RUS Project Designation:
PENNSYLVANIA 1101-A31
LOAN AND SECURITY AGREEMENT
dated as of June 1, 2005
between
PEGASUS RURAL BROADBAND, LLC
and
THE UNITED STATES OF AMERICA
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL UTILITIES SERVICE
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement,") dated as of
June 1, 2005, is between PEGASUS RURAL BROADBAND, LLC ("Borrower,") a limited
liability company existing under the laws of Delaware, and the UNITED STATES OF
AMERICA, acting through the Administrator of the Rural Utilities Service
("RUS.")
The Borrower has applied for financial assistance ("Application")
to RUS, requesting financial assistance from RUS to finance broadband services
in rural areas.
RUS is willing to extend financial assistance, in the form of a
loan to the Borrower, pursuant to Title VI of the Rural Electrification Act of
1936 (7 U.S.C. 901 et seq.,) and all applicable federal regulations, on the
terms and conditions stated herein.
The Borrower is willing to secure the loan and its other
obligations to RUS on the terms stated herein.
THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties agree and bind themselves as follows:
ARTICLE I - DEFINITIONS
The terms defined herein include both the plural and the singular.
Unless otherwise specifically provided, all accounting terms not otherwise
defined herein shall have the meanings assigned to them, and all determinations
and computations herein provided for shall be made in accordance with Accounting
Requirements.
"Accounting Requirements" shall mean the system of accounting
prescribed by RUS in RUS Regulations.
"Advance" or "Advances" shall mean an advance or advances made by
RUS under the Note(s).
"Affiliate" or "Affiliated Company" of any specified person or
entity means any other person or entity directly or indirectly controlling of,
controlled by, under direct or indirect common control with, or related to, such
specified person or entity. For the purpose of this definition, "control" of any
specified person or entity means the power to direct the management and policies
of such specified person or entity, directly or indirectly, whether through the
ownership of stock, by contract, or otherwise.
"Application" shall have the meaning as defined in the second
paragraph hereof.
"Business Day" shall mean any day that RUS and the Department of
Treasury are both open for business.
"Collateral" shall mean any and all property pledged as security
for the Loan and other amounts owing to RUS under the Loan Documents, including,
without limitation, the property described in Article IV and on Schedule 2.
"Distribution" shall have the meaning as defined in Section 7.10.
"Event of Default" shall have the meaning as defined in Article
IX.
"Expiration Date" shall have the meaning as defined in Paragraph
(c) of Section 3.1.
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"Interest Expense" shall have the meaning as defined in
Attachment 3.
"Laws" shall have the meaning as defined in paragraph (e) of
Article II.
"Loans" shall mean the loans described in Section 3.1.
"Loan Documents" shall mean, collectively, this Agreement,
Security Documents and the Note(s).
"Material Adverse Effect" shall mean a material adverse effect on,
or change in, the condition, financial or otherwise, operations, properties,
business or prospects of the Borrower or on the ability of the Borrower to
perform its obligations under the Loan Documents as determined by RUS.
"Net Income" or "Net Margins" shall have the meaning as defined in
Attachment 3.
"Net Worth" shall have the meaning as defined in Attachment 3.
"Note(s)" shall have the meaning as defined in Paragraph (a) of
Section 3.2.
"Obligations" shall mean any and all indebtedness, obligations and
liabilities of the Borrower to RUS, of every kind and description, direct or
indirect, secured or unsecured, joint or several, absolute or contingent, due or
to become due, whether for payment or performance, now existing or hereafter
arising, howsoever evidenced or created, including, without limitation, all
loans (including any loan by renewal or extension); all indebtedness, all Notes,
all undertakings to take or refrain from taking any action; and all interest,
taxes, fees, charges, expenses, and attorney's fees chargeable to Borrower or
incurred by RUS under this Agreement or in any other document or instrument
delivered hereunder or as a supplement hereto.
"Permitted Encumbrances" shall mean:
(1) liens for taxes, assessments and other governmental
charges which are not delinquent;
(2) liens for taxes, assessments and other governmental
charges already delinquent which are currently being
contested in good faith by appropriate proceedings;
PROVIDED the Borrower shall have set aside on its books
adequate reserves with respect thereto;
(3) mechanics', workmen's, repairmen's, materialmen's,
warehousemen's and carriers' liens and other similar liens
arising in the ordinary course of business and which are
not delinquent, or which are being contested in good faith
and have not proceeded to judgment; PROVIDED the Borrower
shall have set aside on its books adequate reserves with
respect thereto;
(4) liens in respect of judgments or awards with respect to
which the Borrower shall in good faith currently be
prosecuting an appeal or proceedings for review and with
respect to which the Borrower shall have secured a stay of
execution pending such appeal or proceedings for review;
PROVIDED the Borrower shall have set aside on its books
adequate reserves with respect thereto;
(5) liens or privileges of any employees of the Borrower for
salary or wages earned but not yet payable;
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(6) any obligations or duties, affecting the property of the
Borrower, to any municipality or governmental or other
public authority with respect to any franchise, grant,
license or permit;
(7) any right which any municipal or governmental authority
may have by virtue of any franchise, license, contract or
statute to purchase, or designate a purchaser of or order
the sale of, any property of the Borrower upon payment of
cash or reasonable compensation therefor or to terminate
any franchise, license or other rights or to regulate the
property and business of the Borrower; PROVIDED, HOWEVER,
that nothing in this clause 7 is intended to waive any
claim or rights that RUS may otherwise have under Federal
laws;
(8) any lien required by law or governmental regulations as a
condition to the transaction of any business or the
exercise of any privilege or license, or to enable the
Borrower to maintain self-insurance or to participate in
any fund established to cover any insurance risks or in
connection with workmen's compensation, unemployment
insurance, old age pensions or other social security, or
to share in the privileges or benefits required for
companies participating in such arrangements; PROVIDED,
HOWEVER, that nothing in this clause 8 is intended to
waive any claim or rights that RUS may otherwise have
under Federal laws; and
(9) liens arising out of any defeased mortgage or indenture of
the Borrower.
"Pledged Deposit Account" shall have the meaning as defined in
Section 6.4.
"Project" shall have the meaning as defined in Paragraph (a) of
Section 3.4.
"RUS Regulations" shall mean the rules, regulations and bulletins
of general applicability published by RUS from time to time, as such rules,
regulations and bulletins exist at the date of applicability thereof, and shall
also include any rule and regulations of other Federal entities which RUS is
required by law to implement. Any reference to specific RUS Regulations shall
mean the version of and cite to such regulation effective at the date of
applicability thereof.
"Security Documents" shall mean, collectively, any mortgage,
security agreement, financing statement, deposit account control agreement or
other document providing collateral for the Loan.
"Service Rates" shall mean the rates charged for data, video,
voice or any other service proposed in the Application.
"Subsidiaries" shall mean the subsidiaries listed in Schedule 1.
"TIER" shall mean the Borrower's total Net Income or Net Margins
plus Interest Expense payable for any year divided by Interest Expense payable
for such year, as determined in Schedule 1 hereto.
"TIER Commencement Date" shall have the meaning as defined in
Section 6.11.
"Total Assets" shall have the meaning as defined in Attachment 3.
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ARTICLE II - REPRESENTATIONS AND WARRANTIES
Recognizing that RUS is relying hereon, the Borrower represents
and warrants, as of the date of this Agreement, as follows:
(a) Organization; Power, Etc The Borrower: (i) is the type of
organization specified in the first paragraph hereof, duly
organized, validly existing, and in good standing under
the laws of the State identified in the first paragraph
hereof; (ii) is duly qualified to do business and is in
good standing in each jurisdiction in which the
transaction of its business make such qualification
necessary; (iii) has legal power to own and operate its
assets and to carry on its business and to enter into and
perform its obligations under the Loan Documents; (iv) has
duly and lawfully obtained and maintained all material
licenses, certificates, permits, authorizations and
approvals necessary to conduct its business or required by
applicable Laws; and (v) is eligible to obtain the
financial assistance from RUS contemplated by the
Agreement.
(b) Authority. The execution, delivery and performance by the
Borrower of this Agreement and the other Loan Documents
and the performance of the transactions contemplated
hereby and thereby have been duly authorized by all
necessary actions and do not violate any provision of law
or any charter, articles of incorporation, organization
documents or bylaws of the Borrower or result in a breach
of, or constitute a default under, any agreement, security
agreement, note or other instrument to which the Borrower
is a party or by which it may be bound. The Borrower has
not received any notice from any other party to any of the
foregoing that a default has occurred or that any event or
condition exists that with the giving of notice or lapse
of time or both would constitute such a default.
(c) Consents. No consent, approval, authorization, order,
filing, qualification, license, or permit of any
governmental authority is necessary in connection with the
execution, delivery, performance or enforcement of the
Loan Documents, except such as have been obtained and are
in full force and effect.
(d) Binding Agreement. Each of the Loan Documents is, or when
executed and delivered will be, the legal, valid, and
binding obligation of the Borrower, enforceable in
accordance with its terms, subject only to limitations on
enforceability imposed in equity or by applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally.
(e) Compliance with Laws. The Borrower is in compliance in all
material respects with all federal, state and local laws,
rules, regulations, ordinances, codes and orders
(collectively, "Laws.")
(f) Litigation. There are no pending or threatened legal,
arbitration or governmental actions or proceedings to
which the Borrower is a party or to which any of its
property is subject which, if adversely determined, could
have a Material Adverse Effect.
(g) Information Submitted with Application. All information,
reports, and other documents and data submitted to RUS in
connection with the Application were, at the time the same
were furnished, complete, and correct in all material
respects. Any financial statements or data submitted to
RUS in connection with the Application present fairly, in
all material respects, the financial position of the
Borrower and the results of its operations in conformity
with Accounting Requirements. Since the date thereof,
there has been no material adverse change in the financial
condition or operations of the Borrower. .
(h) Principal Place of Business. The principal place of
business and chief executive office of the Borrower is at
the address of the Borrower specified in Schedule 1
hereto.
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(i) Organization Number. The Borrower's organization number is
correctly identified in Schedule 1 hereto.
(j) Subsidiaries and Parent. Any subsidiaries or parent of the
Borrower are disclosed on the attached Schedule 1.
(k) Defaults Under Other Agreements. No default by the
Borrower has occurred under any agreement or instrument to
which the Borrower is a party or to which any of its
property is subject that could have a Material Adverse
Effect.
(l) Title to Property. Except as disclosed in writing in the
opinion of counsel, the Borrower holds good and marketable
title to all of the Collateral, free and clear of any
liens, security interests or other encumbrances except for
Permitted Encumbrances.
ARTICLE III - THE LOANS
SECTION 3.1 LOAN AMOUNT, INTEREST RATE, AND EXPIRATION DATE.
(a) RUS agrees to make and the Borrower agrees to accept, on
the terms and conditions stated in this Agreement, a loan,
in the amount specified in Schedule 1 hereto ("Loan.")
(b) The portion of the Loan specified in Schedule 1 hereto
will bear interest at the comparable Treasury rate for
comparable maturities, as determined by RUS, and the
portion of the Loan specified in Schedule 1 hereto will
bear interest at the rate of four percent (4%) per annum.
(c) The obligation of RUS to advance the Loan or any portion
of the Loan shall expire on a date ("Expiration Date")
five years from the date of the Note(s). No portion of the
Loan will be advanced by RUS to the Borrower after the
Expiration Date. RUS, in its sole discretion, may approve
an extension of the Expiration Date, provided that the
Borrower notify RUS, in writing at least ten days prior to
the Expiration Date, of the reasons and need for an
extension, together with a suggested revised Expiration
Date.
SECTION 3.2 LOAN DOCUMENTS
(a) The debt created by the Loan will be evidenced by a
note(s) ("Note(s)") executed by the Borrower and payable
to the United States of America. The Borrower shall repay
the Loan in accordance with the Note(s) which shall be
payable and bear interest in accordance with its (their)
terms.
(b) The Borrower shall execute the Security Documents covering
all of the Borrower's property, in form and substance
satisfactory to RUS, and such other security instruments
as required by RUS.
SECTION 3.3 PAYMENT
Except as otherwise prescribed by RUS, the Borrower shall make all
payments on the Note(s) utilizing electronic fund transfer procedures as
specified by RUS.
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SECTION 3.4 PROJECT
(a) Loan Purpose. The Loan has been made solely to finance the
project specifically described in the Application
("Project.")
(b) Changes to Project. The Borrower shall obtain the prior
written approval of RUS for any material change to the
scope, loan design, construction, delivery of services, or
objectives of the Project.
ARTICLE IV - GRANT OF SECURITY INTEREST
To secure the payment and performance of the Obligations, the
Borrower hereby pledges, assigns, and transfers to RUS, and grants to RUS a
continuing security interest in and to all fixtures and personal property,
tangible and intangible, of every kind, nature or description, now owned,
leased, or hereafter acquired by the Borrower, wherever located, including but
not limited to, accounts, chattel paper, documents, instruments, general
intangibles, licenses, permits, equipment, goods, proceeds, products, and
accessions, as well as its right, title and interests in real property, now
owned, leased or hereafter acquired and wherever located, and the property
described in Schedule 2 hereto.
ARTICLE V - CONDITIONS OF LENDING
SECTION 5.1 CONDITIONS PRECEDENT TO LOAN CLOSING
In connection with the execution and delivery of this Agreement,
each of the following conditions shall be satisfied (all documents, certificates
and other evidence of such conditions are to be satisfactory to RUS in its
discretion):
(a) Legal Matters. All legal matters incident to the
consummation of the transactions hereby contemplated shall
be satisfactory to counsel for RUS;
(b) Loan Documents. RUS shall receive duly executed originals
of the Loan Documents;
(c) Filed and Recorded Security Documents. RUS shall have
received executed, filed and indexed financing statements
covering all of the personal property and fixtures of the
Borrower;
(d) Articles of Incorporation, Charter, Bylaws and
Organizational Documents. With respect to corporate and
cooperative Borrowers, RUS shall have received certified
copies of the Borrower's most recent articles of
incorporation or charter and bylaws. With respect to
limited liability companies or similar organizations, RUS
shall have received certified copies of the Borrower's
most recent organization documents containing provisions
reflecting the obligations of the Borrower in paragraphs
(c) and (d) of Section 7.3;
(e) Authorizations. RUS shall have received satisfactory
evidence that all Loan Documents and proceedings of the
Borrower necessary for duly authorizing the execution,
delivery and performance of the Loan Documents have been
obtained and are in full force and effect;
(f) Approvals. RUS shall have received satisfactory evidence
that the Borrower has duly registered when and where
required by law with all state, Federal and other public
authorities and regulatory bodies and obtained all
authorizations, certificates, permits, licenses,
franchises and approvals necessary for, or required as a
condition of, the validity and enforceability of each of
the Loan Documents and for the construction and operation
of the Project;
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(g) Title Evidence. RUS shall have received satisfactory
evidence that the Borrower has good and marketable title
to its property, including the Project, and holds such
franchises, permits, leases, easements, rights,
privileges, licenses, or right-of-way instruments,
reasonably adequate in form and substance, as may be
required by law for the continued maintenance and
operation of the existing facilities and Project; and
(h) Opinion of Counsel. RUS shall receive an opinion of
counsel for the Borrower (who shall be acceptable to RUS)
in form and content acceptable to RUS.
SECTION 5.2 GENERAL CONDITIONS PRECEDENT TO RUS' OBLIGATIONS TO RELEASE FUNDS
FOR ADVANCE
The obligations of RUS hereunder are subject to the satisfaction
of each of the following conditions precedent (all documents, certificate and
other evidence of such conditions are to be satisfactory to RUS in its
discretion):
(a) Service Rate Evidence. RUS shall have received
satisfactory evidence that the Borrower has duly adopted
Service Rates for all proposed services which are designed
with a view to (i) paying and discharging all taxes,
maintenance expenses, and operating expenses of the
Borrower, (ii) making all payments in respect of principal
and interest on the Note(s) when and as the same shall
become due, (iii) providing and maintaining reasonable
working capital of the Borrower, and (iv) producing and
maintaining the TIER specified in Schedule 1 hereto;
(b) Fidelity Bond or Theft Insurance Coverage. RUS has
received from the Borrower, except Borrowers which are
units of government, evidence, satisfactory to RUS, that
the Borrower has obtained fidelity bond or theft insurance
coverage, as required by RUS Regulations at 7 C.F.R. 1788,
identifying RUS as a loss payee, from a surety doing
business with the United States listed in 31 CFR Part 223,
in the amount specified in Schedule 1, covering all
officers, employees, or agents of the Borrower authorized
to receive, disburse, or receive and disburse the Loan;
(c) Compliance with Deposit Requirements. RUS has received
from the Borrower evidence, satisfactory to RUS, that the
Borrower (i) has on deposit in an account, equity funds,
in the amount specified in Schedule 1, to cover one year's
anticipated operating expenses, in accordance with 7
C.F.R. Section 1738.20(b) and (ii) has, or upon release of
the initial advance of funds hereunder, will have on
deposit in an account, equity funds in the amount
specified in Schedule 1, to be applied against operating
expenses for subsequent periods. The Borrower shall
provide RUS with a schedule of the anticipated application
of funds deposited in accordance with clause (i) of this
paragraph.
(d) Current Financial Information and Certificate of
Authority. RUS has received from the Borrower (i) its
current updated balance sheet, statement of cash flow, and
income statement and (ii) a duly authorized and executed
certification, Form 675, "Certification of Authority,"
designating an officer, employee, or agent of the Borrower
as the person or persons authorized to execute and submit,
on behalf of the Borrower, REA Form 481, "Financial
Requirement Statement."
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SECTION 5.3 CONDITIONS TO INDIVIDUAL ADVANCES
The obligations of RUS to approve any Advance of the Loan is
subject to the satisfaction of each of the following conditions precedent on or
before the date of such Advance (all documents, certificates and other evidence
of such conditions precedent are to be satisfactory to RUS in its discretion):
(a) Continuing Representations and Warranties. That the
representations and warranties of the Borrower contained
in this Agreement be true and correct on and as of the
date of such Advance as though made on and as of such
date;
(b) Material Adverse Effect. That no event has occurred which
has had or could have a Material Adverse Effect;
(c) Event of Default. That no Event of Default and no event
which with the passage of time or giving of notice, or
both, would constitute an Event of Default shall have
occurred and be continuing, or shall have occurred after
giving effect to any Advances on the books of the
Borrower;
(d) Requisitions and Supporting Documentation. That RUS shall
have received a requisition, not more frequently than once
a month, and supporting documentation from the Borrower in
accordance with Rural Utilities Service RUS Bulletin
1738-2, Rural Broadband Access Loan and Loan Guarantee
Advance and Construction Procedures Guide, as amended and
supplemented from time to time (hereinafter "RUS Bulletin
1738-2,") attached hereto as Attachment 1 or available at
▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇/▇▇▇/▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇/▇▇▇-▇▇▇▇▇▇▇▇-
1738-2;
(e) Certification of Reimbursement. That RUS shall have
received a certification in the form of Exhibit A,
confirming that the requested advance is for the
reimbursement of funds spent on approved loan purposes;
(f) Flood Insurance. That for any Advance used in whole or in
part to finance the construction or acquisition of any
building in any area identified by the Secretary of
Housing and Urban Development pursuant to the Flood
Disaster Protection Act of 1973 (the "Flood Insurance
Act") or any rules, regulations or orders issued to
implement the Flood Insurance Act as any area having
special flood hazards, or to finance any facilities or
materials to be located in any such building, or in any
building owned or occupied by the Borrower and located in
such a flood hazard area, the Borrower shall have
submitted evidence, in form and substance satisfactory to
RUS or RUS has otherwise determined, that (i) the
community in which such area is located is then
participating in the national flood insurance program, as
required by the Flood Insurance Act and any related
regulations, and (ii) the Borrower has obtained flood
insurance coverage with respect to such building and
contents as may then be required pursuant to the Flood
Insurance Act and any related regulations.;
(g) Current Financial Information. That RUS has received from
the Borrower its current, updated balance sheet, statement
of cash flow, and income statement;
(h) Compliance with Deposit Requirements. RUS has received
from the Borrower, evidence, satisfactory to RUS, that the
funds required to be on deposit in accordance with Section
5.2(c) have been applied solely for the purposes for which
they were deposited, or if otherwise, with the approval of
RUS.
(i) Compliance with Loan Documents. That the Borrower is in
material compliance with the Loan Documents;
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(j) Additional Documents. The Borrower agrees to provide RUS
with such additional documents as RUS may request; and
(k) Additional Conditions. The Borrower has met all additional
conditions specified in Schedule 1 hereto.
SECTION 5.4 FIRST ADVANCE TO PAY OFF INTERIM FINANCING; RESTRICTIONS ON
SUBSEQUENT ADVANCES
Loan funds to pay off RUS-approved interim financing, if any, will
be included in the first loan advance. Thereafter no further advances will be
made unless and until the Borrower has furnished evidence, in form and content
satisfactory to RUS, that such interim financing has been paid in full and any
associated liens have been duly discharged of record.
ARTICLE VI - AFFIRMATIVE COVENANTS
SECTION 6.1 GENERALLY
Unless otherwise agreed to in writing by RUS, while this Agreement
is in effect, the Borrower shall duly observe each of the affirmative covenants
contained in this Article VI.
SECTION 6.2 USE OF ADVANCES
The Borrower shall apply the proceeds of Advances in accordance
with its Application with such modifications as may be mutually agreed to in
writing by RUS and the Borrower.
SECTION 6.3 UNUSED AND DISALLOWED ADVANCES
(a) The Borrower shall return to RUS forthwith all or any
advanced portion of the Loan not disbursed by the Borrower
for the Project or not needed to complete the Project with
any interest earned thereon when deposited in the Pledged
Deposit Account or other account approved by RUS.
(b) The Borrower shall reimburse RUS for any advanced funds
whose original expenditure has been disallowed by a RUS
loan audit. Disallowances shall be satisfied, as directed
by RUS, by either administrative offset against requests
for Advances or repaying the disallowed amount directly to
the United States Treasury. Such disallowed amounts shall
accrue interest payable to RUS from the date RUS delivers
to the Borrower a written demand for payment. Interest
shall accrue at the lesser of the following: the interest
rate of the disallowed Advance or the then current United
States Treasury rate as prescribed by the Secretary of the
Treasury in the Federal Register and the Treasury Fiscal
Requirements Manual Bulletin. Closeout of the Loan will
not affect the right of RUS to disallow expenditures and
recover, in full, any amount on the basis of a subsequent
audit or other review or the Borrower's obligation to
return any disallowed expenditures.
SECTION 6.4 DEPOSIT OF ADVANCES INTO PLEDGED DEPOSIT ACCOUNT
(a) The Borrower, when directed in writing by RUS, shall open
and maintain a deposit account pledged to RUS ("Pledged
Deposit Account,") in a bank or depository whose deposits
are insured by the Federal Deposit Insurance Corporation
or other federal agency acceptable to RUS and shall be
designated by the RUS name of the Borrower followed by the
words "Pledge Deposit Account." The Borrower shall, when
directed in writing by RUS, promptly deposit (i) proceeds
from such Advances, as may be directed by RUS, (ii)
previously advanced funds whose original expenditure has
been disallowed by a RUS loan audit, and (iii) the funds
described on Schedule 1 hereto as "Additional Funds" into
the Pledged Deposit Account. Moneys in the Pledged Deposit
Account shall be used solely for the purposes for which
the Advance was made, for the purposes as set forth in
Schedule 1 hereto (hereinafter "Additional Purposes,") or
for such other purposes as may be approved by RUS.
Deposits and disbursements from the Pledged Deposit
Account shall be made and recorded in accordance with
Attachment 1 hereto, RUS Bulletin 1738-2, as amended and
supplemented from time to time.
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(b) First Lien on Pledged Deposit Account. The Borrower shall
establish and maintain the Pledged Deposit Account as a
deposit account and perfect a first and prior lien in such
account for RUS, (pursuant to a deposit account agreement
or similar agreement or mechanism for perfecting as
provided by applicable law) in form acceptable to RUS.
(c) Construction Fund Account. The Borrower shall promptly
deposit Loan Advances not required to be deposited in a
Pledged Deposit Account, including previously advanced
Loan funds whose original expenditures has been disallowed
by a RUS loan fund audit, in a bank or depository whose
deposits are insured by the Federal Deposit Insurance
Corporation or other federal agency acceptable to RUS.
Such account (hereinafter the "Construction Fund Account")
shall be designated by the corporate name of the Borrower
followed by the words "Construction Fund Account." Moneys
in the Construction Fund Account shall be used solely for
the approved purposes for which they were advanced.
Deposits and disbursements from the Construction Fund
Account shall be made and recorded in accordance with
Attachment 1 hereto, RUS Bulletin 1738-2, as amended and
supplemented from time to time.
SECTION 6.5 USE OF OPERATING FUNDS
The Borrower shall expend the funds on deposit in accordance with
Section 5.2(c) solely for the purposes approved by RUS, and shall provide RUS
with a schedule for the expenditure of funds deposited to comply with 7 C.F.R.
Section 1738.20(b).
SECTION 6.6 FINANCIAL BOOKS
The Borrower shall maintain, at its premises, such books,
documents, papers, or other records and supporting documents, including, but not
limited to, invoices, receipts, and bills of sale, adequate to identify the
purposes for which, and the manner in which Loan and other funds were expended
on the Project. The Borrower shall at all times keep, and safely preserve,
proper books, records and accounts in which full and true entries shall be made
of all dealings, business, and affairs of the Borrower and its Subsidiaries, in
accordance with any applicable Accounting Requirements. The Borrower shall
maintain copies of all documents submitted to RUS in connection with the Loan
until the Loan has been paid in full and all audits have been completed.
SECTION 6.7 RIGHTS OF INSPECTION
The Borrower shall afford RUS, the Office of the Inspector General
of USDA, and the General Accounting Office, through their representatives,
reasonable opportunity, at all times during business hours and upon prior
notice, to have access to and right to inspect the Project, any other property
encumbered by the Security Documents, and any and all books, records, accounts,
including electronic books, records, accounts and electronic mail messages,
regardless of the physical form or characteristics, invoices, contracts, leases,
payrolls, canceled checks, statements, and other documents, and papers of every
kind belonging to or in any way pertaining to its property or business,
including its Subsidiaries, if any, and to make copies or extracts therefrom.
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SECTION 6.8 ANNUAL AND SPECIAL FINANCIAL REPORTS
(a) One hundred twenty (120) days from the end of the
Borrower's fiscal year in which the first Advance is made
and, thereafter, one hundred twenty (120) days from the
close of each fiscal year of the Borrower, the Borrower
shall cause to be prepared and furnished to RUS a full and
complete annual report of its financial condition and of
its operations in form and substance satisfactory to RUS,
and as provided in 7 C.F.R. 1773, which is audited and
certified by an independent certified public accountant
satisfactory to RUS and accompanied by a report of such
audit in form and substance satisfactory to RUS.
(b) The Borrower shall also furnish to RUS fifteen (15)
Business Days after the end of each calendar year quarter,
and on such additional dates as specified in Schedule 1
(hereinafter "Additional Reporting Dates,") or as
otherwise requested in writing by RUS, balance sheets,
income statements, statements of cash flow, or such other
reports concerning the financial condition or operations
of the Borrower, including its Subsidiaries, as RUS may
request or RUS Regulations require.
SECTION 6.9 ANNUAL COMPLIANCE CERTIFICATE
Commencing forty-five (45) days from the date hereof, and
thereafter, within forty-five (45) days after the close of each calendar year,
or more often if required in writing by RUS, the Borrower shall deliver to RUS a
written statement signed by its general manager, managing member, or equivalent
corporate official satisfactory to RUS, stating that, during such year the
Borrower has fulfilled its obligations under the Loan Documents throughout such
year in all material respects or, if there has been a material default in the
fulfillment of such obligations, specifying each such default known to such
official and the nature and status thereof.
SECTION 6.10 MISCELLANEOUS REPORTS AND NOTICES
The Borrower shall furnish to RUS:
(a) Notice of Default. Promptly after becoming aware thereof,
notice of: the occurrence of any default under the Loan
Documents or the receipt of any notice given pursuant to
the Loan Documents with respect to the occurrence of any
event which with the giving of notice or the passage of
time, or both, could become an Event of Default hereunder
or under the other Loan Documents.
(b) Notice of Litigation. Promptly after the commencement
thereof, notice of the commencement of all actions, suits
or proceedings before any court, arbitrator, or
governmental department, commission, board, bureau,
agency, or instrumentality affecting the Borrower or any
Affiliate which, if adversely determined, could have a
Material Adverse Effect on the Borrower.
(c) Regulatory and Other Notices. Promptly after receipt
thereof, copies of any notices or other communications
received from any governmental authority with respect to
any matter or proceeding which could have a Material
Adverse Effect on the Borrower.
(d) Material Adverse Effect. Promptly after becoming aware
thereof, notice of any matter which has resulted or may
result in a Material Adverse Effect on the Borrower.
Page 12
(e) Corporate Document Changes. Thirty (30) days prior to
their effectiveness, any amendments, supplements or
modifications to the Borrower's Articles of Incorporation,
Charter, Bylaws, Operating Agreement, Members Agreements
or other Organizational Documents.
(f) Other Information. Such other information regarding the
condition, financial or otherwise, or operations of the
Borrower as RUS may, from time to time, reasonably
request.
SECTION 6.11 RATES AND FINANCIAL PERFORMANCE CRITERIA
The Borrower shall design, charge and maintain rates in effect
which (i) pay and discharge all taxes, maintenance expenses and operating
expenses of its system (ii) make all payments in respect of principal of and
interest on the Note(s) when and as the same shall become due, (iii) provide and
maintain reasonable working capital for the Borrower, and (iv) maintain the TIER
specified on Schedule 1 hereto commencing on the date specified on Schedule 1
hereto (the "TIER Commencement Date") and ending when the Loan is repaid in
full.
SECTION 6.12 TIER
The Borrower will maintain the TIER specified in Schedule 1
beginning on the TIER Commencement Date until the Loan is paid in full.
SECTION 6.13 CORRECTIVE ACTION
Within thirty (30) days of (i) sending the financial reports
required by Section 6.8 hereof that shows the TIER specified by Section 6.12 was
not achieved for the reported fiscal period or (ii) being notified by RUS that
the TIER specified in Section 6.12 was not achieved for the reported fiscal
period, whichever is earlier, the Borrower, in consultation with RUS, shall
provide a written plan satisfactory to RUS setting forth the actions that shall
be taken to achieve the specified TIER on a timely basis and shall promptly
implement said plan.
SECTION 6.14 OBLIGATIONS WITH RESPECT TO THE CONSTRUCTION, OPERATION AND
MAINTENANCE OF THE PROJECT
(a) Project Management and Operation. The Borrower shall be
responsible for managing the day to day operations of the
Project and will operate the Project in an efficient and
economic manner as well as maintaining the Project in good
repair.
(b) Design Standards, Construction Standards and List of
Material. The Borrower shall use design standards,
construction standards and list of acceptable materials in
accordance with Attachment 1 hereto, RUS Bulletin 1738-2,
as amended and supplemented from time to time.
(c) Plans and Specifications. The Borrower shall submit plans
and specifications for construction to RUS for review and
approval in accordance with Attachment 1 hereto, RUS
Bulletin 1738-2, as amended and supplemented from time to
time.
(d) Standard Forms of Purchase Contracts, Installation
Contracts, Construction Contracts, and Engineering and
Architectural Service Contracts. The Borrower shall use
the standard forms of contracts promulgated by RUS for
construction, procurement, engineering services and
architectural services in accordance with Attachment 1
hereto, RUS Bulletin 1738-2, as amended and supplemented
from time to time, and shall submit to RUS such contracts
for review and approval in accordance with such
Attachment 1.
Page 13
(e) Contract Bidding Requirements. The Borrower shall follow
RUS bidding procedures when contracting for construction
or procurement in accordance with Attachment 1 hereto, RUS
Bulletin 1738-2, as amended and supplemented from time to
time.
(f) Construction in Accordance with Loan Design. The Borrower
shall cause the Project to be constructed and completed in
accordance with the loan design submitted with the
Application.
(g) General Insurance Requirements. The Borrower shall take
out and maintain insurance on the Project and any other
property acquired with the Loan in accordance with 7 CFR
Section 1788 as well as maintaining the fidelity bond or
theft insurance coverage required in Section 5.2(b)
hereof.
SECTION 6.15 PRESERVATION OF EXISTENCE AND RIGHTS
The Borrower shall, until the Loan is repaid in full, take or
cause to be taken all such actions as from time to time may be necessary to
preserve its existence and to preserve and renew all franchises, contracts,
rights of way, easements, permits, and licenses now or hereafter to be granted
or conferred upon it, with respect to the Project, the loss of which would have
a Material Adverse Effect on the Borrower.
SECTION 6.16 COMPLIANCE WITH LAWS
The Borrower shall operate and maintain the Project and its
properties in compliance in all material respects with all applicable Laws.
SECTION 6.17 NONDISCRIMINATION
(a) Equal Opportunity Provisions in Construction Contracts.
The Borrower shall incorporate or cause to be incorporated
into any construction contract, as defined in Executive
Order 11246 of September 24, 1965 and implementing
regulations, which is paid for in whole or in part with
funds obtained from RUS or borrowed on the credit of the
United States pursuant to a grant, contract, loan,
insurance or guarantee, or undertaken pursuant to any RUS
program involving such grant, contract, loan, insurance or
guarantee, the equal opportunity provisions set forth in
Attachment 2 hereto, entitled Equal Opportunity Contract
Provisions.
(b) Equal Opportunity Contract Provisions Also Bind the
Borrower. The Borrower further agrees that it shall be
bound by such equal opportunity clause in any federally
assisted construction work which it performs itself other
than through the permanent work force directly employed by
an agency of government.
(c) Sanctions and Penalties. The Borrower agrees that it shall
cooperate actively with RUS and the Secretary of Labor in
obtaining the compliance of contractors and subcontractors
with the equal opportunity clause and the rules,
regulations and relevant orders of the Secretary of Labor,
that it shall furnish RUS and the Secretary of Labor such
information as they may require for the supervision of
such compliance, and that it shall otherwise assist the
administering agency in the discharge of RUS' primary
responsibility for securing compliance. The Borrower
further agrees that it shall refrain from entering into
any contract or contract modification subject to Executive
Order 11246 with a contractor debarred from, or who has
not demonstrated eligibility for, Government contracts and
federally assisted construction contracts pursuant to Part
II, Subpart D of Executive Order 11246 and shall carry out
such sanctions and penalties for violation of the equal
opportunity clause as may be imposed upon contractors and
subcontractors by RUS or the Secretary of Labor pursuant
to Part II, Subpart D of Executive Order 11246. In
addition, the Borrower agrees that if it fails or refuses
to comply with these undertakings RUS may cancel,
terminate or suspend in whole or in part this Agreement,
may refrain from extending any further assistance under
any of its programs subject to Executive Order 11246 until
satisfactory assurance of future compliance has been
received from the Borrower, or may refer the case to the
Department of Justice for appropriate legal proceedings.
Page 14
SECTION 6.18 BUY AMERICAN
The Borrower shall use or caused to be used in connection with the
expenditures of funds if such funds were obtained in whole or in part by a loan
being made or guaranteed by RUS only such unmanufactured articles, materials,
and supplies as have been mined or produced in the United States or any eligible
country, and only such manufactured articles, material, and supplies as have
been manufactured in the United States or any eligible country substantially all
from articles, material, and supplies mined, produced or manufactured, as the
case may be, in the United States or any eligible country, except to the extent
RUS shall determine that such use shall be impracticable or that the cost
thereof shall be unreasonable. For purposes of this section, an "eligible
country" is any country that has with respect to the United States an agreement
ensuring reciprocal access for United States products and services and United
States suppliers to the markets of that Country, as determined by the United
States Trade Representative.
SECTION 6.19 COLLATERAL TO BE PURCHASED FREE OF ENCUMBRANCES.
Except as specifically authorized in writing in advance by RUS,
the Borrower will purchase all Collateral and all materials, equipment, supplies
and replacements to be incorporated in, or used in connection with the
Collateral outright, and not subject to any conditional sales agreement, chattel
mortgage, bailment lease or other agreement reserving to the seller any right,
title or lien.
SECTION 6.20 BORROWER TO DEFEND TITLE AND REMOVE LIENS
Except as to Permitted Encumbrances, the Borrower will, so long as
any of the Notes are outstanding, maintain and preserve the lien of this
Agreement superior to all other liens affecting the Collateral, and will forever
warrant and defend the title to the Collateral against any and all claims and
demands whatsoever. The Borrower shall make, execute, acknowledge, deliver, file
and record all such mortgages, financing statements, continuation statements,
security agreements, instruments and conveyances as is necessary to preserve the
lien of this Agreement against the Collateral superior to all other liens.
Except as to Permitted Encumbrances, the Borrower will promptly pay or discharge
any and all obligations for or on account of which any such lien or charge might
exist or could be created and any and all lawful taxes, rates, levies,
assessments, liens, claims or other charges imposed upon or accruing upon any of
the Collateral, as and when the same shall become due and payable; and whenever
called upon so to do by RUS will furnish to RUS adequate proof of such payment
or discharge; provided, however that this provision shall not be deemed to
require the payment or discharge of any tax, rate, levy, assessment or other
governmental charge while the Borrower is contesting the validity thereof by
appropriate proceedings in good faith and so long as it shall have set aside on
its books adequate reserves with respect thereto.
SECTION 6.21 FURTHER ASSURANCES
(a) The Borrower shall from time to time upon written demand
of RUS make, execute, acknowledge and deliver or cause to
be made, executed, acknowledged and delivered all such
further and supplemental mortgages, financing statements,
continuation statements, security agreements, instruments
and conveyances as may be requested by RUS and take or
cause to be taken all such further action as may
reasonably be requested by RUS to provide for the securing
and payment of the principal of, interest on, and any and
all other amounts payable hereunder and under the Note(s)
according to the terms thereof and for the purpose of
fully conveying, transferring and confirming the property
hereby conveyed, mortgaged and pledged or intended so to
be, whether now owned by the Borrower or hereafter
acquired by it.
Page 15
(b) The Borrower shall cause this Agreement, financing
statement, continuation statement and every additional
instrument which shall be executed pursuant to subsection
(a) immediately above, to forthwith upon execution to be
filed and recorded and refiled and rerecorded as
conveyances and security interests in real and personal
property in such manner and in such places as may be
required by law or requested by RUS in order fully to
preserve the security for the Loan and to perfect and
maintain the superior lien of this Agreement and all
supplemental security instruments.
SECTION 6.22 ADDITIONAL AFFIRMATIVE COVENANTS
The Borrower shall comply with the additional affirmative
covenants set forth in Schedule 1 hereto.
ARTICLE VII - NEGATIVE COVENANTS
SECTION 7.1 GENERAL
Unless otherwise agreed to in writing by RUS, while this Agreement
is in effect, the Borrower shall duly observe each of the negative covenants set
forth in this Article VII.
SECTION 7.2 MERGER, CONSOLIDATION AND TRANSFER OF PROPERTY
The Borrower shall not, without the prior written consent of RUS,
take or suffer to be taken any steps to reorganize, consolidate with or merge
into any other corporation, or to sell, lease or transfer (or make any agreement
therefor) all or any part of its property, including, without limitation, the
Project.
SECTION 7.3 COVENANTS FOR LIMITED LIABILITY COMPANIES AND SIMILAR BORROWERS
Borrowers which are limited liability or similar organizations
agree that:
(a) The death, retirement, resignation, expulsion,
termination, bankruptcy or dissolution of any member or
the occurrence of any other event that terminates the
continued membership of any member shall not cause the
Borrower to be dissolved or its affairs to be wound up;
(b) Prior to the date on which any and all obligations owed to
RUS, including the Note evidencing the Loan, are
discharged in full, the Borrower shall not be dissolved or
terminated;
(c) The organizational documents of the Borrower shall contain
provisions reflecting the obligations of the Borrower in
paragraphs (a) and (b) immediately above and such
provisions shall not be amended without the prior written
consent of RUS;
(d) No direct or indirect addition, issuance, or transfer of
any membership units (or any other ownership interest) in
the Borrower may be made by the Borrower or its members
without the prior written consent of RUS.
Page 16
SECTION 7.4 ADDITIONAL INDEBTEDNESS
The Borrower shall not, without the prior written consent of RUS,
incur additional secured or unsecured indebtedness other than (i) purchase money
security interests, (ii) unsecured trade indebtedness and (iii) other debt
arising in the ordinary course of business. Indebtedness under items (i), (ii),
and (iii) in the aggregate shall not exceed five percent (5%) of the Borrower's
consolidated total assets.
SECTION 7.5 NEGATIVE PLEDGE
The Borrower shall not create, incur or suffer any lien, mortgage,
pledge, assignment, or other encumbrance on, or security interest on its
property, other than Permitted Encumbrances.
SECTION 7.6 DISPOSAL OF OBSOLETE OR DAMAGED COLLATERAL
So long as the Borrower is not in default hereunder, the Borrower
may, without obtaining the consent of RUS, sell or otherwise dispose of, free
from the lien hereof, any of its property which is neither necessary to, nor
useful for, the operation of the Borrower's business, or which has become
obsolete, worn out, damaged, or otherwise unsuitable for the purposes of the
Borrower; provided, however, that the Borrower shall to the extent necessary:
(1) replace the same with other property of the same kind and nature, or
substitute thereof, which shall be subject to the lien hereof, free and clear of
all prior liens, and apply the proceeds, if any, derived from the sale or
disposition of such property, which are not needed for the replacement thereof,
to the prepayment of the indebtedness on the outstanding Notes; (2) immediately
upon the receipt of the proceeds of any sale or disposition of said property,
apply the entire amount of such proceeds to the prepayment of the indebtedness
evidenced by the Notes; or (3) deposit all or such part of the proceeds derived
from the sale or disposition of said property into such bank accounts as RUS
shall specify, and shall use the same only for such additions to, or
improvements in, the Collateral, on such terms and conditions as RUS shall
specify.
SECTION 7.7 CONTRACTS
The Borrower shall not, without the prior written consent of RUS,
enter into any contract or contracts for the operation or maintenance of all or
any part of its property, including, without limitation, the Project and shall
not enter into any contract for the use by others of all or any part of its
property, including, without limitation, the Project.
SECTION 7.8 SALARIES
Salaries, wages, and other compensation paid by the Borrower for
services, and directors', members', managers' or trustees' fees, shall be
reasonable and in conformity with the usual practice of entities of the size and
nature of the Borrower.
SECTION 7.9 EXTENSION OF CREDIT
Except as specifically authorized in writing in advance by RUS,
the Borrower will make no advance payments or loans, or in any manner extend its
credit, either directly or indirectly, with or without interest, to any of its
directors, trustees, officers, employees, stockholders, members, managers,
Affiliates or Affiliated companies: provided, however, that the Borrower may
make an investment for any purpose described in section 607(c)(2) of the Rural
Development Act of 1972 (including any investment in, or extension of credit,
guarantee, or advance made to an Affiliated Company that is used by such
Affiliate for such purpose) to the extent that, immediately after such
investment: (1) the aggregate of such investments does not exceed one-third of
the Net Worth and (2) the Borrower's Net Worth is at least twenty (20) percent
of its Total Assets.
Page 17
SECTION 7.10 DISTRIBUTIONS OR WITHDRAWALS
(a) Corporations and Cooperatives. Corporate and cooperative
Borrowers shall not, without the prior written approval of
RUS, make any dividend, stock, capital, capital credit or
other distribution in the nature of an investment,
guarantee, extension of credit, loan or advance payment on
obligations, (all such distributions being hereinafter
collectively called "Distributions"); provided, however,
the Borrower may make a Distribution if after such
Distribution, the Borrower's Net Worth is equal to at
least twenty percent (20%) of its Total Assets and the
amount of all such Distributions during the calendar year
does not --- exceed twenty-five percent (25%) of the
Borrower's Net Income or Net Margins for the prior
calendar year.
(b) Limited Liability Companies. Borrowers which are limited
liability companies shall not, without the prior written
approval of RUS, make any membership withdrawals, unit
redemptions, or other type of profit allocation to its
members and shall not, without the prior written approval
of RUS, make capital distributions in the nature of an
investment, guarantee, extension of credit, loan, or
advance payment of obligations.
SECTION 7.11 CHANGING PRINCIPAL PLACE OF BUSINESS, PLACE OF CONDUCTING BUSINESS,
OR TYPE OF ORGANIZATION
The Borrower shall not change its principal place of business,
place of conducting business, or type of organization without the prior consent
of RUS.
SECTION 7.12 CHANGING NAME OR PLACE OF INCORPORATION OR ORGANIZATION
The Borrower shall not change its legal name or place of
incorporation or organization without giving RUS sixty (60) days prior written
notice.
SECTION 7.13 CHANGING SERVICE RATES
The Borrower shall not change any of its Service Rates without
prior written approval by RUS.
SECTION 7.14 HISTORIC PRESERVATION
The Borrower shall not, without the prior written consent of RUS,
use any Advance to construct any facility which shall involve any district,
site, building, structure or object which is included in, or eligible for
inclusion in, the National Register of Historic Places maintained by the
Secretary of the Interior pursuant to the Historic Sites Act of 1935 and the
National Historic Preservation Act of 1966.
SECTION 7.15 LIMITATIONS ON USING NON-FDIC INSURED DEPOSITORIES.
Without the prior written approval of RUS, the Borrower shall not
place the proceeds of the Loans or any loan which has been made or guaranteed by
RUS in the custody of any bank or other depository that is not insured by the
Federal Deposit Insurance Corporation or other federal agency acceptable to RUS.
SECTION 7.16 AFFILIATED TRANSACTIONS
The Borrower shall not enter into any transaction, contract, or
dealing with an Affiliate of the Borrower or with the Borrower's or Affiliate's
directors, trustees, officers, managers, members (if the Borrower is a limited
liability company), or other corporate officials, without the prior written
consent of RUS.
Page 18
SECTION 7.17 PREFERRED STOCK
The Borrower shall not issue any new or additional preferred stock
without the prior written approval of RUS, which approval shall not be
unreasonably withheld if such stock issuance, in RUS' sole opinion, would not be
considered a debt instrument under generally accepted accounting principles.
SECTION 7.18 ADDITIONAL NEGATIVE COVENANTS
The Borrower shall comply with the additional negative covenants
set forth in Schedule 1 hereto.
ARTICLE VIII - LENDER'S RIGHTS
SECTION 8.1 TERMINATION OF LOAN OFFER
RUS, in its sole discretion, may terminate the offer to make the
Loan(s) if it does not receive the Loan Documents, duly executed on behalf of
the Borrower and all other conditions in Section 5.1 hereof are not satisfied
within one hundred twenty (120) days from the date hereof.
SECTION 8.2 AUDITS AND COMPLIANCE REVIEWS
After giving prior notification to the Borrower, RUS has the right
to conduct compliance reviews and audits of the Borrower to assure compliance
with the Loan Documents and RUS Regulations.
SECTION 8.3 DISALLOWED EXPENDITURES
Upon a determination by RUS that the Borrower did not utilize the
Loan in the manner and exclusively for the Project as approved by RUS, RUS may,
in its sole discretion,
(a) Disallow all or a part of the expenditures and
disbursements of the Loan and require the Borrower to
deposit such funds in the Pledged Deposit Account to be
applied toward other approved Project purposes or to
reimburse the Government, as provided in Section 6.3
hereof;
(b) Suspend making Advances;
(c) Take any other action RUS determines to be necessary
including, without limitation, exercising any right or
remedy available under the Loan Documents or law.
SECTION 8.4 SUSPENSION OF ADVANCES
RUS may, in its absolute discretion, suspend making Advances
hereunder, if RUS determines that an event has occurred that is likely to have a
Material Adverse Effect on the Borrower.
SECTION 8.5 PAYMENT EXTENSIONS
RUS may, at any time or times in succession without notice to or
the consent of the Borrower and upon such terms as RUS may prescribe, grant to
any person, firm or entity who shall have become obligated to pay all or any
part of the principal of or interest on any note held by or indebtedness owed to
RUS or who may be affected by the lien created by the Loan Documents, an
extension of the time for the payment of such principal or interest, and after
any such extension the Borrower will remain liable for the payment of such note
or indebtedness to the same extent as though it had at the time of such
extension consented thereto in writing.
Page 19
SECTION 8.6 RIGHT TO EXPEND MONEY
RUS shall have the right (without prejudice to any of its rights
with respect to any Event of Default) to advance or expend moneys for the
purpose of procuring insurance, or for the payment of insurance premiums as
required hereunder, or to advance or expend moneys for the payment of taxes,
assessments or other charges, or to save the Collateral from sale or forfeiture
for any unpaid tax or assessment, or otherwise, or to redeem the same from any
tax or other sale, or to purchase any tax title thereon, or to remove or
purchase any mechanics' liens or other encumbrance thereon, or to make repairs
thereon or to comply with any covenant herein contained or to prosecute and
defend any suit in relation to the Collateral or in any manner to protect the
Collateral and the title thereto, and all sums so advanced for any of the
aforesaid purposes with interest thereon at the highest legal rate, but not in
excess of twelve per centum (12%) per annum shall be deemed a charge upon the
Collateral and shall be forthwith paid to RUS upon demand. It shall not be
obligatory for RUS in making any such advances or expenditures to inquire into
the validity of any such tax title, or of any such taxes or assessments or sales
therefor, or of any such mechanics' liens or other encumbrance.
SECTION 8.7 RIGHT TO FILE FINANCING STATEMENTS
RUS shall have the right to file such financing statements and
continuation statements on its behalf, as secured party, and on behalf of the
Borrower, as debtor, as RUS deems necessary to perfect a first lien on the
Collateral and to maintain and preserve such perfected first lien as long as the
Loan remains outstanding. The Borrower shall reimburse RUS for any expenses
incurred in the exercise of this right.
ARTICLE IX - EVENTS OF DEFAULT
SECTION 9.1 EVENTS OF DEFAULT
The following shall be events of default (each an "Event of
Default") under this Agreement:
(a) Representations and Warranties. Any representation or
warranty made by the Borrower in Loan Documents or any
certificate furnished to RUS under the Loan Documents, or
in the Application shall prove to have been incorrect in
any material respect at the time made;
(b) Non-Payment. The nonpayment of any required and due
installment of interest on, or principal of, any Note,
whether by acceleration or otherwise, which continues for
five (5) Business Days, as such term is herein defined;
(c) Corrective Actions. Default by the Borrower in the
observance or performance of Section 6.13;
(d) Limited Liability Companies. Default by the Borrower or
its members in the observance or performance of Section
7.3;
(e) Other Covenants. Default by the Borrower in the observance
or performance of any other covenant or agreement
contained in any of the Loan Documents, which shall remain
unremedied for thirty (30) calendar days after written
notice thereof shall have been given to the Borrower by
RUS;
(f) Adverse Effects. The Borrower shall forfeit or otherwise
be deprived of its charter, articles of organization,
franchises, permits, easements, consents or licenses
required to carry on any material portion of its business
or the Borrower files for or an event occurs which can
reasonably be expected to result in its dissolution or
termination;
Page 20
(g) Other Obligations. Default by the Borrower in the payment
of any obligation, whether direct or contingent, for
borrowed money in excess of ten thousand dollars
($10,000.00) or in the performance or observance of the
terms of any instrument pursuant to which such obligation
was created or securing such obligation which default
shall have resulted in such obligation becoming or being
declared due and payable prior to the date on which it
would otherwise be due and payable;
(h) Bankruptcy. A court having jurisdiction in the premises
shall enter a decree or order for relief with respect to
the Borrower in an involuntary case under any applicable
bankruptcy, insolvency, or other similar law now or
hereafter in effect: (1) appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or
similar official, or (2) ordering the winding up or
liquidation of its affairs; or the Borrower shall commence
a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in
effect, or under any such law, or consent to the
appointment or taking possession by a receiver,
liquidator, assignee, custodian or trustee, of a
substantial part of its property, or make any general
assignment for the benefit of creditors;
(i) Dissolution or Liquidation. Other than as provided in the
immediately preceding subsection, the dissolution or
liquidation of the Borrower, or the filing of such by the
Borrower;
(j) Impaired Business. The failure by the Borrower to promptly
forestall or remove any execution, garnishment or
attachment of such consequence as shall impair its ability
to continue its business or fulfill its obligations and
such execution, garnishment or attachment shall not be
vacated within thirty (30) days; and/or
(k) Payment of Final Judgment. A final judgment in an amount
of ten thousand dollars ($10,000.00) or more shall be
entered against the Borrower and shall remain unsatisfied
or without a stay in respect thereof for a period of
thirty (30) days.
ARTICLE X - REMEDIES
SECTION 10.1 GENERALLY
Upon the occurrence of an Event of Default, RUS may pursue all
rights and remedies available to RUS that are contemplated by the Loan Documents
in the manner, upon the conditions, and with the effect provided in the Loan
Documents, including, but not limited to, a suit for specific performance,
injunctive relief or damages. Nothing herein shall limit the right of RUS to
pursue all rights and remedies available to a creditor following the occurrence
of an Event of Default listed in Article IX hereof. Each right, power and remedy
of RUS shall be cumulative and concurrent, and recourse to one or more rights or
remedies shall not constitute a waiver of any other right, power or remedy.
SECTION 10.2 REMEDIES
In addition to the remedies referred to in Section 10.1 hereof,
upon the occurrence of an Event of Default, RUS may:
(a) Refuse to make any advance or further advance on account
of the Loan, but any advance thereafter made by RUS shall
not constitute a waiver of such default;
(b) Declare all unpaid principal of and all interest accrued
on the Note(s) to be immediately due and payable and upon
such declaration all such principal and interest shall
become due and payable immediately;
Page 21
(c) Take immediate possession of the Collateral, collect and
receive all credits, outstanding accounts and bills
receivable of the Borrower and all rents, income, revenues
and profits pertaining to or arising from the Collateral,
or any part thereof, and issue binding receipts therefor;
manage and control and operate the Collateral as fully as
the Borrower might do if in possession thereof; RUS, any
employee or agent of RUS is hereby constituted and
appointed as true and lawful attorney-in-fact of the
Borrower with full power to (i) notify or require the
Borrower to notify any and all Customers that the
Collateral has been assigned to RUS and/or that RUS has a
security interest in the Collateral; (ii) endorse the name
of the Borrower upon any notes, checks, acceptances,
drafts, money orders, or other instruments or payment
(including payments made under any policy of insurance)
that may come into possession of RUS in full or part
payment of any amount owing to RUS; (iii) sign and endorse
the name of the Borrower upon any invoice, freight, or
express ▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse
receipt, assignment verification or notice in connection
with receivables; (iv) send requests for verifications of
Collateral to customers or account debtors; (v) sell,
assign, ▇▇▇ for, collect, or compromise payment of all any
part of the Collateral in the name of the Borrower or in
its own name, or make any other disposition of Collateral,
or any part thereof, which disposition may be for cash,
credit, or any combination thereof, and RUS may purchase
all or any part of the Collateral at public or, if
permitted by law, private sale, and in lieu of actual
payment of such purchase price may set off the amount of
such price against the Obligations; granting to RUS, as
the attorney-in-fact of the Borrower, full power of
substitution and full power to do any and all things
necessary to be done in and about the premises fully and
effectually as the Borrower might or could do but for this
appointment, hereby ratifying all that said
attorney-in-fact shall lawfully do or cause to be done by
virtue hereof. Neither RUS, its employees, nor agents
shall be liable for any act or omissions or for any error
of judgment or mistake of fact or law in its capacity as
such attorney-in-fact. This power of attorney is coupled
with an interest and shall be irrevocable during the term
of this Agreement and so long as any Obligations shall
remain outstanding;
(d) RUS shall have the right to enter and/or remain upon the
premises of the Borrower without any obligation to pay
rent to the Borrower or others, or any other place or
places where any of the Collateral is located and kept
and: (i) remove the Collateral therefrom in order to
maintain, collect, sell, and/or liquidate the Collateral
or, (ii) use such premises, together with materials,
supplies, books, and records of the Borrower, to maintain
possession and/or the condition of the Collateral, and to
prepare the Collateral for sale, liquidation, or
collection. RUS may require the Borrower to assemble the
Collateral and make it available to RUS at a place to be
designated by RUS;
(e) RUS shall have the right, without prior notice to the
Borrower, to exercise rights of setoff or recoupment and
apply any and all amounts held or hereafter held, by RUS
or owed to the Borrower or for the credit of the Borrower
against any and all of the Obligations. RUS agrees to
notify the Borrower promptly after any such setoff or
recoupment and the application thereof, provided that the
failure to give such notice shall not affect the validity
of such setoff, recoupment or application. Borrower waives
all rights of setoff, deduction, recoupment or
counterclaim; and/or
(f) RUS shall have, in addition to any other rights and
remedies contained in this Agreement, and in any other
agreements, guarantees, notes, mortgages, instruments, and
documents heretofore, now, or at any time or times
hereafter executed by the Borrower and delivered to RUS,
all of the rights and remedies of a secured party under
the Uniform Commercial Code in force in the state
identified in the first paragraph hereof, as well as the
state where the Collateral is located, as of the date
hereof, all of which rights and remedies shall be
cumulative, and nonexclusive.
Page 22
SECTION 10.3 NOTICES OF ACTIONS AGAINST COLLATERAL
Any notice required to be given by RUS of a sale or other
disposition or other intended action by RUS with respect to any of the
Collateral, or otherwise, made in accordance with this Agreement at least five
(5) days prior to such proposed action, shall constitute fair and reasonable
notice to the Borrower of any such action.
SECTION 10.4 APPLICATION OF PROCEEDS
Any proceeds or funds arising from the exercise of any rights or
the enforcement of any remedies herein provided after the payment or provision
for the payment of any and all costs and expenses in connection with the
exercise of such rights or the enforcement of such remedies shall be applied
first, to the payment of indebtedness hereby secured other than the principal of
or interest on the Notes; second, to the ratable payment of interest which shall
have accrued on the Notes and which shall be unpaid; third, to the ratable
payment of or on account of the unpaid principal of the Notes, and the balance,
if any, shall be paid to whosoever shall be entitled thereto.
ARTICLE XI - MISCELLANEOUS
SECTION 11.1 NOTICES
All notices, requests and other communications provided for herein
including, without limitation, any modifications of, or waivers, requests or
consents under, this Agreement shall be given or made in writing (including,
without limitation, by telecopy) and delivered to the intended recipient at the
"Address for Notices" specified below; or, as to any party, at such other
address as shall be designated by such party in a notice to each other party.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as provided for herein. The Addresses for Notices of the respective
parties are as follows:
RUS Borrower
--- --------
Rural Utilities Service See Schedule 1
United States Department of Agriculture
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇.▇▇▇▇▇-▇▇▇▇
Attention: Administrator
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: With a copy to:
--------------- ---------------
Rural Utilities Service See Schedule ▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
Stop 1599, Room No. 2844
Washington, D.C. 20250-1599
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 11.2 EXPENSES
To the extent allowed by law, the Borrower shall pay all costs and
expenses of RUS, including reasonable fees of counsel, incurred in connection
with the enforcement of the Loan Documents or with the preparation for such
enforcement if RUS has reasonable grounds to believe that such enforcement may
be necessary.
Page 23
SECTION 11.3 LATE PAYMENTS
If payment of any amount due hereunder is not received at the
United States Treasury in Washington, DC, or such other location as RUS may
designate to the Borrower within five (5) Business Days after the due date
thereof or such other time period as RUS may prescribe from time to time in its
policies of general application in connection with any late payment charge (such
unpaid amount being herein called the "delinquent amount", and the period
beginning after such due date until payment of the delinquent amount being
herein called the "late-payment period"), the Borrower shall pay to RUS, in
addition to all other amounts due under the terms of the Notes, the Mortgage and
this Agreement, any late payment charge as may be fixed by RUS Regulations from
time to time on the delinquent amount for the late-payment period.
SECTION 11.4 FILING FEES
To the extent permitted by law, the Borrower agrees to pay all
expenses of RUS (including the fees and expenses of its counsel) in connection
with the filing or recordation of all financing statements and instruments as
may be required by RUS in connection with this Agreement, including, without
limitation, all documentary stamps, recordation and transfer taxes and other
costs and taxes incident to recordation of any document or instrument in
connection herewith. Borrower agrees to save harmless and indemnify RUS from and
against any liability resulting from the failure to pay any required documentary
stamps, recordation and transfer taxes, recording costs, or any other expenses
incurred by RUS in connection with this Agreement. The provisions of this
section shall survive the execution and delivery of this Agreement and the
payment of all other amounts due hereunder or due on the Notes.
SECTION 11.5 NO WAIVER
No failure on the part of RUS to exercise, and no delay in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise by RUS of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.
SECTION 11.6 GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with applicable federal law and, in the absence of controlling federal law, by
the laws of the District of Columbia, except those that would render such choice
of law ineffective.
SECTION 11.7 HOLIDAY PAYMENTS
If any payment to be made by the Borrower hereunder shall become
due on a day
Page 27
that is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in computing any
interest in respect of such payment.
SECTION 11.8 RESCISSION
The Borrower may elect not to borrow the Loan, in which event RUS
shall release the Borrower from its obligations hereunder, provided the Borrower
complies with such terms and conditions as RUS may impose for such release.
SECTION 11.9 SUCCESSORS AND ASSIGNS
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrower and RUS and their respective
successors and assigns, except that the Borrower may not
assign or transfer its rights or obligations hereunder
without the prior written consent of RUS.
Page 24
(b) Pursuant to federal claims collection laws, RUS' claims
hereunder may be transferred to other agencies of the
United States of America; in the event of such a transfer,
all rights and remedies hereby granted or conferred on RUS
shall pass to and inure to the benefit of any such
successor agency.
SECTION 11.10 COMPLETE AGREEMENT; WAIVERS AND AMENDMENTS
Subject to RUS Regulations, this Agreement and the other Loan
Documents are intended by the parties to be a complete and final expression of
their agreement. However, RUS reserves the right to waive its rights to
compliance with any provision of this Agreement and the other Loan Documents. No
amendment, modification, or waiver of any provision hereof or thereof, and no
consent to any departure of the Borrower herefrom or therefrom, shall be
effective unless approved in writing by RUS in the form of either a RUS
Regulation or other writing signed by or on behalf of RUS, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 11.11 HEADINGS
The headings and sub-headings contained in the titling of this
Agreement are intended to be used for convenience only and do not constitute
part of this Agreement.
SECTION 11.12 SEVERABILITY
If any term, provision, condition, or any part thereof, of this
Agreement, Note(s) or the Security Documents shall for any reason be found or
held invalid or unenforceable by any governmental agency or court of competent
jurisdiction, such invalidity or unenforceability shall not affect the remainder
of such term, provision, or condition nor any other term, provision, or
condition, and this Agreement, the Note(s), and the Security Documents shall
survive and be construed as if such invalid or unenforceable term, provision or
condition had not been contained therein.
SECTION 11.13 RIGHT OF SETOFF
Upon the occurrence and during the continuance of any Event of
Default, RUS is hereby authorized at any time and from time to time, without
prior notice to the Borrower, to exercise rights of setoff or recoupment and
apply any and all amounts held or hereafter held, by RUS or owed to the Borrower
or for the credit or account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing hereunder or under the
Note(s). RUS agrees to notify the Borrower promptly after any such setoff or
recoupment and the application thereof, provided that the failure to give such
notice shall not affect the validity of such setoff, recoupment or application.
The rights of RUS under this section are in addition to any other rights and
remedies (including other rights of setoff or recoupment) which RUS may have.
Borrower waives all rights of setoff, deduction, recoupment or counterclaim.
SECTION 11.14 SCHEDULES AND ATTACHMENTS
Each Schedule and Attachment attached hereto and referred to
herein is each an integral part of this Agreement.
SECTION 11.15 AUTHORITY OF REPRESENTATIVES OF RUS
In the case of any consent, approval or waiver from RUS that is
required under this Agreement or any other Loan Document, such consent, approval
or waiver must be in writing and signed by an authorized RUS representative to
be effective. As used in this section, "authorized RUS representative" means the
Administrator of RUS, and also means a person to whom the Administrator has
officially delegated specific or general authority to take the action in
question.
Page 25
SECTION 11.16 AMENDMENT OF LAWS AND RUS REGULATIONS
Nothing contained herein shall restrict in any way RUS' right to
amend, rescind or supplement any of the RUS Regulations or to seek such changes
to existing laws.
SECTION 11.17 TERM
This Agreement shall remain in effect until one of the following
two events has occurred:
(a) The Borrower and RUS replace this Agreement with another
written agreement; or
(b) All of the Borrower's obligations under this Agreement have
been discharged and paid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
PEGASUS RURAL BROADBAND, LLC
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
Pegasus Satellite Communications Holdings, Inc.
as sole member of
Pegasus Rural Broadband, LLC
(Seal)
Attested to by: /s/ ▇▇▇▇▇ ▇. Blank
Secretary
UNITED STATES OF AMERICA
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Acting Administrator
of the Rural Utilities Service
Page 26
SCHEDULE 1
Article II Representations and Warranties
1. Paragraph (h) Borrower's address:
PEGASUS RURAL BROADBAND, LLC
C/O PEGASUS COMMUNICATIONS CORPORATION
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
2. Paragraph (i) Borrower's Organization Number: 3572968
3. Paragraph (j) Borrower's Subsidiaries: NONE
4. Paragraph (j) Borrower's Parent: PEGASUS SATELLITE COMMUNICATIONS HOLDINGS,
INC.
Article III The Loans
1. Section 3.1(a) Loan amount: $13,044,431
2. Section 3.1(b) Loan portion at the cost-of-money interest rate:
$13,044,431
3. Section 3.1(b) Loan portion at the four percent (4%) rate of interest:
$0
Article V Conditions of Lending
1. Section 5.2(b) amount of fidelity bond coverage: $1,957,000
2. Section 5.2(c)(i) level of funds required on deposit in accordance with
7 C.F.R. 1738.20(b): $2,100,000.
3. Section 5.2(c)(ii) level of funds required on deposit for operating
expenses: $4,000,000.
4. The additional conditions to advance referred to in Section 5.3(j) are
as follow:
(A) THE BORROWER SHALL SUBMIT AN ORDER, SATISFACTORY TO RUS, OF
THE UNITED STATES BANKRUPTCY COURT, DISTRICT OF MAINE
CONFIRMING THE DEBTOR'S FIRST AMENDED JOINT CHAPTER 11 PLAN,
AS IT MAY BE AMENDED, IN CASE NUMBER 04-20878 (IN RE PEGASUS
SATELLITE TELEVISION, INC., ET AL);
(B) THAT THE BORROWER HAS ENTERED INTO, SATISFACTORY TO RUS:
(1) SERVICE AGREEMENTS WITH OKS-AMERIDIAL, INC.
(2) INTERCONNECTION AGREEMENTS WITH SERVICE PROVIDERS IN
ABILENE, CORPUS CHRISTI AND LUBBOCK, TEXAS, TO
PROVIDE SUFFICIENT BANDWIDTH TO THE INTERNET TO OFFER
THE PROPOSED BROADBAND SERVICES;
(C) ADVANCES WILL NOT BE MADE FOR ANY TOWER LOCATION UNTIL THE
BORROWER HAS SUBMITTED LEASE AGREEMENTS, SATISFACTORY TO RUS,
FOR THOSE SITES; AND
(D) BORROWER MUST SUBMIT QUARTERLY CONSTRUCTION SCHEDULES
DEMONSTRATING THAT IT HAS MET THE PROJECTED GOALS FOR
COMMUNITY BUILD OUT AND SUBSCRIBER CONNECTIONS AS OUTLINED IN
THE APPLICATION.
Page 27
Article VI Affirmative Covenants
1. Section 6.4 Additional Funds: $0
2. Section 6.4 Additional Purposes: NONE
3. Section 6.8(b) Additional Reporting Dates: NONE
4. Section 6.11 TIER: 2.00
5. Section 6.11 TIER Commencement Date: DECEMBER 31, 2007
6. The additional affirmative covenants referred to in Section 6.22 are as
follows:
BORROWER AGREES THAT UPON ACQUIRING REAL PROPERTY, IT WILL EXECUTE
A STANDARD MORTGAGE WITH RUS.
Article VII Negative Covenants
1. The additional negative covenants referred to in Section 7.18 are as
follows: NONE
Article XI Miscellaneous
1. Section 11.1 Borrower's address for purposes of notification:
PEGASUS RURAL BROADBAND, LLC
C/O PEGASUS COMMUNICATIONS MANAGEMENT COMPANY
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, EXECUTIVE VICE PRESIDENT
FAX: ▇▇▇-▇▇▇-▇▇▇▇
2. Section 11.1 Address for Borrower's notification copy:
PEGASUS RURAL BROADBAND LLC
C/O PEGASUS COMMUNICATIONS MANAGEMENT COMPANY
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇. BLANK, SENIOR VICE PRESIDENT & GENERAL COUNSEL
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Page 28
SCHEDULE 2
1. Collateral shall include the following:
All property, assets, rights, privileges, licenses and
franchises of the Borrower of every kind and description, real, personal or
mixed, tangible and intangible, of the kind or nature specifically mentioned
herein, or any other kind or nature now owned or hereafter acquired or arising
by the Borrower (by purchase, consolidation, merger, donation, construction,
erection or in any other way) wherever located, including without limitation all
or in part the following (hereinafter the "Collateral:")
I
All right, title, and interest of the Borrower in and to the
Existing Facilities, buildings, plants, works, improvements, structures,
estates, grants, franchises, easements, rights, privileges and properties,
whether real, personal, or mixed, tangible or intangible, of every kind or
description, now or hereafter owned, leased, constructed, or acquired by the
Borrower, wherever located, and in and to all extensions, improvements, and
additions thereto, including but not limited to all buildings, plants, works,
structures, towers, antennas, fixtures, apparatus, materials, supplies,
machinery, tools, implements, poles, posts, crossarms, conduits, ducts, lines,
wires, cables, whether underground, overhead, or otherwise, exchanges, switches,
including, without limitation, host and remote switches, desks, testboards,
frames, racks, motors, generators, batteries, and other items of central office
equipment, pay stations, protectors, instruments, connections and appliances,
office furniture, equipment, and any and all other property of every kind,
nature, and description, used, useful, or acquired for use by the Borrower in
connection therewith;
II
All right, title, and interest of the Borrower in, to, and
under any and all grants, privileges, rights of way and easements now owned,
held, leased, enjoyed or exercised, or which may hereafter be owned, held,
leased, acquired, enjoyed or exercised, by the Borrower for the purposes of, or
in connection with, the construction or operation by, or on behalf of, the
Borrower of its properties, facilities, systems, or businesses, whether
underground, overhead, or otherwise, wherever located;
III
All right, title, and interest of the Borrower in, to, and
under any and all licenses and permits (including without limitation those
granted by the FCC), franchises, ordinances, and privileges, whether heretofore
or hereafter granted, issued, or executed, to it or to its assignors by the
Government, or by any state, county, township, municipality, village, or other
political subdivision thereof, or by any agency, board, commission, or
department of any of the foregoing, authorizing the construction, acquisition,
or operation of the Borrower's properties, facilities, systems, or businesses,
insofar as the same may by law be assigned, granted, bargained, sold, conveyed,
transferred, mortgaged, or pledged;
IV
All right, title, and interest of the Borrower in, to, and
under all personal property and fixtures of every kind and nature, including
without limitation all goods (such as inventory, equipment and any accessions
thereto), instruments (such as promissory notes or chattel paper, electronic or
otherwise), documents, accounts (such as deposit accounts or trust accounts
pursuant hereto or to a loan agreement), letter-of-credit rights, investment
property (such as certificated and uncertificated securities or security
entitlements and accounts,) software, general intangibles (such as payment
intangibles), supporting obligations, contract rights or rights to the payment
of money, insurance claims, and proceeds (as such terms are presently and
hereafter defined in the UCC; provided, however, that the term "instrument"
shall be such term as defined in Article 9 of the UCC rather than Article 3);
Page 29
V
All right, title, and interest of the Borrower in, to, and
under any and all agreements, leases or contracts heretofore or hereafter
executed by and between the Borrower and any person, firm, corporation, or other
corporate entity relating to the Collateral (including contracts for the lease,
occupancy, or sale of the Pledged Property, or any portion thereof);
VI
All right, title, and interest of the Borrower in, to, and
under any and all books, records and correspondence relating to the Pledged
Property, including, but not limited to, all records, ledgers, leases, computer
and automatic machinery, software, programs, databases, disc or tape files,
print-outs, batches, runs, and other electronically-prepared information
indicating, summarizing, evidencing, or otherwise necessary or helpful in the
collection or realization on the Collateral;
VII
Also, all right, title, and interest of the Borrower in, to,
and under all other property, real or personal, tangible or intangible, of every
kind, nature, and description, and wherever situated, now or hereafter owned or
leased by the Borrower, it being the intention hereof that all such property now
owned or leased but not specifically described herein, or acquired or held by
the Borrower after the date hereof, shall be as fully embraced within and
subjected to the lien hereof as if the same were now owned by the Borrower and
were specifically described herein to the extent only, however, that the
subjection of such property to the lien hereof shall not be contrary to law;
Together with all rents, income, revenues, proceeds, products,
profits and benefits at any time derived, received, or had from any and all of
the above-described property of the Borrower;
Provided, however, that except as provided in the Loan and
Security Agreement, no automobiles, trucks, trailers, tractors or other vehicles
(including without limitation aircraft or ships, if any) owned or used by the
Borrower shall be included in the Collateral.
2. Additionally, property pledged as Collateral shall also include the
following specifically described property, if any: NONE
Page 30
EXHIBIT A
CERTIFICATION OF REIMBURSEMENT
The attached requisition for Loan Advances in the amount of
$____________________, is to reimburse Pegasus Rural Broadband, LLC for funds
spend on RUS approved loan purposes, as described in the attached requisition.
--------------------------
Title:
Page 31