CREDIT FACILITY AGREEMENT
BY AND BETWEEN
S T A R T E C, I N C.
AND
SIGNET BANK
Executed as of July 1, 1997
TABLE OF CONTENTS
ARTICLE 1: THE CREDIT FACILITIES . . . . . . . . . . . . . . .
1.1. Line of Credit Facility . . . . . . . . . . . . . . .
1.1.1. Establishment of Credit Facility . . . . . . . . . .
1.1.2. Facility Maturity . . . . . . . . . . . . . . . . . .
1.1.3. Use of Proceeds . . . . . . . . . . . . . . . . . . .
1.1.4. Line of Credit Note . . . . . . . . . . . . . . . . .
1.1.5. Interest . . . . . . . . . . . . . . . . . . . . . .
1.1.5.1. Establishment of Portions . . . . . . . . .
1.1.5.2. Interest Rate Determination . . . . . . . .
1.1.5.3. Selection of Rate Index . . . . . . . . . .
1.1.5.4. Applicable Rate Margins . . . . . . . . . .
1.1.5.5. Calculation of Interest . . . . . . . . . .
1.1.5.6. Special LIBO Rate Provisions . . . . . . . .
1.1.6. Repayment and Prepayment . . . . . . . . . . . . . .
1.1.6.1. Periodic Interest Payments . . . . . . . . .
1.1.6.2. Principal Payments -- Commitment
Reduction . . . . . . . . . . . . . . . . . .
1.1.6.3. Principal Payments -- Periodic Sweep of Excess
Cash Flow
1.1.6.4. At Maturity or Termination . . . . . . . . .
1.1.6.5. Prepayments . . . . . . . . . . . . . . . .
1.1.6.6. Principal Repayment -- Automatic . . . . . .
1.1.6.7. Default Interest Payment . . . . . . . . . .
1.1.6.8. Application of Payments . . . . . . . . . .
1.1.6.9. Availability For Reborrowing . . . . . . . .
1.2. Term Loan Facility . . . . . . . . . . . . . . . . . .
1.3. Determination of Commitment Amounts . . . . . . . . .
1.3.1. Initial Commitment . . . . . . . . . . . . . .
1.3.2. Determination of Borrowing Base . . . . . . .
1.3.3. Voluntary Reduction of Commitment . . . . . . .
1.4. Advances . . . . . . . . . . . . . . . . . . . . . .
1.4.1. Requesting Advances . . . . . . . . . . . . .
1.4.2. Funding Advances . . . . . . . . . . . . . . .
1.4.3. Automatic Line of Credit Advances . . . . . .
1.4.4. Obligation to Advance . . . . . . . . . . . . .
1.4.5. Indemnification for Revocation or Failure
to Satisfy Conditions . . . . . . . . . . . . .
1.5. Payments in General . . . . . . . . . . . . . . . . .
1.5.1. Manner and Place . . . . . . . . . . . . . . .
1.5.2. Special Payment Timing Issues . . . . . . . . .
1.5.3. Application of Payments . . . . . . . . . . .
1.5.4. Debiting Accounts . . . . . . . . . . . . . .
1.5.5. Default Interest . . . . . . . . . . . . . . .
1.5.6. Usury Savings Provision . . . . . . . . . . .
1.6. Release of Security . . . . . . . . . . . . . . . . .
1.7. Fees and Other Compensation . . . . . . . . . . . . .
1.7.1. Commitment Fee . . . . . . . . . . . . . . . .
1.7.2. Periodic Facility Fee . . . . . . . . . . . .
1.7.3. Issuance of Warrants . . . . . . . . . . . . .
1.7.4. Other Fees . . . . . . . . . . . . . . . . . .
1.8. Issuance of Letters of Credit. . . . . . . . . . . .
ARTICLE 2: CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . .
2.1. Closing Conditions . . . . . . . . . . . . . . . . .
2.1.1. Compliance . . . . . . . . . . . . . . . .
2.1.1.1. Fees and Expenses . . . . . . .
2.1.1.2. Representations . . . . . . . .
2.1.1.3. No Default . . . . . . . . . .
2.1.2. Documents . . . . . . . . . . . . . . . . .
2.1.2.1 Credit Agreement . . . . . . .
2.1.2.2 Promissory Note . . . . . . . .
2.1.2.3. Scurity Agreement and Related
Documents . . . . . . . . . . .
2.1.2.4. Intellectual Property Security
Agreements . . . . . . . . . . .
2.1.2.5. Estoppels and Consent Agreements
2.1.2.6. Owners' Pledge and Security
Agreement . . . . . . . . . . .
2.1.2 7. Warrants . . . . . . . . . . .
2.1.2.8. Insurance . . . . . . . . . . .
2.1.2.9. Solvency Certificates . . . . .
2.1.2.10. Compliance Certificates . . . .
2.1.2.11. Opinions of Counsel . . . . . .
2.1.2.12 Payoff Instructions for Prior
Indebtedness . . . . . . . . . .
2.1.2.13. Authorization Documents --
Borrower . . . . . . . . . . .
2.1.2.14. Authorization Documents -- Other
Than Borrower . . . . . . . . .
2.1.2.15. Officer's Certificates . . . .
2.1.2.16. Other Documents . . . . . . . .
2.2. Line of Credit Advances . . . . . . . . . . . . . . .
2.2.1. Advance Request . . . . . . . . . . . . . .
2.2.2. Cash Flow Leverage . . . . . . . . . . . .
2.2.3. Other Documents . . . . . . . . . . . . . .
2.2.4. Compliance . . . . . . . . . . . . . . . .
2.2.4.1. Fees and Expenses . . . . . . .
2.2.4.2. Representations . . . . . . . .
2.2.4.3. No Default . . . . . . . . . .
ARTICLE 3: REPRESENTATIONS AND WARRANTIES . . . . . . . . . . .
3.1. Organization and Good Standing . . . . . . . . . . .
3.2. Power and Authority . . . . . . . . . . . . . . . . .
3.3. Validity and Legal Effect . . . . . . . . . . . . . .
3.4. No Violation of Laws or Agreements . . . . . . . . .
3.5. Title to Assets; Existing Encumbrances;
Intellectual and Real Property . . . . . . . . . . .
3.6. Capital Structure and Equity Ownership . . . . . . .
3.7. Subsidiaries, Affiliates and Investments . . . . . . .
3.8. Material Contracts . . . . . . . . . . . . . . . . .
3.9. Licenses and Authorizations . . . . . . . . . . . . .
3.10. Taxes and Assessments . . . . . . . . . . . . . . . .
3.11. Litigation and Legal Proceedings . . . . . . . . . . .
3.12. Accuracy of Financial Information . . . . . . . . . .
3.13. Accuracy of Other Information . . . . . . . . . . . .
3.14. Compliance with Laws Generally . . . . . . . . . . .
3.15. ERISA Compliance . . . . . . . . . . . . . . . . . .
3.16. Environmental Compliance . . . . . . . . . . . . . .
3.17. Margin Rule Compliance . . . . . . . . . . . . . . .
3.18. Fees and Commissions . . . . . . . . . . . . . . . .
3.19. Solvency . . . . . . . . . . . . . . . . . . . . . .
3.20. FCC and State PUC-Related Representations . . . . . .
3.20.1. No Unresolved Application, Complaint
or Proceeding . . . . . . . . . . . . . . .
3.20.2. Status and Renewal of Licenses . . . . . .
ARTICLE 4: AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . .
4.1. Financial Covenants and Ratios . . . . . . . . . . .
4.1.1. Monthly Net Revenue to Senior Funded Debt .
4.1.2. Minimum Subscribers. . . . . . . . . . . .
4.1.3. Interest Coverage Ratio . . . . . . . . . .
4.1.4. Cash Flow Leverage Ratio . . . . . . . . . .
4.2. Periodic Financial Statements . . . . . . . . . . . .
4.2.1. Monthly Reporting . . . . . . . . . . . . .
4.2.2. Quarterly Financial Statements . . . . . . .
4.2.3. Annual Financial Statements . . . . . . . .
4.3. Other Financial and Specialized Reports . . . . . . .
4.4 Fiscal Year . . . . . . . . . . . . . . . . . . . . .
4.5. Books and Records; Maintenance of Properties . . . .
4.6. Existence and Good Standing . . . . . . . . . . . . .
4.7. Deposit Accounts . . . . . . . . . . . . . . . . . .
4.8. Insurance; Disaster Contingency . . . . . . . . . . .
4.8.1. General Insurance Provisions . . . . . . .
4.8.2. Disaster Recovery and Contingency Program .
4.9. Loan Purpose . . . . . . . . . . . . . . . . . . . .
4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . .
4.11. Management Changes . . . . . . . . . . . . . . . . .
4.12. Litigation and Administrative Proceedings . . . . . .
4.13. Monitoring Compliance with Loan Documents; Occurrence
of Defaults and Material Adverse Effects . . . . . .
4.14. Compliance with Laws . . . . . . . . . . . . . . . .
4.14.1. General . . . . . . . . . . . . . . . . . .
4.14.2. ERISA . . . . . . . . . . . . . . . . . . .
4.14.3. Environmental . . . . . . . . . . . . . . .
4.14.4. Communications . . . . . . . . . . . . . .
4.15. Further Actions . . . . . . . . . . . . . . . . . . .
4.15.1. Additional Collateral . . . . . . . . . . .
4.15.2. Further Assurances . . . . . . . . . . . .
4.15.3. Estoppel Certificate . . . . . . . . . . .
4.15.4. Waivers and Consents . . . . . . . . . . .
4.15.5. Additional Material Contracts, Licenses
Land Authorizations . . . . . . . . . . . .
4.15.6. Access and Audits . . . . . . . . . . . . .
4.16. Costs and Expenses . . . . . . . . . . . . . . . . .
4.17. Other Information . . . . . . . . . . . . . . . . . .
4.18. Payment by Account Debtors . . . . . . . . . . . . . .
4.19. FCC and State PUC-Related Affirmative Covenants . . .
4.19.1. Service Interruption 30
4.19.2. FCC and State PUC Correspondence, Orders and
Filings . . . . . . . . . . . . . . . . . . .
4.20. Post-Closing Items . . . . . . . . . . . . . . . . .
4.20.1. Restructuring of Borrower and Release of
Equity Pledge . . . . . . . . . . . . . . .
4.20.2. Foreign Qualifications . . . . . . . . . .
4.20.3. State PUC Authorizations and Approvals . .
4.20.4. Primary Estoppels and Consents . . . . . .
4.20.5. Secondary Estoppels and Consents . . . . .
4.20.6. Payoff Letters and Termination Statements. .
ARTICLE 5: NEGATIVE COVENANTS . . . . . . . . . . . . . . . . .
5.1. Capital Expenditures . . . . . . . . . . . . . . . .
5.2. Additional Indebtedness . . . . . . . . . . . . . . .
5.3. Guaranties . . . . . . . . . . . . . . . . . . . . . .
5.4. Loans . . . . . . . . . . . . . . . . . . . . . . . .
5.5. Liens and Encumbrances; Negative Pledge . . . . . . .
5.6. Transfer of Assets . . . . . . . . . . . . . . . . .
5.7. Acquisitions and Investments . . . . . . . . . . . .
5.8. New Ventures; Mergers . . . . . . . . . . . . . . . .
5.9. Transactions with Affiliates . . . . . . . . . . . .
5.10. Distributions or Dividends . . . . . . . . . . . . .
5.11. Payment of Subordinated Indebtedness . . . . . . . .
5.12. Payment of Management Fees . . . . . . . . . . . . .
5.13. Issuance of Additional Equity . . . . . . . . . . . .
5.14. Removal of Assets . . . . . . . . . . . . . . . . . .
5.15. Modifications to Organic Documents . . . . . . . . .
5.16. Modifications to Material Relationships . . . . . . .
5.17. Margin Stock Restrictions; Other Federal Statutes . .
ARTICLE 6: ADDITIONAL COLLATERAL AND RIGHT OF SET OFF . . . . .
6.1. Additional Collateral . . . . . . . . . . . . . . . .
6.2. Right of Set-Off . . . . . . . . . . . . . . . . . .
6.3. Additional Rights . . . . . . . . . . . . . . . . . .
ARTICLE 7: DEFAULT AND REMEDIES . . . . . . . . . . . . . . . .
7.1. Events of Default . . . . . . . . . . . . . . . . . .
7.1.1. Payment Obligations . . . . . . . . . . . .
7.1.2. Representations and Warranties . . . . . .
7.1.3. Financial Covenants . . . . . . . . . . . .
7.1.4. Other Covenants in Loan Documents . . . . .
7.1.5. Default Under Other Agreements with Lender .
7.1.6. Default Under Material Agreements with Other
Parties. . . . . . . . . . . . . . . . . . .
7.1.7. Security Interest . . . . . . . . . . . . .
7.1.8. Change of Control . . . . . . . . . . . . .
7.1.9. Government Action . . . . . . . . . . . . .
7.1.10. Insolvency . . . . . . . . . . . . . . . .
7.1.11. Additional Liabilities . . . . . . . . . .
7.1.12. Business Interruption . . . . . . . . . . .
7.1.13. FCC and Other Regulatory-Action Defaults .
7.1.14. Material Adverse Change . . . . . . . . . .
7.2. Remedies . . . . . . . . . . . . . . . . . . . . . .
7.2.1. General; Acceleration . . . . . . . . . . .
7.2.2. Other . . . . . . . . . . . . . . . . . . .
7.2.3. Special FCC and State PUC-Related Remedies
ARTICLE 8: DEFINITIONS . . . . . . . . . . . . . . . . . . . .
8.1. Definitions . . . . . . . . . . . . . . . . . . . . .
8.2. Rules of Interpretation and Construction . . . . . .
8.2.1. Plural; Gender . . . . . . . . . . . . . .
8.2.2. Financial and Accounting Terms . . . . . .
8.2.3. Independence of Covenants and Defaults . .
ARTICLE 9: Miscellaneous . . . . . . . . . . . . . . . . . . .
9.1. Indemnification, Reliance and Assumption of Risk
Provisions . . . . . . . . . . . . . . . . . . . . .
9.2. Assignments and Participations . . . . . . . . . . .
9.3. No Waiver; Delay . . . . . . . . . . . . . . . . . .
9.4. Modification and Amendment . . . . . . . . . . . . .
9.5. Disclosure of Information to Third Parties . . . . .
9.6. Binding Effect and Governing Law . . . . . . . . . .
9.7. Notices . . . . . . . . . . . . . . . . . . . . . . .
9.8. Headings . . . . . . . . . . . . . . . . . . . . . . .
9.9. Time of Day . . . . . . . . . . . . . . . . . . . . .
9.10. Relationship with Prior Agreements . . . . . . . . .
9.11. Severability . . . . . . . . . . . . . . . . . . . .
9.12. Termination and Survival . . . . . . . . . . . . . .
9.13. Reinstatement . . . . . . . . . . . . . . . . . . . .
9.14. Counterparts . . . . . . . . . . . . . . . . . . . .
9.15. Conflict Provision . . . . . . . . . . . . . . . . .
9.16 Waiver of Suretyship Defenses . . . . . . . . . . . .
9.17. Waiver of Liability . . . . . . . . . . . . . . . . .
9.18. Forum Selection; Consent to Jurisdiction . . . . . .
9.19. Waiver of Jury Trial . . . . . . . . . . . . . . . .
2
SCHEDULES AND EXHIBITS:
Schedules:
Schedule 1.1.3 Indebtedness Satisfied with Proceeds
Schedule 1.4.2 Funding Instructions
Schedule 3.1 Good Standing / Foreign Qualification
Jurisdictions
Schedule 3.2 Missing Consents
Schedule 3.4 Existing Violations
Schedule 3.5 Existing Encumbrances
Schedule 3.5A Intellectual Property
Schedule 3.5B Real Property Interests
Schedule 3.5C Operating Names / Trade Names
Schedule 3.6 Capital Structure / Equity Ownership
Schedule 3.7 Subsidiaries, Affiliates & Investments
Schedule 3.8 Material Contracts
Schedule 3.9 Licenses and Authorizations
Schedule 3.10 Taxes and Assessments
Schedule 3.11 Material Litigation
Schedule 3.18 Fees and Commissions
Schedule 3.20 Pending FCC Matters
Schedule 4.7 Existing Deposit Accounts
Schedule 5.2 Permitted Additional Indebtedness
Schedule 5.5 Permitted Additional Liens
Exhibits:
Exhibit 1.4.1 Form of Advance Request
Exhibit 4.2 Form of Periodic Compliance Certificate
Exhibit 4.2.1(a) Form of Monthly Financial Statements
Exhibit 4.2.1(b) Form of Monthly Borrowing Base Certificate
Exhibit 4.2.3 Form of Debt Compliance Letter
3
CREDIT FACILITY AGREEMENT
THE CREDIT FACILITY AGREEMENT (as defined in Article 8 hereof, along
with all other defined terms, this "Agreement") is made and effective as of July
1, 1997, by and between STARTEC, INC. (as more fully defined in Article 8
hereof, "Borrower") and SIGNET BANK (as more fully defined in Article 8 hereof,
"Lender").
R E C I T A L S
WHEREAS, Borrower desires and has applied to Lender for a credit
facility consisting of a line of credit arrangement pursuant to which up to $15
million (subject to adjustment pursuant to Section 1.3 hereof) can be borrowed
from time to time on a senior secured basis; and
WHEREAS, Lender is willing to accommodate the request for credit upon
and subject to the terms, conditions and provisions of the Loan Documents;
NOW, THEREFORE, in consideration of the covenants and agreements
contained in the Loan Documents, and other good and valuable consideration,
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, Borrower and Lender hereby agree as follows:
ARTICLE 1: THE CREDIT FACILlTIES
1.1. Line of Credit Facility.
1.1.1. Establishment of Credit Facility. Subject to the terms and
conditions of and in reliance upon the representations and warranties contained
in the Loan Documents, Lender will lend funds to Borrower on a senior secured
basis from time to time prior to the Line of Credit Maturity Date (as determined
in accordance with Section 1.1.2 hereof) in an aggregate amount at any time
outstanding not to exceed the Available Credit Portion (as determined in
accordance with Section 1.3 hereof).
1.1.2. Facility Maturity. The Line of Credit Facility will mature
on December 31, 1999 (as may be extended from time to time in Lender's sole and
absolute discretion, "Line of Credit Maturity Date").
1.1.3. Use of Proceeds. The funds advanced under this Line of
Credit Facility may be used exclusively as follows:
a. For general working capital and other allowable and
legitimate corporate expenditures (including, without
limitation, for costs associated with (i) marketing to and
retaining of new customers, and (ii) the growth of accounts
receivable, and (iii) the expansion of domestic switch
capacity, overseas gateways, and fiber lines, and (iv) the
support of monthly accounts payable for line charges); and
b. To satisfy the subordinated indebtedness owed by Borrower to
the various Persons listed on Schedule 1.1.3 hereto; and
c. To renew, continue, restructure and refinance the $500,000
(plus accrued interest) of indebtedness owed by Borrower to
Lender under the Business Loan Agreement dated as of June
11, 1997, and
d. The balance of the Available Credit Portion (if any) to pay
(i) for closing costs and fees associated with consummating
and documenting the transactions contemplated by this
Agreement, and (ii) for such other purposes as specifically
authorized hereunder or in writing by Lender (in its sole
and
4
absolute discretion).
1.1.4. Line of Credit Note. The indebtedness under the Line of
Credit Facility and the corresponding obligation of Borrower to repay Lender
with interest in accordance with the terms hereof will be evidenced by an
Amended and Restated Line of Credit Note (as amended, restated, replaced,
supplemented, extended or renewed hereafter, "Line of Credit Note") payable to
the order of Lender. The Line of Credit Note will be due and payable in full on
the Line of Credit Maturity Date. The stated principal amount of the Line of
Credit Note will be the Line of Credit Commitment established as of the Closing
Date pursuant to Section 1.3 hereof; provided, however, that the maximum
liability under such Line of Credit Note will be limited at all times to the
actual amount of indebtedness (including principal, interest, fees and expenses)
then outstanding under the Line of Credit Facility. Lender is authorized to note
or endorse the date and amount of each Advance and payment under the Line of
Credit Facility on a schedule annexed to and constituting a part of the Line of
Credit Note. Such notations or endorsements, if made, will constitute prima
facie evidence of the information noted or endorsed on such schedule, but the
absence of any such notation or endorsement will not limit or otherwise affect
the obligations and liabilities of Borrower thereunder or hereunder.
1.1.5. Interest. Interest under the Line of Credit Facility (and
with respect to any other amounts advanced to or on behalf of Borrower under the
Loan Documents) will be determined and imposed in accordance with the following
provisions (and, as applicable, Section 1.5.5 hereof and Section 1.5.6 hereof):
1.1.5.1. Establishment of Portions. For
purposes of determining interest, Borrower may designate and subdivide the
aggregate outstanding balance under the Line of Credit Facility (including any
other amounts advanced to or on behalf of Borrower under the Loan Documents)
into a maximum of three (3) Portions. No Portion may be less than $100,000
(unless it is designated as $0.00 or the aggregate outstanding balance under the
Line of Credit Facility is less than $100,000 or such Portion is accruing
interest based upon the Prime Rate), and all Portions collectively must total
the aggregate outstanding balance under the Line of Credit Facility. If there is
less than $200,000 outstanding under the Line of Credit Facility, then only one
Portion will be permitted.
1.1.5.2. Interest Rate Determination. The aggregate
outstanding principal balance under each Portion will bear interest (computed
daily until paid, whether prior to
5
or after the Line of Credit Maturity Date) at the applicable Rate Index (as
determined in accordance with Section 1.1.5.3 hereof) plus the applicable Rate
Margin (as determined in accordance with Section 1.1.5.4 hereof). If the Prime
Rate is the applicable Rate Index for a Portion, then the interest rate on such
Portion will change when and as the Prime Rate or Rate Margin changes; and if an
Adjusted LIBO Rate is the applicable Rate Index for a Portion, then the interest
rate on such Portion will be established on the first day of each Interest
Period for such Portion and will not change during such Interest Period, except
as otherwise permitted under Section 1.1.5.6 hereof. Notwithstanding the
foregoing, the applicable interest rate for the entire outstanding balance under
the Line of Credit Facility from the Closing Date until the first date on which
the Rate Index may be changed under Section 1.1.5.3 hereof will be 9.8086%
(i.e., the Adjusted LIBO Rate applicable for a 3-month period as of the Closing
Date plus Rate Margin of 4% per annum).
1.1.5.3. Selection of Rate Index. The applicable Rate
Index for each Portion will be either the Prime Rate or an Adjusted LIBO Rate.
The applicable Rate Index for each Portion may be changed (at the election of
Borrower) as of the first calendar day after the end of the applicable Interest
Period for such Portion. At least three (3) Business Days but not more than ten
(10) Business Days before any day on which the Rate Index may be changed,
Borrower (through an Authorized Officer) must notify Lender in writing of (a)
the dollar amount of each Portion (if more than one exists) and (b) the selected
Rate Index for each Portion during the subsequent rate period (including, if
applicable, the selected length of the Interest Period for balances accruing
interest at the Adjusted LIBO Rate). If Lender does not timely receive such
written notification as to any Portion, then the Prime Rate will be the
applicable Rate Index for the entire outstanding balance of such unspecified
Portion during the subsequent Interest Period. Notwithstanding the foregoing,
with respect to the proceeds of each Advance under the Line of Credit Facility,
unless Borrower otherwise requests the Adjusted LIBO Rate at the time of such
Advance (and an otherwise unallocated Portion then exists), then the Prime Rate
will be the applicable Rate Index from the corresponding Settlement Date for
such Advance until the next date on which the Rate Index may be changed
hereunder.
1.1.5.4. Applicable Rate Margins. The Rate Margin
applicable to the Line of Credit Facility will be 4.0% for each Portion accruing
interest at the Adjusted LIBO Rate and 2.0% for each Portion accruing interest
at the Prime Rate.
1.1.5.5. Calculation of Interest. Interest under the Line
of Credit Facility will be calculated,
6
accrued, imposed and payable on the basis of a 360-day year for the actual
number of days elapsed. Interest will begin to accrue on the outstanding
principal amount of the Line of Credit Facility (and on any other amounts
advanced to or on behalf of Borrower under the Loan Documents) on and as of the
date such funds are advanced.
1.1.5.6. Special LIBO Rate Provisions. The following
provisions will apply with respect to the Adjusted LIBO Rate, notwithstanding
any other provision hereof:
a. Change in Adjusted LIBO Rate. The Adjusted
LIBO Rate may be automatically adjusted by Lender from time to time on a
prospective basis to account for any additional or increased cost of maintaining
any necessary reserves for Eurodollar deposits (including, without limitation,
any increase in the Reserve Percentage) or increased costs due to changes in the
applicable law occurring subsequent to the commencement of the then-applicable
Adjusted LIBO Rate Interest Period. Lender will give Borrower notice of any such
determination and adjustment within a reasonable period of time thereafter, and
(upon written request) Lender will furnish a statement setting forth the basis
for adjusting such Adjusted LIBO Rate and the method for determining the amount
of such adjustment. A determination by Lender hereunder will be conclusive
absent manifest error. If Lender provides any such notice of adjustment under
this Subsection, then Borrower may elect to change the then-applicable Rate
Index (using the same Rate Margin category) to the Prime Rate for any Portion
then subject to an Adjusted LIBO Rate. Such election to change the Rate Index
may be made by providing Lender written notice thereof at any time within the
first 10 Business Days after receipt of the notice of adjustment from Lender
(notwithstanding the restriction hereunder limiting such Rate Index changes to
certain dates, but subject to the requirement to pay actual costs incurred by
Lender as described in Section 1.1.6.5.e hereof). Upon Lender's receipt of such
a written election, the identified Portion will thereupon begin to accrue
interest at the Prime Rate plus the Rate Margin (as applicable for the same
Leverage Ratio level as was previously applicable for the Adjusted LIBO Rate)
for the remainder of the then-current Interest Period for such Portion.
b. Unavailability of Eurodollar Funds. An
Adjusted LIBO Rate will not be available for the Line of Credit Facility if
Lender at any time determines or reasonably believes that (1) Eurodollar
deposits equal to the amount of principal under the Line of Credit Facility for
the applicable Interest Period are unavailable, or (2) an Adjusted LIBO Rate
will not adequately and fairly reflect the cost of
7
maintaining balances under the Line of Credit Facility, or (3) by reason of
circumstances affecting Eurodollar markets, adequate and reasonable means do not
then exist for ascertaining an Adjusted LIBO Rate. Lender will give Borrower
notice of any such event within a reasonable time thereafter, and (upon written
request) Lender will furnish a statement setting forth the basis for such
determination or reasonable belief. A determination or belief by Lender
hereunder will be conclusive absent manifest error.
c. Illegality. An Adjusted LIBO Rate will
also not be available for the Line of Credit Facility if Lender at any time
determines or reasonably believes that it is unlawful or impossible to fund or
maintain sufficient Eurodollar liabilities for the Line of Credit Facility under
an Adjusted LIBO Rate. Lender will give Borrower notice of any such event within
a reasonable time thereafter, and (upon written request) Lender will furnish a
statement setting forth the basis for such determination or reasonable belief. A
determination or belief by Lender hereunder will be conclusive absent manifest
error.
d. Alternative Rate. During the occurrence of
an event contemplated by either Clause "b" of this Subsection or Clause "c" of
this Subsection, Lender's obligation hereunder to fund or maintain balances
under an Adjusted LIBO Rate will be suspended, and during such period, the
outstanding balance under the Line of Credit Facility will bear interest at the
Prime Rate plus the appropriate Rate Margin (determined in accordance with
Section 1.1.5.4 hereof).
1.1.6. Repayment and Prepayment. Borrower hereby promises to pay
Lender the aggregate indebtedness under the Line of Credit Facility (and other
Loan Documents) in accordance with the following provisions:
1.1.6.1. Periodic Interest Payments. Interest accrued
under the Line of Credit Facility will be due and payable quarterly in arrears
on the first calendar day following the end of each such quarter and also on the
first calendar day following the end of each Interest Period for any Portion
accruing interest at an Adjusted LIBO Rate, commencing on the first such date
after the Closing Date.
1.1.6.2. Principal Payments -- Commitment Reduction.
Intentionally Blank.
1.1.6.3. Principal Payments -- Periodic Sweep of Excess
Cash Flow. Intentionally Blank
8
1.1.6.4. At Maturity or Termination. The entire aggregate
outstanding indebtedness under the Line of Credit Facility (including principal,
interest, fees and expenses) is due and payable in its entirety in immediately
available funds on the Line of Credit Maturity Date. Notwithstanding the
foregoing, the entire aggregate outstanding indebtedness under the Line of
Credit Facility (including all principal, interest, fees and expenses) will be
due and payable in its entirety in immediately available funds upon any earlier
termination of either the Line of Credit Commitment, the Line of Credit Facility
or this Agreement.
1.1.6.5. Prepayments.
a. Voluntary Prepayments. The outstanding
principal balance under the Line of Credit Facility may be prepaid in whole or
in part at any time without premium or penalty, except as provided in Clause "e"
of this Subsection.
b. Mandatory Prepayments -- Excessive
Balance. If the aggregate outstanding indebtedness under the Line of Credit
Facility at any time exceeds the Available Credit Portion (as determined in
accordance with Section 1.3 hereof), then such excess amount outstanding must be
prepaid immediately (without necessity of notice or demand by Lender). If any
funds are advanced or costs are incurred by Lender on behalf of Borrower (as
protective advances or otherwise) pursuant to any Loan Documents, other than
Advances pursuant to Section 1.4 hereof, then such advances or costs must also
be repaid to Lender immediately (without necessity of notice or demand).
c. Mandatory Prepayments -- Asset Sales. If
Borrower sells, transfers or otherwise disposes of any assets (other than
inventory or other assets sold in the ordinary course of business with the
proceeds thereof promptly reinvested in similar assets at similar locations)
exceeding an aggregate fair market value of $150,000 in any twelve (12)
consecutive calendar months, then (unless Lender otherwise consents, which
consent may not be unreasonably withheld while no Default is occurring) a
prepayment must be immediately made on the outstanding indebtedness under the
Line of Credit Facility. The amount of any such mandatory prepayment will be the
higher of the cash proceeds or the cash equivalent of the fair market value of
any such asset dispositions net of (1) reasonable commissions and expenses
actually incurred to unrelated third parties in connection with such
transactions and (2) taxes actually due as a direct result of such transactions
(as such taxes are estimated and certified to Lender by an acceptable certified
public
9
accountant or the chief financial officer).
d. In General. Any prepayment under the Line
of Credit Facility must include all accrued but unpaid interest under the Line
of Credit Facility allocable to the amount prepaid through the date of such
prepayment.
e. Adjusted LIBO Rate Prepayments. In
connection with any prepayment of all or any portion of the outstanding balance
under the Line of Credit Facility upon which an Adjusted LIBO Rate is then
applicable on any day other than the last day of an Interest Period -- whether
such prepayment is voluntary, mandatory, by demand, acceleration or otherwise --
Borrower must pay Lender all costs, losses and expenses (including funding
costs) that may arise or be incurred as a result of or in connection with such
prepayment, as such costs, losses and expenses may be calculated by Lender. Upon
written request, Lender will furnish a statement setting forth the basis for
such calculation. A determination or calculation by Lender hereunder will be
conclusive absent manifest error.
1.1.6.6. Principal Repayment -- Automatic. Notwithstanding
the foregoing, if Cash Management Agreements have been executed and are at the
time effective, then principal amounts outstanding from time to time under the
Line of Credit Facility will also be repaid from time to time in accordance with
such Cash Management Agreements.
1.1.6.7. Default Interest Payment. Any payment hereunder
or under the Line of Credit Note during the existence of a Default or an Event
of Default hereunder must include the payment of any default interest due
pursuant to Section 1.5.5 hereof.
1.1.6.8. Application of Payments. Payments hereunder
(including prepayments) will be applied in accordance with Section 1.5.3 hereof.
Notwithstanding the foregoing, payments and prepayments allocable to principal
under the Line of Credit Facility will be applied to repay Portions accruing
interest at the Prime Rate first and then to repay Portions accruing interest at
the Adjusted LIBO Rate (applying first to Portions having the Interest Period
with the longest remaining time to maturity).
1.1.6.9. Availability For Reborrowing. Principal amounts
repaid or prepaid under the Line of Credit Facility prior to the Line of Credit
Maturity Date will be available for reborrowing pursuant to and in accordance
with the terms hereof up to the Available Credit Portion.
10
1.2. Term Loan Facility. Intentionally Blank.
1.3. Determination of Commitment Amounts.
1.3.1. Initial Commitment. Upon the execution of this Agreement
and satisfaction of the conditions precedent set forth in Section 2.1 hereof,
the Line of Credit Commitment established hereunder will be $10.0 million ("Line
of Credit Commitment").
1.3.2. Determination of Borrowing Base. From the Closing Date
through December 31, 1997, the Current Line of Credit Commitment will be $10
million. After December 31, 1997, the Current Line of Credit Commitment
hereunder will be the lesser of (a) $15.0 million or (b) 85% of Eligible
Accounts.
Notwithstanding the foregoing, the maximum amount of credit available at any
time under the Line of Credit Facility may not exceed the amount resulting from
the following formula:
a. The Current Line of Credit Commitment,
b. Minus the then-aggregate amount of all prepayments relating
to asset sales required to have been paid to Lender since
the Closing Date under Section 1.1.6.5.c hereof, and
c. Minus the aggregate amount of all voluntary commitment
reductions requested under Section 1.3.3 hereof, and
d. Minus the aggregate outstanding amount (at face value) of
all letters of credit issued by Lender (or any Affiliate
thereof) on behalf or for the account of Borrower under
Section 1.8 hereof or otherwise.
(Collectively, the amount resulting from the equation under categories "a"
through "d" above is sometimes referred to herein as the "Available Credit
Portion".) On the effective date of any such reduction in the amount of
available credit, a prepayment must be made to the extent required under Section
1.1.6.5.b hereof.
1.3.3. Voluntary Reduction of Commitment. Upon giving Lender
prior written notice of at least ten (10) Business Days, Borrower at any time
and from time to time may reduce the Current Line of Credit Commitment in
multiples of $100,000. On the effective date of any such reduction, a prepayment
must be made to the extent required under Section 1.1.6.5.b hereof. Any
11
such reduction in the Line of Credit Commitment will be permanent, and such
Commitment cannot thereafter be increased without the written consent of Lender.
1.4. Advances.
1.4.1. Requesting Advances. To request an Advance (except with
respect to the initial Advances on the Closing Date or as otherwise provided in
Section 1.4.3 hereof), Borrower (through an Authorized Officer) must give Lender
written notice (or verbal notice by telephone with immediate written
confirmation to follow) at least two (2) Business Days but not more than ten
(10) Business Days prior to the requested Settlement Date for such Advance (such
notice, an "Advance Request"). Each Advance Request, together with certain
certifications, must be substantially in the form of Exhibit 1.4.1 hereto or
such other form as Lender from time to time may reasonably request. Each Advance
under the Line of Credit Facility pursuant to an Advance Request must be in an
amount of at least $10,000 or in a multiple of $10,000 in excess thereof and not
greater than the un-borrowed balance of the Available Credit Portion (as
determined under Section 1.3 hereof). Unless Lender otherwise consents, Borrower
may only request up to ten (10) Advances per month.
1.4.2. Funding Advances. Subject to the satisfaction of and
compliance with the terms and conditions hereof (including, as applicable, the
conditions precedent specified in Section 2.2 hereof), Lender will make each
requested Advance available by crediting such amount to the Account with Lender
(or by such other means as Lender may consider reasonable). At the written
request and expense of Borrower, Lender will wire transfer all or any portion of
an Advance in accordance with such written instructions therefor. By executing
this Agreement, Borrower hereby requests Lender to make and fund the initial
Advances in accordance with the funding instructions attached as Schedule 1.4.2
hereto.
1.4.3. Automatic Line of Credit Advances. If Cash Management
Agreements have been executed and are effective, then the request and
disbursement of Advances under the Line of Credit Facility may also be processed
automatically in accordance with such Cash Management Agreements.
1.4.4. Obligation to Advance. Lender will not be obligated to
make any Advance under the following circumstances (other than with respect to
an Advance by Lender automatically occurring pursuant to Section 1 8 hereof upon
a draw under a letter of credit): (a) if the principal amount of such Advance
plus the aggregate amount outstanding under the Line of Credit
12
Facility would exceed the Available Credit Portion, or (b) during the existence
of a Default or an Event of Default hereunder, or (c) if such Advance would
cause a Default or Event of Default hereunder, or (d) after the Line of Credit
Maturity Date.
1.4.5. Indemnification for Revocation or Failure to Satisfy
Conditions. Borrower will indemnify Lender against any loss, cost or expense
incurred by Lender as a result of any revocation of any requested Advance or any
failure to fulfill the applicable conditions precedent to such Advance on or
before the requested Settlement Date specified in an Advance Request. Such
indemnification will include, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of funds required by
Lender to fund the Advance when such Advance, as a result of such failure, is
not made on the requested Settlement Date. Lender's calculation of such losses,
costs and expenses will be conclusive absent manifest error.
1.5. Payments in General.
1.5.1. Manner and Place. All payments of principal, interest,
fees and other amounts due under the Loan Documents must be received by Lender
in immediately available funds in U.S. dollars (and without any deduction,
offset, netting or counterclaim) on or before Twelve O'Clock (12:00) noon
Eastern Time ("ET") on the due date therefor at the principal office of Lender
set forth in Notice Section hereof or at such other place as Lender may
designate from time to time.
1.5.2. Special Payment Timing Issues. Whenever any payment to be
made under any Loan Document is due on a day that is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of
time will be included in the computation of interest under such Loan Document.
Any funds received by Lender after 12:00 noon ET on any day will be deemed to be
received on the next succeeding Business Day.
1.5.3. Application of Payments. All payments and other funds
received by Lender hereunder will be applied by Lender in the following order:
(a) first to the payment of any fees and charges due under the Loan Documents,
and (b) then to any obligations for the payment of expenses due under the Loan
Documents, and (c) then to the payment of interest due and owing hereunder, and
(d) then to the principal indebtedness due under the Line of Credit Facility,
and (e) then to any other interest accrued hereunder, and (f) then to any other
indebtedness of Borrower or other Obligor to Lender.
1.5.4. Debiting Accounts. Borrower hereby authorizes Lender to
charge any account of Borrower maintained at
13
Lender or at any Affiliate of Lender (including, without limitation, the
Account) for all or any part of any payment of principal, interest, fees and/or
expenses due under the Loan Documents or otherwise due to Lender (including, if
applicable, as due under and in accordance with the Cash Management Agreements).
1.5.5. Default Interest. During the existence of an Event of
Default hereunder, Borrower hereby agrees (to the maximum extent not prohibited
by applicable law) to pay to Lender (upon Lender's request) interest on any
indebtedness outstanding hereunder at the rate of Three Percent (3%) per annum
in excess of the rate then otherwise applicable to such indebtedness.
Notwithstanding the foregoing, if the relevant Default is under Section 7.1.10
hereof, then such rate increase (to the maximum extent not prohibited by
applicable law) will occur automatically without any request by Lender.
1.5.6. Usury Savings Provision. Notwithstanding any provision of
any Loan Document to the contrary, Borrower is not and will not be required to
pay interest at a rate or any fee in an amount prohibited by applicable law. If
interest or any fee payable to Lender on any date would be in a prohibited
amount, then such interest or fee will be automatically reduced to the maximum
amount that is not prohibited, and any interest or fee for subsequent periods
(to the extent not prohibited) will be increased accordingly until Lender
receives payment of the full amount of each such reduction. To the extent that
any prohibited amount is actually received by Lender, then such amount will be
automatically deemed to constitute a repayment of principal indebtedness
hereunder.
1.6. Release of Security. Upon (a) repayment to Lender in full
(unconditionally and indefeasibly) of the entire indebtedness hereunder and of
all other amounts then due or owing to Lender under the Loan Documents, and (b)
the termination of the Loan Documents (and all Facilities thereunder), and (c)
return and cancellation of any effective letters of credit issued by Lender (or
any Affiliate thereof) for the account of Borrower, then Lender (at the written
request and expense of Borrower) (i) will release the Obligors and the property
serving as Collateral hereunder from all the Loan Documents, and (ii) will
execute such UCC termination statements and mortgage and deed of trust releases
and such other documentation (all in form and substance reasonably acceptable to
Lender and without representation, warranty, recourse or indemnification of any
kind) as may be reasonably requested and provided to Lender to effect such
release and termination. Notwithstanding the foregoing, at Lender's sole and
absolute option, such release may be reasonably delayed, qualified and
conditioned, including, without
14
limitation, until the expiration of any period during which a trustee, receiver
or other party could avoid, set aside, rescind or seek repayment or return of
any funds or property received by Lender from any ObLigor hereunder.
1.7. Fees and Other Compensation.
1.7.1. Commitment Fee. On the Closing Date, Lender must receive
in immediately available funds a Credit Commitment Fee in the amount of
$150,000.
1.7.2. Periodic Facility Fee. Borrower will also pay Lender in
immediately available funds a Periodic Facility Fee at the rate of ONE QUARTER
OF ONE PERCENT (0.25%) per annum on the average daily unborrowed portion of the
Current Line of Credit Commitment. Such fee will be calculated by Lender and
will be due and payable in immediately available funds quarterly in arrears on
the first calendar day of each fiscal quarter. To the extent any such
calculations of the unborrowed portion includes the face amount of one or more
letters of credit issued by Lender for the account of Borrower, then the amount
of any issuance fee actually imposed and collected by Lender in connection with
any such letter of credit will be deducted by Lender in calculating subsequent
installments of the Periodic Facility Fee applicable to such amount of the
unborrowed portion until Borrower has received a full credit for the amount of
such issuance fees.
1.7.3. Issuance of Warrants. As additional compensation for the
cost, expense and risk incurred by Lender (or its Affiliates) associated with
the underwriting and establishment of the Facilities (but in no way affecting or
relieving Borrower of any of its obligations to fully and timely perform and to
repay the entire indebtedness due under the Loan Documents), Borrower will issue
and grant to Lender (or its designated Affiliate) warrants exercisable into
shares of voting common stock of Borrower sufficient to represent 10% of its
issued and outstanding shares of voting common stock, on a fully diluted basis
("Warrants"). All of the Warrants exercisable into 5% of the issued and
outstanding shares of voting common stock will vest and will be fully earned by
Lender (or its Affiliate) as of the Closing Date. Thereafter, Warrants will vest
in accordance with the terms of a separate Warrant Agreement executed by and
between Borrower and Lender. Subject to being adjusted in accordance with the
terms of the Warrant Agreement, the Warrants earned as of the Closing Date will
be exercisable at price that values Borrower at a multiple of 10 times monthly
revenue for April 1997 and the Warrants earned after the Closing Date will be
exercisable at a price that values Borrower at a multiple of 10 times monthly
revenue for the month immediately
15
preceding each such vesting. The Warrants, and all of Lender's rights in
connection therewith, are freely assignable and transferable at any time by
Lender (or its Affiliate and assignees) to any other Person, provided that
Lender complies with any applicable terms thereof and restrictions therein (and
obtains any necessary approvals in connection therewith) required by any
applicable State PUC (to the extent non-compliance therewith by Lender could
have or cause a Material Adverse Effect or could otherwise reasonably be
expected to result in the imposition of a penalty in excess of $25,000), the
FCC, the SEC or the Warrant Agreement itself.
1.7.4. Other Fees. Other fees and charges may be imposed by
Lender hereunder for services rendered under and in accordance with other
agreements with Lender, including, without limitation, any deposit account
agreements, any agreement to issue wire transfers or letters of credit, and any
Cash Management Agreements.
1.8. Issuance of Letters of Credit. If Lender (or any Affiliate of Lender)
issues one or more letters of credit on behalf of or for the account of
Borrower, then the obligations of Borrower (or its Affiliate) to such letter of
credit issuer relating thereto will be deemed Obligations under this Agreement
secured by the Collateral herefor pursuant to the terms of the Loan Documents.
So long as any such letter of credit is effective and outstanding, the face
amount thereof will be deducted from the Current Line of Credit Commitment in
determining the Available Credit Portion (under Section 1 3 hereof) at any time
and will be included within the definition of Funded Debt. Such amounts,
however, will be considered "unborrowed" for preposes of calculating the
Facility Fee under Section 1.7.2 hereof. If the beneficiary under any such
letter of credit makes a draw thereunder, then the amount thereof (as of the
date of such draw) will be treated as an Advance to Borrower under the Line of
Credit Facility
ARTICLE 2: CONDITIONS PRECEDENT
2.1. Closing Conditions. The obligation of Lender to execute and perform
the Loan Documents, and to establish the Line of Credit Facility, and to fund
the Advances listed on Schedule 1.4.2 hereto are subject to the following
conditions precedent (unless and except to the extent expressly waived by Lender
in its sole and absolute discretion):
2.1.1. Compliance.
2.1.1.1. Fees and Expenses. Borrower must have paid (or
made acceptable arrangements with Lender to
16
pay) all fees, costs, expenses and taxes due and payable hereunder, including,
without limitation, any fees due and payable pursuant to Section 1.7 hereof and
the reasonable fees, costs and expenses of Lender's attorneys with respect to
the preparation, negotiation and execution of the Loan Documents.
2.1.1.2. Representations. Each, and all, representations
and warranties contained in this Agreement (including those in Article 3 hereof)
and in each other Loan Document, certificate or other writing delivered to
Lender pursuant hereto or thereto on or prior to the Closing Date must be true,
correct and complete in all material respects on and as of the Closing Date,
except for such deviations disclosed in writing and acceptable to Lender.
2.1.1.3. No Default. There must not be any Default or
Event of Default hereunder or any default under any other Loan Document on the
Closing Date, and there must not be any such Default or Event of Default
occurring as a result of executing or advancing funds under the Loan Documents,
except for such defaults disclosed in writing and acceptable to Lender.
2.1.2. Documents. Lender must have received the following
documents, agreements and certificates (together with all exhibits and schedules
thereto), each duly executed, in form, substance and amount satisfactory to
Lender and, when applicable, recorded or filed in the appropriate public office:
2.1.2.1. Credit Agreement. This Agreement.
2.1.2.2. Promissory Note. The Line of Credit Note (i.e.,
as amended and restated) as described in Section 1.1.4 hereof.
2.1.2.3. Security Agreement and Related Documents. An
amended and restated security agreement by Borrower in favor of Lender granting
(and/or reconfirming in favor of) Lender a security interest in all of grantor's
tangible and intangible personal property assets and fixtures (whether now owned
or hereafter acquired) and the proceeds and products thereof, as collateral
security for the indebtedness and obligations hereunder, together with all
necessary financing statements and termination statements (each as filed),
waivers and consents, and evidence of any other recordations required by
applicable law or by Lender to perfect such first lien security interests.
2.1.2.4. Intellectual Property Security Agreements. One or
more separate intellectual property security
17
agreements by Borrower in favor of Lender covering all of grantor's copyrights,
patents, trade names, trademarks, service names, service marks and other
intellectual property (including any and all applications and licenses
therefor), all as now owned or hereafter acquired and the proceeds and goodwill
thereof, together with all appropriate financing statements and termination
statements (each as filed), waivers and consents, and any other documents or
recordations required by applicable law or by Lender to perfect such interests.
2.1.2.5. Estoppels and Consent Agreements. One or more
estoppels and consent agreements in favor of Lender by each party to a real
property lease, Capital Lease on any switch used by Borrower or any other
Material Contract with Borrower consenting to Borrower's encumbrance of the real
property lease, Capital Lease or Material Contract (as applicable) and granting
to Lender certain other rights pursuant thereto.
2.1.2.6. Owners' Pledge and Security Agreement. An equity
pledge and security agreement executed by each holder of any voting equity
interest of Borrower (other than up to a 15% interest owned by Blue Xxxxx
Enterprises Ltd. and other than holders of less than 3.5% of shares of any such
class of voting securities) in favor of Lender pledging a first priority
interest in (among other things) all of such pledgor's outstanding equity
interests and rights of such issuer (whether existing as common or preferred
stock, or limited or general partnership interests, or LLC membership interests,
or any warrants, options or convertible rights therefor) as collateral security
for the indebtedness and obligations hereunder, together with the certificates
therefor (if any), powers executed in blank, and all necessary financing
statements and evidence of registration.
2.1.2.7. Warrants. One or more separate warrant agreements
by Borrower issuing and granting to Lender (or its designated Affiliate) the
Warrants, together with all underlying warrant certificates and evidence of
necessary and appropriate actions by Borrower to authorize and issue such
warrants and related warrant shares.
2.1.2.8. Insurance. Current proof of insurance with an
indication of loss payee and additional insured endorsements in favor of Lender
with respect to all of the insurance coverages required under Section 4.8
hereof. Such proof of insurance must be indicated pursuant to one or more
certificates on (a) an XXXXX 27 form (3/93) for property-related insurance
coverages and (b) a modified version of an XXXXX 25-S form (3/93) permitting
Lender reliance and requiring cancellation
18
notification for general liability and all other types of insurance coverages.
2.1.2.9. Solvency Certificates. A certificate from the
chief financial officer of Borrower to Lender dated as of the Closing Date and
certifying (in form and substance acceptable to Lender) as to the solvency of
Borrower.
2.1.2.10. Compliance Certificates. A certificate from an
Authorized Officer of Borrower to Lender dated as of the Closing Date and
certifying as to compliance with the matters described under Section 2.1.1
hereof (with specific reconciled calculations demonstrating compliance with the
financial covenants under Section 4.1 hereof as of the Closing Date).
2.1.2.11. Opinions of Counsel. One or more written
opinions from legal counsel to Borrower addressed to Lender and its counsel and
dated as of the Closing Date opining as to such matters as Lender may request.
2.1.2.12. Payoff Instructions for Prior Indebtedness. A
letter from Borrower to Lender, consistent with the requirements of Section
1.1.3 hereof, Section 1.4 hereof and Section 2.1.1 hereof, instructing Lender
how to disburse the proceeds of the initial Advance.
2.1.2.13. Authorization Documents -- Borrower. A
certificate of an Authorized Officer of Borrower delivering true, accurate and
complete versions of (a) its Articles of Incorporation and all amendments
thereto, and (b) its Bylaws and all amendments thereto, and (c) the resolutions
authorizing its execution, delivery and full performance of the Loan Documents
and all other documents, certificates and actions required hereunder or in
connection herewith, and (d) an incumbency certificate setting forth its
officers (together with the corresponding signatures), and (e) a long-form good
standing and qualification certificate (issued within 15 calendar days of the
Closing Date) with respect to each jurisdiction listed on Schedule 3.1 hereto,
and (f) a copy of each License (or renewal thereof) issued to it by the Federal
Communications Commission and any State PUC).
2.1.2.14. Authorization Documents -- Other Than Borrower.
A certificate of an Authorized Officer of each Obligor (other than Borrower)
that is not a natural person delivering true, accurate and complete versions of
(a) the resolutions authorizing its execution, delivery and full performance of
the Loan Documents to which it is a party and all other documents, certificates
and actions required of it
19
hereunder or in connection herewith, and (b) an incumbency certificate setting
forth its officers (together with the corresponding signatures).
2.1.2.15. Officer's Certificates. One or more certificates
of an Authorized Officer of Borrower delivering true, accurate and complete
copies of the following documents and agreements (together with all amendments,
exhibits and schedules thereto):
a. Lien Searches -- Searches (conducted within 15 calendar days of
the Closing Date) satisfactory to Lender with respect to
consensual liens, tax liens, judgments and bankruptcy, listing
respectively (a) all effective UCC financing statements that name
Borrower (including any predecessor thereto and any operating or
tradenames thereof) as "debtor" that are filed in the States of
Maryland, New York or California or the District of Columbia or
any other U.S. jurisdiction in which such debtor currently
operates or has had assets at any time within the immediately
preceding 12 calendar months (together with copies of such
financing statements), and (b) all tax liens against any Obligor
(or the assets thereof), and (c) all outstanding judgments
against any Obligor (or the assets thereof), and (d) whether any
Obligor has filed bankruptcy within the preceding 5 years.
b. Financial Statements -- A set of (a) the monthly financial
statements of Borrower for calendar months ending April 30 and
May 31, 1997 (as otherwise consistent with the requirements of
Section 4.2 hereof), and (b) the quarterly financial statements
of Borrower for fiscal quarter ending March 31, 1997 (as
otherwise consistent with the requirements of Section 4.2
hereof), and (c) the audited financial statements of Borrower
(with consolidating schedules thereto, if any) for fiscal year
ending December 31, 1996 (as otherwise consistent with the
requirements of Section 4.2 hereof).
c. Equityholder Agreements -- Each shareholder agreement, member
agreement, partner agreement, voting agreement, buy-sell
agreement, option, warrant, put, call, right of first refusal,
and
20
any other agreement or; instrument with conversion rights into
equity of Borrower either (a) between Borrower and any holder or
prospective holder of any equity interest of Borrower (including
interests convertible into such equity) or (b) otherwise between
any two or more such holders of equity interests.
d. Employment and Non-Compete Agreements -- Each employment
agreement, consulting agreement and non-compete agreement between
Borrower and any director, officer, employee or former owner of
Borrower.
e. Inter-Affiliate Agreements -- Each written agreement between
Borrower and any Affiliate of Borrower.
f. Disaster Recovery and Contingency Program -- A description of the
currently effective disaster recovery and contingency program of
Borrower, as required to be delivered under Section 4.8 hereof.
g. Leases as Lessee -- Each lease between Borrower and any owner or
landlord of real or personal property used in connection with
Borrower's business for which it has an annual rent obligation in
excess of $36,000.
h. Leases as Lessor -- Each lease between Borrower and any lessee of
real or personal property owned or leased by Borrower, but only
to the extent the lessee thereunder has an annual rent obligation
in excess of $12,000.
2.1.2.16. Other Documents. Lender must have received any
additional agreements, documents and certificates as Lender or its counsel may
reasonably request.
2.2. Line of Credit Advances. The obligation of Lender to fund any request
for an Advance under the Line of Credit Facility is subject to the following
conditions precedent (unless and except to the extent expressly waived by Lender
in its sole and absolute discretion):
2.2.1. Advance Request. Lender must have received an Advance
Request under and in accordance with Section 1.4.1 hereof.
21
2.2.2. Cash Flow Leverage. As of the Settlement Date for such
Advance (and in addition to any other requirements and covenants hereunder),
Borrower must be in compliance with the Leverage Ratio requirement under Section
4.1 hereof using an amount for Funded Debt that is as of such Settlement Date
and inclusive of the proposed Advance.
2.2.3. Other Documents. Lender must have received any additional
documents, certificates and opinions as Lender or its counsel may reasonably
request, including without limitation, UCC-1 financing statements, fixture
filings and leasehold mortgages regarding new locations for other assets of
Borrower.
2.2.4. Compliance.
2.2.4.1. Fees and Expenses. Borrower must have paid (or
made acceptable arrangements with Lender to pay) all fees, costs, expenses and
taxes due and payable hereunder, including, without limitation, all reasonable
costs and expenses incurred in connection with or as a result of reviewing and
funding such Advance Request.
2.2.4.2. Representations. Each, and all, representations
and warranties contained in the Loan Documents (including those in Article 3
hereof) and in each other certificate or other writing delivered to Lender
pursuant hereto or thereto on or prior to the Settlement Date must be true,
correct and complete in all material respects on and as of the Settlement Date,
except for such deviations disclosed in writing and acceptable to Lender (which
disclosure will not constitute Lender's waiver or acceptance thereof).
2.2.4.3. No Default. There must not be any Default or
Event of Default hereunder or any default under any other Loan Document on the
Settlement Date, and there must not be any such Default or Event of Default
occurring as a result of funding such Advance, except for such defaults
disclosed in writing and acceptable to Lender (which disclosure will not
constitute Lender's waiver or acceptance thereof).
ARTICLE 3: REPRESENTATIONS AND WARRANTIES
Borrower, as of the Closing Date and the Settlement Date for each
Advance hereunder, hereby represents and warrants as follows:
3.1. Organization and Good Standing. Borrower (a) is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, and (b) has all
22
requisite corporate power and authority to own its properties and to conduct its
business as now conducted and as currently proposed to be conducted, and (c) is
duly qualified to conduct business as a foreign organization and is currently in
good standing in each state and jurisdiction in which it conducts business,
except where failure to be duly qualified and in good standing could not have a
Material Adverse Effect. Each state and jurisdiction in which Borrower is
organized or is (or should be) qualified to conduct business under applicable
law is listed on Schedule 3.1 hereto.
3.2. Power and Authority. Borrower has all requisite power and authority
under applicable law and under its Organic Documents, Authorizations and
Licenses to execute, deliver and perform the obligations under the Loan
Documents to which it is a party. Except as disclosed on Schedule 3.2 hereto,
all actions, waivers and consents (corporate, regulatory and otherwise)
necessary or appropriate for Borrower to execute, deliver and perform the Loan
Documents to which it is a party have been taken and/or received.
3.3. Validity and Legal Effect. This Agreement constitutes, and the other
Loan Documents to which Borrower is a party constitute (or will constitute when
executed and delivered), the legal, valid and binding obligations of Borrower
enforceable against it in accordance with the terms thereof.
3.4. No Violation of Laws or Agreements. Except as disclosed on Schedule
3.4, the execution, delivery and performance of the Loan Documents (a) will not
violate or contravene any material provision of any material law, rule,
regulation, administrative order or judicial decree (federal, state or local),
and (b) will not violate or contravene any provision of the Organic Documents of
Borrower, and (c) will not result in any material breach or violation of (or
constitute a material default under) any material agreement or instrument by
which Borrower or any of its property may be bound, and (d) will not result in
or require the creation of any Lien (other than pursuant to the Loan Documents)
upon or with respect to any properties of Borrower, whether such properties are
now owned or hereafter acquired.
3.5. Title to Assets: Existing Encumbrances: Intellectual and Real
Property. Borrower has good and marketable title to all of its owned real and
personal property assets and the right to possess and use all of its leased or
licensed real and personal property assets. All such property interests are free
and clear of any Liens, except for Permitted Liens (as defined in Section 5.5
hereof) and Liens described on Schedule 3.5 hereto. Schedule 3.5A hereto lists
each trademark, service
23
xxxx, copyright, patent, database, customized application software and systems
integration software, trade secret and other intellectual property owned,
licensed, leased, controlled or applied for by Borrower, together with relevant
identifying information with respect to such intellectual property describing
(among other things) the date of creation, the method of protection against
adverse claims and the registration number. Schedule 3.5B hereto lists each real
property interest owned, leased or otherwise used by Borrower, together with
relevant identifying information describing (among other things) the location
and use of each such real property interest, whether such interest is owned or
leased (and, if leased, the lessor and record owner thereof), and the estimated
appraised value thereof. Each such property and asset is in good order and
repair (ordinary wear and tear excepted) and is fully covered by the insurance
required under Section 4.8 hereof. Each such property and asset owned by
Borrower is titled in the current legal name of Borrower. Schedule 3.5C hereto
identifies each legal, operating and trade name that Borrower has used (or
permitted the filing of a UCC financing statement under) at any time during the
twelve (12) consecutive calendar years immediately preceding the Closing Date.
3.6. Capital Structure and Equity Ownership. Schedule 3.6 hereto accurately
and completely discloses (a) the number of shares and classes of equity
ownership rights and interests of Borrower that are authorized and/or
outstanding (whether existing as common or preferred stock or warrants, options
or other instruments convertible into such equity), and (b) the ownership
thereof. Schedule 3.6 also accurately and completely discloses (i) the number of
shares and classes of equity ownership rights and interests of any organization
that owns or controls at least 50% of any class of equity interests of Borrower
authorized and/or outstanding (whether existing as common or preferred stock,
general or limited partnership interests, or LLC membership interests, or
warrants, options or other instruments convertible into such equity), and (ii)
the ownership thereof. All such shares and interests are validly existing, fully
paid and non-assessable.
3.7. Subsidiaries. Affiliates and Investments. Schedule 3.7 hereto
accurately and completely discloses (a) each Subsidiary and Affiliate of
Borrower (other than its officers and directors) and (b) each investment in or
loan to any other Person by Borrower.
3.8. Material Contracts. Schedule 3.8 hereto (a) accurately and completely
discloses each Material Contract (as defined below) of Borrower, and (b) also
indicates the following information with respect to each such contract: (1) the
contract
24
parties thereunder, and (2) the contract term and any options or renewals
thereto, and (3) the monthly payment required thereunder, and (4) any
restrictions on assignments, and (5) the existence of any breaches or defaults
thereunder. Borrower has not committed any unwaived breach or default under any
material contract (whether or not listed on Schedule 3.8 hereto), and after due
inquiry and investigation, Borrower does not have any knowledge or reason to
believe that any other party to any such material contract (whether or not
listed on Schedule 3.8 hereto) has or might have committed any unwaived breach
or default thereof. For purposes of this Section 3.8 hereof, a "Material
Contract" of Borrower includes the following types of agreements to which
Borrower is a party: (1) any contract either with annual compensation,
consideration or payments in excess of $100,000 or with aggregate compensation,
consideration or payments in excess of $200,000, and (2) any lease of real
estate or office space from which Borrower conducts its primary business
operations, and (3) any lease of real estate or space at which Borrower has
located any switch operations, and (4) any contract, agreement or lease under
the terms of which Borrower obtains the right to use or operate a switch, and
(5) any operating agreement with a foreign country, and (6) any leased line
agreement, and (7) any other agreement or contract the loss or breach of which
could reasonably be expected to have or cause a Material Adverse Effect.
3.9. Licenses and Authorizations. Except as disclosed on Schedule 3.9,
Borrower possesses all Licenses and other Authorizations necessary or required
in the conduct of its businesses and/or the operation of its properties. Each
material Authorization is valid, binding and enforceable on, against and by
Borrower. Each material Authorization is subsisting without any defaults
thereunder or enforceable adverse limitations thereon, and no Authorization is
subject to any proceedings or claims opposing the issuance, continuance,
renewal, development or use thereof or contesting the validity or seeking the
revocation thereof. Schedule 3.9 hereto accurately and completely lists each
material Authorization of Borrower (including, whether or not otherwise
"material", each License and other Authorization issued by the FCC and each
State PUC, and further including all pending applications and renewals
therefor), together with relevant identifying information describing such
Authorizations. With respect to each FCC License and each State PUC License
listed on Schedule 3.9 hereto, the description includes, if applicable, the call
sign, frequency, class, location, file number, issuance date (original or most
recent renewal), and expiration date. For purposes of this Section 3.9 hereof,
all Licenses and ether Authorizations issued by the FCC or any State PUC will be
deemed to be "material".
25
3.10. Taxes and Assessments. Except as disclosed on Schedule 3.10 hereto,
Borrower has timely filed all required tax returns and reports (federal, state
and local) or has properly and timely filed for extensions of the time for the
filing thereof. Borrower does not have knowledge of any deficiency, penalty or
additional assessment due or appropriate in connection with any such taxes. All
taxes (federal, state and local) imposed upon Borrower or any of its properties,
operations or income have been paid and discharged prior to the date when any
interest or penalty would accrue for the nonpayment thereof, except for those
taxes being contested in good faith by appropriate proceedings diligently
prosecuted and with adequate reserves reflected on the financial statements in
accordance with GAAP (all as also disclosed on Schedule 3.10 hereto).
3.11. Litigation and Legal Proceedings. Except as disclosed on Schedule
3.11 hereto, there is no litigation, claim, investigation, administrative
proceeding, labor controversy or similar action that is pending or (to the best
of Borrower's knowledge and information after due inquiry) threatened against
Borrower or its properties that, if adversely resolved, could reasonably be
expected to have or cause a Material Adverse Effect
3.12. Accuracy of Financial Information. All financial statements
previously furnished to Lender concerning the financial condition and operations
of Borrower (a) have been prepared in accordance with GAAP consistently applied,
and (b) fairly present the financial condition of the organization covered
thereby as of the dates and for the periods covered thereby (but, with respect
to interim periodic financial statements, subject to normal and customary year
end audit adjustments), and (c) disclose all material liabilities (contingent
and otherwise) of Borrower. In addition, all written information previously
furnished to Lender concerning the financial condition and operations of
Borrower are true, accurate and complete in all material respects.
3.13. Accuracy of Other Information. All written information contained in
any application, schedule, report, certificate, or any other document furnished
to Lender by Borrower or any other Person (on behalf of Borrower) in connection
with the Loan Documents is in all material respects true, accurate and complete,
and no such Person (including Borrower) has omitted to state therein (or failed
to include in any such document) any material fact or any fact necessary to make
such information not misleading. All written projections furnished to Lender by
Borrower or any other Person on behalf of Borrower have been prepared with a
reasonable basis and in good faith, making use of such information as was
available at the date such projection was made.
26
3.14. Compliance with Laws Generally. Borrower is in compliance in all
material respects with all material laws, rules, regulations, administrative
orders (including the policies and procedures of the FCC and each State PUC) and
judicial decrees (federal, state, local and otherwise) applicable to it, its
operations and its properties.
3.15. ERISA Compliance. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and all rules, regulations and orders implementing
ERISA.
3.15.1. Neither Borrower nor any ERISA Affiliate thereof
maintains or contributes to (or has maintained or contributed to) any
multiemployer plan (as defined in Section 4001 of ERISA) under which Borrower or
any ERISA Affiliate thereof could reasonably be expected to have any withdrawal
liability.
3.15.2. Neither Borrower nor any ERISA Affiliate thereof
sponsors or maintains any defined benefit pension plan under which there is an
accumulated funding deficiency within the meaning of Section 412 of the Code,
whether or not waived.
3.15.3. The liability for accrued benefits under each defined
benefit pension plan that will be sponsored or maintained by Borrower or any
ERISA Affiliate thereof (determined on the basis of the actuarial assumptions
utilized by the PBGC) does not exceed the aggregate fair market value of the
assets under each such defined benefit pension plan.
3.15.4. The aggregate liability of Borrower and each ERISA
Affiliate thereof arising out of or relating to a failure of any employee
benefit plan within the meaning of Section 3(2) of ERISA to comply with
provisions of ERISA or the Code will not have a Material Adverse Effect.
3.15.5. There does not exist any unfunded liability (determined
on the basis of actuarial assumptions utilized by the actuary for the plan in
preparing the most recent annual report) of Borrower or any ERISA Affiliate
thereof under any plan, program or arrangement providing post-retirement, life
or health benefits.
3.15.6. No Reportable Event and no Prohibited Transaction (as
defined in ERISA) has occurred or is occurring with respect to any plan with
which Borrower is associated.
27
3.16. Environmental Compliance.
3.16.1. Borrower has received all permits and filed all
notifications necessary under and is otherwise in compliance in all material
respects with all federal, state and local laws, rules, ordinances and
regulations governing the control, removal, storage, transportation, spill,
release or discharge of hazardous or toxic wastes, substances and petroleum
products, including, without limitation, as provided in the provisions of (a)
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, and
(b) the Solid Waste Disposal Act, and (c) the Clean Water Act, and (d) the Clean
Air Act, and (e) the Hazardous Materials Transportation Act, and (f) the
Resource Conservation and Recovery Act of 1976, and (g) the Federal Water
Pollution Control Act Amendments of 1972, and (h) the rules, regulations and
ordinances of the Environmental Protection Agency, and any departments of health
services, regional water quality control boards, state water resources control
boards, and/or cities in which any of Borrower's assets are located (all of the
foregoing enumerated and nonenumerated statutes, regulations, rules and
ordinances, all as amended from time to time, collectively, the "Environmental
Control Statutes").
3.16.2. Borrower has not given any written or oral notice to the
Environmental Protection Agency ("EPA") or any state or local agency with regard
to any actual or imminently threatened removal, storage, transportation, spill,
release or discharge of hazardous or toxic wastes, substances or petroleum
products either (a) on properties owned or leased by Borrower or (b) otherwise
in connection with the conduct of its business and operations.
3.16.3. Borrower has not received notice that it is potentially
responsible for costs of clean-up of any actual or imminently threatened spill,
release or discharge of hazardous or toxic wastes or substances or petroleum
products pursuant to any Environmental Control Statute.
3.17. Margin Rule Compliance. Borrower does not own or have any present
intention of acquiring any "Margin Stock" within the meaning of the following
Margin Regulations of the FRB: Regulation G at 12 C.F.R. Pt. 207, and Regulation
T at 12 C.F.R. Pt. 220, and Regulation U at 12 C.F.R. Pt. 221, and Regulation X
at 12 C.F.R. Pt. 224. The credit extended under this Agreement does not
constitute "Purpose Credit" within the meaning of the FRB's Margin Regulations.
3.18. Fees and Commissions. Except as disclosed on Schedule 3.18 hereto or
as required by Section 1.7 hereof,
28
Borrower does not owe any fees or commissions of any kind in connection with
this Agreement or the transactions contemplated hereby, and Borrower does not
know of any claim (or any basis for any claim) for any fees or commissions in
connection with this Agreement or the transactions contemplated hereby.
3.19. Solvency.
3.19.1. Through June 1998. Upon the execution of this Agreement
and the funding of each Advance hereunder through the earlier of June 30, 1998
or consummation of an initial Public Offering, Borrower is and will be solvent
such that it will be able to realize upon its assets, will be able to obtain
Advances hereunder and will have sufficient cash flow from operations to enable
it to pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal and ordinary course of business.
Borrower does not intend to (or believe that it will) incur debts or liabilities
beyond its ability to pay such debts and liabilities as they become due and
mature. Borrower has not incurred any obligations under the Loan Documents and
has not made any conveyance pursuant hereto or in connection herewith with the
actual intent to hinder, delay or defraud present or future creditors of it or
any of its Affiliates.
3.19.2. After June 1998. Immediately prior to and upon the
funding of each Advance hereunder after the earlier of June 30, 1998 or
consummation of an initial Public Offering, Borrower was, is and will be solvent
such that:
a. The fair saleable value of its assets (including, without
limitation, the fair saleable value of its goodwill and
other intangible property) is greater than the total amount
of its liabilities, including without limitation, all
contingent liabilities; and
b. The present fair saleable value of its assets (including,
without limitation, the fair saleable value of its goodwill
and other intangible property) is not less than the amount
that will be required to pay the probable liability on its
debts as they become absolute and matured; and
c. It will be able to realize upon its assets and will have
sufficient cash flow from operations to enable it to pay its
debts and other liabilities, contingent obligations and
29
other commitments as they mature in the normal and ordinary
course of business; and
d. The sum of its debts is not greater than all of its property
at a fair valuation.
Borrower does not intend to (or believe that it will) incur debts or liabilities
beyond its ability to pay such debts and liabilities as they become due and
mature. Borrower is not engaged in a business or transaction, or about to engage
in a business or transaction, for which its property would constitute
unreasonably small capital or assets after giving due consideration to the
prevailing practice and industry in which it is engaged. Borrower has not
incurred any obligations under the Loan Documents and has not made any
conveyance pursuant hereto or in connection herewith with the actual intent to
hinder, delay or defraud present or future creditors of it or any of its
Affiliates. For purposes of this Subsection, in computing the amount of
contingent liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual mature liability.
3.20. FCC and State PUC-Related Representations. Without limiting the
generality of the foregoing representations and warranties, Borrower further
represents and warrants as follows:
3.20.1. No Unresolved Application, Complaint or Proceeding.
Except as described on Schedule 3.20 hereto, there is no outstanding or
unresolved (a) application by Borrower for any FCC or State PUC Authorization
(including any renewal of any License), or (b) material complaint to the FCC or
any State PUC regarding Borrower or any of its Licenses or Tariffs, or (c)
litigation, investigation or other inquiry by or before the FCC or any State PUC
involving Borrower or any of its Licenses or Tariffs, or (d) FCC or State PUC
enforcement proceeding against Borrower or any of its Licenses or Tariffs,
including without limitation, any notice of violation, any notice of apparent
liability for forfeiture, or any forfeiture.
3.20.2. Status and Renewal of Licenses. The Licenses identified
on Schedule 3.9 hereto constitute all of the Licenses required by the Federal
Communications Act or any State Act for the operation of Borrower's business as
it is currently being operated. Each such License is validly outstanding and
effective and has been renewed (as applicable) by the FCC or any State PUC
without condition for a full term in accordance with the Federal Communications
Act or any State Act. There are no
30
modifications, amendments or revocations (pending or, to the best of the
knowledge of Borrower after due inquiry, threatened) that could adversely affect
the operations or financial condition of Borrower. After due inquiry, Borrower
does not know of any reason why the FCC or any State PUC (as applicable) would
not routinely grant, for a full term and without condition, the application by
Borrower for the renewal of each such License over which the FCC or such State
PUC has jurisdiction, when and as such application shall become due to be filed
with the FCC or such State PUC.
ARTICLE 4: AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that, so long as any indebtedness
remains outstanding hereunder, Borrower will comply with the following
affirmative covenants:
4.1. Financial Covenants and Ratios. As of the end of each fiscal quarter
or calendar month (as applicable), Borrower will satisfy each of the following
financial ratios and characteristics, each of which will be determined using
GAAP consistently applied, except as otherwise expressly provided:
4.1.1. Monthly Net Revenue to Senior Funded Debt. A ratio of
Monthly Net Revenue to Senior Funded Debt (measured monthly) of not less than
the following:
a. 40%, from the Closing Date through August 30, 1997; and
b. 50%, from August 31, 1997 through October 31, 1997; and
c. 75%, from November 1, 1997 through November
30, 1997; and
d. 90%, from December 1, 1997 through March 30, 1998.
4.1.2. Minimum Subscribers. A minimum number of Subscribers
(measured monthly) of not less than the following:
a. 30,300, from the Closing Date through July 30, 1997; and
b. 31,450, from July 31, 1997 through August 30, 1997; and
c. 37,000, from August 31, 1997 through
31
September 29, 1997; and
d. 43,570, from September 30, 1997 through October 30, 1997;
and
e. 54,450, from October 31, 1997 through November 29, 1997; and
f. 68,100, from November 30, 1997 through December 30, 1997;
and
g. 85,100, from December 31, 1997 through January 30, 1998; and
h. 106,400, from January 31, 1998 through March 30, 1998.
4.1.3. Interest Coverage Ratio. As of and after March 31, 1998, a
ratio of OCF to Interest Expense (measured quarterly) of not less than
2.5-to-1.0.
4.1.4. Cash Flow Leverage Ratio. A ratio of Funded Debt to OCF
(measured quarterly) of not more than the following:
a. 3.75-to-1.0, on March 31, 1998; and
b. 2.0-to-1.0, after March 31, 1998.
4.2. Periodic Financial Statements.
4.2.1. Monthly Reporting.
a. Financial Statements. Within forty-five (45) calendar days
after the end of each calendar month (including, without
limitation, the last calendar month of each year), Borrower
must prepare and deliver to Lender a complete set of
unaudited internal monthly financial statements
substantially similar in form and content with the form of
monthly financial statements attached as Exhibit 4.2.1(a)
hereto. Such financial statements must include, without
limitation, a balance sheet and an income statement (with
appropriate notes and schedules). Such financial statements
must be prepared in accordance with GAAP consistently
applied (except as approved by Lender in its sole and
absolute discretion). Together with the monthly
32
financial statements, Lender must also receive a certificate
executed by Ram Xxxxxxx or Xxxxxxx Xxxxxxx or such other
senior executive officer of Borrower as is acceptable to
Lender (a) stating that the financial statements fairly
present the financial condition of Borrower as of the date
thereof and for the periods covered thereby, and (b)
providing a reconciled calculation demonstrating compliance
with each financial covenant and ratio that is measured on a
monthly basis under Section 4.1 hereof (using the form
attached as Exhibit 4.2 hereto), and (c) calculating, as of
the end of such monthly period, the then-current amounts for
the Current Line of Credit Commitment and the Available
Credit Portion (using the form attached as Exhibit 4.2
hereto), and (d) providing an aging of accounts receivable,
and (e) certifying that as of the date of such certificate
there is not any existing Default or Event of Default.
b. Calculation of Borrowing Base. Within thirty (30) calendar
days after the end of each calendar month (including,
without limitation, the last calendar month of each year),
Borrower also must prepare and deliver to Lender a borrowing
base certificate substantially similar in form and content
with the form of borrowing base certificate attached as
Exhibit 4.2.1(b) hereto.
4.2.2. Quarterly Financial Statements. Within forty-five (45)
calendar days after the end of each fiscal quarter (including, without
limitation, the fourth fiscal quarter of each year), Borrower must prepare and
deliver to Lender unaudited quarterly financial statements, in form and
substance as required by and acceptable to Lender. Such financial statements
must include, without limitation, a balance sheet and an income statement (with
appropriate notes and schedules). Such financial statements must be prepared in
accordance with GAAP consistently applied (except as approved by Lender in its
sole and absolute discretion). Together with the quarterly financial statements,
Lender must also receive a certificate executed by Ram Xxxxxxx or Xxxxxxx
Xxxxxxx or such other senior executive officer of Borrower as is acceptable to
Lender (a) stating that the financial statements fairly present the financial
condition of Borrower as of the date thereof and for the periods covered
thereby, and (b) providing a reconciled calculation demonstrating
33
compliance with each applicable financial covenant and ratio under Section 4.1
hereof (using the form attached as Exhibit 4.2 hereto), and (c) calculating, as
of the end of such fiscal period, the then-current amounts for the Current Line
of Credit Commitment and the Available Credit Portion (using the form attached
as Exhibit 4.2 hereto), and (d) certifying that as of the date of such
certificate there is not any existing Default or Event of Default.
4.2.3. Annual Financial Statements. Within ninety (90) calendar
days after the close of each fiscal year, Borrower must prepare and deliver to
Lender a complete set of audited annual financial statements (with accompanying
notes and consolidating schedules). Such financial statements (a) must include
the types of financial statements and information required on a quarterly basis
under this Section 4.2 hereof as well as a cash flow statement and a
reconciliation of consolidated net worth, and (b) must be prepared in accordance
with GAAP consistently applied, and (c) must be certified without qualification
by an independent certified public accounting firm satisfactory to Lender.
Together with the annual financial statements, Lender must also receive (i) all
related management letters prepared by such accountants, and (ii) a debt
compliance letter (substantially similar in form and substance to the form
attached as Exhibit 4.2.3 and otherwise acceptable to Lender), and (iii) a
certificate signed by such accountants, stating that the financial statements
fairly present the financial condition of Borrower as of the date thereof and
for the periods covered thereby.
4.3. Other Financial and Specialized Reports.
4.3.1. Financial Forecasts. Within 15 Business Days after
receiving, preparing, materially revising or otherwise assembling any periodic
budgets or financial forecasts, Borrower must deliver a complete copy thereof to
Lender.
4.3.2. SEC Filings and Press Releases. Within 15 Business Days
after the date that Borrower or any organization that owns or controls at least
50% of any class of equity interests of Borrower makes any filing with the
Securities Exchange Commission (whether on Form 8-K, Form 10-K, Form 10-Q, or
otherwise) or issues any press release, Borrower must deliver a complete copy
thereof to Lender.
4.4. Fiscal Year. Borrower will maintain a fiscal year that has a December
31st year end.
4.5. Books and Records: Maintenance of Properties. Borrower will keep and
maintain satisfactory and adequate books
34
and records of account in accordance with GAAP. Borrower will also keep,
maintain and preserve all of its property and assets in good order and repair
(ordinary wear and tear excepted).
4.6. Existence and Good Standing. Borrower will preserve and maintain (a)
its existence as a corporation under the laws of its jurisdiction of
organization, and (b) its good standing in all jurisdictions where it conducts
business, and (c) the validity of all its Authorizations and Licenses required
or otherwise appropriate in the conduct of its businesses.
4.7. Deposit Accounts. Borrower will maintain all of its operating and
deposit accounts with Lender or an Affiliate of Lender, except as otherwise
provided in this Section or as consented to in writing by Lender.
Notwithstanding the foregoing, Borrower may maintain commercial deposit accounts
at institutions other than Lender (or its Affiliates) provided that (1) each
such institution is a federally insured depository institution rated as "well
capitalized" by its primary federal regulator, and (2) the aggregate collective
amount of collected balances in all such accounts does not at any time exceed
$25,000 for any ten (10) consecutive calendar days, and (3) within twenty (20)
calendar days after opening or acquiring any such account, Borrower provides
Lender with written notice of the institution's name and location and the
account name and number with respect to each such account. The institution's
name and location and the account name and number for each such account
currently in existence, as well as an approximate current balance (i.e., a
current balance at any time within the preceding thirty (30) calendar days), are
listed on Schedule 4.7 hereto.
4.8. Insurance; Disaster Contingency.
4.8.1 General Insurance Provisions. Borrower will keep all of its
property and assets fully covered by insurance with reputable and financially
sound insurance companies (reasonably acceptable to Lender). Borrower must also
maintain such protection against such hazards and liability (including, without
limitation, casualty, liability, fire, flood, business interruption, earthquake,
workmen's compensation, and other material risks to its property and business),
in such amounts and with such deductibles as is customary in the relevant
industry and appropriate under the relevant circumstances (and, in each
instance, as is reasonably acceptable to Lender). If Borrower fails or refuses
to obtain or maintain any such insurance coverage, then Lender (at its election)
may (but is not obligated to) obtain and maintain such insurance coverage on
behalf of Borrower, and the premiums and other costs thereof (a) will be
included in the indebtedness hereunder secured by the Collateral and (b) will be
due and payable by Borrower to Lender
35
immediately upon demand. Each such policy must name Lender as loss payee and as
additional insured. Each such policy must also require the insurer to furnish
Lender with written notice at least 25 calendar days prior to any termination of
coverage and must provide Lender with the right (but not the obligation) to cure
any non-payment of premium. Upon Lender's request, Borrower will furnish Lender
with proof of such insurance (in form and substance acceptable to Lender) and
will cause Lender to be reflected thereon as additional insured and the loss
payee thereof. Notwithstanding the foregoing, Borrower may receive and keep all
proceeds and payments of less than $50,000 in respect of property insurance if
and to the extent that (a) no Default exists at the time of receiving such
proceeds or payment and (b) such proceeds or payment is promptly reinvested by
Borrower to repair or replace the affected property.
4.8.2. Disaster Recovery and Contingency Program. Borrower will
maintain (and at least annually review the sufficiency of) a disaster recovery
and contingency plan that addresses Borrower's plans for continuing operations
upon the occurrence of a natural disaster or other event that destroys or
prevents the use of or access to Borrower's primary computer systems,
information databases, software applications, business records and operations
facility and/or Borrower's switch sites. Such contingency plan will also
specifically address exposure within Borrower's computer systems, information
databases and software applications to processing the year 2000. Such
contingency plan at all times must be in form and substance reasonably
acceptable to Lender. Upon request, Borrower will provide Lender with a current
copy of such plan.
4.9. Loan Purpose. Borrower will use the proceeds of each Advance under the
Facility exclusively as set forth in Section 1.1.3 hereof.
4.10. Taxes. Borrower will pay and discharge all taxes, assessments or
other governmental charges or levies imposed on it or any of its property or
assets prior to the date upon which any penalty for non-payment or late payment
is incurred, unless (a) the same are then being contested in good faith by
appropriate proceedings diligently prosecuted, and (b) adequate reserves
therefor acceptable to Lender have been established, and (c) Lender has been
notified thereof in writing, and (d) the consequences of such non-payment (in
Lender's reasonable judgment) will not have a Material Adverse Effect.
4.11. Management Changes. Borrower will notify Lender in writing within
thirty (30) calendar days after any change (including, without limitation, any
dismissal or change in title or status) in the senior management personnel of
Borrower.
36
4.12. Litigation and Administrative Proceedings. Borrower will notify
Lender in writing immediately upon the institution or commencement of any
litigation, legal or administrative proceeding, or labor controversy that could
reasonably be expected to have or cause a Material Adverse Effect.
4.13. Monitoring Compliance with Loan Documents: Occurrence of Defaults and
Material Adverse Effects. Borrower at all times will maintain (and comply with)
commercially reasonable procedures and systems designed to monitor compliance
and detect instances of noncompliance with the Loan Documents. Borrower will
notify Lender in writing immediately upon (a) the occurrence of any Default or
Event of Default hereunder, or (b) the occurrence of any default under any other
Loan Document, or (c) the happening of any event or the assertion or threat of
any claim that could reasonably be expected to have or cause a Material Adverse
Effect.
4.14. Compliance with Laws.
4.14.1. General. Borrower will comply in all material respects
(a) with all material laws, rules, regulations and orders (federal, state, local
and otherwise) applicable to its business, and (b) with the provisions and
requirements of all Authorizations. Borrower will notify Lender immediately in
detail of any actual or alleged material failure to comply with or violation of
any such laws, rules, regulations or orders, or under the terms of any of such
Authorizations, or of the occurrence or existence of any facts or circumstances
that with the passage of time, the giving of notice or otherwise could create
such a failure to comply or violation or could reasonably be expected to
occasion the termination of any of such Authorization.
4.14.2. ERISA. Borrower will comply in all respects with the
provisions of ERISA to the extent applicable to any Plan maintained by it or for
the benefit of any of its employees, except to the extent that the failure to be
in such compliance could not reasonably be expected to have or cause a Material
Adverse Effect. Borrower will not (a) incur any material accumulated funding
deficiency (within the meaning of ERISA and the regulations thereunder), or any
material liability to the PBGC established by ERISA or (b) permit any reportable
event (as defined in ERISA) or other event to occur which may indicate that its
Plans are not sound or which may be the basis for PBGC to assert a material
liability against it or which may result in the imposition of a Lien on its
properties or assets. Borrower will notify Lender in writing promptly after any
assertion or threat of any of the following: (i) the occurrence
37
of any reportable event, (ii) the existence of any reportable threat, or (iii)
the occurrence of any other event which may indicate that a Plan is not sound or
may be the basis for PBGC to assert a material liability against it or impose a
Lien on any of its properties or assets.
4.14.3. Environmental. Borrower will comply in all respects with
the Environmental Control Statutes, except to the extent that the failure to be
in such compliance could not reasonably be expected to have or cause a Material
Adverse Effect. Borrower (a) will notify Lender when the EPA, any state or local
agency or any other Person provides oral or written notification to it with
regard to an actual or imminently threatened removal, spill, release or
discharge of hazardous or toxic wastes, substances or petroleum products, and
(b) will notify Lender in detail immediately upon the receipt by it of an
assertion of liability under the Environmental Control Statutes, or any actual
or alleged failure to comply with or perform, breach, violation or default under
any such laws or regulations.
4.14.4. Communications. Borrower will comply in all material
respects with (a) the provisions of the Federal Communications Act and each
State Act and the rules, regulations, policies, procedures and orders of the FCC
and each State PUC and (b) the terms, conditions and restrictions of each
material License, Tariff and other Authorization.
4.15. Further Actions.
4.15.1. Additional Collateral. Borrower will execute, deliver and
record (or, as appropriate, cause the execution, delivery and recordation) at
any time upon Lender's request and in form and substance reasonably satisfactory
to Lender, any of the following instruments in favor of Lender as additional
Collateral hereunder: (a) mortgages, deeds of trust and/or assignments on or of
any real or personal property owned, leased or licensed by it, and (b)
certificates of title encumbrances against any of its titled vehicles, and (c)
any other like assignments or agreements specifically covering any of its
properties or assets (including, without limitation, assignments of any patents,
trademarks, copyrights, databases, trade secrets and other forms of intellectual
property), and (d) any financing or continuation statements requested by Lender.
4.15.2. Further Assurances. From time to time, Borrower will
execute and deliver (or will cause to be executed and delivered) such
supplements, amendments, modifications to and/or replacements of the Loan
Documents and such further instruments as may be reasonably required to
effectuate the intention of the parties to (or to otherwise facilitate
38
the performance of) the Loan Documents.
4.15.3. Estoppel Certificate. Upon Lender's request, Borrower
will execute, acknowledge and deliver (or, as appropriate, cause the execution,
acknowledgement and delivery) to such Person as Lender may request a statement
in writing certifying as follows (to the best of its knowledge, after due
inquiry): (a) that the Loan Documents (as amended, if applicable) are unmodified
and in full force and effect, and (b) that the payments under the Loan Documents
required to be paid by Borrower have been paid, and (c) the then unpaid
principal balance of Facilities hereunder, and (d) whether or not any Default is
then occurring under any of the Loan Documents and, if so, specifying each such
Default of which the signer may have knowledge. Unless Borrower otherwise
consents (which consent will not be unreasonably withheld, delayed or
conditioned), Lender must give Borrower at least ten (10) Business Days to
complete and deliver any such certificate. Borrower understands and agrees that
any such certificate delivered pursuant to this Section may be relied upon by
Lender and, if different, by the recipient thereof.
4.15.4. Waivers and Consents. At any time upon Lender's request,
Borrower will use commercially reasonable efforts to obtain and deliver (in form
and substance reasonably satisfactory to Lender) a waiver or consent to the
assignment to Lender of any contract, lease, Authorization or other agreement to
which it is a party.
4.15.5. Additional Material Contracts Licenses and
Authorizations. Borrower (a) will notify Lender in writing within 90 calendar
days after executing or becoming bound by any contract, agreement, License or
other Authorization that should have been listed on Schedule 3.5A hereto,
Schedule 3.8 hereto or Schedule 3.9 hereto if it had existed as of the Closing
Date, and (b) will concurrently update Schedule 3.5A hereto, Schedule 3.8 hereto
or Schedule 3,9 hereto (as appropriate).
4.15.6. Access and Audits. Lender (from time to time at its
discretion) may conduct audits of the Collateral and of the performance and
operations of Borrower. Borrower (upon Lender's request from time to time) will
use commercially reasonable efforts to provide Lender (and its representatives
and agents) with reasonable access to Borrower's management personnel, books and
records, property and operations (including, without limitation, its financial
records), whether such property, books and records are in the possession of
Borrower or are in the possession of a third party (including, without
limitation, the possession of Borrower's affiliates, accountants and legal
counsel). In connection with any such audit, Lender may also make notes and
copies of (and extracts from) relevant records.
39
4.16. Costs and Expenses. Borrower will pay or reimburse Lender for all
fees and out-of-pocket costs and expenses (including, without limitation, all
reasonable attorneys' fees and disbursements and the reasonable fees and
disbursements of in-house counsel and documentation personnel) that Lender may
pay or incur in connection with (a) the preparation, negotiation and review of
the Loan Documents, any waivers, consents and amendments in connection herewith
or therewith and all other documentation related hereto or thereto, and (b) the
funding of the indebtedness or any Advance hereunder, and (c) the initial and
continuing perfection or protection of Lender's interest in any of the
Collateral, and (d) the collection or enforcement of any of the Loan Documents,
and (e) the periodic examination of the Collateral and the books and records of
Borrower, and (f) Lender's release of its interests in the Collateral in
accordance with the terms of the Loan Documents. Borrower will pay any and all
recordation taxes or other fees due upon the filing of the financing statements
or documents of similar effect required to be filed under the Loan Documents,
and will provide Lender with a copy of any receipt or other evidence reflecting
such payments. All obligations provided for in this Section shall survive the
termination of this Agreement and/or the repayment of indebtedness hereunder.
4.17. Other Information. Borrower will provide Lender with any other
documents and information (financial or otherwise) reasonably requested by
Lender or its counsel from time to time.
4.18. Payment by Account Debtors.
a. Borrower (1) will ensure that all rights to payment in respect
of services rendered by Borrower (in connection with direct-dialed or
operator-assisted telephone calls or otherwise) are billed to the user of such
services either by Borrower or by a LEC; and (2) will perform all processing and
take all other actions (either itself or through one or more Billing Agents) as
are legal and necessary to directly xxxx each ultimate customer or to transmit
such records and other billing information to each LEC in a format compatible
with each LEC's internal billing systems; and (3) will take such actions (either
itself or through one or more Billing Agents) as are necessary to cause each LEC
to purchase, in accordance with its usual and customary practices generally and
consistent with its past practice, from Borrower all records and other billing
information related to all services rendered by Borrower to any Person that such
LEC is authorized to xxxx; and (4) will directly remit or will cause each
Billing Agent to remit or will cause each LEC to whom billing information has
been submitted on behalf
40
of Borrower to remit all payments in respect of such billing information
directly to BIC or, if BIC is not acting as a Billing Agent, to Lender or its
designee via direct wire transfer in accordance with the provisions of Section
1.6 of the Security Agreement.
b. In addition, but not in limitation of clause "a", Borrower
will not sell, transfer, assign, dispose of, or otherwise permit any other
Person to acquire any interest in any records or billing information evidencing
Borrower's right to receive payment for services rendered in connection with
direct-dialed or operator-assisted telephone calls directly billable by Borrower
or billable by any LEC to any Person, except that Borrower may sell such records
and billing information to one or more LECs provided that payment therefor
(after deduction of reasonable and customary processing and xxxx rendering fees
due to the purchasing LEC) is remitted to BIC or Lender or its designee as
provided in clause "a" of this Subsection.
c. Borrower shall cause BIC (1) promptly upon receipt of each
payment by any LEC or other Person, to notify Borrower and Lender of the amount
of such payment allocable to billing information submitted to such LEC or other
Person on behalf of Borrower and (2) to transfer that amount (less such
reasonable fees, charges, charge backs, credits and adjustments as are withheld
in accordance with the BIC Billing Agreement) via direct wire transfer to Lender
or its designee in accordance with the provisions of Section 1.6 of the Security
Agreement.
d. Except with prior written consent of Lender (which consent
shall not be unreasonably withheld while no Default is occurring), Borrower will
not enter into any agreement (other than the BIC Billing Agreement) with any
Person (other than BIC) whereby such Person agrees to act as a Billing Agent.
The BIC Billing Agreement is a Material Contract.
e. Notwithstanding the foregoing (or the provisions of Section
1.6 of the Security Agreement) so long as no Default of the types described in
Sections 7.1.1 through 7.1.13 hereof exists, then any funds received by Lender
pursuant to this Section or Section 1.6 of the Security Agreement that are
considered by Lender to be "collected funds" may be withdrawn by Borrower at any
time (to satisfy indebtedness under the Loan Documents or for other allowable
and legitimate corporate expenditures).
4.19. FCC and State PUC-Related Affirmative Covenants. Without limiting the
generality of the foregoing affirmative covenants, Borrower further covenants
and agrees as follows:
41
4.19.1. Service Interruption. Borrower will notify Lender in
writing within 36 hours after any period during which the transmission at any
switch site is interrupted or curtailed for an aggregate of 24 hours or more
(whether or not consecutive) during any period of 48 consecutive hours. Borrower
will make every effort to restore such transmission as soon as possible to the
level that was obtained prior to such interruption or curtailment.
4.19.2. FCC and State PUC Correspondence. Orders and Filings.
Within 5 Business Days after mailing or receipt (as applicable), Borrower will
provide Lender with a copy of each significant or material correspondence,
application or filing with, to or from the FCC or any State PUC. Within 5
Business Days after the release of any order of the FCC or any State PUC (a)
designating or proposing to designate an application by Borrower to the FCC or a
State PUC for an evidentiary hearing, or designating or proposing to designate
for an evidentiary hearing the possible non-renewal, revocation or modification
of any License or Authorization issued to it by the FCC or a State PUC, or (b)
imposing or proposing to impose a fine, penalty or other forfeiture upon
Borrower, or (c) initiating any other enforcement action against Borrower, or as
soon as Borrower ascertains that any such order will be forthcoming from the FCC
or a State PUC, then Borrower must notify Lender of the same and, if any such
order has been issued by the FCC or a State PUC, must provide a copy of such
order to Lender.
4.20. Post-Closing Items.
4.20.1. Restructuring of Borrower and Release of Equity Pledge.
Borrower will use commercially reasonable efforts to promptly restructure its
ownership (in a manner reasonably acceptable to Lender, written confirmation of
which Lender will not unreasonably withhold) so that Borrower becomes a
wholly-owned operating Subsidiary of a holding company that owns no assets other
than the equity of Borrower (the "Corporate Restructuring"). Concurrently with
the consummation of any such Corporate Restructuring, (a) such holding company
will execute in favor of Lender an unconditional guaranty of payment (in form
and substance acceptable to Lender) with respect to the indebtedness under the
Loan Documents, and (b) such holding company will execute in favor of Lender an
equity pledge (in form and substance acceptable to Lender) pledging all of its
ownership of equity interests of Borrower as Collateral, and (c) Lender will
release from each then-existing equity pledge each other Person who has pledged
equity of Borrower as Collateral, and (d) the Warrant Agreement will be amended
and restated (in a manner acceptable to Lender) so that it grants Lender
substantially
42
similar rights and interests with respect to the ownership of such holding
company, and (e) the various other Loan Documents will be amended (as reasonably
requested by Lender) to appropriately reflect the restructuring of the ownership
of Borrower, and (f) Borrower will obtain for the benefit of Borrower and Lender
a legal opinion as to the effectiveness and validity of such Corporate
Restructuring and issuance of shares in connection therewith. If prior to any
such Corporate Restructuring Borrower issues shares of its stock pursuant to an
effective registration statement filed with the SEC under the Securities Act (a
"Public Offering"), then concurrently with the closing of the first such Public
Offering, (a) Lender will release from each then-existing equity pledge each
Person who has pledged equity of Borrower as Collateral, and (b) each member of
senior management of Borrower (and any relative thereof) who owns equity
interests of Borrower will execute in favor of Lender an option and escrow (in
form and substance acceptable to Lender) by which Lender (at any time while an
Event of Default exists) may purchase from such Persons (at the lesser of the
par value per share or a total of $100) equity of Borrower that collectively in
the aggregate (a) represents at least 50% of the issued and outstanding voting
rights of Borrower (On a fully diluted basis) and (b) has a fair market value of
at least 200% of the Current Line of Credit Commitment (as such commitment
amount may be adjusted from time to time). In connection with any such Public
Offering, any legal opinions issued regarding the validity and effectiveness of
such transaction, the issuance of shares in connection therewith or the status
of regulatory Authorizations shall also be issued for the benefit of Lender.
4.20.2. Foreign Qualifications. On or before July 15, 1997 and
before any Advance hereunder other than the Advances identified on Schedule
1.4.2, Borrower must file to qualify to conduct business as a foreign
corporation (and must deliver evidence thereof to Lender) with respect to the
following jurisdictions: (a) District of Columbia, and (b) New York, and (c) New
Jersey.
4.20.3. State PUC Authorizations and Approvals. Borrower will
diligently prosecute and pursue the obtaining of all consents and approvals from
the following State PUCs whose consents and approvals are necessary or
appropriate for Borrower to obtain and to perform its obligations under the Loan
Documents (and must deliver evidence thereof to Lender): (a) Tennessee and (b)
Washington.
4.20.4. Primary Estoppels and Consents. On or before July 10,
1997 and before any Advance hereunder other than the Advances identified on
Schedule 1.4.2, Borrower must obtain estoppel and consent agreements (in form
and substance reasonably
43
acceptable to Lender) from each of the following Persons with whom Borrower has
entered into a Material Contract or other significant relationship: (a) BIC, and
(b) Xxxxxxx Place Limited Partnership, and (c) Telecommunications Finance Group.
4.20.5. Secondary Estoppels and Consents. On or before July 30,
1997, Borrower must obtain estoppel and consent agreements (in form and
substance reasonably acceptable to Lender) from each of the following Persons
with whom Borrower has entered into a Material Contract or other significant
relationship: (a) Communications Transmission Group ("IXC") and (b) Companhia
Portuguesa Radio Xxxxxxx, X.X. ("Xxxxxxx").
4.20.6. Payoff Letters and Termination Statements. On or before
July 15, 1997 and before any Advance hereunder other than the Advances
identified on Schedule 1.4.2, Borrower must payoff all existing indebtedness
owed to (and must provide evidence thereof to Lender) from General Electric
Capital Corporation ("GECC") and AT&T Commercial Finance Corporation ("AT&T").
On or before July 30, 1997, Borrower must obtain and file termination statements
and such other release documents as are appropriate (in form and substance
reasonably acceptable to Lender) from GECC and AT&T.
ARTICLE 5: NEGATIVE COVENANTS
Borrower hereby covenants and agrees that, so long as any indebtedness
remains outstanding hereunder, Borrower will comply with the following negative
covenants (unless Lender otherwise consents in writing, which consent will not
be unreasonably withheld while no Default is occurring):
5.1. Capital Expenditures. Borrower will not incur Capital Expenditures in
any fiscal year in excess of $4,000,000. Notwithstanding the foregoing, to the
extent that the permitted Capital Expenditures (referenced above) exceed the
actual Capital Expenditures for any fiscal year, then the excess may be carried
over and used during the immediately succeeding fiscal year as additional
permitted amounts of Capital Expenditures in such subsequent fiscal year applied
after first exhausting the otherwise permitted amount of scheduled Capital
Expenditures), provided that in no event may the aggregate amount of Capital
Expenditures in any fiscal year exceed $6,000,000. Notwithstanding the
foregoing, Borrower may not make any such Capital Expenditure to acquire all or
any substantial portion of the assets or equity of another business enterprise.
5.2. Additional Indebtedness. Borrower will not borrow any monies or
create, incur or assume any additional
44
indebtedness, obligations or liabilities (including, without limitation,
monetary obligations under non-compete and consulting arrangements) except as
follows (collectively, the "Permitted Indebtedness"):
a. Borrowings from Lender hereunder; and
b. Trade indebtedness, if and to the extent (i) such indebtedness
is incurred in the normal and ordinary course of business for value received and
(ii) such indebtedness (to the extent it exceeds $10,000 to any single vendor)
is paid on a current basis or is less than 120 calendar days past due; and
c. Indebtedness and obligations incurred to purchase fixed or
capital assets, consistent with the restrictions in Section 5.1 hereof and
Section 5.5 hereof, provided, however, that (1) the aggregate amount of such
asset acquisition indebtedness outstanding at any time (together with the
aggregate amount of Capital Lease indebtedness outstanding under Subsection
5.2.d hereof) may not exceed $2,500,000, and (2) such indebtedness must be
immediately included in the calculation of Funded Debt, and (3) such fixed or
capital assets being purchased may not constitute (a) customized application
software or systems integration software, or (b) equity interests in or
substantially all of the assets of another enterprise other than Permitted
Investments, or (c) any other asset the loss of which could reasonably be
expected to have or cause a Material Adverse Effect; and
d. Indebtedness and obligations incurred under Capital Leases,
consistent with the restrictions in Section 5.1 hereof and Section 5.5 hereof,
provided, however, that (1) the aggregate amount of such Capital Lease
indebtedness outstanding at any time (together with the aggregate amount of
asset acquisition indebtedness outstanding under Subsection 5.2.c hereof) may
not exceed $2,500,000, and (2) such indebtedness must be immediately included in
the calculation of Funded Debt, and (3) such fixed or capital assets being
leased may not constitute (a) customized application software or systems
integration software, or (b) any asset the loss of which could reasonably be
expected to have or cause a Material Adverse Effect; and
e. Subordinated Indebtedness if and to the extent permitted under
Section 5.11 hereof; and
f. Such indebtedness listed on Schedule 5.2 hereto with the prior
written consent of Lender (which consent will not be unreasonably withheld by
Lender while no Default is occurring). Unless Lender otherwise expressly
consents in writing (or unless otherwise specified on Schedule 5.2 hereto),
45
all indebtedness listed on Schedule 5.2 hereto must be included in the
calculation of Funded Debt.
5.3. Guaranties. Borrower will not guarantee, assume or otherwise agree to
become liable in any way, either directly or indirectly, for any additional
indebtedness or liability of any other Person, except as follows (collectively,
the "Permitted Guaranties"): (a) in favor of Lender, or (b) to endorse checks,
drafts and negotiable instruments for collection in the ordinary course of
business, or (c) to the extent that Lender otherwise consents in writing.
5.4. Loans. Borrower will not make any loans or advances to any other
Person, except as follows (collectively, the "Permitted Loans"): loans to
employees that do not exceed $2,500 to any individual employee and do not at any
time in the aggregate outstanding exceed $10,000 among all such loans to all
such employees.
5.5. Liens and Encumbrances: Negative Pledge. Borrower will not create,
permit or suffer the creation or existence of any Liens on any of its property
or assets (real or personal, tangible or intangible), except as follows
(collectively, the "Permitted Liens"):
a. Liens in favor of Lender as security for the Obligations under
the Loan Documents; and
b. Liens arising in favor of sellers or lessors for indebtedness
and obligations incurred to purchase or lease fixed or capital assets as
permitted under Subsection 5.2.c hereof or Subsection 5.2.d hereof, provided,
that (1) such Liens secure only the indebtedness and obligations created
thereunder (but not any related monetary obligations under non-compete and
consulting arrangements) and are limited to the assets purchased or leased
pursuant thereto, and (2) such fixed or capital assets do not constitute (a)
customized application software or systems integration software, or (b) equity
interests in or substantially all of the assets of another enterprise, or (c)
any other asset the loss of which could reasonably be expected to have or cause
a Material Adverse Effect; and
c. Liens for taxes, assessments or other governmental charges
(federal, state or local) that are not yet delinquent or that are then being
currently contested in good faith by appropriate proceedings diligently
prosecuted, provided, however, that (1) the existence of such Liens and
challenge of such charges must have been fully disclosed to Lender, and (2)
adequate reserves therefor in accordance with GAAP must have been established,
and (3) such Liens (in Lender's reasonable opinion)
46
could not reasonably be expected to have or cause a Material Adverse Effect; and
d. Deposits in the ordinary course of business to secure
obligations under workmen's compensation, unemployment insurance or social
security laws or similar legislation; and
e. Deposits to secure performance or payment bonds, bids,
tenders, contracts, leases, franchises or public and statutory obligations
required in the ordinary course of business; and
f. Deposits to secure surety, appeal or custom bonds required in
the ordinary course of business; and
g. Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not past due or
for sums being currently contested in good faith by appropriate proceedings
diligently prosecuted, provided, however, that (1) the existence of such Liens
and challenge of such sums allegedly due must have been fully disclosed to
Lender, and (2) adequate reserves therefor in accordance with GAAP must have
been established, and (3) such Liens (in Lender's reasonable opinion) could not
reasonably be expected to have or cause a Material Adverse Effect; and
h. Easements, rights-of-way, restrictions and other similar
encumbrances on real property of Borrower that, independently and in the
aggregate, do not (1) materially interfere with the occupation, use or enjoyment
by Borrower of the property or assets encumbered thereby in the normal course of
business or (2) materially impair the value of the property subject thereto; and
i. Liens listed on Schedule 5.5 hereof with the consent of Lender
(which consent will not be unreasonably withheld by Lender while no Default is
occurring).
Borrower will not similarly covenant to or in favor of any other Person that it
will not create, permit or suffer the creation or existence of any Liens on any
of its property or assets. In addition, Borrower will not purchase or otherwise
acquire any additional assets (including, without limitation, any leasehold
interest therefor) unless Lender's interest in such property either (a) is
already covered and perfected pursuant to an existing and effective UCC-1
financing statement, fixture filing, mortgage and/or leasehold mortgage (as
appropriate) in favor of Lender or (b) otherwise becomes properly perfected
within 5 calendar days after any such acquisition by Borrower's filing (at its
expense) all necessary UCC-1 financing statements, fixture
47
filings, mortgages and/or leasehold mortgages (as appropriate, and in form and
substance reasonably acceptable to Lender). Moreover, Borrower will not
establish or maintain any "securities account" with any "securities
intermediary" (as such terms are defined in Article 8 of the UCC) except as
permitted under Section 5.7 hereof.
5.6. Transfer of Assets. Borrower will not sell, lease, transfer or
otherwise dispose of all or substantially all of its assets. In addition,
Borrower will not sell, lease, transfer or otherwise dispose of any of its
assets other than (a) pursuant to a transaction with an unrelated third party in
the normal and ordinary course of business for value received and otherwise in
accordance with the terms hereof, (including, without limitation, Section
1.1.6.5 c hereof) or (b) pursuant to a transaction not satisfying the standard
under Clause "(a)" if the aggregate collective fair market value of the asset
being transferred together with all other such transfers during the immediately
preceding 12 calendar months does not exceed $50,000 (collectively, the
"Permitted Transfers").
5.7. Acquisitions and Investments. Borrower will not purchase or otherwise
acquire (including, without limitation, by way of share exchange) any part or
amount of the equity ownership or assets of, or make any investments in, any
other corporation, partnership, limited liability company or other venture or
enterprise. Notwithstanding the foregoing, Borrower may acquire or invest in the
following (collectively, the "Permitted Investments"):
a. Government and agency securities backed by the full faith and
credit of the U.S. federal government; and
b. Commercial paper of a U.S. domestic issuer rated A-1+ or A-1
by Standard & Poor's Ratings Group or P-1 by Xxxxx'x Investor Services, Inc. and
maturing not more than 90 calendar days from the date of acquisition thereof;
and
c. Certificates of deposit (maturing within 12 calendar months
after the date of issuance), time deposits, other deposits and bankers'
acceptances issued by or established with U.S. federally insured commercial
banks rated as "well capitalized" by their primary federal regulators, and
having unimpaired capital and unimpaired surplus (collectively) of at least $250
million, and whose commercial paper (or commercial paper that is supported by
such bank's letter of credit or commitment to lend) is rated as A-1+ or A-1 by
Standard & Poor's Ratings Group or P-1 by Xxxxx'x Investor Services, Inc.; and
d. Assets acquired pursuant to transactions
48
permitted under Section 5.1 hereof or Section 5.2 hereof; and
e. Other investments that collectively in the aggregate of any
time do not exceed $50,000.
Notwithstanding the foregoing, unless and to the extent such investments are
certificated and separately collaterally assigned to Lender, then the amounts of
investments permitted under Clauses "a", "b" and "c" of this Section may not at
any time exceed $50,000. In addition, Borrower will not establish or maintain
any "securities account" with any "securities intermediary" (as such terms are
defined in Article 8 of the UCC), unless a control agreement acceptable in form
and substance to Lender is first executed by such "securities intermediary"
securing Lender's first priority interest and rights in and to all "financial
assets" and "security entitlements" associated with such "securities account".
5.8. New Ventures: Mergers. Borrower will not (a) enter into any new
business activities or ventures not directly related to its current business, or
(b) merge or consolidate with or into any other corporation, partnership,
limited liability company or other organization, or (c) create or acquire (or
cause or permit the creation or acquisition of) any Subsidiary or Affiliate
(except the hiring of officers and directors). Notwithstanding the foregoing,
Borrower may create or acquire (or cause or permit the creation or acquisition
of) one or more wholly-owned Subsidiaries provided that (1) each such Subsidiary
(at Lender's sole discretion) becomes a "Borrower," "Guarantor" and/or "Obligor"
under the Loan Documents, and (2) a first priority security interest and pledge
of 100% of the assets and equity of each such Subsidiary is perfected in favor
of Lender as additional Collateral under the Loan Documents (except as otherwise
permitted under Section 5.5).
5.9. Transactions with Affiliates. Borrower will not enter into any
transaction or agreement with any Subsidiary, Affiliate or other related
enterprise except as follows: (a) reasonable and customary compensation
arrangements in the ordinary course of business with its officers and directors,
and (b) guaranties (if any) to the extent permitted by Section 5.3 hereof, and
(c) employee loans (if any) to the extent permitted under Section 5.4 hereof,
and (d) reasonable and customary asset transfers among Borrowers (if any) to the
extent permitted under Section 5.6 hereof, and (e) reasonable dividends and
distributions (if any) to the extent permitted by Section 5.10 hereof, and (f)
reasonable and customary management fees (if any) to the extent permitted under
Section 5.12 hereof.
5.10. Distributions or Dividends. Borrower will not
49
declare or make (directly or indirectly) any payment or distribution with
respect to, or incur any liability for the purchase, acquisition, redemption or
retirement of, any of its equity interests (including warrants therefor) or as a
dividend, return of capital or other payment or distribution of any kind to any
holder of any such equity interest. Notwithstanding the foregoing, Borrower will
make all payments and distributions to Lender required under or in connection
with the Warrant Agreement, the Warrants and/or any related warrant shares.
5.11. Payment of Subordinated Indebtedness. Borrower will not incur or make
any payments on Subordinated Indebtedness except as permitted by this Section or
by a separate subordination agreement executed between such other creditor and
Lender. Notwithstanding the foregoing, if any Subordinated Indebtedness is
subsequently authorized by Lender and if any Default occurs under the Loan
Documents, then Borrower will not make any further payments in connection with
its Subordinated Indebtedness unless and until such Default has been waived or
cured to Lender's satisfaction.
5.12. Payment of Management Fees. Borrower will not pay any funds or
otherwise incur or accrue any liabilities for any management or related services
except (a) reasonable and customary compensation to bona fide full-time resident
employees of Borrower, and (b) reasonable and customary compensation to
consultant management employees, and (c) as otherwise permitted by this Section.
5.13. Issuance of Additional Equity. Borrower will not permit the issuance
(or reissuance) of any equity interests (common stock, preferred stock,
partnership interests, member interests or otherwise) or any options, warrants,
convertible securities or other rights to purchase such beneficial or equity
interest. Notwithstanding the foregoing, Borrower may issue additional equity
interests provided that: (a) Borrower has provided written notice thereof to
Lender at least 10 Business Days prior to such issuance (which notice must at
least describe the type and amount of equity interests being purchased, the
consideration to be received by Borrower in exchange for such issuance, and the
identity of the purchaser), and (b) such equity interests are pledged to Lender
(with a first lien priority) as additional Collateral hereunder at the time of
issuance thereof using documentation that is in form and substance reasonably
acceptable to Lender, and (c) no Default or Event of Default then exists under
the Loan Documents or would otherwise result from the issuance of such equity
interest (including, without limitation, a Default under the change in control
restrictions set forth in Section 7.1.8 hereof). Further notwithstanding the
foregoing, (a) the negative covenant under this Section
50
restricting additional issuances of equity of Borrower will be automatically
deleted herefrom and will be of no further force or effect immediately prior to
(but conditioned upon) consummation of a Public Offering by Borrower (as defined
in and in accordance with Section 4.20 hereof), and (b) prior to a Corporate
Restructuring, Borrower may issue shares of common stock upon the exercise of
warrants or options outstanding as of the Closing Date (without such equity
being pledged as Collateral if the owner thereof has not otherwise executed an
equity pledge in favor of Lender), and (c) as of and after a Corporate
Restructuring, Borrower only may issue additional equity to its corporate parent
that owns 100% of its equity.
5.14. Removal of Assets. Borrower will not remove or permit the removal of
any asset or group of assets (with a collective fair market value exceeding
$10,000) to a jurisdiction or a county in which no financing statement on Form
UCC-1 has been filed naming Lender as secured party" with respect to such
assets. Notwithstanding the foregoing, Borrower may remove the following types
of assets under the following conditions: (a) temporary removal of equipment for
repair or replacement provided that Lender has received prior written notice
thereof indicating the type of equipment, its approximate fair market value, the
destination location and an estimate of the length of time that such equipment
will be removed from the relevant jurisdiction, and (b) booths, displays,
marketing materials and related accompanying equipment of Borrower being used
temporarily in connection with marketing Borrower's business at trade shows or
otherwise (provided that the aggregate fair market value thereof does not exceed
$50,000), and (c) portable computer and related accompanying equipment being
used by the officers, employees and independent representatives of Borrower in
connection with accomplishing Borrower's business activities at home offices or
otherwise (provided that the aggregate fair market value thereof does not exceed
$50,000). Moreover, Borrower will not move the location of its chief executive
office (or change its official mailing address) without providing Lender with
prior written notice thereof.
5.15. Modifications to Organic Documents. Borrower will not (a) amend or
otherwise modify any of its Organic Documents, or (b) change its official name,
its operating names or the names under which it executes contracts and conducts
business.
5.16. Modifications to Material Relationships. Borrower will not (and will
not permit any other party to) cancel, terminate, amend, modify or otherwise
alter (a) any Subordinated Indebtedness, or (b) any agreement regarding the
provision of management services to Borrower, or (c) any Material Contract
listed (or contract that should be listed) on Schedule 3.8 hereto.
51
5.17. Margin Stock Restrictions; Other Federal Statutes. Borrower will not
use any of the proceeds hereunder, directly or indirectly, to purchase or carry,
or to reduce or retire any indebtedness that was originally incurred to purchase
or carry, any Margin Stock or for any other purpose that might constitute the
transactions contemplated hereby as a "Purpose Credit" within the meaning of the
FRB's Margin Regulations. In addition, Borrower will not engage as its principal
business in the extension of credit for purchasing or carrying Margin Stock.
Borrower will not cause or permit any Loan Document to violate any other
regulation of the FRB or the SEC or any provision of the Securities Act of 1933,
the Securities Exchange Act of 1934, the Investment Company Act of 1940 or the
Small Business Investment Act of 1958, each as amended, or any rules or
regulations promulgated under any of such statutes.
ARTICLE 6: ADDITIONAL COLLATERAL AND RIGHT OF SET OFF
6.1. Additional Collateral. As additional collateral for the payment of any
and all indebtedness and obligations of Borrower to Lender (whether matured or
unmatured, and whether now existing or hereafter incurred or created hereunder
or otherwise), Borrower hereby grants Lender a security interest in and a lien
upon all funds, balances and other property of any kind of Borrower, or in which
Borrower has any interest (limited to the interest of Borrower therein), now or
hereafter in the possession, custody or control of Lender or any Affiliate of
Lender.
6.2. Right of Set-Off. Lender is hereby authorized at any time and from
time to time during the existence of an Event of Default hereunder (unless
expressly prohibited by applicable law) to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) and other
indebtedness at any time held or owing by Lender (or any of its Affiliates) to
or for the credit or the account of Borrower against any and all of the
indebtedness and monetary obligations of Borrower now or hereafter existing
under the Loan Documents or any other evidence of indebtedness originated,
acquired or otherwise held by Lender, irrespective of whether Lender shall have
made any demand under the Loan Documents or other indebtedness and although such
obligations may be unmatured. Notwithstanding the foregoing, Lender may not
exercise such right of set-off if the only Event of Default existing at the time
is under Section 7.1.14 hereof. Lender agrees to notify Borrower within a
commercially reasonable time after any such set-off and application made by
Lender; provided, however, that the failure
52
to give such notice shall not in any way affect the validity of such set-off and
application.
6.3. Additional Rights. The rights of Lender under this Article 6 are in
addition to the other rights and remedies (including, without limitation, other
rights of set-off) that Lender may have by contract, at law, or otherwise.
ARTICLE 7: DEFAULT AND REMEDIES
7.1. Events of Default. Each of the following events separately constitutes
an independent Event of Default hereunder (each of which may be waived by Lender
in its sole and absolute discretion):
7.1.1. Payment Obligations. If any payment of principal, interest
or other sum payable to Lender under any Loan Document (including any Note) is
not received by Lender on the date such payment is due and payable and such
failure to receive payment continues for a period of five (5) Business Days
after the due date therefor.
7.1.2. Representations and Warranties. If any representations,
warranty or other statement made in any Loan Document, or in any written report,
schedule, exhibit, certificate, agreement, or other document given by or on
behalf of Borrower or any other Obligor (or otherwise furnished in connection
herewith) when made was misleading or incorrect in any material respect.
7.1.3. Financial Covenants. If Borrower defaults in or fails to
observe at any time any of the covenants set forth in Section 4.1 hereof.
7.1.4. Other Covenants in Loan Documents. If Borrower or any
other Obligor defaults in the full and timely performance when due of any other
covenant or agreement contained in any Loan Document (or in any other document
or agreement now or hereafter executed or delivered in connection herewith), and
such default remains uncured for a period of ten (10) Business Days after the
earlier of the date that Lender notifies Borrower thereof or the date that
Borrower otherwise acquires knowledge or should have acquired knowledge thereof.
Notwithstanding the foregoing, if such covenant Default is not reasonably
subject to cure within such 10 Business Day period, then such Default will not
be an Event of Default hereunder if and so long as (1) Lender was notified of
the occurrence of such Default in writing within such 10 Business Day period,
and (2) Borrower or such other Obligor commenced cure within such 10 Business
Day period, and
53
(3) Borrower or such other Obligor continues to diligently pursue cure
thereafter, and (4) such default is ultimately cured to Lender's satisfaction
(or waived by Lender) within a reasonable period of time after such 10 Business
Day period (but in any event within 90 calendar days after the occurrence of
such Default).
7.1.5. Default Under Other Agreements with Lender. If any event
of default (as described or defined therein, which term shall include any notice
and cure periods provided therein) occurs or exists under the provisions of any
other credit agreement, security agreement, mortgage, deed of trust, indenture,
debenture, cash management or account agreement, contract, lease or other
agreement between Borrower, any Affiliate of Borrower or any other Obligor and
Lender (or any Affiliate of Lender), unless such default is waived by Lender or
cured to Lender's satisfaction.
7.1.6. Default Under Material Agreements with Other Parties. If
Borrower fails or refuses to make any one or more required payments (whether
principal, interest or otherwise) aggregating in excess of $25,000 with respect
to any Funded Debt (or with respect to any guaranty or reimbursement obligation
of any such indebtedness) prior to the expiration of any applicable grace period
with respect to such payment, or if any such indebtedness for borrowed money in
excess of $25,000 is accelerated prior to its express maturity as a result of
any default thereunder, or if any event of default (as described or defined
therein, which term shall include any notice and cure periods provided therein)
occurs or exists under the provisions of any Material Contract listed on
Schedule 3.8 hereto (or a contract that should be listed on Schedule 3.8 hereto
under the terms hereof). Notwithstanding the foregoing, the occurrence of such
an event of default thereunder will not constitute an Event of Default hereunder
if and so long as either:
(a) (l) lender was notified of the occurrence of such default in
writing within 10 Business Days after the occurrence
thereof, and (2) the other Person to such agreement has not
formally declared an event of default thereunder, has not
accelerated any related indebtedness in connection
therewith, and is not then otherwise pursuing any remedies
thereunder, and (3) Borrower continues to diligently pursue
resolving such dispute with such Person, and (4) such event
of default is ultimately cured (without incurring any
material liability) to Lender's satisfaction within a
reasonable period of time after such
54
10 Business Day period (but in any event within 90 calendar
days after the occurrence of such default), or
(b) Within 30 calendar days after the occurrence of such event
of default, the services or products provided under such
Material Contract are replaced by Borrower with
substantially comparable services or products under a new
contract with another Person (without incurring any material
liability) that is in form and substance acceptable to
Lender.
7.1.7. Security Interest. If the security interest or lien in any
of the Collateral (with a fair market value exceeding collectively $15,000),
other than Collateral consisting of equity ownership interest in Borrower or in
subsidiaries or other securities of Borrower (for which there is no permissible
threshold for non-compliance), at any time does not constitute a legal, valid
and enforceable security interest or lien in favor of Lender.
7.1.8. Change of Control.
a. Prior to the occurrence of a Corporate Restructuring:
(i) If Ram Xxxxxxx ceases to own and control at least 65% of
each class of voting securities of Borrower prior to the occurrence of a Public
Offering of Borrower's common stock or ceases to own and control at least 40%
(and, in any event, the largest single block) of each class of voting securities
of Borrower after the occurrence of a public Offering of Borrower's common
stock.
(ii) If Ram Xxxxxxx or Xxxxxxx Xxxxxxx or Xxxxxxx Xxx ceases
to hold a senior management position with active involvement in the management
and operations of Borrower, unless (1) such event is by reason of his or her
death or disability and (2) replacement management arrangements satisfactory to
Lender (in its sole and absolute discretion) are made within 60 calendar days
after such death or within 120 calendar days after the commencement of such
period of disability.
b. As of and after the occurrence of a Corporate Restructuring:
(i) If the corporate holding company of
55
Borrower ceases to own and control 100% of each class of equity securities of
Borrower.
(ii) If Ram Xxxxxxx or Xxxxxxx Xxxxxxx or Xxxxxxx Xxx ceases
to hold a senior Management position with active involvement in the management
and operations of Borrower, unless (1) such event is by reason of his or her
death or disability and (2) replacement management arrangements satisfactory to
Lender (in its sole and absolute discretion) are made within 60 calendar days
after such death or within 120 calendar days after the commencement of such
period of disability.
7.1.9. Government Action.
a. If custody or control of any substantial part of the
property of Borrower is assumed by any governmental agency or any court of
competent jurisdiction at the instance of any governmental agency.
b. If any governmental regulatory authority or judicial
body makes any other final nonappealable determination that (in Lender's
reasonable judgment) could reasonably be expected to have or cause a Material
Adverse Effect.
7.1.10. Insolvency. If Borrower or any other Obligor that pledges
Collateral or that is directly or indirectly liable to Lender for all or any
part of the indebtedness under the Loan Documents (a) becomes insolvent,
bankrupt or generally fails to pay its, his or her debts as such debts become
due; or (b) is adjudicated insolvent or bankrupt in any proceeding; or (c)
admits in writing an inability to pay its, his or her debts; or (d) comes under
the authority of a custodian, receiver or trustee (or one is appointed for
substantially all of its, his or her property); or (e) makes an assignment for
the benefit of creditors; or (f) has commenced against it, him or her any
proceedings under any law related to bankruptcy, insolvency, liquidation,
dissolution or the reorganization, readjustment or release of debtors that is
either not contested or if contested is not dismissed or stayed within ninety
(90) calendar days after the commencement thereof; or (g) commences or
institutes any proceedings under any law related to bankruptcy, insolvency,
liquidation, dissolution or the reorganization, readjustment or release of
debtors; or (h) calls a meeting of creditors with a view to arranging a
composition or adjustment of debt; or (i) by any act or failure to act that
indicates consent to, approval of or acquiescence in any of the foregoing.
7.1.11. Additional Liabilities. If any
56
judgment, writ, warrant, attachment or execution or similar process that calls
for payment or presents liability in excess of $100,000 is rendered, issued or
levied against Borrower or any of its properties or assets and such liability is
not paid, waived, stayed, vacated, discharged, settled, satisfied or fully
bonded within thirty (30) calendar days after it is rendered, issued or levied.
7.1.12. Business Interruption. If the operations of any switch or
switch facility owned, controlled or used by Borrower is interrupted or
curtailed at any time for a period in excess of 24 hours (whether or not
consecutive) during any period of 7 consecutive calendar days.
7.1.13. FCC and Other Regulatory-Action Defaults. In addition to
the events described in Section 7.1.9 hereof, (a) if any Official Body
(including the FCC) designates for an evidentiary hearing any applications of
Borrower (or any Affiliate thereof) requesting any Authorization from such
Official Body, any Tariff of Borrower, or any complaint, petition or motion of
any third party affecting any of Borrower's requested or then-existing Licenses
or other Authorizations, and Lender reasonably believes that the result thereof
could be the termination, revocation, suspension, non-renewal or material (and
adverse) modification of any material License, Tariff or other Authorization
held by Borrower, or (b) if any Official Body (including the FCC) terminates,
revokes or substantially and adversely modifies any material License, Tariff or
other Authorization of Borrower (or any Affiliate thereof), or (c) if any
Official Body (including the FCC) commences an action or proceeding seeking the
termination, suspension, revocation, non-renewal or substantial and adverse
modification of any material License, Tariff or other Authorization, or (d) if
any material License, Tariff or other Authorization expires by its terms and is
not renewed in a timely manner, or any material agreement which is necessary to
the operation of any switch expires or is revoked or terminated and is not
replaced by a comparable substitute or a substitute reasonably acceptable to
Lender. For purposes of this Section 7.1.13, a "material" License or other
Authorization is (1) any License or Authorization issued by the FCC or any State
PUC, and (2) any other License or Authorization (alone or in conjunction with
other Licenses and Authorizations then subject to any of the circumstances
described in this Section) the loss of which (in Lender's reasonable judgment)
could reasonably be expected to have or cause a Material Adverse Effect.
7.1.14. Material Adverse Change. If Lender determines in good
faith that a Material Adverse Change has occurred with respect to Borrower from
the condition set forth in
57
the financial statements furnished to Lender for the fiscal year ended
immediately prior to the Closing Date, or from the condition of Borrower most
recently disclosed to Lender in any annual financial statements furnished to
Lender pursuant to Section 4.2.3 hereof. If (with respect either to any fiscal
year or to any interim period in connection with a Public Offering) Borrower's
auditors deliver to Lender a set of final draft audited financial statements or
(if applicable) a set of final interim financial statements for a Public
Offering, then Lender will notify Borrower (within 10 Business Days thereof if
possible using commercially reasonable efforts) whether Lender believes in good
faith that such financial statements (if finalized without modification) will
evidence, for purposes of this Section 7.1.14, a Material Adverse Change in the
financial condition from the condition of Borrower disclosed to Lender in the
audited annual financial statements for the preceding fiscal year (but such
notice from Lender will not otherwise indicate whether such financial statements
demonstrate compliance with the Loan Documents, including without limitation,
the financial covenants under Section 4.1. Moreover, to the extent that after
the Closing Date the financial condition or performance of Borrower as of the
Closing Date deteriorates during the balance of fiscal year 1997 but in
accordance with the projections and business plan provided to Lender prior to
the Closing Date, then such deterioration in and of itself will not constitute
an Event of Default for purposes of this Section 7.1.14. Notwithstanding the
foregoing, this Section 7.1.14 will not be effective until January 1, 1998, and
if Borrower consummates an initial Public Offering prior to November 30, 1997,
then this Section 7.1.14 will not be effective until July 1, 1998.
7.2. Remedies.
7.2.1. General; Acceleration. At any time during the existence of
any Event of Default, at the election of Lender but with notice thereof to
Borrower (unless an Event of Default described in Section 7.1.10 hereof has
occurred, in which case acceleration will occur automatically with respect to
the entire indebtedness and without any notice), then Lender may accelerate the
Line of Credit Maturity Date and may declare all or any portion of the
indebtedness of Borrower to Lender (hereunder or otherwise, but including the
unpaid balance of principal, interest and fees hereunder) to be immediately due
and payable. At any time during the existence of any Event of Default, Lender
will also have the immediate right to enforce and realize upon any collateral
security granted hereunder or in connection herewith in any manner or order that
Lender deems expedient without regard to any equitable principles of marshalling
or otherwise.
58
7.2.2. Other. In addition to any rights granted hereunder or in
any other Loan Document, Lender will have all other legal and equitable rights
and remedies granted by or available under any applicable law (including the
rights of a secured party under the Uniform Commercial Code), and all rights and
remedies will be cumulative in nature.
7.2.3. Special FCC and State PUC-Related Remedies.
a. Borrower and Lender hereby acknowledge their intent
that, during the existence of an Event of Default, to the fullest extent
permitted by applicable law and governmental policy (including, without
limitation, the rules, regulations and policies of the FCC and any State PUC),
Lender will have all rights necessary or desirable to obtain, use and/or sell
the assets and operations of Borrower and the other Collateral, and to exercise
all remedies available to Lender under the Loan Documents, the Uniform
Commercial Code or other applicable law. The parties further acknowledge and
agree that, in the event of changes in applicable law or governmental policy
occurring subsequent to the date hereof that affect in any manner Lender's
rights of access to, or use or sale of, Borrower's assets or other Collateral
(including, without limitation, Licenses and other Authorizations issued by the
FCC and any State PUC) or the procedures necessary to enable Lender to obtain
such rights of access, use or sale during an Event of Default, Lender and
Borrower will amend the Loan Documents, in such manner as Lender reasonably
requests, in order to provide Lender with such rights to the greatest extent
possible consistent with then-applicable law and governmental policy.
b. Borrower hereby agrees (during the existence of a
Default) to take any actions that Lender may reasonably request in order to
enable Lender to receive the full rights and benefits granted to Lender by the
Loan Documents. Without limiting the generality of the foregoing, at any time
during the existence of an Event of Default, at the cost and expense of
Borrower, Borrower will use commercially reasonable efforts to assist and
cooperate in obtaining all approvals (including, without limitation, all FCC
approvals) which are then required by applicable law or contract for or in
connection with any action or transaction contemplated by the Loan Documents or
the Uniform Commercial Code. Borrower further agrees, upon Lender's request and
at the expense of Borrower, at any time during the existence of an Event of
Default, to prepare, sign, file and diligently prosecute (and to use its best
efforts to cause the preparation, execution, filing and diligent prosecution by
others) with the FCC or any State PUC the assignor's or transferor's portion of
any applications for the FCC's or any
59
State PUC's consent to the assignment of Licenses or transfer of control thereof
necessary or appropriate under the FCC's or any State PUC's rules for approval
of any sale or transfer of any Collateral pursuant to the exercise of Lender's
remedies under the Loan Documents. Borrower further agrees that, during the
existence of a Default, Borrower will assist and cooperate with Lender (and will
use its best efforts to cause others to assist and cooperate with Lender) to
ensure that Borrower continues (a) to operate in the normal course of business,
and (b) to fulfill all of its legal, regulatory and contractual obligations and
(c) to otherwise be properly and professionally managed. At Lender's request and
the expense of Borrower, at any time during the existence of an Event of
Default, such assistance and cooperation may include (without limitation) the
employment of (and, to the maximum extent not prohibited by the rules,
regulations and orders of the FCC or any State PUC, delegation of appropriate
management authority to) one or more qualified and independent consultants and
professional managers acceptable to Lender to assist in the interim operations
of Borrower; all of which Borrower hereby agrees not to challenge. Borrower
further consents to (and agrees that it will not challenge), at any time during
the existence of an Event of Default, the transfer of control or assignment of
Licenses, Tariffs, Authorizations and other assets to a receiver, trustee,
transferee, or similar official or to any purchaser of the Collateral pursuant
to any public or private sale, judicial sale, foreclosure or exercise of other
remedies available to Lender as permitted by applicable law.
c. Notwithstanding anything to the contrary contained in
any Loan Document, neither Lender nor Borrower will take any action pursuant to
the Loan Documents that would constitute or result in any assignment of an FCC
or State PUC License, Tariff or Authorization or any transfer of control of
Borrower if such assignment of License, Tariff or Authorization or transfer of
control would require under then existing law (including the written rules and
regulations promulgated by the FCC) the prior approval of the FCC or a State
PUC, unless such approval has been obtained (as applicable) from such State PUC
(to the extent failure to obtain such approval by Lender could reasonably be
expected to have or cause a Material Adverse Effect or could otherwise
reasonably be expected to result in the imposition of a penalty in excess of
$25,000) or from the FCC. Without limiting the generality of the foregoing,
Lender specifically agrees that (a) voting rights with respect to the pledged
shares of stock of Borrower will remain with the holders of such voting rights
during the existence of an Event of Default unless and until any required prior
approvals to the transfer of such voting rights shall have been obtained (as
applicable) from any State PUC (to the extent failure to obtain
60
such approval by Lender could have or cause a Material Adverse Effect or could
otherwise reasonably be expected to result in the imposition of a penalty in
excess of $25,000) or from the FCC, and (b) during the existence of any Event of
Default and foreclosure upon the Collateral by Lender, there will be either a
private or public sale of the Collateral that complies with applicable rules and
policies of any State PUC (to the extent failure to comply with such rules and
policies could have or cause a Material Adverse Effect or could otherwise
reasonably be expected to result in the imposition of a penalty in excess of
$25,000) and the FCC, and (c) prior to the exercise of voting rights by the
purchaser at any such sale, any consent of any State PUC or the FCC required
pursuant to any State Act (to the extent failure to obtain such consent could
have or cause a Material Adverse Effect or could otherwise reasonably be
expected to result in the imposition of a penalty in excess of $25,000) or the
Federal Communications Act (respectively) will be obtained.
ARTICLE 8: DEFINITIONS
8.1. Definitions. When used in this Agreement, the following terms shall
have the respective meanings set forth below:
8.1.1. "Account" means, at any relevant time, the designated or
principal deposit account of Borrower at Lender for purposes of effecting
transactions hereunder (and, if applicable, under the Cash Management
Agreements).
8.1.2. "Adjusted LIBO Rate" means the rate per annum (rounded
upwards, if necessary, to the next l/100th of 1%) determined by Lender pursuant
to the following formula:
Adjusted LIBO Rate = LIBO Rate
----------------------
1 - Reserve Percentage
For purposes of this calculation, "LIBO Rate" means the London Interbank Offered
Rate per annum (determined by Lender) on the first day of any Interest Period
for which the Adjusted LIBO Rate is applicable as published by Bloomberg or Dow
Xxxxx-Telerate and displayed on page 3750 as the BBA LIBOR (or, if neither
Bloomberg nor Dow Xxxxx-Telerate is then available, then as published by Reuters
Monitor Money Rates Service and displayed on the LIBO page as the "Libo Rate")
(or, in any such instance, as published by such other service or displayed on
such other page as may replace such service or page for the purpose of
displaying rates or prices comparable to the designated rate) for the offering
of dollar deposits by leading banks in the London interbank market for a period
of approximately 3 months and an amount
61
approximately equal to the amount outstanding hereunder to which such LIBO Rate
will be applicable. If more than one such rate is displayed on such page or its
replacement, then the LIBO Rate will be the arithmetic mean of such displayed
rates. If the first day of the applicable Interest Period is not a Business Day,
then the applicable LIBO Rate will be the rate in effect on the immediately
preceding Business Day. For purposes of this calculation, "Reserve Percentage"
means that percentage (expressed as a decimal) prescribed by the FRB (or any
other governmental or administrative agency to which Lender is subject) for
determining the reserve requirements (including, without limitation, any basic,
supplemental, marginal or emergency reserves) for (a) Lender's negotiable,
non-personal time deposits in U.S. Dollars with maturities of comparable
duration, or (b) deposits of U.S. DoLlars in a non-U.S. or an international
banking office of Lender used to fund loans.
8.1.3. "Advance" means any advance of funds under any Facility.
8.1.4. "Advance Request" has the meaning set forth in Section
1.4.1 hereof.
8.1.5. "Affiliate" of any Person or entity means (a) any Person
directly or indirectly owning, controlling or holding 5% or more of the
outstanding beneficial interest in such person or entity, or (b) any Person as
to which such other Person or entity directly or indirectly owns, controls or
holds 5% or more of the outstanding beneficial interest, or (c) any Person
directly or indirectly controlling, controlled by, or under common control with
such other person or entity, or (d) any officer, director, partner or member of
such Person, but such term with respect to Borrower does not include Lender.
8.1.6. "Agreement" means this Credit Facility Agreement and all
the exhibits and schedules hereto, all as may be amended and otherwise modified
from time to time hereafter.
8.1.7. "Authorized Officer" means any officer, employee or
representative of such organization who is expressly designated as such or is
otherwise authorized to borrow funds hereunder or, as appropriate, to sign loan
documents and/or deliver certificates on behalf of such organization pursuant to
the provisions of such organization's most recent resolution on file with
Lender.
8.1.8. "Authorization" means any License or other governmental
permit, certificate and/or approval issued by or any Tariff filed with an
Official Body.
62
8.1.9. "Available Credit Portion" means that portion of the
Current Line of Credit Commitment that is generally available in the ordinary
course for borrowing at any time under the Line of Credit Facility, as such
amount is determined in accordance with Section 1.3 hereof.
8.1.10. "BIC" means Billing Concepts, Inc.
8.1.11. "BIC Billing Agreement" means the Billing and Information
Management Service Agreement between BIC and Borrower (as the same may be
amended, supplemented, modified or replaced from time to time and including any
similar agreement entered into between BIC and Borrower during the term of this
Agreement) pursuant to which BIC will, upon submission to it of billing
information for Borrower rated calls and in exchange for certain processing and
other fees therein specified, process such billing information and act as
Borrower's agent to collect accounts receivable due to Borrower from one or more
LECs.
8.1.12. "Billing Agent" means any Person (whether or not acting
pursuant to an agreement) who, directly or indirectly, submits billing
information with respect to Borrower rated calls to any LEC or any other Person.
8.1.13. "Billing Concepts" means Billing Concepts, Inc. (formerly
known as U.S. Billings, Inc.), or any successor or permitted assignee thereof.
8.1.14. "Borrower" means, individually and collectively, the
following:
a. STARTEC, Inc., a Maryland corporation, having its
principal and chief executive office at the
address specified in Section 9.7 hereof, or any
successor or authorized assignee thereof, and
b. Any other entity subsequently added hereto as a
Borrower hereunder, or any successor or authorized
assignee thereof.
8.1.15. "Business Day" means any day that is not a Saturday, a
Sunday or a day on which banks under the laws of the Commonwealth of Virginia
(or, with respect to certain LIBO Rate matters, banks in London, England) are
authorized or required to be closed.
8.1.16. "Capital Expenditures" means
63
expenditures (a) for any fixed assets or improvements, replacements,
substitutions or additions thereto that have a useful life of more than one (1)
year, including direct or indirect acquisition of such assets or (b) for any
Capital Leases.
8.1.17. "Capital Leases" means capital leases and subleases as
defined in the Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 13 dated November 1976 (as amended and updated from
time to time).
8.1.18. "Cash Management Agreements" means the cash management
agreements (as amended from time to time) executed and delivered hereunder,
including, as appropriate, without limitation, (a) a target balance management
agreement, and (b) a target balance management loan rider, and (c) a master
repurchase agreement, and (d) an information reporting agreement, and (e) a cash
concentration service agreement, and (f) a wholesale lockbox agreement.
8.1.19. "Closing Date" means the date on which all conditions
precedent to the effectiveness of this Agreement under Section 2.1 hereof have
been satisfied or waived by Lender.
8.1.20. "Code" means the Internal Revenue Code of 1986, as
amended.
8.1.21. "Collateral" means the collateral security committed to
Lender under the Collateral Security Documents executed by Borrower or any other
Obligor in favor of Lender pursuant to this Agreement from time to time and/or
pursuant to all similar or related documents and agreements from time to time,
all as amended from time to time.
8.1.22. "Collateral Security Documents" means, individually and
collectively, (a) the Security Agreements and the financing statements filed
pursuant thereto, and (b) the Pledge and Security Agreements, and (c) any
additional documents guaranteeing indebtedness, assuring performance of
obligations, subordinating indebtedness, or granting security or Collateral to
Lender hereunder, all as amended from time to time.
8.1.23. "Commitment" means any commitment for credit pursuant to
a Facility established hereunder.
8.1.24. "Corporate Restructuring" has the meaning set forth in
Section 4.20.1 hereof.
8.1.25. "Current Line of Credit Commitment" means the absolute
maximum amount of credit that is available for
64
borrowing at any time under the Line of Credit Facility, as such amount is
determined in accordance with Section 1.3 hereof.
8.1.26. "Default" means any event or circumstance that with the
giving of notice or the passage of time would constitute an Event of Default.
8.1.27. "Dollar" or "$" means U.S. dollars.
8.1.28. "EBITDA" means, at the time of any determination, the sum
of the following items for Borrower during the relevant four consecutive fiscal
quarter period:
a. Net income from continuing operations during such
period -- i.e., excluding extraordinary gains and
income items and the cumulative effect of
accounting changes -- determined in accordance
with GAAP, and
b. Plus Interest Expense during such period, but
subtract interest income accrued during such
period, and
c. Plus federal and state income taxes paid and
accrued in accordance with GAAP during such
period, and
d. Plus depreciation permitted under GAAP during such
period, and
e. Plus amortization expense permitted under GAAP
during such period.
For purposes of this calculation, interest shall include interest accrued under
Capital Leases, determined in accordance with GAAP.
8.1.29. "Eligible Accounts" means, at any date, all billed accounts
receivable then properly due to Borrower from all directly-billed customers and
all LECs, other than the following: (a) accounts more than 90 calendar days past
the date on which the customer was originally directly billed by Borrower for
such calls or past the date on which the related billing information for
Borrower rated calls is transmitted to such LEC, and (b) accounts the liability
for which has been disputed by the customer or the LEC or for which the customer
or the LEC has claimed set off rights or other defenses, and (c) accounts owing
from any customer or LEC that shall take or be the subject of any
65
action or proceeding of the type described in Section 7.1.10 hereof, and (d)
accounts as to which Borrower does not have all necessary Authorizations in
order to be entitled to xxxx and collect such amounts, and (e) accounts, the
full and timely collection of which Lender, in its good faith judgment, believes
to be doubtful.
8.1.30. "Environmental Control Statutes" has the meaning set
forth in Section 3.16 hereof.
8.1.31. "EPA" means the United States Environmental Protection
Agency or any other entity that succeeds to its responsibilities and powers.
8.1.32. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and as implemented and interpreted.
8.1.33. "ERISA Affiliate" means any company, whether or not
incorporated, which is considered a single employer with Borrower under Titles
I, II and IV of ERISA.
8.1.34. "Event of Default" means each of the events described in
Section 7.1 hereof.
8.1.35. "Facility" means any credit facility established under
Article 1 hereof.
8.1.36. "FCC" means the Federal Communications Commission or any
other entity or agency that succeeds to its responsibilities and powers.
8.1.37. "Federal Communications Act" means the Communications Act
of 1934, as amended, and as implemented by the FCC and interpreted by the FCC or
any court of competent jurisdiction.
8.1.38. "FRB" means the Board of Governors of the Federal Reserve
System or any other entity or agency that succeeds to its responsibilities and
powers.
8.1.39. "Funded Debt" means, at the time of any determination,
the aggregate principal amount of indebtedness of Borrower for the following:
a. Borrowed money (including the indebtedness under
the Loan Documents, but not including trade
indebtedness permitted under Section 5.2.b
hereof), and
66
b. Installment purchases of real or personal
property, and
c. Capital Leases, and
d. Deferred purchase price in connection with
acquisitions, and
e. Reimbursement obligations under letters of credit,
and,
f. Any indebtedness or contractual payment obligation
that is not paid within 120 calendar days of the
due date therefor, and
g. Guaranties of indebtedness and obligations that
would constitute Funded Debt hereunder if the
primary obligor thereof were Borrower, and
h. Indebtedness otherwise required to be included as
part of "Funded Debt" under Section 5.2 hereof.
Notwithstanding the foregoing, the term "Funded Debt" includes the Subordinated
Indebtedness.
8.1.40. "GAAP" means generally accepted accounting principles
applied on a consistent basis set forth in the Opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants
and/or in statements of the Financial Accounting Standards Board and/or in such
other statements by such other entity as Lender may reasonably approve, which
are applicable in the circumstances as of the date in question, and the
requirement that such principles be applied on a consistent basis shall mean
that the accounting principles observed in a current period are comparable in
all material respects to those applied in a preceding period.
8.1.41. "Hazardous Materials" includes (a) any "hazardous waste"
as defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.), as amended from time to time, and regulations promulgated
thereunder; or (b) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
Section 9601 et seq.), as amended from time to time, and regulations promulgated
thereunder; or (c) any other substance the use or presence of which on, in,
under or above any real
67
property ever owned, controlled or used by Borrower is similarly regulated or
prohibited by any federal, state or local law, rule, ordinance, regulation or
decree of any court or governmental authority as a hazardous material.
8.1.42. "Interest Coverage Ratio" means, at any time such ratio
is being computed, the ratio of "OCF" (for the immediately preceding four fiscal
quarters) to "Interest Expense" (for the immediately preceding four fiscal
quarters).
8.1.43. "Interest Expense" means, at the time of any
determination, the amount of interest and other finance charges of Borrower
required to be charged as an expense under GAAP during the relevant four
consecutive fiscal quarter period (including, without limitation, the fees under
Section 1.7 hereof and any other such charges with respect to any Funded Debt).
For purposes of this calculation, interest includes interest accrued under
Capital Leases.
8.1.44. "Interest Period" means (a) with respect to the Prime
Rate, a period of one (1) Business Day, and (b) with respect to the Adjusted
LIBO Rate, a period of 3 months duration commencing initially on the date of the
relevant Advance and ending 3 months thereafter and (after such initial Interest
Period) commencing on the day immediately following the last day of the
preceding Interest Period and ending on the corresponding day 3 months
thereafter.
8.1.45. "LEC" means a local exchange carrier.
8.1.46. "Lender" means Signet Bank, or any successor thereof, or
any assignee, participant or other transferee of Lender hereunder.
8.1.47. "Leverage Ratio" means, at any time such ratio is being
computed, the ratio of "Funded Debt" to "OCF (i.e., Operating Cash Flow)" (for
the immediately preceding four fiscal quarters).
8.1.48. "LIBO Rate" has the meaning set forth in the definition
of "Adjusted LIBO Rate".
8.1.49. "License" means any authorization, construction or other
permit, consent, franchise, ordinance, registration, certificate, license, call
sign, frequency designation, agreement or other right filed with, granted by,
issued by or entered into with any Official Body.
8.1.50. "Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement,
68
encumbrance, lien (statutory or otherwise), reversionary or reclamation
interest, charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
8.1.51. "Line of Credit Commitment" means the Commitment
established pursuant to Section 1.1 hereof and Section 1.3 hereof.
8.1.52. "Line of Credit Facility" means the line of credit
Facility as described in Article 1 hereof.
8.1.53. "Line of Credit Maturity Date" has the meaning set forth
in Section 1.1.2 hereof, as may be extended from time to time in Lender's sole
and absolute discretion.
8.1.54. "Line of Credit Note" means that certain Note payable to
the order of Lender prepared in accordance with Section 1.1.4 hereof, as may be
amended, modified, restated, replaced, supplemented, extended or renewed from
time to time hereafter.
8.1.55. "LLC" means a limited liability company.
8.1.56. "Loan" means any loan or Advance of funds under any
Facility as well as any other credit extended by Lender to Borrower under this
Agreement.
8.1.57. "Loan Documents" means this Agreement, any Notes, the
Collateral Security Documents and any other documents, agreements and
certificates entered into or delivered in connection herewith or therewith or
pursuant hereto or thereto, all as may be amended, modified and supplemented
from time to time.
8.1.58. "Local Authorities" means, individually and collectively,
the state and local governmental authorities that govern the activities of
Borrower.
8.1.59. "Margin Regulation" has the meaning set forth in Section
3.17 hereof.
8.1.60. "Margin Stock" has the meaning set forth in Section 3.17
hereof.
8.1.61. "Material Adverse Change" means any change that has or
causes or could reasonably be expected to have or cause a Material Adverse
Effect.
69
8.1.62. "Material Adverse Effect" means, relative to any
occurrence of whatever nature (including, without limitation, any adverse
determination in any litigation, arbitration, or governmental investigation or
proceeding), a material adverse change to, or, as the case may be, a materially
adverse effect on:
a. The business, assets, revenues, financial
condition, operations, Collateral or prospects of
Borrower or other Obligor; or
b. The ability of Borrower to perform any of its
payment obligations when due or to perform any
other material obligations under any Loan
Document; or
c. Any right, remedy or benefit of Lender under any
Loan Document.
8.1.63. "Material Contract" has the meaning set forth in Section
3.8 hereof.
8.1.64. "Monthly Net Revenue" means, as of the time of any such
determination, the net revenue for the particular month calculated in accordance
with GAAP.
8.1.65. "Notes" means, individually and collectively, each
promissory note delivered to Lender pursuant to any Loan Document and evidencing
any indebtedness to Lender under the Loan Documents (each as may be amended,
modified, supplemented, restated, extended, renewed or replaced from time to
time).
8.1.66. "Obligations" means all of the indebtedness and
obligations (monetary or otherwise) of Borrower and any other Obligor arising
under or in connection with any Loan Document as well as all indebtedness and
obligations (monetary or otherwise) of any Affiliate of Borrower or other
Obligor arising under or in connection with any agreement between any such
Affiliate and Lender (or any Affiliate of Lender).
8.1.67. "Obligor" means Borrower or any other Person (other than
Lender) obligated under any Loan Document.
8.1.68. "OCF" (or "Operating Cash Flow") means, at the time of
any determination, the sum of the following items for Borrower during the
relevant four consecutive fiscal quarter period:
70
a. EBITDA during such period, and
b. Plus reasonable non-recurring acquisition expenses
acceptable to or approved by Lender during such
period, and
c. With respect to liabilities under Deferred
Compensation Plans and Agreements: add accrued
liabilities reflected on the financial statements
in accordance with GAAP during such period, and
subtract payments made on such liabilities during
such period, and otherwise adjust (as appropriate)
to reflect changes required under GAAP during such
period in the amounts of such accrued liabilities
with respect to accruals made during a previous
reporting period, and
d. With respect to other non-cash items: add the
total amount of other non-cash expenses recognized
during such period (to the extent not already
accounted for in one of the above categories), but
subtract the total amount of other non-cash
revenue recognized during such period (to the
extent not already accounted for in one of the
above categories).
For purposes of this calculation, interest shall include interest accrued under
Capital Leases, determined in accordance with GAAP.
8.1.69. "Official Body" means any federal, state, local, or other
government or political subdivision (and any agency, authority, bureau, central
bank, commission, department or instrumentality of either, including the FCC and
each State PUC) and any court, tribunal, grand jury or arbitrator, in each case
whether foreign or domestic.
8.1.70. "Organic Document" means, relative to any entity, its
certificate and articles of incorporation or organization, its by-laws or
operating agreements, and all equityholder agreements, voting agreements and
similar arrangements applicable to any of its authorized shares of capital
stock, its partnership interests or its member interests,
71
and any other arrangements relating to the control or management of any such
entity (whether existing as a corporation, a partnership, an LLC or otherwise).
8.1.71. "PBGC" means the Pension Benefits Guaranty Corporation or
any other entity that succeeds to its responsibilities and powers under ERISA.
8.1.72. "Permitted Guaranties" has the meaning set forth in
Section 5.3 hereof.
8.1.73. "Permitted Indebtedness" has the meaning set forth in
Section 5.2 hereof.
8.1.74. "Permitted Investments" has the meaning set forth in
Section 5.7 hereof.
8.1.75. "Permitted Liens" has the meaning set forth in Section
5.5 hereof.
8.1.76. "Permitted Loans" has the meaning set forth in Section
5.4 hereof.
8.1.77. "Permitted Transfers" has the meaning set forth in
Section 5.6 hereof.
8.1.78. "Person" means any natural person, corporation, LLC,
partnership, firm, association, trust, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or other capacity.
8.1.79. "Plan" means any pension benefit or welfare benefit plan
as defined in Sections 3(1), (2) or (3) of ERISA covering employees of Borrower
or any ERISA Affiliate of Borrower.
8.1.80. "Pledge and Security Agreements" means, individually and
collectively, each pledge and security agreement relating to a pledge of an
equity interest in an enterprise (all as may be amended, modified and
supplemented from time to time) required to be executed and delivered in favor
of Lender pursuant to the Loan Documents.
8.1.81. "Portion" means a designated portion of the indebtedness
hereunder as to which a specified Rate Index (and a corresponding Rate Margin)
has been selected or deemed to be applicable.
8.1.82. "Prime Rate" means the rate of interest per annum
publicly announced by Lender from time to time as its
72
prime rate of interest on direct, short-term borrowings to its large business
customers with high credit standings; such term, however, does not necessarily
mean Lender's best or lowest rate available.
8.1.83. "Public Offering" has the meaning set forth in Section
4.20.1 hereof.
8.1.84. "Rate Index" has the meaning set forth in Section 1.1.5
hereof.
8.1.85. "Rate Margin" has the meaning set forth in Section 1.1.5
hereof.
8.1.86. "Reserve Percentage" has the meaning set forth in the
definition of "Adjusted LIBO Rate".
8.1.87. "SEC" means the Securities and Exchange Commission or any
other entity that succeeds to its responsibilities and powers.
8.1.88. "Securities Acts" means, collectively, the Securities Act
of 1933 and the Securities Exchange Act of 1934, each as amended, and as
implemented by the SEC and interpreted by the SEC or any court of competent
jurisdiction.
8.1.89. "Security Agreements" means, collectively, each security
agreement (as may be amended, modified and supplemented from time to time)
required to be executed and delivered in favor of Lender pursuant to Article 2
hereof, and any other security agreement required or delivered in connection
with the Loan Documents, including, without limitation, any intellectual
property assignments or security agreements required to be delivered pursuant to
Article 2 hereof.
8.1.90. "Senior Funded Debt" means, at the time of any
determination, the aggregate principal amount of indebtedness of Borrower
outstanding under the Loan Documents.
8.1.91. "Settlement Date" means, with respect to any Advance
hereunder, the date on which funds are advanced by Lender.
8.1.92. "Signet Bank" means Signet Bank, a Virginia-chartered,
federally insured commercial bank, or any successor thereof, having an office at
the address specified in Section 9.7 hereof, and which is Lender hereunder at
the time of execution hereof.
8.1.93. "State Act" means the law of any state
73
in which Borrower does business that governs the provision of telecommunications
services within such state that are applicable to Borrower, as amended from time
to time, and as implemented by the applicable State PUC or any court of
competent jurisdiction.
8.1.94. "State PUC" means the public utilities commission of any
state or any other regulatory agency of any state in which Borrower does
business that is vested with jurisdiction over Borrower and over the provision
of telecommunication services within such state.
8.1.95. "Subordinated Indebtedness" means all indebtedness and
monetary obligations of Borrower (other than indebtedness in favor of Lender or
indebtedness and obligations expressly excluded therefrom by Lender), including,
without limitation, all indebtedness treated or defined as "Subordinated
Indebtedness" under any separate Subordination Agreement by and among Borrower,
Lender and another Person. Notwithstanding the foregoing, the term "Subordinated
Indebtedness" (unless Lender otherwise requires) does not include indebtedness
permitted under Section 5.2(a or b) hereof or (to the extent consistent with
Section 5.5.b hereof) under Section 5.2(c or d) hereof.
8.1.96. "Subscriber" means any Person who is a customer of
Borrower's residential telecommunications services (including, without
limitation, long distance services).
8.1.97. "Subsidiary" of any Person or entity means any Person as
to which such other Person or entity (a) directly or indirectly owns, controls
or holds 25% or more of the outstanding beneficial interest or (b) is otherwise
required in accordance with GAAP to be considered as part of a consolidated
organization.
8.1.98. "Tariff" means any tariff, rate schedule or similar
document that is either (a) required by law or applicable regulation to be filed
with the FCC or a State PUC or (b) permitted by law or applicable regulation so
to be filed and actually filed by Borrower.
8.1.99. "UCC" means the Uniform Commercial Code as in effect in
the applicable jurisdiction.
8.1.100. "Warrants" has the meaning set forth in Section 1.7
hereof.
8.2. Rules of Interpretation and Construction.
8.2.1. Plural: Gender. Whenever used herein, (a) a singular
number includes the plural, and the plural includes
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the singular, and (b) the use of the masculine, feminine or neuter gender
includes all genders.
8.2.2. Financial and Accounting Terms. Except as otherwise
specifically provided herein, financial and accounting terms used in the
foregoing definitions or elsewhere in the Loan Documents shall be defined and
determined in accordance with GAAP.
8.2.3. Independence of Covenants and Defaults. All covenants and
defaults contained in the Loan Documents shall be given independent effect. If a
particular action or condition is not permitted by any covenant in the Loan
Documents, then the fact that such action or condition would be permitted by an
exception to (or would otherwise be within the limitations of) another covenant
in the Loan Documents shall not avoid the occurrence or existence of a Default
if such action is taken or if such condition exists.
ARTICLE 9: MISCELLANEOUS
9.1. Indemnification. Reliance and Assumption of Risk Provisions. Without
limiting any other indemnification in any Loan Document, Borrower hereby agrees
to defend Lender (and its directors, officers, employees, agents, counsels and
Affiliates) from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages, interests, judgments, costs, or expenses
(including without limitation, fees and disbursements of counsel) incurred by
any of them arising out of or in any way connected with any Loan Document,
except for losses resulting directly and exclusively from such Person's own
gross negligence, willful misconduct or fraud. In addition, Borrower will
reimburse and indemnify Lender for all costs, expenses and losses resulting from
the following: (1) any failure or refusal by Borrower or by any Affiliate of
Borrower to provide any requested assistance or cooperation in connection with
any attempt by Lender to liquidate any Collateral in the event of any Event of
Default and/or any attempt by Lender to otherwise exercise its rights hereunder,
and (2) any misrepresentation, gross negligence, fraud or willful misconduct by
Borrower (or any of its employees or officers), or any other person or entity
pledging Collateral hereunder. Moreover, with respect to any Advance Request or
other communication between Borrower and Lender hereunder and all other matters
and transactions in connection therewith, Borrower hereby irrevocably authorizes
Lender to accept, rely upon, act upon and comply with any verbal or written
instructions, requests, confirmations and orders of any Authorized Officer of
Borrower. Borrower acknowledges that the transmissions of any such instruction,
request, confirmation,
75
order or other communication involves the possibility of errors, omissions,
mistakes and discrepancies, and Borrower agrees to adopt such internal measures
and operational procedures to protect its interest. By reason thereof, Borrower
hereby assumes all risk of loss and responsibility for -- and hereby releases
and discharges Lender from any and all risk of loss and responsibility for, and
agrees to indemnify, reimburse on demand and hold Lender harmless from -- any
and all claims, actions, damages, losses, liability and expenses by reason of or
in any way related to (a) Lender's accepting, relying and acting upon, complying
with or observing any such instructions, requests, confirmations or orders from
or on behalf of any such Authorized Officer, and (b) any such errors, omissions,
mistakes and discrepancies by (or otherwise resulting from or attributable to
the actions or inactions of) any Authorized Officer or Borrower; provided,
however, Borrower does not assume hereby the risk of any foreseeable actual loss
resulting directly and exclusively from Lender's own fraud or willful
misconduct. Borrower's obligations provided for in this Section will survive any
termination of this Agreement, and the repayment of the outstanding balances
hereunder.
9.2. Assignments and Participations. No Loan Document may be assigned (in
whole or in part) by Borrower without the prior written consent of Lender.
Notwithstanding any other provision of any Loan Document, without receiving any
consent of Borrower, Lender at any time and from time to time may syndicate,
participate or otherwise transfer or assign its rights and obligations under the
Loan Documents (or the indebtedness evidenced thereby) as follows: (a) up to 49%
of its rights and obligations under any of the Loan Documents (or any of the
indebtedness evidenced thereby) to any Person, and (b) all (or any proportionate
part of) its rights and obligations under any of the Loan Documents (or any of
the indebtedness evidenced thereby) to any Affiliate of Lender or any
successor-in-interest to Lender's Media Communications Group, and (c) all (or
any proportionate part of) its rights and obligations under any of the Loan
Documents (or any of the indebtedness evidenced thereby) to any Person during
the existence of any Event of Default under the Loan Documents. In addition,
Borrower will not unreasonably withhold its consent to any request by Lender to
syndicate, participate or otherwise transfer or assign all or any portion of its
interest in excess of 49%. Lender will make reasonable efforts to notify
Borrower of any such participation, transfer or assignment within twenty (20)
Business Days thereafter; however, a failure to so notify will in no way impair
any rights of Lender or any participant, transferee or assignee. Upon execution
and delivery of an appropriate instrument between any such participant,
transferee or assignee and Lender, then (at Lender's request) such participant,
transferee or assignee will become a
76
Lender party to this Agreement and will have all the rights and obligations of a
Lender as set forth in such instrument. At Lender's request, Borrower will
execute (or re-execute) and deliver (or otherwise obtain) any documents
necessary to reflect or implement any such participation, transfer or assignment
(including, without limitation, replacement promissory notes and any requested
letters authorizing such participant, transferee or assignee to rely on existing
certificates and opinions) and will otherwise fully cooperate in any such
syndication process.
9.3. No Waiver: Delay. To be effective, any waiver by Lender must be
expressed in a writing executed by Lender. Once a Default occurs under the Loan
Documents, then such Default will continue to exist until it either is cured (to
the extent specifically permitted) in accordance with the Loan Documents or is
otherwise expressly waived by Lender (in its sole and absolute discretion) in
writing; and once an Event of Default occurs under the Loan Documents, then such
Event of Default will continue to exist until it is expressly waived by Lender
(in its sole and absolute discretion) in writing. If Lender waives any power,
right or remedy arising hereunder or under any applicable law, then such waiver
will not be deemed to be a waiver (a) upon the later occurrence or recurrence of
any events giving rise to the earlier waiver or (b) as to any other Obligor. No
failure or delay by Lender to insist upon the strict performance of any term,
condition, covenant or agreement of any of the Loan Documents, or to exercise
any right, power or remedy hereunder, will constitute a waiver of compliance
with any such term, condition, covenant or agreement, or preclude Lender from
exercising any such right, power, or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Agreement
or any other Loan Document, Lender will not be deemed to waive the right either
to require prompt payment when due of all other amounts payable under this
Agreement or any other Loan Document or to declare an Event of Default for
failure to effect such prompt payment of any such other amount. The remedies
provided herein are cumulative and not exclusive of each other, the remedies
provided by law, and the remedies provided by the other Loan Documents.
9.4. Modification and Amendment. Except as otherwise expressly provided in
this Agreement, no modification or amendment hereof will be effective unless
made in a writing signed by appropriate officers of the parties hereto.
9.5.Disclosure of Information to Third Parties. Lender will employ
reasonable procedures to treat as confidential all written, non-public
information delivered to Lender pursuant to this Agreement concerning the
performance, operations, assets, structure and business plans of Borrower that
is conspicuously
77
designated by Borrower as confidential information. While other or different
confidentiality procedures may be employed by Lender, the actual procedures
employed by Lender for this purpose will be conclusively deemed to be reasonable
if they are at least as protective of such information as the procedures
generally employed by Lender to safeguard the confidentiality of Lender's own
information that Lender generally considers to be confidential. Notwithstanding
the foregoing, Lender may disclose any information concerning Borrower in
Lender's possession from time to time (a) to permitted participants,
transferees, assignees and investors (including prospective participants,
transferees, assignees and investors), but subject to a reasonable
confidentiality agreement regarding any nonpublic confidential information
thereby disclosed, and (b) in response to credit inquiries consistent with
general banking practices, and (c) to any federal or state regulator of Lender,
and (d) to Lender's Affiliates, employees, legal counsel, appraisers,
accountants, agents and investors, and (e) to any Person pursuant to compulsory
judicial process, and (f) to any judicial or arbitration forum in connection
with enforcing the Loan Documents or defending any action based upon the Loan
Documents or the relationship between Lender and Borrower, and (g) to any other
Person with respect to the public or non-confidential portions of any such
information. Lender may also include operational and performance information and
data relating to Borrower in compilations, reports and data bases assembled by
Lender (or its Affiliates) and used to conduct, support, assist in and validate
portfolio, industry and credit analysis; provided, however, that Lender may not
thereby disclose to other Persons any information relating to Borrower in a
manner that is attributable to Borrower unless (1) such disclosure is permitted
under the standards outlined above in this Section or (2) Borrower otherwise
separately consent thereto (which consent may not be unreasonably withheld).
9.6.Binding Effect and Governing Law. This Agreement and the other Loan
Documents have been delivered by Borrower and the other Obligors and have been
received by Lender in the Commonwealth of Virginia. This Agreement and all
documents executed hereunder are binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. This Agreement and
all documents executed hereunder are governed as to their validity,
interpretation, construction and effect by the laws of the Commonwealth of
Virginia (without giving effect to the conflicts of law rules of Virginia).
9.7. Notices. Any notice, request, consent, waiver or other communication
required or permitted under or in connection with the Loan Documents will be
deemed satisfactorily given if it is in writing and is delivered either
personally to the addressee
78
thereof, or by prepaid registered or certified U.S. mail (return receipt
requested), or by a nationally recognized commercial courier service with
next-day delivery charges prepaid, or by telegraph, or by facsimile (voice
confirmed), or by any other reasonable means of personal delivery to the party
entitled thereto at its respective address set forth below:
If to Borrower [Party Entitled to Notice]
or its Affiliates: c/o STARTEC, Inc.
00000 Xxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to the following Listed counsel or
such other counsel as may be designated by
Borrower from time to time (and which notice shall
not constitute notice to Borrower and failure to
give such notice shall not affect the
effectiveness of notice to Borrower):
Shulman, Rogers, Gandal,
Pordy & Xxxxx, P.A.
00000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, Esquire
Facsimile: (000) 000-0000
If to Lender: Signet Bank
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx,
Vice President
Facsimile: (000) 000-0000
With a copy to the following listed counsel or
such other counsel as may be designated by Lender
from time to time (and which notice shall not
constitute notice to Lender and failure to give
such notice shaLl not affect the effectiveness of
notice to Lender):
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Xxxxxx X. Xxxxxxxxxx, Esquire
Xxxxx Xxxx LLP
000 00xx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
Any party to a Loan Document may change its address or facsimile number for
notice purposes by giving notice thereof to the other parties to such Loan
Document in accordance with this Section, provided that such change shall not be
effective until 2 calendar days after notice of such change. All such notices
and other communications will be deemed given and effective (a) if by mail, then
upon actual receipt or 5 calendar days after mailing as provided above
(whichever is earLier), or (b) if by facsimile, then upon successful transmittal
to such party's designated number, or (c) if by telegraph, then upon actual
receipt or 2 Business Days after delivery to the telegraph company (whichever is
earlier), _ (d) if by nationally recognized commercial courier service, then
upon actual receipt or 2 Business Days after delivery to the courier service
(whichever is earlier), or (e) if otherwise delivered, then upon actual receipt.
For any and all purposes related to giving and receiving notices and
communications between Borrower and Lender under any Loan Document, Borrower
hereby irrevocably appoints its President and Chief Financial Officer as its
agents to whom Lender may give and from whom Lender may receive all such notices
and communications.
9.8. Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof.
9.9. Time of Day. All time of day restrictions imposed herein shall be
calculated using Eastern Time.
9.10. Relationship with Prior Agreements. This Agreement completely and
fully supersedes all oral agreements and all other and prior written agreements
by and between Borrower and Lender concerning the terms and conditions of this
credit arrangement. This Agreement renews, restructures and continues the
Business Loan Agreement between Borrower and Lender dated as of June 11, 1997
without any novation, discharge, release or satisfaction of the underlying
obligations or indebtedness (or any guaranty or collateral security therefor),
all of which obligations, indebtedness and security remain outstanding under the
Credit Agreement and the amended and restated Note.
9.11. Severability. If fulfillment of any provision of or any transaction
related to any Loan Document at the time performance is due involves
transcending the limit of validity prescribed by applicable law, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity. If
80
any clause or provision of this Agreement operates or would prospectively
operate to invalidate this Agreement or any other Loan Document in whole or in
part, then such clause or provision only shall be void (as though not contained
herein or therein), and the remainder of this Agreement or such other Loan
Document shall remain operative and in full force and effect; provided, however,
if any such clause or provision pertains to the repayment of any indebtedness
hereunder, then the occurrence of any such invalidity shall constitute an
immediate Event of Default hereunder.
9.12. Termination and Survival. All agreements, representations, warranties
and covenants of Borrower contained herein or in any documentation required
hereunder will survive the execution and delivery of this Agreement and the
other Loan Documents and the funding of the Advances hereunder and will continue
in full force and effect until terminated in accordance with this Section.
Except as otherwise provided in Section 4.16 hereof, Section 9.16 hereof,
Section 9.13 hereof and the other indemnifications and waivers under the Loan
Documents, this Agreement will terminate upon satisfaction of each of the
following events: (i) payment to Lender in full (unconditionally and
indefeasibly) of the entire indebtedness and monetary obligations due hereunder
and under the other Loan Documents, and (ii) the termination of the Facilities
hereunder, and (iii) return and cancellation of any effective letters of credit
issued by Lender for the account of Borrower.
9.13. Reinstatement. To the maximum extent not prohibited by applicable
law, this Agreement and the other Loan Documents (and the indebtedness hereunder
and Collateral therefor) will be reinstated and the indebtedness correspondingly
increased (as though such payment(s) had not been made) if at any time any
amount received by Lender in respect of any Loan Document is rescinded or must
otherwise be restored, refunded or returned by Lender to Borrower or any other
Person (a) upon or as a result of the insolvency, bankruptcy, dissolution,
liquidation or reorganization of Borrower or any other Person, or (b) upon or as
a result of the appointment of any receiver, intervenor, conservator, trustee or
similar official for Borrower or any other Person or for any substantial part of
the assets of Borrower or any other Person, or (c) for any other reason.
9.14. Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all the signatures on such counterparts
appeared on one document. Each such counterpart will be deemed to be an original
but all counterparts together will constitute one and the same instrument.
81
9.15. Conflict Provision. In the event of an irreconcilable conflict
between the terms and conditions of this Agreement and the terms and conditions
of any other Loan Document (other than a Note or any warrant issued to Lender),
the terms and conditions of this Agreement shall govern.
9.16. Waiver of Suretyship Defenses. Borrower hereby waives any and all
defenses and rights of discharge based upon suretyship or impairment of
collateral (including, without limitation, lack of attachment or perfection with
respect thereto) that it may now have or may hereafter acquire with respect to
Lender or any of its obligations hereunder, under any Loan Document or under any
other agreement that it may have or may hereafter enter into with Lender.
9.17. Waiver of Liability. Borrower (a) agrees that Lender (and its
directors, officers, employees and agents) shall have no liability to Borrower
(whether sounding in tort, contract or otherwise) for losses or costs suffered
or incurred by Borrower in connection with or in any way related to the
transactions contemplated or the relationship established by any Loan Document,
or any act, omission or event occurring in connection herewith or therewith,
except for foreseeable actual losses resulting directly and exclusively from
Lender's own gross negligence, willful misconduct or fraud and (b) waives,
releases and agrees not to xxx upon any claim against Lender (or its directors,
officers, employees or agents) whether sounding in tort, contract or otherwise,
except for claims for foreseeable actual losses resulting directly and exclusive
from Lender's own gross negligence, willful misconduct or fraud. Notwithstanding
the foregoing, under no circumstances will Lender (or its directors, officers,
employees or agents) be liable to Borrower for any loss, cost or damage suffered
or incurred as a result of any action or inaction by Lender (or its directors,
officers, employees or agents) during the existence of a Default or an Event of
Default, except for foreseeable actual losses resulting directly and exclusively
from Lender's own fraud or criminal activity. Moreover, whether or not such
damages are related to a claim that is subject to the waiver effected above and
whether or not such waiver is effective, Lender (and its directors, owners,
employees and agents) shall have no liability with respect to (and Borrower
hereby waives, releases and agrees not to xxx upon any claim for) any special,
indirect, consequential, punitive or non-foreseeable damages suffered by
Borrower in connection with or in any way related to the transactions
contemplated or the relationship established by any Loan Document, or any act,
omission or event occurring in connection herewith or therewith.
9.18. Forum Selection: Consent to Jurisdiction. Any litigation in
connection with or in any way related to any Loan
82
Document, or any course of conduct, course of dealing, statements (whether
verbal or written), actions or inactions of Lender or Borrower will be brought
and maintained exclusively in the courts of the Commonwealth of Virginia or in
the United States District Court for the Eastern District of Virginia; provided,
however, that any suit seeking enforcement against Borrower, any Collateral or
any other property may also be brought (at Lender's option) in the courts of any
other jurisdiction where such Collateral or other property may be found or where
Lender may otherwise obtain personal jurisdiction over Borrower. Borrower hereby
expressly and irrevocably submits to the jurisdiction of the courts of the
Commonwealth of Virginia and of the United States District Court for the Eastern
District of Virginia for the purpose of any such litigation as set forth above
and irrevocably agrees to be bound by any final and non-applicable judgment
rendered thereby in connection with such litigation. Borrower further
irrevocably consents to the service of process by registered or certified mail,
postage prepaid, or by personal service within or outside the Commonwealth of
Virginia. Borrower hereby expressly and irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter may have
to the laying of venue of any such litigation brought in any such court referred
to above and any claim that any such litigation has been brought in an
inconvenient forum. To the extent that Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution or otherwise) with respect to itself or its property, then Borrower
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement.
9.19. Waiver of Jury Trial. Lender and Borrower each hereby knowingly,
voluntarily and intentionally waives any rights it may have to a trial by Jury
in respect of any litigation (whether as claim, counter-claim, affirmative
defense or otherwise) in connection with or in any way related to any of the
Loan Documents, or any course of conduct, course of dealing, statements (whether
verbal or written), actions or inactions of Lender or Borrower. Borrower
acknowledges and agrees (a) that it has received full and sufficient
consideration for this provision (and each other provision of each other Loan
Document to which it is a party), and (b) that it has been advised by legal
counsel in connection herewith, and (c) that this provision is a material
inducement for Lender entering into the Loan Documents and funding Advances
thereunder.
[BALANCE OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the undersigned, by there duly authorized officers, have
executed this Credit Facility Agreement, as an instrument under seal (whether or
not any such seals are physically attached hereto), as of the day and year first
above written.
ATTEST: STARTEC, INC.
By: By:
----------------------------- -------------------------------
Pravhav Maniya Ram Xxxxxxx
Chief Financial Officer President
[CORPORATE SEAL]
WITNESS: SIGNET BANK
By: By:
----------------------------- -------------------------------
Xxxxxxx X. Xxxxxxx,
Vice President
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