LOAN AGREEMENT
The Agreement, dated as of the 4 day of February 1997, between BENTLEY
KING ASSOCIATES, INC., a Delaware corporation whose principal offices are at
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, (hereinafter "BENTLEY" or "LENDER")
and NET TELECOMMUNICATIONS, INC., a Nevada corporation whose principal offices
are at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, (hereinafter "NET TEL"
or " BORROWER") (collectively the "PARTIES") (hereinafter "LOAN AGREEMENT")
agree as follows.
WITNESSETH
WHEREAS, NET TEL requires to funding to continue business operations and
seeks venture capital for said funding;
WHEREAS, BENTLEY agrees to loan a certain sum to NET TEL for the finance
of certain start up operations of a wholly owned subsidiary, as defined
herein, (hereinafter "LOAN'); and
WHEREAS, NET TEL, in order to finance its wholly owned subsidiary so
that it may commence telecommunication service operations and acquire certain
equipment in connection therewith, agrees to accept this LOAN from BENTLEY
pursuant to the terms of this LOAN AGREEMENT and all related documents hereto;
and
WHEREAS, to induce BENTLEY to lend to NET TEL, GUARANTOR, (as defined
herein) shall guarantee the repayment of the LOAN and all terms and conditions
of this LOAN AGREEMENT;
NOW THEREFORE, in consideration of the foregoing covenants and
agreements herein contained, and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the PARTIES agree as follows:
1. The LOAN.
Upon satisfaction of the conditions set forth in Section 4 below, and at
the times and upon the terms indicted in Section 2 below, LENDER shall make a
LOAN to BORROWER. Such LOAN may be referred to herein together as the "LOANS,"
aud each may be referred to individually as a "LOAN."
2. Terms.
(A) The LOAN shall have been made in the aggregate total amount of
$300,000 and shall be advanced to BORROWER initially in three (3) increments:
$55,000.00 on November 11, 1996, and $30,000.00 on December 13, 1996 and
$30,000.00 on January 17, 1997; with the balance of $185,000.00 being funded
on an "as needed" basis and on the consent of LENDER with the aggregate being
paid no later than June 1, 1997. The LOAN shall bear interest at a rate of Ten
percent (10%) per annum and shall be fully due and payable on October 31.
2000. Commencing November 1, 1997, the LOAN shall be self amortizing for the
principal and interest due on the LOAN, including all interest accruing from
the date of this LOAN AGREEMENT through the first payment date, November 1,
1997. BORROWER shall make payments to LENDER of principal and interest in
respect of the LOAN in equal self liquidation payments beginning November 1,
1997 through the maturity Date, October 31, 2000.
(B) The BORROWER shall form a wholly owned subsidiary, the principal
purpose of which will be to acquire equipment and operate as a
telecommunication long distance service provider. From the proceeds available
from the LOAN, NET TEL agrees to make all necessary capital contributions to
the wholly owned subsidiary in order to effectuate the aforementioned
operations. As and for consideration of, and as condition to the LOAN, the
wholly owned subsidiary, shall guarantee the LOAN (hereinafter GUARANTOR").
(C) BORROWER shall pledge as collateral, all shares of the common stock
issued and outstanding to BORROWER by the GUARANTOR, to LENDER pursuant to a
collateral pledge agreement and a stock power,
(D) As and for partial consideration of LENDER making this LOAN, LENDER
shall receive an option to purchase 1,400,000 shares of common stock of the
BORROWER at a price of $.06 per share. This option may be exercised in whole
or any part thereof at the sole discretion of the LENDER. This option shall be
exercisable at the sole discretion of the LENDER at any time during the term
of this LOAN, but in the event of prepayment by the BORROWER, then LENDER may
exercise this option at any time prior to October 31. 2000.
3. Documentation.
The LOAN shall be evidenced by a promissory note in the form attached
hereto as Exhibit A (the "Note" ) and guaranteed by NTI TELECOM, INC., a
Nevada corporation (the "GUARANTOR") pursuant to a guaranty in the form
attached hereto as Exhibit B (the "Guaranty"). Additionally, the LOAN shall be
secured by a UCC-1 financing statement in the form attached hereto as Exhibit
C (the "Financing Statement") and a security agreement (the "Security
Agreement") in the form attached hereto as Exhibit D. BORROWER shall pledge to
LENDER all shares of the common stock issued and outstanding which its holds
of the GUARANTOR pursuant to a collateral pledge agreement attached hereto as
Exhibit E (the "Collateral Pledge Agreement") and a stock power attached
hereto as Exhibit F (the "Stock Power").
4. Conditions Precedent to LENDER'S Obligations.
(A) LENDER'S obligation to make the LOAN shall be subject to
satisfaction of the following conditions precedent:
(1) BORROWER shall have duly executed and delivered to LENDER the
Note, the Financing Statement, the Collateral Pledge Agreement, the
GUARANTOR's shares of common stock and the Stock Power;
(2) GUARANTOR shall be duly formed in accordance with the
appropriate state laws of the state of formation
(3) GUARANTOR shall have executed and delivered to LENDER the
Guaranty;
(4) GUARANTOR shall have executed the digital telephone switch
lease.
(5) No Event of Default (as defined in Section 6 below) shall have
occurred and be existing.
5. Covenants of BORROWER.
So long as the commitment of LENDER hereunder shall be outstanding and
until the payment in full of the Note outstanding hereunder and the
performance of all other obligations of BORROWER hereunder, BORROWER agrees
that, unless LENDER otherwise agrees in writing:
(A)BORROWER covenants to prohibit GUARANTOR from creating, incurring or
suffering any lien, mortgage, pledge, assignment or other encumbrance, except
as contemplated by this LOAN AGREEMENT on, or security interest in, any of
GUARANTOR'S property, assets or receivables, now owned or hereafter acquired;
(B) BORROWER shall not have any indebtedness, except for indebtedness
incurred in the normal course of business;
(C) All taxes, levies and assessments of any description of the BORROWER
will be paid before interest or penalties accrue thereon;
(D)BORROWER will not make any significant change in its management;
(E) BORROWER shall maintain an insurance policy providing "umbrella
liability" coverage in an amount not less than $1,000,000 per occurrence;
This paragraph was deleted from the agreement
(F) BORROWER shall provide one (1) director seat to LENDER on BORROWER'S
Board of directors. BORROWER shall maintain a Board of Directors with at a
total number of five (5) directors seats. In the event that BORROWER
increases its number of Board of Directors seats, for any reason whatsoever,
then LENDER shall receive twenty percent of all seats issued or in the event
that less than five new director seats are added to the Board, then one (l)
additional director seat;
(G) BORROWER shall not decapitalize nor dilute the corporate of stock
structure of GUARANTOR;
(I) BORROWER covenants that all costs, fees charges expenses, etc.
assessed against GUARANTOR by BORROWER shall be customary and reasonable.
(J) BORROWER states and LENDER acknowledges that ownership of the switch
is vested in Telecommunication Finance Group. LENDER acknowledges only the
Lease ownership interest acquired by Net Tel in said equipment.
6. Events of Default.
As used herein, "Events of Default" shall mean any of the following:
(A) BORROWER's default in making any payment in respect of the Note when
it becomes due and payable, where such default continues for a period of five
(5) days;
(B) BORROWER's breach of any covenant contained in Section 5 above or
elsewhere in this LOAN AGREEMENT, where such default continues unremedied for
a period of five (5) days after written notice by LENDER to BORROWER thereof;
(C)BORROWER's voluntary or involuntary dissolution;
(D)BORROWER's voluntary or involuntary transfer or hypothecation,
without LENDER's prior written consent, of all or any portion of the property
which is the subject of the Financing Statement (the "Collateral"); or
(E) Entry by any court having jurisdiction over BORROWER of (1) a decree
or order for relief regarding BORROWER in an involuntary case or proceeding
under any applicable federal or state bankruptcy, insolvency, reorganization
or other similar law, or (2) a decree or order adjudging BORROWER a bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or regarding
BORROWER, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of BORROWER, or ordering the winding up
or liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days.
7. Acceleration.
If an Event of Default occurs LENDER may, by written notice to BORROWER,
declare the Note to be due and payable, whereupon the Note shall immediately
mature and become due and payable, together with interest thereon, without
presentment, demand, protest or notice, all of which are hereby waived by
BORROWER.
8. Failure to Pay
In the event BORROWER fails to make any payment pursuant to this LOAN
AGREEMENT, including a principal or interest payment, then in addition to the
then outstanding principal and interest, there shall be a penalty often
percent (10%) of the outstanding payment due and, owing for failure to make
such payment. In addition, LENDER may exercise any or all rights contained in
this LOAN AGREEMENT or any related documents thereto, including but not
limited to, the Note, the Guaranty, the Collateral Pledge Agreement or Stock
Power. Nothing contained in this section shall be deemed as a waiver of
LENDER's rights.
9. Representations of BORROWER
The BORROWER acknowledges, represents, warrants and covenants, as the
case may be, the following:
A) The BORROWER acknowledges that it has accepted an offer of LENDER
based upon, and in reliance on, all terms, representations, warranties and
other information of this LOAN AGREEMENT as set forth herein.
B) The BORROWER is aware that no federal or state agency, regulatory
authority or other entity has made any findings or determination as to the
fairness or adequacy of this LOAN.
C) The BORROWER represents that it is properly authorized to enter into
this transaction in accordance with its By Laws and pursuant to a vote of its
Board of Directors.
D) The BORROWER warrants and represents that it has determined that the
LOAN is a suitable transaction for it and its financial condition is such that
(i) it has need for financing; and (ii) it is able to bear all risks of
holding the LOAN in accordance with terms of this LOAN AGREEMENT.
E) BORROWER has relied solely upon the information contained in
documents provided to it and upon independent investigations made by it or its
legal representatives. BORROWER is not relying on any representations or
warranties from LENDER or any of its officers, directors, affiliates,
employees or agents, except those contained herein.
F) BORROWER owns the Collateral free and clear of any liens or
encumbrances.
10. Representations of LENDER
LENDER acknowledges, represents, warrants and covenants, as the case may
be, the following:
A) The LENDER is aware that no federal or state agency, regulatory
authority or other entity has made any findings or determination as to the
fairness or adequacy of this LOAN.
B) The LENDER represents that it is properly authorized to enter into
this transaction in accordance with its By Laws and pursuant to a vote of its
Board of Directors.
11. Prepayment.
BORROWER may prepay the LOAN in whole or in part at any time; provided,
that in the event of any partial prepayment of the LOAN, any remaining
principal balance shall continue to bear interest as set forth above and shall
be due and payable at the date set forth in the Note, and all other provisions
of the Note, the Guaranty, the Financing Statement, Collateral Pledge
Agreement and this LOAN AGREEMENT shall continue in full effect
notwithstanding such partial payment.
12. Notices.
Each notice and other communication under or with respect to this LOAN
AGREEMENT shall be in writing and shall be effective when mailed by certified
or registered mail, return receipt requested, to the PARTIES at the following
addresses:
LENDER: Bentley King Associates, Inc.
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BORROWER: Net Tel
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GUARANTOR: NTI Telecom, Inc.
c/o Net Tel
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Any party may change his or its address of record by delivering notice to the
other PARTIES of such address change in accordance with this Section.
13. Application of Nevada Law.
This LOAN AGREEMENT and the related documents, including but not limited
to, the Notes, Collateral Pledge Agreement, Guaranty and Financing Statement
shall be governed by and construed in accordance with Nevada law.
14. Amendments.
This LOAN AGREEMENT may be amended only by a written instrument executed
by all PARTIES.
15. Execution of Additional instruments.
BORROWER and GUARANTOR shall execute and deliver to LENDER such other
and further documents, including without limitation statements of interest and
holdings, designations, powers of attorney, and other instruments necessary or
appropriate to further the intent of this LOAN AGREEMENT or to comply with any
laws, rules or regulations.
16. Severability.
If any provision in this LOAN AGREEMENT is held to be invalid or
unenforceable on any occasion or in any circumstance, such holding shall not
be deemed to render the provision invalid or unenforceable on any other
occasion or in any other circumstance nor to render any other provision hereof
invalid or unenforceable, and to that extent the provisions of this LOAN
AGREEMENT are severable.
17. Heirs, Successors, end assigns.
This LOAN AGREEMENT shall be binding upon and inure to the benefit of
the PARTIES hereto and, to the extent permitted hereunder, their respective
heirs, legal representatives and successors. BORROWER may not assign or cause
the assignment of this LOAN AGREEMENT or of any right or obligation hereunder
without the written consent of the LENDER.
18. Counterparts.
This LOAN AGREEMENT may be executed in counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.
19. Attorney's Fees.
If one or more PARTIES to this LOAN AGREEMENT brings an action to
enforce the terms hereof and declare rights hereunder, the prevailing party or
PARTIES in any such action, on arbitration, trial or appeal, shall be entitled
to its reasonable attorney's fees and costs to be paid by the non-prevailing
party or PARTIES as fixed by the court or arbitrator(s).
20. Order of Recourse.
BORROWER and GUARANTOR are jointly and severally liable to LENDER for
the obligations pursuant to this LOAN AGREEMENT and any related document
thereto. In the event of a default hereunder, LENDER shall not be required to
exhaust any or all remedies against BORROWER before proceeding against
GUARANTOR.
21. Survival
The representations, warranties, covenants, and agreements contained in
or made pursuant to this LOAN AGREEMENT shall survive the closing of this
transaction, irrespective of any investigation made by or on behalf of any
party. The statements contained in any certificate or other instrument
delivered by or on behalf of BORROWER pursuant hereto or in connection with
the transactions contemplated hereby shall be deemed representations,
warranties, covenants and/or agreements, as the case may be, of BORROWER
hereunder.
22. Sole Benefit
This LOAN AGREEMENT is made solely for the benefit of BORROWER, LENDER
and GUARANTOR and no other person shall acquire or have any right under or by
virtue of this LOAN AGREEMENT.
23. Entire Agreement
This LOAN AGREEMENT constitutes the entire understanding among the
PARTES and incorporates all prior dealings, representations and promises,
whether written or oral, and expresses the full agreement after full
investigation by the PARTIES. No party is relying on any statement,
representation or promise that is not set forth in this LOAN AGREEMENT.
24. Modification
This LOAN AGREEMENT and any Exhibits or amendments hereto, sets forth
the entire understanding of the PARTES with respect to the subject matter
hereof, supersedes all existing agreement among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party with the approval of their respective boards of directors.
25. Waiver
Any waiver by any party of a breach of any provision of this LOAN
AGREEMENT shall not operate as, or be construed to be, a waiver of any other
breach of such provision or of any breach of any other provision of this LOAN
AGREEMENT. The failure of a party to insist upon strict adherence to any term
of this LOAN AGREEMENT on one or more occasions shall not be considered a
waiver of the right thereafter to insist upon strict adherence to that term or
any other term of this LOAN AGREEMENT. Any waiver must be in writing.
26. Binding Effect
The provisions of this LOAN AGREEMENT shall be binding upon and inure to
the benefit of the PARTIES hereto and the respective successors and assigns of
the PARTIES. Neither party may sell, assign, transfer, or otherwise convey any
of its rights or delegate any of its duties under this LOAN AGREEMENT without
the prior written consent of the other except to a corporation which has
succeeded to substantially all the business and assets of the assignor and
assumed in writing its obligations under this LOAN AGREEMENT or to a
corporation surviving a merger or consolidation to which the party to this
LOAN AGREEMENT is a party and this LOAN AGREEMENT shall be binding upon and
inure to the benefit of the PARTIES hereto and such respective successors and
assigns of PARTES and such respective assigns Any attempted sale, assignment,
transfer, conveyance, or delegation in violation of this Section shall be
void.
27. Separability
If any provision of this LOAN AGREEMENT is invalid, illegal, or
unenforceable, the balance of this LOAN AGREEMENT shall remain in effect, and
if any provision is inapplicable to any of the PARTIES or circumstances, it
shall nevertheless remain applicable to all other PARTIES and circumstances.
28. Headings
The headings in this LOAN AGREEMENT are solely for convenience of
reference and shall be given no effect in the construction or interpretation
of this LOAN AGREEMENT.
29. Counterparts
This LOAN AGREEMENT may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
30. Confidentiality
The PARTIES agree that in contemplation of this LOAN AGREEMENT certain
business and financial prospects and conditions of the PARTES, have been
divulged, either, orally or in writing, including but not limited to,
financial statements, operation procedures, etc. As a condition to this LOAN
AGREEMENT, the PARTIES agree that no public disclosure to any person or entity
other than the PARTES, shall not be purposefully made until this LOAN
AGREEMENT has been duly executed. The PARTES shall take reasonable precautions
to maintain the confidentiality of this LOAN AGREEMENT and information
pertinent hereto until such time as this LOAN AGREEMENT has been duly
executed. PARTIES acknowledges that the information provided herein is
proprietary in nature.
IN WITNESS WHEREOF the PARTIES have affixed their seal hereto, as of the
date first hereinabove stated.
NET TELECOMMUNICATIONS, INC.
By:/s/▇▇▇▇▇▇▇ ▇▇▇▇▇
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President
BENTLEY KING ASSOCIATES, INC.
By:/s/▇▇▇ ▇. ▇▇▇▇▇▇
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Executive Vice President
NTI TELECOM, INC.
By:/s/▇▇▇▇▇▇▇ ▇▇▇▇▇
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President