EXHIBIT 4.2
EXECUTION COPY
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ECONOPHONE, INC.
$15,000,000
SENIOR SECURED INCREASING RATE NOTES DUE APRIL 24, 1998
______________________________
NOTE PURCHASE AGREEMENT
______________________________
Dated as of April 24, 1997
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TABLE OF CONTENTS
PAGE
1. AUTHORIZATION OF NOTES................................................... 1
2. SALE AND PURCHASE OF NOTES............................................... 1
2.1. Obligation to Purchase........................................... 1
2.2. Notice of Purchase............................................... 2
2.3. Initial Purchase Date............................................ 2
3. CONDITIONS TO THE INITIAL PURCHASE DATE.................................. 2
3.1. Documents Required............................................... 3
3.2. Opinions of Counsel.............................................. 6
3.3. Payment of Accrued Fees and Expenses............................. 7
4. CONDITIONS TO EACH PURCHASE DATE......................................... 7
4.1. Representations and Warranties................................... 7
4.2. No Default....................................................... 7
4.3. Documents Required............................................... 7
4.4. Purchase Permitted by Applicable Requirements of Law, Etc........ 8
4.5. Consents and Approvals........................................... 8
4.6. No Litigation or Other Proceedings............................... 8
4.7. No Material Adverse Change....................................... 9
4.8. No Other Offerings............................................... 9
4.9. No Adverse Change to Financial Markets........................... 9
4.10. Employment of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇.................................... 9
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................ 9
5.1. Organization; Power and Authority................................ 9
5.2. Authorization, Enforceability, Etc...............................10
5.3. Disclosure.......................................................10
5.4. Capitalization; Organization and Ownership of Shares of
Subsidiaries, Etc................................................10
5.5. Financial Statements.............................................11
5.6. Compliance with Laws, Other Instruments, Etc.....................12
5.7. Governmental Authorizations, Etc.................................12
5.8. Litigation.......................................................13
5.9. Taxes............................................................13
5.10. Title to Property; Leases........................................14
5.11. Security Interests, Etc..........................................14
5.12. Licenses, Permits, Etc...........................................15
5.13. Compliance with ERISA............................................15
5.14. Private Offering by the Company..................................16
5.15. Use of Proceeds; Margin Regulations..............................17
5.16. Status Under Certain Statutes....................................17
5.17. Foreign Assets Control Regulations, Etc..........................18
5.18. Employee and Labor Matters.......................................18
5.19. Environmental Matters............................................19
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5.20. No Burdensome Agreements.........................................20
5.21. Existing Indebtedness; Future Liens..............................20
5.22. Solvency.........................................................20
5.23. Related Party Transactions.......................................20
5.24. Material Contracts...............................................21
5.25. Pari Passu Obligations...........................................21
5.26. No Significant Subsidiaries......................................21
5.27. Carrier Contracts................................................22
6. REPRESENTATIONS OF THE PURCHASER.........................................22
6.1. Purchase for Investment..........................................22
6.2. Accredited Investor..............................................22
6.3. Source of Funds..................................................22
7. PREPAYMENTS AND REDEMPTIONS OF THE NOTES.................................23
7.1. Optional Prepayments of the Notes................................23
7.2. Offer to Repurchase Notes and Reduce Commitments in Respect of a
Change of Control................................................24
7.3. Mandatory Redemptions of the Notes...............................25
7.4. Allocation of Partial Prepayments................................26
7.5. Maturity; Surrender, Etc.........................................26
7.6. Purchase of Notes................................................27
7.7. Reduction of Commitments with Excess Proceeds....................27
8. AFFIRMATIVE COVENANTS....................................................27
8.1. Information Covenants............................................27
8.2. Compliance with Law..............................................32
8.3. Maintenance of Insurance.........................................32
8.4. Maintenance of Properties........................................33
8.5. Payment of Taxes and Claims; Performance of Material
Obligations......................................................33
8.6. Preservation of Corporate Existence, Etc.........................34
8.7. Maintenance of Books and Records; Inspection.....................34
8.8. Use of Proceeds..................................................35
8.9. Search Reports...................................................35
8.10. Covenant to Give Further Security................................35
8.11. Furnishing of Rule 144A Information..............................39
9. NEGATIVE COVENANTS.......................................................39
9.1. Limitations on Transactions with Affiliates......................39
9.2. Limitations on Liens.............................................40
9.3. Limitations on Indebtedness......................................42
9.4. Limitations on Sale-Leaseback Transactions.......................43
9.5. Limitations on Restricted Payments...............................43
9.6. Limitations on Fundamental Changes, Asset Sales,
Acquisitions, Etc................................................44
9.7. Limitations on Investments, Etc..................................46
9.8. Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries...........................................47
9.9. Limitation on Issuance of Capital Stock..........................47
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9.10. Limitation on Modifications of Indebtedness; Modifications of
Certificate of Incorporation, Bylaws and Certain Other
Agreements; Etc..................................................48
9.11. Limitations on Conduct of Business...............................49
9.12. Limitations on Accounting Changes and Changes in Fiscal Year.....49
9.13. Limitations on Partnerships......................................49
9.14. Limitations on Speculative Transactions..........................49
9.15. Employment of, or Competition by, Key Employees..................49
9.16. Limitations on Capital Expenditures..............................49
10. FINANCIAL COVENANTS......................................................50
10.1. Minimum Consolidated EBITDA......................................50
10.2. Consolidated Debt Service Coverage Ratio.........................50
10.3. Consolidated Funded Indebtedness to Net Worth Ratio..............50
10.4. Minimum Cash Balance.............................................50
11. EVENTS OF DEFAULT........................................................50
11.1. Events of Default................................................50
11.2. Acceleration.....................................................54
11.3. Other Remedies...................................................54
11.4. Rescission.......................................................54
11.5. Restoration of Rights and Remedies...............................55
11.6. No Waivers or Election of Remedies, Etc..........................55
12. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES............................55
12.1. Registration of Notes............................................55
12.2. Transfer and Exchange of Notes...................................55
12.3. Replacement of Notes.............................................57
13. PAYMENTS ON NOTES........................................................57
13.1. Place of Payment.................................................57
13.2. Home Office Payment..............................................58
14. EXPENSES, INCREASED COSTS AND INDEMNIFICATION, ETC.......................58
14.1. Transaction Expenses.............................................58
14.2. Indemnity........................................................59
14.3. Taxes............................................................60
14.4. Survival.........................................................62
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.............62
16. AMENDMENT AND WAIVER.....................................................62
16.1. Requirements.....................................................62
16.2. Solicitation of Holders of Notes.................................63
16.3. Binding Effect, Etc..............................................64
16.4. Notes Held by Company, Etc.......................................64
17. NOTICES..................................................................64
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18. REPRODUCTION OF DOCUMENTS................................................65
19. CONFIDENTIAL INFORMATION.................................................65
20. SUBSTITUTION OF PURCHASER................................................66
21. MISCELLANEOUS............................................................66
21.1. Successors and Assigns...........................................66
21.2. Payments Due on Non-Business Days................................66
21.3. Satisfaction Requirement.........................................67
21.4. Severability.....................................................67
21.5. Construction; Accounting Terms, Etc..............................67
21.6. Survival of Fee Letter...........................................67
21.7. Computation of Time Periods......................................67
21.8. Execution in Counterparts........................................68
21.9. Governing Law; Submission to Jurisdiction, Etc...................68
21.10. Waiver of Jury Trial.............................................68
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SCHEDULES
Schedule I - Information Relating to Purchasers
Schedule II - Defined Terms
Schedule 5.4(a) - Capitalization of the Company
Schedule 5.4(b) - Subsidiaries
Schedule 5.5(c) - Liabilities and Other Obligations
Schedule 5.7 - Governmental Authorizations and Other Approvals
Schedule 5.8 - Disclosed Litigation
Schedule 5.12 - License and Intellectual Property Infringements, Etc.
Schedule 5.19 - Environmental Matters
Schedule 5.21 - Existing Indebtedness
Schedule 5.24 - Material Contracts
Schedule 9.1 - Transactions with Affiliates
Schedule 9.2 - Existing Liens
Schedule 9.7 - Existing Investments
Schedule 9.8 - Existing Dividend and Payment Restrictions
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Notice of Sale and Purchase
Exhibit C - Form of Shareholder Pledge Agreement
Exhibit D - Form of Solvency Certificate
Exhibit E-1 - Form of Opinion of Special Counsel for the Company and the
Shareholders
Exhibit E-2 - Form of Opinion of General Counsel of the Company
Exhibit F - Form of Compliance Certificate
ECONOPHONE, INC.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Senior Secured Increasing Rate Notes due April 24, 1998
As of April 24, 1997
TO EACH OF THE PURCHASERS LISTED IN
SCHEDULE I ATTACHED HERETO:
Ladies and Gentlemen:
Econophone, Inc., a New York corporation (the "COMPANY"), hereby
agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $15,000,000
aggregate principal amount of its Senior Secured Increasing Rate Notes due April
24, 1998 (the Notes delivered pursuant to Section 2 of this Agreement and the
Other Agreements and any such Notes issued in substitution therefor pursuant to
Section 12 of this Agreement or the Other Agreements being, collectively, the
"NOTES"). Each of the Notes shall be in substantially the form of Exhibit A
attached hereto, with such amendments, supplements and other modifications
thereto, if any, as shall be approved from time to time by you and the Company.
Capitalized terms used in this Agreement shall have the meanings specified in
Schedule II attached hereto; and references in this Agreement to a "SCHEDULE" or
an "EXHIBIT" are, unless otherwise specified herein, references to a Schedule or
an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
2.1. OBLIGATION TO PURCHASE.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you, and you will purchase from the Company, from time to
time on any Business Day during the period from the date of this Agreement to
(but not including) December 31, 1997, Notes in an aggregate principal amount
for each such sale and purchase not to exceed the lesser of (a) your Available
Commitment at such date and (b) at any time prior to the Additional Availability
Date, $6,500,000, at the purchase price of 100% of the aggregate principal
amount thereof. Contemporaneously with entering into this Agreement, the
Company is entering into separate Note Purchase Agreements (collectively, the
"OTHER AGREEMENTS") identical with this Agreement (except as to the identity of
the Other Purchasers and the aggregate principal amount of the Notes to be
purchased thereby) with each of the other purchasers named in Schedule I
attached hereto (collectively, the "OTHER PURCHASERS"), if any, providing for
the sale on each Purchase Date to each of the Other Purchasers of Notes in an
aggregate principal amount for
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each such sale and purchase not to exceed the lesser of (a) the Available
Commitment of the applicable Other Purchaser at such date and (b) at any time
prior to the Additional Availability Date, $6,500,000, at the purchase price of
100% of the aggregate principal amount thereof. Your obligation hereunder and
the obligations of the Other Purchasers under the Other Agreements are several
and not joint obligations, and you shall have no obligation under any Other
Agreement and no liability to any Person for the performance or nonperformance
by any Other Purchaser thereunder. Each sale and purchase of Notes pursuant to
this Section 2.1 shall be in an aggregate principal amount of $1,000,000 or an
integral multiple of $100,000 in excess thereof. Notes purchased and sold under
this Section 2.1 and repaid or prepaid may not be repurchased and resold.
2.2. NOTICE OF PURCHASE.
Each sale and purchase of Notes shall be made upon notice, given
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed sale and purchase (each, a "PURCHASE DATE"), by the
Company to you; PROVIDED, HOWEVER, that no more than one Purchase Date shall be
requested by the Company under this Agreement and the Other Agreements during
any period of five consecutive Business Days. Each notice of a proposed sale
and purchase of Notes (a "NOTICE OF SALE AND PURCHASE") shall be by telephone,
confirmed immediately in writing, or by telex or telecopier, in substantially
the form of Exhibit B attached hereto, specifying therein the requested
(a) Purchase Date (which shall be a Business Day), (b) aggregate principal
amount of Notes to be purchased by you on such Purchase Date and (c) aggregate
principal amount of Notes to be purchased by all of the Other Purchasers on such
Purchase Date. On each Purchase Date, subject to the fulfillment of the
applicable conditions set forth in Section 3, the Company will deliver to you
the Notes to be purchased by you on such Purchase Date in the form of a single
Note (or such greater number of Notes in denominations of at least $100,000 or
integral multiples of $100,000 in excess thereof as you may request at least one
Business Day prior to such Purchase Date), dated such Purchase Date and
registered in your name (or in the name of your nominee), against delivery by
you to the Company or its order of same day funds in the amount of the aggregate
purchase price therefor by wire transfer for the account of the Company to The
Chase Manhattan Bank (ABA ▇▇. ▇▇▇▇▇▇▇▇▇), ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, Account No.
134-631250.
2.3. INITIAL PURCHASE DATE.
The initial sale and purchase of the Notes to be purchased by you
and the Other Purchasers, if any, shall occur at the offices of Shearman &
Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at or before
10:00 A.M. (New York City time), at a closing on April 24, 1997 or on such other
Business Day thereafter on or prior to June 1, 1997 as may be agreed upon among
the Company, you and the Other Purchasers, if any (the "INITIAL PURCHASE DATE").
3. CONDITIONS TO THE INITIAL PURCHASE DATE.
Your obligation to purchase and pay for the Notes to be sold to you
on the Initial Purchase Date is subject to the fulfillment to your satisfaction,
on or prior to the Initial Purchase Date, of the following conditions:
3
3.1. DOCUMENTS REQUIRED.
You shall have received the following documents, each dated as of
the Initial Purchase Date (except as otherwise specified below) and in the form
of the respective Exhibit attached hereto, if any, or otherwise in form and
substance satisfactory to you:
(a) NOTE PURCHASE AGREEMENTS. This Agreement and each of the
Other Agreements, if any, duly executed by the Company.
(b) SHAREHOLDER PLEDGE AGREEMENTS. One or more shareholder
pledge agreements, in each case in substantially the form of Exhibit C
attached hereto (as amended, supplemented or otherwise modified hereafter
from time to time in accordance with the terms thereof and Section 16, the
"SHAREHOLDER PLEDGE AGREEMENTS"), duly executed by each of the
Shareholders, together with:
(i) certificates representing the Initial Pledged Interests
referred to therein, together with undated stock powers executed in
blank;
(ii) instruments evidencing the Initial Pledged Indebtedness
referred to therein, duly endorsed in blank;
(iii) proper financing statements (Form UCC-1 or a comparable
form) or the equivalent thereof under the Uniform Commercial Code (or
similar law or statute) of all jurisdictions that may be necessary or
that you or any of the Other Purchasers may deem desirable in order to
perfect and protect the liens and security interests created under the
Shareholder Pledge Agreements, covering the Collateral described
therein, in each case completed in a manner satisfactory to you and
duly executed by the applicable Shareholder; and
(iv) evidence that all other actions that may be necessary or
that you or any of the Other Purchasers may deem desirable in order to
perfect and protect the liens and security interests created under the
Shareholder Pledge Agreements have been taken or will be taken in
accordance with the terms of the Note Documents.
(c) CORPORATE APPROVALS AND OTHER SIMILAR DOCUMENTATION. Certified
copies of the resolutions of the board of directors (or persons performing
similar functions) of the Company approving each of the Note Documents to
which it is or is to be a party, the issuance and sale of the Notes and the
other transactions contemplated hereby and thereby and all documents
evidencing other necessary corporate action with respect to each such Note
Document, the issuance and sale of the Notes and the other transactions
contemplated hereby and thereby.
(d) CERTIFICATE OF INCORPORATION. A copy of the certificate of
incorporation of the Company and each amendment thereto, certified (as of a
date reasonably near the Initial Purchase Date) by the Secretary of State
of the State of New York as being a true and complete copy thereof.
4
(e) GOOD STANDING CERTIFICATES. A copy of a certificate of the
Secretary of State of the State of New York, dated reasonably near the
Initial Purchase Date, listing the certificate of incorporation of the
Company and each amendment thereto on file in the office of such Secretary
of State and certifying that (i) such amendments are the only amendments to
the certificate of incorporation of the Company on file in his office,
(ii) the Company has paid all franchise taxes (or the equivalent thereof)
to the date of such certificate and (iii) the Company is duly incorporated
and in good standing under the laws of the State of New York.
(f) FOREIGN QUALIFICATION CERTIFICATES. Copies of certificates of
the Secretary of State (or the equivalent Governmental Authority) of each
jurisdiction in which the Company is qualified as a foreign corporation,
dated reasonably near the Initial Purchase Date, in each case stating that
the Company is duly qualified and in good standing as a foreign corporation
in such jurisdiction and has filed all annual reports required to be filed,
and paid all franchise taxes (or the equivalent thereof) required to be
paid, in such jurisdiction to the date of such certificate.
(g) SECRETARY'S CERTIFICATE. A certificate from the secretary or an
assistant secretary (or a person performing similar functions) of the
Company certifying:
(i) the absence of any amendments to the certificate of
incorporation of the Company since the date of the Secretary of
State's certificate referred to in subsection (d) of this Section 3.1;
(ii) the completeness and accuracy of the resolutions of the
board of directors of the Company and all documents evidencing other
necessary corporate action thereof referred to in subsection (c) of
this Section 3.1;
(iii) the completeness and accuracy of the bylaws of the
Company as in effect on the date the resolutions of the board of
directors of the Company referred to in subsection (c) of this Section
3.1 were adopted and on the Initial Purchase Date (a copy of which
shall be attached to such certificate);
(iv) the names and true signatures of the officers of the
Company authorized to sign each of the Note Documents to which it is
or is to be a party and the other agreements, instruments and other
documents to be delivered hereunder or thereunder; and
(v) such other matters as you or any of the Other Purchasers
shall specify relating to the existence and good standing of the
Company and the corporate and other necessary authority for, and the
validity of, each of the Note Documents to which it is or is to be a
party and any other matters relevant to any of the foregoing.
(h) OFFICER'S CERTIFICATE. A certificate of the Company, signed on
behalf of the Company by Mr. ▇▇▇▇ ▇▇▇▇, the Chief Financial Officer thereof
(the statements made in which certificate shall be true on and as of the
Initial Purchase Date), certifying as to:
5
(i) the due organization and good standing of the Company and
each of its Subsidiaries in their respective jurisdictions of
organization and the absence of any proceeding for the dissolution or
liquidation of the Company or any of its Subsidiaries;
(ii) the completeness and accuracy of all of the
representations and warranties made by the Company in this Agreement
and the other Note Documents to which it is or is to be a party,
before and after giving effect to the issue and sale of the Notes and
to the application of the proceeds therefrom as contemplated by
Section 5.15(a), as though made on and as of the Initial Purchase
Date;
(iii) the absence of any event occurring and continuing, or
resulting from the issue and sale of the Notes or the consummation of
any of the other transactions contemplated hereby, that constitutes a
Default or an Event of Default;
(iv) neither the Company nor any of its Subsidiaries having
changed its jurisdiction of organization, having been a party to any
merger, consolidation or other similar transaction or having issued or
sold any shares of its capital stock (or other ownership or profit
interests therein), or any warrants, options or other rights therefor,
at any time following the date of the most recent unaudited
consolidated financial statements of the Company and its Subsidiaries
referred to in Section 5.5(a) other than the issuance and sale of
140,000 shares of Series A Preferred Stock to Princes Gate Investors
II, L.P. and the issuance of 2,646,500 options for shares of common
stock of the Company to key employees thereof under the 1996 Flexible
Incentive Plan;
(v) to the best of his knowledge, the absence of any existing
or threatened event or circumstance applicable to the Company or any
of its Subsidiaries that could reasonably be expected to impair the
ability of the Company to consummate the Refinancing; and
(vi) the satisfaction of all conditions precedent by the
Company to the issuance and sale of the Notes on and as of the
Initial Purchase Date.
(i) SOLVENCY CERTIFICATES. A certificate from Mr. ▇▇▇▇ ▇▇▇▇, the
Chief Financial Officer of the Company, in substantially the form of
Exhibit D attached hereto, attesting to the Solvency of the Company and its
Subsidiaries, taken as a whole, immediately before and immediately after
giving effect to the Note Documents and all of the transactions
contemplated hereby or thereby to occur on or about the Initial Purchase
Date and assuming the sale and purchase of Notes on such date in an
aggregate principal amount of $15,000,000.
(j) FINANCIAL INFORMATION. Copies of (i) the audited consolidated
financial statements of the Company and its Subsidiaries referred to in
Section 5.5(a), in each case accompanied by an unqualified opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent accountants of the Company, and (ii) the
unaudited financial statements of the Company and its Subsidiaries referred
to in Section 5.5(a), together with a certificate of a Senior Financial
Officer of the Company with respect thereto.
6
(k) CONSENTS. Certified copies of all Governmental Authorizations,
and all consents, approvals and authorizations of, and notices to and other
actions by, all Persons with whom any of the Obligors or any of their
respective Subsidiaries has any contractual obligations, as shall be
required for the execution, delivery or performance of this Agreement and
the other Note Documents or the consummation of the issuance and sale of
the Notes or any of the other transactions contemplated hereby or thereby,
including, without limitation:
(i) a waiver of certain provisions set forth in the
certificate of incorporation of the Company, in form and substance
satisfactory to you and the Other Purchasers, if any, and duly
executed by the Company and at least a majority in interest of the
holders of the shares of Series A Preferred Stock, (A) permitting the
Company to enter into this Agreement and the other Note Documents to
which it is or is to be a party, to issue and sell the Notes and to
grant the liens and security interests to be granted thereby from time
to time hereafter pursuant to the terms of Section 8.10, (B) reducing
the amount of "key man" life insurance the Company is required to
maintain with respect to the death and long term incapacity of ▇▇.
▇▇▇▇▇▇ ▇▇▇▇ to $10,000,000 and (C) addressing such other matters as
you or any of the Other Purchasers shall reasonably request; and
(ii) an amendment and waiver to the NTFC Loan Agreement and
the other NTFC Loan Documents, in form and substance satisfactory to
you and the Other Purchasers, if any, and duly executed by the Company
and NTFC, (A) permitting each of the Obligors to grant to the
Collateral Agent, for the benefit of itself and the other Secured
Parties, a valid and perfected lien on and security interests in the
NTFC Collateral owned thereby, (B) permitting the amendment to the
certificate of incorporation of the Company referred to in clause (i)
of this Section 3.1(k), (C) waiving the event of default that has
occurred and is continuing under the NTFC Loan Agreement as a result
of the failure of the Company to deliver to NTFC on or prior to
March 31, 1997 the audited financial statements of the Company and its
Subsidiaries for the Fiscal Year ended December 31, 1996, (D) amending
the definition of "Cash Flow" set forth therein to include, for any
fiscal period of the Company, the remaining Available Commitments of
you and the Other Purchasers as of the last day of such fiscal period
and (E) addressing such other matters as you or any of the Other
Purchasers shall reasonably request.
(l) EXISTING INDEBTEDNESS. Certified copies of all of the
agreements, instruments and other documents evidencing or setting forth the
terms and conditions of the Indebtedness of the Company and its
Subsidiaries existing on the Initial Purchase Date and in an aggregate
amount of at least $100,000 (all of which Indebtedness is described, and
marked with an asterisk, on Schedule 5.21 attached hereto), except for
Indebtedness of the Company described in items 30 and 31 of Schedule 5.21
attached hereto (which Indebtedness is not evidenced by any agreement,
instrument or other document).
3.2. OPINIONS OF COUNSEL.
You shall have received the following favorable opinions, each dated
the Initial Purchase Date and in the form of the respective Exhibit attached
hereto, if any, or otherwise in form and substance satisfactory to you:
7
(a) ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP, special counsel for the Company and
each of the Shareholders, in substantially the form of Exhibit E-1 attached
hereto, and addressing such other matters as you (or your counsel) may
reasonably request (and the Company hereby instructs its special counsel to
deliver such opinion to you);
(b) ▇▇▇▇▇▇ & Fox, General Counsel of the Company, in substantially
the form of Exhibit E-2 attached hereto, and addressing such other matters
as you (or your counsel) may reasonably request (and the Company hereby
instructs its General Counsel to deliver such opinion to you); and
(c) Shearman & Sterling, your special counsel.
3.3. PAYMENT OF ACCRUED FEES AND EXPENSES.
Without limiting the provisions of Section 14.1, all of the accrued
fees and expenses incurred by you in connection with the transactions
contemplated by this Agreement and the other Note Documents (including, without
limitation, the accrued fees and expenses of Shearman & Sterling, special
counsel to you) to be paid by or on behalf of the Company, and all compensation
payable to you pursuant to the terms of the Fee Letter, on or prior to the
Initial Purchase Date shall have been paid.
4. CONDITIONS TO EACH PURCHASE DATE.
Your obligation to purchase and pay for the Notes to be sold to you on
each Purchase Date (including, without limitation, the Initial Purchase Date) is
subject to the fulfillment to your satisfaction, on or prior to such Purchase
Date, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each of the Obligors contained
in this Agreement and each of the other Note Documents shall be complete and
correct on the date of the related Notice of Sale and Purchase and on such
Purchase Date, before and after giving effect to the issue and sale of the Notes
and to the application of the proceeds therefrom as contemplated by Section
5.15(a).
4.2. NO DEFAULT.
After giving effect to the issue and sale of the Notes and to the
application of the proceeds therefrom as contemplated by Section 5.15(a), no
Default or Event of Default shall have occurred and be continuing.
4.3. DOCUMENTS REQUIRED.
You shall have received on or prior to such Purchase Date the
following documents, each dated as of such Purchase Date and in the form of the
respective Exhibit attached hereto, if any, or otherwise in form and substance
satisfactory to you:
8
(a) NOTICE OF SALE AND PURCHASE. A Notice of Sale and Purchase,
properly completed and duly executed by the Company.
(b) NOTES. Notes, registered in your name, in such aggregate
principal amount as is specified to be purchased by you in the related
Notice of Sale and Purchase and in such number of Notes and in such
denominations (of at least $100,000 per Note) as are specified to the
Company by you at least one Business Day prior to such Purchase Date (and
in the absence of such specification, in a single Note), in each case duly
executed by the Company.
(c) ADDITIONAL DOCUMENTATION. Such other information as you or any
of the Other Purchasers may reasonably request.
4.4. PURCHASE PERMITTED BY APPLICABLE REQUIREMENTS OF LAW, ETC.
The purchase of and any payment for the Notes to be purchased by you
on such Purchase Date (a) shall be permitted by the applicable Requirements of
Law of each jurisdiction to which you are subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as to the
character of the particular investment, (b) shall not violate any applicable
Requirements of Law (including, without limitation, Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System) and (c) shall not subject
you to any tax, penalty or other liability under or pursuant to any applicable
Requirements of Law, except for any Taxes or Other Taxes for which the Company
is obligated to compensate you under Section 14.3; PROVIDED that if the purchase
of and any payment for the Notes to be purchased by you on such Purchase Date
would subject you to any such tax, penalty or other liability, you agree to use
reasonable efforts (consistent with your internal policy and legal and
regulatory restrictions) to substitute one of your Affiliates as the purchaser
of the Notes hereunder in accordance with Section 20 if such substitution would
avoid the need for or reduce the amount of any such tax, penalty or liability
and would not, in your sole determination, be otherwise disadvantageous to you.
If requested by you, you shall have received an Officer's Certificate on or
prior to such Purchase Date, dated such Purchase Date, certifying such matters
of fact as you may reasonably specify to enable you to determine whether such
purchase and payment are so permitted.
4.5. CONSENTS AND APPROVALS.
All Governmental Authorizations, and all consents, approvals and
authorizations of, and notices to, and other actions by, any other Person,
necessary in connection with the issuance and sale of the Notes and the other
transactions contemplated hereby and thereby shall have been obtained (without
the imposition of any conditions that are not acceptable to you) and shall
remain in full force and effect; and all applicable waiting periods shall have
expired without any action being taken by any Governmental Authority that could
reasonably be expected to restrain, prevent or impose any material adverse
conditions on the Company or on the sale and purchase of the Notes or any of the
other transactions contemplated by this Agreement.
4.6. NO LITIGATION OR OTHER PROCEEDINGS.
Except as described on Schedule 5.8 attached hereto, there shall exist
no action, suit, investigation, litigation or proceeding pending or, to the best
knowledge of the Company, threatened
9
against or affecting any of the Obligors or any of their respective Subsidiaries
or any of the property or assets thereof in any court or before any arbitrator
or by or before any other Governmental Authority of any kind that (a) either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or (b) challenges the legality, validity, binding effect
or enforceability of this Agreement or any of the other Note Documents or the
consummation of the sale and purchase of the Notes or any of the other
transactions contemplated hereby or thereby.
4.7. NO MATERIAL ADVERSE CHANGE.
Since December 31, 1996, there shall not have occurred (in your
judgment) a material adverse change in the business, condition (financial or
otherwise), operations, results of operations, assets, property, liabilities or
prospects of the Company and its Subsidiaries, taken as a whole.
4.8. NO OTHER OFFERINGS.
None of the Obligors or any of their respective Subsidiaries shall
have offered, placed or sold, or have caused to be offered, placed or sold,
directly or indirectly by private or public offering or offerings, any debt or
preferred equity securities or other obligations that, in your sole judgment,
could reasonably be expected to impair your ability to resell the Notes being
issued hereunder on terms reasonably acceptable to you.
4.9. NO ADVERSE CHANGE TO FINANCIAL MARKETS.
There shall not have occurred any disruption or change in the
financial or capital markets conditions generally from those in effect on or
prior to April 1, 1997, which disruption or change could reasonably be expected
to have a Material Adverse Effect.
4.10. EMPLOYMENT OF ▇▇. ▇▇▇▇▇▇ ▇▇▇▇.
▇▇. ▇▇▇▇▇▇ ▇▇▇▇ shall be in good health, shall be employed as a senior
executive officer of the Company and, in such capacity, shall be actively
involved in managing the businesses and financial matters of the Company and
shall not have expressed any intention to terminate his employment by the
Company.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that as of the date hereof,
the date of each Notice of Sale and Purchase and each Purchase Date:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company and each of its Subsidiaries are Persons duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of organization and are duly qualified as foreign corporations or
other entities and are in good standing in each other jurisdiction in which the
ownership, lease or operation of their property and assets or the conduct of
their businesses requires such qualification, other than any such jurisdiction
in which the failure to be so qualified or in good standing,
10
either individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect. The Company and each of its Subsidiaries have
all corporate and other necessary power and authority, and the legal right, to
own or to hold under lease all of the property and assets they purport to own or
hold under lease and to conduct the business they conduct and propose to
conduct. Each of the Obligors has all corporate and other necessary power and
authority, and the legal right, to execute and deliver this Agreement, the Notes
and the other Note Documents to which it is or is to be a party, to perform its
Obligations hereunder and thereunder and to consummate all of the transactions
contemplated hereby and thereby.
5.2. AUTHORIZATION, ENFORCEABILITY, ETC.
This Agreement and each of the other Note Documents have been duly
authorized by all necessary corporate action (including, without limitation, all
necessary shareholder action) on the part of each of the Obligors intended to be
a party thereto. This Agreement has been, and the Notes and each of the other
Note Documents, when delivered hereunder, will have been, duly executed and
delivered by each of the Obligors intended to be a party thereto. This
Agreement constitutes, and the Notes and each of the other Note Documents, when
delivered hereunder, will constitute, the legal, valid and binding obligations
of each of the Obligors intended to be a party thereto, enforceable against such
Obligor in accordance with their respective terms, except as such enforceability
may be limited by the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally.
5.3. DISCLOSURE.
All of the information furnished by or on behalf of any of the
Obligors or any of their respective Subsidiaries in writing to you or any of the
Other Purchasers pursuant to or in connection with this Agreement or any of the
other Note Documents or any other document, certificate or other writing
furnished to you or any of the Other Purchasers in connection with the sale and
purchase of the Notes or any of the other transactions contemplated hereby,
taken as a whole, is complete and correct in all material respects as of the
date on which such information was so provided; and all such information, taken
as a whole, does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made therein, in light of
the circumstances under which any such statements were made, not misleading.
All financial projections and forecasts that have been prepared by the Company
or any of its Subsidiaries and made available to you have been prepared in good
faith based upon reasonable assumptions and represented, at the time each such
financial projection or forecast was delivered to you, the Company's best
estimate of its future financial performance (it being recognized by you that
such financial projections or forecasts are not to be viewed as facts and that
the actual results during the period or periods covered by any such financial
projections or forecasts may differ from the projected or forecasted results).
5.4. CAPITALIZATION; ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES,
ETC.
(a) As of the Initial Purchase Date, each of the authorized shares of
capital stock of the Company and the issued and outstanding shares of capital
stock of the Company are as described in Part A of Schedule 5.4(a) attached
hereto. All of the issued and outstanding shares of capital stock of the
Company have been validly issued and are fully paid and nonassessable, and the
holders thereof are not entitled to any preemptive or other similar rights. As
of the Initial Purchase Date, 4,012,000 shares
11
of common stock of the Company have been reserved for issuance in connection
with the conversion of the Series A Preferred Stock and 3,000,000 shares of
common stock of the Company are issuable under the terms of the 1996 Flexible
Incentive Plan, copies of which plan have been delivered to you in the form and
on the terms in effect on the Initial Purchase Date. Except as described in
Part B of Schedule 5.4(a) attached hereto, as of the Initial Purchase Date, the
1996 Flexible Incentive Plan is the only plan or arrangement in existence
relating to the issuance of shares of capital stock of the Company. Except as
described in this Section 5.4 or in Part C of Schedule 5.4(a) attached hereto,
as of the Initial Purchase Date, there are no outstanding debt or equity
securities of the Company and no outstanding obligations of the Company
convertible into or exchangeable for, or warrants, options or other rights for
the purchase or acquisition from the Company, or other obligations of the
Company to issue, directly or indirectly, any shares of capital stock of the
Company.
(b) Schedule 5.4(b) attached hereto sets forth all of the
Subsidiaries of the Company as of the Initial Purchase Date, showing, as to each
such Subsidiary, the correct name thereof, the jurisdiction of its organization
and the percentage of shares of each class of its capital stock or similar
equity interests outstanding that are owned by the Company and/or one or more of
its Subsidiaries. All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary of the Company shown on Schedule 5.4(b)
attached hereto as being owned by the Company and/or one or more of its
Subsidiaries have been validly issued, are fully paid and nonassessable and are
owned by the Company and/or one or more of its Subsidiaries, free and clear of
all Liens.
(c) The outstanding shares of capital stock of the Company and each
of its Subsidiaries have been issued, and all outstanding warrants, options or
other rights for the purchase or acquisition from the Company or any of its
Subsidiaries of any shares of its capital stock have been granted, in accordance
with the registration or qualification provisions of the Securities Act and any
applicable state securities laws or pursuant to valid exemptions therefrom.
(d) None of the Subsidiaries of the Company is a party to or
otherwise is subject to any legal restriction or any agreement or arrangement
restricting the ability of such Subsidiary to pay dividends out of profits or to
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns shares of capital stock of or similar equity interests in
such Subsidiary, except under this Agreement and as otherwise expressly
permitted to remain in effect under Section 9.8.
5.5. FINANCIAL STATEMENTS.
(a) The audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1994 and December 31, 1995 and the related
audited consolidated statements of operations, stockholders' equity and cash
flows of the Company and its Subsidiaries for the Fiscal Years ended December
31, 1994 and December 31, 1995, in each case including the schedules and notes
thereto and accompanied by an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, the independent
accountants of the Company, and the consolidated balance sheet of the Company
and its Subsidiaries as of September 30, 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows of the Company and
its Subsidiaries for the three-month period then ended, duly certified by a
Senior Financial Officer of the Company, copies of all of which have been
furnished to you, fairly present (subject, in the case of such balance sheet as
of September 30, 1996 and such statements of operations, stockholders' equity
and cash flows for the three-month period then ended, to normal year-end audit
adjustments) the consolidated financial condition of the Company and its
Subsidiaries as at such dates and the consolidated results of
12
operations and cash flows of the Company and its Subsidiaries for the respective
periods ended on such dates. All of the financial statements referred to above
in this subsection (a), including the schedules and notes thereto, have been
prepared in accordance with generally accepted accounting principles applied
consistently throughout the respective periods covered thereby.
(b) Since December 31, 1996, there has been (i) no material adverse
change in the business, condition (financial or otherwise), operations, results
of operations, assets, property, liabilities or prospects of the Company and its
Subsidiaries, taken as a whole, and (ii) no development, event or circumstance
relating to or affecting the Company or any of its Subsidiaries that, either
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect.
(c) There are no liabilities or obligations of the Company or any of
its Subsidiaries of any nature whatsoever (whether absolute, contingent, accrued
or otherwise and whether or not due) that, either individually or in the
aggregate, could reasonably be expected to be material to the Company, either
individually or together with its Subsidiaries, taken as a whole, in each case
except for those liabilities and obligations that are fully disclosed in the
unaudited consolidated financial statements of the Company and its Subsidiaries
referred to in subsection (a) of this Section 5.5 or on Schedule 5.5(c) attached
hereto or that have been incurred since the Initial Purchase Date and are not
prohibited under the terms of this Agreement or any of the other Note Documents.
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by each of the Obligors of
each of the Note Documents to which it is or is to be a party and the
consummation of the sale and purchase of the Notes and the other transactions
contemplated hereby and thereby do not (a) contravene such Obligor's certificate
of incorporation or bylaws (or similar organizational documents), (b) violate
any Requirement of Law, (c) conflict with or result in the breach of, or
constitute a default under, any loan or purchase agreement, indenture, mortgage,
deed of trust, lease, instrument, contract or other agreement binding on or
affecting such Obligor, any of its Subsidiaries or any of their respective
property or assets or (d) except for the Liens created under the Collateral
Documents, result in or require the creation or imposition of any Lien upon or
with respect to any of the property or assets of such Obligor or any of its
Subsidiaries. Neither any of the Obligors nor any of their respective
Subsidiaries is in violation of any of the terms of its certificate of
incorporation or bylaws (or similar organizational documents) or any Requirement
of Law or in breach of any loan or purchase agreement, indenture, mortgage, deed
of trust, lease, instrument, contract or other agreement referred to in the
immediately preceding sentence, the violation or breach of which, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
(a) The Company and each of its Subsidiaries (i) own or possess all
of the Governmental Authorizations that are necessary to own or lease and
operate their respective property and assets and to conduct their respective
businesses as presently conducted, except where and to the extent that the
failure to obtain or maintain in effect any such Governmental Authorization,
either individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect, and (ii) have not received any notice relating
to or threatening the revocation, termination, cancellation, denial,
13
impairment or modification of any such Governmental Authorization, nor is the
Company or any of its Subsidiaries in violation or contravention of, or in
default under, any such Governmental Authorization.
(b) No Governmental Authorization, and no consent, approval or
authorization of, or notice to, or other action by, any other Person, is
required for the due execution, delivery, recordation, filing or performance by
any of the Obligors of this Agreement or any of the other Note Documents to
which it is or is to be a party, or for the consummation of the sale and
purchase of the Notes or any of the other transactions contemplated hereby and
thereby, except for such Governmental Authorizations, and such consents,
approvals, authorizations, notices and other actions, as are described on
Schedule 5.7 attached hereto, all of which have been obtained or made on or
prior to the Initial Purchase Date and are in full force and effect or will be
obtained or made in accordance with the terms of the Note Documents and,
thereafter, will be in full force and effect.
5.8. LITIGATION.
Except as described on Schedule 5.8 attached hereto, there is no
action, suit, investigation, litigation or proceeding pending or, to the best
knowledge of the Company, threatened against or affecting any of the Obligors or
any of their respective Subsidiaries or any of the property or assets thereof in
any court or before any arbitrator or by or before any other Governmental
Authority of any kind that (a) either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or (b) challenges the
legality, validity, binding effect or enforceability of this Agreement or any of
the other Note Documents or the consummation of the sale and purchase of the
Notes or any of the other transactions contemplated hereby or thereby.
5.9. TAXES.
(a) Each of the Obligors and each of their respective Subsidiaries
have filed or caused to be filed all tax returns and reports that are required
to have been filed in any jurisdiction, and have paid all taxes shown to be due
and payable on such returns and all taxes shown to be due and payable on any
assessments of which such Obligor or such Subsidiary, as the case may be, has
received notice and all other taxes, assessments, levies, fees and other
governmental charges imposed upon any of the Obligors or any of their respective
Subsidiaries, or their property, assets, income or franchises, to the extent
such taxes, assessments, levies, fees and other charges have become due and
payable and before they have become delinquent, (i) except for taxes,
assessments, levies, fees or other governmental charges the amount,
applicability or validity of which is being contested in good faith and by
appropriate proceedings diligently conducted and with respect to which such
Obligor or such Subsidiary, as the case may be, has established reserves in
accordance with generally accepted accounting principles in effect from time to
time and (ii) solely in the case of tax returns and reports that are required to
be filed in any jurisdiction outside of the United States of America, and taxes,
assessments, levies, fees and other governmental charges that are due and
payable with respect thereto, except where the filing of any such tax return or
report or the failure to pay any such tax, assessment, levy, fee or other
governmental charge, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(b) The United States federal income tax liabilities of the Company
and its Subsidiaries have been determined by the Internal Revenue Service and
paid, or the time for audit has expired, for all Fiscal Years through the Fiscal
Year ended December 31, 1992. The Company has
14
established reserves in accordance with generally accepted accounting principles
in effect from time to time for all taxable years and all other taxable periods
for which the expiration of the applicable statute of limitations for assessment
or collection of the federal income tax liabilities of the Company or any of its
Subsidiaries has not occurred (whether as a result of extension or otherwise)
and for its current fiscal period.
(c) As of the Initial Purchase Date, neither any of the Obligors nor
any of their respective Subsidiaries or Affiliates has entered into an agreement
or waiver or been requested to enter into an agreement or waiver extending any
statute of limitations relating to the payment or collection of taxes of any
such Obligor or any such Subsidiary or Affiliate, or is aware of any
circumstances that would cause the taxable years or other taxable periods of any
of the Obligors or any of their respective Subsidiaries or Affiliates not to be
subject to the normally applicable statute of limitations.
(d) Neither the Company nor any of its Subsidiaries is or at any time
has been a member of an affiliated, consolidated, combined or unitary group
other than such group of which the Company is the common parent (within the
meaning of Section 1504(a)(1) of the Internal Revenue Code).
(e) The Company is not an S corporation with the meaning of Section
1361 of the Internal Revenue Code.
5.10. TITLE TO PROPERTY; LEASES.
The Company and each of its Subsidiaries have good and sufficient
title to, or a valid and enforceable leasehold interest in, all of their
respective property and assets that, either individually or in the aggregate,
are material, in each case free and clear of all Liens other than the Liens
expressly permitted under Section 9.2. All leases under which any of the
Company or any of its Subsidiaries are a lessor or a lessee are valid and
subsisting and are in full force and effect in all material respects.
5.11. SECURITY INTERESTS, ETC.
The Collateral Documents create valid and perfected first priority
liens on and security interests in the Collateral (subject to Permitted Liens
and, in the case of the property and assets of the Obligors which become part of
the Collateral on or about the Additional Availability Date, the liens and
security interests of NTFC, on behalf of itself and the other NTFC Lenders,
pursuant to the terms of the NTFC Loan Documents and the Intercreditor
Agreement) in favor of the Collateral Agent, for its benefit and the benefit of
the other Secured Parties, securing the payment of the Notes and all of the
other Obligations of the Obligors under or in respect of the Note Documents.
All of the shares of capital stock of (or other ownership or profit interests
in) the Company and each of the Subsidiaries that are purported to comprise part
of the Collateral have been delivered to the Collateral Agent or NTFC, as
required by the applicable Collateral Documents (on behalf of the Secured
Parties), together with undated stock or other appropriate powers executed in
blank; and all filings and other actions necessary to perfect and protect such
liens and security interests have been duly made or taken and are in full force
and effect or will be duly made or taken in accordance with the terms of the
Note Documents; and all filing and recording fees and taxes have been duly paid.
15
5.12. LICENSES, PERMITS, ETC.
(a) The Company and each of its Subsidiaries own or possess all of
the licenses, permits, franchises, authorizations, consents and approvals, and
own or have the legal right to use all of the patents, copyrights, service
marks, trademarks and trade names (or other rights thereto), that are necessary
to own or lease and operate their respective property and assets and to conduct
their respective businesses as presently conducted, without known conflict with
the rights of any other Person. Except as described on Part A of Schedule 5.12
attached hereto, no action, suit, investigation, litigation or proceeding of any
Person is pending or, to the best knowledge of the Company, is threatened
challenging the use of any such license, permit, franchise, authorization,
consent, approval, patent, copyright, service ▇▇▇▇, trademark, trade name or
other right, or the validity or effectiveness thereof, except for any such
action, suit, investigation, litigation or proceeding that, either individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(b) Except as described on Part B of Schedule 5.12 attached hereto:
(i) no product of the Company or any of its Subsidiaries infringes on
any license, permit, franchise, authorization, consent, approval, patent,
copyright, service ▇▇▇▇, trademark, trade name or other right owned by any
other Person; and
(ii) there is no violation by any Person of any right of the Company
or any of its Subsidiaries with respect to any license, permit, franchise,
authorization, consent, approval, patent, copyright, service ▇▇▇▇,
trademark, trade name or other right owned or used by the Company or any
such Subsidiary.
(c) The Company has and maintains in full force and effect all
Governmental Authorizations required by the FCC or any PUC or any Communications
Law for the construction and operation of its telecommunications network in
accordance with its intended design and at its full capacity, and all such
Governmental Authorizations are not subject to any further judicial or
administrative review and are in all respects final. Neither you nor any other
holder of the Notes will, solely as a result of your or their execution,
delivery or performance of this Agreement, any Other Agreement or any of the
other Note Documents, or your or their investment in (or your or their
commitment to invest in) the Notes, be subject to the regulation or control of
the FCC or any PUC.
5.13. COMPLIANCE WITH ERISA.
(a) The Company and each of the ERISA Affiliates have operated and
administered each ERISA Plan in compliance with its terms and with the
provisions of ERISA and all other applicable Requirements of Law.
(b) During the immediately preceding five-year period, (i) no
Termination Event has occurred or, to the best knowledge of the Company, could
reasonably be expected to occur with respect to any Plan, (ii) no "ACCUMULATED
FUNDING DEFICIENCY" (as such term is defined in Section 302 of ERISA and Section
412 of the Internal Revenue Code), whether or not waived, has occurred with
respect to any Plan and (iii) no Lien in favor of the PBGC or a Plan has arisen
or could reasonably be expected to arise on account of any Plan.
16
(c) Neither the Company nor any of the ERISA Affiliates has incurred
any liability pursuant to Title I or IV or ERISA or the penalty or excise tax
provisions of the Internal Revenue Code relating to ERISA Plans, and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
such ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any such ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA, such penalty or excise tax provisions or
Section 401(a)(29) or 412 of the Internal Revenue Code.
(d) Neither the Company nor any of the ERISA Affiliates (i) has
incurred or, to the best knowledge of the Company, could reasonably be expected
to incur any Withdrawal Liability in respect of any Multiemployer Plan or any
Multiple Employer Plan or (ii) would become subject to any Withdrawal Liability
if the Company or any such ERISA Affiliate were to withdraw completely from all
Multiemployer Plans and all Multiple Employer Plans as of the most recent
valuation date of each such Plan.
(e) No prohibited transaction (within the meaning of Section 406 of
the Internal Revenue Code) or breach of fiduciary responsibility has occurred
with respect to any ERISA Plan which has subjected or may subject the Company or
any of the ERISA Affiliates to any liability under Section 406, 409, 502(i) or
502(l) of ERISA or Section 4975 of the Internal Revenue Code, or under any
agreement or other instrument pursuant to which the Company or any of the ERISA
Affiliates has agreed or is required to indemnify any Person against any such
liability.
(f) The actuarial present value of all "BENEFIT LIABILITIES" (as
defined in Section 4001 of ERISA) under all of the Plans, determined as of the
end of each such Plan's most recently completed plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most recent
actuarial valuation report, whether or not vested, did not exceed the aggregate
current value of the assets of all such Plans allocable to such benefit
liabilities by more than $100,000 in the aggregate.
(g) Neither the Company nor any of the ERISA Affiliates has been
notified that any Multiemployer Plan is in reorganization (within the meaning of
Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of
ERISA) or is being terminated (within the meaning of Title IV of ERISA), and, to
the best knowledge of the Company, no Multiemployer Plan could reasonably be
expected to be in reorganization, insolvent or terminated.
(h) None of the execution and delivery of this Agreement, the
issuance and sale of the Notes hereunder or the consummation of any of the
transactions contemplated hereby will involve any transaction that is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax could
be imposed pursuant to Section 4975 of the Internal Revenue Code. The
representation by the Company in the first sentence of this Section 5.13(h) is
made in reliance upon, and is subject to the accuracy of, your representation in
Section 6.3 as to the sources of the funds used to pay the purchase price of the
Notes to be purchased by you.
5.14. PRIVATE OFFERING BY THE COMPANY.
(a) Neither the Company nor any Person acting on its behalf has
directly or indirectly offered the Notes or any similar securities for sale to,
or solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any Person other than you, the Other
17
Purchasers, if any, and not more than ten other Institutional Investors, each of
which has been offered the Notes at a private sale for investment. Neither the
Company nor any Person acting on its behalf has taken, or will take, any action
that would subject the issuance and sale of the Notes to the registration
requirements of Section 5 of the Securities Act.
(b) Neither the Company nor any Person acting on its behalf has
directly or indirectly offered or sold the Notes by any form of general
solicitation or general advertising, including, without limitation, any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or any broadcast over television or radio
or any seminar or meeting whose attendees have been invited by any form of
general solicitation or general advertising (within the meaning of Rule 502(c)
of Regulation D under the Securities Act).
5.15. USE OF PROCEEDS; MARGIN REGULATIONS.
(a) The proceeds received from the sale of the Notes from time to
time to you and the Other Purchasers, if any, will be used solely to finance
Capital Expenditures of the Company and its Subsidiaries, to pay fees and
expenses incurred in connection with the sale and purchase of the Notes to you
and the Other Purchasers and for other general corporate purposes of the Company
and its Subsidiaries not otherwise prohibited under the terms of the Note
Documents (including, without limitation, to fund financial losses suffered from
time to time by the Company and its Subsidiaries).
(b) Neither the Company nor any of its Subsidiaries is engaged in the
business of extending credit for the purpose of purchasing or carrying any
"MARGIN STOCK" (within the meaning of Regulation G or U of the Board of
Governors of the Federal Reserve System (12 CFR 207)). No part of the proceeds
from the sale of the Notes will be used, directly or indirectly, for the purpose
of purchasing or carrying any margin stock or for the purpose of purchasing,
carrying or trading in any securities under such circumstances as to involve the
Company in a violation of Regulation X of the Board of Governors of the Federal
Reserve System (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of the Board of Governors of the Federal Reserve System (12 CFR
220). Margin stock does not constitute more than 25% of the value of the
consolidated property and assets of the Company and its Subsidiaries and the
Company does not have any present intention that margin stock will constitute
more than 25% of the value of such consolidated property and assets. None of
the transactions contemplated by this Agreement and the Other Agreements
(including, without limitation, the direct and indirect use of proceeds of the
Notes) will violate or result in a violation of the Securities Act or the
Exchange Act or any of the rules and regulations promulgated thereunder or in
such Regulation G, T, U or X, as applicable.
5.16. STATUS UNDER CERTAIN STATUTES.
(a) Neither any of the Obligors nor any of their respective
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
as amended, the Public Utility Act of 1935, as amended, or the Federal Power
Act, as amended.
(b) Neither any of the Obligors nor any of their respective
Subsidiaries is an "INVESTMENT COMPANY", or an "AFFILIATED PERSON" of, or
"PROMOTER" or "PRINCIPAL UNDERWRITER" for, an "INVESTMENT COMPANY" (each as
defined in the Investment Company Act of 1940, as amended). Neither the sale
and purchase of the Notes nor the application of the proceeds therefrom or the
repayment thereof
18
by the Company, nor the consummation of any of the other transactions
contemplated hereby, will violate any provision of such Act or any rule,
regulation or order of the Securities and Exchange Commission thereunder.
(c) Neither any of the Obligors nor any of their respective
Subsidiaries is a "HOLDING COMPANY", or a "SUBSIDIARY COMPANY" of a "HOLDING
COMPANY", or an "AFFILIATE" of a "HOLDING COMPANY" or of a "SUBSIDIARY COMPANY"
of a "HOLDING COMPANY" (each within the meaning of the Public Utility Holding
Company Act of 1935, as amended).
(d) Neither any of the Obligors nor any of their respective
Subsidiaries is a "PERSONAL HOLDING COMPANY" (as defined in Section 542 of the
Internal Revenue Code).
(e) Each of the Obligors and each of their respective Subsidiaries
are current with all reports and documents, if any, required to be filed with
any securities commission or similar agency of any applicable jurisdiction and
are in compliance with all applicable rules and regulations of such commissions
and agencies.
5.17. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the issue and sale of the Notes by the Company nor the use of
the proceeds therefrom will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.18. EMPLOYEE AND LABOR MATTERS.
(a) There is (i) no unfair labor practice complaint pending or, to
the best knowledge of the Company, threatened against the Company or any of its
Subsidiaries before any Governmental Authority and no grievance or arbitration
proceeding pending or threatened against the Company or any of its Subsidiaries
which arises out of or under any collective bargaining agreement, (ii) no
strike, labor dispute, slowdown, stoppage or similar action or grievance pending
or threatened against the Company or any of its Subsidiaries and (iii) to the
best knowledge of the Company, no union representation question existing with
respect to the employees of the Company or any of its Subsidiaries and no union
organizing activity taking place with respect to any of the employees of any of
them.
(b) There exists no actual or threatened termination, cancellation or
limitation of, or modification to or change in, the business relationship
between (i) the Company or any of its Subsidiaries, on the one hand, and any
carrier, any customer or any group thereof, on the other hand, whose agreements
with the Company or any such Subsidiary are, or whose use of the
telecommunications equipment thereof is, either individually or in the
aggregate, material to the business or operations of the Company and its
Subsidiaries, taken as a whole, or (ii) the Company or any of its Subsidiaries,
on the one hand, and any material supplier thereof, on the other hand; and there
exists no present state of facts or circumstances that could reasonably be
expected to give rise to or result in any such termination, cancellation,
limitation, modification or change.
(c) To the best knowledge of the Company, none of the key employees
of the Company are obligated under any contract, agreement or other arrangement
(including, without
19
limitation, licenses, covenants or commitments of any nature) with any Person
other than the Company and/or one or more of its Subsidiaries, or subject to any
judgment, decree, injunction or order of any court, arbitrator or other
Governmental Authority, that could reasonably be expected to interfere with the
use of such employee's best efforts to promote the interests of the Company and
its Subsidiaries or would conflict with such employee's involvement in the
businesses or operations of the Company and its Subsidiaries as conducted and as
proposed to be conducted.
5.19. ENVIRONMENTAL MATTERS.
Except as described on Schedule 5.19 attached hereto:
(a) The operations and properties (whether owned or leased) of the
Company and each of its Subsidiaries comply in all material respects with
all Environmental Laws and Environmental Permits, and all necessary
Environmental Permits have been obtained and are in full force and effect
for all of the operations and properties of the Company and each such
Subsidiary. All past noncompliance with any such Environmental Laws or
Environmental Permits has been resolved without ongoing material
obligations or costs to the Company or any of its Subsidiaries. To the
best knowledge of the Company, no circumstances exist that, either
individually or in the aggregate, could reasonably be expected (i) to form
the basis of an Environmental Action against the Company or any of its
Subsidiaries or any of its properties or (ii) to cause any such property to
be subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law.
(b) There are no and never have been any underground or aboveground
storage tanks or any surface impoundments, septic tanks, pits, sumps or
lagoons in which Hazardous Materials are being or have been treated, stored
or disposed of on any property owned or operated by the Company or any of
its Subsidiaries or, to the best knowledge of the Company, on any property
formerly owned or operated by the Company or any of its Subsidiaries; and
there is no asbestos or asbestos-containing material on any property owned
or operated by the Company or any of its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries is undertaking,
nor has any of them completed, either individually or together with other
potentially responsible parties, any investigation or assessment or
remedial or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any Governmental
Authority or the requirements of any Environmental Law; and all Hazardous
Materials generated, used, treated, handled or stored at, or released,
discharged or disposed of on, or transported to or from, any property owned
or operated by the Company or any of its Subsidiaries have been disposed of
in a manner that does not violate, and could not reasonably be expected to
give rise to liability under, any applicable Environmental Law.
(d) Neither the Company nor any of its Subsidiaries has received any
notice from any Governmental Authority regarding any violation or alleged
violation of, noncompliance or alleged noncompliance with, or liability or
potential liability under or in respect of, any Environmental Law or
Environmental Permit by the Company or any such Subsidiary, nor does the
Company
20
or any such Subsidiary have knowledge or have any reason to believe that
any such notice will be received or is being threatened.
5.20. NO BURDENSOME AGREEMENTS.
Neither any of the Obligors nor any of their respective Subsidiaries
is a party to any loan or purchase agreement, indenture, mortgage, deed of
trust, lease, instrument, contract or other agreement or subject to any
Requirement of Law or any charter or corporate or other similar restriction
that, either individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
5.21. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Schedule 5.21 attached hereto sets forth a complete and correct
list of all outstanding Indebtedness of the Company and each of its Subsidiaries
as of the Initial Purchase Date. Neither the Company nor any of its
Subsidiaries is in default, and no waiver of default is currently in effect, in
the payment of any principal of or interest on any Indebtedness of the Company
or any such Subsidiary, and no event or condition exists with respect to any
Indebtedness of the Company or any such Subsidiary that would permit (or that
with notice or the lapse of time, or both, would permit) one or more Persons to
cause such Indebtedness to become due and payable, or would require an offer to
prepay, redeem, repurchase, purchase or defease such Indebtedness to be made, in
each case prior to its stated maturity or its regularly scheduled dates of
payment.
(b) Neither any of the Obligors nor any of their respective
Subsidiaries has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property or assets, whether
now owned or hereafter acquired, to be subject to a Lien not expressly permitted
under Section 9.2.
5.22. SOLVENCY.
The Company is and the Company and its Subsidiaries, taken as a whole,
are, and upon giving effect to the issuance and sale of all of the Notes and the
other transactions contemplated hereby will be, Solvent.
5.23. RELATED PARTY TRANSACTIONS.
Except as set forth on Schedule 9.1 attached hereto:
(a) no officer or director of the Company and no member of the
immediate family of any officer or director thereof is indebted to the
Company in any amount, nor is the Company indebted to (or committed to make
loans or extend or guarantee credit to or otherwise to make Investments in)
any of them;
(b) to the best knowledge of the Company, neither any officer or
director of the Company nor any member of the immediate family of any
officer or director thereof has any direct or indirect ownership or profit
interest in any corporation or other entity with which the Company is
affiliated or with which the Company has an ongoing business relationship,
or in any
21
corporation or other entity that competes with the Company, that exceeds 1%
of the aggregate ownership and profit interests therein; and
(c) no officer or director of the Company and no member of the
immediate family of any officer or director thereof has any direct or
indirect financial interest in any material contract of the Company, except
for the financial interest of Mr. ▇▇▇▇ ▇▇▇▇ reflected in his employment
agreement with the Company, as amended, a copy which has been delivered to
you prior to the Initial Purchase Date.
5.24. MATERIAL CONTRACTS.
(a) Except for the agreements, contracts, plans, leases, arrangements
and commitments set forth in Schedule 5.24 attached hereto, neither the Company
nor any of its Subsidiaries is a party or subject to any agreement, contract,
plan, lease, arrangement or commitment that (i) is material to the business,
condition (financial or otherwise), operations, results of operations, assets,
property or liabilities of the Company and its Subsidiaries, taken as a whole,
(ii) provides for the purchase in excess of $250,000 of materials, supplies,
goods, services, equipment or other property or assets, except in the ordinary
course of business, (iii) involves any partnership, joint venture or other
similar arrangement or (iv) restricts the Company or any of its Subsidiaries
from engaging in or competing in any line of business, with any Person or in any
geographic area.
(b) Each agreement, contract, plan, lease, arrangement and commitment
disclosed or required to be disclosed pursuant to clause (a) of this Section
5.24 is the legal, valid and binding obligation of the Company or its applicable
Subsidiary, enforceable against the Company or such Subsidiary in accordance
with its terms, and is in full force and effect; and none of the Company or any
of its Subsidiaries or, to the best knowledge of the Company, any other party
thereto is in default in any material respect under the terms of any such
agreement, contract, plan, lease, arrangement or commitment.
5.25. PARI PASSU OBLIGATIONS.
The Obligations of the Company under this Agreement and the other Note
Documents rank senior in right of payment to all Obligations of the Company
other than the outstanding Indebtedness of the Company described on Schedule
5.21 attached hereto and any purchase money Indebtedness of the Company incurred
pursuant to Section 9.3(d). The Obligations of the Company under this Agreement
and the other Note Documents rank at least PARI PASSU in right of payment with
all outstanding Indebtedness of the Company described on Schedule 5.21 attached
hereto and all purchase money Indebtedness of the Company incurred pursuant to
Section 9.3(d).
5.26. NO SIGNIFICANT SUBSIDIARIES.
None of the Subsidiaries of the Company is a "SIGNIFICANT SUBSIDIARY"
within the meaning of Regulation S-X promulgated by the Securities and Exchange
Commission under the Securities Act.
22
5.27. CARRIER CONTRACTS.
The aggregate commitments of the Company and its Subsidiaries under
all of the carrier contracts to which one or more of such Persons are parties do
not exceed $1,200,000 per calendar month.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account
or for one or more separate accounts maintained by you or for the account of one
or more pension or trust funds and not with a view to the distribution thereof;
PROVIDED that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by applicable law, and you agree
that the Company is not required to register the Notes.
6.2. ACCREDITED INVESTOR.
You are an "ACCREDITED INVESTOR" (as defined in Rule 501 of
Regulation D under the Securities Act) and, by reason of your business and
financial experience, and the business and financial experience of those Persons
retained by you to advise you with respect to your investment in the Notes, you,
together with such advisors, have such knowledge, sophistication and experience
in business and financial matters as to be capable of evaluating the merits and
risks of the prospective investment, are able to bear the economic risk of such
investment and, at the present time, are able to afford a complete loss of such
investment. You are not purchasing the Notes in reliance upon any investigation
made by any of the Other Purchasers.
6.3. SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "FUNDS SOURCE") to be used
by you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Funds Source does not constitute the assets of an Employee
Benefit Plan;
(b) the Funds Source will constitute assets of an insurance company
general account (as such term is used in PTCE 95-60 issued by the United
States Department of Labor) and the purchase and holding of the Notes by
you is entitled to the exemption granted by PTCE 95-60; PROVIDED that
neither any of the Obligors nor any of their respective Subsidiaries is
your "AFFILIATE" (within the meaning of Section V(a) of PTCE 95-60);
(c) if any part of any Funds Source will be from the assets of any
separate account maintained by you in which any Employee Benefit Plan (or
its related trust) has an interest, at least one of the following
statements with respect to such Funds Source is accurate:
23
(i) such separate account is maintained solely in connection
with your fixed contractual obligations under which amounts payable or
credited to such Employee Benefit Plan and to any participant or
beneficiary thereof (including any annuitant) are not affected in any
manner by the investment performance of the separate account; or
(ii) the Funds Source will constitute assets of a "POOLED
SEPARATE ACCOUNT" (as such term is used in PTCE 90-1 issued by the
United States Department of Labor) and either (A) prior to the
applicable Purchase Date, you shall have disclosed to the Company the
name of each Employee Benefit Plan whose assets in such separate
account exceed or are expected to exceed 10% of the total assets of
such account as of such Purchase Date or (B) the purchase and holding
of the Notes by you is entitled to the exemption granted under PTCE
90-1; PROVIDED that neither any of the Obligors nor any of their
respective Subsidiaries is your "AFFILIATE" (within the meaning of
PTCE 90-1);
(d) the Funds Source will constitute assets of a "BANK COLLECTIVE
FUND" (as such term is used in PTCE 91-38 issued by the United States
Department of Labor) and either (A) prior to the applicable Purchase Date,
you shall have disclosed to the Company the name of each Employee Benefit
Plan whose assets in such bank collective fund exceed or are expected to
exceed 10% of the total assets of such fund as of such Purchase Date or (B)
the purchase and holding of Notes by you is entitled to the exemption
granted under PTCE 91-38; PROVIDED that neither any of the Obligors nor any
of their respective Subsidiaries is your "AFFILIATE" (within the meaning of
PTCE 91-38); or
(e) the Funds Source will constitute assets of an "INVESTMENT FUND"
managed by a "QUALIFIED PLAN ASSET MANAGER" (as both such terms are defined
in Part V of PTCE 84-14 issued by the United States Department of Labor) (a
"QPAM"); the QPAM and the Employee Benefit Plans on whose behalf the QPAM
is acting have been disclosed to the Company and the purchase and holding
of Notes by you is entitled to the exemption granted under PTCE 84-14;
PROVIDED that neither any of the Obligors nor any of their respective
Subsidiaries, nor any "AFFILIATE" (within the meaning of PTCE 84-14)
thereof, has, as of the applicable Purchase Date, or has exercised during
the calendar year immediately preceding the applicable Purchase Date, the
authority to (A) appoint or terminate the QPAM on behalf of any such
Employee Benefit Plan or (B) negotiate on behalf of any such Employee
Benefit Plan the terms of its management agreement with the QPAM
(including, without limitation, any renewals or modifications thereof).
For purposes of subsections (c) and (d) of this Section 6.3, all Employee
Benefit Plans maintained by the same employer or employee organization are
deemed to be a single plan.
7. PREPAYMENTS AND REDEMPTIONS OF THE NOTES.
7.1. OPTIONAL PREPAYMENTS OF THE NOTES.
The Company may, at its option, upon not less than ten days' prior
notice to the holders of the Notes, prepay all or any part of the Notes, in an
aggregate principal amount of $1,000,000 or integral multiples of $100,000 in
excess thereof (or, if less, the remaining aggregate principal amount of all
Notes outstanding at such time), at a purchase price in cash equal to 100% of
the aggregate
24
principal amount of the Notes so prepaid, PLUS all accrued and unpaid interest
thereon, if any, to the date of such prepayment. Each notice of an optional
prepayment of the Notes pursuant to this Section 7.1 shall specify the date
fixed for such prepayment, the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note held by such holder to
be prepaid (determined in accordance with Section 7.4) and the interest to be
paid on the prepayment date with respect to such principal amount being prepaid,
and shall state that such prepayment is to be made pursuant to this Section 7.1.
7.2. OFFER TO REPURCHASE NOTES AND REDUCE COMMITMENTS IN RESPECT OF A
CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each holder of the
Notes will have the right to require the Company to repurchase all or any
portion (equal to $1,000,000 or an integral multiple of $100,000 in excess
thereof) of the Notes of such holder pursuant to an offer made in the manner
described below (each, a "CHANGE OF CONTROL OFFER"), at a purchase price in cash
equal to 100% of the aggregate principal amount thereof, PLUS accrued and unpaid
interest thereon, if any, to the date of such repurchase (the "CHANGE OF CONTROL
PAYMENT"). In addition, you and each of the Other Purchasers will have the
right to terminate in whole or reduce a portion (equal to $1,000,000 or an
integral multiple of $100,000 in excess thereof) of your or their Available
Commitment, if any, as of the Change of Control Repurchase Date arising in
connection with each Change of Control Offer. Within four Business Days
following any Change of Control, the Company shall deliver a notice, by
facsimile confirmed the same day by overnight courier service, to each holder of
the Notes stating:
(i) that the Change of Control Offer is being made pursuant to
this Section 7.2 and that all Notes tendered shall be accepted for
repurchase;
(ii) the parties, and the events or circumstances giving rise, to
the Change of Control for which such Change of Control Offer is being made,
in reasonable detail;
(iii) the repurchase price for the Note or Notes of such holder and
the Change of Control Repurchase Date therefor;
(iv) that any Note not tendered for repurchase shall continue to
accrue interest in accordance with the terms thereof;
(v) that, unless the Company defaults in the payment of the Change
of Control Payment, all Notes accepted for repurchase pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Repurchase Date; and
(vi) that holders whose Notes are being tendered for repurchase
only in part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
The Company shall comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Notes as a result of a Change of Control. Any holder of the Notes that elects
to have all or a portion of its Notes repurchased as part of the Change of
Control Offer shall deliver notice to the Company of its election at least five
Business Days prior to the scheduled Change of Control Repurchase Date. Any
holder of a Note that does not deliver to the Company notice accepting
25
the Change of Control Offer at least five Business Days prior to the Change of
Control Repurchase Date shall be deemed to have rejected such Change of Control
Offer. Similarly, if you elect to terminate in whole or reduce a portion of
your Available Commitment in connection with any Change of Control Offer, you
shall deliver notice to the Company of your election at least five Business Days
prior to the related Change of Control Repurchase Date (it being understood and
agreed that if you do not deliver such notice to the Company at least five
Business Days prior to the related Change of Control Repurchase Date, you shall
be deemed to have elected to retain your Available Commitment hereunder).
Notwithstanding the foregoing provisions of this subsection (a), the failure of
the Company to deliver the notice referred to in the third sentence of this
subsection (a) to (A) any holder of the Notes shall not affect or impair the
obligation of the Company to purchase any Note from such holder on the
applicable Change of Control Repurchase Date and (B) you or any of the Other
Purchasers shall not affect or impair your or their right to terminate or reduce
your or their Available Commitment on the applicable Change of Control
Repurchase Date.
(b) On a date that is no earlier than 30 days nor later than 60 days
from the date that the Company delivers or causes to be delivered notice of the
Change of Control to the holders or, if the Company fails to deliver such notice
or cause such notice to be delivered, on the date that is 30 days after the
occurrence of such Change of Control (the "CHANGE OF CONTROL REPURCHASE DATE"),
the Company (i) shall, to the extent lawful, accept for repurchase all Notes or
portions thereof properly tendered in response to the Change of Control Offer,
(ii) shall pay to each of the holders of the Notes so accepted the Change of
Control Payment for its Notes and (iii) shall deliver to each holder of Notes
that only tendered a portion of its Notes new Notes equal in aggregate principal
amount to the unpurchased portion of the Notes surrendered, if any, by such
holder. On each Change of Control Repurchase Date, if you or any of the Other
Purchasers shall have notified the Company of your or their election to have
your or their Available Commitment terminated or reduced in accordance with the
terms of subsection (a) of this Section 7.2 as of such date, such termination or
reduction of your or their Available Commitment shall be automatically and
permanently effected as of such date.
(c) Prior to complying with the provisions of this Section 7.2, but
in any event within 20 days following the occurrence of a Change of Control, the
Company either (i) shall repay all outstanding amounts under the NTFC Loan
Documents and terminate all of the commitments of the lenders thereunder and
shall redeem in full all outstanding shares of Series A Preferred Stock or (ii)
shall obtain the requisite waiver of any defaults under the NTFC Loan Documents
and rights of redemption of the holders of shares of the Series A Preferred
Stock, respectively, resulting from the occurrence of the Change of Control or
otherwise and the requisite consents, if any, under the NTFC Loan Documents and
from the holders of the shares of Series A Preferred Stock, respectively, to
permit the repurchase of the Notes required by this Section 7.2.
7.3. MANDATORY REDEMPTIONS OF THE NOTES.
(a) Upon receipt by the Company or any of its Subsidiaries of the Net
Cash Proceeds from (i) the issuance or incurrence by the Company or any of its
Subsidiaries of any Indebtedness (other than (A) Indebtedness issued or incurred
pursuant to any of Sections 9.3(c) through 9.3(i) and (B) Net Cash Proceeds from
all such issuances and incurrences since the date of this Agreement that, when
aggregated with all of the Net Cash Proceeds received by the Company and its
Subsidiaries from the issuances and sales of equity securities since the date of
this Agreement, do not exceed $1,000,000) and (ii) the sale or issuance by the
Company or any of its Subsidiaries of any shares of its capital stock (or
26
other ownership or profit interests therein), any securities convertible into or
exchangeable for shares of its capital stock (or other ownership or profit
interests therein) or any warrants, options or other rights for the purchase or
acquisition of any shares of its capital stock (or other ownership or profit
interests therein) (other than Net Cash Proceeds from all such issuances and
sales since the date of this Agreement that, when aggregated with all of the Net
Cash Proceeds received by the Company and its Subsidiaries from the issuances
and incurrences of Indebtedness since the date of this Agreement (other than
Indebtedness issued or incurred pursuant to any of Sections 9.3(c) through
9.3(i)), do not exceed $1,000,000), the Company shall redeem outstanding Notes
in an amount equal to the lesser of (1) 100% of the aggregate principal amount
of all Notes outstanding on the date of such redemption and (2) the amount of
such Net Cash Proceeds, in either case PLUS all accrued and unpaid interest on
the principal amount of the Notes so redeemed to the date of such redemption and
all fees, expenses and other payments due and payable to the holders of the
Notes under the Note Documents on such date.
(b) Upon receipt by the Company or any of its Subsidiaries of Net
Cash Proceeds from any Asset Sale (other than Asset Sales effected in the
ordinary course of the Company's or the applicable Subsidiary's business), the
Company shall redeem outstanding Notes in an amount equal to the lesser of (i)
100% of the aggregate principal amount of all Notes outstanding on the date of
such redemption and (ii) so long as the NTFC Loan Agreement remains in effect,
an amount equal to the holders of the Notes' ratable portion of such Net Cash
Proceeds (such ratable portion being that portion of such Net Cash Proceeds
which bears the same ratio to the total amount of such Net Cash Proceeds as the
aggregate principal amount of the Notes outstanding on the date of such
redemption bears to the total of such aggregate principal amount PLUS the
aggregate principal amount of all loans made by the NTFC Lenders under the NTFC
Loan Agreement and outstanding on the date of such redemption) and, at any time
thereafter, the amount of such Net Cash Proceeds; PROVIDED, HOWEVER, that,
notwithstanding the foregoing provisions of this Section 7.3(b), the Company
shall not be required to redeem outstanding Notes with the Net Cash Proceeds of
one or more Asset Sales effected since the date of this Agreement for which the
aggregate fair value of the property and assets of the Company and its
Subsidiaries subject to such Asset Sales does not exceed $250,000 so long as
such Net Cash Proceeds are reinvested within 90 days of the date of receipt
thereof in the ordinary course businesses and operations of the Company and its
Subsidiaries.
7.4. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment, repurchase or redemption of
the Notes pursuant to Section 7.1, 7.2 or 7.3, the principal amount of the Notes
to be prepaid, repurchased or redeemed shall be allocated (in integral multiples
of $1,000) among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment, repurchase or redemption, with adjustments to
the extent practicable to compensate for any prior prepayments, repurchases or
redemptions not made exactly in such proportion.
7.5. MATURITY; SURRENDER, ETC.
In the case of each prepayment, repurchase or redemption of the Notes
pursuant to Section 7.1, 7.2 or 7.3, the principal amount of each Note to be
prepaid, repurchased or redeemed shall mature and become due and payable on the
date fixed for such prepayment, repurchase or redemption, together with accrued
and unpaid interest on such principal amount to such date. From and after such
date, unless the Company shall fail to pay such principal amount when so due and
payable, together with
27
the accrued and unpaid interest thereon as aforesaid, interest on such principal
amount shall cease to accrue. Any Note prepaid, redeemed or repurchased in full
shall be surrendered to the Company and cancelled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid, repurchased or redeemed
principal amount of any Note.
7.6. PURCHASE OF NOTES.
The Company will not and will not permit any of its Subsidiaries or
Affiliates to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment, prepayment or
repurchase of the Notes in accordance with the terms of this Agreement and the
Notes. The Company will promptly cancel all Notes acquired by it pursuant to
any payment, prepayment or purchase of Notes in accordance with the terms of
this Agreement and the Notes, and no Notes may be issued in substitution or
exchange for any such Notes.
7.7. REDUCTION OF COMMITMENTS WITH EXCESS PROCEEDS.
In the case of repurchase or redemption of Notes pursuant to Section
7.3, if the Net Cash Proceeds received in connection with the incurrence,
issuance or sale of any debt or equity securities of the Company or any of its
Subsidiaries or any Asset Sale giving rise to such mandatory redemption under
Section 7.3 exceeds the aggregate amount required for the Company to redeem all
of the outstanding Notes on the date such Net Cash Proceeds are received, then
the aggregate Available Commitments of you and the Other Purchasers shall be
automatically and permanently reduced, on a PRO RATA basis, by an amount equal
to such excess Net Cash Proceeds.
8. AFFIRMATIVE COVENANTS.
From the date of this Agreement and, thereafter, so long as any of the
Notes shall be outstanding or you shall have any Commitment hereunder, the
Company will at all times perform and comply, and will cause each of its
Subsidiaries to perform and comply, with each of the following covenants:
8.1. INFORMATION COVENANTS.
The Company will furnish to each holder of the Notes:
(a) MONTHLY REPORTS. As soon as available and in any event within 45
days after the end of each fiscal month of the Company, commencing with the
fiscal month of the Company ending March 31, 1997, the consolidated
statement of operations of the Company and its Subsidiaries for such fiscal
month, in form and detail reasonably acceptable to you.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event within 45 days after the end of each of the first three fiscal
quarters of the Company in each Fiscal Year, (i) the consolidated balance
sheet of the Company and its Subsidiaries as at the end of such fiscal
quarter and the related consolidated statements of operations,
stockholders' equity and cash flows of the Company and its Subsidiaries for
such fiscal quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such fiscal quarter, in
each case
28
setting forth in comparative form the consolidated figures for the
corresponding period in the immediately preceding Fiscal Year, all of the
above-described financial statements to be in substantially the form of the
unaudited consolidated financial statements, as applicable, of the Company
and its Subsidiaries for the fiscal quarter of the Company ended September
30, 1996 that are referred to in Section 5.5(a) or otherwise in form and
detail reasonably acceptable to you, and duly certified by a Senior
Financial Officer of the Company as (A) fairly presenting, subject to
normal year-end audit adjustments, the consolidated financial condition,
results of operations and cash flows of the Company and its Subsidiaries
for such fiscal quarter and (B) having been prepared in accordance with
generally accepted accounting principles in effect for such fiscal quarter
covered thereby and consistently applied and (ii) management's discussion
and analysis of the important operational and financial developments of the
Company and its Subsidiaries during such fiscal quarter and year-to-date
periods.
(c) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any
event within 120 days after the close of each Fiscal Year, the consolidated
balance sheet of the Company and its Subsidiaries as at the end of such
Fiscal Year and the related consolidated statements of operations,
stockholders' equity and cash flows of the Company and its Subsidiaries for
such Fiscal Year, in each case setting forth in comparative form the
consolidated figures for the immediately preceding Fiscal Year, all of the
above-described financial statements to be in substantially the form of the
audited consolidated financial statements of the Company and its
Subsidiaries for the Fiscal Year ended December 31, 1995 that are referred
to in Section 5.5(a) or otherwise in form and detail reasonably acceptable
to you, and audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or other independent accountants
of recognized national standing reasonably acceptable to you, together
with:
(i) an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or such other accountants,
as the case may be, (A) to the effect that such financial statements
have been prepared in accordance with generally accepted accounting
principles in effect for the Fiscal Year covered thereby and
consistently applied and (B) that is not limited as to the scope of
the audit or qualified as to the status of the Company and its
Subsidiaries as a going concern or otherwise qualified in any manner
not reasonably acceptable to you; and
(ii) management's discussion and analysis of the important
operational and financial developments of the Company and its
Subsidiaries during such Fiscal Year.
(d) COMPLIANCE CERTIFICATE. At the time of delivery of the
consolidated financial statements of the Company and its Subsidiaries
provided for in Sections 8.1(b) and 8.1(c), a compliance certificate of the
Company, in substantially the form of Exhibit F hereto, duly certified by a
Senior Financial Officer thereof, (i) stating that, to the best of such
Senior Financial Officer's knowledge after due inquiry, 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 that the Company has taken and proposes to take with
respect thereto, (ii) setting forth the computations used by the Company in
determining compliance with the covenants contained in Section 10 for the
fiscal period covered by such financial statements (including with respect
to each subsection in such Section, where applicable, the calculations of
the maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of each such subsection, and the calculation of
the amount, ratio or percentage then in
29
existence) and (iii) setting forth (A) a description in reasonable detail
of all of the changes, if any, from GAAP in the generally accepted
accounting principles applied in the preparation of such financial
statements and (B) a statement of reconciliation if and to the extent
necessary for determining whether any of the changes in the generally
accepted accounting principles applied in the preparation of such financial
statements would affect the calculation of, or compliance with, any of the
covenants set forth in Section 10, conforming the financial statements that
accompany such compliance certificate to GAAP.
(e) ANNUAL BUDGETS. As soon as practicable and in any event within
30 days after the end of each Fiscal Year, commencing with the Fiscal Year
ending December 31, 1997, an annual budget of the Company and the
Subsidiaries, in form satisfactory to you, consisting of (i) PRO FORMA
financial statements for the next succeeding Fiscal Year of the Company,
accompanied by the statement of a Senior Financial Officer of the Company
to the effect that, to the best of his knowledge, the budget is a
reasonable estimate for the period covered thereby and (ii) such other
projections and forecasted information as you or any of the Other
Purchasers may from time to time reasonably request.
(f) AUDITOR'S REPORTS. Promptly upon receipt thereof, copies of all
"management letters" or other written reports submitted to the Company or
any of its Subsidiaries by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or any other independent
accountants of the Company or any such Subsidiary in connection with each
annual, interim or special audit of its financial statements made by such
accountants (including, without limitation, any comment letter submitted by
such accountants to management of the Company or any such Subsidiary in
connection with their annual audit and any reports addressing internal
accounting controls of the Company or any such Subsidiary submitted by such
accountants), and all responses of the management of the Company or such
Subsidiary thereto.
(g) SEC AND OTHER REPORTS. Promptly upon transmission or receipt
thereof, (i) copies of any filings and registrations with, and any reports
or notices to or from, the Securities and Exchange Commission or any
successor agency thereto, and copies of all financial statements, proxy
statements, notices and reports that the Company or any of its Subsidiaries
shall send to any holder of Indebtedness owed by the Company or any of its
Subsidiaries pursuant to the terms of the documentation governing such
Indebtedness or to any trustee, agent or other representative therefor
(other than any notices requesting borrowings or the issuance of letters of
credit, notices of interest rate selection and other similar notices that
are sent to any such holder) and (ii) copies of all press releases and
other statements made available by the Company or any of its Subsidiaries
to the public (other than bulletins and statements made solely in
telecommunications publications or to other Persons engaged principally in
the telecommunications business).
(h) NOTICE OF DEFAULT, ETC. Promptly and in any event within three
Business Days after a Responsible Officer obtains knowledge thereof, notice
of the occurrence of (i) each Default or Event of Default, or any event,
development or occurrence that, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect continuing
on the date of such statement, setting forth in reasonable detail the
nature of such Default or Event of Default or event, development or
occurrence and the action that the Company has taken and proposes to take
with respect thereto, (ii) any actual or threatened revocation,
termination,
30
cancellation, denial or impairment of, or refusal to renew or extend, or
modification or other change to, any Governmental Authorization necessary
or desirable for the Company or any of its Subsidiaries to own or lease and
operate their respective property and assets or to conduct their respective
businesses as conducted or as proposed to be conducted and (iii) a Change
of Control or any change in the members of the board of directors of, or
any material change in the management of, the Company or any of its
Subsidiaries.
(i) LITIGATION. Promptly after the commencement thereof, notice of
all actions, suits, investigations, litigations and proceedings of the
types described in Section 5.8 in any court or before any arbitrator or by
or before any Governmental Authority of any kind binding upon or affecting
any of the Obligors or any of their respective Subsidiaries or any of their
respective property or assets.
(j) ERISA MATTERS. Promptly and in any event within three Business
Days after a Responsible Officer obtains knowledge of any of the following,
a notice setting forth the nature thereof and the action, if any, that the
Company or any ERISA Affiliate proposes to take with respect thereto:
(i) any event or condition that constitutes, or could
reasonably be expected to result in, a Termination Event;
(ii) with respect to any Multiemployer Plan, the receipt of
any notice of any Withdrawal Liability assessed against the Company or
any ERISA Affiliate, or of a determination that any Multiemployer Plan
is in reorganization or insolvent (both within the meaning of Title IV
of ERISA);
(iii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan;
(iv) the failure to make payment in full on or before the due
date (including extensions thereof) of all amounts that the Company or
any ERISA Affiliate is required to contribute to each Plan pursuant to
its terms and as required to meet the minimum funding standard set
forth in ERISA and the Internal Revenue Code with respect thereto;
(v) any funding deficiency with respect to one or more Plans
in excess of $50,000 or any other change in the funding status of any
Plan that, either individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect; or
(vi) any event, transaction or condition not otherwise
described in this subsection (j) that could result in the incurrence
of any liability by the Company or any ERISA Affiliate pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the
Internal Revenue Code relating to ERISA Plans, or in the imposition of
any Lien on any of the rights, properties or assets of the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty
or excise tax provisions, if
31
such liability or Lien, taken together with any other such liabilities
or Liens then existing, could reasonably be expected to have a
Material Adverse Effect.
Promptly upon your reasonable request, such additional information
concerning any ERISA Plan as you may have reasonably requested, including,
but not limited to, copies of each annual report/return (Form 5500 series)
and all schedules and attachments thereto required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to ERISA
and the Internal Revenue Code, respectively, for each "PLAN YEAR" (within
the meaning of Section 3(39) of ERISA).
(k) ENVIRONMENTAL MATTERS. Promptly and in any event within five
Business Days after a Responsible Officer of the Company obtains knowledge
thereof, notice of the occurrence of one or more of the following:
(i) any pending or threatened Environmental Action against
the Company or any of its Subsidiaries or any of the property owned or
operated by the Company or any such Subsidiary;
(ii) any condition or occurrence on or arising from any
property owned or operated by the Company or any of its Subsidiaries
that (A) results or is alleged to have resulted in noncompliance by
the Company or any such Subsidiary with any applicable Environmental
Law or (B) could reasonably be expected to form the basis of an
Environmental Action against the Company or any such Subsidiary or any
of their respective property;
(iii) any condition or occurrence on any property owned or
operated by the Company or any of its Subsidiaries that could
reasonably be expected to cause such property to be subject to any
restrictions on the ownership, occupancy, use or transferability by
the Company or any such Subsidiary of such property under any
Environmental Law; and
(iv) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
property owned or operated by the Company or any of its Subsidiaries
as required by any Environmental Law, any Environmental Permit or any
Governmental Authority.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence, removal or remedial action and
the Company's or such Subsidiary's response thereto. In addition, the
Company will provide you with copies of all reports, notices and written
information to and from the United States Environmental Protection Agency
or any state or local agency responsible for environmental matters, all
communications with any Person (other than its attorneys) relating to any
Environmental Action of which notice is required to be given pursuant to
this subsection (k), and such detailed reports of any such Environmental
Action as you or any of the Other Purchasers may from time to time
reasonably request.
(l) INSURANCE. As soon as available and in any event within 30 days
after the end of each Fiscal Year, a report summarizing all insurance
coverage maintained by the Company
32
and its Subsidiaries, specifying therein the type, carrier, amount,
deductibles and co-insurance requirements and expiration date thereof and
containing such additional information as you or any of the Other
Purchasers may from time to time reasonably request.
(m) INDEBTEDNESS DOCUMENTS. Promptly after the occurrence thereof or
the request therefor, copies of any amendment, waiver or other modification
of the terms of any of the Indebtedness of the Company and its Subsidiaries
described on Schedule 5.21 attached hereto and outstanding in an aggregate
amount of at least $100,000, or any notice of default delivered thereunder.
(n) REQUESTED INFORMATION. With reasonable promptness, such other
information and documents relating to the condition (financial or
otherwise), business, operations, results of operations, performance,
property, assets or liabilities of the Company or any of its Subsidiaries
as may from time to time be reasonably requested by the Collateral Agent or
any holder of the Notes.
8.2. COMPLIANCE WITH LAW.
(a) The Company will and will cause each of its Subsidiaries to (i)
comply with all Requirements of Law to which each of them and their respective
property and assets are subject and all applicable restrictions imposed on each
of them and their property and assets by any Governmental Authority (including,
without limitation, ERISA and all Environmental Laws and Communications Laws),
and (ii) except as provided in Section 8.6, obtain and maintain in effect all
Governmental Authorizations that are necessary (A) to own or lease and operate
their respective property and assets and to conduct their respective businesses
as presently conducted, except where and to the extent that the failure to
obtain or maintain in effect any such Governmental Authorization, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, or (B) for the due execution, delivery, recordation,
filing or performance by any of the Obligors of this Agreement or any of the
other Note Documents to which it is or is to be a party, or for the consummation
of the sale and purchase of the Notes or any of the other transactions
contemplated hereby and thereby, except for such Governmental Authorizations as
are described on Schedule 5.7 attached hereto, all of which will be obtained or
made in accordance with the terms of the Note Documents and, thereafter, will be
in full force and effect.
(b) Neither the Company nor any of its Subsidiaries will generate,
use, treat, store, release or dispose of, or permit the generation, use,
treatment, storage, release or disposal of Hazardous Materials on any property
now or hereafter owned or operated by the Company or any such Subsidiary, or
transport or permit the transportation of Hazardous Materials to or from any
such property, except for Hazardous Materials used or stored at any such
property in compliance with all applicable Environmental Laws and Environmental
Permits and reasonably required in connection with the operation, use and
maintenance of any such property in the ordinary course of the Company's or the
applicable Subsidiary's business.
8.3. MAINTENANCE OF INSURANCE.
(a) The Company will and will cause each of its Subsidiaries to
maintain insurance with respect to their respective properties, assets and
businesses with insurers that have, or that have directly reinsured such
insurance with insurers that have, an A.M. Best Company claims paying ability
33
rating of "A-" (or the then equivalent rating) and against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of companies of
established reputations engaged in the same or a similar business and similarly
situated, as may otherwise be required by applicable Requirements of Law or by
the Collateral Documents or as may otherwise be reasonably required by you,
including, without limitation, workers' compensation insurance, liability
insurance, casualty insurance and business interruption insurance.
(b) The Company will maintain "key man" insurance with respect to the
death and long term incapacity of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇ with an insurer reasonably
satisfactory to you, naming the Company as sole beneficiary, with a benefit of
at least $10,000,000 and otherwise on terms and conditions reasonably
satisfactory to you; PROVIDED that if the Company or ▇▇. ▇▇▇▇▇▇ ▇▇▇▇ shall
receive any notice of expiration or termination of such key man insurance from
the insurer thereof, the Company shall use its best efforts to cause a new
insurer to provide such key man insurance on the terms described in this
subsection (b) prior to or concurrently with the date of such expiration or
termination and shall, in any event, cause such key man insurance to have been
replaced within 30 days after such expiration or termination date.
8.4. MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to maintain
and keep their respective properties and assets in good repair, working order
and condition (other than as a result of ordinary wear and tear or casualty and
condemnation).
8.5. PAYMENT OF TAXES AND CLAIMS; PERFORMANCE OF MATERIAL OBLIGATIONS.
(a) The Company will and will cause each of its Subsidiaries to pay
and discharge all taxes, assessments, levies, fees and other governmental
charges imposed upon them or any of their properties, assets, income or
franchises, to the extent such taxes, assessments, levies, fees and other
governmental charges have become due and payable and before they have become
delinquent, and all claims for which sums have become due and payable that have
resulted or could result in a Lien upon any of the property or assets of the
Company or any of its Subsidiaries; PROVIDED, HOWEVER, that neither the Company
nor any of its Subsidiaries shall be required to pay or to discharge any such
tax, assessment, levy, fee, other charge or claim the amount, applicability or
validity of which is being contested in good faith and by appropriate
proceedings diligently conducted and with respect to which the Company or such
Subsidiary, as the case may be, has established reserves in accordance with
generally accepted accounting principles in effect from time to time, unless and
until any Lien resulting therefrom attaches to its property and assets and
becomes enforceable by its other creditors, and only for so long as the failure
to pay or to discharge any such tax, assessment, levy, fee, other charge or
claim, either individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.
(b) The Company will and will cause each of its Subsidiaries to
perform all of its obligations under the terms of each loan or purchase
agreement, indenture, mortgage, deed of trust, lease, instrument, contract and
other agreement binding on or affecting it, except where the failure to so
perform, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
34
8.6. PRESERVATION OF CORPORATE EXISTENCE, ETC.
(a) The Company will preserve and keep in full force and effect its
corporate existence, good standing and rights in the State of New York. The
Company will preserve and keep in full force and effect the corporate existence
and good standing of each of its Subsidiaries and all permits, licenses,
approvals, rights, privileges and franchises of the Company and its
Subsidiaries; PROVIDED, HOWEVER, that the Company and its Subsidiaries may
consummate any merger, consolidation, liquidation, dissolution or winding up
otherwise permitted under Section 9.6; and PROVIDED FURTHER, HOWEVER, that
nothing in Section 8.2 or in this sentence of Section 8.6(a) shall prevent the
Company or any of its Subsidiaries from terminating or failing to preserve and
keep in full force and effect any such permit, license, approval, right,
privilege or franchise if the Company has determined in its good faith judgment
that such termination or failure to preserve, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(b) The Company will and will cause each of its Subsidiaries to duly
qualify and to remain duly qualified as a foreign corporation or other entity,
and to be and remain in good standing, in each jurisdiction in which the
ownership, lease or operation of its property and assets or the conduct of its
businesses requires such qualification, except in any such jurisdiction in which
the failure to be so qualified or in good standing, either individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
8.7. MAINTENANCE OF BOOKS AND RECORDS; INSPECTION.
(a) The Company will and will cause each of its Subsidiaries to keep
proper records and books of account in which complete, correct and reasonably
detailed entries shall be made of all financial transactions and of all of the
property, assets and businesses of the Company and each such Subsidiary
(including, without limitation, the establishment and maintenance of adequate
and appropriate reserves) in conformity with generally accepted accounting
principles in effect from time to time and all Requirements of Law. The Company
will ▇▇▇▇ all of its books and records relating to the Collateral (including,
without limitation, its share register) in such a manner as to properly evidence
the Collateral Documents and the liens and security interests created
thereunder.
(b) The Company shall and shall cause each of its Subsidiaries to
permit each holder of the Notes and any of the agents or representatives thereof
(so long as such agent or representative has agreed in writing to be bound by
the provisions of Section 19), upon reasonable notice, during normal business
hours and at the expense of the Company, at any time and from time to time to
visit and inspect any of the offices or properties of, and to examine and make
copies of and abstracts from the records and books of account of, the Company
and/or any of its Subsidiaries, and to discuss the affairs, finances and
accounts of the Company and/or any such Subsidiary, as the case may be, with,
and be advised as to the same by, their officers, directors and independent
accountants (and, by this Subsection (b), the Company authorizes each such
officer, director and independent accountant to discuss the affairs, finances
and accounts of the Company and its Subsidiaries with such Persons).
35
8.8. USE OF PROCEEDS.
The Company will use the proceeds of the sale and purchase of the
Notes solely for the purposes set forth in Section 5.15(a).
8.9. SEARCH REPORTS.
The Company will, as promptly as practicable after the Initial
Purchase Date, deliver to you completed requests for information listing the
financing statements referred to in Section 3.1(b)(iii) and all other effective
financing statements filed in the jurisdictions referred to in
Section 3.1(b)(iii) that name any of the Shareholders as debtor, together with
copies of such other financing statements.
8.10. COVENANT TO GIVE FURTHER SECURITY.
(a) The Company hereby agrees that, as soon as practicable and in any
event not later than May 24, 1997:
(i) The Company will execute and deliver to the Collateral Agent a
security agreement, in form and substance reasonably satisfactory to the
Collateral Agent and you, pursuant to which it will grant to the Collateral
Agent, on behalf of itself and the other Secured Parties, valid and
perfected liens on and security interests in all of the property and assets
of the Company (whether now owned or hereafter acquired and whether or not
existing on such date) that are located in the United States of America and
either (A) are not subject to the lien or security interest of any other
Person at such time, in which case the liens and security interests granted
therein to the Collateral Agent shall be first priority liens and security
interests, subject only to Permitted Liens, or (B) comprise part of the
NTFC Collateral, in which case the liens and security interests granted
therein to the Collateral Agent shall be second priority liens and security
interests, subject only to Permitted Liens and the liens and security
interest in such property and assets granted to NTFC, on behalf of itself
and the other NTFC Lenders, pursuant to, and on the terms and conditions
set forth in, the NTFC Loan Documents, and, in furtherance of the
foregoing, the Company shall:
(A) deliver to the Collateral Agent all of the certificates
representing the shares of capital stock of each of the Domestic
Subsidiaries referred to in such security agreement, accompanied by
undated stock powers executed in blank, and instruments evidencing the
Indebtedness of one or more of the Domestic Subsidiaries to the
Company, duly endorsed in blank;
(B) duly execute and deliver to the Collateral Agent proper
financing statements (Form UCC-1 or a comparable form) under the
Uniform Commercial Code of all jurisdictions that may be necessary or
that the Collateral Agent or you may deem reasonably desirable and may
request in order to perfect and protect the liens and security
interests created under such security agreement, covering the
Collateral described therein, in each case completed in a manner
satisfactory to the Collateral Agent and you; and
(C) provide the Collateral Agent and you with evidence that all
other actions that may be necessary or that the Collateral Agent or
you may deem reasonably desirable
36
and may request in order to perfect and protect the liens and security
interests created under such security agreement (or the intended
priority of such liens and security interests) have been taken or will
be taken in accordance with the terms of such security agreement.
(ii) Each of the Shareholders will execute and deliver to the
Collateral Agent a pledge agreement or an amendment to the Shareholders
Pledge Agreement to which he is a party, in either case in form and
substance reasonably satisfactory to the Collateral Agent and you, pursuant
to which such Shareholder will grant to the Collateral Agent, on behalf of
itself and the other Secured Parties, a valid and perfected lien on and
security interest in all of the shares of capital stock of the Company, or
warrants, options or other rights for the purchase or acquisition from the
Company of any such shares, that are owned or thereafter are acquired by
such Shareholder (whether or not existing on such date), and all proceeds
of such shares, warrants, options or other rights, which comprise part of
the NTFC Collateral, which lien and security interest shall be at least a
second priority lien and security interest, subject only to the lien and
security interest in such property and assets granted to NTFC, on behalf of
itself and the other NTFC Lenders, pursuant to, and on the terms and
conditions set forth in, the NTFC Loan Documents, and, in furtherance of
the foregoing, each such Shareholder shall:
(A) duly execute and deliver to the Collateral Agent proper
amendments to the financing statements (Form UCC-3 or a comparable
form) referred to in Section 3.1(b)(iii) and/or proper financing
statements (Form UCC-1 or a comparable form) under the Uniform
Commercial Code of all jurisdictions that, in either case, may be
necessary or that the Collateral Agent or you may deem reasonably
desirable and may request in order to perfect and protect the lien and
security interest created under such pledge agreement or amendment,
covering the Collateral described therein, in each case completed in a
manner satisfactory to the Collateral Agent and you; and
(B) provide the Collateral Agent and you with evidence that all
other actions that may be necessary or that the Collateral Agent or
you may deem reasonably desirable and may request in order to perfect
and protect the lien and security interest created under such pledge
agreement or amendment (or the intended priority of such lien and
security interest) have been taken or will be taken in accordance with
the terms of the such pledge agreement or amendment.
(iii) Each of the Company and NTFC shall have entered into an
intercreditor agreement with the Collateral Agent, in form and substance
reasonably satisfactory to each of the Collateral Agent and you (as
amended, supplemented, or otherwise modified in accordance with the terms
thereof and Section 16, the "INTERCREDITOR AGREEMENT"), (A) setting forth
the respective rights and responsibilities of each of NTFC and the
Collateral Agent so that (1) the Collateral Agent, on behalf of itself and
the other Secured Parties, will have a valid and perfected first priority
lien on and security interest in all of the Initial Note Documents
Collateral and a valid and perfected second priority lien on and security
interest in all of the NTFC Collateral (subject only to Permitted Liens and
the lien and security interest in such property and assets granted to NTFC,
on behalf of itself and the other NTFC Lenders, pursuant to, and on the
terms and conditions set forth in, the NTFC Loan Documents) and (2) NTFC,
on behalf of itself and the other NTFC Lenders, will have a valid and
perfected first priority lien on and security interest
37
in all of the NTFC Collateral (subject to Permitted Liens) and a valid and
perfected second priority lien on and security interest in all of the
Collateral (subject only to the liens and security interests of the
Collateral Agent, on behalf of itself and the other Secured Parties,
pursuant to, and on the terms and conditions set forth in, the Note
Documents), which arrangements shall be acknowledged by the Company, and
(B) addressing such other matters as the Collateral Agent or you shall
reasonably request (including, without limitation, the agreement of the
Company to take all such actions to assist in effectuating such
intercreditor arrangements as are reasonably requested by the Collateral
Agent and NTFC therein).
(iv) The Company will cause to be delivered to the Collateral Agent,
you and the other Secured Parties signed copies of one or more favorable
opinions of special and appropriate local counsel for the Company and the
Shareholders and as the Collateral Agent or you shall reasonably request,
addressed to the Collateral Agent, you and the other Secured Parties and
reasonably acceptable to each such Person, as to the security agreement,
the pledge agreements or amendments to the Shareholder Pledge Agreements
and the intercreditor agreement referred to in clauses (i), (ii) and (iii)
of this subsection (a), respectively, being the legal, valid and binding
obligations of the Company or the applicable Shareholder, enforceable
against the Company or such Shareholder in accordance with their respective
terms, as to the creation and perfection (and, in the case of shares of
capital stock of the Company or any of its Subsidiaries and intercompany
Indebtedness, the priority) of the liens and security interests created or
purported to be created therein and to such other matters as the Collateral
Agent, you or any of the other Secured Parties may reasonably request.
(b) The Company hereby agrees that if any of the Notes are
outstanding at any time after October 31, 1997 then, upon your request or the
request of any of the Other Purchasers or any of the other holders of the Notes,
the Company will cause, within 60 days of such request, 661/2% of the shares of
capital stock of (or other ownership or profit interests in) each of the Foreign
Subsidiaries entitled to vote (within the meaning of Treasury Regulation Section
1-956-2(c)(2) promulgated under the Internal Revenue Code) (the "VOTING EQUITY
INTERESTS") (on a fully diluted basis) or, if less, all of the Voting Equity
Interests in such Foreign Subsidiary owned by the Company and/or the Domestic
Subsidiaries, and all of the shares of capital stock of (or other ownership or
profit interests in) each of the Foreign Subsidiaries not entitled to vote
(within the meaning of Treasury Regulation Section 1-956-2(c)(2) promulgated
under the Internal Revenue Code) (the "NON-VOTING EQUITY INTERESTS") now or
hereafter owned by the Company or any of the Domestic Subsidiaries, to be
pledged to the Collateral Agent, on behalf of itself and the other Secured
Parties, pursuant to the terms of the Security Agreement and/or one or more
pledge agreements in form and substance reasonably acceptable to the Collateral
Agent and you; PROVIDED, HOWEVER, that, if, as a result of any changes in the
tax laws of the United States of America after the date of this Agreement, the
pledge by the Company or any of its Subsidiaries of any additional shares of
capital stock of (or other ownership or profit interest in) any of the Foreign
Subsidiaries to the Collateral Agent, on behalf of itself and the other Secured
Parties, would not result in an increase in the aggregate net consolidated tax
liabilities of the Company and its Subsidiaries, then, promptly after the
changes in such laws, all such additional shares (or other ownership or profit
interests) shall be pledged to the Collateral Agent, on behalf of itself and the
other Secured Parties, pursuant to the terms and conditions of the Security
Agreement and/or one or more pledge agreements in form and substance reasonably
acceptable to the Collateral Agent and you. In furtherance of the foregoing
provisions of this Section 8.10(b), the Company agrees that, within 60 days
after the applicable request of you, any of the Other Purchasers or any of the
other holders of the Notes:
38
(i) If the shares of capital stock of (or other ownership or profit
interests in) such Foreign Subsidiary (A) are evidenced by certificates, it
will cause certificates representing 661/2% of the Voting Equity Interests
in such Foreign Subsidiary (on a fully diluted basis) or, if less, all of
the Voting Equity Interests in such Foreign Subsidiary owned by the Company
and/or the Domestic Subsidiaries, and all of the Non-Voting Equity
Interests in such Foreign Subsidiary, now or hereafter owned by the Company
or any of the Domestic Subsidiaries to be delivered to the Collateral Agent
(together with undated stock or other appropriate powers duly endorsed in
blank), and pledged to the Collateral Agent, on behalf of itself and the
other Secured Parties, pursuant to the Security Agreement and/or one or
more pledge agreements in form and substance reasonably acceptable to the
Collateral Agent and you or (B) are not evidenced by certificates, to take
all actions (including, without limitation, the filing of financing
statements (or the equivalent thereof) under the Uniform Commercial Code
(or any similar law or statute) of all applicable jurisdictions) that may
be necessary or that the Collateral Agent or you may deem reasonably
desirable and may request to create, perfect and protect first priority
liens and security interests under the laws of all applicable jurisdictions
in 661/2% of the Voting Equity Interests in such Foreign Subsidiary (on a
fully diluted basis) or, if less, all of the Voting Equity Interests in
such Foreign Subsidiary owned by the Company and/or the Domestic
Subsidiaries, and all of the Non-Voting Equity Interests in such Foreign
Subsidiary, now or hereafter owned by the Company or any of the Domestic
Consolidated Subsidiaries pursuant to the Security Agreement and/or one or
more pledge agreements in form and substance reasonably acceptable to the
Collateral Agent and you;
(ii) It will deliver to the Collateral Agent, you and each of the
other Secured Parties (A) such other documentation as the Collateral Agent
or you may reasonably request in connection with the existence, power,
authority and authorization of, and other similar matters relating to, the
Company, each of the Domestic Subsidiaries, if applicable, and each of the
Foreign Subsidiaries and (B) evidence that all other actions that may be
necessary or that the Collateral Agent or you may deem reasonably desirable
and may request in order to perfect and protect the pledge, assignment and
security interest created under the Security Agreement and/or any such
pledge agreement (or the intended priority of such pledge, assignment and
security interest) have been taken or will be taken in accordance with the
terms of the Security Agreement or such pledge agreement; and
(iii) It will cause to be delivered to the Collateral Agent, you
and each of the other Secured Parties signed copies of one or more
favorable opinions of special and appropriate foreign counsel for the
Company and each of the applicable Foreign Subsidiaries as the Collateral
Agent, you or any of the other Secured Parties shall reasonably request,
addressed to the Collateral Agent, you and the other Secured Parties and
reasonably acceptable to each such Person, as to the pledge agreements
referred to in clause (i) of this subsection (b) being the legal, valid and
binding obligations of the Company or the applicable Domestic Subsidiary,
enforceable against the Company or such Domestic Subsidiary in accordance
with their respective terms, as to the creation, perfection and priority of
the liens and security interests created or purported to be created
therein, as to the choice of New York law being recognized in the courts of
the jurisdiction in which each of the applicable Foreign Subsidiaries is
organized and as such other matters as the Collateral Agent, you or any
other Secured Parties may reasonably request.
39
8.11. FURNISHING OF RULE 144A INFORMATION.
The Company agrees that, for so long as it is not subject to Section
13 or 15(d) of the Exchange Act, it will furnish to any holder of the Notes or
to any prospective purchaser of any Note designated by such holder that is a
"QUALIFIED INSTITUTIONAL BUYER" (as defined in Rule 144A under the Securities
Act), upon the request of such holder, on or prior to the date such Note is to
be sold to such prospective purchaser, the following information (which shall be
reasonably current in relation to the date of such sale): (a) a very brief
statement of the nature of the business of the Company and its Subsidiaries and
the products and services they offer; (b) the Company's audited consolidated
balance sheets and related consolidated statements of operations, stockholders'
equity and cash flows for the two most recently completed Fiscal Years prior to
such date; and (c) such other information as may from time to time be reasonably
necessary to maintain the eligibility of the Notes for trading under Rule 144A
under the Securities Act and as shall not be materially more onerous for the
Company to provide than the information required to maintain such eligibility on
the date of this Agreement.
9. NEGATIVE COVENANTS.
From the date of this Agreement and, thereafter, so long as any of the
Notes shall be outstanding or you shall have any Commitment hereunder, the
Company will perform and comply, and will cause each of its Subsidiaries to
perform and comply, at all times with each of the following covenants:
9.1. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any of its Subsidiaries to
directly or indirectly enter into, renew, extend or engage in any transaction or
series of related transactions (including, without limitation, the purchase,
sale, lease, transfer or exchange of property or assets of any kind or the
rendering of services of any kind) with any of its Affiliates, except upon fair
and reasonable terms no less favorable to the Company or such Subsidiary than
would be obtainable in a comparable arm's-length transaction with a Person not
an Affiliate thereof; PROVIDED that the foregoing restrictions of this
Section 9.1 shall not apply to:
(a) the transactions described on Schedule 9.1 attached hereto;
(b) any transaction or series of related transactions solely between
or among the Company and one or more of its Subsidiaries or between or
among Subsidiaries of the Company, to the extent such transactions or
series of related transactions are otherwise permitted under the terms of
the Note Documents;
(c) transactions otherwise permitted under Section 9.5;
(d) the payment of reasonable and customary regular fees to directors
of the Company that are not employees thereof; and
(e) any transaction or series of related transactions either (i) that
is approved by a majority of the disinterested members of the board of
directors of the Company or (ii) for which
40
the Company or any of its Subsidiaries delivers to you a written opinion
from a nationally recognized investment banking firm, and in form and
substance, satisfactory to you, stating that the transaction is fair to the
Company or such Subsidiary from a financial point of view.
9.2. LIMITATIONS ON LIENS.
(a) The Company will not and will not permit any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien on or with
respect to any of its property or assets of any character (including, without
limitation, accounts), whether now owned or hereafter acquired, to file or
suffer to exist under the Uniform Commercial Code or any similar law or statute
of any jurisdiction, a financing statement (or the equivalent thereof) that
names the Company or any of its Subsidiaries as debtor, to sign or suffer to
exist any security agreement authorizing any secured party thereunder to file
such financing statement (or the equivalent thereof), to sell any of its
property or assets subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets (including sales of accounts
receivable with recourse to the Company or any of its Subsidiaries), or to
assign any accounts or other right to receive income; EXCLUDING, HOWEVER, from
the operation of the foregoing restrictions of this Section 9.2 the following:
(i) Permitted Liens;
(ii) Liens in favor of you and the Other Purchasers, if any,
created under the Collateral Documents;
(iii) Liens existing on the date of this Agreement and described in
Schedule 9.2 attached hereto;
(iv) Liens existing on and after the Additional Availability Date
in favor of NTFC, on behalf of itself and the other NTFC Lenders, securing
the Obligations of the Company under the NTFC Loan Documents, but subject
to the terms of the Intercreditor Agreement;
(v) purchase money Liens upon or in property or assets acquired or
held by the Company or any of its Subsidiaries in the ordinary course of
business to secure the purchase price of any such property or asset or to
secure Indebtedness incurred solely for the purpose of financing the
acquisition, construction or improvement of such property or asset to be
subject to such Liens, or Liens existing on any such property or asset at
the time of or within 90 days after the date of its acquisition (other than
any such Liens created in contemplation of such acquisition that do not
secure the purchase price of such property or asset); PROVIDED, HOWEVER,
that no such Lien shall extend to or cover any property or assets other
than the property or asset being so acquired, constructed or improved; and
PROVIDED FURTHER that the aggregate principal amount of Indebtedness
secured by Liens permitted under this clause (v) shall not exceed the
lesser of (A) the cost to the Company or the applicable Subsidiary of the
property or asset to be subject to any such Lien and (B) the amount
otherwise permitted to be incurred therefor under the terms of this
Agreement;
(vi) Liens arising in connection with Capitalized Leases otherwise
permitted under Section 9.3(e); PROVIDED that no such Lien shall extend to
or cover any property or assets other than the property and assets subject
to such Capitalized Leases;
41
(vii) Liens upon any property and assets (other than any shares of
capital stock of, or other ownership or profit interests in, any Person)
existing at the time such property or asset is purchased or otherwise
acquired by the Company or any of its Subsidiaries; PROVIDED that, in each
case, any such Lien was not created in contemplation of such purchase or
other acquisition and does not extend to or cover any property or assets
other than the property or asset being so purchased or otherwise acquired;
and PROVIDED FURTHER that any Indebtedness or other Obligations secured by
such Liens shall otherwise be permitted under the terms of the Note
Documents;
(viii) Liens upon any property and assets (other than shares of
capital stock or other ownership or profit interests) of a Person and its
Subsidiaries existing at the time such Person is merged into or
consolidated with any of the Subsidiaries of the Company in accordance with
the terms of Section 9.6 or becomes a Subsidiary of the Company in
accordance with the terms of Section 9.7; PROVIDED that, in each case, such
Lien was not created in contemplation of such merger, consolidation or
acquisition and does not extend to or cover any property or assets other
than property and assets of the Person and its Subsidiaries being so merged
into or consolidated with such Subsidiary or acquired by the Company or
such Subsidiary, as the case may be;
(ix) deposits to secure the performance of leases of property
(whether real, personal or mixed) of the Company and its Subsidiaries
(excluding Capitalized Leases) in the ordinary course of business; and
(x) the replacement, extension or renewal of any Lien permitted
under clause (v) or (vi) of this Section 9.2(a) solely upon or in the same
property and assets theretofore subject thereto; PROVIDED that any
Indebtedness secured by such Liens shall otherwise be permitted under the
terms of the Note Documents.
(b) The Company will not and will not permit any of its
Subsidiaries to enter into, assume or suffer to exist any agreement prohibiting,
conditioning or otherwise restricting the creation or assumption of any Lien
upon any of its property or assets, whether now owned or hereafter acquired, or
requiring the grant of any assignment or security for any Obligation if an
assignment or security is given for any other Obligation, other than:
(i) any such agreement with you, the Other Purchasers, if any, and
the other holders of the Notes;
(ii) any such agreement evidencing or setting forth the terms of
any Indebtedness described in Schedule 5.21 attached hereto, to the extent
such agreement is in effect on the date hereof;
(iii) any such agreement prohibiting other encumbrances on specific
property and assets of the Company or any such Subsidiaries, which
agreement secures the payment of Indebtedness incurred solely to acquire,
construct or improve such property or assets or to finance the purchase
price therefor and which Indebtedness is otherwise permitted to be incurred
under the terms of this Agreement;
42
(iv) any agreement setting forth customary restrictions on the
subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract of similar property or assets;
(v) any restriction or encumbrance imposed pursuant to an
agreement that has been entered into by the Company or any such Subsidiary
for any Asset Sale so long as such Asset Sale is otherwise permitted under
the terms of the Note Documents; and
(vi) any agreement evidencing Indebtedness outstanding on the date
a Person first becomes a Subsidiary of the Company; PROVIDED that such
agreement was not created in contemplation of the acquisition of such
Person and does not extend to or cover any property or assets other than
property and assets of the Person so acquired by the Company.
9.3. LIMITATIONS ON INDEBTEDNESS.
The Company will not and will not permit any of its Subsidiaries to
directly or indirectly create, incur, assume, guarantee or suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness other than:
(a) Indebtedness arising under the Note Documents;
(b) Indebtedness existing on the date of this Agreement and
described in Schedule 5.21 attached hereto;
(c) Indebtedness of any of the Subsidiaries of the Company owing
to the Company or any of the other Subsidiaries of the Company; PROVIDED,
HOWEVER, that the aggregate principal amount of all Indebtedness of the
Company and its Subsidiaries owing to one or more Subsidiaries of the
Company that are not wholly owned Subsidiaries thereof shall not exceed
$250,000 at any time outstanding;
(d) Indebtedness secured by Liens expressly permitted under
Section 9.2(a)(v) in an aggregate principal amount that, when aggregated
with the principal amount of all Indebtedness incurred under this clause
(d) and clause (e) of this Section 9.3, does not exceed $7,500,000 at any
time outstanding;
(e) Indebtedness evidenced by Capitalized Lease Obligations
entered into in order to finance Capital Expenditures made by the Company
and its Subsidiaries in accordance with the provisions of Section 9.16,
which Indebtedness, when aggregated with the principal amount of all
Indebtedness incurred under this clause (e) and clause (d) of this Section
9.3, does not exceed $7,500,000 at any time outstanding;
(f) Indebtedness existing at the time that any property or asset
is purchased or otherwise acquired by the Company or any of its
Subsidiaries and secured solely by such property or asset; PROVIDED that
such Indebtedness was not incurred in contemplation of such purchase or
other acquisition; and PROVIDED FURTHER that the aggregate principal amount
of all Indebtedness incurred under this subsection (f), together with the
aggregate principal amount of all Indebtedness incurred under subsection
(g) of this Section 9.3, the aggregate cash and noncash
43
purchase price and all purchases and other acquisitions of property and
assets made pursuant to Section 9.6(j) and the aggregate amount of all
Investments made pursuant to Section 9.7(f), does not exceed $1,000,000 at
any time;
(g) Indebtedness existing at the time any Person is merged into or
consolidated with any of the Subsidiaries of the Company in accordance with
the terms of Section 9.6 or becomes a Subsidiary of the Company in
accordance with the terms of Section 9.7; PROVIDED that such Indebtedness
was not incurred in contemplation of such merger, consolidation or
acquisition; and PROVIDED FURTHER that the aggregate principal amount of
all Indebtedness incurred under this subsection (g), together with the
aggregate principal amount of all Indebtedness incurred under subsection
(f) of this Section 9.3 the aggregate cash and noncash purchase price of
all purchases and other acquisitions of property and assets made pursuant
to Section 9.6 (j) and the aggregate amount of all Investments made
pursuant to Section 9.7(f), does not exceed $1,000,000 at any time;
(h) unsecured Indebtedness of the Company and its Subsidiaries not
otherwise permitted under this Section 9.3 in an aggregate principal amount
not to exceed $250,000 at any time outstanding; and
(i) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
9.4. LIMITATIONS ON SALE-LEASEBACK TRANSACTIONS.
The Company will not and will not permit any of its Subsidiaries to
directly or indirectly become or remain liable as lessee or as a guarantor or
surety with respect to any lease (including, without limitation, any Capitalized
Lease) of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, that the Company or such Subsidiary, as the case may be, (a)
has sold or transferred or is to sell or transfer in a transaction with such
assumption of liability to any other Person other than the Company or any of its
wholly owned Subsidiaries or (b) intends to use for substantially the same
purpose as any other property that has been sold or transferred or is to be sold
or transferred by such Person to any other Person in connection with such lease,
that would cause the liabilities of the Company and its Subsidiaries in respect
of all such transactions to exceed $500,000 in the aggregate at any time.
9.5. LIMITATIONS ON RESTRICTED PAYMENTS.
The Company will not and will not permit any of its Subsidiaries to
directly or indirectly declare, order, make or set apart any sum for or to pay
any Restricted Payment, except for:
(a) Restricted Payments to the Company or to or in any of its
wholly owned Subsidiaries;
(b) the payment of dividends or the making of other distributions
by any Subsidiary of the Company to the Company or any of its wholly owned
Subsidiaries;
44
(c) the payment of dividends or the making of other distributions
by any Subsidiary of the Company that is not a wholly owned Subsidiary
thereof to its shareholders generally so long as the Company and/or each of
its Subsidiaries that own any of the equity interests (or other ownership
or profit interests) in such non-wholly owned Subsidiary receive at least
their respective proportionate shares of any such dividend or other
distribution (based upon their relative holdings of the equity interests
(or other ownership or profit interests) therein and taking into account
the relative preferences, if any, of the various classes of the equity
interests (or other ownership or profit interests) therein); PROVIDED,
HOWEVER, that the aggregate amount of all such dividends and other
distributions paid or made by all of the Subsidiaries of the Company that
are not wholly owned Subsidiaries thereof to Persons other than the Company
and its Subsidiaries shall not exceed $100,000 at any time; and
(d) the repurchase or retirement of stock options held by one or
more key employees of the Company and its Subsidiaries upon the retirement
or death of any such key employee, in each case pursuant to the terms of
the 1996 Flexible Incentive Plan, as in effect on the date of this
Agreement; PROVIDED, HOWEVER, that the aggregate amount expended by the
Company from time to time to repurchase or retire any or all of such stock
options shall not exceed $250,000 at any time.
9.6. LIMITATIONS ON FUNDAMENTAL CHANGES, ASSET SALES, ACQUISITIONS, ETC.
The Company will not and will not permit any of its Subsidiaries to
alter the corporate, capital or legal structure of the Company or any such
Subsidiary, to wind up, liquidate or dissolve itself (or suffer any liquidation
or dissolution), to enter into any transaction of merger or consolidation, or to
convey, sell, lease or sublease (as lessor or sublessor), transfer or otherwise
dispose of, whether in one transaction or a series of related transactions, all
or any part of its business, property or assets, whether now owned or hereafter
acquired (or agree to do any of the foregoing at any future time), or to
purchase or otherwise acquire, whether in one transaction or a series of related
transactions, any part of the property, assets or business of any Person (or
agree to do any of the foregoing at any future time), except that:
(a) the Company may merge or consolidate with or into any of its
Subsidiaries so long as the Company is the surviving corporation;
(b) any wholly owned Subsidiary of the Company may merge or
consolidate with or into any other Subsidiary of the Company so long as
such wholly owned Subsidiary is the surviving corporation;
(c) any Subsidiary of the Company that is no longer actively engaged
in any business or activities and does not have property and assets with an
aggregate fair value or book value in excess of $250,000 may be wound up,
liquidated or dissolved by the Company so long as such winding up,
liquidation or dissolution is determined in good faith to be in the best
interests of the Company and its Subsidiaries by the board of directors of
the Company (as evidenced in a resolution set forth in an Officer's
Certificate delivered to you);
(d) the Company and its Subsidiaries may sell their respective
inventory in the ordinary course of business;
45
(e) the Company and its Subsidiaries may enter into sale and
leaseback transactions otherwise permitted to be entered into under Section
9.4, may make Restricted Payments otherwise permitted to be made under
Section 9.5, may make Investments otherwise permitted to be made under
Section 9.7, may sell shares of its capital stock otherwise permitted to be
sold under Section 9.9 and may make Capital Expenditures otherwise
permitted to be made under Section 9.16;
(f) the Company and its Subsidiaries may sell, lease, sublease,
transfer or otherwise dispose of any obsolete, worn out or surplus property
and assets thereof or any other property and assets thereof that are no
longer useful in the conduct of the Company's or the applicable
Subsidiary's business so long as the aggregate book value of all of the
property and assets of the Company and its Subsidiaries that are sold,
leased, subleased, transferred or otherwise disposed of pursuant to this
subsection (f) does not exceed $500,000 at any time;
(g) any Subsidiary of the Company may sell, lease, sublease, transfer
or otherwise dispose of all or any portion of its property and assets to
the Company or any of its wholly owned Subsidiaries;
(h) the Company and its Subsidiaries may sell, lease, sublease,
transfer or otherwise dispose of any of its property and assets, to the
extent not otherwise permitted under this Section 9.6, at the fair market
value thereof (as determined in good faith by the Company) and for cash;
PROVIDED that the gross proceeds thereof do not exceed $1,000,000 in the
aggregate in any Fiscal Year; and PROVIDED FURTHER that the Net Cash
Proceeds from each such sale, lease, sublease, transfer or other
disposition are applied to the redemption of the outstanding Notes and/or
the reduction of the Available Commitments of you and the Other Purchasers
pursuant to this Agreement and the Other Agreements to the extent required
under, and in accordance with the terms of, Sections 7.3 and 7.7;
(i) the Company and its Subsidiaries may purchase or otherwise
acquire inventory, materials, equipment and intangible assets in the
ordinary course of business; and
(j) the Company and its Subsidiaries may acquire all (but not less
than all) of the capital stock of (or other ownership or profit interests
in) any Person and may purchase or otherwise acquire any other property and
assets from any Person so long as the aggregate cash and noncash purchase
price of all such purchases and acquisitions (including, without
limitation, all indemnities to the sellers thereof, all write-downs of
property and assets and reserves for liabilities with respect thereto and
all assumptions of debt, liabilities and other obligations in connection
therewith) do not exceed $1,000,000 at any time; PROVIDED that in the case
of any purchase or acquisition made pursuant to this subsection (j):
(i) any Subsidiary of the Company or any of its Subsidiaries
acquired or created as a result thereof or in connection therewith
shall be a wholly owned Subsidiary thereof;
(ii) any Subsidiary of the Company or any of its Subsidiaries
acquired or created as a result thereof or in connection therewith
shall not have any material contingent liabilities (as determined in
good faith by the board of directors of the Company);
46
(iii) any business acquired or invested in shall be
substantially the same line of business as that of the Company and its
Subsidiaries conducted at the time of such purchase or acquisition in
the ordinary course, or a line of business directly related thereto,
thereof or in connection therewith; and
(iv) immediately before and after giving PRO FORMA effect to
such purchase or acquisition, no Default or Event of Default shall
have occurred and be continuing.
9.7. LIMITATIONS ON INVESTMENTS, ETC.
The Company will not and will not permit any of its Subsidiaries to
directly or indirectly make or commit or agree to make any advance, loan,
guarantee of Obligations, other extension of credit or capital contributions to,
or hold or invest in or commit or agree to hold or invest in, or purchase or
otherwise acquire or commit or agree to purchase or otherwise acquire any shares
of capital stock (or other ownership or profit interests), bonds, notes,
debentures or other securities of, or make or commit or agree to make any other
investment in, any other Person, or purchase or own any futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract (collectively,
"INVESTMENTS"), except that the following shall be permitted:
(a) the Company and its Subsidiaries may acquire and hold accounts
receivable owing to any of them;
(b) the Company and its Subsidiaries may acquire and hold cash and
Cash Equivalents;
(c) the Company and its Subsidiaries may maintain and continue to own
the Investments thereof existing on the date of this Agreement and
described on Schedule 9.7 attached hereto;
(d) the Company and its Subsidiaries may make intercompany
Investments to the extent otherwise permitted to be made under Section 9.3
and may make Restricted Payments otherwise permitted to be made under
Section 9.5;
(e) the Company and its Subsidiaries may make Investments in account
debtors received in connection with the bankruptcy or reorganization, or in
settlement of delinquent obligations, of customers in the ordinary course
of business and in accordance with applicable collection and credit
policies established by the Company or its applicable Subsidiary;
(f) the Company and its Subsidiaries may acquire all (but not less
than all) of the capital stock of (or other ownership or profit interests
in) any Person and, thereafter, may make capital contributions therein;
PROVIDED that, in each case, such acquisition or capital contribution is
otherwise permitted under the terms of the Note Documents; and PROVIDED
FURTHER that the aggregate amount of all of the acquisitions and capital
contributions made pursuant to this subsection (f), together with the
aggregate principal amount of all Indebtedness incurred under Sections
9.3(f) and 9.3(g) and the aggregate cash and noncash purchase price of all
purchases and other acquisitions of property and assets made pursuant to
Section 9.6(j), does not exceed $1,000,000 at any time; and
47
(g) Investments not otherwise permitted under this Section 9.7 in an
aggregate amount not to exceed $250,000 at any time.
9.8. LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company will not and will not permit any of its Subsidiaries to
directly or indirectly create or otherwise cause, incur, assume, suffer or
permit to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any such Subsidiary (a) to pay dividends or to make
any other distribution on any shares of capital stock of (or other ownership or
profit interest in) such Subsidiary owned by the Company or any of its
Subsidiaries, (b) to pay or prepay or to subordinate any Indebtedness owed to
the Company or any of its Subsidiaries, (c) to make loans or advances to the
Company or any of its Subsidiaries or (d) to transfer any of its property or
assets to the Company or any of its Subsidiaries; PROVIDED, HOWEVER, that
nothing in any of clauses (a) through (d) of this Section 9.8 shall prohibit or
restrict:
(i) this Agreement and the other Note Documents;
(ii) any agreements in effect on the date of this Agreement and
described on Schedule 9.8 attached hereto;
(iii) any applicable law, rule or regulation (including, without
limitation, applicable currency control laws and applicable state corporate
statutes restricting the payment of dividends in certain circumstances);
(iv) in the case of clause (d) of this Section 9.8, any agreement
setting forth customary restrictions on the subletting, assignment or
transfer of any property or asset that is a lease, license, conveyance or
contract of similar property or assets;
(v) in the case of clause (d) of this Section 9.8, any holder of a
Lien otherwise permitted to exist under clause (v) or (vi) of Section
9.2(a) from restricting on customary terms the transfer of any property or
assets subject thereto; and
(vi) any agreement evidencing Indebtedness outstanding on the date
a Person first becomes a Subsidiary of the Company; PROVIDED that such
agreement was not created in contemplation of the acquisition of such
Person by the Company.
9.9. LIMITATION ON ISSUANCE OF CAPITAL STOCK.
(a) The Company will not issue or sell or enter into any agreement or
arrangement for the issuance and sale of any shares of its capital stock (or
other ownership or profit interests therein), any securities convertible into or
exchangeable for shares of its capital stock (or other ownership or profit
interests therein) or any warrants, options or other rights for the purchase or
acquisition of any shares of its capital stock (or other ownership or profit
interests therein), except for:
(i) transfers and replacements of outstanding shares of capital stock
of the Company; and
48
(ii) the issuance and sale of shares of common stock of the Company so
long as (A) the Company certifies to you and each of the other holders of
the Notes that the Net Cash Proceeds thereof are at least equal to, and
will be applied to repay or redeem in full, the aggregate outstanding
principal amount of the Notes, all accrued and unpaid interest thereon, if
any, and all fees, expenses and other amounts owing under or in respect of
the Note Documents at such time and (B) such issuance and sale is not in
contravention of the Intercreditor Agreement.
(b) The Company will not permit any of its Subsidiaries to issue or
sell or enter into any agreement or arrangement for the issuance and sale of any
shares of its capital stock (or other ownership or profit interests therein),
any securities convertible into or exchangeable for shares of its capital stock
(or other ownership or profit interests therein) or any warrants, rights or
options to acquire any shares of its capital stock (or other ownership or profit
interests therein), except for:
(i) transfers and replacements of outstanding shares of capital stock
of any such Subsidiary; and
(ii) stock splits, stock dividends and additional issuances of shares
of capital stock of any such Subsidiary which do not decrease the
percentage equity interests (or other ownership or profit interests of, or
adversely modify or affect any of the rights of, the Company or any of its
Subsidiaries in any class of the capital stock of such Subsidiary.
9.10. LIMITATION ON MODIFICATIONS OF INDEBTEDNESS; MODIFICATIONS OF
CERTIFICATE OF INCORPORATION, BYLAWS AND CERTAIN OTHER AGREEMENTS;
ETC.
The Company will not and will not permit any of its Subsidiaries (a)
to amend, modify or otherwise change (or permit the amendment, modification or
other change in any manner of) any of the provisions of any Indebtedness of the
Company or any of its Subsidiaries or of any instrument or agreement (including,
without limitation, any purchase agreement, indenture, loan agreement or
security agreement) relating to any such Indebtedness if such amendment,
modification or change would shorten the final maturity or average life to
maturity of, or require any payment to be made earlier than the date originally
scheduled on, such Indebtedness, would increase the interest rate applicable to
such Indebtedness, or would change the subordination provision, if any, of such
Indebtedness, or would otherwise be adverse to the issuer of such Indebtedness
in any respect, (b) except for the Notes and the other Obligations of the
Company and its Subsidiaries under or in respect of the Note Documents, to make
any voluntary or optional payment, prepayment, redemption or other acquisition
for value of any Indebtedness of the Company or any of its Subsidiaries
(including, without limitation, by way of depositing money or securities with
the trustee therefor before the date required for the purpose of paying any
portion of such Indebtedness when due), or to refund, refinance, replace or
exchange any other Indebtedness for any such Indebtedness, or to make any
prepayment, redemption or repurchase of any outstanding Indebtedness as a result
of any asset sale, change of control, issuance and sale of debt or equity
securities or similar event, or give any notice with respect to any of the
foregoing, or (c) to amend, modify or otherwise change its certificate of
incorporation or bylaws (or other similar organizational documents), including,
without limitation, by the filing or modification of any certificate of
designation, or any agreement or arrangement entered into by it, with respect to
any shares of its capital stock (or other ownership or profit interest therein)
(including any shareholders' agreement), or enter into any new
49
agreement with respect to any of its shares of capital stock (or other ownership
or profit interest therein), other than (i) the amendment to the certificate of
incorporation of the Company is to be effected promptly following the Initial
Purchase Date in order to incorporate therein the matters waived by the holders
of the Series A Preferred Stock pursuant to waiver thereto referred to in
Section 3.1(k)(i) and (ii) any such amendments, modifications or changes or any
such new agreements or arrangements pursuant to this clause (c) that, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
9.11. LIMITATIONS ON CONDUCT OF BUSINESS.
The Company will not and will not permit any of its Subsidiaries to
engage in any business or activities other than providing domestic and
international long distance telecommunications service and telecommunications
equipment to its domestic and international customers (including, but not
limited to, telephone calling card services), and businesses and activities
directly related thereto.
9.12. LIMITATIONS ON ACCOUNTING CHANGES AND CHANGES IN FISCAL YEAR.
The Company will not and will not permit any of its Subsidiaries to
make or permit any change in (a) its accounting policies and reporting
practices, except as required by generally accepted accounting principles in
effect from time to time, or (b) its Fiscal Year.
9.13. LIMITATIONS ON PARTNERSHIPS.
The Company will not and will not permit any of its Subsidiaries to
become a general partner in any general or limited partnership or any joint
venture.
9.14. LIMITATIONS ON SPECULATIVE TRANSACTIONS.
The Company will not and will not permit any of its Subsidiaries to
engage in any transaction involving commodity options or futures contracts or
any similar speculative transactions (including, without limitation, take-or-pay
contracts), except for the Hedge Agreements of the Company in effect on the date
of this Agreement and described in item 60 on Schedule 5.21 attached hereto and
item 1 on Schedule 9.7 attached hereto.
9.15. EMPLOYMENT OF, OR COMPETITION BY, KEY EMPLOYEES.
The Company will not (a) cease to employ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇ or (b) suffer
to exist competition by any of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇, Mr. ▇▇▇▇▇▇ ▇▇▇▇ or ▇▇. ▇▇▇▇
▇▇▇▇▇ with the business now or at any time hereafter conducted by the Company or
any of its Subsidiaries.
9.16. LIMITATIONS ON CAPITAL EXPENDITURES.
The Company will not and will not permit any of its Subsidiaries to
make any Capital Expenditures (including, without limitation, installment
purchases or Capitalized Leases) that would cause the aggregate amount of all
such Capital Expenditures made by the Company and its Subsidiaries in any Fiscal
Year, commencing with the Fiscal Year ending December 31, 1997, to exceed
$10,000,000.
50
10. FINANCIAL COVENANTS.
From the date of this Agreement and, thereafter, so long as any of the
Notes shall be outstanding or you shall have any Commitment hereunder, the
Company will perform and comply with each of the following covenants:
10.1. MINIMUM CONSOLIDATED EBITDA.
The Company will maintain for itself and its Subsidiaries Consolidated
EBITDA for each fiscal quarter of the Company of not less than $(2,500,000).
10.2. CONSOLIDATED DEBT SERVICE COVERAGE RATIO.
The Company will maintain for itself and its Subsidiaries a
Consolidated Debt Service Coverage Ratio for each fiscal quarter of the Company
of not less than 1.10 to 1.
10.3. CONSOLIDATED FUNDED INDEBTEDNESS TO NET WORTH RATIO.
The Company will maintain for itself and its Subsidiaries a ratio of
Consolidated Funded Indebtedness to Consolidated Net Worth at all times of not
greater than 3.00 to 1.
10.4. MINIMUM CASH BALANCE.
The Company will maintain for itself and its Subsidiaries a balance of
cash and Cash Equivalents at all times of not less than $1,000,000, which cash
and Cash Equivalents shall be free and clear of all Liens.
11. EVENTS OF DEFAULT.
11.1. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions
or events shall occur and be continuing (each, an "EVENT OF DEFAULT"):
(a) the Company defaults in the payment of any principal of or
premium, if any, on any Note when the same becomes due and payable, whether
by scheduled maturity or at a date fixed for prepayment, redemption or
repurchase or by declaration, demand or otherwise; or
(b) the Company defaults in the payment of any interest on any Note,
or any Obligor defaults in the payment of any other amount owing under or
in respect of any of the Note Documents, and such default shall continue
for at least three days after the same becomes due and payable, whether by
scheduled maturity or at a date fixed for prepayment, redemption or
repurchase or by declaration, demand or otherwise; or
(c) the Company defaults in the performance of or compliance with any
term, covenant or agreement contained in (i) Section 8.1, 8.6, 8.8, 8.10 or
8.11, any of Sections 9.1
51
through 9.17 or any of Sections 10.1 through 10.4 or (ii) Section 8.2 or
8.5 and such default shall remain unremedied for at least ten consecutive
days after the occurrence thereof; or
(d) any Obligor defaults in the performance of or compliance with any
term, covenant or agreement contained in any of the Note Documents on its
part to be performed or complied with that is not referred to in Section
11.1(a), 11.1(b) or 11.1(c), and such default shall remain unremedied for
at least 20 consecutive days after the earlier of the first date on which
(i) a Responsible Officer becomes aware of such default and (ii) the
Company receives notice of such default from the Collateral Agent or any
holder of a Note; or
(e) any representation or warranty made or deemed made on any
Purchase Date by or on behalf of any Obligor or by any officer of any
Obligor under or pursuant to the terms of this Agreement or any of the
other Note Documents or in any writing furnished to you pursuant to the
terms of this Agreement or any of the other Note Documents proves to have
been false or incorrect in any material respect on the date as of which it
was made or deemed to have been made; or
(f) (i) the Company or any of its Subsidiaries shall fail to pay (A)
any principal of, or premium or interest on, Indebtedness that is
outstanding in a principal or notional amount of at least $100,000 (or the
equivalent thereof in one or more other currencies), either individually or
in the aggregate (but excluding Indebtedness outstanding hereunder), of the
Company and its Subsidiaries, taken as a whole, when the same becomes due
and payable (whether by scheduled maturity, required prepayment, redemption
or repurchase, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in any
agreement or instrument relating to such Indebtedness, or (B) any other
amount of Indebtedness greater than $100,000 (or the equivalent thereof in
one or more other currencies), either individually or in the aggregate (but
excluding Indebtedness outstanding hereunder), of the Company and its
Subsidiaries when the same becomes due and payable (whether by scheduled
maturity, required prepayment, redemption or repurchase, acceleration,
demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in any agreement or instrument relating to
such Indebtedness; or (ii) any other event shall occur or condition shall
exist under any agreement or instrument evidencing, securing or otherwise
relating to any Indebtedness referred to in clause (i) of this Section
11.1(f) and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity
of such Indebtedness or otherwise to cause, or to permit the holder or
holders thereof (or a trustee or agent on behalf of such holders) to cause
such Indebtedness to mature; or (iii) any Indebtedness referred to in
clause (i) of this Section 11.1(f) shall be declared to be due and payable
or required to be prepaid, redeemed or repurchased (other than by a
regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, repurchase, purchase or defease
any such Indebtedness shall be required to be made, in each case prior to
the stated maturity thereof or any date fixed for prepayment, redemption or
repurchase thereunder; or
(g) the Company or any of its Subsidiaries, or any of the
Shareholders, shall generally not pay its or his debts as such debts become
due, or shall admit in writing its or his inability to pay its or his debts
generally, or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the Company or any of
its Subsidiaries, or any of
52
the Shareholders, seeking to adjudicate it or him a bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its or his debts
under 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 receiver, trustee or other similar official for it or him
or for any substantial part of its or his property and assets and, in the
case of any such proceeding instituted against it or him (but not
instituted by it or him) that is being diligently contested by it or him in
good faith, either such proceeding shall remain undismissed or unstayed for
a period of 30 consecutive days or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or him or any substantial part of its or his
property and assets) shall occur; or the Company or any of its
Subsidiaries, or any of the Shareholders, shall take any action to
authorize any of the actions set forth above in this subsection (g); or
(h) one or more judgments or orders for the payment of money
aggregating $100,000 (or the equivalent thereof in one or more other
currencies) or more are rendered against one or more of the Company and its
Subsidiaries and remain unsatisfied and either (i) enforcement proceedings
shall have been commenced by any creditor upon any such judgment or order
or (ii) there shall be a period of at least 10 consecutive days after entry
thereof during which a stay of enforcement of any such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect;
PROVIDED, HOWEVER, that any such judgment or order shall not give rise to
an Event of Default under this subsection (h) if and for so long as (A) the
amount of such judgment or order is covered by a valid and binding policy
of insurance between the defendant and the insurer covering full payment
thereof and (B) such insurer has been notified, and has not disputed the
claim made for payment, of the amount of such judgment or order; or
(i) one or more writs or warrants of attachment, garnishment,
execution, distraint or similar process with respect to Obligations of the
Company or any of its Subsidiaries aggregating $25,000 (or the equivalent
thereof in one or more other currencies) or more have been issued against
the Company or any of its Subsidiaries or any of their respective property
or assets and remain unsatisfied and there shall be a period of at least 10
consecutive days after the issuance thereof during which a stay of
enforcement of any such writ or warrant, by reason of a pending appeal or
otherwise, shall not be in effect; or
(j) any nonmonetary judgment or order shall be rendered against any
Obligor or any of its Subsidiaries that, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect
and there shall be any period of 10 consecutive days after entry thereof
during which a stay of enforcement of any such judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect; or
(k) any provision of any of the Note Documents after delivery thereof
pursuant to Section 3.1 or 8.10 shall for any reason (other than pursuant
to the express terms thereof) cease to be valid and binding on or
enforceable against any of the Obligors intended to be a party to it or
shall cease to give you or any of the Other Purchasers any of the rights,
powers or privileges purported to be created thereunder, or any such
Obligor shall so state any of the foregoing in writing; or
53
(l) any Collateral Document after delivery thereof pursuant to
Section 3.1 or 8.10 shall for any reason (other than pursuant to the
express terms thereof) cease to create a valid and perfected lien on and
security interest in the Collateral purported to be covered thereby (with
the intended priority thereof pursuant to the terms of the Note Documents);
or
(m) any of the following events or conditions shall have occurred and
such event or condition, when aggregated with any and all other such events
or conditions, has resulted or could reasonably be expected to result in a
liability of the Company and/or ERISA Affiliates in an aggregate amount
exceeding $100,000 at any time outstanding:
(i) any Termination Event shall have occurred with respect to
a Plan;
(ii) the Company or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan;
(iii) the Company or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization, is insolvent or is being
terminated, within the meaning of Title IV of ERISA, and, as a result
of such reorganization, insolvency or termination, the aggregate
annual contributions of the Company and the ERISA Affiliates to all
Multiemployer Plans that are in reorganization or being terminated at
such time have been or will be increased over the amounts contributed
to such Multiemployer Plans for the plan years of such Multiemployer
Plans immediately preceding the plan year in which such
reorganization, insolvency or termination occurs;
(iv) any "ACCUMULATED FUNDING DEFICIENCY" (as defined in
Section 302 of ERISA and Section 412 of the Internal Revenue Code),
whether or not waived, shall exist with respect to one or more Plans,
or any Lien shall exist on the property and assets of the Company or
any ERISA Affiliate in favor of the PBGC or a Plan; or
(v) any prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Internal Revenue Code) or any
breach of fiduciary responsibility shall occur that may subject the
Company or any ERISA Affiliate to any liability under Section 406,
409, 502(i) or 502(l) of ERISA or Section 4975 of the Internal Revenue
Code, or under any agreement or instrument pursuant to which the
Company or any ERISA Affiliate has agreed or is required to indemnify
any Person against such liability; or
(n) any Governmental Authorization necessary in order to permit the
Company or any of its Subsidiaries to fully own or lease and operate their
respective property and assets or to properly conduct their respective
businesses shall cease to be in effect or the Company or such Subsidiary
shall cease to have the full intended benefit thereof or rights thereunder,
unless the revocation, termination, cancellation, denial, impairment or
modification of such Governmental Authorization, either individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
54
11.2. ACCELERATION.
(a) If an Event of Default described in Section 11.1(g) shall occur
with respect to the Company, all of the Notes then outstanding shall become
automatically and immediately due and payable.
(b) If any other Event of Default shall occur and be continuing, the
Required Holders may at any time, at their option, by notice or notices to the
Company, declare all of the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in Section 11.1(a) or 11.1(b)
has occurred and is continuing, any holder or holders of the Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all of the Notes held by it
or them to be immediately due and payable. If any holder of the Notes shall
exercise its rights under this Section 11.2(c) at any time, the Company will
give prompt notice thereof to the holders of all other Notes at such time
outstanding and each such holder may (whether or not such notice is given or
received), by notice to the Company, declare the aggregate principal amount of
all Notes held by it to be, and the same shall forthwith become, due and
payable.
(d) Upon any Note becoming due and payable under this Section 11.2,
whether automatically or by declaration, such Note will forthwith mature and the
entire unpaid principal amount of such Note, PLUS all accrued and unpaid
interest thereon and all other amounts due and payable to the holder thereof
under the Note Documents, shall be immediately due and payable, in each and
every case without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Company.
11.3. OTHER REMEDIES.
If one or more Defaults or Events of Default shall occur and be
continuing, and irrespective of whether any of the Notes have become or have
been declared immediately due and payable under Section 11.2, the Required
Holders may proceed to protect and enforce the rights of the holders of the
Notes by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
of the other Note Documents, or for an injunction against a violation of any of
the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by applicable law or otherwise.
11.4. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to Section 11.2(b) or 11.2(c), as the case may be, the holders of not
less than 75% of the aggregate principal amount of the Notes then outstanding,
by notice to the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes, all
principal of and premium, if any, on the Notes that are due and payable and are
unpaid other than by reason of such declaration, and all interest on such
overdue principal and (to the fullest extent permitted by applicable law) any
overdue interest in respect of the Notes, at the Default Rate, (b) all Defaults
and Events of Default, other than nonpayment of amounts that have become due
solely by reason of such declaration, have been remedied or have been waived
pursuant to Section 16 and (c) no judgment or decree has been entered for the
payment of any monies due pursuant to the Notes or any of the other Note
55
Documents. No rescission and annulment under this Section 11.4 will extend to
or affect any subsequent Default or Event of Default or impair any right, power
or remedy consequent thereon.
11.5. RESTORATION OF RIGHTS AND REMEDIES.
If any holder of the Notes has instituted any proceeding to enforce
any right or remedy under this Agreement or any of the other Note Documents and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to such holder, then, and in each such case, the Obligors
and the holders of Notes shall, subject to any determination in such proceeding,
be restored severally to their respective former positions hereunder and under
the other Note Documents and, thereafter, all rights and remedies of the holders
of the Notes shall continue as though no such proceeding had been instituted.
11.6. NO WAIVERS OR ELECTION OF REMEDIES, ETC.
No course of dealing and no delay on the part of any holder of the
Notes in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or any of the other Note Documents
upon any holder of the Notes shall be exclusive of any other right, power or
remedy referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise.
12. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
12.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes of this Agreement and the other Notes
Documents, and the Company shall not be affected by any notice or knowledge to
the contrary. The Company shall give to any holder of the Notes that is an
Institutional Investor, promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
12.2. TRANSFER AND EXCHANGE OF NOTES.
(a) Upon surrender of any Note at the principal executive office of
the Company for registration of transfer or exchange (and, in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or its attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and, subject to subsection (c) of this Section 12.2, shall be
in substantially the form of Exhibit A attached hereto. Each such new
56
Note shall be dated and bear interest from the date to which interest shall have
been paid on the surrendered Note or dated the date of the surrendered Note if
no interest shall have been paid thereon. The Company may require payment of a
sum sufficient to cover any stamp tax or other governmental charge imposed in
respect of any such transfer of Notes. Notes shall not be transferred in
denominations of less than $2,500,000, PROVIDED that, if necessary to enable the
registration of transfer by a holder of its entire holding of Notes, one Note
may be in a denomination of less than $2,500,000.
(b) Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed (i) to have made the
representations set forth in Sections 6.1, 6.2 and 6.3 and (ii) to confirm to
and agree with the transferor and the other parties hereto as follows:
(A) other than as provided in any written instrument of transfer
executed by the transferor and such transferee, such transferor makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Agreement or any of the other Note Documents, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of,
or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, this Agreement or any
of the other Note Documents or any other instrument or document furnished
pursuant hereto or thereto;
(B) such transferor makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Company or
any other Obligor or the performance or observance by any Obligor of any of
its Obligations under this Agreement or any of the other Note Documents or
any other instrument or document furnished pursuant thereto;
(C) such transferee confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred to in
Section 8.1 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to purchase the
Note or Notes being purchased thereby;
(D) such transferee will, independently and without reliance upon the
transferor or any other holder of the Notes and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement;
(E) such transferee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a holder of the Notes;
(F) solely in the case of any direct transferee of MS Group, such
transferee represents that it is a "QUALIFIED INSTITUTIONAL BUYER" (as
defined in Rule 144A under the Securities Act), without giving effect to
the provisions of Rule 144A(a)(1)(i), that would require such transferee to
own and invest on a discretionary basis at least $100,000,000 in securities
of issuers that are not affiliated with such transferee; and
(G) such transferee appoints MS Group as the Collateral Agent
therefor with respect to all of the liens and security interests granted by
the Obligors in the Collateral pursuant to the
57
terms of the Collateral Documents, and agrees to be bound by all of the
terms and provisions relating to the Collateral Agent's rights,
responsibilities and protections as are set forth in the Collateral
Documents or appended to the Note or Notes to be held by such transferee
and, if reasonably requested by the Collateral Agent, agrees to enter into
a collateral agency agreement with the Collateral Agent, the Company and
the other holders of the Notes setting forth such rights, responsibilities
and protections of the Collateral Agent as the Collateral Agent shall
reasonably specify.
(c) The Company hereby acknowledges and agrees that MS Group is the
Collateral Agent for the Secured Parties with respect to all of the liens and
security interests granted by the Obligors in the Collateral pursuant to the
terms of the Collateral Documents, and, if reasonably requested by the
Collateral Agent, agrees to enter into a collateral agency agreement among the
Collateral Agent, the Company and the holders of the Notes with respect thereto.
12.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it; PROVIDED that, if the holder of such Note is
an original purchaser of any of the Notes or any other Institutional
Investor, such Person's own unsecured agreement of indemnity shall be
deemed to be satisfactory, or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company, at its own expense, shall execute and deliver, in lieu thereof, a
new Note, dated and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Note or dated the date of
such lost, stolen, destroyed or mutilated Note if no interest shall have been
paid thereon.
13. PAYMENTS ON NOTES.
13.1. PLACE OF PAYMENT.
Subject to Section 13.2, payments of principal, premiums, if any, and
interest becoming due and payable on the Notes shall be made in New York, New
York, at the principal office of the Company in such jurisdiction. The Company
may, at any time, by notice to each holder of the Notes, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
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13.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 13.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
premium, if any, and interest by the method and at the address specified for
such purpose below your name on Schedule I attached hereto, or by such other
method or at such other address located in the United States of America as you
shall have from time to time specified to the Company for such purpose, without
the presentation or surrender of such Note or the making of any notation
thereon, except that upon the request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 13.1. Prior
to any permitted sale, transfer or other disposition of any Note held by you or
your nominee, you will, at your election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid thereon
or surrender such Note to the Company in exchange for a new Note or Notes
pursuant to Section 12.2. The Company will afford the benefits of this Section
13.2 to any Institutional Investor that is the direct or indirect transferee of
any Note purchased by you under this Agreement and that has made the same
agreement relating to such Note as you have made in this Section 13.2 and in
Section 19.
14. EXPENSES, INCREASED COSTS AND INDEMNIFICATION, ETC.
14.1. TRANSACTION EXPENSES.
Whether or not any of the transactions contemplated hereby are
consummated, the Company will pay, within 15 days of each demand therefor (such
demand to be accompanied by supporting documentation in reasonable detail), (a)
all of the costs and expenses incurred by the Collateral Agent, you, each Other
Purchaser and each other holder of a Note (including, without limitation,
reasonable attorneys' fees of a special counsel and, if reasonably required,
local or other appropriate counsel for you and the Other Purchasers) in
connection with the preparation, execution and delivery of this Agreement, the
Notes and the other Note Documents to the extent provided in the Fee Letter and,
(b) all of the costs and expenses incurred by the Collateral Agent, you, each
Other Purchaser and each other holder of a Note (including, without, limitation,
reasonable attorneys' fees of a special counsel and if reasonably required,
local or other appropriate counsel for the Collateral Agent, you and the Other
Purchasers) in connection with the administration and enforcement of this
Agreement, the Notes and the other Note Documents, and the custody and
preservation of, or the sale or collection from, or other realization upon, any
of the Collateral, and (c) all of the amendments, waivers or consents under or
in respect of this Agreement, the Notes or any of the other Note Documents
(whether or not such amendment, waiver or consent becomes effective), including,
without limitation: (i) the reasonable costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement, the Notes or any of the other Note Documents or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement, the Notes or any of the other
Note Documents, or by reason of being a holder of the Notes, and (ii) the
reasonable costs and expenses (including, without limitation, financial
advisors' fees) incurred in connection with the insolvency or bankruptcy of any
Obligor or any of its Subsidiaries or in connection with any work-out,
renegotiation or restructuring of any of the transactions contemplated hereby,
by the Notes or by the other Note Documents. The Company will pay, and will
save you and each other holder
59
of the Notes harmless from, all claims in respect of any fees, costs or
expenses, if any, of brokers and finders (other than those retained by you or
any such holder).
14.2. INDEMNITY.
(a) In addition to the payment of costs and expenses pursuant to
Section 14.1, the Company agrees to indemnify, pay and hold the Collateral
Agent, you, each MS Group Additional Investor, each Other Purchaser and each
other Person who is or was at any time an MS Group Additional Investor or an
Other Purchaser and each other Person in whose name or for whose benefit such
Person holds or at any time held Notes, and your and their affiliates and your
and their respective officers, directors, employees, attorneys, agents and other
advisors (each, an "INDEMNIFIED PARTY"), harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits
and claims, and all reasonable costs, expenses and disbursements, of any kind or
nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel for such Indemnified Parties) that may be incurred by
or asserted or awarded against any Indemnified Party, in each case arising out
of or in connection with or by reason of, or in connection with the preparation
for a defense of, any investigation, litigation or proceeding arising out of,
related to, or in connection with (i) this Agreement, the Notes, the other Note
Documents or any of the transactions contemplated hereby or thereby, (ii) your
or any Other Purchaser's agreement to purchase Notes, (iii) any use or intended
use of the proceeds of any of the Notes, (iv) any sale or collection from or
other realization upon, or any other remedies expressed in respect of, any or
all of the Collateral or (v) the actual or alleged presence of Hazardous
Materials on any property of the Company or any of its Subsidiaries or any
Environmental Action relating in any way to the Company or any of its
Subsidiaries, in each case whether or not such investigation, litigation or
proceeding is brought by the Company, any of its Subsidiaries, its directors,
shareholders or creditors or an Indemnified Party or any Indemnified Party is
otherwise a party thereto and whether or not any sale and purchase of the Notes
pursuant to this Agreement is effected (collectively, the "INDEMNIFIED
LIABILITIES"); PROVIDED that the Company shall not have any obligation to any
Indemnified Party hereunder with respect to any Indemnified Liabilities arising
from the gross negligence or bad faith of such Indemnified Party as determined
in a final, nonappealable judgment by a court of competent jurisdiction.
(b) The Company will not, without the prior written consent of the
applicable Indemnified Party, settle, compromise, consent to the entry of any
judgment in or otherwise seek to terminate any action, claim, suit or proceeding
in respect of which indemnification of such Indemnified Party may be sought
under subsection (a) of this Section 14.2 (whether or not such Indemnified Party
is a party thereto) unless such settlement, compromise, consent or termination
includes a full and unconditional release of such Indemnified Party from any and
all claims against such Indemnified Party and any and all liabilities thereof
arising out of or relating to such action, claim, suit or proceeding.
(c) The Company also agrees not to assert any claim against the
Collateral Agent, you, any MS Group Additional Investor, any Other Purchaser,
any other Person who is or was at any time an MS Group Additional Investor or
an Other Purchaser or any other Person in whose name or for whose benefit such
Person holds or at any time held any Notes, or any of your or their affiliates,
or any of your or their respective officers, directors, employees, attorneys,
agents and other advisors, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to (i)
this Agreement, the Notes or any of the other Note Documents, or any of the
transactions contemplated hereby or thereby, (ii) your or any Other Purchaser's
agreement to purchase the Notes, (iii) any sale or
60
collection from or other realization upon, or any other remedies exercised in
respect of any or all of the Collateral or (iv) any use or intended use of the
proceeds of any of the Notes.
(d) If and to the extent that the undertaking to indemnify, pay and
hold harmless the Indemnified Parties set forth in this Section 14.2 is
judicially determined to be unavailable to an Indemnified Party in respect of,
or is insufficient with respect to, any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits or claims referred to herein,
then, in lieu of indemnifying such Indemnified Party hereunder, the Company
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits or claims (and reasonable costs, expenses and disbursements
relating thereto) (i) in such proportion as is appropriate to reflect the
relative benefits to the Company and its Subsidiaries, on the one hand, and such
Indemnified Party, on the other hand, from this Agreement and the sale and
purchase of the Notes or (ii) if the allocation provided by clause (i) of this
subsection (d) is not available, in such proportion as is appropriate to reflect
not only the relative benefits referred to in such clause (i) but also the
relative fault of each of the Company and its Subsidiaries, on the one hand, and
such Indemnified Party, on the other hand, in connection with such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits or claims, as
well as any other relevant equitable considerations.
14.3. TAXES.
(a) Any and all payments by or on behalf of the Company hereunder or
under the Notes and the Note Documents shall be made, in accordance with the
terms of the Notes and the other applicable Note Documents, free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, withholdings or other governmental charges, and all liabilities with
respect thereto, EXCLUDING net income taxes and branch profits taxes that are
imposed by the United States of America and net income taxes and franchise taxes
(whether based on income or capital) that are imposed on such holder of the
Notes by the state or foreign jurisdiction under the laws of which such holder
of the Notes is organized or has its principal office or any political
subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions,
withholdings, other governmental charges and liabilities in respect of payments
hereunder, under the Notes or the Note Documents being hereinafter referred to
as "TAXES"). If the Company shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder, under any Note or any of the Note
Documents to any holder of the Notes, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 14.3) such
holder of the Notes receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Company shall make such deductions
and (iii) the Company shall pay the full amount deducted to the relevant
taxation authority or other Governmental Authority in accordance with applicable
law.
(b) In addition, the Company shall pay any present or future
transfer, stamp, documentary, excise, property or other similar taxes,
assessments, charges or levies that arise from any payment made hereunder or
under the Notes or the other Note Documents or from the execution, delivery,
filing or registration of, performance under, or otherwise with respect to, this
Agreement, any Note or any of the other Note Documents (other than any stamp tax
or other governmental charge that arises solely from any transfer of Notes in
respect of which the Company is entitled to receive payment under Section 12.2),
and all reasonable costs, expenses, taxes, assessments and other charges
incurred in connection with any filing or perfection of any lien, pledge or
security interest contemplated under any of the Collateral Documents or any of
the other documents referred to herein or therein (hereinafter referred to as
"OTHER TAXES").
61
(c) The Company agrees to indemnify, pay and hold each holder of the
Notes harmless from and against the full amount of Taxes and Other Taxes, and
for the full amount of taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 14.3, imposed on or paid by such holder of the Notes
as a result of receiving any payment by or on behalf of the Company hereunder or
under the Notes or the other Note Documents and any liability (including
penalties, additions to tax, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be made within 30 days from the
date such holder of the Notes makes written demand therefor accompanied by
evidence as is reasonably available to such holder demonstrating that holder is
liable for or must otherwise pay such Taxes or Other Taxes.
(d) Within 30 days after the date of any payment of Taxes, the
Company shall furnish to each holder of the Notes, at its address referred to in
Section 17, the original receipt of payment thereof or a certified copy of such
receipt. In the case of any payment hereunder or under any Note or any of the
other Note Documents by or on behalf of the Company through an account or branch
outside the United States or by or on behalf of the Company by a payor that is
not a United States person, if the Company determines that no Taxes are payable
in respect thereof, the Company shall furnish, or shall cause such payor to
furnish, to each holder of the Notes, at such address, an opinion of counsel
acceptable to each holder of the Notes stating that such payment is exempt from
Taxes. For purposes of this subsection (d) and subsection (e) of this Section
14.3, the terms "UNITED STATES" and "UNITED STATES PERSON" shall have the
meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each holder of the Notes organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date of its
execution and delivery of this Agreement, in the case of each original purchaser
of the Notes, and on the date on which it becomes a holder of the Notes, in the
case of each subsequent holder of the Notes, and from time to time thereafter as
requested in writing by the Company (so long as there has been no change in law
that would render such holder unable to do so), provide the Company with two
original Internal Revenue Service forms 1001 or 4224 or, in the case of a holder
of the Notes that has certified in writing to the Company that it is not a
"BANK" (as defined in Section 881(c)(3)(A) of the Internal Revenue Code, form
W-8) and, if such holder of the Notes delivers a form W-8, a certificate
representing that such holder of the Notes is not a "bank" for purposes of
Section 881(c) of the Internal Revenue Code, is not a 10-percent shareholder
(within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the
Company and is not a controlled foreign corporation related to the Company
(within the meaning of Section 864(d)(4) of the Internal Revenue Code)), as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service), certifying that such holder of the Notes is exempt from or entitled to
a reduced rate of United States withholding tax on payments pursuant to this
Agreement, the Notes held thereby or the other Note Documents or, in the case of
a holder of the Notes that has provided a form W-8, certifying that such holder
of the Notes is a foreign corporation, partnership, estate or trust. If the
form provided by a holder of the Notes pursuant to this subsection (e) at the
time such holder of the Notes first becomes a party to this Agreement indicates
a United States interest withholding tax rate in excess of zero, withholding tax
at such rate shall be considered excluded from Taxes unless and until such
holder of the Notes provides the appropriate form certifying that a lesser rate
applies, whereupon withholding tax at such lesser rate only shall be considered
excluded from Taxes for periods governed by such form. If any form or document
referred to in this subsection (e) requires the disclosure of information, other
than information necessary to compute the tax payable and information required
on the date hereof by Internal Revenue Service form 1001, 4224 or W-8 (or the
related certificate described above) that the holder of the Notes reasonably
considers to be confidential, the holder of the Notes shall give notice thereof
to the Company and shall not be obligated to include in such form or document
such confidential information.
62
(f) For any period with respect to which a holder of the Notes has
failed to provide the Company with the appropriate form or document described in
subsection (e) of this Section 14.3 (OTHER THAN if such failure is due to a
change in law occurring after the date on which a form originally was required
to be provided or if such form otherwise is not required under such
subsection (e)), such holder of the Notes shall not be entitled to additional
amounts or indemnification under subsection (a) or (c) of this Section 14.3 with
respect to Taxes imposed by the United States by reason of such failure;
PROVIDED, HOWEVER, that should a holder of the Notes become subject to Taxes
because of its failure to deliver a form required hereunder, the Company shall
take such steps as such holder of the Notes shall reasonably request to assist
such holder of the Notes to recover such Taxes.
(g) Any holder of the Notes claiming any additional amounts payable
pursuant to this Section 14.3 shall use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to file any certificate
or document reasonably requested by the Company or to change the jurisdiction of
its applicable lending office if the making of such a filing or such change
would avoid the need for or reduce the amount of any such additional amounts
that may thereafter accrue and would not, in the sole determination of such
holder, be otherwise disadvantageous to such holder.
14.4. SURVIVAL.
The Obligations of the Company under this Section 14 shall survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement, the Notes or any of the other Note Documents, and
the termination of this Agreement and any commitment to purchase Notes hereunder
and, in respect of any Person who was at any time an Other Purchaser or in whose
name or for whose benefit such Person held any Note, the date on which such
Person no longer holds, or no longer holds in the name of or for the benefit of
any other Person, any Note.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein and in the other
Note Documents, and in any certificate or other instrument delivered by or on
behalf of any Obligor pursuant to this Agreement or any of the other Note
Documents, shall survive the execution and delivery of this Agreement and the
Notes, the purchase or transfer by you of any Notes or portion thereof or
interest therein and the payment of any Notes, and may be relied upon by any
subsequent holder of the Notes as of the date made or deemed made, regardless of
any investigation made at any time by or on behalf of you or any other holder of
the Notes. Subject to Section 21.6, this Agreement, the Notes and the other
Note Documents embody the entire agreement and understanding between you and the
Obligors and supersede all prior agreements and understandings relating to the
subject matter hereof.
16. AMENDMENT AND WAIVER.
16.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with and only with the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
63
provisions of Section 1, 2, 3, 4, 5, 6 or 20 will be effective as to you unless
consented to in writing by you and (b) no such amendment or waiver shall,
without the written consent of the holder of each Note at the time outstanding,
do any of the following at any time:
(i) subject to the provisions of Section 11 relating to
acceleration or rescission, change the amount or the time of any
prepayment, repurchase or payment of principal of, or reduce the rate, or
change the time fixed for any payment or change the method of computation
of interest on, the Notes;
(ii) change the percentage of the aggregate principal amount of the
Notes the holders of which are required to consent to any such amendment or
waiver;
(iii) subordinate the Notes (or any of them) to any other
Obligations of the Company now or hereafter existing;
(iv) reduce or limit any Obligor's liability with respect to any
Obligations owing to you, any Other Purchaser or any other holder of any
Note under or in respect of any of the Note Documents;
(v) release a material portion of the Collateral in any
transaction or any series of related transactions;
(vi) permit the creation, incurrence, assumption or existence of
any Lien on a material portion of the Collateral in any transaction or any
series of related transactions to secure any Obligations other than
Obligations owing to you, the Other Purchasers and the other holders of
Notes under the Note Documents; or
(vii) amend any of Section 7, 11.1(a), 11.1(b), 11.2 through 11.6,
16.1 or 19.
Notwithstanding any of the foregoing provisions of this Section 16.1, none of
the defined terms set forth in Schedule II attached hereto shall be amended,
supplemented or otherwise modified in any manner that would change the meaning,
purpose or effect of this Section 16.1 or any Section referred to herein unless
such amendment or modification is agreed to in writing by the holders of the
Notes otherwise required to amend or waive such Section under the terms of this
Section 16.1.
16.2. SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned or otherwise held by it at
the time) with sufficient information, reasonably far in advance of the date a
decision is required, to enable such holder to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in respect of
any of the provisions of this Agreement or any of the other Note Documents. The
Company will deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this Section 16 to each
holder of outstanding Notes promptly following the date on which it is executed
and delivered by, or receives the consent or approval of, the requisite holders
of the Notes.
64
(b) PAYMENT. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions of this
Agreement or any of the other Note Documents, unless such remuneration is
concurrently paid, or security is concurrently granted, on the same terms,
ratably to each holder of Notes then outstanding even if such holder did not
consent to such waiver or amendment.
16.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 16
applies equally to all holders of Notes and is binding upon them, upon each
future holder of any Note and upon each Obligor without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right, power or
remedy consequent thereon. No course of dealing nor any delay on the part of
any holder of any Note in exercising any right, power or remedy hereunder or
under any of the other Note Documents shall operate as a waiver of any right,
power or remedy of any holder of such Note; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided under this Agreement and the other Note Documents are
cumulative and not exclusive of any rights, powers or remedies provided by
applicable law.
16.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or any of the other Note Documents, or have directed the taking of any
action provided for herein or in any of the other Note Documents to be taken
upon the direction of the holders of a specified percentage of the aggregate
principal amount of Notes then outstanding, Notes directly or indirectly owned
by the Company or any of its Affiliates shall be deemed not to be outstanding.
17. NOTICES.
(a) All notices and other communications provided for hereunder
shall be in writing and delivered by telecopier or (if expressly permitted under
the applicable provisions hereof) by telephone, if the sender on the same day
sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), by registered or certified mail with return receipt
requested (postage prepaid) or by a recognized overnight delivery service (with
charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule I attached hereto, or at such
other address as you or it shall have specified to the Company in writing;
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing; or
65
(iii) if to the Company, to the Company at its address set forth on
the first page of this Agreement (Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇) to the
attention of the Chief Financial Officer, or at such other address as the
Company shall have specified to the holder of each Note in writing.
All notices and other communications provided for under this Section 17 will be
deemed given and effective only when actually received.
(b) If any notice required under this Agreement or any of the other
Note Documents is permitted to be made, and is made, by telephone, actions taken
or omitted to be taken in reliance thereon by you shall be binding upon the
Company notwithstanding any inconsistency between the notice provided by
telephone and any subsequent writing in confirmation thereof provided to you;
PROVIDED that any such action taken or omitted to be taken by you shall have
been in good faith and in accordance with the terms of this Agreement.
18. REPRODUCTION OF DOCUMENTS.
This Agreement, each of the other Note Documents and all other
agreements, certificates and other documents relating thereto, including,
without limitation, (a) amendments, waivers and consents of or to this Agreement
or any other Note Document that may hereafter be executed, (b) documents
received by you on the Initial Purchase Date (except the Notes themselves) and
(c) financial statements, certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process. The Company agrees and stipulates that, to the extent permitted by
applicable law, any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by you in
the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
This Section 18 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
19. CONFIDENTIAL INFORMATION.
You hereby agree to maintain, and to cause each of the Persons
referred to in clause (a) of this Section 19 to which you deliver or disclose
Confidential Information to maintain, the confidentiality of all Confidential
Information in accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to you; PROVIDED
that you may deliver or disclose Confidential Information to (a) your affiliates
and your and their respective directors, officers, employees, agents, attorneys
and other advisors (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (b) your counsel
and your financial and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 19, (c) any other holder of any Note or any MS Group
Additional Investor, (d) any Institutional Investor to which you sell or offer
to sell any Note or any part thereof or any participation therein (if such
Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by provisions similar to the provisions of this Section
19), (e) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such
66
Confidential Information to be bound by provisions similar to the provisions of
this Section 19), (f) to the extent required or requested thereby, any federal
or state regulatory authority having jurisdiction over you, (g) the National
Association of Insurance Commissioners, any other insurance company or
regulatory examiners or auditors or accountants or any similar organization, or
any nationally recognized rating agency that requires access to information
about your investment portfolio or (h) any other Person to which such delivery
or disclosure may be necessary (i) in order to effect compliance with any
Requirement of Law applicable to you, (ii) in response to any subpoena or other
legal process or (iii) in connection with any litigation to which you or any
other holder of any Note are a party. Each holder of a Note, by its acceptance
of a Note, will be deemed to have agreed to be bound by and to be entitled to
the benefits of this Section 19 as though it were a party to this Agreement.
Upon the reasonable request of the Company in connection with the delivery to
any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 19. Nothing
in this Section 19 shall obligate you or any other holder of the Notes to return
any Confidential Information furnished by or on behalf of the Company or any of
its Subsidiaries to the Company or any such Subsidiary.
20. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates that
constitutes an Institutional Investor as the purchaser of the Notes that you
have agreed to purchase hereunder, by notice to the Company, which notice shall
be signed by both you and such Affiliate, shall contain such Affiliate's
agreement to be bound by this Agreement and shall contain a confirmation by such
Affiliate of the accuracy with respect to it of the representations set forth in
Section 6. Upon receipt of such notice, wherever the word "YOU" is used in this
Agreement (other than in this Section 20), such word shall be deemed to refer to
such Affiliate in lieu of you. In the event that such Affiliate is so
substituted as a purchaser hereunder and such Affiliate thereafter transfers to
you all of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "YOU" is used in this Agreement
(other than in this Section 20), such word shall no longer be deemed to refer to
such Affiliate, but shall refer to you, and you shall have all of the rights of
an original holder of the Notes under this Agreement.
21. MISCELLANEOUS.
21.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement or any
of the other Note Documents by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note), whether or not so
expressed.
21.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of, or premium, if any, or interest
on, any Note that is due on a date other than a Business Day
67
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the items payable on such next
succeeding Business Day.
21.3. SATISFACTION REQUIREMENT.
Except as otherwise provided herein or in any of the other Note
Documents, if any agreement, certificate or other writing, or any action taken
or to be taken, is by the terms of this Agreement or any of the other Note
Documents required to be satisfactory to you or to the Required Holders, the
determination of such satisfaction shall be made by you or the Required Holders,
as the case may be, in the sole and exclusive judgment (exercised reasonably and
in good faith) of the Person or Persons making such determination.
21.4. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.
21.5. CONSTRUCTION; ACCOUNTING TERMS, ETC.
(a) Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
(b) Except as otherwise expressly provided in this Agreement or any
of the other Note Documents, all accounting terms used herein or therein shall
be interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to you hereunder shall be prepared,
in accordance with GAAP.
21.6. SURVIVAL OF FEE LETTER.
Notwithstanding anything to the contrary contained in this Agreement,
all of the provisions of the Fee Letter shall survive the execution and delivery
of this Agreement and the occurrence of the Initial Purchase Date.
21.7. COMPUTATION OF TIME PERIODS.
In this Agreement, in the computation of periods of time from a
specific date to a later specified date, the word "FROM" means "from and
including", the word "THROUGH" means "through and including", and the words "TO"
and "UNTIL" each mean "to but not excluding".
68
21.8. 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. Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be effective as delivery of
a manually executed counterpart of this Agreement.
21.9. GOVERNING LAW; SUBMISSION TO JURISDICTION, ETC.
(a) This Agreement shall be governed by, and construed in accordance
with, the law of the State of New York.
(b) The Company hereby irrevocably and unconditionally submits, for
itself and its property and assets, to the nonexclusive jurisdiction of any
New York state court or federal court of the United States of America sitting in
New York City, New York, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement, the Notes or the
other Note Documents, or for recognition or enforcement of any judgment in
respect thereof, and the Company hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York state court or, to the fullest extent permitted
by applicable law, in such federal court. The Company hereby irrevocably
consents to the service of copies of any summons and complaint and any other
process which may be served in any such action or proceeding by certified mail,
return receipt requested, or by delivering a copy of such process to the
Company, at its address specified in Section 17, or by any other method
permitted by law. The Company hereby agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable law. Nothing in this Agreement shall affect any right that any
holder of Notes may otherwise have to bring any action or proceeding relating to
this Agreement, the Notes or the other Note Documents in the courts of any
jurisdiction.
(c) The Company hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any action or proceeding arising
out of or relating to this Agreement, the Notes or the other Note Documents in
any New York state or federal court. The Company hereby irrevocably waives, to
the fullest extent permitted by applicable law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
21.10. WAIVER OF JURY TRIAL.
EACH OF THE COMPANY AND THE HOLDERS OF THE NOTES HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER NOTE
69
DOCUMENTS, ANY DOCUMENT DELIVERED UNDER THE NOTE DOCUMENTS, THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF ANY HOLDER OF THE NOTES IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Very truly yours,
ECONOPHONE, INC.
By ________________________
Name:
Title:
* * * * *
If you are in agreement with the foregoing, please sign in the
appropriate space provided below and return it to the Company, whereupon the
foregoing shall become a binding agreement between you and the Company.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ GROUP INC.
By _________________________
Name:
Title:
SCHEDULE I
INFORMATION RELATING TO THE PURCHASERS
NAME OF PURCHASER: COMMITMENT
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group Inc. $15,000,000
NAME(S) FOR REGISTRATION OF NOTES PURCHASED:
MAILING ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TELEPHONE NO.: (▇▇▇) ▇▇▇-▇▇▇▇
TELECOPIER NO.: (▇▇▇) ▇▇▇-▇▇▇▇
WIRE INSTRUCTIONS (INCLUDING ABA NO. AND ACCOUNT NO.)
FOR PAYMENT OF PRINCIPAL AND INTEREST:
To: Citibank, NY
ABA 021-000089
In favor of: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group
Account #: 388 965 27
UNITED STATES TAX IDENTIFICATION NO. (IF ANY): ▇▇-▇▇▇▇▇▇▇
PHYSICAL DELIVERY INSTRUCTIONS:
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SCHEDULE II
DEFINED TERMS
As used in this Agreement, the following terms shall have the
respective meanings set forth below (such meanings to be equally applicable to
both the singular and plural forms of the term defined):
"ADDITIONAL AVAILABILITY DATE" means the first date on which all of
the conditions set forth in Section 8.10(a) have been satisfied.
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person, or is a director or officer of such Person or,
with respect to any individual, has a relationship with such individual by
blood, marriage or adoption not more remote than first cousin. For
purposes of this definition, the term "CONTROL" (including the terms
"CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") of a Person
means the possession, direct or indirect, of the power to vote 5% or more
of the Voting Interest of such Person or to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of Voting Interest, by contract or otherwise.
"AGREEMENT" means this Note Purchase Agreement, as such agreement may
be amended, supplemented or otherwise modified from time to time in
accordance with the terms of Section 16.
"ASSET SALE" means the conveyance, sale, lease, sublease, transfer or
other disposition (other than solely for security purposes) by the Company
or any of its Subsidiaries to any Person other than the Company or any of
its wholly owned Subsidiaries of (a) any of the shares of capital stock of
the Company or any of its Subsidiaries, (b) all or substantially all of the
property and assets of any division or line of business of the Company or
any of its Subsidiaries or (c) any other property or assets (whether
tangible or intangible) of the Company or any of its Subsidiaries.
"AVAILABLE COMMITMENT" means, with respect to you or any of the Other
Purchasers at any time, (a) your Commitment or the Commitment of such Other
Purchaser, as the case may be, at such time LESS (b) the aggregate
principal amount of all Notes purchased by you or such Other Purchaser
(whether or not any such principal amount remains outstanding) at such
time.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or any
other day on which commercial banks are required or authorized by law to be
closed in New York, New York.
"CAPITAL ASSETS" means, with respect to any Person, all equipment,
fixed assets and real property or improvements of such Person, or
replacements or substitutions therefor or additions thereto, that have been
or should be, in accordance with GAAP, reflected as additions to property,
plant or equipment on the balance sheet of such Person or that have a
useful life of more than one year.
"CAPITAL EXPENDITURES" means, with respect to any Person for any
period, (a) all expenditures made directly or indirectly by such Person
(whether paid in cash or other consideration or accrued as a liability and
including, without limitation, all expenditures for maintenance and repairs
which are required, in accordance with GAAP, to be capitalized on the books
of such Person) during such period for Capital Assets and (b) solely to the
extent not otherwise included in clause (a) of this definition, the
aggregate principal amount of all
II-2
Indebtedness (including, without limitation, Capitalized Lease Obligations)
assumed or incurred during such period in connection with any such
expenditures for Capital Assets.
"CAPITALIZED LEASE" means any lease with respect to which the lessee
is required to recognize concurrently the acquisition of property or an
asset and the incurrence of a liability in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, all
lease obligations of such Person which, in accordance with GAAP, are or
will be required to be capitalized on the books of such Person, in each
case valued at the amount thereof accounted for as debt in accordance with
GAAP.
"CASH EQUIVALENTS" means any of the following types of Investments, to
the extent owned by the Company or any of its Subsidiaries free and clear
of all Liens (other than Liens created under the Collateral Documents):
(a) readily marketable obligations issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than 360 days
from the date of acquisition thereof; PROVIDED that the full faith and
credit of the United States of America is pledged in support thereof;
(b) time deposits with, or insured certificates of deposit or
bankers' acceptances of, any commercial bank that (i) is organized
under the laws of the United States of America, any state thereof or
the District of Columbia or is the principal banking subsidiary of a
bank holding company organized under the laws of the United States of
America, any state thereof or the District of Columbia and is a member
of the Federal Reserve System, (ii) issues (or the parent of which
issues) commercial paper rated as described in clause (c) of this
definition and (iii) has combined capital and surplus of at least
$1,000,000,000, in each case with maturities of not more than 180 days
from the date of acquisition thereof;
(c) commercial paper issued by any Person organized under the
laws of any state of the United States of America and rated at least
"Prime-1" (or the then equivalent grade) by ▇▇▇▇▇'▇ Investors Service,
Inc. or at least "A-1" (or the then equivalent grade) by Standard &
Poor's Ratings Services, a Division of The ▇▇▇▇▇▇-▇▇▇▇ Companies,
Inc., in each case with maturities of not more than 270 days from the
date of acquisition thereof;
(d) Investments, classified in accordance with GAAP as current
assets of the Company or any of its Subsidiaries, in money market
investment programs registered under the Investment Company Act of
1940, as amended, which are administered by financial institutions
that have the highest rating obtainable from either ▇▇▇▇▇'▇ Investors
Service, Inc. or Standard & Poor's Ratings Services, a Division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and the portfolios of which are limited
solely to Investments of the character and quality described in
clauses (a), (b) and (c) of this definition; and
II-3
(e) repurchase agreements entered into by the Company or any
such Subsidiary with a bank or trust company or recognized securities
dealer having combined capital and surplus of at least $500,000,000
for direct obligations issued by or fully guaranteed by the United
States of America in which the Company or such Subsidiary shall have a
valid and perfected first priority security interest (subject to no
other Liens); PROVIDED that each such repurchase agreement shall have
a fair market value of at least 100% of the amount of the repurchase
obligations thereunder on the date of purchase thereof.
"CHANGE OF CONTROL" means, at any time, (a) ▇▇. ▇▇▇▇▇▇ ▇▇▇▇ ceases to
be the "BENEFICIAL OWNER" (as defined in Rule 13d-3 under the Exchange Act)
of Voting Interests representing at least 25% of the combined voting power
of all of the Voting Interests of the Company (on a fully diluted basis),
(b) any "PERSON" or "GROUP" (within the meaning of Section 13d-3 or
14(d)(2) of the Exchange Act) becomes the beneficial owner of Voting
Interests of the Company representing a greater percentage of the combined
voting power of all of the Voting Interests of the Company (on a fully
diluted basis) than the percentage of such combined voting power
beneficially owned by ▇▇. ▇▇▇▇▇▇ ▇▇▇▇ (on a fully diluted basis) at such
time or (c) the Company, either individually or together with one or more
of its Subsidiaries, shall convey, sell, lease, assign, transfer or
otherwise dispose of, or agree in writing to convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of the property
and assets of the Company or the Company and its Subsidiaries, taken as a
whole (either in one transaction or a series of related transactions).
"CHANGE OF CONTROL OFFER" has the meaning specified in Section 7.2(a).
"CHANGE OF CONTROL PAYMENT" has the meaning specified in Section
7.2(a).
"CHANGE OF CONTROL REPURCHASE DATE" has the meaning specified in
Section 7.2(b).
"COLLATERAL" means all of the "Collateral" referred to in the
Collateral Documents and all other property and assets of the Obligors and
their Subsidiaries that are or are intended under the terms of the
Collateral Documents to be subject to Liens in favor of you, the Other
Purchasers, if any, and the other holders of the Notes.
"COLLATERAL AGENT" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group Inc., as collateral
agent for itself and the other Secured Parties.
"COLLATERAL DOCUMENTS" means, collectively, the Shareholder Pledge
Agreements, the other pledge agreements, security agreements, mortgages,
charges and other similar documents entered into by the Shareholders or by
the Company or any of its Subsidiaries pursuant to Section 8.10 and all
other agreements that create or purport to create Liens in favor of you,
the Other Purchasers, if any, and the other holders of the Notes.
"COMMITMENT" means, with respect to you or any of the Other Purchasers
at any time, the amount set forth opposite your or such Other Purchaser's
name on Schedule I attached hereto under the caption "Commitment", as such
amount may be reduced at or prior to such time pursuant to Section 7.2 or
7.7.
II-4
"COMMUNICATIONS LAW" means, collectively, (a) the Communications Act
of 1934, as amended from time to time, and any similar or successor federal
law or statute, and the regulations promulgated and the rulings issued by
the FCC from time to time thereunder, and (b) any state law governing the
provision of telecommunications services, and the regulations promulgated
and the rulings issued by any PUC from time to time thereunder, in each
case as in effect from time to time.
"COMPANY" has the meaning specified on page one of this Agreement.
"CONFIDENTIAL INFORMATION" means materials, documents and other
information delivered to you by or on behalf of the Company or any of its
Subsidiaries in connection with any of the transactions contemplated by or
otherwise pursuant to this Agreement or any of the other Note Documents,
whether before or after the date of this Agreement, that is proprietary in
nature and that was clearly marked, labeled or otherwise adequately
identified when received by you as being confidential information of the
Company or such Subsidiary, but does not include any such information that
(a) is or was generally available to the public (other than as a result of
a breach of your confidentiality obligations hereunder) or (b) becomes
known or available to you on a nonconfidential basis other than through
disclosure by the Company or any of its Subsidiaries.
"CONSOLIDATED CASH FLOWS" means, for any period, (a) Consolidated Net
Income of the Company and its Subsidiaries for such period, PLUS (b) all
noncash items otherwise deducted in calculating the Consolidated Net Income
of the Company and its Subsidiaries for such period LESS (c) the sum of (i)
all noncash items otherwise added in calculating the Consolidated Net
Income of the Company and its Subsidiaries for such period, (ii) the
aggregate amount of all Restricted Payments made on or in respect of any
shares of capital stock of the Company during such period to the extent
otherwise permitted to be made under Section 9.5, (iii) the aggregate
amount of all regularly scheduled payments of Subordinated Indebtedness
made during such period and (iv) unless the applicable conditions set forth
in Section 4 cannot be satisfied as of any requested Purchase Date during
such period, the aggregate Available Commitments of you and the Other
Purchasers, if any, remaining on the last day of such period.
"CONSOLIDATED DEBT SERVICE" means, for any period, the sum of (a) all
regularly scheduled principal payments and all required prepayments,
repurchases, redemptions or similar acquisitions for value of Indebtedness
of the Company and its Subsidiaries (including, without limitation, the
principal component of payments due on all Capitalized Leases) made during
such period and (b) all regularly scheduled interest payments and all
interest payments required to be made in connection with any such
prepayments, repurchases, redemptions or similar acquisitions for value of
Indebtedness of the Company and its Subsidiaries made during such period,
all determined on a consolidated basis for such period, but excluding
therefrom any such payments, prepayments, redemptions, repurchases or other
acquisitions to the extent refinanced through the incurrence of additional
Indebtedness otherwise expressly permitted under Section 9.3.
"CONSOLIDATED DEBT SERVICE COVERAGE RATIO" means, for any period, the
ratio of (a) the aggregate Consolidated Cash Flows for such period to (b)
the aggregate Consolidated Debt Service for such period.
II-5
"CONSOLIDATED EBITDA" means, for any period, (a) Consolidated Net
Income of the Company and its Subsidiaries for such period, PLUS (b) the
sum of each of the following expenses that have been deducted from the
determination of Consolidated Net Income of the Company and its
Subsidiaries for such period: (i) Consolidated Interest Expense for such
period, (ii) all income tax expense (whether federal, state, local, foreign
or otherwise) of the Company and its Subsidiaries for such period, (iii)
all depreciation expense of the Company and its Subsidiaries for such
period and (iv) all amortization expense of the Company and its
Subsidiaries for such period, in each case determined on a consolidated
basis and in accordance with GAAP for such period.
"CONSOLIDATED FUNDED INDEBTEDNESS" means Indebtedness in respect of
the Notes, and all other Indebtedness of the Company or any of its
Subsidiaries that by its terms matures more than one year after the date of
determination or matures within one year from such date but is renewable or
extendible, at the option of the Company or such Subsidiary, to a date more
than one year after such date or arises under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during a
period of more than one year after such date; PROVIDED, HOWEVER, that the
term "FUNDED INDEBTEDNESS" shall not include any Subordinated Indebtedness
(if and to the extent such Subordinated Indebtedness would otherwise be
included in such term on any date of determination).
"CONSOLIDATED INTEREST EXPENSE" means, for any period, all interest
expense (whether paid or accrued) on all Indebtedness of the Company or any
of its Subsidiaries for such period, determined on a consolidated basis and
in accordance with GAAP for such period, including, without limitation,
(a) interest expense paid or payable in respect of Indebtedness resulting
from the Notes, (b) the interest component of all obligations under
Capitalized Leases and (c) the net payment, if any, payable in connection
with Hedge Agreements, LESS the net credit, if any, received in connection
with Hedge Agreements.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
net loss) of the Company and its Subsidiaries for such period, determined
on a consolidated basis and in accordance with GAAP for such period.
"CONSOLIDATED NET WORTH" means, at any date of determination, the sum
of (a) the capital stock and additional paid-in capital, PLUS (b) retained
earnings (or LESS accumulated deficits) of the Company and its
Subsidiaries, determined on a consolidated basis and in accordance with
GAAP for such period.
"CONTINGENT OBLIGATION" means, as to any Person, any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("PRIMARY OBLIGATIONS") of any other Person
(the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including, without limitation, (a) the direct or indirect guaranty,
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 the obligation of a primary obligor, (b) the obligation to
make take-or-pay or similar payments, if required, regardless of
nonperformance by any other party or parties to an agreement, (c) any
obligation of such Person, whether or not contingent, (i) to purchase any
such primary obligation or any property constituting direct or indirect
security therefor, (ii) to advance or supply funds (A) for the purchase or
payment of any such primary obligation or (B) to maintain working capital
or equity capital of the primary obligor
II-6
or otherwise to maintain the net worth or solvency of the primary obligor,
(iii) to purchase property, assets, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation
or (iv) otherwise to assure or hold harmless the holder of such primary
obligation against loss in respect thereof; PROVIDED, HOWEVER, that the
term "CONTINGENT OBLIGATION" shall not include any products warranties
extended in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made (or, if less, the maximum amount of such
primary obligation for which such Person may be liable pursuant to the
terms of the instrument evidencing such Contingent Obligation) or, if not
stated or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder),
as determined by such Person in good faith.
"CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT" means that certain
securities purchase agreement dated as of November 1, 1996 between the
Company and Princes Gate Investors II, L.P., as such agreement may be
amended, supplemented or otherwise modified from time to time in accordance
with its terms.
"CURRENT VALUE" has the meaning specified in Section 3 of ERISA.
"DEFAULT" means any Event of Default or any event or condition that
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"DEFAULT RATE" means 3% per annum above the rate of interest stated in
clause (a), (b) or (c), as applicable, of the second paragraph of the
Notes.
"DOMESTIC SUBSIDIARY" means, at any time, any Subsidiary of the
Company of any of its Subsidiaries that is incorporated or organized under
the laws of any state of the United States of America or the District of
Columbia at such time.
"EMPLOYEE BENEFIT PLAN" means an "EMPLOYEE BENEFIT PLAN", within the
meaning of Section 3(3) of ERISA, that is subject to the provisions of
Title I, Subtitle B, Part 4 of ERISA or to Section 4975 of the Internal
Revenue Code.
"ENVIRONMENTAL ACTION" means any action, suit, demand, demand letter,
claim, notice of noncompliance or violation, notice of liability or
potential liability, investigation, proceeding, consent order or consent
agreement, abatement order or other order or directive (conditional or
otherwise) relating in any way to any Environmental Law, any Environmental
Permit or any Hazardous Materials or arising from alleged injury or threat
to health, safety, natural resources or the environment, including, without
limitation, (a) by any Governmental Authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and (b) by any
Governmental Authority or other third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"ENVIRONMENTAL LAW" means any Requirement of Law, or any judicial or
agency interpretation or other requirement of any Governmental Authority,
relating to (a) the generation, use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous
II-7
Materials, (b) pollution or protection of the environment, health, safety
or natural resources or (c) occupational safety and health, industrial
hygiene, land use or the protection of human, plant or animal health or
welfare, including the Comprehensive Environmental Response, Compensation,
and Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.),
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.),
the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances
Control Act (15 U.S.C. Section 2601 ET SEQ.), the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), the
Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.), the
Oil Pollution Act (33 U.S.C. Section 2701 ET SEQ.) and the Emergency
Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 ET
SEQ.), in each case as amended from time to time, and including the
regulations promulgated and the rulings issued from time to time
thereunder.
"ENVIRONMENTAL PERMIT" means any permit, approval, license,
identification number or other authorization required under any
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued from time to time thereunder.
"ERISA AFFILIATE" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of the Company or any of its
Subsidiaries, or under common control with the Company or any of its
Subsidiaries, within the meaning of Section 414 of the Internal Revenue
Code.
"ERISA PLAN" means an "EMPLOYEE BENEFIT PLAN" (as defined in Section
3(3) of ERISA) that is or, within the preceding five years, has been
established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the Company
or any ERISA Affiliate or with respect to which the Company or any ERISA
Affiliate may have any liability.
"EVENT OF DEFAULT" has the meaning specified in Section 11.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and the regulations promulgated and the rulings issued
from time to time thereunder.
"FCC" means the Federal Communications Commission of the United States
of America and any successor thereto.
"FEE LETTER" means that certain letter dated April 24, 1997 from MS
Group to the Company, as such letter may be amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"FISCAL YEAR" means, with respect to the Company or any of its
Subsidiaries, the period commencing on January 1 in any calendar year and
ending on the next succeeding December 31.
"FOREIGN SUBSIDIARY" means, at any time, any Subsidiary of the Company
or any of its Subsidiaries that is not a Domestic Subsidiary at such time.
II-8
"FUNDS SOURCE" has the meaning specified in Section 6.3.
"GAAP" means generally accepted accounting principles in effect in the
United States of America and applied on a consistent basis with the
generally accepted accounting principles applied in the preparation of the
audited consolidated financial statements of the Company and its
Subsidiaries for the Fiscal Year ended December 31, 1995 which are referred
to in Section 5.5(a).
"GOVERNMENTAL AUTHORITY" means any nation or government, any state,
province, city, municipal entity or other political subdivision thereof,
and any governmental, executive, legislative, judicial, administrative or
regulatory agency, department, authority, instrumentality, commission,
board or similar body, whether ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
local or foreign.
"GOVERNMENTAL AUTHORIZATION" means any authorization, approval,
consent, franchise, license, covenant, order, ruling, permit,
certification, exemption, notice, declaration or similar right, undertaking
or other action of, to or by, or any filing, qualification or registration
with, any Governmental Authority.
"HAZARDOUS MATERIALS" means: (a) any chemical, material or substance
at any time defined as or included in the definition of "HAZARDOUS
SUBSTANCES", "HAZARDOUS WASTES", "HAZARDOUS MATERIALS", "EXTREMELY
HAZARDOUS WASTE", "ACUTELY HAZARDOUS WASTE", "RADIOACTIVE WASTE",
"BIOHAZARDOUS WASTE", "POLLUTANT", "TOXIC POLLUTANT", "CONTAMINANT",
"RESTRICTED HAZARDOUS WASTE", "INFECTIOUS WASTE", "TOXIC SUBSTANCES", or
any other term or expression intended to define, list or classify
substances by reason of properties harmful to health, safety or the indoor
or outdoor environment (including, without limitation, harmful properties
such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar
import under any applicable Environmental Laws); (b) any oil, petroleum,
petroleum fraction or petroleum derived substance; (c) any drilling fluids,
produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal
resources; (d) any flammable substances or explosives; (e) any radioactive
materials; (f) any asbestos-containing materials; (g) any urea formaldehyde
foam insulation; (h) any electrical equipment which contains any oil or
dielectric fluid containing polychlorinated biphenyls; (i) any pesticides;
(j) any radon gas; and (k) any other chemical, material or substance
designated, classified or regulated as hazardous or toxic or as a pollutant
or contaminant under any Environmental Law or which could pose a hazard to
health, safety or the environment.
"HEDGE AGREEMENTS" means interest rate swap, cap or collar agreements,
interest rate future or option contracts, commodity future or option
contracts, currency swap agreements, currency future or option contracts
and other similar agreements.
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant
to Section 12.1.
"INDEBTEDNESS" means, with respect to any Person (without
duplication):
(a) all indebtedness of such Person for borrowed money;
II-9
(b) all Obligations of such Person for the deferred purchase
price of property and assets or services (other than trade payables or
other accounts payable incurred in the ordinary course of such
Person's business and not past due for more than 180 days after the
date on which each such trade payable or account payable was created);
(c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, or upon which interest
payments are customarily made;
(d) all Obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property or assets acquired by such Person, even though the rights and
remedies of the seller or the lender under such agreement in the event
of default are limited to repossession or sale of such property or
assets;
(e) all Capitalized Lease Obligations of such Person;
(f) all Obligations, contingent or otherwise, of such Person
under acceptance, standby letter of credit or similar facilities;
(g) all Obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any shares of
capital stock of (or other ownership or profit interest in) such
Person or in any other Person, or any warrants, rights or options to
acquire such shares (or such other ownership or profit interests);
(h) all Obligations of such Person in respect of Hedge
Agreements, take-or-pay agreements or other similar arrangements;
(i) all Contingent Obligations; and
(j) all Obligations referred to in clauses (a) through (i) of
this definition of another Person secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on property or assets (including, without
limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Indebtedness.
The Indebtedness of any Person shall include (i) all Obligations of the
types described in clauses (a) through (j) above of any partnership in
which such Person is a general partner and (ii) all Obligations of the
types described in clauses (a) through (j) above of such Person to the
extent such Person remains legally liable in respect thereof
notwithstanding that any such Obligation is deemed to be extinguished under
generally accepted accounting principles in effect at any date of
determination.
"INDEMNIFIED LIABILITIES" has the meaning specified in
Section 14.2(a).
"INDEMNIFIED PARTY" has the meaning specified in Section 14.2(a).
II-10
"INITIAL NOTE DOCUMENTS COLLATERAL" means all of the Initial Pledged
Interests and the Initial Pledged Indebtedness, all of the additional
equity interests in the Company and the additional intercompany
Indebtedness of the Company required to be pledged to the Collateral Agent
pursuant to the Shareholder Pledge Agreements, as in effect on the Initial
Purchase Date, and all proceeds of the foregoing.
"INITIAL PLEDGED INDEBTEDNESS" has the meaning specified in Section 1
of the applicable Shareholder Pledge Agreement.
"INITIAL PLEDGED INTERESTS" has the meaning specified in Section 1 of
the applicable Shareholder Pledge Agreement.
"INITIAL PURCHASE DATE" has the meaning specified in Section 2.3.
"INSTITUTIONAL INVESTOR" means (a) you, (b) any Other Purchaser or
(c) any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any
insurance company, any broker or dealer or any other similar financial
institution or entity, regardless of legal form.
"INTERCREDITOR AGREEMENT" has the meaning specified in Section
8.10(a)(iii).
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and the rulings
issued from time to time thereunder.
"INVESTMENT" has the meaning specified in Section 9.7.
"LIEN" means, with respect to any Person, any mortgage, lien
(statutory or other), pledge, hypothecation, security interest, charge or
other preference or encumbrance of any kind (including, without limitation,
any agreement to give any of the foregoing), or any sale of accounts
receivable or chattel paper, or any assignment, deposit arrangement or
lease intended as, or having the effect of, security, or any other interest
or title of any vendor, lessor, lender or other secured party to or of such
Person under any conditional sale or other title retention agreement or any
Capitalized Lease or upon or with respect to any property or asset of such
Person (including, in the case of shares of capital stock, stockholder
agreements, voting trust agreements and other similar arrangements).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, results of
operations, assets, property, liabilities or prospects of the Company and
its Subsidiaries, taken as a whole, (b) the ability of any of the Obligors
to perform its Obligations under this Agreement or any of the other Note
Documents to which it is or is to be a party, (c) the rights and remedies
afforded to the Collateral Agent, you, any of the Other Purchasers or any
of the other holders of the Notes under this Agreement or any of the other
Note Documents or (d) the ability of the Company to refinance the Notes
prior to the stated maturity thereof.
"MS GROUP" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group Inc., a Delaware corporation.
II-11
"MS GROUP ADDITIONAL INVESTOR" means any member, shareholder or other
investor or holder of other interests in, or any successor to or transferee
of, MS Group.
"MULTIEMPLOYER PLAN" means a multiemployer plan (as defined in
Section 4001(a)(3) of ERISA) to which the Company or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to make
contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan (as defined in
Section 4001(a)(15) of ERISA) that (a) is maintained for employees of the
Company or any ERISA Affiliate and at least one Person other than the
Company and the ERISA Affiliates or (b) was so maintained and in respect of
which the Company or any ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"NET CASH PROCEEDS" means, with respect to the issuance or incurrence
of any Indebtedness by any Person, or the sale or issuance by any Person of
any shares of its capital stock (or other ownership or profit interests
therein), any securities convertible into or exchangeable for shares of its
capital stock (or other ownership or profit interests therein) or any
warrants, options or other rights for the purchase or acquisition of any
shares of its capital stock (or other ownership or profit interests
therein), or any Asset Sale, as the case may be, the aggregate amount of
cash received from time to time (whether as initial consideration or
through payment or disposition of deferred consideration) by or on behalf
of such Person for its own account in connection with any such transaction,
after deducting therefrom only:
(a) brokerage commissions, underwriting fees and discounts,
legal fees, finder's fees and other similar fees and commissions;
(b) the amount of taxes payable in connection with or as a
result of such transaction;
(c) in the case of any Asset Sale, the outstanding principal
amount of, and the premium or penalty, if any, and any accrued and
unpaid interest on, any Indebtedness (other than the Notes, the loans
made by the NTFC Lenders pursuant to the terms of the NTFC Loan
Agreement and any intercompany Indebtedness) that is secured by a Lien
on the property and assets subject to such Asset Sale and is required
to be repaid under the terms thereof as a result of such Asset Sale;
and
(d) in the case of any Asset Sale, the amount required to be
reserved, in accordance with generally accepted accounting principles
in effect on the date on which the Net Cash Proceeds from such Asset
Sale are calculated, and so reserved against liabilities under
indemnification obligations, liabilities related to environmental
matters or other similar contingent liabilities associated with the
property and assets subject to such Asset Sale that are required to be
so provided for under the terms of the documentation for such Asset
Sale;
II-12
in each case to the extent, but only to the extent, that the amounts so
deducted are, at the time of receipt of such cash, actually paid to a
Person that is not an Affiliate of such Person and are properly
attributable to such transaction or to the property or asset that is the
subject thereof.
"1996 FLEXIBLE INCENTIVE PLAN" means the stock incentive plan of the
Company pursuant to which options for up to 3,561,000 shares of common
stock of the Company may from time to time be granted or sold to key
employees of the Company and its Subsidiaries in order to retain or to
create an incentive for such key employees.
"NON-VOTING EQUITY INTERESTS" has the meaning specified in Section
8.10(b).
"NOTE DOCUMENTS" means, collectively, this Agreement, the Other
Agreements, the Notes, the Collateral Documents, the Intercreditor
Agreement, the Fee Letter, and all other agreements and instruments
evidencing any Obligation of the Company or any of the other Obligors
secured by the Collateral Documents, in each case as such agreement,
instrument or other document may be amended, supplemented or otherwise
modified hereafter from time to time in accordance with the terms thereof
and Section 16.
"NOTES" has the meaning specified in Section 1.
"NOTICE OF SALE AND PURCHASE" has the meaning specified in Section
2.2.
"NTFC" means NTFC Capital Corporation, a Delaware corporation.
"NTFC COLLATERAL" means all of the property and assets of the Obligors
(other than any equipment of the Company or any of its Subsidiaries located
outside of the United States of America) pledged to NTFC, or in which NTFC
has been or is purported to have been granted a lien and security interest,
pursuant to the terms of the NTFC Loan Documents, as in effect from time to
time prior to the Additional Availability Date, including, without
limitation, all of the shares of common stock of the Company pledged by the
Shareholders, all of the equipment of the Company located in any state of
the United States of America and subject thereto and all proceeds of the
foregoing.
"NTFC LENDERS" means NTFC and the other holders, if any, of the
promissory notes originally issued to NTFC under the NTFC Loan Agreement.
"NTFC LOAN AGREEMENT" means that certain Amended and Restated
Equipment Loan and Security Agreement dated as of March 27, 1997 between
NTFC and the Company, as such agreement may have been amended, supplemented
or otherwise modified through the Initial Purchase Date.
"NTFC LOAN DOCUMENTS" means, collectively, the NTFC Loan Agreement,
the promissory notes issued thereunder from time to time, the security
agreements and pledge agreements under which the liens and security
interests in favor of NTFC, on behalf of itself and the other NTFC Lenders,
have been or hereafter are to be granted, in each case as such agreement or
instrument may have been amended, supplemented or otherwise modified
through the Initial Purchase Date.
II-13
"OBLIGATION" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether or
not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 11.1(g). Without limiting the generality
of the foregoing, the Obligations of the Obligors under the Note Documents
include the obligation to pay principal, interest, premiums, charges,
expenses, fees, attorneys' fees and disbursements, indemnities and other
amounts payable by any of the Obligors under any of the Note Documents.
"OBLIGORS" means, collectively, the Company, each of the Shareholders
and each Subsidiary of the Company that becomes party to any pledge
agreement, security agreement, mortgage, charge or other similar document
or any guarantee after the date of this Agreement pursuant to Section 8.10.
"OFFICER'S CERTIFICATE" means, with respect to any Person, a
certificate executed on behalf of such Person by its chairman of the board
(if an officer), its president or one of its vice presidents or a Senior
Financial Officer thereof (or persons performing similar functions to the
foregoing); PROVIDED that each Officer's Certificate shall include (a) a
statement that the officer making or giving such Officer's Certificate has
read the provisions of this Agreement or the other Note Document requiring
the delivery thereof and any definitions or other provisions contained in
this Agreement relating thereto, (b) a statement that, in the opinion of
the signer, he has made or has caused to be made such examination or
investigation as is necessary to enable him to express an informed opinion
as to whether or not such term or condition has been satisfied or complied
with or the certifications required to be made therein are complete and
accurate, (c) a statement as to whether, in the opinion of the signer, such
term or condition has been satisfied or complied with and (d) all other
statements and determinations required by the related terms and conditions
giving rise to the delivery of such Officer's Certificate.
"OTHER AGREEMENTS" has the meaning specified in Section 2.1.
"OTHER PURCHASERS" has the meaning specified in Section 2.1.
"OTHER TAXES" has the meaning specified in Section 14.3(b).
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA, or any successor thereto.
"PERMITTED LIENS" means the following types of Liens (excluding any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA, any such Lien relating to or imposed in
connection with any Environmental Action and any such Lien expressly
prohibited by the applicable terms of any of the Collateral Documents), in
each case as to which no enforcement, collection, execution, levy or
foreclosure proceeding shall have been commenced:
II-14
(a) Liens for taxes, assessments and governmental charges or
levies the payment of which is not, at the time, required under
Section 8.5(a);
(b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's, storage and repairmen's Liens and other similar
Liens arising in the ordinary course of business and securing
obligations (other than Indebtedness for borrowed money) (i) that are
not overdue for a period of more than 30 days or (ii) the amount,
applicability or validity of which are being contested in good faith
and by appropriate proceedings diligently conducted and with respect
to which the Company or any of its Subsidiaries, as the case may be,
has established reserves in accordance with generally accepted
accounting principles in effect from time to time;
(c) pledges or deposits to secure obligations incurred in the
ordinary course of business under workers' compensation laws,
unemployment insurance laws or other similar social security
legislation (other than in respect of Employee Benefit Plans) or to
secure public or statutory obligations;
(d) Liens securing the performance of, or payment in respect of,
bids, tenders, government contracts (other than for the repayment of
borrowed money), surety and appeal bonds and other obligations of a
similar nature incurred in the ordinary course of business;
(e) any interest or title of a lessor or sublessor and any
restriction or encumbrance to which the interest or title of such
lessor or sublessor may be subject that is incurred in the ordinary
course of business and that, either individually or when aggregated
with all other Permitted Liens in effect on any date of determination,
could not be reasonably expected to have a Material Adverse Effect;
(f) Liens arising solely from precautionary filings of financing
statements (or the equivalent thereof) under the Uniform Commercial
Code (or any similar law or statute) of the applicable jurisdictions
relating to operating leases otherwise permitted under the terms of
the Note Documents;
(g) Liens in favor of customs and revenue authorities arising as
a matter of law or pursuant to a bond to secure payment of customs
duties in connection with the importation of goods;
(h) Liens arising out of judgments or awards that do not
constitute an Event of Default under Section 11.1(h), 11.1(i) or
11.1(j) and in respect of which the Company or any of its Subsidiaries
subject thereto shall be prosecuting an appeal or proceedings for
review in good faith and, pending such appeal or proceedings, shall
have secured within 10 days after the entry thereof a subsisting stay
of execution and shall be maintaining reserves, in accordance with
generally accepted accounting principles in effect from time to time,
with respect to any such judgment or award; and
(i) easements, rights of way, zoning restrictions and other
encumbrances and similar restrictions on title to, or the use of, real
property that do not, either individually
II-15
or in the aggregate, materially and adversely affect either the use of
such real property for its intended purposes or the conduct of the
business of the Company or any of its Subsidiaries in the ordinary
course.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"PLAN" means a Single Employer Plan or a Multiple Employer Plan.
"PRESENT VALUE" has the meaning specified in Section 3 of ERISA.
"PROPERTY" or "PROPERTIES" means, unless otherwise expressly stated in
this Agreement, real or personal property of any kind, tangible or
intangible, ▇▇▇▇▇▇ or inchoate.
"PUC" means the public utilities commission (or similar Governmental
Authority) for any jurisdiction in which the Company or any of its
Subsidiaries owns or leases and operates any of its property and assets or
conducts any of its business, or any successor thereto, including, without
limitation, the New York Public Service Commission.
"PURCHASE DATE" has the meaning specified in Section 2.2.
"QPAM" has the meaning specified in Section 6.3(e).
"REFINANCING" means the private placement or public offering and sale
by the Company of senior or subordinated notes or debentures of the Company
in order to refinance all of the Obligations owing under or in respect of
the Notes.
"REQUIRED HOLDERS" means, at any time, the holders of at least a
majority in interest of the aggregate principal amount of all of the Notes
outstanding at such time (excluding from any calculation thereof any Notes
then owned or held by the Company or any of its Subsidiaries or other
Affiliates).
"REQUIREMENTS OF LAW" means, with respect to any Person, all laws,
constitutions, statutes, treaties, ordinances, rules and regulations, all
orders, writs, decrees, injunctions, judgments, determinations or awards of
an arbitrator, a court or any other Governmental Authority, and all
Governmental Authorizations, binding upon or applicable to such Person or
to any of its properties, assets or businesses.
"RESPONSIBLE OFFICER" means any Senior Financial Officer of the
Company or any other officer of the Company or any of its Subsidiaries
responsible for overseeing the administration of, or reviewing compliance
with, all or any portion of this Agreement or any of the other Note
Documents.
"RESTRICTED PAYMENT" means (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of capital stock
of (or other ownership or profit interests in) the Company or any of its
Subsidiaries, now or hereafter outstanding, (b) any repurchase,
II-16
redemption, retirement, defeasance, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares
of any class of capital stock of (or other ownership or profit interests
in) the Company or any direct or indirect parent of the Company, now or
hereafter outstanding, (c) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights for the
purchase or acquisition of shares of any class of capital stock of (or
other ownership or profit interests in) the Company or any direct or
indirect parent of the Company, now or hereafter outstanding, (d) any
return of capital to any shareholders or other equity holders of the
Company or any of its Subsidiaries, or any other distribution of property,
assets, shares of capital stock (or other ownership or profit interests),
warrants, rights, options, obligations or securities thereto as such or (e)
the payment of any management fees or any other fees or expenses (including
the reimbursement thereof by the Company or any of its Subsidiaries)
pursuant to any management, consulting or other services agreement to any
of the Shareholders of the Company or any of its Subsidiaries or other
Affiliates or to any other Subsidiaries or Affiliates or the Company.
"SECURED PARTIES" means the Collateral Agent, you, the Other
Purchasers, if any, the other holders of the Notes and the other Persons,
if any, the Obligations owing to which are or are purported to be secured
by the Collateral under the terms of the Collateral Documents.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR FINANCIAL OFFICER" means, with respect to any Person, the
chief financial officer, the principal accounting officer, the treasurer or
the controller of such Person.
"SEPARATE ACCOUNT" has the meaning specified in Section 3 of ERISA.
"SERIES A PREFERRED STOCK" means the Redeemable Convertible Preferred
Stock, Series A, of the Company, par value $0.01 per share, issued
initially to Princes Gate Investors II, L.P. pursuant to the Convertible
Preferred Stock Purchase Agreement and the amendment to the certificate of
incorporation of the Company dated as of November 1, 1996.
"SHAREHOLDER PLEDGE AGREEMENTS" has the meaning specified in Section
3.1(b).
"SHAREHOLDERS" means, collectively, ▇▇. ▇▇▇▇▇▇ ▇▇▇▇, Mr. ▇▇▇▇▇▇ ▇▇▇▇
and ▇▇. ▇▇▇▇ ▇▇▇▇▇ and any other Person that becomes or is required to
become a party to one or more of the Shareholder Pledge Agreements pursuant
to the terms thereof.
"SINGLE EMPLOYER PLAN" means a single employer plan (as defined in
Section 4001(a)(15) of ERISA) that (a) is maintained for employees of the
Company or any ERISA Affiliate and no Person other than the Company and the
ERISA Affiliates or (b) was so maintained and in respect of which the
Company or any ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"SOLVENT" and "SOLVENCY" mean, with respect to any Person on any date
of determination, that, on such date:
II-17
(a) the fair value of the property and assets of such Person is
greater than the total amount of liabilities (including, without
limitation, contingent liabilities) of such Person;
(b) the present fair salable value of the property and assets of
such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become
absolute and matured;
(c) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay
such debts and liabilities as they mature; and
(d) such Person is not engaged in business or in a transaction,
and is not about to engage in business or in a transaction, for which
such Person's property and assets would constitute an unreasonably
small capital.
The amount of contingent liabilities at any time shall be computed as the
amount that, in the light of all of the facts and circumstances existing at
such time, represents the amount that could reasonably be expected to
become an actual or matured liability.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or any
of its Subsidiaries that is subordinated in right of payment to the Notes
or the other Obligations of such Subsidiary under or in respect of the Note
Documents, if any.
"SUBSIDIARY" means, with respect to any Person at any time, any
corporation, partnership, joint venture, limited liability company, trust
or estate of which (or in which) more than 50% of:
(a) the issued and outstanding shares of capital stock having
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time shares of
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency);
(b) the interest in the capital or profits of such partnership,
joint venture or limited liability company; or
(c) the beneficial interest in such trust or estate,
is, at such time, directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one
or more of such Person's other Subsidiaries.
"TAXES" has the meaning specified in Section 14.3(a).
"TERMINATION EVENT" means:
(a) (i) the occurrence of a reportable event, within the meaning
of Section 4043(c) of ERISA, with respect to any Plan unless the
30-day notice requirement with respect to such event has been waived
by the PBGC or (ii) the requirements of
II-18
paragraph (1) of Section 4043(b) of ERISA (without regard to paragraph
(2) of such Section) are met with respect to a contributing sponsor,
as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event
described in paragraph (9), (10), (11), (12) or (13) of Section
4043(c) of ERISA could reasonably be expected to occur with respect to
such Plan within the following 30 days;
(b) the application for a minimum funding waiver with respect to
a Plan;
(c) the provision by the administrator of any Plan of a notice
of intent to terminate such Plan pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA);
(d) the cessation of operations at a facility of the Company or
any ERISA Affiliate in the circumstances described in Section 4062(e)
of ERISA;
(e) the withdrawal by the Company or any ERISA Affiliate from a
Multiple Employer Plan during a plan year for which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for the imposition of a lien under
Section 302(f) of ERISA shall have been met with respect to any Plan;
(g) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA;
or
(h) the institution by the PBGC of proceedings to terminate a
Plan pursuant to Section 4042 of ERISA, or the occurrence of any event
or condition described in Section 4042 of ERISA, that constitutes
grounds for the termination of, or the appointment of a trustee to
administer, a Plan.
"VOTING EQUITY INTERESTS" has the meaning specified in Section
8.10(b).
"VOTING INTERESTS" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for
the election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of
such a contingency.
"WITHDRAWAL LIABILITY" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.