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EXHIBIT 10.18
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LOAN AND SECURITY AGREEMENT
by and between
AMERIVISION COMMUNICATIONS, INC.,
an Oklahoma corporation
and
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank,
a California corporation
Dated as of February 1, 1999
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS............................................................1
Account Debtor.................................................1
Affiliate......................................................1
Agreement......................................................1
AmeriTel.......................................................1
Audit..........................................................1
Borrower.......................................................1
Borrower's Address.............................................1
Business Day...................................................1
Carrier Reserve................................................1
Change of Control..............................................2
Closing Date...................................................2
Coast..........................................................2
Code...........................................................2
Collateral.....................................................2
Credit Limit...................................................2
Debt Reserve...................................................2
Default........................................................2
Deposit Account................................................2
Dollars or $...................................................2
Early Termination Fee..........................................2
EBIT...........................................................2
EBITDA.........................................................2
Eligible Receivables...........................................2
Eligible Unbilled Receivables..................................3
Equipment......................................................3
Event of Default...............................................3
GAAP...........................................................3
General Intangibles............................................3
Hebron.........................................................4
Hold...........................................................4
Inventory......................................................4
Investment Property............................................4
Leased Locations...............................................4
Loan Documents.................................................4
Loans..........................................................4
Material Adverse Effect........................................4
Material Subsidiary............................................4
Maturity Date..................................................4
Maximum Dollar Amount..........................................4
Minimum Monthly Interest.......................................4
Net Worth......................................................4
Obligations....................................................4
▇▇▇▇▇▇▇ Enterprises............................................4
Permitted Liens................................................4
Person.........................................................5
Prime Rate.....................................................5
Receivables....................................................5
Renewal Date...................................................5
Renewal Fee....................................................5
Solvent........................................................5
Subordinated Creditors.........................................6
Triggering Event...............................................6
USBI...........................................................6
VisionQuest....................................................6
WorldCom.......................................................6
Year 2000 Problem..............................................6
Other Terms....................................................6
2. CREDIT FACILITIES......................................................6
2.1 LOANS..........................................................6
3. INTEREST AND FEES......................................................6
3.1 INTEREST.......................................................6
3.2 FEES...........................................................6
4. SECURITY INTEREST......................................................6
5. CONDITIONS PRECEDENT...................................................7
5.1 Status of Accounts at Closing..................................7
5.2 Minimum Availability...........................................7
5.3 Landlord Waiver................................................7
5.4 Opinion of Borrower's Counsel..................................7
5.5 Priority of Coast's Liens......................................7
5.6 Insurance......................................................7
5.7 Borrower's Existence...........................................7
5.8 Organizational Documents.......................................7
5.9 Taxes..........................................................7
5.10 Due Diligence..................................................7
5.11 Other Documents and Agreements.................................7
5.12 Management Background Checks...................................8
5.13 Lockbox/Triparty/Blocked Account Agreements....................8
5.14 Debt Subordination Agreements.................................8
5.15 Year 2000 Assessment Certificate...............................8
5.16 Net Worth......................................................8
5.17 ▇▇▇▇▇▇▇ ENTERPRISES INFUSION...................................8
5.18 Outline of Carrier Agreement Terms.............................8
5.19 Discount Long Distance.........................................8
5.20 Settlement with The Caleb Trust................................8
6. REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE BORROWER..............................................8
6.1 Existence and Authority........................................9
6.2 Name; Trade Names and Styles...................................9
6.3 Place of Business; Location of Collateral......................9
6.4 Title to Collateral; Permitted Liens...........................9
6.5 Maintenance of Collateral......................................9
6.6 Books and Records..............................................9
6.7 Financial Condition, Statements And Reports....................9
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6.8 Tax Returns and Payments; Pension Contributions.........10
6.9 Compliance with Law.....................................10
6.10 Litigation..............................................10
6.11 Use of Proceeds.........................................10
6.12 Year 2000 Compliance....................................10
7. RECEIVABLES.....................................................10
7.1 Representations Relating to Receivables ................10
7.2 Representations Relating to Documents
and Legal Compliance....................................10
7.3 Schedules and Documents Relating to Receivables.........10
7.4 Collection of Receivables...............................11
7.5 Remittance of Proceeds..................................11
7.6 Disputes................................................11
7.7 Intentionally Deleted...................................11
7.8 Verification............................................11
7.9 No Liability............................................11
8. ADDITIONAL DUTIES OF THE BORROWER...............................12
8.1 Financial and Other Covenants...........................12
8.2 Insurance...............................................12
8.3 Reports.................................................12
8.4 Access to Collateral, Books and Records.................12
8.5 Negative Covenants......................................12
8.6 Litigation Cooperation..................................13
8.7 Further Assurances......................................13
9. TERM............................................................13
9.1 Maturity Date...........................................13
9.2 Early Termination.......................................13
9.3 Payment of Obligations..................................14
10. EVENTS OF DEFAULT AND REMEDIES..................................14
10.1 Events of Default.......................................14
10.2 Remedies................................................15
10.3 Standards for Determining Commercial Reasonableness.....16
10.4 Power of Attorney.......................................17
10.5 Application of Proceeds.................................18
10.6 Remedies Cumulative.....................................18
11. GENERAL PROVISIONS..............................................18
11.1 Interest Computation....................................18
11.2 Application of Payments.................................18
11.3 Charges to Accounts.....................................18
11.4 Monthly Accountings.....................................18
11.5 Notices.................................................18
11.6 Severability............................................19
11.7 Integration.............................................19
11.8 Waivers.................................................19
11.9 No Liability for Ordinary Negligence....................19
11.10 Amendment...............................................19
11.11 Time of Essence.........................................19
11.12 Attorneys Fees, Costs and Charges.......................19
11.13 Benefit of Agreement....................................20
11.14 Publicity...............................................20
11.15 Paragraph Headings; Construction........................20
11.16 Governing Law; Jurisdiction; Venue......................20
11.17 MUTUAL WAIVER OF JURY TRIAL.............................20
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COAST
LOAN AND SECURITY AGREEMENT
BORROWER: AMERIVISION COMMUNICATIONS, INC., AN OKLAHOMA
CORPORATION
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: FEBRUARY 1, 1999
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between COAST
BUSINESS CREDIT, a division of Southern Pacific Bank ("Coast"), a California
corporation, with offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the borrower named above ("Borrower"), whose chief
executive office is located at the above address ("Borrower's Address"). The
Schedule to this Agreement (the "Schedule") shall for all purposes be deemed to
be a part of this Agreement, and the same is an integral part of this Agreement.
(Definitions of certain terms used in this Agreement are set forth in Section 1
below.)
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable other than a local
exchange carrier or the obligor on a General Intangible.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Agreement" means this Agreement, together with all schedules and exhibits
hereto, as amended, supplemented or otherwise modified from time to time.
"Alternative Carrier" means a telecommunications carrier, other than
WorldCom, acceptable to Coast which contracts to supply telecommunication
services to Borrower, on terms substantially similar to the terms provided to
Borrower by WorldCom, with said terms to be reasonably acceptable to Coast.
"AmeriTel" means AmeriTel Communications, Inc., an Oklahoma corporation.
"Audit" means to inspect, audit and copy Borrower's books and records and
the Collateral.
"Borrower" has the meaning set forth in the introduction to this Agreement.
"Borrower's Address" has the meaning set forth in the introduction to this
Agreement.
"Business Day" means a day on which Coast is open for business.
"Carrier Reserve" means the reserve established and maintained on a thirty
(30) day accrual, by Coast against the Loans which would otherwise be available
under this Agreement to cover the amount of wholesale carrier charges incurred
by Borrower as provided for in Section 8.1 of the Schedule. Attached as Exhibit
"F" is an example of the procedure for establishing and maintaining the Carrier
Reserve.
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"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) (other than the current holders of the
ownership interests in any Borrower) becomes the "beneficial owner" (as defined
in Rule 13d- 3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than twenty-five
percent (25%) of the total voting power of all classes of stock or other
ownership interests then outstanding of any Borrower normally entitled to vote
in the election of directors or analogous governing body.
"Closing Date" means the date of the initial funding under this Agreement.
"Coast" has the meaning set forth in the introduction to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 4 hereof.
"Collections" means Borrower's recurring monthly "subscriber" collections.
"Credit Limit" means the maximum amount of Loans that Coast may make to
Borrower pursuant to the amounts and percentages shown on the Schedule.
"Debt Reserve" has the meaning set forth in Section 2.1 of the Schedule.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
"Dollars or $" means United States dollars.
"Early Termination Fee" means the amount set forth on the Schedule that
Borrower must pay Coast if this Agreement is terminated by Borrower or Coast
pursuant to Section 9.2 hereof.
"EBIT" means, in any fiscal period, Borrower's consolidated net income
(other than extraordinary or non-recurring items of Borrower for such period),
plus (i) the amount of all interest expense and income tax expense of Borrower
for such period, on a consolidated basis, and plus or minus (as the case may be)
(ii) any other non-cash charges which have been added or subtracted, as the case
may be, in calculating Borrower's consolidated net income for such period.
"EBITDA" means, in any fiscal period, Borrower's consolidated net income
(other than extraordinary or non-recurring items of Borrower for such period),
plus (i) the amount of all interest expense, income tax expense, depreciation
expense, and amortization expense of Borrower for such period, on a consolidated
basis, and plus or minus (as the case may be) (ii) any other non-cash charges or
extraordinary expenses in accordance with GAAP which have been added or
subtracted, as the case may be, in calculating Borrower's consolidated net
income for such period. Attached as Exhibit "A" is a sample calculation of
EBITDA based upon Borrower's most recent financial statements.
"Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Coast, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Coast may from time to time deem appropriate. Eligible
Receivables shall not include the following:
(a) Receivables that the Account Debtor has failed to pay within 90
days of invoice date or Accounts with selling terms of more than 30 days;
(b) Receivables owed by an Account Debtor or its Affiliates where
twenty-five percent (25%) or more of all Receivables owed by that Account Debtor
(or its Affiliates) are deemed ineligible under clause (a) above;
(c) Receivables with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower;
(d) Receivables with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold, or other terms
by reason of which the payment by the Account Debtor may be conditional;
(e) Receivables that are not payable in Dollars or with respect to
which the Account Debtor: (i) does not maintain its chief executive office in
the United States, or (ii) is not organized under the laws of the United States
or any State thereof, or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof;
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(f) Receivables with respect to which the Account Debtor is either (i)
the United States or any department, agency, or instrumentality of the United
States (exclusive, however, of Accounts with respect to which Borrower has
complied, to the satisfaction of Coast, with the Assignment of Claims Act, 31
U.S.C. Section 3727), or (ii) any State of the United States (exclusive,
however, of Receivables owed by any State that does not have a statutory
counterpart to the Assignment of Claims Act);
(g) Receivables with respect to which the Account Debtor is a creditor
of Borrower, has or has asserted a right of setoff, has disputed its liability,
or has made any claim with respect to the Receivables;
(h) Receivables with respect to an Account Debtor whose total
obligations owing to Borrower exceed twenty percent (20%) of all Eligible
Receivables, to the extent of the obligations owing by such Account Debtor in
excess of such percentage;
(i) Receivables with respect to which the Account Debtor is subject to
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation proceeding, or becomes insolvent, or goes out of
business;
(j) Receivables the collection of which Coast, in its reasonable credit
judgment, believes in good faith to be doubtful by reason of the Account
Debtor's financial condition;
(k) Receivables with respect to which the goods giving rise to such
Receivable have not been shipped and billed to the Account Debtor, the services
giving rise to such Receivable have not been performed and accepted by the
Account Debtor, or the Receivable otherwise does not represent a final sale;
(l) Receivables with respect to which the Account Debtor is located in
the states of New Jersey, Minnesota, Indiana, or West Virginia (or any other
state that requires a creditor to file a Business Activity Report or similar
document in order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such state),
unless Borrower has qualified to do business in New Jersey, Minnesota, Indiana,
West Virginia, or such other states, or has filed a Notice of Business
Activities Report with the applicable division of taxation, the department of
revenue, or with such other state offices, as appropriate, for the then-current
year, or is exempt from such filing requirement; and
(m) Receivables that represent progress payments or other advance
▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by Borrower of the
subject contract for goods or services.
"Eligible Unbilled Receivables" means Eligible Receivables as to which the
invoice has not yet been prepared and sent to an Account Debtor; provided,
however, an otherwise Eligible Unbilled Receivable shall cease being an Eligible
Unbilled Receivable when it is invoiced and the invoice sent to the Account
Debtor or if no invoice is prepared and sent to the Account Debtor, thirty (30)
days after the end of the calendar month in which the services, giving rise to
the Receivable, were rendered.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"Event of Default" means any of the events set forth in Section 10.1 of
this Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, Investment Property, inventions, designs, drawings,
blueprints, patents, patent applications, trademarks and the goodwill of the
business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security and
other deposits, rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments now
or hereafter arising therefrom, all claims of Borrower against Coast, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation life
insurance, key man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer programs,
discs, tapes and tape
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files, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature (other than Receivables).
"Hebron" means Hebron Communications Corporation, a Florida corporation.
"Hold" means HOLD Billing Services, Ltd., a Texas limited partnership.
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit, and
including without limitation all farm products), and all materials and supplies
of every kind, nature and description which are or might be used or consumed in
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise or other
personal property, and all warehouse receipts, documents of title and other
documents representing any of the foregoing.
"Investment Property" has the meaning set forth in Section 9115 of the Code
as in effect as of the date hereof.
"Leased Locations" means each and every location leased by Borrower.
"Loan Documents" means this Agreement, the agreements and documents listed
on Section 5 of the Schedule, and any other agreement, instrument or document
executed in connection herewith or therewith.
"Loans" has the meaning set forth in Section 2.1 hereof.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations of
Borrower or any Material Subsidiary of Borrower or any guarantor of any of the
Obligations taken as a whole, (ii) the ability of Borrower or any guarantor of
any of the Obligations to perform its obligations under this Agreement
(including, without limitation, repayment of the Obligations as they come due)
or (iii) the validity or enforceability of this Agreement or any other agreement
or document entered into by any party in connection herewith, or the rights or
remedies of Coast hereunder or thereunder.
"Material Subsidiary" means the subsidiaries of Borrower listed on Exhibit
"B" attached hereto.
"Maturity Date" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
9.1 and 9.2 hereof.
"Maximum Dollar Amount" has the meaning set forth in Section 2 of the
Schedule.
"Minimum Monthly Interest" has the meaning set forth in Section 3 of the
Schedule.
"Net Worth" means shareholders equity of a Person at any date determined in
accordance with GAAP, plus subordinated debt (which will include approximately
$1,000,000 of debt to a settling entity, as more particularly described in
Section 6.10 of the Schedule, provided that: (i) the debt is incurred by
Borrower, and (2) the debt is subordinated in favor of Coast as more
particularly described in Section 5.20 herein. Attached as Exhibit "C" is a
sample calculation of Net Worth based upon Borrower's most recent financial
statements.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Coast, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Coast in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees (including attorneys' fees and expenses incurred in bankruptcy), expert
witness fees, audit fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, termination fees, minimum interest charges and any
other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and Coast.
▇▇▇▇▇▇▇ Enterprises" means ▇▇▇▇▇▇▇ Enterprises, Inc., a Florida corporation
"Permitted Liens" means the following:
(a) purchase money security interests in specific items of Equipment;
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(b) leases of specific items of Equipment;
(c) liens for taxes not yet payable;
(d) additional security interests and liens consented to in writing by
Coast, which consent shall not be unreasonably withheld;
(e) security interests being terminated substantially concurrently with
this Agreement;
(f) liens of materialmen, mechanics, warehousemen, carriers, or other
similar liens arising in the ordinary course of business and securing
obligations which are not delinquent;
(g) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (a) or (b) above, provided that any extension, renewal or replacement
lien is limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; or
(h) liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods.
(i) security interests and consensual liens existing on the Closing
Date which are listed on Exhibit "D".
Coast will have the right to require, as a condition to its consent under
subparagraph (d) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on Coast's then standard form, acknowledge
that the security interest is subordinate to the security interest in favor of
Coast, and agree not to take any action to enforce its subordinate security
interest so long as any Obligations remain outstanding, and that Borrower agree
that any uncured default in any obligation secured by the subordinate security
interest shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, general partnership,
limited partnership, limited liability partnership, limited liability company,
joint venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Prime Rate" means the actual "Reference Rate" or the substitute therefor
of the Bank of America NT & SA whether or not that rate is the lowest interest
rate charged by said bank. If the Prime Rate, as defined, is unavailable, "Prime
Rate" shall mean the highest of the prime rates published in the Wall Street
Journal on the first business day of the applicable month, as the base rate on
corporate loans at large U.S. money center commercial banks.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities accounts,
security entitlements, commodity contracts, commodity accounts, investment
property and all other forms of obligations at any time owing to Borrower, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower, and all rights of stoppage in transit and all other
rights or remedies of an unpaid vendor, lienor or secured party.
"Renewal Date" shall mean the Maturity Date if this Agreement is renewed
pursuant to Section 9.1 hereof, and each anniversary thereafter that this
Agreement is renewed pursuant to Section 9.1 hereof.
"Renewal Fee" means the fee that Borrower must pay Coast upon renewal of
this Agreement pursuant to Section 9.1 hereof, in the amount set forth on the
Schedule.
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
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"Subordinated Creditors" means each of Persons and debts or obligations
listed on Exhibit "E" attached hereto.
"Triggering Event" means the execution and delivery, in form and substance
satisfactory to Coast and its counsel, of an intercreditor agreement between
Borrower and WorldCom or an Alternative Carrier wherein it is provided or
acknowledged that Coast shall have a first priority security interest in all of
Borrower's assets including, without limitation, its subscriber base and
WorldCom or an Alternative Carrier will have a second priority security interest
in only the subscriber base.
"USBI" means Zero Plus Dialing, Inc., a Delaware corporation, doing
business as U.S. Billing.
"VisionQuest" means VisionQuest Marketing Service, Inc., an Oklahoma
corporation.
"WorldCom" means WorldCom Network Services, Inc., dba WilTel, a Delaware
corporation.
"Year 2000 Problem" means the risk that computer systems, software and
applications used by a Person may be unable to recognize and perform properly
date- sensitive functions involving certain dates prior to and any dates after
December 31, 1999.
"Other Terms." All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
2. CREDIT FACILITIES.
2.1 LOANS. Coast will, in accordance with Coast's standard procedures, make
loans to Borrower (the "Loans"), in amounts and in percentages to be determined
by Coast in its good faith discretion, up to the Credit Limit, provided no
Default or Event of Default has occurred and is continuing. Furthermore, Coast
may create reserves against the Loans which otherwise would be available under
this Agreement, in addition to the required Debt Reserve described in Section
2.1 of the Schedule and the required Carrier Reserve, or reduce its advance
rates described in Section 2.1 of the Schedule, without declaring a Default or
an Event of Default if it reasonably determines that there has occurred a
Material Adverse Effect.
3. INTEREST AND FEES.
3.1 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, in arrears,
on the last day of the month. Interest due and unpaid may, in Coast's
discretion, be charged to Borrower's loan account, and the same shall thereafter
bear interest at the same rate as the other Loans. Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall, from and
after the Closing Date, pay Coast Minimum Monthly Interest during the term of
this Agreement with respect to the Loans in the amount set forth on the
Schedule.
3.2 FEES. Borrower shall pay Coast the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Coast and are deemed
fully earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when due,
Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and wherever
located: All Receivables, Inventory, Equipment, Investment Property, and General
Intangibles, including, without limitation, all of Borrower's Deposit Accounts,
and all money, and all property now or at any time in the future in Coast's
possession (including claims and credit balances), and all proceeds of any of
the foregoing (including proceeds of any insurance policies, proceeds of
proceeds, and claims against third parties), all products of any of the
foregoing, and all books and records related to any of the foregoing (all of the
foregoing, together with all other property in which Coast may now or in the
future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral"). Notwithstanding the foregoing provisions of
this Section 4, such grant of a security interest shall not extend, and the term
"Collateral" shall not include the following (collectively, the "Non-Assignable
Collateral"): any rights in any "Collateral," as that term is defined in the
June 1, 1996 Security Agreement between Borrower and WorldCom, in which a prior
security interest in favor of WorldCom has been granted by Borrower to the
extent that (i) such Non-Assignable Collateral is not assignable or capable of
being further encumbered as a matter of law or under the terms of any agreement
between Borrower and WorldCom (but solely to the extent that any such
restriction shall be enforceable under applicable law),
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without the consent of WorldCom, and (ii) such consent has not been obtained;
provided, however, that the Non- Assignable Collateral shall not, in any event,
include the following and the foregoing grant of a security interest shall
extend to, and the term Collateral shall include the following: (a) the
Non-Assignable Collateral upon the receipt of consent therefor from WorldCom or
upon termination of WorldCom's security interest, and (b) any and all proceeds
of the Non-Assignable Collateral to the extent that the assignment or
encumbering of such proceeds is not so restricted. In the event that an Event of
Default shall have occurred and is continuing, the Borrower shall use all
reasonable efforts to obtain the consent of WorldCom as may be required from
time to time by Coast in writing.
5. CONDITIONS PRECEDENT.
The obligation of Coast to make the Loans is subject to the satisfaction,
in the sole discretion of Coast, at or prior to the first advance of funds
hereunder, of each, every and all of the following conditions:
5.1 STATUS OF ACCOUNTS AT CLOSING. Each carrier accounts payable of
Borrower shall be current with the exception of existing accounts payable
currently under dispute with WorldCom which have been reserved pursuant to
paragraph 5.17 herein. No other accounts payable shall be due and unpaid sixty
(60) days past its invoice date, except for such accounts payable being
contested in good faith in appropriate proceedings and for which adequate
reserves have been provided.
5.2 MINIMUM AVAILABILITY. Borrower shall have minimum availability
immediately following the initial funding in the amount set forth on the
Schedule.
5.3 LANDLORD WAIVER. Coast shall have received duly executed landlord
waivers and access agreements in form and substance satisfactory to Coast, in
Coast's sole and absolute discretion, and, when deemed appropriate by Coast, in
form for recording in the appropriate recording office, with respect to all
Leased Locations where Borrower maintains any inventory or equipment.
5.4 OPINION OF BORROWER'S COUNSEL. Coast shall have received an opinion of
Borrower's counsel, in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.5 PRIORITY OF COAST'S LIENS. Coast shall have received the results of "of
record" searches reflecting its Uniform Commercial Code filings against Borrower
and indicating that Coast has a perfected, first priority lien in and upon all
of the Collateral, subject only to Permitted Liens.
5.6 INSURANCE. Coast shall have received copies of the insurance binders or
certificates evidencing Borrower's compliance with Section 8.2 hereof, including
lender's loss payee endorsements.
5.7 BORROWER'S EXISTENCE. Coast shall have received copies of Borrower's
articles or certificate of incorporation and all amendments thereto, and a
Certificate of Good Standing, each certified by the Secretary of State of the
state of Borrower's organization, and dated a recent date prior to the Closing
Date, and Coast shall have received Certificates of Foreign Qualification for
Borrower from the Secretary of State of each state wherein the failure to be so
qualified could have a Material Adverse Effect.
5.8 ORGANIZATIONAL DOCUMENTS. Coast shall have received copies of
Borrower's By-laws and all amendments thereto, and Coast shall have received
copies of the resolutions of the board of directors of Borrower, authorizing the
execution and delivery of this Agreement and the other documents contemplated
hereby, and authorizing the transactions contemplated hereunder and thereunder,
and authorizing specific officers of Borrower to execute the same on behalf of
Borrower, in each case certified by the Secretary or other acceptable officer of
Borrower as of the Closing Date.
5.9 TAXES. Coast shall have received evidence from Borrower that Borrower
has complied with all tax withholding and Internal Revenue Service regulations
and that Borrower will pay concurrent with the first advance of funds hereunder
or has paid and is current on all taxes, whether federal, state or other
applicable taxing body, in form and substance satisfactory to Coast in its sole
and absolute discretion.
5.10 DUE DILIGENCE. Coast shall have completed its due diligence with
respect to Borrower.
5.11 OTHER DOCUMENTS AND AGREEMENTS. Coast shall have received such other
agreements, instruments and documents as Coast may require in connection with
the transactions contemplated hereby, all in form and substance satisfactory to
Coast in Coast's sole and absolute discretion, and in form for filing in the
appropriate filing office, including, but not limited to, those documents listed
in Section 5 of the Schedule.
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5.12 MANAGEMENT BACKGROUND CHECKS. Coast shall have received the results of
management background checks, including, without limitation, TRWs, tax lien and
litigation searches, LEXIS/NEXIS searches and such other due diligence as Coast
may deem necessary, on certain key officers of Borrower selected by Coast which
background checks shall be satisfactory to Coast in Coast's sole and absolute
discretion.
5.13 LOCKBOX/TRIPARTY/BLOCKED ACCOUNT AGREEMENTS. Coast shall have received
evidence that all cash remittances of Borrower shall be collected pursuant to
one or more lockbox/triparty agreements or blocked account agreements in form
and substance acceptable to Coast.
5.14 DEBT SUBORDINATION AGREEMENTS. Coast shall have received executed debt
subordination agreements evidencing subordinated debt in an approximate
aggregate principal amount equal to Four Million Six Hundred Thousand Dollars
($4,600,000), in the form of Exhibit 5.14 from the Subordinated Creditors.
5.15 YEAR 2000 ASSESSMENT CERTIFICATE. Coast shall have received a
certificate from the relevant officer of Borrower to the effect that, as the
result of an assessment undertaken by Borrower of Borrower's computer systems,
software and applications and after inquiry made to Borrower's material
suppliers and vendors, Borrower knows of no facts that would cause Borrower to
reasonably believe that the Year 2000 Problem will cause a Material Adverse
Effect.
5.16 NET WORTH. Coast shall have received evidence satisfactory to Coast in
its sole and absolute discretion that Borrower's Net Worth is no more negative
than negative Twelve Million Dollars ($12,000,000).
5.17 ▇▇▇▇▇▇▇ ENTERPRISES INFUSION. ▇▇▇▇▇▇▇ Enterprises shall, pursuant to
that certain____________, 199__ Promissory Note made by Borrower, have infused
into Borrower Two Million Five Hundred Thousand Dollars ($2,500,000) in the form
of cash to support an accounts payable reserve of One Million Six Hundred
Thousand Dollars ($1,600,000) for disputed WorldCom accounts payable and to fund
the five (5) month Six Hundred Fifty Thousand Dollar ($650,000) interest
reserve. Cash security for the disputed WorldCom accounts payable will be held
by Coast and released dollar for dollar to Borrower as disputed amounts are
resolved to the reasonable satisfaction of Coast, including using such reserve
to fund payments to WorldCom for payment of the disputed WorldCom accounts
payable. The interest reserve will be released upon the occurrence of: (i) a
Triggering Event, (ii) the establishment of the Debt Reserve, and (iii) provided
that an Event of Default does not then exist and will not result from the
release of the interest reserve. The remaining amount of $250,000, over and
above the amounts needed for the Worldcom accounts payable reserve and the
interest reserve, will be released following the Closing Date provided that: (i)
an Event of Default does not then exist and will not result from the release of
the monies, and (ii) sufficient borrowing availability exists under the terms of
this Agreement. Coast shall have received an executed Debt Subordination
Agreement substantially in the form attached hereto as Exhibit 5.17. Borrower
acknowledges and agrees that the ▇▇▇▇▇▇▇ Enterprises infusion: (i) will not be
segregated, (ii) will earn interest at the rate of the Prime Rate minus three
percent (3%), (iii) will be held indefinitely until the sooner to occur of: (a)
its release pursuant to the terms described hereinabove, or (b) the repayment of
the Obligations.
5.18 OUTLINE OF CARRIER AGREEMENT TERMS. If no telecommunications services
agreement is executed by and between Borrower and WorldCom or an Alternative
Carrier prior to the Closing Date, Borrower shall provide Coast with a detailed
list of the terms of the agreement that it presently has with WorldCom or an
Alternative Carrier.
5.19 DISCOUNT LONG DISTANCE. Coast shall have received evidence from
Borrower that Borrower has resolved its carrier accounts payable dispute with
Discount Long Distance, with said evidence to be in form and substance
reasonably satisfactory to Coast.
5.20 SETTLEMENT OF POTENTIAL LITIGATION. If the current dispute, more
particularly described in Section 6.10 of the Schedule, is settled and results
in the creation of an approximately $1,000,000 promissory note by Borrower,
Coast shall have been provided with a subordination agreement wherein the
creditor subordinates the approximate $1,000,000 obligation owing to it by
Borrower in favor of Coast, with said subordination agreement to be in form and
substance reasonably satisfactory to Coast.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make Loans,
Borrower represents and warrants to Coast as follows, and Borrower covenants
that the following representations will
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continue to be true, and that Borrower will at all times comply with all of the
following covenants:
6.1 EXISTENCE AND AUTHORITY. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a Material Adverse Effect. The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby (a) have
been duly and validly authorized, (b) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally), and (c) do not violate Borrower's
articles or certificate of incorporation, or Borrower's by-laws, or any law or
any material agreement or instrument which is binding upon Borrower or its
property, and (d) do not constitute grounds for acceleration of any material
indebtedness or obligation under any material agreement or instrument which is
binding upon Borrower or its property.
6.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Coast thirty (30) days' prior written notice before changing
its name or doing business under any other name. Borrower has complied, and will
in the future comply, with all laws relating to the conduct of business under a
fictitious business name.
6.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is
located only at the locations set forth on the Schedule. Borrower will give
Coast at least thirty (30) days' prior written notice before opening any
additional place of business, changing its chief executive office, or moving any
of the Collateral to a location other than Borrower's Address or one of the
locations set forth on the Schedule.
6.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Coast now has, and will continue
to have, a first-priority perfected and enforceable security interest in all of
the Collateral, subject only to the Permitted Liens, and Borrower will at all
times defend Coast and the Collateral against all claims of others. None of the
Collateral now is or will be affixed to any real property in such a manner, or
with such intent, as to become a fixture. Borrower is not and will not become a
lessee under any real property lease pursuant to which the lessor may obtain any
rights in any of the Collateral and no such lease now prohibits, restrains,
impairs or will prohibit, restrain or impair Borrower's right to remove any
Collateral from the leased premises. Whenever any Collateral is located upon
premises in which any third party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by Coast, use its reasonable best efforts to cause such third party to
execute and deliver to Coast, in form acceptable to Coast, such waivers and
subordinations as Coast shall specify, so as to ensure that Coast's rights in
the Collateral are, and will continue to be, superior to the rights of any such
third party. Borrower will keep in full force and effect, and will comply with
all the terms of, any lease for a Leased Location where any of the Collateral
now or in the future may be located.
6.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Coast in writing of any
material loss or damage to the Collateral that could reasonably be expected to
have a Material Adverse Effect.
6.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records in accordance with
GAAP.
6.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to Coast have been, and will be, prepared in
conformity with GAAP (except, in the case of unaudited financial statements, for
the absence of footnotes and subject to normal year-end adjustments) and now and
in the future will fairly reflect the financial condition of Borrower, at the
times and for the periods therein stated. Between the last date covered by any
such statement provided to Coast and the date hereof, there has been no Material
Adverse Effect. Borrower is now and will continue to be Solvent.
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6.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Except with respect to
taxes being paid with the first advance of funds hereunder, Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof, Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
6.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all material foreign, federal, state
and local laws and regulations relating to Borrower that are reasonably likely
to result in a Material Adverse Effect, including, but not limited to, the Fair
Labor Standards Act, and those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and
environmental matters.
6.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in a Material Adverse Effect.
Borrower will promptly inform Coast in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or against
Borrower involving an amount set forth on the Schedule.
6.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely to
payoff of existing debt, for working capital purposes and for other lawful
business purposes. Borrower is not purchasing or carrying any "margin stock" (as
defined in Regulation G of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of any Loan will be used to purchase or carry any
"margin stock" or to extend credit to others for the purpose of purchasing or
carrying any "margin stock."
6.12 YEAR 2000 COMPLIANCE. As the result of a review and assessment
undertaken by Borrower of Borrower's computer systems, software and applications
and after inquiry made of Borrower's material suppliers and vendors Borrower
represents and warrants that the Year 2000 problem is not reasonably likely to
result in a Material Adverse Effect.
7. RECEIVABLES.
7.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Coast as follows: Each Receivable (other than those not yet earned
by performance) 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.
7.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Coast as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and indorsements on all documents, instruments, and agreements
relating to all Receivables are, to the best of Borrower's knowledge, genuine,
and all such documents, instruments and agreements are, to the best of
Borrower's knowledge, legally enforceable in accordance with their terms.
7.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver
to Coast via
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facsimile, unless otherwise directed by Coast, at such locations and at such
intervals as Coast may reasonably request, transaction reports and loan
requests, schedules of Receivables, and schedules of collections, all on Coast's
standard forms; provided, however, that Borrower's failure to execute and
deliver the same shall not affect or limit Coast's security interest and other
rights in all of Borrower's Receivables, nor shall Coast's failure to advance or
lend against a specific Receivable affect or limit Coast's security interest and
other rights therein. Loan requests received after 10:30 A.M. Los Angeles,
California time, will not be considered by Coast until the next Business Day.
Together with each such schedule, or later if requested by Coast, Borrower shall
furnish Coast with copies (or, at Coast's request, originals) of all contracts,
orders, invoices, and other similar documents, and all original shipping
instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Coast an aged accounts receivable trial balance
in such form and at such intervals as Coast shall request. In addition, Borrower
shall deliver to Coast the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Receivables, upon receipt thereof and in the same form as received, with all
necessary indorsements, all of which shall be with recourse. Borrower shall also
provide Coast with copies of all credit memos as and when requested by Coast.
7.4 COLLECTION OF RECEIVABLES. All payments on, and proceeds of,
Receivables shall be deposited by Borrower into a lockbox or blocked account as
Coast may specify, pursuant to one or more lockbox or blocked account agreements
in such form as Coast may specify. Coast or its designee may, at any time,
notify Account Debtors that Coast has been granted a security interest in the
Receivables. Coast shall promptly apply all payments on, and proceeds of,
Receivables (a) to the Obligations in such order as Coast shall determine,
and/or (b) to the payment of any carrier accounts payable that are not current
at such time and from time to time as determined by Coast in its reasonable
discretion.
7.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of
any Collateral shall be delivered to Coast within one (1) Business Day after
receipt by Borrower, in their original form, duly endorsed to Coast, to be
applied to the Obligations in such order as Coast shall determine. Borrower
agrees that it will not commingle proceeds of Collateral with any of Borrower's
other funds or property, but will hold such proceeds separate and apart from
such other funds and property and in an express trust for Coast. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.
7.6 DISPUTES. Borrower shall notify Coast promptly of all disputes or
claims in excess of Fifty Thousand Dollars ($50,000) relating to Receivables.
Borrower shall not forgive (completely or partially), compromise or settle any
Receivable for less than payment in full, or agree to do any of the foregoing,
except that Borrower may do so, provided that: (a) Borrower does so in good
faith, in a commercially reasonable manner, in the ordinary course of business,
and in arm's length transactions, which are reported to Coast on the regular
reports provided to Coast; (b) no Default or Event of Default has occurred and
is continuing; and (c) taking into account all such discounts settlements and
forgiveness, the total outstanding Loans will not exceed the Credit Limit. Coast
may, at any time after the occurrence of an Event of Default, settle or adjust
disputes or claims directly with Account Debtors for amounts and upon terms
which Coast considers advisable in its reasonable credit judgment and, in all
cases, Coast shall credit Borrower's Loan account with only the net amounts
received by Coast in payment of any Receivables.
7.7 INTENTIONALLY DELETED.
7.8 VERIFICATION. Coast may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Coast or such other name as Coast may choose.
7.9 NO LIABILITY. Coast shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Coast be deemed to be responsible for any of Borrower's obligations under
any contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve Coast from liability for its own gross negligence or willful
misconduct.
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8. ADDITIONAL DUTIES OF THE BORROWER.
8.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.
8.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry other business insurance with reputable
insurers and comparable in kind and amount to that set forth on Schedule 8.2
attached hereto, all of which policies are in full force and effect as of the
date hereof and copies of which have been provided to Coast pursuant to Section
5.6 hereof, and Borrower shall provide evidence of such insurance to Coast, so
that Coast is satisfied that such insurance is, at all times, in full force and
effect. All liability insurance policies of Borrower shall name Coast as an
additional insured, and all property casualty and related insurance policies of
Borrower shall name Coast as a loss payee thereon and Borrower shall cause a
lender's loss payee endorsement in form reasonably acceptable to Coast. Upon
receipt of the proceeds of any such insurance, Coast shall apply such proceeds
in reduction of the Obligations, except that, provided no Default or Event of
Default has occurred and is continuing, Coast shall release to Borrower
insurance proceeds with respect to Equipment totaling less than the amount set
forth in Section 8 of the Schedule, which shall be utilized by Borrower for the
replacement of the Equipment with respect to which the insurance proceeds were
paid. Coast may require reasonable assurance that the insurance proceeds so
released will be so used. If Borrower fails to provide or pay for any insurance,
Coast may, but is not obligated to, obtain the same at Borrower's expense.
Borrower shall promptly deliver to Coast copies of all reports made to insurance
companies.
8.3 REPORTS. Borrower, at its expense, shall provide Coast with the written
reports set forth in Section 8 of the Schedule, and such other written reports
with respect to Borrower (including budgets, sales projections, operating plans
and other financial documentation), as Coast shall from time to time reasonably
specify.
8.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but not
less frequently than quarterly and on one (1) Business Day's notice, Coast, or
its agents, shall have the right to perform Audits, including, without
limitation, Audits with respect to all amounts paid, directly or indirectly, to
Hebron and VisionQuest to (a) confirm that such payments reflect arms-length
transactions between the parties, and (b) confirm that charges for services
rendered by Hebron and VisionQuest, respectively, are comparable to charges for
similar services rendered by competing vendors. Coast shall take the same steps
it takes to keep its own confidential information confidential, to keep
confidential all confidential information obtained in any report or Audit, but
Coast shall have the right to disclose any such information to its auditors,
regulatory agencies, and attorneys, and pursuant to any subpoena or other legal
process. The Audits shall be at Borrower's expense and the charge for the Audits
shall be Seven Hundred Fifty Dollars ($750) per person per day (or such higher
amount as shall represent Coast's then current standard charge for the same),
plus reasonable out-of-pocket expenses. Coast also shall have the right from
time to time as determined by Coast in its sole discretion (but absent the
occurrence of a Default or Event of Default, Coast's right to an appraisal shall
be limited to one (1) such appraisal during any twelve (12) month period), at
Borrower's sole cost and expense, to have an appraisal of the subscriber base
conducted by an appraiser acceptable to Coast in its sole and absolute
discretion. Borrower agrees to fully cooperate with the appraiser in any such
appraisal and make all information relating to the subscriber base available to
the appraiser at such times and places as requested by the appraiser. Borrower
will not enter into any agreement with any accounting firm, service bureau or
third party to store Borrower's books or records at any location other than
Borrower's Address, without first notifying Coast of the same and obtaining the
written agreement from such accounting firm, service bureau or other third party
to give Coast the same rights with respect to access to books and records and
related rights as Coast has under this Loan Agreement.
8.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's prior written
consent, do any of the following:
(a) merge or consolidate with another entity, except in a transaction
in which (i) the owners of Borrower hold at least fifty percent (50%) of the
ownership interest in the surviving entity immediately after such merger or
consolidation, and (ii) Borrower is the surviving entity;
(b) acquire any assets, except (i) in the ordinary course of business,
or (ii) in a transaction or a series of transactions not involving the payment
of an aggregate amount in excess of the amount set forth in Section 8 of the
Schedule;
(c) enter into any other transaction outside the ordinary course of
business;
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(d) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of Borrower's business, and except for the sale
of obsolete or unneeded Equipment in the ordinary course of business;
(e) store any Inventory or other Collateral with any warehouseman or
other third party without notifying Coast of the same;
(f) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;
(g) make any loans of any money or other assets, except (i) advances to
customers or suppliers in the ordinary course of business, and (ii) travel
advances, employee relocation loans and other employee loans and advances in the
ordinary course of business;
(h) incur any debts, outside the ordinary course of business, which
would have a Material Adverse Effect;
(i) guarantee or otherwise become liable with respect to the
obligations of another party or entity;
(j) pay or declare any dividends or distributions on the ownership
interests in Borrower (except for: (i) dividends or distributions payable from
Borrower's "Net Earnings" (as more particularly described and as limited by
Section 8.1 of the Schedule), and (ii) dividends or distributions payable solely
in stock form of ownership interests in Borrower);
(k) make any change in Borrower's capital structure which would have a
Material Adverse Effect;
(l) transfer or side stream any funds to any Affiliate, except in the
ordinary course of business, and except for payments, directly or indirectly, to
Hebron and VisionQuest that reflect arms-length transactions between the parties
and that reflect charges for services rendered by Hebron and Vision Quest
respectively, that are comparable to charges for similar services rendered by
competing vendors; or
(m) dissolve or elect to dissolve.
Notwithstanding anything to the contrary set forth above in this Section
8.5, Borrower may merge or consolidate with, or transfer all or substantially
all of Borrower's assets to, or purchase all of the assets (or all such assets
other than Real Property) of Hebron, all of the assets or the Tahlequah
telemarketing center assets of VisionQuest or all or substantially all of the
assets of any other affiliate which is a wholly owned or jointly owned
subsidiary, provided that (i) Borrower is not released hereunder and the
surviving entity assumes the Obligations, (ii) Coast shall be satisfied, in its
discretion, that its lien on the Collateral is not adversely affected thereby,
and (iii) Coast shall be satisfied, in its sole discretion that the transaction
will not adversely affect the ability of Borrower to perform its obligations
under this Agreement (including, without limitation, repayment of the
Obligations as they come due).
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default is continuing or would occur as a
result of such transaction.
8.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Coast with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Coast, make available Borrower and
its officers, employees and agents and Borrower's books and records, to the
extent that Coast may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
8.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
9. TERM.
9.1 MATURITY DATE. This Agreement shall continue in effect until the
Maturity Date; 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 (60) days prior to the Maturity Date or the next
Renewal Date, that such party elects to terminate this Agreement effective on
the Maturity Date or such next Renewal Date. If this Agreement is renewed under
this Section 9.1, Borrower shall pay to Coast a Renewal Fee in the amount shown
in Section 3 of the Schedule. The Renewal Fee shall be due and payable on the
Renewal Date and thereafter shall bear interest at a rate equal to the rate
applicable to the Receivable Loans.
9.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (a) by Borrower, effective three (3) Business Days
after written
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notice of termination is given to Coast; or (b) by Coast at any time after the
occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by Coast under this Section 9.2, at
any time after the Closing Date and prior to third anniversary of the date
hereof, then and in that event, Borrower shall pay to Coast an Early Termination
Fee in the amount shown in Section 3 of the Schedule. The Early Termination Fee
shall be due and payable on the effective date of termination and thereafter
shall bear interest at a rate equal to the rate applicable to the Loans.
9.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Notwithstanding any termination of this Agreement, all of Coast's security
interests in all of the Collateral and all of the terms and provisions of this
Agreement shall continue in full force and effect until all Obligations have
been paid and performed in full; provided that, without limiting the fact that
Loans are subject to the discretion of Coast, Coast may, in its sole discretion,
refuse to make any further Loans after termination. No termination shall in any
way affect or impair any right or remedy of Coast, nor shall any such
termination relieve Borrower of any Obligation to Coast, until all of the
Obligations have been paid and performed in full. Upon payment and performance
in full of all the Obligations and termination of this Agreement, Coast shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be required to fully terminate Coast's security
interests.
10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement:
(a) any warranty, representation, statement, report or certificate
made or delivered to Coast by Borrower or any of Borrower's officers, employees
or agents, now or in the future, shall be untrue or materially misleading and
results in a Material Adverse Effect; or
(b) Borrower shall fail to pay when due any Loan or any interest
thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time
shall exceed the Credit Limit; or
(d) Borrower shall fail to deliver the proceeds of Collateral to Coast
as provided in Section 7.5 above, or shall fail to give Coast access to its
books and records or Collateral as provided in Section 8.4 above, or shall
breach any negative covenant set forth in Section 8.5 above; or
(e) Borrower shall fail to comply with the financial covenants set
forth in the Schedule or shall fail to perform any other non-monetary Obligation
which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within ten (10) Business Days after the date due; or
(g) any levy, assessment, attachment, seizure, lien or encumbrance
(other than a Permitted Lien) is made on all or any part of the Collateral which
is not cured within forty-five (45) days provided that no risk to Coast's rights
in Collateral in Coast's reasonable discretion result from the delay after the
occurrence of the same; or
(h) any default or event of default occurs under any obligation
secured by a Permitted Lien, which is not cured within any applicable cure
period or waived in writing by the holder of the Permitted Lien with the
exception of existing accounts payable currently under dispute with WorldCom
which have been reserved for pursuant to paragraph 5.17 herein; or
(i) Borrower breaches any material contract or obligation, which has
or may reasonably be expected to have a Material Adverse Effect with the
exception of existing accounts payable currently under dispute with WorldCom
which have been reserved for pursuant to paragraph 5.17 herein; or
(j) Dissolution, termination of existence, insolvency or business
failure of Borrower or any guarantor of any of the Obligations; or appointment
of a receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or
(k) the commencement of any proceeding against Borrower or any
guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any
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jurisdiction, now or in the future in effect, which is (i) not timely
controverted, or (ii) not cured by the dismissal thereof within forty-five (45)
days after the date commenced; or
(l) revocation or termination of, or limitation or denial of liability
upon, any guaranty of the Obligations or any attempt to do any of the foregoing;
or
(m) revocation or termination of, or limitation or denial of liability
upon, any pledge of any certificate of deposit, securities or other property or
asset of any kind pledged by any third party to secure any or all of the
Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or
(n) Borrower or any guarantor of any of the Obligations makes any
payment on account of any indebtedness or obligation which has been subordinated
to the Obligations, other than as permitted in the applicable subordination
agreement, or if any Person who has subordinated such indebtedness or
obligations terminates or in any way limits his subordination agreement; or
(o) except as permitted under Section 8.5(a), Borrower shall suffer or
experience any Change of Control without Coast's prior written consent, which
consent shall be in the discretion of Coast in the exercise of its reasonable
business judgment; or
(p) Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or
(q) there shall be any Material Adverse Effect; or
(r) Borrower fails to achieve, on or before December 31, 1999, the
projected Net Worth provided Coast in writing on or before the Closing Date and
such failure has a Material Adverse Effect; or
(s) a thirty percent (30%) decrease occurs in any one month of
collections received by Coast from the previous month; provided, however, if
Borrower can demonstrate that the decline is not the result of a permanent
reduction in sales or does not represent a permanent adverse change in the
financial performance and the same are supported by documentation reasonably
satisfactory to Coast within ten (10) days of the receipt by Coast of Borrower's
collections and collection reports, then and only then the occurrence of the
event described in this subparagraph (s) shall not constitute an Event of
Default; or
(t) a thirty percent (30%) decrease occurs in any one month of
collections received by Coast based on a trailing three month moving average; or
(u) a twenty percent (20%) decrease occurs at any time in the
appraised value of the subscriber base from its appraised value as of March 1,
1998, as determined by an appraiser acceptable to Coast in its sole and absolute
discretion.
Coast may cease making any Loans or extending any credit hereunder during any of
the above cure periods.
10.2 REMEDIES. Upon the occurrence, and during the continuance, of any
Event of Default, Coast, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following:
(a) Cease making Loans or otherwise extending credit to Borrower under
this Agreement;
(b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation;
(c) Take possession of any or all of the Collateral wherever it may be
found, and for that purpose Borrower hereby authorizes Coast without judicial
process to enter onto any of Borrower's premises without interference to search
for, take possession of, keep, store or remove any of the Collateral, and remain
on the premises or cause a custodian to remain on the premises in exclusive
control thereof, without charge for so long as reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Coast seek to take possession of any
of the Collateral by Court process, Borrower hereby irrevocably waives:
(i) any bond and any surety or security relating thereto required
by any statute, court rule or otherwise as an incident to such possession;
(ii) any demand for possession prior to the commencement of any
suit or action to recover possession thereof; and
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(iii) any requirement that Coast retain possession of, and not
dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral and make
it available to Coast at places designated by Coast which are reasonably
convenient to Coast and Borrower, and to remove the Collateral to such locations
as Coast may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral
prior to a disposition thereof and, for such purpose and for the purpose of
removal, Coast shall have the right to use Borrower's premises, vehicles,
hoists, lifts, cranes, equipment and all other property without charge. Coast is
hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to Coast's benefit;
(f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Coast obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Coast shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Coast deems reasonable, or on Coast's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Coast may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast to endorse or sign Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Coast's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Receivables and the like for less than face value; and
(h) Demand and receive possession of any of Borrower's federal and
state income tax returns and the books and records utilized in the preparation
thereof or referring thereto.
All attorneys' fees, expenses, costs, liabilities and obligations incurred
by Coast (including attorneys' fees and expenses incurred in connection with
bankruptcy) with respect to the foregoing shall be due from the Borrower to
Coast on demand. Coast may charge the same to Borrower's loan account, and the
same shall thereafter bear interest at the same rate as is applicable to the
Receivable Loans. Without limiting any of Coast's rights and remedies, after the
occurrence and during the continuation of any Event of Default, the interest
rate applicable to the Obligations shall be increased by an additional three
percent per annum.
10.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Coast agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable:
(a) Notice of the sale is given to Borrower at least seven (7) days
prior to the sale, and, in the case of a public sale, notice of the sale is
published at least seven (7) days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted;
(b) Notice of the sale describes the collateral in general,
non-specific terms;
(c) The sale is conducted at a place designated by Coast, with or
without the Collateral being present;
(d) The sale commences at any time between 8:00 a.m. and 6:00 p.m Los
Angeles, California time;
(e) Payment of the purchase price in cash or by cashier's check or wire
transfer is required; and
(f) With respect to any sale of any of the Collateral, Coast may (but
is not obligated to) direct any prospective purchaser to ascertain directly from
Borrower any and all information concerning the same.
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Coast shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
10.4 POWER OF ATTORNEY. Borrower grants to Coast an irrevocable power of
attorney coupled with an interest, authorizing and permitting Coast (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise, but
Coast agrees to exercise the following powers in a commercially reasonable
manner:
(a) Execute on behalf of Borrower any documents that Coast may, in its
sole discretion, deem advisable in order to perfect and maintain Coast's
security interest in the Collateral, or in order to exercise a right of Borrower
or Coast, or in order to fully consummate all the transactions contemplated
under this Agreement, and all other present and future agreements;
(b) After the occurrence and during the continuation of an Event of
Default, execute on behalf of Borrower any document exercising, transferring or
assigning any option to purchase, sell or otherwise dispose of or to lease (as
lessor or lessee) any real or personal property which is part of Coast's
Collateral or in which Coast has an interest;
(c) After the occurrence and during the continuation of an Event of
Default, execute on behalf of Borrower, any invoices relating to any Receivable,
any draft against any Account Debtor and any notice to any Account Debtor, any
proof of claim in bankruptcy, any Notice of Lien, claim of mechanic's,
materialman's or other lien, or assignment or satisfaction of mechanic's,
materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of payment
or proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Coast's
possession;
(e) Endorse all checks and other forms of remittances received by
Coast;
(f) After the occurrence and during the continuation of an Event of
Default, pay, contest or settle any lien, charge, encumbrance, security interest
and adverse claim in or to any of the Collateral, or any judgment based thereon,
or otherwise take any action to terminate or discharge the same;
(g) After the occurrence and during the continuation of an Event of
Default, grant extensions of time to pay, compromise claims and settle
Receivables and General Intangibles for less than face value and execute all
releases and other documents in connection therewith;
(h) After the occurrence and during the continuation of an Event of
Default, pay any sums required on account of Borrower's taxes or to secure the
release of any liens therefor, or both;
(i) After the occurrence and during the continuation of an Event of
Default, settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor;
(j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, Borrower to give Coast the same rights of
access and other rights with respect thereto as Coast has under this Agreement;
(k) After the occurrence and during the continuation of an Event of
Default, take any action or pay any sum required of Borrower pursuant to this
Agreement and any other present or future agreements; and
(l) Pay from time to time all or any portion of any carrier accounts
payable that is not current during the term of this Agreement other than amounts
currently in dispute with WorldCom.
Any and all sums paid and any and all costs, expenses, liabilities,
obligations and attorneys' fees incurred by Coast (including attorneys' fees and
expenses incurred pursuant to bankruptcy) with respect to the foregoing shall be
added to and become part of the Obligations, and shall be payable on demand.
Coast may charge the foregoing to Borrower's loan account and the foregoing
shall thereafter bear interest at the same rate applicable to the Receivable
Loans. In no event shall Coast's rights under the foregoing power of attorney or
any of Coast's other rights under this Agreement be deemed to indicate that
Coast is in control of the business, management or properties of Borrower.
Borrower shall pay, indemnify, defend, and hold Coast and each of its officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all attorneys fees and disbursements and other
costs and expenses actually incurred in connection therewith (as and when they
are
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incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrower shall have no obligation to any
Indemnified Person hereunder with respect to any Indemnified Liability that a
court of competent jurisdiction determines to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. This provision
shall survive the termination of this Agreement and the repayment of the
Obligations.
10.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Coast first to the costs, expenses,
liabilities, obligations and attorneys' fees incurred by Coast in the exercise
of its rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Coast shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Coast for any deficiency. If, Coast, in its sole discretion, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Coast shall have the option, exercisable at
any time, in its sole discretion, of either reducing the Obligations by the
principal amount of purchase price or deferring the reduction of the Obligations
until the actual receipt by Coast of the cash therefor.
10.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, Coast shall have all the other rights and remedies accorded a
secured party in equity, under the Code, and under all other applicable laws,
and under any other instrument or agreement now or in the future entered into
between Coast and Borrower, and all of such rights and remedies are cumulative
and none is exclusive. Exercise or partial exercise by Coast of one or more of
its rights or remedies shall not be deemed an election, nor bar Coast from
subsequent exercise or partial exercise of any other rights or remedies. The
failure or delay of Coast to exercise any rights or remedies shall not operate
as a waiver thereof, but all rights and remedies shall continue in full force
and effect until all of the Obligations have been indefeasibly paid and
performed.
11. GENERAL PROVISIONS.
11.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Coast (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Coast on account of the Obligations three (3) Business Days after
receipt by Coast of immediately available funds, and, for purposes of the
foregoing, any such funds received after 10:30 AM Los Angeles, California time,
on any day shall be deemed received on the next Business Day. Coast shall be
entitled to charge Borrower's account for such three (3) Business Days of
"clearance" or "float" at the rate(s) set forth in Section 3 of the Schedule on
all checks, wire transfers and other items received by Coast, regardless of
whether such three (3) Business Days of "clearance" or "float" actually occur,
and shall be deemed to be the equivalent of charging three (3) Business Days of
interest on such collections. This across-the-board three (3) Business Day
clearance or float charge on all collections is acknowledged by the parties to
constitute an integral aspect of the pricing of Coast's financing of Borrower.
11.2 APPLICATION OF PAYMENTS. Subject to Section 7.5 hereof, all payments
with respect to the Obligations may be applied to the Obligations, in such order
and manner as Coast shall determine in its sole discretion.
11.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that
Borrower pay monetary Obligations in cash to Coast, or charge them to Borrower's
Loan account, in which event they will bear interest from the date due to the
date paid at the same rate applicable to the Loans.
11.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall, absent manifest error, be deemed correct,
accurate and binding on Borrower and an account stated unless Borrower notifies
Coast in writing to the contrary within thirty (30) days after receipt of each
account describing the nature of any alleged errors or omissions.
11.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, facsimile or certified mail return
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receipt requested, addressed to Coast or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Coast shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, faxed (at time of confirmation of
transmission), or at the expiration of one (1) Business Day following delivery
to the private delivery service, or two (2) Business Days following the deposit
thereof in the United States mail, with postage prepaid.
11.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
11.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Coast and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
11.8 WAIVERS. The failure of Coast 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 Coast shall not waive or
diminish any right of Coast 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 Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Coast on which
Borrower is or may in any way be liable, and notice of any action taken by
Coast, unless expressly required by this Agreement.
11.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Coast, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast, but nothing herein shall relieve Coast from
liability for its own gross negligence or willful misconduct.
11.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Coast.
11.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
11.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall reimburse Coast for
all attorneys' fees (including attorneys' fees and expenses incurred pursuant to
bankruptcy) and all filing, recording, search, title insurance, appraisal,
audit, and other costs incurred by Coast, pursuant to, or in connection with, or
relating to this Agreement (whether or not a lawsuit is filed), including, but
not limited to, any attorneys' fees and costs (including attorneys' fees and
expenses incurred pursuant to bankruptcy) Coast incurs in order to do the
following: prepare and negotiate this Agreement and the documents relating to
this Agreement; obtain legal advice in connection with this Agreement or
Borrower; enforce, or seek to enforce, any of its rights; 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 Coast's security interest
in, the Collateral; and otherwise represent Coast in any litigation relating to
Borrower. If either Coast 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 costs and attorneys' fees (including attorneys'
fees and expenses incurred pursuant to bankruptcy), including (but not
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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limited to) attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. Borrower shall also pay
Coast's standard charges for returned checks and for wire transfers, in effect
from time to time. All attorneys' fees, costs and charges (including attorneys'
fees and expenses incurred pursuant to bankruptcy) and other fees, costs and
charges to which Coast may be entitled pursuant to this Agreement may be charged
by Coast to Borrower's loan account and shall thereafter bear interest at the
same rate as the Receivable Loans.
11.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Coast; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall release
Borrower from its liability for the Obligations. Coast may assign its rights and
delegate its duties hereunder without the consent of Borrower. Coast reserves
the right to syndicate all or a portion of the transaction created herein or
sell, assign, transfer, negotiate, or grant participations in all or any part
of, or any interest in Coast's rights and benefits hereunder. In connection with
any such syndication, assignment or participation, Coast may, pursuant to a
confidentiality agreement substantially in the form of Exhibit 11.13 attached
hereto, disclose all documents and information which Coast now or hereafter may
have relating to Borrower or Borrower's business. To the extent that Coast
assigns its rights and obligations hereunder to a third Person, Coast thereafter
shall be released from such assigned obligations to Borrower.
11.14 PUBLICITY. Coast is hereby authorized, at its expense, to issue
appropriate press releases and to cause a tombstone to be published announcing
the consummation of this transaction and the aggregate amount thereof, provided,
however, that Borrower shall have the right, in its reasonable discretion, to
approve the content of the same.
11.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrower and Coast acknowledge that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. The term "including",
whenever used in this Agreement, shall mean "including (but not limited to)".
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 Coast or Borrower under any rule of construction or
otherwise.
11.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Coast and Borrower
shall be governed by the internal laws of the State of California, without
regard to its conflicts of law principles. As a material part of the
consideration to Coast to enter into this Agreement, Borrower (a) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Coast's option, be litigated in courts located within California, and
that the exclusive venue therefor shall be Los Angeles County; (b) consents to
the jurisdiction and venue of any such court and consents to service of process
in any such action or proceeding by personal delivery or any other method
permitted by law; and (c) waives any and all rights Borrower may have to object
to the jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.
11.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST 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, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR BORROWER, IN ALL
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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OF THE FOREGOING CASES, WHETHER SOUNDING
IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
AMERIVISION COMMUNICATIONS, INC.,
an Oklahoma corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------
President or Vice President
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
Secretary or Ass't Secretary
COAST:
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank,
a California corporation
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Title: VP - Underwriting Manager
-----------------------------------------
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COAST
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: AMERIVISION COMMUNICATIONS, INC.,
AN OKLAHOMA CORPORATION
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: FEBRUARY 1, 1999
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Bank, and the
above-borrower of even date.
================================================================================
SECTION 2 - CREDIT FACILITIES
SECTION 2.1 - CREDIT LIMIT:
Loans in a total amount at any time
outstanding not to exceed the
lesser of a total of Thirty Million
Dollars ($30,000,000.00) at any one
time outstanding (the "Maximum
Dollar Amount") or the sum of an
amount not to exceed 85% of the
amount of Borrower's Eligible
Receivables (as defined in Section
1 of this Agreement), plus an
amount not to exceed 75% of the
amount of Borrower's Eligible
Unbilled Receivables (as defined in
Section 1 of this Agreement);
provided, however, effective upon
the occurrence of a Triggering
Event (as defined in Section 1 of
this Agreement) and so long as no
Event of Default then exists or
would result, Loans in a total
amount at any time outstanding
shall thereafter not exceed the
lesser of the Maximum Dollar Amount
or the lesser of (a) and (b) below:
(a) Advances up to three (3) times
recurring monthly collections
received by Coast measured on
a trailing three-month moving
average up to a maximum of
seventy percent (70%) of the
orderly liquidation value of
Borrower's subscriber base, as
determined from time to time
by an appraiser acceptable to
Coast in its sole and absolute
discretion; or
(b) Four times EBITDA based on a
rolling 12 months.
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Notwithstanding the foregoing, at
all times prior to the occurrence
of a Triggering Event, Coast shall
establish and maintain a five (5)
month interest reserve in the
amount of Six Hundred Fifty
Thousand Dollars ($650,000) for
interest accruing on Borrower's
unsecured unsubordinated notes due
to various individuals; provided,
however, after the occurrence of a
Triggering Event the five (5) month
interest reserve shall be released
and a debt reserve (the "Debt
Reserve") in the amount of Eight
Million Seven Hundred Thousand
Dollars ($8,700,000) shall be
established against the Loans which
otherwise would be available under
the Agreement. The Debt Reserve
shall be released from time to time
in an amount equal to the principal
amount of each note payable by
Borrower under its "APLP", "Stock
Program" or "Direct ▇▇▇▇ Programs,"
other than notes payable to the
Subordinated Creditors, which after
the Closing Date are (a) cancelled
and converted to an equity interest
in Borrower, (b) retired and marked
"paid in full", in accordance with
its terms or by way of a prepayment
provided that the prepayment: (i)
will not cause a Material Adverse
Effect, and (ii) consented to by
Coast in its sole discretion, or
(c) converted to subordinated debt
pursuant to a debt subordination
agreement in form and substance
satisfactory to Coast.
================================================================================
SECTION 3 - INTEREST AND FEES
SECTION 3.1 - INTEREST RATE: A rate equal to the Prime Rate plus
the applicable margin per annum set
forth below, determined by
reference to the Net Worth of
Borrower as of the immediately
preceding fiscal year end or
quarter end, confirmed, in each
case, by a CPA year-end or quarter
audit:
Applicable Margin
Net Worth Per Annum
--------- ----------
Less than $2,000,000 3.25%
Equal to or greater than $2,000,000 2.50%
but less than $5,000,000
Equal to or greater than $5,000,000 2.00%
but less than $10,000,000
Equal to or greater than $10,000,000 1.50%
The interest rate applicable to all
Loans shall be calculated on the
basis of a 360-day year for the
actual number of days elapsed and
shall be adjusted monthly as of the
first day of each month. The
interest to be charged for each
month shall be based on the highest
Prime Rate in effect during the
prior month, but in no event shall
the rate of interest charged on any
Loans in any month be less than 9%
per annum.
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COAST BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
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SECTION 3.1 - MINIMUM MONTHLY
INTEREST: The amount due based on daily
outstandings of not less than forty
percent (40%) of the Maximum Dollar
Amount.
SECTION 3.2 - LOAN FEE: 1.00% of the Maximum Dollar Amount
(i.e. $300,000), such amount being
fully earned on the Closing Date,
and payable Two Hundred Thousand
Dollars ($200,000) on the Closing
Date with the remaining One Hundred
Thousand Dollars ($100,000) to
become a separate term loan ("term
loan"), but which shall not reduce
the Credit Limit hereunder, payable
six months following the Closing
Date with said term loan accruing
interest at the same rate as the
Loans hereunder. At the end of the
six month period, the term loan
will be paid by adding the term
loan to the outstanding Loans
hereunder.
SECTION 3.2 - FACILITY FEE: $4,000 per quarter, payable on the
Closing Date (prorated for any
partial quarter at the beginning of
the term of this Agreement) and on
the first day of each calendar
quarter thereafter during the term
hereof.
SECTION 9.1 - RENEWAL FEE: 0.50% of the Maximum Dollar Amount
per year commencing on the Renewal
Date.
SECTION 9.2 - EARLY TERMINATION
FEE: 1. If termination occurs at anytime
prior to or on the first
anniversary of the Closing Date:
An amount equal to the greater
of (i) an amount equal to all
interest due and payable during
the six (6) months immediately
preceding the effective date of
termination, or (ii) an amount
equal to the Minimum Monthly
Interest multiplied by the
number of full or partial months
from the effective date of
termination to the first
anniversary of the Closing Date,
or (iii) an amount equal to the
average monthly interest accrued
during the six (6) months
immediately preceding the
effective date of termination,
multiplied by the number of full
or partial months from the
effective date of termination to
the first anniversary of the
Closing Date.
2. If termination occurs at anytime
after the first anniversary of
the Closing Date: An amount
equal to two percent (2%) of the
Maximum Dollar Amount (as
defined in this Schedule) if
termination is effective after
the first anniversary and before
the second anniversary of the
Closing Date; and one percent
(1%) of the Maximum Dollar
Amount, if termination occurs
after the second anniversary of
the Closing Date and before the
Maturity Date.
================================================================================
SECTION 5 - CONDITIONS PRECEDENT
SECTION 5.2 - MINIMUM
AVAILABILITY: $300,000 provided, however, after
the occurrence of a Triggering
Event the Minimum Availability will
be $1,000,000.
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SECTION 5.11 - OTHER DOCUMENTS
AND AGREEMENTS: 1. Tri-Party Agreements with each
local exchange carrier,
including USBI and Hold;
2. Landlord Waiver regarding
Hebron Communications
Corporation;
3. Debt Subordination Agreements
from each of the Subordinated
Creditors in such amounts and
for such obligations of
Borrower as determined by Coast
in its sole discretion;
4. Debt Subordination Agreement
from ▇▇▇▇▇▇▇ Enterprises;
5. UCC-1 financing statements,
fixture filings and termination
statement with respect to
Borrower and/or AmeriTel;
6. Security Agreements (including
those covering copyrights,
patents and trademarks) of
Borrower and AmeriTel,
respectively; and
7. Lockbox Agreement/Blocked
Account Agreement of Borrower
and AmeriTel.
================================================================================
SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.2 - PRIOR NAMES OF
BORROWER: Ameri-Tel Communications, Inc.
SECTION 6.2 - PRIOR TRADE NAMES
OF BORROWER: None
SECTION 6.2 - EXISTING TRADE NAMES
OF BORROWER: LifeLine
SECTION 6.3 - OTHER LOCATIONS AND
ADDRESSES: None
SECTION 6.10 - MATERIAL ADVERSE
LITIGATION:
- Dispute in the process of being
settled for approximately
$1,000,000 to be paid to settling
entity over an 8 month period.
Payments are subject to compliance
with Negative Covenant requirements
of Section 8.5(j) of Agreement and
limitations contained in Section
8.1 of the Schedule. The
approximate $1,000,000 obligation
will be evidenced by a promissory
note containing provisions which
subordinate the obligation in favor
of Coast. There is no assurance
that this matter will be so
settled.
- Existing accounts payable
currently under dispute with
WorldCom which have been reserved
for pursuant to paragraph 5.17
herein.
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SECTION 6.10 - FUTURE CLAIMS AND Borrower will promptly inform Coast
LITIGATION: in writing of any claim,
proceeding, litigation or
investigation in the future
threatened or instituted by or
against Borrower involving any
single claim of Fifty Thousand
Dollars ($50,000) or more, or
involving One Hundred Thousand
Dollars ($100,000) or more in the
aggregate.
================================================================================
SECTION 8 - ADDITIONAL DUTIES OF BORROWER
SECTION 8.1 - OTHER PROVISIONS: 1. Borrower shall at all times
maintain a Net Worth no more
negative than negative
($12,000,000).
2. Each carrier accounts payable
of Borrower shall be kept
current during the term of this
Agreement with the exception of
existing accounts payable
currently under dispute with
WorldCom which have been
reserved for pursuant to
paragraph 5.17 herein. All
other accounts payable of
Borrower shall be paid on or
before sixty (60) days past its
invoice date, except for such
accounts payable being
contested in good faith in
appropriate proceedings and for
which adequate reserves have
been provided.
3. In connection with the Carrier
Reserve (as defined in Section
1 of this Agreement), Borrower
shall provide Coast with
Borrower's written direction to
pay directly, out of and to the
extent of the amount in the
Carrier Reserve, the amounts
due monthly to Borrower's
wholesale telecommunications
carriers (other than Hebron).
4. All transactions between
Borrower, on the one hand, and
Hebron or VisionQuest, on the
other hand, shall be on an
arms-length basis and all
charges for services rendered
by Hebron or VisionQuest shall
be comparable to charges for
similar services rendered by
competing vendors.
5. Borrower shall deliver to Coast
Borrower's audited financial
statements for fiscal years
ending 1996 and 1997 as soon as
such financial statements are
available. Such audited
financial statements shall not
contain any material adverse
change(s), as determined by
Coast in its sole discretion,
from the preliminary financial
statements for such years
previously delivered to Coast
in connection with this
Agreement.
6. Borrower may pay interest on
its obligations owing to the
Subordinated Creditors pursuant
to the provisions of each
promissory note executed by
Borrower in favor of the
Subordinated Creditor, provided
such interest payments do not
exceed in the aggregate the
amount determined in accordance
with the following formula
measured on a monthly basis:
.80 X (EBIT less the principal and
interest payments due on the
Obligations under the
Agreement)
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COAST BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
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provided, however, so long as no
Event of Default has occurred and
is continuing, Borrower may during
the term of this Agreement make
payments to ▇▇▇▇ ▇▇▇▇▇▇▇▇ of Forty
Thousand Dollars ($40,000) per
month plus the sum of Forty
Thousand Dollars ($40,000) on the
Closing Date to be applied against
the dividends payable as shown on
the balance sheet of Borrower in
the approximate amount of Five
Hundred Forty Five Thousand Three
Hundred and Thirty Dollars
($545,330) as of January 21, 1999,
and
provided further, that so long as
(i)no Event of Default has occurred
and is continuing under the terms
of this Agreement, and (ii)
Borrower's cash flow ratio
(cumulative EBITDA/total principal
amortization plus interest payments
on Debt (defined below) for
Borrower's current fiscal year) is
at least 1.25 to 1:00 measured
monthly, and (iii) Borrower's
borrowing availability is equal to
or greater than Five Hundred
Thousand Dollars ($500,000)
(availability is defined as
unrestricted cash plus Loan excess
availability minus the sum of
(accounts payable over 60 days past
invoice date except for such
accounts payable being contested in
good faith in appropriate
proceedings and for which adequate
reserves have been provided plus
book overdraft plus any payments to
be made to all or a portion of the
Subordinated Creditors), Borrower
may during the term of this
Agreement make regularly scheduled
payments of principal (and
retroactive scheduled payments of
principal that were not made during
the current fiscal year) on the
following subordinated notes: (a)
$36,000 per month to C.A.S.E. on
its $655,409 note (principal
balance as at 01/01/99); provided,
however, that (except as provided
in the following paragraph) the
principal balance outstanding on
such note shall at no time fall
below $300,000, (b) monthly
scheduled principal payments in an
amount not to exceed $25,000 to
▇▇▇▇▇ ▇▇▇▇▇▇ on his $3,275,108 note
(principal balance as at 01/01/99);
provided, however, that (except as
provided in the following
paragraph) the principal balance
outstanding on such note shall at
no time fall below $2,975,000, and
provided lastly, in addition to the
above principal payments, so long
as (i)no Event of Default has
occurred and is continuing under
the terms of this Agreement, (ii)
subject to the above set forth
availability test, Borrower may
further repay the principal balance
of the debt owing to the
Subordinated Creditors or to
parties who have replaced the
Subordinated Creditors, in an
amount (exclusive of the specific
payments to ▇▇▇▇ ▇▇▇▇▇▇▇▇ discussed
above) not to exceed 25% of
Borrower's quarterly "Net Earnings"
(defined as net income after tax
net of extraordinary gains,
measured on a cumulative basis for
Borrower's current fiscal year, and
based on quarterly reviewed
financial statements) (the "SubDebt
Net Earnings Payments").
Additionally, so long as no Event
of Default has occurred and is
continuing under the terms
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COAST BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
of the Agreement, Borrower may pay
from quarterly Net Earnings,
dividend or distribution payments
on ownership interests of Borrower
(which include, without limitation,
the scheduled settlement payments
for the $1,000,000 obligation
listed in Section 6.10 of the
Schedule), as provided for in
Section 8.5(j)(i) of the Agreement,
in an amount up to 50% of
Borrower's quarterly Net Earnings
less any SubDebt Net Earnings
Payments.
Nothing in this Agreement shall be
interpreted to restrict the
Borrower's right to fully or
partially re-finance the
obligations owing to the
Subordinated Creditors with the
proceeds of further subordinated
debt evidenced by loan
documentation and subordination
agreements satisfactory to Coast.
["Debt" means, as of the date of
determination, the sum, but without
duplication, of any and all of the
Borrower's: (i) indebtedness
heretofore or hereafter created,
issued, incurred or assumed by such
Borrower (directly or indirectly)
for or in respect of money
borrowed; (ii) obligations for the
deferred purchase price of property
or services.]
SECTION 8.2 - INSURANCE: Subject to the limitations set
forth in Section 8.2 of the
Agreement, Coast shall release to
Borrower insurance proceeds with
respect to Equipment totaling less
than Fifty Thousand Dollars
($50,000).
SECTION 8.3 - REPORTING: Borrower shall provide Coast with
the following:
1. Monthly Receivable agings,
aged by invoice date, within
ten (10) days after the end
of each month.
2. Monthly accounts payable
agings, aged by invoice
date, and outstanding or
held check registers within
ten (10) days after the end
of each month.
3. Monthly internally prepared
financial statements, as
soon as available, and in
any event within thirty (30)
days after the end of each
month.
4. Quarterly reviewed financial
statements, as soon as
available, and in any event
within forty-five (45) days
after the end of each fiscal
quarter of Borrower.
5. Quarterly customer lists,
including customer name,
address, and phone number.
6. Annual financial statements,
as soon as available, and in
any event within ninety (90)
days following the end of
Borrower's fiscal year,
containing the unqualified
opinion of, and certified
by, an independent certified
public accountant acceptable
to Coast.
SECTION 8.5(b) - NEGATIVE COVENANTS
(ACQUIRED ASSETS) Fifty Thousand Dollars ($50,000)
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================================================================================
SECTION 9 - TERM
SECTION 9.1 - MATURITY DATE: The last Business Day of the month
three (3) years from the Closing
Date, subject to automatic renewal
as provided in Section 9.1 of the
Agreement, and early termination as
provided in Section 9.2 of the
Agreement.
29