LOAN AND SECURITY AGREEMENT
Dated as of September 4, 1996
By and Between
SIEMENS XXXXXXXXX-XXXXXXX
LENDER
AND
GST SWITCHCO, INC.
BORROWER
TABLE OF CONTENTS
PAGE
----
LOAN AND SECURITY AGREEMENT.................................................. 1
RECITALS .....................................................................1
ARTICLE I.....................................................................1
DEFINITIONS...............................................................1
1.1 DEFINITIONS....................................................1
ARTICLE II....................................................................9
LOANS.....................................................................9
2.1 AGREEMENT TO LEND..............................................9
2.2 THE NOTE......................................................12
2.3 TERM LOANS....................................................12
2.4 INTEREST ON LOANS.............................................13
2.5 TERM LOAN PAYMENTS............................................13
2.6 DEFAULT RATE OF INTEREST......................................14
2.7 OPTIONAL PREPAYMENT OF NOTE; MANDATORY PREPAYMENT OF NOTE.....14
2.8 PAYMENT, ETC..................................................14
2.9 MAXIMUM LAWFUL INTEREST RATE..................................15
2.10 INDEMNIFICATION FOR FAILURE TO BORROW.........................15
2.11 ADDITIONAL EQUIPMENT..........................................15
2.12 LEASES........................................................15
2.13 SECURITY AGREEMENT............................................15
2.14 EXTENSION.....................................................15
ARTICLE III..................................................................16
REPRESENTATIONS AND WARRANTIES...........................................16
3.1 ORGANIZATION; POWERS..........................................16
3.2 AUTHORIZATION BY BORROWER.....................................16
3.3 FINANCIAL STATEMENTS..........................................17
3.4 NO MATERIAL ADVERSE CHANGE....................................17
3.5 LITIGATION....................................................17
3.6 TAX RETURNS...................................................17
3.7 NO DEFAULTS...................................................17
3.8 PROPERTIES....................................................18
3.9 LICENSES, ETC.................................................18
3.10 COMPLIANCE WITH LAWS..........................................18
3.11 ERISA.........................................................19
3.12 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT....19
3.13 FEDERAL RESERVE REGULATIONS...................................19
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3.14 COLLATERAL....................................................19
3.15 CHIEF PLACE OF BUSINESS.......................................20
3.16 OTHER CORPORATE NAMES.........................................20
3.17 INSURANCE.....................................................20
3.18 CAPITALIZATION................................................20
3.19 ARTICLES OF INCORPORATION; BY-LAWS............................20
3.20 REAL PROPERTY LEASES AND EASEMENTS............................21
3.21 INTELLECTUAL PROPERTY.........................................21
3.22 FISCAL YEAR...................................................21
3.23 NO MATERIAL MISSTATEMENTS.....................................21
3.24 BUSINESS PLAN.................................................21
ARTICLE IV...................................................................21
CONDITIONS FOR LOANS.....................................................21
4.1 ON OR PRIOR TO THE EFFECTIVE DATE.............................22
4.2 ALL LOANS.....................................................23
ARTICLE V....................................................................25
AFFIRMATIVE COVENANTS....................................................25
5.1 CORPORATE EXISTENCE; LICENSES AND TRADE NAMES.................25
5.2 COMPLIANCE WITH LAWS. ETC.....................................25
5.3 MAINTENANCE OF PROPERTIES.....................................25
5.4 INSURANCE.....................................................26
5.5 TAXES.........................................................26
5.6 FINANCIAL STATEMENTS, REPORTS, ETC............................26
5.7 LITIGATION AND OTHER NOTICES..................................28
5.8 LANDLORD CONSENTS AND AGREEMENTS..............................28
5.9 ERISA.........................................................28
5.10 ACCESS TO PREMISES, RECORDS AND NETWORK.......................29
5.11 ENVIRONMENTAL NOTICES.........................................29
5.12 AMENDMENT OF ORGANIZATION DOCUMENT............................29
5.13 FURTHER ASSURANCES............................................29
5.14 ENVIRONMENTAL PERMITS, LICENSES, ETC..........................30
5.15 PAYMENT RESERVE...............................................30
ARTICLE VI...................................................................31
NEGATIVE COVENANTS.......................................................31
6.1 LIENS, ETC....................................................31
6.2 SALE OF ASSETS; CONSOLIDATION, MERGER, ETC....................31
6.3 GUARANTEES; THIRD-PARTY SALES AND LEASES......................32
6.4 INVESTMENTS...................................................32
6.5 PERMITTED ACTIVITIES..........................................33
6.6 TRANSACTIONS WITH AFFILIATES..................................33
6.7 INDEBTEDNESS..................................................33
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6.9 CORPORATE NAMES...............................................33
6.10 SALE OF COLLATERAL............................................34
6.11 SALARIES AND COMPENSATION.....................................34
ARTICLE VII..................................................................34
COLLATERAL SECURITY......................................................34
7.1 COLLATERAL SECURITY...........................................34
7.2 PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN.......................................................34
ARTICLE VIII.................................................................34
EVENTS OF DEFAULT; REMEDIES..............................................34
8.1 EVENTS OF DEFAULT.............................................34
8.2 TERMINATION OF COMMITMENT; ACCELERATION.......................37
8.3 WAIVER OF DEMAND..............................................37
8.4 RIGHTS AND REMEDIES GENERALLY.................................37
8.5 ENTRY UPON PREMISES AND ACCESS TO INFORMATION.................37
8.6 SALE OR OTHER DISPOSITION OF COLLATERAL BY LENDER.............38
8.7 LENDER NOT LIABLE.............................................38
ARTICLE IX...................................................................39
MISCELLANEOUS............................................................39
9.1 NOTICES.......................................................39
9.2 NO WAIVERS; AMENDMENTS........................................40
9.3 GOVERNING LAW AND JURISDICTION................................41
9.4 EXPENSES; DOCUMENTARY TAXES...................................41
9.5 EQUITABLE RELIEF..............................................41
9.6 INDEMNIFICATION; LIMITATION OF LIABILITY......................41
9.7 SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES, ETC...42
9.8 SUCCESSORS AND ASSIGNS........................................43
9.9 SEVERABILITY..................................................43
9.10 COVER PAGE; TABLE OF CONTENTS AND SECTION HEADINGS............43
9.11 COUNTERPARTS..................................................43
9.12 MARSHALLING; PAYMENTS SET ASIDE...............................43
9.13 SERVICE OF PROCESS............................................44
9.14 WAIVER OF JURY TRIAL..........................................44
9.15 ENTIRE AGREEMENT, ETC.........................................44
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EXHIBITS
Exhibit A -- Form of Guaranty
Exhibit B -- Form of Note
Exhibit C -- Form of Notice of Borrowing
Exhibit D -- Borrower's Balance Sheet
Exhibit E -- [INTENTIONALLY DELETED]
Exhibit F -- Form of Opinion of Borrower's Counsel
Exhibit G -- [INTENTIONALLY DELETED]
Exhibit H -- Form of Lessee Security Agreement
Exhibit I -- Form of Landlord/Mortgagee's Waiver
Exhibit J -- Form of Lease
Exhibit K -- Form of Escrow Agreement
Exhibit L -- Form of Officer's Certificate and Support Affidavit
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SCHEDULES
Schedule 1.1 -- Approved Third-Party Product
Schedule 1.1(a) -- IXC Toll Tandem Features
Schedule 3.2 -- Governmental Consents, Filings, Registrations and
Approvals
Schedule 3.5 -- Pending Litigation
Schedule 3.17 -- Insurance
Schedule 3.18 -- Capitalization
Schedule 3.19 -- Articles of Incorporation; Bylaws
Schedule 3.20 -- Real Property Leases and Easements
Schedule 3.21 -- Intellectual Property
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), dated as of
September 4, 1996 is entered into by and between SIEMENS XXXXXXXXX-XXXXXXX, a
Delaware general partnership ("LENDER"), and GST SWITCHCO, INC. a Washington
corporation ("BORROWER").
RECITALS
WHEREAS, Borrower is a special purpose corporation recently formed to
own and lease equipment to be used in alternate access communications networks;
and
WHEREAS, Borrower has requested that Lender extend a line of credit to
Borrower for the purpose of enabling Borrower to purchase Equipment required by
Borrower in connection with its business; and
WHEREAS, Lender is willing to extend such line of credit to Borrower
subject to, and on the terms and conditions of, this Agreement and in reliance
on the Guaranty executed by Guarantor;
Accordingly, in consideration of the foregoing and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged by the parties, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following words and
terms shall have the meanings specified below:
"ADEQUATE CASH" means accounts in the names of Guarantor and/or
Affiliates of Guarantor consisting of cash or cash equivalents.
"AFFILIATE" means any Person directly or indirectly controlling,
controlled by or under common control with Borrower, and any officer, director
or shareholder of such Person or Borrower.
"APPLICABLE RATE" means with respect to the Note the interest rate then
in effect with respect to the Interim Loans or the Term Loan, as applicable,
evidenced thereby.
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"APPROVED THIRD-PARTY PRODUCT" means (i) all product identified in
SCHEDULE 1.1 hereto as "Approved Product" (as such Schedule may be amended from
time to time by Borrower and Lender) and (ii) any other product or future
product for the provision of communication services that may be mutually agreed
to between Borrower and Lender from time to time based on good faith discussions
between Borrower and Lender; PROVIDED, HOWEVER, that Lender shall not
unreasonably withhold its approval of the designation of any such products as
"Approved Third-Party Product." Notwithstanding the preceding sentence,
"Approved Third-Party Product" shall not include any product identified in
SCHEDULE 1.1 hereto as "Non-Approved Product." It is understood by the parties
that Lender will not finance third-party products which Lender also manufactures
and/or sells and that performs essentially the same application as a Third-Party
Product for which Borrower may request financing.
"BALANCE SHEET" has the meaning set forth in SECTION 3.3.
"BANKRUPTCY CODE" means the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended from time to time, or any successor statute.
"BORROWER AFFILIATE" shall mean any Affiliate to which Borrower has
leased a portion of the Equipment pursuant to a Lease.
"BUSINESS" means the business of acquiring, holding and leasing
alternate access communications equipment and all operations related thereto or
in support thereof.
"BUSINESS DAY" means any day not a Saturday, Sunday or legal holiday in
the State of New York, on which banks are open for business in New York, New
York.
"BUSINESS PLAN" means that certain Business Plan of Borrower dated July
22, 1996 which has been delivered to Lender.
"CABLE" means Siecor fiber optic cable and miscellaneous hardware.
"CABLE COMMITMENT AMOUNT" means Five Million Dollars ($5,000,000), for
the purchase of Siecor fiber optic cable.
"CODE" has the meaning set forth in SECTION 1.3.
"COLLATERAL" means all property and interests in property now owned or
hereafter acquired by Borrower in or upon which a security interest, lien or
mortgage is granted to Lender by Borrower pursuant to Section 7.1 of this
Agreement.
"COMMITMENT" means Lender's agreement to lend as set forth in SECTION
2.1 hereof.
"COMMITMENT TERMINATION DATE" means, for both Phase I and Phase II
Loans, the date that is seven (7) years from the Effective Date.
2
"COMMUNICATIONS ACT" means the Communication Act of 1934, as amended,
and all rules, regulations and policies promulgated thereunder.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"CONVERSION DATE" means the first Business Day of each calendar quarter
during the term hereof.
"DEBT" means, with respect to any Person, (i) indebtedness of such
Person for borrowed money, (ii) obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations of such Person
which arise under conditional sale agreements relating to property purchased by
such Person (including, without limitation, obligations to pay the deferred
purchase price of property or services), excluding trade payables and accrued
expenses incurred in the ordinary course of business, (iv) obligations as lessee
under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases and (v) all Guarantees of such Person.
"EFFECTIVE DATE" means the date on which this Agreement has been duly
executed by and delivered to all parties hereto.
"EQUIPMENT" has the meaning set forth in SECTION 7.1 hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended.
"ERISA AFFILIATE" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of IRC ss. 414(b)) as
Borrower, (ii) partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of IRC ss. 414(c)) with
Borrower, and (iii) member of the same affiliated service group (within the
meaning of IRC ss. 414(m)) as Borrower, any corporation described in clause (i)
above or any partnership or trade or business described in clause (ii) above.
"ESCROW ACCOUNT" means the escrow account maintained in accordance with
the Escrow Agreement into which the Reserve Amount is deposited or withdrawn
from time to time.
"ESCROW AGENT" means the person serving as escrow agent in accordance
with the Escrow Agreement, as selected by Borrower and Lender, and such person's
successors.
"ESCROW AGREEMENT" means the escrow agreement in substantially the form
of EXHIBIT L hereto among Borrower, Lender and Escrow Agent.
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"EVENT OF DEFAULT" has the meaning given to such term in ARTICLE VIII
hereof.
"FCC" means the Federal Communications Commission or any successor
commission or agency.
"FCC LICENSE" means each and every license, permit or authorization, if
any, duly issued by the FCC required by the Borrower to conduct the Business.
"FINANCING FEE AMOUNT" has the meaning set forth in SECTION 2.1(F)
hereof.
"FISCAL YEAR" means the year ending September 30.
"GAAP" means generally accepted accounting principles in the United
States of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application to which Lender's
independent certified public accountants concur), applied both to classification
of items and determination of amounts.
"GUARANTEE" means any obligation, contingent or otherwise, of any
Person guaranteeing any indebtedness of any other Person (the "Primary Obligor")
in any manner, whether directly or indirectly, and including any obligation of
such Person, direct or indirect, (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such indebtedness; (ii) to purchase property, securities or services for the
purpose of assuring the owner of such indebtedness of the payment of such
indebtedness; or (iii) to maintain working capital, equity capital or other
financial statement condition of the Primary Obligor so as to enable the Primary
Obligor to pay such indebtedness.
"GUARANTOR" means GST USA, Inc. a Delaware corporation, together with
its successors and assigns.
"GUARANTY" means the Guaranty in the form attached hereto as EXHIBIT A.
"INTEREST PERIOD" means (i) with respect to each Interim Loan, the
period commencing on the date that such Interim Loan is advanced hereunder and
terminating on the date that such Interim Loan is converted into a Term Loan in
accordance with the terms hereof, and (ii) with respect to each Term Loan, each
six (6) month period commencing on the date that such Term Loan comes into
existence in accordance with the terms hereof until the date that the principal
of such Term Loan is repaid in full.
"INTERIM LOANS" means each of the Loans constituting Phase I Loans and
Phase II Loans made by Lender pursuant to Sections 2.1(a) and 2.1(b) of this
Agreement.
"INTERIM LOAN RATE" means with respect to each Interim Loan, for the
Interest Period with respect thereto, a rate equal to the three (3) months LIBOR
on a date two (2) Business
4
Days prior to the commencement of such Interest Period PLUS four hundred and
fifty (450) basis points.
"INVESTMENT" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, any Guarantee or
similar arrangement, but excluding advances to customers in the ordinary course
of business that are, in conformance with GAAP, recorded as accounts receivable
on the balance sheet of Borrower) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of other) or any purchase of capital stock,
bonds, notes, debentures or other similar instruments issued by, such Person.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder, and any successor
statutes or rules and regulations.
"IRS" means the Internal Revenue Service or any successor agency.
"IXC TOLL TANDEM FEATURES" means the features directly associated with
the Switch for the purpose of providing long distance switched services and
identified in Schedule 1.1(a) hereto.
"LEASE" means any lease between Borrower, as lessor, and a Borrower
Affiliate, as lessee, pursuant to which Borrower has leased a portion of the
Equipment to such Borrower Affiliate, substantially in the form attached hereto
as EXHIBIT J.
"LENDER EQUIPMENT" means all Siemens Xxxxxxxxx-Xxxxxxx equipment and
products (including software), including, but not limited to, fiber optic cable
("CABLE"), Siemens Optiset telephone sets ("OPTISETS"), Switches, Upgraded
Switches and upgrades or growth to such Switches or Upgraded Switches, as
applicable, purchased by Borrower from Lender and invoiced by Siemens
Xxxxxxxxx-Xxxxxxx.
"LENDER EQUIPMENT LOAN" means each Interim Loan to the extent that the
proceeds of which are used exclusively to pay the invoice price for Lender
Equipment, which price shall include any related charges (including, but not
limited to, applicable installation and shipping charges).
"LIBOR" means London Interbank Offered Rate, as quoted in the Eastern
Edition of THE WALL STREET JOURNAL (or any successor publication).
"LIEN" means any mortgage, pledge, deed of trust, assignment for
security, lien, charge, encumbrance or other security interest of any kind, or
the interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement, but excluding easements, rights of way
or similar encumbrances on the real property
5
which are in the ordinary course of business and which do not materially affect
the value, use and insurability of title of such real property.
"LOAN" means any Interim Loan or Term Loan, as applicable.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Note, the
Guaranty, each Security Agreement, each Lease, the Escrow Agreement and the
Officer's Certificate delivered pursuant to Section 4.1(n) hereof, including all
schedules, amendments, exhibits, attachments, modifications and supplements of
or to all such documents.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon the
condition (financial or otherwise), operations, or properties of Borrower or
Guarantor or upon the ability of Borrower or Guarantor to perform under the Loan
Documents.
"NETWORK" means any alternate access communications facility installed
or maintained by Borrower or a Borrower Affiliate, within any Network
Location(s), as expanded and developed from time to time, together with all
Switches, Upgraded Switches, upgrades and growth to Switches and Upgraded
Switches, and equipment, rights of access, easements, leasehold and fee
interests in real property, and all related patents, trademarks, licenses and
certificates, and all replacements, enhancements or additions thereto.
"NETWORK LOCATION(S)" means any city and any municipality, metropolitan
area, or unincorporated jurisdiction within the United States, Mexico and
Canada, in which Borrower or any Borrower Affiliate has deployed or intends to
deploy a Switch or Upgraded Switch, as applicable, financed pursuant to this
Agreement, including without limitation, any areas in which any Equipment is
located which supports such Switch or Upgraded Switch, as applicable.
"NON-LENDER EQUIPMENT" means all equipment, products and software
(including related software licenses), Approved Third-Party Product, peripheral
equipment, air conditioning equipment, fire suppression equipment, transmission
and cable equipment purchased by or provided to Borrower from vendors other than
Lender or Siecor for use in any Network.
"NOTE" has the meaning set forth in SECTION 2.2 hereof.
"OBLIGATIONS" means (i) all amounts due or to become due under the
Note; (ii) the performance of all obligations of Borrower now or hereafter
existing under this Agreement, the Note and all other Loan Documents whether for
principal, interest, fees, expenses, indemnification or otherwise; (iii) all
extensions, renewals, modifications, amendments and refinancings of any of the
foregoing; and (iv) all loans, advances, indebtedness, and other obligations
owed by Borrower to Lender of every description whether now existing or
hereafter arising (including those owed by Borrower to others and acquired by
Lender by purchase, assignment, or otherwise) and whether direct or indirect,
primary or as guarantor
6
or surety, absolute or contingent, liquidated or unliquidated, matured or
unmatured, whether or not secured by additional collateral.
"OPTISET COMMITMENT AMOUNT" means One Million Dollars ($1,000,000) for
the purchase of Siemens Optisets.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"PERMITTED LIENS" has the meaning set forth in SECTION 6.1 hereof.
"PERSON" means any natural person, corporation, division of a
corporation, business trust, joint venture, association, company, partnership,
unincorporated organization or other legal entity, or a government or any agency
or political subdivision thereof.
9 "PHASE I CAP" has the meaning set forth in SECTION 2.1(A) hereof.
"PHASE II CAP" has the meaning set forth in SECTION 2.1(B) hereof.
"PHASE I COMMITMENT AMOUNT" means One Hundred Ten Million Dollars
($110,000,000).
"PHASE II COMMITMENT AMOUNT" means One Hundred Ten Million Dollars
($110,000,000).
"PHASE I LOAN" means any Interim Loan made pursuant to SECTION 2.1(A),
together with any Term Loan relating to such Interim Loan.
"PHASE II LOAN" means any Interim Loan made pursuant to SECTION 2.1(B),
together with any Term Loan relating to such Interim Loan.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement of
Contaminants through or in the, air, soil, surface water, groundwater or
property.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be amended or supplemented from time to
time.
"REMEDIAL ACTION" means actions required to (1) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor environment;
(2) prevent the Release or threat of Release or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor
7
environment; or (3) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"RESERVE AMOUNT" means an amount calculated as of any Conversion Date
following the making of the initial Interim Loan hereunder equal to the total
amount of principal and interest that will become due and payable (assuming no
Event of Default has occurred) on the next two succeeding Conversion Dates in
respect of all Term Loans outstanding on the next day following such Conversion
Date. For purposes of calculating the Reserve Amount as of any Conversion Date,
it will be assumed that any and all amounts of principal and interest due and
payable on such Conversion Date have been paid in full.
"RESERVE NOTICE" means the written notice to be delivered by Lender in
accordance with SECTION 5.15 at least five (5) Business Days prior to any
Conversion Date following the making of the initial Interim Loan hereunder,
which notice shall set forth the Reserve Amount as of such Conversion Date and
the calculation thereof.
"SCHEDULED SHIP DATE," with respect to the applicable Switch or
Upgraded Switch, has the meaning set forth in SECTION 2.1(D) hereof.
"SECURITY AGREEMENT" means any Security Agreement between Lender and a
Borrower Affiliate in the form attached hereto as EXHIBIT H.
"SIECOR" means Siecor Corporation and its successors and assigns.
"SOLVENT" means with respect to any person on a particular date, that
on such date (i) the fair value of the property of such person is greater than
the total amount of liabilities, including, without limitation, contingent
liabilities, of such person, (ii) the present fair salable value of the 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, (iii) such person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such person's ability to pay as such
debts and liabilities mature and (iv) such person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such persons's property would constitute an unreasonably small level of
capitalization. The amount of contingent liabilities at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"SWITCH" means a Siemens Xxxxxxxxx-Xxxxxxx EWSD host switching system
and associated remotes (including related engineering services, installation
costs, ancillary OEM equipment, software licenses and peripheral equipment).
"TERM LOAN" has the meaning set forth in SECTION 2.3 hereof.
8
"TERM LOAN RATE" means with respect to each Term Loan for each Interest
Period with respect thereto, a rate equal to the six (6) month LIBOR on the date
two (2) Business Days prior to the commencement of such Interest Period PLUS
three hundred and fifty (350) basis points.
"TOTAL COMMITMENT AMOUNT" means the sum of the Phase I Commitment
Amount, the Phase II Commitment Amount, the Cable Commitment Amount and the
Optiset Commitment Amount.
"UNDELIVERED LENDER EQUIPMENT" has the meaning set forth in SECTION
2.1(D) hereof.
"UPGRADED SWITCH" means a Switch manufactured with a combined EWSD
platform containing both local and long-distance exchange services, including
IXC Toll Tandem Features.
"VENDOR ADVANCE" means each Interim Loan to the extent that (i) the
proceeds thereof are used exclusively to reimburse Borrower for the invoice
price, which price shall include any related charges (including, but not limited
to, applicable installation and shipping charges) for Non-Lender Equipment to be
used at any Network Location.
1.2 ACCOUNTING TERMS. Except as otherwise herein specifically provided,
each accounting term used herein shall have the meaning given to it under GAAP.
1.3 OTHER TERMS DEFINED IN NEW YORK UNIFORM COMMERCIAL CODE. All other
terms contained in this Agreement (and which are not otherwise specifically
defined herein) shall have the meanings provided by the Uniform Commercial Code
of the State of New York (the "CODE") to the extent the same are used or defined
therein.
ARTICLE II
LOANS
2.1 AGREEMENT TO LEND.
(a) AGREEMENT TO LEND -- PHASE I. Provided no Event of Default as
defined in Article VIII hereof, or any occurrence that would constitute an Event
of Default with the giving of notice or the lapse of time, or both, has occurred
and is continuing, and subject to the terms and conditions herein, unless the
Commitment shall have been terminated in accordance with the terms hereof,
Lender agrees, upon Borrower's request, to make one or more loans (which shall
constitute Phase I Loans) to Borrower from time to time on or after the
Effective Date and until the Commitment Termination Date; PROVIDED, HOWEVER,
that Lender shall be obligated to make its initial Phase I Loan to Borrower only
if Borrower has provided to Lender a firm irrevocable purchase order(s) (which
purchase order(s) need
9
not include the proposed delivery dates(s)), in form acceptable to Lender, for
eleven (11) Switches scheduled to be delivered within thirty-six (36) months of
the Effective Date within Network Locations with the purchase price of each
Switch and related Equipment being not less than One Million Five Hundred
Thousand Dollars ($1,500,000). Borrower covenants and agrees to deliver such
foregoing described purchase order(s) in conjunction with its execution and
delivery of this Agreement. The amount of any proposed Interim Loan made to
Borrower pursuant to this SECTION 2.1(A), may not exceed the sum of (i) the
Phase I Commitment Amount; (ii) the Cable Commitment Amount; and (iii) the
Optiset Commitment Amount (the "PHASE I CAP"), LESS the aggregate principal
balance of the Phase I Loans advanced hereunder to Borrower through the date of
such proposed Interim Loan. Notwithstanding the foregoing, the aggregate amount
of Phase I Loans available for financing the purchase of Cable shall not exceed
the Cable Commitment Amount; and the aggregate amount of the Phase I Loans
available for financing of Siemens Optisets shall not exceed the Optiset
Commitment Amount.
(b) AGREEMENT TO LEND -- PHASE II. Provided (i) no Event of Default
as defined in Article VIII hereof, or any occurrence that would constitute an
Event of Default with the giving of notice or the lapse of time, or both, has
occurred and is continuing and (ii) Lender has determined, in its sole
discretion, that it desires to make such loans, and subject to the terms and
conditions hereof, and unless the commitment shall have been terminated in
accordance with the terms hereof, Lender shall, upon Borrower's request (which
shall be made to Lender within twenty-four (24) months of the Effective Date or
six (6) months after general availability of the IXC Toll Tandem Features,
whichever occurs last), make one or more loans (which shall constitute Phase II
Loans) to Borrower from time to time on or after the Effective Date and until
the Commitment Termination Date, for the purpose of purchasing Switches or
Upgraded Switches to be deployed in any Network location, with the purchase
price of each Switch or Upgraded Switch and related Equipment being not less
than One Million Five Hundred Thousand Dollars ($1,500,000). The amount of a
proposed Interim Loan made to Borrower pursuant to this SECTION 2.1(B), may not
exceed the sum of (i) the Phase II Commitment Amount; (ii) the Cable Commitment
Amount (less the aggregate balance of the Cable Commitment Amount advanced
hereunder to Borrower in connection with the Phase I Loans); and (iii) the
Optiset Commitment Amount (less the aggregate balance of the Optiset Commitment
Amount advanced hereunder to Borrower in connection with the Phase I Loans) (the
"PHASE II CAP"), LESS the aggregate balance of the Phase II Loans advanced
hereunder to Borrower through the date of such proposed Interim Loan.
Notwithstanding the foregoing, the aggregate amount of the Phase II Loans
available for the financing of Cable shall not exceed the Cable Commitment
Amount (less the aggregate amount of the Cable Commitment Amount used to finance
Cable as part of the Phase I Loans); and the aggregate amount of the Phase II
Loans available for the financing of Siemens Optisets shall not exceed the
Optiset Commitment Amount (less the aggregate amount of the Optiset Commitment
Amount used to finance Optisets as part of the Phase I Loans).
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(c) USE OF LOAN PROCEEDS. Borrower covenants and agrees that the
proceeds of each Interim Loan shall be used solely to finance Borrower's
purchase of (i) Lender Equipment to be used solely in any Network and (ii)
Borrower's purchase of Non- Lender Equipment to be used solely in a Network.
(d) LIMITATION ON VENDOR ADVANCES; ADVANCE DATE FOR INTERIM
NON-LENDER EQUIPMENT LOAN. The proceeds of any Vendor Advance used exclusively
to reimburse Borrower for Non-Lender Equipment to be used at any Network
Location, when aggregated with all prior Vendor Advances used to pay for
Non-Lender Equipment for all Network Locations, as of the date such proceeds are
advanced, shall not exceed the aggregate amount of the Loans made to Borrower
hereunder for the acquisition of Lender Equipment for all Network Location(s).
An Interim Loan, to the extent that it constitutes a Vendor Advance, shall be
deemed advanced to Borrower hereunder, and interest shall commence to accrue
with respect to such Vendor Advance, on the date that Lender has (i) received
from Borrower and accepted in accordance with SECTION 4.2(J) hereof: (A) the
invoice for the Non-Lender Equipment financed thereby and (B) the proof of
payment of such invoice, and (ii) advanced such Vendor Advance proceeds to
Borrower in accordance with the instructions described in subsection (h) of this
Section; PROVIDED, HOWEVER, that no Vendor Advance shall be made to Borrower
more than six (6) months prior to the "SCHEDULED SHIP DATE" of the relevant
Switch or Upgraded Switch as set forth in the firm irrevocable purchase order
relating to said Switch or Upgraded Switch. If, for any reason, Borrower fails
or refuses to take delivery of any Switch or Upgraded Switch on or before its
Scheduled Ship Date ("UNDELIVERED LENDER EQUIPMENT") and Lender has made any
Vendor Advance(s) to Borrower for the acquisition of Non-Lender Equipment for
the Network to which the Undelivered Lender Equipment was to be delivered, the
Interim Loan relating to the Undelivered Lender Equipment shall be deemed
advanced to Borrower on the Scheduled Ship Date for such Undelivered Lender
Equipment. Lender shall transport and store such Undelivered Lender Equipment on
behalf of Borrower at Borrower's expense. All the terms and conditions of this
Agreement and all obligations and responsibilities of Borrower relating to the
delivered Lender Equipment (except those terms and conditions relating to
possession and maintenance by Borrower of Lender Equipment after delivery) shall
be applicable to such Undelivered Lender Equipment and the Loan relating
thereto.
(e) ADVANCE DATE FOR INTERIM LENDER EQUIPMENT LOAN. An Interim
Loan, to the extent that it is a Lender Equipment Loan, shall be deemed advanced
to Borrower hereunder, the Lender Equipment to be financed thereby shall be
deemed paid for, and interest shall commence to accrue with respect to such
Interim Loan, thirty (30) days after shipment of such Lender Equipment and the
date the invoice for such Lender Equipment is issued to Borrower or thirty (30)
days after the date of invoice for engineering, installation and services
relating to such Lender Equipment is issued to Borrower, whichever occurs last.
(f) FINANCING FEE. With respect to each Vendor Advance, Lender
shall fully earn, concurrent with the disbursement thereof, a financing fee
equal to one percent (1%) the amount of such Vendor Advance. The amount of each
financing fee earned by
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Lender (the "FINANCING FEE AMOUNT") shall be paid by Borrower to Lender within
thirty (30) days after the Advance Date of the related Interim Loan.
(g) PROCEDURE FOR PROPER REQUEST. Borrower shall give Lender at
least five (5) Business Days' prior written notice of each Interim Loan
requested to be made. In each case, such notice shall be in the form attached
hereto as EXHIBIT C ("NOTICE"), shall be irrevocable and shall specify the
aggregate amount of the proposed Interim Loan, the intended use of such Interim
Loan proceeds, and the specific bank account (including the identity of the bank
and the account number) to which Lender shall transfer the proceeds of the
Vendor Advance portion, if any, of the proposed Interim Loan. Such Notice, to be
effective, must be received by Lender not later than 12:00 noon, Eastern Time,
on the fifth (5th) Business Day prior to the borrowing date specified in such
Notice. In the event and to the extent that any such Notice relates to proceeds
of an Interim Loan to be used to purchase Non-Lender Equipment that does not
constitute Approved Third-Party Product identified in SCHEDULE 1.1 hereto,
Lender shall promptly determine and notify Borrower within five (5) Business
Days whether it is prepared to recognize such Non-Lender Equipment as Approved
Third-Party Product and finance the purchase of such Non-Lender Equipment
through a Vendor Advance. Lender and Borrower agree to use their best efforts in
good faith to resolve any disagreement as to whether any Non-Lender Equipment
constitutes Approved Third-Party Product. Lender shall make the proceeds of any
Vendor Advance available to Borrower at the bank account specified in the Notice
in U.S. dollars in immediately available funds.
(h) ADEQUATE CASH. Notwithstanding the provisions of this Section
2.1, Lender shall be obligated to advance any Interim Loan only if, at the time
such Interim Loan is to be advanced, Guarantor has Adequate Cash in the amount
of not less than Twenty-Five Million Dollars ($25,000,000). If the amount of
Adequate Cash is insufficient as provided in this subparagraph, and if the
Interim Loan was to be a Lender Equipment Loan, Borrower shall be relieved of
its obligation to purchase the related Lender Equipment and, if delivered, it
shall be returned to Lender at the direction of Lender at Borrower's sole cost
and expense.
2.2 THE NOTE. The Loans shall be evidenced by a promissory note in the
form of EXHIBIT B hereto (the "NOTE"). Lender is hereby authorized by Borrower
to endorse on the schedule attached to the Note an appropriate notation
evidencing the date and amount of each Interim Loan, and the date and the
principal amount of each Term Loan thereunder; PROVIDED, HOWEVER, that the
failure of Lender to provide such endorsement, and other information on the Note
or schedule shall not in any manner affect the obligation of Borrower to repay a
Loan in accordance with the terms of the Note.
2.3 TERM LOANS. Each Interim Loan shall be converted into a term loan
(a "TERM LOAN") on the next Conversion Date after the date of such Interim Loan.
Such Term Loan shall continue to be evidenced by the Note.
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2.4 INTEREST ON LOANS.
(a) INTERIM LOAN INTEREST RATE. Subject to the provisions of
SECTION 2.9 hereof, each Interim Loan shall bear interest during each Interest
Period therefor at the Interim Loan Rate for such Interest Period. The Interim
Loan Rate shall be computed on the basis of the actual number of days elapsed
over a year of 360 days. Interest accrued with respect to any Interim Loan shall
be due and payable by Borrower on the first Conversion Date following the date
of the making of the Lender Equipment Loan or Vendor Advance relating to such
Interim Loan.
(b) TERM LOAN INTEREST RATE. Subject to the provisions of SECTION
2.9 hereof, the outstanding principal amount of each Term Loan shall bear
interest from the date of its conversion from an Interim Loan to a Term Loan at
the Term Loan Rate. The Term Loan Rate shall be computed on the basis of the
actual number of days elapsed over a year of 360 days and Term Loan Rate shall
be adjusted semi-annually on the last business day prior to January 1 and July 1
of each year during the term of such Term Loan, which adjustment dates may be
changed by mutual written agreement of Lender and Borrower.
2.5 TERM LOAN PAYMENTS.
(a) TERM LOAN INTEREST PAYMENTS. Interest accrued with respect to
any Term Loan shall be due and payable by Borrower on the last Business Day of
each calendar quarter during the term thereof. Borrower shall make interest only
payments in respect of any Term Loan for the four (4) succeeding quarters
following the related Conversion Date. Thereafter, interest accrued with respect
to the Term Loans and the Term Loan principal amounts outstanding under the Note
shall be due and payable by Borrower on the last Business Day of each calendar
quarter during the term hereof as set forth in this SECTION 2.5(A) AND IN
SECTION 2.5(B) BELOW.
(b) TERM LOAN PRINCIPAL PAYMENTS. The outstanding principal amount
of each Term Loan under the Note shall be payable by Borrower in twenty-four
(24) consecutive quarterly installments commencing on the same date that the
fifth (5th) consecutive quarterly installment of interest with respect to such
Term Loan is payable on the Note, with the amount of principal due and payable
on each such quarterly installment date pursuant to this SECTION 2.5(B) to be
equal to the following percentage of the original principal amount of such Term
Loan (PROVIDED that the last such payment shall be in an amount sufficient to
repay in full the principal amount of such Term Loan):
Percentage of Original
Quarterly Installment Principal Amount
--------------------- ----------------
5 through 12 3.5%
13 through 20 4.0%
21 through 28 5.0%
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2.6 DEFAULT RATE OF INTEREST. If Borrower shall default in the payment
of the principal of or interest on the Note, Borrower shall, on demand, pay
interest on any amount overdue on the Note at a rate that is equal to the
Applicable Rate with respect to the Note plus two percent (2%), from the date
such payment is due to the date of actual payment. If Borrower shall default in
the payment of any amount payable by it hereunder (other than principal of and
interest on any of the Loans), Borrower shall, on demand, pay interest on any
such overdue amount at a rate that is equal to the average of the Applicable
Rates on all Loans then outstanding plus two percent (2%), from the date such
payment is due to the date of actual payment.
2.7 OPTIONAL PREPAYMENT OF NOTE; MANDATORY PREPAYMENT OF NOTE.
(a) Borrower shall have the right at any time to prepay any Note of
Borrower, in whole or in part, without premium or penalty, upon at least five
(5) Business Day's prior written notice to Lender, in integral multiples of one
hundred thousand dollars ($100,000). Any prepayment of less than the entire
aggregate outstanding balance of the Loans should be applied first to the
payment of all accrued interest on the amount so prepaid to and including the
date of prepayment, and second to the payment of the required payment of
principal due under the Note in the inverse order of the maturity of the
installments hereof.
(b) Each notice of prepayment pursuant to subsection (a) of this
section shall specify the principal amount to be prepaid and the prepayment date
on which such principal shall be prepaid, shall be irrevocable and shall commit
the Borrower giving such prepayment notice to prepay such principal amount. Upon
any prepayment pursuant to this section, Borrower shall not be entitled to
reborrow from Lender hereunder the principal amount prepaid.
(c) If (i) the aggregate outstanding principal balance of the Phase
I Loans exceeds the Phase I Cap or (ii) if the aggregate outstanding principal
balance of the Phase II Loans exceeds the Phase II Cap, then in each such case,
Borrower is obligated to immediately repay to Lender, upon notice from Lender,
(i) the amount by which the aggregate outstanding principal balance of the
related Loans exceeds the Phase I Principal Cap or Phase II Principal Cap, as
applicable, plus (ii) all accrued and unpaid interest on such excess principal
up to the date of repayment.
2.8 PAYMENT, ETC. All payments by Borrower hereunder and under the Note
shall be made to Lender by wire transfer or other electronic payment method to
such bank accounts as Lender may designate, for the account of Lender in U.S.
dollars in immediately available funds by 12:00 p.m., Eastern time, on the date
on which such payment shall be due. Interest in respect of any Loan hereunder
shall accrue from the first day following such Loan up to and including the date
on which such Loan is paid in full.
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2.9 MAXIMUM LAWFUL INTEREST RATE. Notwithstanding any provision to the
contrary contained herein, the total liability of Borrower for payment of
interest pursuant hereto and the Note, including any other charges or other
amounts, to the extent such charges and other amounts are deemed to be interest,
shall not exceed the maximum amount of such permitted by law to be charged,
collected, or received from Borrower. If any payments by Borrower include
interest in excess of such a maximum amount, Lender shall apply such excess to
the reduction of the unpaid principal amount due pursuant hereto, or if none is
due, such excess shall be refunded to Borrower.
2.10 INDEMNIFICATION FOR FAILURE TO BORROW. Borrower agrees to pay to
Lender, upon the Lender's request, such amount or amounts as shall compensate
the Lender for any loss, cost or expense incurred by the Lender (as reasonably
determined by the Lender) as a result of any failure by Borrower to borrow an
Interim Loan on the date for such borrowing specified in the relevant Notice
under SECTION 2.1(G) hereof, such compensation to include, without limitation,
an amount equal to any loss or expense incurred by Lender in respect of such
proposed Interim Loan during the period from the date of receipt by Borrower of
such Notice to the last day of such Interest Period, if the rate of interest
obtainable by the Lender upon the redeployment of an amount of funds equal to
the amount of such proposed Interim Loan is less than the rate of interest
applicable to such Interim Loan or such Term Loan, as applicable, for such
Interest Period; provided, however, that Borrower shall not be responsible for
any such loss if the failure to borrow is caused by any willful act or omission
of Lender, including, Lender's unreasonable failure to make any Interim Loan in
accordance with Section 2.1(g) or 2.1(h). The Lender's determination of the
amount of any such loss or expense, when set forth in a written notice to
Borrower, containing the Lender's calculation thereof in reasonable detail,
shall be conclusive, absent manifest error.
2.11 ADDITIONAL EQUIPMENT. Lender agrees to amend this Agreement from
time to time (to the extent necessary) to permit Lender's new products (as such
products become available), including, without limitation, Newbridge ATM/Frame
relay, to the type of Lender Equipment to be financed pursuant to this
Agreement.
2.12 LEASES. Borrower covenants and agrees that all Equipment purchased
by Borrower and financed pursuant to this Agreement, to the extent that the same
shall be operated and maintained by a Borrower Affiliate rather than by
Borrower, shall be operated and maintained by such Borrower Affiliate only
pursuant to the terms of a Lease between Borrower and such Borrower Affiliate,
which Lease shall be substantially in the form attached hereto as EXHIBIT J.
2.13 SECURITY AGREEMENT. Borrower covenants and agrees that it will
cause each Borrower Affiliate to enter into the Security Agreement in favor of
Lender, substantially in the form attached hereto as EXHIBIT H.
2.14 EXTENSION. Lender and Borrower agree that in the year immediately
preceding the Commitment Termination Date they will discuss the possibility of a
three (3)-year
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extension of the Commitment Termination Date, which extension shall occur only
if the parties mutually agree upon the terms and conditions thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that as of the Effective
Date:
3.1 ORGANIZATION; POWERS.
(a) It (i) is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, (ii) is duly
qualified to do business and is in good standing in each jurisdiction where the
failure to qualify could have a Material Adverse Effect;
(b) It has the power and authority to own its properties, to carry
on its business as now conducted or as presently contemplated and to own,
operate and maintain the Network; and
(c) It has the power and authority to execute and deliver and
perform this Agreement and the other Loan Documents to which it is a party and
to borrow hereunder.
3.2 AUTHORIZATION BY BORROWER. The execution, delivery and performance
of this Agreement and the other Loan Documents to which it is a party, if any,
to be delivered subsequent to the date hereof, and the Loans hereunder:
(a) have been duly authorized by Borrower's Board of Directors and,
if necessary, Borrower's shareholders;
(b) do not violate (i) any provision of law or any rules or
regulations applicable to Borrower or the Business, (ii) Borrower's Articles of
Incorporation or By-laws, (iii) any applicable order of any court or other
governmental authority, or (iv) any indenture, agreement for borrowed money,
bond, note or other similar instrument or any other agreement to which Borrower
is a party or by which Borrower or any of Borrower's property is bound, in each
case in a manner which could have a Material Adverse Effect;
16
(c) do not conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any bond, indenture,
agreement for borrowed money, bond, note or similar instrument or material
agreement to which Borrower is a party or by which Borrower or any of Borrower's
property is bound in a manner which could have a Material Adverse Effect;
(d) do not result in the creation or imposition of any Lien of any
nature whatsoever upon any property or assets of Borrower other than the Lien
granted pursuant to ARTICLE VII hereof;
(e) constitute legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, subject,
as to enforcement, to applicable bankruptcy, reorganization, insolvency and
similar laws affecting creditors' rights generally and to moratorium laws from
time to time in effect; and
(f) do not, as of the execution hereof, require any governmental
consent, filing, registration or approval except as set forth on SCHEDULE 3.2,
the lack of which could have a Material Adverse Effect.
3.3 FINANCIAL STATEMENTS. Borrower has furnished to Lender a balance
sheet, dated as of August 31, 1996 (the "BALANCE SHEET"), attached hereto as
EXHIBIT D. As of the Effective Date, (a) the Balance Sheet fairly represents
Borrower's assets, liabilities and financial condition as of such date and
indicates the equity contributions made by Borrower's shareholders as of such
date according to GAAP; and (b) there are no misrepresentations or omissions
from the Balance Sheet or any other facts or circumstances not reflected in the
Balance Sheet which are material.
3.4 NO MATERIAL ADVERSE CHANGE. There has been no material adverse
change in the condition (financial or otherwise), operations or properties of
Borrower since the date of the Balance Sheet.
3.5 LITIGATION. Except as set forth on SCHEDULE 3.5, there are no
actions, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency now pending or, to the knowledge of
Borrower, threatened against or affecting Borrower or any property or rights of
Borrower as to which there is a reasonable possibility of an adverse
determination and which, if adversely determined, would individually or in the
aggregate materially impair the right of Borrower to carry on its business or
would result in any Material Adverse Effect.
3.6 TAX RETURNS. Borrower has filed or caused to be filed all Federal,
state and local tax returns, if any, which are required to be filed and has paid
or caused to be paid all taxes, if any, as shown on such returns or on any
assessment received by it to the extent that such taxes have become due.
3.7 NO DEFAULTS. Borrower is not in default (i) with respect to any
judgment, writ, injunction, decree, rule or regulation of any governmental
instrumentality or other agency which could have a Material Adverse Effect, or
(ii) in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any material agreement or instrument to
which Borrower is a party or by which its assets are bound in a manner which
could have a Material Adverse Effect.
17
3.8 PROPERTIES. Borrower has good and marketable title to all
properties and assets owned by it and all Collateral is free and clear of all
Liens of any nature whatsoever, except Permitted Liens.
3.9 LICENSES, ETC. Borrower has obtained any and all licenses,
authorizations, certificates, permits and approvals of any Federal, state or
local governmental agency, authority or instrumentality having jurisdiction over
Borrower necessary and appropriate for Borrower to own, use and operate the
properties of Borrower. Borrower has all FCC Licenses necessary for Borrower to
operate the Business. Any such FCC Licenses are in full force and effect;
Borrower has fulfilled and performed all of its obligations as a holder of any
such FCC Licenses; and no event has occurred which permits or, after notice, a
lapse of time, or both, would permit revocation or termination of such FCC
Licenses or result in any other material impairment of the rights of Borrower
therein.
3.10 COMPLIANCE WITH LAWS.
(a) Borrower's operations comply in all material respects with all
applicable Federal, state or local laws and regulations, including, without
limitation applicable municipal laws with respect to communications, real estate
and easements and all ERISA, environmental, health and safety statutes and
regulations. None of the properties owned, leased, used or operated by Borrower
or the operations or business of Borrower is subject to any judicial or
administrative proceeding alleging the violation of any Federal, state or local
laws, or regulations or ordinances (including, without limitation, any
communications, utilities, environment, health or safety statute, regulation or
order) which, if resolved adversely to Borrower, could have a Material Adverse
Effect.
(b) To the knowledge of Borrower, none of the operations or
business of Borrower is the subject of any Federal or state investigation
evaluating whether any Remedial Action is needed to respond to a Release of any
Contaminant into the indoor or outdoor environment. Borrower has not filed any
notice under any Federal or state law indicating past or present treatment,
storage or disposal of a hazardous waste or reporting a Release of any
Contaminant into the indoor or outdoor environment. There is no contingent
liability of Borrower of which Borrower has knowledge or reasonably should have
knowledge in connection with any Release of any Contaminant into the indoor or
outdoor environment.
(c) Borrower has made or caused to be made all submissions with
respect to the Business (including, but not limited, to registration statements,
and equal employment opportunity reports), if any, required under the
Communications Act and relevant to the conduct and operation of the Business,
and Borrower and the Business are in compliance with the Communications Act in
all material respects. Without limiting the generality of the foregoing,
Borrower, to the extent required under rules and regulations of the FCC, has
filed appropriate notices with the FCC relating to the operation of the
Business. The execution, delivery and performance of the Loan Documents, do not
require the approval of any FCC,
18
will not result in any violation of the Communications Act, and will not cause
any forfeiture or impairment of any FCC Licenses issued for the operation of the
Business.
3.11 ERISA. Borrower and its ERISA Affiliates, if any, has fulfilled
their obligations under the minimum funding standards of ERISA and the IRC, if
any, with respect to employee benefit plan subject to ERISA and are in
compliance in all material respects with the applicable provisions of ERISA and
the IRC, and have not incurred any liability to the PBGC or any such plan under
Title IV of ERISA and no "prohibited transaction" or "reportable event", as such
terms are defined in ERISA, has occurred with respect to any such plan.
3.12 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Borrower is not an "investment company", as that term is defined in, and is not
otherwise subject to regulation under, the Investment Company Act of 1940.
Borrower is not a "holding company", as that term is defined in, and is not
otherwise subject to regulation under, the Public Utility Holding Company Act of
1935.
3.13 FEDERAL RESERVE REGULATIONS. Borrower is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying any margin stock (within the meaning of
Regulation G of the Board of Governors of the Federal Reserve Network of the
United States), and no part of the proceeds of the Loans hereunder will be used
to purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or for any purpose that
violates, or is inconsistent with, the provisions of Regulation G, T, U or X of
said Board of Governors.
3.14 COLLATERAL. With respect to Collateral located in the United
States, the security interest granted by ARTICLE VII hereof and accompanying
financing statements, when (i) duly filed in the appropriate governmental
offices in accordance with the Uniform Commercial Code in effect in the
applicable jurisdictions and (ii) Borrower has acquired an ownership interest in
the Collateral, shall create a valid and perfected first priority Lien in and to
the Collateral, enforceable against (x) other Persons in all jurisdictions
securing the payment of the Obligations without penalty (subject to Permitted
Liens) and (y) Liens such as carrier's, warehousemen's and mechanic's liens,
which arise in the ordinary course of business with respect to obligations not
yet due or being contested in good faith by appropriate proceedings and for
which Borrower shall have set aside reserves on its books as required by GAAP.
Without limiting the foregoing, upon filing such financing statements, no
further action will be required to perfect fully the Lien of Lender in any such
Collateral. With respect to Collateral located in Mexico or Canada, the security
interest granted by ARTICLE VII hereof when, the appropriate action has been
taken in accordance with appropriate statutes and regulations in effect in the
applicable jurisdictions, and Borrower has acquired an ownership interest in the
Collateral, shall create a valid and perfected first priority Lien in and to the
Collateral, enforceable against (x) other Persons in said jurisdiction securing
the payment of the Obligations without penalty (subject to Permitted Liens) and
(y) Liens such as carrier's,
19
warehouseman's and mechanic's liens, which arise in the ordinary course of
business with respect to obligations not yet due or being contested in good
faith by appropriate proceedings and for which Borrower shall set aside reserves
on its books as required by GAAP.
3.15 CHIEF PLACE OF BUSINESS. As of the execution hereof, the principal
place of business and chief executive office of Borrower is located at 0000
Xxxxx Xxxx Xxxxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx 00000. If any change in such
location occurs, Borrower at such time shall notify Lender thereof not later
than ten (10) days after the occurrence thereof. As of the execution hereof, the
books and records of Borrower and all chattel paper and all records of account
of Borrower are located at its principal place of business and chief executive
office. If any change in such location occurs, Borrower at such time shall
notify Lender thereof not later than ten (10) days after the occurrence thereof.
3.16 OTHER CORPORATE NAMES. Borrower has not used any corporate or
fictitious names other than Borrower's corporate name, as shown in Borrower's
Articles of Incorporation.
3.17 INSURANCE. SCHEDULE 3.17 contains a description of all insurance
which Borrower or any Affiliate of Borrower maintains with respect to the
Business. All of such insurance policies are in full force and effect.
3.18 CAPITALIZATION. SCHEDULE 3.18 sets forth the following information
with respect to Borrower, as of the Effective Date: each class of capital stock
of Borrower, and the related par value, authorized and issued shareholder of
shares of capital stock of Borrower, indicating the amount and type of such
capital stock held by such holder, and the date(s) of acquisition and purchase
price of such capital stock. All of the outstanding shares of capital stock of
Borrower as of the Effective Date are duly and validly issued, fully paid and
nonassessable, and none of such issued and outstanding shares, equity securities
or beneficial interests has been issued in violation of, or is subject to, any
pre-emptive or subscription rights. Except as set forth on SCHEDULE 3.18 hereto,
there are no: (A) outstanding shares of capital stock or other securities
convertible into or exchangeable for equity securities of Borrower as of the
Effective Date, or (B) outstanding rights of subscription, warrants, calls,
options, contracts or other agreements of any kind, issued, made or granted to
or with any Person under which Borrower as of the Effective Date may be
obligated to issue, sell, purchase, retire or redeem or otherwise acquire or
dispose of any equity securities of Borrower.
3.19 ARTICLES OF INCORPORATION; BY-LAWS. Attached as SCHEDULE 3.19
hereto is a true, complete and correct copy of the Articles of Incorporation and
By-laws of Borrower as of the Effective Date, as in effect on the Effective
Date, and the Board of Directors of Borrower has not passed any resolution or
made any determination to amend, modify or annul Borrower's Articles of
Incorporation and By-laws or any provision therein.
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3.20 REAL PROPERTY LEASES AND EASEMENTS. Set forth on SCHEDULE 3.20 is
a list of (i) all real property, if any, owned by Borrower as of the Effective
Date (the "OWNED REAL PROPERTY"), (ii) all real property leased by Borrower, if
any, as of the Effective Date (the "LEASED REAL PROPERTY)" and the material
terms and provisions thereof, (iii) an easements, licenses, rights of way and
similar rights, if any, with respect to real property granted to Borrower (the
"EASEMENTS") and the material terms and provisions thereof.
3.21 INTELLECTUAL PROPERTY. SCHEDULE 3.21 contains a complete and
accurate list of all trade names, trademarks, copyrights and other intellectual
property, if any, owned or licensed by Borrower as of the Effective Date and
Borrower's interests in such intellectual property, if any, are sufficient for
purposes of Borrower conducting and operating the Business. Borrower has no
knowledge of any conflict with the business property rights of others, the
resolution of which could have a Material Adverse Effect on Borrower. Borrower
possesses rights to use all copyrights, trademarks, service marks, service
names, trade names, and patents, if any, necessary to operate the Business. To
the best of Borrower's knowledge, Borrower is not infringing any copyright,
trademark, trademark rights, service marks, service names, trade names, patents,
patent rights, license, trade secrets, or franchises owned by any Person or
Persons, and there is no such claim or action pending, or to the knowledge of
Borrower threatened, with respect thereto.
3.22 FISCAL YEAR. As of the Effective Date, Borrower's fiscal year for
both tax and accounting purposes is from October 1 to September 30.
3.23 NO MATERIAL MISSTATEMENTS. No report, financial statement, exhibit
or schedule furnished by or on behalf of Borrower to Lender in connection with
the Loan Documents or included herein or therein, nor any other information
required to be furnished hereby or thereby, contains any material misstatement
of fact or omits to state any material fact necessary to make the statements
therein not materially misleading as of the date of delivery thereof to Lender
or as of the Effective Date.
3.24 BUSINESS PLAN. The Business Plan, in the reasonable opinion of
Borrower, fairly presents good faith projections based upon reasonable
assumptions at the time of its preparation; provided, however, that (i) there
can be no assurance that said projections will be realized or that actual events
will not result in variations from such projections and (ii) the Business Plan
does not address the effect of deployment of wireless communication services.
ARTICLE IV
CONDITIONS FOR LOANS
Lender's obligation to make Loans hereunder is subject to the
satisfaction of the following conditions:
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4.1 ON OR PRIOR TO THE EFFECTIVE DATE. On or prior to the Effective
Date:
(a) All then applicable legal matters incident to this Agreement
and the other Loan Documents shall be satisfactory to counsel for Lender.
(b) Lender shall have received the Business Plan.
(c) Lender shall have received certificates, dated the Effective
Date, of the Secretary or Assistant Secretary of each of Borrower and Guarantor
as of the Effective Date, certifying (i) the names and true signatures of the
officers authorized to sign each Loan Document to which Borrower or Guarantor is
a party and (ii) the resolutions of the Board of Directors of each of Borrower
and Guarantor approving the transactions contemplated by the Loan Documents.
(d) Lender shall have received the favorable written opinion of
counsel for Borrower and Guarantor, dated the Effective Date, addressed to
Lender and substantially in the form of EXHIBIT F attached hereto.
(e) Lender shall have received certificates of appropriate public
officials of the jurisdiction of the organization of each of Borrower and
Guarantor and of the jurisdictions in which each of Borrower and Guarantor are
required to be qualified, dated not more than thirty (30) days prior to the
Effective Date, as to the legal existence or qualification and good standing of
each of Borrower and Guarantor.
(f) Lender shall have received a copy of Borrower's Articles of
Incorporation, as amended, modified or supplemented to the Effective Date,
certified to be true, correct and complete by the Secretary of State of the
State of Borrower's and Guarantor's incorporation.
(g) Lender shall have received loss payable endorsements in a form
reasonably satisfactory to Lender with respect to Borrower insurance policies
relating to the Collateral pledged by Borrower.
(h) Lender shall have received the fully executed Guaranty.
(i) Lender shall have received the duly executed Note.
(j) Lender shall have received the Balance Sheet.
(k) Lender shall have received all of the financial statements of
Guarantor required to be delivered pursuant to the Guaranty on or before the
Effective Date.
(l) Each of Borrower and Guarantor shall have performed all of its
obligations to be performed hereunder on or before the Effective Date.
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(m) Borrower shall have paid closing fees to Lender including due
diligence fees, transportation costs, credit reports fees, filing fees and
Lender's legal fees (which legal fees shall not be in excess of $100,000)
incurred by Lender for the negotiation and preparation of the Loan Documents.
(n) Lender shall have received an Officer's Certificate in the form
of EXHIBIT L from each of Borrower and Guarantor.
(o) Lender shall have received the purchase order(s) for eleven
(11) switches referred to in Section 2.1(a).
By its execution of this Agreement, Lender acknowledges that all of
the conditions set forth in this Section 4.1 either have been satisfied or
waived by Lender.
4.2 ALL LOANS. In the case of each Interim Loan hereunder:
(a) The representations and warranties of Borrower and Guarantor
set forth in SECTIONS 3.1, 3.2, 3.4, 3.9, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16 AND
3.23 OF ARTICLE III shall be true and correct in all material respects on and as
of the date of such Loan.
(b) Each of Borrower and Guarantor shall have performed all of its
obligations to be performed hereunder or under any other Loan Document or on or
before the date of such Loan.
(c) On the date of, and after giving effect to, each such Loan,
Borrower, each Borrower Affiliate and Guarantor, and each of them, shall be in
compliance with all the terms and provisions set forth herein or in any other
Loan Document on its part to be observed or performed, and no Event of Default,
nor any event which upon notice or lapse of time or both would constitute such
an Event of Default, shall have occurred and be continuing.
(d) On the date of, and after giving effect to, each such Loan, no
event shall have occurred which has a Material Adverse Effect with respect to
Borrower or Guarantor.
(e) Such Loan, when combined with Loans previously made to
Borrower, shall not exceed the sum of the Total Commitment Amount.
(f) Such Loan, to the extent it finances the purchase of Cable,
when combined with Loans previously made to Borrower to finance the purchase of
Cable, shall not exceed the Cable Commitment Amount.
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(g) Such Loan, to the extent it finances the purchase of Siemens
Optisets, when combined with loans previously made to Borrower to finance the
purchase of Siemens Optisets, shall not exceed the Optiset Commitment Amount.
(h) All other legal matters incident to such Loan and the Loan
Documents shall be satisfactory to counsel for Lender.
(i) Lender shall have received a Notice from Borrower pursuant to
SECTION 2.1(G) requesting the Loan, signed by Borrower's President, Chief
Financial Officer, Chief Accounting Officer or Treasurer regarding the requested
Loan and the representations, warranties, absence of default, and use of
proceeds, all as set forth on EXHIBIT C hereto.
(j) As a condition precedent to the disbursement of such Loan
proceeds with respect to Non-Lender Equipment the acquisition of which is to be
financed with the Loan proceeds, Lender shall have received and approved the
invoices for such Non-Lender Equipment and the proofs of payment of such
invoices, which acceptance by Lender shall not be unreasonably withheld.
(k) With respect to Collateral located in the United States, Lender
shall have received satisfactory evidence that its security interests in the
Collateral pledged hereunder have been properly perfected and constitute first
and prior security interests subject only to Permitted Liens including, but not
limited to, (i) the filing and, or recording of UCC- 1 Financing Statements
signed by Borrower, as debtor, (ii) UCC-1 Financing Statements and signed by the
Borrower Affiliate, if any, that it will be leasing the subject Collateral, as
debtor, with the applicable Secretary of State and/or County Recorder.
(l) Lender shall have received such additional supporting
documents, certificates and assurances with respect to Borrower and Guarantor as
Lender shall reasonably determine are material to Borrower's compliance with the
conditions to Lender's extension of such Loan hereunder and to Borrower's
fulfillment of its obligations hereunder, which documents, certificates and
assurances shall be approved by Lender as to form and substance, which approval
shall not be unreasonably withheld.
(m) Lender shall have received a fully executed Escrow Agreement.
(n) Lender shall have received a fully executed Security Agreement
from the Borrower Affiliate to whom Borrower will be leasing the Equipment which
is being financed pursuant to such Loan.
(o) Lender shall have received a copy of the fully executed Lease
between Borrower and the Borrower Affiliate to whom Borrower will be leasing the
Equipment which is being financed pursuant to such Loan.
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(p) With respect to any Loan which finances Equipment to be
deployed in a Network Location in Mexico or Canada, (i) Borrower shall have paid
all reasonable costs and expenses, including, without limitation, attorneys'
fees and expenses, related to negotiation, structuring, transfer and creation
and perfection of the security interest with respect to such Loan (ii) Lender
shall have received satisfactory evidence that its security interest in the
Collateral pledged hereunder have been properly perfected and constitute first
and prior security interests subject only Permitted Liens; and (iii) Borrower
shall have provided evidence satisfactory to Lender in its sole discretion, that
the remedies and rights of enforcement that would be available to Lender with
respect to Collateral to be located in such countries are reasonably comparable
in substance, scope and timing to those that are available to Lender under
applicable laws of the United States with respect to Collateral to be located in
the United States.
ARTICLE V
AFFIRMATIVE COVENANTS
Borrower covenants and agrees with Lender that so long as the Agreement
shall remain in effect or any Obligations hereunder or under any of the other
Loan Documents are unpaid:
5.1 CORPORATE EXISTENCE; LICENSES AND TRADE NAMES. Borrower shall:
(a) preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its organization, and qualify
and remain qualified as a foreign corporation in all jurisdiction in which such
qualification is necessary in view of its business and operations and property;
and
(b) preserve, protect and keep in full force and effect its
material rights and its licenses and certificates, if any, and do all things
necessary to maintain and operate the Business.
5.2 COMPLIANCE WITH LAWS. ETC. Borrower shall comply with all laws and
regulations applicable to it and all material contractual obligations applicable
to it and shall obtain and maintain all material governmental consents, filings,
registrations and approvals. Borrower shall maintain, in full force and effect
the FCC Licenses, if any, required for the Business and shall comply with, or
cause to be complied with, all applicable rules and regulations of the FCC.
5.3 MAINTENANCE OF PROPERTIES. Borrower shall at all times maintain in
good repair, working order and condition, excepting ordinary wear and tear, all
of its properties material to its operations and make all appropriate repairs,
replacements and renewals thereof, in each case consistent with sound business
practices.
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5.4 INSURANCE. Borrower shall:
(a) maintain or cause to be maintained in full force and effect on
the Collateral property casualty insurance in an amount equal to the replacement
value of the Collateral.
(b) maintain or cause to be maintained in full force and effect
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by Borrower in such amounts as
customarily maintained by similar businesses of similar size;
(c) cause each such insurance policy (i) pertaining to the
Collateral, to name Lender as an "additional insured", if such policy is a
liability policy, (ii) to name Lender as a "loss payee" and include a standard
lender's loss payable endorsement in favor of Lender in a form reasonably
satisfactory to Lender if such policy is a property insurance policy, and (iii)
to provide that Lender shall be notified of any proposed cancellation of such
policy at least thirty (30) days in advance of such proposed cancellation; and
(d) promptly deliver to Lender copies of all loss payable
endorsements issued by Borrower's insurers with respect to the policies
described above.
5.5 TAXES. Borrower shall pay and discharge promptly all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, might become a Lien upon such properties or any part
thereof; PROVIDED, HOWEVER, that Borrower shall not be required to pay and
discharge or to cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings diligently pursued, and
Borrower shall set aside on its books such reserves as are required by GAAP with
respect to any such tax, assessment, charge, levy or claim so contested.
5.6 FINANCIAL STATEMENTS, REPORTS, ETC. Borrower shall furnish to
Lender:
(a) within five (5) days after any corresponding periodic filings
with the U.S. Securities and Exchange Commission by GST Telecommunications, Inc.
with respect to the end of each Fiscal Year, an annual unaudited balance sheet
and income statement for Borrower for such fiscal year, which balance sheet
shall fairly represent Borrower's assets, liabilities and financial condition as
of such date according to GAAP and shall indicate the equity contributions made
by Borrower's shareholders as of such date according to GAAP and shall contain
no misrepresentations or omissions of any other facts or circumstances which are
material;
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(b) within five (5) days after any corresponding periodic filing
with the U.S. Securities and Exchange Commission by GST Telecommunications, Inc.
with respect to each of the first three financial quarters of each Fiscal Year,
(i) an unaudited balance sheet and income statement for Borrower as of the end
of each such quarter and for the then elapsed portion of such Fiscal Year, which
balance sheet shall fairly represent Borrower's assets, liabilities and
financial condition as of such date according to GAAP and shall indicate the
equity contributions made by Borrower's shareholders as of such date according
to GAAP and shall contain no misrepresentations or omissions of any other facts
or circumstances which are material and (ii) a copy of the then current Business
Plan;
(c) concurrently with any financial statements provided pursuant to
SECTION 5.6(A) and SECTION 5.6(B) above, a certificate of Borrower executed on
its behalf by its chief financial officer, chief accounting officer or treasurer
to the effect that such financial statements present fairly the financial
position and results of operations of Borrower, in each case subject to normal
year-end audit adjustments;
(d) promptly upon their becoming available, copies of any periodic
or special documents, statements or other information, if any, filed by Borrower
with the FCC or with any other Federal, state or local governmental agency or
authority in connection with the construction and/or operation of the Business
or with respect to the transactions contemplated by any of the Loan Documents,
and copies of any material notices and other material communications from the
FCC or from any other Federal, state or local governmental agency or authority;
(e) immediately upon obtaining knowledge of any condition or event
which either constitutes an Event of Default or which, after notice or lapse of
time or both, would constitute an Event of Default, or which constitutes a
breach of any covenant herein, or which renders any representation or warranty
contained herein materially false or misleading, a certificate of Borrower,
signed by an authorized officer of Borrower, specifying in reasonable detail the
nature and period of existence thereof and what corrective action Borrower has
taken or proposes to take with respect thereto;
(f) within ninety (90) days after the end of each Fiscal Year, a
certificate of Borrower, executed for and on its behalf by an authorized officer
of Borrower, stating that there does not exist any condition or event which
either constitutes an Event of Default or which, after notice or lapse of time
or both, would constitute an Event of Default, or which constitutes a breach of
any covenant hereunder or which renders any representation or warranty herein
materially false or misleading;
(g) promptly from time to time such other information regarding the
operations, business affairs and condition (financial or otherwise) of Borrower
or the Business as Lender may reasonably request.
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5.7 LITIGATION AND OTHER NOTICES. Borrower shall give Lender prompt
written notice of the following: (a) all events of default or any event that
would become an event of default upon notice or lapse of time or both under any
of the terms or provisions of any note, or of any other evidence of indebtedness
or agreement or contract governing the borrowing of money, of Borrower which
would have a Material Adverse Effect; (b) any levy, attachment, execution or
other process against any of the property or assets, real or personal, of
Borrower which would have a Material Adverse Effect; (c) the filing or
commencement of any action, suit or proceeding by or before any court or any
Federal, state, municipal or other governmental department, commission,
instrumentality or agency which, if adversely determined against Borrower, would
materially impair Borrower's right to carry on the Business substantially as now
conducted or contemplated or result in a Material Adverse Effect; (d) any letter
or other correspondence, oral inquiry, communication or request of any kind from
the FCC relating to any FCC License held or required to be held by Borrower
which would or is reasonably likely or foreseeable to have a Material Adverse
Effect on such Network, the Business or Borrower's financial condition or
operations; and (e) any matter which has resulted in, or which Borrower
reasonably believes will result in, a Material Adverse Effect.
5.8 LANDLORD CONSENTS AND AGREEMENTS.
(a) Borrower shall use its best efforts (which efforts shall not
require Borrower to expend any funds) to obtain from each owner of real property
in respect of which a Borrower Affiliate has entered into a Lease prior to the
Effective Date at which Collateral is to be located a landlord/mortgage's waiver
in substantially the form of Exhibit I hereto and shall deliver such
landlord/mortgagee's waiver to Lender.
(b) Borrower shall obtain from each owner of real property in
respect of which a Borrower Affiliate has entered into a Lease (an "OWNER
LEASE") after the Effective Date at which Collateral is to be located a
landlord/mortgagee's waiver in substantially the form of Exhibit I hereto and
shall deliver such waiver to Lender. Each such Owner Lease shall contain a form
of such landlord/mortgagee's waiver as an exhibit or attachment thereto.
(c) In the event any Owner Lease referred to in Section 5.8(b)
above has been recorded with the appropriate officer of the county in which the
related real property is located, Borrower agrees to cause the related waiver
also to be recorded with the such officer of such county.
5.9 ERISA. Borrower shall comply and shall cause each Borrower
Affiliate to comply, in all material respects with the applicable provisions of
ERISA, including the minimum funding requirements of ERISA with respect to any
employee benefit plans subject to ERISA and shall not permit a Reportable Event,
as defined in ERISA, or a Prohibited Transaction, as defined in ERISA, to occur
with respect to any employee benefit plans subject to ERISA.
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5.10 ACCESS TO PREMISES, RECORDS AND NETWORK. Borrower shall permit
representatives of Lender to have access to Borrower's books and records and to
the Collateral and the premises of Borrower at reasonable times upon reasonable
notice and to make such excerpts from such records as such representatives deem
necessary and to inspect the Collateral. Borrower shall grant or shall cause
each Borrower Affiliate to grant, Lender access to the Networks for the purpose
of inspecting the Collateral and monitoring any construction, modification or
expansion thereof.
5.11 ENVIRONMENTAL NOTICES. If Borrower shall:
(a) receive notice that any material violation of any Federal,
state or local environmental law or regulation may have been committed or is
about to be committed by Borrower;
(b) receive notice that any material administrative or judicial
complaint or order has been filed or is about to be filed against Borrower
alleging any material violations of any Federal, state or local environmental
law or regulation or requiring Borrower to take any material action in
connection with any Release of any Contaminant into the indoor or outdoor
environment; or
(c) receive any notice from a federal, state, or local governmental
agency or private party alleging that Borrower may be liable or responsible for
costs associated with a material response to or material cleanup of a Release of
any Contaminant into the indoor or outdoor environment or any material damages
caused thereby;
Borrower shall provide, or shall cause to provide, Lender with a copy of such
notice within fifteen (15) days of receipt thereof. Within fifteen (15) days of
Borrower having learned of the enactment or promulgation of any federal, state
or local environmental law/or regulation which may result in any Material
Adverse Effect, Borrower shall provide Lender with notice thereof.
5.12 AMENDMENT OF ORGANIZATION DOCUMENT. Borrower shall notify Lender
of any amendment to its Articles of Incorporation within ten (10) days of the
occurrence of any such event, and provide Lender with copies of any amendments
certified by the secretary of Borrower and of all other relevant documentation.
Borrower will promptly deliver to Lender such financing statements executed by
Borrower which Lender may request to continue Lender's first priority security
interest in the Collateral as a result of any such event.
5.13 FURTHER ASSURANCES. Borrower agrees to execute and deliver to
Lender such additional assignments, agreements and instruments, at Borrower's
expense, as Lender may reasonably require or deem advisable to carry into effect
the purposes of this Agreement and the Loan Documents or to better assure and
confirm unto Lender its rights, powers and remedies hereunder and thereunder.
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5.14 ENVIRONMENTAL PERMITS, LICENSES, ETC. Borrower shall obtain all
permits, licenses, and other authorizations which are required under, and shall
be in material compliance with, all federal, state and local laws and
regulations relating to pollution, reclamation, or protection of the
environment, including laws relating to Releases or threatened Releases of
Contaminants or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of Contaminants.
5.15 PAYMENT RESERVE. Within fifteen (15) days following receipt by
Borrower from Lender of the Reserve Notice relating to any Conversion Date,
Borrower will deposit or cause to be deposited with Escrow Agent the amount, if
any, required so that the aggregate amount held in the Escrow Account equals the
Reserve Amount calculated by Lender in the exercise of its reasonable judgment
for such Conversion Date as set forth in such Reserve Notice. To the extent that
the amount on deposit in the Escrow Account on any Conversion Date exceeds the
Reserve Amount calculated for such Conversion Date, so long as no Event of
Default has occurred and is continuing, Borrower may require Escrow Agent to
remit the amount of such excess to Borrower. Upon the occurrence and during the
continuation of any Event of Default, Lender may require Escrow Agent to remit
any amounts held in the Escrow Account for application to the payment of any
Obligation of Borrower to Lender then due and payable under this Agreement.
5.16 MAINTENANCE OF COLLATERAL; RISK OF LOSS. Borrower shall and shall
cause each Borrower Affiliate to maintain the Collateral in good repair,
condition and working order (subject to ordinary wear and tear and
obsolescence), and shall furnish any and all parts, mechanisms, and devices
required to keep the Collateral in good repair, condition and working order
(subject to ordinary wear and tear or obsolescence), at the sole cost and
expense of Borrower and/or each Borrower Affiliate. Borrower and/or each
Borrower Affiliate shall bear the entire risk of loss for theft, destruction, or
other injury to the Collateral from any and every cause whatsoever. In the event
of damage or loss to such Collateral (or any part thereof), and irrespective of
payment from any insurance coverage maintained by Borrower, but applying full
credit therefor, Borrower shall at the option of Lender, (a) place such
Collateral in good repair, condition and working order; or (b) replace such
Collateral (or any part thereof) with like equipment in good repair, condition
and working order and grant to Lender a first priority security interest in such
replacement equipment. In the event Borrower is required to restore any of the
Collateral to good repair, condition and working order, Borrower shall have
thirty (30) days after notice from Lender to commence and diligently pursue said
repairs; provided, however, if, within ninety (90) days after Lender's notice,
such Collateral is not placed in good repair, condition and working order or
replaced with like equipment in good repair, condition and working order
(through no fault of Lender), Borrower shall promptly prepay to Lender the
principal amount of any Loan to the extent that the proceeds of such Loan were
used to acquire such Collateral. The terms of this Section 5.16 shall in no way
limit or restrict any rights that Borrower may have against Lender (by reason of
warranty or any other agreement between Lender and Borrower) arising in
connection with Borrower's purchase of Collateral from Lender. Nor shall the
terms of this Section 5.16 in any way modify or expand Lender's
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obligations to Borrower (by reason of warranty or any other agreement between
Lender and Borrower) arising in connection with Borrower's purchase of the
Collateral.
ARTICLE VI
NEGATIVE COVENANTS
Borrower covenants and agrees with Lender that so long as this
Agreement shall remain in effect or the Obligations hereunder or under any of
the Loan Documents shall be unpaid, without the prior written consent of Lender:
6.1 LIENS, ETC. Borrower shall not and shall not permit any Borrower
Affiliate to create, incur, assume or suffer to exist, directly or indirectly,
any Lien upon or with respect to the Collateral, now owned or hereafter acquired
except for the following "PERMITTED LIENS":
(1) Liens granted pursuant to the Loan Documents;
(2) Liens for taxes, assessments or governmental charges or levies
on property of Borrower if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being diligently contested in
good faith and by appropriate proceedings and for which Borrower shall have set
aside reserves on its books as required by GAAP;
(3) Liens such as carrier's, warehousemen's and mechanic's liens
and other similar liens, which arise in the ordinary course of business with
respect to obligations not yet due or being contested in good faith by
appropriate proceedings and for which Borrower shall have set aside reserves on
its books as required by GAAP;
(4) Liens arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other social
security benefits other than any Lien imposed by ERISA; and
(5) Liens consisting of extensions or renewals of the Liens
referred to in clause (4) of this section, provided that the indebtedness
secured thereby shall not be increased or refinanced pursuant to any such
extension or renewal and no such extension or renewal shall extend any such Lien
to additional Collateral.
6.2 SALE OF ASSETS; CONSOLIDATION, MERGER, ETC. Borrower shall not:
(1) consolidate with or merge into any other Person, or acquire all
or substantially all of the assets of any of the capital stock of any Person;
PROVIDED, HOWEVER, that Borrower may merge or consolidate with any affiliate of
Borrower if, but only if:
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(a) Borrower shall have delivered to Lender written notice
thereof not later than thirty (30) days prior to any such merger or
consolidation, together with a reasonably detailed description thereof;
(b) Borrower shall be the surviving entity and, if appropriate,
shall have duly filed appropriate Uniform Commercial Code Financing Statements
in the applicable Secretary of State and County Recorder's Offices in order to
enable Lender to perfect and preserve its Lien on the Collateral theretofore
owned by the merged or consolidated Borrower, and, concurrently with any such
merger or consolidation, delivered to Lender acknowledgment of copies thereof
evidencing such filing;
(c) After giving effect to any such merger or consolidation, no
Event of Default or any event which, with the giving of notice or passage of
time, would constitute an Event of Default shall have occurred and be continuing
or shall exist hereunder.
(2) sublease, transfer or otherwise dispose of all or substantially
all of its assets in any transaction or series of related transaction, except
for the Leases, the Security Agreements, and other sales and subleases in the
ordinary course of business, which shall include dispositions of assets that are
obsolete, surplus or replaced;
(3) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction; or
(4) become subject to any agreement or instrument which by its
terms would restrict Borrower's rights or ability to perform in any material
respect any of its obligations to Lender pursuant to the terms of the Loan
Documents.
6.3 GUARANTEES; THIRD-PARTY SALES AND LEASES. Except for endorsements
of negotiable instruments, Borrower shall not directly or indirectly (i) assume
any obligation or indebtedness of another Person (other than an Affiliate of
Borrower) (ii) make or assume any Guarantee, or (iii) finance any third-party
sales or leases, except for leases of Collateral in the ordinary course of
business.
6.4 INVESTMENTS. Borrower shall not, directly or indirectly, make any
Investments except:
(1) Investments in obligations issued by, or guaranteed by, the
United States of America or any agency or instrumentality thereof, provided that
such obligations mature within three hundred and sixty-five (365) days of the
date of acquisition thereof; or
(2) Investments in certificates of deposit, money market or other
cash management accounts, bankers acceptances and Eurodollar time deposits with
financial institutions having a long term deposit rating of at least A from
Xxxxx'x Investors Service, Inc. or Standard & Poor's Corporation, respectively;
or
32
(3) Investments in commercial paper rated Pl or Al by Moody's
Investor's Service, Inc. or Standard & Poor's Corporation, respectively.
6.5 PERMITTED ACTIVITIES. Borrower shall not engage in any business or
activity other than the operation of the Business.
6.6 TRANSACTIONS WITH AFFILIATES. Except for the Leases, the Security
Agreement and any other agreements contemplated by the Loan Documents, Borrower
shall not directly or indirectly, enter into any transaction, including, without
limitation, leases or other agreements for the purchase or use of any goods or
services, with any Affiliate, except in the ordinary course of and pursuant to
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to Borrower than it would obtain in a comparable arm's
length transaction with an unaffiliated Person.
6.7 INDEBTEDNESS. Borrower shall not create or suffer to exist, or
permit any of its subsidiaries to create or suffer to exist, any Debt except:
(1) the Obligations;
(2) Guarantees and third party financing permitted by SECTION 6.3;
(3) purchase money Debt secured by Liens permitted by clause (5) of
SECTION 6.1;
(4) obligations under capital or operating leases;
(5) Debt which is subordinated to payment of the Obligations on
terms approved by Lender, in its sole discretion, prior to the incurrence of, or
execution of any agreement with respect to incurrence of, such Debt; and
(6) Debt to any Affiliate of Borrower.
6.8 MARGIN REGULATION. Borrower shall not use or permit any other
Person to use any portion of the proceeds of any credit extended under this
Agreement in any manner which might cause the extension of credit made by Lender
or the application of such proceeds to violate the Securities Act of 1933 or
Securities Exchange Act of 1934 (each as amended from time to time, and any
successor statute) or to violate Regulation G, Regulation U, or Regulation X, or
any other regulation of the Federal Reserve Board, in each case as in effect on
the date or dates of such extension of credit and such use of proceeds.
6.9 CORPORATE NAMES. Borrower shall not use any corporate or fictitious
names other than the corporate name as shown in Borrower's Articles of
Incorporation.
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6.10 SALE OF COLLATERAL. Borrower shall not, and shall not permit any
Borrower Affiliate to, sell, transfer, lease (except for Leases to Borrower
Affiliates as permitted hereby), sublease or otherwise dispose of any of the
Collateral without the prior written consent of Lender, in its sole discretion.
6.11 SALARIES AND COMPENSATION. Borrower shall not pay, whether
directly or indirectly, any salary or other compensation, including fees,
bonuses, profit-sharing and distributions, to any of its officers, directors or
shareholders who are not involved in the management and/or operations of the
Business.
ARTICLE VII
COLLATERAL SECURITY
7.1 COLLATERAL SECURITY. To secure payment and performance of the
obligations, Borrower hereby grants to Lender (to the extent permitted by
applicable law) a continuing security interest in and to the following property,
whether now owned or hereafter acquired by Borrower and wheresoever located, to
the extent acquired by Borrower with the proceeds of any Loan: (i) Lender and
Non-Lender Equipment (collectively, "EQUIPMENT") and (ii) all software licenses
and computer programs, accessories, parts, attachments, and appurtenances
appertaining or attached to any of the Equipment (collectively, the
"COLLATERAL") together with all substitutions, trade-ins, renewals and
replacements of, and improvements and accessions to the Collateral, including
Collateral classified as Borrower's inventory.
7.2 PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN. Borrower shall execute and deliver to Lender at any time and from time
to time at the request of Lender, all financing statements or other similar
documents (and pay the cost of filing or recording the same in all public
offices deemed necessary by Lender), as Lender may reasonably request, in a form
satisfactory to Lender, to perfect and keep perfected the security interest in
the Collateral granted by Borrower to Lender or to otherwise protect and
preserve such Collateral and Lender's security interest therein or to enforce
Lender's security interests in such Collateral in a manner consistent with the
Loan Documents. Should Borrower fail to do so, Lender is authorized to sign any
such financing statements as Borrower's agent. Borrower further agrees that a
carbon, photographic or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT. The following events shall each constitute an
"EVENT OF DEFAULT":
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(a) Borrower shall fail to pay the principal of or interest on the
Note, when due, whether as scheduled, at a date fixed for prepayment, by
acceleration or otherwise and such failure shall continue for ten (10) days
after the due date thereof; or
(b) Borrower, a Borrower Affiliate or Guarantor shall fail to
observe or perform any other covenant, condition or agreement to be observed or
performed pursuant to the terms of the Loan Documents (other than a covenant in
SECTION 5.14) and such failure is not cured within thirty (30) days after
receipt by Borrower of written notice thereof; or
(c) Any representation or warranty made by Borrower, a Borrower
Affiliate or Guarantor in connection with this Agreement or any other Loan
Document shall prove to have been false or misleading in any material respect
when made or delivered or when deemed made in accordance with the terms hereof
or thereof; or
(d) Borrower or Guarantor as the case may be, shall fail to pay any
principal, premium or interest on any Debt, which Debt exceeds two hundred and
fifty thousand dollars ($250,000) (in the case of Borrower) or five million
dollars ($5,000,000) (in the case of Guarantor) when due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such indebtedness; or any other
default or event under any agreement or instrument relating to any such
indebtedness or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in any such agreement or instrument
if the effect of such default or event is to accelerate, the maturity of such
indebtedness; or any such indebtedness shall be declared to be due and payable
or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof as a result of any such event
of default; or
(e) Borrower or Guarantor shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator or similar official
for Borrower or Guarantor or for a substantial part of its property, (ii) make a
general assignment for the benefit of creditors, (iii) involuntarily dissolve,
liquidate or wind up its affairs, or (iv) take action for the purpose of
effecting any of the foregoing; or
(f) A voluntary proceeding under any bankruptcy, reorganization,
arrangement of debts, insolvency or receivership law is filed by Borrower, a
Borrower Affiliate or Guarantor or an involuntary proceeding is commenced
against Borrower, a Borrower Affiliate or Guarantor and such proceeding is not
dismissed within sixty (60) days after filing (or Borrower, a Borrower Affiliate
or Guarantor consents to such filing at any time), or Borrower, Borrower
Affiliate or Guarantor takes any action to authorize any of the foregoing
matters; or
(g) Borrower or Guarantor is not Solvent and such party shall not
cure such condition within thirty (30) days of receipt of notice from Lender to
such effect; or
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(h) Any FCC License or any other certificate or license necessary
for the operation by Borrower of the Business shall not be obtained or shall
cease to be in full force and effect, which in respect of a license of the FCC
shall occur when an order revoking or terminating such license shall be issued
which is no longer subject to further administrative and judicial review, or the
FCC or any other governmental authority having jurisdiction over any such
certificate or license shall, prior to the termination thereof, decide, which
decision shall not be subject to further administrative or judicial review, not
to renew such certificate or license; or
(i) For any reason any Loan Document shall not be in full force and
effect or shall not be enforceable in accordance with its terms, or any security
interest or lien granted pursuant thereto shall fail to be perfected, other than
as a result of an act or omission of Lender, or any party thereto other than
Lender shall contest the validity of any Lien granted under, or shall disaffirm
its obligations under, any Loan Document; or
(j) A judgment or judgments for the payment of money in excess of
Two Hundred Fifty Thousand Dollars ($250,000) individually or Five Hundred
Thousand Dollars ($500,000) in the aggregate at any one time shall have been
rendered against Borrower or a judgment or judgments for payment of money in
excess of Two Millon Dollars ($2,000,000) at any one time shall have been
rendered against the Guarantor and/or Borrower Affiliate, and the same shall
have remained unsatisfied undischarged, unvacated, unbonded or unstayed for a
period of forty-five (45) days during which no stay of execution shall have been
obtained; or
(k) For any reason, Borrower or Guarantor ceases to operate the
Business; or
(l) Either Borrower or Guarantor is enjoined, restrained or in any
way prevented by the order of any court or administrative or regulatory agency
from conducting any material portion of their respective business and such
injunction, restraining order or other order is not vacated or stayed within
thirty (30) days; or
(m) Borrower or Guarantor becomes subject to any liabilities,
costs, expenses, damages, fines or penalties which could reasonably be expected
to have a Material Adverse Effect arising out of or related to (i) any Remedial
Action in response to a Release or threatened Release at any location of any
Contaminant into the indoor or outdoor environment or (ii) any material
violation of any environmental, health or safety requirement of law; or
(n) Either Borrower or Guarantor fails to comply with any provision
of the Communications Act or any other FCC regulation or policy, and the effect
of such failure is likely to result in a sanction by the FCC which could have a
Material Adverse Effect on the operations and conditions of Borrower or
Guarantor, financial or otherwise; or
36
(o) Ownership of any Borrower Affiliate shall have been transferred
so that it is no longer wholly owned by Borrower or an Affiliate.
8.2 TERMINATION OF COMMITMENT; ACCELERATION. Upon the occurrence and at
any time during the continuance of any Event of Default, Lender may:
(a) by notice to Borrower, terminate Lender's Commitment to
Borrower to make Loans hereunder; and
(b) declare the Obligations to be immediately due and payable,
whereupon the Obligations shall be immediately due and payable without notice of
any kind; PROVIDED, HOWEVER, that if an Event of Default described in SECTION
8.1(E) OR 8.1(F) shall exist or occur, all of the Obligations shall
automatically, without declaration or notice of any kind, be immediately due and
payable.
8.3 WAIVER OF DEMAND. Demand, presentment, protest and notice of
nonpayment are hereby waived by Borrower. Borrower also waives the benefit of
all valuation, appraisal and exemption laws to the extent permitted by
applicable law.
8.4 RIGHTS AND REMEDIES GENERALLY. If an Event of Default occurs,
Lender shall have, in addition to any other rights and remedies contained in
this Agreement or in any of the other Loan Documents, all of the rights and
remedies of a secured party under the Code and other applicable laws and all
other rights and remedies by law, all of which rights and remedies shall be
cumulative, and non-exclusive, to the extent permitted by law. In addition to
all such rights and remedies, the sale, lease or other disposition of the
Collateral, or any part thereof, by Lender after the occurrence of an Event of
Default may be for cash, credit or any combination thereof, and Lender may
purchase all or any part of the Collateral at public sale held in compliance
with the procedures set forth in the Code, or, if permitted by law, private sale
held in compliance with the procedures set forth in the Code, and in lieu of
actual payment of such purchase price, may set off the amount of such purchase
price against the Obligations then owing. Any sales of the Collateral may be
adjourned from time to time with or without notice. Lender may, in its sole
discretion, cause the Collateral to remain on Borrower's or a Borrower
Affiliate's premises, at Borrower's expense, pending sale or other disposition
of the Collateral. Lender shall have the right to conduct such sales on
Borrower's or a Borrower Affiliate's premises, at Borrower's expense, or
elsewhere, on such occasion or occasions as Lender may see fit. Lender's rights
under this Section shall be enforceable to the extent permitted by applicable
law.
8.5 ENTRY UPON PREMISES AND ACCESS TO INFORMATION. Following the
occurrence and during the continuance of an Event of Default, Lender shall have
the right to enter upon the premises of Borrower where the Collateral is located
(or is believed to be located) without any obligation to pay rent to Borrower or
a Borrower Affiliate, or any other place or places where the Collateral is
believed to be located and kept, and render the Collateral unusable or remove
the Collateral therefrom to the premises of Lender or any agent of
37
Lender, for such time as Lender may desire, in order effectively to collect or
liquidate the Collateral, and/or Lender may require Borrower or a Borrower
Affiliate to assemble the Collateral and make it available to Lender at a place
or places to be designated by Lender. Lender shall have the right to obtain
access to Borrower's data processing equipment or a Borrower Affiliate, computer
hardware and software relating to the Collateral during normal business hours
and to use all of the foregoing and the information contained therein in any
manner Lender deems reasonably appropriate in connection with the exercise of
its rights and remedies. Lender's rights under this Section shall be enforceable
to the extent permitted by applicable law.
8.6 SALE OR OTHER DISPOSITION OF COLLATERAL BY LENDER. Any notice
required to be given by Lender of a sale, lease or other disposition by Lender
pursuant to ARTICLE VIII with respect to any of the Collateral which is
deposited in the United States mails, certified postage prepaid and duly
addressed to Borrower and Guarantor and, each of them, at the address specified
in SECTION 9.1 below, at least five (5) Business Days prior to such proposed
action shall constitute fair and reasonable notice to Borrower and Guarantor of
any such action. The net proceeds realized by Lender upon any such sale or other
disposition, after deduction for the expense of retaking, holding, preparing for
sale, selling or the like and the reasonable attorneys' fees and legal expenses
incurred by Lender in connection therewith, shall be applied as provided herein
toward satisfaction of the Obligations. Lender shall account to Borrower for any
surplus realized upon such sale or other disposition, and Borrower shall remain
liable for any deficiency. The commencement of any action, legal or equitable,
or the rendering of any judgment or decree for any deficiency shall not affect
Lender's security interest in the Collateral. Borrower agrees that Lender has no
obligation to preserve rights to the Collateral against any other Persons. In
connection with the exercise of any remedies pursuant to this section, Lender is
hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, and, to the extent not
prohibited by the terms of any applicable license or franchise agreements,
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's benefit until the Obligations are paid in full. Lender's rights under
this Section shall be enforceable to the extent permitted by applicable law.
8.7 LENDER NOT LIABLE. Lender shall not be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral or of any instrument received in payment therefor or for any damages
resulting therefrom (except to the extent such loss shall be finally adjudicated
or otherwise conclusively determined to have been caused by the gross negligence
or willful misconduct of Lender). Lender shall not, under any circumstances or
in any event whatsoever, have any liability for any error or omission of any
kind made in the settlement, collection or payment of any of the Collateral
(except to the extent such loss shall be finally adjudicated or otherwise
conclusively determined to have been caused by the gross negligence or willful
misconduct of Lender). The costs of collection and enforcement, including, but
not limited to, reasonable counsel fees and out-of-
38
pocket expenses, shall be borne solely by Borrower, whether the same are
incurred by Lender or Borrower.
8.8 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default, Lender is hereby authorized at any time and from time to
tine, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness or other obligations at any time owing by Lender to
or for the credit or the account of Borrower against any and all of the
obligations of Borrower now or hereafter existing under this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. Notices and other communications provided for herein shall
be in writing and shall be delivered by a courier service of recognized standing
or mailed (or, if by telex, graphic scanning or other telegraphic or telecopy
communications equipment of the sending party, delivered by such equipment)
addressed
If to Borrower, to:
GST Switchco, Inc.
0000 Xxxxx Xxxx Xxxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Vice President and Treasurer
Facsimile: (000) 000-0000
with copy to:
Olshan, Grundman, Frome & Xxxxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Xxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
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and if to Lender to:
Siemens Xxxxxxxxx-Xxxxxxx
000 Xxxxxx Xxxxx Xxxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxx
Facsimile: (000) 000-0000
with copy to:
Siemens Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
with additional copy to:
Xxxxxx, White & Xxxxxx
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given (a) three (3) days after mailing when sent by registered or certified
mail, postage prepaid, return receipt requested, or (b) upon receipt, if by
courier service or any telegraphic communications equipment of the sender, in
each case addressed to such party as provided in this Section or in accordance
with the latest unrevoked direction from such party.
9.2 NO WAIVERS; AMENDMENTS.
(a) No failure or delay of Lender to exercise any right hereunder
or under any other Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, preclude any other or further
exercise thereof or the exercise of any other right. No waiver of any provision
of this Agreement or any other Loan Document nor consent to any departure by
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by Lender, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances.
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(b) Neither this Agreement nor any other Loan Documents may be
amended or modified except pursuant to an agreement or agreements in writing
executed by Borrower and Lender.
9.3 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES. BORROWER AND LENDER CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE
OR FEDERAL COURT LOCATED IN NEW YORK CITY IN THE STATE OF NEW YORK AND WAIVE ANY
OBJECTION RELATING TO IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF
ANY PROCEEDING BY SUCH COURT.
9.4 EXPENSES; DOCUMENTARY TAXES. Borrower shall be obligated to pay all
reasonable out-of-pocket expenses incurred by Lender in connection with (i) the
creation, perfection, priority or protection of the Liens in the Collateral,
including the reasonable attorneys' fees incurred both prior to and after the
Effective Date to perfect the Lien in the Collateral, and (ii) the enforcement
of Lender's rights in connection with this Agreement, any other Loan Documents
or the Collateral, including all reasonable attorneys' fees and related expenses
and costs; provided, however, that Borrower shall not be obligated to pay
expenses incurred by Lender on or prior to the Effective Date to the extent that
they exceed $100,000. Borrower agrees to indemnify Lender from and hold it
harmless against any documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of this Agreement
or any other Loan Document.
9.5 EQUITABLE RELIEF. Borrower recognizes that, in the event that
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or any other Loan Document, any remedy at law
may prove to be inadequate relief to Lender; therefore, Borrower agrees that
Lender, if Lender so requests, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.
9.6 INDEMNIFICATION; LIMITATION OF LIABILITY.
(a) Borrower agrees to protect, indemnify and hold harmless Lender
and each of its officers, directors, employees, attorneys, consultants and
agents (collectively the "INDEMNITIES") from and against any and all liabilities
(including tort, negligence and strict liabilities), obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for and consultants of such
Indemnities in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnities shall be designated a party
thereto), which may be imposed on, incurred by, or asserted against such
Indemnities (whether direct, indirect, or consequential and whether
41
based on any federal or state laws or other statutory regulations, including,
without limitation, securities, environmental and commercial laws and
regulations, under common law or at equitable cause or on contract or otherwise)
in any manner relating to or arising out of this Agreement or any of the other
Loan Documents, or any act, event or transaction related or attendant thereto,
the agreements of Lender contained herein, the making of Loans, the management
of such Loans or the Collateral (including any liability under federal, state or
local environmental laws or regulations) or the use or intended use of the
proceeds of such Loans hereunder (collectively, the "INDEMNIFIED MATTERS");
provided that neither Borrower nor Guarantor shall have any obligation to any
Indemnitee hereunder with respect to Indemnified Matters caused by or resulting
from the willful misconduct or gross negligence of such Indemnitee. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall contribute the maximum portion which they are
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnities.
(b) To the extent permitted by applicable law, no claim may be made
by Borrower or any other Person against Lender or any of its affiliates,
directors, officers, employees, agents, attorneys or consultants for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by any of the Loan Documents or any act, omission
or event occurring in connection therewith; and Borrower hereby waives, releases
and agrees not to xxx upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor, to the
extent permitted by applicable law. Neither Lender nor any of its affiliates,
directors, officers, employees, agents, attorneys or consultants shall be liable
for any action taken or omitted to be taken by it or them under or in connection
with any of the Loan Documents, except for its or their own gross negligence or
willful misconduct.
(c) If Borrower fails to pay promptly when due to any other Person
monies which it is required to pay by reason of any provision in this Agreement,
Lender may, but need not, pay the same and Borrower agrees to promptly reimburse
Lender for such payment; PROVIDED, HOWEVER, Lender may not pay any amounts
described in this sentence the validity of which Borrower is contesting, in
proceedings which are being diligently pursued, and for which Borrower has
created reserves therefor which are satisfactory to Lender. Any payments made by
Lender shall not constitute: (i) an agreement by Lender to make similar payments
in the future, or (ii) a waiver by Lender of any Event of Default.
9.7 SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES, ETC. All
warranties, representations, indemnities and covenants made by Borrower in any
Loan Document survive the execution and delivery of this Agreement and the other
Loan Documents and the making of the Obligations and shall survive until
repayment in full in immediately available funds of all Obligations (after which
period Lender shall only have a right of indemnification from Borrower for any
breach of any such warranties, representations and covenants during the
42
period for which such warranties, representations and covenants are in effect);
PROVIDED, HOWEVER, that if the Lender for any reason is required to disgorge any
payment with respect to the Obligations after the date that all of the
Obligations are repaid in full in immediately available funds, then all
warranties, representations and covenants made by Borrower or Guarantor shall be
reinstated as though such full payment had not occurred and shall continue in
effect until repayment in full in immediately available funds of all Obligations
that are restored and/or created as a result of such payment disgorgement.
9.8 SUCCESSORS AND ASSIGNS. Borrower may not assign or transfer any of
its rights or obligations hereunder without Lender's prior written consent.
Lender may not assign or transfer any of its rights or obligations hereunder to
any Person (other than to Siemens Credit Corporation), without Borrower's prior
written consent, which consent shall not be unreasonably withheld or delayed.
Borrower agrees that it will not assert against any permitted assignee of
Lender, including Siemens Credit Corporation, any defense, counterclaim or
off-set that Borrower may have against Lender and that upon notice of any such
assignment or transfer, it will pay all Obligations due under this Agreement to
such assignee or transferee. Borrower acknowledges that any assignment or
transfer by Lender shall not materially change Borrower's duties or obligations
under this Agreement nor shall it materially increase the burdens or risks
imposed on Borrower.
9.9 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement or any other Loan Document shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby.
9.10 COVER PAGE; TABLE OF CONTENTS AND SECTION HEADINGS. The cover
page, Table of Contents and section headings used herein are for convenience of
reference only, are not part of this Agreement and are not to affect the
construction of or be taken into consideration in interpreting this Agreement.
9.11 COUNTERPARTS. This Agreement may be signed in counterparts with
the same effect as if the signatures thereof and hereto were upon the same
instrument.
9.12 MARSHALLING; PAYMENTS SET ASIDE. Lender shall be under no
obligation to xxxxxxxx any assets in favor of Borrower or any other party or
against or in payment of any or all of the Obligations. Notwithstanding any
other provision hereof, to the extent that Borrower makes a payment or payments
to Lender or Lender enforces its security interests or exercises its rights of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, Federal or state law,
common law or equitable cause, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not
43
been made or such enforcement or setoff had not occurred. Lender's rights under
this Section shall be enforceable to the extent permitted by applicable law.
9.13 SERVICE OF PROCESS. BORROWER WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT AND, CONSENTS THAT ALL SERVICE OF PROCESS SHALL BE MADE BY
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO BORROWER, AT THE ADDRESS
INDICATED IN SECTION 9.1 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) BUSINESS DAYS AFTER SAME SHALL HAVE BEEN (1) POSTED AS
AFORESAID OR (2) DELIVERED BY ANY OTHER PROCESS PERMITTED BY APPLICABLE LAW.
9.14 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE, BETWEEN LENDER AND BORROWER ARISING OUT OF, CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH
OR THE TRANSACTIONS RELATED THERETO. BORROWER AND LENDER EACH HEREBY AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT EITHER MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
9.15 ENTIRE AGREEMENT, ETC. This Agreement (including all schedules and
exhibits referred to herein), the Note and all other Loan Documents constitute
the entire contract between the parties hereto with respect to the subject
matter hereof and thereof and shall supersede and take the place of any other
instrument purporting to be an agreement of the parties hereto relating to such
subject matter.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers as of the day and year first
above written.
GST SWITCHCO, INC., Borrower
By:/s/ Xxxx Xxxxx
-----------------------------------------
Xxxx Xxxxx
President and Chief Executive Officer
SIEMENS XXXXXXXXX-XXXXXXX, Lender
By: SIEMENS COMMUNICATIONS SYSTEMS INC.
Its General Partner
By: /s/ Xxxxxxxxx X. Xxxxx
-----------------------------------------
Xxxxxxxxx X. Xxxxx
President and Chief Executive Officer
45