PROMISSORY NOTE
$10,000,000 Dallas, Texas July 1, 1996
FOR VALUE RECEIVED, the undersigned, CAPROCK FIBER NETWORK, LTD., a
Texas limited partnership (herein called "Borrower"), hereby promises to pay
to the order of BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking
association (herein called "Bank"), the principal sum of Ten Million Dollars
($10,000,000) or, if less, the aggregate unpaid principal amount of the Loan
made under this Note by Bank to Borrower pursuant to the terms of the Loan
Agreement (as hereinafter defined), together with interest on the unpaid
principal balance thereof as hereinafter set forth, both principal and
interest payable as herein provided in lawful money of the United States of
America at the offices of Bank, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ or at such
other place within Dallas County, Texas, as from time to time may be
designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Loan Agreement
of even date herewith between Borrower and Bank (herein, as from time to time
supplemented, amended or restated, called the "Loan Agreement"), and is the
Note as defined therein, and (b) is subject to the terms and provisions of
the Loan Agreement, which contains provisions for payments and prepayments
hereunder and acceleration of the maturity hereof upon the happening of
certain stated events. Payments on this Note shall be made and applied as
provided herein and in the Loan Agreement. Reference is hereby made to the
Loan Agreement for a description of certain rights, limitations of rights,
obligations and duties of the parties hereto and for the meanings assigned to
terms used and not defined herein.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate" means, at any time, the sum of (x) the Base Rate Margin
plus (y) the floating annual interest rate established by Bank at that time
as its base-rate of interest, which may not be the lowest interest rate
charged by Bank on loans similar to that evidenced by this Note. The Base
Rate shall in no event, however, exceed the Highest Lawful Rate. The Base
Rate Margin means (a) zero, so long as no Event of Default has occurred and
is continuing, and (b) two percent (2%) upon the occurrence and during the
continuation of an Event of Default under Section 13(a) of the Loan
Agreement. With respect to interest accruing pursuant to clause (b) of the
immediately preceding sentence, the interest itself will not bear interest
if not paid when due.
"Base Rate Payment Date" means (i) the last day of each calendar
month, beginning July 31, 1996, and (ii) any day on which past due interest
or principal is owed hereunder and is unpaid. If the terms hereof or of
the Loan Agreement provide that payments of interest or principal hereon
shall be deferred from one Base Rate Payment Date to another day, such
other day shall also be a Base Rate Payment Date.
"Base Rate Portion" means any portion of the Loan not designated as a
Fixed Rate Portion.
"Business Day" means (a) for purposes of the Fixed Rate, a day when
commercial banks are open for international business in London, England,
and (b) otherwise, any day other than Saturday and Sunday, on which
commercial banks are open for business with the public in Dallas, Texas.
"Fixed Rate" means, for any Fixed Rate Portion and for the relevant
Interest Period, an annual interest rate (rounded upward, if necessary, to
the nearest 0.01%) equal to the sum of (a) the Fixed Rate Margin plus (b)
the quotient obtained by dividing (i) the rate that deposits in United
States dollars are offered to Bank in the London interbank market, at
approximately 11:00 a.m. London time two Business Days before the first
day of the applicable Interest Period, in an amount comparable to that
portion of the principal of this Note and having a maturity approximately
equal to the applicable Interest Period, by (ii) one minus the maximum
aggregate reserve requirements (including all basic, supplemental,
emergency, special, marginal, and other reserves required by applicable
law) applicable to a member bank of the Federal Reserve System for
eurocurrency fundings or liabilities in respect of the relevant Interest
Period. The Fixed Rate determined by Bank with respect to a particular
Fixed Rate Portion shall be fixed at such rate for the duration of the
associated Interest Period. The Fixed Rate Margin means (a) two and one-
half percent (2.5%) so long as no Event of Default has occurred and is
continuing, and (b) four and one-half percent (4.5%) upon the occurrence
and during the continuation of an Event of Default under Section 13(a) of
the Loan Agreement. With respect to interest accruing pursuant to clause
(b) of the immediately preceding sentence, the interest itself will not
bear interest if not paid when due.
"Fixed Rate Payment Date" means, with respect to any Fixed Rate
Portion: (i) the day on which the related Interest Period ends, and (ii)
any day on which past due interest or past due principal is owed hereunder
with respect to such Fixed Rate Portion and is unpaid. If the terms hereof
or of the Loan Agreement provide that payments of interest or principal
with respect to such Fixed Rate Portion shall be deferred from one Fixed
Rate Payment Date to another day, such other day shall also be a Fixed Rate
Payment Date.
"Fixed Rate Portion" means any portion of the unpaid principal balance
of this Note which Borrower designates as such in a Rate Election.
"Funding Loss" means any loss or expense that Bank incurs because (a)
Borrower fails or refuses (for any reason whatsoever other than a default
on the part of Bank) to take any advance that it has requested under this
Note or (b) Borrower pays or is deemed to have converted to the Base Rate
any portion of the principal of this Note before the last day of the
applicable Interest Period.
"Highest Lawful Rate" means the maximum nonusurious rate of interest
that Bank is permitted under applicable law to contract for, take, charge
or receive with respect to the loan.
"Interest Period" means, at Borrower's option, one, two or three
months, so long as (a) the initial Interest Period for any portion of
principal commences on the date it is advanced, and each subsequent
applicable Interest Period commences on the day when the next preceding
applicable Interest Period expires, (b) if any Interest Period begins on a
day for which no numerically corresponding Business Day in the calendar
month at the end of the
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Interest Period exists, then the Interest Period ends on the last Business
Day of that calendar month, and (c) no Interest Period may extend beyond
the scheduled repayment date for the applicable portion of principaL
"Quarterly Payment Date" means March 31, June 30, September 30 and
December 31 of each year.
"Rate Election" means each election by ▇▇▇▇▇▇▇▇ of a Fixed Rate
Portion made in the form of a Rate Election attached as Exhibit 1 hereto,
duly completed, and received by Bank not later than 10:00 a.m. Dallas,
Texas time, two Business Days before the first day of the specified
Interest Period.
Pursuant to a Rate Election, Borrower may from time to time designate
all or any portion of the loan as a Fixed Rate Portion; provided that without
the consent of Bank Borrower may make no such election during the continuance
of an Event of Default and that Borrower may make such an election with
respect to an already existing Fixed Rate Portion only if such election will
take effect at or after the termination of the Interest Period applicable to
such already existing Fixed Rate Portion. Each Rate Election shall be
irrevocable Borrower may make no Rate Election which does not specify an
Interest Period complying with the definition of "Interest Period". Upon the
termination of each Interest Period the portion of the Loan theretofore
constituting the related Fixed Rate Portion shall, unless the subject of a
new Rate Election then taking effect, automatically become a part of the Base
Rate Portion and become subject to all provisions of the Loan Documents
governing the Base Rate Portion.
On each Quarterly Payment Date beginning December 31, 1996 and continuing
regularly thereafter, ▇▇▇▇▇▇▇▇ will make a mandatory payment of principal on the
Loan in addition to the payment of the interest then due. This mandatory payment
shall be equal to a percentage of the principal amount of the loan outstanding
at December 31, 1996; the following table sets out such percentage for the
Quarterly Payment Date for each calendar quarter in each of the following years:
QUARTERLY
PAYMENT DATE 1ST 2ND 3RD 4TH
------------ --- --- --- ---
1996 0.5%
1997 1.0% 2.0% 2.0% 2.0%
1998 2.0% 2.0% 2.5% 2.5%
1999 2.5% 2.5% 2.5% 3.0%
2000 3.0% 3.0% 3.0% 3.5%
2001 3.5% 3.5% 3.5% remaining principal and
accrued interest due and
payable in full
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On the date thirty (30) days after each Quarterly Payment Date at or
after March 31, 1997, Borrower shall, in addition to the interest and
principal payments then otherwise required under this Note, make an
additional mandatory payment of principal (each an "Excess Cash flow
Payment") on the Loan in an amount equal to the excess, if any, of fifty
percent (50%) of Excess Cash Flow. The term "Excess Cash Flow" means the
remainder of (x) the sum of the net income after Tax Distributions (as
defined in the Loan Agreement) of Borrower for the three month period ending
on such Quarterly Payment Date plus depreciation, amortization and other
non-cash expenses of Borrower for such period MINUS (y) the required
principal payment on such Quarterly Payment Date pursuant to the table set
forth above and MINUS (z) capital expenditures incurred during such period.
Any Excess Cash Flow Payment made shall be applied to the principal payments
thereafter required pursuant to the table set forth above in the inverse
order of their maturity.
Borrower shall, promptly upon receipt, pay all amounts received by Borrower
as consideration for the construction of the Network (including without
limitation any such payments by Southwestern Bell Communications) as a mandatory
principal prepayment of the loan. Any such payment shall be applied to the
principal payments thereafter required pursuant to the table set forth above in
the inverse order of their maturity.
Borrower may from time to time and without premium or penalty prepay all or
any part of this Note, so long as Borrower does not prepay any Fixed Rate
Portion. Each prepayment of principal shall be accompanied by all interest then
accrued and unpaid on the principal so prepaid. If any payment of principal of
or interest on this Note becomes due on a day that is not a Business Day, then
that payment shall be made on the next succeeding Business Day (and, any such
extension of time shall be included in computing interest in connection with
that payment) unless the payment involves the Fixed Rate, in which event it must
be made on the next preceding Business Day. Bank's books and records are prima
facie evidence of all outstanding principal of and accrued and unpaid interest
on this Note.
The Base Rate Portion of the Loan (exclusive of any past due principal
or interest) from time to time outstanding shall bear interest on each day
outstanding at the Base Rate in effect on such day. On each Base Rate Payment
Date Borrower shall pay to the holder hereof all unpaid interest which has
accrued on the Base Rate Portion to but not including such Base Rate Payment
Date. Each Fixed Rate Portion of the Loan (exclusive of any past due
principal or interest) shall bear interest on each day during the related
Interest Period at the related Fixed Rate in effect on such day. Interest
shall be calculated on the basis of actual days elapsed but computed as if
each year consisted of 360 days. Each change in the rate becomes effective
without notice to Borrower on the effective date of each change in the
applicable Fixed Rate. On each Fixed Rate Payment Date relating to a Fixed
Rate Portion Borrower shall pay to the holder hereof all unpaid interest
which has accrued on such Fixed Rate Portion to but not including such Fixed
Rate Payment Date. Notwithstanding the foregoing provisions of this
paragraph: (a) this Note shall never bear interest in excess of the Highest
Lawful Rate, and (b) if at any time the rate at which interest is payable on
this Note is limited by the Highest Lawful Rate (by the foregoing clause (a)
or by reference to the Highest Lawful Rate in the definitions of Base Rate,
Fixed Rate, and Default Rate), this Note shall bear interest at the Highest
Lawful Rate and shall continue to bear interest at the Highest Lawful Rate
until such time as the total amount of interest accrued hereon equals (but
does not exceed) the total amount of interest which would have accrued hereon
had there been no Highest Lawful Rate applicable hereto.
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If any law, rule, regulation, ordinance, or requirement of any central
bank, court, or governmental authority (whether or not having the force of
law), any change in Bank's written policy as a result of any of the
foregoing, or any change in the risk category of the transaction related to
this Note by or at the direction of any regulatory authority ever results in
a reduction in the rate of return on Bank's capital as a consequence of its
obligations under the Loan Documents to a level below that which Bank could
have otherwise achieved, then, within ten days after notice from time to time
from Bank, Borrower shall pay to Bank the additional amount as will
compensate Bank for that reduction. In determining the amount due under this
provision, Bank may employ such assumptions and allocations as it shall deem
reasonable and may use any reasonable averaging and attribution method.
This Note and all of the other Loan Documents are intended to be
performed in accordance with, and only to the extent permitted by, all
applicable usury laws. If any provision hereof or of any of the other Loan
Documents or the application thereof to any person or circumstance shall, for
any reason and to any extent, be invalid or unenforceable, neither the
application of such provision to any other person or circumstance nor the
remainder of the instrument in which such provision is contained shall be
affected thereby and shall be enforced to the greatest extent permitted by
law. It is expressly stipulated and agreed to be the intent of the holder
hereof to at all times comply with the usury and other applicable laws now or
hereafter governing the interest payable on the indebtedness evidenced by
this Note. If the applicable law is ever revised, repealed or judicially
interpreted so as to render usurious any amount called for under this Note or
under any of the other Loan Documents, or contracted for, charged, taken,
reserved or received with respect to the indebtedness evidenced by this Note,
or if Bank's exercise of the option to accelerate the maturity of this Note,
or if any prepayment by Borrower results in Borrower having paid any interest
in excess of that permitted by law then it is the express intent of Borrower
and Bank that all excess amounts theretofore collected by Bank be credited on
the principal balance of this Note (or, if this Note and all other
indebtedness arising under or pursuant to the other Loan Documents have been
paid in full, refunded to Borrower), and the provisions of this Note and the
other loan Documents immediately be deemed reformed and the amounts
thereafter collectable hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder or thereunder. All sums paid, or agreed to be
paid, by ▇▇▇▇▇▇▇▇ for the use, forbearance, detention, taking, charging,
receiving or reserving of the indebtedness of Borrower to Bank under this
Note or arising under or pursuant to the other Loan Documents shall, to the
maximum extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in
full so that the rate or amount of interest on account of such indebtedness
does not exceed the usury ceiling from time to time in effect and applicable
to such indebtedness for so long as such indebtedness is outstanding. To the
extent federal law permits Bank to contract for, charge or receive a greater
amount of interest, Bank will rely on federal law instead of TEX. REV. CIV.
STAT. ▇▇▇. ART. 5069-1.04, as amended, for the purpose of determining the
Highest Lawful Rate. Additionally, to the maximum extent permitted by
applicable law now or hereafter in effect, Bank may, at its option and from
time to time, implement any other method of computing the Highest Lawful Rate
under such ARTICLE 5069-1.04; as amended, or under other applicable law by
giving notice, if required, to Borrower as provided by applicable law now or
hereafter in effect. Notwithstanding anything to the contrary contained
herein or in any of the other loan Documents, it is not the intention of Bank
to accelerate the maturity of any interest that has not accrued at the time
of such acceleration or to collect unearned interest at the time of such
acceleration or to collect unearned interest at the time of such acceleration.
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In no event shall TEX. REV. CIV. STAT. ▇▇▇. ART 5069 Ch. 15 (which
regulates certain revolving loan accounts and revolving tri-party accounts)
apply to this Note. To the extent that TEX. REV. CIV. STAT. ▇▇▇. ART
5069-1.04, as amended, is applicable to this Note, the "indicated rate
ceiling" specified in such article is the applicable ceiling; PROVIDED THAT,
if federal law permits greater interest, the law permitting the greatest
interest shall apply.
With respect to any principal bearing interest at the Fixed Rate (a) if
any present or future law imposes, modifies, or deems applicable (or if
compliance by Bank with any requirement of any governmental authority or
central bank results in) any requirement that any reserves (including,
without limitation, any marginal, emergency, supplemental, or special
reserves but not including any reserves already taken into account in the
calculation of the Fixed Rate) be maintained, and if (b) those reserves
reduce any sums receivable by Bank under the Loan Documents or increase the
costs incurred by Bank in advancing or maintaining any portion of principal
bearing interest at the Fixed Rate, and (c) Bank determines that the
reduction or increase is material (and it may, in determining the material
nature of the reduction or increase, utilize reasonable assumptions and
allocations of costs and expenses and use any reasonable averaging or
attribution method), then (d) Bank shall deliver to Borrower a certificate
setting forth in reasonable detail the calculation of the amount necessary to
compensate it for its reduction or increase (which certificate is conclusive
and binding absent manifest error), and (e) Borrower shall pay that amount to
Bank within ten days after demand. The provisions of and undertakings and
indemnification set forth in this paragraph survive the satisfaction and
payment of the Loan and termination of the Loan Documents.
If any law makes it unlawful for Bank to advance or maintain principal
under this Note bearing interest at the Fixed Rate, then Bank shall promptly
notify Borrower, and (a) if maintaining that principal until the last day of
the applicable Interest Period is unlawful, then it shall be converted to
interest at the Base Rate as of the date of notice, and Borrower shall pay to
the holder any related Funding Loss, or (b) if not prohibited by law, that
principal shall be converted to interest at the Base Rate as of the last day
of the applicable Interest Period, or (c) if any conversion will not resolve
the unlawfulness, Borrower shall promptly prepay that principal without
penalty, TOGETHER WITH any related Funding Loss. No notice of conversion is
required to be delivered in connection with any conversion under this
paragraph.
▇▇▇▇▇▇▇▇ agrees to indemnify Bank against and pay to it upon demand, any
Funding Loss it may incur. When Bank demands that Borrower pay any Funding
Loss, it shall deliver to Borrower a certificate setting forth in reasonable
detail the basis for imposing Funding Loss and the calculation of the amount,
which calculation shall be in accordance with common business practices and
which shall be conclusive and binding absent manifest error. The provisions
of and undertakings and indemnification set forth in this paragraph survive
the satisfaction and payment of the Loan and termination of the Loan
Documents.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally
agree to pay reasonable attorneys' fees and collection costs to the holder
hereof in addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest,
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notice of protest, notice of intention to accelerate the maturity of this
Note, declaration or notice of acceleration of the maturity of this Note,
diligence in collecting, the bringing of any suit against any party and any
notice of or defense on account of any extensions, renewals, partial payments
or changes in any manner of or in this Note or in any of its terms,
provisions and covenants, or any releases or substitutions of any security,
or any delay, indulgence or other act of any trustee or any holder hereof,
whether before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW) EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE
FEDERAL LAW.
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CAPROCK FIBER NETWORK, LTD.
By: CapRock Systems, Inc., its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
President
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EXHIBIT 1
RATE ELECTION
Reference is made to that certain Loan Agreement dated as of July 1, 1996
(as from time to time amended, the "Agreement"), by and between CAPROCK FIBER
NETWORK, LTD. ("Borrower") and BANK ONE, TEXAS, N.A. ("Bank"). Terms which are
defined in the Agreement or in the Note and which are used but not defined
herein are used herein with the meanings given them in the Agreement or the
Note. Pursuant to the terms of the Agreement and the Note Borrower hereby
elects a Fixed Rate Portion in the amount of $ _________with an Interest Period
beginning on ________________ and continuing for a period of ________________
To meet the conditions set out in the Note and the Agreement for the making
of such election, Borrower hereby represents, warrants, acknowledges and agrees
that:
(a) The representative of General Partner signing this instrument has
all necessary authority to act for ▇▇▇▇▇▇▇▇ in making the election herein
contained.
(b) There does not exist on the date hereof any condition or event
which constitutes an Event of Default which has not been waived by Bank in
writing.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises or by any course
of dealing. The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.
The representative of General Partner signing this instrument hereby
certifies that, to the best of his knowledge after due inquiry, the above
representations, warranties, acknowledgements, and agreements of Borrower are
true, correct and complete.
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IN WITNESS WHEREOF this instrument is executed as of July 1, 1996.
CAPROCK FIBER NETWORK, LTD.
By: CapRock Systems, Inc., its General Partner
By:
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
President