[FOOTHILL LOGO]
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
COMMUNICATION TELESYSTEMS INTERNATIONAL DBA
WORLDxCHANGE COMMUNICATIONS
WXL COMMUNICATIONS, LTD.
CTS TELCOM, INC.
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF MARCH 11, 1997
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . .1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 28
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . 28
1.5 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . 29
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . 29
2.1 Revolving Advances . . . . . . . . . . . . . . . . . . . . . 29
2.2 Overadvances . . . . . . . . . . . . . . . . . . . . . . . . 30
2.3 Interest: Rates, Payments, and Calculations . . . . . . . . 30
2.4 Collection of Accounts. . . . . . . . . . . . . . . . . . . 32
2.5 Crediting Payments; Application of Collections . . . . . . . 32
2.6 Borrower's Designated Account . . . . . . . . . . . . . . . 33
2.7 Maintenance of Loan Account; Statements of Obligations . . . 33
2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . 35
3.1 Conditions Precedent to the Initial Advance . . . . . . . . 35
3.2 Conditions Precedent to all Advances . . . . . . . . . . . . 38
3.3 Condition Subsequent . . . . . . . . . . . . . . . . . . . . 38
3.4 Term and Termination . . . . . . . . . . . . . . . . . . . . 39
3.5 Effect of Termination . . . . . . . . . . . . . . . . . . . 39
3.6 Early Termination by Borrower . . . . . . . . . . . . . . . 40
3.7 Termination Upon Event of Default . . . . . . . . . . . . . 40
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . 40
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . 40
4.2 Negotiable Collateral . . . . . . . . . . . . . . . . . . . 41
4.3 Collection of Accounts, General Intangibles, and
Negotiable Collateral. . . . . . . . . . . . . . . . . . . . 41
4.4 Delivery of Additional Documentation Required . . . . . . . 41
4.5 Power of Attorney . . . . . . . . . . . . . . . . . . . . . 42
4.6 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . 42
5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 43
5.1 No Prior Encumbrances . . . . . . . . . . . . . . . . . . . 43
5.2 Eligible Accounts . . . . . . . . . . . . . . . . . . . . . 43
5.3 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.4 Location of Inventory and Equipment . . . . . . . . . . . . 44
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5.5 Inventory Records . . . . . . . . . . . . . . . . . . . . . 44
5.6 Location of Chief Executive Office; FEIN or Equivalent . . . 44
5.7 Due Organization and Qualification; No Subsidiaries
Except as Disclosed . . . . . . . . . . . . . . . . . . . . 44
5.8 Due Authorization; No Conflict . . . . . . . . . . . . . . . 44
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10 No Material Adverse Change . . . . . . . . . . . . . . . . . 44
5.11 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.12 Employee Benefits . . . . . . . . . . . . . . . . . . . . . 45
5.13 Environmental Condition . . . . . . . . . . . . . . . . . . 45
5.14 Reliance by Foothill; Cumulative . . . . . . . . . . . . . . 45
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 46
6.1 Accounting System . . . . . . . . . . . . . . . . . . . . . 46
6.2 Collateral Reporting . . . . . . . . . . . . . . . . . . . . 46
6.3 Financial Statements, Reports, Certificates . . . . . . . . 47
6.4 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . 49
6.5 Guarantor Reports . . . . . . . . . . . . . . . . . . . . . 49
6.6 Returns . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.7 Title to Equipment . . . . . . . . . . . . . . . . . . . . . 49
6.8 Maintenance of Equipment . . . . . . . . . . . . . . . . . . 50
6.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.11 Financial Covenant . . . . . . . . . . . . . . . . . . . . . 51
6.12 No Setoffs or Counterclaims . . . . . . . . . . . . . . . . 51
6.13 Location of Inventory and Equipment . . . . . . . . . . . . 51
6.14 Compliance with Laws . . . . . . . . . . . . . . . . . . . . 51
6.15 Employee Benefits . . . . . . . . . . . . . . . . . . . . . 51
6.16 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.17 Performance of Obligations to Carriers . . . . . . . . . . . 52
6.18 LEC and Carrier Agreements . . . . . . . . . . . . . . . . . 53
6.19 Brokerage Indemnity . . . . . . . . . . . . . . . . . . . . 53
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 53
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 53
7.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.3 Restrictions on Fundamental Changes . . . . . . . . . . . . 55
7.4 Extraordinary Transactions and Disposal of Assets . . . . . 55
7.5 Change Name . . . . . . . . . . . . . . . . . . . . . . . . 55
7.6 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.7 Restructure . . . . . . . . . . . . . . . . . . . . . . . . 56
7.8 Prepayments; Subordinated Indebtedness; Modifications . . . 56
7.9 Change of Control . . . . . . . . . . . . . . . . . . . . . 57
7.10 Capital Expenditures . . . . . . . . . . . . . . . . . . . . 57
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7.11 Consignments . . . . . . . . . . . . . . . . . . . . . . . . 57
7.12 Distributions . . . . . . . . . . . . . . . . . . . . . . . 57
7.13 Accounting Methods . . . . . . . . . . . . . . . . . . . . . 57
7.14 Investments. . . . . . . . . . . . . . . . . . . . . . . . . 57
7.15 Transactions with Affiliates . . . . . . . . . . . . . . . . 58
7.16 Suspension . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.17 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 58
7.18 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 59
7.19 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees . . . . . . . . . . . . . . . . . . . 59
7.20 No Prohibited Transactions Under ERISA . . . . . . . . . . . 59
7.21 Contracts with Carriers or LECs . . . . . . . . . . . . . . 60
7.22 Certain Limitations on Investments in CTST and Advances
to CTST. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 60
9. FOOTHILL'S RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . 64
9.1 Rights and Remedies . . . . . . . . . . . . . . . . . . . . 64
9.2 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . 66
10. TAXES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 66
11. WAIVERS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 67
11.1 Demand; Protest; etc . . . . . . . . . . . . . . . . . . . . 67
11.2 Foothill's Liability for Collateral . . . . . . . . . . . . 67
11.3 Indemnification . . . . . . . . . . . . . . . . . . . . . . 68
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER . . . . . . . . . . . . 70
14. DESTRUCTION OF BORROWER'S DOCUMENTS . . . . . . . . . . . . . . . . 70
15. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 71
15.1 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . 71
15.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . 71
15.3 Section Headings . . . . . . . . . . . . . . . . . . . . . . 71
15.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 71
15.5 Severability of Provisions . . . . . . . . . . . . . . . . . 71
15.6 Amendments in Writing . . . . . . . . . . . . . . . . . . . 71
15.7 Counterparts; Telefacsimile Execution . . . . . . . . . . . 71
15.8 Revival and Reinstatement of Obligations . . . . . . . . . . 72
15.9 Integration . . . . . . . . . . . . . . . . . . . . . . . . 72
15.10 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 72
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SCHEDULES AND EXHIBITS
Schedule E-1 20% Account Debtors
Schedule P-1 Permitted Liens
Schedule P-2 Permitted Subsidiary Investments
Schedule R-1 Real Property
Schedule 5.7 Subsidiaries
Schedule 5.9 Litigation
Schedule 6.13 Location of Inventory and Equipment
Schedule 6.17 Certain Matters Regarding Carrier Agreements
Schedule 7.1 Scheduled Indebtedness
Exhibit B-1 Borrower's 1997 Business Plan
Exhibit C-1 Forms of Canadian Security Agreements
Exhibit C-2 Form of Compliance Certificate
Exhibit G-1 Form of Limited Continuing Guaranty
Exhibit P-1 Forms of Pledge Agreements
Exhibit S-1 Form of Suretyship Agreement
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Schedule E-1
20% Account Debtors
WorldCom, Incorporated
TeleGlobe and its Affiliates, collectively
AT&T Corporation, and its subsidiaries
MCI, and its subsidiaries
Sprint, and its subsidiaries
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), is entered into
as of March 11, 1997, between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
COMMUNICATION TELESYSTEMS INTERNATIONAL, dba WORLDxCHANGE Communications, a
California corporation ("WXCC"), with its chief executive office located at
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, WXL
COMMUNICATIONS, LTD., a Canadian corporation ("WXLC"), with its chief
executive office located at ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and CTS TELCOM, INC., a Florida corporation ("CTST"), with
its chief executive office located at ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"ACCOUNT DEBTOR" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account. With respect to
any LEC Account, "Account Debtor" refers to the LEC obligated with respect
thereto rather than the end-user, unless the context in which such term is used
clearly requires otherwise.
"ACCOUNTS" means all currently existing and hereafter arising
accounts; contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the sale or lease of General
Intangibles relating to the provision of telecommunications services, or the
rendition of services by Borrower, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security therefor.
"ADVANCES" shall have the meaning ascribed thereto in SECTION
2.1 (a) hereof.
"AFFILIATE" means, as applied to any Person, any other Person who
directly or indirectly controls, is controlled by, is under common control with
or is a director or officer of such Person. For purposes of this definition,
"control" means the possession, directly or indirectly, of the power to vote
five percent (5%) or more of the securities having ordinary voting power for
the election of directors or the direct or indirect power to direct the
management and policies of a Person.
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"AGREEMENT" has the meaning set forth in the preamble hereto.
"APPLICABLE AMOUNT" means, as of any date of determination
thereof, the lesser of (a) the Reducing Amount, and (b) the outstanding balance
of the Loan Account.
"APPLICABLE MARGIN" means, as of any date of determination
thereof, (i) if such date of determination is prior to the occurrence of the
Reduction Date, two and three-quarters percentage points (2.75%) per annum, (ii)
if such date of determination is on or after the Reduction Date and is prior to
the date that is one year after the Closing Date, two and one-quarter percentage
points (2.25%) per annum, and (iii) if such date of determination is on or after
the Reduction Date and is on or after the date that is one year after the
Closing Date, one and three-quarters percentage points (1.75%) per annum.
"APPLICABLE PERCENTAGE" means (a) from and after the Closing Date
and through and including the first anniversary of the Closing Date, (i) if and
only if the termination of this Agreement and repayment of the Obligations is
occurring contemporaneously with, or within 180 days after, the consummation of
a public or private equity offering in excess of $20,000,000 by Borrower, or a
sale of substantially all of the assets of Borrower (including a sale effected
by one or more mergers or any pooling merger), and as a direct result of either
thereof, under circumstances where the thirty-day prior notice requirement of
SECTION 3.6 has been complied with, two percent (2.00%), or (ii) otherwise, four
percent (4.00%), and (b) thereafter, (i) if and only if the termination of this
Agreement and repayment of the Obligations is occurring contemporaneously with,
or within 180 days after, the consummation of a public or private equity
offering in excess of $20,000,000 by Borrower, or a sale of substantially all of
the assets of Borrower (including a sale effected by one or more mergers or any
pooling merger), and as a direct result of either thereof, under circumstances
where the thirty-day prior notice requirement of SECTION 3.6 has been complied
with, one percent (1.00%), or (ii) otherwise, two percent (2.00%).
"APPLICABLE PREMIUM RATE" means, as of any date of determination
thereof: (a) if the Special Bridge Advance Component Termination Date has not
yet occurred: (i) if such date of determination is prior to the occurrence of
the Reduction Date, four percentage points (4.00%) per annum, (ii) if such date
of determination is on or after the Reduction Date and is prior to the date that
is one year after the Closing Date, three and one-half percentage points (3.50%)
per annum, and (iii) if such date of determination is on or after the Reduction
Date and is on or after the date that is one year after the Closing Date, three
percentage points (3.00%) per annum; and (b) if the Special Bridge Advance
Component Termination Date has occurred, zero percentage points (0.00%) per
annum.
"APPROVED BILLING SERVICES AGREEMENT" means a Billing Services
Agreement a true and complete copy of which previously has been provided to
Foothill and Foothill's counsel for review, that is in form and substance
reasonably satisfactory to Foothill, with
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respect to which the LEC has delivered a LEC Non-Offset Agreement, and with
respect to which the rights of Borrower thereunder may be the subject of an
attached, enforceable, and perfected security interest in favor of Foothill.
"AUTHORIZED OFFICER" means any officer or other employee of
Borrower.
"AVAILABILITY" means, as of any date of determination thereof,
the non negative amount equal to (a) the LESSER of the Borrowing Base and the
Maximum Amount, minus (b) the outstanding balance of the Loan Account.
"AVAILABILITY CONTRACTION DATE" means any date as of which: (a) As
a result of one or more Availability Reductions (considered in the aggregate),
Availability on such date is less than or equal to 90% of what Availability
would have been on such date if such Availability Reductions had not occurred,
all other things being equal; and (b) Borrower has given written notice to
Foothill that Borrower has determined that the circumstance described in clause
(a) of this definition has occurred; PROVIDED that Borrower shall not be
entitled to give such a notice and such a notice shall be ineffective if the
most recent Availability Reduction upon which such notice is premised, in whole
or in part, occurred more than sixty (60) days prior to the date such notice is
given.
"AVAILABILITY REDUCTION" means any action by Foothill, not
consented to by Borrower, to change the standards or criteria for determining
Eligible Accounts or Eligible Unbilled Accounts, or exclusions therefrom, create
additional categories of Accounts that are not Eligible Accounts or Eligible
Unbilled Accounts, reduce rates of advance against Eligible Accounts, Eligible
Unbilled Accounts, or categories or subportions thereof (other than as expressly
provided for herein with respect to the LEC Account Dilution Reserve or the
Direct Account Dilution Reserve), create new reserves (except as set forth below
with respect to SECTION 8 of this Agreement), or change the manner by which
existing reserves are determined (except as set forth below with respect to
SECTION 8 Of this Agreement), to the extent that such action, considered alone
or in conjunction with other such actions (and offsetting the effect of any
concurrent mitigating actions by Foothill to the extent they would effectively
negate or reduce the effect of such action), would have the net effect of
reducing Availability on any date of determination from what it otherwise would
have been on such date of determination, had such action or related actions not
occurred, all other things being equal. Changes in the LEC Account Dilution
Reserve made in accordance with the terms of this Agreement based on increased
LEC Account Dilution shall not constitute Availability Reductions. Changes in
the Direct Account Dilution Reserve made in accordance with the terms of this
Agreement based on increased Direct Account Dilution shall not constitute
Availability Reductions. Reserves maintained by Foothill pursuant to any
provision of SECTION 8 that expressly permits Foothill to maintain reserves with
respect to items that would give rise to Events of Default absent the
maintenance of such reserves shall not constitute Availability Reductions.
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"AVERAGE UNUSED PORTION OF FACILITY" means, as of the first day
of any month: (a) If such day occurs on or prior to December 1, 1997, the
non-negative amount equal to (y) $20,000,000, MINUS (z) the average Daily
Balance of Advances that were outstanding during the immediately preceding
month; and (b) if such day occurs after December 1, 1997, the non-negative
amount equal to (y) the then Maximum Amount (giving effect to any increases
thereof elected by Borrower, if any, that have become effective before, or
that become effective on, such day), MINUS (z) the average Daily Balance of
Advances that were outstanding during the immediately preceding month;
PROVIDED, that, with respect to any day that is the first day of a month and
which day occurs after December 1, 1997, if the Maximum Amount changed during
the immediately preceding month effective on any day or days other than the
first day of such preceding month, then the calculation of the Average Unused
Portion of Facility as of such first day of the succeeding month with respect
to such immediately preceding month shall be performed on a weighted basis
giving effect to all such changes that occurred during the immediately
preceding month (for example, by way of illustration and not by way of
limitation, if the Maximum Amount were to be increased effective on April 11,
1998, from $25,000,000 to $30,000,000, then the calculation of the Average
Unused Portion of Facility for April, 1998, would be 10/30 of the amount that
would be calculated under clause (b) above using $25,000,000 as the Maximum
Amount (except that the average Daily Balance of Advances for purposes of
such calculation would be for the first ten days of November rather than for
the entire month), PLUS 20/30 of the amount that would be calculated under
clause (b) above using $30,000,000 as the Maximum Amount (except that the
average Daily Balance of Advances for purposes of such calculation would be
for the last twenty days of November rather than for the entire month).
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S. C. Section 101 ET SEQ.), as amended, and any successor statute.
"BASE PERMITTED CAPITAL EXPENDITURE AMOUNT" means (a) with respect
to fiscal year 1997 of Borrower, $12,000,000, and (b) with respect to any fiscal
year of Borrower after fiscal year 1997, 120% of the Base Permitted Capital
Expenditure Amount for the immediately preceding fiscal year of Borrower.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which any Borrower or any ERISA Affiliate thereof
has been an "employer" (as defined in Section 3(5) of ERISA) within the past six
years.
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"BILLING AND COLLECTION CHARGES RESERVE" means, as of any date of
determination thereof, which determinations shall not be made more frequently
than weekly without the consent of Borrower unless an Event of Default has
occurred and is continuing, the greater of;
(a) the actual aggregate outstanding accrued and unpaid
obligations of Borrower to LECs, on such date of determination, with respect to
billing and collection charges payable under Billing Services Agreements for
those LEC's which ▇▇▇▇ such charges separately to Borrower (as opposed to being
offset directly on a LEC Confirmation Statement), and
(b) the average of the actual aggregate outstanding accrued and
unpaid obligations of Borrower to LECs, as of each week-ending date that
occurred during the related Lookback Period with respect to which a weekly
report was, is , or will be due to Foothill pursuant to SECTION 6.2(a)(vii) of
this Agreement, with respect to billing and collection charges payable under
Billing Services Agreements, for those LEC's which ▇▇▇▇ such charges separately
to Borrower (as opposed to being offset directly on a LEC Confirmation
Statement),
PROVIDED, HOWEVER, that upon the delivery of Borrower's audited fiscal year 1997
financial statement pursuant to SECTION 6.3, Foothill shall, not more than 30
days after receipt of such financial statement, reasonably determine if
Borrower's actual financial performance, as measured on the basis of Borrower's
audited fiscal year 1997 financial statement, has met or exceeded Borrower's
1997 Business Plan provided to Foothill under this Agreement, and in the event
that Borrower's actual financial performance has met or exceeded Borrower's 1997
Business Plan, then each subsequent determination of the Billing and Collection
Charges Reserve shall be made on the basis of subparagraph (a) alone.
"BILLING SERVICES AGREEMENT" means a billing services agreement or
similar agreement that has been entered into and is in full force and effect
between Borrower and a LEC.
"BORROWER" means WXCC, WXLC, and CTST, and each of them, and any
one or more of them, collectively and individually, and jointly and severally.
"BORROWER'S BOOKS" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"BORROWER'S DESIGNATED ACCOUNT" means account number ▇▇▇▇▇▇▇▇▇▇ of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit
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account (located within the United States) of Borrower designated, in writing
and from time to time, by Borrower to Foothill prior to the date of the
establishment of such other deposit account.
"BORROWER'S DESIGNATED ACCOUNT BANK" means Union Bank of
California, whose office is located at ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and whose ABA routing number is ▇▇▇▇▇▇▇▇▇, or such other bank
designated by Borrower and approved by Foothill with such approval not to be
unreasonably delayed or withheld.
"BORROWER'S 1997 BUSINESS PLAN" means the written business plan
for Borrower with respect to Borrower's fiscal year 1997 that is attached hereto
as EXHIBIT B-1.
"BORROWING BASE" has the meaning set forth in SECTION 2.1(a)
hereof.
"BUSINESS DAY" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"CANADIAN LOCKBOX ACCOUNT" means any deposit account in Canada
into which Canadian Collections are deposited or that is established pursuant to
the terms of any Canadian Lockbox Agreement.
"CANADIAN LOCKBOX AGREEMENT" means any Lockbox Agreement that
relates to the collection of Accounts in Canada.
"CANADIAN MARITIME PROVINCES" means ▇▇▇▇▇▇ ▇▇▇▇▇▇ Island, New
Brunswick, Newfoundland, and Nova Scotia.
"CANADIAN SECURITY AGREEMENTS" means agreements in the forms
attached as EXHIBIT C-1, dated as of even date with this Agreement, executed and
delivered by WXLC to and for the benefit of Foothill.
"CARRIER" means any provider of long distance telecommunications
access or network services with whom Borrower from time to time does business,
such as (without limitation) WilTel, Mercury Communications, Pacific Gateway, Hi
Rim Communications, Unitel, and Pacific ▇▇▇▇.
"CARRIER AGREEMENT" means each contract or agreement in effect
between Borrower and a Carrier.
"CARRYOVER AMOUNT" means, with respect to any fiscal year of
Borrower, commencing with Borrower's fiscal year 1998, the non-negative amount,
if any, equal to the difference obtained by subtracting (x) the amount equal to
the actual total capital expenditures of Borrower during such prior fiscal year
of Borrower from (y) the sum of
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the Base Permitted Capital Expenditure Amount with respect to the prior fiscal
year of Borrower as added to the Net Equity Supplemental Amount with respect to
the prior fiscal year of Borrower.
"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) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 25% of the total voting power of all classes of stock
then outstanding of Borrower entitled to vote in the election of directors.
"CLOSING DATE" means the date of the making of the initial
Advance hereunder.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) the Real Property, if any,
(h) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of
Foothill, and
(i) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance
covering any or all of the Collateral, and any and all
Accounts, Borrower's Books, Equipment, General Intangibles,
Inventory, Negotiable Collateral, Real Property, money,
deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof
or interest therein, and the proceeds thereof.
PROVIDED that the Collateral shall not include any Excluded Property.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver or consent,
mortgagee waiver or consent, Equipment lessor or Equipment secured financer
waiver or consent, bailee letter, or a similar acknowledgement agreement of any
warehouseman, processor, or other Person in possession of Collateral consisting
of goods, or of lessors or secured financers of Equipment to Borrower, in each
case, if and as requested by Foothill,
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"DIRECT ACCOUNT DILUTION" means, in each case based upon the
experience of the immediately prior 6 months, the result of dividing the Dollar
amount of (a) bad debt write-downs, post-billing adjustments, credits, or other
dilutive items with respect to the Direct Accounts (but expressly excluding
Contra Accounts), by (b) Borrower's Collections with respect to Direct Accounts
plus the Dollar amount of clause (a).
"DIRECT ACCOUNT DILUTION RESERVE" means, as of any date of
determination by Foothill, which determinations shall not be made more
frequently than monthly without the consent of Borrower unless an Event of
Default has occurred and is continuing, an amount sufficient to reduce
Foothill's advance rate against Direct Accounts by one percentage point for each
percentage point by which Direct Account Dilution is in excess of ten percent
(10%).
"DIRECT ACCOUNT SUBLINE LIMIT" means, as of any date of
determination thereof, 50% of the Maximum Amount in effect on such date.
"DISBURSEMENT LETTER" means an instructional letter executed and
delivered by Borrower to Foothill regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be satisfactory to
Foothill.
"DOLLARS OR $" means United States dollars.
"EARLY TERMINATION PREMIUM" has the meaning set forth in SECTION
3.6.
"ELIGIBLE ACCOUNTS" means those Accounts created by Borrower in
the ordinary course of business, that arise out of Borrower's sale of goods,
sale of General Intangibles relating to the provision of telecommunication
services, or rendition of services, that strictly comply with each and all of
the representations and warranties respecting Accounts made by Borrower to
Foothill in the Loan Documents, and that are and at all times continue to be
acceptable to Foothill in Foothill's reasonable credit judgment, based upon
standards of eligibility currently existing, or from time to time fixed or
revised as set forth below; PROVIDED, HOWEVER, that standards of eligibility may
be fixed and revised from time to time by Foothill in Foothill's reasonable
credit judgment. Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay
(i) in the case of LEC Accounts, within ninety (90) days of invoice date (which,
for purposes of this Agreement, with respect to any LEC Account, means the date
of receipt by Borrower from the applicable LEC of a LEC Confirmation Statement
with respect to such LEC Account), or (ii) in the case of Direct Accounts,
within ninety (90) days of invoice date; but, in each case, only to the extent
of such unpaid amounts;
(b) Accounts owed by an Account Debtor or its Affiliate
where fifty
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percent (50%) or more of all Accounts owed to Borrower from that Account Debtor
(or its Affiliates) have not been paid within ninety (90) days of invoice date;
(c) Accounts with respect to which the Account Debtor is
an employee, Affiliate, or agent of Borrower; PROVIDED, however, that Direct
Accounts owed by employees or agents of Borrower shall be ineligible only to the
extent that, in the case of any single employee or agent, such Direct Accounts
in the aggregate with respect to such single employee or agent have a balance
due of $5,000 or more;
(d) Accounts 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) Accounts that are not payable in Dollars or Canadian
Dollars or with respect to which the Account Debtor: (i) does not maintain its
chief executive office in the United States or Canada (excluding the Canadian
Maritime Provinces), or (ii) is not organized under the laws of the United
States or any State thereof, or the laws of Canada or any Province thereof
(excluding the Canadian Maritime Provinces), 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, unless (x) the Account is
approved in writing by Foothill in Foothill's sole and absolute discretion, (y)
the Account is supported by an irrevocable letter of credit satisfactory to
Foothill (as to form, substance, and issuer) and assigned and delivered to and
directly drawable by Foothill, or (z) the Account is covered by credit insurance
in form and amount, and by an insurer, satisfactory to Foothill;
(f) Accounts 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 Foothill, with the Assignment of
Claims Act, 31 U.S.C. Section 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) Accounts to the extent that the Account Debtor has
disputed its liability or made any claim with respect to the Account or any
other Account that has not been resolved, but only to the extent of the amount
disputed or claimed by the Account Debtor and only with respect to a written
dispute or claim that remains unresolved after the passage of ten (10) Business
Days after Borrower's receipt of such dispute or claim;
(h) Direct Accounts with respect to an Account Debtor
whose total obligations owing to Borrower with respect to Direct Accounts exceed
fifteen percent
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(15%) of all Eligible Direct Accounts (or twenty percent (20%) in the case of
those Account Debtors identified on SCHEDULE E-1 hereto), to the extent of the
obligations owing by such Account Debtor in excess of such percentage;
(i) Accounts with respect to which Borrower received
from the Account Debtor, and is accountable for, a customer deposit, but only to
the extent of such customer deposit;
(j) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(k) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition or otherwise, and with respect to which Foothill
reasonably has endeavored to provide written or telephonic notice of such
determination to Borrower;
(l) Accounts with respect to which any goods giving rise
to such Account have not been shipped and delivered to and accepted by the
Account Debtor, any General Intangibles relating to the provision of
telecommunications services giving rise to such Account have not been provided
to and accepted, consumed, or utilized by the Account Debtor, any services
giving rise to such Account have not been performed and accepted, consumed, or
utilized by the Account Debtor, or the Account otherwise does not represent a
final sale, except for Eligible Private Line Accounts;
(m) Accounts 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;
(n) LEC Accounts submitted for billing and collection to
a LEC with respect to which there does not exist an Approved Billing Services
Agreement;
(o) LEC Accounts (i) that are not covered by a LEC
Confirmation Statement received by Borrower from the applicable LEC, or (ii)
that are covered by a LEC Confirmation Statement received by Borrower from the
applicable LEC to the extent of (without duplication) reductions of or offsets
against amounts otherwise payable with respect thereto by reason of up-front LEC
rejects or credits deducted in arriving at net confirmed revenues on such LEC
Confirmation Statement;
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(p) Direct Accounts that have not yet been billed to the
Account Debtor (PROVIDED that such Accounts may qualify as Eligible Unbilled
Direct Accounts if they otherwise meet the criteria applicable thereto);
(q) ZPDI Accounts;
(r) Accounts to the extent that they represent
obligations with respect to advance ▇▇▇▇▇▇▇▇ that are due prior to the
completion of performance by Borrower with respect to the subject contract or
transaction that gives rise to such Accounts, except for Eligible Private Line
Accounts;
(s) [intentionally omitted];
(t) Accounts that have been transferred to Borrower's
legal or collection department, if service has been disconnected with respect to
the Account Debtor or collection litigation has been instituted by Borrower
against the Account Debtor; and
(u) Direct Accounts with respect to which there exist
Contra Accounts, to the extent of the balance of such Contra Accounts.
Except as otherwise expressly provided herein, Eligible Accounts and exclusions
therefrom shall be determined on a weekly basis, or more frequently if and as
agreed by the parties, and interim changes between dates of determination shall
be disregarded.
"ELIGIBLE DIRECT ACCOUNT" means, as of any date of determination,
an Eligible Account that is a Direct Account.
"ELIGIBLE LEC ACCOUNT" means, as of any date of determination, an
Eligible Account that is a LEC Account. The amount of any Eligible LEC Account
shall be presumed to be the amount thereof projected to be received by Borrower
on the related LEC Confirmation Statement, unless Foothill in its reasonable
discretion determines the amount thereof to be a different amount.
"ELIGIBLE PRIVATE LINE ACCOUNTS" means, as of any date of
Determination, private line Accounts in an amount not to exceed $200,000 (net of
Contra Accounts) in the aggregate at any one time outstanding, PROVIDED,
HOWEVER, that upon the delivery of Borrower's monthly financial statements for
the month ending September 30, 1997 pursuant to SECTION 6.3, Foothill shall, not
more than 30 days after receipt of such financial statement, reasonably
determine if Borrower's actual financial performance, as measured on the basis
of Borrower's cumulative monthly financial statements from the Closing date
through the month ending September 30, 1997, has met or exceeded Borrower's 1997
Business Plan provided to Foothill under this agreement, and in the event that
Borrower's actual financial performance has met or exceeded Borrower's 1997
Business Plan, then the
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maximum amount of Eligible Private Line Accounts shall be increased to $500,000
(net of Contra Accounts).
"ELIGIBLE UNBILLED DIRECT ACCOUNT" means, as of any date of
determination, a Direct Account that (a) resulted from a transaction that
occurred prior to the date of determination and with respect to which Borrower
has an existing call transaction record in proper format that is capable of
being billed by Borrower to its customer in accordance with Borrower's usual
billing methods for Direct Accounts but that has not yet been billed and
invoiced to such customer, (b) does not relate to a transaction that occurred
more than forty-five (45) days prior to the date of determination, and (c) in
all other respects would qualify as an Eligible Direct Account but for the fact
that it has not yet been billed and invoiced to Borrower's customer. Eligible
Unbilled Direct Accounts shall be net of the balance of any Contra Accounts. If
an Account that was an Eligible Unbilled Direct Account, immediately prior to
being billed and invoiced, then is billed and invoiced, it thereupon shall cease
to be an Eligible Unbilled Direct Account, and it shall become an Eligible
Direct Account if it then meets the criteria applicable thereto.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located, including
(a) any interest of Borrower in any of the foregoing, and (b) all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.
"ERISA" the Employee Retirement Income Security Act of 1974, 29
U.S.C. Sections 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA AFFILIATE" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA EVENT" means with respect to any Borrower, (a) a Reportable
Event with respect to any Benefit Plan or Multiemployer Plan, (b) the withdrawal
of such Borrower or any ERISA Affiliate thereof from a Benefit Plan during a
plan year in which it was a "substantial employer" (as defined in Section
4001(a)(2) of ERISA), (c) the
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providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal, within the meaning of Sections 4203 and 4205 of
ERISA, of any Borrower or ERISA Affiliate thereof, from a Multiemployer Plan, or
(g) providing any security to any Benefit Plan under Section 401(a)(29) of the
IRC by any Borrower or any ERISA Affiliate thereof.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCLUDED PROPERTY" means, with respect to any contract or lease
existing on the Closing Date between Borrower, on the one hand, as lessee,
purchaser, or licensee, and any Designated Financier, on the other hand, as
lessor, seller, or licensor, which contract or lease pertains to the sale,
lease, or license by the Designated Financier to Borrower of personal property,
(a) Borrower's rights under or with respect to such contract or lease, and (b)
Borrower's rights or interests in or with respect to the personal property that
is the subject thereof, in each case to the extent, and only to the extent, that
the grant of a security interest therein by Borrower to Foothill would give rise
to a breach by Borrower of the terms or provisions of such contract or lease
that, in accordance with applicable law, would permit the applicable Designated
Financier to enforce any default right or remedy provided for in such contract
or lease or available pursuant to applicable law.
"EXISTING LENDER" means Reservoir Capital Corporation.
"FEIN" means Federal Employer Identification Number.
"FOOTHILL" has the meaning set forth in the preamble to this
Agreement.
"FOOTHILL ACCOUNT" has the meaning set forth in SECTION 2.7.
"FOOTHILL EXPENSES" means all: costs or expenses (including taxes,
and insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or incurred by Foothill; reasonable out-of-pocket fees
or charges paid or incurred by Foothill in connection with Foothill's
transactions with Borrower, including, fees or charges for photocopying,
notarization, telecommunication, public record searches (including tax lien,
litigation, and ucc searches), filing, recording, publication, post-Event of
Default appraisals to the extent provided for herein, and environmental audits;
actual out-of-pocket costs and expenses incurred by Foothill in the disbursement
of funds to Borrower (by wire transfer or otherwise); actual out-of-pocket
charges paid or incurred by Foothill resulting from the dishonor of checks;
reasonable out-of-pocket costs and expenses
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paid or incurred by Foothill to correct any default or enforce any provision of
the Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Personal Property Collateral or any Real Property, or any portion
thereof, irrespective of whether a sale is consummated; reasonable costs and
expenses paid or incurred by Foothill in examining Borrower's Books; reasonable
out-of-pocket costs and expenses of third party claims or any other suit paid or
incurred by Foothill in enforcing or defending the Loan Documents or in
connection with the transactions contemplated by the Loan Documents or
Foothill's relationship with Borrower; and Foothill's reasonable out-of-pocket
attorneys fees and expenses incurred in advising, structuring, drafting,
reviewing, administering, amending, terminating, enforcing (including reasonable
out-of-pocket attorneys fees and expenses incurred in connection with a
"workout," a "restructuring," or an Insolvency Proceeding concerning Borrower or
any guarantor of the Obligations), defending, or concerning the Loan Documents,
irrespective of whether suit is brought. The foregoing provisions of this
definition notwithstanding, "Foothill Expenses" shall not include any amounts
that otherwise would be included within such definition that a court of
competent jurisdiction finally determines to have been incurred, paid, or
expended as the proximate result of the gross negligence or willful misconduct
of Foothill.
"FOREIGN ADVANCE CAP" means, as of any date of determination
thereof, which determination shall be made monthly, $2,000,000, plus, in the
case of profits, and minus, in the case of losses, 50% of the cumulative pre-tax
net profits or losses of Borrower's domestic operations (including the United
States and each State thereof, and Canada and each Province thereof (excluding
the Canadian Maritime Provinces)), for the period commencing on the Closing Date
and continuing through the last day of the fiscal month of Borrower most
recently ended. In addition, the Foreign Advance Cap shall be increased by 50%
of any net cash proceeds received by Borrower from any public or private equity
offerings, effective upon receipt thereof.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrower's present and future
general intangibles and other personal property (including contract rights,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, literature, reports, catalogs,
deposit accounts, insurance premium rebates, tax refunds, and tax refund
claims), other than goods, Accounts, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means the certificates or articles of
incorporation,
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by-laws, or other organizational or governing documents of any Person.
"GROSS DOMESTIC ACCOUNTS" means, as of any date of determination
thereof, all Accounts of Borrower carried on Borrower's Books in accordance with
GAAP that arise out of transactions in the United States or any State thereof,
or Canada or any Province thereof (excluding the Canadian Maritime Provinces).
"GUARANTEES" means the limited continuing personal guarantees of
the Obligations given by the Principals to Foothill, substantially in the form
attached hereto as EXHIBIT G-1.
"HAZARDOUS MATERIALS" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty (50) parts per million.
"INDEBTEDNESS" means: (a) all obligations of Borrower for borrowed
money, (b) all obligations of Borrower evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of Borrower
in respect of letters of credit, bankers acceptances, interest rate swaps, or
other financial products, (c) all obligations of Borrower under capital leases
(excluding any portion thereof allocated to interest or finance charges in
accordance with GAAP), (d) all obligations or liabilities of others secured by a
lien or security interest on any property or asset of Borrower, irrespective of
whether such obligation or liability is assumed, and (e) any obligation of
Borrower guaranteeing or intended to guarantee (whether guaranteed, endorsed,
co-made, discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors,
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"INSIDER" shall have the meaning ascribed to such term in Section
101 of the Bankruptcy Code, or any comparable successor provision.
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"INTANGIBLE ASSETS" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"INVENTORY" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title
"INVESTMENT" means any transaction within the scope of SECTION
7.14 (whether permitted or prohibited thereby), and includes capital
contributions, equity contributions, loans, and advances.
"INVESTMENT PROPERTY" shall have the meaning ascribed to such term
in Division 9 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"LEC" means a local exchange carrier or telephone company that
provides basic telecommunications services to its customers and from whom
Borrower receives payments with respect to Accounts, such as (without
limitation) Pacific ▇▇▇▇, U.S. West, NYNEX, Southwestern ▇▇▇▇, GTE, and
Ameritech.
"LEC ACCOUNT" means, as of any date of determination, any Account
of Borrower submitted by or on behalf of Borrower to a LEC for billing and
payment pursuant to a Billing Services Agreement.
"LEC ACCOUNT DILUTION" means, with respect to LEC Accounts, in
each case based upon the experience of the immediately prior 6 months, the
result of dividing (a) the Dollar amount of bad debt write-downs, credits,
unbillable transactions, and other dilutive items with respect to the LEC
Accounts for such period (excluding billing and collection charges billed
separately to Borrower (as opposed to being offset directly on a LEC
Confirmation Statement), and up-front LEC rejects and up-front credits already
deducted in arriving at net confirmed revenues on LEC Confirmation Statements),
by (b) Borrower's net confirmed revenues for such period with respect to LEC
Accounts.
"LEC ACCOUNT DILUTION RESERVE" means, as of any date of any
determination by Foothill, which determinations shall not be made more
frequently than monthly without the consent of Borrower unless an Event of
Default has occurred and is continuing, an amount sufficient to reduce
Foothill's advance rate against Eligible LEC Accounts by one percentage point
for each percentage point by which LEC Account Dilution is in excess of ten
percent (10%).
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"LEC ACCOUNT SUBLINE LIMIT" means, as of any date of determination
thereof, 80% of the Maximum Amount in effect on such date.
"LEC CONFIRMATION STATEMENT" means a written confirmation
statement sent to Borrower by a LEC to confirm the receipt by the LEC from
Borrower of call transaction records relating to Accounts that the LEC is to
▇▇▇▇ on behalf of Borrower to customers of the LEC.
"LEC NON-OFFSET AGREEMENT" means an agreement by a LEC in favor of
Borrower, that is in form and substance reasonably satisfactory to Foothill,
that runs to the benefit of Foothill, or that may be assigned to Foothill and is
in fact so assigned, and that is in full force and effect, whereby the LEC
agrees not to offset claims, other than for billing and collection services it
may hold against Borrower against amounts otherwise due Borrower by the LEC
under the Billing Services Agreement in effect between Borrower and the LEC.
"LEC RESERVE" means, as of any date of determination thereof,
which determinations shall not be made more frequently than weekly without
the consent of Borrower unless an Event of Default has occurred and is
continuing, the greater of;
(a) the actual aggregate outstanding accrued and unpaid
obligations of Borrower to each LEC for which Borrower is including LEC Accounts
in the Borrowing Base that has not entered into a LEC Non-Offset Agreement on
such date of determination, with respect to connection or access charges, but
only to the extent of such access or connection charges which are not subject to
a LEC Non-Offset Agreement, and
(b) the average of the actual aggregate outstanding accrued and
unpaid obligations of Borrower to each LEC for which Borrower is including LEC
Accounts in the Borrowing Base that has not entered into a LEC Non-Offset
Agreements of each weekending date that occurred during the related Lookback
Period With respect to which a weekly report was, is, or will be due to Foothill
pursuant to SECTION 6.2(a)(vi) of this Agreement, with respect to connection or
access charges, but only to the extent of such access or connection charges
which are not subject to a LEC Non-Offset Agreement.
PROVIDED, HOWEVER, that upon the delivery of Borrower's audited fiscal year 1997
financial statement pursuant to SECTION 6.3, Foothill shall, not more than 30
days after receipt of such financial statement, reasonably determine if
Borrower's actual financial performance, as measured on the basis of Borrower's
audited fiscal year 1997 financial statement, has met or exceeded Borrower's
1997 Business Plan provided to Foothill under this Agreement, and in the event
that Borrower's actual financial performance has met or exceeded Borrower's 1997
Business Plan, then each subsequent determination of the LEC Reserve shall be
made on the basis of subparagraph (a) alone.
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"LOAN ACCOUNT" has the meaning set forth in SECTION 2.7.
"LOAN DOCUMENTS" means this Agreement, the Canadian Security
Agreements, the Pledge Agreements, the Disbursement Letter, the Guarantees, the
Lockbox Agreements, any Mortgages hereafter delivered by Borrower to Foothill,
the Suretyship Agreement, any note or notes executed by Borrower and payable to
Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"LOCKBOX ACCOUNT" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
"LOCKBOX AGREEMENTS" means those certain Lockbox Operating
Procedural Agreements, Depository Account Agreements, Blocked Account
Agreements, or similar agreements, in form and substance reasonably satisfactory
to Foothill, each of which is among Borrower, Foothill, and one of the Lockbox
Banks.
"LOCKBOX BANKS" means Union Bank of California, The Royal Bank of
Canada, or such other bank(s) as may be selected by Borrower and approved by
Foothill, with such approval not unreasonably to be withheld or delayed.
"LOCKBOXES" has the meaning set forth in SECTION 2.7.
"LOOKBACK PERIOD" means, with respect to any date of
determination, the period commencing on the 90th day prior to such date of
determination and ending on such date of determination, inclusive.
"MAC-RELATED DATE" means the first date, if any, to occur as of
which: (a) A MAC-Related Event of Default has occurred and is continuing; (b) no
Event of Default that is not a MAC-Related Event of Default has occurred and is
continuing; and (c) Foothill has (i) accelerated the maturity of the
Obligations, based solely on the existence of one or more MAC-Related Events of
Default, (ii) ceased for more than two (2) Business Days making Advances to
Borrower, based solely upon the existence of one or more MAC-Related Events of
Default, (iii) terminated the Agreement, based solely on the existence of one or
more MAC-Related Events of Default, or (iv) commenced material enforcement of
its rights and remedies the exercise of which is conditioned upon the occurrence
of an Event of Default, based solely on the existence of one or more MAC-Related
Events of Default.
"MAC-RELATED EVENT OF DEFAULT" means any Event of Default: (a)
Pursuant to SECTION 8.3 of this Agreement; or (b) Pursuant to SECTION 8.12 of
this Agreement, to the extent, and only to the extent, that such SECTION 8.12
Event of Default is premised upon a misstatement or misrepresentation contained
in any warranty or representation at any time made by Borrower in SECTIONS
5.9(c), 5.10, OR 5.12(c) of this Agreement.
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"MATERIAL ADVERSE CHANGE" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of WXCC, WXLC, and CTST on a consolidated
basis that, with the passage of time, is likely to result in an Event of Default
(other than (i) a MAC-Related Event of Default, or (ii) an Event of Default
based on a breach of SECTION 6.11 hereof), (b) the material impairment of
Borrower's ability to perform its obligations under the Loan Documents to which
it is a party or a Foothill to enforce the Obligations or realize upon the
Collateral, (c) a material adverse effect on the value of the Collateral or the
amount that Foothill would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of such
Collateral, or (d) a material impairment of the priority of Foothill's liens or
security interests in the Collateral.
"MAXIMUM AMOUNT" means, subject to adjustment as hereinafter set
forth, Twenty Five Million Dollars ($25,000,000). From time to time after the
Closing Date, subject to the prior or concurrent payment of any applicable fee
provided for in SECTION 2.8(c), Borrower may elect to increase the Maximum
Amount, on one or more occasions, in increments of $1,000,000 or an integral
multiple thereof, to an amount not to exceed $35,000,000, such increases to
become effective, in each instance, prospectively, subject to payment of any
applicable fee as aforesaid, on the date specified in a written notice of such
election received by Foothill from Borrower, which specified date shall be not
less than 3 Business Days after the date on which Foothill receives such notice.
"MAXIMUM FOOTHILL AMOUNT" means that portion of the Maximum Amount for
which Foothill shall be responsible, exclusive of any participations with
Participants, which amount is $20,000,000.
"MORTGAGES" means any one or more mortgages, deeds of trust, or deeds
to secure debt, that hereafter may be from time to time executed by Borrower in
favor of Foothill, the form and substance of which shall be satisfactory to
Foothill, that encumber any Real Property and the related improvements thereto.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which any Borrower of any ERISA Affiliate
thereof has contributed, or was obligated to contribute, within the past six
years.
"NEGOTIABLE COLLATERAL" means all of Borrower's present and future
letters of credit, notes, drafts, instruments, certificated securities
(including the shares of stock of Subsidiaries of Borrower), Investment
Property, documents, personal property leases (wherein Borrower is the lessor),
chattel paper, and Borrower's Books relating to any of the foregoing.
"NET DOMESTIC REVENUES" means, for any period of measurement, revenues
of Borrower derived from transactions in the United States or any State thereof,
or Canada
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or any Province thereof (excluding the Canadian Maritime Provinces), exclusive
of revenues received from Carriers.
"NET EQUITY SUPPLEMENTAL AMOUNT" means, with respect to any fiscal
year of Borrower commencing with Borrower's fiscal year 1997, the non-negative
amount equal to 50% of the aggregate net cash proceeds of any new equity raised
by Borrower during such fiscal year in one or more public or private equity
offerings by Borrower.
"NO-PREMIUM WINDOW" means any and each period of time that begins on a
Triggering Date and lasts for 120 consecutive calendar days.
"OBLIGATIONS" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations owing to Foothill,
premiums (including Early Termination Premiums), liabilities (including all
amounts charged to the Loan Account pursuant hereto), obligations, fees or
Foothill Expenses (including any fees or expenses that, but for the provisions
of the Bankruptcy Code, would have accrued) lease payments, guaranties,
covenants, and duties owing by Borrower to Foothill of any kind and description
(whether pursuant to or evidenced by the Loan Documents or pursuant to any other
agreement between Foothill and Borrower, and irrespective of whether for the
payment of money), whether direct, absolute or contingent, due or to become due,
now existing or hereafter arising, and including any debt, liability, or
obligation owing from Borrower to others that Foothill may have obtained by
assignment or otherwise, and further including all interest not paid when due
and all Foothill Expenses that Borrower is required to pay for reimburse by the
Loan Documents, by law, or otherwise.
"OVERADVANCE" has the meaning set forth in SECTION 2.2.
"PARTICIPANT" means any Person to which Foothill has sold a
participation interest in its rights under the Loan Documents.
"PAY-OFF LETTER" means a letter, in form and substance reasonably
satisfactory to Foothill, from Existing Lender respecting the amount necessary
to repay in full all of the obligations of Borrower owing to Existing Lender and
obtain a termination or release of all of the security interests or liens
existing in favor of Existing Lender in and to the properties or assets of
Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.
"PERMITTED CAPITAL EXPENDITURE AMOUNT" means, with respect to any
fiscal year of Borrower commencing with Borrower's fiscal year 1997, the sum of
(a) the Base Permitted Capital Expenditure Amount for such fiscal year, PLUS (b)
the Net Equity
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Supplemental Amount for such fiscal year, if any, PLUS (c) except with respect
to Borrower's fiscal year 1997, with respect to which no Carryover Amount is
applicable, the Carryover Amount applicable to such fiscal year, if any.
"PERMITTED LIENS" means (a) liens and security interests held by
Foothill, (b) liens for unpaid taxes with respect to which Borrower is not in
breach of its covenants set forth in SECTION 6.9 of this Agreement, (c) liens
and security interests set forth on SCHEDULE P-1 attached hereto, (d)
purchase money security interests and liens of lessors under capital leases
to the extent that the acquisition or lease of the underlying asset was
permitted under SECTION 7.10, and so long as the security interest or lien
only secures the obligations of Borrower under the purchase agreement or
lease with respect to the purchase price of or rental payments with respect
to the asset, interest or finance charges with respect thereto, or related
fees, costs, or expenses, and does not secure unrelated obligations of
Borrower to the holder of such purchase agreement or lease, (e) easements,
rights of way, reservations, covenants, conditions, restrictions, zoning
variances, and other similar encumbrances that do not materially interfere
with the use or value of the property subject thereto, (f) obligations and
duties as lessee under any lease existing on the date of this Agreement, (g)
mechanics', materialmen's, warehousemen's, or similar liens that arise by
operation of law, (h) exceptions listed in any title insurance or commitment
therefor delivered by Borrower hereunder in respect of any Real Property and
as are approved in the sole discretion of Foothill, (i) liens with respect to
which Borrower is engaging in a Permitted Protest permitted by an express
provision of the Loan Documents, to the extent that Borrower is in compliance
with such provision, and (j) liens to the extent that Borrower is given a
grace period pursuant to an express provision of the Loan Documents within
which to remove or eliminate such liens, and to the extent that Borrower is
proceeding in compliance with such provision to remove or eliminate such lien
within such grace period.
"PERMITTED ORDINARY COURSE INVESTMENTS" means (a) direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America with a maturity
not exceeding one year, (b) certificates of deposit, time deposits, banker's
acceptances or other instruments of a bank having a combined capital and
surplus of not less than $500,000,000, or another financial institution
reasonably satisfactory to Foothill, with a maturity not exceeding one year,
(c) investments in commercial paper rated at A-1 or P-1 maturing within one
year after the date of acquisition thereof, (d) money market accounts
maintained at a bank having combined capital and surplus of no less than
$500,000,000 or another financial institution reasonably satisfactory to
Foothill (including satisfaction of requirements necessary for Foothill to
have a perfected security interest therein with the priority provided for
herein), (e) loans and advances to non-Insider officers and employees of
Borrower in the ordinary course of business (excluding loans or advances in
connection with the purchase of stock of Borrower) in an aggregate amount at
any one time outstanding not to exceed $250,000, (f) investments in
negotiable instruments for collection, and (g) advances in connection with
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purchases of goods or services in the ordinary course of business.
"PERMITTED PROTEST" means the right of Borrower to protest any
lien, tax, rental payment, or other charge, other than any such lien or
charge that secures the Obligations, provided that (a) a reserve with respect
to such obligation is established on the books of Borrower in an amount that
is reasonably satisfactory to Foothill, (b) any such protest is instituted
and diligently prosecuted by Borrower in good faith, and (c) Foothill is
reasonably satisfied that, while any such protest is pending, there will be
no impairment of the enforceability, validity, or priority of any of the
liens or security interests of Foothill in and to the Collateral.
"PERMITTED SUBSIDIARY INVESTMENTS" means direct or indirect
Investments of Borrower in Subsidiaries of Borrower either (a) existing on
the Closing Date and fully disclosed in SCHEDULE P-2, or (b) consisting of
advances by Borrower to Subsidiaries made after the Closing Date, or
guarantees by Borrower of Indebtedness of Subsidiaries given after the
Closing Date, so long as of the date of any such advance (1) the aggregate
net Dollar-equivalent amount of such advances outstanding at such date
(giving effect to all such advances made and repaid since the Closing Date),
plus the aggregate potential Dollar-equivalent exposure with respect to all
such guarantees outstanding at such date, plus the aggregate
Dollar-equivalent amount of any and all payments made by Borrower under any
such guarantees after the Closing Date to the extent that such payments have
not been reimbursed to Borrower by the Subsidiary or Subsidiaries whose
obligations were so guarantied, does not exceed the Foreign Advance Cap, and
provided that, (2) on and after August 1, 1997, such advances shall be made,
or guarantees given, only when Borrower does not have any non-disputed
payables due to Carriers that remain unpaid for more than 90 days after their
invoice dates.
"PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"PERSONAL PROPERTY COLLATERAL" means all Collateral other than Real
Property.
"PLAN" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"PLEDGE AGREEMENTS" means agreements in the forms attached as EXHIBIT
P-1 hereto, dated as of even date with this Agreement, and entered into by
Borrower and each Subsidiary of Borrower that owns any interest in any other
Subsidiary of Borrower, in each case for the benefit of Foothill, whereby
Borrower and each such stock-owning Subsidiary of Borrower pledges to Foothill
100% of Borrower's capital stock in its domestic
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Subsidiaries, 100% of Borrower's capital stock of WXLC, and 66 2/3% of
Borrower's capital stock in its foreign Subsidiaries other than WXLC.
"PLEDGED SHARES" means the original certificates evidencing the shares
of capital stock of Subsidiaries of Borrower pledged to Foothill pursuant to the
Pledge Agreements.
"PRACTICABLE" means, with respect to any agreement herein of a
Person to send a facsimile to another Person "if practicable," that the
Person agreeing to send such facsimile to such other Person will make
reasonably diligent attempts to transmit such facsimile to such other Person
contemporaneous with the giving of the related notice or communication by any
other means (such as mail, personal delivery, or telephone, subject to the
provisions hereof and to the extent permitted herein), but the Person
agreeing to send such facsimile shall not be responsible for any inability
successfully to transmit such facsimile, or for the failure of the intended
recipient to receive such facsimile, that results from mechanical failure,
electrical or telephone line failure, failure of the intended recipient's
facsimile device to receive or print such transmission, or any other similar
cause not the proximate result of the gross negligence or willful misconduct
of the Person agreeing to send such facsimile.
"PRINCIPALS" means ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, and each of them, and any one or more of them.
"PRIVATE LINE ACCOUNT" means any Account that arises out of the
provision of dedicated digital point-to-point telecommunication services,
including ancillary services such as local access, muxing, and digital
cross-connect service.
"REAL PROPERTY" means the parcel or parcels of real property and the
related improvements thereto, if any, identified on SCHEDULE R-1, and any
estates or interests in real property hereafter acquired by Borrower, unless
Foothill in its sole discretion has agreed to exclude such after-acquired
estates or interests.
"REDUCING AMOUNT" means, as of any date of determination thereof, the
greater of:
(a) $5,000,000; and
(b) $6,000,000, as of the Closing Date, reduced cumulatively by each
of the following: (i) On the first day of each calendar month,
commencing April 1, 1997, and continuing thereafter on the first
day of each succeeding calendar month, a reduction of $41,667 per
month; and (ii) In addition, with respect to any and each public
or private equity offering consummated by Borrower after the
Closing Date and
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on or before such date of determination, a reduction in an
amount equal to 100% of the net cash proceeds received by or
for the account of Borrower with respect to such public or
private equity offering, effective upon each date of receipt
thereof in the amount so received on each such date.
"REDUCTION DATE" means the first date, if any, to occur as of which
both of the following conditions shall have been satisfied: (a) Borrower has
successfully concluded one or more public or private equity offerings that
raised in the aggregate not less than Twenty Million Dollars ($20,000,000) of
new equity for Borrower; and (b) Borrower has demonstrated to Foothill's
reasonable satisfaction that Borrower has substantially met Borrower's 1997
Business Plan with respect to Borrower's fiscal year 1997 (or the portion of
such fiscal year ending on such date, if such date is prior to the last day of
Borrower's fiscal year 1997).
"REFERENCE RATE" means the highest of the variable rates of interest,
per annum, most recently announced by Norwest Bank Minnesota, National
Association, or any successor thereto, as its "prime rate" or "reference rate,"
irrespective of whether such announced rate is the best rate available from such
financial institution.
"REPORTABLE EVENT" means any of the events described in Section
4043(c) of ERISA or the regulations thereunder other than a Reportable Event as
to which the provision of thirty (30) days notice to the PBGC is waived under
applicable regulations.
"RETIREE HEALTH PLAN" means an "employee welfare benefit plan" within
the meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"SOLVENT" means, with respect to any Person on a particular date,
that on such date (a) 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, (b) 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 (c) 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.
"SPECIAL BRIDGE ADVANCE COMPONENT" means (a) as of any date of
determination on or after the Closing Date and prior to the Special Bridge
Advance
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Component Termination Date, the LESSER of (i) the then applicable Reducing
Amount, and (ii) 45% of Net Domestic Revenues for the three months of Borrower
most recently ended for which Foothill has received financial statements of
Borrower, and (b) as of any date of determination on or after the Second Bridge
Advance Component Termination Date, Zero Dollars.
"SPECIAL BRIDGE ADVANCE COMPONENT TERMINATION DATE" means the earlier
of (a) the date that is two years after the Closing Date, and (b) the first date
that Foothill receives a signed written notice from Borrower stating in
substance that Borrower has elected irrevocably to terminate, and reduce to Zero
Dollars, the Special Bridge Advance Component.
"SPECIFIED AMOUNT" means, with respect to the first four (4)
quarters of Borrower's fiscal year 1997, negative seventeen million dollars
(-$17,000,000) plus any applicable amount provided for in the next sentence
of this definition, and, with respect to all fiscal quarters of Borrower
thereafter, negative nine million dollars (-$9,000,000) plus any applicable
amount provided for in the next sentence of this definition. As of any date
of determination of the Specified Amount, if Borrower has concluded one or
more public or private equity offerings after the Closing Date and on or
before such date of determination, the Specified Amount shall be increased by
fifty percent (50%) of the aggregate net cash proceeds raised by Borrower
after the Closing Date with respect to all such public or private equity
offerings.
"SUBORDINATION AGREEMENTS" means (a) subordination of indebtedness
agreements in form and substance reasonably satisfactory to Foothill, which
shall be in full force and effect and for the benefit of Foothill, with respect
to any obligations or indebtedness of Borrower (other than with respect to
employee compensation permitted by this Agreement, or purchases of services from
WorldxChange, LTD., a New Zealand corporation, that are otherwise permitted by
SECTION 7.15 hereof) owed to any Insider or Affiliate of Borrower, or to any
Principal or other Person to whom Borrower proposes to incur Indebtedness after
the Closing Date pursuant to SECTION 7.1(e) of this Agreement, as required by
Foothill in its sole discretion, and (b) the subordination provisions of the
subordinated debentures of Borrower outstanding on the Closing Date.
"SUBSIDIARY" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or appoint
other managers of such corporation, partnership, limited liability company, or
other entity.
"SURETYSHIP AGREEMENT" means an agreement in the form of EXHIBIT S-1
hereto, dated as of even date with this Agreement, and entered into by Borrower
for the benefit of Foothill.
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"SYNDICATED AMOUNT" means that portion of the Maximum Amount equal to
the aggregate financing commitments (to the extent not breached or terminated)
of all Participants.
"SYNDICATION ABROGATION DATE" means: (A) With respect to any request
by Borrower that the Maximum Amount be increased to an amount greater than
$25,000,000 but not to exceed $35,000,000, the earliest date, if any,
thereafter to occur as of which: (a) At least ninety (90) days have elapsed
since the date Foothill has received each of the following from the Borrower:
(w) projections in reasonable detail prepared not earlier than thirty (30) days
prior to the date of receipt by Foothill, (x) Borrower's cooperation with
respect to any audit of Borrower requested to be conducted by Foothill, (y)
financial statements as of a date not more than forty five (45) days prior to
the date of receipt by Foothill, and (z) a weekly Borrowing Base calculation not
more than one week old as of the date of receipt by Foothill; and during which
ninety (90) days no unwaived Event of Default occurred or was continuing; (b)
Foothill has not succeeded both in causing the sum of the Foothill Maximum
Amount plus the Syndicated Amount to equal an amount not less than the increased
Maximum Amount so requested by Borrower (but not to exceed $35,000,000), and in
giving written notice of such success to Borrower; and (c) Borrower has notified
Foothill in writing that the circumstances described in clauses (a) and (b) of
this definition both have occurred; PROVIDED that Borrower shall not be entitled
to give such a notice and such a notice shall be ineffective if such a notice is
given more than thirty (30) days after the later of (i) conclusion of the ninety
(90) day period referred to in clause (a) of this definition, and (ii) the date
Foothill has given written notice to Borrower that Foothill has ceased
syndication efforts with respect to such request; and (B) With respect to any
reduction in the Syndicated Amount resulting from the breach or termination by
any Participant of its financing commitment, the tenth (10th) Business Day
following the date of such reduction unless, as of such day, Foothill has caused
such reduced portion of the Syndicated Amount (for this purpose only, calculated
without regard to any breach or terminating by such Participant of its financing
commitment) to have been restored, reinstated, or replaced, whether by causing
the breaching or termination Participant to remedy such breach or rescind such
termination and reinstate its financing commitment, by causing another
Participant to assume a new or incremental financing commitment at least equal
to the amount of such reduction, by itself agreeing to increase the Maximum
Foothill Amount by an amount at least equal to the amount of such reduction, or
otherwise (although Foothill shall be under no obligation to do or to seek to
do any of the foregoing).
"TELECOMMUNICATION TAXES" means all excise or other special taxes that
in any way relate to the Borrower's provision of telecommunications services.
"TELECOMMUNICATION TAX RESERVE" means, as of any date of determination
by Foothill, which determinations shall not be made more frequently than monthly
without the consent of Borrower unless an Event of Default has occurred and is
continuing, an amount (without duplication) equal to the aggregate amount of all
unpaid
-27-
Telecommunications Taxes and any related tax liens arising, or that may in the
future arise, with respect to such unpaid Telecommunication Taxes, that Foothill
reasonably determines to have priority over Foothill's liens or security
interests in the Collateral.
"TERMINATION DATE" has the meaning set forth in SECTION 3.4.
"TOTAL AVAILABILITY" means, as of any date of determination thereof,
Availability PLUS all unrestricted cash (or cash equivalents) on hand of
Borrower.
"TRIGGERING DATE" means any (a) Availability Contraction Date, (b)
Syndication Abrogation Date, or (c) MAC-Related Date.
"U.S. WEST" means U.S. West Communications, Inc.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 15.8.
"WILTEL" means WilTel, Inc., and its Affiliates, including Worldcom,
Inc.
"WXCC" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"WXLC" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"ZPDI" means Zero Plus Dialing, Inc., US Billing, Inc., or such other
LEC billing clearinghouse(s) that Borrower may engage to supplement or replace
either or both of them.
"ZPDI ACCOUNT" means, as of any date of determination, any Account of
Borrower transferred or sold to, or submitted for billing and collection to or
through, ZPDI.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistently applied.
When used herein, the term "financial statements" shall include the notes and
schedules thereto. Whenever the term "Borrower" is used in respect of a
financial covenant or a related definition, it shall be understood to mean
Borrower on a consolidated basis, but exclusive of CTST, unless the context
clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires
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otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented
by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder,"
and similar terms in this Agreement refer to this Agreement as a whole and not
to any particular provision of this Agreement. An Event of Default shall
"continue" or be "continuing" until such Event of Default has been waived in
writing by Foothill, or cured by Borrower if and only to the extent that cure is
permitted by the provisions of the Loan Documents or applicable law. Section,
subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or in the Loan
Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOANS AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES. (a) Subject to the terms and conditions of
this Agreement, Foothill agrees to make advances ("Advances") to Borrower in an
amount at any one time outstanding not to exceed the LEAST of (i) the Maximum
Amount, (ii) the Maximum Foothill Amount PLUS the Syndicated Amount, and (iii)
the Borrowing Base. For purposes of this Agreement, "Borrowing Base", as of any
date of determination, shall mean the sum of:
(v) THE LOWER OF: (i) eighty percent (80%) of the result of the
following calculation: (the amount of Eligible LEC Accounts, LESS the
amounts, if any, of each of (1) the LEC Account Dilution Reserve,
(2) the LEC Reserve, (3) the Billing and Collection Charges Reserve);
and (ii) the LEC Account Subline Limit, PLUS
(w) seventy five percent (75%) of the result of the following
calculation: (the amount of Eligible Direct Accounts, LESS the
amount, if any, of the Direct Account Dilution Reserve), PLUS
(x) forty percent (40%) of Eligible Unbilled Direct Accounts,
PLUS
(y) the Special Bridge Advance Component, MINUS
(z) the sum of the following calculation ((i) aggregate amount of
reserves, if any, established by Foothill under SECTION 2.1 (b); PLUS
(ii) the Telecommunication Tax Reserve, if any);
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PROVIDED that, in no event shall the Borrowing Base at any time exceed
100% of Gross Domestic Accounts; and PROVIDED, FURTHER, that, in no
event shall the combined amount of the components of the Borrowing
Base provided for in SECTIONS 2.1(w) AND 2.1(x) exceed the lower of
the Direct Accounts Subline Limit and the amount equal to Borrower's
Collections with respect to Direct Accounts for the immediately
preceding 45 day period.
(b) Anything to the contrary in SECTION 2.1(a) above
notwithstanding, Foothill may create reserves against or reduce its advance
rates based upon Eligible Accounts or categories thereof without declaring an
Event of Default if it reasonably determines that there has occurred a
Material Adverse Change.
(c) Foothill shall have no obligation to make Advances hereunder
to the extent they would cause the outstanding Obligations to exceed the Maximum
Amount. In addition, Foothill shall have no obligation to make Advances
hereunder to the extent they would cause the outstanding Obligations to exceed
the Maximum Foothill Amount plus the Syndicated Amount.
(d) Amounts borrowed pursuant to this SECTION 2.1 may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
2.2 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to SECTION 2.1 is greater than
either the dollar or percentage limitations set forth in SECTION 2.1 (an
"Overadvance"), Borrower immediately shall cause such Overadvance to be
eliminated, either by paying to Foothill, in cash, the amount of such excess to
be used by Foothill to repay Advances outstanding under SECTION 2.1, or by
causing the Borrowing Base to be recomputed, in all respects in accordance with
the terms and provisions of this Agreement, in such fashion as to create
sufficient Availability to eliminate such Overadvance.
2.3 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in SECTION 2.3(b), all
Obligations shall bear interest at a per annum rate from time to time equal to
the Applicable Margin PLUS the Reference Rate. In addition, during all periods
prior to the Special Bridge Advance Component Termination Date, as
consideration for Foothill making available to Borrower, subject to the terms,
conditions, and provisions hereof, the Special Bridge Advance Component of the
Borrowing Base, Borrower shall pay to Foothill additional premium interest on
the average daily Applicable Amount at a per annum rate from time to time equal
to the Applicable Premium Rate. At all times prior to the Special Bridge
Advance Component Termination Date, Obligations outstanding under the Loan
Documents shall be allocated first to the Special Bridge Advance Component of
the
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
(b) Default Rate. All Obligations shall bear interest, from
and after the occurrence and during the continuance of an Event of Default,
at a per annum rate from time to time equal to the Applicable Margin PLUS the
Reference Rate PLUS three (3.00) percentage points. In addition, but not in
duplication of the last sentence of SECTION 2.3(a), during all periods prior
to the Special Bridge Advance Component Termination Date, as consideration
for Foothill making available to Borrower, subject to the terms, conditions,
and provisions hereof, the Special Bridge Advance Component of the Borrowing
Base, Borrower shall pay to Foothill additional premium interest on the
average daily Applicable Amount at a per annum rate from time to time equal
to the Applicable Premium Rate. At all times prior to the Special Bridge
Advance Component Termination Date, Obligations outstanding under the Loan
Documents shall be allocated first to the Special Bridge Advance Component of
the Borrowing Base.
(c) Minimum Interest. In no event shall the rate of interest
chargeable hereunder be less than eight percent (8.00%) per annum. To the
extent that interest accrued hereunder at the rate set forth herein would be
less than the foregoing minimum rate, the interest rate chargeable hereunder
for the period in question automatically shall be deemed increased to the
minimum rate.
(d) Payments. Interest hereunder shall be due and payable, in
arrears, on the first day of each month during the term hereof. Borrower hereby
authorizes Foothill, at its option, without prior notice to Borrower, to charge
such interest, all Foothill Expenses (as and when incurred), and all payments
due under any Loan Document to the Loan Account, which amounts thereafter shall
accrue interest at the rate then applicable hereunder. Any interest not paid
when due shall be compounded and shall thereafter accrue interest at the rate
then applicable hereunder.
(e) Computation. The Reference Rate as of the date of this
Agreement is eight and one quarter percent (8.25%) per annum. In the event the
Reference Rate is changed from time to time hereafter, the applicable rate of
interest hereunder automatically and immediately shall be increased or decreased
by an amount equal to such change in the Reference Rate. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and Foothill, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; PROVIDED, HOWEVER, that,
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anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then IPSO FACTO as of the date of this Agreement, Borrower is and shall be
liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess.
2.4 COLLECTION OF ACCOUNTS. Borrower shall at all times maintain
Lockboxes (the "Lockboxes") and, immediately after the Closing Date, shall
instruct all Advance Debtors with respect to the Accounts, General
Intangibles, and Negotiable Collateral of Borrower to remit ALL Collections
in respect thereof to such Lockboxes. Borrower, Foothill, and the Lockbox
Banks shall enter into the Lockbox Agreements, which among other things shall
provide for the opening of a Lockbox Account for the deposit of Collections
at a Lockbox Bank. Borrower agrees that all Collections and other amounts
received by Borrower from any Account Debtor or any other source immediately
upon receipt shall be deposited into a Lockbox Account. No Lockbox Agreement
or arrangement contemplated thereby shall be modified by Borrower without the
prior written consent of Foothill, which consent shall not unreasonably be
withheld or delayed. Upon the terms and subject to the conditions set forth
in the Lockbox Agreements, all amounts received in each Lockbox Account shall
be wired each Business Day into an account (the "Foothill Account")
maintained by Foothill at a depositary selected by Foothill; PROVIDED that,
with respect to any Canadian Lockbox Agreement and any Canadian Lockbox
Account, unless (a) Borrower's Canadian Collections as a percentage of
Borrower's total Collections exceeded 10.0% with respect to any fiscal month
of Borrower ended after the Closing Date, and, thereafter, Foothill has
notified Borrower that such Canadian amounts henceforth shall be wired each
Business Day to the Foothill Account, (b) an Event of Default has occurred
and is continuing, or (c) Foothill reasonably (from the perspective of a
reasonable secured lender) deems itself insecure (in accordance with Section
1208 of the Code), such Canadian amounts need not be wired to Foothill and
may be retained and used in Canada for any purpose permitted by the Loan
Documents as if such amounts had been used to pay down the balance of
Borrower's loan account and immediately readvanced to Borrower.
2.5 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt
of any Collections by Foothill (whether from transfers to Foothill by the
Lockbox Banks pursuant to the Lockbox Agreements or otherwise) immediately
shall be applied provisionally to reduce the Obligations outstanding under
SECTION 2.1, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds and
is made to the Foothill Account or unless and until such Collection item is
honored when presented for payment. From and after the Closing Date,
Foothill shall be entitled to charge Borrower for two and one half (2.5)
Business Days of 'clearance' or 'float' at the rate set forth in SECTION
2.3(a) or SECTION 2.3(b), as applicable, on all Collections that are received
by Foothill (regardless of whether forwarded by the Lockbox
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Banks to Foothill, whether provisionally applied to reduce the Obligations under
SECTION 2.1, or otherwise), and, in addition, for all Canadian Collections, even
if such Collections are retained by Borrower and not paid to or received by
Foothill. This across-the-board two and one half (2.5) Business Day clearance
or float charge on all Collections is acknowledged by the parties to constitute
an integral aspect of the pricing of Foothill's financing of Borrower, and shall
apply irrespective of the characterization of whether receipts are owned by
Borrower or Foothill, and whether or not there are any outstanding Advances, the
effect of such clearance or float charge being the equivalent of charging two
and one half (2.5) Business Days of interest on such Collections. Should any
Collection item not be honored when presented for payment, then Borrower shall
be deemed not to have made such payment, and interest shall be recalculated
accordingly. Anything to the contrary contained herein notwithstanding, any
Collection item shall be deemed received by Foothill only if it is received into
the Foothill Account on or before 11:00 a.m. Los Angeles time. If any
Collection item is received into the Foothill Account after 11:00 a.m. Los
Angeles time it shall be deemed to have been received by Foothill as of the
opening of business on the immediately following Business Day.
2.6 BORROWER'S DESIGNATED ACCOUNT. Foothill is authorized to make
the Advances under this Agreement based upon telephonic or other instructions
received from anyone purporting to be an Authorized Officer of Borrower, or
without instructions if pursuant to SECTION 2.3(d). Borrower agrees to
establish and maintain Borrower's Designated Account with Borrower's
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by Foothill hereunder. Unless
otherwise agreed by Foothill and Borrower in a writing signed by two of the
individuals identified on the certificate delivered by Borrower to Foothill
pursuant to SECTION 3.1(e) hereof as Persons authorized to execute Loan
Documents on behalf of Borrower, any Advance requested by Borrower and made
by Foothill hereunder shall be made to Borrower's Designated Account.
2.7 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Foothill shall maintain an account on its books in the name of Borrower (the
"Loan Account") on which Borrower will be charged with all Advances made by
Foothill to Borrower or for Borrower's account, including, accrued interest,
Foothill Expenses, and any other payment Obligations of Borrower, in
accordance with SECTION 2.5 and on which Borrower will be credited with all
payments received by Foothill from Borrower or for Borrower's account,
including all amounts received in the Foothill Account from any Lockbox Bank.
Foothill shall render statements regarding the Loan Account to Borrower,
including principal, interest, fees, and including an itemization of all
charges and expenses constituting Foothill Expenses owing, and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrower and Foothill unless, within
ninety (90) days after receipt thereof by Borrower, Borrower shall deliver to
Foothill by registered or certified mail at its address specified in SECTION
12, written objection thereto describing the error or errors contained in any
such statements.
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2.8 FEES. Borrower shall pay to Foothill the following fees:
(a) Closing Facility Fee. A one time closing fee of Two Hundred
Fifty Thousand Dollars ($250,000) which is earned, in full, on the Closing Date
and is due and payable by Borrower to Foothill in connection with this Agreement
on the Closing Date;
(b) Anniversary Facility Fee. On each anniversary of the
Closing Date, other than the Termination Date, a fee in an amount equal to
one-half percent (0.50%) of the then Maximum Amount (giving effect to any
increases thereof elected by Borrower, if any, that have become effective
before, or that become effective on, the date of such anniversary), such fee to
be fully earned on each such date;
(c) Line Increase Fee. On the effective date of any election
by Borrower to increase the Maximum Amount (other than any such effective
date that coincides with an anniversary of the Closing Date), a fee equal to
the PRODUCT of (i) the amount by which the Maximum Amount is increased on
such effective date, TIMES (ii) the fraction equal to the number of days from
and including such effective date through and including the next anniversary
of the Closing Date DIVIDED BY 360, TIMES (iii) (A) if such effective date
occurs prior to the first anniversary of the Closing Date, one percent
(1.00%), and, (B) if such effective date occurs thereafter, one half percent
(0.50%), such fee to be fully earned on each such date.
(d) Unused Line Fee. On the first day of each month during the
term of this Agreement, a fee in an amount equal to one-half percent (0.50%) per
annum times the Average Unused Portion of Facility;
(e) Financial Examination Fees and Post-Event of Default
Appraisal Fees. (i) Foothill's customary fee of Six Hundred Fifty Dollars
($650) per day per examiner, plus actual and reasonable out-of-pocket
expenses (such as, without limitation, transportation, lodging, and meal
expenses) relating to each financial analysis and examination (i.e., audit)
of Borrower performed by personnel employed by Foothill; (ii) the actual and
reasonable out-of-pocket charges paid or incurred by Foothill if it elects to
employ the services of one or more third Persons to perform such financial
analyses and examination (i.e., audits) of Borrower; (iii) if an Event of
Default has occurred and is continuing, but not otherwise, Foothill's
customary appraisal fee of One Thousand Five Hundred Dollars ($1,500) per day
per appraiser, plus actual out-of-pocket expenses (such as, without
limitation, transportation, lodging, and meal expenses) for each appraisal of
the Collateral performed by personnel employed by Foothill: and (iv) if an
Event of Default has occurred and is continuing, but not otherwise, the
actual out-of-pocket charges paid or incurred by Foothill if it elects to
employ the services of one or more third Persons to appraise the Collateral.
Without limiting Foothill's right to be repaid Foothill Expenses
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as provided in the Loan Documents, or to charge Foothill Expenses to the Loan
Account, Foothill hereby confirms that it shall not charge Borrower a recurring
annual documentation fee.
(f) Servicing Fee. On the first day of each month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to Three Thousand Dollars
($3,000) per month.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. The obligation of
Foothill to make the initial Advance is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions on
or before the Closing Date:
(a) the Closing Date shall occur on or before March 21, 1997;
(b) Existing Lender shall have executed and delivered the
Pay-Off Letter, together with UCC termination statements and other documentation
evidencing the termination of its liens and security interests in and to the
properties and assets of Borrower;
(c) Foothill shall have received searches reflecting the filing
of its financing statements (and any comparable Canadian filings); PROVIDED
that, if the transactions contemplated by this Agreement do not close or the
initial Advance is not made by Foothill for any reason, Foothill shall promptly,
upon Borrower's request and at Borrower's expense, deliver to Borrower
termination statements, duly executed by Foothill and in proper form, with
respect to all financing statements (or comparable Canadian filings) that
Foothill has filed against Borrower in any jurisdiction;
(d) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
i) the Lockbox Agreements with respect to each Lockbox
Bank other than the Royal Bank of Canada;
ii) the Disbursement Letter;
iii) the Guarantees;
iv) the Canadian Security Agreements;
v) the Pledge Agreements;
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vi) the Suretyship Agreement; and
(e) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute same;
(f) Foothill shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(g) Foothill shall have received a certificate of status with
respect to Borrower, dated within ten (30) days of the Closing Date, by the
appropriate officer of the jurisdiction of organization of Borrower, which
certificate shall indicate that Borrower is in good standing in such
jurisdiction;
(h) Foothill shall have received certificates of status with
respect to Borrower, each dated within fifteen (40) days of the Closing Date,
such certificates to be issued by the appropriate officer of the jurisdictions
in which its failure to be duly qualified or licensed would have a Material
Adverse Change, which certificates shall indicate that Borrower is in good
standing in such jurisdictions;
(i) Foothill shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.10 hereof,
the form and substance of which shall be satisfactory to Foothill and its
counsel;
(j) [intentionally omitted];
(k) Borrower shall have used its best efforts, to the reasonable
satisfaction of Foothill, to cause Foothill to have received Collateral Access
Agreements from the real property lessors of the premises where the Equipment
consisting of telephone switches or Borrower's AS400 computer system is located,
and from lessors or secured financers of such Equipment to or of Borrower;
(l) Foothill shall have received opinions of Borrower's
California, Canadian, Florida, and special telecommunications outside counsel in
form and substance satisfactory to Foothill in its sole discretion; PROVIDED
that Foothill agrees to bear the lesser of (i) one-half and out-of-pocket
expenses actually incurred by Borrower in obtaining such opinions, as
substantiated by Borrower to Foothill by reasonable documentation, and (ii)
$15,000, by crediting such amount against fees otherwise due from Borrower on
the Closing Date;
(m) Foothill shall have received satisfactory evidence that all
returns
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required to be filed by Borrower have been timely filed and all taxes upon
Borrower or its properties, assets, income, and franchises (including payroll
taxes) have been paid prior to delinquency, except such taxes that are the
subject of a Permitted Protest;
(n) Foothill and Foothill's counsel shall have been provided
with a true and complete copy of each Billing Services Agreement and shall
have had a reasonable opportunity to review each Billing Services Agreement,
and Foothill either (i) shall have advised Borrower that each Billing
Services Agreement is an Approved Billing Services Agreement, or, (ii) as to
any Billing Services Agreements that are not Approved Billing Services
Agreements, Foothill shall have advised Borrower that Foothill nevertheless
is prepared to close (with the LEC Accounts relating to such non-approved
Billing Services Agreements, if any, not constituting Eligible LEC Accounts)
and Borrower shall have agreed in writing to such arrangement with respect to
non-approved Billing Services Agreements;
(o) either (i) Foothill shall have received a LEC Non-Offset
Agreement with respect to each Billing Services Agreement, or (ii) with respect
to any Billing Services Agreement as to which Foothill has not received a LEC
Non-Offset Agreement, Foothill shall have advised Borrower that Foothill
nevertheless is prepared to close (with the LEC Accounts relating to such
Billing Services Agreements, if any, not constituting Eligible LEC Accounts) and
Borrower shall have agreed in writing to such arrangement with respect to
non-approved Billing Services Agreements;
(p) Foothill shall have received and reviewed, and shall have
expressed no objection to, the terms of each Carrier Agreement requested to be
reviewed by Foothill;
(q) Foothill shall have completed a filed survey by its
examiners, and the results shall be acceptable to Foothill;
(r) Foothill shall have received reference checks and personal
credit reports with respect to key management of Borrower and the Principals,
and the results shall be acceptable to Foothill;
(s) Foothill shall have received and reviewed personal financial
statements from each Principal, which shall be acceptable to Foothill;
(t) Except to the extent otherwise provided for in SECTION
3.3(d) AND (e), Foothill shall have received possession of the Pledged Shares
together with duly executed blank stock powers with respect thereto;
(u) On the Closing Date, after giving effect to all payments,
transfers, and transactions contemplated to occur on such date by the Loan
Documents,
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except for, and immediately prior to giving effect to, the payment of any
fees due Foothill on the Closing Date and the reimbursement of any Foothill
Expenses due to be reimbursed on the Closing Date, Borrower shall have Total
Availability of not less than $1,000,000; and
(v) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
In the event the transactions contemplated hereby do not close or Foothill
declines to make the initial Advance hereunder for any reason, then Borrower
shall not be obligated to pay any of the fees set forth in SECTION 2.8, but
Borrower shall be obligated to repay any Foothill Expenses due Foothill.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The following shall be
conditions precedent to all Advances hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the date of such extension of credit, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result
from the making thereof; and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority
against Borrower, Foothill, or any of their Affiliates.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to the making
of the initial Advance, Borrower shall perform or cause to be performed the
following (the failure by Borrower to so perform or cause to be performed
constituting, in the case of SECTIONS 3.3(a) AND (c), an Event of Default
hereunder, and, in the case of SECTION 3.3(b), an event that would entitle
Foothill thenceforth and at all times thereafter to exclude from Eligible
Accounts, and from the Borrowing Base, all Canadian Accounts, without such
exclusion being considered an Availability Reduction hereunder):
(a) within sixty (60) days of the Closing Date, deliver to
Foothill the certified copies of the policies of insurance, together with the
endorsements thereto, as are required by SECTION 6.10 hereof, the form and
substance of which shall be reasonably satisfactory to Foothill and its
counsel;
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(b) within ninety (90) days of the Closing Date, deliver to
Foothill a duly executed original of the Lockbox Agreement with The Royal Bank
of Canada, or such other bank reasonably acceptable to Foothill, which shall be
in full force and effect;
(c) prior to the sixtieth (60th) day following the Closing Date,
Borrower shall have prepared and provided to Foothill a formalized written
contingency plan for backup computer operations, in reasonable detail and
including cost estimates and feasibility analysis, which plan shall be
reasonably satisfactory to Foothill;
(d) within thirty (30) days of the Closing Date, deliver to
Foothill possession of the Pledged Shares in respect of each of (i) WXL
Holdings, Ltd., a corporation organized under the laws of the United Kingdom,
and (ii) WorldXChange Ltd., a corporation organized under the laws of the United
Kingdom, together with duly executed blank stock powers with respect thereto;
(e) within twenty-one (21) days of the Closing date, deliver to
Foothill possession of the Pledged Shares in respect of WorldXChange Pty
Limited, a corporation organized under the laws of Australia, together with duly
executed blank stock powers with respect thereto;
(f) within ninety (90) days of the Closing Date, deliver to
Foothill possession of the Pledged Shares in respect of WorldXChange
Communications SARL, a corporation organized under the laws of France together
with duly executed blank stock powers with respect thereto or otherwise grant a
security interest in such shares to the satisfaction of Foothill, in its
reasonable discretion; and
(g) for the period of sixty (60) days following the Closing
Date, use its reasonable best efforts to open a credit card collection account
with a bank reasonably acceptable to Foothill, and enter into a Lockbox
Agreement with such depositary bank which shall be in full force and effect.
3.4 TERM AND TERMINATION. This Agreement shall become effective upon
the execution and delivery hereof by Borrower and Foothill and shall continue in
full force and effect for a term ending on the date (the "Termination Date")
that is three (3) years from the Closing Date. The foregoing notwithstanding,
Foothill shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including any contingent reimbursement obligations
of Borrower) immediately shall become due and payable without notice or demand.
No termination of this Agreement, however, shall relieve or discharge Borrower
of Borrower's duties, Obligations, or covenants hereunder, and Foothill's
continuing security interests in the
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Collateral shall remain in effect until all Obligations have been fully and
finally discharged and Foothill's obligation to provide additional credit
hereunder is terminated.
3.6 EARLY TERMINATION BY BORROWER. The provisions of SECTION 3.4
that allow termination of this Agreement by Borrower only on the Termination
Date notwithstanding, Borrower has the option, at any time upon thirty (30) days
prior written notice to Foothill, to terminate this Agreement by paying to
Foothill, in cash, the Obligations, in full, together with a premium (the "Early
Termination Premium") equal to the Applicable Percentage of the Maximum Amount.
The foregoing notwithstanding, no Early Termination Premium shall be due under
this SECTION 3.6 if Borrower terminates this Agreement and repays the
Obligations (other than the Early Termination Premium) in full in cash during
any No-Premium Window.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates
this Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be
the amount of damages sustained by Foothill as the result of the early
termination and Borrower agrees that it is reasonable under the circumstances
currently existing. The Early Termination Premium provided for in this
SECTION 3.7 shall be deemed included in the Obligations. The foregoing
notwithstanding, no Early Termination Premium shall be due under this SECTION
3.7, if: (a) Following a termination of this Agreement by Foothill, the
Obligations (other than the Early Termination Premium) are repaid in full in
cash during any No-Premium Window, other than a No-Premium Window that first
commences after the date of termination of this Agreement by Foothill; or (b)
Foothill terminates this Agreement based solely upon the existence of one or
more Events of Default that result directly and proximately from the
occurrence of (y) one or more MAC-Related Events of Default, or (z) one or
more Availability Reductions that, taken together, gave rise to an
Availability Contraction Date, in any such instance at a time when no other
Events of Default have occurred and are continuing.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Foothill a
continuing security interest in all currently existing and hereafter acquired or
arising Personal Property Collateral in order to secure prompt repayment of any
and all Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents. Foothill's security
interests in the Personal Property Collateral shall attach to all Personal
Property Collateral without further act on the part of Foothill or Borrower.
Anything contained in this Agreement or any other Loan Document to the contrary
notwithstanding and except as expressly and explicitly
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permitted under the provisions of this Agreement or the other Loan Documents,
except for the sale of Inventory to buyers in the ordinary course of business,
the sale of Equipment in the ordinary course of business, and the sale of
Permitted Ordinary Course Investments in the ordinary course of business, or the
sale by Borrower with Foothill's prior written consent of Collateral which has
become obsolete or is to be replaced, which consent by Foothill shall not
unreasonably be withheld or delayed, Borrower has no authority, express or
implied, to dispose of any item or portion of the Personal Property Collateral
or any Real Property. Anything contained in the Canadian Security Agreements to
the contrary notwithstanding, the collateral covered by the Canadian Security
Agreements shall not include any Excluded Property.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Foothill, shall endorse and deliver
physical possession of such Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time that an Event of Default has occurred and is continuing
or Foothill reasonably (from the perspective of a reasonable secured lender)
deems itself insecure (in accordance with Section 1208 of the Code), Foothill or
Foothill's designee may (a) notify customers (PROVIDED that, with respect to
end-user customers, in relation to LEC Accounts, Foothill or Foothill's designee
may notify such end-user customers only if Borrower, at the time of the giving
of such notice, has the right to deal directly with such end-user customers
under the provisions of the applicable Billing Services Agreements with the
applicable LECs) or Account Debtors of Borrower that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Foothill or that
Foothill has a security interest therein, and (b) collect the Accounts, General
Intangibles, and Negotiable Collateral directly and charge the collection costs
and expenses to the Loan Account (PROVIDED that, with respect to end-user
customers, in relation to LEC Accounts, Foothill or Foothill's designee may
collect directly from such end-user customers only if Borrower, at the time of
such collection, has the right to deal directly with such end-user customers
under the provisions of the applicable Billing Services Agreements with the
applicable LECs). Borrower agrees that it will hold in trust for Foothill, as
Foothill's trustee, any Collections that it receives and immediately will
deliver said Collections to Foothill in their original form as received by
Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon
the request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, chattel mortgages, Mortgages, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Foothill reasonably may request, in form reasonably satisfactory
to Foothill, to perfect and continue perfected Foothill's security interests in
the
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Collateral, and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents. Without limiting
the generality of the foregoing, Foothill shall be entitled to receive, promptly
upon written demand by Foothill given to Borrower at any time after the Closing
Date, or from time to time thereafter, in Foothill's sole discretion, original
certificates of title, together with duly executed applications in the proper
form for notation of the lien of Foothill thereon, with respect to that portion
of the Collateral, if any, that at any time is subject to certificates of title.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers,
employees, or agents designated by Foothill) as Borrower's true and lawful
attorney, with power to (a) if Borrower refuses to, or fails timely to
execute and deliver any of the documents described in SECTION 4.4, sign the
name of Borrower on any of the documents described in SECTION 4.4, (b) at any
time that an Event of Default has occurred and is continuing or Foothill
reasonably (from the perspective of a reasonable secured lender) deems itself
insecure (in accordance with Section 1208 of the Code), sign Borrower's name
on any invoice or ▇▇▇▇ of lading relating to any Account, drafts against
Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors, (c) send requests for verification
of Accounts, (d) endorse Borrower's name on any Collection item that may come
into Foothill's possession, (e) at any time that an Event of Default has
occurred and is continuing or Foothill reasonably (from the perspective of a
reasonable secured lender) deems itself insecure (in accordance with Section
1208 of the Code), notify the post office authorities to change the address
for delivery of Borrower's mail to an address designated by Foothill, to
receive and open all mail addressed to Borrower, and to retain all mail
relating to the Collateral and forward all other mail to Borrower, (f) at any
time that an Event of Default has occurred and is continuing or Foothill
reasonably (from the perspective of a reasonable secured lender) deems itself
insecure (in accordance with Section 1208 of the Code), make, settle, and
adjust all claims under Borrower's policies of insurance and make all
determinations and decisions with respect to such policies of insurance, and
(g) at any time that an Event of Default has occurred and is continuing or
Foothill reasonably (from the perspective of a reasonable secured lender)
deems itself insecure (in accordance with Section 1208 of the Code), settle
and adjust disputes and claims respecting the Accounts directly with Account
Debtors, for amounts and upon terms that Foothill reasonably determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill reasonably determines to be necessary. The
appointment of Foothill as Borrower's attorney, and each and every one of
Foothill's rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully and finally repaid and performed
and Foothill's obligation to extend credit hereunder is terminated.
4.6 RIGHT TO INSPECT. At any time that an Event of Default has
occurred and is continuing or Foothill reasonably (from the perspective of a
reasonable secured lender) deems itself insecure (in accordance with Section
1208 of the Code), Foothill
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(through any of its officers, employees or agents) shall have the right, from
time to time hereafter to inspect Borrower's Books and to check, test, and
appraise the Collateral in order to verify Borrower's financial condition or the
amount, quality, value, condition of, or any other matter relating to, the
Collateral. At any other time, Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter at
reasonable times and in a reasonable manner (including periodic audits, as
customarily conducted by Foothill of its customers, which are stipulated to be
reasonable), to inspect Borrower's Books and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Foothill as follows:
5.1 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title
to the Collateral, free and clear of liens, claims, security interests, or
encumbrances, except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are, at the time of the
creation thereof and as of each date on which Borrower includes them in a
Borrowing Base calculation or certification, except to the extent any such
Accounts, or any portions thereof, are identified as ineligible and excluded by
Borrower from its calculation or certification of the Borrowing Base, bona fide
existing obligations created by the sale and delivery of Inventory or General
Intangibles or the rendition of services to Account Debtors in the ordinary
course of Borrower's business, unconditionally (except for conditions that would
not render such Account ineligible) owed to Borrower without defenses, disputes,
offsets, counterclaims, or rights of return or cancellation that would render
them ineligible pursuant to the other provisions of this Agreement. Except with
respect to Eligible Private Line Accounts, the property giving rise to such
Eligible Accounts has been delivered or provided to the Account Debtor, or to
the Account Debtor's agent for immediate shipment or delivery to and
unconditional acceptance by the Account Debtor. At the time of the creation of
an Eligible Account and as of each date on which Borrower includes an Eligible
Account in a Borrowing Base calculation or certification, Borrower has not
received actual notice of actual or imminent bankruptcy, insolvency, or material
impairment of the financial condition of any applicable Account Debtor regarding
such Eligible Account that those Authorized Officers of Borrower having direct
responsibility for or involvement in the determination of the Borrowing Base,
and the determination of which Accounts are Eligible Accounts, believe is likely
materially to impair the collectibility of such Eligible Account.
5.3 EQUIPMENT. All of the Equipment owned by Borrower is used or
held for use in Borrower's business and is fit for such purposes.
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5.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment
are not stored with a bailee, warehouseman, or similar party (without Foothill's
prior written consent) and are located only at the locations identified on
SCHEDULE 6.13 or otherwise permitted by SECTION 6.13.
5.5 INVENTORY RECORDS. Borrower now keeps, and hereafter at all
times shall keep, materially correct and accurate records itemizing and
describing the kind, type, quality, and quantity of any Inventory, and
Borrower's cost therefor.
5.6 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN OR EQUIVALENT. The
chief executive office of Borrower is located at the addresses indicated in the
preamble to this Agreement or such other location(s) where Borrower moves with
prior notice to Foothill as required herein (which notice shall specifically
reference any change of chief executive office if such move involves a change of
chief executive office). The FEIN of WXCC is ▇▇-▇▇▇▇▇▇▇. The FEIN of CTST is
▇▇-▇▇▇▇▇▇▇. The Canadian Corporate Income Tax Number of WXLC is 14058-0960RC.
The Canadian GST Tax Number of WXLC is 14058-0960RT. WXLC does not have, and is
not required by law to have, a FEIN.
5.7 DUE ORGANIZATION AND QUALIFICATION; NO SUBSIDIARIES EXCEPT AS
DISCLOSED. Borrower is duly organized and existing and in good standing under
the laws of the jurisdiction of its incorporation and qualified and licensed to
do business in, and in good standing in, any state where the failure to be so
licensed or qualified could reasonably be expected to have a Material Adverse
Change. Borrower has no Subsidiaries except as specifically disclosed on
SCHEDULE 5.7, or created after the Closing Date as permitted by SECTION 7.14
hereof.
5.8 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance of the Loan Documents are within Borrower's corporate powers, have
been duly authorized, and are not in conflict with nor constitute a breach of
any provision contained in Borrower's Articles or Certificate of Incorporation,
or By-laws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which its properties or assets may
be bound.
5.9 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters disclosed on
SCHEDULE 5.9; and (c) matters arising after the date hereof that a reasonable
Person, fully informed of all relevant particulars with respect thereto then
known, would not reasonably conclude are likely to result in a Material Adverse
Change.
5.10 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
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Borrower or any guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, (a) in
the case of Borrower's unaudited financial statements, for the lack of footnotes
and being subject to year-end audit adjustments, and (b) in the case of
Guarantor's unaudited financial statements which are not prepared in accordance
with GAAP) and fairly present Borrower's (or such guarantor's, as applicable)
financial condition as of the date thereof and Borrower's results of operations
for the period then ended. There has not been a Material Adverse Change with
respect to Borrower (or such guarantor, as applicable) since the date of the
latest financial statements submitted to Foothill on or before the Closing Date.
5.11 SOLVENCY. Borrower is Solvent. No transfer of property is being
made by Borrower and no obligation is being incurred by Borrower in connection
with the transactions contemplated by this Agreement or the other Loan Documents
with the intent to hinder, delay, or defraud either present or future creditors
of Borrower.
5.12 EMPLOYEE BENEFITS. (a) No Borrower or any ERISA Affiliate
thereof maintains or contributes to any Benefit Plan, other than those listed
on SCHEDULE 5.12. (b) Each Borrower and each ERISA Affiliate thereof have
satisfied the minimum funding standards of ERISA and the IRC with respect to
each Benefit Plan to which it is obligated to contribute. (c) No ERISA Event
has occurred nor has any other event occurred that may result in an ERISA
Event that reasonably could be expected to result in a Material Adverse
Change. (d) No Borrower or any ERISA Affiliate thereof, or any fiduciary of
any Plan is subject to any direct or indirect liability with respect to any
Plan under any applicable law, treaty, rule, regulation, or agreement that
reasonably could be expected to result in a Material Adverse Change. (e) No
Borrower or any ERISA Affiliate thereof is required to provide security to
any Plan under Section 401(a)(29) of the IRC.
5.13 ENVIRONMENTAL CONDITION. None of Borrower's properties or assets
has ever been used by Borrower or, to the best of Borrower's knowledge, by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any Hazardous Materials, except for halon gas and
batteries. None of Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, or a candidate for closure pursuant to any
environmental protection statute. No lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned or operated by Borrower. Borrower has not received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency concerning any action or omission by
Borrower resulting in the releasing or disposing of Hazardous Materials into the
environment.
5.14 RELIANCE BY FOOTHILL; CUMULATIVE. Each warranty and
representation contained in this Agreement automatically shall be deemed
repeated with each extension of credit hereunder and shall be conclusively
presumed to have been relied on by Foothill
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regardless of any investigation made or information possessed by Foothill. The
warranties and representations set forth herein shall be cumulative and in
addition to any and all other warranties and representations that Borrower now
or hereafter shall give, or cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system of
accounting in accordance with GAAP with ledger and account cards or computer
tapes, disks, printouts, and records pertaining to the Collateral which contain
information as from time to time may be reasonably requested by Foothill.
6.2 COLLATERAL REPORTING. Provide Foothill with the following
documents at the following times in form reasonably satisfactory to Foothill:
(a) at least weekly, (i) a sales journal, and collection register containing
all entries since the last such journals and register delivered hereunder,
(ii) a calculation of the Borrowing Base, (iii) a report summarizing all
written disputes or claims with respect to Accounts received by Borrower and
not previously reported to Foothill, (iv) a report with respect to unbilled
Direct Accounts of Borrower, (v) a report detailing Contra Accounts with
respect to Eligible Direct Accounts and Eligible Unbilled Direct Accounts,
(vi) a report calculating the aggregate outstanding accrued and unpaid
obligations of Borrower to U.S. West, as of the last day of the week most
recently ended, with respect to connection or access charges, and detailing
any accruals or payments with respect thereto that occurred during such week,
(vii) a report calculating the aggregate outstanding accrued and unpaid
obligations of Borrower to LECs, as of the last day of the week most recently
ended, with respect to billing and collection charges payable under Billing
Services Agreements, and detailing any accruals or payments with respect
thereto that occurred during such week, and (viii) a report of all
transactions involving any transfer, sale, or submission of Accounts by
Borrower to ZPDI, or advances or payments by ZPDI to Borrower, in such detail
as reasonably may be requested by Foothill to enable Foothill to verify that
no such ZPDI Accounts are included within any calculation of the Borrowing
Base, (b) on a monthly basis and, in any event, by no later than the
fifteenth (15th) day of each month during the term of this Agreement, (i) a
report detailing all Collections received in any Canadian Lockbox Account
during the preceding month, for purposes of enabling Foothill to calculate
'clearance' or 'float' charges with respect thereto, and (ii) a detailed
aging, by total, of the Accounts, together with such information as Foothill
shall reasonably request to permit Foothill to prepare a reconciliation of
such aging of Accounts to Foothill's month-end calculation of the Borrowing
Base as of the end of the month most recently ended, as calculated by
Foothill's collateral tracking system, (c) on a monthly basis and, in any
event,
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by no later than the twentieth (20th) day of each month during the term of this
Agreement, a summary aging, by vendor, of Borrower's accounts payable and any
book overdraft, (d) upon reasonable request, copies of invoices in connection
with the Accounts, customer statements, credit memos, remittance advices and
reports, deposit slips, and purchase orders and invoices, and (e) such other
reports as to the Collateral or the financial condition of Borrower as Foothill
reasonably may request from time to time. Borrower shall ▇▇▇▇ Account Debtors
with respect to Direct Accounts within 45 days after the close of any monthly
billing period.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Foothill: (a) as soon as available, but in any event within forty-five (45)
days after the end of each month during each of WXCC and WXLC's fiscal years,
an internally-prepared balance sheet, an internally-prepared income
statement, and (if and only if available) an internally-prepared cash flow
statement covering WXCC and WXLC's consolidated operations during such
period, together with a report estimating the aggregate amount, as of the end
of such month, of all Telecommunication Taxes payable by WXCC and WXLC in
respect of their business activities in the State of Texas or any other state
where Foothill determines pursuant to SECTION 2.1 that a Telecommunication
Tax Reserve is necessary; (b) as soon as available, but in any event not
later than April 1, 1997 for each of WXCC and WXLC's 1996 fiscal years, and
within one hundred fifty (150) days after the end of each of WXCC and WXLC's
subsequent fiscal years, consolidated financial statements of WXCC and WXLC
for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Foothill and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP, together with a certificate of such accountants addressed to Foothill
stating that such accountants do not have knowledge of the existence of any
Default or Event of Default then continuing; and (c) if the same are obtained
by WXCC and WXLC, as soon as available, but in any event within one hundred
fifty (150) days after the end of the first two fiscal quarters of each of
WXCC and WXLC's fiscal years, consolidated financial statements of WXCC and
WXLC for such two fiscal quarters, audited by independent certified public
accountants reasonably acceptable to Foothill and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP. Such audited financial statements shall include a balance sheet,
profit and loss statement, and cash flow statement, and, if prepared, such
accountants' letter to management. If WXCC or WXLC is a parent company of
one or more Subsidiaries or is a Subsidiary of another company, then, in
addition to the financial statements referred to above, but without
duplication, WXCC and WXLC agree to deliver financial statements prepared on
a consolidating basis so as to present WXCC and WXLC and each such related
entity separately, and on a consolidated basis.
CTST in addition shall deliver to Foothill, as soon as available, but
in any event within forty-five (45) days after the end of each month during each
of CTST's fiscal years, a company prepared balance sheet and income statement
covering CTST's operations during such period, together with a report estimating
the aggregate amount, as of the end
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of such month, of all Telecommunication Taxes payable by CTST in respect of any
business activities in the State of Texas or any other state where Foothill
determines pursuant to SECTION 2.1 that a Telecommunication Tax Reserve is
necessary.
If CTST hereafter obtains audited annual financial statements, CTST in
addition shall deliver to Foothill, as soon as available, but in any event
within one hundred fifty (150) days after the end of each of its fiscal years
with respect to which such audited financial statements are to be obtained,
financial statements of CTST for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Foothill and certified,
without any qualifications, by such accountants to have been prepared in
accordance with GAAP, together with a certificate of such accountants addressed
to Foothill stating that such accountants do not have knowledge of the existence
of any Default or Event of Default then continuing. Such audited financial
statements shall include a balance sheet, profit and loss statement, and cash
flow statement, and, if prepared, such accountants' letter to management.
With respect to any fiscal year of CTST for which its gross
revenues were greater than or equal to $27,000,000, if the preceding
paragraph hereof is not otherwise applicable because CTST has not itself
determined to obtain audited financial statements, Foothill shall have the
right, upon written request to CTST, to require CTST to obtain audited
financial statements with respect to such fiscal year, and related
accountant's certifications, in compliance with the foregoing paragraph,
except that such items shall be due the earlier of (a) the soonest date that
they are available following Foothill's request, and (ii) one hundred fifty
(150) days after Foothill's request, which request shall not be made until
after the last day of the fiscal year with respect to which such financial
statements relate at such time as it has been ascertained with reasonable
assurance that the gross revenues of CTST for such fiscal year were in fact
greater than or equal to $27,000,000.
Together with the above, Borrower also shall deliver to Foothill
Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by Borrower with the Securities and
Exchange Commission, if any, as soon as the same are filed, or any other
information that is provided by Borrower to its shareholders, and any other
report reasonably requested by Foothill relating to the financial condition of
Borrower.
Each month, together with the financial statements provided pursuant
to SECTION 6.3(a), Borrower shall deliver to Foothill a certificate signed by
its chief financial officer to the effect that: (i) all reports, statements, or
computer prepared information of any kind or nature delivered or caused to be
delivered to Foothill hereunder have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
the financial condition of Borrower, (ii) the representations and warranties of
Borrower
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contained in this Agreement and the other Loan Documents are true and correct in
all material respects on and as of the date of such certificate, as though made
on and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date), (iii) for each month that also is
the date on which a financial covenant in SECTION 6.11 is to be tested, a
Compliance Certificate demonstrating in reasonable detail compliance at the end
of such period with the applicable financial covenants contained in SECTION
6.11, and (iv) on the date of delivery of such certificate to Foothill there
does not exist any condition or event that constitutes a Default or Event of
Default (or, in each case, to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action Borrower
has taken, is taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning Borrower that
Foothill may request. Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Foothill, at
Borrower's expense, copies of Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their possession, and to
disclose to Foothill any information they may have regarding Borrower's business
affairs and financial conditions.
Notwithstanding any other provision contained herein, Foothill shall
not be entitled to obtain any information that Borrower reasonably and in good
faith claims is protected by any attorney-client or attorney-work-product
privileges, and nothing herein shall constitute any waiver by Borrower of such
privileges.
6.4 TAX RETURNS. Deliver to Foothill copies of each of Borrower's
future federal income tax returns, and any amendments thereto, within thirty
(30) days of the filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. Cause any guarantor of any of the Obligations
to deliver its annual financial statements at the time when Borrower provides
its audited financial statements to Foothill and copies of all federal income
tax returns as soon as the same are available and in any event no later than
thirty (30) days after the same are required to be filed by law.
6.6 RETURNS. Returns and allowances, if any, as between Borrower and
its Account Debtors shall be on the same basis and in accordance with the usual
customary practices of Borrower, as they exist at the time of the execution and
delivery of this Agreement, or as reasonably revised by Borrower hereafter with
notice to Foothill.
6.7 TITLE TO EQUIPMENT. Upon Foothill's request, Borrower
immediately shall deliver to Foothill, properly endorsed, any and all evidences
of ownership of,
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certificates of title, or applications for title to any items of Equipment.
6.8 MAINTENANCE OF EQUIPMENT. Maintain all material Equipment in
good operating condition and repair (ordinary wear and tear excepted), and make
all necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved unless Borrower
reasonably determines that replacement is not warranted considering all of the
relevant circumstances. Borrower shall not permit any item of Equipment to
become a fixture to real estate or an accession to the other property, and the
Equipment is now and shall at all times remain personal property.
6.9 TAXES. Except to the extent that Borrower is engaging in a
Permitted Protest thereof, all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property shall be paid in full, before delinquency or before the
expiration of any extension period. Except to the extent that Borrower is
engaging in a Permitted Protest thereof, Borrower shall make due and timely
payment or deposit of all federal, state, and local taxes, assessments, or
contributions required of it by law, and will execute and deliver to Foothill,
on demand, appropriate certificates attesting to the payment thereof or deposit
with respect thereto. Except to the extent that Borrower is engaging in a
Permitted Protest thereof, Borrower will make timely payment or deposit of all
tax payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Foothill with proof
reasonably satisfactory to Foothill indicating that Borrower has made such
payments or deposits.
6.10 INSURANCE.
(a) At its expense, keep the Personal Property Collateral and
any Real Property insured against loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in such amounts, as are
ordinarily insured against by other owners in similar businesses. Borrower also
shall maintain business interruption, public liability, product liability, and
property damage insurance relating to Borrower's ownership and use of the
Personal Property Collateral and any Real Property, as well as insurance against
larceny, embezzlement, and criminal misappropriation.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All such policies of insurance (except those of public liability and
property damage) shall contain a 438BFU lender's loss payable endorsement, or an
equivalent endorsement in a form satisfactory to Foothill, showing Foothill as
an additional loss payee thereof, as its interests may appear, and shall contain
a waiver of warranties, and shall specify that the insurer must give at least
ten (10) days prior written notice to Foothill before canceling its policy for
any reason. Borrower shall deliver to Foothill certified copies of such
policies of
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insurance and evidence of the payment of all premiums therefor. All proceeds
payable under any insurance policy relating to business interruption insurance
coverage shall be paid to Borrower unless an Event of Default has occurred and
is continuing, in which case all such proceeds shall be paid to Foothill to be
applied on account of the Obligations. Except as otherwise provided in the
immediately preceding sentence, all proceeds payable under any policy of
insurance required by this SECTION 6.10 shall be paid to Foothill to be applied
on account of the Obligations.
6.11 FINANCIAL COVENANT. Maintain consolidated net worth determined
in accordance with GAAP of Borrower and its Subsidiaries (but excluding CTST and
any Subsidiaries of CTST from such calculation) of not less than the Specified
Amount, measured on a fiscal quarter-end basis.
6.12 NO SETOFFS OR COUNTERCLAIMS. All payments hereunder and under
the other Loan Documents made by or on behalf of Borrower shall be made
without setoff or counterclaim and free and clear of, and without deduction
or withholding for or on account of, any federal, state, or local taxes.
6.13 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on SCHEDULE 6.13; PROVIDED, HOWEVER,
that Borrower may amend SCHEDULE 6.13 so long as such amendment occurs by
written notice to Foothill not less than thirty (30) days prior to the date on
which the Inventory or Equipment is moved to such new location, so long as such
new location is within the continental United States (or, solely with respect to
Equipment of which Borrower is a lessee but not the owner, so long as such new
location is a location where a Subsidiary of Borrower is located), and so long
as, at the time of such written notification, Borrower provides any financing
statements, fixture filings, or comparable filings necessary to perfect and
continue perfected Foothill's security interests in such assets and also
provides to Foothill a Collateral Access Agreement.
6.14 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would or could reasonably be expected to have
a Material Adverse Change.
6.15 EMPLOYEE BENEFITS.
(a) Cause to be delivered to Foothill each of the following:
(i) promptly, and in any event within ten (10) Business Days after such Borrower
or any of its Subsidiaries knows or has reason to know that an ERISA Event has
occurred that reasonably could be expected to result in a Material Adverse
Change, a written statement of the Chief financial officer of such Borrower
describing such ERISA Event and any action
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that is being taken with respect thereto by such Borrower, any such
Subsidiary, or ERISA Affiliate thereof, and any action taken or threatened by
the IRS, Department of Labor, or PBGC. Such Borrower or such Subsidiary, as
applicable, shall be deemed to know all facts known by the administrator of
any Benefit Plan of which it is the plan sponsor, (ii) promptly, and in any
event within three (3) Business Days after the filing thereof with the IRS, a
copy of each funding waiver request filed with respect to any Benefit Plan
and all communications received by such Borrower, any of its Subsidiaries or,
to the knowledge of such Borrower, any ERISA Affiliate thereof with respect
to such request, and (iii) promptly, and in any event within three (3)
Business Days after receipt by such Borrower, any of its Subsidiaries or, to
the knowledge of such Borrower, any ERISA Affiliate thereof, of the PBGC's
intention to terminate a Benefit Plan or to have a trustee appointed to
administer a Benefit Plan, copies of each such notice.
(b) Cause to be delivered to Foothill, upon Foothill's request,
each of the following: (i) a copy of each Plan (or, where any such plan is not
in writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of such Borrower or any ERISA
Affiliate thereof; (ii) the most recent determination letter issued by the IRS
with respect to each Benefit Plan; (iii) for the three most recent plan years,
annual reports on Form 5500 Series required to be filed with any governmental
agency for each such Benefit Plan; (iv) all actuarial reports prepared for the
last three plan years for each such Benefit Plan; (v) a listing of all
Multiemployer Plans, with the aggregate amount of the most recent annual
contributions required to be made by Borrower or any ERISA Affiliate thereof to
each such plan and copies of the collective bargaining agreements requiring such
contributions; (vi) any information that has been provided to Borrower or any
ERISA Affiliate thereof regarding withdrawal liability under any Multiemployer
Plan; and (vii) the aggregate amount of the most recent annual payments made to
former employees of such Borrower or its Subsidiaries under any Retiree Health
Plan.
6.16 LEASES. Pay not later than the earlier of (a) the sixtieth
(60th) day after the date when first due, or (b) the last day prior to the
date when failure to pay same would create a material default that would
entitle the obligee with respect thereto to take enforcement action against
Borrower, all rents and other amounts payable under any leases to which
Borrower is a party or by which Borrower's properties and assets are bound,
unless such payments are the subject of a Permitted Protest. To the extent
that Borrower fails timely to make payment of such rents and other amounts
payable when required by this SECTION 6.16, Foothill shall be entitled, in
its sole discretion, and without the necessity of declaring an Event of
Default, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
6.17 PERFORMANCE OF OBLIGATIONS TO CARRIERS. Except as otherwise
specifically excepted by SCHEDULE 6.17, from and after August 1, 1997, make all
payments
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due from it to Carriers within ninety (90) days of their due date, and
otherwise comply in all material respects with Borrower's non-monetary
contractual obligations to Carriers; PROVIDED that Borrower shall not be in
breach of this section by virtue of claiming permitted credits and
deductions, or by virtue of immaterial breaches that would not permit
Carriers to enforce default remedies. Should Borrower acquire knowledge that
Borrower is in breach of this section, or should Borrower receive a written
default notice from any Carrier, in each such instance Borrower promptly
shall notify Foothill of same and all relevant details pertaining thereto.
If Foothill reasonably determines that Borrower is in breach of the
requirements of this SECTION 6.17, and that such breach may have an adverse
effect upon the value or collectibility of the Accounts (such as, by way of
illustration but not by way of limitation, where a Carrier threatens to
contact customers of Borrower and give notices or assert demands that could
confuse such customers or interfere with collection of the affected Accounts
by Borrower or Foothill), then Foothill in the reasonable exercise of its
discretion may elect to pay to such Carrier amounts claimed by such Carrier
to be due from Borrower, whereupon such amounts so paid by Foothill shall
become Foothill Expenses immediately due and payable from Borrower to
Foothill.
6.18 LEC AND CARRIER AGREEMENTS. From time to time, if and as
requested by Foothill, Borrower shall deliver to Foothill copies of all Billing
Services Agreements, Carrier Agreements, and/or other material agreements in
effect between Borrower and LECs or Carriers; PROVIDED that if any such
agreement contains confidentiality restrictions, Foothill will agree to
reasonable restrictions upon the use or dissemination of such agreement by
Foothill.
6.19 BROKERAGE INDEMNITY. Pay any and all brokerage commissions or
finder's fees incurred in connection with or as a result of Borrower's
obtaining financing from Foothill under this Agreement, and indemnify and hold
Foothill harmless from and against any claim of a broker or finder for the
payment of any brokerage commission or finder's fee arising out of Borrower's
obtaining financing from Foothill under this Agreement, except for any such
commissions or fees payable as a result of contractual obligations created by
Foothill.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not do any of the following without Foothill's prior written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
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(b) Indebtedness set forth in the latest financial statements of
Borrower submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens;
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c), (e), (f), or (g) of this SECTION 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so long
as: (i) the terms and conditions of such refinancings, renewals, or
extensions do not materially impair the prospects of repayment of the
Obligations by Borrower, (ii) the net cash proceeds of such refinancings,
renewals, or extensions do not result in an increase in the aggregate
principal amount of the Indebtedness so refinanced, renewed, or extended,
(iii) such refinancings, renewals, refundings, or extensions do not result in
a shortening of the average weighted maturity of the Indebtedness so
refinanced, renewed, or extended, and (iv) to the extent that Indebtedness
that is refinanced was subordinated in right of payment to the Obligations,
then the subordination terms and conditions of the refinancing Indebtedness
must be at least as favorable to Foothill as those applicable to the
refinanced Indebtedness;
(e) unsecured Indebtedness subject to Subordination Agreements,
to the extent that Foothill has determined to Foothill's reasonable satisfaction
(which such determination shall not be unreasonably withheld or delayed by
Foothill following receipt by Foothill from Borrower of cash flow projections
sufficient in Foothill's reasonable judgment to allow Foothill to make such
determination) that the projected cash flow of Borrower is sufficient to support
Borrower's projected interest, principal, and other payment obligations with
respect to such Indebtedness in addition to Borrower's other cash flow
requirements;
(f) Indebtedness specifically described on SCHEDULE 7.1 hereto
that is outstanding on the Closing Date;
(g) Guarantees by Borrower of Indebtedness of Subsidiaries of
Borrower to the extent that such guarantees are Permitted Subsidiary
Investments; and
(h) Unsecured reimbursement obligations of Borrower to issuers
of letters of credit issued for the account of Borrower, including contingent
reimbursement obligations with respect to undrawn letters of credit, and
including non-contingent reimbursement obligations with respect to draws honored
by issuers of such letters of credit, not to exceed $250,000 in the aggregate at
any one time.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including liens that are replacements of
Permitted Liens to the extent that the
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original Indebtedness is refinanced under SECTION 7.1(d) and so long as the
replacement liens only encumber those assets or property that secured the
original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any acquisition,
merger, consolidation, reorganization, or recapitalization, or reclassify its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business, property, or assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or substantially all
of the properties, assets, stock, or other evidence of beneficial ownership of
any Person (other than the creation of a new Subsidiary as and to the extent
permitted in SECTION 7.14 of this Agreement); PROVIDED that nothing in this
SECTION 7.3 shall limit the right of Borrower to conduct one or more public or
private offerings of equity, or of Indebtedness permitted by SECTION 7.1(e) of
this Agreement, in each case in compliance with applicable law.
7.4 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Except as
otherwise expressly and explicitly permitted by this Agreement, except for the
sale of Inventory to buyers in the ordinary course of business, the sale of
Equipment in the ordinary course of business, and the sale of Permitted Ordinary
Course Investments in the ordinary course of business, or the sale by Borrower
with Foothill's prior written consent of Collateral which has become obsolete or
is to be replaced, which consent by Foothill shall not unreasonably be withheld
or delayed, enter into any transaction not in the ordinary course of Borrower's
business, including the sale, lease, or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise, of any of Borrower's
properties or assets (other than sales of Inventory to buyers in the ordinary
course of Borrower's business as currently conducted, or as permitted by SECTION
4.1 hereof) or relocations in connection with Borrower's relocation to a new
place of business as permitted by this Agreement; PROVIDED that nothing in this
SECTION 7.4 shall limit the right of Borrower to conduct one or more public or
private offerings of equity, or of Indebtedness permitted by SECTION 7.1(e) of
this Agreement, in each case in compliance with applicable law. In addition,
Borrower shall not, without the prior written consent of Foothill in each
instance, sell to ZPDI, transfer to ZPDI, assign to ZPDI, or submit for
processing to ZPDI any Account that in turn is to be sold, transferred,
assigned, or submitted by ZPDI to a LEC with which Borrower directly is party to
a Billing Services Agreement that would entitle Borrower directly to submit such
Account to such LEC for billing and payment pursuant to such Billing Services
Agreement between Borrower and such LEC. Anything in the forgoing to the
contrary notwithstanding, Borrower may sell, transfer, assign or submit to ZPDI
for processing, free of Foothill's security interest, Accounts which arise
solely from operator service traffic, PROVIDED, HOWEVER, that Foothill's
security interest shall attach to the proceeds of any such Accounts sold,
transferred, assigned, or submitted to ZPDI for processing, consisting of rights
to payment from ZPDI.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate structure
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(within the meaning of Section 9402(7) of the Code), or identity, or add any new
fictitious name, in each case without the prior written consent of Foothill,
which consent, in each case, shall not be unreasonably withheld or delayed.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Foothill, except for guarantees of the
Indebtedness of Subsidiaries of Borrower to the extent permitted by SECTION
7.1(g) of this Agreement, and except for reimbursement obligations with respect
to letters of credit to the extent permitted by SECTION 7.1(h) of this
Agreement.
7.7 RESTRUCTURE. Make any change in the principal nature of
Borrower's business operations, or the date of its fiscal year, without the
prior written consent of Foothill, which consent shall not be unreasonably
withheld or delayed.
7.8 PREPAYMENTS; SUBORDINATED INDEBTEDNESS; MODIFICATIONS. Except in
connection with the refinancing permitted by SECTION 7.1(d):
(a) prepay, redeem, retire (except at maturity and in accordance
with clause (b), where applicable), defease, purchase, or otherwise acquire any
Indebtedness owing to any third Person, other than the Obligations in accordance
with this Agreement;
(b) pay any principal with respect to any Indebtedness that is
subordinated to the Obligations under a Subordination Agreement (regardless of
the maturity or principal amortization terms of such subordinated Indebtedness
as between Borrower and the holders thereof), or make any payment with respect
to such subordinated Indebtedness in violation of the terms of the Subordination
Agreement applicable thereto (giving maximum effect to any optional or
discretionary right of Borrower to subordinate or defer payment of such
subordinated Indebtedness to payment of the Obligations), PROVIDED, HOWEVER,
that Borrower may make principal payments with respect to such subordinated
Indebtedness (i) during any fiscal year in an amount not to exceed $300,000, so
long as after giving effect to such payment, Borrower has Total Availability of
not less than $1,000,000, and (ii) during any fiscal year in an amount in excess
of $300,000 so long as (y) at the time of the making of such payment, Borrower
has a consolidated net worth equal to the Specified Amount plus $5,000,000, or
greater, and (z) so long as after giving effect to such payment, Borrower has
Total Availability of not less than $2,000,000; and
(c) directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under SECTIONS 7.1(b), (c), (d), (e), (f), OR (g), without the prior written
consent of Foothill, which Foothill shall not
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unreasonably withhold or delay if the combined effect of such amendments,
modifications, alterations, or changes would be permitted under the criteria set
forth in SECTION 7.1(d) if the agreements, instruments, documents, indentures,
or other writings so amended, modified, altered, or changed, as so amended,
modified, altered, or changed, were entered into by Borrower with a new creditor
as a refinancing, renewal, or extension pursuant to such SECTION 7.1(d) of the
Indebtedness being so amended, modified, altered, or changed.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CAPITAL EXPENDITURES. Make any capital expenditures in excess of
the Permitted Capital Expenditure Amount during in any fiscal year.
7.11 CONSIGNMENTS. Consign any Inventory or sell any Inventory on
▇▇▇▇ and hold, sale or return, sale on approval, or other conditional terms of
sale, except for the issuance of pre-paid calling cards with respect to which
Borrower's reasonably estimated total financial exposure shall not at any time
exceed $500,000 in the aggregate.
7.12 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding, except that, so long as no Event of
Default has occurred and is continuing, (a) WXCC may declare and pay regularly
scheduled dividends with respect to its preferred stock outstanding on the
Closing Date, in accordance with the rights, preferences, and terms of such
preferred stock as in effect on the Closing Date, and (b) WXCC may repurchase
shares of its stock in connection with immediately exercisable options granted
pursuant to WXCC's stock option plan, for total consideration not to exceed
$100,000 during any fiscal year of WXCC, or $250,000 in the aggregate from and
after the Closing Date until the Obligations are finally paid in cash.
7.13 ACCOUNTING METHODS. Modify or change, in any material respect,
its method of accounting (except as required by GAAP) or enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
or storage of Borrower's accounting records without said accounting firm or
service bureau agreeing to provide Foothill information regarding the Collateral
or Borrower's financial condition. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Foothill pursuant
to or in accordance with this Agreement, and agrees that Foothill may contact
directly any such accounting firm or service bureau in order to obtain such
information.
7.14 INVESTMENTS. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of
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the securities of (whether debt or equity), or other interests in, a Person, (b)
loans, advances, capital contributions, equity contributions, or transfers of
property to a Person, or (c) the acquisition of all or substantially all of the
properties or assets of a Person, except for Permitted Subsidiary Investments,
except for Permitted Ordinary Course Investments, and except for Investments of
WXCC and its Subsidiaries in CTST existing on the Closing Date and disclosed to
Foothill prior to the Closing Date or expressly permitted by SECTION 7.22 of
this Agreement. In addition, WXCC or its Subsidiaries may create and invest in
new foreign Subsidiaries, so long as each of the follow conditions is satisfied:
(i) WXCC provides at least thirty (30) days prior written notice to Foothill of
the relevant particulars (such as the exact legal name of such new Subsidiary of
WXCC, its form of organization and jurisdiction of organization, and the
jurisdictions or locations in which it proposes to engage in business); (ii)
WXCC (or a Subsidiary of WXCC) pledges at least 66 2/3% of the capital stock of
such new foreign Subsidiary to Foothill pursuant to a written pledge agreement
in form and substance reasonably satisfactory to Foothill at the time such
capital stock first is issued; and (iii) all Investments in such Subsidiaries
collectively are subject to and included within the limitations set forth herein
with respect to Permitted Subsidiary Investments.
7.15 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms, that are fully disclosed to Foothill, and that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-Affiliate.
7.16 SUSPENSION. Suspend or go out of a substantial portion of its
business, except that Foothill will not unreasonably withhold or delay its
consent to such matters insofar as they relate to WXLC or CTST (but not WXCC).
7.17 COMPENSATION. Increase the annual fee or per-meeting fees paid
to directors during any year by more than fifteen percent (15%) over the prior
year; PROVIDED, however, that the foregoing shall not preclude WXCC from paying
reasonable compensation to outside directors; pay or accrue total cash
compensation, during any year, to existing officers and senior management
employees, as reasonably attributed by Borrower, in an aggregate amount in
excess of one hundred fifteen percent (115%) of that paid or accrued in the
prior year. The foregoing clause shall not limit the ability of Borrower to add
new or additional officers or senior management employees, and to pay to them,
or accrue with respect to them, reasonable compensation consistent with
prevailing market conditions with respect to the compensation of Persons of
similar qualifications and accomplishments as of the time such new or additional
officers or senior management employees are added, which new or additional
officers or senior management employees, once added, thereafter shall be part of
the pool for purposes of future application of the provisions of the last clause
of the preceding sentence of this SECTION 7.17.
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7.18 USE OF PROCEEDS. Use the proceeds of the Advances made hereunder
for any purpose other than: (a) on the Closing Date, (i) to repay in full the
outstanding principal, accrued interest, and accrued fees and expenses owing to
Existing Lender, (ii) repay a portion of WXCC's Indebtedness to WilTel, and
(iii) to pay transactional costs and expenses incurred in connection with this
Agreement; and (b) thereafter, consistent with the terms and conditions hereof,
for its lawful and permitted corporate purposes.
7.19 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Without thirty (30) days prior written notification to
Foothill, relocate its chief executive office to a new location and so long as,
at the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests and also provides to Foothill a Collateral Access
Agreement. The Inventory and Equipment shall not at any time now or hereafter
be stored with a bailee, warehouseman, or similar party without Foothill's prior
written consent.
7.20 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or indirectly:
(a) Engage, or permit any Subsidiary of Borrower to engage, in any
prohibited transaction which is reasonably likely to result in a civil penalty
or excise tax described in Sections 406 of ERISA or 4975 of the IRC for which a
statutory or class exemption is not available or a private exemption has not
been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412 of the IRC),
whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay timely
required contributions or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to terminate, any
Benefit Plan of such Borrower of any Subsidiary of such Borrower where such
event would result in any liability of Borrower, any of its Subsidiaries, or any
ERISA Affiliate thereof under Title IV of ERISA;
(e) fail, or permit any Subsidiary of such Borrower to fail, to make
any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of such Borrower to fail, to pay
any required installment or any other payment required under Section 412 of the
IRC on or before the due date for such installment or other payment;
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(g) amend, or permit any Subsidiary of such Borrower to amend, a
Benefit Plan resulting in an increase in current liability for the plan year
such that either of such Borrower, or any ERISA Affiliate thereof is required to
provide security to such Benefit Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of such Borrower to withdraw,
from any Multiemployer Plan where such withdrawal is reasonably likely to result
in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of One Dollar ($1.00).
7.21 CONTRACTS WITH CARRIERS OR LECs. Enter into any new contractual
arrangements with Carriers or LECs, or materially amend, modify, or extend
existing contractual arrangements with Carriers or LECs, if the effect in either
case would be to prohibit Foothill from having a security interest in the rights
of Borrower thereunder, to prohibit disclosure of the terms thereof to Foothill
(although disclosure may be conditioned on Foothill's agreement to reasonable
confidentiality provisions), to grant a security interest to the Carrier or LEC
in any of the Collateral, to authorize any Carrier to withhold delivery of call
transaction record tapes other than after the occurrence of a default, or to
authorize any Carrier to contact or directly ▇▇▇▇ customers of Borrower with
respect to services provided by such Carrier to Borrower for resale to
Borrower's customers.
7.22 CERTAIN LIMITATIONS ON INVESTMENTS IN CTST AND ADVANCES TO CTST.
WXCC and its Subsidiaries shall not make post-Closing Date Investments in CTST
(including: (i) equity Investments; (ii) intercompany loans; (iii) advances; or
(iv) accounts that are more than ninety (90) days past due) that, in the
aggregate, are in excess of $1,000,000 at any one time outstanding. CTST shall
not at any time have net utilization of Advances under this Agreement (defined
as Advances to the extent made to or utilized by CTST (as opposed to WXCC or
WXLC), net of repayments made by CTST, or out of Collateral owned by CTST) in
excess of the portion of the Borrowing Base attributable to Collateral owned by
CTST.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay within one (1) Business Day of the date
when due and payable or when declared due and payable, any portion of the
Obligations (whether of principal, interest (including any interest which, but
for the provisions of the Bankruptcy Code, would have accrued on such amounts),
fees and charges due Foothill, reimbursement
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of Foothill Expenses, or other amounts constituting Obligations); PROVIDED,
HOWEVER, that, except as otherwise provided below, in the case of
Overadvances or other payment defaults that are not the result of intentional
non-payment by Borrower, intentional misrepresentation by Borrower, or fraud
on the part of Borrower, any such event shall not constitute an Event of
Default unless, within three (3) Business Days of telephonic notice from
Foothill to Borrower of any such Overadvance or payment default, Borrower
fails to repay in full or otherwise eliminate such Overadvance or payment
default; PROVIDED, FURTHER, that the three (3) Business Day notice and cure
provision provided for in the preceding proviso shall not be available to
Borrower more than two (2) times during any six (6) month period; and
PROVIDED, FURTHER, that, during any period of time that any Overadvance or
payment default exists, even if such Overadvance or payment default is not
yet an Event of Default by virtue of the existence of a grace or cure period
or the precondition of the giving of a notice, Foothill shall not required
during such period to make Advances to Borrower;
8.2 (a) If Borrower fails or neglects to perform, keep, or observe,
in any material respect, any term, provision, condition, covenant, or agreement
contained in SECTIONS 6.2 (Collateral Reporting), 6.3 (Financial Statements,
Reports, Certificates), 6.4 (Tax Returns), 6.5 (Guarantor Reports), 6.7 (Title
to Equipment), 6.13 (Location of Inventory and Equipment), 6.14 (Compliance with
Laws), 6.15 (Employee Benefits), or 6.16 (Leases) of this Agreement and such
failure continues for a period of five (5) days from the date Foothill sends
Borrower telephonic or written notice of such failure or neglect; (b) If
Borrower fails or neglects to perform, keep, or observe, in any material
respect, any term, provision, condition, covenant, or agreement contained in
SECTIONS 6.1 (Accounting System), 6.6 (Returns), or 6.8 (Maintenance of
Equipment) of this Agreement and such failure continues for a period of fifteen
(15) days from the date Foothill sends Borrower telephonic or written notice of
such failure or neglect; or (c) If Borrower fails or neglects to perform, keep,
or observe, in any material respect, any other term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the other Loan
Documents (giving effect to any grace periods, cure periods, or required
notices, if any, expressly provided for in such Loan Documents), or in any other
present or future agreement between Borrower and Foothill (giving effect to any
grace periods, cure periods, or required notices, if any, expressly provided for
in such other agreements); in each case, other than any such term, provision,
condition, covenant, or agreement that is the subject of another provision of
this SECTION 8, in which event such other provision of this SECTION 8 shall
govern); PROVIDED that, during any period of time that any such failure or
neglect of Borrower referred to in this paragraph exists, even if such failure
or neglect is not yet an Event of Default by virtue of the existence of a grace
or cure period or the pre-condition of the giving of a notice, Foothill shall
not required during such period to make Advances to Borrower;
8.3 If there is a Material Adverse Change;
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8.4 If any material portion of Borrower's properties or assets having
a value of at least $50,000 is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes into the possession of any third Person,
and such attachment, seizure, writ, warrant, or levy is not released,
discharged, or bonded against before the earlier of 30 days of the date it first
arises or 5 days prior to the date when such property or asset is subject to
being forfeited by Borrower;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and
any of the following events occur: (a) Borrower consents to the institution
of the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within sixty (60) calendar days of
the date of the filing thereof; PROVIDED, HOWEVER, that, during the pendency
of such period, Foothill shall be relieved of its obligation to extend credit
hereunder; (d) an interim trustee is appointed to take possession of all or a
substantial portion of the properties or assets of, or to operate all or any
substantial portion of the business of, Borrower; or (e) an order for relief
shall have been issued or entered therein;
8.7 If Borrower is enjoined, restrained, or otherwise prevented by
court order from continuing to conduct all or any material part of its business
affairs and such injunction, restraining order, or other court order is not
stayed, dissolved, vacated, or modified so as no longer to enjoin, restrain, or
otherwise prevent Borrower from continuing to conduct all or any material part
of its business affairs, within 30 days of the date on which it first arises;
8.8 (a) If (i) a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's properties or assets by the United
States, or (ii) any taxes or debts owing at any time hereafter to the United
States becomes a lien upon any of Borrower's properties or assets, which lien,
in the reasonable judgment of Foothill, would likely be determined to have
priority over the security interest of Foothill with respect to the Collateral
or any material portion thereof; PROVIDED that, if the aggregate amount claimed
with respect to any of the foregoing is less than $100,000, an Event of Default
shall not occur under this paragraph if such claims are the subject of a
Permitted Protest and the lien, levy, or assessment is released, discharged, or
bonded against before the earlier of 30 days of the date it first arises or 5
days prior to the date when such property or asset is subject to being
forfeited; and, PROVIDED, FURTHER, that in any such case where such a notice of
lien, levy, or assessment if filed of record, or such a tax becomes a lien as
described above, Foothill shall have the right to establish and maintain a
reserve against the Borrowing Base of the aggregate amount asserted to be due
with respect thereto (including instances where such amount is less than
$100,000); or
(b) If (i) a notice of lien, levy, or assessment is filed of
record with
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respect to any Borrower's properties or assets by any state, county,
municipal, or other non-federal governmental agency, or (ii) any taxes or
debts owing for an amount in excess of $100,000 at any time hereafter to any
one or more of such entities becomes a lien upon any of Borrower's properties
or assets, which lien, in the reasonable judgment of Foothill, would likely
be determined to have priority over the security interest of Foothill with
respect to the Collateral or any material portion thereof, and, in any such
case, such taxes or debts are not the subject of a Permitted Protest, and the
lien, levy, or assessment is not released, discharged, or bonded against
before the earlier of 30 days of the date it first arises or 5 days prior to
the date when such property or asset is subject to being forfeited; PROVIDED
that in any such case where such a notice of lien, levy, or assessment if
filed of record, or such a tax becomes a lien as described above, Foothill
shall have the right to establish and maintain a reserve against the
Borrowing Base of the aggregate amount asserted to be due with respect
thereto (including instances where such amount is less than $100,000 and this
paragraph thus otherwise would not be applicable);
8.9 If a judgment or other claim for an amount greater than or equal
to $100,000 becomes a lien or encumbrance upon any material portion of
Borrower's properties or assets and the same is not released, discharged, bonded
against, or stayed pending appeal before the earlier of 45 days of the date it
first arises or 5 days prior to the date when such property or asset is subject
to being forfeited by Borrower; PROVIDED, HOWEVER, that during such period
Foothill shall be entitled to create a reserve against the Borrowing Base, in an
amount sufficient to discharge such lien or encumbrance and any and all
penalties or interest payable in connection therewith;
8.10 If there is a material default in any material agreement relating
to Indebtedness with an unpaid balance greater than or equal to $250,000 to
which Borrower is a party with one or more third Persons and such default (a)
occurs at the final maturity of the obligations thereunder, or (b) results in a
right by such third Person(s), irrespective of whether exercised, but after
giving effect to any applicable grace or cure periods or notice requirements or
entitlements with respect thereto, to accelerate the maturity of Borrower's
obligations thereunder or to terminate the subject agreement;
8.11 If Borrower makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer, employee, agent, or director of Borrower, or if any
such warranty or representation is withdrawn in any respect that is material; or
8.13 If the obligation of any guarantor, or of any third Person that
is an
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Affiliate of Borrower, under any Loan Document, is limited or terminated by
operation of law or by the guarantor or such third Person thereunder, or any
such guarantor or third Person becomes the subject of an Insolvency Proceeding;
PROVIDED that, if such Insolvency Proceeding is involuntary and not consented to
or acquiesced in by such guarantor or Third Person, it shall not become an Event
of Default unless it has not been dismissed within sixty (60) calendar days of
the date of the filing thereof.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Foothill, but without affecting
Foothill's rights and security interests in the Personal Property Collateral or
any Real Property and without affecting the Obligations;
(d) Require Borrower to deliver to Foothill a complete list of
all end-user customers of Borrowers, with respect to all Accounts of Borrower
including LEC Accounts and Direct Accounts, or any reasonably designated portion
thereof, which Borrower shall deliver to Foothill promptly upon demand by
Foothill;
(e) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Foothill reasonably determines to be
reasonable, and in such cases, Foothill will credit the Loan Account with only
the net amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(f) Cause Borrower to hold all returned Inventory in trust for
Foothill, segregate all returned Inventory from all other property of Borrower
or in Borrower's possession and conspicuously label said returned Inventory as
the property of Foothill;
(g) Without notice to or demand upon Borrower or any guarantor,
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make such payments and do such acts as Foothill reasonably considers
necessary or reasonable to protect its security interests in the Collateral.
Borrower agrees to assemble the Personal Property Collateral if Foothill so
requires, and to make the Personal Property Collateral available to Foothill
as Foothill may designate. Borrower authorizes Foothill to enter the
premises where the Personal Property Collateral is located, to take and
maintain possession of the Personal Property Collateral, or any part of it,
and to pay, purchase, contest, or compromise any encumbrance, charge, or lien
that in Foothill's determination appears to conflict with its security
interests and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's owned premises, Borrower hereby grants Foothill
a license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise
any of Foothill's rights or remedies provided herein, at law, in equity, or
otherwise;
(h) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by Foothill (including any amounts received in the Lockbox Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Foothill;
(i) Hold, as cash collateral, any and all balances and deposits
of Borrower held by Foothill, and any amounts received in the Lockbox Accounts,
to secure the full and final repayment of all of the Obligations;
(j) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Personal Property Collateral. Foothill 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 Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
Foothill's benefit;
(k) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as are commercially reasonable. It is not necessary that the Personal Property
Collateral be present at any such sale;
(l) Foothill shall give notice of the disposition of the
Personal Property Collateral as follows:
(1) Foothill shall give Borrower and each holder of a
security
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interest in the Personal Property Collateral who has filed with Foothill a
written request for notice, a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other disposition other than a
public sale is to be made of the Personal Property Collateral, then the time on
or after which the private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in SECTION 12, at least five (5) days
before the date fixed for the sale, or at least five (5) days before the date on
or after which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the Personal
Property Collateral that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market. Notice to Persons
other than Borrower claiming an interest in the Personal Property Collateral
shall be sent to such addresses sa they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also shall
give notice of the time and place by publishing a notice one time at least five
(5) days before the date of the sale in a newspaper of general circulation in
the county in which the sale is to be held;
(m) Foothill may credit bid and purchase at any public sale; and
(n) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Foothill to Borrower.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill
shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies with respect to taxes, assessments by
governmental agencies or authorities, or insurance premiums, due to tax
collectors, governmental agencies or authorities, or insurers, or fails to make
any deposits with respect to any thereof or furnish any required proof of
payment or deposit with respect to any thereof, all as required under the terms
of this Agreement, then, to the extent that Foothill reasonably determines that
there is a not insubstantial likelihood that such failure by
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Borrower may result in a Material Adverse Change, Foothill may but shall not be
obligated to do any or all of the following: (a) make payment of the same or
any part thereof; (b) set up such reserves in the Loan Account as Foothill in
good ▇▇▇▇▇ ▇▇▇▇▇ necessary to protect Foothill from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type described in
SECTION 6.10, and take any action with respect to such policies as Foothill
deems prudent. Under any circumstance not governed by the preceding sentence,
if Borrower fails to pay any monies (including, in the case of leased properties
or assets, rents or other amounts payable under such leases) due to third
Persons, or fails to make any deposits or furnish any required proof of payment
or deposit, all as required, and within any applicable time periods specified,
under the terms of this Agreement, then, to the extent that Foothill reasonably
determines that there is a substantial likelihood that such failure by Borrower
may result in a Material Adverse Change, Foothill may but shall not be obligated
to do any or all of the following: (x) make payment of the same or any part
thereof; (y) set up such reasonable reserves in the Loan Account as Foothill in
good ▇▇▇▇▇ ▇▇▇▇▇ necessary to protect Foothill from the exposure created by such
failure; or (z) obtain and maintain insurance policies of the type described in
SECTION 6.10, and take any action with respect to such policies as Foothill
deems prudent. Any amounts paid by Foothill in accordance with this paragraph
shall constitute Foothill Expenses. Any payments made by Foothill pursuant to
this paragraph shall not constitute an agreement by Foothill to make similar
payments in the future or a waiver by Foothill of any Default or Event of
Default under this Agreement. With respect to any payment made by Foothill
pursuant to the first sentence of this paragraph, Foothill need not inquire as
to, or contest the validity of, any such tax, assessment, insurance premium,
required deposit, encumbrance, or lien and the receipt of the usual official
notice for the payment thereof shall be conclusive evidence that the same was
validly due and owing. With respect to any payment made by Foothill pursuant to
the second sentence of this paragraph, unless Borrower has specifically notified
Foothill that it is engaging in a Permitted Protest with respect to such matter
or item, Foothill need not inquire as to, or contest the validity of, any such
expense, security interest, encumbrance, or lien and the receipt of the usual
official notice for the payment thereof shall be presumptive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Borrower may in any way be
liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code and any
other applicable legal requirements not effectively waived by Borrower, Foothill
shall not in any way or manner
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be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause; (c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other Person. Subject to
the immediately preceding sentence, all risk of loss, damage, or destruction of
the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and hold
Foothill, each Participant, and each of their respective 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 reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
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 under this SECTION 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally 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.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, and also transmitted by telefacsimile where practicable, to
Borrower or to Foothill, as the case may be, at its address set forth below:
IF TO BORROWER: COMMUNICATION TELESYSTEMS INTERNATIONAL dba
WORLDxCHANGE COMMUNICATIONS
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, CFO
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
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AND TO: WXL COMMUNICATIONS, LTD.
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, CFO
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
AND TO: CTS TELCOM, INC.
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, CFO
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
WITH COPIES TO: COMMUNICATION TELESYSTEMS
INTERNATIONAL DBA
WordlxChange Communications
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Legal Department
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Business Finance Division Manager
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
WITH COPIES TO: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this SECTION 12, other
than notices by Foothill in connection with Sections 9504 and 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or five
(5) days after the deposit thereof in the mail and transmission by telefacsimile
where practicable. Borrower acknowledges and agrees that notices sent by
Foothill in connection with Sections 9504 or 9505 of the Code shall be deemed
sent when deposited in the mail or other similar method set forth above and
transmitted by telefacsimile where practicable.
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13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE OPTION OF FOOTHILL, WITH RESPECT TO ACTIONS RELATING TO
PROVISIONAL REMEDIES AGAINST COLLATERAL OR ANCILLARY PROCEEDINGS FOR THE
FORECLOSURE OF INTERESTS IN COLLATERAL, IN ANY OTHER COURT IN WHICH FOOTHILL
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND FOOTHILL
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13. BORROWER AND
FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER
AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to Foothill may be destroyed or otherwise disposed of by Foothill four (4)
months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
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15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
PROVIDED, HOWEVER, that Borrower may not assign this Agreement or any rights or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Borrower from its Obligations. Foothill may assign this Agreement
and its rights and duties hereunder and no consent or approval by Borrower is
required in connection with any such assignment. Foothill reserves the right to
sell, assign, transfer, negotiate, or grant participation in all or any part of,
or any interest in Foothill's rights and benefits hereunder. In connection with
any such assignment or participation, Foothill may disclose all documents and
information which Foothill now or hereafter may have relating to Borrower or
Borrower's business, PROVIDED that such Person is bound by the confidentiality
provisions contained herein. To the extent that Foothill assigns its rights and
obligations hereunder to a third Person, Foothill thereafter shall be released
from such assigned obligations to Borrower and such assignment shall effect a
novation between Borrower and such third Person.
15.3 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
15.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
15.6 AMENDMENTS IN WRITING. This Agreement can only be amended by a
writing signed by both Foothill and Borrower.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery
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of an executed counterpart of this Agreement by telefacsimile shall be equally
as effective as delivery of a manually executed counterpart of this Agreement.
Any party delivering an executed counterpart of this Agreement by telefacsimile
also shall deliver a manually executed counterpart of this Agreement but the
failure to deliver a manually executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to Foothill of any property of
either or both of such parties should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if Foothill is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Foothill is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Foothill related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
15.9 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
15.10 CONFIDENTIALITY. (a) Foothill acknowledge and agrees,
except as otherwise provided below, that the terms and conditions of the Loan
Documents, all documents delivered by or on behalf of Borrower to Foothill
pursuant to the Loan Documents, and all communications between the parties
regarding the Loan Documents (collectively, except as otherwise provided below,
the "Confidential Information"), are confidential. The foregoing
notwithstanding, Confidential Information shall not include: (i) Terms and
provisions of documents filed in public records, such as, by way of illustration
but not by way of limitation, financing statements, articles of incorporation,
and SEC filings; (ii) terms and provisions of documents to which third Persons
not bound by confidentiality agreements are parties; (iii) information generally
available to members of the public from sources other than Foothill; and (iv)
information treated by Borrower in such a way as to give rise to a reasonable
belief on Foothill's part that such information is not confidential, such as, by
way of illustration but not by way of limitation, information disclosed by
Borrower to third Persons other than Foothill with no confidentiality
restrictions.
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(b) Foothill shall not disclose Confidential Information except
as follows: (i) To Persons it reasonably believes to be attorneys, accountants,
employees, officers, agents, or authorized representatives of Borrower; (ii) to
attorneys, agents, examiners, auditors, appraisers, accountants, consultants,
employees, or officers of or acting on behalf of Foothill pursuant to procedures
or policies reasonably calculated to preserve the confidentiality of such
Confidential Information; (iii) to actual or prospective participants or
assignees of Foothill who are bound by the confidentiality provisions hereof;
(iv) to regulators or examiners having regulatory or supervisory authority over
Foothill or its parents or affiliates, as reasonably determined by Foothill to
be necessary or appropriate in connection with the exercise by such regulators
or examiners of their regulatory or supervisory functions; or (v) pursuant to
discovery or disclosure pursuant to legal process, PROVIDED that, to the extent
practicable, Foothill shall provide Borrower with reasonable (where practicable)
advance notice of disclosures made pursuant to this clause (v) in order to
permit Borrower to seek, if it so elects, an appropriate protective order or
exemption.
(c) The provisions of this SECTION 15.10 shall be effective
as of the date of execution and delivery of this Agreement by the parties and
shall remain in full force and effect for a period equal to two (2) years
following the termination hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in Los Angeles, California.
COMMUNICATION TELESYSTEMS
INTERNATIONAL dba WORLDxCHANGE
COMMUNICATIONS,
a California corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Title: President
------------------------
WXL COMMUNICATIONS, LTD.,
a Canadian corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Title: President
------------------------
CTS TELCOM, INC.,
a California corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Title: President
------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ [ILLEGIBLE]
-----------------------------
Title: SVP
------------------------
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LIST OF OMITTED SCHEDULES AND EXHIBITS
The following Schedules and Exhibits to the Loan and Security Agreement
have been omitted from this Exhibit and shall be furnished supplementally to
the Commission upon request:
Schedule E-1 - 20% Account Debtors
Schedule P-1 - Permitted Liens
Schedule P-2 - Permitted Subsidiary Investments
Schedule R-1 - Real Property
Schedule 5.7 - Subsidiaries
Schedule 6.13 - Litigation
Schedule 6.17 - Location of Inventory and Equipment
Schedule 7.1 - Scheduled Indebtedness
Exhibit B-1 - Borrower's 1997 Business Plan
Exhibit C-1 - Forms of Canadian Security Agreements
Exhibit C-2 - Form of Compliance Certificate
Exhibit G-1 - Form of Limited Continuing Guaranty
Exhibit P-1 - Forms of Pledge Agreements
Exhibit S-1 - Form of Suretyship Agreement