schedules and assignments of Accounts, notices of assignment, financing
statements and other evidence of the Agent’s granted hereunder and other public
records, verifications of Account and notices to or from Account Debtors; (iv)
in the case of any Intellectual Property, the Agent may execute and deliver, and
have recorded, any and all agreements, instruments, documents and papers as the
Agent may request to evidence the Agent’s security interest in such Intellectual
Property and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby; (v) to do all other things the Agent deems
necessary to carry out the terms of Section 6 of this Security Agreement and (b)
upon the occurrence and during the continuance of an Event of Default; (i)
endorse such Company’s name on any checks, notes, acceptances, money orders,
drafts or other forms of payment or security that may come into the Agent’s
possession; (ii) verify the validity, amount or any other matter relating to any
Account by mail, telephone, telegraph or otherwise with Account Debtors; (iii)
do all other things necessary to carry out this Agreement, any Ancillary
Agreement and all related documents; and (iv) notify the post office authorities
to change the address for delivery of such Company’s mail to an address
designated by the Agent, and to receive, open and dispose of all mail addressed
to such Company. Each Company hereby ratifies and approves all acts
of the attorney. Neither the Agent, nor the attorney will be liable
for any acts or omissions or for any error of judgment or mistake of fact or
law, except for gross negligence or willful misconduct. This power,
being coupled with an interest, is irrevocable so long as the Agent has a
security interest and until the Obligations have been fully
satisfied.
18. Term of Agreement. Each Lender’s agreement to make Loans
and extend financial accommodations under and in accordance with the terms of
this Agreement or any Ancillary Agreement shall continue in full force and
effect until the expiration of the Term. The Agent may, following the
occurrence of an Event of Default, terminate this Agreement. The
termination of the Agreement shall not affect any of the Agent’s or any Lender’s
rights hereunder or any Ancillary Agreement and the provisions hereof and
thereof shall continue to be fully operative until all transactions entered
into, rights or interests created and the Obligations have been irrevocably
disposed of, concluded or liquidated. Notwithstanding the foregoing,
the Agent shall release its security interests at any time after thirty (30)
days notice upon irrevocable payment to it of all Obligations if each Company
shall have provided the Agent and each Lender with an executed release of any
and all claims which such Company may have or thereafter have under this
Agreement and all Ancillary Agreements.
19. Termination
of Lien. The Liens and rights granted to the Agent hereunder
and any Ancillary Agreements and the financing statements filed in connection
herewith or therewith shall continue in full force and effect, notwithstanding
the termination of this Agreement or the fact that any Company’s account may
from time to time be temporarily in a zero or credit position, until all of the
Obligations have been indefeasibly paid or performed in full and this Agreement
has been terminated in accordance with the terms of this
Agreement. The Agent shall not be required to send termination
statements or other evidence of the release of the Lien granted hereunder to any
Company, or to file them with any filing office, unless and until this Agreement
and the Ancillary Agreements shall have been terminated in accordance with their
terms and all Obligations indefeasibly paid in full in immediately available
funds.
20. Events of Default. The occurrence of any of
the following shall constitute an “Event of
Default”:
(a)
failure to make payment of any of the Obligations when
required hereunder, and, in any such case, such failure shall continue for a
period of three (3) days following the date upon which any such payment was
due;
(b)
failure by any Company or any of its Subsidiaries to pay any
taxes when due unless such taxes are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
provided on such Company’s and/or such Subsidiary’s books;
(c)
failure to perform under, and/or committing any breach of, in any material
respect, this Agreement or any covenant contained herein, which failure or
breach shall continue without remedy for a period of fifteen (15) days after the
occurrence thereof;
(d) any
representation, warranty or statement made by any Company or any of its
Subsidiaries hereunder, in any Ancillary Agreement, any certificate, statement
or document delivered pursuant to the terms hereof, or in connection with the
transactions contemplated by this Agreement should prove to be false or
misleading in any material respect on the date as of which made or deemed
made;
(e)
the occurrence of any default (or similar term) in the observance or
performance of any other agreement or condition relating to any indebtedness or
contingent obligation of any Company or any of its Subsidiaries (including,
without limitation, the indebtedness evidenced by the Subordinated Debt
Documentation) beyond the period of grace (if any), the effect of which default
is to cause, or permit the holder or holders of such indebtedness or beneficiary
or beneficiaries of such contingent obligation to cause, such indebtedness to
become due prior to its stated maturity or such contingent obligation to become
payable;
(f)
attachments or levies in excess of $75,000 in the aggregate are made upon any
Company’s assets or a judgment is rendered against any Company’s property
involving a liability of more than $50,000 which shall not have been vacated,
discharged, stayed or bonded within thirty (30) days from the entry
thereof;
(g) any
change in any Company’s or any of its Subsidiary’s condition or affairs
(financial or otherwise) which in the Agent’s reasonable, good faith opinion,
could reasonably be expected to have a Material Adverse Effect;
(h) any
Lien created hereunder or under any Ancillary Agreement for any reason ceases to
be or is not a valid and perfected Lien having a first priority
interest;
(i)
any Company or any of its Subsidiaries shall (i) apply for,
consent to or suffer to exist the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of creditors, (iii) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent,
(v) file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vi) acquiesce to without challenge within ten (10) days of
the filing thereof, or failure to have dismissed within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the
foregoing;
(j)
any Company or any of its Subsidiaries shall admit in writing its
inability, or be generally unable, to pay its debts as they become due or except
to the extent permitted under this Agreement, cease operations of its present
business;
(k) any
Company or any of its Subsidiaries directly or indirectly sells, assigns,
transfers, conveys, or suffers or permits to occur any sale, assignment,
transfer or conveyance of any assets of such Company or any interest therein,
except as permitted herein;
(l)
any “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d)
of the Exchange Act, as in effect on the date hereof), other than a Lender, APEX
Acquisitions or ▇▇▇▇ ▇▇▇▇▇▇▇, is or becomes the “beneficial owner” (as defined
in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of
35% or more on a fully diluted basis of the then outstanding voting equity
interest of the Parent, (ii) the Board of Directors of the Parent
shall cease to consist of a majority of the Board of Directors of the Parent on
the date hereof (or directors appointed by a majority of the board of directors
in effect immediately prior to such appointment) or (iii) the Parent or any of
its Subsidiaries merges or consolidates with, or sells all or substantially all
of its assets to, any other person or entity;
(m) the
indictment or threatened indictment of any Company or any of its Subsidiaries or
any executive officer of any Company or any of its Subsidiaries under any
criminal statute, or commencement or threatened commencement of criminal or
civil proceeding against any Company or any of its Subsidiaries or any executive
officer of any Company or any of its Subsidiaries pursuant to which statute or
proceeding penalties or remedies sought or available include forfeiture of any
of the property of any Company or any of its Subsidiaries;
(n) an
Event of Default shall occur under and as defined in any Note or in any other
Ancillary Agreement;
(o) any
Company or any of its Subsidiaries shall breach any term or provision of any
Ancillary Agreement to which it is a party (including, without limitation,
Section 7(e) of the Registration Rights Agreement), in any material respect
which breach is not cured within any applicable cure or grace period provided in
respect thereof (if any);
(p) any
Company or any of its Subsidiaries attempts to terminate, challenges the
validity of, or its liability under this Agreement or any Ancillary Agreement,
or any proceeding shall be brought to challenge the validity, binding effect of
any Ancillary Agreement or any Ancillary Agreement ceases to be a valid, binding
and enforceable obligation of such Company or any of its Subsidiaries (to the
extent such Persons are a party thereto);
(q) an
SEC stop trade order or Principal Market trading suspension of the Common Stock
shall be in effect for five (5) consecutive days or five (5) days during a
period of ten (10) consecutive days, excluding in all cases a suspension of all
trading on a Principal Market, provided that the Parent shall not have been able
to cure such trading suspension within thirty (30) days of the notice thereof or
list the Common Stock on another Principal Market within sixty (60) days of such
notice;
(r)
the Parent’s failure to deliver Common Stock to any Lender pursuant to and
in the form required by the Warrants and this Agreement, if such failure to
deliver Common Stock shall not be cured within two (2) Business Days or any
Company is required to issue a replacement Note to any Lender and such Company
shall fail to deliver such replacement Note within seven (7) Business
Days;
(s) any
Company, or any of its Subsidiaries shall take or participate in any action
which would be prohibited under the provisions of any Subordination Agreement or
make any payment on the indebtedness evidenced by the Subordinated Debt
Documentation to a Subordinated Lender that was not entitled to receive such
payments under the applicable Subordination Agreement;
(t)
the Texas Public Utility Commission shall deny Telenational
authorization to operate and provide competitive local exchange services within
the State of Texas; or
(u) failure
of the Secured Party Sale Conditions to be satisfied on or prior to September
30, 2008, provided, however, such failure
shall not constitute an Event of Default if (i) the Secured Party Sale Lenders,
prior to September 30, 2008, accept a higher and better offer for the assets
subject of the Secured Party Sale Transaction in accordance with Section 15(j)
hereof, (ii) the assets of iBroadband Networks, Inc. and iBroadband of Texas,
Inc. are the subject of a bankruptcy proceeding or (iii) any party claiming a
interest in the assets of iBroadband Networks, Inc. or iBroadband of Texas, Inc.
shall have taken legal action which prohibits or stays the consummation of the
Secured Party Sale Transaction..
21. Remedies. Following the occurrence of an Event of
Default, the Agent shall have the right to demand repayment in full of all
Obligations, whether or not otherwise due. Until all Obligations have
been fully and indefeasibly satisfied, the Agent shall retain its Lien in all
Collateral. The Agent shall have, in addition to all other rights
provided herein and in each Ancillary Agreement, the rights and remedies of a
secured party under the UCC, and under other applicable law, all other legal and
equitable rights to which the Agent may be entitled, including the right to take
immediate possession of the Collateral, to require each Company to assemble the
Collateral, at Companies’ joint and several expense, and to make it available to
the Agent at a place designated by the Agent which is reasonably convenient to
both parties and to enter any of the premises of any Company or wherever the
Collateral shall be located, with or without force or process of law, and to
keep and store the same on said premises until sold (and if said premises be the
property of any Company, such Company agrees not to charge the Agent or any
Lender for storage thereof), and the right to apply for the appointment of a
receiver for such Company’s property. Further, the Agent may, at any
time or times after the occurrence of an Event of Default, sell and deliver all
Collateral held by or for the Agent at public or private sale for cash, upon
credit or otherwise, at such prices and upon such terms as the Agent, in its
sole discretion, deems advisable or the Agent may otherwise recover upon the
Collateral in any commercially reasonable manner as the Agent, in its sole
discretion, deems advisable. The requirement of reasonable notice
shall be met if such notice is mailed postage prepaid to Company Agent at
Company Agent’s address as shown in the Agent’s records, at least ten (10) days
before the time of the event of which notice is being given. The
Agent may be the purchaser at any sale, if it is public. In
connection with the exercise of the foregoing remedies, and not without
limitation of any remedies with respect to Intellectual Property Collateral, the
Agent may exercise the rights and license granted under Section 12(j)
hereof. The proceeds of sale shall be applied first to all costs and
expenses of sale, including attorneys’ fees, and second to the payment (in
whatever order the Agent elects) of all Obligations. After the
indefeasible payment and satisfaction in full of all of the Obligations, and
after the payment by the Agent of any other amount required by any provision of
law, including Section 9-608(a)(1) of the UCC (but only after the Agent has
received what the Agent considers reasonable proof of a subordinate party’s
security interest), the surplus, if any, shall be paid to Company Agent (for the
benefit of the applicable Companies) or its representatives or to whosoever may
be lawfully entitled to receive the same, or as a court of competent
jurisdiction may direct. The Companies shall remain jointly and
severally liable to the Creditor Parties for any deficiency. Each
Company and the Creditor Parties acknowledge that the actual damages that would
be incurred by the Lenders after the occurrence of an Event of Default would be
difficult to quantify and that such Company and the Creditor Parties have agreed
that the fees and obligations set forth in this Section and in this Agreement
would constitute fair and appropriate liquidated damages in the event of any
such termination. The parties hereto each hereby agree that the
exercise by any party hereto of any right granted to it or the exercise by any
party hereto of any remedy available to it (including, without limitation, the
issuance of a notice of redemption, a borrowing request and/or a notice of
default), in each case, hereunder or under any Ancillary Agreement shall not
constitute confidential information and no party shall have any duty to the
other party to maintain such information as
confidential. Notwithstanding anything herein to the contrary, to the
extent this Agreement purports to require Company to grant to Agent a Lien on
any of the Telecommunications Licenses for the benefit of the Creditor Parties,
then the Agent shall only have a Lien on such Telecommunications Licenses at
such times and to the extent that a Lien on such Telecommunications Licenses is
permitted under the Communications Laws, but the Agent shall have a Lien, to the
maximum extent permitted by law, on all rights incident or appurtenant to such
Telecommunications Licenses and the right to receive all proceeds derived from
or in connection with the sale, assignment or transfer of such
Telecommunications Licenses. The Companies acknowledge that, upon the
occurrence and during the continuance of an Event of Default and at Agent’s
request, such Companies shall immediately file, or cause to be filed, such
applications for approval and shall take all other and further actions
reasonably required by the Agent to obtain such approvals or consents by a
Governmental Authority as are necessary to transfer ownership and control to the
Creditor Parties or trustee or other fiduciary acting in lieu of the Creditor
Parties in order to ensure compliance with the Communications Laws, on of behalf
and for the benefit of Creditor Parties or their successors or assigns, of the
Telecommunications Licenses held by them.
22. Waivers. To the full extent permitted by
applicable law and except as otherwise provided in this Agreement or any
Ancillary Agreement, each Company hereby waives (a) presentment, demand and
protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all of this Agreement and the
Ancillary Agreements or any other notes, commercial paper, Accounts, contracts,
Documents, Instruments, Chattel Paper and guaranties at any time held by the
Agent on which such Company may in any way be liable, and hereby ratifies and
confirms whatever the Agent may do in this regard; (b) all rights to notice and
a hearing prior to the Agent’s taking possession or control of, or to the
Agent’s replevy, attachment or levy upon, any Collateral or any bond or security
that might be required by any court prior to allowing the Agent to exercise any
of its remedies; and (c) the benefit of all valuation, appraisal and exemption
laws. Each Company acknowledges that it has been advised by counsel
of its choices and decisions with respect to this Agreement, the Ancillary
Agreements and the transactions evidenced hereby and thereby.
23. Expenses. The Companies shall jointly and severally
pay all of the Agent’s out-of-pocket costs and expenses, including reasonable
fees and disbursements of in-house or outside counsel and appraisers, in
connection with (x) the preparation, execution and delivery of this Agreement
and the Ancillary Agreements, and (y) in connection with the prosecution or
defense of any action, contest, dispute, suit or proceeding concerning any
matter in any way arising out of, related to or connected with this Agreement or
any Ancillary Agreement. The Companies shall also jointly and
severally pay all of the Agent’s reasonable fees, charges, out-of-pocket costs
and expenses, including fees and disbursements of counsel and appraisers, in
connection with (a) the preparation, execution and delivery of any waiver, any
amendment thereto or consent proposed or executed in connection with the
transactions contemplated by this Agreement or the Ancillary Agreements, (b) the
Agent’s obtaining performance of the Obligations under this Agreement and any
Ancillary Agreements, including, but not limited to, the enforcement or defense
of the Agent’s security interests, assignments of rights and Liens hereunder as
valid perfected security interests, (c) any attempt to inspect, verify, protect,
collect, sell, liquidate or otherwise dispose of any Collateral, (d) any
appraisals or re appraisals of any property (real or personal) pledged to the
Agent by any Company or any of its Subsidiaries as Collateral for, or any other
Person as security for, the Obligations hereunder and (e) any consultations in
connection with any of the foregoing. The Companies shall also
jointly and severally pay each Creditor Party the customary bank charges for any
bank services (including wire transfers) performed or caused to be performed by
it for any Company or any of its Subsidiaries at any Company’s or such
Subsidiary’s request or in connection with any Company’s loan account with such
Creditor Party. All such costs and expenses together with all filing,
recording and search fees, taxes and interest payable by the Companies to the
Creditor Parties shall be payable on demand and shall be secured by the
Collateral. If any tax by any Governmental Authority is or may be
imposed on or as a result of any transaction between any Company and/or any
Subsidiary thereof, on the one hand, and Creditor Party on the other hand, which
such Creditor Party is or may be required to withhold or pay (including, without
limitation, as a result of a breach by any Company or any of its Subsidiaries of
Section 13(u) herein), the Companies hereby jointly and severally indemnify and
hold such Creditor Party harmless in respect of such taxes, and the Companies
will repay to such Creditor Party the amount of any such taxes which shall be
charged to the Companies’ account; and until the Companies shall furnish such
Creditor Party with indemnity therefor (or supply such Creditor Party with
evidence satisfactory to it that due provision for the payment thereof has been
made), such Creditor Party may hold without interest any balance standing to
each Company’s credit and the Agent shall retain its Liens in any and all
Collateral.
24. Assignment;
Register.
(a)
Each Lender may assign any or all of the Obligations to any Person and,
subject to acceptance and recordation thereof by the Agent pursuant to Section
24(b) and receipt by the Agent of a copy of the agreement or instrument pursuant
to which such assignment is made (each such agreement or instrument, an “Assignment
Agreement”), any such assignee shall succeed to all of the Lenders’
rights with respect thereto; provided that no Lender shall be permitted to
effect any such assignment to a direct competitor of any Company unless an Event
of Default has occurred and is continuing. Each Lender may from time
to time sell or otherwise grant participations in any of the Obligations and the
holder of any such participation shall, subject to the terms of any agreement
between such Lender and such holder, be entitled to the same benefits as such
Lender with respect to any security for the Obligations in which such holder is
a participant. Each Company agrees that each such holder may exercise
any and all rights of banker’s lien, set-off and counterclaim with respect to
its participation in the Obligations as fully as though such Company were
directly indebted to such holder in the amount of such
participation. No Company may assign any of its rights or obligations
hereunder without the prior written consent of the Agent. All of the
terms, conditions, promises, covenants, provisions and warranties of this
Agreement shall inure to the benefit of each of the undersigned, and shall bind
the representatives, successors and permitted assigns of each
Company.
(b) The
Agent shall maintain, or cause to be maintained, for this purpose only as agent
for each Company, (i) a copy of each Assignment Agreement delivered to it and
(ii) a book entry system, within the meaning of U.S. Treasury Regulation
Sections 5f.103-1(c) and 1.871-14(c) (the “Register”), in which
it will register the name and address of each Lender and the name and address of
each assignee of each Lender under this Agreement, and the principal amount of,
and stated interest on, the Loans owing to each such Lender and assignee
pursuant to the terms hereof and each Assignment Agreement. The
right, title and interest of the Lenders and their assignees in and to such
Loans shall be transferable only upon notation of such transfer in the Register,
and no assignment thereof shall be effective until recorded
therein. The Companies and each Creditor Party shall treat each
Person whose name is recorded in the Register as a Lender pursuant to the terms
hereof as a Lender and owner of an interest in the Obligations hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary or any
notation of ownership or other writing or any Note. The Register
shall be available for inspection by any Company or Lender, at any reasonable
time and from time to time, upon reasonable prior notice.
25. No Waiver;
Cumulative Remedies. Failure by any Creditor Party to exercise
any right, remedy or option under this Agreement, any Ancillary Agreement or any
supplement hereto or thereto or any other agreement between or among any Company
and such Creditor Party in exercising the same, will not operate as a waiver; no
waiver by any Creditor Party will be effective unless it is in writing and then
only to the extent specifically stated. The Creditor Parties’ rights
and remedies under this Agreement and the Ancillary Agreements will be
cumulative and not exclusive of any other right or remedy which any of the
Creditor Parties may have.
26. Application
of Payments. Each Company irrevocably waives the right to
direct the application of any and all payments at any time or times hereafter
received by the Agent from or on such Company’s behalf and each Company hereby
irrevocably agrees that the Agent shall have the continuing exclusive right to
apply and reapply any and all payments received at any time or times hereafter
against the Obligations hereunder in such manner as the Agent may deem advisable
notwithstanding any entry by the Agent upon any of the Agent’s books and
records.
27. Indemnity. Each Company hereby jointly and severally
indemnifies and holds each Creditor Party, and its respective affiliates,
employees, attorneys and agents (each, an “Indemnified Person”),
harmless from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses of any kind or nature whatsoever
(including attorneys’ fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal) which may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
credit having been extended, suspended or terminated under this Agreement or any
of the Ancillary Agreements or with respect to the execution, delivery,
enforcement, performance and administration of, or in any other way arising out
of or relating to, this Agreement, the Ancillary Agreements or any other
documents or transactions contemplated by or referred to herein or therein and
any actions or failures to act with respect to any of the foregoing, including
any actual or alleged presence or release of Hazardous Materials on or from any
property owned or operated by any Company or any of its Subsidiaries or any
liability under Environmental Law related in any way to the Company or any
Subsidiary, except to the extent that any such indemnified liability is finally
determined by a court of competent jurisdiction to have resulted solely from
such Indemnified Person’s gross negligence or willful misconduct. NO
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY COMPANY OR TO ANY OTHER
PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.
28. Revival. The Companies further agree that to the
extent any Company makes a payment or payments to any Creditor Party, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or federal
law, common law or equitable cause, then, to the extent of such payment or
repayment, the obligation or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if said payment had not been
made.
29. Borrowing
Agency Provisions.
(a) Each
Company hereby irrevocably designates Company Agent to be its attorney and agent
and in such capacity to borrow, sign and endorse notes, and execute and deliver
all instruments, documents, writings and further assurances now or hereafter
required hereunder, on behalf of such Company, and hereby authorizes the Agent
to pay over or credit all loan proceeds hereunder in accordance with the request
of Company Agent.
(b) The
handling of this credit facility as a co-borrowing facility with a borrowing
agent in the manner set forth in this Agreement is solely as an accommodation to
the Companies and at their request. The Agent shall not incur any
liability to any Company as a result thereof. To induce the Agent to
do so and in consideration thereof, each Company hereby indemnifies the Agent
and holds the Agent harmless from and against any and all liabilities, expenses,
losses, damages and claims of damage or injury asserted against the Agent by any
Person arising from or incurred by reason of the handling of the financing
arrangements of the Companies as provided herein, reliance by the Agent on any
request or instruction from Company Agent or any other action taken by the Agent
with respect to this Paragraph 29.
(c) All
Obligations shall be joint and several, and the Companies shall make payment
upon the maturity of the Obligations by acceleration or otherwise, and such
obligation and liability on the part of the Companies shall in no way be
affected by any extensions, renewals and forbearance granted by the Agent to any
Company, failure of the Agent to give any Company notice of borrowing or any
other notice, any failure of the Agent to pursue to preserve its rights against
any Company, the release by the Agent of any Collateral now or thereafter
acquired from any Company, and such agreement by any Company to pay upon any
notice issued pursuant thereto is unconditional and unaffected by prior recourse
by the Agent to any Company or any Collateral for such Company’s Obligations or
the lack thereof.
(d) Each
Company expressly waives any and all rights of subrogation, reimbursement,
indemnity, exoneration, contribution or any other claim which such Company may
now or hereafter have against the other or other Person directly or contingently
liable for the Obligations, or against or with respect to any other’s property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
all Obligations have been indefeasibly paid in full and this Agreement has been
irrevocably terminated.
(e) Each
Company represents and warrants to the Agent that (i) Companies have one or more
common shareholders, directors and officers, (ii) the businesses and corporate
activities of Companies are closely related to, and substantially benefit, the
business and corporate activities of Companies, (iii) the financial and other
operations of Companies are performed on a combined basis as if Companies
constituted a consolidated corporate group, (iv) Companies will receive a
substantial economic benefit from entering into this Agreement and will receive
a substantial economic benefit from the application of each Loan hereunder, in
each case, whether or not such amount is used directly by any Company and (v)
all requests for Loans hereunder by the Company Agent are for the exclusive and
indivisible benefit of the Companies as though, for purposes of this Agreement,
the Companies constituted a single entity.
30. Notices. Any notice or request hereunder may be
given to any Company, Company Agent or the Agent at the respective addresses set
forth below (or, in the case of any notice to any other Creditor Party, at the
address set forth opposite its name on the signature pages hereto) or as may
hereafter be specified in a notice designated as a change of address under this
Section. Any notice or request hereunder shall be given by registered
or certified mail, return receipt requested, hand delivery, overnight mail or
telecopy (confirmed by mail). Notices and requests shall be, in the
case of those by hand delivery, deemed to have been given when delivered to any
officer of the party to whom it is addressed, in the case of those by mail or
overnight mail, deemed to have been given three (3) Business Days after the date
when deposited in the mail or with the overnight mail carrier, and, in the case
of a telecopy, when confirmed.
Notices
shall be provided as follows:
|
If
to the Agent:
|
LV
Administrative Services, Inc.
|
||
|
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇.
|
|||
|
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
|||
|
Attention:
|
Portfolio
Services
|
||
|
Telephone:
|
(▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
Telecopier:
|
(▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
With
a copy to:
|
Loeb
& Loeb LLP
|
||
|
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
|
|||
|
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
|||
|
Attention:
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, Esq.
|
||
|
Telephone:
|
(▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
Telecopier:
|
(▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
If
to any Company, or Company Agent:
|
Rapid
Link, Incorporated
|
||
|
▇▇▇▇
▇▇ ▇▇▇▇
▇▇▇▇▇▇
|
|||
|
▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|||
|
Attention:
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
||
|
Telephone:
|
▇▇▇-▇▇▇-▇▇▇▇
|
||
|
Facsimile:
|
▇▇▇-▇▇▇-▇▇▇▇
|
||
|
With
a copy to:
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇ LLP
|
||
|
▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|||
|
Attention:
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
||
|
Telephone:
|
(▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
Facsimile:
|
(▇▇▇)▇▇▇-▇▇▇▇
|
||
or such
other address as may be designated in writing hereafter in accordance with this
Section 30 by such Person.
31. Governing
Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS
AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
(b) EACH
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND,
AND ANY CREDITOR PARTY, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY
OF THE ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS; PROVIDED, THAT EACH
CREDITOR PARTY AND EACH COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE
OF NEW YORK; AND FURTHER PROVIDED, THAT
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY CREDITOR
PARTY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
ANY CREDITOR PARTY. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND EACH COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS. EACH COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO COMPANY AGENT AT THE ADDRESS SET FORTH
IN SECTION 30 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF COMPANY AGENT’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(c) THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN ANY
CREDITOR PARTY, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, ANY ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
THERETO.
32. Limitation
of Liability. Each Company acknowledges and understands that
in order to assure repayment of the Obligations hereunder the Creditor Parties
may be required to exercise any and all of the Creditor Parties’ rights and
remedies hereunder and agrees that, except as limited by applicable law, neither
the Creditor Parties nor any of their respective agents shall be liable for acts
taken or omissions made in connection herewith or therewith except for actual
bad faith.
33. Entire Understanding; Maximum Interest. This Agreement and the
Ancillary Agreements contain the entire understanding among each Company, the
Lenders and the Agent as to the subject matter hereof and thereof and any
promises, representations, warranties or guarantees not herein contained shall
have no force and effect unless in writing, signed by each Company’s and the
Agent. Neither this Agreement, the Ancillary Agreements, nor any
portion or provisions thereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged. Nothing contained in this Agreement, any
Ancillary Agreement or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the Maximum Legal
Rate. In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the Maximum Legal Rate, any payments
in excess of such maximum shall be credited against amounts owed by the
Companies to the Creditor Parties and thus refunded to the
Companies.
34. Severability. Wherever possible each provision of
this Agreement or the Ancillary Agreements shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement or the Ancillary Agreements shall be prohibited by or invalid under
applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions thereof.
35. Survival. The representations, warranties, covenants
and agreements made herein shall survive any investigation made by any Creditor
Party and the closing of the transactions contemplated hereby to the extent
provided therein. All statements as to factual matters contained in
any certificate or other instrument delivered by or on behalf of the Companies
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Companies hereunder solely as
of the date of such certificate or instrument. All indemnities set
forth herein shall survive the execution, delivery and termination of this
Agreement and the Ancillary Agreements and the making and repaying of the
Obligations.
36. Captions. All captions are and shall be without
substantive meaning or content of any kind whatsoever.
37. Counterparts; Signatures. This Agreement may be
executed in one or more counterparts, each of which shall constitute an original
and all of which taken together shall constitute one and the same
agreement. Any signature delivered by a party via facsimile or
electronic transmission shall be deemed to be any original signature
hereto.
38. 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, schedules or exhibits thereto.
39. Publicity. Each Company hereby authorizes each
Creditor Party to make appropriate announcements of the financial arrangement
entered into by and among each Company and each Creditor Party, including,
without limitation, announcements which are commonly known as tombstones, in
such publications and to such selected parties as the Agent shall in its sole
and absolute discretion deem appropriate, or as required by applicable
law.
40. Joinder. It is understood and agreed that any
Person that desires to become a Company hereunder, or is required to execute a
counterpart of this Agreement after the date hereof pursuant to the requirements
of this Agreement or any Ancillary Agreement, shall become a Company hereunder
by (a) executing a Joinder Agreement in form and substance satisfactory to the
Agent, (b) delivering supplements to such exhibits and annexes to this Agreement
and the Ancillary Agreements as the Agent shall reasonably request and (c)
taking all actions as specified in this Agreement as would have been taken by
such Company had it been an original party to this Agreement, in each case with
all documents required above to be delivered to the Agent and with all documents
and actions required above to be taken to the reasonable satisfaction of the
Agent.
41. Legends. The Securities shall bear legends as
follows;
(a) The
Notes shall bear substantially the following legend:
“THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION. THIS NOTE IS
REGISTERED WITH THE COMPANY AGENT PURSUANT TO SECTION 24(B) OF THE SECURITY
AGREEMENT. TRANSFER OF ALL OR ANY PORTION OF THIS NOTE IS PERMITTED
SUBJECT TO THE PROVISIONS SET FORTH IN SUCH SECTION 24(B) WHICH REQUIRE, AMONG
OTHER THINGS, THAT NO TRANSFER IS EFFECTIVE UNTIL THE TRANSFEREE IS REFLECTED AS
SUCH ON THE REGISTRY MAINTAINED WITH THE AGENT PURSUANT TO SUCH SECTION
24(B).”
(b) Any
shares of Common Stock issued pursuant to exercise of the Warrants, shall bear a
legend which shall be in substantially the following form until such shares are
covered by an effective registration statement filed with the
SEC:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES
LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, (B) AN EXEMPTION FROM
SUCH REGISTRATION OR (C) AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT
SUCH REGISTRATION IS NOT REQUIRED.”
(c) The
Warrants shall bear substantially the following legend:
“THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT AS TO
THIS WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS, (B) AN EXEMPTION FROM SUCH REGISTRATION OR (C)
AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT
REQUIRED.”
42. Agency. Each Lender has pursuant to an
Administrative and Collateral Agency Agreement hereby designated and appointed
the Agent as the administrative and collateral agent of such Lender under this
Agreement and the Ancillary Agreements.
[Balance
of page intentionally left blank; signature page follows.]
IN
WITNESS WHEREOF, the parties have executed this SECURITY AGREEMENT as of the
date first written above.
|
RAPID
LINK, INCORPORATED
|
|||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
|
TELENATIONAL
COMMUNICATIONS, INC.
|
|||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
|
ONE
RING NETWORKS, INC.
|
|||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
|
LV
ADMINISTRATIVE SERVICES, INC.,
|
|||||
|
as
Agent
|
|||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
|
LAURUS
MASTER FUND, LTD.
|
|||||
|
By:
|
Laurus
Capital Management, LLC, its investment manager
|
||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
|
VALENS
U.S. SPV I, LLC, as a Lender
|
|||||
|
By:
|
Valens
Capital Management, LLC, its investment manager
|
||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
|
VALENS
OFFSHORE SPV II, CORP., as a Lender
|
|||||
|
By:
|
Valens
Capital Management, LLC, its investment manager
|
||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
Annex A -
Definitions
“Account Debtor” means
any Person who is or may be obligated with respect to, or on account of, an
Account.
“Accountants” has the
meaning given to such term in Section 11(a).
“Accounts” means all
“accounts”, as such term is defined in the UCC, now owned or hereafter acquired
by any Person, including: (a) all accounts receivable, other
receivables, book debts and other forms of obligations (other than forms of
obligations evidenced by Chattel Paper or Instruments) (including any such
obligations that may be characterized as an account or contract right under the
UCC); (b) all of such Person’s rights in, to and under all purchase orders or
receipts for goods or services; (c) all of such Person’s rights to any goods
represented by any of the foregoing (including unpaid sellers’ rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (d) all rights to payment due to such
Person for Goods or other property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, for energy provided or to be provided,
for the use or hire of a vessel under a charter or other contract, arising out
of the use of a credit card or charge card, or for services rendered or to be
rendered by such Person or in connection with any other transaction (whether or
not yet earned by performance on the part of such Person); and (e) all
collateral security of any kind given by any Account Debtor or any other Person
with respect to any of the foregoing.
“Accounts
Availability” means ninety percent (90%) of the net face amount of
Eligible Accounts.
“Administrative and
Collateral Agency Agreement” means the Administrative and Collateral
Agency Agreement among the Agent, the Lenders and such other parties thereto
from time to time, as amended, modified, supplemented and restated from time to
time.
“Affiliate” means,
with respect to any Person, (a) any other Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is under
common control with such Person, (b) any other Person that, directly or
indirectly, owns or controls, whether beneficially, or as trustee, guardian or
other fiduciary, 10% or more of the Equity Interests having ordinary voting
power in the election of directors of such Person, (c) any other Person who is a
director, officer, joint venturer or partner (i) of such Person, (ii) of any
Subsidiary of such Person or (iii) of any Person described in clause (a) above
or (d) in the case of the Companies, the immediate family members, spouses and
lineal descendants of individuals who are Affiliates of such
Companies. For the purposes of this definition, control of a Person
shall mean the power (direct or indirect) to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise;
provided however, that the
term “Affiliate” shall specifically exclude any Creditor Party.
“Ancillary Agreements”
means the Notes, the Warrants, the Registration Rights Agreements, the Security
Documents, the Subordination Agreements, the Management Services Agreement and
all other agreements, instruments, documents, mortgages, pledges, powers of
attorney, consents, assignments, contracts, notices, security agreements, trust
agreements and guarantees whether heretofore, concurrently, or hereafter
executed by or on behalf of any Company, any of its Subsidiaries or any other
Person or delivered to any of the Creditor Parties, relating to this Agreement
or to the transactions contemplated by this Agreement or otherwise relating to
the relationship between or among any Company and any Creditor Party, as each of
the same may be amended, supplemented, restated or otherwise modified from time
to time.
“Assignment Agreement”
has the meaning given such term in Section 24(a).
“Balance Sheet Date”
has the meaning given such term in Section 12(f)(ii).
“Books and Records”
means all books, records, board minutes, contracts, licenses, insurance
policies, environmental audits, business plans, files, computer files, computer
discs and other data and software storage and media devices, accounting books
and records, financial statements (actual and pro forma), filings with
Governmental Authorities and any and all records and instruments relating to the
Collateral or otherwise necessary or helpful in the collection thereof or the
realization thereupon.
“Business Day” means a
day on which the Creditor Parties are open for business and that is not a
Saturday, a Sunday or other day on which banks are required or permitted to be
closed in the State of New York.
“Canmax” means Canmax
Retail Systems, Inc., a Texas corporation.
“Capital Availability
Amount” means One Million Two Hundred Thousand Dollars
($1,200,000).
“Capital Expenditures”
means, for any Person for any period, the aggregate of all expenditures, whether
or not made through the incurrence of Indebtedness, by such Person and its
Subsidiaries during such period for the acquisition, leasing (pursuant to a
capital lease), construction, replacement, repair, substitution or improvement
of fixed or capital assets or additions to equipment, in each case required to
be capitalized under GAAP on a Consolidated balance sheet of such
Person.
“Capital Expenditure
Amount” means the lesser of (a) $100,000 and (b) the amount of
Capital Expenditures by Companies on behalf of iBroadband of Texas, Inc. and
iBroadband Networks, Inc. made following the Closing Date for which the
Companies have provided the Agent with evidence satisfactory to the Agent of the
amount and scope of such Capital Expenditures.
“Capital Lease” means,
with respect to any Person, any lease of, or other arrangement conveying the
right to use, any property (whether real, personal or mixed) by such Person as
lessee that has been or should be accounted for as a capital lease on a balance
sheet of such Person prepared in accordance with GAAP.
“Capitalized Lease
Obligations” means, at any time, with respect to any Capital Lease, any
lease entered into as part of any sale/leaseback transaction of any Person or
any synthetic lease, the amount of all obligations of such Person that is (or
that would be, if such synthetic lease or other lease were accounted for as a
Capital Lease) capitalized on a balance sheet of such Person prepared in
accordance with GAAP.
“Charter” has the
meaning given such term in Section 12(c)(iv).
“Chattel Paper” means
all “chattel paper,” as such term is defined in the UCC, including electronic
chattel paper, now owned or hereafter acquired by any Person.
“Closing Date” means
the date on which any Company shall first receive proceeds of the initial Loans
or the date hereof, if no Loan is made under the facility on the date
hereof.
“Code” has the meaning
given such term in Section 15(i).
“Collateral” means all
of each Company’s property and assets, whether real or personal, tangible or
intangible, and whether now owned or hereafter acquired, or in which it now has
or at any time in the future may acquire any right, title or interests including
all of the following property in which it now has or at any time in the future
may acquire any right, title or interest:
(a) all
Inventory;
(b) all
Equipment;
(c) all
Fixtures;
(d) all
Goods;
(e) all
General Intangibles;
(f)
all Accounts;
(g) all
Deposit Accounts, other bank accounts and all funds on deposit
therein;
(h) all
Investment Property;
(i)
all Equity Interests;
(j)
all Chattel Paper;
(k) all
Letter-of-Credit Rights;
(l)
all Instruments;
(m) all
Commercial Tort Claims, including without limitation the claims set forth on
Schedule
1(A);
(n) all
Books and Records;
(o) all
Intellectual Property;
(p) all
Documents;
(q) all
Supporting Obligations including letters of credit and guarantees issued in
support of Accounts, Chattel Paper, General Intangibles and Investment
Property;
(r) (i)
all money, cash and cash equivalents and (ii) all cash held as cash collateral,
all other cash or property at any time on deposit with or held by the Agent for
the account of any Company (whether for safekeeping, custody, pledge,
transmission or otherwise); and
(s) all
products and Proceeds of all or any of the foregoing, tort claims and all claims
and other rights to payment including (i) insurance claims against third parties
for loss of, damage to, or destruction of, the foregoing Collateral and (ii)
payments due or to become due under leases, licenses, rentals and
hires of any or all of the foregoing and Proceeds payable under, or unearned
premiums with respect to policies of insurance in whatever form.
“Commercial Tort
Claims” means all “commercial tort claims”, as such term is defined in
the UCC, now owned or hereafter acquired by any Person.
“Commitment Annex”
means Annex B
to this Agreement.
“Common Stock” means
the shares of stock representing the Parent’s common equity
interests.
“Communications Laws”
means the Communications Act of 1934, as amended, all other national, federal,
state, or local laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority (including the FCC, any State PUC or
Foreign Regulatory Authority) relating in any way to the offering or provision
of telecommunications or communications services.
“Company Agent” means
Rapid Link, Incorporated, a Delaware corporation.
“Compliance
Certificate” means a certificate substantially in the form of Exhibit
C.
“Consolidated” means,
with respect to any Person, the accounts of such Person and its Subsidiaries
consolidated in accordance with GAAP.
“Consolidated EBITDA”
means, with respect to any Person for any period, (a) the Consolidated Net
Income of such Person for such period plus (b) the sum of, in each case to the
extent included in the calculation of such Consolidated Net Income but without
duplication, (i) any provision for United States federal income taxes or other
taxes measured by net income, (ii) Consolidated Interest Expense, amortization
of debt discount and commissions and other fees and charges associated with
Indebtedness (except amortization and expenses related to the consummation of
the initial Loans on the Closing Date and the payment of all fees, costs and
expenses associated with the foregoing), (iii) any loss from extraordinary
items, (iv) any depreciation, depletion and amortization expense, (v) any
aggregate net loss on the sale of property (other than Accounts and Inventory
(as defined under the applicable UCC) outside the ordinary course of business
and (vi) any other non-cash expenditure, charge or loss for such period (other
than any non-cash expenditure, charge or loss relating to write-offs,
write-downs or reserves with respect to accounts and inventory), including the
amount of any compensation deduction as the result of any grant of Equity
Interests to employees, officers, directors or consultants and minus (c) the sum
of, in each case to the extent included in the calculation of such Consolidated
Net Income and without duplication, (i) any credit for United States federal
income taxes or other taxes measured by net income, (ii) any interest income,
(iii) any gain from extraordinary items and any other non-recurring gain, (iv)
any aggregate net gain from the sale of property (other than Accounts and
Inventory (as defined in the applicable UCC) out of the ordinary course of
business by such Person, (v) any other non-cash gain, including any reversal of
a charge referred to in clause (b)(vi) above by reason of a decrease in the
value of any Equity Interests, and (vi) any other cash payment in respect of
expenditures, charges and losses that have been added to Consolidated EBITDA of
such Person pursuant to clause (b)(vi) above in any prior
period.
“Consolidated Fixed Charge
Coverage Ratio” means, with respect to any Person for any period, the
ratio of (a) Consolidated EBITDA of such Person for such period minus Capital
Expenditures of such Person for such period minus the total liability for United
States federal income taxes and other taxes measured by net income actually
payable by such Person in respect of such period to (b) the Consolidated Fixed
Charges of such Person for such period.
“Consolidated Fixed
Charges” means, with respect to any Person for any period, the sum,
determined on a Consolidated basis, of (a) the Consolidated Interest Expense of
such Person for such period, (b) the principal amount of Consolidated Total Debt
of such Person having a scheduled due date during such period, (c) all cash
dividends payable by such Person on Equity Interests in respect of such period
to Persons other than such Person and (d) all commitment fees and other costs,
fees and expenses payable by such Person during such period in order to effect,
or because of, the incurrence of any Indebtedness.
“Consolidated Interest
Expense” means, for any Person for any period, (a) Consolidated total
interest expense of such Person and its Subsidiaries for such period and
including, in any event, (i) interest capitalized during such period and net
costs under Interest Rate Contracts for such period and (ii) all fees, charges,
commissions, discounts and other similar obligations (other than reimbursement
obligations) with respect to letters of credit, bank guarantees, banker’s
acceptances, surety bonds and performance bonds (whether or not matured) payable
by such Person and its Subsidiaries during such period minus (b) the sum of (i)
Consolidated net gains of such Person and its Subsidiaries under Interest Rate
Contracts for such period and (ii) Consolidated interest income of such Person
and its Subsidiaries for such period.
“Consolidated Leverage
Ratio” means, with respect to any Person as of any date, the ratio of (a)
Consolidated Total Debt of such Person outstanding as of such date excluding
intercompany loans made by such Person to any Subsidiary of such Person to (b)
Consolidated EBITDA for such Person for the last period of twelve (12)
consecutive calendar months ending on or before such date.
“Consolidated Net
Income” means, with respect to any Person, for any period, the
Consolidated net income (or loss) of such Person and its Subsidiaries for such
period; provided, however, that the following shall be excluded: (a)
the net income of any other Person in which such Person or one of its
Subsidiaries has a joint interest with a third-party (which interest does not
cause the net income of such other Person to be Consolidated into the net income
of such Person), except to the extent of the amount of dividends or
distributions paid to such Person or Subsidiary, (b) the net income of any
Subsidiary of such Person that is, on the last day of such period, subject to
any restriction or limitation on the payment of dividends or the making of other
distributions, to the extent of such restriction or limitation and (c) the net
income of any other Person arising prior to such other Person becoming a
Subsidiary of such Person or merging or consolidating into such Person or its
Subsidiaries.
“Contract Rate” has
the meaning given such term in the Secured Term Notes when used in reference to
the Term Loan and has the meaning given such term in the Secured Revolving Notes
when used in reference to the Revolving Loans.
“Consolidated Total
Debt” of any Person means all Indebtedness of a type described in clause
(a), (b), (c)(i), (d), (f), (g) or (i) of the definition thereof, in each case
of such Person and its Subsidiaries on a Consolidated basis.
“Contractual
Obligation” means, with respect to any Person, any provision of any
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which such Person is a party or by which it or any of its property
is bound or to which any of its property is subject.
“Customer Notices”
means the notices as required by the that the Parent or an Eligible Subsidiary
are required to deliver by the FCC and Texas Public Utility Commission to the
customers of iBroadband networks, Inc. and iBroadband of Texas,
Inc.
“Default” means any
act or event which, with the giving of notice or passage of time or both, would
constitute an Event of Default.
“Deferred Purchase Price Loan
Commitment Percentage” means, as to any Lender, (i) on the Closing Date,
the percentage set forth opposite such Lender’s name on the Commitment Annex
under the column “Deferred Purchase Price Loan Commitment Percentage” (if such
Lender’s name is not so set forth thereon, then, on the Closing Date, such
percentage for such Lender shall be deemed to be zero) and (ii) on any date
following the Closing Date, the percentage equal to the principal amount of
Deferred Purchase Price Loan held by such Lender on such date divided by the
aggregate principal amount of the Deferred Purchase Price Loan on such
date.
“Deferred Purchase Price
Notes” means those certain Deferred Purchase Price Notes dated as of the
date of consummation of the Secured Party Sale Transaction made by the Companies
in favor of the Secured Party Sale Lenders in the aggregate original face amount
of Two Million Five Hundred Eighteen Thousand Five Hundred Ninety Six and 39/100
Dollars ($2,518,596.39),
as each may be amended, supplemented, restated and/or otherwise modified from
time to time.
“Deposit Accounts”
means all “deposit accounts” as such term is defined in the UCC, now or
hereafter held in the name of any Person, including, without limitation, the
Lockboxes.
“Dial Thru
International” means Dial Thru International Corporation SA, a company
organized under the laws of South Africa.
“Disclosure Controls”
has the meaning given such term in Section 12(f)(iv).
“Documents” means all
“documents”, as such term is defined in the UCC, now owned or hereafter acquired
by any Person, wherever located, including all bills of lading, dock warrants,
dock receipts, warehouse receipts, and other documents of title, whether
negotiable or non-negotiable.
“Domestic Subsidiary”
mean, as respects each Person, each Subsidiary of such Person which is
incorporated, organized or formed under the laws of any jurisdiction of the
United States of America.
“DTI” means
DTI Com, Inc,, a Delaware corporation.
“Eligible Accounts”
means each Account of each Company which conforms to the following
criteria: (a) shipment of the merchandise or the rendition of
services has been completed; (b) no return, rejection or repossession of the
merchandise has occurred; (c) merchandise or services shall not have been
rejected or disputed by the Account Debtor and there shall not have been
asserted any offset, defense or counterclaim; (d) continues to be in full
conformity with the representations and warranties made by such Company to the
Agent with respect thereto; (e) the Agent is, and continues to be, satisfied
with the credit standing of the Account Debtor in relation to the amount of
credit extended; provided, however, that this
clause (e) shall not apply in the case of any determination made as to an
Account on or after the Specified Assignment Date; (f) there are no facts
existing or threatened which are likely to result in any adverse change in an
Account Debtor’s financial condition; (g) is documented by an invoice in a form
approved by the Agent and shall not be unpaid more than ninety (90) days from
invoice date; (h) not more than twenty-five percent (25%) of the unpaid amount
of invoices due from such Account Debtor remains unpaid more than ninety (90)
days from invoice date; (i) is not evidenced by chattel paper or an instrument
of any kind with respect to or in payment of the Account unless such instrument
is duly endorsed to and in possession of the Agent or represents a check in
payment of an Account; (j) the Account Debtor is located in the United States,
except as respects Offshore Accounts; provided, however, the Agent
may from time to time prior to the Specified Assignment Date, in the exercise of
its sole discretion and based upon satisfaction of certain conditions to be
determined at such time by the Agent, deem certain Accounts as Eligible Accounts
notwithstanding that such Account is due from an Account Debtor located outside
of the United States; (k) the Agent has a first priority perfected Lien in such
Account and such Account is not subject to any Lien other than Permitted Liens;
(l) does not arise out of transactions with any employee, officer, director,
stockholder or Affiliate of any Company; (m) is payable to such Company; (n)
does not arise out of a ▇▇▇▇ and hold sale prior to shipment and does not arise
out of a sale to any Person to which such Company is indebted; (o) is net of any
returns, discounts, claims, credits and allowances; (p) if the Account arises
out of contracts between such Company, on the one hand, and the United States,
on the other hand, any state, or any department, agency or instrumentality of
any of them, such Company has so notified the Agent, in writing, prior to the
creation of such Account, and there has been compliance with any governmental
notice or approval requirements, including compliance with the Federal
Assignment of Claims Act; (q) is a good and valid account representing an
undisputed bona fide indebtedness incurred by the Account Debtor therein named,
for a fixed sum as set forth in the invoice relating thereto with respect to an
unconditional sale and delivery upon the stated terms of goods sold by such
Company or work, labor and/or services rendered by such Company; (r) does not
arise out of progress ▇▇▇▇▇▇▇▇ prior to completion of the order; (s) the total
unpaid Accounts from such Account Debtor does not exceed twenty-five percent
(25%) of all Eligible Accounts; (t) such Company’s right to payment is absolute
and not contingent upon the fulfillment of any condition whatsoever; (u) such
Company is able to bring suit and enforce its remedies against the Account
Debtor through judicial process; (v) does not represent interest payments, late
or finance charges owing to such Company and (w) is otherwise satisfactory to
the Agent as determined by the Agent in the exercise of its sole discretion;
provided, however, that this
clause (w) shall not apply in the case of any determination made as to an
Account on or after the Specified Assignment Date. In the event any
Company requests that the Agent include within Eligible Accounts certain
Accounts of one or more of such Company’s acquisition targets, the Agent shall
at the time of such request consider such inclusion, but any such inclusion
shall be at the sole option of the Agent, may not first occur on or after the
Specified Assignment Date and shall at all times be subject to the execution and
delivery to the Agent of all such documentation (including, without limitation,
guaranty and security documentation) as the Agent may require in its sole
discretion.
“Eligible Subsidiary”
means each Subsidiary of the Parent set forth on Exhibit A hereto, as
the same may be updated from time to time with the Agent’s written
consent.
“Embarq Agreement”
means the interconnection, collocation and resale agreement between iBroadband
Networks, Inc. and United Telephone Company of Texas d/b/a Embarq.
“Environmental
Law” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to pollution or the environment , preservation or reclamation of natural
resources, the management, generation, use, handling, treatment, transportation,
storage, disposal or release or threatened release of or exposure to Hazardous
Materials, or occupational health and safety.
“Equipment” means all
“equipment” as such term is defined in the UCC, now owned or hereafter acquired
by any Person, wherever located, including any and all machinery, apparatus,
equipment, fittings, furniture, Fixtures, motor vehicles and other tangible
personal property (other than Inventory) of every kind and description that may
be now or hereafter used in such Person’s operations or that are owned by such
Person or in which such Person may have an interest, and all parts, accessories
and accessions thereto and substitutions and replacements
therefor.
“Equity Interests”
shall mean, with respect to any Person, any and all shares, rights to purchase,
options, warrants, general, limited or limited liability partnership interests,
member interests, units, participations or other equivalents of or interest in
(regardless of how designated) equity of such Person, whether voting or
nonvoting, including common stock, preferred stock, convertible securities or
any other “equity security” (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC (or any successor thereto)
under the Exchange Act).
“ERISA” has the
meaning given such term in Section 12(bb).
“Event of Default”
means the occurrence of any of the events set forth in Section 20.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended.
“Exchange Act Filings”
means the Parent’s filings under the Exchange Act made prior to the date of this
Agreement.
“Excluded Taxes”
means, with respect to any Creditor Party, taxes imposed on or measured by its
overall net income and franchise taxes imposed on it in lieu of net income
taxes, by the jurisdiction (or any political subdivision thereof) under the laws
of which such Creditor Party is incorporated or organized or by the jurisdiction
(or any political subdivision thereof) in which the principal place of
management or applicable lending office of such Creditor Party is
located.
“FCC” means the United
States Federal Communications Commission or any successor agency
thereof.
“FCC Approval” means
the approval by the FCC to the transfer of control of the customer lines of
occurring pursuant to the Secured Party Sale Transaction.
“Financial Reporting
Controls” has the meaning given such term in Section
12(f)(v).
“FINRA” has the
meaning given such term in Section 13(b).
“Fixtures” means all
“fixtures” as such term is defined in the UCC, now owned or hereafter acquired
by any Person.
“Foreign Regulatory
Authority” means any national (or political subdivision thereof)
Governmental Authority in a jurisdiction other than the United States having
utility or communications regulatory authority over any Subsidiary, or any
applicable successor agency.
“Formula Amount” has
the meaning given such term in Section 2(a)(i).
“GAAP” means generally
accepted accounting principles, practices and procedures in effect from time to
time in the United States of America.
“General Intangibles”
means all “general intangibles” as such term is defined in the UCC, now owned or
hereafter acquired by any Person and in any event shall include all right, title
and interest that such Person may now or hereafter have in or under any
contract, all Payment Intangibles, customer lists, Intellectual Property,
interests in partnerships, joint ventures and other business associations,
permits, proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs, knowledge,
know-how, Software, data bases, data, skill, expertise, experience, processes,
models, drawings, materials, Books and Records, Goodwill (including the Goodwill
associated with any Intellectual Property), all rights and claims in or under
insurance policies (including insurance for fire, damage, loss, and casualty,
whether covering personal property, real property, tangible rights or intangible
rights, all liability, life, key-person, and business interruption insurance,
and all unearned premiums), uncertificated securities, choses in action, deposit
accounts, rights to receive tax refunds and other payments, rights to received
dividends, distributions, cash, Instruments and other property in respect of or
in exchange for pledged Equity Interests and Investment Property, and rights of
indemnification.
“Goods” means all
“goods”, as such term is defined in the UCC, now owned or hereafter acquired by
any Person, wherever located, including embedded software to the extent included
in “goods” as defined in the UCC, manufactured homes, fixtures, standing timber
that is cut and removed for sale and unborn young of animals.
“Goodwill” means all
goodwill, trade secrets, proprietary or confidential information, technical
information, procedures, formulae, quality control standards, designs, operating
and training manuals, customer lists, and distribution agreements now owned or
hereafter acquired by any Person.
“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, and any agency, department or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to utility or communications regulatory authority, including, without
limitation, the FCC, a State PUC, and a Foreign Regulatory
Authority.
“Guaranty Obligation”
means, as applied to any Person, any direct or indirect liability, contingent or
otherwise, of such Person for any Indebtedness, lease, dividend or other
obligation (the “primary obligation”) of another Person (the “primary obligor”),
if the purpose or intent of such Person in incurring such liability, or the
economic effect thereof, is to guarantee such primary obligation or provide
support, assurance or comfort to the holder of such primary obligation or to
protect or indemnify such holder against loss with respect to such primary
obligation, including (a) the direct or indirect guaranty, endorsement (other
than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of any primary
obligation, (b) the incurrence of reimbursement obligations with respect to any
letter of credit or bank guarantee in support of any primary obligation, (c) the
existence of any Lien, or any right, contingent or otherwise, to receive a Lien,
on the property of such Person securing any part of any primary obligation and
(d) any liability of such Person for a primary obligation through any
Contractual Obligation (contingent or otherwise) or other arrangement (i) to
purchase, repurchase or otherwise acquire such primary obligation or any
security therefore or to provide funds for the payment or discharge of such
primary obligation (whether in the form of a loan, advance, stock purchase,
capital contribution or otherwise), (ii) to maintain the solvency, working
capital, equity capital or any balance sheet item, level of income or cash flow,
liquidity or financial condition of any primary obligor, (iii) to make
take-or-pay or similar payments, if required, regardless of non-performance by
any other party to any Contractual Obligation, (iv) to purchase, sell or lease
(as lessor or lessee) any property, or to purchase or sell services, primarily
for the purpose of enabling the primary obligor to satisfy such primary
obligation or to protect the holder of such primary obligation against loss or
(v) to supply funds to or in any other manner invest in, such primary obligor
(including to pay for property or services irrespective of whether such property
is received or such services are rendered); provided, however, that “Guaranty
Obligations” shall not include (x) endorsements for collection or deposit in the
ordinary course of business and (y) product warranties given in the ordinary
course of business. The outstanding amount of any Guaranty Obligation
shall equal the outstanding amount of the primary obligation so guaranteed or
otherwise supported or, if lower, the stated maximum amount for which such
Person may be liable under such Guaranty Obligation.
“Hazardous Materials”
means materials, wastes or pollutants listed or defined as “hazardous
substances”, “hazardous wastes” ,”toxic substances” or by words of similar
import or any other substance or waste otherwise regulated by applicable
Environmental Law, including nuclear materials and radioactive substances or
wastes, petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes,
and toxic mold.
“Hedging Agreement”
means any Interest Rate Contract, foreign exchange, swap, option or forward
contract, spot, cap, floor or collar transaction, any other derivative
instrument and any other similar speculative transaction and any other similar
agreement or arrangement designed to alter the risks of any Person arising from
fluctuations in any underlying variable.
“Indebtedness” of any
Person means, without duplication, any of the following, whether or not
matured: (a) all indebtedness for borrowed money (including, without
limitation, all principal, interest, fees and charges relating thereto), (b) all
obligations evidenced by notes, bonds, debentures or similar instruments, (c)
all reimbursement and all obligations with respect to (i) letters of credit,
bank guarantees or bankers’ acceptances or (ii) surety, customs, reclamation or
performance bonds (in each case not related to judgments or litigation) other
than those entered into in the ordinary course of business, (d) all obligations
to pay the deferred purchase price of property or services, other than trade
payables incurred in the ordinary course of business, (e) all obligations
created or arising under any conditional sale or other title retention
agreement, regardless of whether the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property, (f) all Capitalized Lease Obligations, (g) all obligations,
whether or not contingent, to purchase, redeem, retire, defease or otherwise
acquire for value any of its own Equity Interests (or any Equity Interests of a
direct or indirect parent entity thereof) prior to the date that is 180 days
after the maturity of the Notes, valued at, in the case of redeemable preferred
Equity Interests, the greater of the voluntary liquidation preference and the
involuntary liquidation preference of such Equity Interests plus accrued and
unpaid dividends, (h) all payments that would be required to be made in respect
of any Hedging Agreement in the event of a termination (including an early
termination) on the date of determination and (i) all Guaranty Obligations for
obligations of any other Person constituting Indebtedness of such other Person;
provided, however, that the items in each of clauses (a) through (i) above shall
constitute “Indebtedness” of such Person solely to the extent, directly or
indirectly, (x) such Person is liable for any part of any such item, (y) any
such item is secured by a Lien on such Person’s property or (z) any other Person
has a right, contingent or otherwise, to cause such Person to become liable for
any part of any such item or to grant such a Lien.
“Interest Rate
Contracts” means all interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and interest rate
insurance.
“Instruments” means
all “instruments”, as such term is defined in the UCC, now owned or hereafter
acquired by any Person, wherever located, including all certificated securities
and all promissory notes and other evidences of indebtedness, other than
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
“Intellectual
Property” means any and all of the following, throughout the
world, patents, trademarks tradenames, corporate names, fictitious
business names, internet domain names, trade styles, service marks, logos, and
other source of business identifiers and the goodwill symbolized by
and connected with the use thereof; copyrights, mask works, designs, inventions,
trade secrets, information, databases, rights of publicity, software, and any
other proprietary rights and processes; any licenses to use any of the foregoing
owned by a third party; registrations, applications and recordings
pertaining to any of the foregoing; and rights to ▇▇▇ for past, present and
future infringement, dilution, misappropriation, or other violation of any of
the foregoing.
“Interconnection
Agreement” means an interconnection, collocation and resale agreement
between the Parent or an Eligible Subsidiary and United Telephone Company of
Texas d/b/a Embarq or such other incumbent local exchange carrier acceptable to
Agent.
“Inventory” means all
“inventory”, as such term is defined in the UCC, now owned or hereafter acquired
by any Person, wherever located, including all inventory, merchandise, goods and
other personal property that are held by or on behalf of such Person for sale or
lease or are furnished or are to be furnished under a contract of service or
that constitute raw materials, work in process, finished goods, returned goods,
or materials or supplies of any kind, nature or description used or consumed or
to be used or consumed in such Person’s business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
all supplies and embedded software.
“Investment Property”
means all “investment property”, as such term is defined in the UCC, now owned
or hereafter acquired by any Person, wherever located.
“Lender” has the
meaning given such term in the preamble.
“Letter-of-Credit
Rights” means “letter-of-credit rights” as such term is defined in the
UCC, now owned or hereafter acquired by any Person, including rights to payment
or performance under a letter of credit, whether or not such Person, as
beneficiary, has demanded or is entitled to demand payment or
performance.
“Lien” means any
mortgage, security deed, deed of trust, pledge, hypothecation, assignment,
security interest, lien (whether statutory or otherwise), charge, claim or
encumbrance, or preference, priority or other security agreement or preferential
arrangement held or asserted in respect of any asset of any kind or nature
whatsoever including any conditional sale or other title retention agreement,
any lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement under the UCC
or comparable law of any jurisdiction.
“Loans” means
collectively, the Revolving Loans, the Term A Loans, the Term B Loans and the
Deferred Purchase Price Loan.
“Lockboxes” has the
meaning given such term in Section 8(a).
“Material Adverse
Effect” means a material adverse effect on (a) the business, assets,
liabilities, condition (financial or otherwise), properties, operations or
prospects of any Company or any of its Subsidiaries (taken individually and as a
whole), (b) any Company’s or any of its Subsidiary’s ability to pay or perform
the Obligations in accordance with the terms hereof or any Ancillary Agreement,
(c) the sufficiency and/or value of the Collateral, the Liens on the Collateral
or the priority of any such Lien or (d) the practical realization of the
benefits of the Creditor Parties’ rights and remedies under this Agreement and
the Ancillary Agreements. Without limiting the foregoing, any event
or occurrence adverse to a Company which results or could reasonably be expected
to result in costs and/or liabilities or loss of revenues, individually or in
the aggregate to such Company in excess of 30% of such Company’s revenue shall
constitute a Material Adverse Effect.
“Maximum Legal Rate”
has the meaning given such term in Section 5(a)(iv).
“Non-Excluded Taxes”
means all Taxes other than (i) Excluded Taxes and (ii) Other Taxes.
“Note” means any of
the Secured Revolving Notes, the Secured Term A Notes, the Secured Term B Notes
and/or the Deferred Purchase Price Notes.
“Obligations” means
all Loans, all advances, debts, liabilities, obligations, covenants and duties
owing by each Company and each of its Subsidiaries to any Creditor Party (or any
corporation that directly or indirectly controls or is controlled by or is under
common control with any of them) of every kind and description (whether or not
evidenced by any note or other instrument and whether or not for the payment of
money or the performance or non-performance of any act), direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, whether existing by operation of law or otherwise
now existing or hereafter arising including any debt, liability or obligation
owing from any Company and/or each of its Subsidiaries to others which any
Creditor Party may have obtained by assignment or otherwise and further
including all interest (including interest accruing at the then applicable rate
provided in this Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in this Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, whether or not a claim for post-filing or post-petition
interest is allowed or allowable in such proceeding), charges or any other
payments each Company and each of its Subsidiaries is required to make by law or
otherwise arising under or as a result of this Agreement, the Ancillary
Agreements or otherwise, together with all reasonable expenses and reasonable
attorneys’ fees chargeable to the Companies’ or any of their Subsidiaries’
accounts or incurred by any Creditor Party in connection
therewith.
“Offshore Accounts”
means those Accounts of a Company due from United States citizens located
outside of the United States on a United States military base with an APO/FPO
address in an aggregate amount not to exceed $300,000 or such other amount as
the Agent shall from time to time determine.
“Other Taxes” means
any and all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made
hereunder or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Ancillary Agreement.
“Overadvance” has the
meaning given such term in Section 2(a)(ii).
“Parent” has the
meaning given such term in the preamble.
“Payment Intangibles”
means all “payment intangibles” as such term is defined in the UCC, now owned or
hereafter acquired by any Person, including, a General Intangible under which
the Account Debtor’s principal obligation is a monetary obligation.
“Permitted Liens”
means (a) Liens of carriers, warehousemen, artisans, bailees, mechanics and
materialmen incurred in the ordinary course of business securing sums not
overdue; (b) Liens incurred in the ordinary course of business in connection
with worker’s compensation, unemployment insurance or other forms of
governmental insurance or benefits, relating to employees, securing sums (i) not
overdue or (ii) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of the Companies and
their Subsidiaries, as applicable, in conformity with GAAP; (c) licenses of
Intellectual Property granted by the Company prior to the date hereof, Licenses
of Intellectual Property granted in the ordinary course of business consistent
with past practices on convincingly reasonable terms; (d) Liens in favor of the
Agent; (e) Liens for taxes (i) not yet due or (ii) being diligently contested in
good faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Companies and their
Subsidiaries, as applicable, in conformity with GAAP; and which have no effect
on the priority of Liens in favor of the Agent or the value of the assets in
which the Agent has a Lien; (f) Purchase Money Liens securing Purchase Money
Indebtedness to the extent permitted in this Agreement and (f) Liens specified
on Schedule 2
hereto.
“Person” means any
individual, sole proprietorship, partnership, limited liability partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof),
and shall include such Person’s successors and assigns.
“Principal Market”
means the NASD Over The Counter Bulletin Board, NASDAQ Capital Market, NASDAQ
National Market System, American Stock Exchange or New York Stock Exchange
(whichever of the foregoing is at the time the principal trading exchange or
market for the Common Stock).
“Proceeds” means
“proceeds”, as such term is defined in the UCC and, in any event, shall
include: (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Company or any other Person from time to
time with respect to any Collateral; (b) any and all payments (in any form
whatsoever) made or due and payable to any Company from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of any Collateral by any governmental body, governmental authority,
bureau or agency (or any person acting under color of governmental authority);
(c) any claim of any Company against third parties (i) for past, present or
future infringement of any Intellectual Property or (ii) for past, present or
future infringement or dilution of any trademark or trademark license or for
injury to the goodwill associated with any trademark, trademark registration or
trademark licensed under any trademark License; (d) any recoveries by any
Company against third parties with respect to any litigation or dispute
concerning any Collateral, including claims arising out of the loss or
nonconformity of, interference with the use of, defects in, or infringement of
rights in, or damage to, Collateral; (e) all amounts collected on, or
distributed on account of, other Collateral, including dividends, interest,
distributions and Instruments with respect to Investment Property and pledged
Equity Interests; and (f) any and all other amounts, rights to payment or other
property acquired upon the sale, lease, license, exchange or other disposition
of Collateral and all rights arising out of Collateral.
“Purchase Money
Indebtedness” means (a) any indebtedness incurred for the payment of all
or any part of the purchase price of any fixed asset, including indebtedness
under capitalized leases, (b) any indebtedness incurred for the sole purpose of
financing or refinancing all or any part of the purchase price of any fixed
asset, and (c) any renewals, extensions or refinancings thereof (but not any
increases in the principal amounts thereof outstanding at that
time).
“Purchase Money Lien”
means any Lien upon any fixed assets that secures the Purchase Money
Indebtedness related thereto but only if such Lien shall at all times be
confined solely to the asset the purchase price of which was financed or
refinanced through the incurrence of the Purchase Money Indebtedness secured by
such Lien and only if such Lien secures only such Purchase Money
Indebtedness.
“Register” has the
meaning given such term in Section 24(b).
“Registration Rights
Agreements” means that certain Registration Rights Agreement dated as of
the Closing Date by and between the Parent and the Agent and each other
registration rights agreement by and between the Parent and the Agent, as each
of the same may be amended, modified and supplemented from time to
time.
“Reserves” means an
amount equal to Three Hundred Thousand Dollars ($300,000) (the “Specified
Reserve Amount”) plus (a) until the occurrence of the Specified Assignment Date,
such additional reserves as the Agent may reasonably in its good faith judgment
deem proper and necessary from time to time, provided, however, if
Consolidated EBIDTA for the Parent (as reflected on the monthly Consolidated
Financial Statements for Parent delivered to Agent in accordance with the terms
of this Agreement) is greater than zero for any three (3) consecutive months
following the consummation of the Secured Party Sale Transaction, then the
Specified Reserve Amount shall be reduced to zero ($0); it being understood that
any such reduction of the Specified Amount to zero ($0), the Agent may establish
any reserves the Agent may reasonably in its good faith judgment deem proper and
necessary from time to time, and (b) on and after the Specified Assignment Date,
any reserves in effect prior to such date and on and after the Specified
Assignment Date, the Agent may institute reserves in the following
amounts:
(i)
if on the last day of any calendar month commencing on the
calendar month ending October 31, 2008, the Consolidated EBITDA of the Companies
and their Domestic Subsidiaries on a Consolidated basis is less than $1,500,000
but greater than or equal to $1,000,000 for the twelve (12) calendar month
period ending on such day, reserves against the Formula Amount in an amount not
greater than fifty percent (50%) of the Formula Amount;
(ii) if
on the last day of any calendar month commencing on the calendar month ending
October 31, 2008, the Consolidated EBITDA of the Companies and their Domestic
Subsidiaries on a Consolidated basis is less than $1,000,000 for the twelve (12)
calendar month period ending on such day, reserves against the Formula Amount in
an amount not greater than seventy-five percent (75%) of the Formula
Amount;
(iii) if
on the last day of any calendar month commencing on the calendar month ending
October 31, 2008, the Consolidated Leverage Ratio of the Companies and their
Domestic Subsidiaries on a Consolidated basis is greater than 2.50 to 1.00 but
less than or equal to 3.00 to 1.00, reserves against the Formula Amount in an
amount not greater than fifty percent (50%) of the Formula Amount;
(iv) if
on the last day of any calendar month commencing on the calendar month ending
October 31, 2008, the Consolidated Leverage Ratio of the Companies and their
Domestic Subsidiaries on a Consolidated basis is greater than 3.00 to 1.00,
reserves against the Formula Amount in an amount not greater than sixty percent
(60%) of the Formula Amount;
(v) if
on the last day of any calendar month commencing on the calendar month ending
October 31, 2008, the Consolidated Fixed Charge Coverage Ratio of the Companies
and their Domestic Subsidiaries on a Consolidated basis is less than 1.25 to
1.00 but greater than or equal to 1.15 to 1.00, reserves against the Formula
Amount in an amount not greater than forty percent (40%) of the Formula Amount;
or
if on the
last day of any calendar month commencing on the calendar month ending October
31, 2008, the Consolidated Fixed Charge Coverage Ratio of the Companies and
their Domestic Subsidiaries on a Consolidated basis is less than 1.15 to 1.00,
reserves against the Formula Amount in an amount not greater than seventy-five
percent (75%) of the Formula Amount.
“Revolving Commitment
Amount” means, as to any Lender, the dollar amount set forth opposite
such Lender’s name on the Commitment Annex under the column “Revolving
Commitment Amount” (if such Lender’s name is not so set forth thereon, then the
dollar amount on the Commitment Annex for the Revolving Commitment Amount for
such Lender shall be deemed to be zero), as such amount may be adjusted from
time to time by any amounts assigned (with respect to such Lender’s portion of
Revolving Loans outstanding and its commitment to make Revolving Loans) pursuant
to the terms of any and all effective Assignment Agreements to which such Lender
is a party.
“Revolving Commitment
Conditions” means satisfaction of the following conditions in a manner,
and evidenced as applicable by agreements, instruments and documents,
satisfactory in form and substance to Agent: (a) the consummation of
the Secured Party Sale, (b) no Event of Default shall have occurred and then be
continuing, (c) the execution and delivery by the Companies of the Secured
Revolving Notes and (d) the issuance of Warrants to the Lenders for shares of
Common Stock in an amount equal to twenty five percent (25%) of the Revolving
Commitment Amount divided by the Share Price.
“Revolving Commitment
Percentage” means, as to any Lender, (i) on the Closing Date, the
percentage set forth opposite such Lender’s name on the Commitment Annex under
the column “Revolving Commitment Percentage” (if such Lender’s name is not so
set forth thereon, then, on the Closing Date, such percentage for such Lender
shall be deemed to be zero) and (ii) on any date following the Closing Date, the
percentage equal to the Revolving Commitment Amount of such Lender on such date
divided by the Capital Availability Amount on such date.
“Revolving Loans” has
the meaning given such term in Section 2(a)(i) and shall include all other
extensions of credit hereunder and under any Ancillary Agreement.
“SEC” means the
Securities and Exchange Commission.
“SEC Reports” has the
meaning given such term in Section 12(u).
“Secured Party ▇▇▇▇ of
Sale” means the Secured Party ▇▇▇▇ of Sale in the form of Exhibit
D.
“Secured Party Sale
Lenders” means Laurus Master Fund, Ltd, and Valens U.S. SPV I,
LLC.
“Secured Party Sale
Conditions” means satisfaction of the following: (a) the
Parent or an Eligible Subsidiary shall have received an SPCOA; (b) the Parent or
an Eligible Subsidiary shall have received the FCC Approval; (c) the Parent or
an Eligible Subsidiary shall have provided the Customer Notices; and (d) the
Parent or an Eligible Subsidiary shall have entered into an Interconnection
Agreement.
“Secured Party Sale
Transaction” means the sale by the Secured Party Lenders to the Parent or
an Eligible Subsidiary of all of iBroadband Network, Inc.’s and iBroadband of
Texas, Inc.’s right, title and interest in and to substantially all of
iBroadband of Texas, Inc.’s and iBroadband Network, Inc.’s assets, on terms and
pursuant to the Secured Party ▇▇▇▇ of Sale and such other documentation
acceptable to Agent.
“Secured Revolving
Notes” means those certain Secured Revolving Notes dated as of the
Closing Date made by the Companies in favor of the Lender in the aggregate
original face amount of One Million Two Hundred Thousand Dollars ($1,200,000),
as each may be amended, supplemented, restated and/or otherwise modified from
time to time.
“Secured Term Notes”
means, collectively, the Secured Term A Notes, the Secured Term B Notes and the
Deferred Purchase Price Notes.
“Secured Term A Notes”
means those certain Secured Term A Notes dated as of the Closing Date made by
the Companies in favor of the Lenders in the aggregate original face amount of
One Million Seven Hundred Thousand Dollars ($1,700,000), as each may be amended,
supplemented, restated and/or otherwise modified from time to time.
“Secured Term B Notes”
means those certain Secured Term B Notes dated as of the Closing Date made by
the Companies in favor of the Lenders in the aggregate original face amount of
One Million Six Hundred Thousand Dollars ($1,600,000), as each may be amended,
supplemented, restated and/or otherwise modified from time to time.
“Securities” means the
Notes and the Warrants and the shares of Common Stock which may be issued
pursuant to exercise of such Warrants.
“Securities Act” has
the meaning given such term in Section 12(r).
“Security Documents”
means all security agreements, mortgages, cash collateral deposit letters,
pledges and other agreements which are executed by any Company or any of its
Subsidiaries in favor of the Agent for the ratable benefit of the Creditor
Parties.
“Share Price” means,
at the date of determination, (i) the daily volume weighted average price of the
Common Stock for the thirty (30) day period preceding such date on the OTC
Bulletin Board as reported by Bloomberg Financial L.P. (based on a Trading Day
from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (ii) if the Common Stock
is not then listed or quoted on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the "Pink Sheets" published by the Pink
Sheets, LLC (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so
reported; or (iii) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by
the Agent and reasonably acceptable to the Parent.
“Software” means all
“software” as such term is defined in the UCC, now owned or hereafter acquired
by any Person, including all computer programs and all supporting information
provided in connection with a transaction related to any program.
“Solvent” means, with
respect to any Person on a particular date, that on such date (a) the fair value
of the property of such Person is greater than the total amount of liabilities,
including contingent liabilities, of such Person; (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured; (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person’s ability to
pay as such debts and liabilities mature; and (d) such Person is not engaged in
a business or transaction, and is not about to engage in a business or
transaction, for which such Person’s property would constitute and unreasonably
small capital. The amount of contingent liabilities (such as
litigation, guaranties and pension plan liabilities) at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can reasonably be expected to
become an actual or matured liability.
“SPCOA” means a
Service Provider Certificate of Operating Authority and a Certificate of
Operating Authority.
“Specified Assignment
Date” means the first date on which any Person that is not a “United
States Person” as defined in Section 7701(a)(30) of the Code acquires any Loan,
portion thereof or interest therein, by assignment or otherwise, unless such
Person has provided to the Agent on or prior to such date a duly completed
Internal Revenue Service Form W-8ECI (or successor form).
“Specified Lenders”
means those Lenders making Revolving Loans, Term A Loans and/or Term B
Loans.
“State PUC” means any
state Governmental Authority having utility or communications regulatory
authority over any Company, or any applicable successor agency.
“Subordinated Debt
Documentation” means, collectively, (a) the Securities Purchase Agreement
dated as of January 28, 2002 between Rapid Link, Incorporated (f/k/a Dial-Thru
International Corporation) and GCA Strategic Investment Fund Limited (as
amended, modified, supplemented and/or restated from time to time, the “GCA January 28 2002
SPA”) and the other Transaction Agreements (as defined in the GCA January
28 2002 SPA), (b) the Securities Purchase Agreement dated as of January 14, 2002
between Rapid Link, Incorporated (f/k/a Dial-Thru International Corporation) and
GCA Strategic Investment Fund Limited (as amended, modified, supplemented and/or
restated from time to time, the “GCA January 14 2002
SPA”) and the other Transaction Agreements (as defined in the GCA January
14 2002 SPA), (c) the Securities Purchase Agreement dated as of July 24, 2003
between Rapid Link, Incorporated (f/k/a Dial-Thru International Corporation) and
GCA Strategic Investment Fund Limited (as amended, modified, supplemented and/or
restated from time to time, the “GCA July 2003 SPA”)
and the other Transaction Agreements (as defined in the GCA July 2003 SPA), (d)
the Securities Purchase Agreement dated as of February 27, 2006 between Rapid
Link, Incorporated and Trident Growth Fund, L.P. (as amended, modified,
supplemented and/or restated from time to time, the “Trident SPA”) and the
other Transaction Documents (as defined in the Trident SPA), (e) the Securities
Purchase Agreement dated as of October 31, 2007 between Rapid Link, Incorporated
and ▇▇▇▇ ▇▇▇▇▇▇▇ (as amended, modified, supplemented and/or restated from time
to time, the “▇▇▇▇▇▇▇
$500K SPA”), the 8% Secured Convertible Debenture issued in the original
principal amount of $500,000 and the other Transaction Documents (as defined in
the ▇▇▇▇▇▇▇ $500K SPA), (f) the Securities Purchase Agreement dated as of
October 31, 2007 between Rapid Link, Incorporated and ▇▇▇▇ ▇▇▇▇▇▇▇ (as amended,
modified, supplemented and/or restated from time to time, the “▇▇▇▇▇▇▇ $1.1MM SPA”),
the 8% Secured Convertible Debenture issued in the original principal amount of
$1,120,000 and the other Transaction Documents (as defined in the ▇▇▇▇▇▇▇ $1.1MM
SPA), (g) the Securities Purchase Agreement dated as of October 31, 2007 between
Rapid Link, Incorporated and APEX Acquisitions, Inc. (as amended, modified,
supplemented and/or restated from time to time, the “APEX $1.1MM SPA”),
the 8% Secured Convertible Debenture issued in the original principal amount of
$1,120,000 and the other Transaction Documents (as defined in the APEX $1.1MM
SPA), (h) the Securities Purchase Agreement dated as of October 31, 2007 between
Rapid Link, Incorporated and APEX Acquisitions, Inc. (as amended, modified,
supplemented and/or restated from time to time, the “APEX $500K SPA”), the
8% Secured Convertible Debenture issued in the original principal amount of
$500,000 and the other Transaction Documents (as defined in the APEX $500K SPA)
and (i) all other notes, documents, instruments and agreements now or any time
hereafter executed and/or delivered by any Company with or in favor of any
Subordinated Lender which evidences the indebtedness owed by such Company to
such Subordinated Lender.
“Subordinated Lenders”
means, collectively, Trident Growth Fund, L.P., APEX Acquisitions, Inc., GCA
Strategic Investment Fund Limited, ▇▇▇▇ ▇▇▇▇▇▇▇ and any other Person who enters
into a Subordination Agreement with the Agent with respect to amounts owed by
any Company to such Person.
“Subordination
Agreements” means, collectively, each of the Subordination Agreements
dated as of the date hereof executed by each Subordinated Lender in favor of the
Agent and acknowledged by the Companies, and any and all other subordination
agreements and/or intercreditor agreements accepted by the Agent from time to
time with respect to indebtedness of any Company.
“Subsidiary” means,
with respect to any Person, (i) any other Person whose shares of stock or other
ownership interests having ordinary voting power (other than stock or other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors or other governing body of
such other Person, are owned, directly or indirectly, by such Person or (ii) any
other Person in which such Person owns, directly or indirectly, more than 50% of
the equity interests at such time.
“Supporting
Obligations” means all “supporting obligations” as such term is defined
in the UCC.
“Taxes” means any and
all present or future taxes, duties, levies, imposts, deductions, assessments,
fees, withholdings or similar charges, and all liabilities with respect
thereto.
“Telecommunications
Contracts” means all contracts and agreements between any Company and
third parties for services and rights that are necessary for such Company to
operate its telecommunications or communications businesses, including without
limitation all contracts or agreements executed pursuant to Sections 251 and 252
of the Telecommunications Act of 1996, 46 USC Section 151 et seq.
“Telecommunications
Hardware” means Equipment of any Company which is located in such
Company’s service territory and not on a Company’s owned or leased premises
which is used by such Company to provide telecommunications services to its
customers.
“Telecommunications
Licenses” means the licenses, permits, authorizations, or certificates
granted by the FCC, any applicable State PUC, or Foreign Regulatory Authority,
and all extensions, additions and renewals thereto or thereof required for any
Company to operate its telecommunications or communications businesses and/or
qualify for receipt of any Governmental Authority’s high cost support or
universal service funds.
“Telenational” means
Telenational Communications, Inc., a Delaware corporation.
“Term” means the
Closing Date through the close of business on the day immediately preceding the
third anniversary of the Closing Date, subject to acceleration at the option of
the Agent, upon the occurrence of an Event of Default hereunder or other
termination hereunder.
“Term Loans” means,
collectively, Term Loan A, Term Loan B and the Deferred Purchase Price
Loan.
“Term Loan A” has the
meaning given such term in Section 2(b).
“Term Loan B” has the
meaning given such term in Section 2(c).
“Term Loan A Commitment
Percentage” means, as to any Lender, (i) on the Closing Date, the
percentage set forth opposite such Lender’s name on the Commitment Annex under
the column “Term Loan A Commitment Percentage” (if such Lender’s name is not so
set forth thereon, then, on the Closing Date, such percentage for such Lender
shall be deemed to be zero) and (ii) on any date following the Closing Date, the
percentage equal to the principal amount of Term Loan A held by such Lender on
such date divided by the aggregate principal amount of Term Loan A on such
date.
“Term Loan B Commitment
Percentage” means, as to any Lender, (i) on the Closing Date, the
percentage set forth opposite such Lender’s name on the Commitment Annex under
the column “Term Loan B Commitment Percentage” (if such Lender’s name is not so
set forth thereon, then, on the Closing Date, such percentage for such Lender
shall be deemed to be zero) and (ii) on any date following the Closing Date, the
percentage equal to the principal amount of Term Loan B held by such Lender on
such date divided by the aggregate principal amount of Term Loan B on such
date.
“Term Loan B
Conditions” means satisfaction of the following conditions in a manner,
and evidenced as applicable by agreements, instruments and documents,
satisfactory in form and substance to Agent: (a) the consummation of
the Secured Party Sale, (b) no Event of Default shall have occurred and then be
continuing, (c) the execution and delivery of the Secured Term B Notes by the
Companies and (d) the issuance of Warrants to the Lenders for shares of Common
Stock in an amount equal to twenty five percent (25%) of Term Loan B divided by
the Share Price.
“UCC” means the
Uniform Commercial Code as the same may, from time to time be in effect in the
State of New York; provided, that in the event that, by reason of mandatory
provisions of law, any or all of the perfection or priority of, or remedies with
respect to, the Agent’s Lien on any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York,
the term “UCC”
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions of this Agreement relating to such perfection,
priority or remedies and for purposes of definitions related to such provisions;
provided further, that to the extent that UCC is used to define any term herein
or in any Ancillary Agreement and such term is defined differently in different
Articles or Divisions of the UCC, the definition of such term contained in
Article or Division 9 shall govern.
“Warrant Shares” has
the meaning given such term in Section 12(a).
“Warrants” means each
Common Stock Purchase Warrant dated as of the Closing Date made by the Parent in
favor of the Lenders and each other warrant made by the Parent in favor the
Lenders, as each of the same may be amended, restated, modified and/or
supplemented from time to time.
Annex
A
Commitment
Annex
(as
of the Closing Date)
|
Lender
|
Revolving Commitment Amount
|
Revolving Commitment
Percentage
|
Term Loan A Commitment
Amount
|
Term Loan A Percentage
|
Term Loan B Commitment
Amount
|
Term Loan B Percentage
|
Deferred Purchase Price Commitment
Amount
|
Deferred Purchase Price
Percentage
|
||||||||||||||||||||||||
|
Valens U.S. SPV I, LLC
|
$ | 1,200,000 | 100 | % | $ | 0 | 0 | % | $ | 0 | 0 | % | $ | 292,709.40 | 11.62 | % | ||||||||||||||||
|
Valens Offshore SPV II,
Corp.
|
$ | 0 | 0 | % | $ | 1,800,000 | 100 | % | $ | 1,500,000 | 100 | % | 0 | % | 0 | % | ||||||||||||||||
|
Laurus Master Fund, Ltd.
|
$ | 0 | 0 | % | $ | 0 | 0 | % | $ | 0 | 0 | % | $ | 2,225,886.99 | 88.38 | % | ||||||||||||||||
|
Total
|
$ | 1,200,000 | 100 | % | $ | 1,800,000 | 100 | % | $ | 1,500,000 | 100 | % | $ | 2,518,596.39 | 100 | % | ||||||||||||||||
Exhibit
A
Eligible
Subsidiaries
Telenational
Communications, Inc., a Delaware corporation
One Ring
Networks, Inc., a Georgia corporation
Exhibit
B
Borrowing Base
Certificate
As
of ,
200
|
ACCOUNTS
RECEIVABLE per __________ Aging
|
0.00 | |||||||||||
|
Ineligible Accounts:
|
||||||||||||
|
Accounts
over 90 days from Invoice Date
|
0.00 | |||||||||||
|
Credit
Balances Over 90 days from Invoice Date
|
0.00 | |||||||||||
|
Intercompany
and Affiliate Accounts
|
0.00 | |||||||||||
|
__%
Concentration Cap
|
0.00 | |||||||||||
|
Contra
Accounts
|
0.00 | |||||||||||
|
Cash
Sales and COD Accounts
|
0.00 | |||||||||||
|
Foreign
Receivables
|
0.00 | |||||||||||
|
Government
Receivables (without Assignment of Claims)
|
0.00 | |||||||||||
|
Discounts,
Credits and Allowances
|
0.00 | |||||||||||
|
Cross-age
(__% Past Due)
|
0.00 | |||||||||||
|
▇▇▇▇
and Hold Invoices
|
0.00 | |||||||||||
|
Finance/Service/Late
Charges
|
0.00 | |||||||||||
|
Other:
|
0.00 | 0.00 | ||||||||||
|
ELIGIBLE
ACCOUNTS RECEIVABLE
|
||||||||||||
|
Accounts
Receivable Advance Rate
|
90 | % | ||||||||||
|
ACCOUNTS
RECEIVABLE AVAILABILITY
|
0.00 | |||||||||||
|
|
||||||||||||
|
TOTAL
AVAILABILITY
|
0.00 | |||||||||||
|
Less
Reserves
|
0.00 | |||||||||||
|
NET
AVAILABILITY
|
0.00 | |||||||||||
|
REVOLVING
CREDIT LINE
|
0.00 | |||||||||||
|
NET
BORROWING AVAILABILITY (Lesser of Line or Net
Availability)
|
0.00 | |||||||||||
|
Less: Lender
Loans
|
0.00 | |||||||||||
|
EXCESS/(DEFICIT)
AVAILABILITY
|
0.00 | |||||||||||
The
undersigned hereby certifies that all of the foregoing information regarding the
Eligible Accounts are true and correct on the date hereof and all Eligible
Accounts listed as eligible are eligible within the meaning given such term in
the Security Agreement dated _________, 200__ among the Borrowing Agent
signatory below, the other companies named therein, the purchasers party thereto
from time to time and LV Administrative Services, Inc., as administrative and
collateral agent for such purchasers.
_____________,
Borrowing Agent
|
By:
|
||
|
Name:
|
||
|
Title:
|