Term Loan Agreement - Executive TeleCard SA and Internationale Nederlanden (US) Capital Corp.
TERM LOAN AGREEMENT
DATED AS OF JUNE 28, 1996
between
EXECUTIVE TELECARD, S.A.
as Borrower,
EXECUTIVE TELECARD, LTD.,
as a Guarantor
and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION
as Lender
<PAGE>
TERM LOAN AGREEMENT
This TERM LOAN AGREEMENT is dated as of June 28, 1996 and entered
into by and between EXECUTIVE TELECARD, S.A., a corporation
incorporated under the laws of the Turks and Caicos Islands,
("Borrower"), EXECUTIVE TELECARD, LTD., a Delaware corporation
("Parent"), as a Guarantor, and INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, a Delaware corporation ("Lender"). All
capitalized terms used herein are defined in Section 1 of this
Agreement.
WHEREAS, Parent and Borrower desire that Lender make a term loan
to Borrower to provide working capital financing and funds for
other general corporate purposes for Borrower and its Affiliates;
and
WHEREAS, Borrower desires to secure its obligations under the
Loan Documents by granting to Lender a security interest in and
lien upon certain of Borrower's property; and
NOW, THEREFORE, in consideration of the agreements, provisions
and covenants herein contained, Borrower and Lender agree as
follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms. The following terms used in
this Agreement shall have the following meanings:
"Affiliate" means any Person directly or indirectly
controlling, controlled by, or under direct or indirect common
control with, Borrower. As used herein, "control" (including
with correlative meanings, the terms "controlling", "controlled
by" and "under common control with") means the possession
directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities or by contract or
otherwise.
"Affiliate Guaranty" means a Guaranty of the
Obligations of Borrower to be executed and delivered by each
Subsidiary of Parent, in the form attached hereto as Exhibit C.
"Agreement" means this Loan Agreement as it may be
amended, extended, supplemented or otherwise modified from time
to time.
"Asset Disposition" means the disposition, whether by
sale, lease, sale and leaseback, transfer, loss, damage,
destruction, condemnation or otherwise, of any or all of the
assets of Parent or any of its Subsidiaries other than sales in
the ordinary course of business.
"Borrower" has the meaning assigned to that term in the
preamble to this Agreement.
"Business Day" shall mean any day other than: (a) a
Saturday, a Sunday or a day on which banks in Los Angeles,
California or New York, New York are authorized or obligated to
close their regular banking business or (b) a day on which the
Lender's offices in Los Angeles, California or New York, New York
are closed (including all New York Stock Exchange holidays).
"Capital Expenditures" means all expenditures
(including deposits) for, or contracts for expenditures with
respect, to any fixed assets or improvements, or for
replacements, substitutions or additions thereto, which in
conformity with GAAP should be classified as a capital
expenditure.
"Capital Lease" means any lease of any property
(whether real, personal or mixed) that, in conformity with GAAP,
should be accounted for as a capital lease.
"Cash Equivalents" means: (a) marketable direct
obligations issued or unconditionally guarantied by the United
States Government or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case
maturing within six (6) months from the date of acquisition
thereof; (b) commercial paper maturing no more than six (6)
months from the date issued and, at the time of acquisition,
having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from Moody's Investors Service, Inc.;
and (c) certificates of deposit or bankers' acceptances maturing
within six (6) months from the date of issuance thereof issued
by, or overnight reverse repurchase agreements from, any
commercial bank organized under the laws of the United States of
America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and
not subject to setoff rights in favor of such bank.
"Change in Control" means the replacement of a
majority of the Board of Directors of Parent from those directors
who constitute the Board of Directors on the Closing Date, if the
replacement has not been approved by a vote of at least a
majority of the Board of Directors then still in office who were
members on the Closing Date or whose appointment as a member of
the Board of Directors was previously so approved.
"Closing Date" means June 24, 1996, or such later date
as may be mutually agreed by Borrower and Lender.
"Collateral" means, collectively and severally, the
tangible and intangible assets in which a Lien is granted to
Lender by Parent or any Subsidiary under the Loan Documents.
"Compliance Certificate" means a certificate duly
executed by the chief operating officer or principal financial
officer of Parent appropriately completed and in substantially
the form of Exhibit A.
"Default" means a condition or event that, after notice
or lapse of time or both, would constitute an Event of Default if
that condition or event were not cured or removed within any
applicable grace or cure period.
"Default Rate" has the meaning assigned to that term in
subsection 2.2.
"EBITDA" means, for any period, without duplication,
the total of the following for Parent and its Subsidiaries on a
consolidated basis, each calculated for such period: (1) net
income (or net loss); plus, to the extent included in the
calculation of net income, (2) the sum of (a) income and
franchise taxes paid or accrued; (b) interest expense, net of
interest income, paid or accrued; (c) interest paid in kind; (d)
amortization and depreciation and (e) other non-cash charges
(excluding accruals for cash expenses made in the ordinary course
of business); less, to the extent included in the calculation of
net income, (3) the sum of (a) the income of any Person other
than wholly-owned Subsidiaries of Parent in which Parent or a
wholly owned Subsidiary of Parent has an ownership interest
unless such income is received by Parent or such wholly-owned
Subsidiary in a cash distribution; (b) gains or losses from sales
or other dispositions of assets (other than inventory in the
normal course of business); and (c) extraordinary or non-
recurring gains.
"Employee Benefit Plan" means any employee benefit plan
within the meaning of Section 3(3) of ERISA which (a) is
maintained for employees of any Loan Party or any ERISA Affiliate
or (b) has at any time within the preceding six (6) years been
maintained for the employees of any Loan Party or any current or
former ERISA Affiliate.
"Environmental Claims" means claims, liabilities,
investigations, litigation, administrative proceedings, judgments
or orders relating to Hazardous Materials.
"Environmental Laws" means any present or future
federal, state or local law, rule, regulation or order relating
to pollution, waste, disposal or the protection of human health
or safety, plant life or animal life, natural resources or the
environment.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and any successor
statute and all rules and regulations promulgated thereunder.
"ERISA Affiliate", as applied to any Loan Party, means
any Person who is a member of a group which is under common
control with any Loan Party, who together with any Loan Party is
treated as a single employer within the meaning of Section 414(b)
and (c) of the IRC.
"Event of Default" means each of the events set forth
in subsection 8.1.
"Fiscal Year" means each twelve month period ending on
the last day of March in each year.
"GAAP" means generally accepted accounting principles
in the United States of America in effect from time to time,
consistently applied.
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof, or
any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Guarantor Security Agreements" means, collectively,
the Guarantor Security Agreement to be executed and delivered by
each Subsidiary of Parent, in the form attached hereto as Exhibit
B, and any other security agreement or debenture executed by any
Subsidiary in the form required under the laws of applicable
foreign jurisdictions.
"Hazardous Material" means all or any of the following:
(a) substances that are defined or listed in, or otherwise
classified pursuant to, any Environmental 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 or synthetic gas and 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
which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty parts per million.
"Indebtedness" of any Person means (without
duplication): (a) all indebtedness for borrowed money; (b)
obligations under leases which in accordance with GAAP constitute
Capital Leases; (c) notes payable and drafts accepted
representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all
or any part of the deferred purchase price of property or
services if the purchase price is due more than six months from
the date the obligation is incurred or is evidenced by a note or
similar written instrument; (e) all indebtedness secured by any
Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of
that Person; (f) all Indebtedness and liabilities of others
assumed or guaranteed or in respect of which such Person is
contingently liable (other than by endorsement of instruments for
collection); and (g) any capital stock or other equity interest
that by its terms is or may be mandatorily redeemable (pursuant
to a sinking fund or otherwise), or is or may be redeemable at
the option of the holder, on or prior to the date which is one
year after the Maturity Date.
"Intellectual Property" means all present and future
designs, patents, patent rights and applications therefor,
trademarks and registrations or applications therefor, trade
names, service marks, inventions, copyrights and all applications
and registrations therefor, software or computer programs,
license rights, trade secrets, methods, processes, know-how,
drawings, specifications, descriptions, and all memoranda, notes
and records with respect to any research and development, whether
now owned or hereafter acquired, all goodwill associated with any
of the foregoing, and proceeds of all of the foregoing,
including, without limitation, proceeds of insurance policies
thereon.
"Intellectual Property Security Agreements" means,
collectively, the Trademark Security Agreement and the Patent
Security Agreement, each in the form attached to the Security
Agreement or the Guarantor Security Agreement, as applicable, to
be executed and delivered by a Loan Party.
"Intercreditor Agreement" means an agreement between
Lender and the holder of the Subordinated Debt, in form and
substance satisfactory to Lender.
"IRC" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute and all
rules and regulations promulgated thereunder.
"Lender" means Internationale Nederlanden (U.S.)
Capital Corporation, together with its successors and assigns.
"Lien" means any lien, mortgage, pledge, security
interest, preferential arrangement, charge or encumbrance of any
kind, whether voluntary or involuntary (including any conditional
sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" means the term loan made under this Agreement.
"Loan Documents" means this Agreement, the Note, the
Security Agreements, the Affiliate Guaranty, the Parent Guaranty,
the Guarantor Security Agreements, the Intellectual Property
Security Agreements, the Pledge Agreements and all other
instruments, documents and agreements executed by or on behalf of
Borrower or any other Loan Party in connection with the Loan, all
as amended, restated, supplemented or modified from time to time.
"Loan Party" means, collectively, Borrower, Parent,
Parent's Subsidiaries, and any other Person (other than Lender)
which is or becomes a party to any Loan Document.
"Material Adverse Effect" means a material adverse
effect (a) on the business, operations, prospects, properties,
assets or condition (financial or otherwise) of any Loan Party on
an individual basis or on Parent and its Subsidiaries taken as a
whole or (b) on the ability of any Loan Party to perform its
obligations under any Transaction Document to which it is a party
or of Lender to enforce or collect any of the Obligations or (c)
on the Collateral which is likely to decrease the value thereof
in any material respect.
"Material Contract" shall mean any now existing or
hereafter arising contract or group of contracts of Parent or any
of its Subsidiaries that, if breached by Parent or such
Subsidiary, as applicable, would be likely to cause a Material
Adverse Effect.
"Maturity Date" means the date which is one year after
the Closing Date, or such later date to which the Loan repayment
may be extended by mutual agreement of Borrower and Lender.
"Net Cash Proceeds" means (a) with respect to any Asset
Disposition, the gross consideration received by or for the
account of Parent or any of its Subsidiaries minus the reasonable
professional fees and expenses relating to such sale that are
paid in cash by Parent or such Subsidiary in connection therewith
on or about the date of the disposition, minus any cash amount
applied to repayment of Indebtedness secured by a Lien on the
asset that is the subject of such sale, and minus any taxes paid
in cash (or which are payable) by Parent or such Subsidiary
arising from such disposition; provided that Net Cash Proceeds
shall exclude payments with respect to any casualty to the extent
reinvested in assets of Parent or its Subsidiaries within 90
days; and (b) with respect to any issuance of capital stock or
other equity securities, the gross consideration received by
Parent minus underwriting fees or discounts and minus reasonable
and customary fees and expenses payable by Parent in cash in
connection therewith.
"Note" means the promissory note evidencing the Loan
hereunder, in the form attached hereto as Exhibit G.
"Obligations" means all obligations, liabilities and
indebtedness of every nature of each Loan Party from time to time
owed to Lender under the Loan Documents, including the principal
amount of all debts, claims and indebtedness (whether incurred
before or after the Maturity Date), accrued and unpaid interest
and all fees, costs and expenses, whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and/or
from time to time hereafter owing, due or payable.
"Parent" has the meaning given that term in the
preamble to this Agreement.
"Parent Guaranty" means a Guaranty of the Obligations
of Borrower to be executed and delivered by Parent in the form
attached hereto as Exhibit C-2.
"Permitted Encumbrances" means the following types of
Liens: (a) Liens (other than Liens relating to Environmental
Claims or ERISA) for taxes, assessments or other governmental
charges not yet due and payable; (b) statutory Liens of
landlords, carriers, warehousemen, mechanics, materialmen and
other similar liens imposed by law, which are incurred in the
ordinary course of business for sums not more than thirty (30)
days delinquent; (c) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money); (d) easements, rights-of-way, restrictions, and
other similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of any
Loan Party or any of its Subsidiaries; (e) Liens for purchase
money obligations, provided that (i) the purchase of the asset
subject to any such Lien is permitted under subsection 6.1, (ii)
the Indebtedness secured by any such Lien is permitted under
subsection 6.2, and (iii) such Lien encumbers only the asset so
purchased; (f) Liens in favor of Lender; and (g) Liens set forth
on Schedule 1.1.
"Permitted Investment" means an investment by loan,
advance, capital contribution or transfer of assets by Parent in
Borrower, by Borrower in Parent, or by Parent or Borrower in any
Subsidiary of Parent listed on Schedule 6.5 or by one such
Subsidiary in another; provided that such Subsidiary has executed
and delivered an Affiliate Guaranty and a Guarantor Security
Agreement and that Lender has a pledge of all of the capital
stock of such Subsidiary under a Pledge Agreement from its
shareholder.
"Person" means and includes natural persons,
corporations, limited partnerships, general partnerships, limited
liability companies, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political
subdivisions thereof.
"Pledge Agreements" means, collectively, the Pledge
Agreements to be executed and delivered by Parent and its
Subsidiaries in favor of Lender, in the form attached hereto as
Exhibit D.
"Prime Rate" shall mean on any date the fluctuating per
annum rate of interest equal to the arithmetic average of the
rates of interest publicly announced from time to time by The
Chase Manhattan Bank (National Association), Citibank, N.A. and
Morgan Guaranty Trust Company of New York (or their respective
successors) as their respective prime lending rates (or, as to
any such bank that does not announce such a rate, such bank's
"base" or other rate determined by Lender to be the equivalent
rate announced by such bank); provided, however, that if any such
bank shall for any period cease to announce publicly its prime
commercial lending rate (or the equivalent rate), Lender during
such period shall determine the applicable rate based upon the
prime commercial lending rates (or equivalent rates) announced
publicly by such other banks. Lender will give notice to
Borrower of changes in the Prime Rate.
"Requirements of Law" shall mean as to any Person the
Certificate of Incorporation and ByLaws or other organizational
or governing documents of such Person, and any law, treaty, rule
or regulation (including, without limitation, all Environmental
Laws), or a final and binding determination of an arbitrator or a
determination of a court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is
subject.
"Restricted Junior Payment" means: (a) any dividend or
other distribution, direct or indirect, on account of any shares
of any class of stock of Parent or any of its Subsidiaries now or
hereafter outstanding, except a stock dividend; (b) any payment
or prepayment of principal of, premium, if any, or interest on,
or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or similar payment, purchase or other acquisition
for value, direct or indirect, of any Subordinated Debt or any
shares of any class of stock of Parent or any of its Subsidiaries
now or hereafter outstanding; (c) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock of Parent or
any of its Subsidiaries now or hereafter outstanding; and (d) any
payment by Parent or any of its Subsidiaries of any management
fees or similar fees to any Affiliate, whether pursuant to a
management agreement or otherwise.
"Security Agreements" means, collectively, the Security
Agreement, in the form attached hereto as Exhibit E, to be
executed and delivered by Borrower to Lender, and any other
security agreement or debenture executed by Borrower in the form
required under the laws of applicable foreign jurisdictions.
"Subordinated Debt" means all Indebtedness owing by
Parent under that promissory note dated February 28, 1996 in the
original principal amount of $500,000.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more
than fifty percent (50%) of the total voting power of shares of
stock (or equivalent ownership or controlling interest) entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person
or one or more of the other subsidiaries of that Person or a
combination thereof.
"Transaction Documents" means, collectively, the Loan
Documents and the Warrant Documents.
"UCC" means the Uniform Commercial Code as in effect on
the date hereof in the State of New York, as amended from time to
time, and any successor statute.
"Warrant Agreement" means the Common Stock Warrant
Agreement by and between Parent and Lender to be executed and
delivered on the Closing Date.
"Warrant Documents" means the Warrant Agreement, the
warrants to purchase Parent's common stock issued pursuant to the
Warrant Agreement, and the Registration Rights Agreement between
Parent and Lender relating thereto.
1.2 Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the
meanings assigned to such terms in conformity with GAAP.
1.3 Other Definitional Provisions. References to
"Sections", "subsections", "Exhibits" and "Schedules" shall be to
Sections, subsections, Exhibits and Schedules, respectively, of
this Agreement unless otherwise specifically provided. Any of
the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural
depending on the reference. In this Agreement, words importing
any gender include the other genders; the words "including,"
"includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to agreements and other
contractual instruments shall be deemed to include subsequent
amendments, assignments, and other modifications thereto, but
only to the extent such amendments, assignments and other
modifications are not prohibited by the terms of this Agreement
or any other Loan Document; references to Persons include their
respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and
related regulations shall include any amendments of same and any
successor statutes and regulations.
SECTION 2 TERM LOAN AND LOAN DOCUMENTS
2.1 Term Loan.
Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of
Borrower herein set forth, Lender agrees to lend to Borrower on
the Closing Date the Loan in the amount of $6,000,000. The Loan
shall be funded in one drawing. Amounts borrowed under this
subsection 2.1 and repaid may not be reborrowed. The Loan shall
be due and payable in full, together with all interest accrued
thereon, on the Maturity Date.
2.2 Interest. The Loan and all other Obligations shall
bear interest from the date such Loans are made or such other
Obligations become due to the date paid at a fluctuating rate per
annum equal to the Prime Rate in effect on each day plus two and
one-half percent (2.5%). Any principal amount not paid when due
and, to the extent permitted by applicable law, any interest not
paid when due (in each case whether at maturity, by mandatory
prepayment, acceleration, demand or otherwise) shall bear
interest, payable on demand, at a rate per annum equal to the
Prime Rate in effect on each day plus four and one-half percent
(4.5%) (the "Default Rate"). In no event shall interest payable
hereunder exceed the maximum rate of interest permitted to be
charged under applicable law.
Interest shall be computed on the basis of a 360 day year
for the actual number of days elapsed in the period during which
it accrues and shall be payable quarterly in arrears on the last
day of each calendar quarter, beginning September 30, 1996.
2.3 Fees.
(A) Borrower shall pay to Lender on the Closing Date a
facility fee in Borrower's amount of $30,000, in addition to the
$30,000 deposit previously paid to Lender.
(B) If the Loan, together with all accrued and unpaid
interest, is not paid in full on or before the Maturity Date,
Borrower shall pay to Lender on the Maturity Date an additional
fee equal to two percent (2%) of the outstanding principal
balance of the Loan plus the accrued and unpaid interest. Such
fee shall not cure the Event of Default arising from Borrower's
failure to pay the Obligations when due.
2.4 Payments and Prepayments.
(A) Manner and Time of Payment. All payments made on
account of the Obligations shall be made by Borrower, without
setoff or counterclaim, in lawful money of the United States of
America in immediately available same day funds, free and clear
of and without deduction for any taxes, fees or other charges of
any nature whatsoever imposed by any taxing authority and must be
received by Lender by 1:00 p.m. (New York time) on the day of
payment, it being expressly agreed and understood that if a
payment is received after 1:00 p.m. (New York time) by Lender,
such payment will be considered to have been made by Borrower on
the next succeeding Business Day and interest thereon shall be
payable by Borrower at the then applicable rate during such
extension. All payments on account of the Obligations shall be
made to Lender to such office or accounts as Lender may notify
Borrower in writing from time to time. If any payment required
to be made by Borrower hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and interest thereon shall be
payable at the then applicable rate during such extension.
(B) Mandatory Prepayments.
(1) Proceeds of Asset Dispositions. Immediately
upon receipt by Parent or any of its Subsidiaries of proceeds of
any Asset Disposition (in one or a series of related
transactions), which proceeds exceed $100,000 (it being
understood that if the proceeds exceed $100,000, the entire
amount and not just the portion above $100,000 shall be subject
to this subsection 2.4(B)(1)), Borrower shall prepay the Loan in
an amount equal to 100% of the Net Cash Proceeds.
(2) Prepayments from Equity Issuances.
Immediately upon receipt by Parent of proceeds from the issuance
of any of its capital stock or other equity securities other than
the issuance of stock upon exercise of employee or director stock
options existing on the Closing Date, Borrower shall prepay the
Loan in an amount equal to 100% of the Net Cash Proceeds.
(3) Application of Payments. All mandatory
prepayments shall be applied first to accrued and unpaid interest
and then to principal. All prepayments required hereby shall be
without premium or penalty.
(C) Voluntary Prepayments. Borrower may, at any time
upon not less than five Business Days' prior notice to Lender,
prepay the Loan in whole or in part, without premium or penalty,
but interest shall be paid to the date of payment on the
principal amount prepaid. All such voluntary prepayment shall be
in a minimum amount of $500,000 and in multiples of $100,000 in
excess thereof.
2.5 Transaction Documents.
(A) Loan Documents. On the Closing Date, as
collateral security for the Obligations, Borrower shall execute
and deliver to Lender the Security Agreement and a Pledge
Agreement, shall cause each of its Subsidiaries to execute and
deliver to Lender the Affiliate Guaranty, the Guarantor Security
Agreement and a Pledge Agreement and shall cause Parent to
execute and deliver the Parent Guaranty, the Guarantor Security
Agreement and a Pledge Agreement. If Parent forms or acquires
any new Subsidiary, Parent shall cause such Subsidiary to execute
and deliver a counterpart of the Affiliate Guaranty and the
Guarantor Security Agreement, and shall pledge, or cause the
applicable Subsidiary to pledge, the stock of such new
Subsidiary.
(B) Warrant Documents. On the Closing Date, Parent
shall execute and deliver to Lender the Warrant Documents.
2.6 Further Documents. Borrower agrees to execute and
deliver and to cause to be executed and delivered to Lender from
time to time such confirmatory or supplementary security
agreements, financing statements and other documents,
instruments, agreements, notices and consents as Lender may
reasonably request, which are in Lender's judgment necessary or
desirable to obtain for Lender the benefit of the Loan Documents,
the Warrant Documents and the Collateral.
2.7 Requirements of Law; Increased Costs. In the event
that after the Closing Date any applicable law, order,
regulation, treaty or directive issued by any central bank or
other Governmental Authority or any governmental or judicial
interpretation or application thereof, or compliance by Lender
with any request or directive (whether or not having the force of
law) issued by any central bank or other Governmental Authority:
(1) Does or shall subject Lender to any tax of any
kind whatsoever with respect to this Agreement or the Loan made
hereunder, or change the basis of taxation of payments to Lender
of principal, fees, interest or any other amount payable
hereunder (except for change in the rate of tax on the overall
net income of Lender and income or franchise taxes);
(2) Does or shall impose, modify or hold applicable
any reserve, capital requirement, special deposit, compulsory
loan or similar requirements against assets held by, or deposits
or other liabilities in or for the account of, advances or loans
by, or other credit extended by, or any other acquisition of
funds by, any office of Lender; or
(3) Does or shall impose on Lender any other
condition; and the direct result of any of the foregoing is to
increase the cost to Lender in a material amount of making,
renewing or maintaining the Loan or to reduce any amount
receivable in respect thereof or the rate of return on the
capital of Lender or any corporation controlling Lender, then, in
any such case, Borrower shall pay to Lender, within ten days of
written demand, any additional amounts receivable or rate of
return as determined by Lender with respect to this Agreement or
the Loan. If Lender becomes entitled to claim any additional
amounts pursuant to this subsection 2.7, it shall promptly notify
Borrower of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable
pursuant to the foregoing sentence containing the calculation
thereof in reasonable detail submitted by Lender to Borrower
shall be presumptively correct in the absence of manifest error.
The provisions hereof shall survive the termination of this
Agreement and payment of the Loan and all other amounts payable
hereunder.
2.8 Payment of Taxes.
(1) Borrower agrees to pay any taxes, levies,
deductions, charges or withholdings (other than taxes imposed on
or measured by the net income of Lender by the jurisdiction under
the laws of which Lender is organized or any political
subdivision thereof and taxes imposed on its net income by the
jurisdiction of Lender's applicable lending office or any
political subdivision thereof) (collectively, "Taxes") which
arise from any payment made hereunder or under the Note or from
the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document.
(2) Borrower hereby indemnifies Lender for the full
amount of Taxes (including, without limitation, any Taxes imposed
by any jurisdiction on amounts payable under this Section) paid
by Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto (plus
interest on any amounts so paid at a rate equal to the Default
Rate). Payment under this indemnification shall be made within
thirty (30) days from the date Lender makes written demand
therefor.
(3) Without prejudice to the survival of any other
agreement of Borrower hereunder, the agreements and obligations
of Borrower contained in this Section 2.8 shall survive the
payment in full of the Obligations.
2.9 Judgment Currency.
(1) If for the purposes of obtaining judgment in any
court it is necessary to convert a sum due hereunder or under any
other Loan Document in any currency (the "Original Currency")
into another currency (the "Other Currency"), the parties hereto
agree, to the fullest extent permitted by law, that the rate of
exchange used shall be that at which in accordance with normal
banking procedures Lender could purchase the Original Currency
with the Other Currency on the business day preceding that on
which final judgment is given.
(2) The obligation of Borrower in respect of any sum
due from it hereunder in the Original Currency shall,
notwithstanding any judgment in any Other Currency, be discharged
only to the extent that, on the business day following receipt of
any sum adjudged to be so due in such Other Currency, Lender may
in accordance with normal banking procedures purchase such
Original Currency with such Other Currency. If the amount of the
Original Currency so purchased is less than the sum originally
due in the Original Currency, Borrower agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify
Lender and its assignees against such loss.
SECTION 3 CONDITIONS TO TERM LOAN
3. Conditions to Loans. The obligation of Lender to make the
Loan on the Closing Date is subject to satisfaction of all of the
conditions set forth below.
3.1 Closing Deliveries. Lender shall have received, in
form and substance satisfactory to Lender, all documents,
instruments and information identified on Schedule 3.1, duly
executed by the applicable Loan Party, and all other agreements,
notes, certificates, orders, authorizations, financing
statements, mortgages and other documents which Lender may at any
time reasonably request.
3.2 Security Interests. Lender shall have received
satisfactory evidence that all security interests and liens
granted to Lender pursuant to this Agreement or the other Loan
Documents have been duly perfected and constitute first priority
liens on the Collateral, subject only to Permitted Encumbrances.
3.3 Representations and Warranties. The representations
and warranties contained herein and in the Transaction Documents
shall be true, correct and complete in all material respects on
and as of the Closing Date to the same extent as though made on
and as of that date.
3.4 Fees. Borrower shall have paid the facility fees
payable on the Closing Date, as well as all costs and expenses
(including attorneys' fees) of Lender.
3.5 No Default. No event shall have occurred and be
continuing or would result from the funding of the Loan that
would constitute an Event of Default or a Default.
3.6 Performance of Agreements. Each Loan Party shall have
performed in all material respects all agreements and satisfied
all conditions which any Transaction Document provides shall be
performed by it on or before the Closing Date.
3.7 No Prohibition. No order, judgment or decree of any
court, arbitrator or Governmental Authority shall purport to
enjoin or restrain Lender from making the Loan or Borrower from
issuing the Note or Parent from issuing the warrants under the
Warrant Documents.
3.8 No Litigation. There shall not be pending or, to the
knowledge of Parent, threatened, any action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or
arbitration by, against or affecting any Loan Party or any
property of any Loan Party, and there shall have occurred no
development in any such action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration,
that, in the opinion of Lender, would reasonably be expected to
have a Material Adverse Effect.
3.9 No Material Adverse Change. No event or circumstance
shall have occurred since December 31, 1995 that, in the opinion
of Lender, constitutes or would reasonably be expected to
constitute a Material Adverse Effect.
3.10 Financial Statements. Lender shall have received (a)
the consolidated financial statements for Parent and its
Subsidiaries for the 1996 Fiscal Year, accompanied by the
unqualified report of BDO Seidman and (b) the consolidating
financial statements of Parent and its Subsidiaries for the 1996
Fiscal Year, in form and substance satisfactory to Lender.
3.11 Note Repayment. Parent shall have paid in full its
obligations under World Wide Export Ltd., or such repayment shall
be made with the proceeds of the Note.
3.12 EBITDA. Parent's EBITDA for the Fiscal Year ending
March 31, 1996 shall have been at least $4,000,000.
3.13 Consents. Lender shall have received evidence
satisfactory to it that all consents or approvals from
Governmental Authorities or other Persons necessary for the
issuance of the Note and the Warrants or in connection with the
Transaction Documents have been obtained and are in full force
and effect.
SECTION 4 REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, and to make the
Loan, each of Parent and Borrower represents and warrants to
Lender that the following statements are true, correct and
complete:
4.1 Organization, Powers, Capitalization.
(A) Organization and Powers. Each of the Loan Parties
is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and
qualified to do business in all jurisdictions where such
qualification is required except where failure to be so qualified
could not be reasonably expected to have a Material Adverse
Effect. Each of the Loan Parties has all requisite corporate
power and authority to own and operate its properties, to carry
on its business as now conducted and proposed to be conducted and
to enter into each Transaction Document to which it is a party.
(B) Capitalization. The authorized capital stock of
each of the Loan Parties is as set forth on Schedule 4.1. All
issued and outstanding shares of capital stock of each of the
Loan Parties are duly authorized and validly issued, fully paid,
nonassessable, and the capital stock of each of the Subsidiaries
of Parent is free and clear of all Liens other than those in
favor of Lender. All shares of the issued and outstanding
capital stock of the Loan Parties were issued in compliance with
all applicable laws concerning the issuance of securities.
Schedule 4.1 shows all of Parent's Subsidiaries and the ownership
of all of the capital stock of such Subsidiaries. There are no
preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the
purchase or acquisition from any Loan Party of any shares of
capital stock or other securities of any such entity.
4.2 Authorization No Conflict. Borrower has the corporate
power and authority to incur the Obligations, to grant security
interests in the Collateral and to enter into and perform its
obligations under each Transaction Document to which it is a
party. Parent and each of its Subsidiaries has the corporate
power and authority to grant security interests in the Collateral
and to enter into and perform its obligations under each
Transaction Document to which it is a party. On the Closing
Date, the execution, delivery and performance of the Transaction
Documents by each Loan Party signatory thereto will have been
duly authorized by all necessary corporate and shareholder
action. The execution, delivery and performance by each Loan
Party of each Transaction Document to which it is a party and the
consummation of the transactions contemplated by this Agreement
and the other Transaction Documents by each Loan Party do not
contravene and will not be in contravention of any Requirement of
Law or any agreement or order by which any Loan Party or any Loan
Party's property is bound. This Agreement is, and the other Loan
Documents, when executed and delivered will be, the legally valid
and binding obligations of the applicable Loan Parties
respectively, each enforceable against the Loan Parties, as
applicable, in accordance with their respective terms.
4.3 Financial Condition. All financial statements
concerning Parent and its Subsidiaries which have been furnished
by Parent and its Subsidiaries to Lender pursuant to this
Agreement have been prepared in accordance with GAAP consistently
applied throughout the periods involved (except as disclosed
therein) and present fairly the financial condition of the
Persons covered thereby as at the dates thereof and the results
of their operations for the periods then ended. There has been
no event or circumstance which has occurred since December 31,
1995 which constitutes a Material Adverse Effect.
4.4 Indebtedness. As of the Closing Date, neither Parent
nor any of its Subsidiaries has any Indebtedness except as
reflected on the audited financial statements for the Fiscal Year
ended March 31, 1996 or as incurred in the ordinary course of
business following the date of such financial statements.
4.5 Names. Schedule 4.5 sets forth all names, trade names,
fictitious names and business names under which Parent or any of
its Subsidiaries currently conducts business or has at any time
during the past five years conducted business in the United
States, Turks and Caicos or Anguilla.
4.6 Locations; FEIN. Schedule 4.6 sets forth as to Parent
and each of its Subsidiaries the location of its principal place
of business, the location of its books and records, and all
locations of Collateral, and such locations are the sole
locations for the business and the Collateral. Parent's federal
employer identification number is set forth on the signature page
hereof.
4.7 Title to Properties; Liens. Parent and each of its
Subsidiaries has good, sufficient and legal title, subject to
Permitted Encumbrances, to all its respective material properties
and assets. Except for Permitted Encumbrances, all such
properties and assets are free and clear of Liens. To the best
knowledge of Parent and Borrower after due inquiry, there are no
actual, threatened or alleged defaults with respect to any leases
of real property under which any Loan Party is lessee or lessor
which would have a Material Adverse Effect.
4.8 Litigation; Adverse Facts. There are no judgments
outstanding against any Loan Party or affecting any property of
any Loan Party nor, except as set forth on Schedule 4.8, is there
any action, charge, claim, demand, suit, proceeding, petition,
governmental investigation or arbitration now pending or, to the
best knowledge of Parent and Borrower after due inquiry,
threatened against or affecting any Loan Party or any property of
any Loan Party which could reasonably be expected to result in
any Material Adverse Effect.
4.9 Payment of Taxes. All material tax returns and reports
of required to be filed by any of them have been timely filed,
and all taxes, assessments, fees and other governmental charges
upon such Persons and upon their respective properties, assets,
income and franchises which are shown on such returns as due and
payable have been paid when due and payable. None of the income
tax returns of any Loan Party are under audit. No tax liens have
been filed and no claims (except as otherwise permitted by
subsection 5.5) are being asserted with respect to any such
taxes. The charges, accruals and reserves on the books of each
Loan Party in respect of any taxes or other governmental charges
are in accordance with GAAP.
4.10 Performance of Agreements. None of the Loan Parties
and none of their respective Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Material Contract.
4.11 Employee Benefit Plans. Parent, each of its
Subsidiaries and each ERISA Affiliate is in compliance in all
material respects with all applicable provisions of ERISA, the
IRC and all other applicable laws and the regulations and
interpretations thereof with respect to all Employee Benefit
Plans. No material liability has been incurred by Parent, any of
its Subsidiaries or any ERISA Affiliate which remains unsatisfied
for any funding obligation, taxes or penalties with respect to
any Employee Benefit Plan.
4.12 Intellectual Property. Each Loan Party owns, is
licensed to use or otherwise has the right to use, all
Intellectual Property used in or necessary for the conduct of its
business as currently conducted, and all such Intellectual
Property is identified on Schedule 4.12.
4.13 Environmental Compliance. Each Loan Party has been and
is currently in compliance with all applicable Environmental
Laws, including obtaining and maintaining in effect all permits,
licenses or other authorizations required by applicable
Environmental Laws. There are no claims, liabilities,
investigations, litigation, administrative proceedings, whether
pending or threatened, or judgments or orders relating to any
Hazardous Materials asserted or threatened against any Loan Party
or relating to any real property currently or formerly owned,
leased or operated by any Loan Party.
4.14 Solvency. Each Loan Party: (a) owns and will own
assets the fair salable value of which are (i) greater than the
total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be
required to pay probable liabilities as they mature; (b) has
capital that is not unreasonably small in relation to its
business as presently conducted or any contemplated or undertaken
transaction; and (c) does not intend to incur and does not
believe that it will incur debts beyond its ability to pay such
debts as they become due.
4.15 Disclosure. No representation or warranty of Borrower,
Parent, any of Parent's Subsidiaries or any other Loan Party
contained in this Agreement, the financial statements, the other
Transaction Documents, or any other document, certificate or
written statement furnished to Lender by or on behalf of any such
Person for use in connection with the Transaction Documents
contains any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the
circumstances in which the same were made. The projections and
pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by such
Persons to be reasonable at the time made, it being recognized by
Lender that such projections as to future events are not to be
viewed as facts and that actual results during the period or
periods covered by such Projections may differ from the projected
results. There is no material fact known to Parent or Borrower
that has had or is reasonably expected to have a Material Adverse
Effect and that has not been disclosed herein or in such other
documents, certificates and statements furnished to Lender for
use in connection with the transactions contemplated hereby.
4.16 Insurance. Parent and each of its Subsidiaries
maintains adequate insurance policies for public liability,
property damage for its business and properties and product
liability, no notice of cancellation has been received with
respect to such policies and Parent and each of its Subsidiaries
is in compliance with all conditions contained in such policies.
4.17 Compliance with Laws. No Loan Party is in violation
of any Requirement of Law which violation would subject any Loan
Party, or any of their respective officers, to criminal liability
or have a Material Adverse Effect and no such violation has been
alleged.
4.18 Bank Accounts. Schedule 4.18 sets forth the account
numbers and locations of all bank accounts of Parent and its
Subsidiaries.
4.19 Employee Matters. Except as set forth on Schedule
4.19, (a) no Loan Party nor any of such Loan Party's employees is
subject to any collective bargaining agreement, (b) no petition
for certification or union election is pending with respect to
the employees of any Loan Party and no union or collective
bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no
strikes, slowdowns, work stoppages or controversies pending or,
to the best knowledge of Borrower after due inquiry, threatened
between any Loan Party and its respective employees, other than
employee grievances arising in the ordinary course of business
which could reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect.
4.20 Governmental Regulation. None of the Loan Parties is,
or after giving effect to any loan will be, subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal
or state statute or regulation limiting its ability to incur
Indebtedness or to grant Liens on the Collateral.
SECTION 5 AFFIRMATIVE COVENANTS
Each of Parent and Borrower covenants and agrees that until
payment in full of all Obligations unless Lender shall otherwise
give its prior written consent, each of Parent and Borrower shall
perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 5.
5.1 Financial Statements and Other Reports. Parent will
maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance
with sound business practices to permit preparation of financial
statements in conformity with GAAP. Borrower will deliver to
Lender the financial statements and other reports described
below:
(A) Quarterly Financials. As soon as available and in
any event within forty-five (45) days after the end of each of
the first three quarters of a Fiscal Year, Borrower will deliver
(i) Parent's quarterly report on Form 10-Q as filed with the
Securities and Exchange Commission and (ii) a report in form and
detail satisfactory to Lender with respect to the aging of the
accounts receivable of Parent and its Subsidiaries.
(B) Year-End Financials. As soon as available and in
any event within ninety (90) days after the end of each Fiscal
Year, Borrower will deliver (1) the consolidated balance sheet of
Parent and its Subsidiaries as at the end of such year and the
related consolidated statements of income, stockholders' equity
and cash flow for such Fiscal Year; accompanied by a report with
respect to the financial statements from a firm of independent
certified public accountants selected by Parent, and acceptable
to Lender, which report shall be unqualified as to going concern
and scope of audit of Parent and its Subsidiaries and shall state
that (a) such financial statements present fairly the financial
position of Parent and its Subsidiaries as at the dates indicated
and the results of operations and cash flow for the periods
indicated in conformity with GAAP applied on a basis consistent
with prior years and (b) that the examination by such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards ; and (2)
Parent's annual report on Form 10-K as filed with the Securities
and Exchange Commission.
(C) Accountants' Certification and Reports. Together
with each delivery of financial statements of Parent and its
Subsidiaries pursuant to subsection 5.1(B) beginning with the
1997 Fiscal Year, Borrower will deliver (1) a written statement
by Parent's independent certified public accountants (a) stating
that the examination has included a review of the terms of this
Agreement as same relate to accounting matters and (b) stating
whether, in connection with the examination, any condition or
event that constitutes a Default or an Event of Default has come
to their attention and, if such a condition or event has come to
their attention, specifying the nature and period of existence
thereof. Promptly upon receipt thereof, Parent or Borrower will
deliver copies of all significant reports submitted to Parent by
independent public accountants in connection with each annual,
interim or special audit of the financial statements of Parent
made by such accountants, including the comment letter submitted
by such accountants to management in connection with their annual
audit.
(D) Compliance Certificate. Together with the
delivery of each set of financial statements pursuant to
subsection 5.1(A) or (B), Borrower will deliver to Lender a
Compliance Certificate.
(E) Government Notices. Borrower will deliver to
Lender promptly after receipt by any Loan Party copies of all
material notices, requests, subpoenas, inquiries or other
writings received from any Governmental Authority concerning any
Employee Benefit Plan, the violation or alleged violation of any
Requirement of Law, the storage, use or disposal of any Hazardous
Material, or any Loan Party's payment or non-payment of any taxes
(including any tax audit).
(F) Events of Default, etc. Promptly upon any officer
of Parent or Borrower obtaining knowledge of any of the following
events or conditions, Borrower shall deliver a certificate of
Parent's or Borrower's chief operating officer or principal
financial officer specifying the nature and period of existence
of such condition or event and what action any Loan Party has
taken, is taking and proposes to take with respect thereto: (1)
any condition or event that constitutes an Event of Default or
Default; (2) any notice of default that any Person has given to
any Loan Party or any other action taken with respect to a
claimed default; or (3) any Material Adverse Effect.
(G) Trade Names. Parent and each of its Subsidiaries
will give Lender at least thirty (30) days advance written notice
of any change of name or of any new trade name or fictitious
business name in the United States, Turks and Caicos or Anguilla.
The use of any trade name or fictitious business name will be in
compliance with all laws regarding the use of such names.
(H) Locations. Borrower will give Lender at least
thirty (30) days advance written notice of any change in the
principal place of business of Parent or any of its Subsidiaries
or any change in the locations of their books and records or the
Collateral.
(I) Bank Accounts. Borrower will give Lender prompt
notice of any new bank accounts Parent or any of its Subsidiaries
intends to establish prior to their opening same.
(J) Litigation. Promptly upon any officer of Parent
or any of its Subsidiaries obtaining knowledge of (1) the
institution of any action, suit, proceeding, governmental
investigation or arbitration against or affecting any Loan Party
or any property of any Loan Party not previously disclosed or (2)
any material development in any action, suit, proceeding,
governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan
Party which could reasonably be expected to have a Material
Adverse Effect, Borrower will promptly give notice thereof to
Lender and provide such other information as may be reasonably
available to them to enable Lender and its counsel to evaluate
such matter.
(K) Indebtedness Default Notices. Borrower shall
promptly deliver copies of all notices given or received by
Parent or any of its Subsidiaries with respect to noncompliance
with any term or condition related to any Indebtedness in a
principal amount of $50,000 or more, and shall promptly notify
Lender of any potential or actual event of default with respect
to any such Indebtedness.
(L) Change of Directors. Borrower shall promptly
deliver a notice to Lender of any change in its directors or in
the directors of Service 800, S.A., or World Direct Limited,
accompanied by executed and undated resolutions of all directors
approving the transfer of shares upon exercise of remedies under
the applicable Pledge Agreement.
(M) Other Information. With reasonable promptness,
Borrower will deliver such other information and data with
respect to any Loan Party or the Collateral as Lender may
reasonably request from time to time.
5.2 Access to Accountants. Each of Parent and Borrower
authorizes Lender to discuss the financial condition and
financial statements of Parent and its Subsidiaries with Parent's
independent public accountants upon reasonable notice to Borrower
of its intention to do so, and authorizes such accountants to
respond to all of Lender's inquiries.
5.3 Inspection. Each of Parent and Borrower shall permit
Lender and any authorized representatives designated by Lender to
visit and inspect any of the properties of the Loan Parties,
including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and
their affairs, finances and business with its and their officers
and independent public accountants, at such reasonable times
during normal business hours and as often as may be reasonably
requested.
5.4 Corporate Existence. Each of Parent and Borrower will,
and will cause each of its Subsidiaries to, at all times preserve
and keep in full force and effect and all rights and franchises
material to its business. Borrower will promptly notify Lender
of any change in its or any Loan Party's ownership or corporate
structure.
5.5 Payment of Taxes. Each of Parent and Borrower will,
and will cause each of its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any
of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty
accrues thereon provided that no such tax need be paid if a Loan
Party is contesting same in good faith by appropriate proceedings
promptly instituted and diligently conducted and if such Loan
Party has established appropriate reserves as shall be required
in conformity with GAAP.
5.6 Maintenance of Properties; Insurance. Each of Parent
and Borrower will maintain or cause to be maintained in good
repair, working order and condition all material properties used
in the business of the Loan Parties and will make or cause to be
made all appropriate repairs, renewals and replacements thereof.
Parent will maintain or cause to be maintained, with financially
sound and reputable insurers, public liability and property
damage insurance with respect to its business and properties and
the business and properties of its Subsidiaries against loss or
damage of the kinds customarily carried or maintained by
corporations of established reputation engaged in similar
businesses and in amounts acceptable to Lender. Borrower shall
cause Lender to be named as loss payee on all insurance policies
relating to any Collateral and as additional insured under all
liability policies, in each case pursuant to appropriate
endorsements in form and substance satisfactory to Lender.
5.7 Compliance with Laws. Each of Parent and Borrower
will, and will cause each of its Subsidiaries to, comply with
Requirements of Laws.
5.8 Collateral Locations. Each of Parent and Borrower
will, and will cause each of its Subsidiaries to, keep the
Collateral at the locations specified on Schedule 4.7. With
respect to any new location, each of Parent and Borrower will,
and will cause each of its Subsidiaries to, execute such
documents and take such actions as Lender deems necessary to
perfect and protect the security interests of Lender in the
Collateral prior to the transfer or removal of any Collateral to
such new location.
5.9 Use of Proceeds and Margin Security. Borrower shall
use the proceeds of the Loan for proper business purposes
consistent with all Requirements of Laws. No portion of the
proceeds of the Loan shall be used by Borrower or any of its
Affiliates for the purpose of purchasing or carrying margin stock
within the meaning of Regulation G or Regulation U, or in any
manner that might cause the borrowing or the application of such
proceeds to violate Regulation T or Regulation X or any other
regulation of the Board of Governors of the Federal Reserve
System, or to violate the Exchange Act.
5.11 Minimum EBITDA. Parent shall maintain a trailing four
quarter EBITDA of at least $4,000,000 at the end of each fiscal
quarter.
5.12 Equity Offering. Parent shall use its best efforts to
complete a private placement of its common stock, with proceeds
to Parent of at least $10,000,000. In furtherance thereof,
Parent will maintain an active engagement of [Oppenheimer] or
another investment banking firm reasonably acceptable to Lender.
Parent will keep Lender apprised of its progress in such equity
offering.
5.13 Registration of Charges. Within fifteen (15) days
after the Closing Date, Borrower will deliver to Lender evidence
of the registration of charges under the Security Agreements in
the Turks and Caicos Islands and Anguilla.
SECTION 6 NEGATIVE COVENANTS
Each of Parent and Borrower covenants and agrees that until
payment in full of all Obligations, unless it has received the
prior written consent of Lender, neither Parent nor Borrower
shall and will not permit any of its Subsidiaries to:
6.1 Capital Expenditure Limits. Make any Capital
Expenditures (excluding trade-ins and excluding Capital
Expenditures in respect of replacement assets to the extent
funded with casualty insurance proceeds) in excess of $5,500,000
during the term of this Agreement. In the event that any Loan
Party enters into a Capital Lease or other contract with respect
to fixed assets, for purposes of calculating Capital Expenditures
the amount of the Capital Lease or contract initially capitalized
on such Loan Party's balance sheet prepared in accordance with
GAAP shall be considered expended in full on the date that it
enters into such Capital Lease or contract.
6.2 Indebtedness and Liabilities. Directly or indirectly
create, incur, assume, guarantee, or otherwise become or remain
directly or indirectly liable, on a fixed or contingent basis,
with respect to any Indebtedness except: (a) the Obligations;
(b) intercompany Indebtedness which constitutes a Permitted
Investment; provided that such Indebtedness is subordinated in
right of payment to the Obligations; (c) Indebtedness secured by
purchase money Liens or Indebtedness (not included in 6.2(d))
under Capital Leases not to exceed $1,000,000 outstanding at any
time in the aggregate; provided that, after giving effect to the
incurrence of such Indebtedness no Default or Event of Default
shall exist and the terms of such Indebtedness have been approved
by Lender; and (d) Indebtedness existing on the Closing Date and
identified on Schedule 6.2.
6.3 Guaranties. Except for (a) endorsements of instruments
or items of payment for collection in the ordinary course of
business and (b) guaranties of the Obligations, guaranty,
endorse, or otherwise in any way become or be responsible for any
obligations of any other Person, whether directly or indirectly
by agreement to purchase the indebtedness of any other Person or
through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants
or conditions, or by way of stock purchase, capital contribution,
advance or loan for the purpose of paying or discharging any
indebtedness or obligation of such other Person or otherwise.
6.4 Transfers, Liens and Related Matters.
(A) Transfers. Sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with
respect to any assets, except that Parent and its Subsidiaries
may (i) sell inventory in the ordinary course of business; and
(ii) make Asset Dispositions if all of the following conditions
are met: (1) the market value of assets sold or otherwise
disposed of in any single transaction or series of related
transactions does not exceed $250,000 and the aggregate market
value of assets sold or otherwise disposed of in any Fiscal Year
does not exceed $500,000; (2) the consideration received is at
least equal to the fair market value of such assets; (3) the sole
consideration received is cash; (4) the net proceeds of such
Asset Disposition are applied as required by subsection 2.4(B);
(5) after giving effect to the sale or other disposition of the
assets included within the Asset Disposition and the repayment of
the Obligations with the proceeds thereof, the Loan Parties are
in compliance on a pro forma basis with the covenants set forth
in this Agreement recomputed for the most recently ended month
for which information is available and is in compliance with all
other terms and conditions contained in this Agreement; and (6)
no Default or Event of Default shall then exist or result from
such sale or other disposition.
(B) Liens. Except for Permitted Encumbrances,
directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of the Collateral or the
assets of such Person or any proceeds, income or profits
therefrom.
(C) No Negative Pledges. Enter into or assume any
agreement (other than the Loan Documents) prohibiting the
creation or assumption of any Lien upon its properties or assets,
whether now owned or hereafter acquired.
(D) No Restrictions on Subsidiary Distributions to
Borrower. Except as provided herein, directly or indirectly
create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to: (1) pay dividends or make any
other distribution on any of such Subsidiary's capital stock
owned by Parent or any Subsidiary of Parent; (2) subject to
subordination provisions, pay any Indebtedness owed to any Loan
Party; (3) make loans or advances to Parent or any Subsidiary; or
(4) transfer any of its property or assets to Borrower or any
other Subsidiary.
6.5 Investments and Loans. Make or permit to exist
investments in or loans to any other Person, except: (a) Cash
Equivalents; (b) loans and advances to employees for moving,
entertainment, travel and other similar expenses in the ordinary
course of business in an aggregate outstanding amount not in
excess of $100,000 at any time; (c) Permitted Investments and (d)
Capital Expenditures permitted above.
6.6 Restricted Junior Payments. Directly or indirectly
declare, order, pay, make or set apart any sum for any Restricted
Junior Payment, except that: (a) Subsidiaries of Borrower may
make Restricted Junior Payments to Borrower; and (b) Parent may
make payments on the Subordinated Debt in accordance with the
terms of the Intercreditor Agreement.
6.7 Restriction on Fundamental Changes. (a) Enter into any
transaction of merger or consolidation; (b) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); (c)
convey, sell, lease, sublease, transfer or otherwise dispose of,
in one transaction or a series of transactions, all or any
substantial part of its business or assets, or the capital stock
of any of its Subsidiaries, whether now owned or hereafter
acquired; or (d) acquire by purchase or otherwise all or any
substantial part of the business or assets of, or stock or other
evidence of beneficial ownership of, any Person. Notwithstanding
the foregoing, a wholly-owned Subsidiary of Parent may merge with
and into Parent or into another wholly-owned Subsidiary, provided
in each case that the surviving corporation shall execute and
deliver such documents as Lender may request to confirm the
Affiliate Guaranty or the Parent Guaranty as applicable, and the
Lien under any Loan Document and in any merger involving
Borrower, Borrower shall be the surviving corporation.
6.8 Changes Relating to Subordinated Debt. Change or amend
the terms of the Subordinated Debt if the effect of such
amendment is to: (a) increase the interest rate on such
Indebtedness; (b) change the dates upon which payments of
principal or interest are due on such Indebtedness; (c) change
any event of default or add any covenant with respect to such
Indebtedness; (d) change the payment provisions of such
Indebtedness; (e) change the subordination provisions thereof; or
(f) change or amend any other term if such change or amendment
would materially increase the obligations of the obligor or
confer additional material rights on the holder of such
Indebtedness in a manner adverse to Parent, any of its
Subsidiaries, or Lender.
6.9 Transactions with Affiliates. Directly or indirectly,
enter into or permit to exist any transaction (including the
purchase, sale or exchange of property or the rendering of any
service) with any Affiliate or with any officer, director or
employee of any Loan Party, except for transactions in the
ordinary course of and pursuant to the reasonable requirements of
such Loan Party's business and upon fair and reasonable terms
which are no less favorable to such Loan Party than it would
obtain in a comparable arm's length transaction with an
unaffiliated Person.
6.10 Conduct of Business. Engage in any business other than
businesses of the type engaged in by Parent or such Subsidiary on
the Closing Date and those related thereto.
6.11 Compliance with ERISA. Establish any new Employee
Benefit Plan or amend any existing Employee Benefit Plan if the
liability or increased liability resulting from such
establishment or amendment is material. Neither Parent nor any
Subsidiary shall fail to establish, maintain and operate each
Employee Benefit Plan in compliance in all material respects with
the provisions of ERISA, the IRC and all other applicable laws
and the regulations and interpretations thereof.
6.12 Subsidiaries. Establish, create or acquire any new
Subsidiaries.
6.13 Fiscal Year. Change its Fiscal Year.
SECTION 7 DEFAULT, RIGHTS AND REMEDIES
7.1 Event of Default. "Event of Default" shall mean the
occurrence or existence of any one or more of the following:
(A) Payment. Failure to make payment of any of the
Obligations when due and in the case of interest, such failure
shall not be cured within three (3) Business Days of the
applicable due date; or
(B) Default in Other Agreements. (1) Failure of
Parent or any of its Subsidiaries to pay when due any principal
or interest on any Indebtedness or (2) breach or default of
Parent or any of its Subsidiaries with respect to any
Indebtedness (other than the Obligations), if such failure to
pay, breach or default entitles the holder to cause such
Indebtedness having an individual principal amount in excess of
$50,000 or having an aggregate principal amount in excess of
$100,000 to become or be declared due prior to its stated
maturity; or
(C) Breach of Certain Provisions. Failure of Parent
or Borrower to perform or comply with any term or condition
contained in Section 6 or with any provision of any Warrant
Document; or failure of Parent or Borrower to perform or comply
with any term or condition contained in subsections 5.1, 5.5 or
5.6 and such failure shall not be cured within ten (10) days; or
(D) Breach of Warranty. Any representation, warranty,
certification or other statement made by any Loan Party in any
Transaction Document or in any statement or certificate at any
time given by such Person in writing pursuant or in connection
with any Transaction Document is false in any material respect on
the date made; or
(E) Other Defaults Under Loan Documents. Parent or
Borrower or any other Loan Party defaults in the performance of
or compliance with any term contained in this Agreement (other
than occurrences described in other provisions of this subsection
7.1 for which a different grace or cure period is specified or
which constitute immediate Events of Default) or the other Loan
Documents and such default is not remedied or waived within
thirty (30) days; or
(F) Change in Control. A Change of Control occurs; or
(G) Involuntary Bankruptcy; Appointment of Receiver,
etc. (1) A court enters a decree or order for relief with
respect to any Loan Party in an involuntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which decree or order is
not stayed or other similar relief is not granted under any
applicable federal or state law; or (2) the continuance of any of
the following events for sixty (60) days unless dismissed, bonded
or discharged: (a) an involuntary case is commenced against any
Loan Party, under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect; or (b) a decree or order
of a court for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar
powers over any Loan Party, or over all or a substantial part of
their respective property, is entered; or (c) an interim
receiver, trustee or other custodian is appointed without the
consent of a Loan Party, for all or a substantial part of its
property; or
(H) Voluntary Bankruptcy; Appointment of Receiver,
etc. (1) An order for relief is entered with respect to any Loan
Party or any Loan Party commences a voluntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry
of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any
such law or consents to the appointment of or taking possession
by a receiver, trustee or other custodian for all or a
substantial part of its property; or (2) any Loan Party makes any
assignment for the benefit of creditors; or (3) the board of
directors of any Loan Party adopts any resolution or otherwise
authorizes action to approve any of the actions referred to in
this subsection 7.1(H); or
(I) Judgment and Attachments. Except for the
arbitration award described on Schedule 4.8, any money judgment,
writ or warrant of attachment, or similar process involving (1)
an amount in any individual case in excess of $50,000 or (2) an
amount in the aggregate at any time in excess of $100,000 (in
either case not adequately covered by insurance) is entered or
filed against any Loan Party or any of their respective assets
and remains undischarged, unvacated, unbonded or unstayed for a
period of thirty (30) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder; or
(J) Dissolution. Any order, judgment or decree is
entered against any Loan Party decreeing the dissolution or
liquidation of such Loan Party and such order remains
undischarged or unstayed for a period in excess of twenty (20)
days; or
(K) Solvency. Any Loan Party ceases to be solvent (as
represented by Parent and Borrower in subsection 4.14) or admits
in writing its present or prospective inability to pay its debts
as they become due; or
(L) Injunction. Any Loan Party is enjoined,
restrained or in any way prevented by the order of any court or
any administrative or regulatory agency from conducting all or
any material part of its business and such order continues for
more than thirty (30) days; or
(M) Invalidity of Transaction Documents. Any of the
Transaction Documents for any reason, other than a partial or
full release or satisfaction in accordance with the terms
thereof, ceases to be in full force and effect or is declared to
be null and void, or any Loan Party denies that it has any
further liability under any Transaction Documents to which it is
party, or gives notice to such effect; or
(N) Failure of Security. Lender does not have or
ceases to have a valid and perfected first priority security
interest in the Collateral (subject only to Permitted
Encumbrances), in each case, for any reason other than the
failure of Lender to take any action within its control.
7.2 Acceleration. Upon the occurrence of any Event of
Default described in the foregoing subsections 7.1(G) or 7.1(H),
all Obligations shall automatically become immediately due and
payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly
waived by Borrower. Upon the occurrence and during the
continuance of any other Event of Default, Lender may, by written
notice to Borrower, declare all or any portion of the Obligations
to be, and the same shall forthwith become, immediately due and
payable.
7.3 Remedies. If any Event of Default shall have occurred
and be continuing, in addition to and not in limitation of any
rights or remedies available to Lender at law or in equity,
Lender may exercise in respect of the Collateral, in addition to
all other rights and remedies provided for herein or in any
Transaction Document or otherwise available to it, all the rights
and remedies of a secured party on default under the UCC (whether
or not the UCC applies to the affected Collateral) and may also
(a) notify any or all obligors on the accounts of any Loan Party
to make all payments directly to Lender; (b) require any Loan
Party to, and each of Parent and Borrower hereby agrees that it
will and will cause each of its Subsidiaries to, at its expense
and upon request of Lender forthwith, assemble all or part of the
Collateral as directed by Lender and make it available to Lender
at a place to be designated by Lender which is reasonably
convenient to both parties; (c) without notice or demand or legal
process, enter upon any premises of any Loan Party and take
possession of the Collateral; and (d) without notice except as
specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Lender's
offices or elsewhere, at such time or times, for cash, on credit
or for future delivery, and at such price or prices and upon such
other terms as Lender may deem commercially reasonable. each of
Parent and Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days notice to
Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. At any sale of the Collateral, if
permitted by law, Lender may bid (which bid may be, in whole or
in part, in the form of cancellation of indebtedness) for the
purchase of the Collateral or any portion thereof for the account
of Lender. Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given.
Borrower shall remain liable for any deficiency. Lender may
adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to
which it was so adjourned. To the extent permitted by law,
Borrower hereby specifically waives all rights of redemption,
stay or appraisal which it has or may have under any law now
existing or hereafter enacted. Lender shall not be required to
proceed against any Collateral but may proceed against any Loan
Party directly.
7.4 Appointment of Attorney-in-Fact. Borrower hereby
constitutes and appoints Lender as Borrower's attorney-in-fact
with full authority in the place and stead of Borrower and in the
name of Borrower, Lender or otherwise, from time to time in
Lender's discretion while an Event of Default is continuing to
take any action and to execute any instrument that Lender may
deem necessary or advisable to accomplish the purposes of this
Agreement, including: (a) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any of the
Collateral; (b) to adjust, settle or compromise the amount or
payment of any account, or release wholly or partly any customer
or obligor thereunder or allow any credit or discount thereon;
(c) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with
clause (a) above; (d) to file any claims or take any action or
institute any proceedings that Lender may deem necessary or
desirable for the collection of any of the Collateral or
otherwise to enforce the rights of Lender with respect to any of
the Collateral; and (e) to sign and endorse any invoices, freight
or express bills, bills of lading, storage or warehouse receipts,
assignments, verifications and notices in connection with
accounts and other documents relating to the Collateral. The
appointment of Lender as Borrower's attorney and Lender's rights
and powers are coupled with an interest and are irrevocable until
payment in full and complete performance of all of the
Obligations.
7.5 Limitation on Duty of Lender with Respect to
Collateral. Beyond the safe custody thereof, Lender shall have no
duty with respect to any Collateral in its possession or control
(or in the possession or control of any agent or bailee) or with
respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto.
Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that
which Lender accords its own property. Lender shall not be
liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any warehouseman, carrier, forwarding
agency, consignee or other agent or bailee selected by Lender in
good faith.
7.6 Application of Proceeds. Upon the occurrence and
during the continuance of an Event of Default, (a) Borrower
irrevocably waives the right to direct the application of any and
all payments at any time or times thereafter received by Lender
from or on behalf of Borrower, and Borrower hereby irrevocably
agrees that Lender shall have the continuing exclusive right to
apply and to reapply any and all payments received at any time or
times after the occurrence and during the continuance of an Event
of Default against the Obligations in such manner as Lender may
deem advisable notwithstanding any previous entry by Lender upon
any books and records and (b) the proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall
be applied: first, to all fees, costs and expenses incurred by
Lender with respect to this Agreement, the other Loan Documents
or the Collateral; second, to all fees due and owing to Lender;
third, to accrued and unpaid interest on the Obligations; fourth,
to the principal amounts of the Obligations outstanding; and
fifth, to any other indebtedness or obligations of Borrower owing
to Lender.
7.7 License of Intellectual Property. Borrower hereby
assigns, transfers and conveys to Lender, effective upon the
occurrence of any Event of Default hereunder, the non-exclusive
right and license to use all Intellectual Property owned or (to
the extent that such license would not breach any agreement of
Borrower) used by Borrower together with any goodwill associated
therewith, all to the extent necessary to enable Lender to
realize on the Collateral and any successor or assign to enjoy
the benefits of the Collateral. This right and license shall
inure to the benefit of all successors, assigns and transferees
of Lender and its successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such
right and license is granted free of charge, without requirement
that any monetary payment whatsoever be made to Borrower by
Lender.
7.8 Waivers, Non-Exclusive Remedies. No failure on the
part of Lender to exercise, and no delay in exercising and no
course of dealing with respect to, any right under this Agreement
or the other Transaction Documents shall operate as a waiver
thereof; nor shall any single or partial exercise by Lender of
any right under this Agreement or any other Transaction Document
preclude any other or further exercise thereof or the exercise of
any other right. The rights in this Agreement and the other
Transaction Documents are cumulative and are not exclusive of any
other remedies provided by law.
SECTION 8 MISCELLANEOUS
8.1 Assignments and Participations. Lender may assign its
rights and delegate its obligations under this Agreement and
further may assign, or sell participations in, all or any part of
the Loan. In the case of an assignment authorized under this
subsection 8.1, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would
if it were a Lender hereunder, any Lender shall be relieved of
its obligations hereunder with respect thereto. Borrower hereby
acknowledges and agrees that any assignment will give rise to a
direct obligation of Borrower to the assignee and that the
assignee shall be considered to be a "Lender". Lender may
furnish any information concerning Parent and its Subsidiaries in
its possession from time to time to assignees and participants
(including prospective assignees and participants). If at any
time there shall be more than one Lender, Lenders shall designate
one party to act as "agent", and all actions shall be approved by
Lenders holding more than 51% of the Loan.
8.2 Set Off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any
such rights, upon the occurrence of any Event of Default, Lender,
each assignee of Lender's interest, and each participant is
hereby authorized by Parent and Borrower at any time or from time
to time, without notice to Parent or Borrower or to any other
Person, any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all balances held by it
at any of its offices for the account of Parent or any of its
Subsidiaries (regardless of whether such balances are then due to
Parent or its Subsidiaries) and any other property at any time
held or owing by that Lender or assignee to or for the credit or
for the account of Parent or any of its Subsidiaries against and
on account of any of the Obligations then outstanding; provided,
that no participant shall exercise such right without the prior
written consent of Lender.
Each of Parent and Borrower hereby agrees, to the fullest
extent permitted by law, that any Lender, assignee or participant
may exercise its right of setoff with respect to amounts in
excess of its pro rata share of the Obligations (or, in the case
of a participant, in excess of its pro rata participation
interest in the Obligations) and that such Lender, assignee or
participant, as the case may be, shall be deemed to have
purchased for cash in the amount of such excess, participations
in each other Lender's or holder's share of the Obligations.
8.3 Expenses and Attorneys' Fees. Whether or not the
transactions contemplated hereby shall be consummated, Borrower
agrees to promptly pay all fees, costs and expenses incurred by
Lender in connection with any matters contemplated by or arising
out of this Agreement or the other Transaction Documents
including the following, and all such fees, costs and expenses
shall be part of the Obligations, payable on demand and secured
by the Collateral: (a) fees, costs and expenses (including
attorneys' fees, allocated costs of internal counsel and fees of
consultants, accountants and other professionals retained by
Lender) incurred in connection with the examination, review, due
diligence investigation, documentation and closing of the
arrangements evidenced by the Transaction Documents; (b) fees,
costs and expenses (including attorneys' fees, allocated costs of
internal counsel and fees of consultants, accountants and other
professionals retained by Lender) incurred in connection with the
review, negotiation, preparation, documentation, execution and
administration of the Transaction Documents, the Loan, and any
amendments, waivers, consents, forbearances and other
modifications relating thereto or any subordination or
intercreditor agreements; (c) fees, costs and expenses incurred
in creating, perfecting and maintaining perfection of Liens in
favor of Lender; (d) fees, costs, expenses (including attorneys'
fees and allocated costs of internal counsel) and costs of
settlement incurred in collecting upon or enforcing rights
against the Collateral or incurred in any action to enforce this
Agreement or the other Transaction Documents or to collect any
payments due from Borrower or any other Loan Party under this
Agreement or any other Loan Document or incurred in connection
with any refinancing or restructuring of the credit arrangements
provided under this Agreement, whether in the nature of a
"workout" or in connection with any insolvency or bankruptcy
proceedings or otherwise.
8.4 Indemnity. In addition to the payment of expenses
pursuant to subsection 8.3, whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to
indemnify, pay and hold Lender, and the officers, directors,
employees, agents, consultants, auditors, Persons engaged by
Lender to evaluate or monitor the Collateral, affiliates and
attorneys of Lender and such holders (collectively called the
"Indemnitees") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the fees and disbursements of
counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or
threatened, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out
of this Agreement or the other Transaction Documents, the
consummation of the transactions contemplated by this Agreement,
Lender's agreement to make the Loan hereunder, the use or
intended use of the proceeds of any of the Loan or the exercise
of any right or remedy hereunder or under the other Transaction
Documents (the "Indemnified Liabilities"); provided that Borrower
shall have no obligation to an Indemnitee hereunder with respect
to Indemnified Liabilities arising from the gross negligence or
willful misconduct of that Indemnitee as determined by a court of
competent jurisdiction.
8.5 Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Agreement or of
the other Transaction Documents, or consent to any departure by
Borrower or any other Loan Party therefrom, shall be effective
unless the same shall be in writing and signed by Lender and the
applicable Loan Party. Each amendment, modification, termination
or waiver shall be effective only in the specific instance and
for the specific purpose for which it was given.
8.6 Notices. Unless otherwise specifically provided
herein, all notices shall be in writing addressed to the
respective party as set forth below and may be personally served,
telecopied or sent by overnight courier service or United States
mail and shall be deemed to have been given: (a) if delivered in
person, when delivered; (b) if delivered by telecopy, on the date
of transmission if transmitted on a Business Day before 2:00 p.m.
(Pacific time) or, if not, on the next succeeding Business Day;
(c) if delivered by overnight courier, two (2) days after
delivery to such courier properly addressed; or (d) if by U.S.
Mail, four (4) Business Days after depositing in the United
States mail, with postage prepaid and properly addressed.
If to Parent or Borrower: EXECUTIVE TELECARD, LTD.
4260 Evans Avenue
Denver, Colorado 80222
Attn: Allen Mandel
Telecopy No: (303) 692-0965
With a copy to: EXECUTIVE TELECARD, LTD.
8 Avenue C
Nanuet, New York 10954
Attn: John Gitlin, Secretary
Telecopy No.: (914) 627-3631
If to Lender: INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
333 S. Grand Avenue, Suite 3000
Los Angeles, California 90071
Attn: William James
Telecopy No.: (213) 687-7324
or to such other address as the party addressed shall have
previously designated by written notice to the serving party,
given in accordance with this subsection 8.6.
8.7 Survival of Warranties and Certain Agreements. All
agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement and the
making of the Loan hereunder. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of
Borrower set forth in subsections 8.3 and 8.4 shall survive the
payment of the Loan and the termination of this Agreement.
8.8 Indulgence Not Waiver. No failure or delay on the part
of Lender in the exercise of any power, right or privilege shall
impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right,
power or privilege.
8.9 Marshaling; Payments Set Aside. Lender shall not be
under any obligation to marshal any assets in favor of any Loan
Party or any other Person or against or in payment of any or all
of the Obligations. To the extent that any Loan Party makes a
payment or payments to Lender or Lender enforces its security
interests or exercise its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable
cause, then to the extent of such recovery, the Obligations or
part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
8.10 Entire Agreement. This Agreement, the Note, and the
other Transaction Documents referred to herein embody the final,
entire agreement among the parties hereto and supersede any and
all prior commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject
matter hereof and may not be contradicted or varied by evidence
of prior, contemporaneous, or subsequent oral agreements or
discussions of the parties hereto. There are no oral agreements
among the parties hereto.
8.11 Independence of Covenants. All covenants hereunder
shall be given independent effect so that if a particular action
or condition is not permitted by any of such covenants, the fact
that it would be permitted by an exception to, or be otherwise
within the limitations of, another covenant shall not avoid the
occurrence of a Default or an Event of Default if such action is
taken or condition exists.
8.12 Severability. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or
obligation under this Agreement or the other Transaction
Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under
this Agreement, or the other Transaction Documents or of such
provision or obligation in any other jurisdiction.
8.13 Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose or be given any substantive effect.
8.14 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
8.15 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns except that Borrower may
not assign its rights or obligations hereunder without the prior
written consent of Lender.
8.16 CONSENT TO JURISDICTION. EACH OF PARENT AND BORROWER
HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE COURT LOCATED
WITHIN THE BOROUGH OF MANHATTAN OR THE FEDERAL COURTS FOR THE
SOUTHERN DISTRICT OF NEW YORK AND IRREVOCABLY AGREES THAT,
SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER TRANSACTION
DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF PARENT AND
BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE
OTHER TRANSACTION DOCUMENTS OR THE OBLIGATIONS.
8.17 WAIVER OF JURY TRIAL. EACH OF PARENT AND BORROWER AND
LENDER HEREBY WAIVES THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS. EACH OF PARENT AND
BORROWER AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS
ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. PARENT,
BORROWER AND LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
8.18 Counterparts; Effectiveness. This Agreement and any
amendments, waivers, consents, or supplements may be executed in
any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same
instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
8.19 Confidentiality. Lender shall hold all nonpublic
information identified as such by Parent or Borrower in
accordance with Lender's customary procedures for handling
confidential information of this nature and in accordance with
safe and sound business practices and in any event may make
disclosure to such of its respective Affiliates, officers,
directors, employees, agents and representatives as need to know
such information in connection with the Transaction Documents.
Lender may also make disclosure reasonably required by a bona
fide offeree or assignee (or participation), or as required or
requested by any Governmental Authority or representative
thereof, or pursuant to legal process, or to its accountants,
lawyers and other advisors, and shall require any such offeree or
assignee (or participant) to agree (and require any of its
offerees, assignees or participants to agree) to comply with this
Section 8.19.
Witness the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first
written above.
"Borrower" EXECUTIVE TELECARD, S.A.
THE COMMON SEAL OF
EXECUTIVE TELECARD, S.A.
was hereunto to affixed in By: /s/ Allen Mandel
the presence of: Name: Allen Mandel
Director
By:/s/John Gitlin
Name: John Gitlin
Director
"Parent" EXECUTIVE TELECARD, LTD.
By: /s/Allen Mandel
Name: Allen Mandel
Title: Executive Vice President
FEIN: 13-3486421
"Lender" INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/Loring Guessous
Name: Loring Guessous
Title: Senior Vice President