Exhibit 10.20
TBCC
Loan and Security Agreement
Borrower: IDT Corporation,
a Delaware corporation
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Date: December 24, 1997
THIS LOAN AND SECURITY AGREEMENT is entered into as of the above date, between
the above borrower (the "Borrower"), having its chief executive office and
principal place of business at the address shown above, and TRANSAMERICA
BUSINESS CREDIT CORPORATION, a Delaware corporation, ("TBCC") having its
principal office at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and having an office at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇. The Schedule to this Agreement (the "Schedule") being signed
concurrently is an integral part of this Agreement. (Definitions of certain
terms used in this Agreement are set forth in Section 9 below.) The parties
agree as follows:
1. LOANS.
1.1. Loans. TBCC, subject to the terms and conditions of this Agreement,
agrees to make loans (the "Loans") to Borrower, from time to time during the
period from the date of this Agreement to the Maturity Date set forth in the
Schedule, at Borrower's request, in an aggregate principal amount at any one
time outstanding not to exceed the Credit Limit shown on the Schedule. If at
any time the total outstanding Loans and other monetary Obligations exceed said
limit, Borrower shall repay the excess immediately without demand. Borrower
shall use the proceeds of all Loans solely for lawful general business purposes.
1.2. Due Date. The Loans, all accrued interest and all other monetary
Obligations shall be payable in full on the Maturity Date. Borrower may borrow,
repay and reborrow Loans (other than any Term Loans), in whole or in part, in
accordance with the terms of this Agreement.
1.3. Loan Account. TBCC shall maintain an account on its books in the name of
Borrower (the "Loan Account"). All Loans and advances made by TBCC to Borrower
or for Borrower's account and all other monetary Obligations will be charged to
the Loan Account. All amounts received by TBCC from Borrower or for Borrower's
account will be credited to the Loan Account. TBCC will send Borrower a monthly
statement reflecting the activity in the Loan Account, and each such monthly
statement shall be an account stated between Borrower and TBCC and shall be
final conclusive and binding absent manifest error.
1.4. Collection of Receivables. At such time as Borrower's cash balance
(including Cash Equivalents) in its deposit accounts (as reflected in its
Certificate of Cash Balance as described in the Schedule attached hereto) falls
below $5,000,000, then within 1 week after the earlier of the date TBCC receives
such Certificate of Cash Balance or the date by which TBCC should have received
such Certificate of Cash Balance, Borrower shall remit to TBCC all Collections
including all checks, drafts and other documents and instruments evidencing
remittances in payment (collectively referred to as "Items of Payment") within
one Business Day after receipt, in the same form as received, with any necessary
indorsements. For purposes of calculating interest due to TBCC, credit will be
given for Collections and all other proceeds of Collateral and other payments to
TBCC two Business Days after receipt of cleared funds. Borrower's Loan Account
will be credited only with the net amounts actually received in payment of
Receivables, and such payments shall be credited to the Obligations in such
order as TBCC shall determine in its discretion. Pending delivery to TBCC,
Borrower will not commingle any Items of Payment with any of its other funds or
property, but will segregate them from the other assets of Borrower and will
hold them in trust and for the account and as the property of TBCC. Borrower
hereby agrees to endorse any Items of Payment upon the request of TBCC.
1.5. Reserves. TBCC may, from time to time, in its sole and absolute
discretion: (i) establish and modify reserves against Eligible Receivables and
Eligible Inventory, (ii) modify advance rates with respect to Eligible
Receivables and Eligible Inventory, (iii) modify the standards of eligibility
set forth in the definitions of Eligible Receivables and Eligible Inventory, and
(iv) establish reserves against available Loans.
1.6. Term.
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(a) The term of this Agreement shall be from the date of this Agreement to
the Maturity Date set forth in the Schedule, unless sooner terminated in
accordance with the terms of this Agreement, provided that the Maturity Date
shall automatically be extended, and this Agreement shall automatically and
continuously renew, for successive additional terms of one year each, unless one
party gives written notice to the other, not less than sixty days prior to the
next Maturity Date, that such party elects to terminate this Agreement effective
on the next Maturity Date. On the Maturity Date or on any earlier termination
of this Agreement Borrower shall pay in full all Obligations, and
notwithstanding any termination of this Agreement all of TBCC's security
interests and all of TBCC's other rights and remedies shall continue in full
force and effect until payment and performance in full of all Obligations.
(b) This Agreement may be terminated prior to the Maturity Date as follows:
(i) by Borrower, effective three business days after written notice of
termination is given to TBCC; or (ii) by TBCC at any time after the occurrence
of an Event of Default, subject to any applicable right to cure, without notice,
effective immediately. If this Agreement is terminated by Borrower or by TBCC
under this Section 1.6(b), Borrower shall pay to TBCC a termination fee (the
"Termination Fee") in the amount shown on the Schedule. The Termination Fee
shall be due and payable on the effective date of termination. Notwithstanding
the foregoing, Borrower shall have no right to terminate this Agreement at any
time that any principal of, or interest on any of the Loans or any other
monetary Obligations are outstanding, except upon prepayment of all Obligations
and the satisfaction of all other conditions set forth in the Loan Documents.
1.7. Payment Procedures. Borrower hereby authorizes TBCC to charge the Loan
Account with the amount of all interest, fees, expenses and other payments to be
made hereunder and under the other Loan Documents. TBCC may, but shall not be
obligated to, discharge Borrower's payment obligations hereunder by so charging
the Loan Account. Whenever any payment to be made hereunder is due on a day
that is not a Business Day, the payment may be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the amount of interest due.
1.8. Conditions to Initial Loan. The obligation of TBCC to make the initial
Loan is subject to the satisfaction of the following conditions prior to or
concurrent with such initial Loan:
(a) Except for the filing of termination statements under the Code by the
existing lender to Borrower whose loans are being repaid with the Loan proceeds,
no consent or authorization of, filing with or other act by or in respect of any
Governmental Authority or any other Person is required in connection, with the
execution, delivery, performance, validity or enforceability of this Agreement,
or the other Loan Documents or the consummation of the transactions contemplated
hereby or thereby or the continuing operations of the Borrower following the
consummation of such transactions.
(b) TBCC and its counsel shall have performed (i) a review satisfactory to
TBCC of all of the Material Contracts and other assets of the Borrower, the
financial condition of the Borrower, including all of its tax, litigation,
environmental and other potential contingent liabilities, and the corporate and
capital structure of the Borrower and (ii) a pre-closing audit and collateral
review, in each case with results satisfactory to TBCC.
(c) TBCC shall have received the following, each dated the date of the
initial Loan or as of an earlier date acceptable to TBCC, in form and substance
satisfactory to TBCC and its counsel: (i) acknowledgment copies of Uniform
Commercial Code financing statements (naming TBCC as secured party and the
Borrower as debtor), duly filed in all jurisdictions that TBCC deems necessary
or desirable to perfect and protect the Liens created hereunder, and Official
Uniform Commercial Code searches in such jurisdictions, showing such financing
statements of record; (ii) the opinion of counsel for the Borrower covering such
matters incident to the transactions contemplated by this Agreement as TBCC may
specify in its discretion; (iii) certified copies of all policies of insurance
required by this Agreement and the other Loan Documents, together with loss
payee endorsements for all such policies naming TBCC as lender loss payee and an
additional insured; (iv) Copies of the Borrower's articles or certificate of
incorporation, certified as true, correct and complete by the secretary of state
of Borrower's state of incorporation within 45 days of the date hereof; (v)
copies of the bylaws of the Borrower and a copy of the resolutions of the Board
of Directors of the Borrower authorizing the execution, delivery and performance
of this Agreement, the other Loan Documents, and the transactions contemplated
hereby and thereby, attached to which is a certificate of the Secretary or an
Assistant Secretary of the Borrower certifying (A) that such copies of the
bylaws and resolutions are true, complete and accurate copies thereof, have not
been amended or modified since the date of such certificate and are in full
force and effect and (B) the incumbency, names and true signatures of the
officers of the Borrower; (vi) a good standing certificate from the Secretary of
State of Borrower's state of incorporation dated within ten days of the date
hereof and each state in which the Borrower is qualified as a foreign
corporation, each dated within sixty days of the date hereof; (vii) such
other agreements and instruments as TBCC deems necessary in its sole and
absolute discretion in connection with the transactions contemplated hereby.
1.9. Conditions to Lending. The obligation of TBCC to make any Loan is subject
to the satisfaction of the following conditions precedent:
(a) There shall be no pending or, to the knowledge of Borrower after due
inquiry, threatened litigation, proceeding, inquiry or other action relating to
this Agreement, or any other Loan Document, or which could be expected to have a
Material Adverse Effect in the judgment of TBCC;
(b) Borrower shall be in compliance with all Requirements of Law and Material
Contracts, other than such noncompliance that could not have a Material Adverse
Effect;
(c) The Liens in favor of TBCC shall have been duly perfected and shall
constitute first priority Liens, except for Permitted Liens;
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(d) All representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct on and as of the date of such
Loan as if then made, other than representations and warranties that expressly
relate solely to an earlier date, in which case they shall have been true and
correct as of such earlier date;
(e) No Default or Event of Default shall have occurred and be continuing or
would result from the making of the requested Loan as of the date of such
request; and
(f) No Material Adverse Effect shall have occurred.
2. INTEREST AND FEES.
2.1. Interest. Borrower shall pay TBCC interest on all outstanding Loans and
other monetary Obligations, at the interest rate set forth in the Schedule.
Interest shall be payable monthly in arrears on the first Business Day of each
month, and on the Maturity Date. Following the occurrence and during the
continuance of any Event of Default, the interest rate applicable to all
Obligations shall be increased by two percent per annum.
2.2. Fees. Borrower shall pay TBCC the fees set forth in the Schedule.
2.3. Calculations. All interest and fees under this Agreement shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed in the period for which such interest or fees are payable.
2.4. Taxes. Any and all payments by Borrower under this Agreement or any other
Loan Document shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings and penalties, interest and all other liabilities with respect
thereto, excluding in the case of TBCC, taxes imposed on its net income and
franchise taxes imposed on it by the jurisdiction under the laws of which TBCC
is organized or any political subdivision thereof.
3. SECURITY.
3.1. Grant of Security Interest. To secure the payment and performance when
due of all of the Obligations, Borrower hereby grants to TBCC a security
interest in all of its present and future Receivables, Inventory, Other
Property, and other Collateral, wherever located (excluding, however, the assets
of Borrower's Net2Phone division ("Net2Phone"), including any of Net2Phone's
receivables, inventory or other personal property).
3.2. Other Liens; Location of Collateral. Borrower represents, warrants and
covenants that all of the Collateral is, and will at all times continue to be,
free and clear of all Liens, other than Permitted Liens and Liens in favor of
TBCC. All Collateral is and will continue to be maintained at the locations
shown on the Schedule.
3.3. Receivables.
(a) Schedules. At such time as Borrower's cash balance (including Cash
Equivalents) in its deposit accounts (as reflected in its Certificate of Cash
Balance as described in the Schedule attached hereto) falls below $5,000,000,
then within 1 week after the earlier of the date TBCC receives such Certificate
of Cash Balance or the date by which TBCC should have received such Certificate
of Cash Balance, and thereafter as often as requested by TBCC, Borrower shall
execute and deliver to TBCC written schedules of Receivables and Eligible
Receivables (but the failure to execute or deliver any schedule shall not affect
or limit TBCC's security interest in all Receivables) and within such 1 week
period, Borrower shall have executed a Depository Account Agreement on TBCC's
standard form, with such revisions as are acceptable to TBCC in its sole
discretion. On TBCC's request, Borrower shall also furnish to TBCC copies of
invoices to customers and shipping and delivery receipts. Borrower shall
deliver to TBCC the originals of all letters of credit, notes, and instruments
in its favor and such endorsements or assignments as TBCC may reasonably
request.
(b) Records, Collections. Borrower shall report all customer credits to
TBCC, on the regular reports to TBCC in the form from time to time specified by
TBCC. Borrower shall notify TBCC of all returns and recoveries of merchandise
and of all claims asserted with respect to merchandise, on its regular reports
to TBCC. Borrower shall not settle or adjust any dispute or claim, or grant any
discount, credit or allowance or accept any return of merchandise, except in the
ordinary course of its business, without TBCC's prior written consent.
(c) Representations. Borrower represents and warrants to TBCC that each
Receivable with respect to which Loans are requested by Borrower shall, on the
date each Loan is requested and made, represent an undisputed, bona fide,
existing, unconditional obligation of the account debtor created by the sale,
delivery, and acceptance of goods or the rendition of services, in the ordinary
course of Borrower's business, and meet the Minimum Eligibility Requirements set
forth in Section 9.1(n) below.
3.4. Inventory. Borrower shall maintain full, accurate and complete records
respecting the Inventory describing the kind, type and quantity of the Inventory
and Borrower's cost therefor, withdrawals therefrom and additions thereto,
including a perpetual inventory for work in process and finished goods
3.6. Further Assurances. Borrower will perform any and all steps that TBCC may
reasonably request to perfect TBCC's security interests in the Collateral,
including, without limitation, executing and filing financing and continuation
statements in form and substance satisfactory to TBCC. TBCC is hereby authorized
by Borrower to sign Borrower's name or file any financing statements or similar
documents or instruments covering the Collateral whether or not Borrower's
signature appears thereon. Borrower agrees, from time to time, at TBCC's
request, to file notices of Liens, financing statements, similar document or
instruments, and amendments, renewals and continuations thereof, and cooperate
with TBCC, in
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connection with the continued perfection and protection of the Collateral. If
any Collateral is in the possession or control of any Person other than a public
warehouseman where the warehouse receipt is in the name of or held by TBCC,
Borrower shall notify such Person of TBCC's security interest therein and, upon
request, instruct such Person or Persons to hold all such Collateral for the
account of TBCC and subject to TBCC's instructions. If so requested by TBCC,
Borrower will deliver to TBCC warehouse receipts covering any Collateral located
in warehouses showing TBCC as the beneficiary thereof and will also cause the
warehouseman to execute and deliver such agreements as TBCC may request relating
to waivers of liens by such warehouseman and the release of the Inventory to
TBCC on its demand. Borrower shall defend the Collateral against all claims and
demands of all Persons.
3.7. Power of Attorney. Borrower hereby appoints and constitutes TBCC as
Borrower's attorney-in-fact (i) to request at any time from account debtors
verification of information concerning Receivables and the amount owing thereon,
(ii) upon the occurrence and during the continuance of an Event of Default, to
convey any item of Collateral to any purchaser thereof, (iii) to give or sign
Borrower's name to any notices or statements necessary or desirable to create or
continue the Lien on any Collateral granted hereunder and (iv) to take any
act necessary or desirable to protect or preserve any Collateral and (v) upon
the occurrence and during the continuance of an Event of Default, to make any
payment necessary or desirable to protect or preserve any Collateral. TBCC's
authority hereunder shall include, without limitation, the authority to execute
and give receipt for any certificate of ownership or any document, transfer
title to any item of Collateral and take any other actions arising from or
incident to the powers granted to TBCC under this Agreement. This power of
attorney is coupled with an interest and is irrevocable.
4. Representations and Warranties of Borrower. Borrower represents and warrants
as follows:
4.1. Organization, Good Standing and Qualification. Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State set forth above, (ii) has the corporate power and authority to own
its properties and assets and to transact the businesses in which it is engaged
and (iii) is duly qualified, authorized to do business and in good standing in
each jurisdiction where it is engaged in business, except to the extent that the
failure to so qualify or be in good standing would not have a Material Adverse
Effect.
4.2. Locations of Offices, Records and Collateral. The address of the
principal place of business and chief executive office of Borrower is, and the
books and records of Borrower and all of its chattel paper and records relating
to Collateral are maintained exclusively in the possession of Borrower at, the
address of Borrower specified in heading of this Agreement. Borrower has places
of business, and Collateral is located, only at such address and at the
addresses set forth in the Schedule.
4.3. Authority. Borrower has the requisite corporate power and authority to
execute, deliver and perform its obligations under each of the Loan Documents.
All corporate action necessary for the execution, delivery and performance by
Borrower of the Loan Documents has been taken.
4.4. Enforceability. This Agreement is, and, when executed and delivered, each
other Loan Document will be, the legal, valid and binding obligation of Borrower
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
4.5. No Conflict. The execution, delivery and performance of each Loan
Document by Borrower does not and will not contravene (i) any of the Governing
Documents, (ii) any Requirement of Law or (iii) any Material Contract and will
not result in the imposition of any Liens other than in favor of TBCC.
4.6. Consents and Filings. No consent, authorization or approval of, or filing
with or other act by, any shareholders of Borrower or any Governmental Authority
or other Person is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement or any other Loan
Document, the consummation of the transactions contemplated hereby or thereby or
the continuing operations of Borrower following such consummation, except
(i) those that have been obtained or made, and (ii) the filing of financing
statements under the Uniform Commercial Code.
4.7. Solvency. Borrower is Solvent and will be Solvent upon the completion of
all transactions contemplated to occur on or before the date of this Agreement
(including, without limitation, the Loans to be made on the date of this
Agreement).
4.8. Financial Data. Borrower has provided to TBCC complete and accurate
Financial Statements, which have been prepared in accordance with GAAP
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the periods
covered. Borrower has no Contingent Obligation or liability for taxes,
unrealized losses, unusual forward or long-term commitments or long-term leases,
which is not reflected in such Financial Statements or the footnotes thereto.
Since the last date covered by such Financial Statements, there has been no
sale, transfer or other disposition by Borrower of any material part of its
business or property and no purchase or other acquisition of any business or
property (including any capital stock of any other Person) material in relation
to the financial condition of Borrower at said date. Since said date, (i) there
has been no change, occurrence, development or event which has had or could
reasonably be expected to have a Material Adverse Effect and (ii) none of the
capital stock of Borrower has been redeemed, retired, purchased or otherwise
acquired for value by Borrower.
4.9. Accuracy and Completeness of Information. All data, reports and
information previously, now or hereafter furnished by or on behalf of Borrower
to TBCC or the Auditors are or will be true and accurate in all material
respects on the date as of which such data, reports and information are dated or
certified, and not incomplete by omitting to state any material fact necessary
to make such data, reports and information not materially misleading at such
time. There are no facts now known to Borrower which individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect and
which have not been disclosed in writing to TBCC.
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4.10. No Joint Ventures, Partnerships or Subsidiaries. Borrower is not engaged
in any joint venture or partnership with any other Person other than those
disclosed to TBCC in writing from time to time and which involve a commitment of
the assets of the Borrower of at least $500,000 Borrower has no Subsidiaries
other than those disclosed to TBCC in writing from time to time.
4.11. Corporate and Trade Name. During the past five years, Borrower has not
been known by or used any other corporate, trade or fictitious name except for
its name as set forth on the signature page of this Agreement and the other
names specified in the Schedule.
4.12. No Actual or Pending Material Modification of Business. There exists no
actual or, to the best of Borrower's knowledge after due inquiry, threatened
termination, cancellation or limitation of, or any modification or change in the
business relationship of Borrower with any customer or group of customers whose
purchases individually or in the aggregate are material to the operation of
Borrower's business or with any material supplier.
4.13. No Broker's or Finder's Fees. No broker or finder brought about this
Agreement or the Loans. No broker's or finder's fees or commissions will be
payable by Borrower to any Person in connection with the transactions
contemplated by this Agreement.
4.14. Taxes and Tax Returns. Borrower has properly completed and timely
filed all income tax returns it is required to file. The information filed is
complete and accurate in all material respects. All deductions taken in such
income tax returns are appropriate and in accordance with applicable laws and
regulations, except deductions that may have been disallowed but are being
challenged in good faith and for which adequate reserves have been made in
accordance with GAAP. All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date of this Agreement have been
timely paid (or, if not yet due, adequate reserves therefor have been
established) and Borrower has no liability for taxes in excess of the amounts so
paid or reserves so established. No deficiencies for taxes have been claimed,
proposed or assessed by any taxing or other Governmental Authority against
Borrower and no notice of any tax Lien has been filed. There are no pending or
threatened audits, investigations or claims for or relating to any liability for
taxes and there are no matters under discussion with any Governmental Authority
which could result in an additional liability for taxes. No extension of a
statute of limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to Borrower. Borrower is not a
party to and does not have any obligations under any written tax sharing
agreement or agreement regarding payments in lieu of taxes.
4.15. No Judgments or Litigation. No judgments, orders, writs or decrees are
outstanding against Borrower, nor is there now pending or, to the knowledge of
Borrower after due inquiry, threatened litigation, contested claim,
investigation, arbitration, or governmental proceeding by or against Borrower
that (i) could individually or in the aggregate be likely in the reasonable
business judgment of TBCC to have a Material Adverse Effect or (ii) purports to
affect the legality, validity or enforceability of this Agreement, any other
Loan Document or the consummation of the transactions contemplated hereby or
thereby.
4.16. Investments; Contracts. Borrower (i) has not committed to make any
Investment which could have a Material Adverse Effect; (ii) is not a party to
any indenture, agreement, contract, instrument or lease or subject to any
charter, by-law or other corporate restriction or any injunction, order,
restriction or decree, which would materially and adversely affect its business,
operations, assets or financial condition; (iii) is not a party to any "take or
pay" contract as to which it is the purchaser which could have a Material
Adverse Effect; or (iv) has no material contingent or long-term liability,
including management contracts (excluding employment contracts of full-time
individual officers or employees), which could have a Material Adverse Effect.
4.17. No Defaults; Legal Compliance. Borrower is not in default under any term
of any Material Contract or in violation of any Requirement of Law, nor is
Borrower subject to any investigation with respect to a claimed violation of any
Requirement of Law.
4.18. Rights in Collateral; Priority of Liens. All Collateral is owned or
leased by Borrower, free and clear of any and all Liens in favor of third
parties, other than Permitted Liens. The Liens granted to TBCC pursuant to the
Loan Documents constitute valid, enforceable and perfected first-priority Liens
on the Collateral, except for Permitted Liens.
4.19. Intellectual Property. Set forth in the written Representations and
Warranties of Borrower previously delivered to TBCC is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights
(registered and unregistered), and all applications therefor and licenses
thereof, of Borrower. Borrower owns or licenses all material patents,
trademarks, service-marks, logos, tradenames, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of the foregoing,
which are necessary or advisable for the operation of its business as presently
conducted or proposed to be conducted. To the best of its knowledge after due
inquiry, Borrower has not infringed any patent, trademark, service-▇▇▇▇,
tradename, copyright, license or other right owned by any other Person by the
sale or use of any product, process, method, substance, part or other material
presently contemplated to be sold or used, where such sale or use would
reasonably be expected to have a Material Adverse Effect and no claim or
litigation is pending, or to the best of Borrower's knowledge, threatened
against or affecting Borrower that contests its right to sell or use any such
product, process, method, substance, part or other material.
4.20. Labor Matters. There are no existing or threatened strikes, lockouts or
other disputes relating to any collective bargaining or similar agreement to
which Borrower is a party which would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
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4.21. Licenses and Permits. To the best of its knowledge, Borrower has
obtained and holds in full force and effect, all franchises, licenses, leases,
permits, certificates, authorizations, qualifications, easements, rights of way
and other rights and approvals which are necessary or advisable for the
operation of its business as presently conducted and as proposed to be
conducted, except where the failure to possess any of the foregoing
(individually or in the aggregate) would not have a Material Adverse Effect.
4.22. Government Regulation. Borrower is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
Requirement of Law that limits its ability to incur indebtedness or its ability
to consummate the transactions contemplated by this Agreement and the other Loan
Documents.
4.23. Business and Properties. The business of Borrower is not affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could reasonably be expected
to have a Material Adverse Effect.
4.24. Affiliate Transactions. Borrower is not a party to or bound by any
agreement or arrangement (whether oral or written) to which any Affiliate of
Borrower is a party except (i) in the ordinary course of and pursuant to the
reasonable requirements of the business of Borrower and (ii) upon fair and
reasonable terms no less favorable to Borrower than it could obtain in a
comparable arm's-length transaction with an unaffiliated Person.
4.25. Survival of Representations. All representations made by Borrower in
this Agreement and in any other Loan Document executed and delivered by it in
connection herewith shall survive the execution and delivery hereof and thereof
and the closing of the transactions contemplated hereby and thereby.
5. AFFIRMATIVE COVENANTS OF THE BORROWER. Until termination of this Agreement
and payment and satisfaction of all Obligations:
5.1. Corporate Existence. Borrower shall (i) maintain its corporate existence,
(ii) maintain in full force and effect all material licenses, bonds, franchises,
leases, trademarks, qualifications and authorizations to do business, and all
material patents, contracts and other rights necessary or advisable to the
profitable conduct of its business, and (iii) continue in, and limit its
operations to, the same lines of business as presently conducted by it.
5.2. Maintenance of Property. Borrower shall keep all property useful and
necessary to its business in good working order and condition (ordinary wear and
tear excepted) in accordance with its past operating practices.
5.3. Affiliate Transactions. Borrower shall conduct transactions with any of
its Affiliates on an arm's-length basis or other basis no less favorable to
Borrower and which are approved by the board of directors of Borrower.
5.4. Taxes. Borrower shall pay when due (i) all tax assessments, and other
governmental charges and levies imposed against it or any of its property and
(ii) all lawful claims that, if unpaid, might by law become a Lien upon its
property; provided, however, that, unless such tax assessment, charge, levy or
claim has become a Lien on any of the property of Borrower, it need not be paid
if it is being contested in good faith, by appropriate proceedings diligently
conducted and an adequate reserve or other appropriate provision shall have been
made therefor as required in accordance with GAAP.
5.5. Requirements of Law. Borrower shall comply with all Requirements of Law
applicable to it, including, without limitation, all applicable Federal, State,
local or foreign laws and regulations, including, without limitation, those
relating to environmental matters, employee matters, the Employee Retirement
Income Security Act of 1974, and the collection, payment and deposit of
employees' income, unemployment and social security taxes, provided that
Borrower shall not be deemed in violation hereof if Borrower's failure to comply
with any of the foregoing would not require more than $50,000 to cure the same.
5.6. Insurance. Borrower shall maintain public liability insurance, business
interruption insurance, third party property damage insurance and replacement
value insurance on its assets (including the Collateral) under such policies of
insurance, with such insurance companies, in such amounts and covering such
risks as are at all times satisfactory to TBCC in its commercially reasonable
judgment, all of which policies covering the Collateral shall name TBCC as an
additional insured and lender loss payee in case of loss, and contain other
provisions as TBCC may reasonably require to protect fully TBCC's interest in
the Collateral and any payments to be made under such policies.
5.7. Books and Records; Inspections. Borrower shall (i) maintain books and
records (including computer records) pertaining to the Collateral in such
detail, form and scope as is consistent with good business practice and
(ii) provide TBCC and its agents access to the premises of Borrower at any time
and from time to time, during normal business hours and upon reasonable notice
under the circumstances, and at any time on and after the occurrence of a
Default or Event of Default, for the purposes of (A) inspecting and verifying
the Collateral, (B) inspecting and copying (at Borrower's expense) any and all
records pertaining thereto, and (C) discussing the affairs, finances and
business of Borrower with any officer, employee or director of Borrower or with
the Auditors. Borrower shall reimburse TBCC for the reasonable travel and
related expenses of TBCC's employees or, at TBCC's option, of such outside
accountants or examiners as may be retained by TBCC to verify or inspect
Collateral, records or documents of Borrower on a regular basis or for a special
inspection if TBCC deems the same appropriate. If TBCC's own employees are
used, Borrower shall also pay therefor $600 per person per day (or such other
amount as shall represent TBCC's then current standard charge for the same), or,
if outside examiners or accountants are used, Borrower shall also pay TBCC such
sum as TBCC may be obligated to pay as fees therefor.
5.8. Notification Requirements. Borrower shall give TBCC the following notices
and other documents:
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(a) Notice of Defaults. Borrower shall give TBCC written notice of any
Default or Event of Default within two Business Days after becoming aware of the
same.
(b) Proceedings or Adverse Changes. Borrower shall give TBCC written notice
of any of the following, promptly, and in any event within ten Business Days
after Borrower becomes aware of any of the following: (i) any proceeding being
instituted or threatened by or against it in any federal, state, local or
foreign court or before any commission or other regulatory body involving a sum,
together with the sum involved in all other similar proceedings, in excess of
$500,000 in the aggregate, (ii) any order, judgment or decree being entered
against Borrower or any of its properties or assets involving a sum, together
with the sum of all other orders, judgments or decrees, in excess of $500,000 in
the aggregate, and (iii) any actual or prospective change, development or event
which has had or could reasonably be expected to have a Material Adverse Effect.
(c) Change of Name or Chief Executive Office; Opening Additional Places of
Business. Borrower shall give TBCC at least 30 days prior written notice of any
change of Borrower's corporate name or its chief executive office or of the
opening of any additional place of business.
(d) Casualty Loss. Borrower shall (i) provide written notice to TBCC,
within ten Business Days, of any material damage to, the destruction of or any
other material loss to any asset or property owned or used by Borrower other
than any such asset or property with a net book value (individually or in the
aggregate) less than $250,000 or any condemnation, confiscation or other taking,
in whole or in part, or any event that otherwise diminishes so as to render
impracticable or unreasonable the use of such asset or property owned or used by
Borrower together with the amount of the damage, destruction, loss or diminution
in value and (ii) diligently file and prosecute its claim or claims for any
award or payment in connection with a any of the foregoing.
5.9. Qualify to Transact Business. Borrower shall qualify to transact business
as a foreign corporation in each jurisdiction where the nature or extent of its
business or the ownership of its property requires it to be so qualified or
authorized and where failure to qualify or be authorized would have a Material
Adverse Effect.
5.10. Financial Reporting. Borrower shall timely deliver to TBCC the following
financial information: the information set forth in the Schedule, and, when
requested by TBCC in its good-faith judgment, any further information respecting
Borrower or any Collateral. Borrower authorizes TBCC to communicate directly
with its officers, employees and Auditors and to examine and make abstracts from
its books and records. Borrower authorizes its Auditors to disclose to TBCC any
and all financial statements, work papers and other information of any kind that
they may have with respect to Borrower and its business and financial and other
affairs. Borrower shall deliver a letter addressed to the Auditors requesting
them to comply with the provisions of this paragraph when requested by TBCC.
5.11. Payment of Liabilities. Borrower shall pay and discharge, in the
ordinary course of business, all Indebtedness, except where the same may be
contested in good faith by appropriate proceedings and adequate reserves with
respect thereto have been provided on the books and records of Borrower in
accordance with GAAP.
5.12. Trademarks. Borrower shall do and cause to be done all things necessary
to preserve and keep in full force and effect all of its material registrations
of trademarks, service marks and other marks, trade names and other trade
rights.
5.13. Proceeds of Collateral. Without limiting any of the other terms of this
Agreement, and without implying any consent to any sale or other transfer of
Collateral in violation of any provision of this Agreement, Borrower shall
deliver to TBCC all proceeds of any sale or other transfer or disposition of any
Collateral, immediately upon receipt of the same and in the same form as
received, with any necessary endorsements, and Borrower will not commingle any
such proceeds with any of its other funds or property, but will segregate them
from the other assets of Borrower and will hold them in trust and for the
account and as the property of TBCC.
5.14. Solvency. Borrower shall be Solvent at all times.
6. NEGATIVE COVENANTS. Without the prior written consent of TBCC, and until
termination of this Agreement and payment and satisfaction of all Obligations:
6.1. Contingent Obligations. Borrower will not, directly or indirectly, incur,
assume, or suffer to exist any Contingent Obligation, excluding indemnities
given in connection with this Agreement or the other Loan Documents in favor of
TBCC or in connection with the sale of Inventory or other asset dispositions
permitted hereunder.
6.2. Corporate Changes. Borrower will not, directly or indirectly, merge or
consolidate with any Person (the result of which merger or consolidation, the
Borrower is not the surviving the entity), or liquidate or dissolve (or suffer
any liquidation or dissolution).
6.3. Change in Nature of Business. Borrower will not at any time make any
material change in the lines of its business as carried on at the date of this
Agreement or enter into any new material line of business.
6.4. Sales of Assets. Borrower will not, directly or indirectly, in any fiscal
year, sell, transfer or otherwise dispose of any assets (other than Collateral),
or grant any option or other right to purchase or otherwise acquire any assets
(other than Collateral) other than (i) assets (other than Collateral) with an
aggregate value of less than $500,000, and (ii) sales of Inventory in the
ordinary course of business.
6.5. Cancellation of Debt. Borrower will not cancel any claim or debt owed to
it, except in the ordinary course of business.
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6.6. Loans to Other Persons. Borrower will not at any time make loans or
advance any credit (except to trade debtors in the ordinary course of business)
to any Person in excess of $200,000 in the aggregate at any time for all such
loans.
6.7. Liens. Borrower will not, directly or indirectly, at any time create,
incur, assume or suffer to exist any Lien on or with respect to any of the
Collateral, other than: Liens created hereunder and by any other Loan Document;
and Permitted Liens.
6.8. Dividends, Stock Redemptions. Borrower will not, directly or indirectly,
pay any dividends or distributions on, purchase, redeem or retire any shares of
any class of its capital stock or any warrants, options or rights to purchase
any such capital stock, whether now or hereafter outstanding ("Stock"), or make
any payment on account of or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of its Stock, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of Borrower, except
for dividends paid solely in stock of the Borrower.
6.9. Investments in Other Persons. Borrower will not, directly or indirectly,
at any time make or hold any Investment in any Person (whether in cash,
securities or other property of any kind) other than Investments in Cash
Equivalents.
6.10. Partnerships; Subsidiaries; Joint Ventures; Management Contracts.
Borrower will not at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement or become a partner in any general
or limited partnership or enter into any management contract (other than an
employment contract for the employment of an officer or employee entered into in
the regular course of Borrower's business) permitting third party management
rights with respect to Borrower's business.
6.11. Fiscal Year. Borrower will not change its fiscal year.
6.12. Accounting Changes. Borrower will not at any time make or permit any
change in accounting policies or reporting practices, except as required by
GAAP.
6.13. Broker's or Finder's Fees. Borrower will not pay or incur any broker's
or finder's fees in connection with this Agreement or the transactions
contemplated hereby.
6.14. Unusual Terms of Sale. Borrower will not sell goods or products on
extended terms, consignment terms, on a progress billing or ▇▇▇▇ and hold basis,
or on any other unusual terms.
6.15. Amendments of Material Contracts. Borrower will not amend, modify,
cancel or terminate, or permit the amendment, modification, cancellation or
termination of, any Material Contract, if such amendment, modification,
cancellation or termination could have a Material Adverse Effect.
6.16. Sale and Leaseback Obligations. Borrower will not at any time create,
incur or assume any obligations as lessee for the rental of real or personal
property in connection with any sale and leaseback transaction.
6.17. Acquisition of Stock or Assets. Borrower will not acquire or commit or
agree to acquire all or any stock, securities or assets of any other Person
other than Inventory acquired in the ordinary course of business.
7. EVENTS OF DEFAULT.
7.1. Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default":
(a) Borrower shall fail to pay any principal, interest, fees, expenses or
other Obligations when payable, whether at stated maturity, by acceleration, or
otherwise; or
(b) Borrower shall default in the performance or observance of any agreement,
covenant, condition, provision or term contained in Section 1.1, 1.2, 1.4, 3.3,
5.7, 5.13, 6 (and its Sections and subsections), or 8.1 of this Agreement, or
Borrower shall fail to perform any non-monetary Obligation which by its nature
cannot be cured; or
(c) Borrower shall default in the performance or observance of any other
agreement, covenant, condition, provision or term of this Agreement (other than
those referred to in Section 7.1(a) above or Section 7.1(b) above) or any other
Loan Document, and such failure continues uncured for a period of ten Business
Days after the earlier of (i) Borrower's actual knowledge of such default or
(ii) notice from TBCC of such default; or
(d) Borrower or any Guarantor shall dissolve, wind up or otherwise cease to
conduct its business; or
(e) Borrower or any Guarantor shall become the subject of (i) an Insolvency
Event except as set forth in clause (e) of the definition of Insolvency Event or
(ii) an Insolvency Event as set forth in clause (e) of the definition of
Insolvency Event that is not dismissed within sixty days; or
(f) any representation or warranty made by or on behalf of Borrower to TBCC,
under this Agreement or otherwise, shall be incorrect or misleading in any
material respect when made or deemed made; or
(g) A change in the ownership or control of more than 40% of the voting
stock of the Borrower compared to such ownership on the date of this Agreement;
(h) any judgment or order for the payment of money shall be rendered against
Borrower in an amount of at least $250,000 and shall not be stayed, vacated,
bonded or discharged within thirty days; or
(i) Borrower or any Guarantor shall deny or disaffirm its obligations under
any of the Loan Documents or any Liens granted in connection therewith or shall
otherwise challenge any of its obligations under any of the Loan Documents; or
any
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Liens granted in any of the Collateral shall be determined to be void, voidable
or invalid, are subordinated or are not given the priority contemplated by this
Agreement; or
(j) any Loan Document shall for any reason cease to create a valid and
perfected Lien on the Collateral purported to be covered thereby, of first
priority (except for Permitted Liens); or
(k) the independent public accountants for Borrower shall deliver a Qualified
opinion on any Financial Statement; or
(l) Borrower (i) shall fail to pay any Indebtedness in excess of $250,000
owing to any Person other than TBCC or any interest or premium thereon, when due
(whether at scheduled maturity or by required prepayment, acceleration, demand
or otherwise), or (ii) shall otherwise be in breach or default in any of its
obligations under any agreement with respect to any such Indebtedness, if the
effect of such breach, default or failure to pay is to cause such Indebtedness
to become due or redeemed or permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to declare such
Indebtedness due or require such Indebtedness to be redeemed prior to its stated
maturity; or
(m) the occurrence of any event or condition that, in TBCC's judgment, could
reasonably be expected to have a Material Adverse Effect; or
(n) an Event of Default shall occur under the Equipment Loan Agreement.
TBCC may cease making any Loans hereunder during any of the above cure periods,
and thereafter if any Event of Default has occurred and is continuing.
7.2. Remedies. Upon the occurrence and during the continuance of an Event of
Default, TBCC shall have all rights and remedies under applicable law and the
Loan Documents, and TBCC may do any or all of the following:
(a) Declare all Obligations to be immediately due and payable (except with
respect to any Event of Default with respect to Borrower set forth in Section
7.1(e), in which case all Obligations shall automatically become immediately due
and payable) without presentment, demand, protest or any other action or
obligation of TBCC.
(b) Cease making any Loans or other extensions of credit to Borrower of any
kind.
(c) Take possession of all documents, instruments, files and records
(including the copying of any computer records) relating to the Receivables or
other Collateral and use (at the expense of Borrower) such supplies or space of
Borrower at Borrower's places of business necessary to administer and collect
the Receivables and other Collateral;
(d) Accelerate or extend the time of payment, compromise, issue credits, or
bring suit on the Receivables and other Collateral (in the name of Borrower or
TBCC) and otherwise administer and collect the Receivables and other Collateral;
(e) Sell, assign and deliver the Receivables and other Collateral, with or
without advertisement, at public or private sale, for cash, on credit or
otherwise, subject to applicable law; and
(f) Foreclose the security interests created pursuant to the Loan Documents
by any available procedure, take possession of any or all of the Collateral,
with or without judicial process and enter any premises where any Collateral may
be located for the purpose of taking possession of or removing the same.
(g) TBCC may bid or become a purchaser at any sale, free from any right of
redemption, which right is expressly waived by Borrower, if permitted under
applicable law. If notice of intended disposition of any Collateral is required
by law, it is agreed that ten days' notice shall constitute reasonable
notification. Borrower will assemble the Collateral and make it available at
such locations as TBCC may specify, whether at the premises of Borrower or
elsewhere, and will make available to TBCC the premises and facilities of
Borrower for the purpose of TBCC's taking possession of or removing the
Collateral or putting the Collateral in salable form.
7.3. Receivables. Upon the occurrence and during the continuance of an Event
of Default, or at any time that TBCC believes in good faith that fraud has
occurred or that Borrower has failed to deliver the proceeds of Receivables or
other Collateral to TBCC as required by this Agreement or any other Loan
Document, TBCC may (i) settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which it considers advisable, and (ii) notify
account debtors on the Receivables and other Collateral that the Receivables and
Collateral have been assigned to TBCC, and that payments in respect thereof
shall be made directly to TBCC. If an Event of Default has occurred and is
continuing or TBCC reasonably believes in good faith that fraud has occurred, or
that Borrower has failed to deliver the proceeds of Receivables or other
Collateral to TBCC as required by this Agreement or any other Loan Document,
Borrower hereby irrevocably authorizes and appoints TBCC, or any Person TBCC may
designate, as its attorney-in-fact, at Borrower's sole cost and expense, to
exercise, all of the following powers, which are coupled with an interest and
are irrevocable, until all of the Obligations have been indefeasibly paid and
satisfied in full in cash: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of TBCC or Borrower, any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral; (B) to receive,
open and dispose of all mail addressed to Borrower and to notify postal
authorities to change the address for delivery thereof to such address as TBCC
may designate; and (C) to take or bring, in the name of TBCC or Borrower, all
steps, actions, suits or proceedings deemed by TBCC necessary or desirable to
enforce or effect collection of Receivables and other Collateral or file and
sign Borrower's name on a proof of claim in bankruptcy or similar document
against any obligor of Borrower.
7.4. Right of Setoff. In addition to all rights of offset that TBCC may have
under applicable law, upon the occurrence and during the continuance of any
Event of Default, and whether or not TBCC has made any demand or the Obligations
of Borrower have matured, TBCC shall have the right to appropriate and apply to
the payment of the Obligations of Borrower
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all deposits and other obligations then or thereafter owing by TBCC to or for
the credit or the account of Borrower. In the event that TBCC exercises any of
its rights under this Section, TBCC shall provide notice to Borrower of such
exercise, provided that the failure to give such notice shall not affect the
validity of the exercise of such rights.
7.5. License for Use of Software and Other Intellectual Property. After the
occurrence and during the continuance of an Event of Default, unless expressly
prohibited by any licensor thereof, TBCC is hereby granted a license to use all
computer software programs, data bases, processes, trademarks, tradenames and
materials used by Borrower in connection with its businesses or in connection
with the Collateral.
7.6. No Marshalling; Deficiencies; Remedies Cumulative. The net cash proceeds
resulting from TBCC's exercise of any of its rights with respect to Collateral,
including any and all Collections (after deducting all of TBCC's reasonable
expenses related thereto), shall be applied by TBCC to such of the Obligations
in such order as TBCC shall elect in its sole and absolute discretion, whether
due or to become due. Borrower shall remain liable to TBCC for any deficiencies
and TBCC shall remit to Borrower or its successor or assign, any surplus
resulting therefrom. The remedies specified in this Agreement are cumulative,
may be exercised in such order and with respect to such Collateral as TBCC may
deem desirable and are not intended to be exclusive, and the full or partial
exercise of any of them shall not preclude the full or partial exercise of any
other available remedy under this Agreement, under any other Loan Document, at
equity or at law.
7.7. Waivers. Borrower hereby waives any bonds, security or sureties required
by any statute, rule or any other law as an incident to any taking of possession
by TBCC of any Collateral. Borrower also waives any damages (direct,
consequential or otherwise) occasioned by the enforcement of TBCC's rights under
this Agreement or any other Loan Document including the taking of possession of
any Collateral or the giving of notice to any account debtor or the collection
of any Receivable or other Collateral (other than damages that are the result of
acts or omissions constituting gross negligence or willful misconduct of TBCC).
These waivers and all other waivers provided for in this Agreement and the other
Loan Documents have been negotiated by the parties and Borrower acknowledges
that it has been represented by counsel of its own choice and has consulted such
counsel with respect to its rights hereunder.
7.8. Right to Make Payments. In the event that Borrower shall fail to purchase
or maintain insurance required hereunder, or to pay any tax, assessment,
government charge or levy, except as the same may be otherwise permitted
hereunder, or in the event that any Lien prohibited hereby shall not be paid in
full or discharged, or in the event that Borrower shall fail to perform or
comply with any other covenant, promise or obligation to TBCC hereunder or under
any other Loan Document, TBCC may (but shall not be required to) perform, pay,
satisfy, discharge or bond the same for the account of Borrower, and all amounts
so paid by TBCC shall be treated as a Loan hereunder to Borrower and shall
constitute part of the Obligations.
8. ASSIGNMENTS AND PARTICIPATIONS.
8.1. Assignments. Borrower shall not assign this Agreement or any right or
obligation hereunder without the prior written consent of TBCC. TBCC may assign
(without the consent of Borrower) to one or more Persons all or a portion of its
rights and obligations under this Agreement and the other Loan Documents.
8.2. Participations. TBCC may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of the Loans); provided, however, that TBCC's obligations under
this Agreement shall remain unchanged.
8.3. Disclosure. TBCC may, in connection with any permitted assignment or
participation or proposed assignment or participation pursuant to this
Agreement, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower furnished to TBCC by or on
behalf of Borrower.
9. DEFINITIONS.
9.1. General Definitions. As used herein, the following terms shall have the
meanings herein specified (to be equally applicable to both the singular and
plural forms of the terms defined):
(a) "Affiliate" means as to any Person, any other Person who directly or
indirectly controls, is under common control with, is controlled by or is a
director or officer of such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") means possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of voting
securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person who owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of the members of the board of directors or other
governing body of a corporation or twenty percent (20%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation, partnership or other Person.
(b) "Agreement" means this Loan and Security Agreement, as amended,
supplemented or otherwise modified from time to time.
(c) "Auditors" means a nationally recognized firm of independent public
accountants selected by Borrower and reasonably satisfactory to TBCC.
(d) "Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as that title may be amended from time to time, or any successor
statute.
(e) "Borrowing" means a borrowing of Loans.
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(f) "Business Day" means any day other than a Saturday, Sunday or any other
day on which commercial banks in Chicago, Illinois are required or permitted by
law to close.
(g) "Cash Equivalents" means (i) securities issued, guaranteed or insured by
the United States or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of not
more than one year from the date acquired, issued by any U.S. federal or state
chartered commercial bank of recognized standing which has capital and
unimpaired surplus in excess of $100,000,000; (iii) investments in money market
funds registered under the Investment Company Act of 1940; and (iv) other
instruments, commercial paper or investments acceptable to TBCC in its sole
discretion.
(h) "Collateral" means Receivables, Inventory, and Other Property, and all
additions and accessions thereto and substitutions and replacements therefor and
improvements thereon, and all proceeds (whether cash or other property) and
products thereof, including, without limitation, all proceeds of insurance
covering the same and all tort claims in connection therewith, and all records,
files, computer programs and files, data and writings relating to the foregoing,
and all equipment containing the foregoing.
(i) "Collections" means all cash, funds, checks, notes, instruments, any
other form of remittance tendered by account debtors in respect of payment of
Receivables comprising the Borrower's carrier business for telecommunication
services.
(j) "Compliance Certificate" means a certificate as to compliance with the
Obligations, on TBCC's standard form (in effect from time to time).
(k) "Contingent Obligation" means any direct, indirect, contingent or
non-contingent guaranty or obligation for the Indebtedness of another Person,
except endorsements in the ordinary course of business.
(l) "Default" means any of the events specified in Section 7.1, whether or
not any of the requirements for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
(m) "Eligible Inventory" [Inapplicable.]
(n) "Eligible Receivables" means and includes only those Receivables which
TBCC in its sole discretion deems eligible for borrowing, based on such
considerations as TBCC in its sole discretion may deem appropriate from time to
time and less any such reserves as TBCC, in its sole discretion, may require.
Without limiting the fact that the determination of which Receivables are
eligible for borrowing is a matter of TBCC's sole discretion, the following (the
"Minimum Eligibility Requirements") are the minimum requirements for a
Receivable to be an Eligible Receivable: (i) the Receivable must not be
outstanding for more than 90 days from its invoice date, (ii) the Receivable
must not represent progress ▇▇▇▇▇▇▇▇, or be due under a fulfillment or
requirements contract with the account debtor, (iii) the Receivable must not be
subject to any contingencies (including Receivables arising from sales on
consignment, guaranteed sale or other terms pursuant to which payment by the
account debtor may be conditional), (iv) the Receivable must not be owing from
an account debtor with whom the Borrower has any dispute (whether or not
relating to the particular Receivable), (v) the Receivable must not be owing
from an Affiliate of Borrower, (vi) the Receivable must not be owing from an
account debtor which is subject to any insolvency or bankruptcy proceeding, or
whose financial condition is not acceptable to TBCC, or which, fails or goes out
of a material portion of its business, (vii) the Receivable must not be owing
from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to TBCC's satisfaction, with the United
States Assignment of Claims Act), (viii) the Receivable must not be owing from
an account debtor located outside the United States or Canada (unless
pre-approved by TBCC in its discretion in writing, or backed by a letter of
credit satisfactory to TBCC, or FCIA insured satisfactory to TBCC), (ix) the
Receivable must not be owing from an account debtor to whom Borrower is or may
be liable for goods purchased from such account debtor or otherwise. Receivables
owing from one account debtor will not be deemed Eligible Receivables to the
extent they exceed 30% of the total eligible Receivables outstanding. In
addition, if more than 50% of the Receivables owing from an account debtor are
outstanding more than 90 days from their invoice date (without regard to
unapplied credits) or are otherwise not eligible Receivables, then all
Receivables owing from that account debtor will be deemed ineligible for
borrowing. TBCC may, from time to time, in its sole discretion, revise the
Minimum Eligibility Requirements, upon written notice to the Borrower.
(o) "Equipment" means all machinery, equipment, furniture, fixtures,
conveyors, tools, materials, storage and handling equipment, hydraulic presses,
cutting equipment, computer equipment and hardware, including central processing
units, terminals, drives, memory units, printers, keyboards, screens,
peripherals and input or output devices, molds, dies, stamps, vehicles, and
other equipment of every kind and nature and wherever situated now or hereafter
owned by Borrower or in which Borrower may have any interest as lessee or
otherwise (to the extent of such interest), together with all additions and
accessions thereto, all replacements and all accessories and parts therefor, all
manuals, blueprints, know-how, warranties and records in connection therewith,
all rights against suppliers, warrantors, manufacturers, sellers or others in
connection therewith, and together with all substitutes for any of the
foregoing.
(o-1) "Equipment Loan Agreement" shall have the meaning set forth in Section
8 of the Schedule to Loan Agreement.
(p) "Event of Default" means the occurrence of any of the events specified in
Section 7.1.
(q) "Financial Statements" means the balance sheets, profit and loss
statements, statements of cash flow, and statements of changes in intercompany
accounts, if any, for the period specified, prepared in accordance with GAAP and
consistent with prior practices.
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(r) "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination. Whenever any accounting term is
used herein which is not otherwise defined, it shall be interpreted in
accordance with GAAP.
(s) "Governing Documents" means the articles or certificate of incorporation
and by-laws of Borrower.
(t) "Governmental Authority" means any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions thereof or
pertaining thereto.
(u) "Guarantor" means any present or future guarantor of any or all of the
Obligations.
(v) "Indebtedness" means, with respect to any Person, as of the date of
determination any indebtedness, liability or obligation of such Person
(including without limitation obligations under capital leases and contingent
obligations).
(w) "Insolvency Event" means, with respect to any Person, the occurrence of
any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or shall generally fail to pay or admit in writing its inability to
pay its debts as they become due, (b) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or business
or to effect a plan or other arrangement with its creditors, (c) such Person
shall make a general assignment for the benefit of its creditors, or consent to
or acquiesce in the appointment of a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business, (d) such Person
shall file a voluntary petition under any bankruptcy, insolvency or similar law
or take any corporate or similar act in furtherance thereof, or (e) such Person,
or a substantial portion of its property, assets or business shall become the
subject of an involuntary proceeding or petition for its dissolution,
reorganization, and such proceeding is not dismissed or stayed within sixty
days, or the appointment of a receiver, trustee, custodian or liquidator, and
such receiver is not dismissed within sixty days.
(x) "Inventory" means all present and future goods intended for sale, lease
or other disposition by Borrower including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same.
(y) "Investment" in any Person means, as of the date of determination
thereof, any payment or contribution, or commitment to make a payment or
contribution, by any Person including, without limitation, property contributed
or committed to be contributed by any Person, on its account for or in
connection with its acquisition of any stock, bonds, notes, debentures,
partnership or other ownership interest or any other security of the Person in
whom such Investment is made or any evidence of indebtedness by reason of a
loan, advance, extension of credit, guaranty or other similar obligation for any
debt, liability or indebtedness of such Person in whom the Investment is made.
(z) "Lien" means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
(aa) "Loan Account" has the meaning specified in Section 1.3.
(bb) "Loan Documents" means this Agreement and all present and future
documents and instruments delivered or to be delivered by Borrower or any of its
Affiliates or any Guarantor under, in connection with or relating to this
Agreement, as each of the same may be amended, supplemented or otherwise
modified from time to time.
(cc) "Loans" means the loans and financial accommodations made by TBCC
hereunder.
(dd) "Material Adverse Effect" means (i) a material adverse change occurs in
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of Borrower, (ii) the impairment of
Borrower's ability to perform its obligations under the Loan Documents to which
it is a party or of TBCC to enforce the Obligations or realize upon the
Collateral or (iii) a material adverse effect on the value of the Collateral or
the amount which TBCC would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of the
Collateral.
(ee) "Material Contract" means any contract or other arrangement to which
Borrower is a party (other than the Loan Documents) for which breach,
nonperformance, cancellation or failure to renew could have a Material Adverse
Effect.
(ff) "Obligations" means and includes all loans (including the Loans),
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to TBCC of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document or any other
agreement executed in connection herewith or therewith, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether absolute
or contingent, due or to become due, now due or hereafter arising and however
acquired. The term includes, without limitation, all interest (including
interest accruing on or after an Insolvency Event, whether or not an allowed
claim), charges, expenses, commitment, facility, closing and collateral
management fees, letter of
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credit fees, reasonable attorneys' fees, and any other sum properly chargeable
to Borrower under this Agreement, the other Loan Documents or any other
agreement executed in connection herewith or therewith.
(gg) "Other Property" means all present and future: instruments, documents,
documents of title, securities, investment securities, bonds, notes, promissory
notes, drafts, acceptances, letters of credit and rights to receive proceeds of
letters of credit, deposit accounts, chattel paper, certificates, insurance
policies, insurance proceeds, leases, computer tapes, causes of action,
judgments, claims against third parties, leasehold rights in any personal
property, books, ledgers, files and records, general intangibles (including
without limitation, all contract rights, tax refunds, rights to receive tax
refunds, patents, patent applications, copyrights (registered and unregistered),
royalties, licenses, permits, franchise rights, authorizations, customer lists,
rights of indemnification, contribution and subrogation, computer programs,
discs and software, trade secrets, computer service contracts, trademarks, trade
names, service marks and names, logos, goodwill, deposits, choses in action,
designs, blueprints, plans, know-how, telephone numbers and rights thereto,
credits, reserves, and all forms of obligations whatsoever now or hereafter
owing to Borrower), all property at any time in the possession or under the
control of TBCC, and all security given by Borrower to TBCC pursuant to any
other Loan Document or agreement.
(hh) "Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing: (i) Liens for taxes, assessments and other
governmental charges or levies or the claims or demands of landlords, carriers,
warehousemen, mechanics, laborers, materialmen and other like Persons arising by
operation of law in the ordinary course of business for sums which are not yet
due and payable, (ii) deposits or pledges to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits or
obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business (but nothing in this clause (ii) shall permit the
creation of Liens on Receivables or Inventory or Other Property), (iii) zoning
restrictions, easements, encroachments, licenses, restrictions or covenants on
the use of the Property which do not materially impair either the use of the
Property in the operation of the business of Borrower or the value of the
Property, (iv) rights of general application reserved to or vested in any
municipality or other governmental, statutory or public authority to control or
regulate property, or to use property in a manner which does not materially
impair the use of the property for the purposes for which it is held by
Borrower, (v) state and municipal Liens for personal property taxes which are
not yet due and payable, and (vi) Purchase Money Liens.
(ii) "Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization, joint
stock company, association, corporation, institution, entity, party or
government (including any division, agency or department thereof) or any other
legal entity, whether acting in an individual, fiduciary or other capacity, and,
as applicable, the successors, heirs and assigns of each.
(jj) "Plan" means any employee benefit plan, program or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
(kk) "Purchase Money Lien" means a Lien on any item of Equipment created
substantially simultaneously with the acquisition of such Equipment for the
purpose of financing such acquisition, provided that such Lien shall attach only
to the Equipment acquired.
(ll) "Qualification" or "Qualified" means, with respect to any report of
independent public accountants covering Financial Statements, a material
qualification to such report (i) resulting from a limitation on the scope of
examination of such Financial Statements or the underlying data, (ii) as to the
capability of Borrower to continue operations as a going concern or (iii) which
could be eliminated by changes in Financial Statements or notes thereto covered
by such report (such as by the creation of or increase in a reserve or a
decrease in the carrying value of assets) and which if so eliminated by the
making of any such change and after giving effect thereto would result in a
Default or an Event of Default.
(mm) "Receivables" means all present and future accounts and accounts
receivable, together with all security therefor and guaranties thereof and all
rights and remedies relating thereto, including any right of stoppage in
transit.
(nn) "Requirement of Law" means (a) the Governing Documents, (b) any law,
treaty, rule, regulation, order or determination of an arbitrator, court or
other Governmental Authority or (c) any franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval binding on Borrower or any of its property.
(oo) "Schedule" means the Schedule to this Agreement being signed
concurrently by Borrower and TBCC, as amended from time to time.
(pp) "Solvent" means when used with respect to any Person that as of the date
as to which such Person's solvency is to be measured: (a) the fair salable value
of its assets is in excess of the total amount of its liabilities (including
contingent liabilities as valued in accordance with applicable law) as they
become absolute and matured; (b) it has sufficient capital to conduct its
business; and (c) it is able to meet its debts as they mature.
(qq) "Subsidiary" means, as to any Person, a corporation or other entity in
which that Person directly or indirectly owns or controls shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or appoint other managers of such corporation or other
entity.
9.2. Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a basis consistent in all material respects
with the Financial Statements delivered to TBCC on or before the date of this
Agreement. All accounting determinations for purposes of determining compliance
with this Agreement shall be made in accordance with GAAP as in effect on the
date of this Agreement and applied on a basis consistent in all material
respects with the audited Financial Statements delivered to
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TBCC on or before the date of this Agreement. The Financial Statements required
to be delivered hereunder, and all financial records, shall be maintained in
accordance with GAAP. If GAAP shall change from the basis used in preparing the
audited Financial Statements delivered to TBCC on or before the date of this
Agreement, the Compliance Certificates required to be delivered pursuant to this
Agreement shall include calculations setting forth the adjustments necessary to
demonstrate how Borrower is in compliance with the Financial Covenants (if any)
based upon GAAP as in effect on the date of this Agreement.
9.3. Other Terms; Headings; Construction. Unless otherwise defined herein,
terms used herein that are defined in the Uniform Commercial Code, from time to
time in effect in the State of Illinois, shall have the meanings set forth
therein. Each of the words "hereof," "herein," and "hereunder" refer to this
Agreement as a whole. The term "including", whenever used in this Agreement,
shall mean "including (but not limited to)". An Event of Default shall
"continue" or be "continuing" unless and until such Event of Default has been
waived or cured within the grace period specified therefor under Section 7.1.
References to Articles, Sections, Annexes, Schedules, and Exhibits are internal
references to this Agreement, and to its attachments, unless otherwise
specified. The headings and any Table of Contents are for convenience only and
shall not affect the meaning or construction of any provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against TBCC or Borrower under any rule of construction or
otherwise.
10. GENERAL PROVISIONS.
10.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
10.2. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE BORROWER AND TBCC,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY
BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO
WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT TBCC SHALL HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
BORROWER OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY TBCC IN GOOD
FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF TBCC. THE BORROWER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT
BY TBCC. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH TBCC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
10.3. SERVICE OF PROCESS. THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, AS THE
DESIGNEE AND AGENT OF THE BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE
BORROWER, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH
PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL
TO THE BORROWER, BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
10.4. LIMITATION OF LIABILITY. TBCC SHALL HAVE NO LIABILITY TO THE BORROWER
(WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE
BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY
A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON TBCC THAT THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF TBCC. THE BORROWER HEREBY WAIVES ALL FUTURE CLAIMS
AGAINST TBCC FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.5. Delays; Partial Exercise of Remedies. No delay or omission of TBCC to
exercise any right or remedy hereunder shall impair any such right or operate as
a waiver thereof. No single or partial exercise by TBCC of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.
10.6. Notices. Except as otherwise provided herein, all notices and
correspondence hereunder shall be in writing and sent by certified or registered
mail, return receipt requested, by overnight delivery service, with all charges
prepaid, or by telecopier followed by a hard copy sent by regular mail, to the
parties at their addresses set forth in the heading to this Agreement. All such
notices and correspondence shall be deemed given (i) if sent by certified or
registered mail, three Business Days after being postmarked, (ii) if sent by
overnight delivery service, when received at the above stated addresses or when
delivery is refused and (iii) if sent by telecopier transmission, when receipt
of such transmission is acknowledged.
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Borrower's and TBCC's telecopier numbers for purpose of notice hereunder are set
forth in the Schedule; each party's number may be changed by written notice to
the other party.
10.7. Indemnification; Reimbursement of Expenses of Collection. Borrower
hereby indemnifies and agrees, whether or not any of the transactions
contemplated by this Agreement or the other Loan Documents are consummated, to
defend and hold harmless (on an after-tax basis) TBCC, its successors and
assigns and their respective directors, officers, agents, employees, advisors,
shareholders, attorneys and Affiliates (each, an "Indemnified Party") from and
against any and all losses, claims, damages, liabilities, deficiencies,
obligations, fines, penalties, actions (whether threatened or existing),
judgments, suits (whether threatened or existing) or expenses (including,
without limitation, reasonable fees and disbursements of counsel, experts,
consultants and other professionals) incurred by any of them (collectively,
"Claims") (except, in the case of each Indemnified Party, to the extent that any
Claim is determined in a final and non-appealable judgment by a court of
competent jurisdiction to have directly resulted from such Indemnified Party's
gross negligence or willful misconduct) arising out of or by reason of (i) any
litigation, investigation, claim or proceeding which arises out of or is related
to (A) Borrower, or this Agreement, any other Loan Document or the transactions
contemplated hereby or thereby, (B) any actual or proposed use by Borrower of
the proceeds of the Loans, or (C) TBCC's entering into this Agreement or any
other Loan Document or any other agreements and documents relating hereto,
including, without limitation, amounts paid in settlement, court costs and the
reasonable fees and disbursements of counsel incurred in connection with any
such litigation, investigation, claim or proceeding, (ii) any remedial or other
action taken by Borrower in connection with compliance by Borrower, or any of
its properties, with any federal, state or local environmental laws, rules or
regulations, and (iii) any pending, threatened or actual action, claim,
proceeding or suit by any shareholder or director of Borrower or any actual or
purported violation of Borrower's charter, by-laws or any other agreement or
instrument to which Borrower is a party or by which any of its properties is
bound. In addition and without limiting the generality of the foregoing,
Borrower shall, upon demand, pay to TBCC all reasonable costs and expenses
incurred by TBCC (including the reasonable fees and disbursements of counsel and
other professionals) in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents, and pay to
TBCC all reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by TBCC in
order to enforce or defend any of its rights under or in respect of this
Agreement, any other Loan Document or any other document or instrument now or
hereafter executed and delivered in connection herewith, collect the Obligations
or otherwise administer this Agreement, foreclose or otherwise realize upon the
Collateral or any part thereof, prosecute actions against, or defend actions by,
account debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce TBCC's security interest in, the Collateral; and otherwise
represent TBCC in any litigation relating to Borrower. Without limiting the
generality of the foregoing, Borrower shall pay TBCC a fee with respect to each
wire transfer in the amount of $15 plus all bank charges and a fee of $15 for
all returned checks plus all bank charges. If either TBCC or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. If and to the extent that the Obligations of
Borrower hereunder are unenforceable for any reason, Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of the Obligations
which is permissible under applicable law. Borrower's obligations under Section
2.4 and this Section shall survive any termination of this Agreement and the
other Loan Documents and the payment in full of the Obligations, and are in
addition to, and not in substitution of, any of the other Obligations.
10.8. Amendments and Waivers. Any provision of this Agreement or any other
Loan Document may be amended or waived if, but only if, such amendment or waiver
is in writing and signed by Borrower and TBCC and then any such amendment or
waiver shall be effective only to the extent set forth therein. The failure of
TBCC at any time or times to require Borrower to strictly comply with any of the
provisions of this Agreement or any other present or future agreement between
Borrower and TBCC shall not waive or diminish any right of TBCC later to demand
and receive strict compliance therewith. Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent, and whether or
not similar. None of the provisions of this Agreement or any other agreement
now or in the future executed by Borrower and delivered to TBCC shall be deemed
to have been waived by any act or knowledge of TBCC or its agents or employees,
but only by a specific written waiver signed by an authorized officer of TBCC
and delivered to Borrower.
10.9. Counterparts; Telecopied Signatures. This Agreement and any waiver or
amendment hereto may be executed in counterparts and by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
telecopier or other facsimile transmission all with the same force and effect as
if the same was a fully executed and delivered original manual counterpart.
10.10. Severability. In case any provision in or obligation under this
Agreement or any other Loan Document shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
10.11. Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
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10.12. Maximum Rate. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the parties hereto
hereby agree that all agreements between them under this Agreement and the other
Loan Documents, whether now existing or hereafter arising and whether written or
oral, are expressly limited so that in no contingency or event whatsoever shall
the amount paid, or agreed to be paid, to TBCC for the use, forbearance, or
detention of the money loaned to Borrower and evidenced hereby or thereby or for
the performance or payment of any covenant or obligation contained herein or
therein, exceed the maximum non-usurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, reserved, charged or received
on the Obligations, under the laws of the State of Illinois (or the laws of any
other jurisdiction whose laws may be mandatorily applicable notwithstanding
other provisions of this Agreement and the other Loan Documents), or under
applicable federal laws which may presently or hereafter be in effect and which
allow a higher maximum non-usurious interest rate than under the laws of the
State of Illinois (or such other jurisdiction), in any case after taking into
account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Agreement and the other Loan Documents executed
in connection herewith, and any available exemptions, exceptions and exclusions
(the "Highest Lawful Rate"). If due to any circumstance whatsoever, fulfillment
of any provisions of this Agreement or any of the other Loan Documents at the
time performance of such provision shall be due shall exceed the Highest Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance TBCC should ever receive anything of
value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to TBCC for the use, forbearance, or detention of
the Obligations and other indebtedness of Borrower to TBCC shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness, until payment in full thereof, so
that the actual rate of interest on account of all such indebtedness does not
exceed the Highest Lawful Rate throughout the entire term of such indebtedness.
The terms and provisions of this Section shall control every other provision of
this Agreement, the other Loan Documents and all other agreements between the
parties hereto.
10.13. Entire Agreement; Successors and Assigns. This Agreement and the other
Loan Documents constitute the entire agreement between the parties, supersede
any prior written and verbal agreements between them, and shall bind and benefit
the parties and their respective successors and permitted assigns. There are
no oral understandings, oral representations or oral agreements between the
parties which are not set forth in this Agreement or in other written agreements
signed by the parties in connection herewith.
10.14. MUTUAL WAIVER OF JURY TRIAL. TBCC AND BORROWER EACH HEREBY WAIVE 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; OR (ii) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER; OR (iii) ANY CONDUCT,
ACTS OR OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
Borrower:
IDT CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title Chief Financial Officer
TBCC:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By
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Title
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TBCC
Schedule to
Loan and Security Agreement
Borrower: IDT Corporation
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Date: December 24, 1997
This Schedule is an integral part of the Loan and Security Agreement between
TRANSAMERICA BUSINESS CREDIT CORPORATION ("TBCC") and the above borrower
("Borrower") of even date.
1. CREDIT LIMIT (Section 1.1): An amount (the "Credit Limit") not to exceed
the lesser of: (i) $10,000,000 at any one time outstanding; or (ii) 85% of
the amount of Borrower's Eligible Receivables (as defined in Section 9.1(n)
above).
2. INTEREST. (Section 2.1): The interest rate in effect throughout each
calendar month during the term of this Agreement shall be the highest "Base
Rate" in effect during such month, plus 2% per annum, provided that the
interest rate in effect in each month shall not be less than 9% per annum,
and provided that the interest charged for each month shall be a minimum of
$7,500, regardless of the amount of the Obligations outstanding. Interest
shall be calculated on the basis of a 360-day year for the actual number of
days elapsed. "Base Rate" shall mean the higher of (a) the highest prime,
base or equivalent rate of interest announced from time to time by
Citibank, N.A., First National Bank of Chicago and Bank of America National
Trust and Savings Association (which may not be the lowest rate of interest
charged by such bank) and (b) the published annualized rate for 90-day
dealer commercial paper which appears in the "Money Rates" section of The
Wall Street Journal.
3. FEES (Section 2.2):
Loan Fee: $75,000, payable concurrently herewith.
Termination Fee: Not Applicable.
4. MATURITY DATE (Section 1.6): December 31, 1998 (the "Maturity Date"),
subject to automatic renewal and early termination as provided in Section
1.6 above.
TRANSAMERICA Schedule to Loan and Security Agreement
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5. REPORTING (Section 5.10):
Borrower shall provide TBCC with the following reports:
(a) Monthly Financial Statements. Monthly unaudited
financial statements, as soon as available, and in any
event within 30 days after the end of each month.
(b) Monthly Receivable Agings. Monthly Receivable agings,
aged by invoice date, within 10 days after the end of
each month.
(c) Monthly Payable Agings. Monthly accounts payable
agings, aged by invoice date, and outstanding or held
check registers within 10 days after the end of each
month.
(d) Monthly Borrowing Base and Compliance Certificates.
Borrower shall provide TBCC with a Borrowing Base
Certificate, in such form as TBCC shall specify, within
10 days after the end of each month. As soon as
available, but not later than thirty days after the end
of each month, a Compliance Certificate, with an
attached schedule of calculations demonstrating
compliance or indicating non-compliance with any
Financial Covenants.
(e) Monthly Cash Balance Certificate. Borrower shall
provide TBCC, within 10 days after the end of each
month, with a Cash Balance Certificate, in such form as
TBCC shall specify, stating the amount of Borrower's
aggregate cash balance (including Cash Equivalents) in
all of its deposit accounts as of the end of each
month.
(f) Quarterly Financial Statements. Quarterly unaudited
financial statements, as soon as available, and in any
event within 30 days after the end of each fiscal
quarter of Borrower.
(g) Annual Financial Statements. As soon as available, but
not later than 90 days after the end of the Borrower's
fiscal year, (A) Borrower's annual audited Financial
Statements; (B) a comparison in reasonable detail to
the prior year's audited Financial Statements; (C) the
Auditors' opinion without Qualification, a "Management
Letter" and a statement indicating that the Auditors
have not obtained knowledge of the existence of any
Default or Event of Default during their audit; (D) a
narrative discussion of Borrower's financial condition
and results of operations and the liquidity and capital
resources for such fiscal year.
6. BORROWER INFORMATION:
(a) Prior Names of Borrower (Section 4.11): International
Discount Telecommunications, Inc.
(b) Prior Trade Names of Borrower (Section 4.11): None
(c) Existing Trade Names of Borrower (Section 4.11): None
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TRANSAMERICA Schedule to Loan and Security Agreement
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(d) Other Places of Business and Locations of Collateral
(Section 4.2): None
7. FACSIMILE NUMBERS:
Borrower: (▇▇▇) ▇▇▇-▇▇▇▇
TBCC: (▇▇▇) ▇▇▇-▇▇▇▇
8. OTHER COVENANTS:
The following additional covenants and provisions shall apply at
all times to this Agreement and the Borrower:
(1) Reference is made to that certain Security Agreement dated
January 10, 1997 between Borrower and TBCC (as amended from time to
time, the "January Equipment Loan Agreement") and to that certain
Security Agreement dated October 1, 1997 between Borrower and TBCC
(as amended from time to time, the "October Equipment Loan Agreement")
(the January Equipment Loan Agreement and the October Equipment Loan
Agreement, together with any future equipment loan agreements between
Borrower and TBCC, are collectively referred to as the "Equipment Loan
Agreement"). To the extent of any conflicts between the provisions of
this Agreement and the Equipment Loan Agreement, such provision that
grants TBCC greater rights shall be the controlling provision of
either Agreement.
Borrower: TBCC:
IDT CORPORATION TRANSAMERICA BUSINESS CREDIT
CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ By
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Chief Financial Officer Title
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