Exhibit 10.2
U.S. $50,000,000
CREDIT AGREEMENT
Dated as of November 12, 2001
by and between
COVAD COMMUNICATIONS GROUP, INC.,
as Borrower
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and
SBC COMMUNICATIONS INC.,
as Lender
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TABLE OF CONTENTS
Page
Article I DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS ...................... 1
1.1 Defined Terms ............................................................ 1
1.2 Computation of Time Periods .............................................. 17
1.3 Accounting Terms ......................................................... 18
1.4 Certain Terms ............................................................ 18
Article II THE TERM LOAN ......................................................... 18
2.1 The Term Loan ............................................................ 18
2.2 Making the Term Loan ..................................................... 18
2.3 Repayment of Term Loan; Evidence of Debt ................................. 18
2.4 Optional Prepayments ..................................................... 19
2.5 Mandatory Prepayments .................................................... 19
2.6 Interest ................................................................. 19
2.7 Payments and Computations ................................................ 21
2.8 Taxes .................................................................... 21
Article III CONDITIONS TO TERM LOAN ............................................... 24
3.1 Conditions Precedent to Execution and Delivery of the Loan Documents ..... 24
3.2 Conditions Precedent to the Term Loan .................................... 25
Article IV REPRESENTATIONS AND WARRANTIES ........................................ 30
4.1 Corporate Existence; Compliance with Law ................................. 30
4.2 Corporate Power; Authorization; Enforceable Obligations .................. 31
4.3 Taxes .................................................................... 32
4.4 Full Disclosure .......................................................... 32
4.5 Financial Statements ..................................................... 33
4.6 Litigation ............................................................... 34
4.7 Margin Regulations ....................................................... 34
4.8 Ownership of Borrower; Subsidiaries ...................................... 34
4.9 ERISA .................................................................... 34
4.10 Liens .................................................................... 36
4.11 No Burdensome Restrictions; No Defaults .................................. 36
4.12 No Other Ventures ........................................................ 37
4.13 Investment Company Act; Public Utility Holding Company Act ............... 37
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TABLE OF CONTENTS
(continued)
Page
4.14 Insurance ................................................................ 37
4.15 Labor Matters ............................................................ 37
4.16 Use of Proceeds .......................................................... 38
4.17 Environmental Matters .................................................... 38
4.18 Intellectual Property .................................................... 39
4.19 Title; Real Property ..................................................... 39
4.20 Certain Indebtedness ..................................................... 42
4.21 Solvency ................................................................. 42
4.22 ADA Compliance ........................................................... 43
4.23 Financial Accounts ....................................................... 43
4.24 Material Agreements ...................................................... 43
Article V REPORTING COVENANTS ................................................... 43
5.1 Financial Statements ..................................................... 43
5.2 Default or Material Adverse Change Notices ............................... 44
5.3 Asset Sales .............................................................. 45
5.4 ERISA Matters ............................................................ 45
5.5 Litigation ............................................................... 46
5.6 SEC Filings; Press Releases .............................................. 46
5.7 Labor Relations .......................................................... 46
5.8 Tax Returns .............................................................. 46
5.9 Insurance ................................................................ 46
5.10 Environmental Matters .................................................... 46
5.11 Board of Directors ....................................................... 47
5.12 New Subsidiaries ......................................................... 47
5.13 Compliance With the ADA .................................................. 48
5.14 Defaults ................................................................. 48
5.15 Other Information ........................................................ 48
5.16 No Implied Consent ....................................................... 48
Article VI AFFIRMATIVE COVENANTS ................................................. 48
6.1 Compliance with Laws, Etc ................................................ 48
6.2 Conduct of Business ...................................................... 48
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TABLE OF CONTENTS
(continued)
Page
6.3 Payment of Taxes, Etc .................................................... 49
6.4 Maintenance of Insurance ................................................. 49
6.5 Preservation of Corporate Existence, Etc ................................. 50
6.6 Access ................................................................... 50
6.7 Keeping of Books ......................................................... 51
6.8 Real Property Matters .................................................... 51
6.9 Maintenance of Properties, Etc ........................................... 52
6.10 Performance and Compliance with Other Covenants .......................... 52
6.11 Application of Proceeds .................................................. 52
6.12 Fiscal Year .............................................................. 53
6.13 Environmental ............................................................ 53
6.14 Bank Accounts ............................................................ 53
6.15 ADA Compliance ........................................................... 53
6.16 Additional Collateral .................................................... 53
6.17 Subsidiary Guaranty Approvals ............................................ 54
6.18 BlueStar Dissolution ..................................................... 54
6.19 Canadian Accounts ........................................................ 54
6.20 Further Assurances ....................................................... 54
Article VII NEGATIVE COVENANTS .................................................... 55
7.1 Liens, Etc ............................................................... 55
7.2 Indebtedness ............................................................. 57
7.3 Investment in Subsidiaries ............................................... 58
Article VIII EVENTS OF DEFAULT ..................................................... 59
8.1 Events of Default ........................................................ 59
8.2 Remedies ................................................................. 61
Article IX MISCELLANEOUS ......................................................... 61
9.1 Amendments, Waivers, Etc ................................................. 61
9.2 Notices, Etc ............................................................. 61
9.3 No Waiver; Remedies ...................................................... 63
9.4 Costs; Expenses; Indemnities ............................................. 63
9.5 Right of Set-off ......................................................... 65
iii
TABLE OF CONTENTS
(continued)
Page
9.6 Binding Effect ........................................................... 65
9.7 GOVERNING LAW ............................................................ 65
9.8 Section Titles ........................................................... 66
9.9 Execution in Counterparts ................................................ 66
9.10 Entire Agreement ......................................................... 66
9.11 Confidentiality .......................................................... 66
9.12 Change in Accounting Principles .......................................... 67
9.13 Suretyship and Other Waivers and Consents ................................ 67
9.14 Waiver of Usury Defense .................................................. 72
9.15 LIMITATION OF LIABILITY .................................................. 72
9.16 Survival of Agreement .................................................... 72
EXHIBITS
Exhibit A - Form of Term Loan Note
Exhibit B - Form of Pledge Agreement
Exhibit C - Form of Security Agreement
Exhibit D - Form of Intellectual Property Security Agreement
Exhibit E - Form of Mortgage
Exhibit F - Form of Termination and Release Agreement
Exhibit G - Form of Subsidiary Guaranty
Exhibit H - Form of Opinion of Irell & ▇▇▇▇▇▇▇ LLP, counsel to the Loan Parties
Exhibit I - Form of Capital Markets Debt Subordination Provisions
Exhibit J - Form of General Unsecured Debt Subordination Agreement
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TABLE OF CONTENTS
(continued)
Page
SCHEDULES
Schedule 1.1(a) - Money Market Funds
Schedule 1.1(b) - Subsidiary Guarantors
Schedule 3.1(g) - Pre-Execution Date State PUC Filing Locations
Schedule 3.2(a) - Post-Execution Date State PUC Filing Locations
Schedule 3.2(b) - Foreign Qualification States
Schedule 4.6 - Litigation
Schedule 4.8(a) - Ownership of Covad
Schedule 4.8(b) - Subsidiaries
Schedule 4.9 - ERISA Exceptions
Schedule 4.10 - Perfection Documents
Schedule 4.15 - Labor Agreements
Schedule 4.17 - Environmental Matters
Schedule 4.18 - Intellectual Property Claims
Schedule 4.19(a) - Real Property Assets
Schedule 4.19(g) - Flood Hazard Exceptions
Schedule 4.19(h) - Other Real Property Debt
Schedule 4.19(j) - Real Property Restrictions
Schedule 4.20 - Other Debt
Schedule 4.23 - Financial Accounts
Schedule 4.24 - Material Agreements
Schedule 6.19 - Canadian Accounts
Schedule 7.1(m) - Existing Other Liens
Schedule 7.2(h) - Capitalized Lease Obligations
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CREDIT AGREEMENT (this "Agreement"), dated as of November 12, 2001,
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by and between Covad Communications Group, Inc., a Delaware corporation (the
"Borrower") and SBC Communications Inc., a Delaware corporation (the "Lender").
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W I T N E S S E T H:
WHEREAS, the Borrower has filed a voluntary petition under Chapter 11
of the United States Bankruptcy Code with the United States Bankruptcy Court for
the District of Delaware, which is being administered by the Bankruptcy Court
under Case No. 01-10167;
WHEREAS, the Borrower is continuing to operate its business and
manage its properties as debtor and debtor in possession under sections 1107 and
1108 of the Bankruptcy Code;
WHEREAS, an ongoing need exists for the Borrower to obtain additional
funds in order to continue the operation of its business upon exit from the
Bankruptcy Case under the Bankruptcy Code and, accordingly, the Borrower has
requested that the Lender extend financing to the Borrower;
WHEREAS, the Borrower has requested that the Lender make available a
senior secured term loan (referred to herein as the "Term Loan") under which the
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Lender makes a term loan to the Borrower on the Effective Date of $50,000,000 in
aggregate Principal Amount outstanding for the purposes specified in this
Agreement;
WHEREAS, the Lender is willing to make the Term Loan available to the
Borrower on the Effective Date, but only upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the Borrower has agreed to secure its obligations to the
Lender in connection with such financing with, inter alia, security interests
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in, and liens on, substantially all of its property and assets, whether real or
personal, tangible or intangible, as provided herein.
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein, the parties hereto hereby agree as follows:
Article I
DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS
1.1. Defined Terms. As used in this Agreement, the following terms have
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the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"ADA" means the Americans with Disabilities Act, 42 U.S.C.(S).(S).
---
12101, et seq., and all applicable rules and regulations promulgated thereunder.
"Additional Mortgage" means any Mortgage with respect to an
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Additional Mortgaged Property.
1
"Additional Mortgaged Property" means any Real Property Asset of the
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Borrower that becomes subject to a Mortgage executed and delivered by the
Borrower after the Effective Date as required by Section 6.8(a) or otherwise.
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"Affiliate" has the meaning assigned thereto pursuant to Rule 405
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under the Securities Act of 1933, as amended.
"After-Non Excluded Tax Basis" means a basis such that any payment
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received, actually or constructively, or accrued by any Person shall be
supplemented by a further payment to that Person so that the sum of the two
payments shall, after deduction for the Non-Excluded Taxes resulting from the
receipt (actual or constructive) or accrual of such payments, be equal to the
first of such payments.
"After-Tax Basis" means a basis such that any payment received,
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actually or constructively, or accrued by any Person shall be supplemented by a
further payment to that Person so that the sum of the two payments shall, after
deduction for the net increase in all taxes (taking into account all related
current credits or current deductions) resulting from the receipts (actual or
constructive) or accrual of such payments, be equal to the first of such
payments. In making calculations pursuant to this definition, it shall be
assumed that the recipient is fully taxable for all income tax purposes at the
highest marginal rate applicable to corporations at the time such amount is
received or properly accrued.
"Agreement" means this Credit Agreement, together with all Exhibits
---------
and Schedules hereto, as the same may be amended, supplemented or otherwise
modified from time to time in accordance herewith.
"Bankruptcy Case" means the reorganization case under chapter 11 of
---------------
the Bankruptcy Code commenced by the Borrower in the Bankruptcy Court on August
15, 2001.
"Bankruptcy Code" means title 11, United State Code, as amended from
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time to time, as applicable to the Bankruptcy Case.
"Bankruptcy Court" means the United States Bankruptcy Court for the
----------------
District of Delaware, or such other court having jurisdiction over the
Bankruptcy Case at the time of confirmation of the Bankruptcy Plan.
"Bankruptcy Plan" means that certain Plan of Reorganization filed by
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the Borrower on October 18, 2001, in form and substance satisfactory to the
Lender (it being understood and agreed that such changes to such Plan of
Reorganization that (i) are reasonably necessary to reflect the payment by the
Borrower of $3,500,000 ($900,000 of which is being paid from insurance proceeds)
in partial settlement of (A) ▇▇▇▇▇▇▇▇, ▇.▇. ▇. Covad Communications Group, Inc.,
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et. al., (B) Ramius Capital Group, LLP v. Covad Communications Group, Inc, et
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al. and (C) Quattro Global Capital, LLC v. Covad Communications Group, Inc, et
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al. (such proceedings originally having been filed against the Borrower in the
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Superior Court for the State of California for County of Santa ▇▇▇▇▇, Case No.
CV 793408, and subsequently filed as a new action in the United States District
Court for the Northern District of California) and (ii) do not impair any Loan
Party's ability to perform its obligations under any Loan Document or the
Obligations, shall be deemed satisfactory to the Lender).
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"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure
----------------
and the Local Rules of the Bankruptcy Court, each as amended from time to time,
as applicable to the Bankruptcy Case.
"BlueStar Group" has the meaning specified in Section 6.18.
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"Borrower" has the meaning set forth in the preamble hereof.
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"Business Day" means a day of the year on which banks are not
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required or authorized to close in New York, New York or San Francisco,
California.
"Canadian Account" means all deposit accounts maintained at Canadian
----------------
banking institutions by and in the name of the Borrower or any Loan Party
including the accounts identified on Schedule 6.19 hereto, or such other deposit
account with any Canadian banking institution approved by the Lender that is
maintained by the Borrower that complies with Section 6.19.
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"Capitalized Lease" means, as to any Person, any lease of property by
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such Person as lessee which would be accounted for as a capital lease on a
balance sheet of such Person prepared in conformity with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the
-----------------------------
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in conformity
with GAAP.
"Cash Equivalents" means (a) securities issued or fully guaranteed or
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insured by the United States government or any agency thereof, (b) certificates
of deposit, eurodollar time deposits, overnight bank deposits, bankers'
acceptances and repurchase agreements of any commercial bank organized under the
laws of the United States, any state thereof, the District of Columbia, any
foreign bank, or its branches or agencies (fully protected against currency
fluctuations) which, at the time of acquisition, are rated at least "A-1" by
Standard & Poor's Corporation ("S&P") or "P-1" by ▇▇▇▇▇'▇ Investors Service
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("Moody's"), and (c) commercial paper of an issuer rated at least "A-1" by S&P
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or "P-1" by Moody's, (d) shares of (i) any money market fund set forth on
Schedule 1.1(a) or (ii) any money market fund that (i) has at least 95% of its
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assets invested continuously in the types of investments referred to in clauses
(a) through (c) above, (ii) has net assets of not less than $500,000,000 and
(iii) is rated at least "A-1" by S&P or "P-1" by Moody's; provided that the
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maturities of all obligations of the type specified in clauses (a) through (c)
above shall not exceed 360 days.
"Change of Control" means the occurrence of any one or more of the
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following events with respect to the Borrower: (i) any Person or any Group,
together with any Affiliates thereof (provided that solely for purposes of this
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definition of "Change of Control", a controlled Person shall not be deemed to be
an Affiliate of a controlling Person unless the controlling Person has the right
or ability to exercise at least 20% of the total voting power of all classes of
the controlled Person's capital stock entitled to vote generally in the election
of the controlled Person's directors), is or becomes, whether as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases
or otherwise, the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act or any successor provisions thereto), directly or
3
indirectly, of Stock or other securities of the Borrower, entitling or resulting
in the ability of such Person or Group and its or their Affiliates to exercise
more than 50% of the total voting power of all classes of the Borrower's capital
stock entitled to vote generally in the election of the Borrower's directors or
(ii) the Borrower shall consolidate with or merge into any other Person, or any
other Person shall consolidate with or merge into the Borrower, or the Borrower
shall sell, convey, exchange, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets (in one transaction or a series
of related transactions) to any Person or Group, together with their Affiliates,
and, in the case of any such transaction the outstanding Stock is reclassified
into, exchanged for or converted into the right to receive any other property or
security, unless the stockholders of the Borrower immediately before the
consummation of such transaction, own, directly or indirectly, immediately
following the consummation of such transaction, at least a majority of the
combined voting power of the outstanding voting securities of the Person
resulting from such transaction or the Person acquiring such properties and
assets, entitled to vote generally on the election of such resulting or
acquiring Person's directors, in substantially the same proportion as their
ownership of the Stock immediately before such transaction, or (iii) the
stockholders of the Borrower shall approve any plan or proposal for the
liquidation or dissolution of the Borrower or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Borrower's Board of Directors (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Borrower was approved by a vote of at least 51% of the
directors of the Borrower then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office.
"Code" means the Internal Revenue Code of 1986 (or any successor
----
legislation thereto), as amended from time to time.
"Collateral" means the "Collateral" as defined in each of the
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Security Agreements, the "Pledged Collateral" as defined in each of the Pledge
Agreements, the "Intellectual Property Collateral" as defined in each of the
Intellectual Property Security Agreements, the "Mortgaged Property" as defined
in each of the Mortgages and all other property and all interests in property
(including Stock, Stock Equivalents and other equity securities) and proceeds
thereof now owned or hereafter acquired by any Loan Party in or upon which a
Lien is purported to be granted under any of the Collateral Documents, and
includes Additional Collateral.
"Collateral Documents" means the Pledge Agreements, the Security
--------------------
Agreements, the Intellectual Property Security Agreements, the Mortgages and all
other instruments or documents delivered by any Loan Party pursuant to this
Agreement or any of the other Loan Documents to ▇▇▇▇▇ ▇ ▇▇▇▇ on any property of
such Loan Party to secure payment of all or any part of the Obligations.
"Compliance Certificate" has the meaning specified in Section 5.1(b).
----------------------
"Confirmation Order" means the order of the Bankruptcy Court in form
------------------
and substance satisfactory to the Lender confirming the Bankruptcy Plan.
4
"Contaminant" means any substance, material or waste regulated or
-----------
forming the basis of liability under any Environmental Law, including any
substance, material or waste classified, characterized or otherwise regulated as
a pollutant, hazardous, toxic, contaminant, petroleum or petroleum-derived
substance, material or waste, or any constituent of any such substance, material
or waste.
"Contingent Obligation" means, as applied to any Person, any direct
---------------------
or indirect liability, contingent or otherwise, of such Person with respect to
any Indebtedness of another Person, if the primary purpose or intent of such
Person in incurring the Contingent Obligation is to provide assurance to the
obligee of such Indebtedness that such Indebtedness will be paid or discharged,
or that any agreement evidencing or governing such Indebtedness will be complied
with, or that any holder of such Indebtedness will be protected (in whole or in
part) against loss in respect thereof. Contingent Obligations of a Person
include, without limitation, (a) the direct or indirect guarantee, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of
Indebtedness of another Person, and (b) any liability of such Person for
Indebtedness of another Person through any agreement (contingent or otherwise)
(i) to purchase, repurchase or otherwise acquire such Indebtedness or any
security therefor, or to provide funds for the payment or discharge of such
Indebtedness (whether in the form of a loan, advance, stock purchase, capital
contribution or otherwise), (ii) to maintain the solvency or any balance sheet
item, level of income or financial condition of another Person, (iii) to make
take-or-pay or similar payments, if required, regardless of non-performance by
any other party or parties to an agreement, (iv) to purchase, sell or lease (as
lessor or lessee) property, or to purchase or sell services, primarily for the
purpose of enabling such other Person to make payment of such Indebtedness or to
assure the holder of such Indebtedness against loss, or (v) to supply funds to
or in any other manner invest in such other Person (including to pay for
property or services irrespective of whether such property is received or such
services are rendered), if in the case of any agreement described under
subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation on any date of determination shall be equal to the net
outstanding amount of the Indebtedness on such date so guaranteed or otherwise
supported or, if less, the amount to which the Contingent Obligation is limited
by its terms.
"Contractual Obligation" of any Person means any obligation,
----------------------
agreement, undertaking or similar provision of any security issued by such
Person or of any agreement, undertaking, contract, lease, indenture, mortgage,
deed of trust or other instrument (excluding a Loan Document) to which such
Person is a party or by which it or any of its property is bound or to which any
of its properties is subject.
"Default" means any event which with the passing of time or the
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giving of notice (as set forth in Section 8.1(d) or otherwise) or both would
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become an Event of Default.
"Derivatives Contracts" means all Interest Rate Contracts, swaps,
---------------------
collars, floors, caps, futures contracts, ▇▇▇▇▇▇, foreign exchange contracts,
currency swap agreements, commodity purchase or option agreements or other
commodity price hedging arrangements, other similar agreements or arrangements
designed to alter the risks of any Person arising from fluctuations in interest
rates, currency values or commodity prices, in each case whether
5
contingent or matured and any contract or agreement relating to any other
financial product commonly known as a "derivative".
"Directly-Related Assets" has the meaning specified in Section
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7.1(b).
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"Disclosure Statement" means the disclosure statement relating to
--------------------
Bankruptcy Plan.
"Dispute Resolution Agreement" means that certain Dispute Resolution
----------------------------
Agreement, dated September 10, 2000, between the Borrower and the Lender, as
amended from time to time by the Borrower and the Lender.
"Dollars" and the sign "$" each mean the lawful money of the United
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States of America.
"Effective Date" means the "Effective Date" as defined in the
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Bankruptcy Plan; provided that on such date, the transactions contemplated by
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this Agreement, the other Loan Documents and the Resale Agreement (including the
Term Loan) shall be consummated (and shall be deemed to be so consummated on a
simultaneous basis) immediately prior to the consummation of the other
transactions contemplated by the Bankruptcy Plan to be consummated on the
Effective Date.
"Environmental Laws" means all federal, state and local laws, statutes,
------------------
ordinances, regulations and other legal requirements, now or hereafter in
effect, and in each case as amended or supplemented from time to time, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment relating to the regulation and
protection of human health, safety, the environment or natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws
include but are not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C.(S). 9601 et
--
seq.) ("CERCLA"); the Hazardous Material Transportation Act, as amended (49
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U.S.C. (S). 180 et seq.); the Federal Insecticide, Fungicide, and Rodenticide
-- ---
Act, as amended (7 U.S.C.(S). 136 et seq.); the Resource Conservation and
-- ---
Recovery Act, as amended (42 U.S.C.(S). 6901 et seq.) ("RCRA"); the Toxic
-- --- ----
Substance Control Act, as amended (42 U.S.C.(S). 7401 et seq.); the Clean Air
-- ---
Act, as amended (42 U.S.C.(S). 740 et seq.); the Federal Water Pollution Control
-- ---
Act, as amended (33 U.S.C.(S). 1251 et seq.); the Occupational Safety and Health
-- ---
Act, as amended (29 U.S.C.(S). 651 et seq.); and the Safe Drinking Water Act, as
-- ---
amended (42 U.S.C.(S). 300f et seq.), and their state and local counterparts or
-- ---
equivalents and any transfer of ownership notification or approval statute,
including the New Jersey Industrial Site Recovery Act (N.J. Stat. ▇▇▇.(S).
13:1K-6 et seq.)
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("ECRA").
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"Environmental Liabilities and Costs" means, as to any Person, all
-----------------------------------
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand by
any other Person, whether based in contract, tort, implied or express warranty,
strict liability,
6
criminal or civil statute, including any thereof arising under any Environmental
Law, Permit, order or agreement with any Governmental Authority or other Person,
and which relate to any environmental, health or safety condition, or a Release
or threatened Release, and result from the past, present or future operations
of, or ownership of property by, such Person or any of its Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
------------------
Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
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any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with any Loan Party or any of its
Subsidiaries within the meaning of Section 414 (b), (c), (m) or (o) of the Code.
"ERISA Event" means (i) a Reportable Event; (ii) the withdrawal of
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any Loan Party, any of its Subsidiaries or any ERISA Affiliate (or the treatment
of any of the foregoing as having withdrawn under Section 4062(e) of ERISA) from
a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (iii) the
complete or partial withdrawal of any Loan Party, any of its Subsidiaries or any
ERISA Affiliate (or the treatment of any of the foregoing as having withdrawn
under Section 4062(e) of ERISA) from any Multiemployer Plan; (iv) the filing of
a notice of intent to terminate a Title IV Plan or a Multiemployer Plan pursuant
to Section 4041 or 4041A of ERISA or the treatment of a plan amendment as a
termination under Section 4041 or 4041A of ERISA; (v) the institution of
proceedings by the PGBC to terminate, or to appoint a trustee to administer, a
Title IV Plan or a Multiemployer Plan; or (vi) any other 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
Title IV Plan or Multiemployer Plan, or the imposition of any liability under
Title IV of ERISA, other than for PBGC premiums due but not delinquent under
Section 4007 of ERISA.
"Event of Default" has the meaning specified in Section 8.1.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Execution Date" means the date of this Agreement.
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"Financial Statements" means the consolidated statements of
--------------------
operations, statements of cash flows and balance sheets of the Borrower and its
Subsidiaries delivered in accordance with Sections 4.5 and 5.1 of this
Agreement. ------------ ---
"Fiscal Quarter" means each of the three month periods ending on
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March 31, June 30, September 30 and December 31.
"Fiscal Year" means the twelve month period ending on December 31.
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7
"Flood Hazard Property" means a Real Property Asset all or a portion
---------------------
of which is located in an area designated by the Federal Emergency Management
Agency as having special flood or mud slide hazards.
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time 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 in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Group" means any Persons acting together in a manner that would
-----
constitute a "group" for purposes of Section 13(d) of the Exchange Act.
"Highest Lawful Rate" means the maximum lawful rate of interest
-------------------
permitted to the Lender by applicable usury laws, now or hereafter enacted, as
changed when and as such laws change, to the extent permitted by such laws,
effective on the day such change in such laws becomes effective.
"Indebtedness", of any Person, means, without duplication, (a) all
------------
indebtedness of such Person for borrowed money (including reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured) or for the deferred purchase price of
property or services but excluding unsecured trade payables arising in the
ordinary course of business, (b) all obligations of such Person evidenced by
notes, bonds, debentures or similar instruments, (c) all indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (d) all
Capitalized Lease Obligations of such Person, (e) all Contingent Obligations of
such Person in respect of Indebtedness of the types contemplated by clauses (a)
through (d) and (f) through (h) hereof, (f) all obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any Stock or
Stock Equivalents of such Person, valued, in the case of redeemable preferred
stock, at the greater of its voluntary or involuntary liquidation preference
plus accrued and unpaid dividends, (g) all obligations of such Person under
Derivative Contracts, (h) all Indebtedness referred to above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including accounts
and general intangibles) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, valued, if such
Person has not assumed such Indebtedness, at the lesser of the amount of such
Indebtedness or the fair market value of the property subject to such Lien, and
(i) in the case of the Borrower, the Obligations.
"Indemnified Matters" has the meaning specified in Section 9.4(b).
------------------- -------------
8
"Indemnitee" has the meaning specified in Section 9.4(b).
---------- -------------
"Initial Interest Amount" has the meaning specified in Section
----------------------- -------
2.6(a).
-----
"Initial Interest Payment Date" means the first Business Day on or
-----------------------------
after the date that is two years from the Effective Date.
"Initial Mortgage" means a Mortgage in respect of an Initial
----------------
Mortgaged Property.
"Initial Mortgaged Property" means a Real Property Asset indicated as
--------------------------
being part of the Collateral on Schedule 4.19(a).
---------------
"Intellectual Property Security Agreement" means an Intellectual
----------------------------------------
Property Security Agreement executed and delivered by a Loan Party on the
Effective Date, substantially in the form of Exhibit D annexed hereto, as such
---------
Intellectual Property Security Agreement may be amended, amended and restated,
supplemented or otherwise modified from time to time.
"Interest Payment Date" means (i) the Initial Interest Payment Date
---------------------
and (ii) the first Business Day of each calendar quarter after the Initial
Interest Payment Date.
"Interest Rate Contracts" means interest rate swap agreements,
-----------------------
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.
"IRS" means the Internal Revenue Service, or any successor thereto.
---
"Lender" has the meaning specified in the preamble.
------
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, in each case intended
to assure payment of any Indebtedness or other obligation, including any
conditional sale or other title retention agreement, the interest of a lessor
under a Capitalized Lease, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing, under the Uniform
Commercial Code or comparable law of any jurisdiction, of any financing
statement naming the owner of the asset to which such Lien relates as debtor.
"Loan Documents" means, collectively, this Agreement, any Note, each
--------------
Subsidiary Guaranty, the Collateral Documents and each certificate, agreement or
document executed by a Loan Party and delivered to the Lender in connection with
or pursuant to any of the foregoing, including the Resale Agreement. Any
reference in this Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to
such document as the same may be in effect at any and all times such reference
becomes operative.
9
"Loan Party" means each of the Borrower, each Subsidiary Guarantor and
----------
each other Subsidiary and Affiliate of the Borrower that executes and
delivers a Loan Document.
"Material Adverse Change" means a material adverse change in any of
-----------------------
(a) the condition (financial or otherwise), business, performance,
prospects, results of operations or properties of the Borrower and its
Subsidiaries taken as one enterprise, (b) the legality, validity or
enforceability of any Loan Document, (c) the perfection or priority of the
Liens granted pursuant to the Collateral Documents, (d) the ability of the
Borrower to repay the Obligations when due or (e) the rights and remedies
of the Lender under the Loan Documents.
"Material Adverse Effect" means an effect that results in or causes,
-----------------------
or has a reasonable likelihood of causing, a Material Adverse Change.
"Monthly Financial Report" means a report of the Borrower, setting
------------------------
forth financial information regarding the Borrower and its Subsidiaries,
certified by the Chief Financial Officer of the Borrower, consisting of (i)
consolidated unaudited balance sheets and statements of stockholders'
equity as of the close of such month and the related statements of
operations and cash flows for such Fiscal month and for that portion of the
Fiscal Year ending as of the close of such fiscal month, setting forth in
comparative form the figures for the corresponding periods in the prior
year if prepared for such prior year period, all prepared in conformity
with GAAP (subject to normal year-end adjustments) and (ii) a summary of
the outstanding balance of all intercompany Indebtedness as of the last day
of that fiscal month, to the extent required to be delivered by the
Borrower pursuant to Section 5.1.
-----------
"Mortgage" means (i) a security instrument (whether designated as a
--------
deed of trust or a mortgage or by any similar title) executed and delivered
by any Loan Party, substantially in the form of Exhibit E annexed hereto or
---------
in such other form as may be approved by the Lender in its sole discretion,
in each case with such changes thereto as may be recommended by the
Lender's local counsel or by local counsel to such Loan Party approved by
the Lender based on local laws or customary local mortgage or deed of trust
practices, or (ii) at the Lender's option, in the case of an Additional
Mortgaged Property, an amendment to an existing Mortgage, in form
reasonably satisfactory to the Lender, adding such Additional Mortgaged
Property to the Real Property Assets encumbered by such existing Mortgage,
in either case as such security instrument or amendment may be amended,
amended and restated, supplemented or otherwise modified from time to time.
"Mortgages" means all such instruments, including the Initial Mortgages and
any Additional Mortgages, collectively.
"Mortgaged Property" means an Initial Mortgaged Property or an
------------------
Additional Mortgaged Property.
"Mortgage Related Documents" means, with respect to each Mortgage,
--------------------------
except to the extent waived by the Lender in writing with respect to such
Mortgage, each dated as of a date satisfactory to the Lender:
(a) (i) a favorable opinion of counsel to such Loan Party, in form and
substance reasonably satisfactory to the Lender, as to the due
authorization, execution and delivery by such Loan Party of such Mortgage
and such other matters as the Lender may
10
reasonably request; and (ii) an opinion of counsel reasonably satisfactory
to the Lender in the state in which the related Mortgaged Property is
located with respect to the validity and enforceability of such Mortgage
and such other matters (including any matters governed by the laws of such
state regarding personal property security interests in respect of any
Collateral) as the Lender may reasonably request, in each case in form and
substance reasonably satisfactory to the Lender;
(b) a title report issued by such title company with respect thereto,
dated not more than 60 days prior to the date such Mortgage was recorded
and reasonably satisfactory in form and substance to the Lender;
(c) copies of all recorded documents listed as exceptions to title or
otherwise referred to in the Mortgage Policy or title report delivered
pursuant to clause (ii) or (iii) above;
(d) unless waived by the Lender, (i) evidence, which may be in the
form of a letter from an insurance broker or a municipal engineer, as to
(A) whether such Mortgaged Property is a Flood Hazard Property and (B) if
so, whether the community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program and (ii) if such
Mortgaged Property is a Flood Hazard Property, evidence that such Loan
Party has obtained flood insurance in respect of such Flood Hazard Property
(which may constitute any qualifying private flood insurance) to the extent
required under the applicable regulations of the Board of Governors of the
Federal Reserve System;
(e) unless waived by the Lender, an environmental indemnity agreement,
reasonably satisfactory in form and substance to the Lender, with respect
to the indemnification of the Lender for any liabilities that may be
imposed on or incurred by it as a result of any Contaminant located at, on
or under such Mortgaged Property or otherwise associated therewith;
(f) if required by any Governmental Authority or under any
Requirements of Law, unless waived by the Lender, appraisals from one or
more independent real estate appraisers satisfactory to the Lender, in
form, scope and substance reasonably satisfactory to the Lender and
satisfying the requirements of any applicable laws and regulations,
concerning such Mortgaged Property;
(g) unless waived by the Lender, reports and other information, in
form, scope and substance reasonably satisfactory to the Lender and
prepared by environmental consultants satisfactory to the Lender,
concerning any environmental hazards or liabilities to which any Loan Party
or any of its Subsidiaries may be subject to as a result of such Mortgaged
Property, which reports shall (i) at a minimum include a recent Phase I
environmental site assessment for such Mortgaged Property which is
addressed to the Lender or on which the consultant that prepared such
report has authorized the Lender in writing to rely and (ii) indicate the
absence of any condition at the Mortgaged Property that could reasonably be
expected to result in either (A) such Loan Party incurring material
liabilities under Environmental Laws or (B) the imposition or attachment of
an Environmental Lien to such Mortgaged Property;
(h) current ALTA surveys and surveyor's certification by surveyors
selected by the Lender with respect to such Mortgaged Property and, to the
extent available from the
11
applicable Governmental Authority, zoning letters and certificates of
occupancy with respect to such Mortgaged Property, in each case reasonably
satisfactory in form and substance to the Lender;
(i) evidence satisfactory to the Lender that the Lender has a valid
and perfected first priority security interest (subject only to Permitted
Liens) in any tangible personal or mixed property (including fixtures)
Collateral attached to or located in or on such Mortgaged Property,
including (i) such documents duly executed and filed by each Loan Party
(including acknowledgment copies of proper financing statements (Form
UCC-1) duly filed under the UCC and other applicable documents under the
laws of any jurisdiction with respect to the perfection of Liens) as the
Lender may request to perfect its security interests in such Collateral and
(ii) certified copies of requests for information or copies (Form UCC-11),
or equivalent reports, listing all effective financing statements, fixture
filings and judgment and tax lien filings that name any Loan Party as
debtor, together with copies of such financing statements, fixture filings
and judgment and tax lien filings, none of which shall cover such
Collateral; and
(j) duly executed and acknowledged subordination and non-disturbance
agreements from any third party mortgagee of such Mortgaged Property, in
form and substance satisfactory to the Lender.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
------------------
4001(a)(3) of ERISA, and to which any Loan Party, any of its Subsidiaries
or any ERISA Affiliate is making, is obligated to make, has made or been
obligated to make, contributions on behalf of participants who are or were
employed by any of them.
"New Lending Office" has the meaning specified in Section 2.8(d).
------------------
"Non-Excluded Taxes" has the meaning specified in Section 2.8(a).
------------------
"Note" means the Term Loan Note.
----
"Obligations" means the Term Loan and all other advances, debts,
-----------
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender, any Affiliate of the Lender or any Indemnitee, arising under this
Agreement or under any other Loan Document, of every type and description,
present or future, whether or not evidenced by any note, guaranty or other
instrument, whether or not for the payment of money, whether arising by
reason of an extension of credit, loan, guaranty, indemnification, foreign
exchange transaction or Derivative Contract or in any other manner, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and
however acquired; provided, that with respect to the Resale Agreement, the
--------
term "Obligations" shall include only the Required Repayment (as such term
is defined in Section 8.4.1 of the Resale Agreement). The term
"Obligations" includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and disbursements and any other sum
chargeable to the Borrower under this Agreement or any other Loan Document.
"Other Debt" has the meaning specified in Section 7.2(f).
---------- --------------
12
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
successor thereto.
"Pension Plan" means an employee pension benefit plan, as defined in
------------
Section 3(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which
any Loan Party, any of its Subsidiaries or, if a Title IV Plan, any ERISA
Affiliate maintains, contributes to or has an obligation to contribute on
behalf of participants who are or were employed by any of them.
"Permit" means any permit, approval, authorization, license, variance
------
or permission required from a Governmental Authority under an applicable
Requirement of Law.
"Permitted Liens" means at any time (i) with respect to any Mortgaged
---------------
Property, any Permitted Mortgaged Property Liens with respect to such
Mortgaged Property at such time and (ii) with respect to any other
Collateral, any Liens permitted at such time under Section 7.1.
-----------
"Permitted Mortgaged Property Liens" means, at any time, with respect
----------------------------------
to any Mortgaged Property, Liens permitted at such time under clauses (a),
(b), (c), (d), (e), (f), (h) or (j) of Section 7.1.
-----------
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, limited liability company,
unincorporated association, joint venture or other entity, or a
Governmental Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
----
ERISA, which any Loan Party, or any of its Subsidiaries maintains,
contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Pledge Agreement" means a Pledge Agreement executed and delivered by
----------------
a Loan Party on the Effective Date, substantially in the form of Exhibit B
---------
annexed hereto, as such Pledge Agreement may be amended, amended and
restated, supplemented or otherwise modified from time to time.
"PMSI" has the meaning specified in Section 7.1(b).
---- --------------
"Principal Amount" has the meaning specified in Section 2.1. The
---------------- -----------
"Unpaid Principal Amount" of the Term Loan shall be determined after giving
-----------------------
effect to any previous partial prepayments and after the addition of any
and all accrued but unpaid interest.
"Proprietary Information" has the meaning specified in Section
----------------------- -------
9.11(b).
-------
"PTO" means the United States Patent and Trademark Office or any
---
successor or substitute office in which filings are necessary or, in the
opinion of the Lender, desirable to create or perfect Liens on any
Collateral subject to the Intellectual Property Security Agreements.
"Qualified Account" means an account maintained at a banking
-----------------
institution by and in the name of the Borrower that constitutes a
"Qualified Account" with respect to the Borrower
13
within the meaning of the Security Agreements including, without
limitation, the account (account number 4038832663) of Covad Communications
Company maintained with ▇▇▇▇▇ Fargo Bank, N.A. whose office is located at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and whose ABA
number is ▇▇▇▇▇▇▇▇▇, or such other Qualified Account with any banking
institution approved by the Lender that is maintained by the Borrower for
purposes of complying with Section 6.14.
------------
"Qualified Account Letter" has the meaning specified in any Security
------------------------
Agreement.
"Qualified Plan" means an employee pension benefit plan, as defined in
--------------
Section 3(2) of ERISA, which is intended to be tax-qualified under Section
401(a) of the Code, and which any Loan Party, any of its Subsidiaries or
any ERISA Affiliate maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of
them.
"Real Property Asset" means, at any time of determination, any fee or
-------------------
leasehold interest then owned by any Loan Party in any real property.
"Release" means, as to any Person, any release, spill, emission,
-------
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration, in each case of any Contaminant, into the indoor or
outdoor environment or into or out of any property owned by such Person.
"Remedial Action" means all actions required by any Governmental
---------------
Authority or under any Requirements of Law to (a) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Reportable Event" means any of the events described in Sections
----------------
4043(c) of ERISA with respect to a Title IV Plan (other than an event for
which the 30-day notice is waived.
"Requirement of Law" means, as to any Person, the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of
such Person, and all federal, state, local and foreign laws, rules and
regulations, and all orders, judgments, decrees or other determinations of
any Governmental Authority or arbitrator, applicable to or binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Resale Agreement" means that certain Resale Agreement, dated as of
----------------
November 12, 2001, by and among the Lender and the Resale Agreement Covad
Parties, as such Resale Agreement may be amended, amended and restated,
supplemented or otherwise modified from time to time.
"Resale Agreement Covad Parties" means the Borrower, Covad
------------------------------
Communications Company, a California corporation, DIECA Communications
Company, a Virginia corporation, and Laser ▇▇▇▇.▇▇▇, Inc., a Delaware
corporation.
14
"Reserve Account" means the Reserve Fund as defined in, and to be
---------------
established by the Borrower in accordance with, the Bankruptcy Plan.
"Responsible Officer" means, with respect to any Person, any of the
-------------------
principal executive officers of such Person.
"Restricted Junior Payment" means (a) any dividend or other
-------------------------
distribution, direct or indirect, on account of any class of Stock or Stock
Equivalents of the Borrower or any of its respective Subsidiaries now or
hereafter outstanding, except a dividend payable solely in shares of that
class of Stock or Stock Equivalents to the holders of that class, (b) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any class of Stock or Stock
Equivalents of the Borrower or any of its Subsidiaries now or hereafter
outstanding except for Stock of the Borrower issued upon exchange or
conversion of Stock or Stock Equivalents issued by the Borrower, and (c)
any payment or prepayment of principal, premium (if any), interest, fees or
other charges on, or redemption, purchase, retirement, defeasance, sinking
fund or similar payment with respect to, any Subordinated Indebtedness
(other than, in the case of clause (c), any required payments of interest).
"Secured Claim" means that certain secured claim of the Lender against
-------------
the Borrower in the amount of $15.0 million with respect to which the
Lender filed a proof of claim with the Bankruptcy Court on or about October
29, 2001.
"Securities Account" means an account maintained at a Securities
------------------
Intermediary by and in the name of a Loan Party that constitutes a
"Securities Account" with respect to such Loan Party within the meaning of
any Security Agreement.
"Securities Account Control Agreement" has the meaning specified in
------------------------------------
any Security Agreement.
"Securities Intermediary" means a "securities intermediary" as defined
-----------------------
in Section 8-102(a)(14) of the UCC.
"Security Agreement" means a Security Agreement executed and delivered
------------------
by a Loan Party on the Effective Date substantially in the form of Exhibit
C annexed hereto, as such Security Agreement may be amended, amended and
restated, supplemented or otherwise modified from time to time.
"Solvent" means, with respect to any Person, that the value of the
-------
assets of such Person (both at fair value and present fair saleable value)
is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such
Person as of such date and that, as of such date, such Person is able to
pay all liabilities of such Person as such liabilities mature and does not
have unreasonably small capital. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed at
the amount which, in light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become
an actual or matured liability.
15
"Stock" means shares of capital stock, beneficial, partnership or
-----
membership interests, participations or other equivalent equity interests
(regardless of how designated) of or in a corporation or equivalent entity,
whether voting or non-voting, and includes common stock and preferred
stock.
"Stock Equivalents" means all securities convertible into or
-----------------
exchangeable for Stock and all warrants, options or other rights to
purchase or subscribe for any Stock, whether or not presently convertible,
exchangeable or exercisable.
"Subordinated Indebtedness" means any Indebtedness of the Borrower or
-------------------------
any of its Subsidiaries subordinated in right of payment to the
Obligations.
"Subordination Agreement" means a subordination agreement executed and
-----------------------
delivered by any Loan Party, substantially in the form of Exhibit J annexed
hereto or in such other form as may be approved by the Lender in its sole
discretion.
"Subordination Provisions" means subordination provisions contained in
------------------------
an indenture executed and delivered by any Loan Party, substantially in the
form of Exhibit K annexed hereto or in such other form as may be approved
by the Lender in its sole discretion.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, limited liability company or other business entity of which an
aggregate of 50% or more of the outstanding Stock having ordinary voting
power to elect a majority of the board of directors, managers, trustees or
other controlling persons, is, at the time, directly or indirectly, owned
or controlled by such Person and/or one or more Subsidiaries of such Person
(irrespective of whether, at the time, Stock of any other class or classes
of such entity shall have or might have voting power by reason of the
happening of any contingency); provided, that with respect to the Borrower,
--------
"Subsidiary" as used in Articles IV through VIII hereof shall not
----------- ----
include the BlueStar Group.
"Subsidiary Guarantor" means each Subsidiary of the Borrower set forth
--------------------
on Schedule 1.1(b).
---------------
"Subsidiary Guaranty" means a guaranty, substantially in the form of
-------------------
Exhibit G annexed hereto, executed by each Subsidiary Guarantor, as such
---------
guaranty may be amended, supplemented or otherwise modified from time to
time.
"Tax Affiliate" means, as to any Person, (a) any Subsidiary of such
-------------
Person, and (b) any Affiliate of such Person with which such Person files
or is eligible to file consolidated, combined or unitary tax returns.
"Tax Returns" has the meaning specified in Section 4.3.
----------- -----------
"Term Loan" means a loan made by the Lender to the Borrower pursuant
---------
to Section 2.1.
-----------
16
"Termination and Release Agreement" means a Termination and Release
---------------------------------
Agreement executed and delivered by the Borrowers and the Lender on the
Execution Date substantially in the form of Exhibit F annexed hereto.
---------
"Termination Date" means the earliest of (a) the date that is four
----------------
years after the Effective Date, (b) the date on which the Term Loan becomes
or is declared due and payable pursuant to Section 8.2, and (c) the date of
-----------
prepayment and collection in full by the Borrower of the Term Loan to zero
dollars ($0).
"Title IV Plan" means a Pension Plan, other than a Multiemployer Plan,
-------------
which is subject to Title IV.
"UCC" means the Uniform Commercial Code as the same may, from time to
---
time, be enacted and in effect in the State of Delaware; provided, that in
--------
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, the
Lender's Lien on any Collateral is governed by the Uniform Commercial Code
as enacted and in effect in a jurisdiction other than the State of
Delaware, the term "UCC" shall mean the Uniform Commercial Code as enacted
---
and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions.
"Unfunded Pension Liability" means, as to any Loan Party at any time,
--------------------------
the aggregate amount, if any, of the sum of (a) the amount by which the
present value of all accrued benefits under each Title IV Plan of such Loan
Party, any of its Subsidiaries or any ERISA Affiliate exceeds the fair
market value of all assets of such Title IV Plan allocable to such benefits
in accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions
in effect under such Title IV Plan, and (b) for a period of five years
following a transaction reasonably likely to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by
any Loan Party, any of its Subsidiaries or any ERISA Affiliate as a result
of such transaction.
"Unpaid Principal Amount" has the meaning specified in the definition
-----------------------
of "Principal Amount" in Section 1.1.
-----------
"Welfare Benefit Plan" means an employee welfare benefit plan, as
--------------------
defined in Section 3(1) of ERISA, to which any Loan Party or any of its
Subsidiaries maintains, contributes to, contributed to within the six year
period prior to the Effective Date, or has an obligation to contribute to,
on behalf of its former or active employees (or their beneficiaries).
"Withdrawal Liability" means, as to any Loan Party at any time, the
--------------------
aggregate amount of the liabilities of any Loan Party, any of its
Subsidiaries or any ERISA Affiliate pursuant to Section 4201 of ERISA, and
any increase in contributions required to be made pursuant to Section 4243
of ERISA, with respect to all Multiemployer Plans.
1.2. Computation of Time Periods. In this Agreement, 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"; the word "through" means "to and including".
17
1.3. Accounting Terms. Subject to Section 9.12, all accounting terms not
---------------- ------------
specifically defined herein shall be construed in conformity with GAAP and all
accounting determinations required to be made pursuant hereto shall, unless
expressly otherwise provided herein, be made in conformity with GAAP.
1.4. Certain Terms.
-------------
(a) The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, and not to any particular Article,
Section, subsection or clause in this Agreement. References herein to an
Exhibit, Schedule, Article, Section, subsection or clause refer to the
appropriate Exhibit or Schedule to, or Article, Section, subsection or clause in
this Agreement.
(b) The term "Lender" includes its successors and any assignee of the
Lender.
(c) Unless the context of this Agreement clearly requires otherwise,
references to the plural include the singular; references to the singular
include the plural; the term "including" is not limiting; and the term "or" has,
except where otherwise indicated, the inclusive meaning represented by the
phrase "and/or."
ARTICLE II
THE TERM LOAN
2.1. The Term Loan. On the terms and subject to the conditions contained in
-------------
this Agreement, the Lender agrees to make a loan (the "Term Loan") to the
---------
Borrower on the Effective Date, in a principal amount equal to $50,000,000 (the
"Principal Amount"). Amounts prepaid pursuant to Section 2.3(c) or Section 2.4
---------------- -------------- -----------
may not be reborrowed under this Section 2.1.
-----------
2.2. Making the Term Loan. Upon fulfillment of the applicable conditions
--------------------
set forth in Article III, the Lender will make available to the Borrower, in
-----------
immediately available funds, the Term Loan.
2.3. Repayment of Term Loan; Evidence of Debt.
----------------------------------------
(a) The Borrower shall repay the entire Unpaid Principal Amount of the Term
Loan on the Termination Date.
(b) The Lender shall maintain an account or accounts evidencing
Indebtedness of the Borrower to the Lender resulting from the Term Loan from
time to time, and reflecting the amounts of principal and interest payable and
paid to the Lender from time to time under this Agreement.
(c) The Lender shall maintain accounts in which it will record (i) the
amount of the Term Loan made, (ii) the amount of any principal or interest due
and payable by the Borrower to the Lender hereunder and (iii) the amount of any
sum received by the Lender hereunder from the Borrower.
18
(d) The entries made in the accounts maintained pursuant to paragraphs (b)
and (c) of this Section 2.3 shall, to the extent permitted by applicable law, be
-----------
prima facie evidence of the existence and amounts of the obligations recorded
therein; provided, however, that the failure of the Lender to maintain such
-------- -------
accounts or any error therein shall not in any manner affect the obligations of
the Borrower to repay the Term Loan in accordance with its terms.
(e) Notwithstanding any other provision of this Agreement, the Borrower
will promptly execute and deliver a note to the Lender evidencing the Term Loan,
of the Lender, substantially in the form of Exhibit A, and the interests
---------
initially evidenced by such note shall at all times (including after assignment
of all or part of such interests) be evidenced by one or more notes payable to
the payee named therein or its registered assigns.
2.4. Optional Prepayments. The Borrower shall have the right to prepay the
--------------------
Principal Amount of the Term Loan, in whole or in part, at any time without
penalty or premium. Any prepayment of principal shall be accompanied by a
payment of all interest accrued and unpaid on the portion of the Principal
Amount being prepaid. In case of a partial prepayment before the Initial
Interest Payment Date, the Initial Interest Amount as defined in Section 2.6
-----------
will be reduced accordingly.
2.5. Mandatory Prepayments. Upon a Change of Control, the Borrower shall
---------------------
forthwith (i) notify the Lender in writing of the Lender's right to elect to
have all of the Term Loan prepaid, and (ii) within 30 days after receiving a
request from the Lender so to have the Term Loan prepaid, prepay all of the Term
Loan, together with accrued interest to the date of such prepayment and all
other outstanding Obligations; provided, however, that in the event that:
-------- -------
(a) the Borrower shall consolidate with or merge into any other
Person, or any other Person shall consolidate with or merge into the
Borrower, or the Borrower shall sell, convey, exchange, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets
(in one transaction or a series of related transactions) to any Person or
Group, together with their Affiliates, in any such case, in a transaction
constituting or resulting in a Change of Control; or
(b) a Change of Control shall occur as a result of the purchase by any
Person of any securities directly from the Borrower; or
(c) a Change of Control shall occur as a result of any tender offer by
or on behalf of any Person acting in concert with the Borrower;
then notwithstanding the foregoing, the Borrower shall prepay all of the Term
Loan, together with accrued interest to the date of such prepayment and all
other outstanding Obligations, concurrently with the consummation of such
transaction.
2.6. Interest.
--------
(a) From the Effective Date until the Initial Interest Payment Date,
the Principal Amount of the Loan will accrue interest at a rate of 11.000%
(plus, during the continuance of an Event of Default, 2.000%) per annum, without
compounding; provided,
--------
19
however, that any amount of principal or interest thereon which is not paid
-------
when due (whether by acceleration or otherwise) shall bear interest from the
date on which such amount is due until such amount is paid in full, payable on
demand, at a rate of 16.000% per annum. The interest accrued during the period
from the Effective Date until the Initial Interest Payment Date (the "Initial
-------
Interest Amount") will be payable in cash in two installments. The first
---------------
installment will be equal to 50% of the Initial Interest Amount and will be due
on the Initial Interest Payment Date, and the second installment, also equal to
50% of the Initial Interest Amount, will be due on the first anniversary of the
Initial Interest Payment Date.
(b) From the Initial Interest Payment Date until the Termination Date, the
Principal Amount of the Loan will accrue interest at a rate of 11.000% (plus,
during the continuance of an Event of Default, 2.000%) per annum; provided,
--------
however, that any amount of principal or interest thereon which is not paid when
-------
due (whether at stated maturity, by acceleration or otherwise) shall bear
interest from the date on which such amount is due until such amount is paid in
full, payable on demand, at a rate of 16.000% per annum. Such interest accruing
from the Initial Interest Payment Date shall be payable in cash quarterly in
arrears on each Interest Payment Date, with the first such payment to be due on
the next Interest Payment Date after the Initial Interest Payment Date.
(c) It is the intention of the parties hereto to comply with applicable
usury laws; accordingly, it is agreed that, notwithstanding any provisions to
the contrary in this Agreement, the Note, the Loan Documents or in any of the
documents or instruments otherwise relating hereto, in no event shall this
Agreement, the Note, the Loan Documents or such instruments or documents
relating hereto require the payment or permit the collection of interest in
excess of the Highest Lawful Rate. If any such excess of interest is contracted
for, charged, taken, reserved or received under this Agreement, the Note, the
Loan Documents or any of the documents or instruments otherwise relating hereto,
or if the maturity of the Term Loan is accelerated in whole or in part, or if
all or part of the principal of or interest on the Term Loan shall be prepaid,
so that under any of such circumstances the amount of interest contracted for,
charged, taken, reserved or received under this Agreement, the Note, the Loan
Documents or any of the documents or instruments otherwise relating hereto, on
the amount of principal actually outstanding from time to time under the Term
Loan shall exceed the Highest Lawful Rate permitted by applicable usury laws,
then in any such event (i) the provisions of this paragraph shall govern and
control, (ii) neither the Borrower nor any other person or entity now or
hereafter liable for the payment of the Term Loan shall be obligated to pay the
amount of such interest to the extent that it is in excess of the Highest Lawful
Rate allowed under the applicable usury laws, (iii) any such excess which may
have been collected either shall be applied at final maturity of said
Indebtedness as a credit against the then Unpaid Principal Amount of the Term
Loan or refunded to the person paying the same, at the holder's option, and (iv)
the effective rate of interest shall be automatically reduced to the Highest
Lawful Rate of interest allowed under the applicable usury laws as now or
hereafter construed by the courts having jurisdiction thereof. It is further
agreed that, without limitation of the foregoing, all calculations of the rate
of interest contracted for, charged, taken, reserved or received under this
Agreement, the Note, the Loan Documents or any of the documents or instruments
otherwise relating hereto, for the purpose of determining whether such rate
exceeds the Highest Lawful Rate of interest, shall be made to the extent
permitted by the applicable usury laws, by amortizing, prorating, allocating and
spreading in equal or unequal parts during the period of the full stated term of
the Term Loan all interest at
20
any time contracted for, charged, taken, reserved or received from the
Borrower or otherwise by the holder or holders thereof in connection with the
Term Loan.
2.7. Payments and Computations.
-------------------------
(a) The Borrower shall make each payment hereunder (including
expenses) not later than 12:00 P.M. (San Antonio time) on the day when due, in
Dollars to the Lender at an account designated from time to time by the Lender
in immediately available funds without set-off or counterclaim. Payments
received by the Lender after 12:00 P.M. (San Antonio time) shall be deemed to be
received on the next Business Day.
(b) All computations of interest shall be made by the Lender on the
basis of a year of 360 days comprised of twelve 30-day months. Each computation
by the Lender of interest hereunder shall be prima facia evidence of the amount
at issue.
(c) Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest.
(d) As to all payments made when an Event of Default shall have
occurred and be continuing or following the Termination Date, (i) the Borrower
hereby irrevocably waives the right to direct the application of any and all
payments received, and agree that the Lender shall have the continuing exclusive
right to apply any and all such payments against the Obligations in such order
as the Lender may deem advisable and (ii) in the absence of a specific
determination by the Lender with respect thereto, payments shall be applied to
amounts then due and payable in the following order: first, to the Lender's
-----
expenses reimbursable hereunder and any expenses, disbursements and advances
incurred by the Lender (including any such advances constituting the Term Loan)
pursuant to Section 2.7(e); second, to interest on the Term Loan; third, to
-------------- ------ -----
principal payments on the Term Loan; and fourth, to all other Obligations.
------
(e) The Lender is authorized to, and at its option may, make advances
on behalf of the Borrower for the payment when due of all expenses, charges,
costs, principal and interest incurred by the Borrower hereunder or under any of
the other Loan Documents (including those expenses, disbursements and advances
incurred by the Lender pursuant to the Loan Documents after the occurrence and
during the continuance of an Event of Default which the Lender, in its sole
discretion, deems necessary or desirable to preserve or protect the Collateral
or any portion thereof or to enhance the likelihood, or maximize the amount, of
repayment of the Obligations) when and as the Borrower fails to pay promptly any
such amounts (after giving effect to all applicable grace periods). At the
Lender's option and to the extent permitted by law, any advances so made shall
be added to the Principal Amount of the Term Loan hereunder.
2.8. Taxes.
-----
(a) Except as otherwise required by law, all payments made by the
Borrower under this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld
21
or assessed by any Governmental Authority. If any taxes, levies, imposts,
duties, charges, fees, deductions or withholdings are required to be withheld
from any amounts payable to the Lender hereunder, then (A) the amounts so
payable to the Lender shall be increased to the extent necessary to yield to the
Lender (after payment of all Non-Excluded Taxes (as hereinafter defined)
required to be withheld) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement on an After-Non-Excluded
Tax Basis and (B) the Borrower shall withhold the full amount of such
Non-Excluded Taxes from such payment (as increased pursuant to the preceding
clause (A)) and shall pay such amount to the Governmental Authority imposing
such Non-Excluded Taxes in accordance with applicable law. The preceding
sentence shall not apply to the following ("Non-Excluded Taxes"): (i) in the
case of income taxes (including withholding taxes) imposed by the U.S. federal
government, any such taxes imposed under law in effect on the date any Person
who becomes a Lender subsequent to the Effective Date becomes a Lender
hereunder, or (ii) net income taxes and franchise taxes (imposed on or measured
by net income) imposed on the Lender as a result of a connection between the
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (including,
without limitation, such Lender being engaged in a trade or business or having a
permanent establishment in such jurisdiction), but the term "Non-Excluded Taxes"
shall not include, and the gross-up provisions of this Section 2.8(a) shall
apply to, any taxes, levies, imposts, duties, charges, fees, or deductions
(other than withholding taxes) otherwise described in either of clauses (i) or
(ii) that are imposed solely on account of the Lender having executed, delivered
or performed its obligations or received a payment under, or enforced, this
Agreement. Promptly upon any Non-Excluded Taxes becoming payable by the
Borrower, the Borrower shall send to the Lender for the account of the Lender a
certified copy of an original official receipt received by the Borrower showing
payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to
the appropriate Governmental Authority or fails to remit to the Lender the
required receipts or other required documentary evidence or fails to pay any
amount necessary so that the Lender receives each payment hereunder grossed up
on an After-Non-Excluded Tax Basis for any Non-Excluded Taxes (including any
U.S. federal withholding taxes included in such term), the Borrower shall
indemnify, on an After-Tax Basis, the Lender for any incremental taxes, interest
or penalties that may become payable by the Lender as a result of any such
failure. The agreements in this Section 2.8 shall survive the termination of
-----------
this Agreement and the payment of the Lender's Term Loan and all other amounts
payable hereunder.
(b) Subject to clause (d) below, the Borrower shall indemnify the
Lender for any Non-Excluded Taxes that the Lender believes in good faith are
imposed on and are required to be paid by, or that are levied or assessed on
(and whether or not paid directly by) the Lender. Promptly upon receiving notice
from the Lender that any such Non-Excluded Taxes have been so levied, imposed or
assessed, the Borrower shall pay such Non-Excluded Taxes directly to the
relevant Governmental Authority. With respect to indemnification for
Non-Excluded Taxes actually paid by the Lender, the indemnification provided in
the immediately preceding sentence, such indemnification shall be made within 30
days after the date the Borrower receives written demand therefore from the
Lender. The Borrower acknowledges that any payment made to the Lender or to any
Governmental Authority in respect of the indemnification obligations of the
Borrower provided in this clause shall constitute a payment in respect of which
the provisions of clause (a) and this clause shall apply. Upon the reasonable
----------
request of the Borrower, the Lender agrees to use its reasonable efforts to
cooperate with the Borrower with a view to obtaining a
22
refund of any Non-Excluded Taxes with respect to which the Borrower has paid
any amounts pursuant to this Section 2.8(b) and which the Borrower, on advice of
---------------
counsel, reasonably believes were not correctly or legally asserted by the
relevant Government Authority, provided, however, that (i) the Borrower shall,
-------- -------
immediately upon presentation of an invoice, indemnify the Lender for all
out-of-pocket costs and expenses (including legal fees and the allocated cost of
in-house counsel) incurred in assisting the Borrower in obtaining any refund of
such Non-Excluded Taxes, (ii) the Lender shall be permitted to determine, in its
sole discretion exercised in good faith, as to whether to file with a
Governmental Authority any claim that it determines is available for a refund of
any such Non-Excluded Taxes, (iii) any refunds of such Non-Excluded Taxes
received by the Lender shall be subject to Section 2.8(c) below, and (iv) the
--------------
Lender shall not be obligated to disclose any information regarding its tax
affairs or computations to any Person or to take any action that it reasonably
believes would be otherwise disadvantageous to the conduct of its fiscal affairs
(including, without limitation, the disclosure to any Person of any other
information deemed in good faith by such Lender to be confidential or
proprietary).
(c) If the Lender receives a refund of a tax for which a payment has
been made by the Borrower pursuant to this Section 2.8, which refund in the good
-----------
faith judgment of the Lender is attributable to such payment made by the
Borrower, then the Lender shall reimburse the Borrower (without interest, other
than interest included in such refund) for such amount as the Lender determines
to be the proportion of the refund as will leave it, after such reimbursement,
in no better or worse position than it would have been if the payment of such
tax and any payment by the Borrower under this Section 2.8 had not been
-----------
required. The Lender shall use good faith in determining whether to make a claim
for any refund that it determines is available to it. The Lender shall not be
obligated to disclose any information regarding its tax affairs or computations
to any Person in connection with this paragraph (c) or any other provision of
this Section 2.8.
-----------
(d) Any Lender organized under laws of, or administering this
Agreement from a lending office in, a country other than the United States shall
deliver to the Borrower two duly completed copies of the U.S. Internal Revenue
Service Form W-8 BEN (or any subsequent versions thereof or successors thereto)
properly completed and duly executed by the Lender claiming complete exemption
from U.S. federal withholding tax on all payments by the Borrower under this
Agreement and the other Loan Documents. The forms described in the preceding
sentence shall be delivered by the Lender on or before the date of the first
payment to it following the date it becomes a Lender hereunder and on or before
the date of the first payment to it following the date, if any, the Lender
changes its applicable lending office by designating a different lending office
(a "New Lending Office"). In addition, the Lender shall deliver such forms
-------------------
promptly upon the obsolescence or invalidity of any form previously delivered by
the Lender. The failure of the Lender to deliver any form pursuant to this
Section 2.8(d) as a result of a change in law after the date the Lender becomes
--------------
a Lender hereunder or as a result of a change in circumstances of the Borrower
or the use of proceeds of such Lender's Term Loan shall not constitute a failure
to comply with this Section 2.8(d). If the Lender is otherwise unable to deliver
--------------
any form pursuant to this Section 2.8(d), the sole consequence of such failure
--------------
shall be that the indemnity described in Section 2.8(a) and Section 2.8(b)
-------------- --------------
hereof for any Non-Excluded Taxes imposed as a result of such failure shall not
be available with respect to the Lender.
23
(e) The Lender claiming any indemnity payment or additional amounts
payable pursuant to this Section 2.8 shall use reasonable efforts (consistent
-----------
with legal and regulatory restrictions) to file any certificate or document
reasonably requested in writing by the Borrower if the making of such a filing
would avoid the need for or reduce the amount of any such indemnity payment or
additional amounts that may thereafter accrue and would not be otherwise
disadvantageous to the Lender.
(f) In the event that the Lender delivers to the Borrower a form
pursuant to paragraph (d) above that indicates that U.S. federal taxes (other
than Non-Excluded Taxes) must be withheld on payments to the Lender, then the
Borrower shall thereupon withhold from each payment due to the affected Lender
such U.S. federal withholding taxes at the rate indicated, timely deposit such
amounts with an authorized depository and make such reports, filings and other
reports in connection therewith at the times and in the manner required by law.
Article III
CONDITIONS TO TERM LOAN
3.1 Conditions Precedent to Execution and Delivery of the Loan Documents.
--------------------------------------------------------------------
The effectiveness of this Agreement and the obligation of the Lender on the
Execution Date to execute and deliver this Agreement and any other Loan
Document, are subject to, in the case of clauses (a) through (h), the Lender's
receipt, on or before the Execution Date, of the following documentary
conditions precedent, each dated the Execution Date unless otherwise indicated,
in form and substance satisfactory to the Lender and in sufficient copies for
the Lender and, in the case of clauses (i) and (j), to the satisfaction of the
non-documentary conditions precedent specified therein:
(a) This Agreement, duly executed and delivered by the Borrower and
the Resale Agreement, duly executed and delivered by the Resale Agreement Covad
Parties.
(b) Copies of (i) the resolutions of the Board of Directors of the
Borrower and each of the other Resale Agreement Covad Parties approving each
Loan Document to which it is a party and (ii) all documents evidencing any other
necessary corporation action, each certified as of the Execution Date by the
Secretary or Assistant Secretary of the Borrower or such other respective Resale
Agreement Covad Parties as being a true and correct copy thereof and as not
having been modified, amended or rescinded and being in full force and effect.
(c) A copy of the articles or certificate of incorporation (or
equivalent organizational documents) of the Borrower and each of the other
Resale Agreement Covad Parties, certified as of a recent date by the Secretary
of State of the state of incorporation of the Borrower and each such other
Resale Agreement Covad Party, together with good standing certificates for the
Borrower and each other Resale Agreement Covad Party from the Secretary of State
of the state of incorporation of the Borrower and each such other Resale
Agreement Covad Party, respectively, and from the Secretary of State of the
State of California for the Borrower and from the Secretary of the Commonwealth
of the Commonwealth of Pennsylvania for Laser ▇▇▇▇.▇▇▇, Inc. (formerly known as
Lightsaber Acquisition Corp.) and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any
24
franchise or similar taxes from the appropriate taxing authority of such
jurisdictions, each dated a recent date prior to the Execution Date, and a copy
of the certificate of incorporation and the by-laws (or equivalent
organizational documents) of the Borrower and each other Resale Agreement Covad
Party certified as of the Execution Date by the Secretary or an Assistant
Secretary of the Borrower or Resale Agreement Covad Party as being a true and
correct copy thereof and as not having been modified, amended or rescinded and
as being in full force and effect.
(d) A certificate of the Secretary or an Assistant Secretary of the
Borrower and each other Resale Agreement Covad Party certifying the names and
true signatures of each officer of the Borrower or Resale Agreement Covad Party
who has been authorized to execute and deliver any Loan Document or other
document required hereunder to be executed and delivered by or on behalf of the
Borrower or such Resale Agreement Covad Party.
(e) Certified copies of requests for information or copies
(Form UCC-11), or equivalent reports, which reports (i) shall list all effective
financing statements, fixture filings and judgment and tax lien filings that
name any Loan Party as debtor and, with respect to the Borrower, shall be
satisfactory to the Lender in its sole and absolute discretion, together with
copies of such financing statements, fixture filings and judgment and tax lien
filings, none of which shall cover the Collateral (except for Permitted Liens or
Liens for which the Lender shall have received duly executed termination
statements in recordable or fileable form and substance reasonably satisfactory
to it).
(f) The Termination and Release Agreement, duly executed by the
Borrower.
(g) Copies of each filing made by the Borrower or any Subsidiary of
the Borrower on or before the Execution Date, if any, with the public utility
commission or comparable agency of any of the States set forth on Schedule
--------
3.1(g) hereto seeking approval in such State of any Subsidiary Guaranty and the
------
Liens created by the Collateral Documents in the Collateral.
(h) Such other certificates, documents, agreements and information
respecting any Loan Party as the Lender may, in its sole discretion, reasonably
request.
(i) Other than amendments or modifications to the Bankruptcy Plan
disclosed in writing to the Lender on or before the Execution Date, the
Bankruptcy Plan shall not have been amended or modified in a manner that, in the
reasonable judgment of the Lender, individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect.
(j) On the Execution Date, both before and after execution and
delivery hereof, the representations and warranties of the Borrower set forth in
Article IV of this Agreement and in each other Loan Document shall be true and
----------
correct in all material respects on and as of the Execution Date.
3.2. Conditions Precedent to the Term Loan. The effectiveness of this
-------------------------------------
Agreement and the obligation of the Lender on the Effective Date to make the
Term Loan requested to be made by it, are subject to, in the case of clauses (a)
through (y), the Lender's receipt, on or before the Effective Date, of the
following documentary conditions precedent, each dated the Effective Date unless
otherwise indicated, in form and substance satisfactory to the Lender and in
25
sufficient copies for the Lender and, in the case of clauses (z) through (dd),
to the satisfaction of the non-documentary conditions precedent specified
therein:
(a) Copies of (i) the resolutions of the Board of Directors of each
Loan Party approving each Loan Document to which it is a party and all other
documents evidencing necessary corporate action, each certified as of the
Effective Date by the Secretary or Assistant Secretary of such Loan Party as
being a true and correct copy thereof and as not having been modified, amended
or rescinded and being in full force and effect, and (ii) copies of all required
governmental and third party approvals, licenses, consents and permits (other
than approvals of the Subsidiary Guaranties and Liens created by the Collateral
Documents in the Collateral by the public utility commission or comparable
agency of each of the States set forth on Schedule 3.2(a) hereto; provided that
--------------- --------
promptly following the Execution Date, and in any event prior to the Effective
Date, with respect to each state set forth on Schedule 3.2(a), the Borrower
---------------
shall make appropriate filings and take such actions in such states to obtain
such approvals as soon as practicable after the Execution Date) required to be
obtained with respect to each Loan Document and the transactions contemplated
thereby, each certified as of the Effective Date by the Secretary or Assistant
Secretary of the Borrower as being a true and correct copy thereof and as (to
the knowledge of the Borrower) not having been modified, amended or rescinded
and being in full force and effect.
(b) A copy of the articles or certificate of incorporation (or
equivalent organizational documents) of the Borrower and of each of the
Subsidiary Guarantors, certified as of a recent date by the Secretary of State
of the state of incorporation of the Borrower or such Subsidiary Guarantor,
together with good standing certificates from such official and the Secretary of
State of each state set forth on Schedule 3.2(b) hereto, and, to the extent
---------------
generally available, a certificate or other evidence of good standing as to
payment of any franchise or similar taxes from the appropriate taxing authority
of such jurisdictions, each dated a recent date prior to the Effective Date, and
a copy of the certificate of incorporation and the by-laws (or equivalent
organizational documents) of the Borrower and of each of the Subsidiary
Guarantors certified as of the Effective Date by the Secretary or an Assistant
Secretary of the Borrower or such Subsidiary Guarantor as being a true and
correct copy thereof and as not having been modified, amended or rescinded and
as being in full force and effect.
(c) A certificate of the Secretary or an Assistant Secretary of each
Loan Party certifying the names and true signatures of each officer of such Loan
Party who has been authorized to execute and deliver any Loan Document or other
document required hereunder to be executed and delivered on the Effective Date
by or on behalf of such Loan Party.
(d) The Pledge Agreements, Security Agreements and Subsidiary
Guaranties, each duly executed by the Borrower or Subsidiary party thereto,
together with such documents duly executed by each Loan Party (including
acknowledgment copies of proper financing statements (Form UCC-1) and other
applicable documents under the laws of any jurisdiction with respect to the
perfection of Liens) as the Lender may request to perfect its security interests
in the Collateral and (B) certified copies of requests for information or copies
(Form UCC-11), or equivalent reports, which reports (i) shall list all effective
financing statements, fixture filings and judgment and tax lien filings that
name any Loan Party as debtor and shall be satisfactory to the Lender in its
sole and absolute discretion, together with copies of such financing statements,
26
fixture filings and judgment and tax lien filings, none of which shall cover the
Collateral (except for Permitted Liens or Liens for which the Lender shall have
received duly executed termination statements in recordable or fileable form and
substance reasonably satisfactory to it).
(e) The Intellectual Property Security Agreements, duly executed by
the Borrower or Subsidiary party thereto.
(f) Duly executed and acknowledged Initial Mortgages together with
each of the Mortgage Related Documents with respect to each Initial Mortgage.
(g) Copies of all loan agreements, notes and other documentation
evidencing or relating to any Indebtedness for borrowed money of any Loan Party
or any of its Subsidiaries, and all other material agreements of any of them
listed on Schedule 4.24 hereto, each of which (x) shall be certified as of the
-------------
Effective Date by the Secretary or Assistant Secretary of the Borrower as being
a true and correct copy thereof and as not having been modified, amended or
rescinded and as being in full force and effect and (y) which the Lender shall
have had the opportunity to review and determine to be in form and substance
satisfactory to it.
(h) Evidence satisfactory to the Lender that the Lender has a valid
and perfected first priority security interest in the Mortgaged Properties
(subject only to Permitted Mortgaged Property Liens) and in the other Collateral
(subject only to Permitted Liens), including (A) such documents duly executed
and filed by each Loan Party (including acknowledgment copies of proper
financing statements (Form UCC-1) duly filed under the UCC and other applicable
documents under the laws of any jurisdiction with respect to the perfection of
Liens) as the Lender may request to perfect its security interests in the
Collateral, (B) certified copies of requests for information or copies (Form
UCC-11), or equivalent reports, which reports (i) shall list all effective
financing statements, fixture filings and judgment and tax lien filings that
name any Loan Party as debtor and shall be satisfactory to the Lender in its
sole and absolute discretion, together with copies of such financing statements,
fixture filings and judgment and tax lien filings, none of which shall cover the
Collateral (except for Permitted Liens or Liens for which the Lender shall have
received duly executed termination statements in recordable or fileable form and
substance reasonably satisfactory to it) and (C) evidence satisfactory to the
Lender of the release and termination of all Liens on all property and assets of
the Borrower and its Subsidiaries (other than Permitted Liens); and
(i) Share certificates representing all of the certificated securities
being pledged pursuant to the Pledge Agreements and stock powers for such share
certificates executed in blank.
(j) Evidence of the completion of all recordings and filings of the
Intellectual Property Security Agreements as may be necessary or, in the opinion
of the Lender, appropriate to perfect and protect the Liens created by the
Intellectual Property Security Agreements.
(k) Evidence that counterparts of the Mortgages have been recorded in
all places to the extent necessary or appropriate, in the judgment of the
Lender, to create a valid and perfected first priority lien in the property
described therein in favor of the Lender (or in favor of
27
such other trustee as may be required or desired under local law) (subject
only to Permitted Mortgaged Property Liens).
(l) Favorable opinions of (i) Irell & ▇▇▇▇▇▇▇ LLP, counsel to the Loan
Parties, in substantially the form of Exhibit H, with such changes thereto as
---------
may be mutually acceptable to the parties and as to such other matters as the
Lender may reasonably request and (ii) Walsh, Colucci, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., real estate counsel to the Loan Parties, in form and
substance reasonably satisfactory to the Lender.
(m) Evidence satisfactory to the Lender that the procedures with
respect to cash management required by the Loan Documents have been established
and are currently being maintained by each Loan Party, together with copies of
(i) all executed Qualified Account Letters executed by such Loan Party and the
related banking or other financial institution in connection with all Qualified
Accounts and (ii) the Securities Account Control Agreement, executed by the
applicable Loan Party and the securities intermediary entities specified on
Schedule 4.23 hereto.
-------------
(n) Satisfactory evidence that the insurance policies required by
Section 6.4 and each Collateral Document are in full force and effect, together
-----------
with appropriate evidence showing loss payable or additional insured clauses or
endorsements, as requested by the Lender, in favor of the Lender.
(o) A letter from the Loan Parties to their independent auditors
authorizing the independent certified public accountants of the Loan Parties to
communicate with the Lender in accordance with Section 6.5.
-----------
(p) A certificate of the Chief Financial Officer of each Loan Party,
stating that from and after giving effect to all transactions to be consummated
on the Effective Date, the Loan Parties, taken as one enterprise, are Solvent
after giving effect to the Term Loan, the application of the proceeds thereof in
accordance with Section 6.11 and the payment of all estimated legal, accounting
------------
and other fees related hereto and thereto.
(q) The Financial Statements of the Borrower and its Subsidiaries
referred to in Section 4.5.
-----------
(r) To the extent not previously delivered, copies of all loan
agreements, notes and other documentation evidencing or relating to any
Indebtedness for borrowed money of any Loan Party or any of its Subsidiaries,
and all other material agreements of any of them listed on Schedule 4.24 hereto
-------------
and not delivered on the Execution Date, each of which (x) shall be certified as
of the Effective Date by the Secretary or Assistant Secretary of the Borrower as
being a true and correct copy thereof and as not having been modified, amended
or rescinded and as being in full force and effect and (y) which the Lender
shall have had the opportunity to review and determine to be in form and
substance satisfactory to it.
(s) Copies of each filing made by the Borrower or any Subsidiary of
the Borrower on or before the Effective Date and not delivered on the Execution
Date, with the public utility commission or comparable agency of any of the
States set forth on Schedule 3.2(a)
---------------
28
hereto seeking approval in such State of any Subsidiary Guaranty and the
Liens created by the Collateral Documents in the Collateral.
(t) For the account of the Lender, the Note of the Borrower conforming
to the requirements set forth herein
(u) Such other certificates, documents, agreements and information
respecting any Loan Party as the Lender may, in its sole discretion, reasonably
request.
(v) The Bankruptcy Plan shall separately classify the Secured Claim of
the Lender against the Borrower and shall provide for its treatment pursuant to
the Termination and Release Agreement. Except as expressly provided otherwise
pursuant to the Termination and Release Agreement, any and all claims of the
Borrower and its Affiliates against the Lender and its Affiliates shall be
released under the Bankruptcy Plan and not retained by the Borrower as of the
Effective Date.
(w) Either (i) the Disclosure Statement shall be in form and substance
satisfactory to the Lender and, in any case, shall satisfactorily describe the
Termination and Release Agreement, the Resale Agreement and this Agreement or
(ii) the Borrower shall have filed a motion, which shall be in form and
substance satisfactory to the Lender, pursuant to Bankruptcy Rule 9019 seeking
approval of the Termination and Release Agreement, the Resale Agreement and this
Agreement and the transactions contemplated thereby and hereby, and such motion
shall, in any case, satisfactorily describe the Termination and Release
Agreement, the Resale Agreement and this Agreement.
(x) The Confirmation Order (i) shall be in form and substance
satisfactory to the Lender, (ii) shall have been entered by the Bankruptcy Court
and (iii) shall be in full force and effect and not subject to stay and, in any
event, shall authorize the Borrower to enter into the Termination and Release
Agreement, the Resale Agreement, this Agreement, the other Loan Documents and
the other agreements and documents contemplated herein and therein, and shall
contain findings or rulings that the Termination and Release Agreement is fair
and equitable to the Borrower, its estate and all parties in interest.
(y) Other than amendments or modifications to the Bankruptcy Plan
disclosed in writing to the Lender on or before the date of execution of this
Agreement, the Bankruptcy Plan shall not have been amended or modified in a
manner that, in the reasonable judgment of the Lender, individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
(z) (i) The Bankruptcy Plan shall have been approved on or before
January 15, 2002 and (ii) the Confirmation Order shall have been entered on or
before the tenth Business Day thereafter and shall approve of the transactions
contemplated hereby and shall not have been stayed by the Bankruptcy Court or
any other court having jurisdiction to issue any such stay, and the Confirmation
Order shall otherwise be in full force and effect from its date of entry.
(aa) All costs and accrued and unpaid expenses for which the Borrower
has received an invoice (including legal fees and expenses) required to be paid
to the Lender on or before the Effective Date shall have been paid.
29
(bb) There shall not have occurred since the Execution Date (i) a Material
Adverse Change or (ii) any events or developments that in the aggregate have had
a Material Adverse Effect.
(cc) The following statements shall be true on the date of the Term Loan,
both before and after giving effect thereto and to the application of the
proceeds therefrom:
(i) The representations and warranties of the Borrower set forth in
Article IV of this Agreement and in each other Loan Document shall be true
and correct in all material respects on and as of the date of the Term Loan
with the same effect as though made on and as of the Effective Date (or, to
the extent such representations and warranties expressly relate to an
earlier date, on and as of such earlier date); and
(ii) The Borrower and each other Loan Party shall be in compliance in
all material respects with all the terms and provisions set forth herein
and in each other Loan Document on its part to be observed or performed,
and at the time of and immediately after such date, no Default or Event of
Default shall have occurred and be continuing.
(dd) The making of the Term Loan on the Effective Date does not violate any
Requirement of Law on the date of or immediately following the Term Loan and is
not enjoined, temporarily, preliminarily or permanently.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Borrower represents
and warrants to the Lender that (i) on the Execution Date, but for the approval
of the Bankruptcy Plan to the extent such approval is necessary to make such
representation true and correct, and (ii) on the Effective Date, in each case
after giving effect to the transactions contemplated by the Bankruptcy Plan to
be consummated on the Effective Date:
4.1. Corporate Existence; Compliance with Law. The Borrower and each of its
----------------------------------------
Subsidiaries (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation; (b) is duly qualified as a
foreign corporation and in good standing under the laws of each jurisdiction
where such qualification is necessary, except for failures that individually or
in the aggregate would not reasonably be expected to have a Material Adverse
Effect; (c) has all requisite power and authority and the legal right to own and
operate its properties, to lease the property it operates under lease and to
conduct its business as now or currently proposed to be conducted; (d) is in
compliance with its organizational documents; (e) is in compliance with all
other applicable Requirements of Law except for such non-compliance that
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect; and (f) has all necessary licenses, permits, consents
or approvals from or by, has made all necessary filings with, and has given all
necessary notices to, each Governmental Authority having jurisdiction, to the
extent required for such ownership, operation and conduct, except for licenses,
permits, consents, approvals or filings which can be obtained or made by the
30
taking of ministerial action to secure the grant or transfer thereof or failures
that individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
4.2. Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
(a) The (i) execution, delivery and performance by each Loan Party of the
Loan Documents to which it is a party and (ii) consummation of the transactions
contemplated thereby on the Effective Date:
(A) are within such Loan Party's corporate or other powers;
(B) have been duly authorized by all necessary corporate action,
including the consent of shareholders where required;
(C) do not and will not (w) contravene any Loan Party's or any of its
Subsidiaries' respective certificate of incorporation or by-laws or other
comparable organizational documents, (x) violate any other applicable
Requirement of Law applicable to any Loan Party (including Regulations T, U
and X of the Board of Governors of the Federal Reserve System), or any
order or decree of any Governmental Authority or arbitrator applicable to
any Loan Party, (y) conflict with or result in the breach of, or constitute
a default under, or result in or permit the termination or acceleration of,
any Contractual Obligation of any Loan Party or any of its Subsidiaries, or
(z) result in the creation or imposition of any Lien upon any of the
property of any Loan Party or any of its Subsidiaries, other than those in
favor of the Lender pursuant to the Collateral Documents and other Liens
permitted hereby; and
(D) do not require the consent of, authorization by, approval of,
notice to, or filing or registration with, any Governmental Authority or
any other Person (including any consent of any Person necessary to enter
into the Mortgage delivered by any Loan Party with respect to any Mortgaged
Property), other than (x) those which have been obtained or made and copies
of which have been delivered to the Lender pursuant to Section 3.1 and each
-----------
of which is in full force and effect, (y) as to any Additional Mortgaged
Property, the Additional Mortgage which will have been obtained or filed,
as applicable, and copies thereof will have been delivered to the Lender,
on or prior to the date such Additional Mortgaged Property becomes such and
each of which on and after such date will be in full force and effect and
(z) approvals of the Subsidiary Guaranties and Liens created by the
Collateral Documents in the Collateral by the public utility commission or
comparable agency of each of the States set forth on Schedule 3.2(a)
---------------
hereto.
(b) This Agreement has been, and each of the other Loan Documents will have
been upon delivery thereof, duly executed and delivered by each Loan Party
thereto. This Agreement is, and the other Loan Documents will be, when delivered
hereunder, the legal, valid and binding obligation of each Loan Party thereto,
enforceable against such Loan Party in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization,
31
moratorium or other similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability whether raised
in a proceeding in equity or at law.
4.3. Taxes.
-----
(a) All federal, state, local and foreign tax returns, reports and
statements (collectively, the "Tax Returns") required to be filed by the
-----------
Borrower or any of its Tax Affiliates have been filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns are
required to be filed, all such Tax Returns are true and correct in all material
respects, and all taxes, charges and other impositions reflected therein or
otherwise due and payable have been paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto for non-payment
thereof, except where contested in good faith and by appropriate proceedings if
adequate reserves therefor have been established on the books of the Borrower or
such Tax Affiliate in conformity with GAAP. Proper and accurate amounts have
been withheld by the Borrower and each of its Tax Affiliates from their
respective employees for all periods in full and complete compliance with the
tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective Governmental Authorities.
(b) Neither the Borrower nor any of its Tax Affiliates has (i) executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for assessment
or collection of any charges; (ii) agreed or been requested to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise; or (iii) any obligation under any written tax sharing
agreement.
4.4. Full Disclosure.
---------------
(a) All written statements prepared or furnished by or on behalf of
any Loan Party in connection with any of the Loan Documents or the consummation
of the transactions contemplated thereby do not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading in any material respect. There are no facts
known (or which should upon the reasonable exercise of diligence be known) to
the Borrower (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such other
documents, certificates and statements furnished to Lender for use in connection
with the transactions contemplated hereby. Though written Statements prepared or
furnished by or on behalf of any Loan Party relating to inventory reflect
accurate valuations of such inventory in all material respects, the Lender
acknowledges that the location of such inventory may vary from time to time
although substantially all of such inventory is located at all times in the
United States. Projections of the Borrower are based upon estimates and
assumptions stated therein, all of which the Borrower believes to be reasonable
and fair in light of current conditions and current facts known to the Borrower
and reflect the Borrower's good faith estimates of the future financial
performance of the Borrower and its Subsidiaries and of the other information
projected therein for the period set forth therein.
32
(b) All information supplied to the Lender by or on behalf of any Loan
Party with respect to any of the Collateral (in each case taken as a whole with
respect to any particular Collateral) is accurate and complete in all material
respects.
4.5. Financial Statements.
--------------------
(a) The consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 2000, and the related consolidated statements of
operations, stockholders' equity and cash flows of the Borrower and its
Subsidiaries for the fiscal year then ended, certified by Ernst & Young, and the
consolidated balance sheets of the Borrower and its Subsidiaries as at September
30, 2001, and the related consolidated statements of operations, stockholders'
equity and cash flows of the Borrower and its Subsidiaries for the six months
then ended, certified by the Chief Financial Officer of the Borrower, copies of
which have been furnished to the Lender, fairly present in all material
respects, subject, in the case of said balance sheets as at September 30, 2001,
and said statements of operations, stockholders' equity and cash flows for the
six months then ended, to year-end audit adjustments, the consolidated financial
condition of the Borrower and its Subsidiaries as at such dates and the
consolidated results of the operations of the Borrower and its Subsidiaries for
the period ended on such dates, all in conformity with GAAP.
(b) Neither the Borrower nor any of its Subsidiaries prepare (i)
consolidating statements of operations, consolidating statements of cash flows
or consolidating balance sheets in connection with or in preparation of its or
their consolidated statements of operations, consolidated statements of cash
flows or consolidated balance sheets for any period or (ii) Monthly Financial
Reports.
(c) Except for any change in the condition (financial or otherwise),
business, performance, prospects, results of operations or properties of the
Borrower and its Subsidiaries taken as one enterprise that occurred prior to
September 30, 2001 and was expressly disclosed in the Borrower's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001, since December 31,
2000, (x) there has been no Material Adverse Change and (y) there have been no
events or developments that in the aggregate have had a Material Adverse Effect.
(d) Neither the Borrower nor any of its Subsidiaries had at September
30, 2001, any material obligation, contingent liability or liability for taxes,
long-term leases or unusual forward or long-term commitment which is not
reflected in the balance sheet at such date referred to in subsection (a) above
or in the notes thereto.
(e) All financial statements delivered by any Loan Party pursuant
hereto or pursuant to any other Loan Document were prepared by such Loan Party
in good faith in conformity with GAAP and fairly present, in all material
respects, the financial position (on a consolidated basis) of the entities
described in such financial statements as at the respective dates thereof and
the results of operations and cash flows (on a consolidated basis) of the
entities described therein for each of the periods then ended, subject, in the
case of any such unaudited financial statements, to changes resulting from audit
and normal year-end adjustments and footnotes.
33
4.6. Litigation. Except as set forth on Schedule 4.6, there are no pending
---------- ------------
or, to the best knowledge of the Borrower, threatened disputes, actions,
investigations or proceedings against or affecting the Borrower or any of its
Subsidiaries before any court, Governmental Authority or arbitrator that,
individually or in the aggregate, have a reasonable risk of being determined
adversely to any Loan Party and which, if so determined, could reasonably be
expected to have a Material Adverse Effect. Neither the performance of any
action by any Loan Party required or contemplated by any of the Loan Documents
nor the making of the Term Loan is restrained or enjoined (either temporarily,
preliminarily or permanently) by any Governmental Authority or arbitrator; and
no material adverse condition has been imposed by any Governmental Authority or
arbitrator upon any of the foregoing transactions. Except as set forth on
Schedule 4.6, no Loan Party nor any of its properties is subject to any order,
------------
writ, judgment or decree of any Governmental Authority.
4.7. Margin Regulations. Neither the Borrower nor any of its Subsidiaries
------------------
is engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of the Term Loan will
be used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
4.8. Ownership of Borrower; Subsidiaries.
-----------------------------------
(a) A description of the jurisdiction of incorporation and as of the
Execution Date the authorized and outstanding capital stock (including par value
and numbers of shares) of the Borrower and the record ownership thereof is set
forth on Schedule 4.8(a) hereto. All of the outstanding capital stock of the
---------------
Borrower has been validly issued and is fully paid and non-assessable. There are
no agreements to which the Borrower is a party with respect to the voting, sale
or transfer of any shares of Stock of the Borrower, or any agreement to which
the Borrower is a party restricting the transfer or hypothecation of any such
shares. No Stock of the Borrower is subject to any option, warrant, right of
conversion or purchase or any similar right granted by the Borrower.
(b) Set forth on Schedule 4.8(b) hereto is a complete and accurate
---------------
list showing each Subsidiary of the Borrower and, as to each such Subsidiary,
the jurisdiction of its incorporation, the number of shares of each class of its
Stock authorized, the number outstanding and the percentage of the outstanding
shares of each such class owned (directly or indirectly) by the Borrower. No
Stock of any such Subsidiary is subject to any outstanding option, warrant,
right of conversion or purchase or any similar right. All of the outstanding
Stock of each such Subsidiary has been validly issued, is fully paid and
non-assessable and is owned by the Borrower, free and clear of all Liens (other
than Liens in favor of the Lender created pursuant to the Collateral Documents).
Neither the Borrower nor any of its Subsidiaries is a party to, or has knowledge
of, any agreement restricting the transfer or hypothecation of any Stock of any
such Subsidiary, other than the Loan Documents. Except as set forth on Schedule
--------
4.8(b), the Borrower does not own or hold, directly or indirectly, any capital
------
stock or equity security of, or any equity interest in, any Person other than
such Subsidiaries.
4.9. ERISA.
-----
34
(a) With respect to each Loan Party, as of the Execution Date there
are no (i) Title IV Plans, (ii) Multiemployer Plans, (iii) unfunded Pension
Plans or (iv) Welfare Benefit Plans that provide retiree benefits (other than
continuation coverage provided pursuant to Section 4980B of the Code).
(b) No Loan Party nor any of its respective Subsidiaries nor any ERISA
Affiliate, with respect to any Qualified Plan, has failed to make any
contribution or pay any amount due as required by Section 412 of the Code or
Section 302 of ERISA or the terms of any such Qualified Plan.
(c) As of the Execution Date, no Plan is a Title IV Plan or a
Multiemployer Plan.
(d) There has been no, nor is there reasonably expected to occur, any
ERISA Event which could have a Material Adverse Effect.
(e) There are no pending or, to the best knowledge of the Borrower,
threatened, claims, actions or lawsuits (other than claims for benefits in the
normal course), asserted or instituted against (i) any Title IV Plan or its
assets, (ii) any fiduciary with respect thereto or (iii) any Loan Party or any
of its respective Subsidiaries or any ERISA Affiliate with respect thereto. To
the best knowledge of the Borrower, there are no pending or threatened claims,
actions or lawsuits (other than claims for benefits in the normal course),
asserted or instituted against (i) any Multiemployer Plan or its assets, (ii)
any fiduciary with respect thereto or (iii) any Loan Party or any of its
respective Subsidiaries or any ERISA Affiliate with respect thereto.
(f) Except as set forth on Schedule 4.9, no Loan Party nor any of its
------------
respective Subsidiaries nor any ERISA Affiliate has incurred or has any
reasonable likelihood of incurring any Withdrawal Liability under Section 4201
of ERISA as a result of a complete or partial withdrawal from a Multiemployer
Plan (and no event has occurred which, with the giving of notice under Section
4219 of ERISA, would result in any such liability).
(g) Except as set forth on Schedule 4.9, within the last five years no
------------
Loan Party nor any of its respective Subsidiaries nor any ERISA Affiliate has
engaged in a transaction which resulted in a Title IV Plan with Unfunded
Liabilities being transferred outside of the "controlled group" (within the
meaning of Section 4001(a)(14) of ERISA) of any such entity.
(h) Except as set forth on Schedule 4.9, no Plan which is a Welfare
------------
Benefit Plan provides for continuing benefits or coverage for any participant or
any beneficiary of a participant after such participant's termination of
employment (except as may be required by Section 4980B of the Code and at the
sole expense of the participant or the beneficiary of the participant) which
would result in a liability in an amount which could have a Material Adverse
Effect.
(i) No Loan Party nor any of its respective Subsidiaries nor any ERISA
Affiliate has any liability under any terminated "employee pension benefit
plan", as defined in Section 3(2) of ERISA, of any related or unrelated entity,
which termination would reasonably be expected to have a Material Adverse
Effect.
35
(j) The present value of the liability, if any, with respect to all
unfunded Pension Plans of each Loan Party, each of its Subsidiaries and each
ERISA Affiliate is reflected on the most recent audited financial statements
delivered to the Lender pursuant to this Agreement.
4.10. Liens. There are no Liens on any properties of any Loan Party or any
-----
of its Subsidiaries other than those permitted by Section 7.1. The Liens granted
-----------
by the Loan Parties to the Lender pursuant to this Agreement, the Collateral
Documents and the Confirmation Order, as applicable, are fully perfected first
priority Liens in and to the Collateral (other than the Mortgaged Properties and
Collateral located in any of the States set forth on Schedule 3.2(a) hereto),
---------------
subject only to Permitted Liens, and (a) upon recording of the Mortgage Related
Documents referred to in clause (f) of the definition thereof with the
appropriate Governmental Authorities, will be fully perfected first priority
Liens in and to the Mortgaged Properties, subject only to Permitted Mortgaged
Property Liens, and (b) upon receipt of approvals from the public utility
commission or comparable agency of each of the States set forth on Schedule
--------
3.2(a), will be fully perfected first priority Liens in and to all of the
------
Collateral located in such States. The only filings or recordings necessary to
perfect the Liens granted by the Loan Parties to the Lender pursuant to the
Collateral Documents are the financing statements and other documents listed on
Schedule 4.10. As of the Execution Date, Schedule 7.1(m) annexed hereto lists
------------- ---------------
each financing statement or mortgage which has been filed against any Loan Party
and each other Lien securing Indebtedness in excess of $10,000 (other than, in
either case, the Liens securing the Obligations).
4.11. No Burdensome Restrictions; No Defaults.
---------------------------------------
(a) Neither the Borrower nor any of its Subsidiaries (i) is a party to
any Contractual Obligation the compliance with which would reasonably be
expected to have a Material Adverse Effect or the performance of which by any
thereof, either unconditionally or upon the happening of an event, will result
in the creation of a Lien (other than a Lien granted pursuant to a Loan Document
or otherwise permitted hereby) on the property or assets of any thereof or (ii)
is subject to any charter or corporate restriction which would reasonably be
expected to have a Material Adverse Effect.
(b) (i) No Subsidiary of the Borrower on the Execution Date and (ii)
neither the Borrower nor any of its Subsidiaries on the Effective Date, is in
default under or with respect to any Contractual Obligation owed by it and, to
the best knowledge of the Borrower, no other party is in default under or with
respect to any Contractual Obligation owed to any Loan Party or to any
Subsidiary of a Loan Party, other than, in either case, those defaults which
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
(c) No Default or Event of Default has occurred and is continuing.
(d) To the best knowledge of the Borrower, there is no Requirement of
Law applicable to any Loan Party the compliance with which by such Loan Party
would reasonably be expected to have a Material Adverse Effect.
36
(e) No Subsidiary of the Borrower is subject to any Contractual
Obligation restricting or limiting its ability to declare or make any dividend
payment or other distribution on account of any shares of any class of its Stock
or its ability to purchase, redeem, or otherwise acquire for value or make any
payment in respect of any such shares or any shareholder rights, except pursuant
to a Loan Document.
4.12. No Other Ventures. No Loan Party and no Subsidiary of a Loan Party
-----------------
is engaged in any joint venture or partnership with any
other Person.
4.13. Investment Company Act; Public Utility Holding Company Act.
----------------------------------------------------------
(a) Neither the Borrower nor any of its Subsidiaries is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended. The making of the Term Loan by the Lender, the
application of the proceeds and repayment thereof by the Borrower and the
consummation of the transactions contemplated by the Loan Documents will not
result in a violation by the Borrower or any Subsidiary of the Borrower of any
provision of such Act or any rule, regulation or order issued by the Securities
and Exchange Commission thereunder.
(b) Neither the Borrower nor any of its Subsidiaries is a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", as each such term is defined and used in the Public Utility
Holding Act of 1935, as amended.
4.14. Insurance. All policies of insurance of any kind or nature of any
---------
Loan Party or any of its respective Subsidiaries, including policies of fire,
theft, product liability, public liability, property damage, other casualty,
employee fidelity, workers' compensation and employee health and welfare
insurance, are in full force and effect and are of a nature and provide such
coverage as is customarily carried by companies of the size and character of
such Person and comply with the requirements of Section 6.4. No Loan Party nor
any of its respective Subsidiaries has been refused insurance which it has not
replaced on comparable terms for any material coverage which it had applied or
had any policy of insurance terminated (other than at its request).
4.15. Labor Matters.
-------------
(a) There are no strikes, work stoppages, slowdowns or lockouts
pending or threatened against or involving any Loan Party or any of its
respective Subsidiaries, other than those which in the aggregate would have no
Material Adverse Effect.
(b) There are no unfair labor practices, grievances or complaints
pending, or, to the best knowledge of the Borrower, threatened against or
involving any Loan Party or any of its respective Subsidiaries, nor are there
any arbitrations or grievances threatened involving any Loan Party or any of its
respective Subsidiaries, other than those which, in the aggregate, if resolved
adversely to such Loan Party or such Subsidiary, would have no Material Adverse
Effect.
37
(c) Except as set forth on Schedule 4.15, there is no collective
-------------
bargaining agreement covering any of the employees of the Borrower or Subsidiary
of the Borrower.
4.16. Use of Proceeds. The proceeds of the Term Loan are being used by the
---------------
Borrower solely as follows: (i) to refinance existing Indebtedness of the
Borrower and its Subsidiaries, for the payment of related transaction costs,
fees and expenses for the payment of interest on the Term Loan; and (ii) for
general working capital and corporate purposes; provided, that, except as
--------
specifically provided in Section 7.3, the proceeds of the Term Loan shall not be
-----------
directed or otherwise made available to any Subsidiary of the Borrower that is
not a Subsidiary Guarantor.
4.17. Environmental Matters. Except as disclosed on Schedule 4.17:
--------------------- -------------
(a) The operations and properties of each Loan Party and each of its
respective Subsidiaries or tenants have been and are in compliance with all
Environmental Laws other than such non-compliance the consequences of which
could not result in the Loan Parties and their Subsidiaries incurring
Environmental Liabilities and Costs in excess of $25,000 individually or
$100,000 in the aggregate;
(b) Each Loan Party and each of its Subsidiaries has obtained all
environmental, health and safety Permits necessary for their operations, and all
such Permits are in good standing and each Loan Party and each of its
Subsidiaries are in compliance with the terms and conditions of such Permits
other than any such failure to obtain or be in good standing or such
non-compliance the consequences of which could not result in the Loan Parties
and their Subsidiaries incurring Environmental Liabilities and Costs in excess
of $25,000 individually or $100,000 in the aggregate;
(c) No Loan Party nor any of its respective Subsidiaries currently or
previously owned, operated or leased property or operations, is subject to any
threatened or outstanding order from or agreement with any Governmental
Authority or other Person or is subject to any judicial or docketed
administrative proceeding respecting (i) Environmental Laws, (ii) Remedial
Action or (iii) any Environmental Liabilities and Costs arising from a Release
or threatened Release, other than those the consequences of which in the
aggregate could not have a Material Adverse Effect;
(d) No Loan Party nor any of its respective Subsidiaries is a
treatment, storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., the regulations
-------
thereunder or any state analog;
(e) No Loan Party nor any of its respective Subsidiaries has filed or
failed to file any notice required to be filed by it under any applicable
Environmental Law reporting a Release unless neither such Release nor such
failure to file would reasonably be expected to result in the Loan Party and its
respective Subsidiaries incurring Environmental Costs and Liabilities in excess
of $25,000, individually or $100,000 in the aggregate;
(f) There are no facts, circumstances or conditions arising out of,
associated with or otherwise related to the operations of any Loan Party or any
of its respective Subsidiaries, including any operations of or ownership of
property by any Loan Party or any of
38
its respective Subsidiaries, which could reasonably be expected to result in
the Loan Parties and their respective Subsidiaries incurring Environmental
Liabilities and Costs in excess of $50,000;
(g) No Environmental Lien and no unrecorded Environmental Lien has
attached to any property of any Loan Party or any of its respective
Subsidiaries;
(h) There is not now on, in or under the property owned, leased or
operated by any Loan Party or any of its respective Subsidiaries any underground
storage tanks over which any Loan Party or any of its Subsidiaries has control
or surface impoundments containing hazardous materials;
(i) To the best knowledge of the Borrower, there is not now on, in or
under any property owned, operated or leased by any Loan Party or any of its
respective Subsidiaries (i) any asbestos-containing material, or (ii) any
polychlorinated biphenyls used in electrical or other equipment, in either case,
as to which the Loan Party is not in compliance with Environmental Laws; and
(j) Each Loan Party has provided to the Lender copies of all
environmental or health or safety reports, including audits, assessments,
investigations, monitoring results, UST reports and asbestos surveys relating to
the operations or property of such Loan Party or any of its Subsidiaries to the
extent such reports are in the possession, custody or control of such Loan Party
or any of its Subsidiaries.
4.18. Intellectual Property. Each Loan Party and each of its Subsidiaries
---------------------
owns or licenses or otherwise has the right to use all material licenses,
permits, patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, copyright applications, franchises,
authorizations and other intellectual property rights (including all
Intellectual Property Collateral as defined in the Intellectual Property
Security Agreements) that are necessary for the operations of its businesses,
without known infringement upon or conflict with the rights of any other Person
with respect thereto, including all trade names associated with any private
label brands of concession or other merchandise of any Loan Party or any of its
Subsidiaries. To the best knowledge of the Borrower, no slogan or other
advertising device, product, process, method, substance, part or component, or
other material now employed, or now contemplated to be employed, by any Loan
Party or any of its Subsidiaries infringes upon or conflicts with any rights
owned by any other Person, and no claim or litigation regarding any of the
foregoing is pending or threatened. Except as set forth on Schedule 4.18 hereto,
-------------
there is no claim or action by any such other Person pending or, to the
knowledge of any Responsible Officer of the Borrower or any Subsidiary of the
Borrower, threatened against any Loan Party or any Subsidiary of any Loan Party
with respect to any of the rights or property referred to in this Section 4.18.
------------
4.19. Title; Real Property.
--------------------
(a) Each Loan Party and each of its respective Subsidiaries owns fee
simple absolute title to all of the Real Property Assets purported to be owned
by such Loan Party or Subsidiary, which Real Property Assets are described in
Schedule 4.19(a), and good title to, or valid leasehold interests in, all other
----------------
properties and assets purported to be owned by such Loan
39
Party or Subsidiary, and all property reflected in the most recent Financial
Statements delivered by the Borrower (other than those properties or assets sold
thereafter (if sold on or prior to the Execution Date) in the ordinary course of
business, and none of the properties and assets of any Loan Party or any of its
Subsidiaries, including any Real Property Asset, is subject to any Liens, except
for Liens granted to the Lender pursuant to the Loan Documents and Permitted
Liens. Each Loan Party and each of its Subsidiaries has received all deeds,
assignments, waivers, consents, non-disturbance and recognition or similar
agreements, bills of sale and other documents, and has duly effected all
recordings, filings and other actions, necessary to establish, protect and
perfect such Loan Party's or Subsidiary's right, title and interest in and to
all such property except, with respect to any properties (other than any
Mortgaged Properties), for any documents which the failure to receive or actions
which the failure to take could not individually or in the aggregate have a
Material Adverse Effect. Except as permitted by this Agreement, all such
properties and assets are free and clear of Liens.
(b) Each Real Property Asset owned by any Loan Party or any
Subsidiary, of any Loan Party together with the name of the owner of record
thereof, an accurate street address, and a description of the use of such real
property, are set forth on Schedule 4.19(a) hereto. Each of the leases with
----------------
respect to all Mortgaged Properties leased by any Loan Party or any of its
Subsidiaries (whether by lease, sublease or assignment and whether such Loan
Party or Subsidiary is landlord or tenant (whether directly or as an assignee or
successor in interest)) is valid and enforceable, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and to
general principles of equity, in accordance with its terms and is, to the best
of such Loan Party's knowledge, in full force and effect. The Borrower has
delivered to the Lender true and complete copies of each of such leases, leases
or assignments of leases (together with all amendments, modifications,
supplements, renewals or extensions of any thereof) and affecting the rights or
obligations of any Loan Party or any of its Subsidiaries which is a party
thereto, including any non-disturbance and recognition agreements, subordination
agreements, attornment agreements and agreements regarding the term or rental of
any of the leases. No default or other event has occurred and is continuing or
condition exists under any lease beyond the end of any grace period provided
therefor in such lease the effect of which event is (x) if such event
constitutes a default in payment (other than with respect to payment of common
area maintenance charges), to terminate, or to permit the landlord to terminate,
such lease or (y) if such event constitutes any event other than such a payment
default, to terminate, or to permit the landlord to terminate (in circumstances
where such landlord is likely to terminate), such lease, except for any such
leases, the termination of which could not individually or in the aggregate have
a Material Adverse Effect.
(c) No Loan Party nor any of its Subsidiaries owns or holds, or is
obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any real
property owned or leased by such Loan Party or Subsidiary.
(d) All components of all improvements included within any Real
Property Asset owned or Mortgaged Property leased by any Loan Party or any of
its Subsidiaries (hereinafter collectively referred to as the "Improvements"),
--------------
including, without limitation, the roofs and structural elements thereof and the
heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer,
waste water, storm water, paving and parking equipment, systems
40
and facilities included therein, (i) in the case of any owned Real Property
Asset, are or (ii) in the case of any leased Mortgaged Property, (x) to the
extent required to be maintained, repaired or replaced under the related lease,
are or (y) to the extent not so required to be maintained, repaired or replaced,
to the best of the Borrower's knowledge, are, in each case, in good working
order and repair except, in the case of any owned Real Property Asset not
constituting a Mortgaged Property, as could not, individually or in the
aggregate for all such Real Property Assets, have a Material Adverse Effect. All
water, gas, electrical, steam, compressed air, telecommunication, sanitary and
storm sewage lines and systems and other similar systems currently serving the
real property owned or leased by any Loan Party or any of its Subsidiaries are
installed and operating and are sufficient to enable the real property owned or
leased by such Loan Party or Subsidiary to continue to be used and operated in
the manner currently being used and operated, and no Loan Party nor any of its
Subsidiaries has any knowledge of any factor or condition that could result in
the termination or material impairment of the furnishing thereof. No Improvement
or portion thereof is dependent for its access, operation or utility on any
land, building or other Improvement that is not both included in the real
property owned or leased by any Loan Party or any of its Subsidiaries and, if
such Improvement or portion thereof is subject to a Mortgage, subject to such
Mortgage.
(e) All material Permits required to have been issued to the Borrower
to enable all real property owned or leased by any Loan Party or any of its
Subsidiaries to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used have been lawfully issued and are in full
force and effect.
(f) As of the date hereof, and continuing thereafter except to the
extent any Loan Party or Subsidiary thereof provides notice to the contrary, no
Loan Party nor any of its Subsidiaries has received any notice, or has any
knowledge, of any material pending, threatened or contemplated condemnation
proceeding affecting any real property owned or leased by any Loan Party or any
of its Subsidiaries or any part thereof or any proposed termination or
impairment of any parking at any such owned or leased real property or of any
sale or other disposition of any such owned or leased real property or any part
thereof in lieu of condemnation.
(g) No portion of any real property owned or leased by any Loan Party
or any of its Subsidiaries has suffered any damage by fire or other casualty
loss which has not heretofore been completely repaired and restored to its
original condition. Except as disclosed on Schedule 4.19(g), no portion of any
----------------
real property owned or leased by the Borrower or any of its Subsidiaries is a
Flood Hazard Property which is not insured as to flood hazards.
(h) Schedule 4.19(h) sets forth with respect to all Real Property
----------------
Assets, (i) the amount of existing Indebtedness (other than the Obligations)
secured by a Lien on each property, (ii) the current monthly payment of interest
and principal in respect of such Indebtedness, and (iii) the current interest
payable in respect of such Indebtedness.
(i) With respect to each Mortgaged Property, any consents from any
holders of any Indebtedness secured by such Mortgaged Property that are required
to permit the Lender to acquire and hold a valid and perfected first priority
security interest therein have been obtained and such consents are in full force
and effect.
41
(j) Except as set forth on Schedule 4.19(j):
----------------
(i) no structure owned or leased by any Loan Party or any of its
Subsidiaries fails to conform in any material respect with
applicable ordinances, regulations, zoning laws and restrictive
covenants nor encroaches upon real property of others, nor is
any such real property encroached upon by structures of others
in any case in any manner that would have or would be reasonably
likely to have a Material Adverse Effect;
(ii) no charges or violations have been filed, served, made or
threatened against any Loan Party or, to the knowledge of the
Borrower, any other Person, against or relating to any such
property or structure or any of the operations conducted at any
such property or structure, as a result of any violation or
alleged violation of any applicable ordinances, requirements,
regulations, zoning laws or restrictive covenants or as a result
of any encroachment on the property of others where the effect
of same would have or would be reasonably likely to have a
Material Adverse Effect;
(iii) other than pursuant to applicable laws, rules, regulations or
ordinances, covenants that run with the land or provisions in
the applicable leases, there exists no restriction on the use,
transfer or mortgaging of any such property;
(iv) each Loan Party and each of its Subsidiaries has adequate rights
of ingress to and egress from any such property used by it for
the operations conducted thereon and, in the case of colocation
spaces, as customary for similarly situated Persons; and
(v) there are no developments affecting any of the real property or
interests of any Loan Party therein pending or, to the best
knowledge of the Borrower, threatened which might reasonably be
expected to curtail or interfere in any material respect with
the use of such property for the purposes for which it is now
used.
4.20. Certain Indebtedness. Schedule 4.20 separately identifies all
-------------------- -------------
Indebtedness (and the unpaid principal amount thereof as of the Execution Date)
of each Loan Party and each Subsidiary of a Loan Party that is not a Loan Party
which is either (i) for borrowed money, (ii) incurred outside of the ordinary
course of the business or in a manner and to the extent not consistent with past
practice, or (iii) material to the financial condition, business, operations or
prospects of such Loan Party or such Subsidiary (or will be material to the
financial condition, business, operations or prospects of such Loan Party, the
Borrower or such Subsidiary), $150,000 being hereby deemed material for purposes
of this Section 4.20.
------------
4.21. Solvency. Both before and after giving effect to (a) the Term Loan to
--------
be made or extended on the Effective Date, (b) the disbursement of the proceeds
of the Term Loan pursuant to the instructions of the Borrower, (c) the payment
and accrual of all transaction costs in connection with the foregoing and (d)
the effectiveness of the Bankruptcy Plan, (i) the Borrower and (ii) each
Subsidiary of the Borrower, taken as one enterprise, is Solvent.
42
4.22. ADA Compliance. Each Loan Party has made all modifications or
--------------
provided all accommodations which are required to be made or provided by such
Loan Party to each Mortgaged Property pursuant to the ADA, except where
noncompliance with such requirements could not have a Material Adverse Effect.
No Loan Party has received any notice or complaint regarding any noncompliance
with the ADA of any of the Mortgaged Properties or of any Loan Party's
employment practices and, to the best knowledge of the Borrower, there has been
no threatened litigation alleging any such noncompliance except where
noncompliance with such requirements could not have a Material Adverse Effect.
4.23. Financial Accounts. Schedule 4.23 hereto sets forth a list of all
------------------ -------------
bank accounts, securities accounts and investment accounts of any Loan Party.
4.24. Material Agreements. Schedule 4.24 hereto sets forth as of the
------------------- -------------
Execution Date a list of each Contractual Obligation (other than the Loan
Documents) to which any Loan Party or any Subsidiary thereof is a party or by
which any of such persons is bound that constitutes a contract that would be
required to be filed as an exhibit to an Exchange Act form filed on the
Execution Date pursuant to paragraph 10 of Item 601 of Regulation S-K under the
Exchange Act, and all amendments, modifications and supplements to each of the
foregoing. No Loan Party or any Subsidiary thereof is in default or breach
(after the expiration of any applicable grace period), or will, after giving
effect to the transactions contemplated hereby, be in default or breach of any
such Contractual Obligation.
ARTICLE V
REPORTING COVENANTS
As long as any of the Obligations remain outstanding, unless the
Lender otherwise consents in writing, the Borrower agrees with the Lender that:
5.1. Financial Statements. The Borrower shall furnish to the Lender the
--------------------
following Financial Statements:
(a) (i) within thirty (30) days after the end of each fiscal month
(other than any month which is the end of a Fiscal Quarter or Fiscal Year) with
respect to which the Borrower has prepared a Monthly Financial Report, a Monthly
Financial Report or (ii) within thirty (30) days after the end of each fiscal
month (other than any month which is the end of a Fiscal Quarter or Fiscal Year)
with respect to which the Borrower has not prepared a Monthly Financial Report,
a report, setting forth financial information regarding the Borrower and its
Subsidiaries, certified by the Chief Financial Officer of the Borrower,
consisting of a summary of the outstanding balance of (A) cash accounts, (B)
accounts receivable and (C) accounts payable as of the last day of that fiscal
month;
(b) as soon as available and in any event within 45 days after the end
of each of the first three Fiscal Quarters of each Fiscal Year, consolidated
balance sheets of the Borrower and its Subsidiaries as of the end of such
quarter and consolidated statements of operations and cash flows of the Borrower
and its Subsidiaries for the period commencing at the end of the previous Fiscal
Year and ending with the end of such Fiscal Quarter, all prepared in conformity
43
with GAAP and certified by the Chief Financial Officer or Treasurer of the
Borrower. Such financial information shall be accompanied by a certificate
(each, a "Compliance Certificate") including (i) a statement by such Chief
Financial Officer that such financial information presents fairly in all
material respects in conformity with GAAP (subject to normal year-end
adjustments and footnotes) the financial position, results of operations and
statements of cash flows of the Borrower and its Subsidiaries, on a consolidated
basis, as at the end of such Fiscal Quarter and for the period then ended, (ii)
a certificate of said officer stating that no Default or Event of Default has
occurred and is continuing or, if a Default or an Event of Default has occurred
and is continuing, a statement as to the nature thereof and the action the
Borrower proposes to take with respect thereto, and (iii) at any time when the
Borrower is not required to file quarterly reports on Form 10-Q, a written
discussion and analysis by the management of the Borrower of the financial
statements furnished in respect of such Fiscal Quarter;
(c) as soon as available and in any event within 90 days after the end
of each Fiscal Year, consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such year and consolidated statements of
operations and cash flows of the Borrower and its Subsidiaries for such Fiscal
Year, all prepared in conformity with GAAP and certified, in the case of such
consolidated financial statements, as fairly presenting, in all material
respects, the consolidated financial position of the Borrower and its
Subsidiaries as at the dates indicated, and the results of their operations and
cash flows for the periods indicated, and, from and including Fiscal Year 2003,
without qualification as to the scope of the audit or as to the Borrower and its
Subsidiaries being a going concern, in each case by Ernst & Young or other "Big
Four" or nationally recognized independent public accountants reasonably
acceptable to the Lender, together with (i) to the extent not prohibited by
American Institute of Certified Public Accountants professional standards or
such auditor's United States firm-wide policy or practice, any letter from such
accounting firm relating to the absence or existence of any material weakness in
the Borrower's system of internal controls and (ii) at any time when the
Borrower is not required to file annual reports on Form 10-K, a written
discussion and analysis by the management of the Borrower of the financial
statements furnished in respect of such Fiscal Year;
(d) promptly, from time to time, such other information regarding the
operations, including information regarding specific lines of business of the
Borrower or any of its Subsidiaries, business affairs and financial condition of
the Borrower or any of its Subsidiaries, or compliance with the terms of any
Loan Document, as the Lender may reasonably request; and
(e) promptly, from time to time, such other information regarding any
Loan Party as the Lender may reasonably request, including, any or all
regulatory filings of any Loan Party.
5.2 Default or Material Adverse Change Notices. As soon as practicable,
------------------------------------------
and in any event within five (5) Business Days after a Responsible Officer of
any Loan Party has actual knowledge of the existence of any Default, Event of
Default or other event which has had a Material Adverse Effect or which could
reasonably be expected to cause or result in a Default or Event of Default, the
Borrower shall give the Lender telephonic or telecopied notice specifying the
nature of such Default or Event of Default or other event, including the
anticipated effect
44
thereof, which notice, if given telephonically, shall be promptly confirmed in
writing on the next Business Day.
5.3. Asset Sales. Prior to any asset sale by the Borrower or any of its
-----------
Subsidiaries and involving the disposition of any Collateral or other assets
anticipated to generate in excess of $500,000 (or its equivalent) in proceeds,
the Borrower shall send the Lender a notice (a) describing the assets being sold
or the nature and material terms and conditions of such transaction and (b)
stating the estimated proceeds anticipated to be received by the Borrower or any
of its Subsidiaries.
5.4. ERISA Matters. The Borrower shall furnish the Lender:
-------------
(a) (i) promptly and in any event within 30 days after the Borrower,
any of its Subsidiaries or any ERISA Affiliate knows or has reason to know that
any ERISA Event has occurred, and (ii) promptly and in any event within 10 days
after the Borrower, any of its Subsidiaries or any ERISA Affiliate knows or has
reason to know that a request for a minimum funding waiver under Section 412 of
the Code has been filed with respect to any Qualified Plan, a written statement
of the Chief Financial Officer or other appropriate officer of the Borrower
describing such ERISA Event or waiver request and the action, if any, which the
Borrower, its Subsidiaries and ERISA Affiliates propose to take with respect
thereto and a copy of any notice filed with the PBGC or the IRS pertaining
thereto;
(b) promptly and in any event within 30 days after the adoption
thereof, notice of (i) any amendment to a Title IV Plan which results in an
increase in benefits or the adoption of any new Title IV Plan, and (ii) any
amendment to a, or adoption of a new, Welfare Benefit Plan, which results in new
or increased benefits for retirees, their spouses or their beneficiaries, other
than continuation coverage provided pursuant to Section 4980B of the Code;
(c) promptly and in any event after receipt of written notice of
commencement thereof, notice of any action, suit or proceeding before any
Governmental Authority or arbitrator affecting the Borrower, any of its
Subsidiaries or any ERISA Affiliate with respect to any Title IV Plan,
Multiemployer Plan, except those which in the aggregate, if adversely
determined, could not have a Material Adverse Effect;
(d) promptly and in any event within 10 days after receipt thereof by
the Borrower, any of its Subsidiaries or any ERISA Affiliate, a copy of each
notice from the PBGC, received by the Borrower, any of its Subsidiaries or any
ERISA Affiliate of the PBGC's intention to terminate any Pension Plan or to have
a trustee appointed to administer any Pension Plan;
(e) simultaneously with the date that the Borrower, any of its
Subsidiaries or any ERISA Affiliate files a notice of intent to terminate any
Title IV Plan under a distress termination within the meaning of Section 4041(c)
of ERISA, a copy of each such notice; and
(f) simultaneously with the date that the Borrower, any of its
Subsidiaries or any ERISA Affiliate files a notice of intent to terminate any
Title IV Plan, if such termination would require material additional
contributions in order to be considered a standard termination within the
meaning of Section 4041(b) of ERISA, a copy of each notice.
45
5.5. Litigation. Promptly after a Responsible Officer of the Borrower
----------
obtains knowledge thereof, the Borrower shall give the Lender written notice of
the commencement of any action, suit or proceeding before any domestic or
foreign Governmental Authority or arbitrator, against or affecting the Borrower
or any of its Subsidiaries, (i) which is brought by or on behalf of any
Governmental Authority or in which injunctive or other equitable relief is
sought or (ii) as to which it is probable (within the meaning of Statement of
Financial Accounting Standards No. 5) that there will be an adverse
determination and which, if adversely determined, would (A) reasonably be
expected to result in liability of the Borrower or any of its Subsidiaries in an
aggregate amount of $100,000 or more, not reimbursable by insurance, or (B)
materially impair the right of any Loan Party to perform its obligations under
this Agreement or any other Loan Document to which it is a party.
5.6. SEC Filings; Press Releases. Promptly after the receipt, sending or
---------------------------
filing thereof, the Borrower shall send the Lender (a) copies of all reports
which any Loan Party sends to its security holders generally, and copies of all
reports and registration statements which any Loan Party or any Subsidiary of
any Loan Party files with the Securities and Exchange Commission or any national
securities exchange or the National Association of Securities Dealers, Inc. and
(b) copies of all press releases and other statements made available by any Loan
Party to the public generally concerning material changes or developments in the
business of such Loan Party.
5.7. Labor Relations. Promptly after becoming aware of the same, the
---------------
Borrower shall give the Lender written notice of (a) any material labor dispute
to which the Borrower or any of its Subsidiaries is or becomes a party,
including any strikes, lockouts or other labor disputes relating to such
Person's facilities, and (b) any Worker Adjustment and Retraining Notification
Act or related liability incurred with respect to the closing of any facility of
such Person.
5.8. Tax Returns. Upon the request of the Lender, the Borrower will provide
-----------
copies of all federal, state, local and foreign tax returns and reports filed by
the Borrower or any of its Subsidiaries in respect of taxes measured by income
or net worth or capital (excluding sales, use and like taxes).
5.9. Insurance. As soon as is practicable and in any event within 15 days
---------
of request, the Borrower will furnish the Lender with (i) a certificate of
insurance or other report in form and substance satisfactory to the Lender
outlining all material insurance coverage maintained as of the date of such
report by the Borrower and its Subsidiaries, the duration of such coverage, the
amounts and risks covered and the related deductible amounts and otherwise
indicating compliance of such insurance with the requirements of Section 6.4 and
-----------
(ii) an insurance broker's statement that all premiums then due and payable with
respect to such coverage have been paid.
5.10. Environmental Matters. The Borrower shall provide the Lender promptly
---------------------
and in any event within 10 days of the Borrower or any of its Subsidiaries
learning of any of the following, written notice of any of the following:
(a) any Loan Party or any of its Subsidiaries is or is likely to be
liable to any Person as a result of a Release or threatened Release which could
reasonably be expected to subject such Loan Party or Subsidiary to Environmental
Liabilities and Costs of $50,000 or more or when combined with other outstanding
liabilities could reasonably be expected to subject such
46
Loan Party or any of its Subsidiaries to Environmental Liabilities and Costs in
excess of $250,000;
(b) the receipt by any Loan Party or any of its Subsidiaries of
notification that any real or personal property of such Loan Party or Subsidiary
is subject to any Environmental Lien;
(c) the receipt by any Loan Party or any of its Subsidiaries of any
notice of violation of, or knowledge by such Loan Party or Subsidiary that there
exists a condition which could reasonably be expected to result in a violation
by such Loan Party or Subsidiary of, any Environmental Law, except for
violations the consequence of which in the aggregate could not reasonably be
expected to result in the Loan Parties collectively incurring Environmental
Liabilities and Costs of $50,000 or more;
(d) the commencement of any judicial or administrative proceeding or
investigation alleging a violation or liability of any Loan Party under any
Environmental Law, other than those the consequences of which in the aggregate
could have no reasonable likelihood of subjecting the Loan Parties collectively
to Environmental Liabilities and Costs of $50,000 or more;
(e) any proposed acquisition of stock, assets or real estate, or any
proposed leasing of any property, or any other action by any Loan Party or any
of its Subsidiaries other than those the consequences of which in the aggregate
have or would have in the reasonable judgment of the Borrower no likelihood of
subjecting the Loan Parties collectively to Environmental Liabilities and Costs
of $50,000 or more; and
(f) any proposed action taken by any Loan Party or any of its
Subsidiaries that require the Loan Parties to (i) obtain additional
environmental, health or safety Permits that collectively require the
expenditure of $50,000 or more or (ii) become subject to additional
Environmental Liabilities and Costs of $50,000 or more; and
(g) upon written request by the Lender, a report providing an update
of the status of any environmental, health or safety compliance, hazard or
liability issue identified in any notice or report delivered pursuant to this
Agreement, other than those which in the aggregate have in the reasonable
judgment of the Borrower no likelihood of subjecting the Loan Parties to
Environmental Liabilities and Costs of $50,000 or more.
5.11. Board of Directors. The Borrower shall, with reasonable promptness,
------------------
provide written notice of any change in the Board of Directors of the Borrower.
5.12. New Subsidiaries. The Borrower shall, promptly upon any Person
----------------
becoming a Subsidiary of the Borrower, provide a written notice setting forth
with respect to such Person (a) the date on which such Person became a
Subsidiary of the Borrower and (b) all of the data required to be set forth in
Schedule 4.8(a) and Schedule 4.8(b) with respect to all Subsidiaries of the
--------------- ---------------
Borrower, which written notice shall be deemed to supplement Schedule 4.8(a) and
---------------
Schedule 4.8(b) for all purposes of this Agreement.
---------------
47
5.13. Compliance With the ADA. The Borrower shall promptly provide the
-----------------------
Lender with copies of all claims which are received by the Borrower made by any
individual, entity or governmental agency as to any alleged material
noncompliance of any Real Property Asset with the requirements of the ADA.
5.14. Defaults. Immediately upon any Responsible Officer of the Borrower
--------
becoming aware thereof, the Borrower shall provide written notice to the Lender
of the breach beyond any applicable grace period by any party of any Contractual
Obligation of the Borrower or any of its Subsidiaries that is material to the
business of the Borrower and its Subsidiaries taken as one enterprise.
5.15. Other Information. The Borrower will provide the Lender with such
-----------------
other information respecting the business, properties, condition, financial or
otherwise, or operations of the Borrower or any of its Subsidiaries as the
Lender reasonably may request from time to time.
5.16. No Implied Consent. No provision herein requiring the notification
------------------
of, or delivery of documents to, the Lender in respect of any transaction shall
constitute, or be deemed to constitute, a consent to, or authorize, or be deemed
to authorize, any transaction otherwise prohibited by this Agreement.
ARTICLE VI
AFFIRMATIVE COVENANTS
As long as the Obligations remain outstanding, unless the Lender
otherwise consents in writing, the Borrower agrees with the Lender that:
6.1. Compliance with Laws, Etc. The Borrower shall, and shall cause each of
--------------------------
its Subsidiaries to, comply with all applicable Requirements of Law and Permits
except for any Requirements of Law or Permits non-compliance with which would
not individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
6.2 Conduct of Business. The Borrower shall (a) conduct, and shall cause
-------------------
each of its Subsidiaries to conduct, its business in the ordinary course and
consistent with past practice, (b) use, and cause each of its Subsidiaries to
use, its reasonable efforts, in the ordinary course and consistent with past
practice, to preserve its business and the goodwill and business of the
advertisers, suppliers and others having business relations with the Borrower or
any of its Subsidiaries, (c) preserve, and cause each of its Subsidiaries to
preserve, all registered patents, trademarks, trade names, trade secrets,
know-how, copyrights and service marks material to the conduct of the business
of the Borrower and its Subsidiaries taken as one enterprise, and (d) perform
and observe, and cause each of its Subsidiaries to perform and observe, all the
terms, covenants and conditions required to be performed and observed by it
under its Contractual Obligations (including pay all rent and other charges
payable, and perform any repairs required to be performed, under any lease and
all Indebtedness and other obligations as the same become due), and do, and
cause its Subsidiaries to do, all things necessary to preserve and to keep
unimpaired its rights under such Contractual Obligations except for any
Contractual Obligations
48
non-performance or observance of which could not individually or in the
aggregate have a Material Adverse Effect.
6.3. Payment of Taxes, Etc. The Borrower shall pay and discharge, and shall
----------------------
cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, all lawful governmental claims, taxes, assessments, charges
and levies, except where contested in good faith, by proper proceedings and with
respect to which adequate reserves therefor have been established on the books
of the Borrower or the appropriate Subsidiary in conformity with GAAP.
6.4. Maintenance of Insurance.
------------------------
(a) The Borrower shall, at its expense, keep the Collateral insured
against loss or damage by fire, theft, explosion, fraud, sprinklers and all
other hazards and risks, and in such amounts, as are in accordance with normal
industry practice. The Borrower also shall maintain public liability, product
liability and property damage insurance relating to the Borrower's ownership and
use of the Collateral.
(b) The Borrower shall, at its expense, obtain and maintain (i)
insurance of the type reasonably necessary to insure the Improvements (as
defined in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes, elevator collision, and other risks from time to
time included under "extended coverage" policies, in such amounts as the Lender
may require, but in any event in amounts sufficient to prevent the Borrower from
becoming a co-insurer under such policies, (ii) combined single limit bodily
injury and property damages insurance against any loss, liability, or damages
commonly insured under a commercial general liability policy on, about, or
relating to each of the Mortgaged Properties, in an amount of not less than
$5,000,000; (iii) business interruption insurance covering annual receipts (net
of the amount of expenses not payable or accruing during the interruption) for a
12 month period for each of the Mortgaged Properties; and (iv) insurance for
such other risks as the Lender may reasonably require. Replacement costs, at the
Lender's option, may be redetermined by an insurance appraiser, reasonably
satisfactory to the Lender, not more frequently than once every 12 months at the
cost of the Borrower.
(c) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to the Lender.
All insurance required herein shall be written by companies which are authorized
to do insurance business in each of the states in which any Mortgaged Properties
are located. All hazard insurance and such other insurance as the Lender shall
specify shall contain a mortgagee endorsement satisfactory to the Lender,
showing the Lender as sole loss payee thereof and shall contain a waiver of
warranties. Every policy of insurance referred to in this Section 6.4 shall
-----------
contain an agreement by the insurer that it will not cancel such policy except
after 30 days prior written notice to the Lender and that any loss payable
thereunder shall be payable to the Lender notwithstanding any act or negligence
of the Borrower which might, absent such agreement, result in a forfeiture of
all or a part of such insurance payment and notwithstanding (i) occupancy or use
of the Mortgaged Properties for purposes more hazardous than permitted by the
terms of such policy, (ii) any foreclosure or other action or proceeding taken
by the Lender pursuant to the Collateral Documents upon the
49
occurrence of an Event of Default, or (iii) any change in title or ownership of
the Mortgaged Properties. The Borrower shall deliver to the Lender copies of
such policies of insurance and evidence of the payment of all premiums therefor
certified as complete by an Authorized Officer. All liability insurance shall
contain the Lender as a named insured.
(d) Original policies or certificates thereof satisfactory to the
Lender evidencing such insurance shall be delivered to the Lender at least 30
days prior to the expiration of the existing or preceding policies. The Borrower
shall give the Lender prompt notice of any loss covered by such insurance and,
upon the occurrence and during the continuance of an Event of Default, the
Lender shall have the exclusive right to adjust all losses payable under any
such insurance policies without any liability to the Borrower whatsoever in
respect of such adjustments. Any Loan Party shall cause any monies received by
such Loan Party as payment for any loss under any insurance policy, including
the insurance policies mentioned above, to be paid over to the Lender to be
disbursed (if no Event of Default has occurred or is continuing) to the Borrower
under stage payment terms satisfactory to the Lender for application to the cost
of repairs, replacements, or restorations. All repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction.
(e) The Borrower shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 6.4, unless the Lender is included thereon as named insured
-----------
with the loss payable to the Lender, under a mortgagee endorsement satisfactory
to the Lender, or its local equivalent. The Borrower immediately shall notify
the Lender whenever such separate insurance is taken out, specifying the insurer
thereunder and full particulars as to the policies evidencing the same, and
originals or certificates of such policies immediately shall be provided to the
Lender.
6.5. Preservation of Corporate Existence, Etc. The Borrower shall, and
-----------------------------------------
shall cause each of its Subsidiary Guarantors to, preserve and maintain its
corporate existence and, except to the extent that the failure to preserve such
rights and franchises would not reasonably be expected to have a Material
Adverse Effect, its rights (charter and statutory) and franchises.
6.6. Access. The Borrower shall, and shall cause each of its Subsidiaries
------
to, from time to time as the Lender may request, but not more frequently than
annually so long as no Default or Event of Default has occurred and is
continuing, permit the Lender, or any agents or representatives thereof, within
two Business Days after written notification of the same (other than during the
continuance of an Event of Default, in which case no such notice shall be
required), during normal business hours, to (a) examine and audit and make
copies of and abstracts from the records and books of account of the Borrower
and each of its Subsidiaries, (b) visit the properties of the Borrower and each
of its Subsidiaries, (c) discuss the affairs, finances and accounts of the
Borrower and each of its Subsidiaries with any of their respective officers or
directors, (d) communicate directly with the Borrower's independent certified
public accountants (provided the Borrower shall have received at least 24 hours
notice thereof and the opportunity to participate) and (e) take such action as
the Lender deems necessary or desirable to review compliance by the Borrower
with the terms and conditions of the Loan Documents. The Borrower shall
authorize its independent certified public accountants to disclose to the Lender
any and all financial statements in respect of the Borrower, as the Lender
reasonably requests,
50
and which such accountants may have with respect to the financial condition or
results of operations of the Borrower or any of its Subsidiaries; provided, that
--------
any customer or proprietary business information may not be disclosed.
6.7. Keeping of Books. The Borrower shall, and shall cause each of its
----------------
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Borrower and each of its Subsidiaries.
6.8. Real Property Matters.
---------------------
(a) From and after the Effective Date, unless waived by the Lender in
writing, in the event that the Borrower or any Subsidiary of the Borrower
acquires any owned Real Property Asset or material leased Real Property Asset or
at the time any Person becomes a Subsidiary of the Borrower, such Person owns
any Real Property Asset or leases any material Real Property Asset, the Borrower
shall, or shall cause such Subsidiary to, at least thirty (30) days prior to the
date on which such Real Property Asset is acquired or such Person becomes a
Subsidiary, notify the Lender of that fact and, on or prior to such date,
deliver to the Lender, a duly executed and acknowledged Mortgage with respect to
such Real Property Asset, together with (i) each of the Mortgage Related
Documents with respect to such Additional Mortgaged Property; and (ii) evidence
that counterparts of such Mortgage have been recorded in all places to the
extent necessary or desirable, in the judgment of the Lender, to create a valid
and perfected first priority security interest in the property described therein
in favor of the Lender (or in favor of such other trustee as may be required or
desired under local law); provided, that to the extent clauses (i) and (ii)
--------
apply to Real Property Assets in any state with mortgage taxes, it is hereby
agreed that the taxable value of any such Real Property Assets will not exceed
the fair market value of such Real Property Asset to the extent the applicable
jurisdiction allows an apportionment of such taxable value, and to the extent
such apportionment of value is not allowed in the applicable jurisdiction, the
parties hereby agree to use reasonable efforts to reduce such mortgage taxes.
(b) If required by any Governmental Authority or under any
Requirements of Law, the Borrower shall, and shall cause each of its
Subsidiaries to, permit an independent real estate appraiser satisfactory to the
Lender, upon reasonable notice, to visit and inspect any Mortgaged Property for
the purpose of preparing an appraisal of such Mortgaged Property satisfying the
requirements of any applicable laws and regulations (in each case to the extent
required under such laws and regulations as determined by the Lender in its
discretion).
(c) At least twenty (20) days prior to the making by the Borrower or
any Subsidiary of the Borrower of any sale or disposition of any assets of the
Borrower or such Subsidiary encumbered by a Lien arising under any Collateral
Document, the Borrower shall, to the extent necessary to effect such sale or
disposition of assets, request that the Lender execute and deliver to the
Borrower such releases (including amendments to the UCC-1 financing statements
that have been filed or recorded in connection with such Collateral Document)
releasing any Liens on the assets being sold pursuant to such sale or
disposition of assets that were granted in favor of the Lender pursuant to such
Collateral Document. Upon receiving any such request, the Lender shall, at the
Borrower's expense, execute and deliver to the Borrower such releases, in
recordable form, on the date of such sale or disposition of assets; provided
--------
that,
51
at the time of the Lender's execution and delivery to the Borrower of such
releases, no Default or Event of Default shall have occurred and be continuing
or shall be caused thereby.
(d) Upon the request of the Lender, the Borrower shall provide the
Lender with a copy of each lease of real property to which the Borrower or any
Subsidiary of the Borrower is then a party, whether as lessor or lessee. The
Borrower shall, and shall cause each of its Subsidiaries to, (i) comply (no
later than the expiration of any applicable grace period provided therefor in
the lease) with all of its obligations under all leases now or hereafter held by
it with respect to real property, to the extent the effect of any non-compliance
is (x) as to any non-compliance constituting a default in payment (other than
with respect to payment of common area maintenance charges), to terminate, or to
permit the landlord to terminate, such lease, or (y) as to any other
non-compliance, to terminate, or to permit the landlord to terminate (in
circumstances where such landlord is likely to terminate), such lease except for
any such non-compliance (whether monetary or non-monetary) which individually or
in the aggregate for all such leases would not reasonably be expected to have a
Material Adverse Effect; (iii) not modify, amend, cancel, extend or otherwise
change in any materially adverse manner any of the terms, covenants or
conditions of any leases referred to in clause (i) (excluding any exercise of
any right of renewal or extension pursuant to the terms of such lease as in
effect on the Effective Date or, if later, the date of execution and delivery of
such lease); (iv) not assign or terminate or sublet any lease if such assignment
or termination or sublet could have a Material Adverse Effect; (v) provide the
Lender with a copy of each notice of default under any material lease referred
to in clause (i) received by the Borrower or any Subsidiary of the Borrower
promptly following receipt thereof and deliver to the Lender a copy of each
notice of default sent by the Borrower or any Subsidiary of the Borrower under
any such lease simultaneously with its delivery of such notice under such lease;
and (vi) provide the Lender with a copy of any notice to the landlord of the
Borrower's or any Subsidiary of the Borrower's intention either to renew or
extend or to not renew or extend any lease material to the business of the Loan
Parties, taken as a whole, referred to in clause (i).
6.9. Maintenance of Properties, Etc. The Borrower shall, and shall cause
-------------------------------
each of its Subsidiaries to, maintain and preserve (a) all of its properties
which are necessary in the conduct of its business in good working order and
condition, ordinary wear and tear excepted and (b) all rights, permits,
licenses, approvals and privileges (including all Permits) which are necessary
in or material to the conduct of the business of the Borrower and its
Subsidiaries taken as one enterprise.
6.10. Performance and Compliance with Other Covenants. The Borrower shall,
-----------------------------------------------
and shall cause each of its Subsidiaries to perform and comply with each
Contractual Obligation to which the Borrower or any of its Subsidiaries is a
party (no later than the expiration of any applicable grace period) to the
extent that failure to do so would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
6.11. Application of Proceeds. The Borrower shall cause the entire amount
-----------------------
of the proceeds of the Term Loan to be used as specified in Section 4.16.
------------
52
6.12. Fiscal Year. The Borrower shall, and shall cause each of its
-----------
Subsidiaries to, maintain, as its Fiscal Year the twelve month period ending on
December 31 of each year unless the Borrower gives the Lender 30 days prior
written notice thereof.
6.13. Environmental. The Borrower shall, and shall cause each of its
-------------
Subsidiaries to, comply with all Environmental Laws applicable to the operations
or properties of the Borrower or such Subsidiary. The Borrower shall, at its
sole cost and expense, upon receipt of any notification or otherwise obtaining
knowledge of any Release by a Loan Party or other event that could result in the
Borrower or any of its Subsidiaries incurring Environmental Liabilities and
Costs in excess of $100,000, conduct or pay for consultants to conduct tests,
investigations or assessments of environmental conditions at such operations or
properties, including the investigation and testing of subsurface conditions,
and shall take such remedial, investigational or other action as required by
Environmental Laws, as any Governmental Authority or the Lender requires or as
is appropriate and consistent with good business practice to correct or
otherwise address the condition. The Borrower shall at all times maintain an
asbestos operation and maintenance ("O&M") program, which has been developed by
---
a licensed asbestos professional, at each property of the Borrower at which
there is located asbestos-containing materials ("ACM") or materials that are
---
presumed to be ACM, as defined in 29 C.F.R. Section 1910.1001, which O&M program
at a minimum shall be consistent with guidelines established by the United
States Environmental Protection Agency and any guidelines established by the
state in which the property is located.
6.14. Bank Accounts.
-------------
(a) The Borrower shall, and shall cause each of its Subsidiaries to,
maintain any cash or Cash Equivalents (within the meaning of clause (b) of the
definition thereof) only in (i) a Qualified Account, (ii) a Securities Account
or (iii) the Reserve Account.
(b) The Borrower shall, and shall cause each of its Subsidiaries to,
at all times have in effect for all Qualified Accounts and Securities Accounts
maintained by the Borrower or such Subsidiary and any other bank account
maintained by the Borrower or such Subsidiary (except the Reserve Account), a
cash management system, such system to be pursuant to such agreements and other
documents as shall be in form and substance reasonably satisfactory to the
Lender.
6.15. ADA Compliance. The Borrower shall, and shall cause each of its
--------------
Subsidiaries to, observe and comply in all material respects with all
obligations and requirements of the ADA as it applies to any Real Property
Asset, which shall include (to the extent required by the ADA), (i) installing
or constructing all improvements or alterations which may be necessary to cause
such Real Property Asset to be accessible to all persons if the use of any of
such Real Property Asset or any part thereof becomes a "public accommodation,"
as defined in the ADA, and (ii) making any reasonable accommodations which may
be necessary to accommodate the needs or requirements of any existing or future
employee of any Loan Party or any Subsidiary thereof.
6.16. Additional Collateral. The Borrower acknowledges that it is its
---------------------
intention to provide the Lender with a Lien on substantially all the property of
the Borrower and its Subsidiary Guarantors, whether now owned or hereafter
acquired (other than as agreed to in
53
writing by the Lender), subject only to Permitted Liens. Without limitation of
Sections 6.8 hereof, the Borrower shall from time to time promptly notify the
Lender of the acquisition by the Borrower or any of its Subsidiaries of any
material property in which the Lender does not then hold a perfected Lien (other
than as agreed to in writing by the Lender), or the creation or existence of any
such property, and, whether or not the Borrower has so notified the Lender
thereof, the Borrower shall, upon request by the Lender, promptly execute and
deliver to the Lender or cause to be executed and delivered to the Lender pledge
agreements, security agreements, mortgages or other like agreements with respect
to such property, together with such other documents, certificates, opinions of
counsel and the like as the Lender shall reasonably request in connection
therewith, in form and substance satisfactory to the Lender, such that the
Lender shall receive valid and perfected Liens (subject only to Permitted Liens)
on all such property (including property which, on the Effective Date, is not
subject to a Lien in favor of the Lender).
6.17. Subsidiary Guaranty Approvals. The Borrower shall, or shall cause
-----------------------------
its domestic Subsidiary Guarantors, as applicable, to make all appropriate
filings, promptly following the Execution Date, and in any event prior to the
Effective Date, with the public utility commission or comparable agency of each
of the States set forth on Schedule 3.2(a) as necessary to obtain the approval,
---------------
in such State, of each of the Subsidiary Guaranties and the Liens created by the
Collateral Documents in the Collateral. The Borrower shall use its best efforts,
and shall cause its domestic Subsidiary Guarantors, as applicable, to use their
best efforts, with respect to each such State set forth on Schedule 3.2(a), to
---------------
obtain all such approvals as promptly as practicable after the Effective Date
and shall take all such actions in such States as may be necessary to obtain
such approvals as promptly as practicable after the Effective Date.
6.18. BlueStar Dissolution. To the extent it can do so without
--------------------
jeopardizing or losing future tax benefits based on losses generated by, or
investment by the Borrower and its Affiliates in, BlueStar Communications Group,
Inc., a Delaware corporation, and all of its subsidiaries (collectively, the
"BlueStar Group"), the Borrower shall, promptly upon the liquidation of the
--------------
assets of the BlueStar Group by the assignee for the benefit of creditors
thereof, formally dissolve each member of the BlueStar Group.
6.19. Canadian Accounts. The Borrower shall, and shall cause each other
-----------------
Loan Party and its other Subsidiaries to, (i) permit only funds received from
credit card payments that are required to be deposited in accounts in Canada to
be deposited at any time in any of the Canadian Accounts, (ii) sweep all funds
in the Canadian Accounts into a Qualified Account in the United States no less
frequently than once per month, (iii) not permit any average monthly balance of
all of the Canadian Accounts to exceed $300,000 in the aggregate and (iv)
provide the Lender a copy of each monthly account statement received in respect
of each of the Canadian Accounts and all of the Canadian Accounts in the
aggregate, on a monthly basis, no later than ten (10) Business Days after
receipt thereof.
6.20. Further Assurances. The Borrower shall, and shall cause each other
------------------
Loan Party and its other Subsidiaries to, promptly execute any and all further
documents and take all further actions which may be required under applicable
law, or which the Lender may reasonably request, to grant, preserve, protect and
perfect the Liens created by the Collateral Documents in the Collateral.
54
ARTICLE VII
NEGATIVE COVENANTS
As long as any of the Obligations remain outstanding, without the
written consent of the Lender, the Borrower agrees with the Lender that:
7.1. Liens, Etc. The Borrower shall not, and shall not permit any of its
-----------
Subsidiaries to, create or suffer to exist, any Lien upon or with respect to any
of its properties or assets, whether now owned or hereafter acquired, or assign,
or permit any of its Subsidiaries to assign, any right to receive income, except
for:
(a) Liens created pursuant to the Loan Documents;
(b) purchase money Liens or purchase money security interests upon or
in any property acquired or held by any Loan Party in the ordinary course of
business to secure the purchase price of such property or to secure Indebtedness
incurred solely for the purpose of financing the acquisition of such property
and Liens in respect of Capitalized Lease Obligations with respect to personal
property (including Liens on property or on the assets of Persons acquired by a
Loan Party, existing at the time of such acquisition); provided, however, that
-------- -------
(i) any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
the cost of development, construction and integration) of the property subject
thereto (any such Lien, a "PMSI"), (ii) the principal amount of the Indebtedness
----
secured by such PMSI does not exceed 100% of such cost, (iii) such PMSI does not
extend to or cover any property other than such item of property and any
improvements on such item and proceeds (including insurance proceeds, product
replacements, substitutions and accretions thereto) thereof ("Directly-Related
----------------
Assets"), and (iv) the aggregate principal amount of the Indebtedness secured by
------
the PMSIs permitted by this clause (b) shall not exceed $75,000,000 in the
aggregate at any time outstanding; provided further, that notwithstanding
----------------
anything in the Security Agreement or any other Loan Document to the contrary,
the Lender shall, if so required by the PMSI holder, or if the terms of such
PMSI would otherwise conflict with the provisions of the Collateral Documents,
and upon notice thereof from the Borrower, release its security interest solely
in such specified item(s) of property subject or to be subject to such PMSI
(including Directly-Related Assets), and thereupon, without any necessity of any
action by the Lender unless otherwise required by the PMSI holder or applicable
law, the Lender's security interest in such items of property subject to such
PMSI shall be automatically released and shall no longer constitute "Collateral"
for the purpose of any Collateral Document and, if requested by the Borrower,
the Lender shall execute and deliver documents and instruments provided by the
Borrower which are necessary or reasonably requested by the holder of such PMSI
in order to effect, or in connection with, such release and the Borrower shall
pay the Lender, on demand, all of the Lender's out-of-pocket costs and other
expenses in connection therewith, as specified by the Lender;
(c) any Lien securing the renewal, extension, refinancing or
refunding of any Indebtedness or other Obligation secured by any Lien (i)
permitted by subsection (b) or (m) of this Section 7.1, in either case (x)
-----------
without any increase in the amount secured thereby or in the assets subject to
such Lien and (y) if such Lien renews, extends, refinances or refunds any Lien
55
permitted by subsection (m) of this Section 7.1 and is on any Mortgaged
Property, only if such Lien is subordinated to the Liens created pursuant to
the Loan Documents;
(d) any Lien arising by operation of law or provided for under the
terms of any lease with respect to any leased Real Property Asset in favor of
any lessor incurred by any Loan Party in the ordinary course of business which
secure its obligations to such lessor and which do not extend to or cover any
property other than fixtures or personal property located at or on the related
leased Real Property Asset; provided that (i) no Loan Party is in default (after
--------
the expiration of any applicable grace period) with respect to any such
obligation to any such lessor unless such Loan Party is in good faith and by
appropriate proceedings diligently contesting such obligation and adequate
provision is made for the payment thereof, on the books of such Loan Party in
conformity with GAAP and (ii) all such Liens in the aggregate would not
reasonably be expected to have a Material Adverse Effect;
(e) Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers or other similar Persons (other than lessors)
incurred by a Loan Party in the ordinary course of business which secures its
obligations to such Person; provided that (i) such Liens are for amounts not yet
--------
overdue or for amounts that are overdue for less than thirty (30) days unless
such Loan Party is in good faith and by appropriate proceedings diligently
contesting such obligation and adequate provision is made for the payment
thereof, on the books of such Loan Party in conformity with GAAP and (ii) all
such Liens in the aggregate would not reasonably be expected to have a Material
Adverse Effect;
(f) Liens (excluding Environmental Liens) securing taxes,
assessments or governmental charges or levies; provided, that no Loan Party is
--------
in default in respect of any payment obligation with respect thereto unless such
Loan Party is in good faith and by appropriate proceedings diligently contesting
such obligation and adequate provision is made for the payment thereof on the
books of such Loan Party in conformity with GAAP, and all such Liens in the
aggregate would not reasonably be expected to have a Material Adverse Effect;
(g) Liens (excluding rights of set-off other than rights of set-off
recognized under agreements governing Qualified Accounts) of brokers, securities
intermediaries and depositary banks arising by operation of law or pursuant to
account maintenance agreements entered into in the ordinary course of business;
(h) Liens on the Reserve Account;
(i) Liens incurred or pledges and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, old-age pensions and other social security benefits;
(j) deposits held by any Loan Party and received from customers of
such Loan Party in the ordinary course of business with respect to which such
Loan Party has an obligation to return such deposits to such customers;
(k) zoning restrictions, easements, licenses, reservations or
restrictions on the use of real property or minor irregularities of title
incident thereto which do not in the aggregate render title thereto unmarketable
or impair, in any material manner, the use of such property for
56
the purposes for which such property is held by such Loan Party or result in a
material diminution in the value of any Collateral;
(l) financing statements filed by a personal property lessor or
purchaser for precautionary purposes in respect of any lease (other than any
Capitalized Lease) or sale of such personal property to the Borrower by such
lessor;
(m) Liens (other than in favor of lessors) existing on the Effective
Date that are (x) disclosed on Schedule 7.1(m) and (y) if on any Real Property
---------------
Asset that is a Mortgaged Property, subordinated to the Liens created pursuant
to the Loan Documents;
(n) Liens securing the performance of contracts (other than leases
with respect to any Real Property Asset or contracts for the repayment of
borrowed money), statutory obligations and surety performance bonds, incurred as
an incident to and in the ordinary course of business, and appeal bonds and
judgment liens; provided that all such Liens (i) in the aggregate could have no
--------
Material Adverse Effect and (ii) do not secure directly or indirectly judgments
(not covered by insurance or an indemnity from a creditworthy party who, in
either case, has acknowledged coverage or is required to honor the same pursuant
to a final judgment or order) in excess of $2,500,000;
(o) Liens on cash security deposits under leases with respect to any
Real Property Asset and utility deposits in an aggregate amount not to exceed
$1,000,000; and
(p) Liens not otherwise permitted by the foregoing clauses (a)
through (o) of this Section 7.1 (other than on any Mortgaged Property) securing
-----------
obligations or other liabilities (other than Indebtedness) of any Loan Party;
provided, however, that the aggregate amount of such obligations and liabilities
-------- -------
secured by such Liens shall not exceed $5,000,000 at any time outstanding.
7.2. Indebtedness. The Borrower shall not, and shall not permit any of its
------------
Subsidiaries to, directly or indirectly create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to any Indebtedness
except:
(a) the Obligations;
(b) Indebtedness with respect to Contingent Obligations;
(c) Indebtedness in respect of the Reserve Account;
(d) Indebtedness owing to any wholly-owned Subsidiary of the
Borrower by the Borrower or any other wholly-owned Subsidiary of the Borrower
and Indebtedness owing to the Borrower by any Subsidiary of the Borrower which
is subordinated to the Obligations on terms acceptable to the Lender;
(e) Indebtedness secured by Liens permitted by Section 7.1(b);
--------------
provided, however, that the aggregate principal amount of Indebtedness incurred
-------- -------
pursuant to this clause (e) shall not exceed $75,000,000 at any one time
outstanding;
57
(f) Indebtedness outstanding on the Effective Date and listed on
Schedule 4.20 (the "Other Debt") and any refinancings of the Other Debt without
------------- ----------
any increase in the principal amount of such Indebtedness;
(g) Obligations pursuant to Derivative Contracts to the extent such
obligations constitute Indebtedness;
(h) Indebtedness under Capitalized Lease Obligations outstanding on
the Effective Date and listed on Schedule 7.2(h);
---------------
(i) unsecured Indebtedness of the Borrower and its Subsidiaries in an
aggregate principal amount at any time outstanding not in excess of
$200,000,000; provided, however, that only up to $75,000,000 of the aggregate
-------- -------
amount of the Indebtedness permitted by this clause (i) may be incurred by the
Subsidiaries of the Borrower, taken as a whole; and provided, further, that the
-------- -------
maximum aggregate amount of the Indebtedness permitted by this clause (i) shall
be reduced by the aggregate amount of any Indebtedness incurred pursuant to
Section 7.2(e);
--------------
(j) unsecured Indebtedness of the Borrower or any of its
Subsidiaries that is fully subordinated in rank and right of payment to the
payment in full of the Obligations on terms satisfactory in form and substance
to the Lender pursuant to (i) if such Indebtedness is incurred through capital
markets (e.g., pursuant to an offering under Rule 144A of the Securities Act),
an indenture containing Subordination Provisions substantially in the form of
Exhibit I hereto and (ii) if such Indebtedness is incurred through any means
---------
other than capital markets, a Subordination Agreement with subordination terms
substantially in the form of Exhibit J hereto, in either case, with such changes
---------
as the Lender may approve in writing in its sole and absolute discretion; and
7.3 Investment in Subsidiaries. The Borrower shall not, and shall not
--------------------------
permit any of the Subsidiary Guarantors to, directly or indirectly, make any
loan or advance to any of their respective Subsidiaries that is not a Subsidiary
Guarantor, or purchase or otherwise acquire, any Stock, Stock Equivalents, other
equity interest, obligations or other securities of, or any assets constituting
the purchase of a business or line of business, or make any capital contribution
to, or otherwise invest in, any such Subsidiary that is not a Subsidiary
Guarantor; provided that the Borrower may make such investments (a) in ACCA
--------
Networks Co., Ltd., in an amount necessary to pay the customary fees, discounts
and expenses of a broker unaffiliated with the Borrower in connection with the
sale of the Borrower's indirect interest therein, but in any event an amount not
to exceed $1,500,000, (b) to the extent resulting from the grant of one or more
(i) non-exclusive licenses of rights in intellectual property or (ii) exclusive
licenses (which exclude all Persons including the Borrower and all of its
Subsidiaries) of rights in intellectual property to non-United States
Subsidiaries of the Borrower, such rights only being exercisable with respect to
territories outside of the United States and Mexico, and in either case, granted
in the ordinary course of business and that do not in any way hinder or restrict
the assignability to or assumption by the Lender of the Borrower's interests in
the intellectual property that is the subject of any such license and (c) in
DishnetDSL Limited in an aggregate amount not to exceed $500,000.
58
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default. The occurrence of any one or more of the following
-----------------
events (regardless of the reason therefor) shall constitute an Event of Default:
(a) the Borrower shall fail to pay any principal of the Term Loan
when the same becomes due and payable; or
(b) the Borrower shall fail to pay any interest on the Term Loan or
any other Obligation under the Loan Documents other than the Resale Agreement
(other than principal of the Term Loan) and such non-payment continues for a
period of five (5) Business Days after the due date therefor; or
(c) any representation or warranty made or deemed made in writing by
any Loan Party in any Loan Document other than the Resale Agreement or by any
Loan Party (or any of its officers) in connection with any Loan Document other
than the Resale Agreement shall prove to have been incorrect in any material
respect when made or deemed made; or
(d) any Loan Party shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 5.2 or Article VII or (ii) any other
----------- -----------
term, covenant or agreement contained in this Agreement or in any other Loan
Document other than the Resale Agreement if such failure under this clause (ii)
shall remain unremedied for thirty (30) days after the earlier of the date on
which (A) a Responsible Officer of the Borrower becomes aware of such failure or
(B) written notice thereof shall have been given to the Borrower by the Lender;
or
(e) the Borrower and the other Resale Agreement Covad Parties shall
fail to make any repayment of the Prepayment for Services (as defined in the
Resale Agreement) as required under the Resale Agreement and such non-payment
continues for a period of five (5) Business Days after the due date therefor; or
(f)(i) any Loan Party or any of its Subsidiaries that are guarantors
of any amount owing to the Lender shall fail to make any payment on any
Indebtedness (other than Indebtedness incurred hereunder) of such Loan Party or
Subsidiary having a principal amount of $500,000 or more, in each case beyond
the end of any grace period provided therefor, when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise); or (ii) any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Indebtedness, if
the effect of such event or condition is to accelerate the maturity of such
Indebtedness; or (iii) any such Indebtedness shall become or be declared to be
due and payable, or required to be prepaid or repurchased (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(g) any Loan Party shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against any Loan Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under
59
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
custodian, receiver, trustee or other similar official for it or for any
substantial part of its property and, in the case of any such proceedings
instituted against any Loan Party (but not instituted by it), either such
proceedings shall remain undismissed or unstayed for a period of sixty (60) days
or any of the actions sought in such proceedings shall occur; or any Loan Party
shall take any corporate action to authorize any of the actions set forth above
in this subsection (f); or
(h) any judgment or order (or other similar process) involving, in
any single case or in the aggregate, an amount in excess of $800,000 to the
extent not fully covered by insurance shall be rendered against any Loan Party
or any of its Subsidiaries and shall remain unpaid and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of twenty (20) consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(i) (i) with respect to any Qualified Plan, any Loan Party or any
ERISA Affiliate shall incur an accumulated funding deficiency or request a
funding waiver from the IRS or, (ii) with respect to any Title IV Plan, or any
Multiemployer Plan, an ERISA Event not described in clause (i) hereof shall
occur; provided, however, that the events listed in clauses (i) and (ii) hereof
-------- -------
shall constitute Events of Default only if the liability, deficiency or waiver
request of any Loan Party or any ERISA Affiliate, whether or not assessed,
exceeds $500,000 in the aggregate for all such cases;
(j) any provision of any Collateral Document after delivery thereof
pursuant to this Agreement or any other Loan Document shall for any reason cease
to be valid and binding on, or enforceable against, any Loan Party thereto, or
any Loan Party shall so state in writing; or
(k) except as expressly set forth in any of the Collateral Documents
or in Section 4.10, any Collateral Document after delivery thereof pursuant to
------------
this Agreement or any other Loan Document shall, for any reason, cease to create
a valid Lien on any of the Collateral purported to be covered thereby, or such
Lien shall cease to be a perfected and first priority Lien (subject only to
Permitted Liens), or any Loan Party shall so state in writing; provided, that if
--------
any such Collateral Document or Loan Document shall cease to be valid and
binding on, or enforceable against, such Loan Party solely due to a change in
then-existing law, such event shall be an Event of Default thirty (30) days
thereafter if continuing on such date; or
(l) there shall occur any Change of Control with respect to which the
Borrower shall have failed to make any mandatory prepayment required by
Section 2.5;
-----------
(m) (i) the Borrower shall fail to own of record and beneficially all
of the outstanding Stock and Stock Equivalents of the Subsidiary Guarantors free
and clear of all Liens, or (ii) any direct Subsidiaries shall fail to own of
record and beneficially all of the outstanding Stock and Stock Equivalents of
indirect Subsidiaries free and clear of all Liens unless the proceeds of any
sale of such Subsidiaries becomes Collateral substantially simultaneously with
such sale, by deposit into a Qualified Account or otherwise, in each case except
any Liens in favor of the Lender;
60
(n) any default or other event shall occur and be continuing or
condition shall exist under any lease with respect to any Real Property Asset
beyond the end of any grace period provided therefor in such lease if the effect
of such event is (x) if such event constitutes a default in payment (other than
with respect to payment of common area maintenance charges), to terminate, or to
permit the landlord to terminate, such lease or (y) if such event constitutes
any event other than such a payment default, to terminate, or to permit the
landlord to terminate (in circumstances where, in the reasonable judgment of the
Lender, such landlord is likely to terminate), such lease and, in either case,
the aggregate unpaid amounts owing by any Loan Party under such lease (together
with all other such leases) exceeds $1,000,000 in the aggregate; or
8.2. Remedies. During the continuance of any Event of Default, the Lender
--------
may by notice to the Borrower declare the Term Loan, all interest thereon and
all other amounts and Obligations payable under this Agreement to be forthwith
due and payable, whereupon the Term Loan, all such interest and all such amounts
and Obligations shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower; provided, however, that upon the
-------- -------
occurrence of the Event of Default specified in Section 8.1(g) above, the Term
--------------
Loan, all such interest and all such amounts and Obligations shall automatically
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided further, that in no event shall the Required Repayment (as such term is
----------------
defined in Section 8.4.1 of the Resale Agreement) become due and payable
pursuant to this Section 8.2 prior to the time it would otherwise become due and
-----------
payable pursuant to the applicable provisions set forth in Article VIII of the
Resale Agreement. In addition to the remedies set forth above, the Lender may
exercise any remedies provided for by the Collateral Documents in accordance
with the terms thereof or any other remedies provided by applicable law.
ARTICLE IX
MISCELLANEOUS
9.1. Amendments, Waivers, Etc. No amendment or waiver of any provision of
-------------------------
this Agreement or any other Loan Document nor consent to any departure by any
Loan Party therefrom shall in any event be effective unless the same shall be in
writing and signed by each party against whom enforcement thereof would be
sought, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
9.2. Notices, Etc. Any notice, request, instruction or other document to
-------------
be given hereunder under any section of this Agreement shall be in writing and
shall be deemed given upon receipt if delivered personally or by telex or
facsimile, the next day if by express mail or three days after being sent by
registered or certified mail, return receipt requested, postage prepaid to the
following addresses (or at such other address as shall be specified by like
notice provided that such notice shall be effective only after receipt thereof):
61
If to the Lender: ▇▇ ▇▇▇▇▇▇▇▇▇
VP Business Development & Alliance Management
SBC Communications Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇-▇-▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Voice: ▇▇▇-▇▇▇-▇▇▇▇
With a copy (which shall not ▇▇▇▇▇ ▇▇▇▇▇
constitute notice) to: Vice President & Asst. General Counsel
SBC Communications Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇-▇-▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Voice ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
Sr. VP & General Counsel-Business & Consumer
SBC Communications, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Voice: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Voice: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Borrower: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Covad Communications Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Voice: (▇▇▇) ▇▇▇-▇▇▇▇
62
With a copy (which shall not constitute ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
notice) to: Deputy General Counsel
Covad Communications
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Voice: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Irell & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Voice: (▇▇▇) ▇▇▇-▇▇▇▇
; provided, however, that (i) notices and communications to the Lender pursuant
-------- -------
to Article II or IX shall not be effective until received by the Lender and (ii)
---------- --
notices and communications to the Lender by telecopy shall not be effective
unless one of the Attention Persons has received telephonic notice thereof.
9.3. No Waiver; Remedies. No failure on the part of the Lender to exercise,
-------------------
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
9.4. Costs; Expenses; Indemnities.
----------------------------
(a) Regardless of whether the transactions contemplated by this Agreement
and other Loan Documents are consummated, the Borrower agrees to pay on demand
(i) all out-of-pocket costs and expenses of the Lender in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, each of the other Loan Documents (except the Resale Agreement)
and each of the other documents to be delivered hereunder and thereunder
(excluding any documents delivered in connection with the Resale Agreement),
including (A) the fees and out-of-pocket expenses of Weil, Gotshal & ▇▇▇▇▇▇ LLP,
counsel to the Lender, (B) the fees of accountants, appraisers, consultants or
industry experts retained by the Lender, (C) all out-of-pocket expenses incurred
by the Lender in connection with the taking and perfection of security interests
and Liens against the Collateral and obtaining any Mortgage Related Documents
(including fees and expenses for doing and updating title and Lien searches,
surveys, title commitment and insurance costs and corporate search fees), and
(D) all filings and recording fees and all transportation and audit and field
exam costs and expenses, and (ii) all costs and expenses of the Lender in
connection with the restructuring, workout or enforcement (whether through
negotiation, legal proceedings or otherwise) of this Agreement and the other
Loan Documents (except the Resale Agreement).
(b) Regardless of whether the transactions contemplated by this Agreement
and the other Loan Documents are consummated, the Borrower agrees to indemnify
and hold harmless the Lender and its Affiliates, and the directors, members,
partners, shareholders,
63
officers, employees, lenders, attorneys, consultants and investment and other
advisors of or to any of the foregoing (including those retained in connection
with the satisfaction or attempted satisfaction of any of the conditions set
forth in Article III) (each of the foregoing being an "Indemnitee") from and
----------- ----------
against any and all claims, damages, liabilities, obligations, losses,
penalties, actions, judgments, suits, costs, disbursements and expenses of any
kind or nature (including reasonable fees and disbursements of counsel to any
such Indemnitee, whether or not suit is brought) which at any time may be
imposed on, incurred by or asserted against any such Indemnitee in connection
with or arising out of any investigation, litigation or proceeding, whether or
not any such Indemnitee is a party thereto, whether or not resulting from third
party claims, whether direct, indirect, or consequential and whether based on
any federal, state or local law or other statutory regulation, securities or
commercial law or regulation, or under common law or in equity, or on contract,
tort or otherwise, in any manner relating to or arising out of this Agreement,
any other Loan Document (except the Resale Agreement), any Obligation or any
act, event or transaction related or attendant to any thereof, including (i) all
Environmental Liabilities and Costs arising from or connected with the past,
present or future operations of the Borrower or any of its Subsidiaries
involving any property subject to a Collateral Document, or damage to real or
personal property or natural resources or harm or injury alleged to have
resulted from any Release of Contaminants on, upon or into such property or any
contiguous real estate; (ii) any costs or liabilities incurred in connection
with any Remedial Action concerning the Borrower or any of its Subsidiaries;
(iii) any costs or liabilities incurred in connection with any Environmental
Lien; (iv) any costs or liabilities incurred in connection with any other matter
under any Environmental Law, including CERCLA and applicable state property
transfer laws, whether, with respect to any of the foregoing, such Indemnitee is
a mortgagee pursuant to any leasehold mortgage, a mortgagee in possession, the
successor in interest to the Borrower or any of its Subsidiaries, or the owner,
lessee or operator of any property of the Borrower or any of its Subsidiaries by
virtue of foreclosure except, with respect to any of the foregoing referred to
in clauses (i), (ii), (iii) and (iv), to the extent incurred following (A)
foreclosure by the Lender, or the Lender having become the successor in interest
to the Borrower or any of its Subsidiaries, and (B) attributable solely to acts
of the Lender or any agent on behalf of the Lender; (v) the use or intended use
of the proceeds of the Term Loan or in connection with any investigation of any
potential matter covered hereby or (vi) the administration of the Term Loan
hereunder (collectively, the "Indemnified Matters"); provided, however, that the
------------------- -------- -------
Borrower shall not have any obligation under this Section 9.4(b) to an
Indemnitee with respect to any Indemnified Matter directly resulting from the
gross negligence or willful misconduct of that Indemnitee, as determined by a
court of competent jurisdiction in a final non-appealable judgment or order. All
amounts payable under this Section 9.4(b) shall be due and payable on written
--------------
demand therefor.
(c) The Borrower shall indemnify the Lender for, and hold the Lender
harmless from and against, any and all claims for brokerage commissions, fees
and other compensation made against the Lender for any broker, finder or
consultant with respect to any agreement, arrangement or understanding made by
or on behalf of any Loan Party or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement.
(d) The Lender agrees that in the event that any such investigation,
litigation or proceeding set forth in subparagraph (b) above is asserted or
threatened in writing or instituted against it or any other Indemnitee, or any
Remedial Action, is requested of it or any of its
64
officers, directors, agents and employees, for which any Indemnitee may desire
indemnity or defense hereunder, such Indemnitee shall promptly notify the
Borrower in writing.
(e) The Borrower, at the request of any Indemnitee, shall have the
obligation to defend against such investigation, litigation or proceeding or
requested Remedial Action, and the Borrower, in any event, may participate in
the defense thereof with legal counsel of the Borrower's choice. In the event
that such Indemnitee requests the Borrower to defend against such investigation,
litigation or proceeding or requested Remedial Action, the Borrower shall
promptly do so and such Indemnitee shall have the right to have legal counsel of
its choice participate in such defense. No action taken by legal counsel chosen
by such Indemnitee in defending against any such investigation, litigation or
proceeding or requested Remedial Action, shall vitiate or in any way impair the
Borrower's obligation and duty hereunder to indemnify and hold harmless such
Indemnitee.
(f) The Borrower agrees that any indemnification or other protection
provided to any Indemnitee pursuant to this Agreement (including pursuant to
this Section 9.4) or any other Loan Document (except the Resale Agreement) shall
-----------
(i) survive and remain operative and in full force and effect regardless of the
occurrence of the Termination Date, the consummation of the transactions
contemplated hereby, the repayment of the Term Loan, the invalidity or
unenforceability of any term or provision of this Agreement or the Note, any
investigation made by or on behalf of the Lender and the payment in full of the
Obligations and (ii) inure to the benefit of any Person who was at any time an
Indemnitee under this Agreement or any other Loan Document (except the Resale
Agreement).
9.5. Right of Set-off. Upon the occurrence and during the continuance of
----------------
any Event of Default, the Lender is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Lender to or for the
credit or the account of the Borrower against any and all of the Obligations now
or hereafter existing whether or not the Lender shall have made any demand under
(i) this Agreement or (ii) any other Loan Document (except the Resale Agreement)
and although such Obligations may be unmatured. The Lender agrees promptly to
notify the Borrower after any such set-off and application made by the Lender;
provided, however, that the failure to give such notice shall not affect the
-------- -------
validity of such set-off and application. The rights of the Lender under this
Section 9.5 are in addition to the other rights and remedies (including other
-----------
rights of set-off) which the Lender may have.
9.6. Binding Effect. This Agreement shall become effective when it shall
--------------
have been executed by the Borrower and the Lender and thereafter shall be
binding upon and inure to the benefit of the Borrower, the Lender and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein and the Lender
agrees not to assign its rights hereunder or any interest herein except in
compliance with applicable securities laws.
9.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HERETO, INCLUDING THE INTERPRETATION, CONSTRUCTION, VALIDITY AND
ENFORCEABILITY THEREOF, SHALL BE
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GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF DELAWARE.
9.8. Section Titles. The Section titles contained in this Agreement are and
--------------
shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.
9.9. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
9.10. Entire Agreement. Subject to the terms of the Dispute Resolution
----------------
Agreement, this Agreement, together with all of the other Loan Documents and all
certificates and documents delivered hereunder or thereunder, embodies the
entire agreement of the parties and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof, including
that certain term sheet, dated on or about October 19, 2001, between the
Borrower and the Lender.
9.11. Confidentiality.
---------------
(a) The Lender agrees to keep information obtained by it pursuant hereto
and the other Loan Documents confidential and agrees that it will only use such
information in connection with the transactions contemplated by this Agreement
and not disclose any of such information other than (i) the Lender's employees,
representatives and lenders who are or are expected to be involved in the
evaluation of such information in connection with the transactions contemplated
by this Agreement and who are advised of the confidential nature of such
information, (ii) to the extent such information presently is or hereafter
becomes available to the Lender, as the case may be, on a non-confidential basis
from a source other than the Borrower, (iii) to the extent disclosure is
required by law, regulation or judicial order or requested or required by bank
or other regulators or auditors, (iv) to assignees or participants or potential
assignees or participants who agree to be bound by the provisions of this
sentence or (v) information in respect of any Collateral disclosed in connection
with any sale thereof.
(b) Notwithstanding any other provision in this Agreement or any other
Loan Document, the Loan Parties shall not be required to deliver or disclose (or
to direct any third party to deliver or disclose) to the Lender any non-public
and proprietary customer and pricing information or business strategy
("Proprietary Information") which would otherwise be required to be delivered or
-----------------------
disclosed hereunder or thereunder. To the extent that any such required delivery
or disclosure would otherwise include Proprietary Information, the Loan Parties
may, and may instruct applicable third parties to, redact solely and exclusively
such Proprietary Information from such delivery or disclosure; provided that the
--------
Loan Parties shall otherwise deliver or disclose, as applicable, all such
information in its entirety without any redaction or other alteration. Nothing
contained in this Section 9.11(b) shall be construed to limit the Loan Parties'
---------------
obligations to deliver information of a purely financial nature as required
hereunder or under any other Loan Document.
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9.12. Change in Accounting Principles. If any change in the accounting
-------------------------------
principles used in the preparation of the most recent Financial Statements
referred to in Section 4.5 or Section 5.1 is hereafter required or permitted by
----------- -----------
the rules, regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
any successors thereto) and are adopted by the Borrower and its Subsidiaries
with the agreement of its independent public accountants and such change results
in a change in the method of calculation of any of the covenants, standards or
defined terms found in Article VII, the parties hereto agree to enter into
-----------
negotiations in order to amend such provisions so as to equitably reflect such
change with the desired results that the criteria for evaluating compliance with
such covenants, standards and defined terms by the Borrower and its Subsidiaries
shall be the same after such change as if such change had not been made;
provided that no change in GAAP that would affect the method of calculation of
--------
any such covenants, standards or defined terms shall be given effect in such
calculations until such provisions are amended to reflect such changes in GAAP.
9.13. Suretyship and Other Waivers and Consents.
-----------------------------------------
(a) The Borrower agrees that it is directly and primarily liable to the
Lender for payment in full of all Obligations and that such liability is
independent of the duties, obligations, and liabilities of the other Loan
Parties. The Loan Documents are a primary and original obligation of the
Borrower, are not the creation of a surety relationship, and are an absolute,
unconditional, and continuing promise of payment and performance which shall
remain in full force and effect without respect to future changes in conditions,
including any change of law or any invalidity or irregularity with respect to
the Loan Documents. The Borrower acknowledges that the obligations of the
Borrower undertaken herein might be construed to consist, at least in part, of
the guaranty of obligations of each other Loan Party and, in full recognition of
that fact, the Borrower consents and agrees that the Lender may, at any time and
from time to time, without notice or demand, whether before or after any actual
or purported termination, repudiation, or revocation of this Agreement by the
Borrower, and without affecting the enforceability or continuing effectiveness
hereof as to the Borrower: (i) supplement, restate, modify, amend, increase,
decrease, extend, renew, accelerate, or otherwise change the time for payment or
the terms of the Obligations or any part thereof with respect to any other Loan
Party, including any increase or decrease of the rate(s) of interest thereon;
(ii) supplement, restate, modify, amend, increase, decrease or waive, or enter
into or give any agreement, approval, or consent with respect to, the
Obligations or any part thereof with respect to any other Loan Party, or any of
the Loan Documents or any additional security or guaranties, or any condition,
covenant, default, remedy, right, representation or term thereof or thereunder;
(iii) accept new or additional instruments, documents or agreements in exchange
for or relative to any of the Loan Documents or the Obligations or any part
thereof; (iv) accept partial payments on the Obligations from any other Loan
Party; (v) receive and hold additional security or guaranties for the
Obligations or any part thereof with respect to any other Loan Party; (vi)
release, reconvey, terminate, waive, abandon, fail to perfect, subordinate,
exchange, substitute, transfer, or enforce any security or guaranties, and apply
any security and direct the order or manner of sale thereof with respect to any
other Loan Party, as the Lender in its sole and absolute discretion may
determine; (vii) release any Person including any other Loan Party from any
personal liability with respect to the Obligations or any part thereof, (viii)
with respect to any other Loan Party, settle, release on terms satisfactory to
the Lender or by operation of applicable laws, or otherwise
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liquidate or enforce any Obligations and any security therefor or guaranty
thereof in any manner, consent to the transfer of any security and bid and
purchase at any sale; or (ix) consent to the merger, change, or any other
restructuring or termination of the corporate or partnership existence of the
Borrower or any other Person, and correspondingly restructure the Obligations,
and any such merger, change, restructuring, or termination shall not affect the
liability of the Borrower or the continuing effectiveness hereof, or the
enforceability hereof with respect to all or any part of the Obligations.
(b) Upon the occurrence and during the continuance of any Event of
Default, the Lender may enforce this Agreement independently as to the Borrower
and independently of any other remedy or security the Lender at any time may
have or hold in connection with the Obligations, and it shall not be necessary
for the Lender to marshal assets in favor of the Borrower or any other Person or
to proceed upon or against or exhaust any security or remedy before proceeding
to enforce this Agreement. The Borrower expressly waives any right to require
the Lender to marshal assets in favor of the Borrower or any other Person or to
proceed against any other Borrower or any collateral provided by any Person, and
agrees that the Lender may proceed against Borrower or any collateral in such
order as it shall determine in its sole and absolute discretion.
(c) The Lender may file a separate action or actions against the Borrower,
whether action is brought or prosecuted with respect to any security or against
any other Person, or whether any other Person is joined in any such action or
actions. The Borrower agrees that the Lender and the Borrower and any Affiliate
of the Borrower may deal with each other in connection with the Obligations or
otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the continuing efficacy of this Agreement.
(d) The Lender's rights hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount at
any time paid on account of the Obligations which thereafter shall be required
to be restored or returned by the Lender, all as though such amount had not been
paid. The rights of the Lender created or granted herein and the enforceability
of this Agreement at all times shall remain effective to cover the full amount
of all the Obligations even though the Obligations, including any part thereof
or any other security or guaranty therefor, may be or hereafter may become
invalid or otherwise unenforceable as against the Borrower and whether or not
any other Loan Party shall have any personal liability with respect thereto.
(e) To the maximum extent permitted by applicable law, the Borrower, in
addition to the waivers or agreements made by the Borrower elsewhere herein or
in any other Loan Document, expressly waives any and all defenses now or
hereafter arising or asserted by reason of, and agrees that the Obligations of
the Borrower hereunder and under the other Loan Documents shall be absolute and
unconditional irrespective of:
(i) any disability or other defense of any other Loan Party with
respect to the Obligations,
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(ii) any lack of validity or enforceability with respect to any other
Loan Party of any provision of any other Loan Document or any other
agreement or instrument relating to any Loan Document, or avoidance or
subordination of any of the Obligations,
(iii) any extension, forbearance or granting of any indulgence by the
Lender with respect to any provision of any Loan Document,
(iv) the unenforceability or invalidity with respect to any other Loan
Party of any security or guaranty for the Obligations or the lack of
perfection or continuing perfection or failure of priority of any security
for the Obligations and any requirement that the Lender protect, secure,
perfect or insure any security interest in or other Lien on any property,
(v) the cessation for any cause whatsoever of the liability of any
other Loan Party (other than by reason of the full payment and performance
(after the Termination Date) of all Obligations),
(vi) any failure of the Lender to marshal assets in favor of the
Borrower or any other Person,
(vii) any failure of the Lender to give notice of sale or other
disposition of collateral to any other Loan Party or any other Person or
any defect in any notice that may be given in connection with any sale or
disposition of collateral,
(viii) any failure of the Lender to comply with applicable law with
respect to any other Loan Party in connection with the sale or other
disposition of any collateral or other security for any Obligation,
including any failure of the Lender to conduct a commercially reasonable
sale or other disposition with respect to any other Loan Party of any
collateral or other security for any Obligation,
(ix) any act or omission of the Lender or others that directly or
indirectly results in or aids the discharge or release of any other Loan
Party or the Obligations or any security or guaranty therefor by operation
of law or otherwise,
(x) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more
burdensome than that of the principal or which reduces a surety's or
guarantor's obligation in proportion to the principal obligation,
(xi) any failure of the Lender to file or enforce a claim in any
bankruptcy or other proceeding with respect to any other Person,
(xii) the election by the Lender of the application or non-application
of Section 1111(b)(2) of the United States Bankruptcy Code,
69
(xiii) the disallowance, under Section 502 of the United States
Bankruptcy Code, of all or any portion of the claims of the Lender for
payment of any of the Obligations of any other Loan Party,
(xiv) any extension of credit or the grant of any lien under ▇▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code,
(xv) any use of cash collateral under Section 363 of the United States
Bankruptcy Code,
(xvi) any agreement or stipulation with respect to the provision of
adequate protection in any bankruptcy proceeding of any Person,
(xvii) the avoidance of any lien in favor of the Lender for any
reason,
(xviii) any action taken by the Lender that is authorized by this
section or any other provision of any Loan Document,
(xix) the benefit of any statute of limitation in respect of any other
Loan Party, or
(xx) any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of a borrower or a guarantor.
Until such time (after the Termination Date) as all of the Obligations have been
fully and finally paid and collected in full in cash: (x) the Borrower hereby
waives and postpones any right of subrogation it has or may have as against any
other Loan Party with respect to the Obligations; and (y) in addition, the
Borrower also hereby waives and postpones any right to proceed or to seek
recourse against or with respect to any property or asset of any other Loan
Party. The Borrower expressly waives all setoffs and counterclaims, promptness,
diligence, and all presentments, demands for payment or performance, notices of
nonpayment or nonperformance, protests, notices of protest, notices of dishonor
and all other notices or demands of any kind or nature whatsoever with respect
to the Obligations of any other Loan Party (other than any notice expressly
required to be given under any Loan Document, and all notices of acceptance of
this Agreement or of the existence, creation or incurring of new or additional
Obligations.
(f) In the event that all or any part of the Obligations at any time are
secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interests in real property, the Borrower
authorizes the Lender, upon the occurrence of and during the continuance of any
Event of Default, at its sole option, without notice or demand and without
affecting the obligations of any Loan Party, the enforceability of this
Agreement, or the validity or enforceability of any Liens of the Lender on any
Collateral, to foreclose any or all of such deeds of trust or mortgages or other
instruments by judicial or nonjudicial sale.
(g) To the fullest extent permitted by applicable law, the Borrower
expressly waives any defenses to the enforcement of this Agreement or any rights
of the Lender created or granted hereby or to the recovery by the Lender against
any Loan Party or any other Person liable therefor of any deficiency after a
judicial or nonjudicial foreclosure or sale, even though
70
such a foreclosure or sale may impair the subrogation rights of the Borrower
and may preclude the Borrower from obtaining reimbursement or contribution from
one or more other Loan Party. To the fullest extent permitted by applicable law,
the Borrower expressly waives any suretyship defenses or benefits that it
otherwise might or would have under applicable law with respect to actions taken
in respect of the Obligations of any other Loan Party. WITHOUT LIMITING THE
GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS SECTION, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER WAIVES ALL RIGHTS
AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY THE LENDER, EVEN THOUGH
THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO
SECURITY FOR THE OBLIGATIONS, HAS DESTROYED THE BORROWER'S RIGHTS OF SUBROGATION
AND REIMBURSEMENT AGAINST ONE OR MORE OTHER LOAN PARTIES BY THE OPERATION OF LAW
OR OTHERWISE.
(h) If, in the exercise of any of its rights and remedies, the Lender
shall forfeit any of its rights or remedies, including its right to enter a
deficiency judgment against the Borrower or any other Person, whether because of
any applicable law pertaining to "election of remedies" or the like, the
Borrower hereby consents to such action by the Lender and waives any claim based
upon such action with respect to any other Loan Party. Any election of remedies
which results in the denial or impairment of the right of the Lender to seek a
deficiency judgment against the Borrower shall not impair the obligation of any
other Loan Party to pay the full amount of the Obligations or any other
obligation of the Borrower contained herein or in any Loan Document.
(i) In the event the Lender shall bid at any foreclosure or trustee's sale
or at any private sale permitted by law or under any of the Loan Documents, the
Lender may bid all or less than the amount of the Obligations and the amount of
such bid need not be paid by the Lender but shall be credited against the
Obligations. The amount of the successful bid at any such sale, whether the
Lender or any other Person is the successful bidder, to the extent permitted by
applicable law, shall be conclusively deemed to be the fair market value of such
Collateral and the difference between such bid amount and, to the extent
permitted by applicable law, the remaining balance of the Obligations shall be
conclusively deemed to be the amount of the Obligations, notwithstanding that
any present or future law or court decision or ruling may have the effect of
reducing the amount of any deficiency claim to which the Lender might otherwise
be entitled by reason of such bidding at any such sale.
(j) The Borrower agrees that notwithstanding any other provision of this
Section 9.13 and without limiting the generality of any other provision of this
------------
Section 9.13 if, after the occurrence and during the continuance of an Event of
------------
Default, the Lender is prevented by applicable law from exercising its rights to
accelerate the maturity of the Obligations, to collect interest on the
Obligations, or to enforce or exercise any other right or remedy with respect to
the Obligations, or the Lender is prevented from taking any action to realize on
the Collateral, in each case with respect to any Loan Party, the Borrower agrees
to pay to the Lender, upon demand therefor, the amount that would otherwise have
been due and payable had such rights and remedies been permitted to be exercised
by the Lender.
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(k) The Borrower warrants and agrees that each of the waivers and consents
set forth herein are made after consultation with legal counsel and with full
knowledge of their significance and consequences, with the understanding that
events giving rise to any defense or right waived may diminish, destroy or
otherwise adversely affect rights which the Borrower otherwise may have against
the Lender or others, or against the Collateral. If any of the waivers or
consents herein are, or are determined to be, contrary to any applicable law or
public policy, such waivers and consents shall be effective to the maximum
extent permitted by law.
9.14. Waiver of Usury Defense. To the extent permitted by applicable law,
-----------------------
each of the Borrower agrees that it will not assert, plead (as a defense or
otherwise) or in any manner whatsoever claim (and will actively resist any
attempt to compel it to assert, plead or claim) in any action, suit or
proceeding that the effective interest rate on the Term Loan violates present or
future usury or other laws relating to the interest payable on any Obligations
and will not otherwise avail itself (and will actively resist any attempt to
compel it to avail itself) of the benefits or advantages of any such laws.
9.15. LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY THE BORROWER, ANY
-----------------------
OTHER LOAN PARTY OR ANY OTHER PERSON AGAINST THE LENDER OR THE AFFILIATES,
DIRECTORS, MEMBERS, PARTNERS, SHAREHOLDERS, OFFICERS, EMPLOYEES, LENDERS,
ATTORNEYS, CONSULTANTS AND INVESTMENT AND OTHER ADVISORS OF OR TO ANY OF THEM
FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR, TO THE FULLEST EXTENT
PERMITTED BY LAW, FOR ANY EXEMPLARY OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM
OR CAUSE OF ACTION (WHETHER BASED ON CONTRACT, TORT, STATUTORY LIABILITY OR ANY
OTHER GROUND) BASED ON, ARISING OUT OF OR RELATED TO ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, AND THE BORROWER (FOR ITSELF AND ON BEHALF OF EACH OTHER
LOAN PARTY) HEREBY WAIVES, RELEASES AND AGREES NEVER TO ▇▇▇ UPON ANY CLAIM FOR
ANY SUCH DAMAGES, WHETHER SUCH CLAIM NOW EXISTS OR HEREAFTER ARISES AND WHETHER
OR NOT IT IS NOW KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. EACH PARTY HERETO
ACKNOWLEDGES THAT NO AFFILIATE, DIRECTOR, MEMBER, PARTNER, SHAREHOLDER, OFFICER,
EMPLOYEE, LENDER, ATTORNEY, CONSULTANT OR INVESTMENT OR OTHER ADVISOR OF OR TO
THE LENDER SHALL BE LIABLE FOR ANY CLAIM ARISING HEREUNDER OR IN CONNECTION
HEREWITH.
9.16. Survival of Agreement. All covenants, agreements, representations and
---------------------
warranties made by the Borrower, any other Loan Party or any of their respective
Subsidiaries herein or in the certificates or other instruments prepared or
delivered in connection with this Agreement, any of the Collateral Documents or
any other Loan Document shall be considered to have been relied upon by the
Lender and shall survive the making by the Lender of the Term Loan, the
execution and delivery to the Lender of the Note and the repayment of the
Obligations (on the Termination Date or otherwise) to the extent any payment
obligation (contingent or otherwise) continues to exist hereunder or under the
Resale Agreement, including any Obligation, notwithstanding any investigation
heretofore or hereafter made (or any prior or future participation in the
preparation or delivery of any such documents or schedules thereto) by
72
any of them (or by any employees, lenders, attorneys, consultants and
advisors thereof or thereto). Notwithstanding the foregoing, Article IV, Article
---------- -------
V and Article VI of this Agreement shall, solely to the extent that no action
- ----------
has been initiated by or on behalf of the Lender under, in respect of or in
connection with any such Article or provision therein, and is continuing on such
date, terminate on the date that is six (6) years after the Effective Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER: COVAD COMMUNICATIONS GROUP, INC.
By:
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Name:
-------------------------------------------------------
Title:
------------------------------------------------------
LENDER: SBC COMMUNICATIONS INC.
By:
---------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Senior Executive Vice President and Chief
Financial Officer
74