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EXHIBIT 10.16
AMENDED GUARANTY
AMENDMENT TO GUARANTY ("AMENDMENT"), dated as of ___________, 2000,
made by and between HORIZON TELCOM, INC. (hereinafter called the "Guarantor"), a
corporation existing under the laws of the State of Ohio and RURAL TELEPHONE
FINANCE COOPERATIVE (hereinafter sometimes called the "Lender" and sometimes
called the "RTFC"), a South Dakota cooperative association.
WHEREAS, Guarantor previously executed and delivered to Lender a
guaranty (the "Guaranty") dated August 29, 1997, guaranteeing certain
obligations of Guarantor's wholly-owned subsidiary, HORIZON PERSONAL
COMMUNICATIONS, INC. ("Borrower") under a loan agreement and a promissory note
(collectively the "1997 Loan Documents"), each dated August 29, 1997 and
designated OH 803-A-01, between Borrower and Lender providing for an extension
of credit in the principal amount of $23,557,965; and
WHEREAS, the Borrower is a party to a certain Loan Agreement (the "2000
Loan Agreement") dated ___________________, 2000 by and between itself and RTFC
providing for an extension of credit as evidenced by a secured promissory note
(the "2000 Note") designated OH 803-9002 in the principal amount of $40,500,000;
and
WHEREAS, under the terms of the 2000 Loan Agreement, the extension of
credit and advancement of funds called for in the 2000 Loan Agreement is
conditioned upon this amendment of the Guaranty;
NOW THEREFORE, to induce Lender to make the extension of credit called
for in the 2000 Loan Agreement and the benefits derived by the Guarantor
therefrom, and in satisfaction of a material condition precedent to such
extension of credit by the Lender, the parties agree to amend the Guaranty to
read as follows:
1. For and in consideration of loans, advances, acceptances, discounts and
extensions of credit made by RURAL TELEPHONE FINANCE COOPERATIVE, a
cooperative organized and existing under the laws of South Dakota
("RTFC" or "Lender"), to, for the account of, or on behalf of HORIZON
PERSONAL COMMUNICATIONS, INC. a corporation organized and existing
under the laws of Ohio ("Borrower") (the documents evidencing such
obligations of Borrower to RTFC pursuant to (i) a loan agreement and a
promissory note, each dated August 29, 1997; and (ii) a loan agreement
and a promissory note, each dated ___________________, 2000 are
hereinafter called the "Loan Documents"), the undersigned, HORIZON
TELCOM, INC., a corporation organized and existing under the laws of
Ohio ("Guarantor"), hereby absolutely and unconditionally guarantees to
RTFC the punctual payment in full of an amount not to exceed the lesser
of: (a) the aggregate principal amount of $7,852,655 (United States
dollars) plus interest due thereon, or (b) 12.26% of Borrower's
outstanding principal indebtedness plus interest due thereon under the
Loan Documents, from the date hereof until the termination of the
liability of the Guarantor hereunder as hereinafter provided, on
account of any and all obligations, indebtedness and liability of the
Borrower to RTFC pursuant to the Loan Documents, whether now existing
or hereafter incurred, whether direct, indirect, or contingent, and
whether otherwise guaranteed or secured, (such obligations,
indebtedness and liability pursuant to the Loan Documents are
hereinafter referred to as "Indebtedness").
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2. The Guarantor further agrees to pay Lender its pro-rata portion
(12.26%) of any and all costs, expenses and reasonable attorneys' fees
paid or incurred by Lender in collecting or endeavoring to collect the
Indebtedness of the Borrower, and all costs, expenses and reasonable
attorneys' fees paid or incurred in enforcing or endeavoring to enforce
this Guaranty. Notwithstanding anything to the contrary herein, the
Guarantor shall not be liable for any expenses incurred in Lender's
endeavoring to collect under the guaranty provided by Motorola, Inc.
pursuant to the Loan Documents.
3. The Lender may, at the Lender's option, proceed to enforce this
Guaranty directly against the Guarantor (and any collateral securing
performance of this Guaranty owned by the Guarantor) without first
proceeding against the Borrower, any co-guarantor, or any other person
liable for payment or performance under the Loan Documents and without
first proceeding against or exhausting any collateral now or hereafter
held by the Lender to secure payment or performance under the Loan
Documents.
4. The Guarantor waives diligence, presentment, protest, notice of
dishonor, demand for payment, notice of nonpayment or nonperformance,
notice of the incurrence of indebtedness by Borrower, notice of
acceptance of this Guaranty and all other notices of any nature in
connection with the exercise of the Lender's rights under the Loan
Documents or this Guaranty. Performance by the Guarantor hereunder will
not entitle the Guarantor to any payment by the Borrower under any
claim for contribution, indemnification, subrogation or otherwise,
until such time as all Indebtedness owing to the Lender has been paid.
The Guarantor waives the right to require Lender to file suit against
the Borrower or any other party before enforcing this Guaranty, and all
rights to setoffs and counterclaims against the Lender and agrees that
any subrogation rights which the Guarantor might now or hereafter hold
against the Borrower and any co-guarantors will be subordinate, junior
and inferior to all rights which the Lender might now or hereafter hold
against the Borrower and any co-guarantors.
5. The Guarantor hereby consents and agrees that renewals and extensions
of time of payment, surrender, release, exchange, substitution, dealing
with or taking of additional collateral security, taking or release of
other guarantees, abstaining from taking advantage of or realizing upon
any collateral security or other guarantees and any and all other
forbearances or indulgences granted by Lender to the Borrower or any
other party may be made, granted and effected by Lender without notice
to the Guarantor and without in any manner affecting its liability
hereunder.
6. Nothing herein contained shall limit the Lender in exercising any
rights held under any one or more of the Loan Documents. In the event
of any default under the Loan Documents or this Guaranty, the Lender
will be entitled to selectively and successively enforce any one or
more of the rights held by the Lender and such action will not be
deemed a waiver of any other rights held by the Lender. All of the
remedies of the Lender under this Guaranty and the Loan Documents are
cumulative and not alternative. If the Lender elects to foreclose any
lien created by the Loan Documents, the Lender is authorized to
purchase for the Lender's account all or any part of the collateral
covered by such lien at public or private sale and to credit the amount
recovered first against any portion of the Indebtedness for which the
Guarantor is liable with any balance remaining to be applied in
reduction of the liability of the Guarantor hereunder.
7. In the event that a petition in bankruptcy or for an arrangement or
reorganization of the Borrower under the bankruptcy laws or for the
appointment of a receiver for the Borrower or any of its property is
filed by or against the Borrower, or if the Borrower shall make an
assignment for the
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benefit of creditors or shall become insolvent, all Indebtedness of the
Borrower shall, for the purpose of this Guaranty, be deemed at Lender's
election to have become immediately due and payable.
8. Guarantor hereby represents and warrants that:
a. Good Standing. Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Ohio, has the power to own its property and to carry
on its business, is duly qualified to do business, and is in
good standing in each jurisdiction in which the transaction of
its business makes such qualification necessary.
b. Authority. Guarantor has the corporate power and authority to
enter into this Guaranty, to execute and deliver all documents
and instruments required hereunder, and to incur and perform
the obligations provided for herein, all of which have been
duly authorized by all necessary and proper corporate and
other action.
c. Other Obligations. The aggregate amount of obligations
guaranteed hereunder shall not exceed the maximum amount
allowed under any mortgage, indenture or agreement of any kind
entered into by or affecting the Guarantor at the time Lender
may seek payment under this Guaranty.
9. Guarantor covenants and agrees with Lender that, until all of the
obligations guaranteed hereunder shall have been satisfied in full:
a. Control. The Guarantor will not merge, consolidate, liquidate,
alter or otherwise permit alteration of control of the
Guarantor without the prior written consent of Lender. Control
shall be as defined by regulations for telephone companies
issued by the Federal Communications Commission.
b. Additional Indebtedness. The Guarantor will not borrow money
on a secured or unsecured basis from any other lender without
obtaining Lender's prior written consent. Furthermore, no
subsidiary of the Guarantor will borrow money on a secured or
unsecured basis from any other lender, or incur any additional
secured or unsecured Indebtedness, or enter into any Leases,
unless at that time Guarantor and its subsidiaries shall have
a consolidated Net Worth equal to or greater than forty
percent (40%); provided, however, Guarantor and its
subsidiaries may grant purchase money secured indebtedness or
incur unsecured trade debt or pay other current operating
liabilities that arise in the ordinary course of business so
long as the aggregate total of such debt does not exceed five
percent (5%) of Guarantor's consolidated total assets. If
Guarantor and its subsidiaries' consolidated Net Worth exceeds
forty percent (40%), then Guarantor's subsidiaries may incur
additional Guarantor's Indebtedness or enter into Leases
without prior written approval of Lender so long as the
Guarantor and its subsidiaries meet the forty percent (40%)
consolidated Net Worth test after incurring such additional
Guarantor's Indebtedness or entering into such Leases;
provided, further, however, Guarantor's subsidiary must give
at least thirty (30) days written notice to Lender prior to
incurring or entering into any additional Leases or term
loans, guarantees, lines of credit or other third-party credit
facilities. Notwithstanding anything to the contrary herein,
without Lender's prior written consent, Guarantor's
subsidiary, The Chillicothe Telephone Company ("Chillicothe"),
will be able to incur additional secured indebtedness and
unsecured indebtedness not to exceed ten percent (10%) of
Chillicothe's
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stand-alone total assets provided that Chillicothe: (i) meets
the forty percent (40%) unconsolidated Net Worth test after
incurring such additional indebtedness; (ii) has a current
assets to current liabilities ratio of 1.10 after incurring
such additional indebtedness; and (iii) along with Guarantor
are in compliance with all of their loan and guaranty
documents with Lender. Furthermore, Lender hereby expressly
acknowledges, and agrees to except from the preceding
calculations, Chillicothe's conversion of $4,000,000 of
short-term debt to long-term debt and its proposed addition of
$6,000,000 of long-term switch financing as presented to
Lender in conjunction with Borrower's proposed financing.
For purposes of this Guaranty, unless stated otherwise "Net
Worth" shall be calculated on a consolidated basis for
Guarantor and all its subsidiaries, and shall be calculated by
dividing equity (as determined by subtracting total
liabilities from total assets) by total assets. For purposes
of this Guaranty, "Leases" shall mean any lease of property by
which Guarantor or any of its subsidiaries shall be obligated
for rental or other payments which individually are in excess
of $50,000 per year, or in the aggregate are in excess of
$1,500,000 per year. For purposes of this Guaranty,
"Guarantor's Indebtedness" shall include all items which would
properly be included in the liability section of a balance
sheet or in a footnote to a financial statement, in accordance
with generally accepted accounting principles including,
without limitation, contingent liabilities.
c. Dividends and Other Cash Distributions. The Guarantor will
not, in any one fiscal year, without the prior approval in
writing of the Lender (i) declare or pay any dividends or make
any other distribution to its stockholders with respect to its
capital stock; (ii) purchase or redeem or retire any of its
capital stock; or (iii) pay any management fees or if already
paying a management fee, pay an increase in management fees
unless with respect to any of the foregoing (after giving
effect to such transaction) Guarantor's Net Worth shall exceed
twenty five percent (25%); provided, however, without Lender's
prior written consent, Guarantor may make dividend payments or
distributions equal to its prevailing consolidated net income
so long as the total amount of dividends paid by Guarantor in
any given fiscal year does not exceed $1,914,779.
d. Sale of Assets. The Guarantor and any subsidiary of the
Guarantor may not, without prior written approval of the
Lender, sell, lease or transfer any asset unless the fair
market value of such asset is less than 1% of Guarantor's
consolidated total assets and the aggregate value of assets
sold, leased or transferred in any 12-month period is less
than 5% of Guarantor's consolidated total assets.
Notwithstanding anything to the contrary herein, Guarantor and
its subsidiaries may: (i) sell securities issued or guaranteed
by the United States government or any agency or
instrumentality thereof, or securities or obligations of
institutions whose senior unsecured debt obligations are rated
by at least two nationally recognized ratings organizations in
either of its two highest categories; and (ii) sell, lease or
transfer inventory, customer premise equipment and PABX
equipment. Notwithstanding anything to the contrary herein,
Guarantor may not sell, transfer, encumber or otherwise convey
any of its voting Common Stock in Chillicothe.
e. Financial Reports and Other Information. The Guarantor will
furnish, in form and substance satisfactory to Lender: (a) a
full and complete report of Guarantor's and its subsidiaries'
financial condition at least once during each 12-month period
during the term hereof but in no event later than 120 days
after the end of each fiscal year of Guarantor, which shall
include (i) annual financial statements prepared on a
consolidated basis and audited by
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independent public accountants selected by Guarantor and
reasonably acceptable to Lender, accompanied by an opinion of
such accountants reasonably acceptable to Lender, and (ii)
unaudited annual consolidating financial statements of
Guarantor and its subsidiaries; (b) within 120 days of the
close of each calendar year, a written statement signed by the
Guarantor's president, chief executive officer or similar
presiding officer stating that to the best of said person's
knowledge that the Guarantor has fulfilled all of its
obligations hereunder or, if there has been a default in the
fulfillment of any such obligations, specifying each such
default known to such person and the nature and status
thereof; and (c) such other information, reports or statements
concerning the operations, business affairs and/or financial
condition of Guarantor and its subsidiaries as the Lender may
reasonably request from time to time.
f. Financial Books; Lender Right of Inspection: Guarantor and its
subsidiaries will at all times keep, and safely preserve,
proper books, records and accounts in which full and true
entries will be made of all of the dealings, business and
affairs of the Guarantor, in accordance with methods of
accounting prescribed by the state regulatory body having
jurisdiction over the Guarantor, or in the absence of such
regulatory body or such prescription, in accordance with
generally accepted accounting principles. The Lender, through
its representatives, shall at all times during reasonable
business hours have access to, and the right to inspect and
make copies of, any or all books, records and accounts, and
any or all invoices, contracts, leases, payrolls, canceled
checks, statements and other documents and papers of every
kind belonging to or in possession of the Guarantor and its
subsidiaries and pertaining to the Guarantor's and its
subsidiaries' property or business.
g. Loans, Investments and Other Obligations: (a) The Guarantor
will not, without first obtaining the written approval of
Lender: (i) purchase or make any commitment to purchase any
stock, bonds, notes, debentures or other securities or
obligations of or beneficial interests in, (ii) make any other
investments in, (iii) make any loan to, or (iv) guarantee,
assume, or otherwise become liable for any obligation of, any
corporation, association, partnership, joint venture, trust,
government or any agency or department thereof, or any other
entity of any kind if the aggregate amount of all such
purchases, investments, loans and guarantees exceeds the
greater of ten percent (10%) of Total Plant or thirty percent
(30%) of Net Worth. For purposes of this Guaranty, "Total
Plant" shall be calculated on a consolidated basis for the
Guarantor and all its subsidiaries and shall mean the total of
all assets included in property, plant and equipment pursuant
to generally accepted accounting principles and shall exclude
any goodwill or plant acquisition adjustments. (b) The
following shall not be included in the limitation on
purchases, investments, loans and guarantees in (a) above: (i)
bonds, notes, debentures, stock, or other securities or
obligations issued by or guaranteed by the United States
government or any agency or instrumentality thereof; (ii)
bonds, notes, debentures, stock, commercial paper,
subordinated capital certificates, or any other security or
obligation of institutions whose senior unsecured debt
obligations are rated by at least two nationally recognized
rating organizations in either of its two highest categories;
(iii) investments incidental to loans made by RTFC; (iv) any
deposit that is fully insured by the Federal Government; and
(v) common stock or other equity investments in Borrower. For
purposes of this section, securities and investments shall be
calculated at cost and exclude any cash surrender value of
life insurance.
10. If the Guarantor fails to make any payment pursuant to Lender's demand
for payments provided for in Sections 1 and 2 hereunder, then a
"Payment Event of Default" shall have been deemed to occur
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hereunder and then Lender may, upon five (5) days written notice (with
a copy of such notice to Borrower) during which time Guarantor or
Borrower shall have the right to cure such Payment Event of Default, in
addition to any other rights available to Lender at law or in equity,
declare the maximum amount guaranteed by Guarantor at such time
pursuant to Sections 1 and 2 hereunder to be immediately due and
payable without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived. Any funds collected hereunder
shall be immediately applied as a prepayment (subject to any applicable
prepayment fees) pro-ratably to all of Borrower's Indebtedness.
11. If the Guarantor fails to observe or perform any warranty, covenant or
condition under Section 9 of this Guaranty, then a "Covenant Event of
Default" shall have been deemed to occur hereunder. Upon the occurrence
of a Covenant Event of Default, the Lender may provide written notice
to Guarantor (with a copy of such notice to Borrower) of the occurrence
of said Covenant Event of Default and demand that such Covenant Event
of Default be cured within thirty (30) days of receipt of such notice.
If such Covenant Event of Default is not cured by Guarantor, or a
substitute guarantor is not approved in writing by Lender within such
thirty (30) day cure period, then Lender may, in addition to any other
rights available to Lender at law or in equity, declare a "Payment
Event of Default" and, upon five (5) days written notice (with a copy
of such notice to Borrower) during which time Guarantor or Borrower
shall have the right to cure such Payment Event of Default, so declare
the maximum amount guaranteed by Guarantor at such time pursuant to
Sections 1 and 2 hereunder to be immediately due and payable without
presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived. Any funds collected hereunder shall be
immediately applied as a prepayment (subject to any applicable
prepayment fees) pro-ratably to all of Borrower's Indebtedness.
12. If any provision of this Guaranty is held to be invalid, illegal or
unenforceable in any respect or application for any reason, such
invalidity, illegality or unenforceability will not affect any other
provisions herein contained and such other provisions will remain in
full force and effect.
13. If any payment or thing of value should be received and accepted by the
Lender in payment of any Indebtedness or obligation of the Borrower
under any of the Loan Documents and it should subsequently be
determined or adjudged that such payment be void or voidable under any
law or statute now or hereafter in effect the receipt of such payment
by the Lender shall, as to the Guarantor, be deemed a provisional
receipt and if any such payment should be avoided or set aside under
any such law or statute the Guarantor shall be and remain liable to the
Lender in respect thereof as if such payment had not been received by
the Lender notwithstanding any release or discharge of this Guaranty to
the Guarantor issued or granted by the Lender in the belief or
assumption that its receipt of such payment was absolute and not
subject to any avoidance.
14. THIS GUARANTY WILL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF VIRGINIA. GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE UNITED STATES COURTS LOCATED IN THE
COMMONWEALTH OF VIRGINIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY. GUARANTOR IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
ESTABLISHING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE
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GUARANTOR AND THE LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
15. This Guaranty shall be binding upon the Guarantor and its successors
and assigns, and shall inure to the benefit of RTFC and its successors
and assigns. This Guaranty may be transferred or assigned by Guarantor
to another entity of equal or greater credit quality than Guarantor so
long as RTFC provides its prior written consent to such transfer or
assignment, which consent shall not be unreasonably withheld.
16. All accounting terms not specifically defined herein shall have the
meaning assigned to them by generally accepted accounting principles.
17. This Guaranty shall operate as a continuing guaranty and shall expire
only upon the satisfaction by Borrower, Guarantor, or any co-guarantor
of all obligations owed by Borrower to RTFC under the Loan Documents.
18. On or prior to the initial advance under the 2000 Loan Agreement to
Borrower, Guarantor covenants to enter into revised firm equity
subscription agreements with Borrower, in form and substance reasonably
satisfactory to Lender, that provide for additional common equity
capital contributions from Guarantor in the minimum amounts set forth
below opposite the corresponding date.
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Date Amount
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At closing $15,106,203
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December 31, 2000 1,500,000
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December 31, 2001 1,000,000
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December 31, 2002 1,000,000
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The revised equity subscription agreement shall also provide that it
may not be modified, transferred, or terminated by either party without
Lender's prior written consent and the Lender shall be named as a third
party beneficiary with regard to enforcing payments under that
agreement.
19. On or prior to the date of the initial advance under the 2000 Loan
Documents to Borrower, Guarantor covenants to enter into a tax sharing
arrangement with Borrower, in form and substance satisfactory to
Lender, that provides for the pass through to Borrower of tax benefits
as cash payments equal to the lesser of (i) the amounts set forth below
opposite the corresponding date, or (ii) a positive dollar amount
equivalent to 34% of the Borrower's book net loss.
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Date Amount
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December 31, 2000 $ 4,522,000
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December 31, 2001 $ 4,619,000
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December 31, 2002 $ 1,196,000
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To the extent that Borrower and/or Guarantor do not have final net
income calculations by December 31st of any given year, such parties
shall use their best efforts to provide an estimated cash payment in
accordance with the above schedule by December 31st of said year;
thereafter,
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based on the latest available tax information but in no event later
than March 31st of the following year, a "true-up" calculation shall be
made whereby Guarantor shall provide Borrower an additional cash
payment in accordance with the above schedule (if the December 31st
contribution was underestimated) or Borrower at Guarantor's option
shall provide Guarantor a refund payment (if the December 31st
contribution was overestimated). Notwithstanding the timing of any
true-ups and whenever the years final tax return is filed, Guarantor
shall continue to be liable for any necessary payments in accordance
with the above schedule.
The revised tax sharing agreement shall also provide that it may not be
modified, transferred, or terminated by either party without Lender's
prior written consent and the Lender shall be named as a third party
beneficiary with regard to enforcing payments under that agreement.
20. The Guarantor hereby states, and RTFC hereby expressly acknowledges,
that this Guaranty is not collateralized by either the stock or the
assets of Guarantor's wholly-owned subsidiary, The Chillicothe
Telephone Company.
21. Whenever prior approval or consent is required under the terms and
conditions of this Guaranty, RTFC agrees to not unreasonably withhold
or delay such approval or consent.
IN WITNESS WHEREOF, this Guaranty has been executed and delivered by RTFC and
the undersigned Guarantor as of the _______ day of __________________, 2000.
HORIZON TELCOM, INC.
(SEAL) By:
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Title:
----------------------------------
Address: 00 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attest:
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(Secretary)
RURAL TELEPHONE FINANCE
COOPERATIVE
(SEAL) By:
-------------------------------------
Title:
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Address: Woodland Park
0000 Xxxxxxxxxxx Xxx
Xxxxxxx, Xxxxxxxx 00000-0000
Fax: (000) 000-0000
Attest:
--------------------------
(Secretary)
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