<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 15, 1998
-----------------------------------------------
Date of Report (Date of earliest event reported)
CANMAX INC.
-----------------------------------------------------
Exact Name of Registrant as Specified in its Charter)
Wyoming 0-22636 75-2461665
--------------- -------------- -------------------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
150 West Carpenter Freeway
Irving, Texas 75039
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(972) 541-1600
---------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
-------------------------------------------------------------
(Former Name or Former Address, If Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 30, 1998, Canmax Inc., a Wyoming corporation (the "Company"),
acquired USCommunication Services, Inc., a Delaware corporation ("USC"),
pursuant to the terms of an Agreement and Plan of Merger dated as of January 30,
1998 (the "Merger Agreement"). Pursuant to the Merger Agreement, the former
shareholders of USC received an aggregate of 1.5 million shares of common stock,
no par value per share, of the Company ("Common Shares"), and warrants to
acquire 2.5 million Common Shares at exercise prices of $1.25 - $2.00 per share
(collectively, the "Merger Consideration"). Pursuant to the terms of the Merger
Agreement, James C. Bernet, the former President of USC, executed an Employment
Contract pursuant to which he received warrants to acquire 2.0 million Common
Shares at exercise prices of $2.00 - $3.00 per share (the "Employment
Warrants"). Mr. Bernet and John Melideo also joined the Board of Directors of
the Company in connection with the Merger Agreement.
On June 15, 1998, the Company and the former shareholders of USC (the "USC
Shareholders") agreed to rescind the Merger Agreement and executed a Rescission
Agreement providing for (a) Company's delivery of all of the common stock of USC
to the USC Shareholders, (b) the USC Shareholders' return of the Merger
Consideration to the Company, (c) the termination of all agreements executed in
connection with the Merger Agreement, including without limitation, the
Employment Contract (and Employment Warrants), the Escrow Agreement and the
Non-Competition Agreement with Mr. Bernet, and (d) the repayment of amounts
advanced by the Company to USC (approximately $725,000), which indebtedness
is secured by a lien on all of the assets of USC. Following the execution of
the Rescission Agreement, Mr. Bernet and Mr. Melideo resigned from the
Company's Board of Directors.
The USC Shareholders consist of Delia O'Donnell, the wife of Mr. Bernet,
and Alan Anderson, the trustee of the voting trust established for the benefit
of the former shareholders of USC. At the time of the execution of the
Rescission Agreement, Mr. Bernet was an executive officer and a director of the
Company.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
The unaudited pro forma financial information relative to the
rescission is included on pages F-1 to F-5.
<PAGE>
(c) EXHIBITS.
Exhibit No. Document Description
10.1 Rescission Agreement dated June 15, 1998 among Canmax
Inc., Canmax Telecom, Inc., James C. Bernet, Delia
O'Donnell and Alan Anderson, as Trustee (filed as
Exhibit 10.1 to Canmax's Quarterly Report on Form 10-Q
for the period ended April 30, 1998).
10.2 Restated Promissory Note dated June 15, 1998 from
USCommunication Services, Inc. to Canmax Telecom, Inc.*
10.3 Security Agreement dated June 15, 1998 from
USCommunication Services, Inc. for the benefit of
Canmax Telecom, Inc.*
10.4 Guaranty dated June 15, 1998 executed by Delia
O'Donnell for the benefit of Canmax Telecom, Inc.*
10.5 Guaranty dated June 15, 1998 executed by Alan Anderson,
Trustee, for the benefit of Canmax Telecom, Inc.*
10.6 Pledge Agreement executed by Delia O'Donnell and Alan
Anderson, as Trustee, for the benefit of Canmax Telecom,
Inc.*
10.7 Guaranty dated June 15, 1998 executed by James C. Bernet
for the benefit of Canmax Telecom, Inc.*
- ----------------
* Filed herewith
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CANMAX INC.
DATE: June 30, 1998 By: /s/ Roger D. Bryant
-----------------------------------
Roger D. Bryant
President and
Chief Executive Officer
<PAGE>
INDEX TO
PRO FORMA FINANCIAL INFORMATION
<TABLE>
<S> <C>
PRO FORMA BALANCE SHEET AS OF APRIL 30, 1998 ............................ F-2
PRO FORMA STATEMENT OF OPERATION FOR THE
FISCAL YEAR ENDED OCTOBER 31, 1997 .................................... F-4
PRO FORMA STATEMENT OF OPERATION FOR
THE SIX MONTHS ENDED APRIL 30, 1998 ................................... F-5
</TABLE>
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma balance sheet as of April 30, 1998
gives effect to the disposition of the assets described above as if the
transaction had occurred on that date. The disposition was effected pursuant
to the terms of the Rescission Agreement dated June 15, 1998, which rescinded
the Company's January 30, 1998 acquisition of USC. Pursuant to the
Rescission Agreement, the former shareholders of USC were returned all of the
outstanding shares of USC, and the Company was returned all of the
consideration issued in the acquisition (consisting of 1.5 million shares of
common stock and warrants to acquire an additional 2.5 million shares). In
addition, USC executed a restated promissory note in the approximate amount
of $725,000 to restate and consolidate inter-company advances previously made
to USC by the Company, which note remained outstanding following the
rescission. The following unaudited pro forma statement of operations for
the six months ended April 30, 1998 gives effect to the disposition of assets
as though it had occurred on November 1, 1997, while the unaudited pro forma
statement of operations for the fiscal year ended October 31, 1997 gives
effect to the disposition as though it had occurred on November 1, 1996.
The unaudited pro forma adjustments are based upon available information
and certain assumptions that management believes are reasonable under the
circumstances. The unaudited pro forma financial information reports are not
intended to represent what the Company's financial position or results of
operations would have actually been if the disposition had occurred on the
referenced dates or project the Company's financial position or results of
operation as of a future date or period. The unaudited pro forma financial
information should be read in conjunction with the Company's financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1997 and Quarterly Reports on Form
10-Q for the periods ended January 31, 1998 and April 30, 1998.
F-1
<PAGE>
CANMAX INC. AND SUBSIDIARIES
BALANCE SHEET
APRIL 30, 1998
(UNAUDITED)
<TABLE>
Pro forma Pro forma
Historical Adjustments(1) as adjusted
---------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 114,083 $ (77,079) $ 37,004
Accounts receivable, net 2,134,052 (1,060,429) 1,073,623
Inventory 72,460 (6,460) 66,000
Prepaid expenses and other 201,960 (45,867) 156,093
----------- ----------- -----------
Total current assets 2,522,555 (1,189,835) 1,332,720
Property and equipment at cost 4,284,179 (495,013) 3,789,166
Accumulated depreciation and amortization (3,128,098) 57,517 (3,070,581)
----------- ----------- -----------
Property and equipment at cost - Net 1,156,081 (437,496) 718,585
Capitalized software costs 1,650,269 - 1,650,269
Accumulated amortization (954,979) - (954,979)
----------- ----------- -----------
Capitalized software costs - Net 695,290 - 695,290
Intellectual property rights 670,173 - 670,173
Accumulated amortization (647,951) - (647,951)
----------- ----------- -----------
Intellectual property rights - Net 22,222 - 22,222
Goodwill 3,425,742 (3,425,742) -
Accumulated amortization (171,287) 171,287 -
----------- ----------- -----------
Goodwill - Net 3,254,455 (3,254,455) -
Notes Receivable 752,431 752,431
Allowance for doubtful accounts (752,431) (752,431)
Other Assets 91,217 154,282 245,499
----------- ----------- -----------
Total Assets 7,741,820 (4,727,504) 3,014,316
</TABLE>
(1) Pro forma adjustments to reflect disposition of USCommunication
Services, Inc. pursuant to the terms of the Rescission Agreement dated
as of June 15, 1998.
F-2
<PAGE>
CANMAX INC. AND SUBSIDIARIES
BALANCE SHEET
APRIL 30, 1998
(UNAUDITED)
<TABLE>
Pro forma Pro forma
Historical Adjustments(1) as adjusted
------------ -------------- -----------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Notes payable $ 152,754 $ (152,754) $ -
Convertible debentures 1,200,000 1,200,000
Accounts payable 743,750 (370,862) 372,888
Accrued liabilities 1,444,236 (1,036,493) 407,743
Deferred revenue 210,958 (1,934) 209,024
Current portion of lease obligation 83,739 83,739
Current portion of long-term debt 35,195 35,195
Advance from shareholder - -
------------ ------------ ------------
Total current liabilities 3,870,632 (1,562,043) 2,308,589
Lease Obligations 171,259 - 171,259
Long-term debt 33,688 - 33,688
Shareholders' equity:
Common stock, no par value,
44,169100 shares authorized
8,111,805 shares issued in historical
6,611,005 shares issued in pro forma 25,938,131 (2,647,398) 23,290,733
------------ ------------ ------------
Accumulated deficit (22,271,890) (518,063) (22,789,953)
Total shareholders' equity 3,666,241 (3,165,461) 500,780
------------ ------------ ------------
7,741,820 (4,727,504) 3,014,316
</TABLE>
(1) Pro forma adjustments to reflect disposition of USCommunication
Services, Inc. pursuant to the terms of the Rescission Agreement dated
as of June 15, 1998.
F-3
<PAGE>
CANMAX INC. AND SUBSIDIARIES
Statement of Operations
Year ended October 31, 1997
(UNAUDITED)
<TABLE>
--------------- Pro forma Pro forma
Historical (1) Adjustments(2) as adjusted
--------------- -----------------------------------
<S> <C> <C> <C>
Revenues:
Software licenses and product revenue $ 1,924,897 $ - $ 1,924,897
Development 8,704,338 - 8,704,338
Service Agreements 2,106,988 - 2,106,988
Telecommunication 719,705 (719,705) -
--------------- ---------------- ---------------
13,455,928 (719,705) 12,736,223
Costs and expenses:
Costs of software licenses and product
revenue 772,502 - 772,502
Cost of development revenues 4,564,441 - 4,564,441
Cost of telecommunication revenue 545,699 (545,699) -
Customer service 2,254,986 - 2,254,986
Product development 614,503 - 614,503
General and administrative 4,839,049 (1,025,782) 3,813,267
Sales and marketing 832,316 (223,871) 608,445
Interest and financing costs, net 28,374 (7,626) 20,748
Total costs and expenses 14,451,870 (1,802,978) 12,648,892
--------------- ---------------- ---------------
Net income (loss) (995,942) (1,083,273) 87,331
Net income (loss) per common and common
equivalent share
(0.136) 0.015
Weighted average common and common
equivalent shares outstanding 7,327,262 (1,500,000) 5,827,262
</TABLE>
(1) Historical amounts reflect the pro forma effect of the acquisition of
USCommunication Services, Inc. on January 30, 1998, as "previously
reported" (as defined in Rule 12b-2 of the Securities Act of 1934, as
amended) in the Company's Form 8-K/A dated January 30, 1998 and filed
on April 15, 1998.
(2) Pro forma adjustments to reflect disposition of USCommunication
Services, Inc. pursuant to the terms of the Rescission Agreement dated
as of June 15, 1998.
F-4
<PAGE>
CANMAX INC. AND SUBSIDIARIES
Statement of Operations
6 months ending April 30, 1998
(UNAUDITED)
<TABLE>
Pro forma Pro forma
Historical Adjustments(1) as adjusted
--------------- -----------------------------------
<S> <C> <C> <C>
Revenues:
Software licenses and product revenue $ 286,097 $ - $ 286,097
Development 1,788,143 - 1,788,143
Service Agreements 1,316,723 - 1,316,723
Telecommunication 1,430,857 (1,430,857) -
--------------- -----------------------------------
4,821,820 (1,430,857) 3,390,963
Costs and expenses:
Costs of software licenses and product
revenue 230,413 - 230,413
Cost of development revenues 882,784 - 882,784
Cost of telecommunication revenue 1,655,494 (1,655,494) -
Customer service 1,025,331 - 1,025,331
Product development 206,785 - 206,785
General and administrative 1,656,908 - 1,656,908
Sales and marketing 309,998 - 309,998
Bad debt expense(2) 752,431 752,431
Interest and financing costs, net 55,199 (9,731) 45,468
--------------- ---------------- ---------------
Total costs and expenses 6,022,912 (912,794) 5,110,118
--------------- ---------------- ---------------
Net income (loss) (1,201,092) (518,063) (1,719,155)
Net income (loss) per common and common
equivalent share
(0.148) (0.260)
Weighted average common and common
equivalent shares outstanding 8,111,005 (1,500,000) 6,611,005
</TABLE>
(1) Pro forma adjustments to reflect disposition of USCommunication
Services, Inc. pursuant to the terms of the Rescission Agreement dated
as of June 15, 1998.
(2) Reflects the allowance for doubtful accounts established in connection
with the cash and advances made to USCommunication Service, Inc. and
represented by the Restated Promissory Note dated June 15, 1998.
F-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Document Description
10.1 Rescission Agreement dated June 15, 1998 among Canmax
Inc., Canmax Telecom, Inc., James C. Bernet, Delia
O'Donnell and Alan Anderson, as Trustee (filed as
Exhibit 10.1 to Canmax's Quarterly Report on Form 10-Q
for the period ended April 30, 1998).
10.2 Restated Promissory Note dated June 15, 1998 from
USCommunication Services, Inc. to Canmax Telecom, Inc.*
10.3 Security Agreement dated June 15, 1998 from
USCommunication Services, Inc. for the benefit of
Canmax Telecom, Inc.*
10.4 Guaranty dated June 15, 1998 executed by Delia
O'Donnell for the benefit of Canmax Telecom, Inc.*
10.5 Guaranty dated June 15, 1998 executed by Alan Anderson,
Trustee, for the benefit of Canmax Telecom, Inc.*
10.6 Pledge Agreement executed by Delia O'Donnell and Alan
Anderson, as Trustee, for the benefit of Canmax Telecom,
Inc.*
10.7 Guaranty dated June 15, 1998 executed by James C. Bernet
for the benefit of Canmax Telecom, Inc.*
- ----------------
* Filed herewith
<PAGE>
EXHIBIT 10.2
RESTATED
PROMISSORY NOTE
$724,660 June 15, 1998
FOR VALUE RECEIVED, on or before June 15, 2001 ("MATURITY DATE"), the
undersigned ("BORROWER"), promises to pay to the order of Canmax Telecom, Inc.
("LENDER") at its offices at 150 W. Carpenter Freeway, Irving, Texas 75039 the
principal amount of SEVEN HUNDRED TWENTY FOUR THOUSAND SIX HUNDRED SIXTY AND
NO/100 DOLLARS ($724,660.00), subject to adjustment as provided in Section 5(a)
of the Rescission Agreement (defined below) ("TOTAL PRINCIPAL AMOUNT"), or such
amount less than the Total Principal Amount which is outstanding from time to
time if the total amount outstanding under this Promissory Note ("NOTE") is less
than the Total Principal Amount, together with interest on such portion of the
Total Principal Amount which has been advanced to Borrower as of the date hereof
until paid at a fixed rate per annum equal to the lesser of (a) the Maximum Rate
(as hereinafter defined) or (b) twelve percent (12%), calculated on the basis of
actual days elapsed but computed as if each year consisted of 360 days. The term
"MAXIMUM RATE," as used herein, shall mean at the particular time in question
the maximum rate of interest which, under applicable law, may then be charged on
this Note. If such maximum rate of interest changes after the date hereof and
this Note provides for a fluctuating rate of interest, the Maximum Rate shall be
automatically increased or decreased, as the case may be, without notice to
Borrower from time to time as of the effective date of each change in such
maximum rate. If applicable law ceases to provide for such a maximum rate of
interest, the Maximum Rate shall be equal to eighteen percent (18%) per annum.
The principal of and all accrued but unpaid interest on this Note shall be
due and payable as follows:
(a) payments of principal and interest shall be payable monthly on the
fifteenth day of each month following the date hereof through the Maturity Date,
in the following amounts:
DATE: PAYMENTS:
---- --------
July 15, 1998 $34,946.73
August 15, 1998 $53,567.21
September 15, 1998 $72,017.53
October 15 to
December 15, 1998 $15,000.00
January 1, 1999 to
June 1, 1999 $20,000.00
July 15, 1999 to
June 15, 2001 $22,046.49
(b) the outstanding principal balance of this Note, together with all
accrued but unpaid interest, shall be due and payable on the Maturity Date.
If a payment is ten (10) or more days late, Borrower will pay a delinquency
charge in an amount equal to 5.0% of the amount of the delinquent payment up to
the maximum amount of $250.00.
This Note evidences obligations and indebtedness from time to time owing by
Borrower to Lender arising from a series of loans by Canmax Inc. and Lender to
Borrower that commenced in January of 1998, and is given in renewal and
substitution for such obligations, as further set forth in that certain
Rescission Agreement of even date herewith by and between Borrower and Lender
("RESCISSION AGREEMENT"), and is secured by, INTER ALIA, a Security Agreement of
even date herewith, by and between Borrower and Lender, covering certain
collateral as more particularly described therein.
PROMISSORY NOTE - PAGE 1
<PAGE>
Payment of this Note is guaranteed by each of Delia O'Donnell, James C.
Bernet ("Bernet") and Alan Anderson, as Trustee, pursuant to separate Guaranties
of even date herewith (the "GUARANTIES"). This Note, the Rescission Agreement,
the Guaranties and all other documents evidencing, securing, governing,
guaranteeing and/or pertaining to this Note, including but not limited to those
documents described above, are hereinafter collectively referred to as the "LOAN
DOCUMENTS." The holder of this Note is entitled to the benefits and security
provided in the Loan Documents.
Borrower may from time to time prepay all or any portion of the principal
of this Note without premium or penalty. Unless otherwise agreed to in writing,
or otherwise required by applicable law, payments will be applied first to
unpaid accrued interest, then to principal, and any remaining amount to any
unpaid collection costs, delinquency charges and other charges; provided,
however, upon delinquency or other Event of Default, Lender reserves the right
to apply payments among principal, interest, delinquency charges, collection
costs and other charges, at its discretion. All prepayments shall be applied
to the indebtedness owing hereunder in such order and manner as Lender may from
time to time determine in its sole discretion. All payments and prepayments of
principal of or interest on this Note shall be made in lawful money of the
United States of America in immediately available funds, at the address of
Lender indicated above, or such other place as the holder of this Note shall
designate in writing to Borrower. If any payment of principal of or interest on
this Note shall become due on a day which is not a Business Day (as hereinafter
defined), such payment shall be made on the next succeeding Business Day and any
such extension of time shall be included in computing interest in connection
with such payment. As used herein, the term "BUSINESS DAY" shall mean any day
other than a Saturday, Sunday or any other day on which national banking
associations are authorized to be closed. The books and records of Lender shall
be PRIMA FACIE evidence of all outstanding principal of and accrued and unpaid
interest on this Note.
Borrower agrees that no advances under this Note shall be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("EVENT OF DEFAULT"):
(a) failure of Borrower to pay any installment of principal of or interest
on this Note or on any other indebtedness of Borrower to Lender when due; or
(b) any representation, warranty, certification or statement made by
Borrower in any Loan Document or which is contained in any certificate, document
or financial or other statement furnished at any time under or in connection
with any Loan Document shall prove to have been untrue in any material respect
when made;
(c) failure on the part of Borrower to observe or perform any covenant
or agreement contained in any Loan Documents;
(d) Borrower has commenced a voluntary case or other proceeding seeking
liquidation, winding-up, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency, moratorium or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or has consented to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or has made a general assignment for the
benefit of creditors, or has taken any corporate action to authorize any of the
foregoing;
(e) an involuntary case or other proceeding has been commenced against
Borrower seeking liquidation, winding-up, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency, moratorium or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days, or
an order for relief has been entered against Borrower under the federal
bankruptcy laws as now or hereafter in effect;
PROMISSORY NOTE - PAGE 2
<PAGE>
(f) judgments or judicial orders for the payment of money which in the
aggregate at any one time exceed $50,000 and are not covered by insurance have
been rendered against Borrower by a court of competent jurisdiction and such
judgments or orders shall continue unsatisfied and unstayed for a period of 60
days; or
(g) any default by any guarantor (other than Bernet) of this Note under
the Guaranties or agreements securing the Guaranties or any revocation of any
Guaranty by any guarantor.
the holder of this Note may, at its option, without further notice or demand,
(i) declare the outstanding principal balance of and accrued but unpaid interest
on this Note at once due and payable, (ii) foreclose all liens securing payment
hereof, (iii) pursue any and all other rights, remedies and recourses available
to the holder hereof, including but not limited to any such rights, remedies or
recourses under the Loan Documents, at law or in equity, or (iv) pursue any
combination of the foregoing.
The failure to exercise the option to accelerate the maturity of this Note
or any other right, remedy or recourse available to the holder hereof upon the
occurrence of an Event of Default hereunder shall not constitute a waiver of the
right of the holder of this Note to exercise the same at that time or at any
subsequent time with respect to such Event of Default or any other Event of
Default. The rights, remedies and recourses of the holder hereof, as provided
in this Note and in any of the other Loan Documents, shall be cumulative and
concurrent and may be pursued separately, successively or together as often as
occasion therefore shall arise, at the sole discretion of the holder hereof.
The acceptance by the holder hereof of any payment under this Note which is less
than the payment in full of all amounts due and payable at the time of such
payment shall not (i) constitute a waiver of or impair, reduce, release or
extinguish any right, remedy or recourse of the holder hereof, or nullify any
prior exercise of any such right, remedy or recourse, or (ii) impair, reduce,
release or extinguish the obligations of any party liable under any of the Loan
Documents as originally provided herein or therein.
This Note and all of the other Loan Documents are intended to be performed
in accordance with, and only to the extent permitted by, all applicable usury
laws. If any provision hereof or of any of the other Loan Documents or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, neither the application of such
provision to any other person or circumstance nor the remainder of the
instrument in which such provision is contained shall be affected thereby and
shall be enforced to the greatest extent permitted by law. It is expressly
stipulated and agreed to be the intent of the holder hereof to at all times
comply with the usury and other applicable laws now or hereafter governing the
interest payable on the indebtedness evidenced by this Note. If the applicable
law is ever revised, repealed or judicially interpreted so as to render usurious
any amount called for under this Note or under any of the other Loan Documents,
or contracted for, charged, taken, reserved or received with respect to the
indebtedness evidenced by this Note, or if Lender's exercise of the option to
accelerate the maturity of this Note, or if any prepayment by Borrower results
in Borrower having paid any interest in excess of that permitted by law, then it
is the express intent of Borrower and Lender that all excess amounts theretofore
collected by Lender be credited on the principal balance of this Note (or, if
this Note and all other indebtedness arising under or pursuant to the other Loan
Documents have been paid in full, refunded to Borrower), and the provisions of
this Note and the other Loan Documents immediately be deemed reformed and the
amounts thereafter collectable hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder or thereunder. All sums paid, or agreed to be paid, by
Borrower for the use, forbearance, detention, taking, charging, receiving or
reserving of the indebtedness of Borrower to Lender under this Note or arising
under or pursuant to the other Loan Documents shall, to the maximum extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not exceed the
usury ceiling from time to time in effect and applicable to such indebtedness
for so long as such indebtedness is outstanding. To the extent federal law
permits Lender to contract for, charge or receive a greater amount of interest,
Lender will rely on federal law instead of the Texas Finance Code, as
supplemented by Texas Credit Title for the purpose of determining the Maximum
Rate. Additionally, to the maximum extent permitted by applicable law now or
hereafter in effect, Lender may, at its option and from time to time, implement
any other method of computing the Maximum Rate under the Texas Finance Code, as
supplemented by Texas Credit Title, or under other applicable law by giving
notice, if required, to Borrower as provided by applicable law now or hereafter
in effect. Notwithstanding anything to the contrary contained herein or in any
of the other Loan Documents, it is not the
PROMISSORY NOTE - PAGE 3
<PAGE>
intention of Lender to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at
the time of such acceleration.
If this Note is placed in the hands of an attorney for collection, or is
collected in whole or in part by suit or through probate, bankruptcy or other
legal proceedings of any kind, Borrower agrees to pay, in addition to all other
sums payable hereunder, all costs and expenses of collection, including but not
limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Note severally
waive presentment for payment, notice of nonpayment, protest, demand, notice of
protest, notice of intent to accelerate, notice of acceleration and dishonor,
diligence in enforcement and indulgences of every kind and without further
notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
THIS NOTE HAS BEEN EXECUTED UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT AS SUCH LAWS ARE
PREEMPTED BY APPLICABLE FEDERAL LAWS.
BORROWER:
USCOMMUNICATION SERVICES, INC.
By: /s/ James C. Bernet
-----------------------------------
Name: James C. Bernet
Title: President
Address: P.O. Box 500730
San Diego, CA 92150
PROMISSORY NOTE - PAGE 4
<PAGE>
EXHIBIT 10. 3
RESTATED SECURITY AGREEMENT
This RESTATED SECURITY AGREEMENT (this "AGREEMENT") is made as of the 15th
day of June, 1998, by USCOMMUNICATION SERVICES, INC., a Delaware corporation
("BORROWER") in favor of CANMAX TELECOM, INC., a Texas corporation ("LENDER").
Borrower hereby agrees with Lender as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
(a) The term "CODE" shall mean the Uniform Commercial Code as in
effect in the State of Texas on the date of this Agreement or as it may
hereafter be amended from time to time.
(b) The term "COLLATERAL" shall mean all of the property set forth
below:
(i) All present and future accounts, chattel paper, documents,
instruments, deposit accounts and general intangibles (including any
right to payment for goods sold or services rendered arising out of
the sale or delivery of personal property or work done or labor
performed by Borrower), now or hereafter owned, held, or acquired by
Borrower, together with any and all books of account, customer lists
and other records relating in any way to the foregoing (including,
without limitation, computer software, whether on tape, disk, card,
strip, cartridge or any other form), and in any case where an account
arises from the sale of goods, the interest of Borrower in such goods.
(ii) All present and hereafter acquired inventory (including
without limitation, all raw materials, work in process and finished
goods) held, possessed, owned, held on consignment, or held for
sale, lease, return or to be furnished under contracts of services,
in whole or in part, by Borrower wherever located, all records
relating in any way to the foregoing (including, without limitation,
any computer software, whether on tape, disk, card, strip, cartridge
or any other form).
(iii) All equipment and fixtures of whatsoever kind and
character now or hereafter possessed, held, acquired, leased or
owned by Borrower and used or usable in Borrower's business,
together with all replacements, accessories, additions,
substitutions and accessions to all of the foregoing, all records
relating in any way to the foregoing (including, without limitation,
any computer software, whether on tape, disk, card, strip, cartridge
or any other form). To the extent that the foregoing property is
located on, attached to, annexed to, related to, or used in
connection with, or otherwise made a part of, and is or shall become
fixtures upon, real property, such real property and the record
owner thereof is described on EXHIBIT "A" attached hereto and made a
part hereof.
The term Collateral, as used herein, shall also include all PRODUCTS and
PROCEEDS of all of the foregoing (including without limitation, insurance
payable by reason of loss or damage to the foregoing property) and any property,
securities, guaranties or monies of Borrower which may at any time come into the
possession of Secured Party (as hereinafter defined). The designation of
proceeds does not authorize Borrower to sell, transfer or otherwise convey any
of the foregoing property except finished goods intended for sale in the
ordinary course of Borrower's business or as otherwise provided herein.
(c) The term "INDEBTEDNESS" shall mean (i) all indebtedness,
obligations and liabilities of Borrower to Secured Party or Canmax Inc.
of any kind or character, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, (ii) all accrued but
unpaid interest on any of the indebtedness described in (i) above, (iii)
all obligations of Borrower to Secured Party under any documents
evidencing, securing, governing and/or pertaining to all or any part of
the indebtedness described in (i) and (ii) above, (iv) all costs and
expenses incurred by Secured Party in connection with the collection and
administration of all or any part of the indebtedness and obligations
described in (i), (ii) and (iii) above or the protection or preservation
of, or realization upon, the collateral securing all or any part of such
indebtedness and obligations, including
RESTATED SECURITY AGREEMENT - PAGE 1
<PAGE>
without limitation all reasonable attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above.
(d) The term "LOAN DOCUMENTS" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining
to the Indebtedness, including without limitation the Rescission
Agreement dated the date hereof between, among others, Borrower and
Secured Party (the "RESCISSION AGREEMENT").
(e) The term "OBLIGATED PARTY" shall mean any party other than
Borrower who secures, guarantees and/or is otherwise obligated to pay all
or any portion of the Indebtedness.
(f) The term "SECURED PARTY" shall mean Lender, its successors and
assigns, including without limitation, any party to whom Lender, or its
successors or assigns, may assign its rights and interests under this
Agreement.
All words and phrases used herein which are expressly defined in Section 1.201
or Chapter 9 of the Code shall have the meaning provided for therein. Other
words and phrases defined elsewhere in the Code shall have the meaning specified
therein except to the extent such meaning is inconsistent with a definition in
Section 1.201 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Borrower, for
value received, hereby grants to Secured Party a continuing security interest
in the Collateral. This Agreement is executed in partial substitution and
replacement of the security arrangements existing between Debtor and Secured
Party as of the date hereof.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants the following to Secured Party:
(a) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and all of the other Loan Documents by Borrower have been
duly authorized by all necessary corporate action of Borrower.
(b) ENFORCEABILITY. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Borrower, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the
enforcement of creditors' rights and except to the extent specific remedies
may generally be limited by equitable principles.
(c) OWNERSHIP AND LIENS. Except for encumbrances existing on the
date hereof and disclosed to Secured Party, (i) Borrower has good and
marketable title to the Collateral free and clear of all liens, security
interests, encumbrances or adverse claims, except for the security
interest created by this Agreement; (ii) no dispute, right of setoff,
counterclaim or defense exists with respect to all or any part of the
Collateral; and (iii) Borrower has not executed any other security
agreement currently affecting the Collateral and no effective financing
statement or other instrument similar in effect covering all or any part
of the Collateral is on file in any recording office except as may have
been executed or filed in favor of Secured Party.
(d) NO CONFLICTS OR CONSENTS. Neither the ownership, the intended
use of the Collateral by Borrower, the grant of the security interest by
Borrower to Secured Party herein nor the exercise by Secured Party of its
rights or remedies hereunder, will (i) conflict with any provision of (A)
any domestic or foreign law, statute, rule or regulation, (B) the
articles or certificate of incorporation, charter, bylaws or partnership
agreement, as the case may be, of Borrower, or (C) any agreement,
judgment, license, order or permit applicable to or binding upon
Borrower, or (ii) result in or require the creation of any lien, charge
or encumbrance upon any assets or properties of Borrower or of any person
except as may be expressly contemplated in the Loan Documents. Except as
expressly contemplated in the Loan Documents, no consent, approval,
authorization or order of, and no notice to or filing with, any court,
governmental authority or third party is required in connection with the
grant by Borrower of the security interest herein or the exercise by
Secured Party of its rights and remedies hereunder.
RESTATED SECURITY AGREEMENT - PAGE 2
<PAGE>
(e) SECURITY INTEREST. Borrower has and will have at all times full
right, power and authority to grant a security interest in the Collateral
to Secured Party in the manner provided herein, free and clear of any lien,
security interest or other charge or encumbrance, except for any liens in
existence on the date hereof and disclosed to Secured Party. This
Agreement creates a legal, valid and binding security interest in favor of
Secured Party in the Collateral securing the Indebtedness. Possession by
Secured Party of all certificates, instruments and cash constituting
Collateral from time to time and/or the filing of the financing statements
delivered prior hereto and/or concurrently herewith by Borrower to Secured
Party will perfect and establish the first priority of Secured Party's
security interest hereunder in the Collateral, except for any liens in
existence on the date hereof and disclosed to Secured Party.
(f) LOCATION. Borrower's residence or chief executive office, as
the case may be, and the office where the records concerning the
Collateral are kept is located at its address set forth on the signature
page hereof. Except as specified elsewhere herein, all Collateral shall
be kept at such address and such other addresses as may be listed in
SCHEDULE "A" attached hereto and made a part hereof.
(g) SOLVENCY OF BORROWER. As of the date hereof, and after giving
effect to this Agreement and the completion of all other transactions
contemplated by Borrower at the time of the execution of this Agreement,
and Secured Party acknowledges that as of the date hereof, (i) Borrower
is and will be solvent, (ii) the fair saleable value of Borrower's assets
exceeds and will continue to exceed Borrower's liabilities (both fixed
and contingent), (iii) Borrower is paying and will continue to be able to
pay its debts as they mature, and (iv) if Borrower is not an individual,
Borrower has and will have sufficient capital to carry on Borrower's
businesses and all businesses in which Borrower is about to engage.
(h) INVENTORY. The security interest in the inventory shall continue
through all stages of manufacture and shall, without further action, attach
to the accounts or other proceeds resulting from the sale or other
disposition thereof and to all such inventory as may be returned to
Borrower by its account Borrowers.
(i) ACCOUNTS. Each account represents the valid and legally binding
indebtedness of a bona fide account Borrower arising from the sale or lease
by Borrower of goods or the rendition by Borrower of services and is not
subject to contra accounts, setoffs, defenses or counterclaims by or
available to account Borrowers obligated on the accounts except as
disclosed by Borrower to Secured Party from time to time in writing. The
amount shown as to each account on Borrower's books is the true and
undisputed amount owing and unpaid thereon, subject only to discounts,
allowances, rebates, credits and adjustments to which the account Borrower
has a right and which have been disclosed to Secured Party in writing.
(j) CHATTEL PAPER, DOCUMENTS AND INSTRUMENTS. The chattel paper,
documents and instruments of Borrower pledged hereunder have only one
original counterpart and no party other than Borrower or Secured Party is
in actual or constructive possession of any such chattel paper, documents
or instruments.
4. AFFIRMATIVE COVENANTS. Borrower will comply with the covenants
contained in this Section 4 at all times during the period of time this
Agreement is effective unless Secured Party shall otherwise consent in writing.
(a) OWNERSHIP AND LIENS. Borrower will maintain good and
marketable title to all Collateral free and clear of all liens, security
interests, encumbrances or adverse claims, except for the security
interest created by this Agreement and the security interests and other
encumbrances expressly permitted by the other Loan Documents. Borrower
will not permit any dispute, right of setoff, counterclaim or defense to
exist with respect to all or any part of the Collateral. Borrower will
cause any financing statement or other security instrument with respect
to the Collateral to be terminated, except as may exist or as may have
been filed in favor of Secured Party. Borrower will defend at its
expense Secured Party's right, title and security interest in and to the
Collateral against the claims of any third party.
(b) FURTHER ASSURANCES. Borrower will from time to time at its
expense promptly execute and deliver all further instruments and
documents and take all further action necessary or appropriate or
RESTATED SECURITY AGREEMENT - PAGE 3
<PAGE>
that Secured Party may request in order (i) to perfect and protect the
security interest created or purported to be created hereby and the first
priority of such security interest, (ii) to enable Secured Party to
exercise and enforce its rights and remedies hereunder in respect of the
Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing such financing or
continuation statements, or amendments thereto; and (B) furnishing to
Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral, all in reasonable detail satisfactory to
Secured Party.
(c) INSPECTION OF COLLATERAL. Borrower will keep adequate records
concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect any of the
Collateral and the books and records of or relating to the Collateral at
any time during normal business hours, to make and take away photocopies,
photographs and printouts thereof and to write down and record any such
information.
(d) PAYMENT OF TAXES. Borrower (i) will timely pay all property
and other taxes, assessments and governmental charges or levies imposed
upon the Collateral or any part thereof, (ii) will timely pay all lawful
claims which, if unpaid, might become a lien or charge upon the
Collateral or any part thereof, and (iii) will maintain appropriate
accruals and reserves for all such liabilities in a timely fashion in
accordance with generally accepted accounting principles.
Notwithstanding any other provision contained in this Subsection, Secured
Party may at its discretion exercise its rights under Subsection 6(c) at
any time to pay such taxes, assessments, governmental charges, interest,
costs and penalties.
(e) MORTGAGEE'S AND LANDLORD'S WAIVERS. Borrower shall cause each
landlord of real property leased by Borrower to execute and deliver
agreements satisfactory in form and substance to Secured Party by which
such mortgagee or landlord waives or subordinates any rights it may have in
the Collateral.
(f) CONDITION OF GOODS. Borrower will maintain, preserve, protect
and keep all Collateral which constitutes goods in good condition, repair
and working order and will cause such Collateral to be used and operated
in good and workmanlike manner, in accordance with applicable laws and in
a manner which will not make void or cancelable any insurance with
respect to such Collateral. Borrower will promptly make or cause to be
made all repairs, replacements and other improvements to or in connection
with the Collateral which Secured Party may request from time to time.
(g) INSURANCE. Borrower will, at its own expense, maintain
insurance with respect to all Collateral which constitutes goods in such
amounts, against such risks, in such form and with such insurers, as
shall be satisfactory to Secured Party from time to time. If requested
by Secured Party, each policy for property damage insurance shall provide
for all losses to be paid directly to Secured Party. If requested by
Secured Party, each policy of insurance maintained by Borrower shall (i)
name Borrower and Secured Party as insured parties thereunder (without
any representation or warranty by or obligation upon Secured Party) as
their interests may appear, (ii) contain the agreement by the insurer
that any loss thereunder shall be payable to Secured Party
notwithstanding any action, inaction or breach of representation or
warranty by Borrower, (iii) provide that there shall be no recourse
against Secured Party for payment of premiums or other amounts with
respect thereto, and (iv) provide that at least thirty (30) days prior
written notice of cancellation or of lapse shall be given to Secured
Party by the insurer. Borrower will, if requested by Secured Party,
deliver to Secured Party original or duplicate policies of such insurance
and, as often as Secured Party may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Borrower will
also, at the request of Secured Party, duly execute and deliver
instruments of assignment of such insurance policies and cause the
respective insurers to acknowledge notice of such assignment. All
insurance payments in respect of loss of or damage to any Collateral
shall be paid to Secured Party and applied as Secured Party in its sole
discretion deems appropriate.
(h) ACCOUNTS AND GENERAL INTANGIBLES. Borrower will, except as
otherwise provided in Subsection 6(f), collect, at Borrower's own
expense, all amounts due or to become due under each of the accounts and
general intangibles. In connection with such collections, Borrower may
and, at Secured
RESTATED SECURITY AGREEMENT - PAGE 4
<PAGE>
Party's direction, will take such action not otherwise forbidden by
Subsection 5(e) as Borrower or Secured Party may deem necessary or
advisable to enforce collection or performance of each of the accounts and
general intangibles. Borrower will also duly perform and cause to be
performed all of its obligations with respect to the goods or services, the
sale or lease or rendition of which gave rise or will give rise to each
account and all of its obligations to be performed under or with respect to
the general intangibles. Borrower also covenants and agrees to take any
action and/or execute any documents that Secured Party may request in order
to comply with the Federal Assignment of Claims Act, as amended.
(i) CHATTEL PAPER, DOCUMENTS AND INSTRUMENTS. Borrower will take
such action as may be requested by Secured Party in order to cause any
chattel paper, documents or instruments to be valid and enforceable and
will cause all chattel paper to have only one original counterpart. Upon
request by Secured Party, Borrower will deliver to Secured Party all
originals of chattel paper, documents or instruments and will mark all
chattel paper with a legend indicating that such chattel paper is subject
to the security interest granted hereunder.
5. NEGATIVE COVENANTS. Borrower will comply with the covenants contained
in this Section 5 at all times during the period of time this Agreement is
effective, unless Secured Party shall otherwise consent in writing.
(a) TRANSFER OR ENCUMBRANCE. Borrower will not (i) sell, assign (by
operation of law or otherwise), transfer, exchange, lease or otherwise
dispose of any of the Collateral, (ii) grant a lien or security interest in
or execute, file or record any financing statement or other security
instrument with respect to the Collateral to any party other than Secured
Party, or (iii) deliver actual or constructive possession of any of the
Collateral to any party other than Secured Party, except for (A) sales and
leases of inventory in the ordinary course of business, and (B) the sale or
other disposal of any item of equipment which is worn out or obsolete and
which has been replaced by an item of equal suitability and value, owned by
Borrower and made subject to the security interest under this Agreement,
but which is otherwise free and clear of any lien, security interest,
encumbrance or adverse claim; provided, however, the exceptions permitted
in clauses (A) and (B) above shall automatically terminate upon the
occurrence of an Event of Default.
(b) IMPAIRMENT OF SECURITY INTEREST. Borrower will not take or
fail to take any action which would in any manner impair the value or
enforceability of Secured Party's security interest in any Collateral.
(b) POSSESSION OF COLLATERAL. Borrower will not cause or permit the
removal of any Collateral from its possession, control and risk of loss,
nor will Borrower cause or permit the removal of any Collateral from the
address on the signature page hereof and the addresses specified on
SCHEDULE "B" to this Agreement other than (i) as permitted by Subsection
5(a), or (ii) in connection with the possession of any Collateral by
Secured Party or by its bailee.
(d) GOODS. Borrower will not permit any Collateral which constitutes
goods to at any time (i) be covered by any document except documents in the
possession of the Secured Party, (ii) become so related to, attached to or
used in connection with any particular real property so as to become a
fixture upon such real property, or (iii) be installed in or affixed to
other goods so as to become an accession to such other goods unless such
other goods are subject to a perfected first priority security interest
under this Agreement.
(e) COMPROMISE OF COLLATERAL. Borrower will not adjust, settle,
compromise, amend or modify any Collateral, except an adjustment,
settlement, compromise, amendment or modification in good faith and in the
ordinary course of business; provided, however, this exception shall
automatically terminate upon the occurrence of an Event of Default or upon
Secured Party's written request. Borrower shall provide to Secured Party
such information concerning (i) any adjustment, settlement, compromise,
amendment or modification of any Collateral, and (ii) any claim asserted by
any account Borrower for credit, allowance, adjustment, dispute, setoff or
counterclaim, as Secured Party may request from time to time.
RESTATED SECURITY AGREEMENT - PAGE 5
<PAGE>
(f) FINANCING STATEMENT FILINGS. Borrower recognizes that financing
statements pertaining to the Collateral have been or may be filed where
Borrower maintains any Collateral, has its records concerning any
Collateral or has its residence or chief executive office, as the case may
be. Without limitation of any other covenant herein, Borrower will not
cause or permit any change in the location of (i) any Collateral, (ii) any
records concerning any Collateral, or (iii) Borrower's residence or chief
executive office, as the case may be, to a jurisdiction other than as
represented in Subsection 3(f) unless Borrower shall have notified Secured
Party in writing of such change at least thirty (30) days prior to the
effective date of such change, and shall have first taken all action
required by Secured Party for the purpose of further perfecting or
protecting the security interest in favor of Secured Party in the
Collateral. In any written notice furnished pursuant to this Subsection,
Borrower will expressly state that the notice is required by this Agreement
and contains facts that may require additional filings of financing
statements or other notices for the purpose of continuing perfection of
Secured Party's security interest in the Collateral.
6. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section 6 at all times during the period of time this
Agreement is effective.
(a) ADDITIONAL FINANCING STATEMENTS FILINGS. Borrower hereby
authorizes Secured Party to file, without the signature of Borrower, one
or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Borrower further agrees that a carbon,
photographic or other reproduction of this Security Agreement or any
financing statement describing any Collateral is sufficient as a
financing statement and may be filed in any jurisdiction Secured Party
may deem appropriate.
(b) POWER OF ATTORNEY. Borrower hereby irrevocably appoints
Secured Party as Borrower's attorney-in-fact, such power of attorney
being coupled with an interest, with full authority in the place and
stead of Borrower and in the name of Borrower or otherwise, from time to
time in Secured Party's discretion, to take any action and to execute any
instrument which Secured Party may deem necessary or appropriate to
accomplish the purposes of this Agreement, including without limitation:
(i) to obtain and adjust insurance required by Secured Party hereunder;
(ii) to demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of the Collateral; (iii) to receive, endorse and collect any
drafts or other instruments, documents and chattel paper in connection
with clause (i) or (ii) above; and (iv) to file any claims or take any
action or institute any proceedings which Secured Party may deem
necessary or appropriate for the collection and/or preservation of the
Collateral or otherwise to enforce the rights of Secured Party with
respect to the Collateral.
(c) PERFORMANCE BY SECURED PARTY. If Borrower fails to perform any
agreement or obligation provided herein, Secured Party may itself perform,
or cause performance of, such agreement or obligation, and the expenses of
Secured Party incurred in connection therewith shall be a part of the
Indebtedness, secured by the Collateral and payable by Borrower on demand.
(d) BORROWER'S RECEIPT OF PROCEEDS. All amounts and proceeds
(including instruments and writings) received by Borrower in respect of
such accounts or general intangibles shall be received in trust for the
benefit of Secured Party hereunder and, upon an Event of Default and
request of Secured Party, shall be segregated from other property of
Borrower and shall be forthwith delivered to Secured Party in the same
form as so received (with any necessary endorsement) and applied to the
Indebtedness in such manner as Secured Party deems appropriate in its
sole discretion.
(e) NOTIFICATION OF ACCOUNT BORROWERS. Secured Party may, upon an
Event of Default, notify any or all obligors under any accounts or
general intangibles (i) of Secured Party's security interest in such
accounts or general intangibles and direct such obligors to make payment
of all amounts due or to become due to Borrower thereunder directly to
Secured Party, and (ii) to verify the accounts or general intangibles
with such obligors. Secured Party shall have the right, at the expense of
Borrower, to enforce collection of any such accounts or general
intangibles and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Borrower.
RESTATED SECURITY AGREEMENT - PAGE 6
<PAGE>
7. EVENTS OF DEFAULT. Each of the following constitutes an "EVENT OF
DEFAULT" under this Agreement:
(a) FAILURE TO PAY INDEBTEDNESS. The failure, refusal or neglect of
Borrower to make any payment of principal or interest on the Indebtedness,
or any portion thereof, as the same shall become due and payable; or
(b) NON-PERFORMANCE OF COVENANTS. The failure of Borrower or any
Obligated Party to timely and properly observe, keep or perform any
covenant, agreement, warranty or condition required herein or in any of the
other Loan Documents; or
(c) DEFAULT UNDER OTHER LOAN DOCUMENTS. The occurrence of an event
of default under any of the other Loan Documents (other than attributable
to the insolvency or bankruptcy of James C. Bernet); or
(d) FALSE REPRESENTATION. Any representation contained herein or
in any of the other Loan Documents made by Borrower or any Obligated
Party is false or misleading in any material respect; or
(e) BANKRUPTCY OR INSOLVENCY. If Borrower or any Obligated Party
(other than James C. Bernet): (i) becomes insolvent, or makes a transfer
in fraud of creditors, or makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts as they
become due; (ii) generally is not paying its debts as such debts become
due; (iii) has a receiver, trustee or custodian appointed for, or take
possession of, all or substantially all of the assets of such party or
any of the Collateral, either in a proceeding brought by such party or in
a proceeding brought against such party and such appointment is not
discharged or such possession is not terminated within sixty (60) days
after the effective date thereof or such party consents to or acquiesces
in such appointment or possession; (iv) files a petition for relief under
the United States Bankruptcy Code or any other present or future federal
or state insolvency, bankruptcy or similar laws (all of the foregoing
hereinafter collectively called "APPLICABLE BANKRUPTCY LAW") or an
involuntary petition for relief is filed against such party under any
Applicable Bankruptcy Law and such involuntary petition is not dismissed
within sixty (60) days after the filing thereof, or an order for relief
naming such party is entered under any Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization or other relief of
Borrowers now or hereafter existing is requested or consented to by such
party; (v) fails to have discharged within a period of sixty (60) days
any attachment, sequestration or similar writ levied upon any property of
such party; or (vi) fails to pay within thirty (30) days any final money
judgment against such party.
(f) ACTION BY OTHER LIENHOLDER. The holder of any lien or security
interest on any of the assets of Borrower, including without limitation,
the Collateral (without hereby implying the consent of Secured Party to the
existence or creation of any such lien or security interest on the
Collateral), declares a default thereunder or institutes foreclosure or
other proceedings for the enforcement of its remedies thereunder; or
(g) LIQUIDATION AND RELATED EVENTS. The liquidation, dissolution,
merger or consolidation of Borrower.
8. REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Loan Documents or otherwise available to Secured Party,
Secured Party may exercise one or more of the rights and remedies provided in
this Section.
(a) REMEDIES. Secured Party may from time to time at its discretion,
without limitation and without notice except as expressly provided in any
of the Loan Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a secured party under the Code (whether or not the Code
applies to the affected Collateral);
(ii) require Borrower to, and Borrower hereby agrees that it
will at its expense and upon request of Secured Party, assemble the
Collateral as directed by Secured Party and make it
RESTATED SECURITY AGREEMENT - PAGE 7
<PAGE>
available to Secured Party at a place to be designated by Secured
Party which is reasonably convenient to both parties;
(iii) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest granted
hereunder by any available judicial procedure;
(iv) sell or otherwise dispose of, at its office, on the
premises of Borrower or elsewhere, the Collateral, as a unit or in
parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale or other disposition of any
part of the Collateral shall not exhaust Secured Party's power of
sale, but sales or other dispositions may be made from time to time
until all of the Collateral has been sold or disposed of or until
the Indebtedness has been paid and performed in full), and at any
such sale or other disposition it shall not be necessary to exhibit
any of the Collateral;
(v) buy the Collateral, or any portion thereof, at any public
sale;
(vi) buy the Collateral, or any portion thereof, at any private
sale if the Collateral is of a type customarily sold in a recognized
market or is of a type which is the subject of widely distributed
standard price quotations;
(vii) apply for the appointment of a receiver for the
Collateral, and Borrower hereby consents to any such appointment; and
(viii) at its option, retain the Collateral in satisfaction of
the Indebtedness whenever the circumstances are such that Secured
Party is entitled to do so under the Code or otherwise.
Borrower agrees that in the event Borrower is entitled to receive any
notice under the Uniform Commercial Code, as it exists in the state governing
any such notice, of the sale or other disposition of any Collateral,
reasonable notice shall be deemed given when such notice is deposited in a
depository receptacle under the care and custody of the United States Postal
Service, postage prepaid, at Borrower's address set forth on the signature
page hereof, five (5) days prior to the date of any public sale, or after
which a private sale, of any of such Collateral is to be held. Secured Party
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. Secured Party may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which
it was so adjourned.
(b) APPLICATION OF PROCEEDS. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held
by Secured Party as Collateral, and any cash proceeds received by Secured
Party in respect of any sale or other disposition of, collection from, or
other realization upon, all or any part of the Collateral as follows in
such order and manner as Secured Party may elect:
(i) to the repayment or reimbursement of the reasonable costs
and expenses (including, without limitation, reasonable attorneys'
fees and expenses) incurred by Secured Party in connection with (A)
the administration of the Loan Documents, (B) the custody,
preservation, use or operation of, or the sale of, collection from,
or other realization upon, the Collateral, and (C) the exercise or
enforcement of any of the rights and remedies of Secured Party
hereunder;
(ii) to the payment or other satisfaction of any liens and other
encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
RESTATED SECURITY AGREEMENT - PAGE 8
<PAGE>
(v) to the payment of any other amounts required by applicable
law (including without limitation, Section 9.504(a)(3) of the Code
or any other applicable statutory provision); and
(vi) by delivery to Borrower or any other party lawfully
entitled to receive such cash or proceeds whether by direction of a
court of competent jurisdiction or otherwise.
(c) DEFICIENCY. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the
Collateral by Secured Party are insufficient to pay all amounts to which
Secured Party is legally entitled, Borrower and any party who guaranteed
or is otherwise obligated to pay all or any portion of the Indebtedness
shall be liable for the deficiency, together with interest thereon as
provided in the Loan Documents.
(d) NON-JUDICIAL REMEDIES. In granting to Secured Party the power to
enforce its rights hereunder without prior judicial process or judicial
hearing, Borrower expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. Borrower recognizes and concedes that
non-judicial remedies are consistent with the usage of trade, are
responsive to commercial necessity and are the result of a bargain at arm's
length. Nothing herein is intended to prevent Secured Party or Borrower
from resorting to judicial process at either party's option.
(e) OTHER RECOURSE. Borrower waives any right to require Secured
Party to proceed against any third party, exhaust any Collateral or other
security for the Indebtedness, or to have any third party joined with
Borrower in any suit arising out of the Indebtedness or any of the Loan
Documents, or pursue any other remedy available to Secured Party.
Borrower further waives any and all notice of acceptance of this
Agreement and of the creation, modification, rearrangement, renewal or
extension of the Indebtedness. Borrower further waives any defense
arising by reason of any disability or other defense of any third party
or by reason of the cessation from any cause whatsoever of the liability
of any third party. Until all of the Indebtedness shall have been paid in
full, Borrower shall have no right of subrogation and Borrower waives the
right to enforce any remedy which Secured Party has or may hereafter have
against any third party, and waives any benefit of and any right to
participate in any other security whatsoever now or hereafter held by
Secured Party. Borrower authorizes Secured Party, and without notice or
demand and without any reservation of rights against Borrower and without
affecting Borrower's liability hereunder or on the Indebtedness to (i)
take or hold any other property of any type from any third party as
security for the Indebtedness, and exchange, enforce, waive and release
any or all of such other property, (ii) apply such other property and
direct the order or manner of sale thereof as Secured Party may in its
discretion determine, (iii) renew, extend, accelerate, modify,
compromise, settle or release any of the Indebtedness or other security
for the Indebtedness, (iv) waive, enforce or modify any of the provisions
of any of the Loan Documents executed by any third party, and (v) release
or substitute any third party.
9. INDEMNITY. Borrower hereby indemnifies and agrees to hold harmless
Secured Party, and its shareholders, officers, directors, employees, agents
and representatives (each an "INDEMNIFIED PERSON") from and against any and
all liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature made
by or through Borrower or any Obligated Party (collectively, the "CLAIMS")
which may be imposed on, incurred by, or asserted against, any Indemnified
Person arising in connection with the Loan Documents, the Indebtedness or the
Collateral (including without limitation, the enforcement of the Loan
Documents and the defense of any Indemnified Person's actions and/or inactions
in connection with the Loan Documents). WITHOUT LIMITATION, THE FOREGOING
INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO ANY CLAIMS
WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH
AND/OR ANY OTHER INDEMNIFIED PERSON, except to the limited extent the Claims
against an Indemnified Person are proximately caused by such Indemnified
Person's gross negligence or willful misconduct. If Borrower or any third
party ever alleges such gross negligence or willful misconduct by any
Indemnified Person, the indemnification provided for in this Section shall
nonetheless be paid upon demand, subject to later adjustment or reimbursement,
until such time as a court of competent jurisdiction enters a final judgment
as to the extent and effect of the alleged gross negligence or willful
misconduct. The indemnification provided for in this Section shall survive
the termination of this
RESTATED SECURITY AGREEMENT - PAGE 9
<PAGE>
Agreement and shall extend and continue to benefit each individual or entity
who is or has at any time been an Indemnified Person hereunder.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire agreement
of Secured Party and Borrower with respect to the Collateral. If the
parties hereto are parties to any prior agreement, either written or
oral, relating to the Collateral, the terms of this Agreement shall amend
and supersede the terms of such prior agreements as to transactions on
or after the effective date of this Agreement, but all security
agreements, financing statements, guaranties, other contracts and notices
for the benefit of Secured Party shall continue in full force and effect
to secure the Indebtedness unless Secured Party specifically releases its
rights thereunder by separate release.
(b) AMENDMENT. No modification, consent or amendment of any
provision of this Agreement or any of the other Loan Documents shall be
valid or effective unless the same is in writing and signed by the party
against whom it is sought to be enforced.
(c) ACTIONS BY SECURED PARTY. The lien, security interest and other
security rights of Secured Party hereunder shall not be impaired by (i) any
renewal, extension, increase or modification with respect to the
Indebtedness, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Secured Party may grant with respect to the
Collateral, or (iii) any release or indulgence granted to any endorser,
guarantor or surety of the Indebtedness. The taking of additional security
by Secured Party shall not release or impair the lien, security interest or
other security rights of Secured Party hereunder or affect the obligations
of Borrower hereunder.
(d) WAIVER BY SECURED PARTY. Secured Party may waive any Event of
Default without waiving any other prior or subsequent Event of Default.
Secured Party may remedy any default without waiving the Event of Default
remedied. Neither the failure by Secured Party to exercise, nor the delay
by Secured Party in exercising, any right or remedy upon any Event of
Default shall be construed as a waiver of such Event of Default or as a
waiver of the right to exercise any such right or remedy at a later date.
No single or partial exercise by Secured Party of any right or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right or remedy hereunder may be
exercised at any time. No waiver of any provision hereof or consent to
any departure by Borrower therefrom shall be effective unless the same
shall be in writing and signed by Secured Party and then such waiver or
consent shall be effective only in the specific instances, for the
purpose for which given and to the extent therein specified. No notice
to or demand on Borrower in any case shall of itself entitle Borrower to
any other or further notice or demand in similar or other circumstances.
(e) COSTS AND EXPENSES. Borrower will upon demand pay to Secured
Party the amount of any and all costs and expenses (including without
limitation, attorneys' fees and expenses), which Secured Party may incur
in connection with (i) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, the Collateral,
(ii) the exercise or enforcement of any of the rights of Secured Party
under the Loan Documents, or (iii) the failure by Borrower to perform or
observe any of the provisions hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT
OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
(g) VENUE. This Agreement has been entered into in Dallas County,
Texas where Secured Party's address for notice purposes is located, and
it shall be performable for all purposes in such county. Courts within
the State of Texas shall have jurisdiction over any and all disputes
arising under or pertaining
RESTATED SECURITY AGREEMENT - PAGE 10
<PAGE>
to this Agreement and venue for any such disputes shall be in the county
or judicial district where this Agreement has been executed and delivered.
(h) SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable,
shall not impair or invalidate the remainder of this Agreement and the
effect thereof shall be confined to the provision held to be illegal,
invalid or unenforceable.
(i) NO OBLIGATION. Nothing contained herein shall be construed as an
obligation on the part of Secured Party to extend or continue to extend
credit to Borrower.
(j) NOTICES. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery
service with proof of delivery, or (iii) United States mail, postage
prepaid, registered or certified mail, return receipt requested, sent to
the intended addressee at the address set forth on the signature page
hereof or to such different address as the addressee shall have designated
by written notice sent pursuant to the terms hereof and shall be deemed to
have been received either, in the case of personal delivery, at the time of
personal delivery, in the case of expedited delivery service, as of the
date of first attempted delivery at the address and in the manner provided
herein, or in the case of mail, upon deposit in a depository receptacle
under the care and custody of the United States Postal Service. Either
party shall have the right to change its address for notice hereunder to
any other location within the continental United States by notice to the
other party of such new address at least thirty (30) days prior to the
effective date of such new address.
(k) BINDING EFFECT AND ASSIGNMENT. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on
Borrower and the heirs, executors, administrators, personal
representatives, successors and assigns of Borrower, and (iii) shall inure
to the benefit of Secured Party and its successors and assigns. Without
limiting the generality of the foregoing, Secured Party may pledge, assign
or otherwise transfer the Indebtedness and its rights under this Agreement
and any of the other Loan Documents to any other party. Borrower's rights
and obligations hereunder may not be assigned or otherwise transferred
without the prior written consent of Secured Party.
(l) TERMINATION. It is contemplated by the parties hereto that
from time to time there may be no outstanding Indebtedness, but
notwithstanding such occurrences, this Agreement shall remain valid and
shall be in full force and effect as to subsequent outstanding
Indebtedness. Upon (i) the satisfaction in full of the Indebtedness,
(ii) written request for the termination hereof delivered by Borrower to
Secured Party, and (iii) written release or termination delivered by
Secured Party to Borrower, this Agreement and the security interests
created hereby shall terminate. Upon termination of this Agreement and
Borrower's written request, Secured Party will, at Borrower's sole cost
and expense, return to Borrower such of the Collateral as shall not have
been sold or otherwise disposed of or applied pursuant to the terms
hereof and execute and deliver to Borrower such documents as Borrower
shall reasonably request to evidence such termination.
(m) CUMULATIVE RIGHTS. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right or remedy
which Secured Party may otherwise have at law or in equity or under any
of the other Loan Documents, and the exercise of one or more of such
rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of any other rights or remedies.
(n) GENDER AND NUMBER. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in the
singular number shall be held and construed to include the plural and
words in the plural number shall be held and construed to include the
singular, unless in each instance the context requires otherwise.
(o) DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
RESTATED SECURITY AGREEMENT - PAGE 11
<PAGE>
EXECUTED as of the date first written above.
Borrower's Address: BORROWER:
P.O. Box 500730 USCommunication Services, Inc.
San Diego, CA 92150
By: /s/ James C. Bernet, President
----------------------------------
Secured Party's Address: James C. Bernet, President
c/o Canmax Inc.
150 W. Carpenter Freeway
Irving, Texas 75039
RESTATED SECURITY AGREEMENT - PAGE 12
<PAGE>
EXHIBIT 10.4
GUARANTY
-----------
(O'DONNELL)
THIS GUARANTY ("GUARANTY") is made as of the 15th day of June, 1998, by
Guarantor (as hereinafter defined) for the benefit of Lender (as hereinafter
defined).
1. DEFINITIONS. As used in this Guaranty, the following terms shall have
the meanings indicated below:
(a) The term "LENDER" shall mean Canmax Telecom, Inc., a Texas
corporation, whose address for notice purposes is the following:
c/o Canmax Inc.
150 W. Carpenter Freeway
Irving, Texas 75039
(b) The term "BORROWER" shall mean USCommunication Services, Inc., a
Delaware corporation.
(c) The term "GUARANTEED INDEBTEDNESS" shall mean (i) all
indebtedness, obligations and liabilities of Borrower to Lender arising
under any of the Loan Documents whether joint, several or joint and
several, and (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all costs and expenses incurred
by Lender in connection with the collection and administration of all or
any part of the indebtedness and obligations described in (i) and (ii)
above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys' fees, and (iv) all
renewals, extensions, modifications and rearrangements of the indebtedness
and obligations described in (i), (ii) and (iii) above.
(d) The term "GUARANTOR" shall mean Delia O'Donnell, whose address
for notice purposes is the following:
P.O. Box 500730
San Diego, California 92150
(e) The term "LOAN DOCUMENTS" shall mean (i) that certain Restated
Promissory Note of even date herewith executed by Borrower payable to the
order of Lender in the original principal amount of $724,660, bearing
interest and payable as provided therein, (ii) that certain Restated
Security Agreement of even date herewith executed by Borrower for the
benefit of Lender securing, among other items, the repayment of the
Promissory Note, (iii) the Rescission Agreement, (iv) the Pledge Agreement
executed by Guarantor to secure the obligations hereunder, and (v) all
other obligations of Borrower to Lender under any other documents
evidencing, securing and/or pertaining to the Guaranteed Indebtedness.
(f) The term "RESCISSION AGREEMENT" shall mean that certain
Rescission Agreement of even date herewith among Canmax Inc., Borrower,
Lender, Guarantor, Alan Anderson (as Trustee) and James C. Bernet.
2. OBLIGATIONS. As an inducement to Lender to consummate the rescission
of the transactions described in the Rescission Agreement, Guarantor, for value
received, does hereby unconditionally and absolutely guarantee the prompt and
full payment and performance of the Guaranteed Indebtedness when due or declared
to be due and at all times thereafter.
- --------------------------------------------------------------------------------
GUARANTY - PAGE 1
(CANMAX/USC)
<PAGE>
3. CHARACTER OF OBLIGATIONS. This is an absolute, continuing and
unconditional guaranty of payment and not of collection. All Guaranteed
Indebtedness heretofore or concurrently herewith made by Lender to Borrower
shall be conclusively presumed to have been made or acquired in acceptance
hereof. Guarantor shall be liable, jointly and severally, with Borrower and any
other guarantor of all or any part of the Guaranteed Indebtedness.
4. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and
warrants the following to Lender:
(a) Guarantor is a shareholder of Borrower, and as such this Guaranty
may reasonably be expected to benefit, directly or indirectly, Guarantor;
and
(b) Guarantor is familiar with, and has independently reviewed the
books and records regarding, the financial condition of Borrower and is
familiar with the value of any and all collateral intended to be security
for the payment of all or any part of the Guaranteed Indebtedness;
provided, however, Guarantor is not relying on such financial condition or
collateral as an inducement to enter into this Guaranty; and
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of Borrower
and Guarantor is not relying on Lender to provide such information to
Guarantor either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver and
perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery and performance of
this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith do not and will not violate (i) any agreement or
instrument to which Guarantor is a party, (ii) any law, rule, regulation or
order of any governmental authority to which Guarantor is subject, or
(iii) its articles or certificate of incorporation or bylaws, if Guarantor
is a corporation, or its partnership agreement, if Guarantor is a
partnership; and
(e) Neither Lender nor any other party has made any representation,
warranty or statement to Guarantor in order to induce Guarantor to execute
this Guaranty; and
(f) The financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Lender are and
shall be true and correct in all material respects and fairly present the
financial position of Guarantor as of the dates thereof, and no material
adverse change has occurred in the financial condition of Guarantor
reflected in the financial statements and other financial information
regarding Guarantor heretofore delivered to Lender since the date of the
last statement thereof; and
(g) As of the date hereof, and after giving effect to this Guaranty
and the obligations evidenced hereby, (i) Guarantor is and will be solvent,
(ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii)
Guarantor is and will continue to be able to pay its debts as they mature,
and (iv) if Guarantor is not an individual, Guarantor has and will continue
to have sufficient capital to carry on its business and all businesses in
which it is about to engage.
5. COVENANTS. Guarantor hereby covenants and agrees with Lender as
follows:
(a) Guarantor shall not, so long as its obligations under this
Guaranty continue, transfer or pledge any material portion of its assets
for less than full and adequate consideration; and
(b) Guarantor shall promptly furnish to Lender at any time and from
time to time such financial statements and other financial information of
Guarantor as the Lender may require, in form and substance satisfactory to
Lender; and
(c) Guarantor shall comply with all terms and provisions of the Loan
Documents that apply to Guarantor; and
- --------------------------------------------------------------------------------
GUARANTY - PAGE 2
(CANMAX/USC)
<PAGE>
(d) Guarantor shall promptly inform Lender of (i) any litigation or
governmental investigation against Guarantor or affecting any security for
all or any part of the Guaranteed Indebtedness or this Guaranty which, if
determined adversely, might have a material adverse effect upon the
financial condition of Guarantor or upon such security or might cause a
default under any of the Loan Documents, (ii) any claim or controversy
which might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the financial
condition of Guarantor.
6. CONSENT AND WAIVER.
(a) Guarantor waives (i) promptness, diligence and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration,
notice of dishonor, diligence in enforcement and indulgences of every kind,
and (ii) the taking of any other action by Lender, including without
limitation, giving any notice of default or any other notice to, or making
any demand on, Borrower, any other guarantor of all or any part of the
Guaranteed Indebtedness or any other party.
(b) Guarantor waives any rights Guarantor has under, or any
requirements imposed by, Chapter 34 of the Texas Business and Commerce
Code, as in effect on the date of this Guaranty or as it may be amended
from time to time.
(c) Lender may at any time, without the consent of or notice to
Guarantor, without incurring responsibility to Guarantor and without
impairing, releasing, reducing or affecting the obligations of Guarantor
hereunder: (i) change the manner, place or terms of payment of all or any
part of the Guaranteed Indebtedness, or renew, extend, modify, rearrange or
alter all or any part of the Guaranteed Indebtedness; (ii) change the
interest rate accruing on any of the Guaranteed Indebtedness (including,
without limitation, any periodic change in such interest rate that occurs
because such Guaranteed Indebtedness accrues interest at a variable rate
which may fluctuate from time to time); (iii) sell, exchange, release,
surrender, subordinate, realize upon or otherwise deal with in any manner
and in any order any collateral for all or any part of the Guaranteed
Indebtedness or this Guaranty or setoff against all or any part of the
Guaranteed Indebtedness; (iv) neglect, delay, omit, fail or refuse to take
or prosecute any action for the collection of all or any part of the
Guaranteed Indebtedness or this Guaranty or to take or prosecute any action
in connection with any of the Loan Documents; (v) exercise or refrain from
exercising any rights against Borrower or others, or otherwise act or
refrain from acting; (vi) settle or compromise all or any part of the
Guaranteed Indebtedness and subordinate the payment of all or any part of
the Guaranteed Indebtedness to the payment of any obligations, indebtedness
or liabilities which may be due or become due to Lender or others;
(vii) apply any deposit balance, fund, payment, collections through process
of law or otherwise or other collateral of Borrower to the satisfaction and
liquidation of the indebtedness or obligations of Borrower to Lender, if
any, not guaranteed under this Guaranty pursuant to Section 10 herein; and
(viii) apply any sums paid to Lender by Guarantor, Borrower or others to
the Guaranteed Indebtedness in such order and manner as Lender, in its sole
discretion, may determine.
(d) Should Lender seek to enforce the obligations of Guarantor
hereunder by action in any court or otherwise, Guarantor waives any
requirement, substantive or procedural, that (i) Lender first enforce any
rights or remedies against Borrower or any other person or entity liable to
Lender for all or any part of the Guaranteed Indebtedness, including
without limitation that a judgment first be rendered against Borrower or
any other person or entity, or that Borrower or any other person or entity
should be joined in such cause, or (ii) Lender shall first enforce rights
against any collateral which shall ever have been given to secure all or
any part of the Guaranteed Indebtedness or this Guaranty. Such waiver
shall be without prejudice to Lender's right, at its option, to proceed
against Borrower or any other person or entity, whether by separate action
or by joinder.
(e) In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or omission
of Lender, its directors, officers, employees, representatives or agents in
connection with
- --------------------------------------------------------------------------------
GUARANTY - PAGE 3
(CANMAX/USC)
<PAGE>
Lender's administration of the Guaranteed Indebtedness, except for Lender's
willful misconduct and gross negligence.
7. OBLIGATIONS NOT IMPAIRED.
(a) Guarantor agrees that its obligations hereunder shall not be
released, diminished, impaired, reduced or affected by the occurrence of
any one or more of the following events: (i) the death, disability or lack
of corporate power of Borrower, Guarantor (except as provided in paragraph
11 herein) or any other guarantor of all or any part of the Guaranteed
Indebtedness, (ii) any receivership, insolvency, bankruptcy or other
proceedings affecting Borrower, Guarantor or any other guarantor of all or
any part of the Guaranteed Indebtedness, or any of their respective
property; (iii) the partial or total release or discharge of Borrower or
any other guarantor of all or any part of the Guaranteed Indebtedness, or
any other person or entity from the performance of any obligation contained
in any instrument or agreement evidencing, governing or securing all or any
part of the Guaranteed Indebtedness, whether occurring by reason of law or
otherwise; (iv) the taking or accepting of any collateral for all or any
part of the Guaranteed Indebtedness or this Guaranty; (v) the taking or
accepting of any other guaranty for all or any part of the Guaranteed
Indebtedness; (vi) any failure by Lender to acquire, perfect or continue
any lien or security interest on collateral securing all or any part of the
Guaranteed Indebtedness or this Guaranty; (vii) the impairment of any
collateral securing all or any part of the Guaranteed Indebtedness or this
Guaranty; (viii) any failure by Lender to sell any collateral securing all
or any part of the Guaranteed Indebtedness or this Guaranty in a
commercially reasonable manner or as otherwise required by law; (ix) any
invalidity or unenforceability of or defect or deficiency in any of the
Loan Documents; or (x) any other circumstance which might otherwise
constitute a defense available to, or discharge of, Borrower or any other
guarantor of all or any part of the Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of all or any part of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by
Lender upon the insolvency, bankruptcy or reorganization of Borrower,
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
(c) In the event Borrower is a corporation, joint stock association
or partnership, or is hereafter incorporated, none of the following shall
affect Guarantor's liability hereunder: (i) the unenforceability of all or
any part of the Guaranteed Indebtedness against Borrower by reason of the
fact that the Guaranteed Indebtedness exceeds the amount permitted by law;
(ii) the act of creating all or any part of the Guaranteed Indebtedness is
ultra vires; or (iii) the officers or partners creating all or any part of
the Guaranteed Indebtedness acted in excess of their authority. Guarantor
hereby acknowledges that withdrawal from, or termination of, any ownership
interest in Borrower now or hereafter owned or held by Guarantor shall not
alter, affect or in any way limit the obligations of Guarantor hereunder.
8. ACTIONS AGAINST GUARANTOR. In the event of a default in the payment
or performance of all or any part of the Guaranteed Indebtedness when such
Guaranteed Indebtedness becomes due, whether by its terms, by acceleration or
otherwise, Guarantor shall, without notice or demand, promptly pay the amount
due thereon to Lender, in lawful money of the United States, at Lender's address
set forth in subparagraph 1(a) above. One or more successive or concurrent
actions may be brought against Guarantor, either in the same action in which
Borrower is sued or in separate actions, as often as Lender deems advisable.
The exercise by Lender of any right or remedy under this Guaranty or under any
other agreement or instrument, at law, in equity or otherwise, shall not
preclude concurrent or subsequent exercise of any other right or remedy. The
books and records of Lender shall be admissible in evidence in any action or
proceeding involving this Guaranty and shall be PRIMA FACIE evidence of the
payments made on, and the outstanding balance of, the Guaranteed Indebtedness.
9. PAYMENT BY GUARANTOR. Whenever Guarantor pays any sum which is or may
become due under this Guaranty, written notice must be delivered to Lender
contemporaneously with such payment. Such notice shall be effective for
purposes of this paragraph when contemporaneously with such payment Lender
receives such notice either by: (a) personal delivery to the address and
designated department of Lender identified in subparagraph 1(a) above, or
(b) United States mail, certified or registered, return receipt requested,
postage prepaid, addressed to Lender at the address shown in subparagraph 1(a)
above. In the absence of such notice to Lender by Guarantor in
- --------------------------------------------------------------------------------
GUARANTY - PAGE 4
(CANMAX/USC)
<PAGE>
compliance with the provisions hereof, any sum received by Lender on account
of the Guaranteed Indebtedness shall be conclusively deemed paid by Borrower.
10. DEATH OF GUARANTOR. In the event of the death of Guarantor, any duly
authorized representative of the estate of Guarantor may revoke Guarantor's
future obligations under this Guaranty by giving Lender written notice of
Guarantor's death and that the estate of Guarantor shall not be liable hereunder
for any indebtedness or obligations of Borrower incurred on or after the
effective date of such revocation. Such revocation shall be deemed to be
effective on the day following the day Lender receives such notice delivered
either by: (a) personal delivery to the address and designated department of
Lender identified in subparagraph 1(a) above, or (b) United States mail,
registered or certified, return receipt requested, postage prepaid, addressed to
Lender at the address shown in subparagraph 1(a) above. Notwithstanding such
revocation, the obligations of the deceased Guarantor shall continue as an
obligation against his estate as to (x) all of the Guaranteed Indebtedness that
is outstanding on the effective date of such revocation, and any renewals or
extensions thereof, and (y) all loans, advances and other extensions of credit
made to or for the account of Borrower on or after the effective date of such
revocation pursuant to an obligation of Lender under a commitment or agreement
made to or with Borrower prior to the effective date of such revocation. The
terms and conditions of this Guaranty, including without limitation the consents
and waivers set forth in Section 6 hereof, shall remain in effect with respect
to the Guaranteed Indebtedness described in the preceding sentence in the same
manner as if such revocation had not been made.
11. NOTICE OF SALE. In the event that Guarantor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, at the address for Guarantor set forth in
subparagraph 1(d) above, five (5) days prior to the date any public sale, or
after which any private sale, of any such collateral is to be held; PROVIDED,
HOWEVER, that notice given in any other reasonable manner or at any other
reasonable time shall be sufficient.
12. WAIVER BY LENDER. No delay on the part of Lender in exercising any
right hereunder or failure to exercise the same shall operate as a waiver of
such right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by an officer of Lender, and
then only in the specific instance and for the purpose given.
13. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of Lender,
its successors and assigns. This Guaranty is binding upon Guarantor and
Guarantor's heirs, executors, administrators, personal representatives and
successors, including without limitation any person or entity obligated by
operation of law upon the reorganization, merger, consolidation or other change
in the organizational structure of Guarantor.
14. COSTS AND EXPENSES. Guarantor shall pay on demand by Lender all costs
and expenses, including without limitation, all reasonable attorneys' fees
incurred by Lender in connection with the preparation, administration,
enforcement and/or collection of this Guaranty. This covenant shall survive the
payment of the Guaranteed Indebtedness.
15. SEVERABILITY. If any provision of this Guaranty is held by a court of
competent jurisdiction to be illegal, invalid or unenforceable under present or
future laws, such provision shall be fully severable, shall not impair or
invalidate the remainder of this Guaranty and the effect thereof shall be
confined to the provision held to be illegal, invalid or unenforceable.
16. NO OBLIGATION. Nothing contained herein shall be construed as an
obligation on the part of Lender to extend or continue to extend credit to
Borrower.
17. AMENDMENT. No modification or amendment of any provision of this
Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of
Lender, and then shall be effective only in the specific instance and for the
purpose for which given.
18. CUMULATIVE RIGHTS. All rights and remedies of Lender hereunder are
cumulative of each other and of every other right or remedy which Lender may
otherwise have at law or in equity or under any instrument or
- --------------------------------------------------------------------------------
GUARANTY - PAGE 5
(CANMAX/USC)
<PAGE>
agreement, and the exercise of one or more of such rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of any other
rights or remedies.
19. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.
20. VENUE. This Guaranty has been entered into in the county in Texas
where Lender's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising under or pertaining to
this Guaranty and venue for any such disputes shall be in the county or judicial
district where the Lender's address for notice purposes is located.
21. COMPLIANCE WITH APPLICABLE USURY LAWS. Notwithstanding any other
provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, Guarantor
and Lender by its acceptance hereof agree that Guarantor shall never be required
or obligated to pay interest in excess of the maximum nonusurious interest rate
as may be authorized by applicable law for the written contracts which
constitute the Guaranteed Indebtedness. It is the intention of Guarantor and
Lender to conform strictly to the applicable laws which limit interest rates,
and any of the aforesaid contracts for interest, if and to the extent payable by
Guarantor, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
22. DESCRIPTIVE HEADINGS. The headings in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
23. GENDER. Within this Guaranty, words of any gender shall be held and
construed to include the other gender.
24. ENTIRE AGREEMENT. This Guaranty contains the entire agreement between
Guarantor and Lender regarding the subject matter hereof and supersedes all
prior written and oral agreements and understandings, if any, regarding same;
provided, however, this Guaranty is in addition to and does not replace, cancel,
modify or affect any other guaranty of Guarantor now or hereafter held by Lender
that relates to Borrower or any other person or entity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- --------------------------------------------------------------------------------
GUARANTY - PAGE 6
(CANMAX/USC)
<PAGE>
EXECUTED as of the date first above written.
GUARANTOR:
/s/ DELIA O'DONNELL
----------------------------------------
Delia O'Donnell
- --------------------------------------------------------------------------------
GUARANTY - PAGE 7
(CANMAX/USC)
<PAGE>
EXHIBIT 10.5
GUARANTY
(TRUSTEE)
THIS GUARANTY ("GUARANTY") is made as of the 15th day of June, 1998, by
Guarantor (as hereinafter defined) for the benefit of Lender (as hereinafter
defined).
1. DEFINITIONS. As used in this Guaranty, the following terms shall
have the meanings indicated below:
(a) The term "LENDER" shall mean Canmax Telecom, Inc., a Texas
corporation, whose address for notice purposes is the following:
c/o Canmax Inc.
150 W. Carpenter Freeway
Irving, Texas 75039
(b) The term "BORROWER" shall mean USCommunication Services, Inc., a
Delaware corporation.
(c) The term "GUARANTEED INDEBTEDNESS" shall mean (i) all
indebtedness, obligations and liabilities of Borrower to Lender arising
under any of the Loan Documents whether joint, several or joint and
several, and (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all costs and expenses incurred
by Lender in connection with the collection and administration of all or
any part of the indebtedness and obligations described in (i) and (ii)
above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys' fees, and (iv) all
renewals, extensions, modifications and rearrangements of the indebtedness
and obligations described in (i), (ii) and (iii) above.
(d) The term "GUARANTOR" shall mean Alan Anderson, trustee of the
voting trust created under agreement dated May 1, 1997 and amended on
December 1, 1997 and January 30, 1998, whose address for notice purposes is
the following:
90 Windsor Road
Hamden, Connecticut 06517
(e) The term "LOAN DOCUMENTS" shall mean (i) that certain Restated
Promissory Note of even date herewith executed by Borrower payable to the
order of Lender in the original principal amount of $724,660 bearing
interest and payable as provided therein, (ii) that certain Restated
Security Agreement of even date herewith executed by Borrower for the
benefit of Lender securing, among other items, the repayment of the
Promissory Note, (iii) the Rescission Agreement, (iv) the Pledge Agreement
executed by Guarantor to secure the obligations hereunder, and (v) all
other obligations of Borrower to Lender under any other documents
evidencing, securing and/or pertaining to the Guaranteed Indebtedness.
(f) The term "RESCISSION AGREEMENT" shall mean that certain
Rescission Agreement of even date herewith among Canmax, Inc., Borrower,
Lender, Guarantor, Delia O'Donnell and James C. Bernet.
2. OBLIGATIONS. As an inducement to Lender to consummate the
rescission of the transactions described in the Rescission Agreement,
Guarantor, for value received, does hereby unconditionally and absolutely
guarantee on a non-recourse basis the prompt and full payment and performance
of the Guaranteed Indebtedness when due or declared to be due and at all
times thereafter.
3. CHARACTER OF OBLIGATIONS. This is an absolute, continuing and
unconditional guaranty of payment on a non-recourse basis and not of
collection. All Guaranteed Indebtedness heretofore or concurrently herewith
made by Lender to Borrower shall be conclusively presumed to have been made
or acquired in acceptance hereof.
- --------------------------------------------------------------------------------
GUARANTY - PAGE 1
(CANMAX/USC)
<PAGE>
Guarantor shall be liable, jointly and severally, with Borrower and any other
guarantor of all or any part of the Guaranteed Indebtedness.
4. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and
warrants the following to Lender:
(a) Guarantor is a shareholder of Borrower and as such, this Guaranty
may reasonably be expected to benefit, directly or indirectly, Guarantor;
and
(b) Guarantor is familiar with, and has independently reviewed the
books and records regarding, the financial condition of Borrower and is
familiar with the value of any and all collateral intended to be security
for the payment of all or any part of the Guaranteed Indebtedness;
provided, however, Guarantor is not relying on such financial condition or
collateral as an inducement to enter into this Guaranty; and
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of Borrower
and Guarantor is not relying on Lender to provide such information to
Guarantor either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver and
perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery and performance of
this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith do not and will not violate (i) any agreement or
instrument to which Guarantor is a party, (ii) any law, rule, regulation or
order of any governmental authority to which Guarantor is subject, or
(iii) its articles or certificate of incorporation or bylaws, if Guarantor
is a corporation, or its partnership agreement, if Guarantor is a
partnership; and
(e) Neither Lender nor any other party has made any representation,
warranty or statement to Guarantor in order to induce Guarantor to execute
this Guaranty; and
(f) The financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Lender are and
shall be true and correct in all material respects and fairly present the
financial position of Guarantor as of the dates thereof, and no material
adverse change has occurred in the financial condition of Guarantor
reflected in the financial statements and other financial information
regarding Guarantor heretofore delivered to Lender since the date of the
last statement thereof; and
(g) As of the date hereof, and after giving effect to this Guaranty
and the obligations evidenced hereby, (i) Guarantor is and will be solvent,
(ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii)
Guarantor is and will continue to be able to pay its debts as they mature,
and (iv) if Guarantor is not an individual, Guarantor has and will continue
to have sufficient capital to carry on its business and all businesses in
which it is about to engage.
5. COVENANTS. Guarantor hereby covenants and agrees with Lender as
follows:
(a) Guarantor shall not, so long as its obligations under this
Guaranty continue, transfer or pledge any material portion of its assets
for less than full and adequate consideration; and
(b) Guarantor shall promptly furnish to Lender at any time and from
time to time such financial statements and other financial information of
Guarantor as the Lender may require, in form and substance satisfactory to
Lender; and
(c) Guarantor shall comply with all terms and provisions of the Loan
Documents that apply to Guarantor; and
(d) Guarantor shall promptly inform Lender of (i) any litigation or
governmental investigation against Guarantor or affecting any security for
all or any part of the Guaranteed Indebtedness
- --------------------------------------------------------------------------------
GUARANTY - PAGE 2
(CANMAX/USC)
<PAGE>
or this Guaranty which, if determined adversely, might have a material
adverse effect upon the financial condition of Guarantor or upon such
security or might cause a default under any of the Loan Documents, (ii) any
claim or controversy which might become the subject of such litigation or
governmental investigation, and (iii) any material adverse change in the
financial condition of Guarantor.
6. CONSENT AND WAIVER.
(a) Guarantor waives (i) promptness, diligence and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration,
notice of dishonor, diligence in enforcement and indulgences of every kind,
and (ii) the taking of any other action by Lender, including without
limitation, giving any notice of default or any other notice to, or making
any demand on, Borrower, any other guarantor of all or any part of the
Guaranteed Indebtedness or any other party.
(b) Guarantor waives any rights Guarantor has under, or any
requirements imposed by, Chapter 34 of the Texas Business and Commerce
Code, as in effect on the date of this Guaranty or as it may be amended
from time to time.
(c) Lender may at any time, without the consent of or notice to
Guarantor, without incurring responsibility to Guarantor and without
impairing, releasing, reducing or affecting the obligations of Guarantor
hereunder: (i) change the manner, place or terms of payment of all or any
part of the Guaranteed Indebtedness, or renew, extend, modify, rearrange or
alter all or any part of the Guaranteed Indebtedness; (ii) change the
interest rate accruing on any of the Guaranteed Indebtedness (including,
without limitation, any periodic change in such interest rate that occurs
because such Guaranteed Indebtedness accrues interest at a variable rate
which may fluctuate from time to time); (iii) sell, exchange, release,
surrender, subordinate, realize upon or otherwise deal with in any manner
and in any order any collateral for all or any part of the Guaranteed
Indebtedness or this Guaranty or setoff against all or any part of the
Guaranteed Indebtedness; (iv) neglect, delay, omit, fail or refuse to take
or prosecute any action for the collection of all or any part of the
Guaranteed Indebtedness or this Guaranty or to take or prosecute any action
in connection with any of the Loan Documents; (v) exercise or refrain from
exercising any rights against Borrower or others, or otherwise act or
refrain from acting; (vi) settle or compromise all or any part of the
Guaranteed Indebtedness and subordinate the payment of all or any part of
the Guaranteed Indebtedness to the payment of any obligations, indebtedness
or liabilities which may be due or become due to Lender or others;
(vii) apply any deposit balance, fund, payment, collections through process
of law or otherwise or other collateral of Borrower to the satisfaction and
liquidation of the indebtedness or obligations of Borrower to Lender, if
any, not guaranteed under this Guaranty pursuant to Section 10 herein; and
(viii) apply any sums paid to Lender by Guarantor, Borrower or others to
the Guaranteed Indebtedness in such order and manner as Lender, in its sole
discretion, may determine.
(d) Should Lender seek to enforce the obligations of Guarantor
hereunder by action in any court or otherwise, Guarantor waives any
requirement, substantive or procedural, that (i) Lender first enforce any
rights or remedies against Borrower or any other person or entity liable to
Lender for all or any part of the Guaranteed Indebtedness, including
without limitation that a judgment first be rendered against Borrower or
any other person or entity, or that Borrower or any other person or entity
should be joined in such cause, or (ii) Lender shall first enforce rights
against any collateral which shall ever have been given to secure all or
any part of the Guaranteed Indebtedness or this Guaranty. Such waiver
shall be without prejudice to Lender's right, at its option, to proceed
against Borrower or any other person or entity, whether by separate action
or by joinder.
(e) In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or omission
of Lender, its directors, officers, employees, representatives or agents in
connection with Lender's administration of the Guaranteed Indebtedness,
except for Lender's willful misconduct and gross negligence.
- --------------------------------------------------------------------------------
GUARANTY - PAGE 3
(CANMAX/USC)
<PAGE>
7. OBLIGATIONS NOT IMPAIRED.
(a) Guarantor agrees that its obligations hereunder shall not be
released, diminished, impaired, reduced or affected by the occurrence of
any one or more of the following events: (i) the death, disability or lack
of corporate power of Borrower, Guarantor (except as provided in paragraph
11 herein) or any other guarantor of all or any part of the Guaranteed
Indebtedness, (ii) any receivership, insolvency, bankruptcy or other
proceedings affecting Borrower, Guarantor or any other guarantor of all or
any part of the Guaranteed Indebtedness, or any of their respective
property; (iii) the partial or total release or discharge of Borrower or
any other guarantor of all or any part of the Guaranteed Indebtedness, or
any other person or entity from the performance of any obligation contained
in any instrument or agreement evidencing, governing or securing all or any
part of the Guaranteed Indebtedness, whether occurring by reason of law or
otherwise; (iv) the taking or accepting of any collateral for all or any
part of the Guaranteed Indebtedness or this Guaranty; (v) the taking or
accepting of any other guaranty for all or any part of the Guaranteed
Indebtedness; (vi) any failure by Lender to acquire, perfect or continue
any lien or security interest on collateral securing all or any part of the
Guaranteed Indebtedness or this Guaranty; (vii) the impairment of any
collateral securing all or any part of the Guaranteed Indebtedness or this
Guaranty; (viii) any failure by Lender to sell any collateral securing all
or any part of the Guaranteed Indebtedness or this Guaranty in a
commercially reasonable manner or as otherwise required by law; (ix) any
invalidity or unenforceability of or defect or deficiency in any of the
Loan Documents; or (x) any other circumstance which might otherwise
constitute a defense available to, or discharge of, Borrower or any other
guarantor of all or any part of the Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of all or any part of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by
Lender upon the insolvency, bankruptcy or reorganization of Borrower,
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
(c) In the event Borrower is a corporation, joint stock association
or partnership, or is hereafter incorporated, none of the following shall
affect Guarantor's liability hereunder: (i) the unenforceability of all or
any part of the Guaranteed Indebtedness against Borrower by reason of the
fact that the Guaranteed Indebtedness exceeds the amount permitted by law;
(ii) the act of creating all or any part of the Guaranteed Indebtedness is
ultra vires; or (iii) the officers or partners creating all or any part of
the Guaranteed Indebtedness acted in excess of their authority. Guarantor
hereby acknowledges that withdrawal from, or termination of, any ownership
interest in Borrower now or hereafter owned or held by Guarantor shall not
alter, affect or in any way limit the obligations of Guarantor hereunder.
8. ACTIONS AGAINST GUARANTOR. In the event of a default in the
payment or performance of all or any part of the Guaranteed Indebtedness when
such Guaranteed Indebtedness becomes due, whether by its terms, by
acceleration or otherwise, Guarantor shall, without notice or demand,
promptly pay the amount due thereon to Lender, in lawful money of the United
States, at Lender's address set forth in subparagraph 1(a) above, subject to
the non-recourse limitations set forth in Section 25 hereof. One or more
successive or concurrent actions may be brought against Guarantor, either in
the same action in which Borrower is sued or in separate actions, as often as
Lender deems advisable. The exercise by Lender of any right or remedy under
this Guaranty or under any other agreement or instrument, at law, in equity
or otherwise, shall not preclude concurrent or subsequent exercise of any
other right or remedy. The books and records of Lender shall be admissible
in evidence in any action or proceeding involving this Guaranty and shall be
PRIMA FACIE evidence of the payments made on, and the outstanding balance of,
the Guaranteed Indebtedness.
9. PAYMENT BY GUARANTOR. Whenever Guarantor pays any sum which is or
may become due under this Guaranty, written notice must be delivered to
Lender contemporaneously with such payment. Such notice shall be effective
for purposes of this paragraph when contemporaneously with such payment
Lender receives such notice either by: (a) personal delivery to the address
and designated department of Lender identified in subparagraph 1(a) above, or
(b) United States mail, certified or registered, return receipt requested,
postage prepaid, addressed to Lender at the address shown in subparagraph
1(a) above. In the absence of such notice to Lender by Guarantor in
compliance with the provisions hereof, any sum received by Lender on account
of the Guaranteed Indebtedness shall be conclusively deemed paid by Borrower.
- --------------------------------------------------------------------------------
GUARANTY - PAGE 4
(CANMAX/USC)
<PAGE>
10. DEATH OF GUARANTOR. In the event of the death of Guarantor, any
duly authorized representative of the estate of Guarantor may revoke
Guarantor's future obligations under this Guaranty by giving Lender written
notice of Guarantor's death and that the estate of Guarantor shall not be
liable hereunder for any indebtedness or obligations of Borrower incurred on
or after the effective date of such revocation. Such revocation shall be
deemed to be effective on the day following the day Lender receives such
notice delivered either by: (a) personal delivery to the address and
designated department of Lender identified in subparagraph 1(a) above, or (b)
United States mail, registered or certified, return receipt requested,
postage prepaid, addressed to Lender at the address shown in subparagraph
1(a) above. Notwithstanding such revocation, the obligations of the deceased
Guarantor shall continue as an obligation against his estate as to (x) all of
the Guaranteed Indebtedness that is outstanding on the effective date of such
revocation, and any renewals or extensions thereof, and (y) all loans,
advances and other extensions of credit made to or for the account of
Borrower on or after the effective date of such revocation pursuant to an
obligation of Lender under a commitment or agreement made to or with Borrower
prior to the effective date of such revocation. The terms and conditions of
this Guaranty, including without limitation the consents and waivers set
forth in Section 6 hereof, shall remain in effect with respect to the
Guaranteed Indebtedness described in the preceding sentence in the same
manner as if such revocation had not been made.
11. NOTICE OF SALE. In the event that Guarantor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, at the address for Guarantor set forth
in subparagraph 1(d) above, five (5) days prior to the date any public sale,
or after which any private sale, of any such collateral is to be held;
PROVIDED, HOWEVER, that notice given in any other reasonable manner or at any
other reasonable time shall be sufficient.
12. WAIVER BY LENDER. No delay on the part of Lender in exercising any
right hereunder or failure to exercise the same shall operate as a waiver of
such right. In no event shall any waiver of the provisions of this Guaranty
be effective unless the same be in writing and signed by an officer of
Lender, and then only in the specific instance and for the purpose given.
13. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of
Lender, its successors and assigns. This Guaranty is binding upon Guarantor
and Guarantor's heirs, executors, administrators, personal representatives
and successors, including without limitation any person or entity obligated
by operation of law upon the reorganization, merger, consolidation or other
change in the organizational structure of Guarantor.
14. COSTS AND EXPENSES. Guarantor shall pay on demand by Lender all
costs and expenses, including without limitation, all reasonable attorneys'
fees incurred by Lender in connection with the preparation, administration,
enforcement and/or collection of this Guaranty. This covenant shall survive
the payment of the Guaranteed Indebtedness.
15. SEVERABILITY. If any provision of this Guaranty is held by a court
of competent jurisdiction to be illegal, invalid or unenforceable under
present or future laws, such provision shall be fully severable, shall not
impair or invalidate the remainder of this Guaranty and the effect thereof
shall be confined to the provision held to be illegal, invalid or
unenforceable.
16. NO OBLIGATION. Nothing contained herein shall be construed as an
obligation on the part of Lender to extend or continue to extend credit to
Borrower.
17. AMENDMENT. No modification or amendment of any provision of this
Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of
Lender, and then shall be effective only in the specific instance and for the
purpose for which given.
18. CUMULATIVE RIGHTS. All rights and remedies of Lender hereunder are
cumulative of each other and of every other right or remedy which Lender may
otherwise have at law or in equity or under any instrument or agreement, and
the exercise of one or more of such rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of any other rights or remedies.
- --------------------------------------------------------------------------------
GUARANTY - PAGE 5
(CANMAX/USC)
<PAGE>
19. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.
20. VENUE. This Guaranty has been entered into in the county in Texas
where Lender's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of
Texas shall have jurisdiction over any and all disputes arising under or
pertaining to this Guaranty and venue for any such disputes shall be in the
county or judicial district where the Lender's address for notice purposes is
located.
21. COMPLIANCE WITH APPLICABLE USURY LAWS. Notwithstanding any other
provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness,
Guarantor and Lender by its acceptance hereof agree that Guarantor shall
never be required or obligated to pay interest in excess of the maximum
nonusurious interest rate as may be authorized by applicable law for the
written contracts which constitute the Guaranteed Indebtedness. It is the
intention of Guarantor and Lender to conform strictly to the applicable laws
which limit interest rates, and any of the aforesaid contracts for interest,
if and to the extent payable by Guarantor, shall be held to be subject to
reduction to the maximum nonusurious interest rate allowed under said law.
22. DESCRIPTIVE HEADINGS. The headings in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
23. GENDER. Within this Guaranty, words of any gender shall be held
and construed to include the other gender.
24. ENTIRE AGREEMENT. This Guaranty contains the entire agreement
between Guarantor and Lender regarding the subject matter hereof and
supersedes all prior written and oral agreements and understandings, if any,
regarding same; provided, however, this Guaranty is in addition to and does
not replace, cancel, modify or affect any other guaranty of Guarantor now or
hereafter held by Lender that relates to Borrower or any other person or
entity.
25. NON-RECOURSE LIMITATIONS. Notwithstanding anything to the contrary
contained herein, Lender acknowledges and agrees that its sole recourse
against Guarantor for the non-payment or non-performance of any of the
Guaranteed Indebtedness shall be limited to the collateral pledged Lender
pursuant to the terms of the Pledge Agreement, and that Guarantor's
obligations hereunder may be fully discharged upon Guarantor's delivery of
such collateral to Lender.
EXECUTED as of the date first above written.
GUARANTOR:
/s/ Alan Anderson
----------------------------------------
Alan Anderson, Trustee of the voting
trust created under agreement dated
May 1, 1997 and amended December 1, 1997
and January 30, 1998
- --------------------------------------------------------------------------------
GUARANTY - PAGE 6
(CANMAX/USC)
<PAGE>
EXHIBIT 10. 6
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "AGREEMENT") is made as of the 15th day of
June, 1998, by Delia O'Donnell ("O'Donnell") and Alan Anderson, Trustee (the
"TRUSTEE") of the trust (the "TRUST") established under the Voting Trust
Agreement of Nationwide Transportation Products, Inc. (subsequently known as
USCommunication Services, Inc.) dated May 1, 1997 and amended on December 1,
1997 and January 30, 1998 (collectively, O'Donnell and Trustee are referred to
as PLEDGOR"), in favor of Canmax Telecom, Inc., a Texas corporation ("PLEDGEE").
Pledgor, jointly and severally, hereby agrees with Pledgee as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
(a) The term "BORROWER" shall mean either Pledgor or the Company.
(b) The term "COMPANY " shall mean USCommunication Services, Inc., a
Delaware corporation.
(c) The term "CODE" shall mean the Uniform Commercial Code as in
effect in the State of Arizona on the date of this Agreement or as it may
hereafter be amended from time to time.
(d) The term "COLLATERAL" shall mean all shares of capital stock or
other equity interests now owned or hereafter acquired by Pledgor in the
Company, together with certificates representing all of such shares or
other interests, including without limitation all property specifically
described on SCHEDULE "A" attached hereto and made a part hereof (the
"PLEDGED SHARES"), and all dividends, cash, options, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any of
the Pledged Shares. The term Collateral, as used herein, shall also include
(A) all certificates, instruments and/or other documents evidencing the
foregoing, (B) all renewals, replacements and substitutions of all of the
foregoing, (C) all Additional Property (as hereinafter defined), and (D)
all PRODUCTS and PROCEEDS of all of the foregoing. The designation of
proceeds does not authorize Pledgor to sell, transfer or otherwise convey
any of the foregoing property. The delivery at any time by Pledgor to
Pledgee of any property as a pledge to secure payment or performance of any
indebtedness or obligation whatsoever shall also constitute a pledge of
such property as Collateral hereunder.
(e) The term "GUARANTIES" shall mean the separate Guaranty agreements
executed by O'Donnell and the Trustee for the benefit of Pledgee
guaranteeing the payment of the indebtedness outstanding under the Note and
other obligations of the Company and each Pledgor arising under the Loan
Documents.
(f) The term "INDEBTEDNESS" shall mean (i) all indebtedness,
obligations and liabilities of Borrower to Pledgee arising under any of the
Loan Documents, whether joint, several or joint and several, (ii) all
accrued but unpaid interest on any of the indebtedness described in (i)
above, (iii) all obligations of Pledgor to Pledgee under any documents
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Pledgee in connection with the collection and administration of
all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon,
the collateral securing all or any part of such indebtedness and
obligations, including without limitation all reasonable attorneys' fees,
and (v) all renewals, extensions, modifications and rearrangements of the
indebtedness and obligations described in (i), (ii), (iii) and (iv) above.
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 1
<PAGE>
(g) The term "LOAN DOCUMENTS" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining
to the Indebtedness, including without limitation this Agreement, the
Rescission Agreement, the Guaranties, the Note and the Security Agreement.
(h) The term "NOTE" shall mean that certain promissory note executed
by the Company payable to the Pledgee of even date herewith in the original
principal amount of $724,660, bearing interest and payable as set forth
therein.
(i) The term "OBLIGATED PARTY" shall mean any party other than
Borrower who secures, guarantees and/or is otherwise obligated to pay all
or any portion of the Indebtedness.
(j) The term "RESCISSION AGREEMENT" shall mean the Rescission
Agreement of even date herewith executed by the Company, Canmax Inc.,
Pledgee, Pledgor, and James C. Bernet.
(k) The term "SECURITY AGREEMENT" shall mean that certain Security
Agreement of even date herewith between the Company and Pledgee securing
the repayment of the Note.
All words and phrases used herein which are expressly defined in Section 1.201,
Chapter 8 or Chapter 9 of the Code shall have the meaning provided for therein.
Other words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1-201, Chapter 8 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Pledgor, for
value received, hereby grants to Pledgee a continuing security interest in the
Collateral.
3. ADDITIONAL PROPERTY. Collateral shall also include the following
property (collectively, the "ADDITIONAL PROPERTY") which Pledgor becomes
entitled to receive or shall receive in connection with any other Collateral:
(a) any stock certificate, including without limitation, any certificate
representing a stock dividend or any certificate in connection with any
recapitalization, reclassification, merger, consolidation, conversion, sale of
assets, combination of shares, stock split or spin-off; (b) any option, warrant,
subscription or right, whether as an addition to or in substitution of any other
Collateral; (c) any dividends or distributions of any kind whatsoever, whether
distributable in cash, stock or other property; (d) any interest, premium or
principal payments; and (e) any conversion or redemption proceeds. All
Additional Property and all certificates or other written instruments or
documents evidencing and/or representing the Additional Property, together with
such instruments of transfer as Pledgee may request, shall immediately be
delivered to or deposited with Pledgee and held by Pledgee as Collateral under
the terms of this Agreement. If the Additional Property received by Pledgor
shall be shares of stock or other securities, such shares of stock or other
securities shall be duly endorsed in blank or accompanied by proper instruments
of transfer and assignment duly executed in blank with, if requested by Pledgee,
signatures guaranteed by a member or member organization in good standing of an
authorized Securities Transfer Agents Medallion Program, all in form and
substance satisfactory to Pledgee. Pledgee shall be deemed to have possession of
any Collateral in transit to it or its agent.
4. VOTING RIGHTS. As long as no Event of Default shall have occurred
hereunder, any voting rights incident to any stock or other securities pledged
as Collateral may be exercised by Pledgor; provided, however, that Pledgor will
not exercise, or cause to be exercised, any such voting rights, without the
prior written consent of Pledgee, if the direct or indirect effect of such vote
will result in an Event of Default hereunder.
5. MAINTENANCE OF COLLATERAL. Other than the exercise of reasonable care
to assure the safe custody of any Collateral in Pledgee's possession from time
to time, Pledgee does not have any obligation, duty or responsibility with
respect to the Collateral. Without limiting the generality of the foregoing,
Pledgee shall not have any obligation, duty or responsibility to do any of the
following: (a) ascertain any maturities, calls, conversions, exchanges,
offers, tenders or similar matters relating to the Collateral or informing
Pledgor with respect to any such matters; (b) fix, preserve or exercise any
right, privilege or option (whether conversion, redemption or otherwise) with
respect to the Collateral unless (i) Pledgor makes written demand to Pledgee to
do so, (ii) such written demand
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 2
<PAGE>
is received by Pledgee in sufficient time to permit Pledgee to take the action
demanded in the ordinary course of its business, and (iii) Pledgor provides
additional collateral, acceptable to Pledgee in its sole discretion; (c)
collect any amounts payable in respect of the Collateral (Pledgee being liable
to account to Pledgor only for what Pledgee may actually receive or collect
thereon); (d) sell all or any portion of the Collateral to avoid market loss;
(e) sell all or any portion of the Collateral unless and until (i) Pledgor
makes written demand upon Pledgee to sell the Collateral, and (ii) Pledgor
provides additional collateral, acceptable to Pledgee in its sole discretion;
or (f) hold the Collateral for or on behalf of any party other than Pledgor.
6. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants the following to Pledgee:
(a) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and all of the other Loan Documents by Pledgor have been duly
authorized by each Pledgor.
(b) ENFORCEABILITY. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Pledgor, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies may generally be
limited by equitable principles.
(c) OWNERSHIP AND LIENS. Pledgor has good and marketable title to
the Collateral free and clear of all liens, security interests, encumbrances or
adverse claims, except for the security interest created by this Agreement. No
dispute, right of setoff, counterclaim or defense exists with respect to all or
any part of the Collateral. Pledgor has not executed any other security
agreement currently affecting the Collateral and no financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office except as may have been executed or filed in favor
of Pledgee. The capital stock described on SCHEDULE "A" hereto constitutes 100%
of the issued and outstanding capital stock of the Company.
(d) NO CONFLICTS OR CONSENTS. Neither the ownership, the intended
use of the Collateral by Pledgor, the grant of the security interest by Pledgor
to Pledgee herein nor the exercise by Pledgee of its rights or remedies
hereunder, will (i) conflict with any provision of (A) any domestic or foreign
law, statute, rule or regulation, (B) any documents governing the organization
of the Trust or (C) any agreement, judgment, license, order or permit applicable
to or binding upon Pledgor or otherwise affecting the Collateral, or (ii) result
in or require the creation of any lien, charge or encumbrance upon any assets or
properties of Pledgor or of any person except as may be expressly contemplated
in the Loan Documents. No consent, approval, authorization or order of, and no
notice to or filing with, any court, governmental authority or third party is
required in connection with the grant by Pledgor of the security interest herein
or the exercise by Pledgee of its rights and remedies hereunder.
(e) SECURITY INTEREST. Pledgor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Pledgee in the manner provided herein, free and clear of any lien, security
interest or other charge or encumbrance. This Agreement creates a legal, valid
and binding security interest in favor of Pledgee in the Collateral.
(f) LOCATION. Pledgor's residence or chief executive office, as the
case may be, and the office where the records concerning the Collateral are kept
is located at its address set forth on the signature page hereof.
(g) SOLVENCY OF PLEDGOR. As of the date hereof, and after giving
effect to this Agreement and the completion of all other transactions
contemplated by Pledgor at the time of the execution of this Agreement, (i)
Pledgor is and will be solvent, (ii) the fair saleable value of Pledgor's assets
exceeds and will continue to exceed Pledgor's liabilities (both fixed and
contingent), (iii) Pledgor is paying and will continue to be able to pay its
debts as they mature, and (iv) if Pledgor is not an individual, Pledgor has and
will have sufficient capital to carry on Pledgor's businesses and all businesses
in which Pledgor is about to engage.
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 3
<PAGE>
7. AFFIRMATIVE COVENANTS. Pledgor will comply with the covenants
contained in this Section at all times during the period of time this Agreement
is effective unless Pledgee shall otherwise consent in writing.
(a) OWNERSHIP AND LIENS. Pledgor will maintain good and marketable
title to all Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created by this
Agreement and the security interests and other encumbrances expressly permitted
by the other Loan Documents. Pledgor will not permit any dispute, right of
setoff, counterclaim or defense to exist with respect to all or any part of the
Collateral. Pledgor will cause any financing statement or other security
instrument with respect to the Collateral to be terminated, except as may exist
or as may have been filed in favor of Pledgee. Pledgor will defend at its
expense Pledgee's right, title and security interest in and to the Collateral
against the claims of any third party.
(b) INSPECTION OF BOOKS AND RECORDS. Pledgor will keep adequate
records concerning the Collateral and will permit Pledgee and all
representatives and agents appointed by Pledgee to inspect Pledgor's books and
records of or relating to the Collateral at any time during normal business
hours, to make and take away photocopies, photographs and printouts thereof and
to write down and record any such information.
(c) ADVERSE CLAIM. Pledgor covenants and agrees to promptly notify
Pledgee of any claim, action or proceeding affecting title to the Collateral, or
any part thereof, or the security interest created hereunder and, at Pledgor's
expense, defend Pledgee's security interest in the Collateral against the claims
of any third party. Pledgor also covenants and agrees to promptly deliver to
Pledgee a copy of all written notices received by Pledgor with respect to the
Collateral, including without limitation, notices received from the issuer of
any securities pledged hereunder as Collateral.
(d) DELIVERY OF INSTRUMENTS AND/OR CERTIFICATES. Contemporaneously
herewith, Pledgor covenants and agrees to deliver to Pledgee any certificates,
documents or instruments representing or evidencing the Collateral, with
Pledgor's endorsement thereon and/or accompanied by proper instruments of
transfer and assignment duly executed in blank with, if requested by Pledgee,
signatures guaranteed by a member or member organization in good standing of an
authorized Securities Transfer Agents Medallion Program, all in form and
substance satisfactory to Pledgee.
(e) ACTIONS OF THE COMPANY. Pledgor shall cause the Company to (i)
not sell, transfer, move, assign, pledge, grant any security interest in or
otherwise hypothecate any of the Company's assets other than in the ordinary
course of business, (ii) not issue any equity securities of the Company other
than the Collateral, (iii) not liquidate, dissolve, merge or consolidate with
any other entity and (iv) comply with all covenants set forth in the Security
Agreement.
(f) FURTHER ASSURANCES. Pledgor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Pledgee may request in order (i) to
perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Pledgee
to exercise and enforce its rights and remedies hereunder in respect of the
Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Pledgee; (C)
cooperating with Pledgee in registering the pledge of any securities pledged as
Collateral with the issuer of such securities; (D) delivering notice of
Pledgee's security interest in any securities pledged as Collateral to any
securities or financial intermediary, clearing corporation or other party
required by Pledgee, in form and substance satisfactory to Pledgee; and (E)
obtaining written confirmation of the pledge of any securities constituting
Collateral from any securities or financial intermediary, clearing corporation
or other party required by Pledgee, in form and substance satisfactory to
Pledgee. When applicable law provides more than one method of perfection of
Pledgee's security interest in the Collateral, Pledgee may choose the method(s)
to be used.
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 4
<PAGE>
8. NEGATIVE COVENANTS. Pledgor will comply with the covenants contained
in this Section at all times during the period of time this Agreement is
effective, unless Pledgee shall otherwise consent in writing.
(a) TRANSFER OR ENCUMBRANCE. Pledgor will not (i) sell, assign (by
operation of law or otherwise) or transfer Pledgor's rights in any of the
Collateral, (ii) grant a lien or security interest in or execute, file or record
any financing statement or other security instrument with respect to the
Collateral to any party other than Pledgee, or (iii) deliver actual or
constructive possession of any certificate, instrument or document evidencing
and/or representing any of the Collateral to any party other than Pledgee.
(b) IMPAIRMENT OF SECURITY INTEREST. Pledgor will not take or fail
to take any action which would in any manner impair the value or enforceability
of Pledgee's security interest in any Collateral.
(c) DILUTION OF OWNERSHIP. As to any securities pledged as
Collateral (other than securities of a class which are publicly traded), Pledgor
will not consent to or approve of the issuance of (i) any additional shares of
any class of securities of such issuer (unless immediately upon issuance
additional securities are pledged and delivered to Pledgee pursuant to the terms
hereof to the extent necessary to give Pledgee a security interest after such
issuance in at least the same percentage of such issuer's outstanding securities
as Pledgee had before such issuance), (ii) any instrument convertible
voluntarily by the holder thereof or automatically upon the occurrence or
non-occurrence of any event or condition into, or exchangeable for, any such
securities, or (iii) any warrants, options, contracts or other commitments
entitling any third party to purchase or otherwise acquire any such securities.
(d) RESTRICTIONS ON SECURITIES. Pledgor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Pledgee.
(e) COMPLIANCE WITH COVENANTS. Pledgor will not take any action that
would cause a violation of any of the covenants set forth in Section 7 hereof,
and shall not cause or permit the Company to violate any of the covenants set
forth in the Security Agreement.
9. RIGHTS OF PLEDGEE. Pledgee shall have the rights contained in this
Section at all times during the period of time this Agreement is effective.
(a) POWER OF ATTORNEY. Pledgor hereby irrevocably appoints Pledgee
as Pledgor's attorney-in-fact, such power of attorney being coupled with an
interest, with full authority in the place and stead of Pledgor and in the name
of Pledgor or otherwise, to take any action and to execute any instrument which
Pledgee may from time to time in Pledgee's discretion deem necessary or
appropriate to accomplish the purposes of this Agreement, including without
limitation, the following action: (i) transfer any securities, instruments,
documents or certificates pledged as Collateral in the name of Pledgee or its
nominee; (ii) use any interest, premium or principal payments, conversion or
redemption proceeds or other cash proceeds received in connection with any
Collateral to reduce any of the Indebtedness; (iii) exchange any of the
securities pledged as Collateral for any other property upon any merger,
consolidation, reorganization, recapitalization or other readjustment of the
issuer thereof, and, in connection therewith, to deposit and deliver any and all
of such securities with any committee, depository, transfer agent, registrar or
other designated agent upon such terms and conditions as Pledgee may deem
necessary or appropriate; (iv) exercise or comply with any conversion, exchange,
redemption, subscription or any other right, privilege or option pertaining to
any securities pledged as Collateral; provided, however, except as provided
herein, Pledgee shall not have a duty to exercise or comply with any such right,
privilege or option (whether conversion, redemption or otherwise) and shall not
be responsible for any delay or failure to do so; and (v) file any claims or
take any action or institute any proceedings which Pledgee may deem necessary or
appropriate for the collection and/or preservation of the Collateral or
otherwise to enforce the rights of Pledgee with respect to the Collateral.
(b) PERFORMANCE BY PLEDGEE. If Pledgor fails to perform any
agreement or obligation provided herein, Pledgee may itself perform, or cause
performance of, such agreement or obligation, and the
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 5
<PAGE>
expenses of Pledgee incurred in connection therewith shall be a part of the
Indebtedness, secured by the Collateral and payable by Pledgor on demand.
Notwithstanding any other provision herein to the contrary, Pledgee does not
have any duty to exercise or continue to exercise any of the foregoing rights
and shall not be responsible for any failure to do so or for any delay in doing
so.
10. EVENTS OF DEFAULT. Each of the following constitutes an "Event of
Default" under this Agreement:
(a) DEFAULT UNDER LOAN DOCUMENTS. The occurrence of any event of
default under the Note the Guaranties, the Security Agreement any other Loan
Document (other than attributable to the insolvency or bankruptcy of James C.
Bernet); or
(b) BANKRUPTCY OR INSOLVENCY. If Pledgor: (i) becomes insolvent, or
makes a transfer in fraud of creditors, or makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its debts as they become
due; (ii) generally is not paying its debts as such debts become due; (iii) has
a receiver, trustee or custodian appointed for, or take possession of, all or
substantially all of the assets of such party or any of the Collateral, either
in a proceeding brought by such party or in a proceeding brought against such
party and such appointment is not discharged or such possession is not
terminated within sixty (60) days after the effective date thereof or such party
consents to or acquiesces in such appointment or possession; (iv) files a
petition for relief under the United States Bankruptcy Code or any other present
or future federal or state insolvency, bankruptcy or similar laws (all of the
foregoing hereinafter collectively called "Applicable Bankruptcy Law") or an
involuntary petition for relief is filed against such party under any Applicable
Bankruptcy Law and such involuntary petition is not dismissed within sixty (60)
days after the filing thereof, or an order for relief naming such party is
entered under any Applicable Bankruptcy Law, or any composition, rearrangement,
extension, reorganization or other relief of debtors now or hereafter existing
is requested or consented to by such party; (v) fails to have discharged within
a period of sixty (60) days any attachment, sequestration or similar writ levied
upon any property of such party; or (vi) fails to pay within thirty (30) days
any final money judgment against such party; or
(c) EXECUTION ON COLLATERAL. The Collateral or any portion thereof
is taken on execution or other process of law in any action against Pledgor or
any person or entity other than Pledgee; or
(d) ABANDONMENT. Pledgor abandons the Collateral or any portion
thereof; or
(e) ACTION BY OTHER LIENHOLDER. The holder of any lien or security
interest on any of the assets of Pledgor, including without limitation, the
Collateral (without hereby implying the consent of Pledgee to the existence or
creation of any such lien or security interest on the Collateral), declares a
default thereunder or institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder; or
(f) DILUTION OF OWNERSHIP. The issuer of any securities (other than
securities of a class which are publicly traded) constituting Collateral
hereafter issues any shares of any class of capital stock (unless immediately
upon issuance, additional securities are pledged and delivered to Pledgee
pursuant to the terms hereof to the extent necessary to give Pledgee a security
interest after such issuance in at least the same percentage of such issuer's
outstanding securities as Pledgee had before such issuance) or any options,
warrants or other rights to purchase any such capital stock; or
(g) BANKRUPTCY OF ISSUER. (i) The issuer of any securities
constituting Collateral files a petition for relief under any Applicable
Bankruptcy Law, (ii) an involuntary petition for relief is filed against any
such issuer under any Applicable Bankruptcy Law and such involuntary petition is
not dismissed within thirty (30) days after the filing thereof, or (iii) an
order for relief naming any such issuer is entered under any Applicable
Bankruptcy Law; or
(h) LIQUIDATION OR DISSOLUTION. The liquidation, dissolution, merger
or consolidation of Borrower.
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 6
<PAGE>
11. REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Loan Documents or otherwise available to Pledgee, then
Pledgee may exercise one or more of the rights and remedies provided in this
Section.
(a) REMEDIES. Pledgee may from time to time at its discretion,
without limitation and without notice except as expressly provided in any of the
Loan Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a Pledgee under the Code (whether or not the Code applies to the
affected Collateral);
(ii) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest granted hereunder by any
available judicial procedure;
(iii) sell or otherwise dispose of, at its office, on the premises
of Pledgor or elsewhere, the Collateral, as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed that
the sale or other disposition of any part of the Collateral shall not exhaust
Pledgee's power of sale, but sales or other dispositions may be made from time
to time until all of the Collateral has been sold or disposed of or until the
Indebtedness has been paid and performed in full), and at any such sale or other
disposition it shall not be necessary to exhibit any of the Collateral;
(iv) buy the Collateral, or any portion thereof, at any public
sale;
(v) buy the Collateral, or any portion thereof, at any private
sale if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations;
(vi) apply for the appointment of a receiver for the Collateral,
and Pledgor hereby consents to any such appointment; and
(vii) at its option, retain the Collateral in satisfaction of the
Indebtedness whenever the circumstances are such that Pledgee is entitled to do
so under the Code or otherwise.
Pledgor agrees that in the event Pledgor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any Collateral, reasonable notice
shall be deemed given when such notice is deposited in a depository receptacle
under the care and custody of the United States Postal Service, postage prepaid,
at Pledgor's address set forth on the signature page hereof, five (5) days prior
to the date of any public sale, or after which a private sale, of any of such
Collateral is to be held. Pledgee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Pledgee may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Pledgor further acknowledges and
agrees that the redemption by Pledgee of any certificate of deposit pledged as
Collateral shall be deemed to be a commercially reasonable disposition under
Section 9-504(3) of the Code.
(b) PRIVATE SALE OF SECURITIES. Pledgor recognizes that Pledgee may
be unable to effect a public sale of all or any part of the securities pledged
as Collateral because of restrictions in applicable federal and state securities
laws and that Pledgee may, therefore, determine to make one or more private
sales of any such securities to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire such securities for their own
account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that each any such private sale may be at prices
and other terms less favorable then what might have been obtained at a public
sale and, notwithstanding the foregoing, agrees that each such private sale
shall be deemed to have been made in a commercially reasonable manner and that
Pledgee shall have no obligation to delay the sale of any such securities for
the period of time necessary to permit the issuer to register such securities
for public sale under any federal or state securities laws. Pledgor further
acknowledges and agrees that any offer to sell such
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 7
<PAGE>
securities which has been made privately in the manner described above to not
less than five (5) bona fide offerees shall be deemed to involve a "public
sale" for the purposes of Section 9-504(3) of the Code, notwithstanding that
such sale may not constitute a "public offering" under any federal or state
securities laws and that Pledgee may, in such event, bid for the purchase of
such securities.
(c) APPLICATION OF PROCEEDS. If any Event of Default shall have
occurred, Pledgee may at its discretion apply or use any cash held by Pledgee as
Collateral, and any cash proceeds received by Pledgee in respect of any sale or
other disposition of, collection from, or other realization upon, all or any
part of the Collateral as follows in such order and manner as Pledgee may elect:
(i) to the repayment or reimbursement of the reasonable costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred by Pledgee in connection with (A) the administration of the
Loan Documents, (B) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, the Collateral, and (C) the
exercise or enforcement of any of the rights and remedies of Pledgee hereunder;
(ii) to the payment or other satisfaction of any liens and other
encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by applicable
law (including without limitation, Section 9-504(1)(c) of the Code or any other
applicable statutory provision); and
(vi) by delivery to Pledgor or any other party lawfully entitled
to receive such cash or proceeds whether by direction of a court of competent
jurisdiction or otherwise.
(d) DEFICIENCY. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the Collateral by
Pledgee are insufficient to pay all amounts to which Pledgee is legally
entitled, Borrower and any party who guaranteed or is otherwise obligated to pay
all or any portion of the Indebtedness shall be liable for the deficiency,
together with interest thereon as provided in the Loan Documents.
(e) NON-JUDICIAL REMEDIES. In granting to Pledgee the power to
enforce its rights hereunder without prior judicial process or judicial hearing,
Pledgor expressly waives, renounces and knowingly relinquishes any legal right
which might otherwise require Pledgee to enforce its rights by judicial process.
Pledgor recognizes and concedes that non-judicial remedies are consistent with
the usage of trade, are responsive to commercial necessity and are the result of
a bargain at arm's length. Nothing herein is intended to prevent Pledgee or
Pledgor from resorting to judicial process at either party's option.
(f) OTHER RECOURSE. Pledgor waives any right to require Pledgee to
proceed against any third party, exhaust any Collateral or other security for
the Indebtedness, or to have any third party joined with Pledgor in any suit
arising out of the Indebtedness or any of the Loan Documents, or pursue any
other remedy available to Pledgee. Pledgor further waives any and all notice of
acceptance of this Agreement and of the creation, modification, rearrangement,
renewal or extension of the Indebtedness. Pledgor further waives any defense
arising by reason of any disability or other defense of any third party or by
reason of the cessation from any cause whatsoever of the liability of any third
party. Until all of the Indebtedness shall have been paid in full, Pledgor
shall have no right of subrogation and Pledgor waives the right to enforce any
remedy which Pledgee has or may hereafter have against any third party, and
waives any benefit of and any right to participate in any other security
whatsoever now or hereafter held by Pledgee. Pledgor authorizes Pledgee, and
without notice or demand and without any reservation of rights against Pledgor
and without affecting Pledgor's liability hereunder or on the Indebtedness, to
(i) take or hold any other property of any type from any third party as security
for the Indebtedness, and exchange, enforce, waive and release any or all of
such other property, (ii) apply such other property and direct
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 8
<PAGE>
the order or manner of sale thereof as Pledgee may in its discretion
determine, (iii) renew, extend, accelerate, modify, compromise, settle or
release any of the Indebtedness or other security for the Indebtedness, (iv)
waive, enforce or modify any of the provisions of any of the Loan Documents
executed by any third party, and (v) release or substitute any third party.
(g) VOTING RIGHTS. Upon the occurrence of an Event of Default,
Pledgor will not exercise any voting rights with respect to securities pledged
as Collateral. Pledgor hereby irrevocably appoints Pledgee as Pledgor's
attorney-in-fact (such power of attorney being coupled with an interest) and
proxy to exercise any voting rights with respect to Pledgor's securities pledged
as Collateral upon the occurrence of an Event of Default.
12. INDEMNITY. Pledgor hereby indemnifies and agrees to hold harmless
Pledgee, and its officers, directors, employees, agents and representatives
(each an "Indemnified Person") from and against any and all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature made by or through
Borrower or any Obligated Party (collectively, the "Claims") which may be
imposed on, incurred by, or asserted against, any Indemnified Person arising in
connection with the Loan Documents, the Indebtedness or the Collateral
(including without limitation, the enforcement of the Loan Documents and the
defense of any Indemnified Person's actions and/or inactions in connection with
the Loan Documents). WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY
TO EACH INDEMNIFIED PERSON WITH RESPECT TO ANY CLAIMS WHICH IN WHOLE OR IN PART
ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH AND/OR ANY OTHER
INDEMNIFIED PERSON, except to the limited extent the Claims against an
Indemnified Person are proximately caused by such Indemnified Person's gross
negligence or willful misconduct. If Pledgor or any third party ever alleges
such gross negligence or willful misconduct by any Indemnified Person, the
indemnification provided for in this Section shall nonetheless be paid upon
demand, subject to later adjustment or reimbursement, until such time as a court
of competent jurisdiction enters a final judgment as to the extent and effect of
the alleged gross negligence or willful misconduct. The indemnification
provided for in this Section shall survive the termination of this Agreement and
shall extend and continue to benefit each individual or entity who is or has at
any time been an Indemnified Person hereunder.
13. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire agreement
of Pledgee and Pledgor with respect to the Collateral. If the parties hereto
are parties to any prior agreement, either written or oral, relating to the
Collateral, the terms of this Agreement shall amend and supersede the terms of
such prior agreements as to transactions on or after the effective date of
this Agreement, but all security agreements, financing statements, guaranties,
other contracts and notices for the benefit of Pledgee shall continue in full
force and effect to secure the Indebtedness unless Pledgee specifically releases
its rights thereunder by separate release.
(b) AMENDMENT. No modification, consent or amendment of any
provision of this Agreement or any of the other Loan Documents shall be valid or
effective unless the same is in writing and signed by the party against whom it
is sought to be enforced.
(c) ACTIONS BY PLEDGEE. The lien, security interest and other
security rights of Pledgee hereunder shall not be impaired by (i) any renewal,
extension, increase or modification with respect to the Indebtedness, (ii) any
surrender, compromise, release, renewal, extension, exchange or substitution
which Pledgee may grant with respect to the Collateral, or (iii) any release or
indulgence granted to any endorser, guarantor or surety of the Indebtedness.
The taking of additional security by Pledgee shall not release or impair the
lien, security interest or other security rights of Pledgee hereunder or affect
the obligations of Pledgor hereunder.
(d) WAIVER BY PLEDGEE. Pledgee may waive any Event of Default
without waiving any other prior or subsequent Event of Default. Pledgee may
remedy any default without waiving the Event of Default remedied. Neither the
failure by Pledgee to exercise, nor the delay by Pledgee in exercising, any
right or remedy upon any Event of Default shall be construed as a waiver of such
Event of Default or as a waiver of the right to exercise any such right or
remedy at a later date. No single or partial exercise by Pledgee of any right
or remedy
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 9
<PAGE>
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right or remedy hereunder may be exercised at
any time. No waiver of any provision hereof or consent to any departure by
Pledgor therefrom shall be effective unless the same shall be in writing and
signed by Pledgee and then such waiver or consent shall be effective only in
the specific instances, for the purpose for which given and to the extent
therein specified. No notice to or demand on Pledgor in any case shall of
itself entitle Pledgor to any other or further notice or demand in similar or
other circumstances.
(e) COSTS AND EXPENSES. Pledgor will upon demand pay to Pledgee the
amount of any and all costs and expenses (including without limitation,
attorneys' fees and expenses), which Pledgee may incur in connection with
(i) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, the Collateral, (ii) the exercise or
enforcement of any of the rights of Pledgee under the Loan Documents, or
(iii) the failure by Pledgor to perform or observe any of the provisions hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE TEXAS AND APPLICABLE FEDERAL LAWS,
EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION
OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
TEXAS.
(g) APPOINTMENT OF PLEDGEE AS AGENT. Pledgee has been appointed to
act as Pledgee hereunder by and for the benefit of the Secured Parties.
(h) SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable under
present or future laws, such provision shall be fully severable, shall not
impair or invalidate the remainder of this Agreement and the effect thereof
shall be confined to the provision held to be illegal, invalid or unenforceable.
(i) NO OBLIGATION. Nothing contained herein shall be construed as an
obligation on the part of Pledgee to extend or continue to extend credit to
Borrower.
(j) NOTICES. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and given by (i) personal delivery, (ii) expedited delivery service with proof
of delivery, or (iii) United States mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended addressee at the
address set forth on the signature page hereof or to such different address as
the addressee shall have designated by written notice sent pursuant to the terms
hereof and shall be deemed to have been received either, in the case of personal
delivery, at the time of personal delivery, in the case of expedited delivery
service, as of the date of first attempted delivery at the address and in the
manner provided herein, or in the case of mail, upon deposit in a depository
receptacle under the care and custody of the United States Postal Service.
Either party shall have the right to change its address for notice hereunder to
any other location within the continental United States by notice to the other
party of such new address at least thirty (30) days prior to the effective date
of such new address.
(k) BINDING EFFECT AND ASSIGNMENT. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on Pledgor
and the heirs, executors, administrators, personal representatives, successors
and assigns of Pledgor, and (iii) shall inure to the benefit of Pledgee and its
successors and assigns. Without limiting the generality of the foregoing,
Pledgee may pledge, assign or otherwise transfer the Indebtedness and its rights
under this Agreement and any of the other Loan Documents to any other party.
Pledgor's rights and obligations hereunder may not be assigned or otherwise
transferred without the prior written consent of Pledgee.
(l) TERMINATION. It is contemplated by the parties hereto that from
time to time there may be no outstanding Indebtedness, but notwithstanding such
occurrences, this Agreement shall remain valid and shall be in full force and
effect as to subsequent outstanding Indebtedness. Upon (i) the satisfaction in
full of the Indebtedness, (ii) the termination or expiration of any commitment
of Pledgee to extend credit to Borrower, (iii)
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 10
<PAGE>
written request for the termination hereof delivered by Pledgor to Pledgee,
and (iv) written release delivered by Pledgee to Pledgor, this Agreement and
the security interests created hereby shall terminate. Upon termination of
this Agreement and Pledgor's written request, Pledgee will, at Pledgor's sole
cost and expense, return to Pledgor such of the Collateral as shall not have
been sold or otherwise disposed of or applied pursuant to the terms hereof and
execute and deliver to Pledgor such documents as Pledgor shall reasonably
request to evidence such termination.
(m) CUMULATIVE RIGHTS. All rights and remedies of Pledgee hereunder
are cumulative of each other and of every other right or remedy which Pledgee
may otherwise have at law or in equity or under any of the other Loan Documents,
and the exercise of one or more of such rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of any other rights or remedies.
(n) GENDER AND NUMBER. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in the
singular number shall be held and construed to include the plural and words in
the plural number shall be held and construed to include the singular, unless in
each instance the context requires otherwise.
(o) DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 11
<PAGE>
EXECUTED as of the date first written above.
PLEDGOR:
/s/ Delia O'Donnell
--------------------------------------
Delia O'Donnell
Address: P.O. Box 500730
San Diego, California 92150
/s/ Alan Anderson
---------------------------------------
Alan Anderson, Trustee
Address: 90 Windsor Road
Hamden, Connecticut 06517
Pledgee's Address:
c/o Canmax Inc.
150 W. Carpenter Frwy.
Irving, TX 75039
- -------------------------------------------------------------------------------
PLEDGE AGREEMENT - PAGE 12
<PAGE>
SCHEDULE "A"
TO
PLEDGE AGREEMENT
DATED June 15, 1998
The following property is a part of the Collateral as defined in Subsection
1(c):
1,000 shares of common stock of USCommunication Services, Inc., a Delaware
corporation and formerly known as CNMX MergerSub, Inc., as evidenced by
certificate nos. 002 and 003 issued in the name of Pledgor.
SCHEDULE "A" - Solo Page
<PAGE>
EXHIBIT 10.7
GUARANTY
--------
(BERNET)
THIS GUARANTY ("GUARANTY") is made as of the 15th day of June, 1998, by
Guarantor (as hereinafter defined) for the benefit of Lender (as hereinafter
defined).
1. DEFINITIONS. As used in this Guaranty, the following terms shall have
the meanings indicated below:
(a) The term "LENDER" shall mean Canmax Telecom, Inc., a Texas
corporation, whose address for notice purposes is the following:
c/o Canmax Inc.
150 W. Carpenter Freeway
Irving, Texas 75039
(b) The term "BORROWER" shall mean USCommunication Services, Inc., a
Delaware corporation.
(c) The term "GUARANTEED INDEBTEDNESS" shall mean (i) all
indebtedness, obligations and liabilities of Borrower to Lender arising
under any of the Loan Documents whether joint, several or joint and
several, and (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all costs and expenses incurred
by Lender in connection with the collection and administration of all or
any part of the indebtedness and obligations described in (i) and (ii)
above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys' fees, and (iv) all
renewals, extensions, modifications and rearrangements of the indebtedness
and obligations described in (i), (ii) and (iii) above.
(d) The term "GUARANTOR" shall mean James C. Bernet, whose address
for notice purposes is the following:
P.O. Box 500730
San Diego, CA 92150
(e) The term "LOAN DOCUMENTS" shall mean (i) that certain Restated
Promissory Note of even date herewith executed by Borrower payable to the
order of Lender in the original principal amount of $724,660, bearing
interest and payable as provided therein, (ii) that certain Restated
Security Agreement of even date herewith executed by Borrower for the
benefit of Lender securing, among other items, the repayment of the
Promissory Note, (iii) the Rescission Agreement and (iv) all other
obligations of Borrower to Lender under any other documents evidencing,
securing and/or pertaining to the Guaranteed Indebtedness.
(f) The term "RESCISSION AGREEMENT" shall mean that certain
Rescission Agreement of even date herewith among Canmax Inc., Borrower,
Lender, Guarantor, Alan Anderson (as Trustee) and Delia O'Donnell.
2. OBLIGATIONS. As an inducement to Lender to consummate the rescission
of the transactions described in the Rescission Agreement, Guarantor, for value
received, does hereby unconditionally and absolutely guarantee the prompt and
full payment and performance of the Guaranteed Indebtedness when due or declared
to be due and at all times thereafter.
- --------------------------------------------------------------------------------
GUARANTY - PAGE 1
(CANMAX/USC)
<PAGE>
3. CHARACTER OF OBLIGATIONS. This is an absolute, continuing and
unconditional guaranty of payment and not of collection. All Guaranteed
Indebtedness heretofore or concurrently herewith made by Lender to Borrower
shall be conclusively presumed to have been made or acquired in acceptance
hereof. Guarantor shall be liable, jointly and severally, with Borrower and any
other guarantor of all or any part of the Guaranteed Indebtedness.
4. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and
warrants the following to Lender:
(a) This Guaranty may reasonably be expected to benefit, directly or
indirectly, Guarantor; and
(b) Guarantor is familiar with, and has independently reviewed the
books and records regarding, the financial condition of Borrower and is
familiar with the value of any and all collateral intended to be security
for the payment of all or any part of the Guaranteed Indebtedness;
provided, however, Guarantor is not relying on such financial condition or
collateral as an inducement to enter into this Guaranty; and
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of Borrower
and Guarantor is not relying on Lender to provide such information to
Guarantor either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver and
perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery and performance of
this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith do not and will not violate (i) any agreement or
instrument to which Guarantor is a party, (ii) any law, rule, regulation or
order of any governmental authority to which Guarantor is subject, or
(iii) its articles or certificate of incorporation or bylaws, if Guarantor
is a corporation, or its partnership agreement, if Guarantor is a
partnership; and
(e) Neither Lender nor any other party has made any representation,
warranty or statement to Guarantor in order to induce Guarantor to execute
this Guaranty; and
(f) The financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Lender are and
shall be true and correct in all material respects and fairly present the
financial position of Guarantor as of the dates thereof, and no material
adverse change has occurred in the financial condition of Guarantor
reflected in the financial statements and other financial information
regarding Guarantor heretofore delivered to Lender since the date of the
last statement thereof; and
(g) As of the date hereof, and after giving effect to this Guaranty
and the obligations evidenced hereby, (i) Guarantor is and will be solvent,
(ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii)
Guarantor is and will continue to be able to pay its debts as they mature,
and (iv) if Guarantor is not an individual, Guarantor has and will continue
to have sufficient capital to carry on its business and all businesses in
which it is about to engage.
5. COVENANTS. Guarantor hereby covenants and agrees with Lender as
follows:
(a) Guarantor shall not, so long as its obligations under this
Guaranty continue, transfer or pledge any material portion of its assets
for less than full and adequate consideration; and
(b) Guarantor shall promptly furnish to Lender at any time and from
time to time such financial statements and other financial information of
Guarantor as the Lender may require, in form and substance satisfactory to
Lender; and
- --------------------------------------------------------------------------------
GUARANTY - PAGE 2
(CANMAX/USC)
<PAGE>
(c) Guarantor shall comply with all terms and provisions of the Loan
Documents that apply to Guarantor; and
(d) Guarantor shall promptly inform Lender of (i) any litigation or
governmental investigation against Guarantor or affecting any security for
all or any part of the Guaranteed Indebtedness or this Guaranty which, if
determined adversely, might have a material adverse effect upon the
financial condition of Guarantor or upon such security or might cause a
default under any of the Loan Documents, (ii) any claim or controversy
which might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the financial
condition of Guarantor.
6. CONSENT AND WAIVER.
(a) Guarantor waives (i) promptness, diligence and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration,
notice of dishonor, diligence in enforcement and indulgences of every kind,
and (ii) the taking of any other action by Lender, including without
limitation, giving any notice of default or any other notice to, or making
any demand on, Borrower, any other guarantor of all or any part of the
Guaranteed Indebtedness or any other party.
(b) Guarantor waives any rights Guarantor has under, or any
requirements imposed by, Chapter 34 of the Texas Business and Commerce
Code, as in effect on the date of this Guaranty or as it may be amended
from time to time.
(c) Lender may at any time, without the consent of or notice to
Guarantor, without incurring responsibility to Guarantor and without
impairing, releasing, reducing or affecting the obligations of Guarantor
hereunder: (i) change the manner, place or terms of payment of all or any
part of the Guaranteed Indebtedness, or renew, extend, modify, rearrange or
alter all or any part of the Guaranteed Indebtedness; (ii) change the
interest rate accruing on any of the Guaranteed Indebtedness (including,
without limitation, any periodic change in such interest rate that occurs
because such Guaranteed Indebtedness accrues interest at a variable rate
which may fluctuate from time to time); (iii) sell, exchange, release,
surrender, subordinate, realize upon or otherwise deal with in any manner
and in any order any collateral for all or any part of the Guaranteed
Indebtedness or this Guaranty or setoff against all or any part of the
Guaranteed Indebtedness; (iv) neglect, delay, omit, fail or refuse to take
or prosecute any action for the collection of all or any part of the
Guaranteed Indebtedness or this Guaranty or to take or prosecute any action
in connection with any of the Loan Documents; (v) exercise or refrain from
exercising any rights against Borrower or others, or otherwise act or
refrain from acting; (vi) settle or compromise all or any part of the
Guaranteed Indebtedness and subordinate the payment of all or any part of
the Guaranteed Indebtedness to the payment of any obligations, indebtedness
or liabilities which may be due or become due to Lender or others;
(vii) apply any deposit balance, fund, payment, collections through process
of law or otherwise or other collateral of Borrower to the satisfaction and
liquidation of the indebtedness or obligations of Borrower to Lender, if
any, not guaranteed under this Guaranty pursuant to Section 10 herein; and
(viii) apply any sums paid to Lender by Guarantor, Borrower or others to
the Guaranteed Indebtedness in such order and manner as Lender, in its sole
discretion, may determine.
(d) Should Lender seek to enforce the obligations of Guarantor
hereunder by action in any court or otherwise, Guarantor waives any
requirement, substantive or procedural, that (i) Lender first enforce any
rights or remedies against Borrower or any other person or entity liable to
Lender for all or any part of the Guaranteed Indebtedness, including
without limitation that a judgment first be rendered against Borrower or
any other person or entity, or that Borrower or any other person or entity
should be joined in such cause, or (ii) Lender shall first enforce rights
against any collateral which shall ever have been given to secure all or
any part of the Guaranteed Indebtedness or this Guaranty. Such waiver
shall be without
- --------------------------------------------------------------------------------
GUARANTY - PAGE 3
(CANMAX/USC)
<PAGE>
prejudice to Lender's right, at its option, to proceed against Borrower or
any other person or entity, whether by separate action or by joinder.
(e) In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or omission
of Lender, its directors, officers, employees, representatives or agents in
connection with Lender's administration of the Guaranteed Indebtedness,
except for Lender's willful misconduct and gross negligence.
7. OBLIGATIONS NOT IMPAIRED.
(a) Guarantor agrees that its obligations hereunder shall not be
released, diminished, impaired, reduced or affected by the occurrence of
any one or more of the following events: (i) the death, disability or lack
of corporate power of Borrower, Guarantor (except as provided in paragraph
11 herein) or any other guarantor of all or any part of the Guaranteed
Indebtedness, (ii) any receivership, insolvency, bankruptcy or other
proceedings affecting Borrower, Guarantor or any other guarantor of all or
any part of the Guaranteed Indebtedness, or any of their respective
property; (iii) the partial or total release or discharge of Borrower or
any other guarantor of all or any part of the Guaranteed Indebtedness, or
any other person or entity from the performance of any obligation contained
in any instrument or agreement evidencing, governing or securing all or any
part of the Guaranteed Indebtedness, whether occurring by reason of law or
otherwise; (iv) the taking or accepting of any collateral for all or any
part of the Guaranteed Indebtedness or this Guaranty; (v) the taking or
accepting of any other guaranty for all or any part of the Guaranteed
Indebtedness; (vi) any failure by Lender to acquire, perfect or continue
any lien or security interest on collateral securing all or any part of the
Guaranteed Indebtedness or this Guaranty; (vii) the impairment of any
collateral securing all or any part of the Guaranteed Indebtedness or this
Guaranty; (viii) any failure by Lender to sell any collateral securing all
or any part of the Guaranteed Indebtedness or this Guaranty in a
commercially reasonable manner or as otherwise required by law; (ix) any
invalidity or unenforceability of or defect or deficiency in any of the
Loan Documents; or (x) any other circumstance which might otherwise
constitute a defense available to, or discharge of, Borrower or any other
guarantor of all or any part of the Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of all or any part of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by
Lender upon the insolvency, bankruptcy or reorganization of Borrower,
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
(c) In the event Borrower is a corporation, joint stock association
or partnership, or is hereafter incorporated, none of the following shall
affect Guarantor's liability hereunder: (i) the unenforceability of all or
any part of the Guaranteed Indebtedness against Borrower by reason of the
fact that the Guaranteed Indebtedness exceeds the amount permitted by law;
(ii) the act of creating all or any part of the Guaranteed Indebtedness is
ultra vires; or (iii) the officers or partners creating all or any part of
the Guaranteed Indebtedness acted in excess of their authority. Guarantor
hereby acknowledges that withdrawal from, or termination of, any ownership
interest in Borrower now or hereafter owned or held by Guarantor shall not
alter, affect or in any way limit the obligations of Guarantor hereunder.
8. ACTIONS AGAINST GUARANTOR. In the event of a default in the payment
or performance of all or any part of the Guaranteed Indebtedness when such
Guaranteed Indebtedness becomes due, whether by its terms, by acceleration or
otherwise, Guarantor shall, without notice or demand, promptly pay the amount
due thereon to Lender, in lawful money of the United States, at Lender's address
set forth in subparagraph 1(a) above. One or more successive or concurrent
actions may be brought against Guarantor, either in the same action in which
Borrower is sued or in separate actions, as often as Lender deems advisable.
The exercise by Lender of any right or remedy under this Guaranty or under any
other agreement or instrument, at law, in equity or otherwise, shall not
preclude concurrent or subsequent exercise of any other right or remedy. The
books and records of Lender shall be
- --------------------------------------------------------------------------------
GUARANTY - PAGE 4
(CANMAX/USC)
<PAGE>
admissible in evidence in any action or proceeding involving this Guaranty
and shall be PRIMA FACIE evidence of the payments made on, and the
outstanding balance of, the Guaranteed Indebtedness.
9. PAYMENT BY GUARANTOR. Whenever Guarantor pays any sum which is or may
become due under this Guaranty, written notice must be delivered to Lender
contemporaneously with such payment. Such notice shall be effective for
purposes of this paragraph when contemporaneously with such payment Lender
receives such notice either by: (a) personal delivery to the address and
designated department of Lender identified in subparagraph 1(a) above, or
(b) United States mail, certified or registered, return receipt requested,
postage prepaid, addressed to Lender at the address shown in subparagraph 1(a)
above. In the absence of such notice to Lender by Guarantor in compliance with
the provisions hereof, any sum received by Lender on account of the Guaranteed
Indebtedness shall be conclusively deemed paid by Borrower.
10. DEATH OF GUARANTOR. In the event of the death of Guarantor, any duly
authorized representative of the estate of Guarantor may revoke Guarantor's
future obligations under this Guaranty by giving Lender written notice of
Guarantor's death and that the estate of Guarantor shall not be liable hereunder
for any indebtedness or obligations of Borrower incurred on or after the
effective date of such revocation. Such revocation shall be deemed to be
effective on the day following the day Lender receives such notice delivered
either by: (a) personal delivery to the address and designated department of
Lender identified in subparagraph 1(a) above, or (b) United States mail,
registered or certified, return receipt requested, postage prepaid, addressed to
Lender at the address shown in subparagraph 1(a) above. Notwithstanding such
revocation, the obligations of the deceased Guarantor shall continue as an
obligation against his estate as to (x) all of the Guaranteed Indebtedness that
is outstanding on the effective date of such revocation, and any renewals or
extensions thereof, and (y) all loans, advances and other extensions of credit
made to or for the account of Borrower on or after the effective date of such
revocation pursuant to an obligation of Lender under a commitment or agreement
made to or with Borrower prior to the effective date of such revocation. The
terms and conditions of this Guaranty, including without limitation the consents
and waivers set forth in Section 6 hereof, shall remain in effect with respect
to the Guaranteed Indebtedness described in the preceding sentence in the same
manner as if such revocation had not been made.
11. NOTICE OF SALE. In the event that Guarantor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, at the address for Guarantor set forth in
subparagraph 1(d) above, five (5) days prior to the date any public sale, or
after which any private sale, of any such collateral is to be held; PROVIDED,
HOWEVER, that notice given in any other reasonable manner or at any other
reasonable time shall be sufficient.
12. WAIVER BY LENDER. No delay on the part of Lender in exercising any
right hereunder or failure to exercise the same shall operate as a waiver of
such right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by an officer of Lender, and
then only in the specific instance and for the purpose given.
13. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of Lender,
its successors and assigns. This Guaranty is binding upon Guarantor and
Guarantor's heirs, executors, administrators, personal representatives and
successors, including without limitation any person or entity obligated by
operation of law upon the reorganization, merger, consolidation or other change
in the organizational structure of Guarantor.
14. COSTS AND EXPENSES. Guarantor shall pay on demand by Lender all costs
and expenses, including without limitation, all reasonable attorneys' fees
incurred by Lender in connection with the preparation, administration,
enforcement and/or collection of this Guaranty. This covenant shall survive the
payment of the Guaranteed Indebtedness.
15. SEVERABILITY. If any provision of this Guaranty is held by a court of
competent jurisdiction to be illegal, invalid or unenforceable under present or
future laws, such provision shall be fully severable, shall not
- --------------------------------------------------------------------------------
GUARANTY - PAGE 5
(CANMAX/USC)
<PAGE>
impair or invalidate the remainder of this Guaranty and the effect thereof
shall be confined to the provision held to be illegal, invalid or
unenforceable.
16. NO OBLIGATION. Nothing contained herein shall be construed as an
obligation on the part of Lender to extend or continue to extend credit to
Borrower.
17. AMENDMENT. No modification or amendment of any provision of this
Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of
Lender, and then shall be effective only in the specific instance and for the
purpose for which given.
18. CUMULATIVE RIGHTS. All rights and remedies of Lender hereunder are
cumulative of each other and of every other right or remedy which Lender may
otherwise have at law or in equity or under any instrument or agreement, and the
exercise of one or more of such rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of any other rights or remedies.
19. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.
20. VENUE. This Guaranty has been entered into in the county in Texas
where Lender's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising under or pertaining to
this Guaranty and venue for any such disputes shall be in the county or judicial
district where the Lender's address for notice purposes is located.
21. COMPLIANCE WITH APPLICABLE USURY LAWS. Notwithstanding any other
provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, Guarantor
and Lender by its acceptance hereof agree that Guarantor shall never be required
or obligated to pay interest in excess of the maximum nonusurious interest rate
as may be authorized by applicable law for the written contracts which
constitute the Guaranteed Indebtedness. It is the intention of Guarantor and
Lender to conform strictly to the applicable laws which limit interest rates,
and any of the aforesaid contracts for interest, if and to the extent payable by
Guarantor, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
22. DESCRIPTIVE HEADINGS. The headings in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
23. GENDER. Within this Guaranty, words of any gender shall be held and
construed to include the other gender.
24. ENTIRE AGREEMENT. This Guaranty contains the entire agreement between
Guarantor and Lender regarding the subject matter hereof and supersedes all
prior written and oral agreements and understandings, if any, regarding same;
provided, however, this Guaranty is in addition to and does not replace, cancel,
modify or affect any other guaranty of Guarantor now or hereafter held by Lender
that relates to Borrower or any other person or entity.
EXECUTED as of the date first above written.
GUARANTOR:
/s/ James C. Bernet
-------------------------------------
James C. Bernet
- --------------------------------------------------------------------------------
GUARANTY - PAGE 6
(CANMAX/USC)
