EXHIBIT 10.3
LOAN AND SECURITY AGREEMENT
by and among
US LEC CORP.,
as Borrower
and
US LEC of North Carolina Inc.
US LEC of Tennessee Inc.
US LEC of Georgia Inc.
US LEC of South Carolina Inc.
US LEC of Florida Inc.
US LEC of Virginia L.L.C.
US LEC of Alabama Inc.
US LEC of Pennsylvania Inc.
US LEC of Maryland Inc.
US LEC Communications Inc.
US LEC Acquisition Co.
US LEC of New York Inc.,
as Guarantors
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Lender
and
Dated: October 25, 2005
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS............................................................................................1
SECTION 2. CREDIT FACILITIES.....................................................................................44
2.1 Revolving Loans................................................................................44
2.2 Increase of the Facility Maximum Credit........................................................45
SECTION 3. INTEREST AND FEES.....................................................................................46
3.1 Interest.......................................................................................46
3.2 Closing Fee....................................................................................48
3.3 Unused Line Fee................................................................................48
3.4 Changes in Laws and Increased Costs of Revolving Loans.........................................48
SECTION 4. CONDITIONS PRECEDENT..................................................................................50
4.1 Conditions Precedent to Initial Revolving Loans................................................50
4.2 Conditions Precedent to All Revolving Loans....................................................52
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST.............................................................53
5.1 Grant of Security Interest.....................................................................53
5.2 Perfection of Security Interests...............................................................54
SECTION 6. COLLECTION AND ADMINISTRATION.........................................................................59
6.1 Borrower's Revolving Loan Accounts.............................................................59
6.2 Statements.....................................................................................59
6.3 Collection of Accounts.........................................................................59
6.4 Payments.......................................................................................60
6.5 Authorization to Make Revolving Loans..........................................................61
6.6 Use of Proceeds................................................................................61
(ii)
SECTION 7. COLLATERAL REPORTING AND COVENANTS....................................................................62
7.1 Collateral Reporting...........................................................................62
7.2 Accounts Covenants.............................................................................63
7.3 Inventory Covenants............................................................................64
7.4 Equipment and Real Property Covenants..........................................................64
7.5 Power of Attorney..............................................................................64
7.6 Right to Cure..................................................................................65
7.7 Access to Premises.............................................................................66
SECTION 8. REPRESENTATIONS AND WARRANTIES........................................................................66
8.1 Corporate Existence, Power and Authority.......................................................66
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations......................67
8.3 Financial Statements; No Material Adverse Change...............................................67
8.4 Priority of Liens; Title to Properties.........................................................68
8.5 Tax Returns....................................................................................68
8.6 Litigation.....................................................................................68
8.7 Compliance with Other Agreements and Applicable Laws...........................................68
8.8 Environmental Compliance.......................................................................69
8.9 Employee Benefits..............................................................................70
8.10 Bank Accounts..................................................................................71
8.11 Intellectual Property..........................................................................71
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.............................................71
8.13 Labor Disputes.................................................................................72
8.14 Restrictions on Subsidiaries...................................................................72
8.15 Material Contracts.............................................................................73
8.16 Payable Practices..............................................................................73
8.17 Carrier Service Agreements, IRU Agreements and Interconnection Agreements......................73
8.18 Billing Processor Agreements...................................................................74
8.19 Governmental Authorizations....................................................................74
(iii)
8.20 No Regulatory Event............................................................................75
8.21 Trade Relations................................................................................75
8.22 Interrelated Businesses........................................................................75
8.23 Accuracy and Completeness of Information.......................................................75
8.24 Survival of Warranties; Cumulative.............................................................76
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS....................................................................76
9.1 Maintenance of Existence.......................................................................76
9.2 New Collateral Locations.......................................................................76
9.3 Compliance with Laws, Regulations, Etc.........................................................77
9.4 Payment of Taxes and Claims....................................................................77
9.5 Insurance......................................................................................78
9.6 Financial Statements and Other Information.....................................................79
9.7 Limitation on Asset Sales......................................................................81
9.8 Encumbrances...................................................................................82
9.9 Indebtedness...................................................................................83
9.10 Merger, Consolidation..........................................................................84
9.11 Limitation on Restricted Payments..............................................................86
9.12 Transactions with Affiliates...................................................................88
9.13 Compliance with ERISA..........................................................................89
9.14 End of Fiscal Years; Fiscal Quarters...........................................................89
9.15 Change in Business.............................................................................89
9.16 Limitation of Restrictions Affecting Subsidiaries..............................................90
9.17 Minimum Consolidated Cash Flow.................................................................90
9.18 License Agreements.............................................................................91
9.19 Foreign Assets Control Regulations, Etc........................................................91
9.20 Carrier Service Agreements; Interconnection Agreements; IRU Agreements.........................92
9.21 Billing Processor Agreements...................................................................93
9.22 Senior Secured Note Permitted Indebtedness Limit...............................................94
9.23 Modifications of Indebtedness, Organizational Documents and Certain Other
Agreements; Certain Payments of Indebtedness, Etc..............................................94
(iv)
9.24 Costs and Expenses.............................................................................95
9.25 Further Assurances.............................................................................96
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.......................................................................97
10.1 Events of Default..............................................................................97
10.2 Remedies.......................................................................................99
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW........................................102
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.........................102
11.2 Waiver of Notices.............................................................................104
11.3 Amendments and Waivers........................................................................104
11.4 Intentionally Deleted.........................................................................104
11.5 Indemnification...............................................................................104
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS....................................................................105
12.1 Term..........................................................................................105
12.2 Interpretative Provisions.....................................................................106
12.3 Notices.......................................................................................108
12.4 Partial Invalidity............................................................................109
12.5 Successors....................................................................................109
12.6 Confidentiality...............................................................................109
12.7 Entire Agreement..............................................................................111
12.8 USA Patriot Act...............................................................................111
12.9 Counterparts, Etc.............................................................................111
(v)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Form of Compliance Certificate
Exhibit 1.16 Borrowing Base Certificate
Exhibit C Form of Notice of Borrowing
Schedule 1.79 Initial Pledged Interests
Schedule 1.80 Initial Pledged Shares
Schedule 1.83 Intercompany Notes
Schedule 8.17(a)(i) Carrier Out Agreements
Schedule 8.17(a)(ii) Carrier In Agreements
Schedule 8.17(b) Interconnection Agreements
Schedule 8.18 Billing Processor Agreements
Schedule 8.19 Governmental Authorizations
Schedule 9.8 Existing Liens
Schedule 1.139 Senior Secured Note Documents
Schedule 1.147 Merger Entities
(vi)
LOAN AND SECURITY AGREEMENT
This
Loan and Security Agreement dated October 25, 2005 (the
"Agreement") is entered into by and among Wachovia Bank, National Association, a
national banking association ("Lender" as hereinafter further defined) and
US
LEC Corp., a Delaware corporation ("Borrower"), US LEC of
North Carolina Inc., a
North Carolina corporation ("USNC"; US LEC of Tennessee Inc., a Delaware
corporation ("USTN"); US LEC of Georgia Inc., a Delaware corporation ("USGA");
US LEC of South Carolina Inc., a Delaware corporation ("USSC"), US LEC of
Florida Inc., a
North Carolina corporation ("USFL"); US LEC of Virginia L.L.C.,
a Delaware limited liability company ("USVA"); US LEC of Alabama Inc., a
North
Carolina corporation ("USAL"); US LEC of Pennsylvania Inc., a
North Carolina
corporation ("USPA"); US LEC of Maryland Inc., a
North Carolina corporation
("USMD"); US LEC Communications Inc., a
North Carolina corporation ("USComm");
US LEC Acquisition Co., a
North Carolina corporation ("US-AC"), and US LEC of
New York Inc.,
North Carolina corporation ("USNY" and together with USNC, USTN,
USGA, USSC, USFL, USVA, USAL, USPA, USMD, USComm and US-AC, each individually a
"Guarantor" and collectively, "Guarantors" as hereinafter further defined).
WITNESSETH:
WHEREAS, Borrower and Guarantors have requested that Lender enter into
financing arrangements with Borrower pursuant to which Lender may make Revolving
Loans and provide other financial accommodations to Borrower;
WHEREAS, under the terms of the Senior Secured Note Documents this
Agreement will be deemed a "Credit Facility" (as such term is defined in the
Senior Secured Note Indenture as in effect on the date hereof); and
WHEREAS, Lender is willing to agree to make such Revolving Loans and
provide such financial accommodations on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall have the meaning ascribed to such term in the UCC.
1.2 "Acquired Indebtedness" means Indebtedness of a Person or any of
its Subsidiaries existing at the time such Person becomes a Subsidiary of
Borrower or at the time it merges or consolidates with or into Borrower or any
of its Restricted Subsidiaries or assumed in
connection with the acquisition of assets from such Person and in each case not
incurred by such Person in connection with, or in anticipation or contemplation
of, such Person becoming a Restricted Subsidiary of Borrower or such
acquisition, merger or consolidation.
1.3 "Additional Pledged Interests" shall mean, collectively, with
respect to Borrower and each Guarantor, (i) all options, warrants, rights,
agreements, additional membership, partnership or other equity interests of
whatever class of any issuer of Initial Pledged Interests or any interest in any
such issuer, together with all rights, privileges, authority and powers of
Borrower or such Guarantor relating to such interests in each such issuer or
under any organizational document of any such issuer, and the certificates,
instruments and agreements representing such membership, partnership or other
interests and any and all interest of Borrower or such Guarantor in the entries
on the books of any financial intermediary pertaining to such membership,
partnership or other equity interests from time to time acquired by Borrower or
such Guarantor in any manner and (ii) all membership, partnership or other
equity interests, as applicable, of each limited liability company, partnership
or other entity (other than a corporation) hereafter acquired or formed by
Borrower or such Guarantor and all options, warrants, rights, agreements,
additional membership, partnership or other equity interests of whatever class
of such limited liability company, partnership or other entity, together with
all rights, privileges, authority and powers of Borrower or such Guarantor
relating to such interests or under any Organizational Document of any such
issuer, and the certificates, instruments and agreements representing such
membership, partnership or other equity interests and any and all interest of
Borrower or such Guarantor in the entries on the books of any financial
intermediary pertaining to such membership, partnership or other interests, from
time to time acquired by Borrower or such Guarantor in any manner.
1.4 "Additional Pledged Shares" shall mean, collectively, with respect
to Borrower and each Guarantor, (i) all options, warrants, rights, agreements,
additional shares of capital stock of whatever class of any issuer of the
Initial Pledged Shares or any other equity interest in any such issuer, together
with all rights, privileges, authority and powers of Borrower and such Guarantor
relating to such interests issued by any such issuer under any organizational
document of any such issuer, and the certificates, instruments and agreements
representing such interests and any and all interest of Borrower and such
Guarantor in the entries on the books of any financial intermediary pertaining
to such interests, from time to time acquired by in any manner and (ii) all the
issued and outstanding shares of capital stock of each corporation hereafter
acquired or formed by Borrower or such Guarantor and all options, warrants,
rights, agreements or additional shares of capital stock of whatever class of
such corporation, together with all rights, privileges, authority and powers of
Borrower or such Guarantor relating to such shares or under any Organizational
Document of such corporation, and the certificates, instruments and agreements
representing such shares and any and all interest of Borrower or such Guarantor
in the entries on the books of any financial intermediary pertaining to such
shares, from time to time acquired by Borrower or such Guarantor in any manner.
1.5 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for
2
any Eurodollar Rate Loan comprising part of the same borrowing (including
conversions, extensions and renewals), the rate per annum determined by dividing
(a) the London Interbank Offered Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean for any day, that percentage (expressed
as a decimal) which is in effect from time to time under Regulation D of the
Board of Governors of the Federal Reserve System (or any successor), as such
regulation may be amended from time to time or any successor regulation, as the
maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable with respect
to Eurocurrency liabilities as that term is defined in Regulation D (or against
any other category of liabilities that includes deposits by reference to which
the interest rate of Eurodollar Loans is determined), if Lender has any
Eurocurrency liabilities subject to such reserve requirement. Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such shall be
deemed subject to reserve requirements without benefits of credits for
proration, exceptions or offsets that may be available from time to time to
Lender. The Adjusted Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Reserve Percentage.
1.6 "Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing. A Person shall not be deemed an "Affiliate" of Borrower or any of its
Subsidiaries solely as a result of such Person being a joint venture partner of
Borrower or any of its Subsidiaries.
1.7 "Asset Acquisition" means (a) an Investment by Borrower or any
Restricted Subsidiary of Borrower in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of Borrower or any
Restricted Subsidiary of Borrower, or shall be merged with or into Borrower
(with Borrower as the surviving entity) or any Restricted Subsidiary of
Borrower, or (b) the acquisition by Borrower or any Restricted Subsidiary of
Borrower of the assets of any Person (other than a Restricted Subsidiary of
Borrower) which constitute all or substantially all of the assets of such Person
or comprise any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
1.8 "Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by Borrower
or any of its Subsidiaries (including any sale and leaseback transaction but
excluding the grant of any Permitted Lien or other Lien permitted in accordance
with Section 9.8 hereof) to any Person other than Borrower or a Wholly Owned
Restricted Subsidiary of Borrower that is a Borrower or Guarantor of: (a) any
Capital Stock of any Restricted Subsidiary of Borrower; or (b) any other
property or assets of Borrower or any
3
Restricted Subsidiary of Borrower other than in the ordinary course of business;
provided, that, Asset Sales shall not include: (i) a transaction or series of
related transactions for which Borrower or its Subsidiaries receive aggregate
consideration of less than $1,000,000; (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of
Borrower pursuant to a merger or consolidation permitted under the terms of this
Agreement; (iii) any Restricted Payment permitted by Section 9.11 or that
constitutes a Permitted Investment; (iv) the sale or discount, in each case
without recourse, of Receivable arising in the ordinary course of business or
related to a bankruptcy claim, but only in connection with the compromise or
collection thereof; (v) disposals or replacements of (A) obsolete or worn out
equipment and (B) fixtures on real property that are no longer used or useful in
the business of Borrower or its Subsidiaries; (vi) the good faith surrender or
waiver of contract rights or the settlement, release or surrender of claims of
any kind.
1.9 "Authorized Officer" shall mean a Responsible Officer or Treasury
Manager of Borrower.
1.10 "Billing Processor" shall mean any third party servicing or
processing agent or intermediary who facilitates, services, processes or manages
the billing transfer and/or payment procedures with respect to any services
provided by Borrower to its customers through a Carrier or otherwise. The term
"Billing Processor" shall not include collection agencies, merchant accounts,
Credit Card Processors, lockbox accounts or printers of invoices.
1.11 "Billing Processor Acknowledgments" shall mean, individually and
collectively, in form and substance reasonably satisfactory to Agent, by any
Billing Processor in favor of Lender, as the same may from time to time exist or
be amended, modified, supplemented, extended, renewed, restated or replaced.
1.12 "Billing Processor Agreements" shall mean all agreements (other
than Billing Processor Acknowledgments) now existing or hereafter entered into
by Borrower with any Billing Processor, in its capacity as such, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced, including without limitation, the agreements listed on
Schedule 8.18 hereto.
1.13 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.14 "Borrower" shall mean,
US LEC Corp., a Delaware corporation, and
its successors and assigns.
1.15 "Borrowing Base" shall mean, at any time, the amount equal to: (a)
eighty-five (85%) percent of the Eligible Accounts of Borrower minus (b)
Reserves.
1.16 "Borrowing Base Certificate" shall mean a report substantially in
the form of Exhibit 1.16 hereto, as the same may from time to time be modified
by Lender in consultation with Borrower, which is duly completed and executed by
a Responsible Officer of Borrower and delivered to Lender.
4
1.17 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the State of North Carolina, and a day on
which Lender is open for the transaction of business, except that if a
determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
1.18 "Capitalized Lease Obligations" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
1.19 "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock or partnership, limited liability company or
other equity interests at any time outstanding, and any and all rights, warrants
or options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.20 "Carrier Accounts" shall mean Accounts owing by Carriers arising
from the sale by Borrower or its Subsidiaries to such Carriers of
telecommunication services pursuant to the Carrier Service Agreements or
otherwise.
1.21 "Carriers" shall mean, collectively, telecommunication
interexchange carriers or other providers of telecommunications long distance
services and local exchange companies or other providers of local
telecommunications service, including without limitation, AT&T, MCI, Verizon,
▇▇▇▇ South, Sprint, SBC or Qwest, sometimes being referred to herein
individually as a "Carrier".
1.22 "Carrier Service Agreements" shall mean, collectively, the
Carrier-In Service Agreements and the Carrier-Out Service Agreements, sometimes
being referred to herein individually as a "Carrier Service Agreement".
1.23 "Carrier-In Service Agreements" shall mean, collectively, the
agreements, including, Interconnection Agreements, between Borrower or any
Guarantor and Carriers in the ordinary course of the business of Borrower and
Guarantors providing for the purchase by Borrower or such Guarantor from such
Carrier, of telecommunication services, sometimes being referred to herein
individually as a "Carrier-In Service Agreement".
1.24 "Carrier-Out Service Agreements" shall mean, collectively, the
agreements between Borrower or any Guarantor and Carriers in the ordinary course
of the business of
5
Borrower and Guarantors providing for the sale by Borrower or such Guarantor to
such Carrier, of telecommunication services, sometimes being referred to herein
individually as a "Carrier-Out Service Agreement."
1.25 "Cash Dominion Event" shall mean the occurrence of any of the
following: (a) an Event of Default shall exist or have occurred and be
continuing, or (b) any three (3) consecutive business days on which Cash
Dominion Excess Availability is less than $5,000,000 which Cash Dominion Event
shall be deemed to continue until such time as a Cash Dominion Reversion Date
occurs.
1.26 "Cash Dominion Excess Availability" shall mean, the amount, as
determined by Lender, calculated at any date, equal to: (a) the lesser of: (i)
the Borrowing Base or (ii) the Maximum Credit plus (b) Qualified Cash minus (c)
the principal amount of all then outstanding Revolving Loans.
1.27 "Cash Dominion Reversion Date" shall mean, during the any Cash
Dominion Event described in Section 1.25 hereof, the sixtieth (60th) consecutive
date that Cash Dominion Excess Availability has been equal to or greater than
$5,000,000.
1.28 "Cash Equivalents" means:
(a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (b)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or ▇▇▇▇▇'▇; (c) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from ▇▇▇▇▇'▇; (d)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (e) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (a) above entered into with any bank meeting the
qualifications specified in clause (d) above; and (f)investments in money market
funds that invest substantially all their assets in securities of the types
described in clauses (a) through (e) above.
1.29 "Change of Control" means the occurrence of one or more of the
following events:
(a) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of Borrower to any Person or group of
6
related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"),
together with any Affiliates thereof (whether or not otherwise in compliance
with the provisions of this Agreement), other than to Permitted Holders;
(b) the approval by the holders of Capital Stock of Borrower
of any plan or proposal for the liquidation or dissolution of Borrower (whether
or not otherwise in compliance with the provisions of this Agreement);
(c) any Person or Group (other than one or more Permitted
Holders or any entity formed for the purpose of owning Capital Stock of
Borrower) shall become the owner, directly or indirectly, beneficially or of
record, of shares representing more than 50% of the aggregate ordinary voting
power represented by the issued and outstanding Capital Stock of Borrower; or
(d) the replacement of a majority of the Board of Directors of
Borrower over a two-year period from the directors who constituted the Board of
Directors of Borrower at the beginning of such period, and such replacement
shall not have been approved by a vote of either (i) the Permitted Holders or
(ii) a majority of the Board of Directors of Borrower then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved pursuant to clause (a) above or this clause (d).
1.30 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.31 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.32 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance satisfactory to Lender, from the lessor of Borrower's and
each Guarantor's principal executive office.
1.33 "Commodity Accounts" shall mean, collectively, with respect to
Borrower and each Guarantor, all "commodity accounts" as such term is defined in
the UCC other than any Excluded Accounts.
1.34 "Communications Act" shall mean the Communications Act of 1934, as
the same now exists or may from time to time hereafter be amended (and including
as amended pursuant to the Telecommunications Act of 1996), modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.35 "Communications Laws" shall mean the Communications Act and any
similar or successor Federal statute or statutes and any applicable State or
foreign law governing the provision of telecommunications services, as the same
now exist or may from time to time
7
hereafter be amended, modified, recodified or supplemented, together with all
rules and regulations thereunder or related thereto.
1.36 "Communications Regulatory Authority" shall mean the FCC, any PUC
and any future federal, state or local communications regulatory commission,
agency, department board or authority.
1.37 "Consolidated Cash Flow" means, with respect to any Person, for
any period, the sum (without duplication) of: (a) Consolidated Net Income; and
(b) to the extent Consolidated Net Income has been reduced thereby: (i) all
income taxes of such Person and its Restricted Subsidiaries, paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business); (ii)
Consolidated Interest Expense; and(iii) Consolidated Non-cash Charges less any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP. The calculation of Consolidated Cash Flow
shall exclude any non-cash, non-recurring charges related to inter-carrier
compensation disputes and receivables as they relate to revenues and profits for
periods before the period being measured.
1.38 "Consolidated Interest Expense" means, with respect to any Person
for any period, the sum of, without duplication: (a) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation: (i) any amortization of debt discount and amortization or write-off
of deferred financing costs (other than write-offs made in connection with the
issuance of the Senior Secured Notes on September 30, 2004); (ii) the net costs
under Interest Swap Obligations; (iii) all capitalized interest; and (iv) the
interest portion of any deferred payment obligation; and (b) the interest
component of Capitalized Lease Obligations paid or accrued by such Person and
its Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP; provided, that, there shall be excluded therefrom
any non-cash amortization or write-off of fees and expenses incurred in
connection with the issuance of the Senior Secured Notes and the negotiation and
execution of this Agreement and the other Financing Agreements.
1.39 "Consolidated Net Income" means, with respect to any Person, for
any period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, that, there shall be excluded therefrom without
duplication:
(1) after-tax gains and losses from Asset Sales (without regard to the
$1,000,000 limitation set forth in the definition thereof) or abandonments or
reserves relating thereto;
(2) after-tax items classified as extraordinary or nonrecurring gains;
8
(3) the net income (but not loss) of any Restricted Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise;
(4) the net income of any Person, other than a Restricted Subsidiary of
the referent Person, except to the extent of cash dividends or distributions
paid to the referent Person or to a Wholly Owned Restricted Subsidiary of the
referent Person by such Person;
(5) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following September 30, 2004;
(6) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued); and
(7) in the case of a successor to the referent Person by consolidation
or merger or as a transferee of the referent Person's assets, any earnings of
the successor corporation prior to such consolidation, merger or transfer of
assets.
1.40 "Consolidated Non-Cash Charges" means, with respect to any Person,
for any period, the aggregate depreciation, amortization, non-cash dividends or
distributions on Qualified Capital Stock paid in Qualified Capital Stock and
other non-cash expenses of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP (excluding
any such charges constituting an extraordinary item or loss or any such charge
which requires an accrual of or a reserve for cash charges for any future
period).
1.41 "Consolidated Total Indebtedness" means, as at any date of
determination, an amount equal to the sum of (a) the aggregate amount of all
outstanding Indebtedness of Borrower and its Restricted Subsidiaries and (b) the
aggregate amount of all outstanding Disqualified Capital Stock of Borrower and
its Subsidiaries, with the amount of such Disqualified Capital Stock equal to
the greater of its respective voluntary or involuntary liquidation preferences
and maximum fixed repurchase prices, in each case determined on a consolidated
basis in accordance with GAAP.
1.42 "Copyrights" shall mean, collectively, with respect to Borrower
and each Guarantor, all copyrights (whether statutory or common law, whether
established or registered in the United States or any other country or any
political subdivision thereof, whether registered or unregistered and whether
published or unpublished) and all copyright registrations and applications made
by Borrower and such Guarantor, in each case, whether now owned or hereafter
created or acquired by or assigned to Borrower and such Guarantor, together with
any and all (a) rights and privileges arising under applicable law with respect
to Borrower's and such Guarantor's use of such copyrights, and (b) reissues,
renewals, continuations and extensions thereof.
9
1.43 "Credit Card Issuer" shall mean any Person (other than Borrowers
but including Financing Subsidiaries) who issues or whose members issue credit
cards, including, without limitation, MasterCard or VISA bank credit or debit
cards or other bank credit or debit cards issued through MasterCard
International, Inc., Visa, U.S.A., Inc. or Visa International and American
Express, Discover, Diners Club, and other non-bank credit or debit cards,
including, without limitation, credit or debit cards issued by or through
American Express Travel Related Services Company, Inc.
1.44 "Credit Card Processor" shall mean any servicing or processing
agent or any factor or financial intermediary who facilitates, services,
processes or manages the credit authorization, billing transfer and/or payment
procedures with respect to any sales transactions of Borrower and its
Subsidiaries involving credit card or debit card purchases by customers using
credit cards or debit cards issued by any Credit Card Issuer.
1.45 "Credit Card Receivables" shall mean collectively, (a) all present
and future rights of Borrower or any Subsidiary of Borrower to payment from any
Credit Card Issuer, Credit Card Processor or other third party arising from
sales of goods or rendition of services to customers who have purchased such
goods or services using a credit or debit card and (b) all present and future
rights of Borrower or any Subsidiary to payment from any Credit Card Issuer,
Credit Card Processor or other third party in connection with the sale or
transfer of Credit Card Receivables arising pursuant to the sale of goods or
rendition of services to customers who have purchased such goods or services
using a credit card or a debit card, including, but not limited to, all amounts
at any time due or to become due from any Credit Card Issuer or Credit Card
Processor under the Credit Card Agreements or otherwise.
1.46 "Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
Borrower or any Restricted Subsidiary of Borrower against fluctuations in
currency values and not for speculative purposes.
1.47 "Default" shall mean an act, condition or event which with notice
or passage of time or both would constitute an Event of Default.
1.48 "Deposit Accounts" shall mean, collectively, with respect to
Borrower and each Guarantor, (a) all "deposit accounts" as such term is defined
in the UCC other than any Excluded Accounts, and in any event shall include the
Collateral Account and all accounts and sub-accounts relating to the foregoing
account and (b) all cash, funds, checks, notes and instruments from time to time
on deposit in any of the accounts or sub-accounts described in clause (a) of
this definition.
1.49 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance reasonably satisfactory to Lender, by and among
Lender, the Borrower or a
10
Guarantor with a deposit account (other than Excluded Accounts) at any bank at
which such deposit account is at any time maintained which provides that such
bank will comply with instructions originated by Lender directing disposition of
the funds in the deposit account without further consent by Borrower or such
Guarantor and has such other terms and conditions as Lender may require.
1.50 "Disqualified Capital Stock" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof on or prior to the final maturity date
of the Senior Secured Notes; provided, that, (a) the Convertible Preferred Stock
shall not be deemed Disqualified Capital Stock and (b) any Capital Stock that
would not constitute Disqualified Capital Stock but for provisions thereof
giving holders the right to require Borrower to repurchase or redeem such
Capital Stock upon the occurrence of a "change of control" or "asset sale"
occurring prior to the final maturity of the Senior Secured Notes shall not
constitute Disqualified Capital Stock if (i) the "change of control" or "asset
sale" provisions applicable to such Capital Stock are no more favorable to the
holders of such Capital Stock than the provisions contained in Sections 4.15 or
4.10 of the Senior Secured Note Indenture, as applicable, or the Convertible
Preferred Stock and (ii) any such requirement becomes operative only after
compliance with such terms applicable to the Senior Secured Notes, including
prior completion of any offer to purchase the Senior Secured Notes pursuant to a
Change of Control Offer or a Net Proceeds Offer (as such terms are defined in
the Senior Secured Note Indenture as in effect on the date hereof), as
applicable.
1.51 "Distributions" shall mean, collectively, with respect to Borrower
and each Guarantor, all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital or principal, income, interest, profits and
other property, interests (debt or equity) or proceeds, including as a result of
a split, revision, reclassification or other like change of the Pledged
Securities, from time to time received, receivable or otherwise distributed to
Borrower or such Guarantor in respect of or in exchange for any or all of the
Pledged Securities or Intercompany Notes.
1.52 "Eligible Accounts" shall mean Accounts of Borrower and Guarantors
which are and continue to be acceptable to Lender based on the criteria set
forth below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or such Guarantor or rendition of services by
Borrower or such Guarantor in the ordinary course of its business which
transactions are completed in accordance with any applicable terms and
provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than the earlier of
sixty (60) days after the original due date for them or one hundred twenty (120)
days after the date of the original invoice for them
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(c) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(d) the chief executive office of the account debtor with
respect to such Accounts is located in the United States of America or Canada
(provided, that, at any time promptly upon Lender's request, Borrower or such
Guarantor shall execute and deliver, or cause to be executed and delivered, such
other agreements, documents and instruments as may be reasonably required by
Lender to perfect the security interests of Lender in those Accounts of an
account debtor with its chief executive office or principal place of business in
Canada in accordance with the applicable laws of the Province of Canada in which
such chief executive office or principal place of business is located and take
or cause to be taken such other and further actions as Lender may reasonably
request to enable Lender as secured party with respect thereto to collect such
Accounts under the applicable Federal or Provincial laws of Canada);
(e) if the chief executive office of the account debtor with
respect to such Accounts is located other than in the United States of America
or Canada, then such Accounts shall be deemed Eligible Accounts if such Accounts
otherwise satisfy the criteria for Eligible Accounts; provided, that, the
aggregate amount of all such Eligible Accounts shall not exceed $1,000,000 at
any time, except in the discretion of Lender, if either: (i) the account debtor
has delivered to Borrower or such Guarantor an irrevocable letter of credit
issued or confirmed by a bank reasonably satisfactory to Lender and payable only
in the United States of America and in U.S. dollars, sufficient to cover such
Account, in form and substance satisfactory to Lender and if required by Lender,
the original of such letter of credit has been delivered to Lender or Lender's
agent, and Borrower or such Guarantor has complied with the terms of Section
5.2(f) hereof with respect to the assignment of the proceeds of such letter of
credit to Lender or naming Lender as transferee beneficiary thereunder, as
Lender may specify, or (ii) such Account is subject to credit insurance payable
to Lender issued by an insurer and on terms and in an amount acceptable to
Lender, or (iii) such Account is otherwise acceptable in all respects to Lender
(subject to such lending formula with respect thereto as Lender may in good
faith determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇ (such
that the obligation of the account debtors with respect to such Accounts is
conditioned upon such Borrower's or Guarantor's satisfactory completion of any
further performance under the agreement giving rise thereto), ▇▇▇▇ and hold
invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form and
substance reasonably satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) such Accounts do not consist of Accounts for connection
services to be provided by Borrower or such Guarantor more than thirty (30) days
in advance of the performance of such services;
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(h) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and is not owed or does not claim to
be owed any amounts that may give rise to any right of setoff or recoupment
against such Accounts (but the portion of the Accounts of such account debtor in
excess of the amount at any time and from time to time owed by Borrower or such
Guarantor to such account debtor or claimed owed by such account debtor may be
deemed Eligible Accounts);
(i) there are no material facts, events or occurrences which
would impair the validity, enforceability or collectability of such Accounts or,
except as otherwise permitted in this Agreement, reduce the amount payable or
delay payment thereunder beyond the periods set forth in subsection (b) of this
definition;
(j) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and are not subject to any liens except as
expressly permitted in this Agreement and which liens are subject to an
intercreditor agreement in form and substance reasonably satisfactory to Lender
between the holder of such security interest or lien and Lender;
(k) such Accounts may be owed by account debtors who are
employees of Borrower or any Guarantor provided, that, the aggregate amount of
all such Accounts deemed Eligible Accounts shall not exceed $100,000 in the
aggregate;
(l) the Account debtor with respect to such Account is the
United States of America or any department, agency or instrumentality thereof,
so long as the aggregate outstanding amount of all such Accounts does not exceed
$1,500,000 (such Accounts in excess of $1,500,000, either singly or in the
aggregate, shall be deemed Eligible Accounts if, upon Lender's request, the
Federal Assignment of Claims Act of 1940, as amended, if applicable, has been
complied with in a manner reasonably satisfactory to Lender);
(m) the Account debtor in respect of such Accounts has not to
the knowledge of Borrower, any Guarantor or Lender (i) filed a petition for
bankruptcy or any other relief under the Bankruptcy Code or any other law
relating to bankruptcy, insolvency, reorganization or relief of debtors, (ii)
made an assignment for the benefit of creditors, (iii) had filed against it any
petition or other application for relief under the Bankruptcy Code or any such
other law, (iv) has failed, suspended business operations, become insolvent, or
(v) had or suffered a receiver or a trustee to be appointed for all or a
significant portion of its assets or affairs, except, that, Accounts created in
respect of such account debtors after the occurrence of any events described in
clauses (i) through (iv) above may be deemed eligible to the extent such
Accounts otherwise satisfy, in the determination of Lender, the criteria set
forth herein;
(n) the aggregate amount of such Accounts owing by a single
account debtor do not constitute more than ten (10%) percent of the aggregate
amount of all otherwise Eligible Accounts (but the portion of the Accounts not
in excess of the applicable percentage shall be deemed Eligible Accounts if such
Accounts otherwise qualify as Eligible Accounts);
13
(o) such Accounts are not owed by an account debtor who has
Accounts unpaid more than the earlier of sixty (60) days after the original due
date for them or one hundred twenty (120) days after the date of the original
invoice for them which constitute more than fifty (50%) percent of the total
Accounts of such account debtor;
(p) such Accounts are not Carrier Accounts or Credit Card
Receivables;
(q) such Accounts are not in respect of service at locations
of account debtors for which such service(s) has been disconnected;
(r) such Accounts are not in respect of services performed for
which no invoice has been rendered;
(s) if such Accounts are owed to any Guarantor, Borrower owns,
directly or indirectly, at least eighty (80%) percent of the Voting Stock of
such Guarantor; and
(t) notwithstanding anything to the contrary set forth in this
definition, no more than ten (10%) percent of the dollar amount of all Eligible
Accounts shall be Accounts in respect of which residential customers are Account
debtors.
Upon written notice to Borrower, the criteria for Eligible Accounts set forth
above may be changed and any new criteria for Eligible Accounts may be
established by Lender in good faith only based on and with a reasonable
relationship to either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Lender has no written notice thereof
from a Borrower prior to the date hereof, in either case under clause (i) or
(ii) which materially adversely affects or could reasonably be expected to
materially adversely affect the Accounts in the good faith determination of
Lender. Any Accounts that are not Eligible Accounts shall nevertheless be part
of the Collateral.
1.53 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower or any
Guarantor and any Governmental Authority, (a) relating to pollution and the
protection, preservation or restoration of the environment (including air, water
vapor, surface water, ground water, drinking water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, (b) relating to the exposure to, or the
use, storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the
14
Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
and the Federal Safe Drinking Water Act of 1974, (ii) applicable state
counterparts to such laws and (iii) any common law or equitable doctrine that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Materials.
1.54 "Equipment" shall have the meaning set forth in the UCC.
1.55 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, together with all rules, regulations and interpretations thereunder or
related thereto.
1.56 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower, any Guarantor or any of its or their respective Subsidiaries
under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
1.57 "ERISA Event" shall mean (a) the occurrence of any "reportable
event", as defined in Section 4043(c) of ERISA, with respect to a Pension Plan,
other than events as to which the requirement of notice has been waived in
regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of any
amendment to a Pension Plan that would require the provision of security
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) a
complete or partial withdrawal by Borrower, Guarantor or any ERISA Affiliate
from a Multiemployer Plan or a cessation of operations which is treated as such
a withdrawal or the receipt by Borrower, Guarantor or any ERISA affiliate of
notification that a Multiemployer Plan is in reorganization; (d) the filing of a
notice of intent to terminate, the treatment of a Pension Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Pension
Plan; (e) an event or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (f) the imposition of any
liability under Title IV of ERISA, other than the Pension Benefit Guaranty
Corporation premiums due but not delinquent under Section 4007 of ERISA, upon
Borrower, Guarantor or any ERISA Affiliate in excess of $5,000,000; and (g) any
other event or condition with respect to a Plan including any Pension Plan
maintained, or contributed to, by any ERISA Affiliate that could reasonably be
expected to result in liability of Borrower in excess of $5,000,000.
1.58 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.59 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.60 "Excess Availability" shall mean, the amount, as determined by
Lender,
15
calculated at any date, equal to: (a) the lesser of: (i) the Borrowing Base and
(ii) the Maximum Credit plus (b) Qualified Cash minus (c) the sum of: (i) the
amount of all then outstanding and unpaid Revolving Loans plus (ii) the amount
of all then outstanding and unpaid trade payables and other obligations of
Borrower and Guarantors which exceed $1,000,000 in the aggregate and are
outstanding more than sixty (60) days past due as of the end of the immediately
preceding month (other than trade payables, other obligations or carrier
disputes being contested or disputed by Borrower and Guarantors in good faith).
1.61 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.62 "Excluded Account" shall mean (a) any Deposit Account, Securities
Account or Commodity Account opened by Borrower or any Guarantor the average
daily balance of which is less than $500,000; provided, that, the average daily
balance of any such account when aggregated with the average daily balance of
all other such accounts with balances of less than $500,000 shall not exceed
$1,000,000 and (b) any Deposit Account used solely for (i) funding payroll or
segregating payroll taxes or (ii) segregating 401k contributions or
contributions to the employee stock purchase plan and other health and benefit
plans, in each case for payment in accordance with any applicable laws.
1.63 "Excluded Property" shall mean Special Property other than the
following:
(a) the right to receive any payment of money (including
Accounts, General Intangibles and Payment Intangibles) or any other rights
referred to in Sections 9 406(d), 9 407 (a) or 9 408(a) of the UCC to the extent
that such sections of the UCC are effective to limit the prohibitions which make
such property "Special Property"; and
(b) any claim under the policy of insurance (an "Insurance
Claim"); and
(c) any Proceeds, substitutions or replacements of any Special
Property (unless such Proceeds, substitutions or replacements would constitute
Special Property).
1.64 "Facility Maximum Credit" shall mean $10,000,000; provided, that,
the Facility Maximum Credit may be increased to an amount not to exceed
$20,000,000 upon the satisfaction of all conditions set forth in Section 2.2
hereof as determined by Lender.
1.65 "FCC" shall mean the Federal Communications Commission of the
United States of America, and any successor, in whole or in part, to its
jurisdiction.
1.66 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements, deposit account control
agreements, investment property control agreements, intercreditor agreements and
all other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by Borrower or any Guarantor in connection with this
Agreement provided, that, the Financing Agreements shall not include Interest
Swap Obligations.
16
1.67 "Fixtures" shall have the meaning set forth in the UCC.
1.68 "Foreign Subsidiary" shall mean any Subsidiary of Borrower which
is organized and existing under the laws of any jurisdiction outside of the
United States of America.
1.69 "Funding Bank" shall have the meaning given to such term in
Section 3.7 hereof.
1.70 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board or such other statement by such
other entity as may be approved by a significant segment of the accounting
profession in the United States or changes in application of which the
Borrower's independent certified public accountants concur.
1.71 "General Intangibles" shall mean, collectively, with respect to
Borrower and each Guarantor, all "general intangibles," as such term is defined
in the UCC, of Borrower and such Guarantor and, in any event, shall include (i)
all of Borrower's and such Guarantor's rights, title and interest in, to and
under all insurance policies and Contracts, (ii) all know-how and warranties
relating to any of the Collateral, if applicable, (iii) any and all other
rights, claims, choses-in-action and causes of action of such Guarantor against
any other person and the benefits of any and all collateral or other security
given by any other person in connection therewith, (iv) all guarantees,
endorsements and indemnifications on, or of, any of the Collateral, if
applicable, (v) all lists, books, records, correspondence, ledgers, printouts,
files (whether in printed form or stored electronically), tapes and other papers
or materials containing information relating to any of the Collateral, if
applicable, including all customer or tenant lists, identification of suppliers,
data, plans, blueprints, specifications, designs, drawings, appraisals, recorded
knowledge, surveys, studies, engineering reports, test reports, manuals,
standards, processing standards, performance standards, catalogs, research data,
computer and automatic machinery software and programs and the like, field
repair data, accounting information pertaining to Borrower's or such Guarantor's
operations or any of the Collateral, if applicable, and all media in which or on
which any of the information or knowledge or data or records may be recorded or
stored and all computer programs used for the compilation or printout of such
information, knowledge, records or data, (vi) all licenses, consents, permits,
variances, certifications, authorizations and approvals, however characterized,
of any Governmental Authority (or any person acting on behalf of a Governmental
Authority) now or hereafter acquired or held by Borrower or such Guarantor
pertaining to operations now or hereafter conducted by such Guarantor or any of
the Collateral, if applicable, including building permits, certificates of
occupancy, environmental certificates, industrial permits or licenses and
certificates of operation and (vii) all rights to reserves, deferred payments,
deposits, refunds, indemnification of claims to the extent the foregoing relate
to any Collateral, if applicable, and claims for tax or other refunds against
any Governmental Authority relating to any Collateral, if applicable.
17
1.72 "Goodwill" shall mean, collectively, with respect to Borrower and
each Guarantor, the goodwill connected with such Guarantor's business including
all goodwill connected with (i) the use of and symbolized by any Trademark or
Trademark License in which Borrower or such Guarantor has any interest and (ii)
all know-how, trade secrets, customer and supplier lists, proprietary
information, inventions, methods, procedures, formulae, descriptions,
compositions, technical data, drawings, specifications, name plates, catalogs,
confidential information and the right to limit the use or disclosure thereof by
any person, pricing and cost in-formation, business and marketing plans and
proposals, consulting agreements, engineering contracts and such other assets
which relate to such goodwill.
1.73 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
1.74 "Guarantors" shall mean, collectively, the following (together
with their respective successors and assigns): (a) US LEC of North Carolina
Inc., a North Carolina corporation; (b) US LEC of Tennessee Inc., a Delaware
corporation; (c) US LEC of Georgia Inc., a Delaware corporation; (d) US LEC of
South Carolina Inc., a Delaware corporation; (e) US LEC of Florida Inc., a North
Carolina corporation; (f) US LEC of Virginia, L.L.C., a Delaware limited
liability company (g) US LEC of Alabama Inc., a North Carolina corporation; (h)
US LEC of Pennsylvania Inc., a North Carolina corporation; (i) US LEC of
Maryland Inc., a Delaware corporation; (j) US LEC Communications Inc., a North
Carolina corporation; (k) US LEC Acquisition Co., a North Carolina corporation;
(l) US LEC of New York Inc., a North Carolina corporation; and (m) any other
Person that at any time after the date hereof becomes party to a guarantee in
favor of Lender or otherwise liable on or with respect to the Obligations or who
is the owner of any property which is security for the Obligations (other than
Borrower); each sometimes being referred to herein individually as a
"Guarantor".
1.75 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.76 "Indebtedness" means with respect to any Person, without
duplication:
(a) all obligations of such Person for borrowed money;
18
(b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(c) all Capitalized Lease Obligations of such Person;
(d) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations and all
Obligations under any title retention agreement (but excluding trade accounts
payable and other accrued liabilities arising in the ordinary course of business
that are not overdue by 90 days or more or are being contested in good faith);
(e) all obligations for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction;
(f) guarantees and other contingent obligations in respect of
Indebtedness of other Persons of the type referred to in clauses (a) through (e)
above and clause (h) below but, in the case of a guarantee, only to the extent
so guaranteed;
(g) all obligations of any other Person of the type referred
to in clauses (a) through (f) which are secured by any lien on any property or
asset of such Person, the amount of such obligation being deemed to be the
lesser of the fair market value of such property or asset and the amount of the
Obligation so secured;
(h) all obligations under Currency Agreements and Interest
Swap Obligations of such Person; and
(i) all Disqualified Capital Stock issued by such Person with
the amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any.
For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Agreement, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of Borrower of such
Disqualified Capital Stock.
The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation;
provided, that, the amount outstanding at any time of any Indebtedness issued
with original issue discount is the original issue price of such Indebtedness.
19
1.77 "Indebtedness to Cash Flow Ratio" means the ratio of (a) the
Consolidated Total Indebtedness as of the date of calculation (the "Calculation
Date") to (b) the Consolidated Cash Flow for the four full consecutive fiscal
quarters immediately preceding such Calculation Date for which financial
information is available (the "Measurement Period"). For purposes of calculating
Consolidated Cash Flow for the Measurement Period ending immediately prior to
the relevant Calculation Date:
(i) any Person that is a Restricted Subsidiary on the
Calculation Date (or would become a Restricted Subsidiary on such Calculation
Date in connection with the transaction that requires the determination of such
Consolidated Cash Flow) will be deemed to have been a Restricted Subsidiary at
all times during such Measurement Period;
(ii) any Person that is not a Restricted Subsidiary on such
Calculation Date (or would cease to be a Restricted Subsidiary on such
Calculation Date in connection with the transaction that requires the
determination of such Consolidated Cash Flow) will be deemed not to have been a
Restricted Subsidiary at any time during such Measurement Period; and
(iii) if since the beginning of the Measurement Period,
Borrower, any Restricted Subsidiary or any Person that subsequently became a
Restricted Subsidiary or was merged with or into Borrower or any Restricted
Subsidiary since the beginning of the Measurement Period shall have in any
manner (x) acquired (including through an Asset Acquisition or the commencement
of activities constituting such operating business) or (y) disposed of
(including by way of an Asset Sale or the termination or discontinuance of
activities constituting such operating business) any operating business in each
case during such Measurement Period or after the end of such period and on or
prior to such Calculation Date, such calculation will be made on a pro forma
basis in accordance with GAAP and giving effect to any increase or reduction of
any associated Consolidated Cash Flow attributable thereto (including any pro
forma adjustments (including cost-savings adjustments) calculated on a basis
consistent with Regulation S-X under the Securities Act), as if, in the case of
an Asset Acquisition or the commencement of activities constituting such
operating business, all such transactions had been consummated on the first day
of such Measurement Period and, in the case of an Asset Sale or termination or
discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period.
1.78 "Information Certificate" shall mean, collectively, the
Information Certificates of Borrower and Guarantors constituting Exhibit A
hereto containing material information with respect to Borrower and Guarantors,
their respective businesses and assets provided by or on behalf of Borrower and
Guarantors to Lender in connection with the preparation of this Agreement and
the other Financing Agreements and the financing arrangements provided for
herein.
1.79 "Initial Pledged Interests" shall mean, with respect to Borrower
and each Guarantor, all membership, partnership or other equity interests (other
than in a corporation), as
20
applicable, of each issuer described in Schedule 1.79 hereto, together with all
rights, privileges, authority and powers of Borrower or such Guarantor in and to
each such issuer or under any organizational document of each such issuer, and
the certificates, instruments and agreements representing such membership,
partnership or other interests and any and all interest of Borrower or such
Guarantor in the entries on the books of any financial intermediary pertaining
to such membership, partnership or other interests.
1.80 "Initial Pledged Shares" shall mean, collectively, with respect to
Borrower and each Guarantor, the issued and outstanding shares of capital stock
of each issuer described in Schedule 1.80 hereto together with all rights,
privileges, authority and powers of Borrower or such Guarantor relating to such
interests in each such issuer or under any organizational document of each such
issuer, and the certificates, instruments and agreements representing such
shares of capital stock and any and all interest of Borrower or such Guarantor
in the entries on the books of any financial intermediary pertaining to the
Initial Pledged Shares.
1.81 "Instruments" shall mean, collectively, with respect to Borrower
and each Guarantor, all "instruments," as such term is defined in Article 9 of
the UCC, rather than Article 3, of the UCC, and shall include all promissory
notes, drafts, bills of exchange or acceptances.
1.82 "Intellectual Property" shall mean, as to Borrower and each
Guarantor, collectively, such Borrower's and Guarantor's now owned and hereafter
arising or acquired collectively, Patents, Trademarks, Copyrights, Licenses and
Goodwill.
1.83 "Intercompany Notes" shall mean, with respect to Borrower and each
Guarantor, all intercompany notes described in Schedule 1.83 hereto and
intercompany notes hereafter acquired by Borrower or such Guarantor and all
certificates, instruments or agreements evidencing such intercompany notes, and
all assignments, amendments, restatements, supplements, extensions, renewals,
replacements or modifications thereof to the extent permitted pursuant to the
terms hereof.
1.84 "Intercreditor Agreement" shall mean the Intercreditor Agreement,
dated of even date herewith, by and among Lender and Senior Secured Note Trustee
(on behalf of the holders of the Senior Secured Notes), as acknowledged and
agreed to by Borrower and Guarantors, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.85 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), three (3) months or six (6) months
duration as Borrower may elect, the exact duration to be determined in
accordance with the customary practice in the applicable Eurodollar Rate market;
provided, that, Borrower may not elect an Interest Period which will end after
the last day of the then-current term of this Agreement.
1.86 "Interest Rate" shall mean,
21
(a) Subject to clause (b) of this definition below:
(i) as to Prime Rate Loans, a rate equal to
one-quarter (.25%) percent per annum in excess of the Prime Rate,
(ii) as to Eurodollar Rate Loans, a rate equal to two
and one-quarter (2.25%) percent per annum in excess of the Adjusted Eurodollar
Rate (in each case, based on the London Interbank Offered Rate applicable for
the Interest Period selected by Borrower, as in effect two (2) Business Days
prior to the commencement of the Interest Period, whether such rate is higher or
lower than any rate previously quoted to Borrower or any Guarantor).
(b) Notwithstanding anything to the contrary contained in
clause (a) of this definition, the Interest Rate shall mean the rate of two and
one-quarter (2.25%) percent per annum in excess of the Prime Rate as to Prime
Rate Loans and the rate of four and one-quarter (4.25%) percent per annum in
excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at Lender's
option, without notice, (i) either (A) for the period on and after the date of
termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid and satisfied in full in immediately available funds, or (B)
for the period from and after the date of the occurrence of any Event of
Default, and for so long as such Event of Default is continuing as determined by
Lender and (ii) on the Revolving Loans to Borrower at any time outstanding in
excess of the Borrowing Base or the Maximum Credit (whether or not such
excess(es) arise or are made with or without Lender's knowledge or consent and
whether made before or after an Event of Default).
1.87 "Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements and not entered into for
speculative purposes.
1.88 "Inventory" shall have the meaning set forth in the UCC.
1.89 "Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any other purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by, any other Person. "Investment" shall exclude extensions
of trade credit by the Borrower and its Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of the Borrower or
such Restricted Subsidiary, as the case may be. If the Borrower or any
Restricted Subsidiary of the Borrower sells or otherwise disposes of any Common
Stock of any direct or indirect Restricted Subsidiary of Borrower such that,
after giving effect to any such
22
sale or disposition, Borrower no longer owns, directly or indirectly, 100% of
the outstanding Common Stock of such Restricted Subsidiary, Borrower shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
1.90 "Investment Property" shall mean a security, whether certificated
or uncertificated, Security Entitlement, Securities Account, Commodity Contract
or Commodity Account, excluding, however, the Securities Collateral.
1.91 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender,
Borrower or any Guarantor (as the case may be) and any securities intermediary,
commodity intermediary or other person who has custody, control or possession of
any investment property of Borrower or such Guarantor (other than Excluded
Accounts) acknowledging that such securities intermediary, commodity
intermediary or other person has custody, control or possession of such
investment property on behalf of Lender, that it will comply with entitlement
orders originated by Lender with respect to such investment property, or other
instructions of Lender, and has such other terms and conditions as Lender may
require.
1.92 "Lender" shall mean Wachovia Bank, National Association, a
national banking association, and its successors and assigns.
1.93 "Lender Payment Account" shall mean account no. 2070482789126 of
Lender at Wachovia Bank, National Association or such other account of Lender as
Lender may from time to time designate to Borrower as the Lender Payment Account
for purposes of this Agreement and the other Financing Agreements.
1.94 "Licenses" shall mean, collectively, with respect to Borrower and
each Guarantor, all license and distribution agreements with, and covenants not
to ▇▇▇, any other party with respect to any Patent, Trademark or Copyright or
any other patent, trademark or copyright, whether Borrower or such Guarantor is
a licensor or licensee, distributor or distributee under any such license or
distribution agreement, together with any and all renewals, extensions,
supplements and continuations thereof.
1.95 "License Agreements" shall have the meaning set forth in Section
8.11 hereof.
1.96 "Lien" shall mean any mortgage or deed of trust, charge, pledge,
lien (statutory or otherwise), privilege, security interest, assignment,
deposit, arrangement, easement, hypothecation, claim, preference, priority or
other encumbrance upon or with respect to any property of any kind (including
any conditional sale, capital lease or other title retention agreement, any
leases in the nature thereof, and any agreement to give any security interest),
real or personal, movable or immovable, now owned or hereafter acquired. A
Person will be deemed to own subject to a Lien any property that it has acquired
or holds subject to the interest of a vendor or lessor under any conditional
sale agreement, Capitalized Lease Obligation or other title retention agreement.
23
1.97 "London Interbank Offered Rate" shall mean, with respect to any
Eurodollar Loan for the Interest Period applicable thereto, the rate of interest
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing
on Telerate Page 3750 (or any successor page) as the London interbank offered
rate for deposits in U.S. Dollars at approximately 11:00 A.M. (London time) two
(2) Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, that, if more than one rate is
specified on Telerate Page 3750, the applicable rate shall be the arithmetic
mean of all such rates. If, for any reason, such rate is not available, the term
"London Interbank Offered Rate" shall mean, with respect to any Eurodollar Loan
for the Interest Period applicable thereto, the rate of interest per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two (2) Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates.
1.98 "Material Adverse Effect" shall mean a material adverse effect on
(a) the financial condition, business, performance or operations of Borrower and
its Subsidiaries taken as a whole; (b) the legality, validity or enforceability
of this Agreement or any of the other Financing Agreements; (c) the legality,
validity, enforceability, perfection or priority of the security interests and
liens of Lender upon the Collateral; (d) the Collateral or the value of
Accounts; (e) the ability of Borrower and Guarantors (taken as a whole) to repay
the Obligations or of Borrower and Guarantors to perform its obligations under
this Agreement or any of the other Financing Agreements as and when to be
performed; or (f) the ability of Lender to enforce the Obligations or realize
upon the Collateral or otherwise with respect to the rights and remedies of
Lender under this Agreement or any of the other Financing Agreements. For
purposes of determining a Material Adverse Effect, any non-cash, non-recurring
charges related to inter-carrier compensation or carrier access disputes and
receivables will be excluded. It is agreed by the parties hereto that the
effects of Hurricanes ▇▇▇▇▇▇▇ and ▇▇▇▇ did not have a Material Adverse Effect on
the Borrower and its Subsidiaries.
1.99 "Material Contract" shall mean any contract or other agreement
(other than the Financing Agreements), whether written or oral, to which
Borrower or any Guarantor is a party as to which the breach, nonperformance,
cancellation or failure to renew or be replaced by any party thereto would have
a Material Adverse Effect.
1.100 "Maximum Credit" shall mean, on any date of determination, the
amount equal to (a) the Facility Maximum Credit minus (b) the aggregate amount
of outstanding "Permitted Indebtedness" under clause (2) of the definition of
Permitted Indebtedness (as set forth in the Senior Secured Note Indenture as in
effect on the date hereof) exclusive of the aggregate principal amount of
Revolving Loans and other Obligations outstanding hereunder.
1.101 "Maximum Secured Debt Amount" means the maximum amount of
Indebtedness
24
that may be incurred by Borrower or any of its Restricted Subsidiaries without
causing the Secured Indebtedness to Cash Flow Ratio for Borrower (based on
Borrower's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
Indebtedness is incurred) to exceed 3.0 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if such
Indebtedness had been incurred at the beginning of such four-quarter period. For
purposes of determining the amount of Indebtedness of Borrower and its
Restricted Subsidiaries as of any date of determination, the total committed
amounts under all revolving Credit Facilities (as such term is defined in the
Senior Secured Note Indenture as in effect on the date hereof) will be deemed to
be outstanding as of such date of determination.
1.102 "Multiemployer Plan" shall mean a "multi-employer plan" as
defined in Section 4001(a)(3) of ERISA which is or was at any time during the
current year or the immediately preceding six (6) years contributed to by
Borrower, Guarantor or any ERISA Affiliate or with respect to which Borrower,
Guarantor or any ERISA Affiliate may incur any liability.
1.103 "Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by Borrower, Guarantor, or any other Restricted Subsidiaries
from such Asset Sale net of: (a) reasonable out-of-pocket expenses and fees
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions); (b) taxes paid or payable
after taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements; (c) in the
case of an Asset Sale of Collateral, repayment of Indebtedness that is secured
by, or directly related to, the property or assets that are the subject of such
Asset Sale, and, in the case of any other Asset Sale, repayment of Indebtedness
that is required to be repaid in connection therewith; and (d) appropriate
amounts to be provided by such Borrower, Guarantor or any Restricted Subsidiary,
as the case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by such Borrower,
Guarantor or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
1.104 "Obligations" shall mean, without duplication, any and all
Revolving Loans and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrower to Lender,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
arising under this Agreement or any of the other Financing Agreements, whether
now existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to such Borrower under the United States Bankruptcy Code or
any similar statute (including the payment of interest and other amounts
25
which would accrue and become due but for the commencement of such case, whether
or not such amounts are allowed or allowable in whole or in part in such case),
whether direct or indirect, absolute or contingent, joint or several, due or not
due, primary or secondary, liquidated or unliquidated, or secured or unsecured.
1.105 "Participant" shall mean any financial institution that acquires
and holds a participation in the interest of Lender in any of the Revolving
Loans in conformity with the provisions of Section 12.5 of this Agreement
governing participations.
1.106 "Patents" shall mean, collectively, with respect to Borrower and
each Guarantor, all patents issued or as-signed to and all patent applications
and registrations made by Borrower or such Guarantor (whether established or
registered or recorded in the United States or any other country or any
political subdivision thereof), together with any and all (i) rights and
privileges arising under applicable law with respect to Borrower's or such
Guarantor's use of any patents, (ii) inventions and improvements described and
claimed therein and (iii) reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof.
1.107 "Pension Plan" shall mean a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which Borrower or any Guarantor
sponsors, maintains, or to which Borrower, Guarantor or ERISA Affiliate makes,
is making, or is obligated to make contributions, other than a Multiemployer
Plan.
1.108 "Permitted Holders" means at any time (a) one or more investment
funds controlled by ▇▇▇▇▇▇ ▇. ▇▇▇ Partners, L.P.; (b) one or more investment
funds controlled by ▇▇▇▇ Capital, LLC and (c) in the case of clause (a) and (b)
above, each of their respective Affiliates (not including, however, any
portfolio companies of any of the foregoing).
1.109 "Permitted Indebtedness" means, without duplication, each of the
following:
(a) Indebtedness of Borrower and Guarantors evidenced by the
Senior Secured Notes and the Senior Secured Note Indenture as in effect on the
date hereof, provided, that:
(i) this Agreement is and shall at all times continue
to be a "Credit Facility" as such term is defined in the Senior Secured Note
Indenture as in effect on the date hereof and is and shall be entitled to all of
the rights and benefits thereof under the Senior Secured Note Indenture as in
effect on the date hereof,
(ii) any lien on the Collateral securing such
Indebtedness shall at all times be subordinate to the lien in favor of Lender
pursuant to the terms of the Intercreditor Agreement,
(iii) Borrower may amend the Senior Secured Note
Indenture after the date hereof, upon notice to Lender, provided, that, no such
amendment or modification shall
26
have an adverse effect on (A) the legality, validity, enforceability, perfection
or priority of the security interests and liens of Lender upon the Collateral;
(B) the Collateral or the value of Accounts; (C) the ability of Borrower and
Guarantors (taken as a whole) to repay the Obligations or of Borrower and
Guarantors to perform its obligations under this Agreement or any of the other
Financing Agreements as and when to be performed; (D) the ability of Lender to
enforce the Obligations or realize upon the Collateral or otherwise with respect
to the rights and remedies of Lender under this Agreement or any of the other
Financing Agreements, or (E) make the provisions of such Senior Secured Note
Indenture or the Senior Secured Notes more restrictive or burdensome on the
Borrower and Guarantors than the terms or conditions of such Senior Secured Note
Indenture in effect on the date hereof;
(iv) Borrower and Guarantors shall furnish to Lender
all material written notices or demands in connection with such Indebtedness
either received by Borrower or any Guarantor or on its behalf, promptly after
the receipt thereof, or sent by Borrower or any Guarantor or on its behalf,
concurrently with the sending thereof, as the case may be;
(b) other Indebtedness of Borrower and its Restricted
Subsidiaries outstanding on September 30, 2004 reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(c) Interest Swap Obligations of Borrower or any Restricted
Subsidiary of Borrower covering Indebtedness of Borrower or any of its
Restricted Subsidiaries; provided, that, that such Interest Swap Obligations are
entered into to protect Borrower and its Subsidiaries from fluctuations in
interest rates on their outstanding Indebtedness to the extent the notional
principal amount of such Interest Swap Obligation does not, at the time of the
incurrence thereof, exceed the principal amount of the Indebtedness to which
such Interest Swap Obligation relates;
(d) Indebtedness of a Restricted Subsidiary of Borrower to
Borrower or to a Wholly Owned Restricted Subsidiary of Borrower for so long as
such Indebtedness is held by Borrower or a Wholly Owned Restricted Subsidiary of
Borrower, in each case subject to no Lien held by a Person other than Borrower
or a Restricted Subsidiary of Borrower or the holder of a Lien permitted under
this Agreement, provided that, (i) any Indebtedness of a Borrower or Guarantor
to any Wholly Owned Restricted Subsidiary of Borrower that is not a Guarantor is
unsecured and subordinated, pursuant to a written agreement, to such Guarantor's
or Borrower's obligations under this Agreement and (ii) if as of any date any
Person other than Borrower or a Wholly Owned Restricted Subsidiary of Borrower
or the holder of a Lien permitted under this Agreement owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted Indebtedness
under this clause (d) by Borrower of such Indebtedness;
(e) Indebtedness of Borrower to a Wholly Owned Restricted
Subsidiary of Borrower for so long as such Indebtedness is held by a Wholly
Owned Restricted Subsidiary of Borrower or the holder of a Lien permitted under
this Agreement, in each case subject to no Lien other than a Permitted Lien or a
Lien in favor of Lender or in favor of the Senior Secured Note
27
Trustee pursuant to the terms of the Senior Secured Note Documents and subject
to the terms of the Intercreditor Agreement; provided, that, (i) any
Indebtedness of Borrower to any Wholly Owned Restricted Subsidiary of Borrower
that is not a Guarantor is unsecured and subordinated, pursuant to a written
agreement, to Borrower's obligations under the Senior Secured Notes and
Borrower's and Guarantors' Obligations under this Agreement and the other
Financing Agreements and (ii) if as of any date any Person other than a Wholly
Owned Restricted Subsidiary of Borrower or the holder of a Lien permitted under
this Agreement owns or holds any such Indebtedness or any Person holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness under this clause (e) by
Borrower, or such other Borrower or Guarantor, as the case may be;
(f) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; provided, that, such Indebtedness is
extinguished within five (5) business days of incurrence;
(g) Indebtedness of Borrower or any of its Restricted
Subsidiaries in respect of performance bonds, bankers' acceptances, workers'
compensation claims, surety or appeal bonds, payment obligations in connection
with self-insurance or similar obligations, letters of credit (whether
cash-collateralized or not) functioning as or supporting any of the foregoing or
any real estate leases and bank overdrafts in the ordinary course of business
and consistent with past practice;
(h) Indebtedness represented by Capitalized Lease Obligations
and Purchase Money Obligations of Borrower and its Restricted Subsidiaries
incurred in the ordinary course of business; provided, that the principal amount
of any Indebtedness permitted under this clause (h) did not in each case at the
time of incurrence exceed the fair market value, as determined by Borrower in
good faith, of the acquired or constructed asset or improvement so financed; and
provided, that, the aggregate principal amount of Indebtedness outstanding under
this clause (h) does not, when taken together with any Revolving Loans
outstanding under this Agreement, and any other Senior Secured Note Permitted
Credit Facility exceed $10,000,000 (or such greater amount as may be agreed to
by Borrower, Guarantors and Senior Secured Note Trustee, after the date hereof
pursuant to an amendment (in form and substance satisfactory to Lender) to the
Senior Secured Note Documents) at any time outstanding;
(i) Refinancing Indebtedness;
(j) Indebtedness represented by guarantees by Borrower or its
Restricted Subsidiaries of Indebtedness otherwise permitted to be incurred under
this Agreement;
(k) Indebtedness of Borrower or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments, earn-outs or similar obligations in connection with the
acquisition or disposition of property or assets; and
28
(l) additional Indebtedness of Borrower and its Subsidiaries
not otherwise permitted pursuant to clauses (a) through (k) hereof in an
aggregate principal amount not to exceed $7,500,000 at any one time outstanding.
For purposes of determining compliance with Section 9.9
hereof, in the event that an item of Indebtedness meets the criteria of more
than one of the categories of Permitted Indebtedness described in clauses (a)
through (l) above or is entitled to be incurred pursuant to the Indebtedness to
Cash Flow Ratio provisions of Section 9.9 hereof, Borrower shall, in its sole
discretion, classify (or later reclassify) such item of Indebtedness in any
manner that complies with this definition. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest or fees or
expenses on any Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified Capital Stock in the
form of additional shares of the same class of Disqualified Capital Stock will
not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified
Capital Stock for purposes of Section 9.9 hereof.
1.110 "Permitted Investments" means:
(a) Asset Acquisitions (whether made in cash or by issuance of
Capital Stock of Borrower) by Borrower or any Restricted Subsidiary of Borrower
in any Person that is or will become immediately after such Asset Acquisition a
Restricted Subsidiary of Borrower or that will merge or consolidate into
Borrower or a Wholly Owned Restricted Subsidiary of Borrower; provided, that,
each of the following conditions is satisfied in the determination of Lender:
(i) as of the closing date of any such Asset Acquisition and immediately after
giving effect thereto, Excess Availability shall be not less than $7,500,000
(except, that, this condition shall not have to be satisfied if such Asset
Acquisition is made by the issuance of Capital Stock by the Borrower only), (ii)
the assets acquired which constitute Collateral and the Capital Stock so
acquired by Borrower or its Restricted Subsidiary shall be free and clear of any
security interest, mortgage, pledge, Lien, charge, or other encumbrance (other
than Permitted Liens) and Lender shall have received evidence reasonably
satisfactory to it of the same, (iii) promptly upon consummation of such
Investment, (A) Lender shall have received true, correct and complete copies of
all agreements, documents and instruments relating thereto, and (C) Lender shall
have received all items required by Sections 5.2 and 9.25 hereof in connection
with the Asset Acquisition to the extent required under such Sections, (iv) the
Asset Acquisition shall be related, ancillary or complementary to the business
of Borrower and its Subsidiaries, (v) as of the closing date of any such Asset
Acquisition and immediately after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing, and (vi) in no event shall any
Accounts acquired by Borrower or any Guarantor, as the case may be, pursuant to
any such Asset Acquisition be deemed Eligible Accounts unless Lender shall have
conducted a field examination and other due diligence with respect to such
assets and the results of such field examination shall be satisfactory to Lender
in all respects, and then only to the extent the criteria for Eligible Accounts
set forth herein are satisfied with respect thereto (or as modified by Lender to
reflect the results of Lender's field examination, including any separate
advance percentage
29
with respect to such Accounts or Reserves as Lender may determine, and upon the
reasonable request of Lender, the Accounts acquired by Borrower or such
Guarantor, as the case may be, pursuant to such Asset Acquisition shall at all
times after such Asset Acquisition be separately identified and reported to
Lender in a manner reasonably satisfactory to Lender;
(b) Investments in Borrower by any Subsidiary of Borrower;
provided that any Indebtedness evidencing such Investment and held by a
Subsidiary that is not a Guarantor is unsecured and subordinated, pursuant to a
written agreement, to Borrower's obligations under the Senior Secured Notes and
the payment and performance of Borrower's and Guarantors' Obligations under the
Financing Agreements;
(c) Investments in cash and Cash Equivalents;
(d) loans and advances to employees, directors and officers of
Borrower and its Restricted Subsidiaries in the ordinary course of business for
bona fide business purposes not to exceed $2,000,000 at any one time
outstanding;
(e) Currency Agreements and Interest Swap Obligations entered
into in the ordinary course of Borrower's or its Restricted Subsidiaries'
businesses and otherwise in compliance with this Agreement;
(f) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers or in good faith
settlement of delinquent obligations of such trade creditors or customers;
(g) Investments made by Borrower or its Restricted
Subsidiaries as a result of consideration received in connection with an Asset
Sale made in compliance with Section 9.7 hereof.
(h) Investments represented by guarantees that are otherwise
permitted under this Agreement;
(i) Investments the payment for which is Qualified Capital
Stock of Borrower; and
(j) additional Investments not to exceed $5,000,000 at any one
time outstanding, provided, that, as of the date of making such Investment and
immediately after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing.
1.111 "Permitted Liens" means, the following types of Liens:
(a) Liens on the Collateral in favor of Lender;
30
(b) Liens on the Collateral that are second priority Liens to
those in favor of Lender securing additional Indebtedness of Borrower and the
Guarantors ranking pari passu with the Senior Secured Notes incurred pursuant to
Section 9.9(a) hereof in an amount not to exceed the Maximum Secured Debt Amount
(which, for the avoidance of doubt, shall be calculated in the aggregate with
all other outstanding Secured Indebtedness); provided, that, (i) such
Indebtedness has a Weighted Average Life to Maturity and final maturity that is
equal to or greater than that of the latest maturity of the Senior Secured
Notes, (ii) such Liens permitted pursuant to this clause (b) are, in terms of
priority, no better than on an equal and ratable basis with the Liens securing
the Senior Secured Notes, i.e., such Liens on the Collateral are second priority
Liens to those in favor of Lender securing the Obligations and (iii) such
security interests in and mortgages and liens upon the Collateral in favor of
such Person are and shall at all times be subject and subordinate to the
security interests, and liens therein of Lender pursuant to the terms of an
intercreditor agreement, in form and substance satisfactory to such Lender,
between such party and Lender; provided, that, Lender shall not require an
Intercreditor Agreement from such Person in the event the Collateral securing
such Indebtedness is a cash deposit (other than Qualified Cash) or a letter of
credit;
(c) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which Borrower or any of its Subsidiaries shall have set
aside on its books such reserves as may be required pursuant to GAAP;
(d) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
in respect thereof;
(e) Liens incurred on deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, including any Lien on deposits securing letters
of credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, real estate leases, merchant credit obligations, surety
and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(f) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such proceedings may be
initiated shall not have expired, and for which Lender in its discretion may
establish a Reserve;
31
(g) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of Borrower or
any of its Restricted Subsidiaries;
(h) (i) any interest or title of a lessor under any
Capitalized Lease Obligation or operating lease incurred pursuant to clause (h)
of the definition of "Permitted Indebtedness"; provided, that, such Liens do not
extend to any property or assets which is not leased property subject to such
Capitalized Lease Obligation or operating lease; and (ii) Liens securing
Purchase Money Obligations incurred in the ordinary course of business and other
Indebtedness incurred pursuant to clause (h) of the definition of "Permitted
Indebtedness"; provided, that, (A) such Purchase Money Obligations shall not
exceed the purchase price or other cost of or investment in the property subject
thereto and shall not be secured by any property of Borrower or any Restricted
Subsidiary of Borrower other than the property subject thereto and (B) the Lien
securing such Purchase Money Obligations shall be created prior to or within 90
days after the later of the acquisition, completion of construction or
improvement or commencement of full operation of such property;
(i) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(j) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(k) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of
Borrower or any of its Restricted Subsidiaries, including rights of offset and
setoff;
(l) subject to clauses (b)(ii) and (iii) of this Section
1.111, Liens securing Interest Swap Obligations which Interest Swap Obligations
relate to Indebtedness that is otherwise permitted under this Agreement
(Interest Swap Obligations may be secured by letters of credit or deposits of
cash pursuant to clause (e) of this defintion);
(m) Liens on assets of such Person other than Accounts and
Qualified Cash of such Person securing Acquired Indebtedness incurred in
accordance with Section 9.9 hereof; provided, that:
(i) such Liens secured such Acquired Indebtedness at
the time of and prior to the incurrence of such Acquired Indebtedness by
Borrower or a Restricted Subsidiary of Borrower and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by Borrower or a Restricted Subsidiary of Borrower;
32
(ii) such Liens do not extend to or cover any
property or assets of Borrower or of any of its Restricted Subsidiaries other
than the property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of Borrower or a Restricted
Subsidiary of Borrower and are no more favorable to the lienholders than those
securing the Acquired Indebtedness prior to the incurrence of such Acquired
Indebtedness by Borrower or a Restricted Subsidiary of Borrower.
(n) leases, subleases, licenses and sublicenses granted to
others that do not materially interfere with the ordinary course of business of
Borrower and its Restricted Subsidiaries;
(o) banker's Liens, rights of setoff and similar Liens with
respect to cash and Cash Equivalents on deposit in one or more bank accounts in
the ordinary course of business so long as such rights are subject to the terms
and conditions of a Deposit Account Control Agreement unless such deposit
account is an Excluded Account;
(p) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payments of customs duties in connection with the
importation of goods;
(q) Liens identified on Schedule 9.8 hereto (other than Liens
described in (s) below) to the extent and in the manner such Liens are in effect
on the date hereof ;
(r) Liens securing obligations with respect to operating
leases and guarantees thereof; provided, that, such Liens do not extend to or
cover any property of Borrower or any of its Restricted Subsidiaries other than
the property subject to such leases, any property or rights (including rights
under subleases) relating to such leased property and the equity interests of
the lessee in any such lease;
(s) the security interests in and mortgages and liens upon the
Collateral in favor of Senior Secured Note Trustee to secure the Indebtedness
arising under the Senior Secured Notes (and any Refinancing Indebtedness in
replacement thereof), provided, that, the security interests in and mortgages
and liens upon the Collateral in favor of Senior Secured Note Trustee are and
shall at all times be subject and subordinate to the security interests, and
liens therein of Lender pursuant to the terms of the Intercreditor Agreement;
(t) Liens securing Refinancing Indebtedness incurred to
Refinance any Indebtedness that was previously so secured on terms substantially
similar to than the terms of the Liens securing such Refinanced Indebtedness,
provided, that, the Indebtedness secured is not increased and the Lien is not
extended to any additional assets or property that would not have been security
for the Indebtedness Refinanced;
(u) Liens arising from filing UCC financing statements
reporting leases;
(v) rights of a licensor of Intellectual Property;
33
(w) deposits made in the ordinary course of business to secure
liability to insurance carriers;
(x) Liens arising under conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Borrower or any of the Guarantors in the ordinary course of business.
1.112 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.113 "Plan" shall mean an employee benefit plan (as defined in Section
3(3) of ERISA) which Borrower or any Guarantor sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years or with respect to which Borrower or any Guarantor
may incur liability.
1.114 "Pledged Interests" shall mean, collectively, the Initial Pledged
Interests and the Additional Pledged Interests; provided, however, that to the
extent applicable, Pledged Interests shall not include (a) more than 65% of any
series of the outstanding capital stock of any Foreign Subsidiary or (b) any of
the capital stock of a Subsidiary of a Foreign Subsidiary.
1.115 "Pledged Securities" shall mean, collectively, the Pledged
Interests, the Pledged Shares and the Successor Interests.
1.116 "Pledged Shares" shall mean, collectively, the Initial Pledged
Shares and the Additional Pledged Shares; provided, however, that Pledged Shares
shall not include (a) more than 65% of any series of the outstanding capital
stock of any Foreign Subsidiary or (bi) any of the capital stock of a Subsidiary
of a Foreign Subsidiary.
1.117 "Prime Rate" shall mean the rate from time to time publicly
announced by Lender, or its successors, as its prime rate, whether or not such
announced rate is the best rate available at such bank.
1.118 "Prime Rate Loans" shall mean any Revolving Loans or portion
thereof on which interest is payable based on the Prime Rate in accordance with
the terms thereof.
1.119 "PUCs" shall mean, collectively, the public utilities commissions
or boards for any State or any other jurisdiction in which Borrower or any
Guarantor operates its telecommunications business or any successor agency, and
any successor, in whole or in part, to its functions or jurisdictions, sometimes
being referred to herein individually as a "PUC".
34
1.120 "Purchase Money Obligations" means any Indebtedness secured by a
Lien on assets related to the business of Borrower or any Guarantor and any
additions and accessions thereto which are purchased or constructed by Borrower
or any Guarantor at any time after September 30, 2004; provided, that,
(a) the security agreement or conditional sale or other title
retention contract pursuant to which the Lien on such assets is created
(collectively a "Purchase Money Security Agreement") shall be entered into
within 90 days after the purchase or substantial completion of the construction
of such assets and shall at all times be confined solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom,
(b) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except in connection with
the purchase of additions and accessions thereto and except in respect of fees
and other obligations in respect of such Indebtedness, and
(c) (A) the aggregate outstanding principal amount of
Indebtedness secured thereby (determined on a per asset basis in the case of any
additions and accessions) shall not at the time such Purchase Money Security
Agreement is entered into exceed 100% of the purchase price to Borrower or any
Guarantor of the assets subject thereto or (B) the Indebtedness secured thereby
shall be with recourse solely to the assets so purchased or acquired, any
additions and accessions thereto and any proceeds therefrom.
1.121 "Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
1.122 "Qualified Cash" shall mean cash and Cash Equivalents of Borrower
and Guarantors which are (a) subject to a first priority perfected security
interest in favor of Lender (including without limitation, the execution and
delivery of a Deposit Account Control Agreement or an Investment Property
Control Agreement, as the case may be); provided, that, cash and Cash
Equivalents held by Borrower and Guarantors in Excluded Accounts (but only in
those Excluded Accounts described in clause (i) of the definition of Excluded
Accounts set forth herein) shall be included in any calculation of Qualified
Cash, and (b) available to Borrower and Guarantors without restriction or
condition (exclusive of any cash in the Blocked Accounts).
1.123 "Real Property" shall mean all now owned and hereafter acquired
real property of Borrower and each Guarantor, including leasehold interests,
together with all buildings, structures, and other improvements located thereon
and all licenses, easements and appurtenances relating thereto, wherever
located.
1.124 "Receivables" shall mean all of the following now owned or
hereafter arising or acquired property of Borrower and each Guarantor: (a) all
Accounts; (b) all interest, fees, late charges, penalties, collection fees and
other amounts due or to become due or otherwise payable in connection with any
Account; (c) all payment intangibles of Borrower or such Guarantor; (d)
35
letters of credit, indemnities, guarantees, security or other deposits and
proceeds thereof issued payable to Borrower or any Guarantor or otherwise in
favor of or delivered to Borrower or any Guarantor in connection with any
Account; or (e) all other accounts, contract rights, chattel paper, instruments,
notes, general intangibles and other forms of obligations owing to Borrower or
any Guarantor, whether from the sale and lease of goods or other property,
licensing of any property (including Intellectual Property or other general
intangibles), rendition of services or from loans or advances by Borrower or any
Guarantor or to or for the benefit of any third person (including loans or
advances to any Affiliates or Subsidiaries of Borrower or any Guarantor) or
otherwise associated with any Accounts, Inventory or general intangibles of
Borrower or any Guarantor (including, without limitation, choses in action,
causes of action, tax refunds, tax refund claims, any funds which may become
payable to Borrower or any Guarantor in connection with the termination of any
Plan or other employee benefit plan and any other amounts payable to Borrower or
any Guarantor from any Plan or other employee benefit plan, rights and claims
against carriers and shippers, rights to indemnification, business interruption
insurance and proceeds thereof, casualty or any similar types of insurance and
any proceeds thereof and proceeds of insurance covering the lives of employees
on which Borrower or any Guarantor is a beneficiary).
1.125 "Records" shall mean, as to Borrower and each Guarantor, all of
such Borrower's and Guarantor's present and future books of account of every
kind or nature, purchase and sale agreements, invoices, ledger cards, bills of
lading and other shipping evidence, statements, correspondence, memoranda,
credit files and other data relating to the Collateral or any account debtor,
together with the tapes, disks, diskettes and other data and software storage
media and devices, file cabinets or containers in or on which the foregoing are
stored (including any rights of Borrower or any Guarantor with respect to the
foregoing maintained with or by any other person).
1.126 "Refinancing Indebtedness" means any Refinancing by Borrower or
any Restricted Subsidiary of Borrower of Indebtedness incurred in accordance
with Section 9.9 hereof (other than pursuant to clause (c), (d), (e), (f), (g),
(h) or (i) of the definition of "Permitted Indebtedness"), in each case that
does not:
(a) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing (plus
accrued interest thereon and plus the amount of any premium required to be paid
under the terms of the instrument governing such Indebtedness and plus the
amount of fees, expenses and other amounts payable by Borrower in connection
with such Refinancing); or
(b) create Indebtedness with: (i) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced; or (ii) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced;
provided, that, (x) if such Indebtedness being Refinanced is Indebtedness of
Borrower (and is not otherwise guaranteed by a Restricted Subsidiary of
Borrower), then such Refinancing
36
Indebtedness shall be Indebtedness solely of Borrower and (y) if such
Indebtedness being Refinanced is subordinate or junior to the Obligations, then
such Refinancing Indebtedness shall be subordinate to the Obligations at least
to the same extent and in the same manner as the Indebtedness being Refinanced.
1.127 "Regulatory Event" shall mean any of the following events: (a)
Agent and/or Lenders become(s) subject to regulation as a "carrier", a
"telephone company", a "common carrier", a "public utility" or otherwise under
any applicable liability or common carrier law or governmental regulation,
Federal, State or local, solely as result of the transactions contemplated by
this Agreement and the other Financing Agreements, or (b) any Borrower or
Guarantor becomes subject to a statute or regulation by any Governmental
Authority different from the statutes or regulations existing as of the date
hereof and that could have a Material Adverse Effect, except, that, the
occurrence of such an event under this clause (b) shall not be considered an
Event of Default so long as (i) the application of such statutes or regulations
to Borrower and/or its Subsidiaries is being appealed or contested in good faith
by such Borrower or Guarantor by appropriate proceedings diligently pursued and
available to such Borrower or Guarantor, and during such appeal or contest, such
Borrower or Guarantor may continue to operate under the statute or regulations
that existed prior to the adoption of the statutes or regulations that could
have a Material Adverse Effect and (ii) the application of such statute does not
otherwise have a Material Adverse Effect on the ability of Borrower and
Guarantors to perform their Obligations or on the Collateral, or (c) the FCC,
any PUC or any other Communications Regulatory Authority issues an order or
other statement revoking, denying or refusing to renew, or recommending the
revocation, denial or non-renewal of, any material Permit (except for any such
order or statement that is being appealed or contested in good faith by such
Borrower or Guarantor by appropriate proceedings diligently pursued and
available to such Borrower or Guarantor, so long as during such appeal or
contest, such Borrower or Guarantor may continue to receive the benefit of, and
operate pursuant to, such Permit) except where the failure to have such a Permit
does not or could not reasonably be expected to result in a Material Adverse
Effect.
1.128 "Reserves" shall mean as of any date of determination, such
amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans which would otherwise be available to
Borrower under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks which, as determined by Lender in
good faith, adversely affect, or would have a reasonable likelihood of adversely
affecting, either (i) the Collateral or any other property which is security for
the Obligations, or the amount that might be received by Lender from the sale or
other disposition or realization upon such Collateral, or (ii) the assets or
business of Borrower or any Guarantor or (iii) the security interests and other
rights of Lender in the Collateral (including the enforceability, perfection and
priority thereof) or (b) to reflect Lender's good faith belief that any
collateral report or financial information furnished by or on behalf of Borrower
or any Guarantor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect, or (c) in respect of any state of facts
which Lender determines in good faith constitutes a Default or an
37
Event of Default. Without limiting the generality of the foregoing, Reserves
may, at Lender's option, be established to reflect: (i) dilution with respect to
the Accounts (based on the ratio of the aggregate amount of non-cash reductions
in Accounts for any period to the aggregate dollar amount of the sales of such
Borrower for such period) as calculated by Lender for any period is or is
reasonably anticipated to be greater than five (5%) percent; (ii) returns,
discounts, claims, credits and allowances of any nature that are not paid
pursuant to the reduction of Accounts; (iii) upon the occurrence of a Default or
an Event of Default past due amounts to owners and lessors of premises where any
Collateral is located and, in the case of the principal executive office
locations of Borrower and each Guarantor for which Lender has not received a
Collateral Access Agreement, Lender may establish a reserve with respect to each
such location in an amount equal to up to two (2)months rent; provided, that, no
such reserve shall be established earlier than ninety (90) days after (x) the
date hereof, in respect of Borrower's current principal executive office and (y)
Borrower or such Guarantor, enters into a lease with respect to any new
principal executive office; and (iv) a change in the average monthly churn rate
for business class customers over any trailing twelve (12) month period to more
than two (2%) percent, provided, that, the amount of such Reserve, if the
increase in the churn rate is more than two (2%) percent but less than or equal
to three (3%) percent, shall not exceed ten (10)% of the value of Eligible
Accounts, provided, that, Lender may establish additional Reserves in amounts to
be determined by Lender if such churn rate increases during such period by to an
amount in excess of three (3%) percent. To the extent that Lender may revise the
lending formula used to determine the Borrowing Base or establish new criteria
or revise existing criteria for Eligible Accounts so as to address any
circumstances, condition or event or contingency in a manner satisfactory to
Lender, Lender shall not establish a Reserve for the same purpose. The amount of
any Reserve established by Lender shall have a reasonable relationship to the
event, condition or other matter which is the basis for such reserve as
determined by Lender in good faith and to the extent that such Reserve
established in respect of past due amounts that are payable to third parties
(including amounts past due to taxing authorities or any other Governmental
Authority) pursuant to clause (iii) of the immediately preceding sentence,
Lender may, at its option, deduct the amount of such Reserve from the Maximum
Credit, at any time that such limit is less than the amount of the Borrowing
Base. In establishing a Reserve, Lender shall act as asset based lenders
similarly situated would act, with similar rights and providing a credit
facility of the type and with the Collateral and information then available to
it set forth herein, would act in such circumstances.
1.129 "Responsible Officer" shall mean the chief executive officer, the
chief financial officer, general counsel and treasurer of Borrower.
1.130 "Restricted Subsidiary" of any Person means any Subsidiary of
such Person that at the time of determination is not an Unrestricted Subsidiary.
1.131 "Revolving Loans" shall mean the loans now or hereafter made by
or on behalf of Lender for the account of Borrower on a revolving basis
(involving advances, repayments and readvances) as set forth in Section 2.1
hereof.
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1.132 "Secured Indebtedness Measurement Period" has the meaning set
forth in the definition of Secured Indebtedness Determination Date.
1.133 "Secured Indebtedness to Cash Flow Ratio" means the ratio of (i)
the Consolidated Total Indebtedness as of the date of calculation (the "Secured
Indebtedness Determination Date") that is secured by a Lien on any assets of
such Person or its Subsidiaries to (ii) the Consolidated Cash Flow for the four
full consecutive fiscal quarters immediately preceding such Secured Indebtedness
Determination Date for which financial information is available (the "Secured
Indebtedness Measurement Period"). For purposes of determining the amount of
Indebtedness of Borrower and its Restricted Subsidiaries as of any date of
determination, the total committed amounts under all revolving Credit Facilities
will be deemed to be outstanding as of such Secured Indebtedness Determination
Date. In addition, for purposes of calculating Consolidated Cash Flow for the
Secured Indebtedness Measurement Period ending immediately prior to the relevant
Secured Indebtedness Determination Date:
(a) any Person that is a Restricted Subsidiary on the Secured
Indebtedness Determination Date (or would become a Restricted Subsidiary on such
Secured Indebtedness Determination Date in connection with the transaction that
requires the determination of such Consolidated Cash Flow) will be deemed to
have been a Restricted Subsidiary at all times during such Secured Indebtedness
Measurement Period;
(b) any Person that is not a Restricted Subsidiary on such
Secured Indebtedness Determination Date (or would cease to be a Restricted
Subsidiary on such Secured Indebtedness Determination Date in connection with
the transaction that requires the determination of such Consolidated Cash Flow)
will be deemed not to have been a Restricted Subsidiary at any time during such
Secured Indebtedness Measurement Period; and
(c) if since the beginning of the Secured Indebtedness
Measurement Period, Borrower, any Restricted Subsidiary or any Person that
subsequently became a Restricted Subsidiary or was merged with or into Borrower
or any Restricted Subsidiary since the beginning of the Secured Indebtedness
Measurement Period shall have in any manner (x) acquired (including through an
Asset Acquisition or the commencement of activities constituting such operating
business) or (y) disposed of (including by way of an Asset Sale or the
termination or discontinuance of activities constituting such operating
business) any operating business in each case during such Secured Indebtedness
Measurement Period or after the end of such period and on or prior to such
Secured Indebtedness Determination Date, such calculation will be made on a pro
forma basis in accordance with GAAP and giving effect to any increase or
reduction of any associated Consolidated Cash Flow attributable thereto
(including any pro forma adjustments (including cost-savings adjustments)
calculated on a basis consistent with Regulation S-X under the Securities Act),
as if, in the case of an Asset Acquisition or the commencement of activities
constituting such operating business, all such transactions had been consummated
on the first day of such Secured Indebtedness Measurement Period and, in the
case of an Asset Sale or termination or discontinuance of activities
constituting such operating
39
business, all such transactions had been consummated prior to the first day of
such Secured Indebtedness Measurement Period.
1.134 "Scheduled Termination Date" shall have the meaning set forth in
Section 12.1 hereof.
1.135 "Secured Indebtedness Determination Date" has the meaning set
fort in the definition of Secured Indebtedness to Cash Flow Ratio.
1.136 "Securities Accounts" shall mean, collectively, with respect to
Borrower and each Guarantor, all "securities accounts" as such term is defined
in the UCC other than any Excluded Accounts.
1.137 "Securities Collateral" shall mean, collectively, the Pledged
Securities, the Intercompany Notes and the Distributions.
1.138 "Senior Secured Note Indenture" shall mean the Indenture, dated
September 30, 2004, by and among Borrower, Guarantors, as Guarantors and Senior
Secured Note Trustee, as trustee, with respect to the Senior Secured Notes, as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.139 "Senior Secured Note Documents shall mean, collectively, the
Senior Secured Note Indenture, the Senior Secured Notes and the documents listed
on Schedule 1.139 hereto, as the same now exist or may hereafter be amended
modified, supplemented, extended, renewed restated or replaced.
1.140 "Senior Secured Notes" shall mean, collectively, the Senior
Secured Notes due 2009 and the related guarantees issued by Borrower or the
Guarantor, respectively, pursuant to the Senior Secured Note Indenture in the
original aggregate principal amount of $150,000,000, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated,
refinanced or replaced.
1.141 "Senior Secured Note Trustee" shall mean US Bank, National
Association, as trustee under the Senior Secured Note Indenture and any
successor, replacement or additional trustee and their respective successors and
assigns.
1.142 "Senior Secured Note Permitted Credit Facility" means the term
"Credit Facility" as set forth in the Senior Secured Note Indenture as in effect
on the date hereof.
1.143 "Solvent" shall mean, at any time with respect to any Person,
that at such time such Person (a) is able to pay its debts as they mature and
has (and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business consistent
with its practices as of the date hereof, and (b) the assets and properties
(whether recorded or unrecorded) of such Person at a fair valuation (and
including as assets for
40
this purpose at a fair valuation all rights of subrogation, contribution or
indemnification arising pursuant to any guarantees given by such Person) are
greater than the Indebtedness of such Person, and including subordinated and
contingent liabilities computed at the amount which, such person has a
reasonable basis to believe, represents an amount which can reasonably be
expected to become an actual or matured liability (and including as to
contingent liabilities arising pursuant to any guarantee the face amount of such
liability as reduced to reflect the probability of it becoming a matured
liability).
1.144 "Special Property shall mean:
(a) any personal property or other asset in respect of which
perfection of a lien is not either: (i) governed by the UCC or (ii) effected by
appropriate evidence of the Lien being filed in either the United States
Copyright Office or the United States Patent and Trademark Office;
(b) any personal property or other asset that is subject to a
Lien securing a Purchase Money Obligation or a Capitalized Lease Obligation
permitted under the Indenture if the contract or other agreement in which such
Lien is granted (or the documentation providing for such obligation) prohibits
the creation of a lien on such personal property or other assets;
(c) any permit, lease, license, contract or instrument now or
hereafter held or owned by any pledgor if the grant of a security interest in
such, permit, lease, license, contract or instrument, under the terms thereof or
under any applicable legal requirement, (i) is prohibited and would result in
the termination thereof or give other parties the right to terminate such
permit, lease, license, contract or instrument or accelerate such pledgor's
obligations thereunder or would result in a default thereunder that otherwise
materially and adversely alter such pledgor's rights, titles and interests
thereunder (including upon the giving of notice or the lapse of time or both) or
(ii) would require the consent of any Person, other than any pledgor; and
(d) Excluded Accounts;
provided, however, that, in each case described in clauses (a), (b), (c) and (d)
of this definition, such property shall constitute "Special Property" only to
the extent and for so long as such permit lease, license contract, instrument or
other agreement or legal requirement applicable to such property validly
prohibits the creation of a Lien on such property in favor of the Lender and,
upon the termination of such prohibition (howsoever occurring), such property
shall case to constitute "Special Property."
1.145 "Subordinated Indebtedness" means Indebtedness of Borrower or any
Guarantor that is subordinated in right of payment to the Obligations, pursuant
to a written agreement, in form and substance satisfactory to the Lender,
between the holder of such Indebtedness and the Lender.
1.146 "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any
41
corporation, limited liability company, limited liability partnership or other
limited or general partnership, trust, association or other business entity of
which an aggregate of at least a majority of the outstanding Capital Stock or
other interests entitled to vote in the election of the board of directors of
such corporation (irrespective of whether, at the time, Capital Stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency), managers, trustees or other
controlling persons, or an equivalent controlling interest therein, of such
Person is, at the time, directly or indirectly, owned by such Person and/or one
or more subsidiaries of such Person.
1.147 "Successor Interests" shall mean, collectively, with respect to
Borrower and each Guarantor, all shares of each class of the capital stock of
the successor corporation or interests or certificates of the successor limited
liability company, partnership or other entity owned by Borrower or such
Guarantor (unless such successor is such Person itself) formed by or resulting
from any consolidation or merger in which any person listed in Schedule 1.147
annexed hereto is not the surviving entity; provided, however, that to the
extent applicable, Successor Interest shall not include (a) more than 65% of any
series of the outstanding capital stock of any Foreign Subsidiary or (b) any of
the capital stock of a Subsidiary of a Foreign Subsidiary.
1.148 "Telecommunication Assets" shall mean, with respect to any
Person, Equipment and other properties or assets (whether tangible or
intangible) used in the telecommunications business, including, without
limitation, fiber optic cable, in-building wiring, metro fiber, long haul fiber,
switches, innerducts, fiber conduits, in-building wiring, rights-of-way, rights
with respect to indefeasible rights of use (which is the right to use a
telecommunications system, usually an underground cable, with most of the rights
and duties of ownership, but without the right to control or manage the facility
and depending upon the particular agreement, without any right to salvage or
duty to dispose of the system's cable at the end of its useful life), minimum
assignable ownership units (which is capacity on a telecommunications system,
usually an underground fiber optic cable, acquired on an ownership basis) or
minimum investment units (or similar interests) in fiber optic cable and
international or domestic telecommunications switches or other transmission
facilities, including monitoring and related administrative support facilities
(or Capital Stock of a Person that becomes a Subsidiary, the assets of which
consist primarily of any such Telecommunications Assets), in each case
purchased, or acquired through a Capital Lease, by Borrower.
1.149 "Trademarks" shall mean, collectively, with respect to Borrower
and each Guarantor, all trademarks (including service marks), slogans, logos,
certification marks, trade dress, uniform resource locations (URL's), domain
names, corporate names and trade names, whether registered or unregistered,
owned by or assigned to Borrower or such Guarantor and all registrations and
applications for the foregoing (whether statutory or common law and whether
established or registered in the United States or any other country or any
political subdivision thereof), together with any and all (i) rights and
privileges arising under applicable law with respect to Borrower's or such
Guarantor's use of any trademarks and (ii) reissues, continuations, extensions
and renewals thereof.
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1.150 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of North Carolina, and any successor statute, as in effect from time to
time (except that terms used herein which are defined in the Uniform Commercial
Code as in effect in the State of North Carolina on the date hereof shall
continue to have the same meaning notwithstanding any replacement or amendment
of such statute except as Lender may otherwise determine).
1.151 "Unrestricted Subsidiary" of any Person means:
(a) any Subsidiary of such Person that at the time of
determination shall be or continue to be designated an Unrestricted Subsidiary
by the Board of Directors of such Person in the manner provided below; and
(b) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, Borrower or any other Subsidiary of Borrower that is not a
Subsidiary of the Subsidiary to be so designated; provided, that:
(i) Borrower certifies to Lender that such
designation complies with Section 9.11 hereof; and
(ii) each Subsidiary to be so designated and each of
its Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of Borrower or any of its Restricted
Subsidiaries.
For purposes of making the determination of whether any such designation of a
Subsidiary as an Unrestricted Subsidiary complies with Section 9.11 hereof, the
portion of the fair market value of the net assets of such Subsidiary of
Borrower at the time that such Subsidiary is designated as an Unrestricted
Subsidiary that is represented by the interest of Borrower and its Restricted
Subsidiaries in such Subsidiary, in each case as determined in good faith by the
Board of Directors of Borrower, or, if less, the amount of the value of the
Investment in such Subsidiary when made, shall be deemed to be an Investment.
Such designation will be permitted only if such Investment would be permitted at
such time under the covenant described under Section 9.11 hereof. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if:
(A) immediately after giving effect to such
designation, Borrower is able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 9.9(a) hereof; and
43
(B) immediately before and immediately after
giving effect to such designation, no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to Lender by promptly filing with Lender a copy of the Board
Resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
1.152 "Voting Stock" shall mean with respect to any Person, (a) one (1)
or more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
1.153 "Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
1.154 "Wholly Owned Subsidiary" of any Person means any Subsidiary of
such Person of which all the outstanding capital stock (other than in the case
of a foreign Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) is
owned by such Person or any Wholly Owned Subsidiary of such Person.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower up to the aggregate amount outstanding at any one
time equal to the lesser of: (i) the Borrowing Base at such time or (ii) the
Maximum Credit.
(b) Except in Lender's discretion or as otherwise provided
herein, (i) the aggregate principal amount of the Revolving Loans outstanding at
any time to Borrower shall not exceed the lesser of the Borrowing Base or the
Maximum Credit, and (ii) the aggregate principal amount of outstanding Revolving
Loans at any time when taken together with the aggregate amount of all
outstanding Capitalized Lease Obligations, Purchase Money Obligations and other
Senior Secured Note Permitted Credit Facilities shall not exceed $10,000,000 (or
such greater amount as may be agreed to by Borrower, Guarantors and Senior
Secured Note Trustee, after the
44
date hereof pursuant to an amendment (in form and substance satisfactory to
Lender) to the Senior Secured Note Documents).
(c) In the event that (i) the aggregate amount of the
Revolving Loans outstanding at any time exceed the lesser of the Borrowing Base
or the Maximum Credit, or (ii) the aggregate amount of outstanding Revolving
Loans at any time when taken together with the aggregate amount of all
outstanding Capitalized Lease Obligations, Purchase Money Obligations and Senior
Secured Note Permitted Credit Facilities exceeds $10,000,000 (or such greater
amount as may be agreed to by Borrower, Guarantors and Senior Secured Note
Trustee, after the date hereof pursuant to an amendment (in form and substance
satisfactory to Lender) to the Senior Secured Note Documents) such event shall
not limit, waive or otherwise affect any rights of Lender in such circumstances
or on any future occasions and Borrower shall, upon demand by Lender, which may
be made at any time or from time to time, immediately repay to Lender the entire
amount of any such excess(es) for which payment is demanded.
2.2 Increase of the Facility Maximum Credit. Borrower may, at any time,
after the date hereof, deliver a request to Lender to increase the Facility
Maximum Credit by an amount up to $10,000,000 (the "Facility Increase"):
provided, that, only one Facility Increase may be effected pursuant to this
Section 2.2. Such increase in the Facility Maximum Credit shall be effective or
the first Business Day on which all of the conditions precedent set forth in
clauses (a) through (e) below shall have been satisfied or waived by Lender (the
"Facility Increase Effective Date"):
(a) Borrower shall have given Lender at least 30 days prior
written notice of its intention to effect the Facility Increase, after it has
received the necessary governmental approvals in respect of such Facility
Increase and the liens on Collateral granted in favor of Lenders pursuant to the
terms of the Financing Agreements;
(b) Borrower and its Subsidiaries, on a consolidated basis,
shall have maintained, when measured as of the fiscal quarter most recently
ended for which Lender has received financial statements in accordance with
Section 9.6(a)(i) hereof, for the four (4) immediately preceding consecutive
fiscal quarters then ended, Consolidated Cash Flow of not less than $40,000,000;
(c) the conditions precedent to a Borrowing set forth in
Section 4.2 hereof shall be satisfied as of the Facility Increase Effective Date
for such Facility Increase, both before and after giving effect to such Facility
Increase;
(d) Lender shall have received (i) evidence, in form and
substance satisfactory to Lender, that the Senior Secured Note Indenture permits
such an increase in the Maximum Credit and that after giving effect to such
Facility Increase, this Agreement shall continue to be a "Credit Facility" for
all purposes under the Senior Secured Note Indenture (including clause (ii) of
the definition of Permitted Indebtedness set forth therein), and that the Senior
Secured Note Indenture's limitations on the amount of secured debt permitted to
be outstanding in respect of
45
Credit Facilities (as such term is defined in the Senior Secured Note
Indenture), Purchase Money Obligations and Capitalized Lease Obligations shall
be increased so as to specifically permit this Credit Facility after giving
effect to the Facility Increase plus an amount equal to or greater than the
amount of Purchase Money Obligations and Capitalized Lease Obligations
outstanding on the Facility Increase Effective Date, and (ii) an amendment to
the Intercreditor Agreement , in form and substance satisfactory to Lender,
increasing the "Maximum Amount" (as such term is defined in the Intercreditor
Agreement) to $20,000,000 (or such lesser amount, as the case may be, after
giving effect to the Facility Increase) duly executed and delivered by the
Senior Secured Note Trustee.
(e) Lender shall have received an opinion of counsel to the
Borrower and Guarantors in form and substance and from counsel reasonably
satisfactory to Lender and addressed to Lender, which opinions shall include
opinions that (i) the security interests and Liens in the Collateral granted by
Borrower and Guarantors pursuant to the Financing Agreements validly and in
accordance with law secure the increase in the Facility Maximum Credit to
$20,000,000, and (ii) that such increase in the Facility Maximum Credit and the
making of Revolving Loans to Borrower up to such amount is (A) not in
contravention of law or any indenture (including without limitation the Senior
Secured Note Indenture), agreement or undertaking to which Borrower or any
Guarantor is a party or by which Borrower or any Guarantor or its property are
bound and (B) will not result in the creation or imposition of, or require or
give rise to any obligation to grant, any lien, security interest, charge or
other encumbrance upon any property of Borrower or any Guarantor whether
pursuant to the Senior Secured Note Indenture or otherwise.
(f) the effectiveness of such Facility Increase on such
Facility Increase Effective Date shall not violate any Requirement of Law and
shall not be enjoined, temporarily, preliminarily or permanently; and
(g) there shall have been paid to Lender all fees and expenses
due and payable to such Person by Borrower and Guarantors on or before the
Facility Increase Effective Date, including without limitation a closing fee in
the amount equal to one (1%) of the amount of any increase in the Facility
Maximum Credit.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the Revolving Loans at the Interest Rate. All interest
accruing hereunder on and after the date of any Event of Default or termination
hereof shall be payable on demand.
(b) Borrower may from time to time request Eurodollar Rate
Loans or may request that Prime Rate Loans be converted to Eurodollar Rate Loans
or that any existing Eurodollar Rate Loans continue for an additional Interest
Period. Such request from a Borrower
46
shall specify the amount of the Eurodollar Rate Loans or the amount of the Prime
Rate Loans to be converted to Eurodollar Rate Loans or the amount of the
Eurodollar Rate Loans to be continued (subject to the limits set forth below)
and the Interest Period to be applicable to such Eurodollar Rate Loans. Subject
to the terms and conditions contained herein, three (3) Business Days after
receipt by Lender of such a request from a Borrower, such Eurodollar Rate Loans
shall be made or Prime Rate Loans shall be converted to Eurodollar Rate Loans or
such Eurodollar Rate Loans shall continue, as the case may be, provided, that,
(i) no Default or Event of Default shall exist or have occurred and be
continuing, (ii) no party hereto shall have sent any notice of termination of
this Agreement, (iii) such Borrower shall have complied with such customary
procedures as are established by Lender and specified by Lender to Borrower from
time to time for requests by Borrower for Eurodollar Rate Loans, (iv) no more
than six (6) Interest Periods may be in effect at any one time, (v) the
aggregate amount of the Eurodollar Rate Loans must be in an amount not less than
$1,000,000 or an integral multiple of $250,000 in excess thereof, and (vi) the
maximum amount of the Eurodollar Rate Loans in the aggregate at any time
requested by Borrower shall not exceed the amount equal to the lowest principal
amount of the Revolving Loans which it is anticipated will be outstanding during
the applicable Interest Period, in each case as determined by Lender in good
faith (but with no obligation of Lender to make such Loans). Any request by or
on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans
to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall
be irrevocable. Notwithstanding anything to the contrary contained herein,
Lender shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Lender had purchased such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate Loan
at least two (2) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower, be subsequently converted to Prime Rate Loans in the
event that this Agreement shall terminate or not be renewed. Borrower shall pay
to Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrower) any amounts required to compensate Lender or any
Participant for any loss (including loss of anticipated profits), cost or
expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Lender (i) in
respect of Prime Rate Loans, monthly in arrears not later than the first
business day of each calendar month, and (ii) in respect of Eurodollar Rate
Loans, in respect of which Borrower has selected an Interest Period of one, two,
three or six months, the last day of such Interest Period, and in the case of
any Interest Period of six months, the last day of an Interest Period, then at
the request of Lender, on the corresponding date of the third month of the
Interest Period, and shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed. The
47
interest rate on non-contingent Obligations (other than Eurodollar Rate Loans)
shall increase or decrease by an amount equal to each increase or decrease in
the Prime Rate effective on the day of any change in such Prime Rate is
announced. In no event shall charges constituting interest payable by Borrower
to Lender exceed the maximum amount or the rate permitted under any applicable
law or regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee in an
amount equal to one (1%) percent of the Facility Maximum Credit, which shall be
fully earned and payable as of the date hereof.
3.3 Unused Line Fee. Borrower shall pay to Lender quarterly an unused
line fee at a rate equal to three-quarters of one (.75%) percent per annum
calculated upon the amount by which the Facility Maximum Credit exceeds the
average daily principal balance of the outstanding Revolving Loans during the
immediately preceding calendar quarter (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first business day of each calendar quarter in
arrears.
3.4 Changes in Laws and Increased Costs of Revolving Loans.
(a) If after the date hereof, either (i) any change in, or in
the interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to Lender or any
banking or financial institution from whom Lender borrows funds or obtains
credit (a "Funding Bank"), or (ii) a Funding Bank or Lender complies with any
future guideline or directive from any central bank or other Governmental
Authority or (iii) a Funding Bank or Lender determines that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or a Funding Bank or Lender complies with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, and in the case of any event set
forth in this clause (iii), such adoption, change or compliance has or would
have the direct or indirect effect of reducing the rate of return on Lender's
capital as a consequence of its obligations hereunder to a level below that
which Lender could have achieved but for such adoption, change or compliance
(taking into consideration the Funding Bank's or Lender's policies with respect
to capital adequacy) by an amount deemed by Lender to be material, and the
result of any of the foregoing events described in clauses (i), (ii) or (iii) is
or results in an increase in the cost to Lender of funding or maintaining the
Revolving Loans, then Borrower and Guarantors shall from time to time upon
demand by Lender pay to Lender additional amounts sufficient to indemnify Lender
against such increased cost on an after-tax basis (after taking into account
applicable deductions and credits in
48
respect of the amount indemnified). A certificate as to the amount of such
increased cost shall be submitted to Administrative Borrower by Lender and shall
be conclusive, absent manifest error.
(b) If prior to the first day of any Interest Period, (i)
Lender shall have determined in good faith (which determination shall be
conclusive and binding upon Borrower and Guarantors) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Adjusted Eurodollar Rate for such Interest
Period, (ii) Lender determines that the Adjusted Eurodollar Rate determined or
to be determined for such Interest Period will not adequately and fairly reflect
the cost to Lender of making or maintaining Eurodollar Rate Loans during such
Interest Period, or (iii) Dollar deposits in the principal amounts of the
Eurodollar Rate Loans to which such Interest Period is to be applicable are not
generally available in the London interbank market, Lender shall give telecopy
or telephonic notice thereof to Borrower as soon as practicable thereafter, and
will also give prompt written notice to Borrower when such conditions no longer
exist. If such notice is given (A) any Eurodollar Rate Loans requested to be
made on the first day of such Interest Period shall be made as Prime Rate Loans,
(B) any Revolving Loans that were to have been converted on the first day of
such Interest Period to or continued as Eurodollar Rate Loans shall be converted
to or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate
Loan shall be converted, on the last day of the then-current Interest Period
thereof, to Prime Rate Loans. Until such notice has been withdrawn by Lender, no
further Eurodollar Rate Loans shall be made or continued as such, nor shall
Borrower have the right to convert Prime Rate Loans to Eurodollar Rate Loans.
(c) Notwithstanding any other provision herein, if the
adoption of or any change in any law, treaty, rule or regulation or final,
non-appealable determination of an arbitrator or a court or other Governmental
Authority or in the interpretation or application thereof occurring after the
date hereof shall make it unlawful for Lender to make or maintain Eurodollar
Rate Loans as contemplated by this Agreement, (i) Lender shall promptly give
written notice of such circumstances to Borrower (which notice shall be
withdrawn whenever such circumstances no longer exist), (ii) the commitment of
Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans
as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be
canceled and, until such time as it shall no longer be unlawful for Lender to
make or maintain Eurodollar Rate Loans, Lender shall then have a commitment only
to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii)
Revolving Loans then outstanding as Eurodollar Rate Loans, if any, shall be
converted automatically to Prime Rate Loans on the respective last days of the
then current Interest Periods with respect to such Revolving Loans or within
such earlier period as required by law. If any such conversion of a Eurodollar
Rate Loan occurs on a day which is not the last day of the then current Interest
Period with respect thereto, Borrower and Guarantors shall pay to such Lender
such amounts, if any, as may be required pursuant to Section 3.3(d) below.
(d) Borrower and Guarantors shall indemnify Lender and hold
Lender harmless from any loss or expense which Lender may sustain or incur as a
consequence of (i)
49
default by Borrower in making a borrowing of, conversion into or extension of
Eurodollar Rate Loans after such Borrower has given a notice requesting the same
in accordance with the provisions of this Agreement, (ii) default by Borrower in
making any prepayment of a Eurodollar Rate Loan after Borrower has given a
notice thereof in accordance with the provisions of this Agreement, and (iii)
the making of a prepayment of Eurodollar Rate Loans on a day which is not the
last day of an Interest Period with respect thereto. With respect to Eurodollar
Rate Loans, such indemnification may include an amount equal to the excess, if
any, of (A) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, converted or extended, for the period from the date
of such prepayment or of such failure to borrow, convert or extend to the last
day of the applicable Interest Period (or, in the case of a failure to borrow,
convert or extend, the Interest Period that would have commenced on the date of
such failure) in each case at the applicable rate of interest for such
Eurodollar Rate Loans provided for herein over (B) the amount of interest (as
determined by such Lender) which would have accrued to Lender on such amount by
placing such amount on deposit for a comparable period with leading banks in the
interbank Eurodollar market. This covenant shall survive the termination or
non-renewal of this Agreement and the payment of the Obligations.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Revolving Loans. The obligation of
Lender to make the initial Revolving Loans is subject to the satisfaction of, or
waiver of, immediately prior to or concurrently with the making of such
Revolving Loan of each of the following conditions precedent:
(a) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or Governmental Authority (and
including a copy of the certificate of incorporation of Borrower and each
Guarantor certified by the Secretary of State (or equivalent Governmental
Authority) which shall set forth the same complete corporate name of Borrower or
such Guarantor as is set forth herein and such document as shall set forth the
organizational identification number of each Borrower or Guarantor, if one is
issued in its jurisdiction of incorporation);
(b) no Material Adverse Effect shall have occurred since the
date of Lender's latest field examination (not including for this purpose the
field review referred to in clause (c) below);
(c) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Revolving Loans available to Borrower (including,
without limitation, roll-forwards of Accounts through the date of closing,
together with such supporting documentation as may be necessary or
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appropriate, and other documents and information that will enable Lender to
accurately identify and verify the Collateral), the results of which each case
shall be satisfactory to Lender, not more than ten (10) Business Days prior to
the date hereof or such earlier date as Lender may agree;
(d) Lender shall have received, in form and substance
reasonably satisfactory to Lender, all consents, waivers, acknowledgments and
other agreements from third persons which Lender may deem necessary or desirable
in order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including, without limitation, the Collateral
Access Agreement if obtained by the Borrower using commercially reasonable
efforts;
(e) the Excess Availability as determined by Lender, as of the
date hereof, shall be not less than $20,000,000 after giving effect to the
initial Revolving Loans made or to be made in connection with the initial
transactions hereunder;
(f) Lender shall have received, in form and substance
reasonably satisfactory to Lender, Deposit Account Control Agreements by and
among Lender, Borrower and each Guarantor, as the case may be and each bank
where such Borrower (or Guarantor) has a deposit account (other than an Excluded
Account), in each case, duly authorized, executed and delivered by such bank and
Borrower or Guarantor, as the case may be (or Lender shall be the bank's
customer with respect to such deposit account as Lender may specify);
(g) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral;
(h) Lender shall have received and reviewed lien and judgment
search results for the jurisdiction of organization of Borrower and each
Guarantor, the jurisdiction of the chief executive office of Borrower and each
Guarantor and all jurisdictions in which assets of Borrower and Guarantors are
located, which search results shall be in form and substance satisfactory to
Lender;
(i) A certificate of a Responsible Officer setting forth, in
form and substance, satisfactory to Lender, among other things, a calculation of
the outstanding Capitalized Lease Obligations and Purchase Money Obligations on
the date of this Agreement and stating that other than the credit facility
evidenced by this Agreement, Borrower, Guarantors and other Restricted
Subsidiaries of Borrower are not parties to any other Senior Secured Note
Permitted Credit Facilities;
(j) Lender shall have received, in form and substance
reasonably satisfactory to Lender in good faith, true, correct and complete copy
of the Senior Secured Note Indenture, duly authorized, executed and delivered by
the parties thereto;
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(k) Lender shall have received, in form and substance
reasonably satisfactory to Lender in good faith, the Intercreditor Agreement,
duly authorized, executed and delivered by each of the parties thereto;
(l) Lender shall have received evidence that the originals of
the shares of the stock certificates representing all of the issued and
outstanding shares of the Capital Stock of each Guarantor and owned by Borrower
or any Guarantor, in each case together with stock powers duly executed in blank
with respect thereto are in the possession of the Senior Secured Note Trustee;
(m) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(n) Lender shall have received evidence, in form and substance
satisfactory to Lender, that all governmental approvals necessary to permit
Borrower and Guarantors to grant Liens in favor of Lender on the Collateral have
been obtained;
(o) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower and
Guarantors with respect to the Financing Agreements and such other matters as
Lender may request; and
(p) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Revolving Loans. The obligation of
Lender to make the Revolving Loans, including the initial Revolving Loans is
subject to the further satisfaction of, or waiver of, immediately prior to or
concurrently with the making of each such Revolving Loan of each of the
following conditions precedent:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct with the same effect as
though such representations and warranties had been made on and as of the date
of the making of each such Revolving Loan and after giving effect thereto,
except to the extent that such representations and warranties expressly relate
solely to an earlier date (in which case such representations and warranties
shall have been true and accurate on and as of such earlier date);
(b) At any time during which the limitations with respect to
secured indebtedness and limitation on liens set forth in the Senior Secured
Note Indenture remain in effect, Borrower shall, together with any request for a
Revolving Loan, deliver a certificate of a Responsible Officer to Lender stating
that prior to and after giving effect to the making of such Revolving Loan, the
aggregate amount of outstanding Revolving Loans, Capitalized Lease
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Obligations and Purchase Money Obligations shall not exceed $10,000,000 (or such
greater amount as may be agreed to by Borrower, Guarantors and Senior Secured
Note Trustee, after the date hereof pursuant to an amendment (in form and
substance satisfactory to Lender) to the Senior Secured Note Documents) and
setting forth the calculations with respect thereto;
(c) Lender shall received a completed Notice of Borrowing in
the form of Exhibit C hereto duly executed by an Authorized Officer (each a
"Notice of Borrowing"); and
(d) no Default or Event of Default shall exist or have
occurred and be continuing on and as of the date of the making of such Revolving
Loan and after giving effect thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security ▇▇▇▇▇▇▇▇.▇▇ collateral security for the payment
and performance in full of all the Obligations, the Borrower and each Guarantor
hereby pledges and grants to the Lender for its benefit, a lien on and security
interest in and to all of the right, title and interest of the Borrower and each
Guarantor in, to and under the following property, wherever located, whether now
existing or hereafter arising or acquired from time to time (collectively, the
"Collateral"):
(a) all Accounts;
(b) all Equipment, Goods, Inventory and Fixtures;
(c) all Documents, Instruments and Chattel Paper;
(d) all Letters of Credit and Letter-of-Credit Rights;
(e) all Securities Collateral;
(f) all Collateral Accounts;
(g) all Investment Property;
(h) all Intellectual Property;
(i) the Commercial Tort Claims described in the Information
Certificate;
(j) all General Intangibles;
(k) all Deposit Accounts;
(l) all Supporting Obligations;
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(m) Records relating to the Collateral; and
(n) to the extent not covered by clauses (a) through (m) of
this sentence, all other personal property of Borrower and each Guarantor,
whether tangible or intangible and all Proceeds and products of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of, each of the foregoing, any and all Proceeds of any
insurance, indemnity, warranty or guaranty payable to Borrower or such Guarantor
from time to time with respect to any of the foregoing.
Notwithstanding anything to the contrary contained in clauses (a)
through (n) above, the security interest created by this Agreement shall not
extend to, and the term "Collateral" shall not include, any Excluded Property or
any property that does not constitute Pledged Collateral for purposes of the
Senior Secured Note Indenture. From and after the Closing Date, neither the
Borrower nor any Guarantor shall permit to become effective in any document
creating, governing or providing for any permit, lease or license, a provision
that would prohibit the creation of a Lien on such permit, lease or license in
favor of the Lender unless the Borrower or such Guarantor believes, in its
reasonable judgment, that such prohibition is usual and customary in
transactions of such type.
5.2 Perfection of Security Interests.
(a) Borrower and each Guarantor irrevocably and
unconditionally authorizes Lender (or its agent) to file at any time and from
time to time such financing statements with respect to the Collateral naming
Lender or its designee as the secured party and Borrower or such Guarantor as
debtor, as Lender may require, and including any other information with respect
to Borrower or such Guarantor or otherwise required by part 5 of Article 9 of
the Uniform Commercial Code of such jurisdiction as Lender may determine,
together with any amendment and continuations with respect thereto, which
authorization shall apply to all financing statements filed on, prior to or
after the date hereof. Borrower and each Guarantor hereby ratifies and approves
all financing statements naming Lender or its designee as secured party and
Borrower or such Guarantor, as the case may be, as debtor with respect to the
Collateral (and any amendments with respect to such financing statements) filed
by or on behalf of Lender prior to the date hereof and ratifies and confirms the
authorization of Lender to file such financing statements (and amendments, if
any). Borrower and each Guarantor hereby authorizes Lender to adopt on behalf of
Borrower and such Guarantor any symbol required for authenticating any
electronic filing. In the event that the description of the collateral in any
financing statement naming Lender or its designee as the secured party and
Borrower or any Guarantor as debtor includes assets and properties of Borrower
or such Guarantor that do not at any time constitute Collateral, whether
hereunder, under any of the other Financing Agreements or otherwise, the filing
of such financing statement shall nonetheless be deemed authorized by Borrower
or such Guarantor to the extent of the Collateral included in such description
and it shall not render the financing statement ineffective as to any of the
Collateral or otherwise affect the financing statement as it applies to any of
the Collateral. In no event shall Borrower or any Guarantor at any time file, or
permit or cause to be filed, any correction statement or termination statement
54
with respect to any financing statement (or amendment or continuation with
respect thereto) naming Lender or its designee as secured party and Borrower or
such Guarantor as debtor.
(b) Borrower and each Guarantor does not have any chattel
paper (whether tangible or electronic) or instruments as of the date hereof,
except as set forth in the Information Certificate. In the event that Borrower
or any Guarantor shall be entitled to or shall receive any chattel paper or
instrument after the date hereof in excess of $250,000 (whether singly or in the
aggregate and taken together with the electronic chattel paper and transferable
records described in clause (c) below), Borrower and Guarantors shall promptly
notify Lender thereof in writing. Promptly upon the receipt thereof by or on
behalf of Borrower or any Guarantor (including by any agent or representative),
Borrower or such Guarantor shall deliver, or cause to be delivered to Lender,
all tangible chattel paper and instruments that Borrower or such Guarantor has
or may at any time acquire, accompanied by such instruments of transfer or
assignment duly executed in blank as Lender may from time to time specify, in
each case except as Lender may otherwise agree. At Lender's option, Borrower and
each Guarantor shall, or Lender may at any time on behalf of Borrower or any
Guarantor, cause the original of any such instrument or chattel paper to be
conspicuously marked in a form and manner acceptable to Lender with the
following legend referring to chattel paper or instruments as applicable: "This
[chattel paper][instrument] is subject to the security interest of Wachovia
Bank, National Association and any sale, transfer, assignment or encumbrance of
this [chattel paper][instrument] violates the rights of such secured party."
(c) In the event that Borrower or any Guarantor shall at any
time hold or acquire an interest in any electronic chattel paper or any
"transferable record" (as such term is defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction) in excess of $250,000 (whether singly or in the aggregate and
taken together with the chattel paper described in clause (b) below), Borrower
or such Guarantor shall promptly notify Lender thereof in writing. Promptly upon
Lender's request, Borrower or such Guarantor shall take, or cause to be taken,
such actions as Lender may request to give Lender control of such electronic
chattel paper under Section 9-105 of the UCC and control of such transferable
record under Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as in effect in such jurisdiction.
(d) Borrower and each Guarantor does not have any deposit
accounts as of the date hereof, except as set forth in the Information
Certificate. Borrower and Guarantors shall not, directly or indirectly, after
the date hereof open, establish or maintain any deposit account (other than an
Excluded Account) unless each of the following conditions is satisfied: (i)
Lender shall have received not less than five (5) Business Days prior written
notice of the intention of Borrower or any Guarantor to open or establish such
account which notice shall specify in reasonable detail and specificity
acceptable to Lender the name of the account, the owner of the account, the name
and address of the bank at which such account is to be opened or established,
55
the individual at such bank with whom Borrower or such Guarantor is dealing and
the purpose of the account, (ii) the bank where such account is opened or
maintained shall be acceptable to Lender, such acceptance will not be
unreasonably withheld, and (iii) on or before the opening of such deposit
account, Borrower or such Guarantor shall as Lender may specify either (A)
deliver to Lender a Deposit Account Control Agreement with respect to such
deposit account duly authorized, executed and delivered by Borrower or such
Guarantor and the bank at which such deposit account is opened and maintained or
(B) arrange for Lender to become the customer of the bank with respect to the
deposit account on terms and conditions acceptable to Lender. The terms of this
subsection (d) shall not apply to deposit accounts which are Excluded Accounts
and deposit accounts which are intended to secure Permitted Indebtedness in
respect of standby letters of credit; provided, that, to the extent an Excluded
Account no longer satisfies the conditions set forth in clause (a) of the
definition of "Excluded Account" set forth in this Agreement, Borrower or such
Guarantor, as the case may be, shall take all actions necessary to comply with
the requirements of this Section 5.2(d), with respect to such deposit account.
(e) No Borrower or Guarantor owns or holds, directly or
indirectly, beneficially or as record owner or both, any investment property, as
of the date hereof, or have any investment account, securities account,
commodity account or other similar account with any bank or other financial
institution or other securities intermediary or commodity intermediary as of the
date hereof, in each case except as set forth in the Information Certificate.
(i) In the event that Borrower or any Guarantor shall
be entitled to or shall at any time after the date hereof hold or acquire any
certificated securities having a dollar value in excess of $250,000 whether
singly or in the aggregate (which securities are not held in an account
described in clause (ii) below), Borrower or such Guarantor shall promptly
endorse, assign and deliver the same to Lender, accompanied by such instruments
of transfer or assignment duly executed in blank as Lender may from time to time
specify. If any securities, now or hereafter acquired by Borrower or any
Guarantor are uncertificated and are issued to Borrower or such Guarantor or its
nominee directly by Borrower thereof, Borrower or such Guarantor shall
immediately notify Lender thereof and shall as Lender may specify, either (A)
cause Borrower to agree to comply with instructions from Lender as to such
securities, without further consent of Borrower or any Guarantor or such
nominee, or (B) arrange for Lender to become the registered owner of the
securities.
(ii) Borrower and Guarantors shall not, directly or
indirectly, after the date hereof open, establish or maintain any Securities
Account or Commodity Account (other than a Deposit Account) with any securities
intermediary or commodity intermediary which investment account (other than
Excluded Accounts) unless each of the following conditions is satisfied: (A)
Lender shall have received not less than five (5) Business Days prior written
notice of the intention of Borrower or Guarantor to open or establish such
account which notice shall specify in reasonable detail and specificity
acceptable to Lender the name of the account, the owner of the account, the name
and address of the securities intermediary or commodity intermediary at which
such account is to be opened or established, the individual at such
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intermediary with whom Borrower or such Guarantor is dealing and the purpose of
the account, (B) the securities intermediary or commodity intermediary (as the
case may be) where such account is opened or maintained shall be acceptable to
Lender (such acceptance will not be unreasonably withheld), and (C) on or before
the opening of such investment account, securities account or other similar
account with a securities intermediary or commodity intermediary, Borrower or
such Guarantor shall as Lender may specify either (1) execute and deliver, and
cause to be executed and delivered to Lender, an Investment Property Control
Agreement with respect thereto duly authorized, executed and delivered by
Borrower or such Guarantor and such securities intermediary or commodity
intermediary or (2) arrange for Lender to become the entitlement holder with
respect to such investment property on terms and conditions acceptable to
Lender. Notwithstanding anything to the contrary set forth herein, Borrower and
Guarantors shall not be required to obtain Investment Property Control
Agreements with respect to any investment accounts, securities account,
commodity account or any other similar account (other than a deposit
account),which are not Excluded Accounts, in which Permitted Investments are
held unless (A) Obligors desire to include such Permitted Investments consisting
of Cash Equivalents in the calculation of Qualified Cash or (B) such investment
accounts are opened after the occurrence of a Cash Dominion Event.
Notwithstanding the foregoing, to the extent an Excluded Account no longer
satisfies the conditions set forth in clause (a) of the definition of "Excluded
Account" set forth in this Agreement, Borrower or such Guarantor, as the case
may be, shall take all actions necessary to comply with the requirements of this
Section 5.2(e), with respect to any such investment or similar account.
(f) Borrower and Guarantors are not the beneficiary or
otherwise entitled to any right to payment under any letter of credit, banker's
acceptance or similar instrument in excess of $250,000 as of the date hereof,
except as set forth in the Information Certificate. In the event that Borrower
or any Guarantor shall be entitled to or shall receive any right to payment
under any letter of credit, banker's acceptance or any similar instrument,
whether as beneficiary thereof or otherwise after the date hereof, Borrower or
such Guarantor shall promptly notify Lender thereof in writing. Borrower or such
Guarantor shall immediately, as Lender may specify, either (i) deliver, or cause
to be delivered to Lender, with respect to any such letter of credit, banker's
acceptance or similar instrument, the written agreement of Borrower and any
other nominated person obligated to make any payment in respect thereof
(including any confirming or negotiating bank), in form and substance
satisfactory to Lender, consenting to the assignment of the proceeds of the
letter of credit to Lender by Borrower or such Guarantor and agreeing to make
all payments thereon directly to Lender or as Lender may otherwise direct or
(ii) cause Lender to become, at Borrower's expense, the transferee beneficiary
of the letter of credit, banker's acceptance or similar instrument (as the case
may be).
(g) Borrower and Guarantors do not have any Commercial Tort
Claims as of the date hereof, except as set forth in the Information
Certificate. In the event that Borrower or any Guarantor shall at any time after
the date hereof have any Commercial Tort Claims, Borrower or such Guarantor
shall promptly notify Lender thereof in writing, which notice shall (i) set
forth in reasonable detail the basis for and nature of such Commercial Tort
Claim and (ii)
57
include the express grant by Borrower or such Guarantor to Lender of a security
interest in such Commercial Tort Claim (and the proceeds thereof). In the event
that such notice does not include such grant of a security interest, the sending
thereof by Borrower or such Guarantor to Lender shall be deemed to constitute
such grant to Lender. Upon the sending of such notice, any Commercial Tort Claim
described therein shall constitute part of the Collateral and shall be deemed
included therein. Without limiting the authorization of Lender provided in
Section 5.2(a) hereof or otherwise arising by the execution by Borrower or such
Guarantor of this Agreement or any of the other Financing Agreements, Lender is
hereby irrevocably authorized from time to time and at any time to file such
financing statements naming Lender or its designee as secured party and Borrower
or such Guarantor as debtor, or any amendments to any financing statements,
covering any such Commercial Tort Claim as Collateral. In addition, Borrower and
each Guarantor shall promptly upon Lender's request, execute and deliver, or
cause to be executed and delivered, to Lender such other agreements, documents
and instruments as Lender may require in connection with such Commercial Tort
Claim.
(h) Borrower and Guarantors do not have any goods, documents
of title or other Collateral in the custody, control or possession of a third
party as of the date hereof, except as set forth in the Information Certificate
and except for goods located in the United States in transit to a location of a
Borrower or Guarantor permitted herein in the ordinary course of business of
Borrower or such Guarantor in the possession of the carrier transporting such
goods. In the event that any goods, documents of title or other Collateral are
at any time after the date hereof in the custody, control or possession of any
other person not referred to in the Information Certificate or such carriers,
Borrower and Guarantors shall promptly notify Lender thereof in writing.
(i) Borrower and Guarantors shall take any other actions
reasonably requested by Lender from time to time to cause the attachment,
perfection and first priority of, and the ability of Lender to enforce, the
security interest of Lender in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC or other applicable
law, to the extent, if any, that Borrower's or Guarantor's signature thereon is
required therefor, (ii) causing Lender's name to be noted as secured party on
any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Lender to enforce, the
security interest of Lender in such Collateral, (iii) complying with any
provision of any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Lender to enforce, the security
interest of Lender in such Collateral, (iv) obtaining the consents and approvals
of any Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral, and
taking all actions required by any earlier versions of the UCC or by other law,
as applicable in any relevant jurisdiction.
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SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Revolving Loan Accounts. Lender shall maintain one or
more loan account(s) on its books in which shall be recorded (a) all Revolving
Loans, and other Obligations and the Collateral, (b) all payments made by or on
behalf of Borrower or any Guarantor and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and Guarantors and
conclusively binding upon Borrower and Guarantors as an account stated except to
the extent that Lender receives a written notice from Borrower of any specific
exceptions of Borrower thereto within thirty (30) days after the date such
statement has been received by Borrower. Until such time as Lender shall have
rendered to Borrower a written statement as provided above, the balance in
Borrower's loan account(s) shall be presumptive evidence of the amounts due and
owing to Lender by Borrower and Guarantors.
6.3 Collection of Accounts.
(a) Borrower and Guarantors shall establish and maintain, at
their expense, blocked accounts or lockboxes and related blocked accounts (in
either case, "Blocked Accounts"), as Lender may specify, with such banks as are
acceptable to Lender into which Borrower and Guarantors shall promptly deposit
and direct their respective account debtors to directly remit all payments
constituting proceeds of Collateral (other than amounts deposited into Excluded
Accounts) in the identical form in which such payments are made, whether by
cash, check or other manner. Borrower and Guarantors shall deliver, or cause to
be delivered to Lender a Deposit Account Control Agreement (provided, that, each
Deposit Account Control Agreement shall provide that the applicable depository
banks at which the Blocked Accounts are maintained are authorized by Lender to
transfer the funds on deposit in the Blocked Accounts to such operating bank
account of Borrower or Guarantor as Borrower or such Guarantor may specify in
writing to Lender until such time as Lender shall notify the depository bank
otherwise) duly authorized, executed and delivered by each bank where a Blocked
Account is maintained as provided in Section 5.2 hereof or at any time and from
time to time Lender may become the bank's customer with respect to any of the
Blocked Accounts and promptly upon Lender's request, Borrower and each Guarantor
shall execute and deliver such agreements and documents as Lender may require in
connection therewith. Lender will only instruct the depository banks at which
the Blocked Accounts are maintained to transfer all funds received or deposited
into the Blocked Accounts to the Lender Payment Account at any time upon and
after the occurrence of a Cash Dominion Event (and until the occurrence of a
Cash Dominion Reversion Date) Borrower and each Guarantor agrees that at all
times that Lender shall have notified any depository bank to
59
transfer funds from the Blocked Accounts, all payments made to such Blocked
Accounts or other funds received and collected by Lender shall be treated as
payments to Lender in respect of the Obligations and therefore shall constitute
the property of Lender to the extent of the then outstanding Obligations, and
the balance of any such funds shall be promptly, at the receipt by Lender of a
request of Borrower, transferred by Lender to the operating account specified by
Borrower.
(b) For purposes of calculating the amount of the Revolving
Loans available to each Borrower, such payments will be applied (conditional
upon final collection) to the Obligations on the Business Day of receipt by
Lender of immediately available funds in the Lender Payment Account provided
such payments and notice thereof are received in accordance with Lender's usual
and customary practices as in effect from time to time and within sufficient
time to credit such Borrower's loan account on such day, and if not, then on the
next Business Day. For the purposes of calculating interest on the Obligations,
such payments or other funds received will be applied (conditional upon final
collection) to the Obligations on the date of receipt of immediately available
funds by Lender in the Lender Payment Account provided such payments or other
funds and notice thereof are received in accordance with Lender's usual and
customary practices as in effect from time to time and within sufficient time to
credit such Borrower's loan account on such day, and if not, then on the next
Business Day.
(c) Borrower and each Guarantor and their respective
employees, agents and Subsidiaries shall, acting as trustee for Lender, receive,
as the property of Lender, any monies, checks, notes, drafts or any other
payment relating to and/or proceeds of Accounts or other Collateral which come
into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked Accounts
in accordance with Section 6.3(a) hereof, or at all times during a Cash Dominion
Event remit the same or cause the same to be remitted, in kind, to Lender. In no
event during a Cash Dominion Event shall the same be commingled with Borrower's
or Guarantor's own funds. Borrower agrees to reimburse Lender on demand for any
amounts owed or paid to any bank or other financial institution at which a
Blocked Account or any other deposit account or investment account is
established or any other bank, financial institution or other person involved in
the transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank, financial institution or other
person. The obligations of Borrower to reimburse Lender for such amounts
pursuant to this Section 6.3 shall survive the termination of this Agreement.
6.4 Payments.
(a) All Obligations shall be payable to the Lender Payment
Account as provided in Section 6.3 or such other place as Lender may designate
from time to time. Subject to the other terms and conditions contained herein,
Lender shall apply payments received or collected from Borrower or any Guarantor
or for the account of Borrower or any Guarantor (including the monetary proceeds
of collections or of realization upon any Collateral) as follows: first, to pay
any fees, indemnities or expense reimbursements then due to Lender from Borrower
or any Guarantor; second, to pay interest due in respect of any Revolving Loans;
third, to pay
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principal in respect of the Revolving Loans; fourth, to pay or prepay any other
Obligations whether or not then due, in such order and manner as Lender
determines, (i) unless so directed by Borrower, or unless a Default or an Event
of Default shall exist or have occurred and be continuing, Lender shall not
apply any payments which it receives to any Eurodollar Rate Loans, except (A) on
the expiration date of the Interest Period applicable to any such Eurodollar
Rate Loans or (B) in the event that there are no outstanding Prime Rate Loans
and (ii) to the extent Borrower uses any proceeds of the Revolving Loans to
acquire rights in or the use of any Collateral or to repay any Indebtedness used
to acquire rights in or the use of any Collateral, payments in respect of the
Obligations shall be deemed applied first to the Obligations arising from
Revolving Loans that were not used for such purposes and second to the
Obligations arising from Revolving Loans the proceeds of which were used to
acquire rights in or the use of any Collateral in the chronological order in
which such Borrower acquired such rights in or the use of such Collateral.
(b) At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrower maintained
by Lender. If after receipt of any payment of, or proceeds of Collateral applied
to the payment of, any of the Obligations, Lender is required to surrender or
return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
and Guarantors shall be liable to pay to Lender, and do hereby indemnify and
hold Lender harmless for the amount of any payments or proceeds surrendered or
returned. This Section 6.4(b) shall remain effective notwithstanding any
contrary action which may be taken by Lender in reliance upon such payment or
proceeds. This Section 6.4 shall survive the payment of the Obligations and the
termination of this Agreement.
6.5 Authorization to Make Revolving Loans. Lender is authorized to make
the Revolving Loans based upon telephonic or other instructions received from
anyone purporting to be an Authorized Officer of Borrower or other authorized
person together with its receipt of a completed Notice of Borrowing or, at the
discretion of Lender, if such Revolving Loans are necessary to satisfy any
Obligations. All requests for Revolving Loans hereunder shall specify the date
on which the requested advance is to be made (which day shall be a Business Day)
and the amount of the requested Revolving Loan. Requests received after 11:00
a.m. New York City time on any day shall be deemed to have been made as of the
opening of business on the immediately following Business Day. All Revolving
Loans under this Agreement shall be conclusively presumed to have been made to,
and at the request of and for the benefit of, Borrower or any Guarantor when
deposited to the credit of Borrower or any Guarantor or otherwise disbursed or
established in accordance with the instructions of Borrower or any Guarantor or
in accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. All Revolving Loans made to Borrower pursuant to
the provisions hereof shall be used by such Borrower only for general operating,
working capital
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and other proper corporate purposes of such Borrower not otherwise prohibited by
the terms hereof. None of the proceeds will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Revolving Loans to be considered a "purpose credit" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as
amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrower shall provide Lender with the following documents
in a form satisfactory to Lender:
(i) within fifteen (15) days after the end of each
fiscal quarter, (A) a Borrowing Base Certificate duly completed and executed by
a Responsible Officer of Borrower, (B) summary agings of accounts receivable by
customer number (together with a reconciliation to the previous month's summary
aging and general ledger), and (C) a report of total sales made, credits issued
and cash received,; provided, that, in the event that a Cash Dominion Event
shall have occurred and be continuing, then a Borrowing Base Certificate and
such summary agings shall be delivered as Lender may reasonably request;
(ii) as soon as possible after the end of each
calendar quarter (but in any event within forty-five (45) days after the end
thereof): (A) the payment report, if any, generated by each Billing Processor
and provided to Borrower in accordance with the current practices of Billing
Processor and Borrower in effect on the date hereof and (B) information
regarding amounts owing to owners and lessors of leased premises and other third
parties from time to time in possession of any Collateral which are more than
thirty (30) days past due, provided, that, each of the foregoing reports shall
be delivered to Lender as soon as possible after the end of each month (but in
any event within fifteen (15) Business Days after the end thereof, or more
frequently as Lender may reasonably request at any time that an Event of Default
shall have occurred and be continuing), if Revolving Loans are outstanding more
than five (5) consecutive Business Days during any such quarter;
(iii) upon Lender's reasonable request, (A) copies of
customer statements, purchase orders, sales invoices, credit memos, remittance
advices and reports, and copies of customer acceptance documents in excess of
$1,000,000, and (B) the Borrower's calculation of the churn rate for business
class customers; provided, that, in the event that such churn rate exceeds two
(2%) percent, Borrower shall report the churn rate for business class customers
no less frequently than at the end of each calendar quarter (and in any event no
later than forty-five days after the end thereof); and
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(iv) such other reports as to the Collateral as
Lender shall reasonably request from time to time.
(b) If Borrower's or any Guarantor's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor or
other agent, Borrower and such Guarantor will, upon Lender's request, authorize
such service, contractor, shipper or agent to deliver such records, reports, and
related documents to Lender and to follow Lender's instructions with respect to
further services at any time that an Event of Default exists or has occurred and
is continuing.
7.2 Accounts Covenants.
(a) In addition to monthly reporting, Borrower shall notify
Lender promptly of, to the extent that any of the following involve an amount
equal to or greater than five (5%) percent of the Borrowing Base at such time:
(i) any material delay in Borrower's performance of any of its material
obligations to any Eligible Account debtor or the assertion of any material
claims, offsets, defenses or counterclaims by any Eligible Account debtor, or
any material disputes with Eligible Account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse information known to
Borrower or any Guarantor relating to the financial condition of any account
debtor whose account constitutes an Eligible Account and (iii) any event or
circumstance which, to the best of Borrower's or Guarantor's knowledge, would
cause Lender to consider any then existing Accounts as no longer constituting
Eligible Accounts. No credit, discount, allowance or extension or agreement for
any of the foregoing shall be granted to any account debtor without Lender's
consent, except in the ordinary course of the Borrower's or any Guarantor's
business in accordance with practices and policies consistently applied,
provided, that, Borrower and Guarantors may assign (i) up to five (5%) percent
of the aggregate dollar amount of Eligible Accounts at any time outstanding and
(ii) Accounts which are not Eligible Accounts to collection agencies in
accordance with Borrower's and Guarantors' current practices as in effect on the
date hereof. So long as no Event of Default exists or has occurred and is
continuing, Borrower and Guarantors shall settle, adjust or compromise any
claim, offset, counterclaim or dispute with any account debtor. At any time that
an Event of Default exists or has occurred and is continuing, Lender shall, at
its option and upon notice to Borrower, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) With respect to each Eligible Account: (i) the amounts
shown on any invoice delivered to Lender or schedule thereof delivered to Lender
shall be true and complete, (ii) no payments shall be made thereon except
payments delivered to Lender or otherwise as permitted pursuant to the terms of
this Agreement, (iii) no credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted to any account debtor except as
reported to Lender in accordance with this Agreement and except for credits,
discounts, allowances or extensions made or given in the ordinary course of each
Borrower's business in accordance with practices and policies consistently
applied in accordance with past practice, (iv) there shall be no material
setoffs, deductions, contras, defenses, counterclaims or disputes
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existing or asserted with respect thereto except as reported to Lender in
accordance with the terms of this Agreement, (v) none of the transactions giving
rise thereto will violate any applicable foreign, Federal, State or local laws
or regulations, all documentation relating thereto will be legally sufficient
under such laws and regulations and all such documentation will be legally
enforceable in accordance with its terms.
(c) Lender shall, in the reasonable exercise of its
discretion, during field examinations and at any time after the occurrence and
during the continuance of an Event of Default, have the right at any time or
times, in Lender's name or in the name of a nominee of Lender, to verify the
validity, amount or any other matter relating to any Receivables or other
Collateral, by mail, telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
and Guarantors shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (b) Borrower and each Guarantor assumes
all responsibility and liability arising from or relating to the production,
use, sale or other disposition of the Inventory; and (c) Borrower and Guarantors
shall keep the Inventory in good and marketable condition.
7.4 Equipment and Real Property Covenants.
(a) With respect to the Equipment and Real Property: (a)
Borrower and Guarantors shall keep the Equipment in good order, repair,
condition (ordinary wear and tear excepted); (b) Borrower and Guarantors shall
use the Equipment and Real Property with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with all
applicable laws; (c) the Equipment is and shall be used in the business of
Borrower and Guarantors and not for personal, family, household or farming use;
(d) Borrower and Guarantors shall not remove any Equipment from the locations
set forth or permitted herein, except for equipment located at a customer's
location in the ordinary course of business or to the extent necessary to have
any Equipment repaired, stored or maintained in the ordinary course of its
business or to move Equipment directly from one location set forth or permitted
herein to another such location and except for the movement of motor vehicles
used by or for the benefit of Borrower or such Guarantor in the ordinary course
of business; and (e) as among Borrower, Guarantors, and Lender, Borrower and
each Guarantor assumes all responsibility and liability arising from the use of
the Equipment and Real Property.
7.5 Power of Attorney. Borrower and each Guarantor hereby irrevocably
designates and appoints Lender (and all persons designated by Lender) as such
Borrower's and Guarantor's true and lawful attorney-in-fact, and authorizes
Lender, in such Borrower's, Guarantor's or Lender's name, to: (a) upon receipt
by the Borrower of a written demand from the Lender that the Lender is
exercising its remedies pursuant to Section 10.2(b): (i) demand payment on
Receivables or other Collateral, (ii) enforce payment of Receivables by legal
proceedings or
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otherwise, (iii) exercise all of such Borrower's or Guarantor's rights and
remedies to collect any Receivable or other Collateral, (iv) sell or assign any
Receivable upon such terms, for such amount and at such time or times as the
Lender deems advisable, (v) settle, adjust, compromise, extend or renew an
Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign
such Borrower's or Guarantor's name on any proof of claim in bankruptcy or other
similar document against an account debtor or other obligor in respect of any
Receivables or other Collateral, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an address
designated by Lender, and open and dispose of all mail addressed to Borrower or
such Guarantor and handle and store all mail relating to the Collateral; and
(ix) do all acts and things which are necessary, in Lender's determination, to
fulfill such Borrower's or Guarantor's obligations under this Agreement and the
other Financing Agreements and (x) endorse such Borrower's or Guarantor's name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or bills of lading
and other negotiable or non-negotiable documents, and (b) at any time that an
Event of Default shall exist or have occurred and be continuing to (i) take
control in any manner of any item of payment in respect of Receivables or
constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Lender, (ii) have access to any lockbox or
postal box into which remittances from account debtors or other obligors in
respect of Receivables or other proceeds of Collateral are sent or received,
(iii) endorse such Borrower's or Guarantor's name upon any items of payment in
respect of Receivables or constituting Collateral or otherwise received by
Lender and deposit the same in Lender's account for application to the
Obligations and (iv) sign such Borrower's or Guarantor's name on any
verification of Receivables and notices thereof to account debtors or any
secondary obligors or other obligors in respect thereof. Borrower and each
Guarantor hereby releases Lender and its officers, employees and designees from
any liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Lender's own gross negligence or willful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, at any time after the
occurrence of an Event of Default and notice to the Borrower, (a) cure any
default by Borrower or any Guarantor under any Material Contract with a third
party that affects the Collateral, its value or the ability of Lender to
collect, sell or otherwise dispose of the Collateral or the rights and remedies
of Lender therein or the ability of Borrower or any Guarantor to perform its
obligations hereunder or under any of the other Financing Agreements, (b) pay or
bond on appeal any judgment entered against Borrower or any Guarantor, (c)
discharge taxes, liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral and (d) pay any amount,
incur any expense or perform any act which, in Lender's judgment, is necessary
or appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Lender with respect thereto. Lender may add any amounts so expended to
the Obligations and charge Borrower's account therefor, such amounts to be
repayable by Borrower on demand. Lender
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shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Borrower or any Guarantor. Any payment made or other action taken by Lender
under this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as reasonably requested by
Lender, but other than after an Event of Default has occurred and is continuing,
in no event more than four times per year, at the cost and expense of Borrower,
(a) Lender or its designee shall have complete access to all of each Borrower's
and Guarantor's premises during normal business hours and after notice to
Borrower, or at any time and without notice to Borrower if an Event of Default
exists or has occurred and is continuing, for the purposes of inspecting,
verifying and auditing the Collateral and all of each Borrower's and Guarantor's
books and records, including the Records, and (b) Borrower and each Guarantor
shall promptly furnish to Lender such copies of such books and records or
extracts therefrom as Lender may request, and (c) Lender or Lender's designee
may use during normal business hours such of Borrower's and Guarantor's
personnel, equipment, supplies and premises as may be reasonably necessary for
the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Receivables and realization of other
Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower and each Guarantor hereby represents and warrants to Lender
the following (which shall survive the execution and delivery of this
Agreement):
8.1 Corporate Existence, Power and Authority. Borrower and each
Guarantor is a corporation duly organized and in good standing under the laws of
its jurisdiction of organization and is duly qualified as a foreign corporation
and in good standing in all states or other jurisdictions where the nature and
extent of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on such Borrower's or
Guarantor's financial condition, results of operation or business or the rights
of Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder (a) are all within each
Borrower's and Guarantor's corporate powers, (b) have been duly authorized, (c)
are not in contravention of law or the terms of Borrower's or Guarantor's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which Borrower or any Guarantor is a
party or by which Borrower or any Guarantor or its property are bound and (d)
will not result in the creation or imposition of, or require or give rise to any
obligation to grant, any lien, security interest, charge or other encumbrance
upon any property of Borrower or any Guarantor other than the Liens granted in
favor of Lender pursuant to the terms of this Agreement and the other Financing
Agreements. This Agreement and the other Financing Agreements to which Borrower
or any Guarantor is a party constitute legal, valid and binding obligations of
Borrower and such Guarantor enforceable in accordance with their respective
terms.
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8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of Borrower and each Guarantor is as
set forth on the signature page of this Agreement and in the Information
Certificate. No Borrower or Guarantor has, during the five years prior to the
date of this Agreement, been known by or used any other corporate or fictitious
name or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its property
or assets out of the ordinary course of business, except as set forth in the
Information Certificate.
(b) Borrower and each Guarantor is an organization of the type
and organized in the jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of Borrower and each Guarantor or accurately states that Borrower or such
Guarantor has none and accurately sets forth the federal employer identification
number of Borrower and each Guarantor.
(c) The chief executive office and mailing address of Borrower
and each Guarantor and each Borrower's and Guarantor's Records concerning
Accounts are located only at the address identified as such in Schedule 8.2 to
the Information Certificate and its only other places of business and the only
other locations of Collateral, if any, are the addresses set forth in Schedule
8.2 to the Information Certificate, subject to the rights of Borrower or any
Guarantor to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by a Borrower or Guarantor and sets forth the owners and/or operators
thereof. As of the date hereof each Guarantor has the same principal executive
office as Borrower.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower or any Guarantor which have been or may
hereafter be delivered by Borrower or any Guarantor to Lender have been prepared
in accordance with GAAP (except as to any interim financial statements, to the
extent such statements are subject to normal quarter-end and year-end
adjustments and do not include any notes) and fairly present in all material
respects the financial condition and the results of operation of Borrower and
such Guarantor as at the dates and for the periods set forth therein. Except as
disclosed in any interim financial statements furnished by Borrower and
Guarantors to Lender prior to the date of this Agreement, there has been no act,
condition or event which has had or is reasonably likely to have a Material
Adverse Effect since the date of the most recent audited financial statements of
Borrower or any Guarantor furnished by Borrower or any Guarantor to Lender prior
to the date of this Agreement. The projections dated July 18, 2005 for the
fiscal years ending 2005 through 2009 that have been delivered to Lender or any
projections hereafter delivered to Lender have been prepared in light of the
past operations of the businesses of Borrower and Guarantors and are based upon
estimates and assumptions stated therein, all of which Borrower and Guarantors
have determined to be reasonable and fair in light of the then current
conditions and current facts and reflect the good faith and reasonable estimates
of Borrower and Guarantors of the future financial performance of Borrower and
its Subsidiaries and of the other information projected therein for the periods
set forth therein.
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8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4 to
the Information Certificate. Borrower and each Guarantor has good and marketable
fee simple title to or valid leasehold interests in all of its Real Property and
good, valid and merchantable title to all of its other properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 to the Information Certificate or permitted
under Section 9.8 hereof.
8.5 Tax Returns. Borrower and each Guarantor has filed, or caused to be
filed, in a timely manner all material tax returns, reports and declarations
which are required to be filed by it. All information in such tax returns,
reports and declarations is complete and accurate in all material respects.
Borrower and each Guarantor has paid or caused to be paid all taxes due and
payable or claimed due and payable in any assessment received by it, except
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Guarantor and
with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on Schedule 8.6 to the Information
Certificate, (a) there is no investigation by any Governmental Authority
pending, or to the best of Borrower's or Guarantor's knowledge threatened,
against or affecting Borrower or any Guarantor, its or their assets or business
and (b) there is no action, suit, proceeding or claim by any Person pending, or
to the best of Borrower's or Guarantor's knowledge threatened, against Borrower
or any Guarantor or its or their assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, in each case, which if adversely
determined against Borrower or such Guarantor has or could reasonably be
expected to have a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Borrower and Guarantors are not in default in any material
respect under, or in violation in any material respect of the terms of, any
material agreement, contract, instrument, lease or other commitment to which it
is a party or by which it or any of its assets are bound. Borrower and
Guarantors are in compliance in all material respects with the requirements of
all applicable laws, rules, regulations and orders of any Governmental Authority
relating to their respective businesses, including, without limitation, those
set forth in or promulgated pursuant to the Occupational Safety and Health Act
of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA,
the Code, as amended, and the rules and regulations thereunder, and all
Environmental Laws unless such default, violation or failure to comply would not
individually or in the aggregate result in a Material Adverse Event.
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(b) Borrower and Guarantors have each obtained all permits,
licenses, approvals, authorizations, licenses, filings, registrations, consents,
permits, exemptions, qualifications, designations, declarations, or other
actions or undertakings, consents, certificates, orders or authorizations of any
Governmental Authority, including, without limitation, any certificates of
public convenience and all grants, approvals, licenses, filings and
registrations from or to the FCC or any PUC or any other Communications
Regulatory Authority or under Communications Law necessary for the lawful
conduct of its business as presently conducted, including the provision of the
telecommunication services set forth in any Permits (the "Permits") unless the
failure to have any of the same would not individually or in the aggregate
result in a Material Adverse Effect. All of the Permits are valid and subsisting
and in full force and effect. There are no investigations, actions, claims or
proceedings pending or to the best of Borrower's or Guarantor's knowledge, as
the result of the practices of Borrower or any Guarantor or any of its
Affiliates pursuant to any violations of or failure to comply with any
Communications Laws or otherwise, or threatened in writing that seek the
revocation, cancellation, non-renewal, suspension or modification of any of the
Permits except where such investigations, actions, claims or proceedings could
not be reasonably expected to have a Material Adverse Effect. Lender will not,
by reason of the execution, delivery and performance of this Agreement or any of
the other Financing Agreements, be subject to the regulation or control of
either the FCC or any PUC; provided, that, Lender may be required, prior to
exercising certain rights or remedies hereunder, to obtain prior written consent
from Communications Regulatory Authorities with respect to: (i) the sale, pledge
(other than the pledge in favor of Lender provided for in the Financing
Agreements) or other disposition of the Stock, including the exercise of voting
or other consensual rights with respect to the Stock, of Borrower or any
Guarantor that results in a Change of Control under the Communications Laws; or
(ii) the transfer of title or disposition of Telecommunications Assets of
Borrower or any Guarantor.
8.8 Environmental Compliance. Except to the extent that could
reasonably be expected to not result in a Material Adverse Effect:
(a) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrower, Guarantors and any Restricted Subsidiary of Borrower or
any Guarantor have not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates in any material respect any applicable Environmental Law or Permit, and
the operations of Borrower, Guarantors and any Restricted Subsidiary of Borrower
or any Guarantor complies in all material respects with all Environmental Laws
and all Permits.
(b) Except as set forth on Schedule 8.8 to the Information
Certificate, there has been no investigation by any Governmental Authority or
any proceeding, complaint, order, directive, claim, citation or notice by any
Governmental Authority or any other person nor is any pending or to the best of
Borrower's or Guarantor's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
Borrower or
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any Guarantor and any Restricted Subsidiary of Borrower or any Guarantor or the
release, spill or discharge, threatened or actual, of any Hazardous Material or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which adversely affects or could reasonably be expected
to adversely affect in any material respect Borrower or any Guarantor or its or
their business, operations or assets or any properties at which Borrower or such
Guarantor has transported, stored or disposed of any Hazardous Materials.
(c) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrower, Guarantors and their Subsidiaries have no material
liability (contingent or otherwise) in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrower, Guarantors and their Subsidiaries have all
Permits required to be obtained or filed in connection with the operations of
Borrower and Guarantors under any Environmental Law and all of such licenses,
certificates, approvals or similar authorizations and other Permits are valid
and in full force and effect, except where the failure to obtain or file such
Permits would not be reasonably expected to result in a Material Adverse Effect.
8.9 Employee Benefits.
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other Federal or State law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service and
to the best of Borrower's or Guarantor's knowledge, nothing has occurred which
would cause the loss of such qualification. Each Borrower and its ERISA
Affiliates have made all required contributions to any Plan subject to Section
412 of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending, or to the best of Borrower's or
Guarantor's knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan that could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan that could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) based on the latest valuation of each Pension Plan and on the
actuarial methods and assumptions employed for such valuation (determined in
accordance with the assumptions used for funding such Pension Plan pursuant to
Section 412 of the Code), the aggregate current value of accumulated benefit
liabilities of such Pension Plan under Section 4001(a)(16) of ERISA does not
exceed the aggregate current value of the assets of such Pension Plan; (iii)
Borrower and each Guarantor, and their ERISA Affiliates, have not incurred and
do not reasonably expect to
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incur, any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan; and (iv) Borrower and
each Guarantor, and their ERISA Affiliates, have not engaged in a transaction
that would be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower or any Guarantor maintained at
any bank or other financial institution are set forth on Schedule 8.10 to the
Information Certificate, subject to the right of Borrower and each Guarantor to
establish new accounts in accordance with Section 5.2 hereof.
8.11 Intellectual Property. Borrower and each Guarantor owns or
licenses or otherwise has the right to use all Intellectual Property necessary
for the operation of its business as presently conducted or proposed to be
conducted. As of the date hereof, Borrower and Guarantors do not have any
Intellectual Property registered, or subject to pending applications, in the
United States Patent and Trademark Office or any similar office or agency in the
United States, any State thereof, any political subdivision thereof or in any
other country, other than those described in Schedule 8.11 to the Information
Certificate and has not granted any licenses with respect thereto other than as
set forth in Schedule 8.11 to the Information Certificate. No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. To the best of Borrower's
and Guarantor's knowledge, no slogan or other advertising device, product,
process, method, substance or other Intellectual Property or goods bearing or
using any Intellectual Property presently contemplated to be sold by or employed
by Borrower or any Guarantor infringes any patent, trademark, servicemark,
tradename, copyright, license or other Intellectual Property owned by any other
Person presently and no claim or litigation is pending or threatened against or
affecting Borrower or any Guarantor contesting its right to sell or use any such
Intellectual Property. Schedule 8.11 to the Information Certificate sets forth
all of the agreements or other arrangements of Borrower and each Guarantor
pursuant to which Borrower or such Guarantor has a license or other right to use
any trademarks, logos, designs, representations or other Intellectual Property
owned by another person as in effect on the date hereof and the dates of the
expiration of such agreements or other arrangements of Borrower or such
Guarantor as in effect on the date hereof (collectively, together with such
agreements or other arrangements as may be entered into by Borrower or any
Guarantor after the date hereof, collectively, the "License Agreements" and
individually, a "License Agreement").
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
(a) Borrower and each Guarantor does not have any direct or
indirect Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in Schedule 8.12 to the Information Certificate.
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(b) Borrower and each Guarantor is the record and beneficial
owner of all of the issued and outstanding shares of Capital Stock of each of
the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being
owned by Borrower or such Guarantor and there are no proxies, irrevocable or
otherwise, with respect to such shares and no equity securities of any of the
Subsidiaries of Borrower are or may become required to be issued by reason of
any options, warrants, rights to subscribe to, calls or commitments of any kind
or nature and there are no contracts, commitments, understandings or
arrangements by which any Restricted Subsidiary is or may become bound to issue
additional shares of it Capital Stock or securities convertible into or
exchangeable for such shares.
(c) The issued and outstanding shares of Capital Stock of each
Borrower (other than Borrower) and Guarantor are directly and beneficially owned
and held by the persons indicated in the Information Certificate, and in each
case all of such shares have been duly authorized and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances of
any kind, except as disclosed in writing to Lender prior to the date hereof.
(d) Borrower and Guarantors taken as a whole are Solvent and
will be Solvent immediately after the creation of the Obligations, the security
interests of Lender and the other transaction contemplated hereunder.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate
is a list (including dates of termination) of all collective bargaining or
similar agreements between or applicable to Borrower and each Guarantor and any
union, labor organization or other bargaining agent in respect of the employees
of Borrower or any Guarantor on the date hereof.
(b) There is (i) no significant unfair labor practice
complaint pending against Borrower or any Guarantor or, to the best of
Borrower's or Guarantor's knowledge, threatened against it, before the National
Labor Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is
pending on the date hereof against Borrower or any Guarantor or, to best of
Borrower's or Guarantor's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Borrower or any Guarantor or, to the best of Borrower's or Guarantor's
knowledge, threatened against Borrower or any Guarantor.
8.14 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement, the Senior Secured Note Documents or any other agreement with
respect to Indebtedness of Borrower or any Guarantor permitted hereunder as in
effect on the date hereof, there are no contractual or consensual restrictions
on Borrower or any Guarantor or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between Borrower
or any Guarantor and any of its or their Subsidiaries or (ii) between any
Subsidiaries of Borrower or any Guarantor or (b) the ability of Borrower or any
Guarantor or any of its or their Subsidiaries to incur Indebtedness or grant
security interests to Lender in the Collateral.
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8.15 Material Contracts. Schedule 8.15 to the Information Certificate
sets forth all Material Contracts to which Borrower or any Guarantor is a party
or is bound as of the date hereof. Borrower and Guarantors have delivered or
provided access to true, correct and complete copies of such Material Contracts
to Lender on or before the date hereof. Borrower and Guarantors are not in
breach or in default in any material respect of or under any Material Contract
and have not received any notice of the intention of any other party thereto to
terminate any Material Contract, which would reasonably be expected to have a
Material Adverse Effect.
8.16 Payable Practices. Borrower and each Guarantor have not made any
material change in the historical accounts payable practices from those in
effect immediately prior to the date hereof.
8.17 Carrier Service Agreements, IRU Agreements and Interconnection
Agreements.
(a) Set forth in Schedule 8.17(a)(i) hereto is a correct and
complete list of all of the Carrier-Out Service Agreements in effect on the date
hereof that were the basis for ten percent (10%) or more of the revenues of
Borrower and Guarantors in the aggregate during calendar year 2004, which relate
to or give rise to any Receivables, and set forth in Schedule 8.17(a)(ii) hereto
is a correct and complete list of all of the Carrier-In Service Agreements. A
correct and substantially complete list of all Interconnection Agreements and an
identification of existing relationships with ILECs is set forth on Schedule
8.17(b). The Carrier Service-In Agreements constitute all of such agreements
necessary for Borrower and Guarantors to operate their businesses as presently
conducted or proposed to be conducted. No Carrier Accounts of Borrower arise
from the use by customers of telecommunication services, other than those which
use services of the Borrower or of a Carrier with whom Borrower or any Guarantor
has a valid and enforceable Carrier Service Agreement or other interconnection
agreement set forth on Schedule 8.17 hereto or with whom Borrower has entered
into a Carrier Service Agreement in accordance with Section 9.20 hereof or for
which Borrower or any Guarantor uses carrier services, available to it pursuant
to a tariff or a statement of generally available terms. Except as set forth in
the Information Certificate, each of such Carrier Service Agreements constitutes
the legal, valid and binding obligations of such Borrower party thereto and to
the best of such Borrower's knowledge, the other parties thereto, enforceable in
accordance with their respective terms and are in full force and effect, except
as to the Carrier Service Agreements identified on Schedule 8.17 hereto for
which such Borrower has an interim or alternative interconnection arrangement.
To the best of Borrower's and Guarantors' knowledge, no event of default, or
act, condition or event which with notice or passage of time or both, would
constitute an event of default under any of such Carrier Service Agreements
exists or has occurred and is continuing, and each Borrower and the other
parties thereto have complied with (or waived in writing compliance with) all of
the terms and conditions of the Carrier Service-Out Agreements to the extent
necessary for such Borrower to be entitled to receive all payments thereunder.
(b) Set forth in Schedule 8.17(c) hereto is a correct and
substantially complete list of all of the Indefeasible Right To Use Agreements
("IRU Agreements") in effect on the date hereof. The IRU Agreements listed in
such Schedule constitute all of such agreements necessary
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for Borrower and Guarantors to operate their businesses as presently conducted
or proposed to be conducted and Borrower and Guarantors are not parties to any
IRU Agreements other than those set forth on Schedule 8.17(c) hereto or with
whom Borrower shall enter into in accordance with Section 9.20 hereof or for
which Borrower use carrier services available to them pursuant to carrier
tariffs or a statement of generally available terms. Except as set forth in the
Information Certificate, each of such IRU Agreements constitutes the legal,
valid and binding obligations of Borrower or such Guarantor party thereto and to
the best of such Borrower's or Guarantor's knowledge, the other parties thereto,
enforceable in accordance with their respective terms and are in full force and
effect. To the best of Borrower's and Guarantors' knowledge, no event of
default, or act, condition or event which with notice or passage of time or
both, would constitute an event of default under any of such IRU Agreements
exists or has occurred and is continuing, and each Borrower or Guarantor, as the
case may be, and the other parties thereto have complied with (or waived in
writing compliance with) all of the terms and conditions of the IRU Agreements
to the extent necessary for Borrower or such Guarantor to be entitled to receive
its rights thereunder.
8.18 Billing Processor Agreements. Set forth in Schedule 8.18 hereto is
a correct and complete list of all Billing Processor Agreements in effect on the
date hereof. No Billing Processor has any security interest, lien, encumbrance
or other claim in or to any of the Accounts or other Collateral. The Billing
Processor is acting solely as an agent on behalf of Borrower for the purpose of
billing Borrower's customers and the arrangements of Borrower with the Billing
Processor does not involve the purchase and sale by Borrower of Receivables to
the Billing Processor. The Billing Processor Agreements constitute all of such
agreements necessary for each Borrower to operate its business as presently
conducted or proposed to be conducted and no Accounts of Borrower arise from the
use by its customers of telecommunication services, other than those which are
subject to the Billing Processor Agreements with Billing Processors with whom
Borrower has a valid and enforceable Billing Processor Agreement set forth on
Schedule 8.18 hereto or with whom Borrower has entered into a Billing Processor
Agreement in accordance with Section 9.23 hereof. Each of the Billing Processor
Agreements constitutes the legal, valid and binding obligations of such Borrower
party thereto and to the best of each Borrower's knowledge, the other parties
thereto, enforceable in accordance with their respective terms and are in full
force and effect. To the best of Borrower's knowledge, no event of default, or
act, condition or event which with notice or passage of time or both, would
constitute an event of default under any of the Billing Processor Agreements
exists or has occurred and is continuing. Borrower have delivered, or caused to
be delivered to Lender, true, correct and complete copies of all of the Billing
Processor Agreements.
8.19 Governmental Authorizations. Except as set forth on Schedule 8.19
hereto, no authorizations, consent, approval, license, exemption or other action
by, and no registration, qualification, designation, declaration or filing with,
any Governmental Authority (other than the filing of UCC financing statements
and continuation statements) is or will be necessary in connection with
execution and delivery of this Agreement or any of the other Financing
Agreements by Borrower and Guarantors, consummation of the transactions herein
or therein
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contemplated, or performance of or compliance by Borrower and Guarantors with
the terms and conditions hereof or thereof except where the failure to do so
could not reasonably be expected to result in a Material Adverse Effect. The
failure to file any notice or other information with any Governmental Authority
as set forth on Schedule 8.19 hereto shall not have any Material Adverse Effect;
provided, that, Lender may be required, prior to exercising certain rights or
remedies hereunder, to obtain prior written consent from Communications
Regulatory Authorities with respect to: (i) the sale, pledge (other than the
pledge in favor of Lender provided for in the Financing Agreements) or other
disposition of the Stock, including the exercise of voting or other consensual
rights with respect to the Stock, of Borrower or any Guarantor that results in a
Change of Control under the Communications Laws; or (ii) the transfer of title
or disposition of Telecommunications Assets of Borrower or any Guarantor.
8.20 No Regulatory Event. No Regulatory Event has occurred and is
continuing.
8.21 Trade Relations. There exists no actual or, to the best of
Borrower's knowledge, threatened termination, cancellation or limitation of the
business relationship between Borrower and any Carrier, any labor organizations,
any material customer or any group thereof whose agreements with Borrower are
material to the business of Borrower, or with any material supplier that could
reasonably be expected to have a Material Adverse Effect.
8.22 Interrelated Businesses. Borrower and Guarantors make up a related
organization of various entities constituting a single economic and business
enterprise so that Borrower and Guarantors share an identity of interests such
that any benefit received by any one of them benefits the others. Borrower and
Guarantors render services to or for the benefit of the other, purchase or sell
and supply goods to or from or for the benefit of the others, make loans,
advances and provide other financial accommodations to or for the benefit of
Borrower and Guarantors (including inter alia, the payment by Borrower of
creditors of the Guarantors and guarantees by Borrowers of indebtedness of the
Guarantors and provide administrative, marketing, payroll and management
services to or for the benefit of the Guarantors). Borrower and Guarantors have
the same chief executive office, centralized accounting and legal services,
certain common officers and directors and generally do not provide consolidating
financial statements to creditors.
8.23 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower or any Guarantor in writing to Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the date
as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. This
Section 8.23 does not apply to any forward looking information provided to
Lender including the projections referred to in Section 8.3 above. No event or
circumstance has occurred which has had or could reasonably be expected to have
a Material Adverse Effect, which has not been fully and accurately disclosed to
Lender in writing prior to the date hereof.
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8.24 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower or any Guarantor shall now or hereafter give, or cause to be given, to
Lender related to the transactions contemplated by the Financing Agreements.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Borrower and each Guarantor shall at all times preserve,
renew and keep in full force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
licenses, trademarks, tradenames, approvals, authorizations, leases, contracts
and Permits necessary to carry on the business as presently or proposed to be
conducted, except as to any Guarantor other than Borrower as permitted in
Sections 9.7 and 9.10 hereof.
(b) No Borrower or Guarantor shall change its name unless each
of the following conditions is satisfied: (i) Lender shall have received not
less than ten (10) days prior written notice from Borrower of such proposed
change in its corporate name, which notice shall accurately set forth the new
name; and (ii) Lender shall have received a copy of the amendment to the
Certificate of Incorporation of Borrower or such Guarantor providing for the
name change certified by the Secretary of State of the jurisdiction of
incorporation or organization of Borrower or such Guarantor as soon as it is
available.
(c) No Borrower or Guarantor shall change its chief executive
office or its mailing address or organizational identification number (or if it
does not have one, shall not acquire one) unless Lender shall have received not
less than ten (10) days' prior written notice from Borrower of such proposed
change, which notice shall set forth such information with respect thereto as
Lender may require and Lender shall have received such agreements as Lender may
reasonably require in connection therewith. No Borrower or Guarantor shall
change its type of organization, jurisdiction of organization or other legal
structure without the prior written consent of Lender which will not be
unreasonably withheld..
9.2 New Collateral Locations. Borrower and each Guarantor may only open
any new location within the continental United States provided, that, in the
event the location serves as the Borrower's or any Guarantor's corporate
headquarters, Borrower or such Guarantor (a) gives Lender ten (10) days prior
written notice of the intended opening of any such new location and (b) will use
commercially reasonable efforts to execute and deliver, or cause to be executed
and delivered, to Lender such agreements, documents, and instruments as Lender
may deem
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reasonably necessary or desirable to protect its interests in the Collateral at
such location, including a Collateral Access Agreement.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower and each Guarantor shall, and shall cause any
Restricted Subsidiary of Borrower to, at all times, comply in all material
respects with all laws, rules, regulations, licenses, approvals, orders and
other Permits applicable to it and duly observe all requirements of any foreign,
Federal, State or local Governmental Authority to the extent the failure to do
so would have a Material Adverse Effect.
(b) Borrower and Guarantors shall give written notice to
Lender promptly upon Borrower's or Guarantor's receipt of any notice of, or
Borrower's or Guarantor's otherwise obtaining knowledge of, (i) the occurrence
of any event involving the release, spill or discharge, threatened or actual, of
any Hazardous Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by Borrower or any Guarantor or (B)
the release, spill or discharge, threatened or actual, of any Hazardous Material
other than in the ordinary course of business and other than as permitted under
any applicable Environmental Law.
(c) Borrower and each Guarantor shall indemnify and hold
harmless Lender and its directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including reasonable
attorneys' fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of Borrower or any
Guarantor and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.
9.4 Payment of Taxes and Claims. Borrower and each Guarantor shall, and
shall cause any Restricted Subsidiary to, duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against it or its
properties or assets, except for taxes the validity of which are being contested
in good faith by appropriate proceedings diligently pursued and available to
such Borrower, Guarantor or Restricted Subsidiary, as the case may be, and with
respect to which adequate reserves have been set aside on its books. Borrower
and each Guarantor shall be liable for any tax or penalties imposed on Lender,
after the date hereof, as a result of the financing arrangements provided for
herein and Borrower and each Guarantor agrees to indemnify and hold Lender
harmless with respect to the foregoing, and to repay to Lender on demand the
amount thereof, and until paid by Borrower or such Guarantor such amount shall
be added and deemed part of the Revolving Loans, provided, that, nothing
contained herein shall be construed to require Borrower or any Guarantor to pay
any income or franchise taxes attributable to the income of Lender from any
amounts charged or paid hereunder
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to Lender. The foregoing indemnity shall survive the payment of the Obligations
and the termination of this Agreement.
9.5 Insurance. Borrower and each Guarantor shall, and shall cause any
Restricted Subsidiary to, at all times, maintain with financially sound and
reputable insurers insurance with respect to the Collateral against loss or
damage and all other insurance of the kinds and in the amounts customarily
insured against or carried by corporations of established reputation engaged in
the same or similar businesses and similarly situated. Said policies of
insurance shall be reasonably satisfactory to Lender as to form, amount and
insurer; Lender acknowledges that the current policies of insurance of Borrower
and Guarantors delivered to Lender on the date hereof are satisfactory as to
form, amount and insurer. Borrower and Guarantors shall furnish certificates,
policies or endorsements to Lender as Lender shall reasonably require as proof
of such insurance, and, if Borrower or any Guarantor fails to do so, Lender is
authorized, but not required, to obtain such insurance at the expense of
Borrower but no sooner than after ten (10) Business Days written notice to the
Borrower. Borrower will use commercially reasonable efforts to ensure that all
policies shall provide for at least ten (10) days prior written notice to Lender
of any cancellation or reduction of coverage and that, at any time after an
Event of Default has occurred and is continuing, Lender may act as attorney for
Borrower and each Guarantor in obtaining, and at any time an Event of Default
exists or has occurred and is continuing, adjusting, settling, amending and
canceling such insurance. Borrower and Guarantors shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower and Guarantors shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and Borrower and further specify that
Lender shall be paid regardless of any act or omission by Borrower, Guarantor or
any of its or their Affiliates. Upon the occurrence and continuance of an Event
of Default, Borrower and each Guarantor hereby authorize Lender (upon notice to
Borrower), to instruct such insurance companies to remit proceeds of insurance
directly to Lender. Borrower and each Guarantor hereby irrevocably designates
and appoints Lender (and all persons designated by Lender) as such Borrower's
and Guarantor's true and lawful attorney-in-fact, and authorizes Lender, in such
Borrower's, Guarantor's or Lender's name, to at all times during the continuance
of an Event of Default, to endorse on behalf of Borrower or such Guarantor , as
the case may be, any check or other instrument or amounts payable in respect of
any loss or damage under any insurance policy. Without limiting any other rights
of Lender, any insurance proceeds received by Lender at any time a Cash Dominion
Event has occurred and is continuing may be applied to payment of the
Obligations, whether or not then due, in any order and in such manner as Lender
may determine. Any insurance proceeds received by Lender at any time a Cash
Dominion Event is not continuing shall be promptly, upon request of Borrower,
delivered to Borrower. Upon application of such proceeds to the Revolving Loans,
Revolving Loans shall be available subject and pursuant to the terms hereof to
be used to be reinvested in Collateral or for the costs of repair or replacement
of the Collateral lost or damages resulting in the payment of such insurance
proceeds.
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9.6 Financial Statements and Other Information.
(a) Borrower and each Guarantor shall, and shall cause any
Restricted Subsidiary to, keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of such Borrower, Guarantor and its
Subsidiaries in accordance with GAAP. Borrower and Guarantors shall promptly
furnish to Lender all such financial and other information as Lender shall
reasonably request relating to the Collateral and the assets, business and
operations of Borrower and Guarantors, and to notify the auditors and
accountants of Borrower and Guarantors that Lender is authorized to obtain such
information directly from them. Without limiting the foregoing, Borrower shall
furnish or cause to be furnished to Lender, the following:
(i) Intentionally Deleted;
(ii) within forty-five (45) days after the end of
each fiscal quarter, quarterly unaudited consolidated financial statements and
unaudited consolidating financial statements (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), all in reasonable detail, fairly presenting in all
material respects the financial position and the results of the operations of
Borrower and its Subsidiaries as of the end of and through such fiscal quarter,
certified to be correct by a Responsible Officer, subject to normal year-end
adjustments together with accompanied by a compliance certificate substantially
in the form of Exhibit B hereto, along with a schedule in form reasonably
satisfactory to Lender of the calculations used in determining, as of the end of
such quarter, whether Borrower and Guarantors were in compliance with the
covenants set forth in Section 9.17 (to the extent compliance with such covenant
is required in accordance with the terms hereof) and 9.22 of this Agreement and
a calculation of outstanding Capitalized Lease Obligations and Purchase Money
Obligations outstanding for such quarter; and
(iii) within ninety (90) days after the end of each
fiscal year, audited consolidated financial statements and unaudited
consolidating financial statements of Borrower and its Subsidiaries (including
in each case balance sheets, statements of income and loss, statements of cash
flow, and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting in all material respects
the financial position and the results of the operations of Borrower and its
Subsidiaries as of the end of and for such fiscal year, together with the
unqualified opinion of independent certified public accountants with respect to
the audited consolidated financial statements, which accountants shall be an
independent accounting firm selected by Borrower and reasonably acceptable to
Lender, that such audited consolidated financial statements have been prepared
in accordance with GAAP, and present fairly in all material respects the results
of operations and financial condition of Borrower and its Subsidiaries as of the
end of and for the fiscal year then ended. Lender hereby acknowledges that,
Borrower's current accountants, Deloitte & Touche are acceptable to Lender; and
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(iv) at such time as available, but in no event later
than one hundred five (105) days after the end of each fiscal year (commencing
with the fiscal year of Borrower ending December 31, 2005), projected
consolidated financial statements (including in each case, forecasted balance
sheets and statements of income and loss, statements of cash flow, and
statements of shareholders' equity) of Borrower and its Subsidiaries for the
next fiscal year, all in reasonable detail, and in a format and for the time
periods consistent with the projections delivered by Borrower to Lender prior to
the date hereof, together with such supporting information as Lender may
reasonably request. Such projected financial statements shall depict quarterly
projected results for the next succeeding year. Such projections shall represent
the reasonable best estimate by Borrower and Guarantors of the future financial
performance of Borrower and its Subsidiaries for the periods set forth therein
and shall have been prepared on the basis of the assumptions set forth therein
which Borrower and Guarantors believe are fair and reasonable as of the date of
preparation in light of current and reasonably foreseeable business conditions
(it being understood that actual results may differ from those set forth in such
projected financial statements). Borrower shall, upon the request of Lender,
provide to Lender an update with respect to such projections at any time a
Default or Event of Default exists or has occurred and is continuing.
(b) Borrower and Guarantors shall promptly notify Lender in
writing of the details of (i) any loss, damage, investigation, action, suit,
proceeding or claim relating to Collateral having a value of more than
$1,000,000 and which if adversely determined would have a Material Adverse
Effect on Borrower's and Guarantor's business, properties, assets, goodwill or
condition, financial or otherwise, taken as a whole, (ii) any Material Contract
which has not been renewed or replaced, the consequence of which is expected to
have a Material Adverse Effect,(iii) any order, judgment or decree in excess of
$1,000,000 shall have been entered against Borrower or any Guarantor or any of
its or their properties or assets, (iv) any notification of a material violation
of laws or regulations received by Borrower or any Guarantor, (v) any ERISA
Event, (vi) any Regulatory Event or other material changes to Communications
Laws or other applicable laws affecting Borrower and Guarantors' business which
is expected to have a Material Adverse Effect, and (vii) the occurrence of any
Default or Event of Default.
(c) Promptly after the sending or filing thereof, Borrower
shall send to Lender (to the extent any of the following have not been posted on
the Borrower's website) copies of (i) all reports which Borrower or any of its
Subsidiaries sends to its security holders generally (ii) all reports which
Borrower or any of its Subsidiaries files with the Securities Exchange
Commission, any national or foreign securities exchange or the National
Association of Securities Dealers, Inc., and such other reports as Lender may
hereafter specifically identify to Borrower that Lender will require be provided
to Lender, (iii) all press releases and (iv) all other statements concerning
material changes or developments in the business of a Borrower or Guarantor made
available by Borrower or any Guarantor to the public.
(d) Upon Lender's reasonable request, Borrower and each
Guarantor hereby authorizes and directs all accountants or auditors to deliver
to Lender, at Borrower's expense,
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copies of the financial statements of Borrower and Guarantor and any reports or
management letters prepared by such accountants or auditors on behalf of
Borrower or any Guarantor and to disclose to Lender such information as they may
have regarding the business of Borrower and Guarantor. Any documents, schedules,
invoices or other papers delivered to Lender may be destroyed or otherwise
disposed of by Lender one (1) year after the same are delivered to Lender,
except as otherwise designated by Borrower to Lender in writing.
9.7 Limitation on Asset Sales.
(a) Borrower and each Guarantor shall not , and Borrower will
not permit any of its Restricted Subsidiaries to, consummate an Asset Sale
unless:
(i) such Borrower, Guarantor or the applicable
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by Board of Directors of such
Borrower, Guarantor or Restricted Subsidiary, as the case may be);
(ii) at least 75% of the consideration received by
such Borrower, Guarantor or the Restricted Subsidiary, as the case may be, from
such Asset Sale is in the form of cash or Cash Equivalents and is received at
the time of such disposition (provided, that, (A) the amount of any liabilities
of such Borrower, Guarantor or any such Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Obligations) that are
assumed by the transferee of any such assets and (B) any securities or other
obligations received by such Borrower, Guarantor or any such Restricted
Subsidiary in exchange for any such assets (other than assets which constitute
Collateral) that are converted into cash within 180 days after the consummation
of such Asset Sale (to the extent of the cash received) shall be deemed to be
cash for purposes of this provision);
(iii) if such Asset Sale involves the disposition of
Collateral, the Net Cash Proceeds relating to such Asset Sale shall be paid
directly by the purchaser of the Collateral to Lender (pursuant to the terms of
the Intercreditor Agreement), for application to the Revolving Loans (which may
be reborrowed pursuant to the terms of this Agreement); and
(iv) upon the consummation of an Asset Sale other
than Collateral, Borrower or such Guarantor shall apply, or Borrower shall cause
such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such
Asset Sale within 365 days of receipt thereof either:
(A) to prepay any secured Indebtedness;
(B) to make an investment in properties and
assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets (including Capital Stock) that will be
used in the business as existing on September 30, 2004 of Borrower and its
Subsidiaries or in businesses reasonably related thereto
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("Replacement Assets") or to make a Permitted Investment; provided, that, any
Replacement Assets acquired with any Net Cash Proceeds of an Asset Sale of
Collateral shall be owned by Borrower or such Guarantor and shall not be subject
to any Liens other than Permitted Liens and Borrower or such Guarantor, as the
case may be, shall execute and deliver to Lender such documents or other
instruments as shall be reasonably necessary to cause such property or assets to
become subject to the first priority Lien of Lender; and/or
(C) a combination of prepayment and
investment permitted by the foregoing clauses (iv)(A) and (iv)(B).
(v) as of the date of such Asset Sale and after
giving effect thereto, no Default or Event of Default shall exist or have
occurred and be continuing; and
(vi) on the date of such Asset Sale and after giving
effect thereto Excess Availability shall be not less than $7,500,000.
(b) Notwithstanding Section 9.7(a) hereof, Borrower and
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with Section 9.7(a) hereof to the extent that: (i) the consideration
for such Asset Sale constitutes an investment in properties and assets that
replace the properties and assets that were the subject of such Asset Sale or in
properties and assets (including Capital Stock) that will be used in the
business as existing on September 30, 2004 of Borrower and its Subsidiaries or
in businesses reasonably related thereto ("Replacement Assets"); and (ii) such
Asset Sale is for fair market value; provided, that, to the extent such Asset
Sale consists of Collateral, the Replacement Assets shall be owned by Borrower
or a Guarantor and shall not be subject to any Liens other than Permitted Liens
and Borrower or such Guarantor shall execute and deliver to Lender such
documents or other instruments as shall be reasonably necessary to cause such
property or assets to become subject to the first priority Lien of the Lender.
(c) In the event of the transfer of substantially all (but not
all) of the property and assets of Borrower and its Restricted Subsidiaries as
an entirety to a Person in a transaction permitted under Section 9.10 hereof,
which transaction does not constitute a Change of Control, the successor
corporation shall be deemed to have sold the properties and assets of Borrower
and its Restricted Subsidiaries not so transferred for purposes of this Section
9.7, and shall comply with the provisions of this Section 9.7 with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair market value
of such properties and assets of Borrower or its Subsidiaries deemed to be sold
shall be deemed to be Net Cash Proceeds for purposes of this Section 9.7.
9.8 Encumbrances. Borrower and Guarantors shall not, and Borrower will
not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or permit or suffer to exist any Liens of any
kind against or upon any property or assets of Borrower or any of its Restricted
Subsidiaries, whether owned or hereafter acquired, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom, in
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each case other than Permitted Liens except that the Borrower and its Restricted
Subsidiaries may incur Liens on property or assets that are not Collateral if in
the case of any such Liens securing Indebtedness that is expressly subordinate
or junior in right of payment to the Obligations, the Obligations are secured by
a Lien on such property or assets that is senior in priority to such Liens. In
the event that the Lien the existence of which gives rise to a Lien securing the
Obligations pursuant to the foregoing exception ceases to exist, the Lien
securing the Obligations required by the foregoing exception shall be released
at the request of Borrower and Lender shall execute appropriate documentation as
reasonably requested by Borrower.
9.9 Indebtedness.
(a) Borrower and Guarantors shall not and Borrower will not
permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume, guarantee, acquire, become liable, contingently or otherwise, with
respect to, or otherwise become responsible for payment of (collectively,
"incur") any Indebtedness (other than Permitted Indebtedness); provided, that,
if no Default or Event of Default shall have occurred and be continuing at the
time of or as a consequence of the incurrence of any such Indebtedness, Borrower
or any of its Restricted Subsidiaries that is or, upon such incurrence, becomes
a Guarantor may incur Indebtedness (including, without limitation, Acquired
Indebtedness) and any Restricted Subsidiary of Borrower that is not or will not,
upon such incurrence, become a Guarantor may incur Acquired Indebtedness, in
each case if on the date of the incurrence of such Indebtedness, after giving
effect to the incurrence thereof, the Indebtedness to Cash Flow Ratio of
Borrower would not have exceeded 4.5 to 1.0.
(b) Borrower and Guarantors will not, and Borrower will not
permit any Restricted Subsidiary to, directly or indirectly, incur any
Indebtedness which by its terms (or by the terms of any agreement governing such
Indebtedness) is expressly subordinated in right of payment to any other
Indebtedness of Borrower or such Guarantor, as the case may be, unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate to the payment of the Obligations
to the extent and in the same manner as such indebtedness is subordinated to
other indebtedness of the Borrower or such Guarantor, as the case may be. For
purposes of the foregoing, no Indebtedness will be deemed to be subordinated in
right of payment to any other Indebtedness of Borrower or any Guarantor solely
by virtue of such Indebtedness being unsecured or by virtue of the fact that the
holders of such Indebtedness have entered into one or more intercreditor
agreements giving one or more of such holders priority over the other holders in
the collateral held by them.
(c) Notwithstanding the foregoing or any other provision of
this Agreement, Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, incur any Indebtedness, the proceeds of which will
be used, directly or indirectly, to redeem, repurchase or otherwise retire the
Convertible Preferred Stock (or any replacement, refunding or renewal thereof)
on or prior to the expiration of the initial term of this Agreement set forth in
Section 12.1 hereof.
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9.10 Merger, Consolidation. The Borrower will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary of Borrower to sell, assign, transfer,
lease, convey or otherwise dispose of) all or substantially all of Borrower's
assets (determined on a consolidated basis for Borrower and Borrower's
Restricted Subsidiaries) whether as an entirety or substantially as an entirety
to any Person unless:
(a) either:
(i) Borrower shall be the surviving or continuing
corporation or limited liability company; or
(ii) the Person (if other than Borrower) formed by
such consolidation or into which Borrower is merged or the Person that acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of Borrower and its Restricted Subsidiaries substantially
as an entirety (the "Surviving Entity"):
(x) shall be a corporation organized and validly
existing under the laws of the United States or any
state thereof or the District of Columbia; and
(y) shall expressly assume, by joinder agreement (in
form satisfactory to Lender), executed and delivered
to Lender, the due and punctual payment of the
principal of and premium, if any, and interest on all
of the Obligations and the performance of every
covenant of the Financing Agreements on the part of
Borrower to be performed or observed, and shall cause
such amendments, supplements or other instruments to
be filed and recorded in such jurisdictions as may be
required by applicable law to preserve and protect
the Lien in favor of Lender on the Collateral owned
by or transferred to the Surviving Entity, together
with such financing statements as may be required to
perfect any security interests in such Collateral
which may be perfected by the filing of a financing
statement under the UCC of the relevant states;
(b) immediately after giving effect to such transaction and
the assumption contemplated by clause (a)(ii)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred in connection with or in
respect of such transaction), Borrower or such Surviving Entity, as the case may
be, shall be able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 9.9 hereof;
(i) immediately after giving effect to such
transaction and the assumption contemplated by clause (a)(ii)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred and any Lien granted in connection with or in respect of
the transaction), no Default or Event of Default shall have occurred or be
continuing; and
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(ii) Borrower or the Surviving Entity shall have
delivered to Lender an officers' certificate and an opinion of counsel, each in
form and substance satisfactory to Lender stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other disposition and,
if a joinder agreement is required in connection with such transaction, such
joinder agreement complies with the applicable provisions of this Agreement and
the other Financing Agreements and that all conditions precedent in this
Agreement relating to such transaction have been satisfied.
For purposes of the foregoing, (a) the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of Borrower, the Capital Stock of which constitutes all or
substantially all of the properties and assets of Borrower, shall be deemed to
be the transfer of all or substantially all of the properties and assets of
Borrower; (b) Borrower, if surviving, shall be discharged from all Obligations
arising under this Agreement and the other Financing Agreements after the date
of such transfer; and (iii) any Collateral transferred to the Surviving Entity
shall (a) continue to constitute Collateral under this Agreement and the other
Financing Agreements, (b) be subject to the first priority Lien in favor of the
Lender, and (c) not be subject to any Lien other than Permitted Liens.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of Borrower in accordance with the foregoing in
which Borrower is not the continuing corporation, the successor Person formed by
such consolidation or into which Borrower is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, Borrower under this Agreement and the other
Financing Agreements with the same effect as if such Surviving Entity had been
named as such.
(c) Each Guarantor (other than any Guarantor whose Guarantee
is to be released in accordance with the terms of this Agreement in connection
with any transaction complying with the provisions of Section 9.7 hereof) will
not, and Borrower will not cause or permit any Guarantor to, consolidate with or
merge with or into any Person other than Borrower or any other Guarantor unless:
(i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any state thereof
or the District of Columbia;
(ii) such entity assumes by supplemental indenture
all of the obligations of the Guarantor on the Guarantee, and shall cause such
amendments, supplements or other instruments to be filed and recorded in such
jurisdictions as may be required by applicable law to preserve and protect the
Lien on the Collateral owned by or transferred to the Surviving Entity, together
with such financing statements as may be required to perfect any
85
security interests in such Collateral which may be perfected by the filing of a
financing statement under the Uniform Commercial Code of the relevant states;
(iii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and
(iv) immediately after giving effect to such
transaction and the use of any net proceeds therefrom on a pro forma basis,
Borrower could satisfy the provisions of Section 5.1(a)(2) hereof.
Any merger or consolidation of a Guarantor with and into Borrower (with Borrower
being the Surviving Entity) or another Guarantor that is a Wholly Owned
Restricted Subsidiary of Borrower need only comply with Section 5.01(a)(4)
hereof. The Collateral owned by such Guarantor or surviving Person, as the case
may be, (a) shall be subject to a first priority Lien in favor of Lender; and
(b) shall not be subject to any Lien, other than Permitted Liens.
9.11 Limitation on Restricted Payments.
(a) Borrowers and Guarantors will not and Borrower will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any
distribution (other than dividends or distributions payable in Capital Stock of
Borrower) on or in respect of shares of Borrower's Capital Stock to holders of
such Capital Stock;
(ii) purchase, redeem or otherwise acquire or retire
for value any Capital Stock of Borrower (other than Capital Stock owned by a
Restricted Subsidiary);
(iii) make any principal payment on, purchase,
defease, redeem, prepay or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Subordinated Indebtedness; or
(iv) make any Investment (other than Permitted
Investments)
(each of the foregoing actions set forth in clauses (i), (ii), (iii) and (iv)
being referred to as a "Restricted Payment") unless in the determination of
Lender, at the time of such Restricted Payment and immediately after giving
effect thereto,
(A) no Default or Event of Default shall
have occurred and be continuing,
(B) all of the conditions set forth in the
Senior Note Indenture regarding such Restricted Payment have been satisfied
(whether or not such Senior Note Indenture is in full force and effect), and
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(C) Excess Availability on the date of any
such Restricted Payment and after giving effect thereto shall be not less than
$7,500,000;
provided, that, to the extent any such Investment is an Asset Acquisition, all
of the terms and conditions set forth in Section 1.110(a) of this Agreement
shall be satisfied in the determination of Lender.
(b) Notwithstanding the foregoing, the provisions set forth in
the immediately preceding paragraph shall not prohibit:
(i) the payment of any dividend within 60 days after
the date of declaration of such dividend if such dividend would have been
permitted on the date of declaration, provided, that, Excess Availability on the
date of any such payment and after giving effect thereto shall have been equal
to or greater than $7,500,000;
(ii) so long as no Default or Event of Default shall
have occurred and be continuing, the acquisition of any shares of Capital Stock
of Borrower, either (i) solely in exchange for shares of Capital Stock of
Borrower or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of Borrower) of shares of
Capital Stock of Borrower;
(iii) so long as no Default or Event of Default shall
have occurred and be continuing, the acquisition of any Subordinated
Indebtedness, either (A) solely in exchange for shares of Qualified Capital
Stock of Borrower or (B) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of Borrower)
of (1) shares of Qualified Capital Stock of Borrower or (2) Refinancing
Indebtedness;
(iv) so long as no Default or Event of Default shall
have occurred and be continuing, repurchases by Borrower of Common Stock of
Borrower from officers, directors and employees of Borrower or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment of such employees or termination of their seat on the
board of Borrower in an aggregate amount not to exceed $2,000,000 in any
calendar year and not to exceed $5,000,000 in the aggregate since September 30,
2004;
(v) the repurchase of Capital Stock deemed to occur
upon the exercise, conversion or exchange of options or warrants if such Capital
Stock represents all or a portion of the exercise price thereof; provided, that,
if cash is paid to a holder of Capital Stock in connection with any such
transaction, such cash payment must be permitted pursuant to another provision
of this Section 9.11;
(vi) bona fide payments or distributions to
dissenting stockholders of Borrower (other than the Permitted Holders) to the
extent required by applicable law in connection with a merger, consolidation or
transfer of assets that otherwise complies with the terms of this Agreement; and
87
(vii) so long as no Default or Event of Default shall
have occurred and be continuing, Restricted Payments in an aggregate amount not
to exceed $5,000,000 since September 30, 2004.
In determining the aggregate amount of Restricted Payments
made subsequent to the September 30, 2004 in accordance with clause (C) of the
immediately preceding paragraph, amounts expended pursuant to clauses (i),
(ii)(B), (iii)(B)(1), (iv) and (vii) shall be included in such calculation.
(c) Notwithstanding the foregoing or any other provision of
this Agreement, Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, make any cash dividend payments (whether permitted
pursuant to this Section 11(a) or otherwise) on the Convertible Preferred Stock
(or any replacement, refunding or renewal thereof) on or prior to the expiration
of the initial term of this Agreement set forth in Section 12.1 hereof.
9.12 Transactions with Affiliates.
(a) Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each, an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under Section
9.12(c) hereof and (y) Affiliate Transactions on terms that are no less
favorable than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of Borrower or such Restricted Subsidiary.
(b) All Affiliate Transactions (and each series of related
Affiliate Transactions that are similar or part of a common plan) involving
aggregate payments or other property with a fair market value in excess of
$2,500,000 shall, prior to the consummation thereof, be approved by a majority
of the disinterested members of the Board of Directors of Borrower or such
Restricted Subsidiary, as the case may be, such approval to be evidenced by a
Board Resolution stating that such disinterested members (or the disinterested
member, if there is only one disinterested member) have determined that such
transaction complies with the foregoing provisions. If Borrower or any
Restricted Subsidiary of Borrower enters into an Affiliate Transaction (or a
series of related Affiliate Transactions that are similar or part of a common
plan) involving aggregate payments or other property with a fair market value in
excess of $10,000,000, Borrower or such Restricted Subsidiary, as the case may
be, shall, prior to the consummation thereof, obtain a favorable opinion as to
the fairness of such transaction or series of related transactions to Borrower
or the relevant Restricted Subsidiary, as the case may be, from a financial
point of view, from an Independent Financial Advisor and file the same with
Lender.
(c) The restrictions set forth Sections 9.12(a) and 9.12(b)
hereof shall not apply to:
88
(i) reasonable fees and compensation paid to and
indemnity provided on behalf of officers, directors, employees or consultants of
Borrower or any Subsidiary of Borrower as determined in good faith by Borrower's
Board of Directors or senior management;
(ii) transactions exclusively between or among
Borrower and any of its Wholly-Owned Subsidiaries or exclusively between or
among such Subsidiaries, provided, that, such transactions are not otherwise
prohibited by this Agreement;
(iii) any agreement as in effect as of September 30,
2004 or any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) or any replacement agreement thereto so long
as any such amendment or replacement agreement is not more disadvantageous to
Lender in any material respect than the original agreement as in effect on
September 30, 2004; and
(iv) Restricted Payments permitted by this Agreement.
9.13 Compliance with ERISA. Borrower and each Guarantor shall, and
shall cause each of their ERISA Affiliates to: (a) maintain each Plan in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other Federal and State law; (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; (c)not
terminate any Pension Plan so as to incur any material liability to the Pension
Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any Plan or any trust created thereunder which would
subject such Borrower, Guarantor or such ERISA Affiliate to a material tax or
other liability on prohibited transactions imposed under Section 4975 of the
Code or ERISA; (e) make all required contributions to any Pension Plan which it
is obligated to pay under Section 302 of ERISA, Section 412 of the Code; (f) not
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such Pension Plan; (g) not engage in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA; or (h) not allow or
suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any Plan that is a single employer plan, which
termination could result in any material liability to the Pension Benefit
Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters. Borrower and each Guarantor
shall, for financial reporting purposes, cause its, and each of its Restricted
Subsidiaries' (a) fiscal years to end on December 31st of each year and (b)
fiscal quarters to end on March 31st, June 30th, September 30th and December
31st of each year.
9.15 Change in Business. Borrower and each Guarantor shall not engage
in any business other than the business of Borrower or such Guarantor on the
date hereof and any business reasonably related, ancillary or complimentary to
the business in which Borrower or such Guarantor is engaged on the date hereof.
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9.16 Limitation of Restrictions Affecting Subsidiaries. Borrower and
each Guarantor shall not, directly, or indirectly, create or otherwise cause or
suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Restricted Subsidiary of Borrower or such Guarantor to (a) pay
dividends or make other distributions on or in respect to Capital Stock or pay
any Indebtedness owed to Borrower or such Guarantor or any Restricted Subsidiary
of Borrower or such Guarantor; (b) make loans or advances to Borrower or such
Guarantor or any Restricted Subsidiary of Borrower or such Guarantor, or (c)
transfer any of its properties or assets to Borrower or such Guarantor or any
Restricted Subsidiary of Borrower or such Guarantor except in each case for such
encumbrances and restrictions existing under or by reason of (i) applicable law,
(ii) this Agreement, (iii) the Indenture, Senior Secured Notes and related
guarantees and collateral documents related thereto, (iv) any agreement or
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired; (v)
agreements existing on the Issue Date to the extent and in the manner such
encumbrances or restrictions are in effect on the Issue Date; (vi) restrictions
on the transfer of assets subject to any Lien permitted under this Indenture
imposed by the holder of such Lien; (vii) restrictions imposed by any agreement
to sell assets or Capital Stock permitted under this Indenture to any Person
pending the closing of such sale; (viii) customary provisions in joint venture
agreements and other similar agreements (in each case relating solely to the
respective joint venture or similar entity or the equity interests therein
entered into in the ordinary course of business; (ix) restrictions contained in
the terms of Purchase Money Obligations or Capitalized Lease Obligations not
incurred in violation of this Indenture; provided that such restrictions relate
only to the property financed with such Indebtedness, and restrictions contained
in the terms of any other Indebtedness not incurred in violation of this
Indenture; (x) customary non-assignment provisions of any contract or any lease
governing a leasehold of any Restricted Subsidiary of the Borrower; and (xi) an
agreement governing Indebtedness incurred to Refinance the Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in clauses (vi) through
(viii) above, provided, however, that the provisions relating to such
encumbrance or restriction contained in any such Indebtedness are no less
favorable to the Borrower or the applicable Restricted Subsidiary in any
material respect as determined by the Board of Directors of the Borrower in its
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clauses
(vi), (vii), (viii) and (ix).
Nothing contained in this Section 9.16 shall prevent the Borrower or any of its
Restricted Subsidiaries from creating, incurring, assuming or suffering to exist
any Liens otherwise permitted by Section 9.8 hereof.
9.17 Minimum Consolidated Cash Flow. At any time that Cash Dominion
Excess Availability is less than $5,000,000 during the fiscal quarter then
ended, Borrower and its Restricted Subsidiaries, on a consolidated basis, shall,
when measured as of the fiscal quarter most recently ended for which Lender has
received financial statements in accordance with
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Section 9.6(a)(i) hereof, for the four (4) immediately preceding consecutive
fiscal quarters then ended, maintain, Consolidated Cash Flow of not less than
$40,000,000.
9.18 License Agreements. Borrower and each Guarantor shall (a) promptly
and faithfully observe and perform all of the material terms, covenants,
conditions and provisions of the material License Agreements to which it is a
party to be observed and performed by it, at the times set forth therein, if
any, (b) not do, permit, suffer or refrain from doing anything that could
reasonably be expected to result in a default under or breach of any of the
terms of any material License Agreement, (c) not cancel, surrender, modify,
amend, waive or release any material License Agreement in any material respect
or any term, provision or right of the licensee thereunder in any material
respect, or consent to or permit to occur any of the foregoing; except, that,
subject to Section 9.19(b) below, Borrower or such Guarantor may cancel,
surrender or release any material License Agreement in the ordinary course of
the business of Borrower or such Guarantor,(d) give Lender prompt written notice
of any material License Agreement entered into by Borrower or such Guarantor
after the date hereof, together with a true, correct and complete copy thereof
and such other information with respect thereto as Lender may request, (e) give
Lender prompt written notice of any material breach of any obligation, or any
default, by any party under any material License Agreement, and deliver to
Lender (promptly upon the receipt thereof by Borrower or such Guarantor in the
case of a notice to Borrower or such Guarantor and concurrently with the sending
thereof in the case of a notice from Borrower or such Guarantor) a copy of each
notice of default and every other notice and other communication received or
delivered by Borrower or such Guarantor in connection with any material License
Agreement which relates to the right of Borrower or such Guarantor to continue
to use the property subject to such License Agreement, and (f) furnish to
Lender, promptly upon the request of Lender, such information and evidence as
Lender may reasonably require from time to time concerning the observance,
performance and compliance by Borrower or such Guarantor or the other party or
parties thereto with the material terms, covenants or provisions of any material
License Agreement.
9.19 Foreign Assets Control Regulations, Etc. None of the requesting or
borrowing of the Revolving Loans will violate the Trading With the Enemy Act (50
USC Section 1 et seq., as amended) (the "Trading With the Enemy Act") or any of
the foreign assets control regulations of the United States Treasury Department
(31 C.F.R., Subtitle B, Chapter V, as amended) (the "Foreign Assets Control
Regulations") or any enabling legislation or executive order relating thereto
(including, but not limited to (a) Executive order 13224 of September 21, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the "Executive
Order") and (b) the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law
107-56). None of Borrower or any of their Subsidiaries or other Affiliates is or
will become a "blocked person" as described in the Executive Order, the Trading
with the Enemy Act or the Foreign Assets Control Regulations or engages or will
engage in any dealings or transactions, or be otherwise associated, with any
such "blocked person".
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9.20 Carrier Service Agreements; Interconnection Agreements; IRU
Agreements.
(a) Borrower and Guarantors shall (i) promptly and faithfully
observe and perform in all material respects all of the terms, covenants,
conditions and provisions of any Carrier-Out Service Agreement that is the basis
for ten (10%) percent or more of the aggregate revenues of Borrower and
Guarantors and all Carrier-In Service Agreements in the immediately preceding
month to be observed and performed by it, where the failure to so observe or
perform gives any other party to such Carrier Service Agreement the right or
option to terminate or suspend or otherwise prevent the use by Borrower of the
services subject to such Carrier Service Agreement or cease any payment to
Borrower or any Guarantor thereunder or could otherwise reasonably be expected
to have a Material Adverse Effect, (ii) not do, permit, suffer or refrain from
doing anything, as a result of which there could be a material event of default
under or material breach of any of the terms of any such Carrier Service
Agreement where such event of default or breach would have or would reasonably
be expected to have a Material Adverse Effect, (iii) not cancel, terminate,
surrender, modify, amend, waive or release any such Carrier Service Agreement or
any term, provision or right of Borrower or any Guarantor thereunder, or consent
to or permit to occur any of the foregoing except where the cancellation,
termination or other release would not have or would not reasonably be expected
to have a Material Adverse Effect, (iv) give Lender prompt written notice of any
breach of any material obligation, or any event of default, by any party under
any Carrier-In Service Agreement, which gives any other party to such Carrier-In
Service Agreement the right or option to terminate or suspend or otherwise
prevent the use by Borrower or Guarantor of the services subject to such
Carrier-In Service Agreement where the failure of Borrower or any Guarantor to
have access to such services could reasonably be expected to have a Material
Adverse Effect or in respect of any Carrier-Out Service Agreement any payments
to Borrower or any Guarantor constituting their Eligible Accounts or with
respect to payments the lack of which would have a Material Adverse Effect and
deliver to Lender (promptly upon the receipt thereof by Borrower or any
Guarantor in the case of a notice to Borrower, and concurrently with the sending
thereof in the case of a notice from Borrower), a copy of each notice of default
or other notice received or delivered by Borrower or any Guarantor in connection
with any Carrier Service Agreement which relates to the right of Borrower or any
Guarantor to continue to use the services subject to such Carrier Service
Agreement or to receive any payments thereunder, (v) furnish to Lender, promptly
upon the request of Lender, such information and evidence as Lender may
reasonably require from time to time concerning the observance, performance and
compliance by Borrower or any Guarantor or the other party or parties thereto
with the terms, covenants or provisions of the Carrier Service Agreements, (vi)
promptly and faithfully observe and perform all of the material terms,
covenants, conditions and provisions of any Carrier-In Agreements, where the
failure to so observe or perform gives any other party to such Carrier-In
Agreements the right or option to terminate or suspend or otherwise prevent the
use by Borrower of the services subject to such Carrier-In Agreement , and such
termination or suspension would have a Material Adverse Effect, and (vii)
furnish to Lender, promptly upon the request of Lender, such information and
evidence as Lender may reasonably require from time to time concerning the
observance, performance and compliance by Borrower or any Guarantor or the other
party or parties thereto
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with the terms, covenants or provisions of the Carrier-In Agreements.
Notwithstanding the foregoing, nothing in the subsection shall effect the
Borrower's or any Guarantor's ability to exercise its rights under the Carrier
Service Agreement or require the Borrower or any Guarantor to give notice to
Lender of any claims relating to Carrier Service Agreements so long as the
Borrower or any Guarantor is disputing such claims in good faith unless the
Borrower or any such Guarantor reasonably believes that the outcome of the
dispute would have a Material Adverse Effect.
(b) Borrower and Guarantors shall (i) promptly and faithfully
observe and perform in all material respects all of the terms, covenants,
conditions and provisions of any IRU Agreements, where the failure to so observe
or perform gives any other party to such IRU Agreements the right or option to
terminate or suspend or otherwise prevent the use by Borrower of the services
subject to such IRU Agreement or cease any payment to Borrower or any Guarantor
thereunder or would have a Material Adverse Effect, (ii) not do, permit, suffer
or refrain from doing anything, as a result of which there could be a material
event of default under or material breach of any of the terms of any such IRU
Agreement where such event of default or breach would have or would reasonably
be expected to have a Material Adverse Effect, (iii) not cancel, terminate,
surrender, modify, amend, waive or release any such IRU Agreement or any term,
provision or right of Borrower or any Guarantor thereunder, or consent to or
permit to occur any of the foregoing where such cancellation, termination,
release or other modification would have or would reasonably be expected to have
a Material Adverse Effect, (iv) give Lender prompt written notice of any breach
of any material obligation, or any event of default, by any party under any IRU
Agreement, which gives any other party to such IRU Agreement the right or option
to terminate or suspend or otherwise prevent the use by Borrower or Guarantor of
the services subject to such IRU Agreement or any payments to Borrower or any
Guarantor and deliver to Lender (promptly upon the receipt thereof by Borrower
or any Guarantor in the case of a notice to the Borrower, and concurrently with
the sending thereof in the case of a notice from Borrower), a copy of each
notice of default or other notice received or delivered by Borrower or any
Guarantor in connection with any IRU Agreement which relates to the right of
Borrower or any Guarantor to continue to use the services subject to such IRU
Agreement or to receive any payments thereunder, (v) with respect to all
existing IRU Agreements and all IRU Agreements entered into after the date
hereof, use commercially efforts to obtain the express written agreement from
the other party thereto that Borrower or such Guarantor shall have the express
right without the prior consent of such party to assign or otherwise transfer
any such IRU Agreement as collateral to Lender or to any corporation or other
person that purchases any or all of the assets of Borrower or such Guarantor;
and (vi) furnish to Lender, promptly upon the request of Lender, such
information and evidence as Lender may require from time to time concerning the
observance, performance and compliance by Borrower or any Guarantor or the other
party or parties thereto with the terms, covenants or provisions of the IRU
Agreements.
9.21 Billing Processor Agreements. Borrower and Guarantors shall (a)
promptly and faithfully observe and perform in all material respects all of the
terms, covenants, conditions and provisions of any Billing Processor Agreements
to be observed and performed by it at the times
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set forth therein, if any, where the failure to so observe or perform gives any
other party to such Billing Processor Agreement the right or option to terminate
or suspend providing the services to Borrower to be provided thereunder and such
termination could reasonably be expected to have a Material Adverse Effect; (b)
not do, permit, suffer or refrain from doing anything, as a result of which
there would reasonably be expected to be a material event of default under or
material breach of any of the terms of any Billing Processor Agreement, (c) at
all times, maintain in full force and effect the Billing Processor Agreements
and not terminate, cancel, surrender, modify, amend, waive or release any
Billing Processor Agreement, or consent to or permit to occur any of the
foregoing; except, that, Borrower may terminate or cancel any Billing Processor
Agreement in the ordinary course of the business of Borrower; provided, that,
Borrower shall give Lender not less than thirty (30) days prior written notice
of its intention to so terminate or cancel any Billing Processor Agreement; (d)
not enter into any new Billing Processor Agreement with any new Billing
Processor unless (i) Lender shall have received not less than thirty (30) days
prior written notice of the intention of Borrower to enter into such agreement
(together with such other information with respect thereto as Lender may
reasonably request), (ii) Borrower or such Guarantor delivers, or causes to be
delivered to Lender, a Billing Processor Acknowledgment in favor of Lender, duly
authorized, executed and delivered by such Billing Processor; (e) give Lender
immediate written notice of any Billing Processor Agreement entered into by
Borrower after the date hereof, together with a true, correct and complete copy
thereof and such other information with respect thereto as Lender may reasonably
request; and (f) furnish to Lender, promptly upon the request of Lender, such
information and evidence as Lender may reasonably request from time to time
concerning the observance, performance and compliance by Borrower or such
Guarantor or the other party or parties thereto with the terms, covenants or
provisions of the Billing Processor Agreements.
9.22 Senior Secured Note Permitted Indebtedness Limit. Borrower shall
not permit the outstanding aggregate amount of Revolving Loans at any time when
taken together with outstanding Capitalized Lease Obligations and Purchase Money
Obligations to exceed $10,000,000 (or such greater amount as may be agreed to by
Borrower, Guarantors and Senior Secured Note Trustee, after the date hereof
pursuant to an amendment to the Senior Secured Note Documents). Borrower and
Guarantors shall give Lender at least ten (10) days notice prior, to entering
into any Senior Secured Note Permitted Credit Facility after the date hereof.
9.23 Modifications of Indebtedness, Organizational Documents and
Certain Other Agreements; Certain Payments of Indebtedness, Etc. Borrower and
Guarantors shall not, and Borrower shall not permit any Restricted Subsidiary
to:
(a) amend, modify or otherwise change its certificate of
incorporation, articles of association, certificate of formation, limited
liability agreement or other organizational documents, as applicable, including,
without limitation, entering into any new agreement with respect to any of its
Capital Stock, except for amendments, modifications or other changes that do not
adversely affect the rights and privileges of Borrower or any Guarantor, or its
Restricted Subsidiaries and do not adversely affect the ability of a Borrower,
Guarantor or such Subsidiary
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to amend, modify, renew or supplement the terms of this Agreement or any of the
other Financing Agreements, or otherwise affect the interests of Lender and so
long as at the time of any such amendment, modification or change, no Default or
Event of Default shall exist or have occurred;
(b) amend, modify or otherwise change (or permit the
amendment, modification or other change in any manner of) any of the provisions
of any of Senior Secured Note Documents, or the agreements related to any other
Indebtedness permitted under Section 9.9 hereof in a way that would adversely
effect the Lender's rights under this Agreement;
(c) make or agree to make any payment, prepayment, redemption,
retirement, defeasance, purchase or sinking fund payment or other acquisition
for value of any of its Indebtedness (including, without limitation, by way of
depositing money or securities with the trustee therefor before the date
required for the purpose of paying any portion of such Indebtedness when due),
or otherwise set aside or deposit or invest any sums for such purpose, except
that Borrower, Guarantors or any such Subsidiary may (i) make payments of
regularly scheduled principal and interest or other mandatory payments as and
when due in respect of Indebtedness permitted under Section 9.9 hereof and (ii)
prepay, redeem, retire or repurchase such Indebtedness in cash or other
immediately available funds; provided, that, Excess Availability shall have been
not less than $7,500,000 as of the date of the most recent calculation of the
Borrowing Base prior to the date of any such payment, and after giving effect to
the payment of such payment, on a pro forma basis using the Excess Availability
as of the date of the most recent calculation of the Borrowing Base immediately
prior to any such payment, Adjusted Excess Availability shall be not less than
$7,500,000, and (B) in the case of any such prepayment, redemption, retirement
or repurchase, as of the date of any such payment and after giving effect
thereto, no Default or Event of Default shall exist or have occurred.
9.24 Costs and Expenses. Borrower and Guarantors shall pay to Lender on
demand all reasonable and invoiced costs, expenses, filing fees and taxes paid
or payable in connection with the preparation, negotiation, execution, delivery,
recording, syndication, administration, collection, liquidation, enforcement and
defense of the Obligations, Lender's rights in the Collateral, this Agreement,
the other Financing Agreements and all other documents related hereto or
thereto, including any amendments, supplements or consents which may hereafter
be contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all out of pocket costs and expenses of filing or
recording (including Uniform Commercial Code financing statement filing taxes
and fees, documentary taxes and intangibles taxes and fees, if applicable); (b)
costs and expenses and fees for insurance premiums, assessments, search fees,
background checks, costs and expenses of remitting loan proceeds, collecting
checks and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with respect
thereto; (c) all out of pocket costs and expenses of preserving and protecting
the Collateral; (d) all out of pocket costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise
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enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (e) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and such Borrower's or
Guarantor's operations, plus a per diem charge at Lender's then standard rate
for Lender's examiners in the field and office (which rate as of the date hereof
is $850 per person per day, provided, that, such field exams shall not exceed
ten (10) Business Days per calendar year other than after the occurrence of an
Event of Default); and (f) the reasonable fees and disbursements of counsel
(including legal assistants) to Lender in connection with any of the foregoing.
9.25 Further Assurances.
(a) In the case of the formation or acquisition by a Borrower
or Guarantor of any Subsidiary after the date hereof (other than an Unrestricted
Subsidiary), as to any such Subsidiary, (i) the Borrower or Guarantor forming
such Subsidiary shall cause any such Subsidiary to execute and deliver to
Lender, the following (each in form and substance satisfactory to Lender), (A)
an absolute and unconditional guarantee of payment of the Obligations, (B) a
security agreement granting to Lender a first security interest and lien (except
as otherwise consented to in writing by Lender) upon all of the assets of any
such Subsidiary, and (C) such other agreements, documents and instruments as
Lender may require in connection with the documents referred to above in order
to make such Subsidiary a party to this Agreement as a "Borrower" or as a
"Guarantor" including those agreements, instruments and documents such
Subsidiary would have executed and delivered to Lender had such Subsidiary been
a Guarantor as of the date of this Agreement and any related agreements that
Borrower or an existing Guarantor would have executed with or in favor of Lender
with respect to such Subsidiary had it existed on the date hereof.
(b) In the case of an acquisition of assets (other than
Capital Stock) by a Borrower or Guarantor after the date hereof, Lender shall
have received, in form and substance satisfactory to Lender, (i) evidence that
Lender has valid and perfected security interests in and liens upon all
purchased assets to the extent such assets constitute Collateral hereunder, (ii)
all Collateral Access Agreements and other consents, waivers, acknowledgments
and other agreements from third persons which Lender may deem necessary or
desirable in order to permit, protect and perfect its security interests in and
liens upon the assets purchased, (iii) the agreement of the seller consenting to
the collateral assignment by the Borrower or Guarantor purchasing such assets of
all rights and remedies and claims for damages of Borrower or such Guarantor
relating to the Collateral (including, without limitation, any bulk sales
indemnification) under the agreements, documents and instruments relating to
such acquisition and (iv) such other agreements, documents and instruments as
Lender may require in connection with the documents referred to above,
including, but not limited to, supplements and amendments hereto, corporate
resolutions and other organization and authorizing documents and favorable
opinions of counsel to such person.
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(c) At the request of Lender at any time and from time to
time, Borrower and Guarantors shall, at their expense, duly execute and deliver,
or cause to be duly executed and delivered, such further agreements, documents
and instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of Borrower or any Guarantor representing that all conditions
precedent to the making of Loans and providing Letters of Credit contained
herein are satisfied. In the event of such request by Lender, Lender may, at
Lender's option, cease to make any further Revolving Loans until Lender has
received such certificate and, in addition, Lender has determined that such
conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay (A) any of the Obligations
(other than interest or fees) when due (or) any payment of interest or fees on
the Obligations within five (5) days of when stated to be due, or (ii) Borrower
or any Guarantor fails to perform any of the covenants contained in Sections
9.3, 9.4, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such failure shall
continue for thirty (30) days; provided, that, such thirty (30) day period shall
not apply in the case of: (A) any failure to observe any such covenant which is
not capable of being cured at all or within such thirty (30) day period or which
has been the subject of a prior failure within a six (6) month period or (B) an
intentional breach by Borrower or any Guarantor of any such covenant or (iii)
Borrower or any Guarantor fails to perform any of the terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements other than those described in Sections 10.1(a)(i) and
10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
Borrower or any Guarantor in this Agreement, the other Financing Agreements or
any other written agreement, schedule, confirmatory assignment or otherwise
shall when made or deemed made be false or misleading in any material respect;
(c) any Guarantor revokes or terminates or purports to revoke
or terminate, or fails to perform any of the terms, covenants, conditions or
provisions of any guarantee, endorsement or other agreement of such party in
favor of Lender;
(d) any judgment for the payment of money is rendered against
Borrower or any Guarantor in excess of $5,000,000 in any one case or in excess
of $5,000,000 in the aggregate (to the extent not covered by insurance where the
insurer has assumed responsibility in writing for such judgment) and shall
remain undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any judgment other
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than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against Borrower or any Guarantor or any of the Collateral
having a value in excess of $5,000,000 in the aggregate and shall remain
undischarged or unvacated for a period in excess of thirty (30) days;
(e) Borrower dissolves or suspends or discontinues doing
business;
(f) Borrower or any Guarantor makes an assignment for the
benefit of creditors, makes or sends notice of a bulk transfer or calls a
meeting of its creditors or principal creditors in connection with a moratorium
or adjustment of the Indebtedness due to them;
(g) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Guarantor or all or any part of its
properties and such petition or application is not dismissed within forty-five
days after the date of its filing (such time period shall be increased to sixty
(60) days if on the 45th day after the filing of such case or proceeding
Borrower or such Guarantor is still in good faith diligently pursuing the
dismissal of such case or proceeding) or Borrower or any Guarantor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Guarantor or for all or any part of its
property;
(i) any default in respect of any Indebtedness of Borrower or
any Guarantor (other than Indebtedness owing to Lender hereunder), in any case
in an amount in excess of $5,000,000, which default continues for more than the
applicable cure period, if any, with respect thereto or any default by Borrower
or any Guarantor under any Material Contract, which default continues for more
than the applicable cure period, if any, with respect thereto and/or is not
waived in writing by the other parties thereto;
(j) any material provision hereof or of any of the other
Financing Agreements shall for any reason cease to be valid, binding and
enforceable with respect to any party hereto or thereto (other than Lender) in
accordance with its terms, or any such party shall challenge the enforceability
hereof or thereof, or shall assert in writing, or take any action or fail to
take any action based on the assertion that any provision hereof or of any of
the other Financing Agreements has ceased to be or is otherwise not valid,
binding or enforceable in accordance with its terms, or any security interest
provided for herein or in any of the other
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Financing Agreements shall cease to be a valid and perfected first priority
security interest in any of the Collateral purported to be subject thereto
(except as otherwise permitted herein or therein);
(k) an ERISA Event shall occur which results in or could
reasonably be expected to result in liability of Borrower in an aggregate amount
in excess of $5,000,000;
(l) any Change of Control;
(m) the indictment by any Governmental Authority, or as Lender
may reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of Borrower or any Guarantor of which Borrower, Guarantor
or Lender receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Lender, under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower or such Guarantor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of (i) any of the Collateral having a value in excess of
$5,000,000 or (ii) any other property of Borrower or any Guarantor which is
necessary or material to the conduct of its business;
(n) there shall have occurred a Material Adverse Effect after
the date hereof;
(o) the occurrence of any Regulatory Event; or
(p) the Borrower or a Guarantor defaults under any of the
other Financing Agreements in a manner other than covered by subsection (a)-(p)
above.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the UCC and other applicable law, all
of which rights and remedies may be exercised without notice to or consent by
Borrower or any Guarantor, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies and
powers granted to Lender hereunder, under any of the other Financing Agreements,
the UCC or other applicable law, are cumulative, not exclusive and enforceable,
in Lender's discretion, alternatively, successively, or concurrently on any one
or more occasions, and shall include, without limitation, the right to apply to
a court of equity for an injunction to restrain a breach or threatened breach by
Borrower or any Guarantor of this Agreement or any of the other Financing
Agreements. Lender may, at any time or times, proceed directly against Borrower
or any Guarantor to collect the Obligations without prior recourse to the
Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion,
upon notice to Borrower, (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Lender,
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(provided, that, upon the occurrence of any Event of Default described in
Sections 10.1(g) and 10.1(h), all Obligations shall automatically become
immediately due and payable), (ii) with or without judicial process or the aid
or assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(iii) require Borrower or any Guarantor, at Borrower's expense, to assemble and
make available to Lender any part or all of the Collateral at any place and time
designated by Lender, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker's board, at any office of Lender
or elsewhere) at such prices or terms as Lender may deem reasonable, for cash,
upon credit or for future delivery, with the Lender having the right to purchase
the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of Borrower or any
Guarantor, which right or equity of redemption is hereby expressly waived and
released by Borrower and Guarantors and/or (vii) terminate this Agreement. If
any of the Collateral is sold or leased by Lender upon credit terms or for
future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, ten (10) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower and Guarantors waive any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, Borrower and
each Guarantor waives the posting of any bond which might otherwise be required.
At any time an Event of Default exists or has occurred and is continuing, upon
Lender's request.
(c) At any time or times that an Event of Default exists or
has occurred and is continuing, Lender may, in its discretion, enforce the
rights of Borrower or any Guarantor against any account debtor, secondary
obligor or other obligor in respect of any of the Accounts or other Receivables.
Without limiting the generality of the foregoing, Lender may, in its discretion,
at such time or times (i) notify any or all account debtors, secondary obligors
or other obligors in respect thereof that the Receivables have been assigned to
Lender and that Lender has a security interest therein and Lender may direct any
or all account debtors, secondary obligors and other obligors to make payment of
Receivables directly to Lender, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Receivables or other obligations included
in the Collateral and thereby discharge or release the account debtor or any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Lender shall not be
liable for any failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action
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Lender may deem necessary or desirable for the protection of its interests. At
any time that an Event of Default exists or has occurred and is continuing, at
Lender's request, all invoices and statements sent to any account debtor shall
state that the Accounts and such other obligations have been assigned to Lender
and are payable directly and only to Lender and Borrower and Guarantors shall
deliver to Lender such originals of documents evidencing the sale and delivery
of goods or the performance of services giving rise to any Accounts as Lender
may require. In the event any account debtor returns Collateral when an Event of
Default exists or has occurred and is continuing, Borrower shall, upon Lender's
request, hold the returned Collateral in trust for Lender, and not issue any
credits, discounts or allowances with respect thereto without Lender's prior
written consent.
(d) To the extent that applicable law imposes duties on Lender
to exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), Borrower and each Guarantor acknowledges and agrees that
it is not commercially unreasonable for Lender (i) to fail to incur expenses
reasonably deemed significant by Lender to prepare Collateral for disposition,
(ii) to fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by other law, to fail to obtain
consents of any Governmental Authority or other third party for the collection
or disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against account debtors, secondary obligors or
other persons obligated on Collateral or to remove liens or encumbrances on or
any adverse claims against Collateral, (iv) to exercise collection remedies
against account debtors and other persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other persons, whether or not in the same business as Borrower or any
Guarantor, for expressions of interest in acquiring all or any portion of the
Collateral, (vii) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing Internet sites that provide
for the auction of assets of the types included in the Collateral or that have
the reasonable capability of doing so, or that match buyers and sellers of
assets, (ix) to dispose of assets in wholesale rather than retail markets, (x)
to disclaim disposition warranties, (xi) to purchase insurance or credit
enhancements to insure Lenders against risks of loss, collection or disposition
of Collateral or to provide to Lender a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by Lender,
to obtain the services of other brokers, investment bankers, consultants and
other professionals to assist Lender in the collection or disposition of any of
the Collateral. Borrower and each Guarantor acknowledges that the purpose of
this Section is to provide non-exhaustive indications of what actions or
omissions by Lender would not be commercially unreasonable in the exercise by
Lender of remedies against the Collateral and that other actions or omissions by
Lender shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section. Without limitation of the foregoing, nothing
contained in this Section shall be construed to grant any rights to Borrower or
any Guarantor or to impose any duties on Lender that would not have been granted
or imposed by this Agreement or by applicable law in the absence of this
Section.
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(e) For the purpose of enabling Lender to exercise the rights
and remedies hereunder, Borrower and each Guarantor hereby grants to Lender, to
the extent assignable, an irrevocable, non-exclusive license (exercisable at any
time an Event of Default shall exist or have occurred and for so long as the
same is continuing) without payment of royalty or other compensation to Borrower
or any Guarantor, to use, assign, license or sublicense any of the trademarks,
service-marks, trade names, business names, trade styles, designs, logos and
other source of business identifiers and other Intellectual Property and general
intangibles now owned or hereafter acquired by Borrower or any Guarantor,
wherever the same maybe located, including in such license reasonable access to
all media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout thereof.
(f) At any time an Event of Default exists or has occurred and
is continuing, Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in accordance
with the terms hereof, whether or not then due or may hold such proceeds as cash
collateral for the Obligations. Borrower and Guarantors shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and expenses.
(g) Without limiting the foregoing, upon the occurrence of a
Default or an Event of Default, Lender may, at Lender's option, with notice, (i)
cease making Revolving Loans or reduce the lending formulas or amounts of
Revolving Loans available to Borrower and/or (ii) terminate any provision of
this Agreement providing for any future Revolving Loans to be made by Lender to
Borrower and/or (iii) establish such Reserves as Lender determines, without
limitation or restriction, notwithstanding anything to the contrary contained
herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements (except as otherwise provided
therein) and any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of North Carolina but excluding any principles of
conflicts of law or other rule of law that would cause the application of the
law of any jurisdiction other than the laws of the State of North Carolina.
(b) Borrower, Guarantors and Lender irrevocably consent and
submit to the non-exclusive jurisdiction of the Superior Court for North
Carolina, Mecklenburg County and the United States District Court for the
Western District of North Carolina, whichever Lender may elect, and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Agreement or any of the other Financing
Agreements or in any way connected with or related or incidental to the dealings
of the parties hereto in
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respect of this Agreement or any of the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and agree
that any dispute with respect to any such matters shall be heard only in the
courts described above (except that Lender shall have the right to bring any
action or proceeding against Borrower or any Guarantor or its or their property
in the courts of any other jurisdiction which Lender deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against Borrower or any Guarantor or its or their property).
(c) Borrower and each Guarantor hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by certified mail (return receipt requested) directed to its address set
forth herein and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Lender's
option, by service upon Borrower or any Guarantor in any other manner provided
under the rules of any such courts. Within the earlier of such period of time
permitted by applicable law or thirty (30) days after such service, Borrower or
such Guarantor shall appear in answer to such process, failing which Borrower or
such Guarantor shall be deemed in default and judgment may be entered by Lender
against Borrower or such Guarantor for the amount of the claim and other relief
requested.
(d) BORROWER, GUARANTORS AND LENDER EACH HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR
THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER,
GUARANTORS AND LENDER HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT BORROWER, ANY GUARANTOR OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower or any
Guarantor (whether in tort, contract, equity or otherwise) for losses suffered
by Borrower or such Guarantor in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Lender , that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Lender shall be
entitled to the benefit of the rebuttable
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presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement. Borrower and each
Guarantor: (i) certifies that neither Lender nor any representative, agent or
attorney acting for or on behalf of Lender has represented, expressly or
otherwise, that Lender would not, in the event of litigation, seek to enforce
any of the waivers provided for in this Agreement or any of the other Financing
Agreements and (ii) acknowledges that in entering into this Agreement and the
other Financing Agreements, Lender is relying upon, among other things, the
waivers and certifications set forth in this Section 11.1 and elsewhere herein
and therein.
11.2 Waiver of Notices. Borrower and each Guarantor hereby expressly
waives demand, presentment, protest and notice of protest and notice of dishonor
with respect to any and all instruments and chattel paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on Borrower or any Guarantor which
Lender may elect to give shall entitle Borrower or such Guarantor to any other
or further notice or demand in the same, similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Intentionally Deleted.
11.5 Indemnification. Borrower and each Guarantor shall, jointly and
severally, indemnify and hold Lender, and its officers, directors, agents,
employees, advisors and counsel and their respective Affiliates (each such
person being an "Indemnitee"), harmless from and against any and all losses,
claims, damages, liabilities, costs or expenses (including attorneys' fees and
expenses) imposed on, incurred by or asserted against any of them in connection
with any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing Agreements,
or any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel except that Borrower and Guarantors shall not have any obligation under
this Section 11.5 to indemnify an Indemnitee with respect to a matter covered
hereby resulting from the gross negligence or wilful misconduct of such
Indemnitee as determined pursuant to a final, non-
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appealable order of a court of competent jurisdiction (but without limiting the
obligations of Borrower or Guarantors as to any other Indemnitee). To the extent
that the undertaking to indemnify, pay and hold harmless set forth in this
Section may be unenforceable because it violates any law or public policy,
Borrower and Guarantors shall pay the maximum portion which it is permitted to
pay under applicable law to Lender in satisfaction of indemnified matters under
this Section. To the extent permitted by applicable law, no Borrower or
Guarantor shall assert, and Borrower and each Guarantor hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any of
the other Financing Agreements or any undertaking or transaction contemplated
hereby. No Indemnitee referred to above shall be liable for any damages arising
from the use by unintended recipients of any information or other materials
distributed by it through telecommunications, electronic or other information
transmission systems in connection with this Agreement or any of the other
Financing Agreements or the transaction contemplated hereby or thereby. All
amounts due under this Section shall be payable upon demand. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on August 1, 2009, unless at
least six (6) months prior to such date, Lender has received evidence in form
and substance satisfactory to it that the final maturity date of the Senior
Secured Notes has been extended to a date which is later than December 31, 2009,
in which case, the term of this Agreement shall end on the date four (4) years
from the date hereof (the earlier of such dates being the "Scheduled Termination
Date"). In addition, Borrower may terminate this Agreement at any time upon ten
(10) days prior written notice to Lender (which notice shall be irrevocable) and
Lender may, at its option, terminate this Agreement at any time on or after an
Event of Default. Upon the Scheduled Termination Date or any other effective
date of termination of the Financing Agreements, Borrower shall pay to Lender
all outstanding and unpaid Obligations and shall furnish cash collateral to
Lender (or at Lender's option, a letter of credit issued for the account of
Borrower and at Borrower's expense, in form and substance satisfactory to
Lender, by an Borrower acceptable to Lender and payable to Lender as
beneficiary) in such amounts as Lender determines are reasonably necessary to
secure Lender from loss, cost, damage or expense, including attorneys' fees and
expenses, in connection with any contingent Obligations, including checks or
other payments provisionally credited to the Obligations and/or as to which
Lender has not yet received final and indefeasible payment and any continuing
obligations of Lender pursuant to any Deposit Account Control Agreement. Such
payments in respect of the Obligations shall be remitted by wire transfer in
Federal funds to the Lender Payment Account or such other bank account of
Lender, as Lender may, in its discretion, designate in writing to Borrower for
such purpose. Interest shall be due until and including the
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next Business Day, if the amounts so paid by Borrower to the Lender Payment
Account or other bank account designated by Lender are received in such bank
account later than 12:00 noon, New York City time.
(b) No termination of this Agreement or any of the other
Financing Agreements shall relieve or discharge Borrower or any Guarantor of its
respective duties, obligations and covenants under this Agreement or any of the
other Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Lender's continuing security interest in the Collateral
and the rights and remedies of Lender hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until all such Obligations
have been fully and finally discharged and paid. Accordingly, Borrower and each
Guarantor waives any rights it may have under the UCC to demand the filing of
termination statements with respect to the Collateral and Lender shall not be
required to send such termination statements to Borrower or Guarantors, or to
file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Obligations paid and
satisfied in full in immediately available funds.
12.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1,
Article 8 or Article 9 of the UCC shall have the meanings given therein unless
otherwise defined in this Agreement. Capitalized terms used herein and not
otherwise defined herein shall have their meanings as set forth in the Senior
Secured Note Indenture as in effect on the date hereof.
(b) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
(c) All references to Borrower, Guarantor and Lender pursuant
to the definitions set forth in the recitals hereto, or to any other person
herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not any particular provision of this Agreement
and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall
mean "including, without limitation" and the word "will" when used in this
Agreement shall be construed to have the same meaning and effect as the word
"shall".
(f) An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance with Section 11.3
or is cured in a manner satisfactory to Lender, if such Event of Default is
capable of being cured as determined by Lender.
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(g) All references to the term "good faith" used herein when
applicable to Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrower and Guarantors shall have the burden of proving any lack of
good faith on the part of Lender alleged by Borrower or any Guarantor at any
time. All references to the term "reasonably" as applied to any conduct or
determination by Lender shall be based on how an asset-based lender with similar
rights providing a credit facility of the type set forth herein would act in
similar circumstances.
(h) Any accounting term used in this Agreement shall have,
unless otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrower most recently
received by Lender prior to the date hereof. Notwithstanding anything to the
contrary contained in GAAP or any interpretations or other pronouncements by the
Financial Accounting Standards Board or otherwise, the term "unqualified
opinion" as used herein to refer to opinions or reports provided by accountants
shall mean an opinion or report that is unqualified and also does not include
any explanation, supplemental comment or other comment concerning the ability of
the applicable person to continue as a going concern or the scope of the audit.
(i) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including", the
words "to" and "until" each mean "to but excluding" and the word "through" means
"to and including".
(j) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(l) This Agreement and other Financing Agreements may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the
result of negotiations among and have been reviewed by counsel to Lender and the
other parties, and are the products of all parties. Accordingly, this Agreement
and the other Financing Agreements
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shall not be construed against Lender merely because of Lender's involvement in
their preparation.
12.3 Notices.
(a) All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. Notices delivered through
electronic communications shall be effective to the extent set forth in Section
13.3(b) below. All notices, requests and demands upon the parties are to be
given to the following addresses (or to such other address as any party may
designate by notice in accordance with this Section):
If to Borrower or any Guarantor:
US LEC Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Treasurer
Telephone No.: ▇▇▇.▇▇▇.▇▇▇▇
Telecopy No.: 704.602.1133
with a copy to:
US LEC Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇
General Counsel
Telephone No.:▇▇▇.▇▇▇.▇▇▇▇
Telecopy No.: 704.602.6869
If to Lender: Wachovia Bank, National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ 0479, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇
Telephone No.:▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.:▇▇▇-▇▇▇-▇▇▇▇
(b) Notices and other communications to Lenders hereunder may
be delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by Lender or as
otherwise determined by Lender. Lender or
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Borrower or any Guarantor may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided, that, approval of such procedures may be
limited to particular notices or communications. Unless Lender otherwise
requires, (i) notices and other communications sent to an e-mail address shall
be deemed received upon the sender's receipt of an acknowledgement from the
intended recipient (such as by the "return receipt requested" function, as
available, return e-mail or other written acknowledgement), provided, that, if
such notice or other communication is not given during the normal business hours
of the recipient, such notice shall be deemed to have been sent at the opening
of business on the next Business Day for the recipient, and (ii) notices or
communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail address
as described in the foregoing clause (i) of notification that such notice or
communications is available and identifying the website address therefor.
12.4 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender and Borrower and their respective
successors and assigns, except that Borrower may not assign their rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Any such
purported assignment without such express prior written consent shall be void.
Lender may, after notice to Borrower, assign its rights and delegate its
obligations under this Agreement and the other Financing Agreements and further
may assign, or sell participations in, all or any part of the Revolving Loans,
or any other interest herein to another financial institution or other person on
terms and conditions acceptable to Lender; provided, that, (i) any assignment by
Lender (exclusive of granting of any participations by Lender ) shall be
approved in writing, by Borrower (which approval shall not be unreasonably
withheld or delayed ) prior to any assignment by Lender, except, that, the
approval of the Borrower shall not be required in respect of any assignment by
Lender made: (A) after the occurrence and during the continuance of any Event of
Default, (B) in connection with an assignment by any Lender upon the merger,
consolidation, sale, transfer or other disposition of all or any substantial
portion of any Lender's business, loan portfolio or other assets, or (C) the
parent company of Lender or any Affiliate of Lender.
12.6 Confidentiality.
(a) Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrower or any Guarantor pursuant to
109
this Agreement which is clearly and conspicuously marked as confidential at the
time such information is furnished by such Borrower to Lender, provided, that,
nothing contained herein shall limit the disclosure of any such information: (i)
to the extent required by statute, rule, regulation, subpoena or court order,
(ii) to bank examiners and other regulators, auditors and/or accountants, in
connection with any litigation to which Lender is a party, (iii) to any
Participant (or prospective Participant) or to any Affiliate of Lender so long
as such Participant (or prospective Participant) or Affiliate shall have been
instructed to treat such information as confidential in accordance with this
Section 12.6, or (iv) to counsel for Lender, Participant (or prospective
Participant).
(b) In the event that Lender receives a request or demand to
disclose any confidential information pursuant to any subpoena or court order,
Lender, as the case may be, agrees (i) to the extent permitted by applicable law
or if permitted by applicable law, to the extent Lender determines in good faith
that it will not create any risk of liability to Lender, Lender will promptly
notify Borrower of such request so that Borrower may seek a protective order or
other appropriate relief or remedy and (ii) if disclosure of such information is
required, disclose such information and, subject to reimbursement by Borrower of
Lender's expenses, cooperate with Borrower in the reasonable efforts to obtain
an order or other reliable assurance that confidential treatment will be
accorded to such portion of the disclosed information which Borrower so
designates, to the extent permitted by applicable law or if permitted by
applicable law, to the extent Lender determines in good faith that it will not
create any risk of liability to Lender.
(c) In no event shall this Section 12.6 or any other provision
of this Agreement, any of the other Financing Agreements or applicable law be
deemed: (i) to apply to or restrict disclosure of information that has been or
is made public by Borrower, Guarantor or any third party or otherwise becomes
generally available to the public other than as a result of a disclosure in
violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Lender (or any Affiliate of Lender) on a
non-confidential basis from a person other than a Borrower or Guarantor, (iii)
to require Lender to return any materials furnished by a Borrower or Guarantor
to Lender or prevent Lender from responding to routine informational requests in
accordance with the Code of Ethics for the Exchange of Credit Information
promulgated by The ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates or other applicable industry
standards relating to the exchange of credit information. The obligations of
Lender under this Section 12.6 shall supersede and replace the obligations of
Lender under any confidentiality letter signed prior to the date hereof or any
other arrangements concerning the confidentiality of information provided by
Borrower or any Guarantor to Lender. In addition, Lenders may disclose
information relating to this Agreement to Gold Sheets and other similar bank
trade publications, with such information to consist of deal terms and other
information customarily found in such publications and the use of the name,
logos and other insignia of the Borrower and Guarantors in any "tombstone" or
comparable advertising, on its website or in other marketing materials of Lender
or its Affiliates.
110
12.7 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
12.8 USA Patriot Act. Lender hereby notifies Borrower and Guarantors
that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub.L.
107-56 (signed into law October 26, 2001) (the "Act"), it is required to obtain,
verify and record information that identifies each person or corporation who
opens an account and/or enters into a business relationship with it, which
information includes the name and address of Borrower and Guarantors and other
information that will allow such Lender to identify such person in accordance
with the Act and any other applicable law. Borrower and Guarantors are hereby
advised that any Revolving Loans hereunder are subject to satisfactory results
of such verification.
12.9 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile or other electronic method of
transmission shall have the same force and effect as the delivery of an original
executed counterpart of this Agreement or any of such other Financing
Agreements. Any party delivering an executed counterpart of any such agreement
by telefacsimile or other electronic method of transmission shall also deliver
an original executed counterpart, but the failure to do so shall not affect the
validity, enforceability or binding effect of such agreement.
111
IN WITNESS WHEREOF, Lender, Borrower and Guarantors have caused these
presents to be duly executed as of the day and year first above written.
LENDER BORROWER
WACHOVIA BANK, NATIONAL ASSOCIATION
US LEC CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------ -----------------------------
Title: Vice President Title: Vice President
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GUARANTORS
US LEC OF NORTH CAROLINA INC.
US LEC OF GEORGIA INC.
US LEC OF SOUTH CAROLINA INC.
US LEC OF FLORIDA INC.
US LEC OF VIRGINIA L.L.C.
US LEC OF ALABAMA INC.
US LEC OF PENNSYLVANIA, INC.
US LEC OF MARYLAND INC.
US LEC COMMUNICATIONS INC.
US LEC ACQUISITION CO.
US LEC OF NEW YORK INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Title: Vice President - Treasurer
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