Exhibit 10.38
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of January 15, 1999,
by and between I-LINK INCORPORATED, a Florida corporation (the
"Borrower"), and WINTER HARBOR, L.L.C., a Delaware limited liability
company (the "Lender").
RECITALS:
Borrower desires to borrow from Lender from time to time up to $8,000,000
on a term loan basis, the proceeds of which will be used for capital
expenditures and working capital purposes in the operations of the Borrower and
its subsidiaries.
AGREEMENTS:
IN CONSIDERATION of the mutual promises and agreements herein contained,
Lender and Borrower agree as follows:
ARTICLE I. AMOUNT AND TERMS OF THE LOAN
Section 1.1 The Loan. Lender agrees from time to time, upon the terms and
conditions hereinafter set forth, to make a loan or loans to Borrower in an
aggregate principal amount not to exceed at any one time outstanding up to
$8,000,000 (the "Loan"), $5,158,288 of which remains available for borrowing
from the date hereof. As of the date hereof, the Lender has lent to the
Borrower and the Borrower has borrowed from the Lender the principal amount of
$4,841,712 in the amounts and on the dates set forth on Exhibit 2, attached
hereto. $600,000 of such amount represents (a) accrued and unpaid interest and
(b) accrued and unpaid expenses (the loans made as of the date hereof and such
interest and expenses may be referred to hereinafter collectively as the
"Preexisting Loans"), which amounts have not been paid and remain outstanding.
The Borrower hereby acknowledges receipt of such funds and such debt and agrees
that the Preexisting Loans shall be governed by the terms and conditions of this
Agreement and the Loan Documents. The Preexisting Loan and the Loans shall be
referred to herein collectively as the "Loan" or "Loans". The Loans shall be
junior in right of payment to the loans in the aggregate principal amount of
$7,768,000 made by Lender to Borrower prior to the date hereof (the "Prior
Loans") and shall be pari passu with all other debt and liabilities of Borrower.
Section 1.2 The Note. The outstanding principal amount of the Loan shall
be evidenced by and subject to the terms of a promissory note, dated the date of
the first borrowing hereunder, substantially in the form set forth as Exhibit 1
hereto (as amended, renewed, restated, increased, consolidated or substituted
from time to time, the "Note"), payable to the order of Lender.
Section 1.3 Interest. The Loan shall bear interest on the unpaid
principal amount thereof at a rate per annum at all times equal to the sum
of the rate of interest announced in the Wall Street Journal (Eastern Edition)
as the prime rate from time to time (the "Prime Rate") plus (a)
from November 10, 1998 through and including February 9, 1999, 4% per annum; (b)
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from February 10, 1999 through and including May 8, 1999, 5% per annum; (c) from
May 10, 1999 through and including August 9, 1999, 6% per
annum; (d) and thereafter, 7% per annum (the "Interest Rate"). The prime rate
functions as a reference rate index. The Prime Rate will automatically change
as and when such prime rate changes. Interest shall be calculated on the basis
of a year of 365 days and the actual number of days elapsed during the period
for which such interest is payable. Interest shall begin to accrue on the
outstanding principal amount of the Loan on the date of disbursement of all or a
portion of the Loan. Accrued
interest shall be paid monthly on the last business day of each calendar month
until all principal and interest hereunder is paid in full at the repayment or
maturity of the Loan. Upon the occurrence of any Event of Default (as that term
is defined in Section 7.1), the entire outstanding principal amount of the Loan
and (to the extent permitted by law) unpaid interest thereon and all other
amounts due hereunder shall bear interest, from the date of occurrence of such
Event of Default until the earlier of
the date the Loan is paid in full and the date on which such Event of Default is
cured or waived in writing, at an interest rate equal to the sum of the
applicable Interest Rate plus 2% per annum, which shall be payable upon demand.
Section 1.4 Principal Repayment. The outstanding principal balance of the
Loan plus any accrued and unpaid interest thereon shall be due and payable on
October 31, 1999 (the "Maturity Date"). The Loans shall be converted into
Series N Preferred Stock upon consummation of the Rights Offering (as those
terms are defined in Section 1.6(b)(iii)) in accordance with the provisions of
Section 1.6(b)(iii).
Section 1.5 Use of Proceeds and Advancement of Funds. Each borrowing
hereunder shall be made by Lender in such amount as Borrower shall request in
writing five business days prior to the date of the requested borrowing,
provided that each borrowing shall be no more than $1,000,000. Borrower shall
not be permitted to make more than five additional borrowings hereunder. The
obligation of Lender to make any portion of the Loan is
conditioned upon the fact that (i) no Event of Default and no event which with
the lapse of any applicable grace period or the giving of notice or both would
constitute an Event of Default (a "Potential Default") shall then exist or
immediately after the Loan would exist; (ii) all of the Loan Documents (as that
term is defined in Section 4.2) shall still be in full force and effect; (iii)
the representations and warranties contained herein and in the Loan Documents
shall be true and correct in all material
respects as if made on and as of the date of such borrowing, except to the
extent that any thereof expressly relate to an earlier date; and (iv) the
Borrower's actual results of operations shall equal or exceed its monthly budget
projections delivered to, and approved by, the Lender.
Section 1.6 Prepayments.
(a) Voluntary Prepayments. By written notice to Lender no later than
12:00 noon, Delaware time on the business day prior to such prepayment, Borrower
may, at its option, prepay the Loan in whole at any time or in part from time to
time without penalty or premium; provided, however, that each partial prepayment
shall be in the aggregate
principal amount of not less than $100,000 or an integral multiple of
$50,000 in excess thereof.
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(b) Mandatory Prepayments.
(i) Proceeds of Asset Sales. Borrower shall make a
mandatory prepayment of the Loan in an amount equal to the cash proceeds of
any sale by it or any of its subsidiaries of any material assets, net of
any reasonable costs directly incurred in connection with such sale and any
taxes payable in connection with such sale. Together with any prepayment
required by this Section, Borrower shall deliver to Lender a certificate
executed by Borrower's chief financial officer setting forth the
calculation of the net cash proceeds of such sale, including a calculation
of the taxes payable in respect of such sale. Such prepayment shall be
made simultaneously with the consummation of such sale.
(ii) Net Equity and Debt Proceeds. If Borrower issues or
sells any shares of its capital stock or other equity interests or
securities convertible into or exercisable for any shares of its capital
stock or other equity interests or incurs any indebtedness for borrowed
money, it shall, within five days of such sale, issuance or incurrence,
make a mandatory prepayment of the Loan in an amount equal to 100% of the
cash proceeds thereof, net of any reasonable costs directly incurred in
connection with such sale, issuance or incurrence; provided, however, that
no such prepayment shall be required in connection with any such issuance
or sale (a) in connection with an acquisition (including by way of merger
or consolidation or share exchange) by Borrower, which acquisition is
approved by Lender, of the stock or assets of another person in a
transaction pursuant to which the purchase price is paid in whole or in
part by the delivery of capital stock of Borrower to the seller or (b) to
employees of Borrower or any of its subsidiaries pursuant to stock option
or other employee benefit plans approved by Lender.
(iii) Rights Offering. Borrower shall make a rights
offering (the "Rights Offering") to all of its existing shareholders for
$20,000,000 of a newly created class of Series N Convertible Preferred
Stock (the "Series N Stock") having the terms and conditions set forth on
Schedule I attached hereto and such other terms and conditions as may be
reasonably acceptable to Borrower and Lender. Borrower shall file the
documents relating to the Rights Offering with the Securities and Exchange
Commission (the "SEC") no later than January 15, 1999. If Borrower mails
the Rights Offering materials to its shareholders by the earlier of March
10, 1999 and that business day which is three business days following the
receipt of clearance from the SEC (the "Mailing Date"), and consummates the
Rights Offering by the earlier of April 16, 1999 and that business day
which is the first business day following the 35th calendar day from the
Mailing Date (the "Consummation Date"), then, so long as Borrower shall
have notified Lender of such conversion on or prior to March 15, 1999,
Borrower shall cause the outstanding principal amount of the Loans,
together with all accrued interest to be converted into Series N Stock.
Lender shall have the right, but not the obligation, to subscribe for any
Series N Stock not otherwise subscribed for as part of the Rights Offering.
(c) Application of Prepayments. All voluntary and mandatory
prepayments of the Loan shall be applied first to accrued interest and then to
the principal outstanding under the Loan. No amount so prepaid may be
reborrowed.
Section 1.7 Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Note shall be due on a Saturday, Sunday or public
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holiday, such payment may be made on the next succeeding business day, and such
extension of time in such case shall be included in the computation of interest
hereunder and under the Note.
Section 1.8 Taxes. All sums payable by Borrower hereunder or under the
Note, whether of principal, interest, fees, expenses or otherwise, shall be paid
in full, free of any deductions or withholdings for any and all present and
future taxes, levies, imposts, stamps, duties, fees, assessments, deductions,
withholdings, and other governmental charges and all liabilities with respect
thereto. If Borrower is prohibited by law from making payments hereunder or
under the Note free of such deductions or withholdings, then Borrower shall pay
such additional amount as may be necessary in order that the actual amount
received by Lender after such deduction or withholding shall equal the full
amount stated to be payable hereunder or under the Note.
Section 1.9 Standby Letters of Credit. The Lender shall assist the
Borrower in acquiring $3,000,000 aggregate stated amount of standby letters of
credit (the "Standby Letter of Credit") to guaranty the Borrower's obligations
under $3,000,000 of equipment capitalized leases. The Lender shall act as the
account party, guarantying the Borrower's obligation to repay the Standby Letter
of Credit. The amount of Lender's commitment in Section 1 shall be reduced by
the aggregate stated amount of all Standby Letters of Credit issued pursuant to
this Section. Borrower shall bear all costs and expenses of issuance of the
Standby Letters of Credit, including any application or issuance fees, any
annual fees and all attorneys fees. In addition, Borrower shall pay, at the
beginning of each annual period, to the Lender a fee of 1.0% per annum on the
stated amount of all Standby Letters of Credit. Upon any draw on a Standby
Letter of Credit, Lender shall be deemed to have made a Loan to Borrower which
shall bear interest in accordance with the provisions of Section 1.3 hereof.
Section 1.10 Warrants.
(a) As further consideration for Lender's commitment to make
available the Loans and to arrange the Standby Letter of Credit, Borrower
will grant to Lender warrants ("Warrants") to purchase a certain number of
shares of the Borrower's common stock pursuant to the terms of a Warrant
Agreement (the "Warrant Agreement"). Such Warrant Agreement shall have an
exercise period of 7.5 years from the date hereof and shall grant the
Lender the right to acquire (i) one Warrant for (A) every $10 in Loan
proceeds made available to the Borrower hereunder and (B) every $10 of the
aggregate stated amount of the Standby Letters of Credit and (ii) an
additional nine Warrants for (A) every $10 in Loan proceeds made available
to the Borrower hereunder upon the occurrence of an Event of Default or if
the Loan is not paid in full on or before March 15, 1999 and (B) every $10
of the aggregate stated amount of the Standby Letters of Credit upon the
occurrence of an Event of Default or if the Loan is not paid in full on or
before March 15, 1999 or if there is a draw on any Standby Letter of
Credit; provided, however, in the event that a Equity Transaction (as
defined below) occurs on or after February 1, 1999 and prior to March 15,
1999, then the Borrower shall issue to the Lender the additional Warrants
referenced in subclauses (ii) (A) and (B) of this Section 1.10 prior to
such Equity Transaction. As used herein, "Equity Transaction" shall mean
(pursuant to a single transaction or a series of related transactions by a
single party or related parties (other than the Lender)) (i) the
acquisition of 20% or more of the Borrower's capital stock; (ii) the sale
of all or substantially all of the assets of the Borrower; or (iii)
repayment, directly or indirectly, of all or any portion of the Loan in
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connection with the sale of the Borrower's capital stock or the sale or
license of the Borrower's technology.
(b) The Warrants shall have a strike price of $2.78 (the "Strike
Price"), which Strike Price shall reset (the "Reset Price") to the lower of
(i) $2.78; (ii) the average trading price for any 20 day period subsequent
to the issuance of such Warrants; (iii) the price at which common stock or
common stock equivalents of the Borrower is issued (whether by conversion,
exercise or otherwise and whether any such security is outstanding on the
date hereof); and (iv) the exercise price or conversion rate of any new
options, warrants, preferred stock or other convertible security; provided,
however the Reset Price shall not be below $1.25.
ARTICLE II. CLOSING
Section 2.1 Closing and Closing Date. The making of each disbursement of
the Loan and the other transactions contemplated hereby shall take place on a
date set forth in a notice delivered by Borrower to Lender at least five days
before such date or at such other date and at such place as to which the parties
may agree (the "Closing" and the "Closing Date"). Subject to the terms and
conditions hereof, upon the fulfillment or waiver in writing of all the
conditions precedent set out in Article IV below, Lender shall disburse such
portion of the Loan to Borrower as Borrower may request.
ARTICLE III. SECURITY
Section 3.1 Guaranty. As partial security for the Loan, Borrower shall
cause each of its subsidiaries listed on Schedule 3.1 hereto (the
"Subsidiaries"), to execute and deliver to Lender, on or before the Closing
Date, a guaranty (the "Guaranty"), in form and substance satisfactory to
Lender, pursuant to which the Subsidiaries shall guarantee the obligations of
Borrower to Lender hereunder and under the Note.
Section 3.2 Security Interest. As further security for the Loan, Borrower
shall, and shall cause its Subsidiaries to, execute and deliver to Lender, on or
before the date hereof, an amendment to the security agreement, dated April 14,
1998 (as amended, the "Security Agreement"), in form and substance satisfactory
to Lender, pursuant to which Borrower and its Subsidiaries grant to Lender a
security interest in substantially
all of their personal property (other than equipment leased to Borrower and its
Subsidiaries and any leases which by their terms prohibit the grant of security
interests in, or assignments of, Borrower or the Subsidiaries' leasehold
interest therein) as collateral security for their obligations under the
Guaranty and for Borrower's obligations hereunder and under the Note. The
Security Interests granted pursuant to this amendment shall be
subordinate to the security interest securing the Prior Loans. In addition,
Borrower shall cause I-Link to execute and deliver to Lender, on or before the
Closing Date, a patent assignment in form and substance satisfactory to Lender
(the "Patent Assignment"), pursuant to which I-Link collaterally assigns to
Lender as security for I-Link's obligations under the Guaranty
and Borrower's obligations hereunder and under the Note its interest in all
patent applications it has filed with the United States Patent and
Trademark Office, including without limitation Patent Application No. 08/599,238
filed February 9, 1996 and entitled "Voice Internet Transmission System" and
Patent Application No. 08/585,628 filed January 16, 1996, and entitle "Facsimile
Internet Transmission System."
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Section 3.3 Pledge Agreement. As further security for the Loan, on or
before the Closing Date, Borrower shall execute and deliver to Lender an
amendment to the pledge agreement, dated April 14, 1998 (as amended, the
"Pledge Agreement"), in form and substance satisfactory to Lender, pursuant to
which Borrower grants to Lender a security interest in all of the issued and
outstanding equity interests of the Subsidiaries as collateral
security for Borrower's obligations hereunder and under the Note.
ARTICLE IV. CONDITIONS OF LENDING
Section 4.1 Conditions Precedent to Loan. The obligation of Lender to
disburse from time to time any portion of the Loan hereunder is subject to the
following conditions precedent:
(a) Lender shall have received all of the following, on or before the
Closing Date, in form and substance satisfactory to Lender:
(i) The Note, duly executed and delivered by Borrower;
(ii) The Guaranty, duly executed and delivered by the
Subsidiaries;
(iii) The Security Agreement, together with appropriate
UCC-1 financing statements duly executed and delivered by the Subsidiaries,
and the Patent Assignment;
(iv) The Pledge Agreement, duly executed and delivered by
Borrower, together with stock certificates and blank stock powers, as
applicable;
(v) Certified copies of the resolutions of the Board of
Directors of each of Borrower and the Subsidiaries evidencing approval of
the execution, delivery and performance of this Agreement, the Note, the
Guaranty, the Security Agreement, the Patent Assignment, the Pledge
Agreement and other matters contemplated hereby;
(vi) Certificates of Good Standing for each of Borrower and
its Subsidiaries from the jurisdiction of their organization and from each
other jurisdiction in which any is authorized to conduct business issued no
more than ten days prior to the Closing Date;
(vii) Copies of UCC, judgment and tax lien searches in
each jurisdiction in which collateral covered by the Security Agreement is
located, naming the Subsidiaries as debtors;
(viii) Copies of the certificates evidencing the insurance
required to be maintained by Borrower pursuant to Section 6.1(e); and
(ix) Such other agreements, certificates, opinions of
counsel and documents as Lender may reasonably require.
Section 4.2 Compliance. All of the representations and warranties of
Borrower and the Subsidiaries in this Agreement, the Guaranty, the Security
Agreement, the Pledge Agreement, the Patent Assignment, the Warrant Agreement
and in each other agreement, document, or instrument executed or delivered
pursuant hereto or thereto (collectively, the "Loan Documents") shall be true
and accurate in all material respects on and as of the
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Closing Date and the date of any subsequent disbursement of any portion of the
Loan, as if made on and as of such date and time. Borrower shall be in
compliance with all of the applicable terms and provisions of this Agreement and
no Event of Default or Potential Default shall have occurred and be continuing.
Borrower shall have performed all obligations and taken all actions to be
performed or taken by it hereunder on or prior to such date. On the date of
each borrowing, Borrower shall deliver to Lender a certificate, dated as of such
date and signed by an executive officer of Borrower, certifying compliance with
the conditions of this Section 4.2. Each disbursement of all or a portion of
the Loan to Borrower shall in and of itself, constitute a representation and
warranty that Borrower as of the
date of such Loan, is in compliance with this Section, and if Borrower is not in
compliance with this Section, Lender shall not be required to disburse such Loan
to Borrower.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and make the
Loan, Borrower represents and warrants as follows:
Section 5.1 Existence and Standing.
(a) Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Florida, is qualified to do
business and in good standing under the laws of each other jurisdiction in which
it conducts its business, and has all requisite power and authority, corporate
or otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, this Agreement, the Note,
the Pledge Agreement, the Warrant Agreement and all other Loan Documents.
(b) Each Subsidiary is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, is qualified to do
business and in good standing under the laws of each other
jurisdiction in which it conducts its business, and has all requisite power and
authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, each Loan Document to which it is a party.
Section 5.2 Authorizations, Compliance with Laws. The execution, delivery
and performance by each of Borrower and its Subsidiaries of each Loan Document
to which it is a party, and of each other document required to be executed and
delivered by it pursuant to this Agreement or any other Loan Document, have been
duly authorized by all necessary corporate action and do not and will not (i)
violate (A) any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to Borrower or any of its Subsidiaries
or (B) any provision of the Certificate of Incorporation, By-laws or other
organizational documents of Borrower or any of its Subsidiaries; or (ii) result
in a breach of or constitute a default under any agreement or instrument to
which Borrower or its Subsidiaries is a party or by which any of their
properties may be affected; or (iii) result
in the creation of a lien, charge or encumbrance of any nature upon
Borrower's or any of its Subsidiaries' properties or assets other than as
contemplated by this Agreement.
Section 5.3 Financial Statements. Borrower has delivered to Lender true
and complete copies of (a) the audited consolidated financial statements of
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Borrower for the fiscal years ended December 31, 1997, December 31, 1996, and
December 31, 1995, and (b) the unaudited consolidated financial statements of
Borrower as of September 30, 1998, and for the three month period then ended
(the "Financial Statements"). The Financial Statements are true and complete in
all material respects (including, without limitation, a disclosure of all
material contingent liabilities) and present fairly the financial condition and
results of operations of Borrower and its subsidiaries, as of the dates and for
the periods indicated and have been prepared in accordance with generally
accepted accounting principles, consistently applied, subject in the case of
statements for interim periods to normal year-end adjustments and the absence of
footnotes.
Section 5.4 Capitalization. All of the issued and outstanding capital
stock of Borrower has been duly and validly issued, and is fully paid and
nonassessable. All of the issued and outstanding equity interests of the
Subsidiaries have been duly and validly issued, and is fully paid and
nonassessable and is free and clear of any liens (except for the lien of Mr.
Drore Nahumi on the capital stock of MiBridge, Inc.), security interests or
other claims or encumbrances, except those granted to Lender pursuant to the
terms of this Agreement and the other Loan Documents. Except as set forth on
Schedule 5.4 attached hereto, neither Borrower nor any other person has any
commitment or obligation, either firm or conditional, to issue, deliver,
purchase or sell, under any offer, option agreement, bonus agreement, purchase
plan, incentive plan, compensation plan, warrant, conversion rights, contingent
share agreement, stockholders agreement, partnership agreement or otherwise, any
capital stock or other equity securities or securities convertible into shares
of capital stock or other equity securities.
Section 5.5 No Consent. No authorization, consent, approval, license,
exemption of or filing or registration with any court or governmental department
or agency or any other person is or will be necessary for the valid execution,
delivery and performance by Borrower or any of its Subsidiaries of this
Agreement, the Note, the Pledge Agreement, the Guaranty, the Security Agreement,
the Warrant Agreement or any other document required to be executed and
delivered by Borrower and its Subsidiaries pursuant to this Agreement.
Section 5.6 Binding Obligations. This Agreement, the Note, the Pledge
Agreement, the Guaranty, the Security Agreement, the Warrant Agreement and all
other documents required to be executed and delivered by Borrower and its
Subsidiaries pursuant to this Agreement have been executed and delivered by a
duly authorized officer of Borrower and its Subsidiaries and constitute legal,
valid and binding obligations of Borrower and its Subsidiaries, enforceable in
accordance with their respective terms.
Section 5.7 Litigation. There are no actions, suits or proceedings
pending, or, to the knowledge of Borrower, threatened against or affecting
Borrower or its Subsidiaries or any of their properties before any court or
governmental department or agency which materially adversely affects the
transactions contemplated by this Agreement or which could have a material
adverse effect on the business, properties, prospects, operation or condition
(financial or otherwise) of Borrower or any of its Subsidiaries.
Section 5.8 No Default. Neither Borrower nor any of its Subsidiaries is
in material default in the performance, observance or fulfillment of any of the
obligations or conditions contained in any material agreement or instrument to
which it is a party, nor with respect to any order, judgment, writ, injunction
or decree of any court, governmental authority or
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arbitration board.
Section 5.9 Compliance with Laws. Each of Borrower and each of its
Subsidiaries has complied and is in compliance in all material respects with all
applicable federal, state and local laws. Each of Borrower and each of its
Subsidiaries has obtained all necessary licenses and permits required for the
conduct of its business and operations or such licenses and permits have been
applied for and are now being diligently pursued.
Section 5.10 Taxes. Except as set forth on Schedule 5.10 attached hereto,
each of Borrower and each of its Subsidiaries has filed all tax returns and
reports (federal, state and local) required to be filed by it, and has paid all
taxes shown thereon, including interest and penalties, and all assessments
received by it (except to the extent that the same are being contested in good
faith by appropriate proceedings diligently prosecuted and as to which adequate
reserves have been set aside on the books of Borrower and its Subsidiaries, as
appropriate, in conformity with
generally accepted accounting principles).
Section 5.11 Title to Properties. Each of Borrower, and each of its
Subsidiaries has good and marketable title to all of its property and assets and
valid and enforceable leasehold interests in the property which it holds under
lease, all such property, assets and leasehold interests being free and clear of
any and all mortgages, deeds of trust, assignments, liens, security interests,
charges, encumbrances or adverse claims of any nature whatsoever, and no
mortgages, deeds of trust, financing statements or other evidences of security
interests covering all or any of the aforesaid property are on file among the
records of any public office. Each of Borrower and each of its Subsidiaries
owns or possesses the valid right to use all the patents, patent applications,
patent and know-how licenses, inventions, technology, permits, trademark
registrations and applications, trademarks, service marks, trade names,
copyrights, product
designs, applications, formulae, processes, circulation, and other subscriber
lists, industrial property rights and licenses and rights in respect of the
foregoing used or necessary for the conduct of its business (collectively,
"proprietary rights"). Borrower is not aware of any existing or threatened
infringement or misappropriation of (a) any such proprietary rights of others by
Borrower or any of its subsidiaries or (b) any proprietary rights of Borrower or
any of its subsidiaries by others.
Section 5.12 Absence of Undisclosed Liabilities. Except for (i)
obligations under the Loan Documents, and (ii) liabilities incurred in the
ordinary course of business (other than for borrowed money), neither Borrower,
nor any of its Subsidiaries has any material liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise.
Section 5.13 Solvency. Each of Borrower and each of its Subsidiaries
has received, or has the right to receive, consideration which is the reasonable
equivalent value of the obligations and liabilities that it has incurred to
Lender. Neither Borrower, nor any of its Subsidiaries is insolvent as defined
in Section 101 of Title 11 of the United States Code or any applicable state
insolvency statute, nor, after giving effect
to the consummation of the transactions contemplated herein, will Borrower or
its Subsidiaries be rendered insolvent by the execution and delivery of this
Agreement, the Note or the other Loan Documents to Lender. Neither Borrower,
nor any of its Subsidiaries is engaged, and is not about to engage, in any
business or transaction for which the assets retained by it shall be an
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unreasonably small capital, taking into consideration the
obligations to Lender incurred hereunder and under the Loan Documents. Neither
Borrower, nor any of its Subsidiaries intends to, nor believes that it will,
incur debts beyond its ability to pay them as they mature.
Section 5.14 Material Misstatement. No statement made herein or in any
other Loan Document or information, exhibit or report furnished by Borrower or
its Subsidiaries to Lender in connection with this Agreement or its negotiation,
contains any material misstatement of fact or omits to state a material fact or
any fact necessary to make the foregoing not misleading.
Section 5.15 Absence of Material Adverse Effect. No material adverse
effect upon or change in (a) the properties, assets, business, operations or
condition (financial or otherwise) of the Borrower and its Subsidiaries taken as
a whole or on the ability of the Borrower and its Subsidiaries to conduct their
businesses, or (b) the ability of the Borrower or any of its Subsidiaries to
perform its obligations hereunder or under any other Loan
Document to which it is a party has occurred since September 30, 1998.
ARTICLE VI. COVENANTS OF BORROWER
Section 6.1 Affirmative Covenants. So long as the Note shall remain
unpaid and this Agreement shall not have been terminated, Borrower hereby agrees
that it will, and that it will cause each of its subsidiaries to, unless Lender
shall otherwise consent in writing:
(a) Payment of Obligations. Pay punctually and discharge when due:
(i) all indebtedness heretofore or hereafter incurred; (ii) all taxes,
assessments and governmental charges or levies imposed upon it or its income or
profits, or upon any properties belonging to it; (iii) all claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like persons
which, if unpaid might become a lien or charge upon the property of Borrower or
such subsidiary; provided that this
covenant shall not require the payment of any of the matters set forth in (i),
(ii) and (iii) above if the same shall be contested in good faith and by proper
proceedings diligently pursued and as to which adequate reserves have been set
aside on the books of Borrower or such subsidiary in
accordance with generally accepted accounting principles.
(b) Preservation of Existence. Preserve and maintain its respective
corporate existence, and all material rights, franchises, licenses and
privileges used or useful in the operation of its business.
(c) Maintenance of Properties. Maintain and preserve all of its
properties necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted.
(d) Compliance with Laws. Comply in all material respects with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority.
(e) Maintenance of Insurance. Maintain with responsible and reputable
insurance companies insurance policies on all of its properties and covering
such risks, including public liability and workers' compensation, in such
amounts as are usually carried by companies engaged in similar businesses and
owning similar properties as Borrower or its subsidiaries, and promptly upon
execution thereof provide to Lender copies of all such policies and any riders
10
or amendments thereto; the policies of insurance required hereunder shall name
Lender as an additional loss payee or additional insured, as applicable, and
shall provide that Lender shall receive at least thirty days written notice
prior to the cancellation, termination or alteration of any such policy.
(f) Operations in Ordinary Course. Continue to operate its business
in the ordinary course.
(g) Perfection of Liens. Do all things requested by Lender to
preserve and perfect as first and second liens and security interests of Lender
arising pursuant to the Security Agreement, the Pledge Agreement or any other
agreement required hereunder.
(h) Governmental Approval. If counsel to Lender reasonably determines
that the consent of the Federal Communications Commission or any other federal,
state or local governmental or licensing authority is required in connection
with the execution, delivery and performance of
this Agreement, the Note, the Pledge Agreement, the Guaranty, the Security
Agreement, the Warrant Agreement or any other document delivered to Lender in
connection herewith or therewith or as a result of any action which may
be taken pursuant hereto or thereto, then Borrower, at its sole cost and
expense, agrees to use its best efforts to secure such consent and to cooperate
with Lender in any action commenced by Lender to secure such consent.
(i) Agreements. Comply with its obligations under the Loan Documents.
(j) Information and Inspection. Furnish to Lender from time to time,
upon request, full information pertaining to any covenant, provision or
condition hereof, or to any matter connected with its books, records,
operations, financial condition, properties, activities or business. At all
reasonable times, Borrower shall permit any authorized representatives
designated by Lender to visit and inspect any of the properties of Borrower or
any of its subsidiaries and its books and records, and to take extracts
therefrom and make copies thereof, and to discuss Borrower's and its
subsidiaries' affairs, finances and accounts with the management and independent
accountants of Borrower.
(k) Rights Offering. The Borrower shall (i) mail the Rights Offering
to its shareholders as soon as practicable, but in no event later than the
Mailing Date and (ii) consummate the Rights Offering as soon as practicable, but
in no event later than the Consummation Date.
Section 6.2 Negative Covenants. So long as the Note shall remain unpaid
and this Agreement shall not have been terminated, Borrower hereby
agrees that it will not, and that it will not permit any of its subsidiaries to,
without Lender's prior written approval or pursuant to an agreement to which the
Lender is a party:
(a) Indebtedness. Create or incur, assume or suffer to exist any
indebtedness, obligation or liability (or guaranty the indebtedness, obligation
or liability of any other person), whether matured or unmatured, liquidated or
unliquidated, direct or contingent, joint or several,
except for: (i) indebtedness evidenced by the Note; (ii) indebtedness (other
than for borrowed money) incurred in the ordinary course of business, and (iii)
obligations or liabilities arising under the Loan Documents.
(b) Liens. Except as disclosed herein, create, assume or suffer to
11
exist, directly or indirectly, any security interest, mortgage, deed of trust,
pledge, lien, charge or other encumbrance, of any nature whatsoever upon any of
its properties or assets, now owned or hereafter acquired, excluding, however,
from the operation of this covenant:
(i) any security interest or lien created pursuant to or in connection with
this Agreement or securing the Loan;
(ii) liens for taxes or assessments either not delinquent or the validity of
which are being contested in good faith by appropriate legal or
administrative proceedings and as to which adequate reserves shall have
been set aside on its books, in conformity with generally accepted
accounting principles;
(iii) materialmen's, mechanics', carriers', workmen's, repairmen's,
warehousemen's or other like statutory liens arising in the ordinary
course of business and either not yet due and payable or being contested
in good faith by appropriate legal proceedings and as to which adequate
reserves shall have been set aside on its books, in conformity with
generally accepted accounting principles;
(iv) deposits or pledges to secure payment of workers' compensation,
unemployment insurance or other social security benefits or obligations;
or
(v) any judgment lien, singly or aggregated with other judgment liens, in an
amount less than $25,000, unless the judgment it secures shall not, within
thirty days after the entry thereof, have been discharged, vacated,
reversed, or execution thereof stayed pending appeal, or shall not have
been discharged, vacated or reversed within thirty days after the
expiration of any such stay.
(c) Disposition of Assets. Sell, transfer, lease or otherwise dispose
of any of its assets or properties (including without limitation the sale or
other disposition of the capital stock or other equity interests in any
subsidiary) other than sales of assets in the ordinary
course of business and the disposition of obsolete or other assets which the
board of directors of Borrower determines in good faith are no longer useful in
the operations of Borrower's or any of its subsidiaries' business.
(d) Merger; Acquisition; Joint Ventures; Liquidation. Enter into any
consolidation or merger with, or into any acquisition of all or substantially
all of the properties or assets of any person or entity; or
enter into any partnership or joint venture with any other person; or
dissolve or liquidate.
(e) Transfer or Issuance of Shares. Issue or permit the transfer of
any shares of the capital stock or other equity interests of Borrower or any
subsidiary, or any options, warrants, convertible securities or other rights to
purchase Borrower's or any subsidiary's stock or other equity interests except
pursuant to the Loan Documents.
(f) Change of Business. Change, in any material respect, the nature
or character of its business as currently conducted, or engage in any activity
not reasonably related to such business.
(g) Remove Assets. Permit any of its Subsidiaries to remove any of
12
its assets to a jurisdiction in which no financing statement on Form UCC-1 has
been filed by Lender with respect to such assets.
(h) Distributions or Dividends. Other than with respect to the Rights
Offering, declare or make, directly or indirectly, any payment or distribution
to any of the shareholders of Borrower, or incur any liability for the purchase,
acquisition, redemption or retirement of any capital stock of Borrower or as a
dividend, return of capital or other payment or distribution of any kind to any
shareholder of Borrower or any other affiliate of Borrower (other than any stock
dividend or stock split or similar distribution payable only in capital stock of
Borrower) in
respect of Borrower's capital stock.
(i) Transactions with Affiliates. Enter into any transaction or
agreement, other than the Loan Documents, with any affiliate of Borrower or any
affiliate of any shareholder of Borrower unless the terms of such transaction or
agreement are fair and reasonable and no more onerous to
Borrower or such subsidiary than could be obtained from an independent third
party in an arms-length transaction.
(j) Contracts. Enter into any contract or commitment except for
contracts involving aggregate payments of less than $50,000 individually or
$250,000 in the aggregate and contracts which can be terminated without
penalty on thirty days notice or less, or amend or terminate any material
contract (or waive any substantial right thereunder), or incur any obligation
(including obligations relating to the borrowing of money or guarantee of
indebtedness).
(k) Adverse Change. Suffer any material adverse change in the
business, assets, properties, prospects or condition (financial or otherwise) of
Borrower or any subsidiary, or any damage, destruction or loss affecting any
assets used or useful in the conduct of the business of
Borrower or any subsidiary.
(l) Employee Compensation. Suffer any material increase in excess of
the reasonable range in the telecommunications industry for similarly situated
companies in the same or similar markets in compensation payable or to become
payable to any employees, or any bonus payment made
or promised to any employee, or any material change in personnel policies,
insurance benefits or other compensation arrangements affecting any employees,
provided that nothing in this clause shall be construed to limit or restrict the
commission compensation of employees who may be participating in I-Link's
multi-level marketing program.
(m) Cancellation of Debts. Cancel any material debts owed to or claims
held by Borrower or any subsidiary.
(n) Investments. Purchase or otherwise acquire, hold or invest in any
stock or other securities or evidences of indebtedness of, or any interest or
investment in, or make or permit to exist any loans or advances to, any other
person, except:
(i) direct obligations of the United States Government maturing within one
year;
(ii) certificates of deposit of a member bank of the Federal Reserve System
having capital, surplus and undivided profits in excess of $2,000,000,000;
13
(iii) any investment in commercial paper which at the time of such investment is
assigned the highest quality rating in accordance with the rating systems
employed by either Moody's Investors Service, Inc. or Standard & Poor's
Corporation;
(iv) money market funds; and
(v) investments in its existing subsidiaries.
(o) Write-Down. Suffer any significant write-down of the value of any
assets or any significant write-off as uncollectible of any accounts receivable
without the prior written consent of Lender except and as required by generally
accepted accounting principles as required to
present accurate financial information on Borrower and its subsidiaries.
(p) Rights. Transfer or grant any right under, or enter into any
settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, service mark, trade name, franchise, or similar right, or
modify any existing right relating to Borrower or any of its
subsidiaries.
(q) Agreements. Terminate, amend or commit any material breach or
default under the Loan Documents.
(r) Subsidiaries. Create or acquire any subsidiary unless Lender
shall have approved such action in advance and Borrower shall have taken all
actions required by Lender to grant Lender a first priority security interest in
all of the issued and outstanding stock or other equity
interests of such subsidiary and caused such subsidiary to execute and deliver
to Lender a guaranty and security agreement in substantially the form of the
Guaranty and Security Agreement. Borrower acknowledges and agrees that until
such time as such security interest is granted and
perfected, Lender shall have an equitable lien in the stock of any subsidiary
created or acquired by Borrower.
(s) Operating Budget. The Borrower shall not materially divert from
its Budget without the prior consent of the Lender.
Section 6.3 Reporting Requirements. So long as the Note shall remain
unpaid and this Agreement shall not have been terminated, Borrower shall, unless
Lender shall otherwise consent in writing, furnish to Lender:
(a) Default Certificate. As soon as possible and in any event within
five business days after the occurrence of each Event of Default (as defined in
Section 7.1) of which Borrower has knowledge, the statement of the President of
Borrower setting forth details of such Event of Default
and the action which Borrower proposes to take with respect thereto.
(b) Financial Statements. Monthly unaudited, unconsolidated financial
statements for the Borrower and its subsidiaries within thirty days after the
end of each month and quarterly unaudited consolidated and consolidating
financial statements of the Borrower within forty-five days
after the end of each fiscal quarter (or such longer period, not to exceed five
calendar days, as shall be permitted by the U.S. Securities and Exchange
Commission ("SEC") for the timely filing of the quarterly report on Form 10-Q
pursuant to Rule 12b-25 of the SEC), each such monthly and quarterly financial
statement to be certified by the chief financial
14
officer of Borrower; within ninety days after the end of each fiscal year of
Borrower (or such longer period, not to exceed fifteen calendar days, as shall
be permitted by the SEC for the timely filing of the quarterly report on Form
10-K pursuant to Rule 12b-25 of the SEC), a copy of the audited consolidated
financial statements for such year for Borrower and its subsidiaries, including
therein a consolidated balance sheet as of the end of such fiscal year,
consolidated statements of income and expense of Borrower for such fiscal year,
and a consolidated statement of cash flow of Borrower and its subsidiaries for
such fiscal year, in each case prepared by an independent public accountant of
recognized standing acceptable to Lender. Borrower shall deliver to Lender with
each set of monthly financial statements a calculation of Adjusted Cash Flow (as
that term is defined in Section 6.4(a) below) for such month.
(c) Securities Filings. Copies of all reports and filings made by
Borrower or any of its subsidiaries with the Securities and Exchange Commission
or any securities exchange on which any of Borrower's or such subsidiary's
securities are listed or traded and of all mailing or distributions to
Borrower's shareholders.
(d) Notice of Litigation. Promptly give written notice of all
actions, suits and proceedings before any court or governmental agency, domestic
or foreign, which may be commenced or threatened against Borrower or any of its
subsidiaries in which the claim involved is $5,000 or more
and of any other matter of the type described in Section 5.7.
(e) Budget. An annual budget ("Budget") within thirty days before the
beginning of each fiscal year of Borrower. Such Budget shall be satisfactory in
form and substance to Lender.
(f) Other Information. Such other information respecting the
business, properties, operations or the condition, financial or otherwise, of
Borrower or any of its subsidiaries as Lender may from time to time reasonably
request.
Section 6.4 Financial Covenants.
(a) Adjusted Cash Flow. Borrower shall not permit Adjusted Cash Flow,
as defined below to be less than $1,000,000.
"Adjusted Cash Flow", for purposes of this Section 6.4(a), means for any
period total consolidated revenues of Borrower and its subsidiaries for
such period minus the sum of (i) all operating expenses (excluding
depreciation and amortization) incurred in such period, (ii) all capital
expenditures made in such period, (iii) all payments of principal made on
any indebtedness (including capital leases and financing leases) in such
period, (iv) all cash interest expense paid in such period and (v) all
taxes paid or accrued in such period, in each case as determined by
generally accepted accounting principles, consistently applied.
(b) Working Capital. Borrower shall not permit its consolidated
current liabilities (not including the liability arising hereunder and evidenced
by the Note) at any time to exceed its consolidated current assets by an amount
in excess of $1,000,000, in each case as determined
by generally accepted accounting principles, consistently applied.
15
ARTICLE VII. EVENTS OF DEFAULT
Section 7.1 Events of Default. Under this Agreement, an Event of Default
shall be any of the following:
(a) Borrower shall fail to pay any installment of principal or
interest on the Note, or any other obligation to Lender when due whether at the
due date thereof or by acceleration or otherwise, and, in the case of any
installment of interest, such default shall remain unremedied for a period of
three days; or
(b) The security interest or lien of Lender in any material portion of
the collateral covered by the Security Agreement or Pledge Agreement or any
other Loan Document shall at any time cease to be a second priority (second only
to the Lender's first priority security interest securing the Prior Loans),
perfected security interest or lien or shall not constitute a legal, valid and
enforceable security interest or lien; or
(c) Any representation or warranty made by Borrower or any of its
Subsidiaries (or any of their officers) herein, in the Pledge Agreement, the
Warrant Agreement, the Guaranty, the Security Agreement or any other
Loan Document or in any certificate, agreement, instrument or statement
contemplated by or made or delivered pursuant to or in connection with this
Agreement or any other Loan Document shall prove to have been incorrect in any
material respect when made or deemed made; or
(d) Borrower or any of its Subsidiaries shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement, the
Note, the Guaranty, the Security Agreement, the Pledge Agreement, the
Warrant Agreement or any other Loan Document, and any such failure remains
unremedied for ten days after the occurrence of such failure; or
(e) Borrower or any of its subsidiaries shall fail to pay any
indebtedness for borrowed money owing by Borrower or any of its subsidiaries or
any interest or premium thereon, when due, whether such indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise, or Borrower or any of
its subsidiaries shall fail to perform any term, covenant or agreement under any
agreement or instrument evidencing or securing or relating to any such
indebtedness owing by Borrower or any of its subsidiaries if the effect of such
failure is to accelerate, or to permit the holder of such
indebtedness to accelerate, the maturity of such indebtedness; or
(f) Either (i) Borrower or any of its subsidiaries shall fail to pay
its debts as they mature in the ordinary course of business; or (ii) Borrower or
any of its subsidiaries shall file a petition commencing a
voluntary case concerning it under any Chapter of Title 11 of the United States
Code entitled "Bankruptcy"; or (iii) Borrower or any of its subsidiaries shall
apply for or consent to the appointment of any receiver, trustee, custodian or
similar officer for it or for all or any substantial part of its property; or
(iv) such receiver, trustee, custodian or similar officer shall be appointed
without the application or consent of Borrower or any of its subsidiaries and
such appointment shall continue undischarged for a period of thirty days; or (v)
an involuntary case is commenced against Borrower or any of its subsidiaries
under any Chapter of the aforementioned Title 11 and an order for relief under
such Title 11 is entered or the petition commencing the case is controverted but
is not dismissed within thirty days after the commencement of the case; or (vi)
16
Borrower or any of its subsidiaries shall institute (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation
or similar proceeding relating to it under the laws of any jurisdiction; or
(vii) any such proceeding shall be instituted against Borrower or any of its
subsidiaries and shall remain undismissed for a period of thirty days; or (viii)
Borrower or any of its subsidiaries shall take any action for the purpose of
effectuating any of the foregoing; or
(g) Any court, government, or government agency shall condemn, seize
or otherwise appropriate or take custody or control of all or a substantial
portion of the property or assets of Borrower or any of its subsidiaries; or
(h) Any money judgment, writ or warrant of attachment, or similar
process involving, either individually or in the aggregate, an amount in excess
of $25,000, and in either case not adequately covered by insurance as to which
the insurance company has acknowledged coverage, shall be entered or filed
against Borrower or any of its subsidiaries or its assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period
of thirty days or in any event later than five days prior to the date of any
proposed sale thereunder; or
(i) Any person or group of persons (other than the Lender) is or
becomes the "beneficial owner" (within the meaning of Rules 13d-3 and 13d-5
under the federal Securities Exchange Act of 1934, as amended), directly or
indirectly, of a percentage of the common voting stock of Borrower greater than
25%; or (ii) Borrower shall cease or fail to own, directly or indirectly,
beneficial and legal title to all of the issued and outstanding equity interests
in any of its subsidiaries; or (iii) John W. Edwards shall
cease for any reason to be the President and Chief Executive Officer of
Borrower; or
(j) Any material adverse effect upon or change in (i) the properties,
assets, business, operations, financial condition, prospects, liabilities or
capitalization of Borrower or any of its subsidiaries or on the ability of
Borrower or any of its subsidiaries to conduct its business,
(ii) the ability of Borrower or any of its Subsidiaries or any other party to a
Loan Document (other than Lender) to perform its obligations hereunder or under
any other Loan Document to which it is a party, (iii) the validity or
enforceability of this Agreement, the Note or any other Loan Document, (iv) the
rights or remedies of Lender under this Agreement, the Note, any
other Loan Document or at law or in equity or (v) the value of any material
collateral granted to Lender pursuant to any Loan Document shall occur.
(k) Borrower shall fall short of its monthly budget by greater than
10% as set forth in the Budget delivered to the Lender.
Section 7.2 Effect of Event of Default. Should any Event of Default occur,
Lender may at its option by written notice to Borrower declare the entire unpaid
principal amount of the Note, together with all unpaid interest and all other
amounts payable under this Agreement and every other obligation of Borrower to
Lender, immediately due and payable, whereupon the Note and all such obligations
shall become and be forthwith due and payable, without presentment, demand,
protest or other notice of any kind,
all of which are hereby expressly waived by Borrower, anything contained herein
or in the Note or in such other note or evidence of indebtedness to the contrary
notwithstanding; provided, however, that in case of an Event of Default under
17
Section 7.1(f), all the obligations of Borrower under this Agreement and the
Note shall become immediately due and payable as of the date of any such Event
of Default regardless of the cause of such Event of Default and without any
notice to Borrower required from Lender. Lender shall have, in addition to all
other rights and remedies allowed by law, the rights and remedies of a secured
party under the Uniform Commercial Code and, without limiting the generality of
the foregoing, the rights and remedies provided for in the Guaranty, the
Security Agreement, the Pledge Agreement and any other Loan Document, which
provisions are hereby incorporated by reference.
ARTICLE VIII. MISCELLANEOUS
Section 8.1 No Waiver; Cumulative Remedies. No failure or delay on the
part of Lender in exercising any right, power or remedy hereunder shall operate
as a waiver, nor shall any single or partial exercise of any such right, power
or remedy hereunder operate as a waiver. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
Section 8.2 Amendments. No amendment, modification, termination or waiver
of any provision of this Agreement, the Note or any other Loan Document, nor
consent to any departure by Borrower or any of its Subsidiaries therefrom, shall
in any event be effective unless in writing, signed by Lender and then only in
the specific instance and for the specific purpose for which given. No notice
to or demand on Borrower or any of its Subsidiaries in any case shall entitle it
to any other or further notice or demand in similar or other circumstances
except as
expressly provided herein or in another Loan Document.
Section 8.3 Address for Notices. All notices and other communications
under this Agreement shall be in writing and shall be delivered in person or by
mailing a copy thereof by registered or certified U.S. mail, return receipt
requested, to the applicable party at the addresses indicated below:
If to Borrower: I-LINK INCORPORATED
13751 South Wadsworth Park Drive
Suite 200
Draper, Utah 84020
Attention: John W. Edwards, President
Telecopier: 801-576-5075
with a copy (which shall not constitute notice) to:
David E. Hardy, Esq.
60 E. South Temple
Suite 2200
Salt Lake City, Utah 84111
Telecopier: (801) 364-6664
If to Lender: Winter Harbor, L.L.C.
c/o First Media, L.P.
11400 Skipwith Lane
Potomac, Maryland 20854
Attention: Ralph W. Hardy, Jr.
Telecopier: (301) 983-2425
18
with a copy (which shall not constitute notice) to:
Ralph W. Hardy, Jr., Esq.
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Telecopier: (202) 776-2222
or at such other address as may be designated by either party in a written
notice to the other complying as to delivery with the terms of this
Section. All such notices and other communications shall be effective when
deposited in the mails.
Section 8.4 Expenses. Borrower agrees to pay on demand all costs and
expenses incurred by Lender directly in the enforcement of this Agreement, the
Note, the Guaranty, the Security Agreement, the Pledge Agreement and other
instruments and documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of any attorney to
whom the Note is referred for collection (whether or not litigation is
commenced) or for representation out of court, in trial, on appeal or in
proceedings under any bankruptcy or insolvency law or otherwise. In addition,
Borrower shall pay any and all taxes and fees payable or determined to be
payable in connection with the execution, delivery or recordation of any
instruments and documents to be delivered hereunder. In
addition, Borrower agrees to pay (i) all the costs and expenses of Lender in
connection with the negotiation, preparation and execution of the Loan Documents
and all the costs of furnishing all opinions by counsel for Borrower, and of
Borrower's performance of and compliance with all agreements and conditions
contained herein and in the other Loan Documents on its part to be performed or
complied with, including, without limitation, confirming compliance with
environmental and insurance requirements; (ii) the fees, expenses and
disbursements of counsel and consultants to the Lender in connection with the
negotiation, preparation, execution and administration of the Rights Offering,
Loan Documents and the Loan and any consents, amendments, waivers or other
modifications hereto or thereto; and (iii) all the costs and expenses of
creating and perfecting liens in favor of Lender pursuant to any Loan Document.
Section 8.5 Binding Effect; Assignment. This Agreement shall become
effective when executed and thereafter shall be binding upon and inure to the
benefit of Borrower, Lender and their respective successors and
assigns, except that Borrower shall not have the right to assign any rights or
obligations hereunder without the prior written consent of Lender. Lender shall
be permitted to assign, without Borrower's consent, all or any
portion of Lender's rights and interests hereunder and under each other document
executed in connection with this Agreement.
Section 8.6 Governing Law. This Agreement, the Note, the Pledge Agreement,
the Guaranty, the Security Agreement and related documents shall be governed by,
and construed in accordance with, the laws of the State of Delaware with the
exception of its conflicts of laws provisions; provided that the effect of any
recordation shall be determined by the State
thereof.
Section 8.7 Severability of Provisions. Any provision of this Agreement,
the Note, the Pledge Agreement, the Guaranty or the Security Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
19
invalidating the remaining provisions or affecting the validity or
enforceability of any provisions in any other jurisdiction.
Section 8.8 Headings. Article and Section headings in this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
Section 8.9 Rights Affected by Extensions. The rights of Lender and its
assigns shall not be impaired by any indulgence, release, renewal, extension or
modification which Lender may grant with respect to the indebtedness or any part
thereof, or with respect to the collateral or with respect to any endorser,
guarantor, or surety without notice or consent of Borrower or any endorser,
guarantee or surety.
Section 8.10 Survival of Representations and Warranties. All
representations and warranties made in this Agreement and in any agreements,
documents or certificates delivered pursuant hereto or thereto shall survive the
execution and delivery of this Agreement and the Note and the making of the Loan
hereunder and continue in full force and effect, as of the respective dates as
of which they were made, until all of the obligations of Borrower to Lender
hereunder have been paid in full.
Section 8.11 Further Assurances. From time to time, Borrower shall execute
and deliver, or cause to be executed and delivered, to Lender such additional
documents as Lender may reasonably require to carry out the purposes of this
Agreement or any of the documents entered into in connection herewith, or to
preserve and protect the rights of Lender hereunder or thereunder.
Section 8.12 Indemnification. Borrower hereby indemnifies and holds
harmless Lender and its partners, directors, officers, shareholders, employees,
agents, counsel, subsidiaries and affiliates (the "Indemnified Persons") from
and against any and all losses, liabilities, obligations, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against any
Indemnified Person in any way relating to or arising out of this Agreement, the
other Loan Documents, the documents entered into in connection herewith or
therewith, or any of them or any of the transactions contemplated hereby or
thereby, the making of the Loan, the use of the proceeds of the Loan or the
ownership or operation of the business or assets of Borrower or any of its
subsidiaries; provided, however, that Borrower shall not be liable to any
Indemnified Person, if there is a judicial determination that such losses,
liabilities, obligations, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence or willful
misconduct of such Indemnified Person.
Section 8.13 JURY TRIAL WAIVER. EACH OF LENDER AND BORROWER HEREBY AGREES
TO WAIVE ITS RESPECTIVE RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, REPLACEMENTS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOAN.
20
Section 8.14 Maximum Interest. Lender and Borrower intend that this
Agreement and the other Loan Documents conform to all applicable usury laws.
Accordingly, no provisions of the Loan Documents shall require the payment or
permit the collection of interest in excess of the maximum rate permitted by
applicable law ("Maximum Rate"), or obligate Borrower to pay any taxes,
assessments, charges, insurance premiums or other amounts which
are held to constitute interest to the extent that such payments, when added to
the other obligations under the Loan Documents, would be held to constitute
contracting for, or the payment by Borrower of, interest at a rate greater than
the Maximum Rate. Lender and Borrower further agree that:
(i) if any excess of interest in such respect is herein or in any such other
instrument provided for, or shall be adjudicated to be so provided for
herein or in any such instrument, the provisions of this subsection 8.14
shall govern, and neither Borrower nor its successors or assigns shall be
obligated to pay the amount of such interest to the extent it is in excess
of the Maximum Rate;
(ii) if at any time the amount of interest under any of the Loan Documents for
a calendar year exceeds the Maximum Rate had the Maximum Rate at all times
been in effect, the interest chargeable under any such Loan Document shall
be limited to the amount of interest that could have been charged if the
Maximum Rate had at all times been in effect, but any subsequent
reductions in the interest due shall not reduce the rate of interest
chargeable under any such Loan Document below the Maximum Rate until the
total amount of interest accrued under any such Loan Document equals the
amount of interest that would have accrued if the interest provided for in
any such Loan Document had at all times been in effect and collectible;
(iii) if the maturity of any Loan Document is accelerated for any reason, or in
the event of any prepayment by Borrower, or in any other event, earned
interest may never include more than the Maximum Rate, computed from the
date of disbursement of the funds evidenced by such Loan Document until
payment, and any interest otherwise payable under such Loan Document that
is in excess of the Maximum Rate shall be canceled automatically as of
such acceleration or such other event and (if theretofore paid) shall be
credited against principal;
(iv) if it should be held that any interest payable or chargeable under any
Loan Document is in excess of the Maximum Rate, the interest payable or
chargeable under such Loan Document shall be reduced to the maximum amount
permitted by applicable federal or state law, whichever shall permit the
higher lawful interest, as construed by courts having jurisdiction
thereof; and
(v) the spreading, prorating and amortizing of interest over the Maturity Date
of the Loan Documents shall be allowed to the fullest extent permitted by
applicable law.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be executed by their respective duly authorized officers as of
the date first above written.
I-LINK INCORPORATED
By: /s John Edwards
John Edwards, President
WINTER HARBOR, L.L.C.
By: First Media, L.P., its member
By: First Media Corporation,
its sole general partner
By: /s Ralph W. Hardy Jr.
Ralph W. Hardy Jr., Secretary
22
Exhibit 1
FORM OF PROMISSORY NOTE
$8,000,000 November 10, 1998
FOR VALUE RECEIVED, the undersigned, I-LINK INCORPORATED, a Florida
corporation (the "Maker"), promises to pay to the order of WINTER HARBOR,
L.L.C., a Delaware limited liability company (the "Payee"), on or before
October 31, 1999 (the "Maturity Date"), the principal sum of $8,000,000, or
if less, the outstanding principal balance of the Loans made by Payee to
Maker pursuant to the Loan Agreement, as that term is defined below,
together with interest thereon as provided herein. All capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to
them in the Loan Agreement.
9. Interest. The unpaid principal balance of this Note shall bear interest
at the rates determined in accordance with the provisions of that certain Loan
Agreement dated as of January 15, 1999, between the Maker and the Payee (as the
same may be amended, modified, extended or restated, the "Loan Agreement").
Interest accrued hereunder shall be paid monthly on the last business day of
each calendar month until all principal and interest hereunder is paid in full
at the repayment or maturity of the Loan.
10. Principal Repayment. The aggregate principal balance of this
Note shall be due and payable as provided in Section 1.4 of the Loan
Agreement.
11. Prepayments. This Note may be voluntarily prepaid in whole or
in part without premium or penalty at any time and from time to time;
provided, however, that each partial prepayment shall be in the aggregate
principal amount of not less than $100,000 or an integral multiple of $50,000 in
excess thereof. In making a prepayment in whole, the Maker shall pay all
accrued interest through the date of such prepayment. The Maker shall make a
mandatory prepayment of the outstanding principal amount of the Note together
with all accrued interest on and subject to the terms and conditions of the Loan
Agreement.
12. Payment on Business Days. If any payment of principal or interest on
this Note shall become due on a Saturday, Sunday or public
holiday, such payment may be made on the next succeeding business day,
and such extension of time in such case shall be included in the
computation of interest in connection with such payment.
13. Form of Payment. All payments made pursuant to the terms of
this Note shall be made in lawful money of the United States of America and
shall be payable to the Payee at its principal office located at 11400 Skipwith
Lane, Potomac, Maryland 20854 or at such other place as the Payee shall have
designated to the Maker in writing.
14. Choice of Law. This Note shall be governed by and construed in
accordance with the laws of the State of Delaware with the exception of the
conflicts of laws provisions thereof.
15. Events of Default. Upon the occurrence of any Event of Default,
Lender may at its option by written notice to Borrower declare the entire unpaid
principal amount of the Note, together with all unpaid interest and all other
amounts payable hereunder, immediately due and payable.
23
16. Collection Expenses. If at any time the indebtedness evidenced
by this Note is collected through legal proceedings or this Note is
placed in the hands of attorneys for collection, the Maker and each
endorser of this Note hereby jointly and severally agree to pay all
costs and expenses (including reasonable attorneys' fees) incurred by
the holder of this Note in collecting or attempting to collect such
indebtedness.
17. Waivers. To the extent permitted by law, except as otherwise
provided herein or in the Loan Agreement, the Maker and each endorser
of this Note, and their respective heirs, successors, legal
representatives and assigns, hereby severally waive presentment;
protest and demand; notice of protest, demand, dishonor and
nonpayment; diligence in collection, and any relief whatever from the
valuation or appraisement laws of any state.
IN WITNESS WHEREOF, the Maker has executed this Note as of the date
and year first above written.
I-LINK INCORPORATED,
a Florida corporation
By:_______________________________
John Edwards, President
24
Exhibit 2
Date Borrowed Amount Borrowed
November 11, 1998 $600,000*
November 11, 1998 $1,041,712
November 24, 1998 $1,200,000
December 1, 1998 $1,000,000
January 4, 1999 $1,000,000
Total as of the date hereof: $4,841,712
* Represents certain accrued and unpaid interest and accrued and unpaid
expenses owed to the Lender.
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Schedule 3.1
a. I-Link Communications, Inc. (f/k/a Family Telecommunication
Incorporated);
b. I-Link Worldwide LLC;
c. MiBridge, Inc. (f/k/a I-Link Mergerco, Inc.);
d. I-Link Systems, Inc. (f/k/a I-Link Worldwide, Inc.)
e. Vianet Technologies, Ltd.
26
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