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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED JULY 31, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER: 0-27898
IDT CORPORATION
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(Exact name of registrant as specified in its charter)
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DELAWARE 22-3415036
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation and organization)
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190 MAIN STREET
HACKENSACK, NEW JERSEY 07601
(Address of principal executive offices, including zip code)
(201) 928-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
(Title of class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the closing price of the Common Stock on December 31, 1997
of $20.25, as reported on the Nasdaq National Market, was approximately $227.7
million. Shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded
from this computation in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of December 31, 1997 the Registrant had outstanding approximately
12,885,812 shares of Common Stock, $.01 par value, and approximately 10,255,909
shares of Class A Common Stock, $.01 par value.
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EXPLANATORY NOTE: Part I, Part II, Part III and the Financial Statements set
forth in Item 14 of Part IV of this Form 10-K have been intentionally omitted
because this Amendment No. 2 does not effect any changes to such items. The
purpose of this filing is to update the Exhibits set forth in Item 14 of Part
IV.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report:
1. Financial Statements.
2. Financial Statement Schedules.
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SCHEDULE NO. DESCRIPTION
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I. Valuation and Qualifying Accounts
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3. Exhibits.
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EXHIBIT
NO. DESCRIPTION
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3.01(1) Restated Certificate of Incorporation of the Registrant.
3.02(1) By-laws of the Registrant.
4.01(2) Specimen Certificates for shares of the Registrant's Common Stock and Class A
Stock.
4.02(1) Description of Capital Stock (contained in the Certificate of Incorporation of
the Registrant, filed as Exhibit 3.01).
10.01(3) Employment Agreement between the Registrant and Howard S. Jonas.
10.02(3) Employment Agreement between the Registrant and Howard S. Balter.
10.03(4) Amended and Restated 1996 Stock Option and Incentive Plan of IDT Corporation.
10.04(4) Form of Stock Option Agreement under the 1996 Stock Option and Incentive Plan.
10.05(5) Network Service Provider Agreement between Netscape Communications Corporation
and the Registrant.
10.06(2) Form of Registration Rights Agreement between the Company's Stockholders and the
Company.
10.07(1) Lease of 294 State Street.
10.08* Lease of 190 Main Street.
10.09(6) Form of Registration Rights Agreement between Howard S. Jonas and the
Registrant.
10.10(7) Employment Agreement between the Registrant and James Courter.
10.11(5) Restated Sales Agreement between International Computer Systems, Inc. and the
Registrant.
10.12(5) Restated Consultant and Customer Support Agreement between the Registrant and
International Computer Systems, Inc.
10.13(8) Form of Debenture between the Registrant, RGC International Investors, LDC,
Pangaea Fund Ltd., Special Situations Private Equity Fund, L.P. and Halifax
Fund L.P.
10.14(8) Securities Purchase Agreement among the Registrant, RGC International Investors,
LDC, Pangaea Fund Ltd., Special Situations Private Equity Fund, L.P. and
Halifax Fund L.P.
10.15(8) Registration Rights Agreement among the Registrant, RGC International Investors,
LDC, Pangaea Fund Ltd., Special Situations Private Equity Fund, L.P. and
Halifax Fund L.P.
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EXHIBIT
NO. DESCRIPTION
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10.16- Warrants (No. 1 and No. 2) for the Purchase of Common Stock between the
Registrant and Prime Leasing, Inc.
10.17- Stock Purchase Agreement between the Registrant and Mr. David Turock.
10.18- Agreement between the Registrant and Mr. Clifford M. Sobel.
10.19* Employment Agreement between the Registrant and Mr. David Turock.
10.20* Loan and Security Agreement between the Registrant and Transamerica Business
Credit Corporation.
10.21* Revolving Credit Note issued by the Registrant to Transamerica Business Credit
Corporation.
10.22* Security Agreement executed by certain subsidiaries of the Registrant in favor
of Transamerica Business Credit Corporation.
10.23* Guaranty executed by certain subsidiaries of the Registrant in favor of
Transamerica Business Credit Corporation.
10.24- Employment Agreement between the Registrant and Mr. Hal Brecher.
21.01* Subsidiaries of the Registrant.
23.01- Consent of Ernst & Young LLP.
27.01- Financial Data Schedule.
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* filed herewith
- previously filed
(1) incorporated by reference to Form S-1 filed February 21, 1996, file No. 333-00204
(2) incorporated by reference to Form S-1 filed March 8, 1996, file No. 333-00204
(3) incorporated by reference to Form S-1 filed January 9, 1996, file No. 333-00204
(4) incorporated by reference to Form S-8 filed January 14, 1996, file No. 333-19727
(5) incorporated by reference to Form 10-K/A for the fiscal year ended July 31, 1996
filed November 21, 1996
(6) incorporated by reference to Form S-1 filed March 14, 1996, file No. 333-00204
(7) incorporated by reference to Form S-1 filed December 27, 1996, file No. 333-18901
(8) incorporated by reference to Form 8-K filed September 19, 1997
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(b) Reports on Form 8-K. The Registrant filed one report on Form 8-K during the
fiscal year ended July 31, 1997, on September 19, 1997, relating to the
Company's issuance of $7,500,000 aggregate principal amount of convertible
subordinated debentures.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to the
Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
IDT CORPORATION
By: /s/ HOWARD S. JONAS
-----------------------------------------
Howard S. Jonas
Chairman, Chief Executive Officer
and Treasurer
Date: February 2, 1998
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Exhibit 10.08
LEASE AGREEMENT
THIS LEASE, dated the tenth day of April 25th, 1996, between MCTOOBE
MANAGEMENT, INC. having an office at 190 Main Street, New Jersey 07601,
hereinafter referred to as LANDLORD,
AND
IDT INTERNET, INC. having an office at 294 State Street, Hackensack
07601, New Jersey, herein referred to as TENANT.
WITNESSETH that the Landlord hereby leases to the Tenant and the Tenant
hereby rents from the Landlord for the term and upon the rate specified, the
premises described as follows, situated in the City of Hackensack, County of
Bergen and State of New Jersey, consisting of 22,800 rentable square feet, in
the aforesaid premises known as 190 Main Street, Hackensack, New Jersey.
Landlord and tenant agree rent is $8.75 per sq. ft. as space hasn't been
measured yet by tenant.
1. The term of this lease shall be three (3) years, beginning May 1,
1996 and ending April 30, 1999.
2(a). Rent shall not start being due until latter of month after
electric installed or space is actually ready.
2. The Tenant agrees to pay to the Landlord as rent for and during
the term hereof, the sum of $598,500.00 (FIVE HUNDRED AND NINETY EIGHT
THOUSAND AND FIVE HUNDRED DOLLARS) at a rate of $16,625.00 monthly. Real
estate taxes are included. Tenant will be responsible for his pro rata share
of tax increases over base year 1996 as additional rent. Tenant shall not be
responsible for reassessment increases.
3. Payment of rent is due on the first day of each month. Payable to
Mctoobe Management, Inc. and mailed to 190 Main Street, Hackensack, New
Jersey 07601 or as may be otherwise directed by the Landlord in writing.
Tenant shall pay a late charge of 5% of the monthly rent for each payment
received by the Landlord after the 5th day of each month. Tenant shall pay a
late charge of 10% of the monthly rent for each rent payment that is received
by the landlord after the 10th of each month. The late charge shall be due
with the current late rent payment.
4. The Landlord covenants and agrees that the Tenant, on paying the
said rental and performing covenants and conditions in this lease contained,
shall and may peaceably and quietly have, hold and enjoy the demised premises
for the term aforesaid.
5. The Tenant covenants and agrees to use the demised premises as an
office. Sublease of any portion of the demised premises shall not be
unreasonably withheld.
6. The Tenant will comply with all the laws, statutes, ordinances,
orders, regulations, rules and requirements of every kind and nature relating
to the premises, or hereafter in effect, of the federal, state, county,
municipal, or other governmental
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authorities whether they be usual or usual ordinary or extraordinary. The
Tenant agrees at his cost and expense to comply with all said requirements that
pertain to the Tenant and/or his use of the said demised premises. The Landlord
will be held harmless from all expenses and/or damages by reason of any notices,
orders, violations, or penalties filed against or imposed upon the premises or
against the Landlord because of the Tenant's non compliance with said
requirements.
7. The Tenant from and after the date of the commencement of the term
of this lease will hold the Landlord harmless against any and all claims,
suits, damages, or causes of action for damages arising after the
commencement of the term of this lease, and against any orders or decrees of
judgments which may be entered therein, brought for damages or alleged
damages resulting from any injury to person and/or property or loss of life
sustained in the demised premises, during the term hereof.
8. The Tenant shall during the demised term maintain a general
liability policy insuring the Tenant and naming the Landlord as additional
insured in an amount to be agreed upon by the parts but in no event less than
$100,000/$300,000. Tenant shall cause the Landlord to be provided with
certificates of insurance showing the issuance of the insurance policies
provided for in this and shall further provide the Landlord with proof of
payment of the premiums in connection with said property.
9. All erections, alterations, additions and improvements, whether
temporary or permanent in character, which may be made upon the premises
either by the Landlord or the Tenant, except furniture or movable trade
fixtures installed at the expense of the Tenant shall be the property of the
Landlord and shall remain upon and be surrendered with the premises as a part
hereof at the termination of this lease without compensation to the Tenant.
The Tenant further agrees to keep said premises and all parts thereof in a
clean and sanitary condition and free from trash, inflammable material and
other objectionable material.
10. The Tenant shall not make any alterations, additions, or
improvements to said premises without the prior written consent of the
Landlord.
11. In the event that any mechanics' lien is filed against the
premises as a result of alterations, additions, or improvements made by the
Tenant, the Landlord at its option, after 90 days notice to the Tenant, may
terminate this lease and may pay the said lien without inquiring into the
validity thereof, and the Tenant shall forthwith reimburse the Landlord the
total expense incurred by the Landlord in discharging the said lien as
additional rent hereunder. Tenant may however post security with landlord's
attorney equal to mechanic lien and keep lease in effect until tenant has
lien removed. (Security may be cash, bond or insurance guarantee.)
12. If the Tenant does not exercise the option to renew as per the
conditions in Paragraph 23 of this Lease, then six (6) months prior to the
expiration of the demised term, the Landlord or its agent shall have the
right to place a suitable "For Lease" sign on the premises. Also, during
this time the Landlord or its agent with reasonable notice shall have the
right to examine the premises and/or exhibit the suite to perspective tenants.
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13. The Tenant agrees that in case of a fire or other casualty
resulting in damage to the premises it will give immediate notice thereof to
the Landlord, who shall thereupon, with expedition and in good and
workmanlike manner, after said damage, enter upon and undertake said repair
and rehabilitation, as is necessary to restore said premises to its original
condition before such damage, provided that such damage, with reasonable
dispatch, can be repaired within ninety (90) days from the fire or casualty.
The Landlord will make every effort to place the Tenant into available space
within the building during the repairs not to exceed the 90 day period. In
the event that the said demised premises shall at any time during the demised
term be totally destroyed by fire or other casualty, or should be rendered
party untenable, and the repair and rehabilitation of said demised premises
shall be of an extent requiring more than (90) days from the fire or casualty
for this completion, then this lease, at the option of either the Landlord or
Tenant may be terminated and the obligation to make rental payments thereupon
shall cease as of the date of such damage or destruction. Tenant shall not
be obligated to make rental payments in the event that landlord is unable to
place the Tenant into available space in or in close proximity to the
Building.
14. It is further agreed that if the rent herein provided for as well
as additional sums deemed rent and to be paid by the Tenant shall at any time
be in arrears and unpaid for more than ten (10) days after the demand,
Landlord, at his option may move to void this lease and enter into possession
of the demised premises and sue for and recover all rent due as herein
provided for the entire unexpired lease term. If tenant pays arrears, legal
fees, and penalties, landlord [illegible] Tenant in any such proceedings
hereby waives the right to trial by jury. In the event Landlord shall enter
into possession of the demised premises after default as above provided,
Landlord may rent the premises for the unexpired term on behalf of the Tenant
reserving the right to rent the premises for a longer period of time than
fixed in the original lease without releasing the original Tenant from any
liability, applying any monies collected first to the expense of resuming or
obtaining possession, second to restoring premises to a rentable condition
and then to the payment of the rent and all other charges due and to grow due
to the Landlord, any surplus to be paid to the Tenant who shall remain liable
for any deficiency, as measured by the term of this lease.
15. This lease is subject and is hereby subordinated to all present
and future mortgages, deeds of trust and other encumbrances affecting the
demised premises or the property of which said premises are a part. The
tenant agrees to execute, at no expense to the Landlord, any instrument which
may be deemed necessary or desirable by the Landlord to further effect the
subordination of this lease to any such mortgage, deed or trust or
encumbrance. Tenant may not in any manner or form encumber this lease and
the leasehold hereby created. Regardless of the terms of this Paragraph,
Landlord will seek to obtain from any mortgage the right to quiet enjoyment
of the Tenant as long as the Tenant attorns to said mortgage.
16. If the property or any substantial part hereof wherein the demised
premises are located shall be taken by public or quasi-public authority under
any power or eminent domain or commendation, this lease at the option of the
landlord shall forthwith terminate and the Tenant shall have no claim or
interest in or to any award or
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damages from the Landlord for such taking. The Tenant is not precluded from
the maintaining its own action against the condemning authority if said
Tenant's rights are legislatively protected.
17. The Tenant has this day deposited with the Landlord the sum of
$16,625.00 (SIXTEEN THOUSAND SIX HUNDRED AND TWENTY FIVE DOLLARS) as security
for the full and faithful performance by the Tenant of all the terms,
covenants and conditions of this lease upon the Tenant's part to be
performed, which said sum shall be returned to the Tenant after the time
fixed as the expiration of the term herein or any renewal option thereof,
provided the Tenant has fully and faithfully carried out all of said terms,
covenants and conditions on Tenant's part to be performed. In the event of a
bona fide sale, subject to this lease, the Landlord shall have the right to
transfer the security to the purchaser for the benefit of the Tenant and the
Landlord shall be considered released by the Tenant from all liability for
the return of the said security; and the Tenant agrees to look to the new
Landlord solely for the return of the said security, and it is agreed that
this shall apply to every transfer or assignment made of the security of a
new Landlord.
18. No sign, advertisement or notice shall be affixed to or placed
upon any part of the demised premises by the Tenant, except in such manner
and of such size, design and color as shall be approved in advance in writing
by the Landlord, such approval not to be unreasonably withheld.
19. The rules and regulations regarding the demised premises which are
part of this lease, shall be observed by the Tenant and by the Tenant's
employees, agents and customers.
20. The Tenant shall surrender and deliver up the demised premises at
the expiration of this lease or sooner termination in good repair and
condition, reasonable wear and tear thereof excepted.
21. Landlord represents and warrants that Landlord and his agents
knows of nothing concerning the premises which are subject matter of this
leasehold agreement that would prohibit use of the premises by the Tenant for
the uses and purposes intended and further that all of the mechanical
equipment and structure in question, at time of the delivery of the premises
to the Tenant, is sound and in good working order. Moreover, the electrical
lines and plumbing likes contained within the building are in proper working
order as of the time of the initial occupancy herein specified.
22. All of the terms, covenants and conditions of this lease shall
insure to the benefit of and be binding upon the respective heirs, executors,
administrators, successors and assigns of the parties hereto.
23. Provided that the Tenant is not in default under this lease,
Tenant shall have the option to renew this lease for two (2) three (3) year
terms by notifying the Landlord in writing, by Certified Mail, notice of its
election to do so at least six (6) months prior to the date of the expiration
of the then current term. The new rent to be
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payable shall be adjustable by CPI not to exceed 5% per annum. All other terms
and conditions of the original lease shall remain in effect in full force and
effect.
24. The Tenant accepts the premises in "as is" condition. No rent is
due until tenant receive c/o from city all other par not withstanding.
25. The Landlord will provide heat, air conditioning, and electric to
the demised premises, which is included in the rate stated in Paragraph 2 of
the lease. The Tenant will be responsible for cleaning of the demised
premises at the Tenant's expense. Landlord shall at its cost and expense
furnish to the demised premises year round air conditioning (heated or cooled
as may be required seasonally for comfortable occupancy) between 8 am and 6
pm, prevailing time, on business days from Monday through Friday and between
9 am and 3 pm on Sunday. Landlord further agrees to provide twenty four (24)
hour, seven (7) days a week, air conditioning, upon notice by the tenant that
such is required. Tenant agrees to compensate Landlord for additional costs
involved. (Heat and power are provided 24 hrs a day in basic lease.)
26. The Tenant shall be listed on the Lobby Directory of the building
in which the demised premises is located.
27. The Tenant shall have access to the freight elevator at all times,
during regular business hours, without restriction, whether or not the
presently unrented and vacant space is rented or leased at any time, and so
long as Tenant is occupying the premises as set forth herein.
28. The Tenant represents that it did not deal with any broker in
connection with the negotiation of this Lease.
29. The Tenant agrees to comply with the Rules and Regulation of the
Landlord, a copy of which is annexed hereto and made part hereof.
30. In the event the Tenant operates any heat-procuring equipment or
computers that require special air conditioning or cooling devices over and
above that which is provided by the landlord, the Tenant will be required to
supply and maintain such cooling devices or to install the necessary
electrical wiring at Tenant's sole costs and expense and pay an energy
surcharge to the Landlord for the operation of special equipment aforesaid.
31. The Tenant agrees to advance to the Landlord the sum of [illegible]
for the upgrade of the power and air conditioning supplies destined for the
premises to be occupied under this Lease. Said advance will be repaid in the
form of a monthly reduction of rent in the amount of $1,000 (One Thousand
Dollars). Tenant shall have 1,000 amps available for the space after
renovation.
32. The Tenant and the Landlord agree that this Lease Agreement
supersedes and consolidates any previous Lease Agreements signed by the
parties concerning any space in the herein referred property. The security
deposit already paid shall be deducted from that mentioned in Paragraph 17
which will be reduced to $7,609.79.
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33. Tenant shall have the right of first refusal on any space in
building where leases are expiring at tenant's rate of rent of suite 203 and
such space shall be added to rent.
IN WITNESS WHEREOF, the said parties have hereunto set their hands and
seals the days and year first above written.
MCTOOBE MANAGEMENT, INC.
Landlord
By /s/ Henry Kupferberg
-----------------------------
Henry Kupferberg
Manager
IDT INTERNET, INC.
Tenant
By /s/ Howard Jonas
-----------------------------
Howard Jonas
President
By_________________________________
Joyce J. Mason
Corporate Secretary
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of July 2, 1997 by and
between IDT Corporation, a Delaware corporation (the "Company"), and David
Turock (the "Executive").
WHEREAS, in recognition of the Executive's experience and abilities, the
Company desires to assure itself of the employment of the Executive in
accordance with the terms and conditions provided herein; and
WHEREAS, the Executive wishes to perform services for the Company in
accordance with the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the promises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to perform services for the Company, on the terms
and conditions set forth herein.
2. Commencement Term, Termination and Renewal.
(a) Commencement and Term. This Agreement is for the five year
period (the "Term") commencing on the later of the date of signing of this
Agreement by the last of the parties required to sign or the date of execution
of a Stock Purchase Agreement between Executive, as sole shareholder of Rock
Enterprises, Inc. and the Company (the "Commencement Date"). Execution of the
said Stock Purchase Agreement is a condition precedent to the effectiveness and
enforcement of this Employment Agreement.
(b) Termination and Renewal. This Agreement shall terminate on the
fifth anniversary of the Commencement Date, or upon the Executive's earlier
death or other termination of employment pursuant to Section 7 hereof, provided,
however, that commencing on the fifth anniversary date of the commencement date
and each anniversary thereafter, the Term shall automatically be extended for
one additional year beyond its otherwise expiration unless, not later than 90
days prior to any such anniversary, either party hereto shall have notified the
other party hereto in writing that such extension shall not take effect.
3. Position. During the Term, the Executive shall serve as Chief
Technology Officer.
4. Duties and Reporting Relationship. During the Term, the Executive
shall, on a full time basis, use his skills and render services to the best of
his abilities in both maintaining the current level of, as well as developing,
the Company's technological endeavors in all facets of the Company's
telecommunications business provided, however, that upon execution of this
Agreement, the Executive shall, as quickly as is practicable, reduce his active
management role in companies or businesses in which he owns an interest to the
level of activity permitted by
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Section 15(a) hereof; however, in no event shall the Executive work less than
the following hours in the first through twenty fourth week of the Term; ten
(10) hours per week in the first four weeks of the Term; twenty (20) hours per
week in the fifth through eighth week of the Term; thirty (30) hours per week in
the ninth through twelfth weeks of the Term; thereafter, and for the remainder
of the Term, Executive will devote his efforts, full-time, to the fulfillment of
this duties as Chief Technology Officer. The Executive shall report directly to
the Chief Executive officer and Board of Directors of the Company.
5. Place of Performance. The Executive shall perform his duties and
conduct his business at the offices of the Company, located in Hackensack, New
Jersey, except for required travel on the Company's business.
6. Compensation and Related Matters.
(a) Annual Base Salary. The Company shall pay to the Executive an
annual base salary (the "Base Salary") at a rate not less than $841.35 per week
during the first through fourth week of the Term; $1,682.69 per week during the
fifth through eighth week of the Term; $2,524.04 per week during the ninth
through twelfth week of the term; thereafter at rate of not less than $3,365.85
per week (or $175,000.00 per year) such salary to be paid in conformity with the
Company's payroll policies relating to its senior executive officers, but in any
event not less than monthly. The Base Salary may, from time to time, be
increased, however, if the Executive's Base Salary is increased, it shall not
thereafter be decreased during the Term.
(b) Royalty. Executive shall be paid a royalty in the amount of
1/20th of one (1) cent per minute of all billable telecommunications processed
by IDT switches, up to an aggregate amount of Two Million Dollars
($2,000,000.00). The number of billable telecommunications minutes used to
calculate the royalty shall be the number of minutes reported in the Company's
Form 10-Q filings with the Securities and Exchange Commission or, in the event
that such number is not reported on the Form 10-Q, in such other filing or
report that is prepared or certified by the Company's outside auditor.
(c) Employee Benefits. During the Term, the Executive shall be
eligible to participate in the following insurance plans: health, dental,
disability and life. In addition, the Executive will be eligible to participate
in the Company's 401K plan. The benefits listed in this sub-paragraph (c) will
be made available to the Executive pursuant to the terms, including cost and
participation date, of each benefit plan described herein. Executive shall be
entitled to three (3) weeks of paid vacation per calendar year.
(d) Business Expenses. The Executive will be reimbursed for all
ordinary and necessary business expenses incurred by him in connection with his
employment (including without limitation, expenses for travel and entertainment
incurred in conducting or promoting business for the Company) upon submission by
the Executive of receipts and other documentation in accordance with the
Company's normal reimbursement procedures.
(e) Compensation During Disability. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental illness, the Executive shall continue to receive his full
Base Salary, as well as applicable employee
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benefits provided to other senior executives of the Company, until his
employment is terminated in accordance with applicable law, including, but not
limited to the Family and Medical Leave Act, and the Americans with Disabilities
Act. Upon such termination the Company shall pay the Executive (i) all unpaid
amounts, if any, to which the Executive was entitled as of the Date of
Termination under Section 6(a) hereof and (ii) all unpaid amounts to which the
Executive was then entitled under the Benefit Plans, the Pension Plans and any
other unpaid employee benefits, perquisites or other reimbursement (the amounts
set forth in clause (i) and (ii) above being hereinafter referred to as the
"Accrued Obligation").
(f) Compensation Payable Upon Death. In the event the Executive's
employment is terminated pursuant to Section 7(a) then as soon as practicable
thereafter, the Company shall pay the Accrued Obligation to the Executive's
Beneficiary (as defined in Section 18 hereof).
(g) Compensation Upon Termination for Cause or Voluntary Termination
Without Good Reason. If the Executive's employment is terminated by the Company
for Cause or by the Executive other than for Good Reason, then the Company shall
pay all Accrued Obligations to the Executive within ten (10) business days after
the Date of Termination and the Company shall have no further obligations to the
Executive under this Agreement.
(h) Compensation Upon Termination Without Cause or Termination for
Good Reason. If the Company shall terminate the Executive's employment other
than for cause, or the Executive shall terminate his employment for Good Reason,
then the Company shall pay Accrued Obligations to the Executive within ten (10)
days after the Date of Termination.
7. Termination. The Executive's employment hereunder may be terminated
without breach of this Agreement only under the following circumstances.
(a) Death. The Executive's employment hereunder shall terminate upon
his death.
(b) Cause. The Company may terminate the Executive's employment
hereunder for "Cause". For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder (i) upon the
Executive's conviction for the commission of an act or acts constituting a
felony under the laws of the United States or any state thereof, (ii) upon the
Executive's willful and continued failure to substantially perform his duties
hereunder (other than any such failure resulting from the Executive's incapacity
due to physical or mental illness), after written notice has been delivered to
the Executive by the Company, which notice specifically identifies the manner in
which the Executive has not substantially performed his duties, and the
Executive's failure to substantially perform his duties is not cured within
fifteen (15) business days after notice of such failure has been given to the
Executive, or in the event that the alleged failure to substantially perform
cannot be completely cured within fifteen (15) days, that the Executive has
taken all actions that were reasonably available to him within that period, or
(iii) if Executive fails to devote all his business time and energy in
furtherance of the Company's business to the extent required by this Agreement.
For purposes of this Section 7(b), no act, or failure to act, on the Executive's
part shall be deemed "willful",
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unless done, or omitted to be done by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company.
(c) Termination by the Executive. The Executive may terminate his
employment hereunder for "Good Reason." "Good Reason" for termination by the
Executive of the Executive's employment shall mean the occurrence (without the
Executive's express written consent) of any one of the following acts by the
Company, or failure by the Company to act.
(i) a material breach of this Agreement by the Company;
(ii) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirement of paragraph (d) below; for purposes of this
Agreement, no such purported termination shall be effective;
(iii) any change of employment condition whereby Executive no
longer reports directly to the Chief Executive Officer, President or
Board of Directors of the Company.
(iv) any material change of Executive's duties from those
described in Section 4 of this Agreement.
(v) any change in Executive's position from that provided in
Section 3 of this Agreement.
(d) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination under
Section 7(a) hereof) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 12 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause issuing
from the Company is required to include a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the entire membership
of the Board at a meeting of the Board (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith
opinion of the Board, the Executive was guilty of conduct set forth in the
definition of Cause herein, and specifying the particulars thereof.
(e) Date of Termination. "Date of Termination" shall mean if the
Executive's employment is terminated by his death, the date of his death. If
the Executive's employment is terminated pursuant to paragraph (b)(i) above,
the Date of Termination shall be the date of the Executive's conviction as
described therein. If the Executive's employment is terminated pursuant to
paragraph (b)(ii) or (c) above, the Date of Termination shall be the date
upon which the fifteen (15) day period specified in the Notice of
Termination, as required by paragraph (d) above, shall expire.
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8. Executive hereby acknowledges and agrees that all copyrightable works
included in the Inventions as defined in sub-paragraph (a) of this paragraph,
shall be "works made for hire" within the meaning of the Copyright Act of 1986,
as amended (17 U.S.C. Section 101) (the "Act"), and that Company is to be the
"author" within the meaning of the Act. Executive acknowledges and agrees that
all Inventions are the sole and exclusive property of the Company. In the event
that title to any or all of the Inventions does not or may not, by operation of
law, vest in Company, Executive hereby assigns to Company, all his right, title
and interest in all Inventions and all copies of them, in whatever medium fixed
or embodied, and in all writings relating thereto in Executive's possession or
control. Executive hereby expressly waives any moral rights or similar rights
in any Invention or any such work made for hire.
(a) "Inventions" means all ideas, inventions, discoveries,
improvements, trade secrets, formulae, techniques, data, software, programs,
systems, specifications, developments, system architectures, documentation,
algorithms, flow charts, logic diagrams, source code, methods, processes, and
other information, including works-in-progress, whether or not subject to
statutory protection, whether or not reduced to practice, which are conceived,
created, authored, developed, or reduced to practice by Executive, either alone
or jointly with others, whether on the premises of Company or not, during his
employment with the Company (including, without limitation, all periods of
employment with Company prior to the Effective Date); provided, however, that
any of the foregoing occurring neither on the premises of nor through use of the
property of nor at the direction of the Company which do not (a) relate to the
actual business of the Company, or (b) result from or are suggested by work
performed by Executive for the Company (whether or not made or conceived during
normal working hours or on the premises of the Company), or (c) results to any
extent, from use of the Company's premises or Property shall not constitute
"Inventions" for purposes of this Agreement but must be disclosed to the
Company.
9. During the Term, the Executive agrees not to file any patent,
copyright or trademark applications relating to any Invention. Executive agrees
to assist the Company, whether before or after the termination of employment, in
perfecting, registering, maintaining, and enforcing, in any jurisdiction, the
Company's rights in the Inventions by performing promptly all acts and executing
all documents deemed necessary or convenient by Company.
(a) Executive warrants and represents that as of the date of the
execution of this Agreement, Executive does not own any Patent or rights to any
Patent which has not been sold or assigned prior to the execution date of this
Agreement.
10. If Company is unable, after duly reasonable effort, to secure
Executive's signature on any such documents, executive hereby irrevocably
designates and appoints Company and its duly authorized officers and agents as
Executive's agent and attorney-in-fact to do all lawfully permitted acts
(including but not limited to the execution, verification and filing of
applicable documents) with the same legal force and effect as if performed by
Executive.
11. During the Term and thereafter, the parties agree that Executive will
not (a) use any Confidential Information, however acquired, except as necessary
within the scope of employment with the Company to perform his duties;
(b) himself duplicate or replicate or cause or permit others to duplicate or
replicate any document or other material in any medium
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embodying any Confidential Information except as necessary in connection with
the Scope of this Employment; or (c) disclose or permit the disclosure of any
Confidential Information to any person, without the prior written consent of
Company.
(a) "Confidential Information" means technical and business
information about the Company, its subsidiaries and affiliates and their
respective clients and customers that is not otherwise generally known or
available to persons unaffiliated with the Company and is learned by Executive
in the course of his employment with the Company (including, without limitation,
all periods of employment with Company prior to the Effective Date) including,
without limitation, any and all proprietary Inventions, customer and potential
customer names, product plans and designs, licenses and other agreements,
marketing and business plans, various other financial and business information
of Company. Executive acknowledges that such Confidential Information is
specialized, unique in nature and of great value to Company, and that such
information gives Company a competitive advantage.
12. Executive acknowledges that Company owns all right, title and interest
in and to the Confidential Information. Executive acquires hereunder no right,
title or interest in any Confidential Information.
13. Executive hereby represents and warrants that (i) Executive's
performance of the terms of this Agreement and as an employee of the Company
will not breach any confidentiality or other agreement which Executive entered
into with former Companies, and (ii) Executive is not bound by any agreement
either oral or written which conflicts with this Agreement.
14. Upon the termination or expiration of the Employment, Executive will
return to Company all tangible materials and all copies thereof, in whatever
media, then in Executive's possession or control, containing or employing any
Confidential Information, together with a written certification with the
foregoing.
15. Covenant Not to Compete. Executive hereby agrees that he shall not,
either as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director or in any other individual or
representative capacity, engage or participate, invest in or become employed by
any business that is in competition in any manner whatsoever with the business
of the Company in any of the United States during the Term and for a period of
one year immediately following the termination of his employment with Company,
except upon express written consent of Company.
(a) Nothing in paragraph 15 shall prohibit the Executive from serving
on the Board of Directors of or providing conceptual oversight and advice to
Telecommunications Premium Services, Ltd., Interexchange, Inc., the Latcom, Ltd.
companies, Telecom Internet Ltd. and Intelligent Engineering, Inc. as long as
such activities are not in conflict with the business interests of the Company
(provided, however, that the companies may continue to develop, market and sell
the product lines in existence at the time of execution of this agreement) and
provided that Executive does not actively participate in the day to day decision
making, management or operations of these companies. Executive shall not spend
more than three hundred (300) hours in the aggregate during the first year of
this contract providing said oversight and advice or provide said oversight and
advice during normal working hours on more
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than twelve separate days. It is further understood between the parties that
the Executive shall use his best efforts to reduce the above mentioned three
hundred (300) hours over the subsequent two (2) years of this Agreement as the
above-mentioned enterprises develop in-house expertise and experience. It is
anticipated that after the first three (3) years of this contract the hours
expended by Executive for the above stated purposes shall be de minimis.
Provided, however, that if, in an emergency situation in any of the businesses
listed above, Executive must exceed the number of hours otherwise permitted by
this section, Executive may do so. However, for each business day on which
Executive devotes time to the said business in excess of the number of hours
otherwise permitted by this section, Executive shall pay the Company a fee of
$1,000.00 per day.
16. Executive agrees that, during the Term and for a period of two (2)
years thereafter, Executive shall not, directly or indirectly:
(a) influence or attempt to influence customers or suppliers of
Company, or any of its subsidiaries or affiliates, to divert their business to
any competitor of Company, and
(b) solicit or recruit any employee of Company for the purpose of
being employed by him or by a competitor of Company and that he will not convey
any confidential information about other employees of Company to any other
person.
17. Executive hereby agree that, during the Term of employment and for one
(1) year thereafter, Executive will not directly or indirectly disparage the
Company or disseminate, or cause or permit to be negative regarding Company or
any other employee, officer, director or agent of Company. Notwithstanding the
foregoing, Executive is not hereby barred or restricted from exercising any
right of speech or expression protected by applicable federal, state or local
law from restriction by Company.
18. Successors; Binding Agreement.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid that executes and delivers the agreement provided for in this
Section 19 or that otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors,
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administrators, successors, heirs, distributes, devises and legatees. If the
Executive should die while any amounts would still be payable to him hereunder
if he had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatees, or other designee or, if there be no such designee, to the
Executive's estate (any of which is referred to herein as a "Beneficiary").
19. Notices. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company:
IDT Corporation
190 State Street
Hackensack, NJ 07601
Attn: General Counsel
If to the Executive:
David Turock
272 Highland Avenue
Upper Montclair, New Jersey 07043
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
20. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the state of New Jersey without
regard to its conflicts of law principles.
21. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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23. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes any and all other prior agreements, promises, covenants,
arrangements, communications, representations or warranties whether oral or
written, by any officer, employee or representative of any party hereof, and any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled.
24. Representations. Executive has been advised to obtain independent
counsel to evaluate the terms, conditions and covenants herein set forth and he
has been afforded ample opportunity to obtain such independent advice and
evaluation. Executive warrants to the Company that he has relied upon such
independent counsel and not upon any representation (legal or otherwise),
statement or advice said or offered by the Company or the Company's counsel in
connection herewith.
25. Executive's Status Under Agreement. The parties agree and acknowledge
that the Executive shall at all times act in the capacity of an employee under
this Agreement, and nothing in this Agreement shall be construed to create the
relationship of an independent contractor, partner, joint venturer, or any other
relationship or status other than that of an employee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
IDT CORPORATION
By: /s/ James A. Courter
---------------------------
President
EXECUTIVE
/s/ David Turock
---------------------------
David Turock
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Exhibit 10.20
TBCC
Loan and Security Agreement
Borrower: IDT Corporation,
a Delaware corporation
Address: 190 Main Street
Hackensack, NJ 07601
Date: December 24, 1997
THIS LOAN AND SECURITY AGREEMENT is entered into as of the above date, between
the above borrower (the "Borrower"), having its chief executive office and
principal place of business at the address shown above, and TRANSAMERICA
BUSINESS CREDIT CORPORATION, a Delaware corporation, ("TBCC") having its
principal office at 9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018
and having an office at 16133 Ventura Blvd., Suite 700, Encino, California
91436. The Schedule to this Agreement (the "Schedule") being signed
concurrently is an integral part of this Agreement. (Definitions of certain
terms used in this Agreement are set forth in Section 9 below.) The parties
agree as follows:
1. LOANS.
1.1. Loans. TBCC, subject to the terms and conditions of this Agreement,
agrees to make loans (the "Loans") to Borrower, from time to time during the
period from the date of this Agreement to the Maturity Date set forth in the
Schedule, at Borrower's request, in an aggregate principal amount at any one
time outstanding not to exceed the Credit Limit shown on the Schedule. If at
any time the total outstanding Loans and other monetary Obligations exceed said
limit, Borrower shall repay the excess immediately without demand. Borrower
shall use the proceeds of all Loans solely for lawful general business purposes.
1.2. Due Date. The Loans, all accrued interest and all other monetary
Obligations shall be payable in full on the Maturity Date. Borrower may borrow,
repay and reborrow Loans (other than any Term Loans), in whole or in part, in
accordance with the terms of this Agreement.
1.3. Loan Account. TBCC shall maintain an account on its books in the name of
Borrower (the "Loan Account"). All Loans and advances made by TBCC to Borrower
or for Borrower's account and all other monetary Obligations will be charged to
the Loan Account. All amounts received by TBCC from Borrower or for Borrower's
account will be credited to the Loan Account. TBCC will send Borrower a monthly
statement reflecting the activity in the Loan Account, and each such monthly
statement shall be an account stated between Borrower and TBCC and shall be
final conclusive and binding absent manifest error.
1.4. Collection of Receivables. At such time as Borrower's cash balance
(including Cash Equivalents) in its deposit accounts (as reflected in its
Certificate of Cash Balance as described in the Schedule attached hereto) falls
below $5,000,000, then within 1 week after the earlier of the date TBCC receives
such Certificate of Cash Balance or the date by which TBCC should have received
such Certificate of Cash Balance, Borrower shall remit to TBCC all Collections
including all checks, drafts and other documents and instruments evidencing
remittances in payment (collectively referred to as "Items of Payment") within
one Business Day after receipt, in the same form as received, with any necessary
indorsements. For purposes of calculating interest due to TBCC, credit will be
given for Collections and all other proceeds of Collateral and other payments to
TBCC two Business Days after receipt of cleared funds. Borrower's Loan Account
will be credited only with the net amounts actually received in payment of
Receivables, and such payments shall be credited to the Obligations in such
order as TBCC shall determine in its discretion. Pending delivery to TBCC,
Borrower will not commingle any Items of Payment with any of its other funds or
property, but will segregate them from the other assets of Borrower and will
hold them in trust and for the account and as the property of TBCC. Borrower
hereby agrees to endorse any Items of Payment upon the request of TBCC.
1.5. Reserves. TBCC may, from time to time, in its sole and absolute
discretion: (i) establish and modify reserves against Eligible Receivables and
Eligible Inventory, (ii) modify advance rates with respect to Eligible
Receivables and Eligible Inventory, (iii) modify the standards of eligibility
set forth in the definitions of Eligible Receivables and Eligible Inventory, and
(iv) establish reserves against available Loans.
1.6. Term.
<PAGE>
TBCC Loan and Security Agreement
- -------------------------------------------------------------------------------
(a) The term of this Agreement shall be from the date of this Agreement to
the Maturity Date set forth in the Schedule, unless sooner terminated in
accordance with the terms of this Agreement, provided that the Maturity Date
shall automatically be extended, and this Agreement shall automatically and
continuously renew, for successive additional terms of one year each, unless one
party gives written notice to the other, not less than sixty days prior to the
next Maturity Date, that such party elects to terminate this Agreement effective
on the next Maturity Date. On the Maturity Date or on any earlier termination
of this Agreement Borrower shall pay in full all Obligations, and
notwithstanding any termination of this Agreement all of TBCC's security
interests and all of TBCC's other rights and remedies shall continue in full
force and effect until payment and performance in full of all Obligations.
(b) This Agreement may be terminated prior to the Maturity Date as follows:
(i) by Borrower, effective three business days after written notice of
termination is given to TBCC; or (ii) by TBCC at any time after the occurrence
of an Event of Default, subject to any applicable right to cure, without notice,
effective immediately. If this Agreement is terminated by Borrower or by TBCC
under this Section 1.6(b), Borrower shall pay to TBCC a termination fee (the
"Termination Fee") in the amount shown on the Schedule. The Termination Fee
shall be due and payable on the effective date of termination. Notwithstanding
the foregoing, Borrower shall have no right to terminate this Agreement at any
time that any principal of, or interest on any of the Loans or any other
monetary Obligations are outstanding, except upon prepayment of all Obligations
and the satisfaction of all other conditions set forth in the Loan Documents.
1.7. Payment Procedures. Borrower hereby authorizes TBCC to charge the Loan
Account with the amount of all interest, fees, expenses and other payments to be
made hereunder and under the other Loan Documents. TBCC may, but shall not be
obligated to, discharge Borrower's payment obligations hereunder by so charging
the Loan Account. Whenever any payment to be made hereunder is due on a day
that is not a Business Day, the payment may be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the amount of interest due.
1.8. Conditions to Initial Loan. The obligation of TBCC to make the initial
Loan is subject to the satisfaction of the following conditions prior to or
concurrent with such initial Loan:
(a) Except for the filing of termination statements under the Code by the
existing lender to Borrower whose loans are being repaid with the Loan proceeds,
no consent or authorization of, filing with or other act by or in respect of any
Governmental Authority or any other Person is required in connection, with the
execution, delivery, performance, validity or enforceability of this Agreement,
or the other Loan Documents or the consummation of the transactions contemplated
hereby or thereby or the continuing operations of the Borrower following the
consummation of such transactions.
(b) TBCC and its counsel shall have performed (i) a review satisfactory to
TBCC of all of the Material Contracts and other assets of the Borrower, the
financial condition of the Borrower, including all of its tax, litigation,
environmental and other potential contingent liabilities, and the corporate and
capital structure of the Borrower and (ii) a pre-closing audit and collateral
review, in each case with results satisfactory to TBCC.
(c) TBCC shall have received the following, each dated the date of the
initial Loan or as of an earlier date acceptable to TBCC, in form and substance
satisfactory to TBCC and its counsel: (i) acknowledgment copies of Uniform
Commercial Code financing statements (naming TBCC as secured party and the
Borrower as debtor), duly filed in all jurisdictions that TBCC deems necessary
or desirable to perfect and protect the Liens created hereunder, and Official
Uniform Commercial Code searches in such jurisdictions, showing such financing
statements of record; (ii) the opinion of counsel for the Borrower covering such
matters incident to the transactions contemplated by this Agreement as TBCC may
specify in its discretion; (iii) certified copies of all policies of insurance
required by this Agreement and the other Loan Documents, together with loss
payee endorsements for all such policies naming TBCC as lender loss payee and an
additional insured; (iv) Copies of the Borrower's articles or certificate of
incorporation, certified as true, correct and complete by the secretary of state
of Borrower's state of incorporation within 45 days of the date hereof; (v)
copies of the bylaws of the Borrower and a copy of the resolutions of the Board
of Directors of the Borrower authorizing the execution, delivery and performance
of this Agreement, the other Loan Documents, and the transactions contemplated
hereby and thereby, attached to which is a certificate of the Secretary or an
Assistant Secretary of the Borrower certifying (A) that such copies of the
bylaws and resolutions are true, complete and accurate copies thereof, have not
been amended or modified since the date of such certificate and are in full
force and effect and (B) the incumbency, names and true signatures of the
officers of the Borrower; (vi) a good standing certificate from the Secretary of
State of Borrower's state of incorporation dated within ten days of the date
hereof and each state in which the Borrower is qualified as a foreign
corporation, each dated within sixty days of the date hereof; (vii) such
other agreements and instruments as TBCC deems necessary in its sole and
absolute discretion in connection with the transactions contemplated hereby.
1.9. Conditions to Lending. The obligation of TBCC to make any Loan is subject
to the satisfaction of the following conditions precedent:
(a) There shall be no pending or, to the knowledge of Borrower after due
inquiry, threatened litigation, proceeding, inquiry or other action relating to
this Agreement, or any other Loan Document, or which could be expected to have a
Material Adverse Effect in the judgment of TBCC;
(b) Borrower shall be in compliance with all Requirements of Law and Material
Contracts, other than such noncompliance that could not have a Material Adverse
Effect;
(c) The Liens in favor of TBCC shall have been duly perfected and shall
constitute first priority Liens, except for Permitted Liens;
-2-
<PAGE>
TBCC Loan and Security Agreement
- -------------------------------------------------------------------------------
(d) All representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct on and as of the date of such
Loan as if then made, other than representations and warranties that expressly
relate solely to an earlier date, in which case they shall have been true and
correct as of such earlier date;
(e) No Default or Event of Default shall have occurred and be continuing or
would result from the making of the requested Loan as of the date of such
request; and
(f) No Material Adverse Effect shall have occurred.
2. INTEREST AND FEES.
2.1. Interest. Borrower shall pay TBCC interest on all outstanding Loans and
other monetary Obligations, at the interest rate set forth in the Schedule.
Interest shall be payable monthly in arrears on the first Business Day of each
month, and on the Maturity Date. Following the occurrence and during the
continuance of any Event of Default, the interest rate applicable to all
Obligations shall be increased by two percent per annum.
2.2. Fees. Borrower shall pay TBCC the fees set forth in the Schedule.
2.3. Calculations. All interest and fees under this Agreement shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed in the period for which such interest or fees are payable.
2.4. Taxes. Any and all payments by Borrower under this Agreement or any other
Loan Document shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings and penalties, interest and all other liabilities with respect
thereto, excluding in the case of TBCC, taxes imposed on its net income and
franchise taxes imposed on it by the jurisdiction under the laws of which TBCC
is organized or any political subdivision thereof.
3. SECURITY.
3.1. Grant of Security Interest. To secure the payment and performance when
due of all of the Obligations, Borrower hereby grants to TBCC a security
interest in all of its present and future Receivables, Inventory, Other
Property, and other Collateral, wherever located (excluding, however, the assets
of Borrower's Net2Phone division ("Net2Phone"), including any of Net2Phone's
receivables, inventory or other personal property).
3.2. Other Liens; Location of Collateral. Borrower represents, warrants and
covenants that all of the Collateral is, and will at all times continue to be,
free and clear of all Liens, other than Permitted Liens and Liens in favor of
TBCC. All Collateral is and will continue to be maintained at the locations
shown on the Schedule.
3.3. Receivables.
(a) Schedules. At such time as Borrower's cash balance (including Cash
Equivalents) in its deposit accounts (as reflected in its Certificate of Cash
Balance as described in the Schedule attached hereto) falls below $5,000,000,
then within 1 week after the earlier of the date TBCC receives such Certificate
of Cash Balance or the date by which TBCC should have received such Certificate
of Cash Balance, and thereafter as often as requested by TBCC, Borrower shall
execute and deliver to TBCC written schedules of Receivables and Eligible
Receivables (but the failure to execute or deliver any schedule shall not affect
or limit TBCC's security interest in all Receivables) and within such 1 week
period, Borrower shall have executed a Depository Account Agreement on TBCC's
standard form, with such revisions as are acceptable to TBCC in its sole
discretion. On TBCC's request, Borrower shall also furnish to TBCC copies of
invoices to customers and shipping and delivery receipts. Borrower shall
deliver to TBCC the originals of all letters of credit, notes, and instruments
in its favor and such endorsements or assignments as TBCC may reasonably
request.
(b) Records, Collections. Borrower shall report all customer credits to
TBCC, on the regular reports to TBCC in the form from time to time specified by
TBCC. Borrower shall notify TBCC of all returns and recoveries of merchandise
and of all claims asserted with respect to merchandise, on its regular reports
to TBCC. Borrower shall not settle or adjust any dispute or claim, or grant any
discount, credit or allowance or accept any return of merchandise, except in the
ordinary course of its business, without TBCC's prior written consent.
(c) Representations. Borrower represents and warrants to TBCC that each
Receivable with respect to which Loans are requested by Borrower shall, on the
date each Loan is requested and made, represent an undisputed, bona fide,
existing, unconditional obligation of the account debtor created by the sale,
delivery, and acceptance of goods or the rendition of services, in the ordinary
course of Borrower's business, and meet the Minimum Eligibility Requirements set
forth in Section 9.1(n) below.
3.4. Inventory. Borrower shall maintain full, accurate and complete records
respecting the Inventory describing the kind, type and quantity of the Inventory
and Borrower's cost therefor, withdrawals therefrom and additions thereto,
including a perpetual inventory for work in process and finished goods
3.6. Further Assurances. Borrower will perform any and all steps that TBCC may
reasonably request to perfect TBCC's security interests in the Collateral,
including, without limitation, executing and filing financing and continuation
statements in form and substance satisfactory to TBCC. TBCC is hereby authorized
by Borrower to sign Borrower's name or file any financing statements or similar
documents or instruments covering the Collateral whether or not Borrower's
signature appears thereon. Borrower agrees, from time to time, at TBCC's
request, to file notices of Liens, financing statements, similar document or
instruments, and amendments, renewals and continuations thereof, and cooperate
with TBCC, in
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connection with the continued perfection and protection of the Collateral. If
any Collateral is in the possession or control of any Person other than a public
warehouseman where the warehouse receipt is in the name of or held by TBCC,
Borrower shall notify such Person of TBCC's security interest therein and, upon
request, instruct such Person or Persons to hold all such Collateral for the
account of TBCC and subject to TBCC's instructions. If so requested by TBCC,
Borrower will deliver to TBCC warehouse receipts covering any Collateral located
in warehouses showing TBCC as the beneficiary thereof and will also cause the
warehouseman to execute and deliver such agreements as TBCC may request relating
to waivers of liens by such warehouseman and the release of the Inventory to
TBCC on its demand. Borrower shall defend the Collateral against all claims and
demands of all Persons.
3.7. Power of Attorney. Borrower hereby appoints and constitutes TBCC as
Borrower's attorney-in-fact (i) to request at any time from account debtors
verification of information concerning Receivables and the amount owing thereon,
(ii) upon the occurrence and during the continuance of an Event of Default, to
convey any item of Collateral to any purchaser thereof, (iii) to give or sign
Borrower's name to any notices or statements necessary or desirable to create or
continue the Lien on any Collateral granted hereunder and (iv) to take any
act necessary or desirable to protect or preserve any Collateral and (v) upon
the occurrence and during the continuance of an Event of Default, to make any
payment necessary or desirable to protect or preserve any Collateral. TBCC's
authority hereunder shall include, without limitation, the authority to execute
and give receipt for any certificate of ownership or any document, transfer
title to any item of Collateral and take any other actions arising from or
incident to the powers granted to TBCC under this Agreement. This power of
attorney is coupled with an interest and is irrevocable.
4. Representations and Warranties of Borrower. Borrower represents and warrants
as follows:
4.1. Organization, Good Standing and Qualification. Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State set forth above, (ii) has the corporate power and authority to own
its properties and assets and to transact the businesses in which it is engaged
and (iii) is duly qualified, authorized to do business and in good standing in
each jurisdiction where it is engaged in business, except to the extent that the
failure to so qualify or be in good standing would not have a Material Adverse
Effect.
4.2. Locations of Offices, Records and Collateral. The address of the
principal place of business and chief executive office of Borrower is, and the
books and records of Borrower and all of its chattel paper and records relating
to Collateral are maintained exclusively in the possession of Borrower at, the
address of Borrower specified in heading of this Agreement. Borrower has places
of business, and Collateral is located, only at such address and at the
addresses set forth in the Schedule.
4.3. Authority. Borrower has the requisite corporate power and authority to
execute, deliver and perform its obligations under each of the Loan Documents.
All corporate action necessary for the execution, delivery and performance by
Borrower of the Loan Documents has been taken.
4.4. Enforceability. This Agreement is, and, when executed and delivered, each
other Loan Document will be, the legal, valid and binding obligation of Borrower
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
4.5. No Conflict. The execution, delivery and performance of each Loan
Document by Borrower does not and will not contravene (i) any of the Governing
Documents, (ii) any Requirement of Law or (iii) any Material Contract and will
not result in the imposition of any Liens other than in favor of TBCC.
4.6. Consents and Filings. No consent, authorization or approval of, or filing
with or other act by, any shareholders of Borrower or any Governmental Authority
or other Person is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement or any other Loan
Document, the consummation of the transactions contemplated hereby or thereby or
the continuing operations of Borrower following such consummation, except
(i) those that have been obtained or made, and (ii) the filing of financing
statements under the Uniform Commercial Code.
4.7. Solvency. Borrower is Solvent and will be Solvent upon the completion of
all transactions contemplated to occur on or before the date of this Agreement
(including, without limitation, the Loans to be made on the date of this
Agreement).
4.8. Financial Data. Borrower has provided to TBCC complete and accurate
Financial Statements, which have been prepared in accordance with GAAP
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the periods
covered. Borrower has no Contingent Obligation or liability for taxes,
unrealized losses, unusual forward or long-term commitments or long-term leases,
which is not reflected in such Financial Statements or the footnotes thereto.
Since the last date covered by such Financial Statements, there has been no
sale, transfer or other disposition by Borrower of any material part of its
business or property and no purchase or other acquisition of any business or
property (including any capital stock of any other Person) material in relation
to the financial condition of Borrower at said date. Since said date, (i) there
has been no change, occurrence, development or event which has had or could
reasonably be expected to have a Material Adverse Effect and (ii) none of the
capital stock of Borrower has been redeemed, retired, purchased or otherwise
acquired for value by Borrower.
4.9. Accuracy and Completeness of Information. All data, reports and
information previously, now or hereafter furnished by or on behalf of Borrower
to TBCC or the Auditors are or will be true and accurate in all material
respects on the date as of which such data, reports and information are dated or
certified, and not incomplete by omitting to state any material fact necessary
to make such data, reports and information not materially misleading at such
time. There are no facts now known to Borrower which individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect and
which have not been disclosed in writing to TBCC.
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TBCC Loan and Security Agreement
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4.10. No Joint Ventures, Partnerships or Subsidiaries. Borrower is not engaged
in any joint venture or partnership with any other Person other than those
disclosed to TBCC in writing from time to time and which involve a commitment of
the assets of the Borrower of at least $500,000 Borrower has no Subsidiaries
other than those disclosed to TBCC in writing from time to time.
4.11. Corporate and Trade Name. During the past five years, Borrower has not
been known by or used any other corporate, trade or fictitious name except for
its name as set forth on the signature page of this Agreement and the other
names specified in the Schedule.
4.12. No Actual or Pending Material Modification of Business. There exists no
actual or, to the best of Borrower's knowledge after due inquiry, threatened
termination, cancellation or limitation of, or any modification or change in the
business relationship of Borrower with any customer or group of customers whose
purchases individually or in the aggregate are material to the operation of
Borrower's business or with any material supplier.
4.13. No Broker's or Finder's Fees. No broker or finder brought about this
Agreement or the Loans. No broker's or finder's fees or commissions will be
payable by Borrower to any Person in connection with the transactions
contemplated by this Agreement.
4.14. Taxes and Tax Returns. Borrower has properly completed and timely
filed all income tax returns it is required to file. The information filed is
complete and accurate in all material respects. All deductions taken in such
income tax returns are appropriate and in accordance with applicable laws and
regulations, except deductions that may have been disallowed but are being
challenged in good faith and for which adequate reserves have been made in
accordance with GAAP. All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date of this Agreement have been
timely paid (or, if not yet due, adequate reserves therefor have been
established) and Borrower has no liability for taxes in excess of the amounts so
paid or reserves so established. No deficiencies for taxes have been claimed,
proposed or assessed by any taxing or other Governmental Authority against
Borrower and no notice of any tax Lien has been filed. There are no pending or
threatened audits, investigations or claims for or relating to any liability for
taxes and there are no matters under discussion with any Governmental Authority
which could result in an additional liability for taxes. No extension of a
statute of limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to Borrower. Borrower is not a
party to and does not have any obligations under any written tax sharing
agreement or agreement regarding payments in lieu of taxes.
4.15. No Judgments or Litigation. No judgments, orders, writs or decrees are
outstanding against Borrower, nor is there now pending or, to the knowledge of
Borrower after due inquiry, threatened litigation, contested claim,
investigation, arbitration, or governmental proceeding by or against Borrower
that (i) could individually or in the aggregate be likely in the reasonable
business judgment of TBCC to have a Material Adverse Effect or (ii) purports to
affect the legality, validity or enforceability of this Agreement, any other
Loan Document or the consummation of the transactions contemplated hereby or
thereby.
4.16. Investments; Contracts. Borrower (i) has not committed to make any
Investment which could have a Material Adverse Effect; (ii) is not a party to
any indenture, agreement, contract, instrument or lease or subject to any
charter, by-law or other corporate restriction or any injunction, order,
restriction or decree, which would materially and adversely affect its business,
operations, assets or financial condition; (iii) is not a party to any "take or
pay" contract as to which it is the purchaser which could have a Material
Adverse Effect; or (iv) has no material contingent or long-term liability,
including management contracts (excluding employment contracts of full-time
individual officers or employees), which could have a Material Adverse Effect.
4.17. No Defaults; Legal Compliance. Borrower is not in default under any term
of any Material Contract or in violation of any Requirement of Law, nor is
Borrower subject to any investigation with respect to a claimed violation of any
Requirement of Law.
4.18. Rights in Collateral; Priority of Liens. All Collateral is owned or
leased by Borrower, free and clear of any and all Liens in favor of third
parties, other than Permitted Liens. The Liens granted to TBCC pursuant to the
Loan Documents constitute valid, enforceable and perfected first-priority Liens
on the Collateral, except for Permitted Liens.
4.19. Intellectual Property. Set forth in the written Representations and
Warranties of Borrower previously delivered to TBCC is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights
(registered and unregistered), and all applications therefor and licenses
thereof, of Borrower. Borrower owns or licenses all material patents,
trademarks, service-marks, logos, tradenames, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of the foregoing,
which are necessary or advisable for the operation of its business as presently
conducted or proposed to be conducted. To the best of its knowledge after due
inquiry, Borrower has not infringed any patent, trademark, service-mark,
tradename, copyright, license or other right owned by any other Person by the
sale or use of any product, process, method, substance, part or other material
presently contemplated to be sold or used, where such sale or use would
reasonably be expected to have a Material Adverse Effect and no claim or
litigation is pending, or to the best of Borrower's knowledge, threatened
against or affecting Borrower that contests its right to sell or use any such
product, process, method, substance, part or other material.
4.20. Labor Matters. There are no existing or threatened strikes, lockouts or
other disputes relating to any collective bargaining or similar agreement to
which Borrower is a party which would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
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TBCC Loan and Security Agreement
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4.21. Licenses and Permits. To the best of its knowledge, Borrower has
obtained and holds in full force and effect, all franchises, licenses, leases,
permits, certificates, authorizations, qualifications, easements, rights of way
and other rights and approvals which are necessary or advisable for the
operation of its business as presently conducted and as proposed to be
conducted, except where the failure to possess any of the foregoing
(individually or in the aggregate) would not have a Material Adverse Effect.
4.22. Government Regulation. Borrower is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
Requirement of Law that limits its ability to incur indebtedness or its ability
to consummate the transactions contemplated by this Agreement and the other Loan
Documents.
4.23. Business and Properties. The business of Borrower is not affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could reasonably be expected
to have a Material Adverse Effect.
4.24. Affiliate Transactions. Borrower is not a party to or bound by any
agreement or arrangement (whether oral or written) to which any Affiliate of
Borrower is a party except (i) in the ordinary course of and pursuant to the
reasonable requirements of the business of Borrower and (ii) upon fair and
reasonable terms no less favorable to Borrower than it could obtain in a
comparable arm's-length transaction with an unaffiliated Person.
4.25. Survival of Representations. All representations made by Borrower in
this Agreement and in any other Loan Document executed and delivered by it in
connection herewith shall survive the execution and delivery hereof and thereof
and the closing of the transactions contemplated hereby and thereby.
5. AFFIRMATIVE COVENANTS OF THE BORROWER. Until termination of this Agreement
and payment and satisfaction of all Obligations:
5.1. Corporate Existence. Borrower shall (i) maintain its corporate existence,
(ii) maintain in full force and effect all material licenses, bonds, franchises,
leases, trademarks, qualifications and authorizations to do business, and all
material patents, contracts and other rights necessary or advisable to the
profitable conduct of its business, and (iii) continue in, and limit its
operations to, the same lines of business as presently conducted by it.
5.2. Maintenance of Property. Borrower shall keep all property useful and
necessary to its business in good working order and condition (ordinary wear and
tear excepted) in accordance with its past operating practices.
5.3. Affiliate Transactions. Borrower shall conduct transactions with any of
its Affiliates on an arm's-length basis or other basis no less favorable to
Borrower and which are approved by the board of directors of Borrower.
5.4. Taxes. Borrower shall pay when due (i) all tax assessments, and other
governmental charges and levies imposed against it or any of its property and
(ii) all lawful claims that, if unpaid, might by law become a Lien upon its
property; provided, however, that, unless such tax assessment, charge, levy or
claim has become a Lien on any of the property of Borrower, it need not be paid
if it is being contested in good faith, by appropriate proceedings diligently
conducted and an adequate reserve or other appropriate provision shall have been
made therefor as required in accordance with GAAP.
5.5. Requirements of Law. Borrower shall comply with all Requirements of Law
applicable to it, including, without limitation, all applicable Federal, State,
local or foreign laws and regulations, including, without limitation, those
relating to environmental matters, employee matters, the Employee Retirement
Income Security Act of 1974, and the collection, payment and deposit of
employees' income, unemployment and social security taxes, provided that
Borrower shall not be deemed in violation hereof if Borrower's failure to comply
with any of the foregoing would not require more than $50,000 to cure the same.
5.6. Insurance. Borrower shall maintain public liability insurance, business
interruption insurance, third party property damage insurance and replacement
value insurance on its assets (including the Collateral) under such policies of
insurance, with such insurance companies, in such amounts and covering such
risks as are at all times satisfactory to TBCC in its commercially reasonable
judgment, all of which policies covering the Collateral shall name TBCC as an
additional insured and lender loss payee in case of loss, and contain other
provisions as TBCC may reasonably require to protect fully TBCC's interest in
the Collateral and any payments to be made under such policies.
5.7. Books and Records; Inspections. Borrower shall (i) maintain books and
records (including computer records) pertaining to the Collateral in such
detail, form and scope as is consistent with good business practice and
(ii) provide TBCC and its agents access to the premises of Borrower at any time
and from time to time, during normal business hours and upon reasonable notice
under the circumstances, and at any time on and after the occurrence of a
Default or Event of Default, for the purposes of (A) inspecting and verifying
the Collateral, (B) inspecting and copying (at Borrower's expense) any and all
records pertaining thereto, and (C) discussing the affairs, finances and
business of Borrower with any officer, employee or director of Borrower or with
the Auditors. Borrower shall reimburse TBCC for the reasonable travel and
related expenses of TBCC's employees or, at TBCC's option, of such outside
accountants or examiners as may be retained by TBCC to verify or inspect
Collateral, records or documents of Borrower on a regular basis or for a special
inspection if TBCC deems the same appropriate. If TBCC's own employees are
used, Borrower shall also pay therefor $600 per person per day (or such other
amount as shall represent TBCC's then current standard charge for the same), or,
if outside examiners or accountants are used, Borrower shall also pay TBCC such
sum as TBCC may be obligated to pay as fees therefor.
5.8. Notification Requirements. Borrower shall give TBCC the following notices
and other documents:
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TBCC Loan and Security Agreement
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(a) Notice of Defaults. Borrower shall give TBCC written notice of any
Default or Event of Default within two Business Days after becoming aware of the
same.
(b) Proceedings or Adverse Changes. Borrower shall give TBCC written notice
of any of the following, promptly, and in any event within ten Business Days
after Borrower becomes aware of any of the following: (i) any proceeding being
instituted or threatened by or against it in any federal, state, local or
foreign court or before any commission or other regulatory body involving a sum,
together with the sum involved in all other similar proceedings, in excess of
$500,000 in the aggregate, (ii) any order, judgment or decree being entered
against Borrower or any of its properties or assets involving a sum, together
with the sum of all other orders, judgments or decrees, in excess of $500,000 in
the aggregate, and (iii) any actual or prospective change, development or event
which has had or could reasonably be expected to have a Material Adverse Effect.
(c) Change of Name or Chief Executive Office; Opening Additional Places of
Business. Borrower shall give TBCC at least 30 days prior written notice of any
change of Borrower's corporate name or its chief executive office or of the
opening of any additional place of business.
(d) Casualty Loss. Borrower shall (i) provide written notice to TBCC,
within ten Business Days, of any material damage to, the destruction of or any
other material loss to any asset or property owned or used by Borrower other
than any such asset or property with a net book value (individually or in the
aggregate) less than $250,000 or any condemnation, confiscation or other taking,
in whole or in part, or any event that otherwise diminishes so as to render
impracticable or unreasonable the use of such asset or property owned or used by
Borrower together with the amount of the damage, destruction, loss or diminution
in value and (ii) diligently file and prosecute its claim or claims for any
award or payment in connection with a any of the foregoing.
5.9. Qualify to Transact Business. Borrower shall qualify to transact business
as a foreign corporation in each jurisdiction where the nature or extent of its
business or the ownership of its property requires it to be so qualified or
authorized and where failure to qualify or be authorized would have a Material
Adverse Effect.
5.10. Financial Reporting. Borrower shall timely deliver to TBCC the following
financial information: the information set forth in the Schedule, and, when
requested by TBCC in its good-faith judgment, any further information respecting
Borrower or any Collateral. Borrower authorizes TBCC to communicate directly
with its officers, employees and Auditors and to examine and make abstracts from
its books and records. Borrower authorizes its Auditors to disclose to TBCC any
and all financial statements, work papers and other information of any kind that
they may have with respect to Borrower and its business and financial and other
affairs. Borrower shall deliver a letter addressed to the Auditors requesting
them to comply with the provisions of this paragraph when requested by TBCC.
5.11. Payment of Liabilities. Borrower shall pay and discharge, in the
ordinary course of business, all Indebtedness, except where the same may be
contested in good faith by appropriate proceedings and adequate reserves with
respect thereto have been provided on the books and records of Borrower in
accordance with GAAP.
5.12. Trademarks. Borrower shall do and cause to be done all things necessary
to preserve and keep in full force and effect all of its material registrations
of trademarks, service marks and other marks, trade names and other trade
rights.
5.13. Proceeds of Collateral. Without limiting any of the other terms of this
Agreement, and without implying any consent to any sale or other transfer of
Collateral in violation of any provision of this Agreement, Borrower shall
deliver to TBCC all proceeds of any sale or other transfer or disposition of any
Collateral, immediately upon receipt of the same and in the same form as
received, with any necessary endorsements, and Borrower will not commingle any
such proceeds with any of its other funds or property, but will segregate them
from the other assets of Borrower and will hold them in trust and for the
account and as the property of TBCC.
5.14. Solvency. Borrower shall be Solvent at all times.
6. NEGATIVE COVENANTS. Without the prior written consent of TBCC, and until
termination of this Agreement and payment and satisfaction of all Obligations:
6.1. Contingent Obligations. Borrower will not, directly or indirectly, incur,
assume, or suffer to exist any Contingent Obligation, excluding indemnities
given in connection with this Agreement or the other Loan Documents in favor of
TBCC or in connection with the sale of Inventory or other asset dispositions
permitted hereunder.
6.2. Corporate Changes. Borrower will not, directly or indirectly, merge or
consolidate with any Person (the result of which merger or consolidation, the
Borrower is not the surviving the entity), or liquidate or dissolve (or suffer
any liquidation or dissolution).
6.3. Change in Nature of Business. Borrower will not at any time make any
material change in the lines of its business as carried on at the date of this
Agreement or enter into any new material line of business.
6.4. Sales of Assets. Borrower will not, directly or indirectly, in any fiscal
year, sell, transfer or otherwise dispose of any assets (other than Collateral),
or grant any option or other right to purchase or otherwise acquire any assets
(other than Collateral) other than (i) assets (other than Collateral) with an
aggregate value of less than $500,000, and (ii) sales of Inventory in the
ordinary course of business.
6.5. Cancellation of Debt. Borrower will not cancel any claim or debt owed to
it, except in the ordinary course of business.
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6.6. Loans to Other Persons. Borrower will not at any time make loans or
advance any credit (except to trade debtors in the ordinary course of business)
to any Person in excess of $200,000 in the aggregate at any time for all such
loans.
6.7. Liens. Borrower will not, directly or indirectly, at any time create,
incur, assume or suffer to exist any Lien on or with respect to any of the
Collateral, other than: Liens created hereunder and by any other Loan Document;
and Permitted Liens.
6.8. Dividends, Stock Redemptions. Borrower will not, directly or indirectly,
pay any dividends or distributions on, purchase, redeem or retire any shares of
any class of its capital stock or any warrants, options or rights to purchase
any such capital stock, whether now or hereafter outstanding ("Stock"), or make
any payment on account of or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of its Stock, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of Borrower, except
for dividends paid solely in stock of the Borrower.
6.9. Investments in Other Persons. Borrower will not, directly or indirectly,
at any time make or hold any Investment in any Person (whether in cash,
securities or other property of any kind) other than Investments in Cash
Equivalents.
6.10. Partnerships; Subsidiaries; Joint Ventures; Management Contracts.
Borrower will not at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement or become a partner in any general
or limited partnership or enter into any management contract (other than an
employment contract for the employment of an officer or employee entered into in
the regular course of Borrower's business) permitting third party management
rights with respect to Borrower's business.
6.11. Fiscal Year. Borrower will not change its fiscal year.
6.12. Accounting Changes. Borrower will not at any time make or permit any
change in accounting policies or reporting practices, except as required by
GAAP.
6.13. Broker's or Finder's Fees. Borrower will not pay or incur any broker's
or finder's fees in connection with this Agreement or the transactions
contemplated hereby.
6.14. Unusual Terms of Sale. Borrower will not sell goods or products on
extended terms, consignment terms, on a progress billing or bill and hold basis,
or on any other unusual terms.
6.15. Amendments of Material Contracts. Borrower will not amend, modify,
cancel or terminate, or permit the amendment, modification, cancellation or
termination of, any Material Contract, if such amendment, modification,
cancellation or termination could have a Material Adverse Effect.
6.16. Sale and Leaseback Obligations. Borrower will not at any time create,
incur or assume any obligations as lessee for the rental of real or personal
property in connection with any sale and leaseback transaction.
6.17. Acquisition of Stock or Assets. Borrower will not acquire or commit or
agree to acquire all or any stock, securities or assets of any other Person
other than Inventory acquired in the ordinary course of business.
7. EVENTS OF DEFAULT.
7.1. Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default":
(a) Borrower shall fail to pay any principal, interest, fees, expenses or
other Obligations when payable, whether at stated maturity, by acceleration, or
otherwise; or
(b) Borrower shall default in the performance or observance of any agreement,
covenant, condition, provision or term contained in Section 1.1, 1.2, 1.4, 3.3,
5.7, 5.13, 6 (and its Sections and subsections), or 8.1 of this Agreement, or
Borrower shall fail to perform any non-monetary Obligation which by its nature
cannot be cured; or
(c) Borrower shall default in the performance or observance of any other
agreement, covenant, condition, provision or term of this Agreement (other than
those referred to in Section 7.1(a) above or Section 7.1(b) above) or any other
Loan Document, and such failure continues uncured for a period of ten Business
Days after the earlier of (i) Borrower's actual knowledge of such default or
(ii) notice from TBCC of such default; or
(d) Borrower or any Guarantor shall dissolve, wind up or otherwise cease to
conduct its business; or
(e) Borrower or any Guarantor shall become the subject of (i) an Insolvency
Event except as set forth in clause (e) of the definition of Insolvency Event or
(ii) an Insolvency Event as set forth in clause (e) of the definition of
Insolvency Event that is not dismissed within sixty days; or
(f) any representation or warranty made by or on behalf of Borrower to TBCC,
under this Agreement or otherwise, shall be incorrect or misleading in any
material respect when made or deemed made; or
(g) A change in the ownership or control of more than 40% of the voting
stock of the Borrower compared to such ownership on the date of this Agreement;
(h) any judgment or order for the payment of money shall be rendered against
Borrower in an amount of at least $250,000 and shall not be stayed, vacated,
bonded or discharged within thirty days; or
(i) Borrower or any Guarantor shall deny or disaffirm its obligations under
any of the Loan Documents or any Liens granted in connection therewith or shall
otherwise challenge any of its obligations under any of the Loan Documents; or
any
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Liens granted in any of the Collateral shall be determined to be void, voidable
or invalid, are subordinated or are not given the priority contemplated by this
Agreement; or
(j) any Loan Document shall for any reason cease to create a valid and
perfected Lien on the Collateral purported to be covered thereby, of first
priority (except for Permitted Liens); or
(k) the independent public accountants for Borrower shall deliver a Qualified
opinion on any Financial Statement; or
(l) Borrower (i) shall fail to pay any Indebtedness in excess of $250,000
owing to any Person other than TBCC or any interest or premium thereon, when due
(whether at scheduled maturity or by required prepayment, acceleration, demand
or otherwise), or (ii) shall otherwise be in breach or default in any of its
obligations under any agreement with respect to any such Indebtedness, if the
effect of such breach, default or failure to pay is to cause such Indebtedness
to become due or redeemed or permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to declare such
Indebtedness due or require such Indebtedness to be redeemed prior to its stated
maturity; or
(m) the occurrence of any event or condition that, in TBCC's judgment, could
reasonably be expected to have a Material Adverse Effect; or
(n) an Event of Default shall occur under the Equipment Loan Agreement.
TBCC may cease making any Loans hereunder during any of the above cure periods,
and thereafter if any Event of Default has occurred and is continuing.
7.2. Remedies. Upon the occurrence and during the continuance of an Event of
Default, TBCC shall have all rights and remedies under applicable law and the
Loan Documents, and TBCC may do any or all of the following:
(a) Declare all Obligations to be immediately due and payable (except with
respect to any Event of Default with respect to Borrower set forth in Section
7.1(e), in which case all Obligations shall automatically become immediately due
and payable) without presentment, demand, protest or any other action or
obligation of TBCC.
(b) Cease making any Loans or other extensions of credit to Borrower of any
kind.
(c) Take possession of all documents, instruments, files and records
(including the copying of any computer records) relating to the Receivables or
other Collateral and use (at the expense of Borrower) such supplies or space of
Borrower at Borrower's places of business necessary to administer and collect
the Receivables and other Collateral;
(d) Accelerate or extend the time of payment, compromise, issue credits, or
bring suit on the Receivables and other Collateral (in the name of Borrower or
TBCC) and otherwise administer and collect the Receivables and other Collateral;
(e) Sell, assign and deliver the Receivables and other Collateral, with or
without advertisement, at public or private sale, for cash, on credit or
otherwise, subject to applicable law; and
(f) Foreclose the security interests created pursuant to the Loan Documents
by any available procedure, take possession of any or all of the Collateral,
with or without judicial process and enter any premises where any Collateral may
be located for the purpose of taking possession of or removing the same.
(g) TBCC may bid or become a purchaser at any sale, free from any right of
redemption, which right is expressly waived by Borrower, if permitted under
applicable law. If notice of intended disposition of any Collateral is required
by law, it is agreed that ten days' notice shall constitute reasonable
notification. Borrower will assemble the Collateral and make it available at
such locations as TBCC may specify, whether at the premises of Borrower or
elsewhere, and will make available to TBCC the premises and facilities of
Borrower for the purpose of TBCC's taking possession of or removing the
Collateral or putting the Collateral in salable form.
7.3. Receivables. Upon the occurrence and during the continuance of an Event
of Default, or at any time that TBCC believes in good faith that fraud has
occurred or that Borrower has failed to deliver the proceeds of Receivables or
other Collateral to TBCC as required by this Agreement or any other Loan
Document, TBCC may (i) settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which it considers advisable, and (ii) notify
account debtors on the Receivables and other Collateral that the Receivables and
Collateral have been assigned to TBCC, and that payments in respect thereof
shall be made directly to TBCC. If an Event of Default has occurred and is
continuing or TBCC reasonably believes in good faith that fraud has occurred, or
that Borrower has failed to deliver the proceeds of Receivables or other
Collateral to TBCC as required by this Agreement or any other Loan Document,
Borrower hereby irrevocably authorizes and appoints TBCC, or any Person TBCC may
designate, as its attorney-in-fact, at Borrower's sole cost and expense, to
exercise, all of the following powers, which are coupled with an interest and
are irrevocable, until all of the Obligations have been indefeasibly paid and
satisfied in full in cash: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of TBCC or Borrower, any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral; (B) to receive,
open and dispose of all mail addressed to Borrower and to notify postal
authorities to change the address for delivery thereof to such address as TBCC
may designate; and (C) to take or bring, in the name of TBCC or Borrower, all
steps, actions, suits or proceedings deemed by TBCC necessary or desirable to
enforce or effect collection of Receivables and other Collateral or file and
sign Borrower's name on a proof of claim in bankruptcy or similar document
against any obligor of Borrower.
7.4. Right of Setoff. In addition to all rights of offset that TBCC may have
under applicable law, upon the occurrence and during the continuance of any
Event of Default, and whether or not TBCC has made any demand or the Obligations
of Borrower have matured, TBCC shall have the right to appropriate and apply to
the payment of the Obligations of Borrower
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all deposits and other obligations then or thereafter owing by TBCC to or for
the credit or the account of Borrower. In the event that TBCC exercises any of
its rights under this Section, TBCC shall provide notice to Borrower of such
exercise, provided that the failure to give such notice shall not affect the
validity of the exercise of such rights.
7.5. License for Use of Software and Other Intellectual Property. After the
occurrence and during the continuance of an Event of Default, unless expressly
prohibited by any licensor thereof, TBCC is hereby granted a license to use all
computer software programs, data bases, processes, trademarks, tradenames and
materials used by Borrower in connection with its businesses or in connection
with the Collateral.
7.6. No Marshalling; Deficiencies; Remedies Cumulative. The net cash proceeds
resulting from TBCC's exercise of any of its rights with respect to Collateral,
including any and all Collections (after deducting all of TBCC's reasonable
expenses related thereto), shall be applied by TBCC to such of the Obligations
in such order as TBCC shall elect in its sole and absolute discretion, whether
due or to become due. Borrower shall remain liable to TBCC for any deficiencies
and TBCC shall remit to Borrower or its successor or assign, any surplus
resulting therefrom. The remedies specified in this Agreement are cumulative,
may be exercised in such order and with respect to such Collateral as TBCC may
deem desirable and are not intended to be exclusive, and the full or partial
exercise of any of them shall not preclude the full or partial exercise of any
other available remedy under this Agreement, under any other Loan Document, at
equity or at law.
7.7. Waivers. Borrower hereby waives any bonds, security or sureties required
by any statute, rule or any other law as an incident to any taking of possession
by TBCC of any Collateral. Borrower also waives any damages (direct,
consequential or otherwise) occasioned by the enforcement of TBCC's rights under
this Agreement or any other Loan Document including the taking of possession of
any Collateral or the giving of notice to any account debtor or the collection
of any Receivable or other Collateral (other than damages that are the result of
acts or omissions constituting gross negligence or willful misconduct of TBCC).
These waivers and all other waivers provided for in this Agreement and the other
Loan Documents have been negotiated by the parties and Borrower acknowledges
that it has been represented by counsel of its own choice and has consulted such
counsel with respect to its rights hereunder.
7.8. Right to Make Payments. In the event that Borrower shall fail to purchase
or maintain insurance required hereunder, or to pay any tax, assessment,
government charge or levy, except as the same may be otherwise permitted
hereunder, or in the event that any Lien prohibited hereby shall not be paid in
full or discharged, or in the event that Borrower shall fail to perform or
comply with any other covenant, promise or obligation to TBCC hereunder or under
any other Loan Document, TBCC may (but shall not be required to) perform, pay,
satisfy, discharge or bond the same for the account of Borrower, and all amounts
so paid by TBCC shall be treated as a Loan hereunder to Borrower and shall
constitute part of the Obligations.
8. ASSIGNMENTS AND PARTICIPATIONS.
8.1. Assignments. Borrower shall not assign this Agreement or any right or
obligation hereunder without the prior written consent of TBCC. TBCC may assign
(without the consent of Borrower) to one or more Persons all or a portion of its
rights and obligations under this Agreement and the other Loan Documents.
8.2. Participations. TBCC may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of the Loans); provided, however, that TBCC's obligations under
this Agreement shall remain unchanged.
8.3. Disclosure. TBCC may, in connection with any permitted assignment or
participation or proposed assignment or participation pursuant to this
Agreement, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower furnished to TBCC by or on
behalf of Borrower.
9. DEFINITIONS.
9.1. General Definitions. As used herein, the following terms shall have the
meanings herein specified (to be equally applicable to both the singular and
plural forms of the terms defined):
(a) "Affiliate" means as to any Person, any other Person who directly or
indirectly controls, is under common control with, is controlled by or is a
director or officer of such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") means possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of voting
securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person who owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of the members of the board of directors or other
governing body of a corporation or twenty percent (20%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation, partnership or other Person.
(b) "Agreement" means this Loan and Security Agreement, as amended,
supplemented or otherwise modified from time to time.
(c) "Auditors" means a nationally recognized firm of independent public
accountants selected by Borrower and reasonably satisfactory to TBCC.
(d) "Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as that title may be amended from time to time, or any successor
statute.
(e) "Borrowing" means a borrowing of Loans.
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(f) "Business Day" means any day other than a Saturday, Sunday or any other
day on which commercial banks in Chicago, Illinois are required or permitted by
law to close.
(g) "Cash Equivalents" means (i) securities issued, guaranteed or insured by
the United States or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of not
more than one year from the date acquired, issued by any U.S. federal or state
chartered commercial bank of recognized standing which has capital and
unimpaired surplus in excess of $100,000,000; (iii) investments in money market
funds registered under the Investment Company Act of 1940; and (iv) other
instruments, commercial paper or investments acceptable to TBCC in its sole
discretion.
(h) "Collateral" means Receivables, Inventory, and Other Property, and all
additions and accessions thereto and substitutions and replacements therefor and
improvements thereon, and all proceeds (whether cash or other property) and
products thereof, including, without limitation, all proceeds of insurance
covering the same and all tort claims in connection therewith, and all records,
files, computer programs and files, data and writings relating to the foregoing,
and all equipment containing the foregoing.
(i) "Collections" means all cash, funds, checks, notes, instruments, any
other form of remittance tendered by account debtors in respect of payment of
Receivables comprising the Borrower's carrier business for telecommunication
services.
(j) "Compliance Certificate" means a certificate as to compliance with the
Obligations, on TBCC's standard form (in effect from time to time).
(k) "Contingent Obligation" means any direct, indirect, contingent or
non-contingent guaranty or obligation for the Indebtedness of another Person,
except endorsements in the ordinary course of business.
(l) "Default" means any of the events specified in Section 7.1, whether or
not any of the requirements for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
(m) "Eligible Inventory" [Inapplicable.]
(n) "Eligible Receivables" means and includes only those Receivables which
TBCC in its sole discretion deems eligible for borrowing, based on such
considerations as TBCC in its sole discretion may deem appropriate from time to
time and less any such reserves as TBCC, in its sole discretion, may require.
Without limiting the fact that the determination of which Receivables are
eligible for borrowing is a matter of TBCC's sole discretion, the following (the
"Minimum Eligibility Requirements") are the minimum requirements for a
Receivable to be an Eligible Receivable: (i) the Receivable must not be
outstanding for more than 90 days from its invoice date, (ii) the Receivable
must not represent progress billings, or be due under a fulfillment or
requirements contract with the account debtor, (iii) the Receivable must not be
subject to any contingencies (including Receivables arising from sales on
consignment, guaranteed sale or other terms pursuant to which payment by the
account debtor may be conditional), (iv) the Receivable must not be owing from
an account debtor with whom the Borrower has any dispute (whether or not
relating to the particular Receivable), (v) the Receivable must not be owing
from an Affiliate of Borrower, (vi) the Receivable must not be owing from an
account debtor which is subject to any insolvency or bankruptcy proceeding, or
whose financial condition is not acceptable to TBCC, or which, fails or goes out
of a material portion of its business, (vii) the Receivable must not be owing
from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to TBCC's satisfaction, with the United
States Assignment of Claims Act), (viii) the Receivable must not be owing from
an account debtor located outside the United States or Canada (unless
pre-approved by TBCC in its discretion in writing, or backed by a letter of
credit satisfactory to TBCC, or FCIA insured satisfactory to TBCC), (ix) the
Receivable must not be owing from an account debtor to whom Borrower is or may
be liable for goods purchased from such account debtor or otherwise. Receivables
owing from one account debtor will not be deemed Eligible Receivables to the
extent they exceed 30% of the total eligible Receivables outstanding. In
addition, if more than 50% of the Receivables owing from an account debtor are
outstanding more than 90 days from their invoice date (without regard to
unapplied credits) or are otherwise not eligible Receivables, then all
Receivables owing from that account debtor will be deemed ineligible for
borrowing. TBCC may, from time to time, in its sole discretion, revise the
Minimum Eligibility Requirements, upon written notice to the Borrower.
(o) "Equipment" means all machinery, equipment, furniture, fixtures,
conveyors, tools, materials, storage and handling equipment, hydraulic presses,
cutting equipment, computer equipment and hardware, including central processing
units, terminals, drives, memory units, printers, keyboards, screens,
peripherals and input or output devices, molds, dies, stamps, vehicles, and
other equipment of every kind and nature and wherever situated now or hereafter
owned by Borrower or in which Borrower may have any interest as lessee or
otherwise (to the extent of such interest), together with all additions and
accessions thereto, all replacements and all accessories and parts therefor, all
manuals, blueprints, know-how, warranties and records in connection therewith,
all rights against suppliers, warrantors, manufacturers, sellers or others in
connection therewith, and together with all substitutes for any of the
foregoing.
(o-1) "Equipment Loan Agreement" shall have the meaning set forth in Section
8 of the Schedule to Loan Agreement.
(p) "Event of Default" means the occurrence of any of the events specified in
Section 7.1.
(q) "Financial Statements" means the balance sheets, profit and loss
statements, statements of cash flow, and statements of changes in intercompany
accounts, if any, for the period specified, prepared in accordance with GAAP and
consistent with prior practices.
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(r) "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination. Whenever any accounting term is
used herein which is not otherwise defined, it shall be interpreted in
accordance with GAAP.
(s) "Governing Documents" means the articles or certificate of incorporation
and by-laws of Borrower.
(t) "Governmental Authority" means any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions thereof or
pertaining thereto.
(u) "Guarantor" means any present or future guarantor of any or all of the
Obligations.
(v) "Indebtedness" means, with respect to any Person, as of the date of
determination any indebtedness, liability or obligation of such Person
(including without limitation obligations under capital leases and contingent
obligations).
(w) "Insolvency Event" means, with respect to any Person, the occurrence of
any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or shall generally fail to pay or admit in writing its inability to
pay its debts as they become due, (b) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or business
or to effect a plan or other arrangement with its creditors, (c) such Person
shall make a general assignment for the benefit of its creditors, or consent to
or acquiesce in the appointment of a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business, (d) such Person
shall file a voluntary petition under any bankruptcy, insolvency or similar law
or take any corporate or similar act in furtherance thereof, or (e) such Person,
or a substantial portion of its property, assets or business shall become the
subject of an involuntary proceeding or petition for its dissolution,
reorganization, and such proceeding is not dismissed or stayed within sixty
days, or the appointment of a receiver, trustee, custodian or liquidator, and
such receiver is not dismissed within sixty days.
(x) "Inventory" means all present and future goods intended for sale, lease
or other disposition by Borrower including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same.
(y) "Investment" in any Person means, as of the date of determination
thereof, any payment or contribution, or commitment to make a payment or
contribution, by any Person including, without limitation, property contributed
or committed to be contributed by any Person, on its account for or in
connection with its acquisition of any stock, bonds, notes, debentures,
partnership or other ownership interest or any other security of the Person in
whom such Investment is made or any evidence of indebtedness by reason of a
loan, advance, extension of credit, guaranty or other similar obligation for any
debt, liability or indebtedness of such Person in whom the Investment is made.
(z) "Lien" means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
(aa) "Loan Account" has the meaning specified in Section 1.3.
(bb) "Loan Documents" means this Agreement and all present and future
documents and instruments delivered or to be delivered by Borrower or any of its
Affiliates or any Guarantor under, in connection with or relating to this
Agreement, as each of the same may be amended, supplemented or otherwise
modified from time to time.
(cc) "Loans" means the loans and financial accommodations made by TBCC
hereunder.
(dd) "Material Adverse Effect" means (i) a material adverse change occurs in
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of Borrower, (ii) the impairment of
Borrower's ability to perform its obligations under the Loan Documents to which
it is a party or of TBCC to enforce the Obligations or realize upon the
Collateral or (iii) a material adverse effect on the value of the Collateral or
the amount which TBCC would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of the
Collateral.
(ee) "Material Contract" means any contract or other arrangement to which
Borrower is a party (other than the Loan Documents) for which breach,
nonperformance, cancellation or failure to renew could have a Material Adverse
Effect.
(ff) "Obligations" means and includes all loans (including the Loans),
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to TBCC of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document or any other
agreement executed in connection herewith or therewith, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether absolute
or contingent, due or to become due, now due or hereafter arising and however
acquired. The term includes, without limitation, all interest (including
interest accruing on or after an Insolvency Event, whether or not an allowed
claim), charges, expenses, commitment, facility, closing and collateral
management fees, letter of
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credit fees, reasonable attorneys' fees, and any other sum properly chargeable
to Borrower under this Agreement, the other Loan Documents or any other
agreement executed in connection herewith or therewith.
(gg) "Other Property" means all present and future: instruments, documents,
documents of title, securities, investment securities, bonds, notes, promissory
notes, drafts, acceptances, letters of credit and rights to receive proceeds of
letters of credit, deposit accounts, chattel paper, certificates, insurance
policies, insurance proceeds, leases, computer tapes, causes of action,
judgments, claims against third parties, leasehold rights in any personal
property, books, ledgers, files and records, general intangibles (including
without limitation, all contract rights, tax refunds, rights to receive tax
refunds, patents, patent applications, copyrights (registered and unregistered),
royalties, licenses, permits, franchise rights, authorizations, customer lists,
rights of indemnification, contribution and subrogation, computer programs,
discs and software, trade secrets, computer service contracts, trademarks, trade
names, service marks and names, logos, goodwill, deposits, choses in action,
designs, blueprints, plans, know-how, telephone numbers and rights thereto,
credits, reserves, and all forms of obligations whatsoever now or hereafter
owing to Borrower), all property at any time in the possession or under the
control of TBCC, and all security given by Borrower to TBCC pursuant to any
other Loan Document or agreement.
(hh) "Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing: (i) Liens for taxes, assessments and other
governmental charges or levies or the claims or demands of landlords, carriers,
warehousemen, mechanics, laborers, materialmen and other like Persons arising by
operation of law in the ordinary course of business for sums which are not yet
due and payable, (ii) deposits or pledges to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits or
obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business (but nothing in this clause (ii) shall permit the
creation of Liens on Receivables or Inventory or Other Property), (iii) zoning
restrictions, easements, encroachments, licenses, restrictions or covenants on
the use of the Property which do not materially impair either the use of the
Property in the operation of the business of Borrower or the value of the
Property, (iv) rights of general application reserved to or vested in any
municipality or other governmental, statutory or public authority to control or
regulate property, or to use property in a manner which does not materially
impair the use of the property for the purposes for which it is held by
Borrower, (v) state and municipal Liens for personal property taxes which are
not yet due and payable, and (vi) Purchase Money Liens.
(ii) "Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization, joint
stock company, association, corporation, institution, entity, party or
government (including any division, agency or department thereof) or any other
legal entity, whether acting in an individual, fiduciary or other capacity, and,
as applicable, the successors, heirs and assigns of each.
(jj) "Plan" means any employee benefit plan, program or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
(kk) "Purchase Money Lien" means a Lien on any item of Equipment created
substantially simultaneously with the acquisition of such Equipment for the
purpose of financing such acquisition, provided that such Lien shall attach only
to the Equipment acquired.
(ll) "Qualification" or "Qualified" means, with respect to any report of
independent public accountants covering Financial Statements, a material
qualification to such report (i) resulting from a limitation on the scope of
examination of such Financial Statements or the underlying data, (ii) as to the
capability of Borrower to continue operations as a going concern or (iii) which
could be eliminated by changes in Financial Statements or notes thereto covered
by such report (such as by the creation of or increase in a reserve or a
decrease in the carrying value of assets) and which if so eliminated by the
making of any such change and after giving effect thereto would result in a
Default or an Event of Default.
(mm) "Receivables" means all present and future accounts and accounts
receivable, together with all security therefor and guaranties thereof and all
rights and remedies relating thereto, including any right of stoppage in
transit.
(nn) "Requirement of Law" means (a) the Governing Documents, (b) any law,
treaty, rule, regulation, order or determination of an arbitrator, court or
other Governmental Authority or (c) any franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval binding on Borrower or any of its property.
(oo) "Schedule" means the Schedule to this Agreement being signed
concurrently by Borrower and TBCC, as amended from time to time.
(pp) "Solvent" means when used with respect to any Person that as of the date
as to which such Person's solvency is to be measured: (a) the fair salable value
of its assets is in excess of the total amount of its liabilities (including
contingent liabilities as valued in accordance with applicable law) as they
become absolute and matured; (b) it has sufficient capital to conduct its
business; and (c) it is able to meet its debts as they mature.
(qq) "Subsidiary" means, as to any Person, a corporation or other entity in
which that Person directly or indirectly owns or controls shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or appoint other managers of such corporation or other
entity.
9.2. Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a basis consistent in all material respects
with the Financial Statements delivered to TBCC on or before the date of this
Agreement. All accounting determinations for purposes of determining compliance
with this Agreement shall be made in accordance with GAAP as in effect on the
date of this Agreement and applied on a basis consistent in all material
respects with the audited Financial Statements delivered to
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TBCC on or before the date of this Agreement. The Financial Statements required
to be delivered hereunder, and all financial records, shall be maintained in
accordance with GAAP. If GAAP shall change from the basis used in preparing the
audited Financial Statements delivered to TBCC on or before the date of this
Agreement, the Compliance Certificates required to be delivered pursuant to this
Agreement shall include calculations setting forth the adjustments necessary to
demonstrate how Borrower is in compliance with the Financial Covenants (if any)
based upon GAAP as in effect on the date of this Agreement.
9.3. Other Terms; Headings; Construction. Unless otherwise defined herein,
terms used herein that are defined in the Uniform Commercial Code, from time to
time in effect in the State of Illinois, shall have the meanings set forth
therein. Each of the words "hereof," "herein," and "hereunder" refer to this
Agreement as a whole. The term "including", whenever used in this Agreement,
shall mean "including (but not limited to)". An Event of Default shall
"continue" or be "continuing" unless and until such Event of Default has been
waived or cured within the grace period specified therefor under Section 7.1.
References to Articles, Sections, Annexes, Schedules, and Exhibits are internal
references to this Agreement, and to its attachments, unless otherwise
specified. The headings and any Table of Contents are for convenience only and
shall not affect the meaning or construction of any provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against TBCC or Borrower under any rule of construction or
otherwise.
10. GENERAL PROVISIONS.
10.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
10.2. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE BORROWER AND TBCC,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY
BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO
WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT TBCC SHALL HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
BORROWER OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY TBCC IN GOOD
FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF TBCC. THE BORROWER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT
BY TBCC. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH TBCC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
10.3. SERVICE OF PROCESS. THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM, 1209 ORANGE STREET, WILMINGTON, DELAWARE 19801, AS THE
DESIGNEE AND AGENT OF THE BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE
BORROWER, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH
PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL
TO THE BORROWER, BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
10.4. LIMITATION OF LIABILITY. TBCC SHALL HAVE NO LIABILITY TO THE BORROWER
(WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE
BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY
A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON TBCC THAT THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF TBCC. THE BORROWER HEREBY WAIVES ALL FUTURE CLAIMS
AGAINST TBCC FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.5. Delays; Partial Exercise of Remedies. No delay or omission of TBCC to
exercise any right or remedy hereunder shall impair any such right or operate as
a waiver thereof. No single or partial exercise by TBCC of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.
10.6. Notices. Except as otherwise provided herein, all notices and
correspondence hereunder shall be in writing and sent by certified or registered
mail, return receipt requested, by overnight delivery service, with all charges
prepaid, or by telecopier followed by a hard copy sent by regular mail, to the
parties at their addresses set forth in the heading to this Agreement. All such
notices and correspondence shall be deemed given (i) if sent by certified or
registered mail, three Business Days after being postmarked, (ii) if sent by
overnight delivery service, when received at the above stated addresses or when
delivery is refused and (iii) if sent by telecopier transmission, when receipt
of such transmission is acknowledged.
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<PAGE>
TBCC Loan and Security Agreement
- -------------------------------------------------------------------------------
Borrower's and TBCC's telecopier numbers for purpose of notice hereunder are set
forth in the Schedule; each party's number may be changed by written notice to
the other party.
10.7. Indemnification; Reimbursement of Expenses of Collection. Borrower
hereby indemnifies and agrees, whether or not any of the transactions
contemplated by this Agreement or the other Loan Documents are consummated, to
defend and hold harmless (on an after-tax basis) TBCC, its successors and
assigns and their respective directors, officers, agents, employees, advisors,
shareholders, attorneys and Affiliates (each, an "Indemnified Party") from and
against any and all losses, claims, damages, liabilities, deficiencies,
obligations, fines, penalties, actions (whether threatened or existing),
judgments, suits (whether threatened or existing) or expenses (including,
without limitation, reasonable fees and disbursements of counsel, experts,
consultants and other professionals) incurred by any of them (collectively,
"Claims") (except, in the case of each Indemnified Party, to the extent that any
Claim is determined in a final and non-appealable judgment by a court of
competent jurisdiction to have directly resulted from such Indemnified Party's
gross negligence or willful misconduct) arising out of or by reason of (i) any
litigation, investigation, claim or proceeding which arises out of or is related
to (A) Borrower, or this Agreement, any other Loan Document or the transactions
contemplated hereby or thereby, (B) any actual or proposed use by Borrower of
the proceeds of the Loans, or (C) TBCC's entering into this Agreement or any
other Loan Document or any other agreements and documents relating hereto,
including, without limitation, amounts paid in settlement, court costs and the
reasonable fees and disbursements of counsel incurred in connection with any
such litigation, investigation, claim or proceeding, (ii) any remedial or other
action taken by Borrower in connection with compliance by Borrower, or any of
its properties, with any federal, state or local environmental laws, rules or
regulations, and (iii) any pending, threatened or actual action, claim,
proceeding or suit by any shareholder or director of Borrower or any actual or
purported violation of Borrower's charter, by-laws or any other agreement or
instrument to which Borrower is a party or by which any of its properties is
bound. In addition and without limiting the generality of the foregoing,
Borrower shall, upon demand, pay to TBCC all reasonable costs and expenses
incurred by TBCC (including the reasonable fees and disbursements of counsel and
other professionals) in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents, and pay to
TBCC all reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by TBCC in
order to enforce or defend any of its rights under or in respect of this
Agreement, any other Loan Document or any other document or instrument now or
hereafter executed and delivered in connection herewith, collect the Obligations
or otherwise administer this Agreement, foreclose or otherwise realize upon the
Collateral or any part thereof, prosecute actions against, or defend actions by,
account debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce TBCC's security interest in, the Collateral; and otherwise
represent TBCC in any litigation relating to Borrower. Without limiting the
generality of the foregoing, Borrower shall pay TBCC a fee with respect to each
wire transfer in the amount of $15 plus all bank charges and a fee of $15 for
all returned checks plus all bank charges. If either TBCC or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. If and to the extent that the Obligations of
Borrower hereunder are unenforceable for any reason, Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of the Obligations
which is permissible under applicable law. Borrower's obligations under Section
2.4 and this Section shall survive any termination of this Agreement and the
other Loan Documents and the payment in full of the Obligations, and are in
addition to, and not in substitution of, any of the other Obligations.
10.8. Amendments and Waivers. Any provision of this Agreement or any other
Loan Document may be amended or waived if, but only if, such amendment or waiver
is in writing and signed by Borrower and TBCC and then any such amendment or
waiver shall be effective only to the extent set forth therein. The failure of
TBCC at any time or times to require Borrower to strictly comply with any of the
provisions of this Agreement or any other present or future agreement between
Borrower and TBCC shall not waive or diminish any right of TBCC later to demand
and receive strict compliance therewith. Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent, and whether or
not similar. None of the provisions of this Agreement or any other agreement
now or in the future executed by Borrower and delivered to TBCC shall be deemed
to have been waived by any act or knowledge of TBCC or its agents or employees,
but only by a specific written waiver signed by an authorized officer of TBCC
and delivered to Borrower.
10.9. Counterparts; Telecopied Signatures. This Agreement and any waiver or
amendment hereto may be executed in counterparts and by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
telecopier or other facsimile transmission all with the same force and effect as
if the same was a fully executed and delivered original manual counterpart.
10.10. Severability. In case any provision in or obligation under this
Agreement or any other Loan Document shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
10.11. Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
-15-
<PAGE>
TBCC Loan and Security Agreement
- -------------------------------------------------------------------------------
10.12. Maximum Rate. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the parties hereto
hereby agree that all agreements between them under this Agreement and the other
Loan Documents, whether now existing or hereafter arising and whether written or
oral, are expressly limited so that in no contingency or event whatsoever shall
the amount paid, or agreed to be paid, to TBCC for the use, forbearance, or
detention of the money loaned to Borrower and evidenced hereby or thereby or for
the performance or payment of any covenant or obligation contained herein or
therein, exceed the maximum non-usurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, reserved, charged or received
on the Obligations, under the laws of the State of Illinois (or the laws of any
other jurisdiction whose laws may be mandatorily applicable notwithstanding
other provisions of this Agreement and the other Loan Documents), or under
applicable federal laws which may presently or hereafter be in effect and which
allow a higher maximum non-usurious interest rate than under the laws of the
State of Illinois (or such other jurisdiction), in any case after taking into
account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Agreement and the other Loan Documents executed
in connection herewith, and any available exemptions, exceptions and exclusions
(the "Highest Lawful Rate"). If due to any circumstance whatsoever, fulfillment
of any provisions of this Agreement or any of the other Loan Documents at the
time performance of such provision shall be due shall exceed the Highest Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance TBCC should ever receive anything of
value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to TBCC for the use, forbearance, or detention of
the Obligations and other indebtedness of Borrower to TBCC shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness, until payment in full thereof, so
that the actual rate of interest on account of all such indebtedness does not
exceed the Highest Lawful Rate throughout the entire term of such indebtedness.
The terms and provisions of this Section shall control every other provision of
this Agreement, the other Loan Documents and all other agreements between the
parties hereto.
10.13. Entire Agreement; Successors and Assigns. This Agreement and the other
Loan Documents constitute the entire agreement between the parties, supersede
any prior written and verbal agreements between them, and shall bind and benefit
the parties and their respective successors and permitted assigns. There are
no oral understandings, oral representations or oral agreements between the
parties which are not set forth in this Agreement or in other written agreements
signed by the parties in connection herewith.
10.14. MUTUAL WAIVER OF JURY TRIAL. TBCC AND BORROWER EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER; OR (iii) ANY CONDUCT,
ACTS OR OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
Borrower:
IDT CORPORATION
By /s/ Stephen Brown
---------------------------------
Title Chief Financial Officer
TBCC:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By
-----------------------------------
Title
----------------------------
- -7B-auto-6
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<PAGE>
TBCC
Schedule to
Loan and Security Agreement
Borrower: IDT Corporation
Address: 190 Main Street
Hackensack, NJ 07601
Date: December 24, 1997
This Schedule is an integral part of the Loan and Security Agreement between
TRANSAMERICA BUSINESS CREDIT CORPORATION ("TBCC") and the above borrower
("Borrower") of even date.
1. CREDIT LIMIT (Section 1.1): An amount (the "Credit Limit") not to exceed
the lesser of: (i) $10,000,000 at any one time outstanding; or (ii) 85% of
the amount of Borrower's Eligible Receivables (as defined in Section 9.1(n)
above).
2. INTEREST. (Section 2.1): The interest rate in effect throughout each
calendar month during the term of this Agreement shall be the highest "Base
Rate" in effect during such month, plus 2% per annum, provided that the
interest rate in effect in each month shall not be less than 9% per annum,
and provided that the interest charged for each month shall be a minimum of
$7,500, regardless of the amount of the Obligations outstanding. Interest
shall be calculated on the basis of a 360-day year for the actual number of
days elapsed. "Base Rate" shall mean the higher of (a) the highest prime,
base or equivalent rate of interest announced from time to time by
Citibank, N.A., First National Bank of Chicago and Bank of America National
Trust and Savings Association (which may not be the lowest rate of interest
charged by such bank) and (b) the published annualized rate for 90-day
dealer commercial paper which appears in the "Money Rates" section of The
Wall Street Journal.
3. FEES (Section 2.2):
Loan Fee: $75,000, payable concurrently herewith.
Termination Fee: Not Applicable.
4. MATURITY DATE (Section 1.6): December 31, 1998 (the "Maturity Date"),
subject to automatic renewal and early termination as provided in Section
1.6 above.
<PAGE>
TRANSAMERICA Schedule to Loan and Security Agreement
- -------------------------------------------------------------------------------
5. REPORTING (Section 5.10):
Borrower shall provide TBCC with the following reports:
(a) Monthly Financial Statements. Monthly unaudited
financial statements, as soon as available, and in any
event within 30 days after the end of each month.
(b) Monthly Receivable Agings. Monthly Receivable agings,
aged by invoice date, within 10 days after the end of
each month.
(c) Monthly Payable Agings. Monthly accounts payable
agings, aged by invoice date, and outstanding or held
check registers within 10 days after the end of each
month.
(d) Monthly Borrowing Base and Compliance Certificates.
Borrower shall provide TBCC with a Borrowing Base
Certificate, in such form as TBCC shall specify, within
10 days after the end of each month. As soon as
available, but not later than thirty days after the end
of each month, a Compliance Certificate, with an
attached schedule of calculations demonstrating
compliance or indicating non-compliance with any
Financial Covenants.
(e) Monthly Cash Balance Certificate. Borrower shall
provide TBCC, within 10 days after the end of each
month, with a Cash Balance Certificate, in such form as
TBCC shall specify, stating the amount of Borrower's
aggregate cash balance (including Cash Equivalents) in
all of its deposit accounts as of the end of each
month.
(f) Quarterly Financial Statements. Quarterly unaudited
financial statements, as soon as available, and in any
event within 30 days after the end of each fiscal
quarter of Borrower.
(g) Annual Financial Statements. As soon as available, but
not later than 90 days after the end of the Borrower's
fiscal year, (A) Borrower's annual audited Financial
Statements; (B) a comparison in reasonable detail to
the prior year's audited Financial Statements; (C) the
Auditors' opinion without Qualification, a "Management
Letter" and a statement indicating that the Auditors
have not obtained knowledge of the existence of any
Default or Event of Default during their audit; (D) a
narrative discussion of Borrower's financial condition
and results of operations and the liquidity and capital
resources for such fiscal year.
6. BORROWER INFORMATION:
(a) Prior Names of Borrower (Section 4.11): International
Discount Telecommunications, Inc.
(b) Prior Trade Names of Borrower (Section 4.11): None
(c) Existing Trade Names of Borrower (Section 4.11): None
-2-
<PAGE>
TRANSAMERICA Schedule to Loan and Security Agreement
- -------------------------------------------------------------------------------
(d) Other Places of Business and Locations of Collateral
(Section 4.2): None
7. FACSIMILE NUMBERS:
Borrower: (201) 907-5147
TBCC: (818) 995-9148
8. OTHER COVENANTS:
The following additional covenants and provisions shall apply at
all times to this Agreement and the Borrower:
(1) Reference is made to that certain Security Agreement dated
January 10, 1997 between Borrower and TBCC (as amended from time to
time, the "January Equipment Loan Agreement") and to that certain
Security Agreement dated October 1, 1997 between Borrower and TBCC
(as amended from time to time, the "October Equipment Loan Agreement")
(the January Equipment Loan Agreement and the October Equipment Loan
Agreement, together with any future equipment loan agreements between
Borrower and TBCC, are collectively referred to as the "Equipment Loan
Agreement"). To the extent of any conflicts between the provisions of
this Agreement and the Equipment Loan Agreement, such provision that
grants TBCC greater rights shall be the controlling provision of
either Agreement.
Borrower: TBCC:
IDT CORPORATION TRANSAMERICA BUSINESS CREDIT
CORPORATION
By /s/ Stephen Brown By
-------------------------- ------------------------------
Chief Financial Officer Title
---------------------------
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<PAGE>
REVOLVING CREDIT NOTE
$10,000,000 Chicago, Illinois December 24, 1997
FOR VALUE RECEIVED, IDT Corporation, a Delaware corporation having its
chief executive office and principal place of business at 190 Main Street,
Hackensack, New Jersey 07601 (the "Borrower"), hereby unconditionally and
absolutely promises to pay to the order of TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation ("TBCC"), on the Maturity Date, at TBCC's
office at 9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018, or at
such other location as TBCC may from time to time designate, in lawful money of
the United States of America and in immediately available funds, the principal
amount equal to $10,000,000 or such greater or lesser amount as represents the
aggregate unpaid principal amount of all Loans made by TBCC to the Borrower
pursuant to the Loan and Security Agreement between TBCC and Borrower dated
December 24, 1997 (the "Loan Agreement"). The Borrower further promises to pay
interest in like money and funds at TBCC's office specified above (or at such
other location as TBCC may from time to time designate) on the unpaid principal
amount hereof from time to time outstanding from and including the date hereof
until paid in full (both before and after judgment) at the rates and on the
dates set forth in the Loan Agreement. All capitalized terms used herein which
are not defined herein shall have the meanings ascribed to such terms in the
Loan Agreement.
The holder of this Note is authorized to record the date and amount of each
Loan evidenced by this Note, the date and amount of each payment or prepayment
of principal hereof and the interest rate with respect thereto on a schedule
attached hereto, or on a continuation of such schedule attached hereto and made
a part hereof, and any such notation shall be conclusive and binding for all
purposes absent manifest error; provided, however, that the failure of TBCC to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Loan Agreement.
Whenever any payment to be made hereunder shall be stated to be due on a
day that is not a Business Day, the payment may be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the amount of interest due hereunder.
This Note is entitled to the benefit of all terms and conditions of, and
the security of all security interests, liens, mortgages, deeds of trust and
rights granted pursuant to, the Loan Agreement and the other Loan Documents, and
is subject to optional and mandatory prepayment as provided therein.
Upon the occurrence of any one or more Events of Default, all amounts then
remaining unpaid on this Note may be declared to be or may automatically become
immediately due and payable as provided in the Loan Agreement.
The Borrower acknowledges that the holder of this Note may assign, transfer
or sell all or a portion of its rights and interests to and under this Note to
one or more Persons as provided in the Loan Agreement and that such Persons
shall thereupon become vested with all of the rights and benefits of TBCC in
respect hereof as to all or that portion of this Note which is so assigned,
transferred or sold.
In the event of any conflict between the terms hereof and the terms and
provisions of the Loan Agreement, the terms and provisions of the Loan Agreement
shall control.
The Borrower and all other parties that at any time may be liable hereupon
in any capacity, jointly or severally, waive presentment, demand for payment,
protest and notice of dishonor of this Note and authorize the holder hereof,
without notice, to increase or decrease the rate of interest on any amount owing
under this Note in accordance with the Loan Agreement. The Borrower further
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations and any requirement that TBCC exhaust any
rights or take any action against any other Person or any collateral. The
Borrower further hereby waives notice of or proof of reliance by TBCC upon this
Note, and the Obligations shall conclusively be deemed to have been created,
contracted, incurred, renewed,
1
<PAGE>
extended, amended or waived in reliance upon this Note. The Borrower shall make
all payments hereunder and under the Loan Agreement without defense, offset or
counterclaim. No failure to exercise and no delay in exercising any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights. This Note may not be changed orally, but only by an agreement in
writing, which is signed by the party or parties against whom enforcement of any
waiver, change, modification or discharge is sought.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE AND THE OTHER
LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS NOTE,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY
THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) AND DECISIONS
OF THE STATE OF ILLINOIS.
ALL DISPUTES ARISING UNDER OR IN CONNECTION WITH THIS NOTE AND ANY OTHER
LOAN DOCUMENT BETWEEN THE BORROWER AND TBCC, WHETHER SOUNDING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED
IN CHICAGO, ILLINOIS, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN;
PROVIDED, HOWEVER, THAT TBCC SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN ANY LOCATION
REASONABLY SELECTED BY TBCC IN GOOD FAITH TO ENABLE TBCC TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF TBCC. THE
BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR
CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY TBCC. THE BORROWER WAIVES ANY
OBJECTION THAT THE BORROWER MAY HAVE TO THE LOCATION OF THE COURT IN WHICH TBCC
HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM, 1209
ORANGE STREET, WILMINGTON, DELAWARE 19801 AS THE DESIGNEE AND AGENT OF THE
BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE BORROWER SERVICE OF PROCESS IN ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT.
IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS
WILL BE PROMPTLY FORWARDED BY MAIL TO THE BORROWER, BUT THE FAILURE OF THE
BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH
PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF TBCC TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
THE BORROWER AND, BY ITS ACCEPTANCE HEREOF, TBCC EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO: (i) THIS NOTE; OR (ii) ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER; OR (iii) ANY CONDUCT, ACTS OR
OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR BORROWER; IN
EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
IDT CORPORATION
By: /s/ Stephen Brown
--------------------------------
Title: Chief Financial Officer
2
<PAGE>
SCHEDULE
TO REVOLVING CREDIT NOTE
DATED DECEMBER 24, 1997
OF IDT CORPORATION TO
TRANSAMERICA BUSINESS CREDIT CORPORATION
Date Amount of Interest Amount of Unpaid Notation
Loan Rate Principal Paid Principal Made by
Balance
3
<PAGE>
Exhibit 10.22
TBCC
SECURITY AGREEMENT
Obligor: Genie Interative, Inc. Obligor: Internet Online Services, Inc.
a New Jersey corporation a New Jersey corporation
Address: 294 State Street Address: 294 State Street
Hackensack, NJ 07601 Hackensack, NJ 07601
Obligor: IDT America, Corp., Obligor: Media Response, Inc.
a New Jersey corporation a New Jersey corporation
Address: 294 State Street Address: 294 State Street
Hackensack, NJ 07601 Hackensack, NJ 07601
Obligor: IDT International, Corp., Obligor: New World
a New Jersey corporation Telecommunications, Corp.,
a New Jersey corporation
Address: 294 State Street Address: 294 State Street
Hackensack, NJ 07601 Hackensack, NJ 07601
Obligor: IDT Internet Services, Inc., Obligor: Yovelle Renaissance
a Delaware corporation Corporation,
a Delaware corporation
Address: 294 State Street Address: 294 State Street
Hackensack, NJ 07601 Hackensack, NJ 07601
Date: December 24, 1997
THIS SECURITY AGREEMENT is entered into as of the above date, between the
above Obligor (the "Obligor"), having its chief executive office and
principal place of business at the address shown above, and TRANSAMERICA
BUSINESS CREDIT CORPORATION, a Delaware corporation, ("TBCC") having its
principal office at 9399 West Higgins Road, Suite 600, Rosemont, Illinois
60018 and having an office at 16133 Ventura Blvd., Suite 700, Encino,
California 91436. (Definitions of certain terms used in this Agreement are
set forth in Section 7 below.) The parties agree as follows:
1. SECURITY
1.1. GRANT OF SECURITY INTEREST. To secure the payment and performance
when due of all of the Obligations, Obligor hereby grants to TBCC a security
interest in all of its present and future Receivables, Inventory, Other
Property, and other Collateral, wherever located.
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1.2. Other Liens; Location of Collateral. Obligor represents, warrants
and covenants that all of the Collateral is, and will at all times continue
to be, free and clear of all Liens, other than Permitted Liens and Liens in
favor of TBCC. All Collateral is and will continue to be maintained at the
locations shown on the Schedule.
1.3. Records. Obligor shall maintain full, accurate and complete
records respecting the Receivables, Inventory (including without limitation
records describing the kind, type and quantity of the inventory and
Obligor's cost therefor, withdrawals therefrom and additions thereto,
including a perpetual inventory for work in process and finished goods).
1.5. Further Assurances. Obligor will perform any and all steps that
TBCC may reasonably request to perfect TBCC's security interests in the
Collateral, including, without limitation, executing and filing financing and
continuation statements in form and substance satisfactory to TBCC. TBCC is
hereby authorized by Obligor to sign Obligor's name or file any financing
statements or similar documents or instruments covering the Collateral
whether or not Obligor's signature appears thereon. Obligor agrees, from time
to time, at TBCC's request, to file notices of Liens, financing statements,
similar document or instruments, and amendments, renewals and continuations
thereof, and cooperate with TBCC, in connection with the continued perfection
and protection of the Collateral. If any Collateral is in the possession or
control of any Person other than a public warehouseman where the warehouse
receipt is in the name of or held by TBCC, Obligor shall notify such Person
of TBCC's security interest therein and, upon request, instruct such Person
or Persons to hold all such Collateral for the account of TBCC and subject to
TBCC's instructions. If so requested by TBCC, Obligor will deliver to TBCC
warehouse receipts covering any Collateral located in warehouses showing TBCC
as the beneficiary thereof and will also cause the warehouseman to execute
and deliver such agreements as TBCC may request relating to waivers of liens
by such warehouseman and the release of the Inventory to TBCC on its demand.
Obligor shall defend the Collateral against all claims and demands of all
Persons.
1.6. Power of Attorney. Obligor hereby appoints and constitutes TBCC as
Obligor's attorney-in-fact (i) to request at any time from account debtors
verification of information concerning Receivables and the amount owing
thereon, (ii) upon the occurrence and during the continuance of an Event of
Default, to convey any item of Collateral to any purchaser thereof, (iii) to
give or sign Obligor's name to any notices or statements necessary or
desirable to create or continue the Lien on any Collateral granted hereunder
and (iv) to take any act necessary or desirable to protect or preserve any
Collateral and (v) upon the occurrence and during the continuance of an Event
of Default, to make any payment necessary or desirable to protect or preserve
any Collateral.
TBCC's authority hereunder shall include, without limitation, the
authority to execute and give receipt for any certificate of ownership or any
document, transfer title to any item of Collateral and take any other actions
arising from or incident to the powers granted to TBCC under this Agreement.
This power of attorney is coupled with an interest and is irrevocable.
2. Representations and Warranties of Obligor. Obligor represents and warrants
as follows:
2.1 Organization, Good Standing and Qualification. Obligor (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the State set forth above, (ii) has the corporate power and authority
to own its properties and assets and to transact the businesses in which it
is engaged and (iii) is duly qualified, authorized to do business and in good
standing in each jurisdiction where it is engaged in business, except to the
extent that the failure to so qualify or be in good standing would not have a
Material Adverse Effect.
2.2 Locations of Offices, Records and Collateral. The address of the
principal place of business and chief executive office of Obligor is, and the
books and records of Obligor and all of its chattel paper and records
relating to Collateral are maintained exclusively in the possession of Obligor
at, the address of Obligor specified in heading of this Agreement. Obligor
has places of business, and Collateral is located, only at such address and
at the addresses set forth in the Schedule.
2.3 Authority. Obligor has the requisite corporate power and
authority to execute, deliver and perform its obligations under each of the
Loan Documents. All corporate action necessary for the execution, delivery
and performance by Obligor of the Loan Documents has been taken.
2.4 Enforceability. This Agreement is, and, when executed and
delivered, each other loan Document will be, the legal, valid and binding
obligation of Obligor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and general principles of equity.
2.5 No Conflict. The execution, delivery and performance of each Loan
Document by Obligor does not and will not contravene (i) any of the Governing
Documents, (ii) any Requirement of Law or (iii) any Material Contract and
will not result in the imposition of any Liens other than in favor of TBCC.
2.6 Consents and Filings. No consent, authorization or approval of,
or filing with or other act by, any shareholders of Obligor or any
Governmental Authority or other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement or any other Loan Document, the consummation of the transactions
contemplated hereby or thereby or the continuing operations of Obligor
following such consummation, except (i) those that have been obtained or
made, and (ii) the filing of financing statements under the Uniform
Commercial Code.
2.7 Solvency. Obligor is Solvent and will be Solvent upon the
completion of all transactions contemplated to occur on or before the date of
this Agreement.
2.8 Financial Data. Obligor has provided to TBCC complete and
accurate Financial Statements, which have been prepared in accordance with
GAAP consistently applied throughout the periods involved and fairly present
the financial position and results of operations of Obligor for each of the
periods covered. Obligor has no Contingent Obligation or
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liability for taxes, unrealized losses, unusual forward or long-term
commitments for long-term leases, which is not reflected in such Financial
Statements or the footnotes thereto. Since the last date covered by such
Financial Statements, there has been no sale, transfer or other disposition by
Obligor of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the financial condition of Obligor
at said date. Since said date, (i) there has been no change, occurrence,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect and (ii) none of the capital stock of Obligor has
been redeemed, retired, purchased or otherwise acquired for value by Obligor.
2.90. ACCURACY AND COMPLETENESS OF INFORMATION. All data, reports and
information previously, now or hereafter furnished by or on behalf of
Obligor to TBCC or the Auditors are or will be true and accurate in all
material respects on the date as of which said data, reports and information
are dated or certified, and not incomplete by omitting to state any material
fact necessary to make such data, reports and information not materially
misleading at such time. There are no facts now known to Obligor which
individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect and which have not been disclosed in writing to TBCC.
2.10. NO JOINT VENTURES, PARTNERSHIPS OR SUBSIDIARIES. Obligor is not
engaged in any joint venture or partnership with any other Person other than
those disclosed to TBCC in writing from time to time and which involve a
commitment of the assets of the Obligor (in the aggregate) of at least
$500,000. Obligor has no Subsidiaries other than those disclosed to TBCC in
writing from time to time.
2.11. CORPORATE AND TRADE NAME. During the past five years, Obligor has
not been known by or used any other corporate, trade or fictitious name except
for its name as set forth on the signature page of this Agreement and the
other names specified in the Schedule.
2.12. NO ACTUAL OR PENDING MATERIAL MODIFICATION OF BUSINESS. There exists
no actual or, to the best of Obligor's knowledge after due inquiry,
threatened termination, cancellation or limitation of, or any modification or
change in the business relationship of Obligor with any customer or group of
customers whose purchases individually or in the aggregate are material to
the operation of Obligor's business or with any material supplier.
2.13. TAXES AND TAX RETURNS. Obligor has properly completed and timely
filed all income tax returns it is required to file. The information filed is
complete and accurate in all material respects. All deductions taken in such
income tax returns are appropriate and in accordance with applicable laws and
regulations, except deductions that may have been disallowed but are being
challenged in good faith and for which adequate reserves have been made in
accordance with GAAP. All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date of this Agreement have been
timely paid (or, if not yet due, adequate reserves therefor have been
established) and Obligor has no liability for taxes in excess of the amounts
so paid or reserves so established. No deficiencies for taxes have been
claimed, proposed or assessed by any taxing or other Governmental Authority
against Obligor and no notice of any tax Lien has been filed. There are no
pending or threatened audits, investigations or claims for or relating to
any liability for taxes and there are no matters under discussion with any
Governmental Authority which could result in an additional liability for
taxes. No extension of a statute of limitations relating to taxes,
assessments, fees or other governmental charges is in effect with respect to
Obligor. Obligor is not a party to and does not have any obligations under
any written tax sharing agreement or agreement regarding payments in lieu of
taxes.
2.14. NO JUDGMENTS OR LITIGATION. No judgments, orders, writs or decrees
are outstanding against Obligor, nor is there now pending or, to the
knowledge of Obligor after due inquiry, threatened litigation, contested
claim, investigation, arbitration, or governmental proceeding by or against
Obligor that (i) could individually or in the aggregate be likely in the
reasonable business judgment of TBCC to have a Material Adverse Effect or
(ii) purports to affect the legality, validity or enforceability of this
Agreement, any other Loan Document or the consummation of the transactions
contemplated hereby or thereby.
2.15. INVESTMENTS; CONTRACTS. Obligor (i) has not committed to make any
Investment which could have a Material Adverse Effect; (ii) is not a party to
any indenture, agreement, contract, instrument or lease or subject to any
charter, by-law or other corporate restriction or any injunction, order,
restriction or decree, which would materially and adversely affect its
business, operations, assets or financial condition; (ii) is not a party to
any "take or pay" contract as to which it is the purchaser which could have a
Material Adverse Effect; or (iv) has no material contingent or long-term
liability, including management contracts excluding employment contracts of
full-time individual officers or employees), which could have a Material
Adverse Effect.
2.16. NO DEFAULTS; LEGAL COMPLIANCE. Obligor is not in default under any
term of any Material Contract or in violation of any Requirement of Law, nor
is Obligor subject to any investigation with respect to a claimed violation
of any Requirement of Law.
2.17. RIGHTS IN COLLATERAL; PRIORITY OF LIENS. All Collateral is owned or
leased by Obligor, free and clear of any and all Liens in favor of third
parties, other than Permitted Liens. The Liens granted to TBCC pursuant to
the Loan Documents constitute valid, enforceable and perfected first-priority
Liens on the Collateral, except for Permitted Liens.
2.18. INTELLECTUAL PROPERTY. Set forth in the written Representations and
Warranties of Obligor previously delivered to TBCC is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights
(registered and unregistered), and all applications therefor and licenses
thereof, of Obligor. Obligor owns or licenses all material patents,
trademarks, service-marks, logos, tradenames, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of the
foregoing, which are necessary or advisable for the operation of its
business as presently conducted or proposed to be conducted. To the best of
its knowledge after due inquiry, Obligor has not infringed any patent,
trademark, service-
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TBCC Security Agreement
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mark, tradename, copyright license or other right owned by any other Person
by the sale or use of any product, process, method, substance, part or other
material presently contemplated to be sold or used, where such sale or use
would reasonably be expected to have a Material Adverse Effect and no claim
or litigation is pending, or to the best of Obligor's knowledge, threatened
against or affecting Obligor that contests its right to sell or use any such
product, process, method, substance, part or other material.
2.19. Labor Matters. There are no existing or threatened strikes,
lockouts or other disputes relating to any collective bargaining or similar
agreement to which Obligor is a party which would, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect.
2.20. Licenses and Permits. To the best of its knowledge, Obligor has
obtained and holds in full force and effect, all franchises, licenses,
leases, permits, certificates, authorizations, qualifications, easements,
rights of way and other rights and approvals which are necessary or advisable
for the operation of its business as presently conducted and as proposed to
be conducted, except where the failure to possess any of the foregoing
(individually or in the aggregate) would not have a Material Adverse Effect.
2.21. Government Regulation. Obligor is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
Requirement of Law that limits its ability to incur indebtedness or its
ability to consummate the transactions contemplated by this Agreement and the
other Loan Documents.
2.22. Business and Properties. The business of Obligor is not affected by
any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy
or other casualty (whether or not covered by insurance) that could reasonably
be expected to have a Material Adverse Effect.
2.23. Affiliate Transactions. Obligor is not a party to or bound by any
agreement or arrangement (whether oral or written) to which any Affiliate of
Obligor is a party except (i) in the ordinary course of and pursuant to the
reasonable requirements of the business of Obligor and (ii) upon fair and
reasonable terms no less favorable to Obligor than it could obtain in a
comparable arm's-length transaction with an unaffiliated Person.
2.24. Survival of Representations. All representations made by Obligor in
this Agreement and in any other Loan Document executed and delivered by it in
connection herewith shall survive the execution and delivery hereof and
thereof and the closing of the transactions contemplated hereby and thereby.
3. AFFIRMATIVE COVENANTS OF THE OBLIGOR. Until termination of this Agreement
and payment and satisfaction of all Obligations:
3.1. Corporate Existence. Obligor shall (i) maintain its corporate
existence, (ii) maintain in full force and effect all material licenses,
bonds, franchises, leases, trademarks, qualifications and authorizations to
do business, and all material patents, contracts and other rights necessary
or advisable to the profitable conduct of its business, and (iii) continue
in, and limit its operations to, the same lines of business as presently
conducted by it.
3.2. Maintenance of Property. Obligor shall keep all property useful and
necessary to its business in good working order and condition (ordinary wear
and tear expected) in accordance with its past operating practices.
3.3. Affiliate Transactions. Obligor shall conduct transactions with any
of its Affiliates on an arm's-length basis or other basis no less favorable
to Obligor and which are approved by the board of directors of Obligor.
3.4. Taxes. Obligor shall pay when due (i) all tax assessments, and other
governmental charges and levies imposed against it or any of its property and
(ii) all lawful claims that, if unpaid, might by law become a Lien upon its
property; provided, however, that, unless such tax assessment, charge, levy
or claim has become a Lien on any of the property of Obligor, it need not be
paid if it is being contested in good faith, by appropriate proceedings
diligently conducted and an adequate reserve or other appropriate provision
shall have been made therefor as required in accordance with GAAP.
3.5. Requirements of Law. Obligor shall comply with all Requirements of
Law applicable to it, including, without limitation, all applicable Federal,
State, local or foreign laws and regulations, including, without limitation,
those relating to environmental matters, employee matters, the Employee
Retirement Income Security Act of 1974, and the collection, payment and
deposit of employees' income, unemployment and social security taxes,
provided that Obligor shall not be deemed in violation hereof if Obligor's
failure to comply with any of the foregoing would not require more than
$50,000 to cure the same.
3.6. Insurance. Obligor shall maintain public liability insurance,
business interruption insurance, third party property damage insurance and
replacement value insurance on its assets (including the Collateral) under
such policies of insurance, with such insurance companies, in such amounts
and covering such risks as are at all times satisfactory to TBCC in its
commercially reasonable judgment, all of which policies covering the
Collateral shall name TBCC as an additional insured and lender loss payee in
case of loss, and contain other provisions as TBCC may reasonably require to
protect fully TBCC's interest in the Collateral and any payments to be made
under such policies.
3.7. Books and Records; Inspections. Obligor shall (i) maintain books
and records (including computer records) pertaining to the Collateral in such
detail, form and scope as is consistent with good business practice and (ii)
provide TBCC and its agents access to the premises of Obligor at any time and
from time to time, during normal business hours and upon reasonable notice
under the circumstances, and at any time on and after the occurrence of a
Default or Event of Default, for the purposes of (A) inspecting and
verifying the Collateral, (B) inspecting and copying (at Obligor's expense)
any and all
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records pertaining thereto, and (C) discussing the affairs, finances and
business of Obligor with any officer, employee or director of Obligor or with
the Auditors. Obligor shall reimburse TBCC for the reasonable travel and
related expenses of TBCC's employees or, at TBCC's option, of such outside
accountants or examiners as may be retained by TBCC to verify or inspect
Collateral, records or documents of Obligor on a regular basis or for a
special inspection if TBCC deems the same appropriate. If TBCC's own
employees are used, Obligor shall also pay therefor $600 per person per day
(or such other amount as shall represent TBCC's then current standard charge
for the same), or, if outside examiners or accountants are used, Obligor
shall also pay TBCC such sum as TBCC may be obligated to pay as fees therefor.
3.8. Notification Requirements. Obligor shall give TBCC the following
notices and other documents:
(a) Notice of Defaults. Obligor shall give TBCC written notice of
any Default or Event of Default within two Business Days after becoming aware
of the same.
(b) Proceedings or Adverse Changes. Obligor shall give TBCC written
notice of any of the following, promptly, and in any event within ten
Business Days after Obligor becomes aware of any of the following: (i) any
proceeding being instituted or threatened by or against it in any federal,
state, local or foreign court or before any commission or other regulatory
body involving a sum, together with the sum involved in all other similar
proceedings, in excess of $500,000 in the aggregate, (ii) any order, judgment
or decree being entered against Obligor or any of its properties or assets
involving a sum, together with the sum of all other orders, judgments or
decrees, in excess of $500,000 in the aggregate, and (iii) any actual or
prospective change, development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
(c) Change of Name or Chief Executive Office; Opening Additional
Places of Business. Obligor shall give TBCC at least 30 days prior written
notice of any change of Obligor's corporate name or its chief executive
office or of the opening of any additional place of business.
(d) Casualty Loss. Obligor shall (i) provide written notice to
TBCC, within ten Business Days, of any material damage to, the destruction of
or any other material loss to any asset or property owned or used by Obligor
other than any such asset or property with a net book value (individually or
in the aggregate) less than $250,000 or any condemnation, confiscation or
other taking, in whole or in part, or any event that otherwise diminishes so
as to render impracticable or unreasonable the use of such asset or property
owned or used by Obligor together with the amount of the damage, destruction,
loss or diminution in value and (ii) diligently file and prosecute its claim
or claims for any award or payment in connection with any of the foregoing.
3.9. Qualify to Transact Business. Obligor shall qualify to transact
business as a foreign corporation in each jurisdiction where the nature or
extent of its business or the ownership of its property requires it to be so
qualified or authorized and where failure to qualify or be authorized would
have a Material Adverse Effect.
3.10. Financial Reporting. Obligor shall timely deliver to TBCC such
information respecting Obligor or any Collateral as TBCC may from time to
time request in its good-faith business judgment. Obligor authorizes TBCC to
communicate directly with its officers, employees and Auditors and to examine
and make abstracts from its books and records. Obligor authorizes its
Auditors to disclose to TBCC any and all financial statements, work papers
and other information of any kind that they may have with respect to Obligor
and its business and financial and other affairs. Obligor shall deliver a
letter addressed to the Auditors requesting them to comply with the
provisions of this paragraph when requested by TBCC.
3.11. Payment of Liabilities. Obligor shall pay and discharge, in the
ordinary course of business, all Indebtedness, except where the same may be
contested in good faith by appropriate proceedings and adequate reserves with
respect thereto have been provided on the books and records of Obligor in
accordance with GAAP.
3.12. Trademarks. Obligor shall do and cause to be done all things
necessary to preserve and keep in full force and effect all of its material
registrations of trademarks, service marks and other marks, trade names and
other trade rights.
3.13. Proceeds of Collateral. Without limiting any of the other terms of
this Agreement, and without implying any consent to any sale or other
transfer of Collateral in violation of any provision of this Agreement,
Obligor shall deliver to TBCC all proceeds of any sale or other transfer or
disposition of any Collateral, immediately upon receipt of the same and in
the same form as received, with any necessary endorsements, and Obligor will
not commingle any such proceeds with any of its other funds or property, but
will segregate them from the other assets of Obligor and will hold them in
trust and for the account and as the property of TBCC.
3.14. Solvency. Obligor shall be Solvent at all times.
3.15. Interest. Obligor shall pay TBCC interest on all sums due from
Obligor to TBCC hereunder at an interest rate equal to the highest interest
rate applicable to any of the Loans, from the date due to the date paid.
4. NEGATIVE COVENANTS. termination of this Agreement and payment and
satisfaction of all Obligations:
4.1. Contingent Obligations. Obligor will not, directly or indirectly,
incur, assume, or suffer to exist any Contingent Obligation, excluding
indemnities given in connection with this Agreement or the other Loan
Documents in favor of TBCC or in connection with the sale of Inventory or
other asset dispositions permitted hereunder.
4.2. Corporate Changes. Obligor will not, directly or indirectly, merge or
consolidate with any Person (the result of which merger or consolidation, the
Obligor is not the surviving the entity), or liquidate or dissolve (or suffer
any liquidation or dissolution).
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4.3. Change in Nature of Business. Obligor will not at any time make any
material change in the lines of its business as carried on at the date of
this Agreement or enter into any new material line of business.
4.4. Sales of Assets. Obligor will not, directly or indirectly, in any
fiscal year, sell, transfer or otherwise dispose of any assets (other than
Collateral), or grant any option or other right to purchase or otherwise
acquire any assets (other than Collateral) other than (i) assets (other than
Collateral) with an aggregate value of less than $500,000, and (ii) sales of
Inventory in the ordinary course of business.
4.5. Cancellation of Debt. Obligor will not cancel any claim or debt owed
to it, except in the ordinary course of business.
4.6. Loans to Other Persons. Obligor will not at any time make loans or
advance any credit (except to trade debtors in the ordinary course of
business) to any Person in excess of $200,000 in the aggregate at any time
for all such loans.
4.7. Liens. Obligor will not, directly or indirectly, at any time create,
incur, assume or suffer to exist any Lien on or with respect to any of the
Collateral, other than: Liens created hereunder and by any other Loan
Document; and Permitted Liens.
4.8. Dividends, Stock Redemptions. Obligor will not, directly or
indirectly, pay any dividends or distributions on, purchase, redeem or retire
any shares of any class of its capital stock or any warrants, options or
rights to purchase any such capital stock, whether now or hereafter
outstanding ("Stock"), or make any payment on account of or set apart assets
for a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of its Stock, or make any other
distribution in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of Obligor, except for dividends paid
solely in stock of the Obligor.
4.9. Investments in Other Persons. Obligor will not, directly or
indirectly, at any time make or hold any Investment in any Person (whether in
cash, securities or other property of any kind) other than Investments in
Cash Equivalents.
4.10. Partnerships; Subsidiaries; Joint Ventures; Management Contracts.
Obligor will not at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement or become a partner in any
general or limited partnership or enter into any management contract (other
than an employment contract for the employment of an officer or employee
entered into in the regular course of Obligor's business) permitting third
party management rights with respect to Obligor's business.
4.11. Fiscal Year. Obligor will not change its fiscal year.
4.12. Accounting Changes. Obligor will not at any time make or permit any
change in accounting policies or reporting practices, except as required by
GAAP.
4.13. Broker's or Finder's Fees. Obligor will not pay or incur any
broker's or finder's fees in connection with this Agreement or the
transactions contemplated hereby.
4.14. Unusual Terms of Sale. Obligor will not sell goods or products on
extended terms, consignment terms, on a progress billing or bill and hold
basis, or on any other unusual terms.
4.15. Amendments of Material Contracts. Obligor will not amend, modify,
cancel or terminate, or permit the amendment, modification, cancellation or
termination of, any Material Contract, if such amendment, modification,
cancellation or termination could have a Material Adverse Effect.
4.16. Sale and Leaseback Obligations. Obligor will not at any time
create, incur or assume any obligations as lessee for the rental of real or
personal property in connection with any sale and leaseback transaction.
4.17. Acquisition of Stock or Assets. Obligor will not acquire or commit
or agree to acquire all or any stock, securities or assets of any other
Person other than Inventory and Equipment acquired in the ordinary course of
business.
5. EVENTS OF DEFAULT.
5.1. Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default":
(a) Obligor shall fail to pay any Obligation when payable, whether at
stated maturity, by acceleration, or otherwise; or
(b) Obligor shall default in the performance or observance of any
agreement, covenant, condition, provision or term contained in Section 3.7,
3.13, 4 (and its Sections and subsections), or 6.2 of this Agreement, or
Obligor shall fail to perform any non-monetary Obligation which by its nature
cannot be cured; or
(c) Obligor shall default in the performance or observance of any
other agreement, covenant, condition, provision or term of this Agreement
(other than those referred to in Section 5.1(a) above or Section 5.1(b)
above) or any other Loan Document, and such failure continues uncured for a
period of ten Business Days after the earlier of (i) Obligor's actual
knowledge of such default or (ii) notice from TBCC of such default; or
(d) Obligor shall dissolve, wind up or otherwise cease to conduct its
business; or
(e) Obligor shall become the subject of (i) an Insolvency Event
except as set forth in clause (e) of the definition of Insolvency Event or
(ii) an Insolvency Event as set forth in clause (e) of the definition of
Insolvency Event that is not dismissed within sixty days; or
(f) any representation or warranty made by or on behalf of Obligor to
TBCC, under this Agreement or otherwise, shall be incorrect or misleading in
any material respect when made or deemed made; or
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(g) A change in the ownership or control of more than 40% of the voting
stock of the Obligor compared to such ownership on the date of this Agreement;
(h) any judgment or order for the payment of money shall be rendered
against Obligor in an amount of at least $250,000 and shall not be stayed,
vacated, bonded or discharged within thirty days; or
(i) Obligor shall deny or disaffirm its obligations under any of the
Loan Documents or any Liens granted in connection therewith or shall
otherwise challenge any of its obligations under any of the Loan Documents;
or any Liens granted in any of the Collateral shall be determined to be void,
voidable or invalid; are subordinated or are not given the priority
contemplated by this, Agreement; or
(j) any Loan Document shall for any reason cease to create a valid and
perfected Lien on the Collateral purported to be covered thereby, of first
priority (except for Permitted Liens); or
(k) the independent public accountants for Obligor shall deliver a
Qualified opinion on any Financial Statement; or
(l) Obligor (i) shall fail to pay any Indebtedness in excess of
$250,000 owing to any Person other than TBCC or any interest or premium
thereon, when due (whether at scheduled maturity or by required prepayment,
acceleration, demand or otherwise), or (ii) shall otherwise be in breach or
default in any of its obligations under any agreement with respect to any
such Indebtedness, if the effect of such breach, default or failure to pay is
to cause such Indebtedness to become due or redeemed or permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder
or holders) to declare such Indebtedness due or require such Indebtedness to
be redeemed prior to its stated maturity; or
(m) the occurrence of any event or condition that, in TBCC's judgment,
could reasonably be expected to have a Material Adverse Effect.
5.2. Remedies. Upon the occurrence and during the continuance of an Event
of Default, TBCC shall have all rights and remedies under applicable law and
the Loan Documents, and TBCC may do any or all of the following:
(a) Declare all Obligations to be immediately due and payable (except
with respect to any Event of Default with respect to Obligor set forth in
Section 5.1(e), in which case all Obligations shall automatically become
immediately due and payable) without presentment, demand, protest or any
other action or obligation of TBCC.
(b) Cease making any extensions of credit to Obligor of any kind.
(c) Take possession of all documents, instruments, files and records
(including the copying of any computer records) relating to the Receivables
or other Collateral and use (at the expense of Obligor) such supplies or
space of Obligor at Obligor's places of business necessary to administer and
collect the Receivables and other Collateral;
(d) Accelerate or extend the time of payment, compromise, issue
credits, or bring suit on the Receivables and other Collateral (in the name
of Obligor or TBCC) and otherwise administer and collect the Receivables and
other Collateral;
(e) Sell, assign and deliver the Receivables and other Collateral, with
or without advertisement, at public or private sale, for cash, on credit or
otherwise, subject to applicable law; and
(f) Foreclose the security interests created pursuant to the Loan
Documents by any available procedure, take possession of any or all of the
Collateral, with or without judicial process and enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same.
(g) TBCC may bid or become a purchaser at any sale, fee from any right
of redemption, which right is expressly waived by Obligor, if permitted under
applicable law. If notice of intended disposition of any Collateral is
required by law, it is agreed that ten days' notice shall constitute
reasonable notification. Obligor will assemble the Collateral and make it
available at such locations as TBCC may specify, whether at the premises of
Obligor or elsewhere, and will make available to TBCC the premises and
facilities of Obligor for the purpose of TBCC's taking possession of or
removing the Collateral or putting the Collateral in salable form.
5.3. Receivables. Upon the occurrence and during the continuance of an
Event of Default, or at any time that TBCC believes in good faith that fraud
has occurred or that Obligor has failed to deliver the proceeds of
Receivables or other Collateral to TBCC as required by this Agreement or any
other Loan Document, TBCC may (i) settle or adjust disputes or claims
directly with account debtors for amounts and upon terms which it considers
advisable, and (ii) notify account debtors on the Receivables and other
Collateral that the Receivables and Collateral have been assigned to TBCC,
and that payments in respect thereof shall be made directly to TBCC. If an
Event of Default has occurred and is continuing or TBCC reasonably believes
in good faith that fraud has occurred, or that Obligor has failed to deliver
the proceeds of Receivables or other Collateral to TBCC as required by this
Agreement or any other Loan Document, Obligor hereby irrevocably authorizes
and appoints TBCC, or any Person TBCC may designate, as its attorney-in-fact,
at Obligor's sole cost and expense, to exercise, all of the following powers,
which are coupled with an interest and are irrevocable, until all of the
Obligations have been indefeasibly paid and satisfied in full in cash: (A) to
receive, take, endorse, sign, assign and deliver, all in the name of TBCC or
Obligor, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral; (B) to receive, open and dispose of
all mail addressed to Obligor and to notify postal authorities to change the
address for delivery thereof to such address as TBCC may designate; and (C)
to take or bring, in the name of TBCC or Obligor, all steps, actions, suits
or proceedings deemed by TBCC necessary or desirable to enforce or effect
collection of Receivables and other Collateral or file and sign Obligor's
name on a proof of claim in bankruptcy or similar document against any
obligor of Obligor.
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5.4. Right of Setoff. In addition to all rights of offset that TBCC may
have under applicable law, upon the occurrence and during the continuance of
any Event of Default, and whether or not TBCC has made any demand or the
Obligations of Obligor have matured, TBCC shall have the right to appropriate
and apply to the payment of the Obligations of Obligor all deposits and other
obligations then or thereafter owing by TBCC to or for the credit or the
account of Obligor. In the event that TBCC exercises any of its rights under
this Section, TBCC shall provide notice to Obligor of such exercise, provided
that the failure to give such notice shall not affect the validity of the
exercise of such rights.
5.5. License for Use of Software and Other Intellectual Property. After
the occurrence and during the continuance of an Event of Default, unless
expressly prohibited by any licensor thereof, TBCC is hereby granted a
license to use all computer software programs, data bases, processes,
trademarks, tradenames and materials used by Obligor in connection with its
businesses or in connection with the Collateral.
5.6. No Marshalling; Deficiencies; Remedies Cumulative. The net cash
proceeds resulting from TBCC's exercise of any of its rights with respect to
Collateral, including any and all Collections (after deducting all of TBCC's
reasonable expenses related thereto), shall be applied by TBCC to such of the
Obligations in such order as TBCC shall elect in its sole and absolute
discretion, whether due or to become due. Obligor shall remain liable to TBCC
for any deficiencies and TBCC shall remit to Obligor or its successor or
assign, any surplus resulting therefrom. The remedies specified in this
Agreement are cumulative, may be exercised in such order and with respect to
such Collateral as TBCC may deem desirable and are not intended to be
exclusive, and the full or partial exercise of any of them shall not preclude
the full or partial exercise of any other available remedy under this
Agreement, under any other Loan Document, at equity or at law.
5.7. Waivers. Obligor hereby waives any bonds, security or sureties
required by any statute, rule or any other law as an incident to any taking
of possession by TBCC of any Collateral. Obligor also waives any damages
(direct, consequential or otherwise) occasioned by the enforcement of TBCC's
rights under this Agreement or any other Loan Document including the taking
of possession of any Collateral or the giving of notice to any account debtor
or the collection of any Receivable or other Collateral (other than damages
that are the result of acts or omissions constituting gross negligence or
willful misconduct of TBCC). These waivers and all other waivers provided for
in this Agreement and the other Loan Documents have been negotiated by the
parties and Obligor acknowledges that it has been represented by counsel of
its own choice and has consulted such counsel with respect to its rights
hereunder.
5.8. Right to Make Payments. In the event that Obligor shall fail to
purchase or maintain insurance required hereunder, or to pay any tax,
assessment, government charge or levy, except as the same may be otherwise
permitted hereunder, or in the event that any Lien prohibited hereby shall
not be paid in full or discharged, or in the event that Obligor shall fail to
perform or comply with any other covenant, promise or obligation to TBCC
hereunder or under any other Loan Document, TBCC may (but shall not be
required to) perform, pay, satisfy, discharge or bond the same for the
account of Obligor, and Obligor shall immediately reimburse TBCC for all
amounts so paid by TBCC.
6. TERMS, ASSIGNMENTS AND PARTICIPATIONS.
6.1. Term. This Agreement shall continue in effect until all of the
Obligations have been paid and performed in full and the Loan Agreement has
terminated.
6.2. Assignments. Obligor shall not assign this Agreement or any right or
obligation hereunder without the prior written consent of TBCC. TBCC may
assign (without the consent of Obligor) to one or more Persons all or a
portion of its rights and obligations under this Agreement and the other Loan
Documents.
6.3. Participations. TBCC may sell participations in or to all or a
portion of its rights and obligations under this Agreement, provided,
however, that TBCC's obligations under this Agreement shall remain unchanged.
6.4. Disclosure. TBCC may, in connection with any permitted assignment or
participation or proposed assignment or participation pursuant to this
Agreement, disclose to the assignee or participant or proposed assignee or
participant any information relating to Obligor furnished to TBCC by or on
behalf of Obligor.
7. DEFINITIONS.
7.1. General Definitions. As used herein, the following terms shall have
the meanings herein specified (to be equally applicable to both the singular
and plural forms of the terms defined):
(a) "Affiliate" means as to any Person, any other Person who directly
or indirectly controls, is under common control with, is controlled by or is
a director or officer of such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common
control with") means possession, directly or indirectly, of the power to
direct or cause the direction of management or policies (whether through
ownership of voting securities or partnership or other ownership interests,
by contract or otherwise), provided that, in any event, any Person who owns
directly or indirectly twenty percent (20%) or more of the securities having
ordinary voting power for the election of the members of the board of
directors or other governing body of a corporation or twenty percent (20%) or
more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
control such corporation, partnership or other Person.
(b) "Agreement" means this Loan and Security Agreement, as amended,
supplemented or otherwise modified from time to time.
(c) "Auditors" means a nationally recognized firm of independent
public accountants selected by Obligor and reasonably satisfactory to TBCC.
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(d) "Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as that title may be amended from time to time, or any
successor statute.
(e) "Borrower" means IDT Corporation, and its successors.
(f) "Business Day" means any day other than a Saturday, Sunday or any
other day on which commercial banks in Chicago, Illinois are required or
permitted by law to close.
(g) "Cash Equivalents" means (i) securities issued, guaranteed or insured
by the United States or any of its agencies with maturities of not more than
one year from the date acquired; (ii) certificates of deposit with maturities
of not more than one year from the date acquired, issued by any U.S. federal
or state chartered commercial bank of recognized standing which has capital
and unimpaired surplus in excess of $100,000,000; (iii) investments in money
market funds registered under the Investment Company Act of 1940; and (iv)
other instruments, commercial paper or investments acceptable to TBCC in its
sole discretion.
(h) "Collateral" means Receivables, Inventory, and Other Property, and
all additions and accessions thereto and substitutions and replacements
therefor and improvements thereon, and all proceeds (whether cash or other
property) and products thereof, including, without limitation, all proceeds
of insurance covering the same and all tort claims in connection therewith,
and all records, files, computer programs and files, data and writing
relating to the foregoing, and all equipment containing the foregoing.
(i) "Collections" means all cash, funds, checks, notes, instruments, any
other form of remittance tendered by account debtors in respect of payment of
Receivables and any other payments received by Obligor with respect to any
other Collateral.
(j) "Compliance Certificate" means a certificate as to compliance with the
Obligations, on TBCC's standard form (in effect from time to time).
(k) "Contingent Obligation" means any direct, indirect, contingent or
non-contingent guaranty or obligation for the Indebtedness of another Person,
except endorsements in the ordinary course of business.
(l) "Default" means any of the events specified in Section 5.1, whether or
not any of the requirements for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
(m) "Equipment" means all machinery, equipment, furniture, fixtures,
conveyors, tools, materials, storage and handling equipment, hydraulic
presses, cutting equipment, computer equipment and hardware, including
central processing units, terminals, drives, memory units, printers,
keyboards, screens, peripherals and input or output devices, molds, dies,
stamps, vehicles, and other equipment of every kind and nature and wherever
situated now or hereafter owned by Obligor or in which Obligor may have any
interest as lessee or otherwise (to the extent of such interest), together
with all additions and accessions thereto, all replacements and all
accessories and parts therefor, all manuals, blueprints, know-how, warranties
and records in connection therewith, all rights against suppliers,
warrantors, manufacturers, sellers or others in connection therewith, and
together with all substitutes for any of the foregoing.
(n) "Event of Default" means the occurrence of any of the events specified
in Section 5.1.
(o) "Financial Statements" means the balance sheets, profit and loss
statements, statements of cash flow, and statements of changes in
intercompany accounts, if any, for the period specified, prepared in
accordance with GAAP and consistent with prior practices.
(p) "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are
applicable to the circumstances as of the date of determination. Whenever any
accounting term is used herein which is not otherwise defined, it shall be
interpreted in accordance with GAAP.
(q) "Governing Documents" means the articles or certificate of
incorporation and by-laws of Obligor.
(r) "Governmental Authority" means any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions thereof or
pertaining thereto.
(s) "Indebtedness" means, with respect to any Person, as of the date of
determination any indebtedness, liability or obligation of such Person
(including without limitation obligations under capital leases and contingent
obligations).
(t) "Insolvency Event" means, with respect to any Person, the occurrence
of any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or shall generally fail to pay or admit in writing its inability to
pay its debts as they become due, (b) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or
business or to effect a plan oar other arrangement with its creditors, (c)
such Person shall make a general assignment for the benefit of its creditors,
or consent to or acquiesce in the appointment of a receiver, trustee,
custodian or liquidator for a substantial portion of its property, assets or
business, (d) such Person shall file a voluntary petition under any
bankruptcy, insolvency or similar law or take any corporate or similar act in
furtherance thereof, or (e) such Person, or a substantial portion of its
property, assets or business shall become the subject of an involuntary
proceeding or petition for its dissolution, reorganization, and such
proceeding is not dismissed or stayed
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within sixty days, or the appointment of a receiver, trustee, custodian or
liquidator, and such receiver is not dismissed within sixty days.
(u) "Inventory" means all present and future goods intended for sale,
lease or other disposition by Obligor including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods
in the possession of outside processors or other third parties, goods
consigned to Obligor to the extent of its interest therein as consignee,
materials and supplies of any kind, nature or description which are or might
be used in connection with the manufacture, packing, shipping, advertising,
selling or finishing of any such goods, and all documents of title or
documents representing the same.
(v) "Investment" in any Person means, as of the date of determination
thereof, any payment or contribution, or commitment to make a payment or
contribution, by any Person including, without limitation, property
contributed or committed to be contributed by any Person, on its account for
or in connection with its acquisition of any stock, bonds, notes, debentures,
partnership or other ownership interest or any other security of the Person
in whom such Investment is made or any evidence of indebtedness by reason of
a loan, advance, extension of credit, guaranty or other similar obligation
for any debt, liability or indebtedness of such Person in whom the Investment
is made.
(w) "Lien" means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
(x) "Loan Agreement" means the Loan and Security Agreement dated
December 24, 1997 between TBCC and the Borrower (and all extensions,
renewals, replacements and modifications, thereof).
(y) "Loan Documents" means this Agreement, the Loan Agreement, and all
present and future documents and instruments delivered or to be delivered by
Borrower, Obligor or any of their Affiliates under, in connection with or
relating to this Agreement or the Loan Agreement as each of the same may be
amended, supplemented or otherwise modified from time to time.
(z) "Material Adverse Effect" means (i) a material adverse change occurs
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Obligor, (ii) the
impairment of Obligor's ability to perform its obligations under the Loan
Documents to which it is a party or of TBCC to enforce the Obligations or
realize upon the Collateral or (iii) a material adverse effect on the value
of the Collateral or the amount which TBCC would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in the
liquidation of the Collateral.
(aa) "Material Contract" means any contract or other arrangement to
which Obligor is a party (other than the Loan Documents) for which breach,
nonperformance, cancellation or failure to renew could have a Material
Adverse Effect.
(bb) "Obligations" means and includes all debts, liabilities,
obligations, guaranties, covenants and duties owing by Obligor to TBCC of any
kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, which may arise under, out of, or in connection
with, that certain Guaranty dated December 24, 1997 executed by Obligor in
favor of TBCC with respect to the Borrower (and all extensions, renewals,
replacements and modifications thereof), this Agreement, any other Loan
Document or any other agreement executed in connection herewith or therewith,
whether or not for the payment of money, whether arising by reason of an
extension of credit, opening, guaranteeing or confirming of a letter of
credit, loan, guaranty, indemnification or in any other manner, whether
direct or indirect (including those acquired by assignment, purchase,
discount or otherwise), whether absolute or contingent, due or to become due,
now due or hereafter arising and however acquired. The term includes, without
limitation, all interest (including interest accruing on or after an
Insolvency Event, whether or not an allowed claim), charges, expenses,
reasonable attorneys' fees, and any other sum properly chargeable to Obligor
under this Agreement, the other Loan Documents or any other agreement
executed in connection herewith or therewith.
(cc) "Other Property" means all present and future: instruments,
documents, documents of title, securities, investment securities, bonds,
notes, promissory notes, drafts, acceptances, letters of credit and rights to
receive proceeds of letters of credit, deposit accounts, chattel paper,
certificates, insurance policies, insurance proceeds, leases, computer tapes,
causes of action, judgments, claims against third parties, leasehold rights in
any personal property, books, ledgers, files and records, general intangibles
(including without limitation, all contract rights, tax refunds, rights to
receive tax refunds, patents, patent applications, copyrights (registered and
unregistered), royalties, licenses, permits, franchise rights,
authorizations, customer lists, rights of indemnification, contribution and
subrogation, computer programs, discs and software, trade secrets, computer
service contracts, trademarks, trade names, service marks and names, logos,
goodwill, deposits, choses in action, designs, blueprints, plans, know-how,
telephone numbers and rights thereto, credits, reserves, and all forms of
obligations whatsoever now or hereafter owing to Obligor), all property at any
time in the possession or under the control of TBCC, and all security given
by Obligor to TBCC pursuant to any other Loan Document or agreement.
(dd) "Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing: (i) Liens for taxes, assessments and other
governmental charges or levies or the claims or demands of landlords,
carriers, warehousemen, mechanics, laborers, materialmen and other like
Persons arising by operation of law in the ordinary course of business for
sums which are not yet due and payable, (ii) deposits or pledges to secure
the payment of workmen's compensation, unemployment insurance or other social
security benefits or obligations, public or statutory obligations, surety or
appeal bonds, bid or performance bonds, or other obligations of a like nature
incurred in the ordinary course of business (but nothing in this clause (ii)
shall permit the creation
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of Liens on Receivables or Inventory or Other Property), (iii) zoning
restrictions, easements, encroachments, licenses, restrictions or covenants
on the use of the Property which do not materially impair either the use of
the Property in the operation of the business of Obligor or the value of the
Property, (iv) rights of general application reserved to or vested in any
municipality or other governmental, statutory or public authority to control
or regulate property, or to use property in a manner which does not
materially impair the use of the property for the purposes for which it is
held by Obligor, (v) state and municipal Liens for personal property taxes
which are not yet due and payable, and (vi) Purchase Money Liens.
(ee) "Person" means any individual, sole proprietorship,
partnership, joint venture, limited liability company, trust, unincorporated
organization, joint stock company, association, corporation, institution,
entity, party or government (including any division, agency or department
thereof) or any other legal entity, whether acting in an individual,
fiduciary or other capacity, and, as applicable, the successors, heirs and
assigns of each.
(ff) "Plan" means any employee benefit plan, program or arrangement
maintained or contributed to by Obligor or with respect to which it may incur
liability.
(gg) "Purchase Money Lien" means a Lien on any item of Equipment
created substantially simultaneously with the acquisition of such Equipment
for the purpose of financing such acquisition, provided that such Lien shall
attach only to the Equipment acquired.
(hh) "Qualification" or "Qualified" means, with respect to any
report of independent public accountants covering Financial Statements, a
material qualification to such report (i) resulting from a limitation on the
scope of examination of such Financial Statements or the underlying data,
(ii) as to the capability of Obligor to continue operations as a going
concern or (iii) which could be eliminated by changes in Financial Statements
or notes thereto covered by such report (such as by the creation of or
increase in a reserve or a decrease in the carrying value of assets) and
which if so eliminated by the making of any such change and after giving
effect thereto would result in a Default or an Event of Default.
(ii) "Receivables" means all present and future accounts and accounts
receivable, together with all security therefor and guaranties thereof and
all rights and remedies relating thereto, including any right of stoppage in
transit.
(jj) "Requirement of Law" means (a) the Governing Documents, (b) any
law, treaty, rule, regulation, order or determination of an arbitrator,
court or other Governmental Authority or (c) any franchise, license, lease,
permit, certificate, authorization, qualification easement, right of way,
right or approval binding on Obligor or any of its property.
(kk) "Schedule" means the Schedule to this Agreement being signed
concurrently by Obligor and TBCC, as amended from time to time.
(ll) "Solvent" means when used with respect to any Person that as of
the date as to which such Person's solvency is to be measured: (a) the fair
salable value of its assets is in excess of the total amount of its
liabilities (including contingent liabilities as valued in accordance with
applicable law) as they become absolute and matured; (b) it has sufficient
capital to conduct its business; and (c) it is able to meet its debts as they
mature.
(mm) "Subsidiary" means, as to any Person, a corporation or other
entity in which that Person directly or indirectly owns or controls shares of
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or appoint other managers of such
corporation or other entity.
7.2. Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all
material respects with the Financial Statements delivered to TBCC on or
before the date of this Agreement. All accounting determinations for
purposes of determining compliance with this Agreement shall be made in
accordance with GAAP as in effect on the date of this Agreement and applied
on a basis consistent in all material respects with the audited Financial
Statements delivered to TBCC on or before the date of this Agreement. The
Financial Statements required to be delivered hereunder, and all financial
records, shall be maintained in accordance with GAAP. If GAAP shall change
from the basis used in preparing the audited Financial Statements delivered
to TBCC on or before the date of this Agreement, the Compliance Certificates
required to be delivered pursuant to this Agreement shall include
calculations setting forth the adjustments necessary to demonstrate how
Obligor is in compliance with the Financial Covenants (if any) based upon
GAAP as in effect on the date of this Agreement.
7.3. Other Terms; Headings; Construction. Capitalized terms used in
this Agreement, which are not defined, shall have the meanings set forth in
the Loan Agreement. Unless otherwise defined herein, terms used herein that
are defined in the Uniform Commercial Code, from time to time in effect in
the State of Illinois, shall have the meanings set forth therein. Each of
the words "hereof," "herein," and "hereunder" refer to this Agreement as a
whole. The term "including", whenever used in this Agreement, shall mean
"including (but not limited to)". An Event of Default shall "continue" or be
"continuing" unless and until such Event of Default has been waived or cured
within the grace period specified therefor under Section 5.1. References
to Articles, Sections, Annexes, Schedules, and Exhibits are internal
references to this Agreement, and to its attachments, unless otherwise
specified. The headings and any Table of Contents are for convenience only
and shall not affect the meaning or construction of any provision of this
Agreement. This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against TBCC or Obligor under any rule
of construction or otherwise.
8. GENERAL PROVISIONS.
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8.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
8.2. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE OBLIGOR AND
TBCC, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND
THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT
TBCC SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE OBLIGOR OR ITS PROPERTY IN ANY LOCATION REASONABLY
SELECTED BY TBCC IN GOOD FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF TBCC. THE OBLIGOR
AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR
CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY TBCC. THE OBLIGOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH TBCC HAS
COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED OR FORUM NON CONVENIENS.
8.3. SERVICE OF PROCESS. THE OBLIGOR HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM, 1209 ORANGE STREET, WILMINGTON, DELAWARE 19801, AS THE
DESIGNEE AND AGENT OF THE OBLIGOR TO RECEIVE, FOR AND ON BEHALF OF THE
OBLIGOR, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF
SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED
BY MAIL TO THE OBLIGOR, BUT THE FAILURE OF THE OBLIGOR TO RECEIVE SUCH COPY
SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
8.4. LIMITATION OF LIABILITY. TBCC SHALL HAVE NO LIABILITY TO THE
OBLIGOR (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES
SUFFERED BY THE OBLIGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY
RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT,
OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON
TBCC THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF TBCC. THE OBLIGOR HEREBY WAIVES ALL
FUTURE CLAIMS AGAINST TBCC FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
DAMAGES.
8.5. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or omission of TBCC
to exercise any right or remedy hereunder shall impair any such right or
operate as a waiver thereof. No single or partial exercise by TBCC of any
right or remedy shall preclude any other or further exercise thereof, or
preclude any other right or remedy.
8.6. NOTICES. Except as otherwise provided herein, all notices and
correspondence hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, by overnight delivery service,
with all charges prepaid, or by telecopier followed by a hard copy sent by
regular mail, to the parties at their addresses set forth in the heading to
this Agreement. All such notices and correspondence shall be deemed given (i)
if sent by certified or registered mail, three Business Days after being
postmarked, (ii) if sent by overnight delivery service, when received at the
above stated addresses or when delivery is refused and (iii) if sent by
telecopier transmission, when receipt of such transmission is acknowledged.
Obligor's and TBCC's telecopier numbers for purpose of notice hereunder are
set forth in the Schedule; each party's number may be change by written
notice to the other party.
8.7. INDEMNIFICATION; REIMBURSEMENT OF EXPENSES OF COLLECTION. Obligor
hereby indemnifies and agrees, whether or not any of the transactions
contemplated by this Agreement or the other Loan Documents are consummated,
to defend and hold harmless (on an after-tax basis) TBCC, its successors and
assigns and their respective directors, officers, agents, employees,
advisors, shareholders, attorneys and Affiliates (each, an "Indemnified
Party") from and against any and all losses, claims, damages, liabilities,
deficiencies, obligations, fines, penalties, actions (whether threatened or
existing), judgments, suits (whether threatened or existing) or expenses
(including, without limitation, reasonable fees and disbursements of counsel,
experts, consultants and other professionals) incurred by any of them
(collectively, "Claims") (except, in the case of each Indemnified Party, to
the extent that any Claim is determined in a final and non-appealable
judgment by a court of competent jurisdiction to have directly resulted from
such Indemnified Party's gross negligence or willful misconduct) arising out
of or by reason of (i) any litigation, investigation, claim or proceeding
which arises out of or is related to (A) Obligor, or this Agreement, any
other Loan Document or the transactions contemplated hereby or thereby, (B)
any actual or proposed use by Borrower of the proceeds of the Loans, or (C)
TBCC's entering into this Agreement or any other Loan Document or any other
agreements and documents relating hereto, including, without limitation,
amounts paid in settlement, court costs and the reasonable fees and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding, (ii) any remedial or other action taken by
Obligor in connection with compliance by Obligor, or any of its properties,
with any federal, state or local environmental laws, rules or regulations,
and (iii) any pending, threatened or actual action, claim, proceeding or suit
by any shareholder or director of Obligor or any actual or purported
violation of Obligor's
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TBCC Security Agreement
- ------------------------------------------------------------------------------
charter, by-laws or any other agreement or instrument to which Obligor is a
party or by which any of its properties is bound. In addition and without
limiting the generality of the foregoing. Obligor shall, upon demand, pay to
TBCC all reasonable costs and expenses incurred by TBCC (including the
reasonable fees and disbursements of counsel and other professionals) in
connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents, and pay to TBCC all
reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by TBCC in
order to enforce or defend any of its rights under or in respect of this
Agreement, any other Loan Document or any other document or instrument now or
hereafter executed and delivered in connection herewith, collect the
Obligations or otherwise administer this Agreement, foreclose or otherwise
realize upon the Collateral or any part thereof, prosecute actions against,
or defend actions by, account debtors, commence, intervene in, or defend any
action or proceeding; initiate any complaint to be relieved of the automatic
stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim,
third-party claim, or other claim; examine, audit, copy, and inspect any of
the Collateral or any of Obligor's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce TBCC's security
interest in, the Collateral; and otherwise represent TBCC in any litigation
relating to Obligor. If either TBCC or Obligor files any lawsuit against the
other predicated on a breach of this Agreement, the prevailing party in such
action shall be entitled to recover its reasonable costs and attorney's fees,
including (but not limited to) reasonable attorneys' fees and costs incurred
in the enforcement of, execution upon or defense of any order, decree, award
or judgment. If and to the extent that the Obligations of Obligor hereunder
are unenforceable for any reason, Obligor hereby agrees to make the maximum
contribution to the payment and satisfaction of the Obligations which is
permissible under applicable law. Obligor's obligations under this Section
shall survive any termination of this Agreement and the other Loan Documents
and the payment in full of the Obligations, and are in addition to, and not
in substitution of, any of the other Obligations.
8.8 AMENDMENTS AND WAIVERS. Any provision of this Agreement or any
other Loan Document may be amended or waived if, but only if, such amendment
or waiver is in writing and signed by Obligor and TBCC and then any such
amendment or waiver shall be effective only to the extent set forth therein.
The failure of TBCC at any time or times to require Obligor to strictly
comply with any of the provisions of this Agreement or any other present or
future agreement between Obligor and TBCC shall not waive or diminish any
right of TBCC later to demand and receive strict compliance therewith. Any
waiver of any default shall not waive or affect any other default, whether
prior or subsequent, and whether or not similar. None of the provisions of
this Agreement or any other agreement now or in the future executed by
Obligor and delivered to TBCC shall be deemed to have been waived by any act
or knowledge of TBCC or its agents or employees, but only by a specific
written waiver signed by an authorized officer of TBCC and delivered to
Obligor.
8.9 COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement and any waiver
or amendment hereto may be executed in counterparts and by the parties hereto
in separate counterparts, each of which when so executed and delivered shall
be an original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any
notices given in connection herewith or therewith may be executed and
delivered by telecopier or other facsimile transmission all with the same
force and effect as if the same was a fully executed and delivered original
manual counterpart.
8.10 SEVERABILITY. In case any provision in or obligation under this
Agreement or any other Loan Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
8.11 JOINT AND SEVERAL LIABILITY. If Obligor consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Obligor shall not constitute a compromise
with, or a release of, any other Obligor.
8.12 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement and the
other Loan Documents constitute the entire agreement between the parties,
supersede any prior written and verbal agreements between them, and shall
bind and benefit the parties and their respective successors and permitted
assigns. There are no oral understandings, oral representations or oral
agreements between the parties which are not set forth in this Agreement or
in other written agreements signed by the parties in connection herewith.
8.13 MUTUAL WAIVER OF JURY TRIAL. TBCC AND OBLIGOR EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND OBLIGOR, OR (iii) ANY
CONDUCT, ACTS OR OMISSIONS OF TBCC OR OBLIGOR OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
TBCC OR OBLIGOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
Obligor:
GENIE INTERACTIVE, INC.
By: /s/ Stephen Brown
Title: Chief Financial Officer
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TBCC Security Agreement
- -----------------------------------------------------------------------------
IDT AMERICA, CORP.
By /s/ Stephen Brown
-----------------
Title Chief Financial Officer
IDT INTERNATIONAL, CORP.
By /s/ Stephen Brown
-----------------
Title Chief Financial Officer
IDT INTERNET SERVICES, INC.
By /s/ Stephen Brown
-----------------
Title Chief Financial Officer
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INTERNET ONLINE SERVICES, INC.
By /s/ Stephen Brown
------------------------
Title Chief Financial Officer
MEDIA RESPONSE, INC.
By /s/Stephen Brown
------------------------
Title Chief Financial Officer
NEW WORLD TELECOMMUNICATIONS, CORP.
By /s/Stephen Brown
------------------------
Title Chief Financial Officer
YOVELLE RENAISSANCE CORPORATION
By /s/Stephen Brown
------------------------
Title Chief Financial Officer
TBCC:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By ___________________________
Title_________________________
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Exhibit 10.23
GUARANTY
THIS GUARANTY dated as of December 24, 1997 (the "Guaranty"), made by
GENIE INTERACTIVE, INC., a New Jersey corporation, with an address at 294
State Street, Hackensack, New Jersey 07601, IDT AMERICA, CORP., a New Jersey
corporation, with an address at 294 State Street, Hackensack, New Jersey
07601, IDT INTERNATIONAL, CORP., a New Jersey corporation, with an address at
294 State Street, Hackensack, New Jersey 07601, IDT INTERNET SERVICES, INC.,
a Delaware corporation, with an address at 294 State Street, Hackensack, New
Jersey 07601, INTERNET ONLINE SERVICES, INC., a New Jersey corporation, with
an address at 294 State Street, Hackensack, New Jersey 07601, MEDIA RESPONSE,
INC., a New Jersey corporation, with an address at 294 State Street,
Hackensack, New Jersey 07601, NEW WORLD TELECOMMUNICATIONS, CORP., a New
Jersey corporation, with an address at 294 State Street, Hackensack, New
Jersey 07601, and YOVELLE RENAISSANCE CORPORATION, a Delaware corporation,
with an address at 294 State Street, Hackensack, New Jersey 07601 (jointly
and severally, the "Guarantor"), in favor of TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation, ("TBCC") having its principal office at
9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018 and having an
office at 16133 Ventura Blvd., Suite 700, Encino, California 91436, with
respect to the "Indebtedness" (as defined below) of IDT CORPORATION, a
Delaware corporation (the "Borrower").
1. Guaranty. The Guarantor hereby (a) unconditionally and irrevocably
guarantees the punctual payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all of the Indebtedness, and (b)
agrees to pay any and all reasonable costs and expenses (including reasonable
attorneys' fees and related expenses) incurred by the TBCC in enforcing any
rights under this Guaranty. As used herein, "Indebtedness" means and includes
all loans (including the Loans), advances, debts, liabilities, obligations,
covenants and duties owing by Borrower to TBCC of any kind or nature, present
or future, whether or not evidenced by any note, guaranty or other
instrument, which may arise under, out of, or in connection with, any present
or future Loan and Security Agreement between Borrower and TBCC (the "Loan
Agreement"), any other Loan Document or any other agreement executed in
connection herewith or therewith, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening, guaranteeing or
confirming of a letter of credit, loan, guaranty, indemnification or in any
other manner, whether direct or indirect (including those acquired by
assignment, purchase, discount or otherwise), whether absolute or contingent,
due or to become due, now due or hereafter arising and however acquired. The
term "Indebtedness" includes, without limitation, all interest (including
interest accruing on or after an Insolvency Event, whether or not an allowed
claim), charges, expenses, commitment, facility, closing and collateral
management fees, letter of credit fees, reasonable attorneys' fees, and any
other sum properly chargeable to Borrower under the Loan Agreement, the other
Loan Documents or any other agreement executed in connection herewith
or therewith. (Capitalized terms used in this Guaranty, which are not defined,
shall have the meanings set forth in the Loan Agreement.)
2. Guaranty Absolute. The Guarantor guarantees that the Indebtedness
will be paid and performed strictly in accordance with the terms of the Loan
Agreement regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of the terms or the rights of the
TBCC with respect thereto. The liability of the Guarantor under this Guaranty
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan Agreement or
any other agreement or instrument relating thereto, including, without
limitation, this Guaranty (collectively, the "Loan Documents");
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(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Indebtedness, or any amendment or waiver of
any term of or any consent to departure from the Loan Agreement or any other
Loan Document;
(c) any exchange, release or non-perfection of any collateral, or any
release, amendment or waiver of any term of, or consent to departure from,
any other guaranty for all or any of the Indebtedness;
(d) any failure on the part of the TBCC or any other person or
entity to exercise, or any delay in exercising, any right under the Loan
Agreement or any other Loan Document; or
(e) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower, the Guarantor or any
other guarantor with respect to the Indebtedness (including, without
limitation, all defenses based on suretyship or impairment of collateral, and
all defenses that the Borrower may assert to the repayment of the
Indebtedness, including, without limitation, failure of consideration, breach
of warranty, fraud, payment, statute of frauds, bankruptcy, lack of legal
capacity, statute of limitations, lender liability, accord and satisfaction,
and usury) or which might otherwise constitute a defense to this Guaranty and
the obligations of the Guarantor under this Guaranty.
The Guarantor hereby agrees that if the Borrower or any other guarantor of all
or a portion of the Indebtedness is the subject of a bankruptcy proceeding
under Title 11 of the United States Code, it will not assert the pendency of
such proceeding or any order entered therein as a defense to the timely
payment of the Indebtedness. This Guaranty shall continue to be effective or
be reinstated, as the case may be, if at any time any payment of any of the
Indebtedness is rescinded or must otherwise be returned by the TBCC upon the
insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as
though the payment had not been made.
3. Waiver. The Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Indebtedness and
this Guaranty and any requirement that the TBCC protect, secure, perfect or
insure any security interest or lien or any property subject thereto or
exhaust any right to take any action against the Borrower or any other person
or any collateral.
4. Subrogation. The Guarantor hereby irrevocably waives, to the fullest
extent permitted by law, any and all claims, rights or remedies which it may
now have or hereafter acquire against the Borrower that arise hereunder or
from the performance by him hereunder including, without limitation, any
claims, rights or remedies of subrogation, reimbursement, exoneration,
contribution, indemnification or participation in any claims, rights or
remedies of the TBCC against the Borrower or in any security which the TBCC
now has or hereafter acquires, whether or not the claims, rights or remedies
arise in equity, under contract, by statute, under common law or otherwise.
5. Representations and Warranties. The Guarantor hereby represents and
warrants as follows:
(a) Power and Authority. The Guarantor has full power, authority,
capacity and legal right to execute and deliver and to perform its
obligations under this Guaranty and the other Loan Documents to which the
Guarantor is a party.
(b) Enforceability. This Guaranty and the other Loan Documents to
which the Guarantor is a party have been duly executed and delivered by the
Guarantor and constitute a legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor, its
2
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successors and assigns (and, in the case of Guarantors who are individuals,
their heirs, estate, personal representatives, executors and administrators)
in accordance with their respective terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
(c) No Conflicts. The execution, delivery and performance of this
Guaranty and the other Loan Documents to which the Guarantor is a party will
not violate any requirement of law or contractual obligation of the Guarantor
or result in the creation or imposition of any lien on any of the property or
assets of the Guarantor, except for liens (if any) granted in favor of the
TBCC pursuant to the Loan Documents.
(d) No Consents. No consent of any other Person and no consent,
license, permit, approval or authorization, of, exemption by, notice or
report to, or registration, filing or declaration with, and governmental
authority is required in connection with the execution, delivery,
performance, validity or enforceability of this Guaranty and the other Loan
Documents to which the Guarantor is a party.
(e) Solvency. The fair value of the property of the Guarantor
exceeds the total amount of liabilities (including, without limitation,
contingent liabilities) of the Guarantor; the present fair saleable value of
the assets of the Guarantor exceeds the amount that will be required to pay
the probable liability of the Guarantor on its existing debts as they become
absolute and matured; the Guarantor is able to realize upon its assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature and the Guarantor does not intend to, and does not
believe that it will, incur debts or liabilities beyond the Guarantor's
ability to pay as the debts and liabilities mature. In computing the amount
of contingent liabilities at any time, it is intended that the liabilities
will be computed at the amount which, in light of all facts and circumstances
existing at such time, represents the amount that can reasonably be expected
to become an actual or mature liability.
(f) Absence of Litigation. Except as otherwise heretofore disclosed
to the TBCC in writing, there are no actions, suits, investigations,
litigation or proceedings pending or, to the knowledge of the Guarantor,
threatened against or affecting the Guarantor or any of its properties before
any court, arbitrator or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, that has an amount in
controversy in excess of $25,000, or which purports to affect any part of the
transactions contemplated hereby or by the other Loan Documents to which the
Guarantor is a party or the legality, validity or enforceability of this
Guaranty or other other Loan Documents to which the Guarantor is a party.
(g) Financial Condition. The financial condition and net worth of
the Guarantor contained in the financial statements, dated _______________
are true and correct; there is no event, fact, circumstance or condition
known to the Guarantor which is inconsistent with the statements or is
required to be disclosed in order to cause the statements not to be
misleading; and the Guarantor knows of no reason why it will not be able to
perform duly and promptly its obligations under this Guaranty.
(h) Payment of Taxes. The Guarantor has filed all tax returns
(federal, state, local and foreign) required to be filed and paid all taxes
shown thereon to be due, including interest and penalties, except for such
taxes as are being contested in good faith and by proper proceedings.
6. Covenants. The Guarantor covenants and agrees that, so long as any
part of the Indebtedness shall remain unpaid, the Guarantor shall provide the
TBCC with financial statements relating to the financial condition and net
worth of the Guarantor and the ability of the Guarantor to satisfy its
obligations hereunder, such financial statements to be certified as being
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<PAGE>
true and correct by the Guarantor. Such financial statements shall be
provided (i) in the case of a Guarantor who is an individual, as of December
31 of each year, by January 31 of the following year; (ii) in the case of a
Guarantor which is a corporation, partnership, limited liability company,
trust, or any other entity or organization, within 120 days after the end of
the Guarantor's fiscal year.
7. Amendments, Etc. No amendment or waiver of any provision of this
Guaranty or consent to any departure by the Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by the
TBCC, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
8. Addresses for Notices. All notices and other communications provided
for hereunder shall be in writing (including by telecopier) and, if to the
Guarantor, mailed or delivered to him at its address specified on the first
page of this Guaranty, if to the TBCC, mailed or delivered to it at the
address of the TBCC specified on the first page of this Guaranty, or as to
each party at such other address as shall be designated by the party in a
written notice to the other party. All the notices and other communications
shall, if mailed, be effective when deposited in the mail addressed as
aforesaid.
9. No Waiver; Remedies. No failure on the part of the TBCC to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof. No single or partial exercise of any right hereunder shall preclude
any other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
10. Right of Set-off. The TBCC is hereby authorized at any time and from
time-to-time following an Event of Default, to the fullest extent permitted
by law,, to set off and apply any and all deposits (general or special, time
or demand, provisional of final) at any time held and other indebtedness at
any time owing by the TBCC to or for the credit or the account of the
Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under this Guaranty, irrespective of whether or not the
TBCC shall have made any demand under this Guaranty and although such
obligations may be contingent and unmatured. The TBCC agrees promptly to
notify the Guarantor after any such set-off and application, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of the TBCC under this Section are in addition to
the other rights and remedies (including, without limitation, other rights of
set-off) which the TBCC may have.
11. Continuing Guaranty; Assignments. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the indefeasible
payment in full of the Indebtedness and all other amounts payable under this
Guaranty, (b) be binding upon the Guarantor and its successors, assigns,
beneficiaries and indorsees (including, without limitation, the heirs,
administrators, executors and estate of the Guarantor), except that no
Guarantor shall assign or transfer any of its rights or obligations hereunder
without the prior written consent of the TBCC, and (c) insure to the benefit
of the be enforceable by the TBCC and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), the
TBCC may assign or otherwise transfer any of the Indebtedness to any other
person or entity, and such other person or entity shall thereupon become
vested with all the rights in respect thereof granted to the TBCC herein or
otherwise. This Guaranty and the obligations of the Guarantor hereunder shall
terminate upon the indefeasible payment in full of all of the Indebtedness
and all other amounts payable under this Guaranty.
12. Subordination. Any and all payments on any indebtedness or
obligations of the Borrower now or hereafter owing to the Guarantor other
than in respect of salaries or wages (the "Junior Debt") is hereby
subordinated and junior in right of payment and exercise of remedies to
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the prior payment in full in cash of the Indebtedness. Upon the written
request of the TBCC, the Junior Debt shall be collected, enforced and
received by the Guarantor as trustee for the TBCC and paid over to the TBCC
on account of the Indebtedness but without reducing or affecting in any
manner the liability of the Guarantor under the other provisions of this
Guaranty.
13. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF ILLINOIS
WITHOUT GIVEN EFFECT TO CONFLICTS OF LAW PRINCIPLES THEREOF.
14. Telecopier; Counterparts. This Guaranty may be executed and delivered
by telecopier or other facsimile transmission with the same force and effect
as if the same was a fully executed and delivered original counterpart. This
Guaranty may be executed by the parties in one or more counterparts, each of
which shall be an original and all of this shall constitute one and the same
agreement.
15. CONSENT TO JURISDICTION.
(a) THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY ILLINOIS STATE OR FEDERAL COURT SITTING IN ILLINOIS IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN
DOCUMENTS, AND THE GUARANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
ILLINOIS STATE OR FEDERAL COURT. THE GUARANTOR HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT HE MAY EFFECTIVELY DO SO, ANY OBJECTION TO THE LAYING OF
VENUE OR ANY DEFENSE OF AN INCONVENIENT FORUM WHICH HE MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF SUCH ACTION OR PROCEEDING. THE GUARANTOR IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE GUARANTOR AT HIS
ADDRESS SPECIFIED ON THE FIRST PAGE OF THIS GUARANTY. THE GUARANTOR AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW.
(b) NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE TBCC TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT
OF THE TBCC TO BRING ANY ACTION OR PROCEEDING AGAINST THE GUARANTOR OR HIS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTIONS.
16. JURY TRIAL WAIVER. THE GUARANTOR AND, BY ITS ACCEPTANCE HEREOF, THE
TBCC, HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN
ANY COURT RELATING TO, IN CONNECTION
5
<PAGE>
WITH OR ARISING UNDER THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
date first above written.
GENIE INTERACTIVE, INC. INTERNET ONLINE SERVICES, INC.
By /s/ Stephen Brown By /s/ Stephen Brown
----------------- -----------------
Title Chief Financial Officer Title Chief Financial Officer
IDT AMERICA, CORP. MEDIA RESPONSE, INC.
By /s/ Stephen Brown By /s/ Stephen Brown
----------------- -----------------
Title Chief Financial Officer Title Chief Financial Officer
IDT INTERNATIONAL, CORP. NEW WORLD
TELECOMMUNICATIONS, CORP.
By /s/ Stephen Brown By /s/ Stephen Brown
----------------- -----------------
Title Chief Financial Officer Title Chief Financial Officer
IDT INTERNET SERVICES, INC. YOVELLE RENAISSANCE
CORPORATION
By /s/ Stephen Brown By /s/ Stephen Brown
----------------- -----------------
Title Chief Financial Officer Title Chief Financial Officer
6
<PAGE>
EXHIBIT 21.01
SUBSIDIARIES OF REGISTRANT
IDT America, Corp.
IDT International Corp.
IDT Internet Services, Inc.
Internet Online Services, Inc.
Media Response, Inc.
New World Telecommunications, Corp.
IDT Global Ltd.
Net2Phone, Inc.
Yovelle Renaissance Corporation
Rock Enterprises, Inc.
Genie Interactive, Inc.
Shmuelco Equipment Corp.
Phone Depot, Inc.
