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EXHIBIT 10.5
BUSINESS LOAN AGREEMENT
The undersigned, US XCHANGE, L.L.C., a Michigan limited liability company, with
its chief executive office at 20 Monroe, NW, Suite 450, Grand Rapids, Michigan
49503 (the "Borrower"), has requested from RONALD H. VANDER POL, of Byron
Center, Michigan (the "Lender"), and Lender agrees to make, or has made, the
loan described below (the "Loan") under the terms and conditions stated in this
Business Loan Agreement ("Agreement"):
I. LOAN.
The following Loan and any amendments, extensions, renewals or
refinancing thereof are subject to this Agreement:
A. Lender shall provide to Borrower a Line of Credit in the
amount of Fifty Million Dollars ($50,000,000.00) for the
acquisition of telecommunication equipment and general
corporate operating needs. The line of credit shall be secured
by a Promissory Note of even date herewith (the "Note").
B. This Loan shall be subordinated to the security interests of
all current and future secured financing agreements entered
into by the Borrower.
C. The Interest Rate shall be Comerica Bank's prime rate less
1.25%. Any change in the Interest Rate occasioned by a change
in Comerica Bank's prime rate shall be effective on the date
of the change in the prime rate by Comerica Bank. Interest
shall be accrued monthly but will be payable upon commencement
of principal repayments.
D. Principal payments (together with accrued interest) shall not
be permitted until after the full repayment of all obligations
under secured credit facilities outstanding on the date of
this Agreement.
E. This Loan shall mature, and all principal, interest and other
amounts advanced by Lender on behalf of Borrower shall become
due and owing, on demand by Lender, subject to Paragraph D
above.
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II. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Lender, all which representations
and warranties shall be continuing and shall survive the execution of
this Agreement until all of the Indebtedness is fully repaid to Lender
and Borrower's obligations under this Agreement and the Related
Documents are fully performed, as follows:
A. BORROWER'S EXISTENCE AND AUTHORITY. Borrower is a limited
liability company and the person(s) executing this Agreement
have full power and complete authority to execute this
Agreement and all of the Related Documents on behalf of
Borrower.
B. VALIDITY OF EXISTING INDEBTEDNESS. All of Borrower's
obligations to Lender under this Agreement, the Note and all
Related Documents constitute valid and binding obligations of
Borrower, and are enforceable against Borrower in accordance
with their terms.
C. FINANCIAL INFORMATION. All Financial Statements requested by
Lender, and provided by Borrower, has been prepared and will
continue to be prepared in accordance with GAAP and will fully
and fairly represent the financial condition of the Borrower.
D. TITLE AND ENCUMBRANCES. Borrower owns and has good title to
all of its Property, including the Collateral, and there are
no liens or encumbrances on any of the Property, or the
Collateral, except as established by a Loan and Security
Agreement dated April 29, 1999 between a wholly-owned
subsidiary of the Borrower and General Electric Capital
Corporation and by a credit facility agreement with Comerica
Bank dated August 28, 1997.
E. LITIGATION. There are no suits or proceedings pending before
any court or government agency, arbitration panel, or
administrative tribunal, or, to Borrower's knowledge,
threatened against Borrower, which may result in any material
adverse change in the business, Property or financial
condition of Borrower.
F. NO MISREPRESENTATIONS. All representations and warranties in
this Agreement and the Related Documents are true and correct
and no material fact has been omitted.
G. DEBT COVENANT COMPLIANCE. The Borrower has complied with all
debt covenant-reporting requirements, and there are no events
of default as provided under its debt agreements.
H. SECURITIES AND EXCHANGE COMMISSION FILINGS. The Borrower has
complied with all applicable reporting requirements as
provided under the Securities and Exchange Act of 1934.
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I. ENVIRONMENTAL COMPLIANCE. Borrower agrees to indemnify and
hold Lender harmless from any and all claims, fines,
penalties, liability, damages, costs or expenses arising out
of (i) any actual or alleged violations by Borrower of any
Federal or Michigan environmental laws or (ii) any actual or
alleged environmental contamination for which Borrower is
allegedly liable under any Federal or Michigan environmental
laws. Borrower represents and warrants to the Lender that the
Borrower has received no notice that any governmental agency,
or any other person, has asserted or is asserting any claim
against the Borrower or any of its Property pursuant to any
Federal or Michigan environmental law. Furthermore, Borrower
shall give the Lender written notice should any governmental
agency, or any other person, assert any claim against the
Borrower or any of its Property pursuant to any Federal or
Michigan environmental law or allege any violation by Borrower
of any Federal or Michigan environmental law.
J. COMPLIANCE WITH WORKERS' COMPENSATION LAWS. Borrower
represents and warrants that it has complied, and at all times
during the term of this Agreement shall comply, with all
applicable laws, regulations, and administrative rules,
directives or requirements governing workers' compensation in
all jurisdictions in which Borrower conducts its business.
Borrower shall promptly furnish Bank evidence of such
compliance upon request.
III. BORROWER'S COVENANTS.
As of the date of this Agreement and continuing until the Borrower's
obligations under this Agreement and the Related Documents are fully
performed and the Indebtedness is fully repaid to Lender, Borrower
shall at all times:
A. BOOKS AND REPORTS.
1. Maintain books and records in accordance with GAAP.
2. Furnish to Lender, in form satisfactory to Lender,
all Financial Statements of Borrower, within 60 days
after the end of each fiscal quarter certified by an
appropriate representative or officer of Borrower.
3. Furnish to Lender, in form satisfactory to Lender,
within 90 days after the end of Borrower's fiscal
year audited Financial Statements of the Borrower
prepared by a certified public accountant acceptable
to Lender.
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4. Promptly furnish to lender such other information and
reports concerning the Borrower's business, Property
and financial condition as are provided to Borrower's
owners or as Lender shall request, and permit Lender
to inspect, confirm, and copy Borrower's books and
records at any time during Borrower's normal business
hours.
B. NOTICE OF ADVERSE EVENTS. Promptly notify Lender in writing of
any litigation, governmental proceeding, default or any other
occurrence that may have a material adverse effect on
Borrower's business, Property or financial condition.
C. MAINTAIN BUSINESS EXISTENCE AND OPERATIONS. Do all things
necessary to keep in full force and effect Borrower's
corporate existence and maintain its present business status.
Borrower shall not change its corporate existence, nor sell or
merge Borrower's business, in whole or in part, to or with any
other Person, or issue or transfer any membership interest in
Borrower to any other person without the prior written consent
of Lender.
D. INSURANCE. Maintain adequate fire and extended risk coverage,
business interruption, workers compensation, public liability
and such other insurance coverages as may be required by law
or as may be required by Lender. All insurance policies shall
be in such amounts, upon such terms, and be in a form
acceptable to lender, and shall be carried with insurers
acceptable to Lender. Borrower shall, upon Lender's request,
provide evidence satisfactory to Lender that all such the
policies are in full force and effect, and that Lender is
named as an additional insured and a loss payee under such
policies, and that the insurer is required to provide Lender
thirty (30) days' advance written notice of any cancellation
or expiration of coverage. If Borrower fails to maintain
insurance as provided in this Agreement, such failure shall be
an Event of Default and Lender may obtain such insurance on
Borrower's behalf but shall have no obligation to do so; all
amounts so expended by Lender shall be added to the
Indebtedness or shall be payable on demand, at Lender's
option.
E. PAYMENT OF TAXES. Promptly pay all taxes, levies and
assessments due to all local, State and Federal agencies.
Except to the extent that Borrower has established a cash
reserve therefore and is actively pursuing a tax appeal, any
failure by Borrower to promptly pay any taxes, levies, and
assessments due shall be an Event of Default.
F. EMPLOYEE BENEFIT PLANS.
1. At no time shall Borrower allow any event to occur or
condition to exist with respect to any employee
benefit plan to subject to ERISA which might
constitute grounds for a termination of the plan or
for the appointment of a trustee to administer any
such plan.
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2. At no time shall Borrower allow any employee benefit
plan subject to ERISA to be the subject of voluntary
or involuntary termination proceedings from which
there may result a liability of the Borrower to the
PBGC which, in the opinion of the Lender, will have a
material adverse effect upon the business,
properties, or financial condition of Borrower.
G. USE OF PROCEEDS; PURPOSE OF LOANS. Borrower shall use the
proceeds of the Loan(s) only for the acquisition of network
facilities and general business capital expenditures and for
normal operating expenses in the conduct of the Borrower's
telecommunications business.
H. MAINTENANCE OF RECORDS; CHANGE IN PLACE OF BUSINESS OF NAME.
Borrower shall keep all of its books and records at the
address set forth in this Agreement, and shall give the Lender
prompt written notice of any change in its principal place of
business, in the location of Borrower's books and records, in
Borrower's name, and any change in the location of the
Collateral.
I. WORKERS COMPENSATION INSURANCE. Borrower shall at all times
during the term of this Agreement and until the Indebtedness
shall have been fully repaid, maintain workers' compensation
insurance as required by law unless Borrower is qualified and
duly authorized by law to self-insure with respect to its
workers' compensation liability and is not otherwise
prohibited by this Agreement from doing so.
IV. NEGATIVE COVENANTS.
Until all of Borrower's obligations under this Agreement and the
Related Documents are fully performed and the Indebtedness is fully
repaid, Borrower shall not cause to occur a violation of or default in
any of its covenants, agreements or obligations under the 15% Senior
Notes due 2008, the Loan and Security Agreement dated April 29, 1999
with General Electric Capital Corporation, the Comerica Bank credit
facility dated August 28, 1997 or any other future credit facility
issued to or on behalf of Borrower.
V. SECURITY FOR LOANS AND SUBORDINATIONS.
A. SECURITY INTERESTS. Borrower named in this Agreement has
granted or agrees to grant to Lender on the same date as this
Agreement a security interest in all of Borrower's assets,
including all telecommunications equipment, furniture,
accounts, documents, chattel paper, instruments, creditor's
rights, general intangibles, inventory, goods and fixtures now
owned or hereafter acquired by Borrower, and wherever located,
together with all accessions, parts, attachments and
accessories, the proceeds thereof, and the proceeds of all
insurance, eminent domain and condemnation awards, and all tax
refunds
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payable to Borrower by any taxing authority, as more
particularly defined by the Michigan Uniform Commercial Code
as collateral security for the Loan and repayment of the
Indebtedness.
B. DOCUMENTS. The security interests granted to Lender shall be
evidenced by a written security agreement signed by Borrower
in form and substance acceptable to Lender, and shall be
performed by the filing of a UCC financing statement, in form
and substance acceptable to Lender, signed by Borrower, and
filed with the appropriate filing offices of the State of
Michigan.
C. SUBORDINATION. Lender hereby agrees to subordinate its right
to repayment of the Indebtedness, as well as its lien in the
Collateral, in favor of any secured credit facilities
outstanding on the date of this Agreement. Upon Borrower's
request, Lender will execute and deliver any document or
instrument reasonably necessary to effectuate this
subordination.
VI. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an Event
of Default under this Agreement:
A. FAILURE TO PAY AMOUNTS DUE. If any principal and interest due
and owing under the Note, or any other Indebtedness due and
owing to Lender is not paid when due. Borrower will have
thirty (30) days after the due date to remedy the default
before Lender shall be entitled to pursue its remedies under
this Agreement.
B. MISREPRESENTATION; FALSE FINANCIAL INFORMATION. If any
warranty or representation of the Borrower in connection with
or contained in this Agreement, or if any Financial Statements
now or hereafter furnished to the Lender by or on behalf of
the Borrower, are false or misleading in any material respect.
C. BREACH OF COVENANTS OR AGREEMENTS. If the Borrower shall fail
to perform any of its obligations and covenants under, or
shall fail to comply with any of the provisions of this
Agreement or any other agreement with Lender, including but
not limited to the Related Documents.
D. OTHER DEFAULTS. Any indebtedness of Borrower to any person
other than Lender is declared to be due and payable prior to
the stated maturity thereof, or is otherwise declared to be in
default.
E. JUDGMENTS; ATTACHMENTS; TAX LIENS. If there shall be entered
against Borrower any judgment which materially affects
Borrower's business, properties or financial condition, or if
any tax lien, levy, attachment, garnishment, execution or
similar writ shall be issued against the Collateral or which
materially affects Borrower's business, Property or financial
condition,
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and which remains unpaid, unstayed on appeal, undischarged,
unbonded, or undismissed for a period of thirty (30) days
after the entry thereof.
F. BUSINESS MERGER SUSPENSION, BANKRUPTCY. If Borrower sells or
merges the assets of, or any ownership interests in Borrower's
business, to or with any other person; voluntarily suspends
transaction of its business; fails to generally pay debts as
they mature; makes a general assignment for the benefit of
creditors; or files or has filed against Borrower any
reorganization or liquidation under the Bankruptcy Code or
under any other state or federal laws for the relief of
debtors which is not discharged within thirty (30) days after
filing; or a receiver, trustee or custodian is appointed for
the Borrower for any portion of Borrower's Property.
G. MATERIAL ADVERSE CHANGE. Any material adverse change in the
Borrower's business, properties or financial condition has
occurred or is imminent.
H. IMPAIRED COLLATERAL. If the Collateral and its value or the
Lender's rights with respect thereto are materially impaired
in any way.
I. NON-COMPLIANCE WITH WORKER'S COMPENSATION LAWS. If Borrower
fails to comply with any workers' compensation law, regulation
or administrative rule, directive or requirement; has its
workers' compensation insurance terminated or cancelled for
any reason; or, if applicable, has its self-insurance
certification revoked or should such certification lapse for
any reason.
VII. REMEDIES ON DEFAULT.
A. ACCELERATION. Upon occurrence of any Event of Default, the
Loan(s) and all Indebtedness to Lender may, at the option of
Lender, and without demand or notice of any kind, be declared
to be immediately due and payable.
B. ANY REMEDIES; REMEDIES CUMULATIVE. The remedies provided for
in this Agreement are cumulative and not exclusive, and Lender
may exercise any remedies available to it at law or in equity
or in any Related Document or other agreement between Borrower
and Lender.
C. NO WAIVER. No delay or failure of Lender in exercising any
right, remedy, power or privilege hereunder shall affect that
right, remedy, power or privilege, nor shall any single or
partial exercise thereof preclude the exercise of any other
right, remedy, power or privilege. No delay or failure of
Lender at any time to demand strict adherence to the terms of
this Agreement shall be deemed to constitute a course of
conduct inconsistent with the Lender's right at any time
before or after any Event of Default, to demand strict
adherence to the terms of this Agreement or the Related
Documents.
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D. LENDER'S RIGHT OF SET-OFF. Upon the occurrence of any Event of
Default, Lender shall have a right to apply any funds of the
Borrower deposited in any bank account held by Lender, against
any Indebtedness of Borrower to Lender.
VIII. MISCELLANEOUS.
A. COMPLIANCE WITH LENDER'S AGREEMENTS. Borrower acknowledges
that its representative has read this Agreement, the Related
Documents, and all other agreements between Borrower and
Lender, and Borrower agrees fully to comply with all such
agreements.
B. EXPENSES. Borrower agrees to pay all of Lender's expenses
incidental to perfecting Lender's security interests and
liens, all insurance premiums, Uniform Commercial Code search
fees, and all fees incurred by Lender for audits, inspection,
and copying of Borrower's books and records. Borrower also
agrees to pay all costs and expenses of Lender in connection
with the enforcement of the Lender's rights and remedies under
this Agreement, the Related Documents, and any other agreement
between Borrower and Lender, and in connection with the
preparation of any amendments, modifications, waiver or
consents with respect to this Agreement, including reasonable
attorney fees.
C. FURTHER ACTION. Borrower agrees, from time to time, upon
request of Lender, to make, execute, acknowledge, and deliver
to Lender such further and additional instruments, documents
and agreements, and to take such further action as may be
required to carry out the intent and purpose of this Agreement
and the repayment of the Loan.
D. GOVERNING LAW; PARTIAL ILLEGALITY. This Agreement and the
Related Documents shall be interpreted, and the rights of the
parties hereunder shall be determined, under the laws of the
State of Michigan. Should any part, term, or provision of this
Agreement be adjudged illegal or in conflict with any law of
the United States or State of Michigan, the validity of the
remaining portion or provisions of the Agreement shall not be
affected.
E. WRITINGS CONSTITUTE ENTIRE AGREEMENT; MODIFICATIONS ONLY IN
WRITING. This Agreement together with all other written
agreements of the parties documenting or securing this loan
and shall be interpreted in harmony with the each other. None
of the parties shall be bound by anything not expressed in
writing, and this Agreement supercedes all other prior and
contemporaneous oral or written agreements between the parties
concerning the subject matter of this Agreement. This
Agreement may not be modified except by a writing executed by
Borrower and by the Lender. This Agreement shall inure to the
benefit of and shall be binding upon all of the parties to
this Agreement and their respective successors, estate
representatives, and assigns, provided,
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however, that Borrower cannot assign or transfer its rights or
obligations under this Agreement without Lender's prior
written consent.
F. HEADINGS. All section and paragraph headings in this Agreement
are included for convenience only, and do not constitute a
part of this Agreement.
G. TERM OF AGREEMENT. Unless superseded by a later Business Loan
Agreement, this Agreement shall continue in full force and
effect until all of Borrower's obligations to Lender are fully
satisfied and the Loan and Indebtedness are fully repaid.
IX. DEFINITIONS.
The following words shall have the following meanings in this
Agreement:
A. "COLLATERAL" shall mean that property which Borrower has
pledged, mortgaged, or granted Lender a security interest in,
wherever located and whether now owned or hereafter acquired,
together with all replacements, substitutions, proceeds and
products thereof.
B. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, or any successor act.
C. "EVENT OF DEFAULT" shall mean any of the events described in
Section VI of this Agreement or in the Related Documents.
D. "FINANCIAL STATEMENTS" shall mean all balance sheets,
statements of operations and cash flows, and other financial
information which have been, are now, or are in the future
requested by, and furnished to Lender.
E. "GAAP" shall mean the "generally accepted accounting
principles" consistently applied as set forth from time to
time in the Opinion of the Accounting Principles Board of the
America Institute of Certified Public Accountants and the
Financial Accounting Standards Board, or which have other
substantial authoritative support.
F. "INDEBTEDNESS" shall mean all Loans and indebtedness of
Borrower to Lender(s), including but not limited to, Lender
advances for payments of insurance, taxes, any amounts
advanced by Lender to protect its interest in the collateral,
overdrafts in deposit accounts with any bank, and all other
indebtedness, obligations and liabilities of the Borrower to
the Lender, whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent,
joint or several, due or to become due, now existing or
hereafter arising.
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G. "PBGC" shall mean the Pension Benefit Guaranty Corporation or
any person succeeding to the present powers and functions of
the Pension Benefit Guaranty Corporation.
H. "PERSON" shall mean any individual, corporation, partnership,
joint venture, association, trust, unincorporated association,
Joint Stock Company, government, municipality, political
subdivision, agency or other entity.
I. "PRIME RATE" shall mean the highest variable rate of interest
from time to time established by Comerica Bank as its prime
commercial lending rate.
J. "PROPERTY" shall mean all of Borrower's assets, whether
tangible or intangible, real or personal.
K. "RELATED DOCUMENTS" shall mean any and all documents,
promissory notes, security agreements, leases, mortgages,
guaranties, pledges, and any other documents or agreements
executed in connection with this Agreement. The term shall
include both documents existing at the time of execution of
this Agreement and documents executed after the date of this
Agreement.
WHEREOF, the parties have executed this Agreement on this 26th
day of August 1999.
US XCHANGE, L.L.C.
By /s/ Richard Postma
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Richard Postma
Its /s/ Chairman-CEO
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BORROWER
/s/ Ronald H. VanderPol
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RONALD H. VANDERPOL
LENDER
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