EXHIBIT 4.18
Borrower: HOLD BILLING SERVICES, LTD.
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Address: ▇▇▇▇▇ ▇▇-▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
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▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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Date: March __, 1997
THIS LOAN AND SECURITY AGREEMENT ("Agreement") dated the date set forth above,
is entered into by and between the Borrower named above (the "Borrower"), whose
address is set forth above and FINOVA Capital Corporation ("FINOVA"), whose
address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1. LOANS.
1.1 Total Facility. Upon the terms and conditions set forth herein and provided
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that no Event of Default or event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default, shall have
occurred, FINOVA shall, upon Borrower's request, make advances to Borrower from
time to time in an aggregate outstanding principal amount not to exceed the
Total Facility amount (the "Total Facility") set forth on the schedule hereto
(the "Schedule"), subject to deduction of reserves for accrued interest and such
other reserves (in each case to the extent not already considered in the
Borrowing Base), including, without limitation, reserves with respect to (i)
past due federal excise taxes, state taxes or public utility charges; (ii)
billing and collection charges payable to Eligible LECs; (iii) other sums
chargeable against Borrower's Loan Account as Loans under any section of this
Agreement; (iv) untrued up volume by Eligible LECs; (v) LEC access charges; (vi)
up to three (3) months of any sums due and owing to any landlord or mortgagee
from whom FINOVA has not obtained a landlord's or mortgagee's waiver; and (vii)
such other matters, events, conditions, or contingencies as FINOVA deems proper
from time to time, and less amounts FINOVA may be obligated to pay in the future
on behalf of Borrower. The Schedule is an integral part of this Agreement and
all references to "herein", "herewith" and words of similar import shall for all
purposes be deemed to include the Schedule.
1.2 Loans. Advances under the Total Facility ("Loans") shall be comprised of the
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amounts and at the advance rates shown on the Schedule. FINOVA may, after an
Event of Default, in its sole discretion, adjust the advance rates set forth on
the Schedule.
1.3 Overadvance. If at any time or for any reason the outstanding amount of
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advances made pursuant hereto exceeds any of the dollar or percentage
limitations contained in the Schedule (any such excess, an "Overadvance"), then
Borrower shall, upon FINOVA's demand, immediately pay to FINOVA, in cash, the
full amount of such Overadvance. Without limiting Borrower's obligation to repay
to FINOVA on demand the amount of any Overadvance, Borrower agrees to pay FINOVA
interest on the outstanding principal amount of any Overadvance, on demand, at
the rate set forth on the Schedule.
1.4. Loan Account. All advances made hereunder shall be added to and deemed part
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of the Obligations when made. FINOVA may from time to time charge all
Obligations of Borrower to Borrower's loan account with FINOVA.
2. CONDITIONS PRECEDENT.
2.1 Initial Advance. The obligation of FINOVA to make the initial advance
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hereunder is subject to the fulfillment and satisfaction of FINOVA and its
counsel, of each of the following conditions on or prior to the date set forth
on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following Loan
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Documents: (i) the Secured Revolving Credit Note, in such amount and on such
terms and conditions as FINOVA shall specify, executed by Borrower; (ii) such
security agreements, intellectual property assignments and deeds of trust as
FINOVA may require with respect to this Agreement executed by Borrower and, if
applicable, duly acknowledged for recording or filing in the appropriate
governmental offices; (iii) Subordination Agreements on FINOVA's standard form,
executed by each of the Subordinating Creditors, together with copies of all
instruments subject thereto showing a legend indicating such subordination; (iv)
Validity and Support Agreements on FINOVA's standard form, executed by ▇▇▇▇▇▇
Box and ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.; (v) such Blocked Account or Dominion Account
agreements as FINOVA shall determine; and (vi) such other documents, instruments
and agreements in connection herewith as FINOVA shall require, executed,
certified and/or acknowledged by such parties as FINOVA shall designate;
(b) Terminations by Existing Lender(s). Borrower's existing lender(s) shall have
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executed and delivered UCC termination statements and other documentation
evidencing the termination of its liens and security interests in the assets of
Borrower or a subordination agreement in form and substance satisfactory to
FINOVA in its sole discretion;
(c) Charter Documents. FINOVA shall have received copies of Borrower's
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certificate of limited partnership and limited partnership agreement, as
amended, modified or supplemented to the Closing Date and its sole general
partner's, HBS, Inc.'s ("HBS"), By-laws and Articles or Certificate of
Incorporation, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Borrower;
(d) Good Standing. FINOVA shall have received a certificate of limited
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partnership status with respect to Borrower and a certificate of corporate
status with respect to HBS, each dated within ten (10) days of the Closing Date,
by the Secretary of State of the state of registration of Borrower and the state
of incorporation of HBS, which certificates shall indicate that HBS and Borrower
are in good standing in such states;
(e) Foreign Qualification. FINOVA shall have received certificates of limited
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partnership status with respect to Borrower dated within ten (10) days of the
Closing Date, issued by the Secretary of State of each state in which such
party's failure to be duly qualified or licensed would have a material adverse
effect on its financial condition or assets indicating that such party is in
good standing;
(f) Authorizing Resolutions and Incumbency. FINOVA shall have received a
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certificate from the Secretaries of Borrower and HBS attesting to (i) the
adoption of resolutions of Borrower's and HBS's Board of Directors and/or
shareholders and/or partners, as appropriate, authorizing the execution and
delivery of this Agreement and the other Loan Documents to which Borrower is a
party, and authorizing specific officers of Borrower and HBS to execute same,
and (ii) the authenticity of original specimen signatures of such officers;
(g) Insurance. FINOVA shall have received the insurance certificates and
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certified copies of policies required by Section 4.4 hereof, all in form and
substance satisfactory to FINOVA and its counsel;
(h) Title Insurance. Not Applicable.
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(i) Searches; Certificates of Title. FINOVA shall have received searches
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reflecting the filing of its financing statements and fixture filings in such
jurisdictions as it shall determine, and shall have received certificates of
title with respect to the Collateral which shall have been duly executed in a
manner sufficient to perfect all of the security interests granted to FINOVA;
(j) Landlord and Mortgagee Waivers. FINOVA shall have received landlord,
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warehouseman and mortgagee waivers from the lessors and mortgagees of all
locations where any Collateral is located.
(k) Fees. Borrower shall have paid all fees payable by it on the Closing Date
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pursuant to this Agreement;
(l) Opinion of Counsel. FINOVA shall have received an opinion of Borrower's
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counsel covering such matters as FINOVA shall determine in its sole discretion;
(m) Officer Certificate. FINOVA shall have received a certificate of the
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President and the Chief Financial Officer or similar official of Borrower,
attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(n) Solvency Certificate. If requested by FINOVA, a signed certificate of the
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Borrower's duly elected Chief Financial Officer concerning the solvency and
financial condition of Borrower, on FINOVA's standard form;
(o) Blocked Account/Dominion Account. The Blocked Account or Dominion Account
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referred to in Section 7.2 and 7.3 hereof shall have been established to the
satisfaction of FINOVA in its sole discretion;
(p) Environmental Assessment. Not applicable;
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(q) Environmental Certificate. FINOVA shall have received an Environmental
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Certificate from Borrower, in form and substance satisfactory to FINOVA in its
sole and absolute discretion, with respect to all locations of Collateral; and
(r) Other Matters. All other documents and legal matters in connection with the
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transactions contemplated by this Agreement shall have been delivered, executed
or recorded and shall be in form and substance satisfactory to FINOVA and its
counsel.
2.2 Subsequent Advances. The obligation of FINOVA to make any advance hereunder
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shall be subject to the further conditions precedent that, on and as of the date
of such advance:
(a) the representations and warranties of Borrower set forth in this Agreement
shall be accurate, before and after giving effect to such advance or issuance
and to the application of any proceeds thereof;
(b) no Event of Default and no event which, with notice or passage of time or
both, would constitute an Event of Default has occurred, or would result from
such advance
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or issuance or from the application of any proceeds thereof;
(c) no material adverse change has occurred in the Borrower's business,
operations, financial condition, or assets or in the prospect of repayment of
the Obligations; and
(d) FINOVA shall have received such other approvals, opinions or documents as
FINOVA shall reasonably request, including without limitation, written
confirmations from all applicable LECs confirming their acceptance of all LEC
Receivables which are included in the Borrowing Base at the time of the
applicable advance.
3. INTEREST RATE AND OTHER CHARGES.
3.1 Interest; Fees. Borrower shall pay FINOVA interest on the daily outstanding
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balance of Borrower's loan account at the per annum rate set forth on the
Schedule. Borrower shall also pay FINOVA the fees set forth on the Schedule.
3.2 Default Interest Rate. Upon the occurrence and during the continuation of an
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Event of Default, Borrower shall pay FINOVA interest on the daily outstanding
balance of Borrower's loan account at a rate per annum which is two percent (2%)
in excess of the rate which would otherwise be applicable thereto pursuant to
the Schedule. All such default interest shall be payable upon demand of FINOVA.
3.3 Examination Fees. Borrower agrees to pay to FINOVA an examination fee in the
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amount set forth on the Schedule in connection with each audit or examination of
Borrower performed by FINOVA prior to or after the date hereof.
3.4 Excess Interest. The contracted for rate of interest of the loan
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contemplated hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule, calculated and applied to the principal
balance of the Obligations in accordance with the provisions of this Agreement;
(ii) interest after an Event of Default, calculated and applied to the amount of
the Obligations in accordance with the provisions hereof; and (iii) all
Additional Sums (as herein defined), if any. Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. The examination fees, attorneys' fees, expert witness fees, letter of
credit fees, Collateral Management Fees, closing fees, Loan Fees, Termination
Fees, Unused Line fees, other charges, goods, things in action or any other sums
or things of value paid or payable by Borrower (collectively, the "Additional
Sums"), whether pursuant to this Agreement or any other documents or instruments
in any way pertaining to this lending transaction, or otherwise with respect to
this lending transaction, that under any applicable law may be deemed to be
interest with respect to this lending transaction, for the purpose of any
applicable law that may limit the maximum amount of interest to be charged with
respect to this lending transaction, shall be payable by Borrower as, and shall
be deemed to be, additional interest and for such purposes only, the agreed upon
and "contracted for rate of interest" of this lending transaction shall be
deemed to be increased by the rate of interest resulting from the inclusion of
the Additional Sums.
It is the intent of the parties to comply with the usury laws of the State
of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Agreement, or in any of
the documents securing payment hereof or otherwise relating hereto, in no event
shall this Agreement or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "Maximum Interest Rate"). In the event (a) any such
excess of interest otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the Loans evidenced hereby, (b) the
maturity of the Obligations is accelerated in whole or in part, or (c) all or
part of the Obligations shall be prepaid, so that under any of such
circumstances, the amount of interest contracted for, shared or received in
connection with the Loans evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other Person or entity now or
hereafter liable for the payment of the Obligations shall be obligated to pay
the amount of such interest to the extent that it is in excess of the Maximum
Interest Rate, (3) any such excess which may have been collected shall be either
applied as a credit against the then unpaid principal amount of the Obligations
or refunded to Borrower, at FINOVA's sole option, and (4) the effective rate of
interest shall be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the Loans evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such Loans; and (y) in the event that
the effective rate of interest on the Loans should at any time exceed the
Maximum Interest Rate, such excess interest that would otherwise have been
collected had there been no
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ceiling imposed by the Applicable Usury Law shall be paid to FINOVA from time to
time, if and when the effective interest rate on the loan otherwise falls below
the Maximum Interest Rate, to the extent that interest paid to the date of
calculation does not exceed the Maximum Interest Rate, until the entire amount
of interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the Maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
4. COLLATERAL.
4.1 Security Interest in the Collateral. To secure the payment and performance
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of the Obligations when due, Borrower hereby grants to FINOVA a first priority
security interest in all of Borrower's now owned or hereafter acquired or
arising Inventory, Equipment, Receivables, investment property (as such term is
defined in the Code) and General Intangibles, including, without limitation, all
of Borrower's Deposit Accounts, money, any and all property now or at any time
hereafter in FINOVA's possession (including claims and credit balances), and all
proceeds (including, without limitation, proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records related to any of the foregoing (all of the foregoing,
together with all other property in which FINOVA may be granted a lien, mortgage
or security interest, is referred to herein, collectively, as the "Collateral").
4.2 Perfection and Protection of Security Interest. Borrower shall, at its
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expense, take all actions requested by FINOVA at any time to perfect, maintain,
protect and enforce FINOVA's security interest and other rights in the
Collateral and the priority thereof from time to time, including, without
limitation, (i) executing and filing financing or continuation statements and
amendments thereof and executing and delivering such documents and titles in
connection with motor vehicles as FINOVA shall require, all in form and
substance satisfactory to FINOVA, (ii) maintaining a perpetual inventory
reporting system and complete and accurate stock records, (iii) delivering to
FINOVA warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued, and, after an Event of
Default, transferring Inventory to warehouses designated by FINOVA, (iv) placing
notations on Borrower's books of account to disclose FINOVA's security interest
therein, and (v) delivering to FINOVA all letters of credit on which Borrower is
named beneficiary. FINOVA may file, without Borrower's signature, one or more
financing statements disclosing FINOVA's security interest under this Agreement.
Borrower agrees that a carbon, photographic, photostatic or other reproduction
of this Agreement or of a financing statement is sufficient as a financing
statement. If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any of Borrower's agents or processors, Borrower shall
notify such Person of FINOVA's security interest in such Collateral and, upon
FINOVA's request, instruct them to hold all such Collateral for FINOVA's account
subject to FINOVA's instructions. From time to time, Borrower shall, upon
FINOVA's request, execute and deliver confirmatory written instruments pledging
the Collateral to FINOVA, but Borrower's failure to do so shall not affect or
limit FINOVA's security interest or other rights in and to the Collateral. Until
the Obligations have been fully satisfied and FINOVA's obligation to make
further advances hereunder has terminated, FINOVA's security interest in the
Collateral shall continue in full force and effect.
4.3 Preservation of Collateral. FINOVA may, in its sole discretion, at any time
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discharge any lien or encumbrance on the Collateral or bond the same, pay any
insurance, maintain guards, pay any service bureau, obtain any record or take
any other action to preserve the Collateral and charge the cost thereof to
Borrower's loan account as an Obligation.
4.4 Insurance. Borrower will maintain and deliver evidence to FINOVA of such
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insurance required, written by insurers and in amounts satisfactory to FINOVA.
All premiums shall be paid by Borrower as and when due. Accurate and complete
copies of the policies shall be delivered by Borrower to FINOVA. If Borrower
fails to do so, FINOVA may (but shall not be required to) procure such insurance
at Borrower's expense and charge the cost thereof to Borrower's loan account as
an obligation. Each policy shall include a provision requiring thirty days'
prior written notice to FINOVA of any cancellation or substantial modification.
5. EXAMINATION OF RECORDS; FINANCIAL REPORTING.
5.1 Examinations. FINOVA shall at all times have full access to and the right to
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examine, audit, make abstracts and copies from and inspect Borrower's records,
files, books of account and all other documents, instruments and agreements
relating to the Collateral and the right to check, test and appraise the
Collateral provided, however, that prior to the occurrence of an Event of
Default, FINOVA shall not perform such examinations more than once each calendar
quarter. Borrower shall deliver to FINOVA any instrument necessary for FINOVA to
obtain records from any service bureau maintaining records for Borrower. All
instruments and certificates prepared by Borrower showing the value of any of
the Collateral shall be accompanied, upon FINOVA's request, by copies of related
purchase orders and invoices. FINOVA may, at
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any time after the occurrence of an Event of Default, remove (to the extent
deemed necessary by FINOVA to exercise its rights and remedies hereunder) from
Borrower's premises Borrower's books and records (or copies thereof) or require
Borrower to deliver such books and records (to the extent deemed necessary by
FINOVA to exercise its rights and remedies hereunder) or copies to FINOVA.
FINOVA may, without expense to FINOVA, use such of Borrower's personnel,
supplies, copiers, facsimiles, other equipment, and premises as may be
reasonably necessary for maintaining or enforcing FINOVA's security interest and
rights hereunder.
5.2 Reporting Requirements. Borrower shall furnish FINOVA, upon request, such
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information and statements as FINOVA shall request from time to time regarding
Borrower's business affairs, financial condition and the results of its
operations. Without limiting the generality of the foregoing, Borrower shall
provide FINOVA with (i) upon request, copies of sales invoices, all
correspondence and other information between Borrower and any LEC (including,
without limitation, all commitment reports), customer statements and credit
memoranda issued purchase of accounts receivable reports for LECS, remittance
advices and reports and copies of deposit slips; (ii) on or prior to the date
set forth on the Schedule, monthly agings and reconciliations of Receivables
with listings of concentrated accounts, payables reports, and unaudited
financial statements with respect to the prior month prepared on a basis
consistent with such statements prepared in prior months; (iii) audited annual
financial statements, prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the most recent Prepared
Financials provided to FINOVA by Borrower, including balance sheets, income and
cash flow statements of Borrower and its Affiliates, accompanied by the
unqualified report thereon of independent certified public accountants
acceptable to FINOVA as soon as available, and in any event, within ninety (90)
days after the end of each of Borrower's fiscal years; and (iv) such
certificates relating to the foregoing as FINOVA may request, including, without
limitation, a monthly certificate from the president and the chief financial
officer of Borrower showing Borrower's compliance with each of the financial
covenants set forth in this Agreement, and stating whether any Event of Default
has occurred or event which, with giving of notice or the passage of time, or
both, would constitute an Event of Default, and if so, the steps being taken to
prevent or cure such Event of Default.
6. COLLATERAL REPORTING.
6.1 Invoices. Borrower shall not re-date any invoice or sale from the original
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date thereof or make sales on extended terms beyond those customary in
Borrower's industry, or otherwise extend or modify the term of any Receivable.
If Borrower becomes aware of any matter affecting any Receivable, including
information affecting the credit of the account debtor thereon, Borrower shall
promptly notify FINOVA in writing.
6.2 Instruments. In the event any Receivable is or becomes evidenced by a
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promissory note, trade acceptance or any other instrument for the payment of
money, Borrower shall immediately deliver such instrument to FINOVA
appropriately endorsed to FINOVA and, regardless of the form of any presentment,
demand, notice of dishonor, protest or notice of protest with respect thereto,
Borrower shall remain liable thereon until such instrument is paid in full.
7. PRINCIPAL PAYMENTS; PROCEEDS OF COLLATERAL.
7.1 Principal Payments. Except where evidenced by notes or other instruments
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issued or made by Borrower to FINOVA specifically containing payment provisions
which are in conflict with this Section 7.1 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), that
portion of the Obligations consisting of principal payable on account of Loans
shall be payable by Borrower to FINOVA immediately upon the earliest of (i) the
receipt by FINOVA or Borrower of any proceeds of any of the Collateral, to the
extent of said proceeds, (ii) the occurrence of an Event of Default in
consequence of which FINOVA elects to accelerate the maturity and payment of
such loans, or (iii) any termination of this Agreement pursuant to Section 16
hereof; provided, however, that any Overadvance shall be payable on demand
pursuant to the provisions of Section 1.3 hereof.
7.2 Collections. Until FINOVA notifies Borrower to the contrary, Borrower shall
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direct all LECs to direct all payments (except payments made by check by
Southwestern ▇▇▇▇, which shall be made payable to Borrower but sent to FINOVA or
to a lockbox if FINOVA shall so direct) to a "blocked account" as FINOVA may
require (each, a "Blocked Account") pursuant to an arrangement with such bank as
may be selected by Borrower and be acceptable to FINOVA. Borrower shall hold any
payments received by it as trustee of FINOVA and immediately deliver all
payments to FINOVA in their original form as set forth below, duly endorsed in
blank. FINOVA or its designee may, at any time after the occurrence of an Event
of Default, pursuant to a Notice of Assignment in the form attached hereto as
Exhibit "7.2", notify all other account debtors that the Receivables have been
assigned to FINOVA and of FINOVA's security interest therein, and may collect
the Receivables directly and charge the collection costs and expenses to
Borrower's loan account. Borrower agrees that, in computing the charges under
this Agreement, all items of payment shall be deemed applied by FINOVA on
account of the Obligations one (1) Business Day after receipt by FINOVA of good
funds which have been
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finally credited to FINOVA's account, whether such funds are received directly
from Borrower or from the Blocked Account bank or the Dominion Account bank,
pursuant to Section 7.3 hereof. FINOVA is not, however, required to credit
Borrower's account for the amount of any item of payment which is unsatisfactory
to FINOVA in its sole discretion and FINOVA may charge Borrower's loan account
for the amount of any item of payment which is returned to FINOVA unpaid. In
this Agreement or in any Loan Document, whenever, there is a reference to
"receipt by FINOVA of funds," or language of similar effect regarding the
receipt of funds by FINOVA, in order to be credited to the applicable account on
the date that good funds were received by FINOVA (either directly or through a
bank account or lockbox arrangement, etc . . . ) the funds must reach FINOVA no
later than 12:00 noon, Philadelphia, Pennsylvania time, on that date. Any funds
reaching FINOVA after 12:00 noon, Philadelphia, Pennsylvania time, will be
credited to the applicable account on the next immediately following Business
Day.
7.3 Management of a Blocked Account or Dominion Account. On a daily basis,
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Borrower shall report to FINOVA the amount of proceeds in the Blocked Account
from the Collateral (net of amounts collected for taxes) and the amount of any
funds received with respect to customers other than Approved Customers and shall
provide FINOVA with such supporting information as FINOVA may request. Provided
that FINOVA agrees with Borrower's calculation of such amounts, Borrower and
FINOVA shall execute a joint disbursement authorization in the form attached as
Exhibit "A". Borrower shall obtain the agreement by the bank where the Blocked
Account is maintained to waive any offset rights against the funds so deposited.
FINOVA assumes no responsibility for any Blocked Account arrangement, including,
without limitation, any claim of accord and satisfaction or release with respect
to deposits accepted by any bank thereunder. Alternatively, FINOVA may establish
depository accounts in the name of FINOVA at a bank or banks for the deposit of
such funds (each, a "Dominion Account") and Borrower shall deposit all proceeds
of Receivables and all cash proceeds of any sale of Inventory or, to the extent
permitted herein, Equipment, or cause same to be deposited, in kind, in such
Dominion Accounts of FINOVA in lieu of depositing same to Blocked Accounts.
7.4 Payments Without Deductions. Borrower shall pay principal, interest, and all
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other amounts payable hereunder, or under any related agreement, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
7.5 Collection Days Upon Repayment. In the event Borrower repays the Obligations
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in full at any time hereafter, such payment in full shall be credited
(conditioned upon final collection) to Borrower's loan account one (1) Business
Day after FINOVA's receipt thereof.
7.6 Monthly Accountings. FINOVA shall provide Borrower with an account of
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advances, charges, expenses and payments and other transactions made pursuant to
this Agreement on a monthly basis. Such account shall be deemed correct,
accurate and binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by FINOVA),
unless Borrower notifies FINOVA in writing to the contrary within thirty (30)
days after each account is rendered, describing the nature of any alleged errors
or admissions.
7.7 Collections and Administration. FINOVA may, (i) at any time, whether or not
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an Event of Default has occurred, without notice to or assent of Borrower,
notify any LEC of the fact that the Receivables and other Collateral have been
assigned to FINOVA by Borrower and that payment thereof is to be made to the
Blocked Account, and (ii) at any time after an Event of Default has occurred,
without notice to or assent of Borrower, notify any other account debtor of the
fact that the Receivables and other Collateral have been assigned to FINOVA by
Borrower and that payment thereof is to be made to the order of FINOVA, and
(iii) at any time after an Event of Default has occurred, without notice to or
assent of Borrower, demand, collect or enforce payment of any Receivables or
such other Collateral, but without any duty to do so, and FINOVA shall not be
liable for any failure to collect or enforce payment thereof. At FINOVA's
request, all invoices, or bills and statements sent to any account debtor, other
obligor or bailee, shall state that the Receivables and such Collateral shall
have been assigned to FINOVA and are payable directly and only to FINOVA. FINOVA
shall have the right, at any time, in FINOVA's name or in the name of a nominee
of the FINOVA, to verify the validity, amount or any other matter relating to
the Receivables or the other Collateral, by mail, telephone or otherwise.
8. POWER OF ATTORNEY.
Borrower irrevocably appoints FINOVA and its officers, agents and designees as
Borrower's attorney, with the power to endorse Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that come
into FINOVA's possession; to sign Borrower's name on any invoice or ▇▇▇▇ of
lading relating to any Receivable, on drafts against customers, on assignments
of Receivables, on notices of assignment, financing statements and other public
records, on verifications of accounts and on notices to customers or account
debtors; to send requests for verification of Receivables to customers or
account debtors; and after the occurrence of any Event of Default, to notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by FINOVA and
- 6 -
to open and dispose of all mail addressed to Borrower; and to do all other
things FINOVA deems necessary or desirable to carry out the terms of this
Agreement. Borrower hereby ratifies and approves all acts of such attorney.
Neither FINOVA nor any of its officers, agents and designees shall be liable for
any acts or omissions nor for any error of judgment or mistake of fact or law
while acting as Borrower's attorney except for any acts or omissions which
constitute fraud. This power, being coupled with an interest, is irrevocable
until the Obligations have been fully satisfied and FINOVA's obligation to
provide loans hereunder shall have terminated.
9. RECEIVABLES.
9.1 Representations and Warranties.
------------------------------
(a) Receivables. Borrower hereby represents and warrants to FINOVA that: (A)
-----------
with respect to each existing and future LEC Receivable (i) each such Receivable
is genuine and in all respects what it purports to be and is not evidenced by a
judgment; (ii) each such Receivable arises out of the sale, assignment, transfer
or delivery of End User Accounts (for which all of the representations and
warranties set forth in clause 9.1(a)(B) below are true, accurate and complete)
by the Borrower, on behalf of a Customer, to a LEC in the ordinary course of
Borrower's business and in accordance with the terms and conditions of an
Agreement for Billing Services and a Billing Services Agreement; (iii) to the
best of Borrower's knowledge, each such Receivable is, for a specific liquidated
amount due and owing (without defense, set-off or counterclaim of any nature) as
such amount is reflected on the Billing Tape covering the applicable LEC
Receivable, a copy of which is available to FINOVA, (iv) no payment will be
received with respect to any such Receivable, and no credit, discount (other
than those discounts given in the ordinary course of business), or extension, or
agreement therefor will be granted on any such Receivable, except as reported to
FINOVA in accordance with this Agreement; (v) there are no facts, events or
occurrences which in any way impair the validity or enforceability thereof or
tend to reduce the amount payable thereunder from the amount reflected on the
Billing Tape therefor; (vi) to the best of Borrower's knowledge, the LEC
thereunder (1) had the capacity to contract at the time any contract or other
document giving rise to the Receivable was executed and (2) such LEC is solvent;
(vii) Borrower has no knowledge of any fact or circumstances which would impair
the validity or collectibility by Borrower of such Receivable, and to the best
of Borrower's knowledge, there are no proceedings or actions which are
threatened or pending against the associated LEC which might result in any
material adverse change in such LEC's financial condition or collectibility of
such LEC Receivable; (viii) all supporting documents (including all Billing
Services Agreements and Agreements for Billing Services) and other evidence of
such Receivable delivered to FINOVA are complete and correct and valid and
enforceable in accordance with their terms, and all signatures and endorsements
that appear thereon are genuine, and all signatories and endorsers have full
capacity to contract; (ix) Borrower has filed all necessary UCC-1 financing
statements against, and has executed all necessary security agreements with,
each of its Approved Customers as required by applicable law for Borrower to
obtain a first priority perfected security interest in all of such Approved
Customer's LEC Receivables for LEC's where the LEC Receivables are purchased by
Borrower and Accounts which give rise to such LEC Receivables and all customer
lists related thereto and all such UCC-1 financing statements have been assigned
to FINOVA by the filing of UCC-3 assignment forms or by indicating FINOVA as
assignee on such financing statements, all in form and substance acceptable to
FINOVA; and (x) such Receivable is not subject to any prohibition or limitation
upon assignment except as may be set forth in the applicable Agreement for
Billing Services or Billing Services Agreement; and
(B) with respect to each existing and future End User Account (i) each such
Receivable is genuine and in all respects what it purports to be and is not
evidenced by a judgment; (ii) each such Receivable arises out of the completed
delivery of telephone services in the ordinary course of a Customer's business
and in the name of such Customer, unless otherwise approved by FINOVA, and in
accordance with the terms and conditions of any contracts or other documents
relating thereto; (iii) each such receivable is for a specific amount due and
owing as reflected on the Billing Tapes or billing transmission covering such
End User Account; (iv) to the best of Borrower's knowledge, such End User
Account is not subject to any offset Lien, deduction, defense, dispute,
counterclaim or any other adverse condition, and is absolutely owing to a
Customer or LEC and is not contingent in any respects or for any reason except
for matters for which discounts, credits or allowances are granted by Borrower
in the ordinary course of Borrower's business consistent with past practices;
(v) neither Borrower nor the applicable Customer or LEC has made any agreement
with any End User thereunder for any deduction therefor, except discounts,
credits or allowances which are granted by such Customer in the ordinary course
of business; (vi) there are no facts, events or circumstances which in any way
impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the amount reflected on the Billing Tape therefor; (vii)
the account debtor thereunder (1) had the capacity to contract at the time any
contract or other document relating to the End User Account was executed and (2)
to the best of Borrower's knowledge, the account debtor on such End User Account
is solvent; (viii) Borrower has no knowledge of any facts or circumstances which
would impair the validity or collectibility by Borrower, the applicable Customer
or the applicable LEC of the End User Account and, to the best
- 7 -
of Borrower's knowledge, there are no proceedings or actions which are
threatened or pending against the account debtor thereunder which might result
in any material adverse changes in such account debtor's financial condition or
the collectibility of such End User Account; (ix) all supporting documents and
other evidence of End User Accounts delivered to Lender are complete and correct
and valid and enforceable in accordance with their terms, and all signatures and
endorsements that appear thereon are genuine, and all signatories and endorsers
have full capacity to contract; (x) the Customer from whom such receivable was
purchased was approved by Borrower in conformity with its Underwriting
Guidelines; and (xi) the End User Account is not subject to any prohibition or
limitation upon assignment except as provided in the applicable Billing Services
Agreement.
(b) Invoices. Borrower represents and warrants that Borrower shall not
--------
re-date any invoice or sale or make sales on extended dating beyond that
customary in Borrower's business or extend or modify any Receivable. If Borrower
becomes aware of any matter adversely affecting any Receivable, including,
without limitation, information regarding the account debtor's creditworthiness,
Borrower will immediately so advise FINOVA in writing.
9.2 Breach of Warranty or Representation. If any representation or warranty
--------------------------------------
herein or in any report submitted to FINOVA is breached as to any Receivable or
any Receivable ceases to be an Eligible Receivable for any reason other than
payment thereof, then FINOVA may, in addition to its other rights hereunder,
designate any and all Receivables owing by that account debtor as not Eligible
Receivables; provided, that FINOVA shall in any such event retain its security
interest in all Receivables, whether or not Eligible Receivables, until the
Obligations have been fully satisfied and FINOVA's obligation to provide loans
hereunder has terminated.
9.3 Disputes. Borrower shall notify FINOVA promptly of all disputes or claims
--------
which singly, or in the aggregate, involve amounts exceeding $10,000 and settle
or adjust all disputes or claims at no expense to FINOVA, but no discount,
credit or allowance shall be granted to any account debtor and no returns of
merchandise shall be accepted by Borrower without FINOVA's consent, except for
discounts, credits and allowances made or given in the ordinary course of
Borrower's business. FINOVA may, at any time after the occurrence of an Event of
Default, settle or adjust disputes or claims directly with account debtors for
amounts and upon terms which FINOVA considers advisable in its reasonable credit
judgment and, in all cases, FINOVA shall credit Borrower's loan account with
only the net amounts received by FINOVA in payment of any Receivables.
10. EQUIPMENT.
Borrower shall keep and maintain the Equipment in good operating condition and
repair and make all necessary replacements thereto to maintain and preserve the
value and operating efficiency thereof at all times consistent with Borrower's
past practice, ordinary wear and tear excepted. Borrower shall not permit any
item of Equipment to become a fixture (other than a trade fixture) to real
estate or an accession to other property.
11. OTHER LIENS; NO DISPOSITION OF COLLATERAL.
Borrower represents, warrants and covenants that (a) all Collateral (including
with limitation all End User Accounts and LEC Receivables) is and shall continue
to be owned by it free and clear of all liens, claims and encumbrances
whatsoever (except for FINOVA's security interest, Permitted Encumbrances, and
such other liens, claims and encumbrances as may be permitted by FINOVA in its
sole discretion from time to time in writing), and (b) Borrower shall not,
without FINOVA's prior written approval, sell, encumber or dispose of or permit
the sale, encumbrance or disposal of any Collateral or any interest of Borrower
therein, except for (i) the sale of Inventory or the sale of Receivables to
Eligible LECs in the ordinary course of Borrower's business, provided that any
such sale of Receivables shall be subject to FINOVA's security interest in the
Receivables sold to the extent the Receivable is due from an End User or (ii)
the sale of obsolete Equipment in the ordinary course of Borrower's business.
The proceeds of any such sales shall be remitted to FINOVA pursuant to this
Agreement for application to the Obligations.
12. GENERAL REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
12.1 Due Organization. It is a limited partnership duly organized, validly
-----------------
existing and in good standing under the laws of the State set forth on the
Schedule, is qualified and authorized to do business and is in good standing in
all states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite power
and authority to conduct its business as presently conducted, to own its
property and to execute and deliver each of the Loan Documents to which it is a
party and perform all of its Obligations thereunder;
12.2 Other Names. It has not, during the preceding five (5) years, been known by
-----------
or used any other partnership or fictitious name except as set forth on the
Schedule, nor has it been the surviving entity of a merger or consolidation or
acquired all or substantially all of the assets of any person during such time
except as set forth on the Schedule;
- 8 -
12.3 Due Authorization. The execution, delivery and performance by Borrower of
-----------------
the Loan Documents to which it is a party have been authorized by all necessary
limited partnership action and do not and shall not constitute a violation of
any applicable law or of Borrower's Certificate of Limited Partnership or
Limited Partnership Agreement or any other document, agreement or instrument to
which Borrower is a party or by which Borrower or its assets are bound;
12.4 Binding Obligation. Each of the Loan Documents to which Borrower is a party
------------------
is the legal, valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms;
12.5 Intangible Property. Borrower possesses adequate assets, licenses, permits,
-------------------
approvals, patents, patent applications, copyrights, trademarks, trademark
applications and trade names for the present and planned future conduct of its
business without any known conflict with the rights of others, and each is valid
and has been duly registered or filed with the appropriate governmental
authorities;
12.6 Capital. Borrower has capital sufficient to conduct its business and is
-------
able to pay its debts as they mature and owns property having a fair salable
value greater than the amount required to pay all of its debts (including
contingent debts);
12.7 Material Litigation. Borrower has no pending or, to its knowledge, overtly
-------------------
threatened litigation, actions or proceedings which would materially and
adversely affect its business, assets, operations, prospects or condition,
financial or otherwise, or the Collateral or any of FINOVA's interests therein;
12.8 Title; Security Interests of FINOVA. Borrower has good, indefeasible and
------------------------------------
merchantable title to the Collateral and, upon the filing of UCC-1 Financing
Statements and the recording of any mortgages or deeds of trust with respect to
real property, in each case in the appropriate offices, this Agreement and such
documents shall create valid and perfected first priority liens in the
Collateral, subject only to Permitted Encumbrances;
12.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or subject
---------------------------------------
to any contract or subject to any charge, corporate restriction, judgment,
decree or order materially and adversely affecting its business, assets,
operations, prospects or condition, financial or otherwise, or which restricts
its right or ability to incur Indebtedness, and it is not party to any labor
dispute except as disclosed on the Schedule. In addition, no labor contract is
scheduled to expire during the Initial Term of this Agreement, except as
disclosed to FINOVA in writing prior to the date hereof.
12.10 Laws. Borrower is not in violation of any applicable statute, regulation,
----
ordinance or any order of any court, tribunal or governmental agency, in any
respect materially and adversely affecting the Collateral or its business,
assets, operations, prospects or condition, financial or otherwise;
12.11 Consents. Borrower has obtained or caused to be obtained or issued any
--------
required consent of a governmental agency or other Person in connection with the
financing contemplated hereby;
12.12 Defaults. Borrower is not in default with respect to any note, indenture,
--------
loan agreement, mortgage, lease, deed or other agreement to which it is a party
or by which it or its assets are bound, nor has any event occurred which, with
the giving of notice or the lapse of time, or both, would cause such a default;
12.13 Financial Condition. The Prepared Financials fairly present Borrower's
--------------------
financial condition and results of operations and those of such other Persons
described therein as of the date thereof; there are no material omissions from
the Prepared Financials or other facts or circumstances not reflected in the
Prepared Financials; and there has been no material and adverse change in such
financial condition or operations since the date of the initial Prepared
Financials delivered to FINOVA hereunder;
12.14 ERISA. Neither Borrower, any ERISA Affiliate, or any Plan is or has been
-----
in violation of any of the provisions of ERISA, any of the qualification
requirements of IRC Section 401(a) or any of the published interpretations
thereunder, nor has Borrower or any ERISA Affiliate received any notice to such
effect. No notice of intent to terminate a Plan has been filed under Section
4041 of ERISA, nor has any Plan been terminated under ERISA. The PBGC has not
instituted proceedings to terminate, or appointed a trustee to administer, a
Plan. No lien upon the assets of Borrower has arisen with respect to a Plan. No
prohibited transaction or Reportable Event has occurred with respect to a Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal liability
with respect to any Multiemployer Plan. Borrower and each ERISA Affiliate have
made all contributions required to be made by them to any Plan or Multiemployer
Plan when due. There is no accumulated funding deficiency in any Plan, whether
or not waived;
12.15 Taxes. Borrower has filed all tax returns and such other reports as it is
-----
required by law to file and has paid or made adequate provision for the payment
on or prior to the date when due of all taxes, assessments and similar charges
that are due and payable other than those contested in good faith and for which
adequate reserves have been established in accordance with GAAP;
- 9 -
12.16 Locations. Borrower's chief executive office and the offices and locations
---------
where it keeps the Collateral (except for Inventory in transit) are at the
locations set forth on the Schedule, except to the extent that such locations
may have been changed after notice to FINOVA in accordance with Section 13.5
below;
12.17 Business Relationships. There exists no actual or, to Borrower's
-----------------------
knowledge, threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship between Borrower and any
customer or any group of customers whose purchases individually or in the
aggregate are material to the business of Borrower, or with any material
supplier, and there exists no present condition or state of facts or
circumstances which would materially and adversely affect Borrower or prevent
Borrower from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted; and
12.18 Reaffirmations. Each request for a loan made by Borrower pursuant to this
--------------
Agreement shall constitute (i) an automatic representation and warranty by
Borrower to FINOVA that there does not then exist any Event of Default and (ii)
a reaffirmation as of the date of said request of all of the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents.
12.19 Deferred Compensation. As of the Closing Date, Borrower owes no deferred
----------------------
compensation to any of its officers or directors.
13. AFFIRMATIVE COVENANTS.
Borrower covenants that, so long as any Obligation remains outstanding and this
Agreement is in effect, it shall:
13.1 Expenses. Promptly reimburse FINOVA for all costs, fees and expenses
--------
incurred by FINOVA in connection with the negotiation, preparation, execution,
delivery, administration and enforcement of each of the Loan Documents,
including, but not limited to, the attorneys' and paralegals' fees of outside
counsel, expert witness fees, lien, title search and insurance fees, appraisal
fees, all charges and expenses incurred in connection with any and all
environmental reports and environmental remediation activities, and all other
costs, expenses, taxes and filing or recording fees payable in connection with
the transactions contemplated by this Agreement, including without limitation,
all such costs, fees and expenses as FINOVA shall incur or for which FINOVA
shall become obligated in connection with (i) any inspection or verification of
the Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and Borrower or any third party, (iv)
enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral, and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any Affiliate, whether or not suit is filed.
Borrower shall also pay all FINOVA charges in connection with bank wire
transfers, forwarding of loan proceeds, deposits of checks and other items of
payment, returned checks, establishment and maintenance of lockboxes and other
Blocked Accounts, and all other bank and administrative matters, in accordance
with FINOVA's schedule of bank and administrative fees and charges in effect
from time to time;
13.2 Taxes. File all tax returns and pay or make adequate provision for the
-----
payment of all taxes, assessments and other charges on or prior to the date when
due;
13.3 Notice of Litigation. Notify FINOVA in writing within five (5) Business
---------------------
Days of becoming aware of any litigation, suit or administrative proceeding
which may materially and adversely affect the Collateral or Borrower's business,
assets, operations, prospects or condition, financial or otherwise, whether or
not the claim is covered by insurance;
13.4 ERISA. Notify FINOVA in writing (i) promptly upon the occurrence of any
-----
event described in Section 4043 of ERISA, other than a termination, partial
termination or merger of a Plan or a transfer of a Plan's assets and (ii) prior
to any termination, partial termination or merger of a Plan or a transfer of a
Plan's assets;
13.5 Change in Location. Notify FINOVA in writing forty-five (45) days prior to
------------------
any change in the location of Borrower's chief executive office or the location
of any Collateral, or Borrower's opening or closing of any other place of
business;
13.6 Partnership Existence. Maintain its limited partnership existence and its
----------------------
qualification to do business and good standing in all states necessary for the
conduct of its business and the ownership of its property and maintain adequate
assets, licenses, patents, copyrights, trademarks and trade names for the
conduct of its business;
13.7 Labor Disputes. Promptly notify FINOVA in writing of any labor dispute to
---------------
which Borrower is or may become subject and the expiration of any labor contract
to which Borrower is a party or bound;
13.8 Violations of Law. Notify FINOVA in writing within five (5) Business Days
-----------------
of becoming aware of any violation of any law, statute, regulation or ordinance
of
- 10 -
any governmental entity, or of any agency thereof, applicable to Borrower which
may materially and adversely affect the Collateral or Borrower's business,
assets, prospects, operations or condition, financial or otherwise;
13.9 Defaults. Notify FINOVA in writing within five (5) Business Days of
--------
Borrower's default under any note, indenture, loan agreement, mortgage, lease or
other agreement to which Borrower or any of its Affiliates is a party or by
which Borrower or any of its Affiliates is bound, or of any other default under
any Indebtedness of Borrower which has a then outstanding principal balance of
more than $50,000;
13.10 Capital Expenditures. Promptly notify FINOVA in writing of the making of
---------------------
any Capital Expenditure materially affecting Borrower's business, assets,
prospects, operations or condition, financial or otherwise;
13.11 Books and Records. Keep adequate records and books of account with respect
-----------------
to its business activities in which proper entries are made in accordance with
past practice consistently applied, reflecting all of its financial
transactions;
13.12 Leases; Warehouse Agreements. Provide FINOVA with (i) copies of all
------------------------------
agreements between Borrower and any landlord or warehouseman which owns any
premises at which any Collateral may, from time to time, be located, and (ii)
without limiting the landlord and mortgagee waivers to be provided pursuant to
Section 2.1(j) above, landlord and mortgagee waivers in form acceptable to
FINOVA with respect to all locations where any Collateral is hereafter located;
and
13.13 Additional Documents. At FINOVA's request, promptly execute or cause to be
--------------------
executed and delivered to FINOVA any and all documents, instruments or
agreements deemed necessary by FINOVA to facilitate the collection of the
Obligations or the Collateral or otherwise to give effect to or carry out the
terms or intent of this Agreement or any of the other Loan Documents.
13.14 Financial Covenants. Comply with the financial covenants set forth on the
-------------------
Schedule.
14. NEGATIVE COVENANTS.
Without FINOVA's prior written consent, which consent FINOVA may withhold in its
sole discretion, so long as any Obligation remains outstanding and this
Agreement is in effect, Borrower shall not:
14.1 Mergers. Merge or consolidate with or acquire any other Person, or make any
-------
other material change in its capital structure or in its business or operations
which might adversely affect the repayment of the Obligations;
14.2 Loans. Make advances, loans or extensions of credit to, or invest in, any
-----
Person provided, however, that Borrower may purchase LEC Receivables and make
advances and loans in the ordinary course of its business not to exceed the
aggregate amount of $5,000.00 outstanding at any one time;
14.3 Dividends. Declare or pay cash dividends upon any of its stock or
---------
distribute any of its property or redeem, retire, purchase or acquire directly
or indirectly any of its stock or make any other distributions except, provided
no Event of Default has occurred and is continuing or would result after taking
into effect the results of making the applicable distribution and no event has
occurred and is continuing which, with the giving of notice, passage of time or
both, would become an Event of Default (a) annual distributions to ▇▇▇▇▇ to
reimburse ▇▇▇▇▇ for the amount of taxes actually paid by ▇▇▇▇▇ during the
applicable year which were attributable to Borrower's income, which dividends
shall in no event exceed the lesser of (i) the total income taxes paid by ▇▇▇▇▇
during the period covered by the distribution or (ii) the amount of income taxes
directly attributable to Borrower's income during the period covered by the
distribution; (b) on the Closing Date, a distribution to ▇▇▇▇▇ in an amount to
be determined by Borrower, provided, that taking into account the effect of such
distribution, Borrower shall have excess availability under the Borrowing Base
("Excess Availability") of not less than $700,000 and (c) quarterly
distributions payable after FINOVA has verified the applicable Total Debt
Service Coverage Ratio measurement for the quarter ending immediately prior to
the date of the proposed distribution (which quarter ends shall correspond with
the measurement dates set forth on the Schedule for measuring Total Debt Service
Coverage Ratio), in an amount to be determined based on the following formula:
(i) if Borrower's Total Debt Service Coverage Ratio is greater than 1.1 to 1.0
for the quarter ending immediately prior to the date of the proposed
distribution and Borrower had an average Excess Availability of $500,000 or more
over the 60 day period immediately preceding the date of measurement of
Borrower's Total Debt Service Coverage Ratio for the applicable quarter, in both
cases after taking into account the effect of the proposed distribution; then up
to $200,000; or (ii) if Borrower's Total Debt Service Coverage Ratio is greater
than 1.5 to 1.0 for the quarter ending immediately prior to the date of the
proposed distribution and Borrower had an average Excess Availability of
$1,500,000 or more over the 60 day period immediately preceding the date of
measurement of Borrower's Total Debt Service Coverage Ratio for the applicable
quarter, in both cases after taking into account the effect of the proposed
distribution; then $200,000 or more.
- 11 -
14.4 Adverse Transactions. Enter into any transaction which materially and
---------------------
adversely affects the Collateral or its ability to repay the Obligations in full
as and when due;
14.5 Indebtedness of Others. Become directly or contingently liable for the
----------------------
Indebtedness of any Person except by endorsement of instruments for deposit;
14.6 Repurchase. Make a sale to any customer on a ▇▇▇▇-and-hold, guaranteed
----------
sale, sale and return, sale on approval, consignment, or any other repurchase or
return basis;
14.7 Name. Use any corporate or fictitious name other than its corporate name as
----
set forth in its Articles or Certificate of Incorporation on the date hereof or
as set forth on the Schedule;
14.8 Prepayment. Prepay any Indebtedness other than trade payables and other
----------
than the Obligations except for prepayments of Subordinated Debt to the extent
permitted by the terms of the subordination agreements applicable thereto;
14.9 Capital Expenditure. Make or incur any Capital Expenditure if, after giving
-------------------
effect thereto, the aggregate amount of all Capital Expenditures by Borrower in
any fiscal year would exceed the amount set forth on the Schedule;
14.10 Compensation. Pay total compensation, including salaries, withdrawals,
------------
fees, bonuses, commissions, drawing accounts and other payments, whether
directly or indirectly, in money or otherwise, during any fiscal year to all of
Borrower's executives, officers and directors (or any relative thereof), in an
amount in excess of the amount set forth on the Schedule;
14.11 Indebtedness. Create, incur, assume or permit to exist any Indebtedness
------------
(including Indebtedness in connection with Capital Leases) in excess of the
amount set forth on the Schedule, other than (i) the Obligations, (ii) trade
payables and other contractual obligations to suppliers and customers incurred
in the ordinary course of business, (iii) Indebtedness which is secured by
Permitted Encumbrances and (iv) other Indebtedness existing on the date of this
Agreement and reflected in the Prepared Financials (except Indebtedness paid on
the date of this Agreement from proceeds of the initial advances hereunder);
14.12 Affiliate Transactions. Except as set forth below, sell, transfer,
-----------------------
distribute or pay any money or property to any Affiliate, or invest in (by
capital contribution or otherwise) or purchase or repurchase any stock or
Indebtedness, or any property, of any Affiliate, or become liable on any
guaranty of the indebtedness, dividends or other obligations of any Affiliate.
Notwithstanding the foregoing, Borrower may pay compensation permitted by
Section 14.10 to employees who are Affiliates and, if no Event of Default has
occurred, Borrower may (i) pay the dividends permitted pursuant to Section 14.3
above and (ii) Borrower may engage in transactions with Affiliates in the normal
course of business, in amounts and upon terms which are fully disclosed to
FINOVA and which are no less favorable to Borrower than would be obtainable in a
comparable arm's length transaction with a Person who is not an Affiliate.
Borrower may also make payments to Subordinating Creditors in accordance with
the terms of the subordination agreements approved by FINOVA.
14.13 Nature of Business. Enter into any new business other than providing
-------------------
customer service and billing and collection services for, and contracting for
such services on behalf of, Customers and other providers of telecommunications,
internet, enhanced and convergent services or make any material change in any of
Borrower's business objectives, purposes or operations;
14.14 FINOVA's Name. Use the name of FINOVA in connection with any of Borrower's
-------------
business or activities, except in connection with internal business matters or
as required in dealings with governmental agencies and financial institutions or
with trade creditors of Borrower, solely for credit reference purposes and
except in connection with the public recording of financing statements and other
Loan Documents recorded by FINOVA in connection with this Agreement;
14.15 Margin Security. Own, purchase or acquire (or enter into any contract to
---------------
purchase or acquire) any "margin security" as defined by any regulation of the
Federal Reserve Board as now in effect or as the same may hereafter be in
effect; or
14.16 Change of Ownership. Permit or suffer the occurrence of any transfer of
--------------------
more than ten percent (10%) of the issued and outstanding shares of common stock
or other evidence of ownership of Borrower.
15. ENVIRONMENTAL MATTERS.
15.1 Definitions. The following definitions apply to the provisions of this
-----------
Section 15:
(a) the term "Applicable Law" shall include, but shall not be limited to, each
statute named or referred to in this Section 15.1 and all rules and regulations
thereunder, and any other local, state and/or federal laws, rules, regulations
or ordinances, whether currently in existence or hereafter enacted, which
govern, to the extent applicable to the Property or to Borrower, (i) the
existence, cleanup and/or remedy of contamination on real property; (ii) the
protection of the environment from soil, air or water pollution, or from
spilled, deposited or otherwise emplaced contamination; (iii) the emission or
- 12 -
discharge of hazardous substances into the environment; (iv) the control of
hazardous wastes; or (v) the use, generation, transport, treatment, removal or
recovery of Hazardous Substances;
(b) The term "Hazardous Substance" shall mean (i) any oil, flammable substance,
explosives, radioactive materials, hazardous wastes or substances, toxic wastes
or substances or any other wastes, materials or pollutants which either pose a
hazard to the Property or to persons on or about the Property or cause the
Property to be in violation of any Applicable Law; (ii) asbestos in any form
which is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment which contain dielectric fluid containing levels
of polychlorinated biphenyls, or radon gas; (iii) any chemical, material or
substance defined as or included in the definition of "hazardous substances,"
"waste," "hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," or "toxic substances" or words of similar import
under any Applicable Law, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 USC 9601
et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 USC 6901 et
-- --- --
seq.; the Hazardous Materials Transportation Act, 49 USC 1801 et seq.; the
--- -- ---
Federal Water Pollution Control Act, 33 USC 1251 et seq.; (iv) any other
-- ---
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority which may or could pose a hazard to the
health or safety of the occupants of the Property or the owners and/or occupants
of property adjacent to or surrounding the Property, or any other person coming
upon the Property or adjacent property; and (v) any other chemical, materials or
substance which may or could pose a hazard to the environment; and
(c) the term "Property" shall mean all real property, wherever located, in which
Borrower or any Affiliate of Borrower has any right, title or interest, whether
now existing or hereafter arising, and including, without limitation, as owner,
lessor or lessee.
15.2 Covenants and Representations.
-----------------------------
(a) Borrower represents and warrants that there have not been during the period
of Borrower's possession of any interest in the Property and, to the best of its
knowledge after reasonable inquiry, there have not been at any other times, any
activities on the Property involving, directly or indirectly, the use,
generation, treatment, storage or disposal of any Hazardous Substances except in
compliance with Applicable Law (i) under, on or in the land included in the
Property, whether contained in soil, tanks, sumps, ponds, lagoons, barrels, cans
or other containments, structures or equipment, (ii) incorporated in the
buildings, structures or improvements included in the Property, including any
building material containing asbestos, or (iii) used in connection with any
operations on or in the Property.
(b) Without limiting the generality of the foregoing and to the extent not
included within the scope of this Section 15.2, Borrower represents and warrants
that it is in full compliance with Applicable Law and has received no notice
from any person or any governmental agency or other entity of any violation by
Borrower or its Affiliates of any Applicable Law.
(c) Borrower shall be solely responsible for and agrees to indemnify FINOVA,
protect and defend FINOVA with counsel and experts reasonably acceptable to
FINOVA, and hold FINOVA harmless from and against any claims, actions,
administrative proceedings, judgments, damages, punitive damages, penalties,
fines, costs, liabilities (including sums paid in settlements of claims),
interest or losses, attorneys' fees (including any fees and expenses incurred in
enforcing this indemnity), consultant fees, expert fees, and other out-of-pocket
costs or expenses actually incurred by FINOVA (collectively, the "Environmental
Costs"), that may, at any time or from time to time, arise directly or
indirectly from or in connection with: (i) the presence, suspected presence,
release or suspected release of any Hazardous Substance whether into the air,
soil, surface water or groundwater of or at the Property, or any other violation
of Applicable Law, or (ii) any breach of the foregoing representations and
covenants; except to the extent any of the foregoing result from the actions of
FINOVA, its employees, agents and representatives. All Environmental Costs
incurred or advanced by FINOVA shall be deemed to be made by FINOVA in good
faith and shall constitute Obligations hereunder.
16. TERM; TERMINATION.
16.1 Term. The initial term of this Agreement shall be as set forth on the
----
Schedule (the "Initial Term") and may, in the sole discretion of FINOVA, be
renewed for successive periods of one (1) year (each, a "Renewal Term"), unless
earlier terminated as provided herein.
16.2 Prior Notice. Each party shall have the right to terminate this Agreement
------------
at the end of the Initial Term or at the end of any Renewal Term by giving the
other party written notice not less than sixty (60) days prior to the effective
date of such termination, by registered or certified mail.
16.3 Payment in Full. Upon the effective date of termination, the Obligations
---------------
shall become immediately due and payable in full in cash.
16.4 Early Termination; Termination Fee. In addition to the procedure set forth
-----------------------------------
in Section 16.2, Borrower may terminate this Agreement at any time but only upon
sixty
- 13 -
(60) days' prior written notice and prepayment of the Obligations in full in
immediately available funds. Upon any such early termination by Borrower or any
termination of this Agreement by FINOVA upon the occurrence of an Event of
Default, then, and in any such event, Borrower shall pay to FINOVA upon the
effective date of such termination a fee (the "Termination Fee") in an amount
equal to the amount shown on the Schedule.
17. DEFAULT.
17.1 Events of Default. Any one or more of the following events shall constitute
-----------------
an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the Obligations at
stated maturity, upon acceleration or otherwise;
(b) Borrower or any other Loan Party fails or neglects to perform, keep, or
observe any term, provision, covenant or agreement contained in any Loan
Document to which Borrower or such other Loan Party is a party;
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) Any material portion of Borrower's assets is seized, attached, subjected to
a writ or distress warrant, is levied upon or comes into the possession of any
judicial officer;
(e) Borrower shall generally not pay its debts as they become due or shall enter
into any agreement (whether written or oral), or offer to enter into any
agreement, with all or a significant number of its creditors regarding any
moratorium or other indulgence with respect to its debts or the participation of
such creditors or their representatives in the supervision, management or
control of the business of Borrower;
(f) Any bankruptcy or other insolvency proceeding is (i) commenced by Borrower,
or (ii) commenced against Borrower and remains undischarged or unstayed for
forty-five (45) days from the date of the involuntary petition;
(g) Any notice of a valid lien, levy or assessment is filed of record with
respect to any of Borrower's assets;
(h) Any final judgments are entered against Borrower in an aggregate amount
exceeding $100,000 which are not covered by insurance and which remain
unsatisfied for five (5) business days;
(i) Any default by Borrower shall occur under any capital lease, loan or other
agreement for the payment of money where Borrower is indebted for an amount in
excess of $50,000, between Borrower and any third party including, without
limitation, any default which would result in a right by such third party to
accelerate the maturity of any such Indebtedness of Borrower to such third
party;
(j) Any representation or warranty made or deemed to be made by Borrower, any
Affiliate or any other Loan Party in any Loan Document or any other statement,
document or report made or delivered to FINOVA in connection therewith shall
prove to have been misleading in any material respect; or
(k) Any Prohibited Transaction or Reportable Event shall occur with respect to a
Plan which could have a material adverse effect on the financial condition of
Borrower; any lien upon the assets of Borrower in connection with any Plan shall
arise; Borrower or any of its ERISA Affiliates shall fail to make full payment
when due of all amounts which Borrower or any of its ERISA Affiliates may be
required to pay to any Plan or any Multiemployer Plan as one or more
contributions thereto; Borrower or any of its ERISA Affiliates creates or
permits the creation of any accumulated funding deficiency, whether or not
waived.
17.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may, at its
--------
option and in its sole discretion and in addition to all of its other rights
under the Loan Documents, terminate this Agreement and declare all of the
Obligations to be immediately payable in full. FINOVA shall also have all of its
rights and remedies under applicable law, including, without limitation, the
default rights and remedies of a secured party under the Code. Further, FINOVA
may, at any time, take possession of the Collateral and keep it on Borrower's
premises, at no cost to FINOVA, or remove any part of it to such other place(s)
as FINOVA may desire, or Borrower shall, upon FINOVA's demand, at Borrower's
sole cost, assemble the Collateral and make it available to FINOVA at a place
reasonably convenient to FINOVA. FINOVA may sell and deliver any Collateral at
public or private sales, for cash, upon credit or otherwise, at such prices and
upon such terms as FINOVA deems advisable, at FINOVA's discretion, and may, if
FINOVA deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Borrower agrees that FINOVA has no
obligation to preserve rights to the Collateral or ▇▇▇▇▇▇▇▇ any Collateral for
the benefit of any Person. FINOVA is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks and advertising matter, or any similar
property, in completing production, advertising or selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
FINOVA's benefit. Any requirement of reasonable notice shall be met if such
notice is mailed postage prepaid to Borrower at its
- 14 -
address set forth in the heading to this Agreement at least five (5) days before
sale or other disposition. The proceeds of sale shall be applied, first, to all
attorneys fees and other expenses of sale, and second, to the Obligations in
such order as FINOVA shall elect, in its sole discretion. FINOVA shall return
any excess to Borrower and Borrower shall remain liable for any deficiency to
the fullest extent permitted by law. FINOVA shall also have the right to reduce
the Total Facility amount, the Borrowing Base or any portion thereof or the
advance rates or to modify the terms and conditions upon which FINOVA is willing
to consider making advances under the Total Facility or to take additional
reserves in the Borrowing Base for any reason.
17.3 Standards for Determining Commercial Reasonableness. Borrower and FINOVA
-----------------------------------------------------
agree that the following conduct by FINOVA with respect to any disposition of
Collateral shall conclusively be deemed commercially reasonable (but other
conduct by FINOVA, including, but not limited to, FINOVA's use in its sole
discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition as to which on no later than the fifth calendar
day prior thereto written notice thereof is mailed or personally delivered to
Borrower and, with respect to any public disposition, on no later than the fifth
calendar day prior thereto notice thereof describing in general non-specific
terms, the Collateral to be disposed of is published once in a newspaper of
general circulation in the county where the sale is to be conducted. The public
disposition shall be at any place designated by FINOVA, with or without the
Collateral being present, and which commences at any time between 8:00 a.m. and
5:00 p.m. (PROVIDED THAT NO NOTICE OF ANY PUBLIC OR PRIVATE DISPOSITION NEED BE
GIVEN TO THE BORROWER IF THE COLLATERAL IS PERISHABLE OR THREATENS TO DECLINE
SPEEDILY IN VALUE OR IS OF A TYPE CUSTOMARILY SOLD ON A RECOGNIZED MARKET).
Without limiting the generality of the foregoing, Borrower expressly agrees
that, with respect to any disposition of accounts, instruments and general
intangibles, it shall be commercially reasonable for FINOVA to direct any
prospective purchaser thereof to ascertain directly from Borrower any and all
information concerning the same, including, but not limited to, the terms of
payment, aging and delinquency, if any, the financial condition of any obligor
or account debtor thereon or guarantor thereof, and any collateral therefor.
18. DEFINITIONS.
18.1 Defined Terms. As used in this Agreement, the following terms have the
--------------
definitions set forth below:
"Accounts" or "accounts" has the meaning ascribed thereto in the Code.
-------- --------
"Advance Date" means, with respect to a Receivable, the date on which Borrower
------------
pays the initial payment to the applicable Customer in connection with the
purchase of such Receivable from such Customer.
"Affiliate" means any Person controlling, controlled by or under common control
---------
with Borrower. For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause direction of the
management and policies of any Person, whether through ownership of common or
preferred stock or other equity interests, by contract or otherwise. Without
limiting the generality of the foregoing, each of the following shall be an
Affiliate: any officer, director, employee or other agent of Borrower, any
shareholder or subsidiary of Borrower, and any other Person with whom or which
Borrower has common shareholders, officers or directors.
"Agreements for Billing Services" means the billing services agreements in the
--------------------------------
form delivered by Borrower to FINOVA prior to the date hereof, executed and
delivered by and between Borrower and an Eligible LEC or billing aggregators
acceptable to FINOVA, as the same may from time to time be amended, with such
changes therein as shall be acceptable to FINOVA, and any other billing services
agreement between Borrower and an Eligible LEC entered into after the date
hereof and approved by FINOVA in its sole discretion.
"Approved Customer" means any Customer which meets each of the following
------------------
requirements to FINOVA's satisfaction in the exercise of its sole discretion:
(i) the Customer has a minimum period of operating history acceptable to FINOVA;
(ii) FINOVA shall have reviewed the dilution applicable to such Customer's
Accounts and determined that such dilution rates are acceptable to FINOVA; (iii)
the Customer has management background and experience acceptable to FINOVA and
experience in the telecommunications industry which is also acceptable to
FINOVA; (iv) such Customer shall have executed and delivered the Billing
Services Agreement, and, if it is selling its accounts, or any portion thereof,
to Borrower pursuant to a Supplemental Advance Purchase Agreement, UCC-1
financing statements and security agreements to perfect Borrower's interest in
such Customer's Accounts and Customer lists which financing statements shall
also indicate that FINOVA is the assignee thereof; (v) FINOVA shall have
received copies of the Uniform Commercial Code search and judgment and federal
tax lien searches against such Customer where such Customer's principal place of
business is located, indicating that there are no liens against any of the
accounts of such Customer which Borrower is purchasing; (vi) FINOVA shall have
the right, as assignee of Borrower's rights under the Billing Services
Agreement, to at any time conduct an examination of such Customer's financial
condition, the results of which must be acceptable to FINOVA (the costs of which
examination shall be borne by Borrower at the rate of $1,000.00 per day plus
expenses); (vii) FINOVA shall have approved in
- 15 -
writing the financing of such Customer's Accounts under the credit facility
established pursuant to this Agreement; and (viii) Borrower shall have submitted
all information and met all conditions on the appropriate Collateral and Credit
Criteria List and shall have submitted a completed Customer Background Form for
such Customer both in form and substance satisfactory to FINOVA in its sole
discretion.
"ATAC" means Alternative Telephone Communications, Inc.
----
"ATAC Receivable" means a LEC Receivable which arises from the submission by
----------------
Borrower to LECs of Accounts purchased from ATAC.
"▇▇▇▇▇" means ▇▇▇▇▇ Communications, Inc.
-----
"Billing Services Agreements" means the Billing Services Agreements in the form
----------------------------
delivered by Borrower to FINOVA prior to the date hereof, executed and delivered
by and between Borrower and Approved Customers, as the same may from time to
time be amended, with such changes therein as shall be acceptable to FINOVA, and
any other Billing Services Agreement between Borrower and an Approved Customer
entered into after the date hereof and approved by FINOVA in its sole
discretion.
"Billing Tape" means a billing tape in EMI or other format designated by an
-------------
Eligible LEC and presentable to a LEC in accordance with the applicable
Agreement for Billing Services.
"Borrowing Base" has the meaning set forth in the Schedule.
--------------
"Business Day" means any day on which commercial banks in both Philadelphia,
-------------
Pennsylvania and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities incurred in
---------------------
connection with entering an Agreement for Billing Services and for the
acquisition of any fixed asset or improvement, replacement, substitution or
addition thereto which has a useful life of more than one year and including,
without limitation, those arising in connection with Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in accordance with
-------------
generally accepted accounting principles, should be capitalized for financial
reporting purposes and reflected as a liability on the balance sheet of
Borrower.
"Closing Date" means the date on which this Agreement is executed.
------------
"Code" means the Uniform Commercial Code as adopted and in effect in the State
----
of Arizona from time to time.
"Collateral" has the meaning set forth in Section 4.1 above.
----------
"Collateral and Credit Criteria List" means Collateral and credit information
------------------------------------
provided by Borrower to FINOVA for each Customer submitted for approval,
substantially in the form attached hereto as Exhibit "A".
"Customer" means any client of Borrower which is a party to a Billing Services
--------
Agreement.
"Customer Background Form" means a document prepared by a Customer and presented
------------------------
by Borrower to FINOVA for each Customer submitted for approval, substantially in
the form attached hereto as Exhibit "C" as may be modified by FINOVA from time
to time.
"Deposit Accounts" has the meaning set forth in Section 9105 of the Code.
----------------
"Eligible LEC" means any LEC set forth on the Schedule and any other LEC
-------------
hereafter expressly approved by FINOVA in writing.
"Eligible Receivables" means: a LEC Receivable due from an Eligible LEC in each
---------------------
case arising in the ordinary course of the "0+", "1+", operator, internet,
enhanced or convergent services rendered by an Approved Customer which FINOVA,
in its sole judgment, deems to be an Eligible Receivable; provided, however,
that no such Receivable shall be an Eligible Receivable if: (i) such LEC
Receivable is unpaid more than ninety (90) days after the applicable LEC
Confirmation Date; or (ii) with respect to LEC Receivables from a particular
LEC, if twenty-five percent (25%) or more of the LEC Receivables from the LEC
that is the account debtor are not deemed Eligible Receivables of such LEC
hereunder; or (iii) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached; or (iv) the LEC has
disputed liability with respect to a Receivable or has made any claim with
respect to any other LEC Receivable due from the LEC to Borrower, to the extent
of any dispute or claim, or (v) such Receivable is due from or processed by an
account debtor that has commenced a voluntary case under the federal bankruptcy
laws, as now constituted or hereafter amended, or made assignment for the
benefit of creditors, or a decree or order for relief has been entered by a
court having jurisdiction over such account debtor in an involuntary case under
the federal bankruptcy laws, as now constituted or hereafter amended, or any
other petition or other application for relief under the federal bankruptcy laws
has been filed against the account debtor, or if the account debtor has failed,
suspended business, ceased to be solvent, or consented to or suffered a
receiver, trustee, liquidator, or custodian to be appointed for it or for all or
a significant portion of its assets or
- 16 -
affairs; or (vi) FINOVA believes, in its reasonable judgment, that collection of
such Receivable is insecure or that payment thereof is doubtful or will be
delayed by reason of the LEC's or other account debtor's financial condition; or
(vii) the Receivable is subject to a Lien other than FINOVA's; or (viii) the
Receivable is evidenced by chattel paper or an instrument of any kind or has
been reduced to judgment; or (ix) Borrower has made any agreement with a LEC or
any other account debtors for any deduction therefrom, except for post-billing
adjustments which are made in the ordinary course of business and except as
provided in the applicable Agreement for Billing Services, but only to the
extent of such deduction; or (x) Borrower has made an agreement with the LEC to
extend the time of payment thereof, unless, notwithstanding such agreement,
payment is made within ninety (90) days of the applicable LEC Confirmation Date;
or (xi) such Receivable is subject to setoff, carve-out or other adjustment
under a contract other than a Billing Services Agreement or telecommunications
service contract between an Approved Customer and an End User, to the extent of
such setoff, carve-out or other adjustment; or (xii) such Receivable is a
duplicate billing; or (xiii) such Receivable has not been confirmed by a LEC and
FINOVA has not been supplied with written evidence of such confirmation, in form
and substance acceptable to FINOVA; or (xiv) such LEC Receivable does not arise
from the purchase by Borrower from the Approved Customer originating the End
User Account which has been sold, assigned or transferred to a LEC to create
such LEC Receivable pursuant to the terms set forth in the Agreement for Billing
Services; or (xv) call records for such Receivable have not been subject to
validation acceptable to FINOVA or have dilution rates which are unacceptable to
FINOVA.
"End Users" means Persons to whom a Customer renders telecommunication services.
---------
"End User Accounts" means Receivables arising from services rendered by a
------------------
Customer to End Users of telecommunications services, which accounts have been
purchased by a LEC, from Borrower on behalf of the applicable Customer pursuant
to a Billing Services Agreement, and which have been processed and formatted for
billing on a Billing Tape to be submitted to a LEC. Each End User Account shall
cease to be an End User Account and become a LEC Receivable upon its sale,
assignment, or transfer by Borrower, on behalf of the applicable Customer, to a
LEC for billing and collection pursuant to an Agreement for Billing Services.
"Equipment" means all of Borrower's present and hereafter acquired machinery,
---------
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"ERISA" means the Employment Retirement Income Security Act of 1974, as amended,
-----
and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not incorporated and
----------------
whether or not foreign) which is or may hereafter become a member of a group of
which Borrower is a member and which is treated as a single employer under ERISA
Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 17.1 of this
-----------------
Agreement.
"General Intangibles" means all general intangibles of Borrower, whether now
--------------------
owned or hereafter created or acquired by Borrower, including, without
limitation, any moneys due or to become due and other sums due Borrower from any
LEC under any Agreement for Billing Services or from any billing company under
an Agreement for Billing Services to which Borrower is now or may hereafter
become a party, all monies due or to become due and other sums due Borrower from
a Customer under any Billing Services Agreement to which Borrower is now or
hereafter becomes a party (including, without limitation, all processing fees),
all choses in action, rights under judgments, rights under tort claims, causes
of action, corporate or other business records (including, without limitation,
Billing Tapes), Deposit Accounts, inventions, designs, drawings, blueprints,
patents, patent applications, trademarks and the goodwill of the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against FINOVA, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance) tax refunds and claims,
computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower to secure
payment of any of the Receivables by an account debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Receivables).
- 17 -
"Indebtedness" means all of Borrower's present and future obligations,
------------
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether under
written or oral agreement, operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities and (v)
deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
------------
"Intangible Assets" means all assets of any Person which would be classified in
------------------
accordance with GAAP as intangible assets including, without limitation (a) all
franchises, licenses, permits, patents, applications, copyrights, trademarks,
tradenames, goodwill, experimental or organizational expenses and other like
intangibles and (b) investments in and loans to shareholders, directors,
employees, Subsidiaries and Affiliates.
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
---------
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in Borrower's business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
documents of title or other documents representing them.
"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations
---
thereunder.
"LEC" means any Regional ▇▇▇▇ Operating Company, ▇▇▇▇ Operating Company,
---
independent local exchange company, credit card company or provider of local
telephone services which is a party to any Billing Services Agreements.
"LEC Confirmation Date" means, with respect to a Receivable, the date on which
----------------------
Borrower receives written confirmation of acceptance of such Receivable from the
applicable LEC.
"LEC Receivables" means all Receivables and General Intangibles for money due or
---------------
to become due, and all other debts and any other amounts payable to Borrower by
any LEC.
"Loan Documents" means, collectively, this Agreement, any note or notes executed
--------------
by Borrower and payable to FINOVA, and any other agreement entered into in
connection with this Agreement, together with all alterations, amendments,
changes, extensions, modifications, refinancings, refundings, renewals,
replacements, restatements, or supplements, of or to any of the foregoing.
"Loan Party" means Borrower, each Subordinating Creditor and each other party
----------
(other than FINOVA) to any Loan Document.
"Month-end Reports" means all reports prepared by Borrower on a monthly basis,
------------------
which reports shall include, without limitation, general ledger, trial balance,
financial statements, Receivables and accounts payable agings, agings of
accounts payable accruals and sales and cash receipts journals and a monthly
reconciliation of Receivables and accounts payable and cash.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA Sections
-------------------
3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of Borrower or
any ERISA Affiliate.
"Notice of Assignment" shall mean, with respect to any Agreement for Billing
---------------------
Services, a letter, in the form attached as Exhibit 7.2 or as may otherwise be
satisfactory in the sole discretion of FINOVA, sent to the applicable LEC, in
which the LEC is notified with respect to the assignment and grant of a security
interest by Borrower to FINOVA of and in all of Borrower's right, title, and
interest in and to all LEC Receivables relating to such Agreement for Billing
Services and directing such LEC to make all payments to the lockbox or Dominion
Account.
"Obligations" means all present and future loans, advances, debts, liabilities,
-----------
obligations, covenants, duties and indebtedness at any time owing by Borrower to
FINOVA, whether evidenced by this Agreement, any note or other instrument or
document, whether arising from an extension of credit, opening of a letter of
credit, banker's acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect (including, without limitation, those acquired by
assignment and any participation by FINOVA in Borrower's debts owing to others),
absolute or contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, attorney's fees, expert witness fees,
examination fees, letter of credit fees, Examination Fees, closing fees, Loan
Fees, Termination Fees, Unused Line Fees, Collateral Management Fees and any
other sums chargeable to
- 18 -
Borrower hereunder or under any other agreement with FINOVA.
"Overadvance" has the meaning set forth in Section 1.3 hereof.
-----------
"PBGC" means the Pension Benefit Guarantee Corporation.
----
"Permitted Encumbrance" means each of the liens, mortgages and other security
----------------------
interests set forth on the Schedule and incorporated herein by this reference.
"Person" means any individual, sole proprietorship, partnership, joint venture,
------
trust, unincorporated organization, association, corporation, limited liability
entity, government, or any agency or political division thereof, or any other
entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for employees
----
of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Prepared Financials" means the balance sheets of Borrower as of the date set
-------------------
forth in the Schedule, and as of each subsequent date on which audited balance
sheets are delivered to FINOVA from time to time hereunder, and the related
statements of operations, changes in stockholder's equity and changes in cash
flow for the periods ended on such dates.
"Prohibited Transaction" means any transaction described in Section 406 of ERISA
----------------------
which is not exempt by reason of Section 408 of ERISA, and any transaction
described in Section 4975(c) of the IRC which is not exempt by reason of Section
4975(c)(2) of the IRC.
"Receivables" means al of Borrower's now owned and hereafter acquired Accounts
-----------
(whether or not earned by performance or processed and formatted for billing),
proceeds of any letters of credit naming Borrower as beneficiary, contract
rights, chattel paper, instruments, documents (as such terms are defined in the
Code) and all other forms of obligations at any time owing to Borrower, all
guaranties and other security therefor, whether secured or unsecured, all
merchandise returned to or repossessed by Borrower, and all rights of stoppage
in transit and all other rights or remedies of an unpaid vendor, lienor or
secured party.
"Renewal Term" has the meaning set forth on the Schedule.
------------
"Reportable Event" means a reportable event described in Section 4043 of ERISA
or the regulations thereunder, a withdrawal from a Plan described in Section
4063 of ERISA, or a cessation of operations described in Section 4068(f) of
ERISA.
"Shareholder" means any Person who is an owner of any of Borrower's stock.
-----------
"Subordinated Debt" means liabilities of Borrower, the repayment of which is
------------------
subordinated to the payment and performance of the Obligations, pursuant to a
subordination agreement on FINOVA's standard form.
"Subordinating Creditor" means the Persons set forth on the Schedule.
----------------------
"Supplemental Advance Purchase Agreement" means a Hold Billing Services, Ltd.
-----------------------------------------
Supplemental Advance Purchase Agreement in form and substance acceptable to
FINOVA.
"Total Facility" has the meaning set forth on the Schedule.
--------------
"Underwriting Guidelines" means Borrower's procedures for approving a Customer
------------------------
for factoring as set forth on Exhibit "D" attached hereto.
18.2 Other Terms. All accounting terms used in this Agreement, unless otherwise
-----------
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated herein or in the
Schedule, shall have the meanings provided by the Code, to the extent such terms
are defined therein.
19. MISCELLANEOUS.
19.1 Recourse to Security; Certain Waivers. All Obligations shall be payable by
--------------------------------------
Borrower as provided for herein and, in full, at the termination of this
Agreement; recourse to security shall not be required at any time. Borrower
waives presentment and protest of any instrument and notice thereof, notice of
default and, to the extent permitted by applicable law, all other notices to
which Borrower might otherwise be entitled.
19.2 No Waiver by FINOVA. Neither FINOVA's failure to exercise any right, remedy
-------------------
or option under this Agreement, any supplement, the Loan Documents or other
agreement between FINOVA and Borrower nor any delay by FINOVA in exercising the
same shall operate as a waiver. No waiver by FINOVA shall be effective unless in
writing and then only to the extent stated. No waiver by FINOVA shall affect its
right to require strict performance of this Agreement. FINOVA's rights and
remedies shall be cumulative and not exclusive.
19.3 Binding on Successor and Assigns. All terms, conditions, promises,
------------------------------------
covenants, provisions and warranties shall inure to the benefit of and bind
FINOVA's and Borrower's representatives, successors and assigns.
- 19 -
19.4 Severability. If any provision of this Agreement shall be prohibited or
------------
invalid under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.
19.5 Amendments; Assignments. This Agreement may not be modified, altered or
------------------------
amended, except by an agreement in writing signed by Borrower and FINOVA.
Borrower may not sell, assign or transfer any interest in this Agreement or any
other Loan Document, or any portion thereof, including, without limitation, any
of Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder. Borrower hereby consents to FINOVA's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof or
thereof, including, without limitation, FINOVA's rights, title, interests,
remedies, powers and duties hereunder or thereunder (provided any such party to
whom such interest is sold, assigned or transferred assumes FINOVA's obligations
with respect thereto). In connection therewith, FINOVA may disclose all
documents and information which FINOVA now or hereafter may have relating to
Borrower's businesses provided that any such party to whom such information may
be provided shall be under a duty of non-disclosure with respect to such
information. To the extent that FINOVA assigns its rights and obligations
hereunder to a third party, FINOVA shall thereafter be released from such
assigned obligations to Borrower and such assignment shall effect a novation
between Borrower and such third party.
19.6 Integration. This Agreement, together with the Schedule (which is a part
-----------
hereof) and the other Loan Documents, reflect the entire understanding of the
parties with respect to the transactions contemplated hereby.
19.7 Governing Law; Waivers. THIS AGREEMENT SHALL BE INTERPRETED IN ACCORDANCE
-----------------------
WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF
ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF MARICOPA, THE STATE OF ARIZONA OR, AT THE SOLE
OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND VENUE.
BORROWER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS
THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE MANNER SET FORTH IN SECTION
19.13 HEREOF FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES ANY RIGHT IT MAY
OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT.
19.8 Survival. All of the representations and warranties of Borrower contained
--------
in this Agreement shall survive the execution, delivery and acceptance of this
Agreement by the parties. No termination of this Agreement or of any guaranty of
the Obligations shall affect or impair the powers, obligations, duties, rights,
representations, warranties or liabilities of the parties hereto and all shall
survive any such termination.
19.9 Evidence of Obligations. Each Obligation may, in FINOVA's discretion, be
-----------------------
evidenced by notes or other instruments issued or made by Borrower to FINOVA. If
not so evidenced, such Obligation shall be evidenced solely by entries upon
FINOVA's books and records.
19.10 Collateral Security. The Obligations shall constitute one loan secured by
-------------------
the Collateral. FINOVA may, in its sole discretion, (i) exchange, enforce, waive
or release any of the Collateral, (ii) apply Collateral and direct the order or
manner of sale thereof as it may determine, and (iii) settle, compromise,
collect or otherwise liquidate any Collateral in any manner without affecting
its right to take any other action with respect to any other Collateral.
19.11 Application of Collateral. FINOVA shall have the continuing and exclusive
-------------------------
right to apply or reverse and re-apply any and all payments to any portion of
the Obligations. To the extent that Borrower makes a payment or FINOVA receives
any payment or proceeds of the Collateral for Borrower's benefit which is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, debtor in possession, receiver or any
other party under any bankruptcy law, common law or equitable cause, then, to
such extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
FINOVA.
19.12 Loan Requests. Each oral or written request for a loan by any Person who
-------------
purports to be any employee, officer or authorized agent of Borrower shall be
made to FINOVA on or prior to 11:00 a.m., Philadelphia time, on the Business Day
on which the proceeds thereof are requested to be paid to Borrower and shall be
conclusively presumed to be made by a Person authorized by Borrower to do so and
the crediting of a loan to Borrower's operating account shall conclusively
establish Borrower's obligation to repay such loan. Unless and until Borrower
otherwise directs FINOVA in writing, all loans shall be wired to Borrower's
operating account set forth on the Schedule.
- 20 -
19.13 Notices. Any notices or consents required or permitted by this Agreement
-------
shall be deemed given if delivered in person with receipt, sent by telegram
(with messenger service specified) or sent by nationally recognized overnight
courier service, or sent by certified or registered mail postage prepaid, return
receipt requested, or sent by facsimile transmission as follows, unless such
address is changed by written notice hereunder:
If to FINOVA:
FINOVA Capital Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
FAX: 610/▇▇▇-▇▇▇▇
FINOVA Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
FAX: 213/▇▇▇-▇▇▇▇
FINOVA Capital Corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇'▇▇▇▇▇, Esq.
FAX: 602/▇▇▇-▇▇▇▇
With copies to:
Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇, Esquire
FAX: 215/▇▇▇-▇▇▇▇
If to Borrower:
Hold Billing Services, Ltd.
▇▇▇▇▇ ▇▇-▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
FAX: 210/▇▇▇-▇▇▇▇
▇▇▇▇▇ Communications, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, CFO
FAX: 312/▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
5400 Rennaissance Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esquire
FAX: 214/▇▇▇-▇▇▇▇
19.14 Brokerage Fees. Borrower represents and warrants to FINOVA that, with
---------------
respect to the financing transaction herein contemplated, no Person is entitled
to any brokerage fee or other commission and Borrower agrees to pay any fee or
commission due to such Person and to indemnify and hold FINOVA harmless against
any and all such claims.
19.15 Disclosure. No representation or warranty made by Borrower in this
----------
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not disclosed
to FINOVA in writing with respect to the transactions contemplated by this
Agreement which materially and adversely affects the business, assets,
operations, prospects or condition (financial or otherwise), of Borrower.
19.16 Publicity. FINOVA is hereby authorized to issue appropriate press releases
---------
and to cause a tombstone to be published announcing the consummation of this
transaction and the aggregate amount thereof.
19.17 Captions. The Section titles contained in this Agreement are without
--------
substantive meaning and are not part of this Agreement.
19.18 Injunctive Relief. Borrower recognizes that, in the event Borrower fails
-----------------
to perform, observe or discharge any of its Obligations under this Agreement,
any remedy at law may prove to be inadequate relief to FINOVA. Therefore,
FINOVA, if it so requests, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.
19.19 Counterparts. This Agreement may be executed in one or more counterparts,
------------
each of which taken together shall constitute one and the same instrument.
19.20 Construction. The parties acknowledge that each party and its counsel have
------------
reviewed this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments or exhibits
hereto.
19.21 Time of Essence. Time is of the essence for the performance by Borrower of
---------------
the Obligations set forth in this Agreement.
19.22 Limitation of Actions. Borrower agrees that any claim or cause of action
---------------------
by Borrower against FINOVA, or any of FINOVA's directors, officers, employees,
agents, accountants or attorneys, based upon, arising from, or relating to this
Agreement, or any other present or future agreement with FINOVA, or any other
transaction
- 21 -
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, whether or not relating hereto or thereto,
occurred, done, omitted or suffered to be done by FINOVA, or by FINOVA's
directors, officers, employees, agents, accountants or attorneys, whether
sounding in contract or in tort or otherwise, shall be barred unless asserted by
Borrower by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within one year after the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based and service of a summons and complaint on an officer of FINOVA
or any other person authorized to accept service of process on behalf of FINOVA,
within 60 days thereafter. Borrower agrees that such one-year period of time is
a reasonable and sufficient time for Borrower to investigate and act upon any
such claim or cause of action. The one-year period provided herein shall not be
waived, tolled, or extended except by a specific written agreement of FINOVA.
This provision shall survive any termination of this Loan Agreement or any other
agreement.
19.23 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable for any
---------
indirect, special, incidental or consequential damages in connection with any
breach of contract, tort or other wrong relating to this Agreement or the
Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if FINOVA has been advised of the possibility of such
damages. Neither FINOVA, nor any FINOVA Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by the Borrower through the ordinary negligence of FINOVA,
or any FINOVA Affiliate. "FINOVA Affiliate" shall mean FINOVA's directors,
officers, employees, agents, attorneys or other person or entity affiliated with
or representing FINOVA.
19.24 Notice of Breach by FINOVA. Borrower agrees to give FINOVA written notice
--------------------------
of (i) any action or inaction by FINOVA or any attorney of FINOVA in connection
with any Loan Documents that may be actionable against FINOVA or any attorney of
FINOVA or (ii) any defense to the payment of the Obligations for any reason,
including, but not limited to, commission of a tort or violation of any
contractual duty or duty implied by law. Borrower agrees that unless such notice
is fully given as promptly as possible (and in any event within thirty (30)
days) after Borrower has knowledge, or with the exercise of reasonable diligence
should have had knowledge, of any such action, inaction or defense, Borrower
shall not assert, and Borrower shall be deemed to have waived, any claim or
defense arising therefrom.
19.25 Withholding and Other Tax Liabilities: FINOVA shall have the right to
---------------------------------------
refuse to make any advances from time to time unless Borrower shall, at FINOVA's
request, have given to FINOVA evidence, reasonably satisfactory to FINOVA, that
Borrower has properly deposited or paid, as required by law, all withholding
taxes and all federal, state, city, county or other taxes due up to and
including the date of the loan. Until all of Borrower's liabilities and
obligations to FINOVA have been indefeasibly paid and satisfied in full, FINOVA
shall be entitled to continue to hold any and all of the Collateral until
Borrower has given to FINOVA evidence, reasonably satisfactory to FINOVA, that
Borrower has properly deposited or paid, as required by law, all federal
withholding taxes due up to and including the date of such expiration or
termination. Copies of validated deposit slips showing payment shall likewise
constitute satisfactory evidence for such purpose. In the event that any lien,
assessment or tax liability against Borrower shall arise in favor of any taxing
authority, whether or not notice thereof shall be filed or recorded as may be
required by law, FINOVA shall have the right (but shall not be obligated, nor
shall FINOVA hereby assume the duty) upon reasonable prior notice to Borrower to
pay any such lien, assessment or tax liability by virtue of which such charge
shall have arisen; provided, however, that FINOVA shall not pay any such tax,
assessment or lien if the amount, applicability or validity thereof is being
contested in good faith and by appropriate proceedings by Borrower and further
provided that Borrower's title to and its right to use, the Collateral is not
adversely affected and FINOVA's lien and priority in the Collateral are not
affected, altered or impaired thereby. In order to pay any such lien, assessment
or tax liability, FINOVA shall not be obliged to wait until said lien,
assessment or tax liability is filed before taking such action as hereinabove
set forth. Any sum or sums which FINOVA shall have paid for the discharge of any
such lien shall be added to the Revolving Loans and shall be paid by Borrower to
FINOVA with interest thereon, upon demand, and FINOVA shall be subrogated to all
rights of such taxing authority against Borrower. FINOVA may establish reserves
against the Borrowing Base for any amounts paid by FINOVA pursuant to this
paragraph or for any amounts being contested in good faith under this paragraph.
- 22 -
19.26 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH HEREBY
-------------------------------------
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; (ii) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND BORROWER; OR (iii)
ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
FINOVA OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
Borrower:
HOLD BILLING SERVICES, LTD.
By: HBS, Inc., its sole general partner
By: _______________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice President
Attest:____________________________
Secretary or Ass't Secretary
Tax I.D. No. ▇▇-▇▇▇▇▇▇▇
FINOVA CAPITAL CORPORATION
By_______________________________
Title____________________________