-----------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
DATED AS OF FEBRUARY 4, 1999
AMONG
KMC TELECOM III, INC.
AND
KMC TELECOM LEASING III LLC
AS BORROWERS,
THE FINANCIAL INSTITUTIONS FROM TIME TO
TIME PARTIES HERETO,
AS LENDERS,
AND
LUCENT TECHNOLOGIES INC.
AS AGENT FOR THE LENDERS
and
STATE STREET BANK AND TRUST COMPANY
AS COLLATERAL AGENT FOR THE LENDERS
-----------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I DEFINITIONS......................................................1
SECTION 1.01. DEFINITIONS.............................................1
SECTION 1.02. ACCOUNTING TERMS.......................................22
SECTION 1.03. OTHERS DEFINED IN NEW YORK UNIFORM COMMERCIAL CODE.....22
ARTICLE II LOANS...........................................................22
SECTION 2.01. AGREEMENT TO LEND......................................22
SECTION 2.02. LOANS..................................................23
SECTION 2.03. PROCEDURE FOR LOAN REQUEST AND BORROWING COMMITMENT....24
SECTION 2.04. THE NOTES..............................................26
SECTION 2.05. INTEREST ON LOANS......................................26
SECTION 2.06. CONVERSION OR CONTINUATION.............................27
SECTION 2.07. SPECIAL PROVISIONS GOVERNING LIBOR LOANS...............28
SECTION 2.08. PAYMENTS...............................................30
SECTION 2.09. OPTIONAL AND MANDATORY PREPAYMENT OF LOANS; OPTIONAL
AND MANDATORY REDUCTION OF COMMITMENT AMOUNT...........31
SECTION 2.10. FEES...................................................32
SECTION 2.11. MANNER OF PAYMENT; SPECIAL TAX CONSIDERATIONS..........33
SECTION 2.12. MAXIMUM LAWFUL INTEREST RATE...........................38
SECTION 2.13. FUNDING ISSUES.........................................38
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................40
SECTION 3.01. ORGANIZATION; POWERS...................................40
SECTION 3.02. CORPORATE AUTHORIZATION................................40
SECTION 3.03. FINANCIAL STATEMENTS...................................41
SECTION 3.04. NO MATERIAL ADVERSE CHANGE.............................41
SECTION 3.05. LITIGATION.............................................41
SECTION 3.06. TAX RETURNS............................................41
SECTION 3.07. NO DEFAULTS............................................41
SECTION 3.08. PROPERTIES.............................................42
SECTION 3.09. LICENSES, MATERIAL AGREEMENTS, INTELLECTUAL PROPERTY...42
SECTION 3.10. COMPLIANCE WITH LAWS...................................42
SECTION 3.11. ERISA..................................................43
SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING
COMPANY ACT............................................43
SECTION 3.13. FEDERAL RESERVE REGULATIONS............................44
SECTION 3.14. COLLATERAL.............................................44
SECTION 3.15. CHIEF PLACE OF BUSINESS................................44
SECTION 3.16. OTHER CORPORATE NAMES..................................44
SECTION 3.17. INSURANCE..............................................44
SECTION 3.18. KMC III TIER III PLAN..................................44
SECTION 3.19. CAPITALIZATION AND SUBSIDIARIES........................45
SECTION 3.20. REAL PROPERTY, LEASES AND EASEMENTS....................45
SECTION 3.21. SOLVENCY...............................................45
SECTION 3.22. BROKERS, ETC...........................................45
SECTION 3.23. NO MATERIAL MISSTATEMENTS..............................46
i
SECTION 3.24. YEAR 2000 PROBLEMS.....................................46
ARTICLE IV CONDITIONS FOR LOANS............................................46
SECTION 4.01. CONDITIONS PRECEDENT TO INITIAL LOANS..................46
SECTION 4.02. CONDITIONS PRECEDENT TO ALL LOANS......................51
SECTION 4.03. CONDITIONS PRECEDENT TO LOANS IN
EXCESS OF THE LEVEL 1 LENDING......................... 52
SECTION 4.04. CONDITIONS PRECEDENT TO LOANS IN
EXCESS OF THE LEVEL 2 LENDING LIMIT................... 52
ARTICLE V AFFIRMATIVE COVENANTS...........................................53
SECTION 5.01. CORPORATE AND FRANCHISE EXISTENCE......................53
SECTION 5.02. COMPLIANCE WITH LAWS, ETC..............................53
SECTION 5.03. MAINTENANCE OF PROPERTIES..............................54
SECTION 5.04. INSURANCE..............................................54
SECTION 5.05. OBLIGATIONS AND TAXES..................................59
SECTION 5.06. FINANCIAL STATEMENTS, REPORTS, ETC.....................60
SECTION 5.07. LITIGATION AND OTHER NOTICES...........................62
SECTION 5.08. MORTGAGES; LANDLORD CONSENTS;
LICENSES AND OTHER AGREEMENTS..........................62
SECTION 5.09. ERISA..................................................63
SECTION 5.10. ACCESS TO PREMISES AND RECORDS.........................63
SECTION 5.11. DESIGN AND CONSTRUCTION................................64
SECTION 5.12. ENVIRONMENTAL NOTICES..................................64
SECTION 5.13. AMENDMENT OF ORGANIZATIONAL DOCUMENTS..................64
SECTION 5.14. THIRD PARTY AGREEMENTS AND DELIVERY
AND ACCEPTANCE CERTIFICATES............................64
SECTION 5.15. ACCOUNTS PAYABLE.......................................65
SECTION 5.16. INTELLECTUAL PROPERTY..................................65
SECTION 5.17. FISCAL YEAR............................................65
SECTION 5.18. COMPLETED SYSTEMS......................................65
SECTION 5.19. YEAR 2000 PROBLEMS.....................................65
SECTION 5.20. SUBSIDIARY GUARANTEES AND PLEDGES......................65
SECTION 5.21. ACCOUNTING.............................................66
SECTION 5.22. FURTHER ASSURANCES.....................................66
ARTICLE VI NEGATIVE COVENANTS..............................................66
SECTION 6.01. LIENS, ETC.............................................66
SECTION 6.02. USE OF PROCEEDS........................................67
SECTION 6.03. SALE OF ASSETS, CONSOLIDATION, MERGER, ETC.............67
SECTION 6.04. DIVIDENDS AND DISTRIBUTIONS; SALE OF EQUITY INTERESTS..67
SECTION 6.05. MANAGEMENT FEES AND PERMITTED CORPORATE OVERHEAD.......68
SECTION 6.06. GUARANTEES; THIRD PARTY SALES AND LEASES...............68
SECTION 6.07. INVESTMENTS............................................68
SECTION 6.08. SUBSIDIARIES...........................................68
SECTION 6.09. PERMITTED ACTIVITIES...................................69
SECTION 6.10. DISPOSITION OF LICENSES, ETC...........................69
SECTION 6.11. TRANSACTIONS WITH AFFILIATES...........................69
SECTION 6.12. ERISA..................................................69
ii
SECTION 6.13. INDEBTEDNESS...........................................70
SECTION 6.14. PREPAYMENT AND DEBT DOCUMENTS..........................70
SECTION 6.15. SALE AND LEASEBACK TRANSACTIONS........................71
SECTION 6.16. MARGIN REGULATION......................................71
SECTION 6.17. MANAGEMENT AND TAX SHARING AGREEMENTS..................71
ARTICLE VII FINANCIAL COVENANTS...........................................71
SECTION 7.01. FINANCIAL COVENANTS PRIOR TO ACHIEVING POSITIVE EBITDA.71
SECTION 7.02. FINANCIAL COVENANTS AFTER ACHIEVING POSITIVE EBITDA....72
ARTICLE VIII COLLATERAL SECURITY...........................................74
SECTION 8.02. PRESERVATION OF COLLATERAL AND PERFECTION
OF SECURITY INTERESTS THEREIN..........................75
SECTION 8.03. APPOINTMENT OF THE COLLATERAL AGENT AS THE
BORROWERS' ATTORNEY-IN-FACT............................76
SECTION 8.04. COLLECTION OF ACCOUNTS AND RESTRICTED
ACCOUNT ARRANGEMENTS...................................76
SECTION 8.05. CURE RIGHTS............................................77
ARTICLE IX EVENTS OF DEFAULT; REMEDIES.....................................77
SECTION 9.01. EVENTS OF DEFAULT......................................77
SECTION 9.02. TERMINATION OF COMMITMENT; ACCELERATION................81
SECTION 9.03. WAIVERS................................................81
SECTION 9.04. RIGHTS AND REMEDIES GENERALLY..........................81
SECTION 9.05. ENTRY UPON PREMISES AND ACCESS TO INFORMATION..........82
SECTION 9.06. SALE OR OTHER DISPOSITION OF COLLATERAL BY THE AGENT...82
SECTION 9.07. GOVERNMENTAL APPROVALS.................................82
SECTION 9.08. APPOINTMENT OF RECEIVER OR TRUSTEE.....................83
SECTION 9.09. RIGHT OF SETOFF........................................84
ARTICLE X THE AGENT AND THE COLLATERAL AGENT..............................84
SECTION 10.01. APPOINTMENT OF AGENT..................................84
SECTION 10.02. AGENT'S RELIANCE, ETC.................................85
SECTION 10.03. LUCENT AND AFFILIATES.................................86
SECTION 10.04. LENDER CREDIT DECISION................................86
SECTION 10.05. INDEMNIFICATION.......................................87
SECTION 10.06. SUCCESSOR AGENT.......................................87
SECTION 10.07. PAYMENTS; NON-FUNDING LENDERS;
INFORMATION; ACTIONS IN CONCERT.......................88
SECTION 10.08. COLLATERAL MATTERS....................................89
SECTION 10.09. AGENCY FOR PERFECTION.................................90
SECTION 10.10. CONCERNING THE COLLATERAL AND THE RELATED
LOAN DOCUMENTS AND THE COLLATERAL AGENT...............91
ARTICLE XI MISCELLANEOUS...................................................91
SECTION 11.01. NOTICES; ACTION ON NOTICES, ETC.......................91
SECTION 11.02. NO WAIVERS; AMENDMENTS................................92
SECTION 11.03. GOVERNING LAW AND JURISDICTION........................93
SECTION 11.04. EXPENSES..............................................93
SECTION 11.05. EQUITABLE RELIEF......................................93
iii
SECTION 11.06. INDEMNIFICATION; LIMITATION OF LIABILITY..............94
SECTION 11.07. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.......95
SECTION 11.08. SUCCESSORS AND ASSIGNS; ASSIGNMENTS; PARTICIPATIONS...95
SECTION 11.09. SEVERABILITY..........................................98
SECTION 11.10. COVER PAGE, TABLE OF CONTENTS AND SECTION HEADINGS....98
SECTION 11.11. COUNTERPARTS..........................................98
SECTION 11.12. APPLICATION OF PAYMENTS...............................98
SECTION 11.13. MARSHALLING; PAYMENTS SET ASIDE.......................98
SECTION 11.14. SERVICE OF PROCESS....................................99
SECTION 11.15. WAIVER OF JURY TRIAL, ETC.............................99
SECTION 11.16. CONFIDENTIALITY.......................................99
SECTION 11.17. ENTIRE AGREEMENT, ETC................................100
SECTION 11.18. NO STRICT CONSTRUCTION...............................100
EXHIBITS
EXHIBIT A KMC III Tier III Plan
EXHIBIT B Form of Collateral Assignment of Leases
EXHIBIT C Form of Collateral Assignment of Licenses
EXHIBIT D Form of Landlord Waiver
EXHIBIT E Form of Note
EXHIBIT F Form of Periodic Reporting Certificate
EXHIBIT G-1 Form of Guaranty of KMC Holdings
EXHIBIT G-2 Form of Guaranty of KMC IHC
EXHIBIT H-1 Form of Notice of Borrowing
EXHIBIT H-2 Form of Notice of Continuation/Conversion
EXHIBIT I Financials
EXHIBIT J-1 Form of Secretary's Certificate of Borrower
EXHIBIT J-2 Form of Secretary's Certificate of KMC Holdings
EXHIBIT J-3 Form of Secretary's Certificate of KMC IHC
EXHIBIT K-1 Form of Opinion of Borrowers' Special Counsel
EXHIBIT K-2 Form of Opinion of Borrowers' Regulatory Counsel
EXHIBIT K-3 Form of Opinion of Borrowers' Local Counsel
iv
EXHIBIT L Form of Pledge Agreement
EXHIBIT M Form of Loss Payable Endorsement
EXHIBIT N Form of Restricted Account Agreement
EXHIBIT O Form of Assignment Agreement
EXHIBIT P Form of Delivery and Acceptance Certificate
EXHIBIT Q Form of Trademark Security Agreement
EXHIBIT R Form of Contribution Agreement
v
SCHEDULES
SCHEDULE 1.01(a) Services
SCHEDULE 3.02 Consents
SCHEDULE 3.05 Litigation
SCHEDULE 3.09(a) Governmental Authorizations and Approvals
SCHEDULE 3.09(b) Material Agreements
SCHEDULE 3.09(c) Intellectual Property
SCHEDULE 3.10 Environmental Matters
SCHEDULE 3.11 Plans
SCHEDULE 3.14 Filing Offices
SCHEDULE 3.16 Corporate and Fictitious Names
SCHEDULE 3.17 Insurance
SCHEDULE 3.19 Capitalization and Subsidiaries
SCHEDULE 3.20 Real Property, Leased Real Property and Easements
SCHEDULE 3.22 Fees
SCHEDULE 6.11 Transactions With Affiliates
SCHEDULE 8.04 Collection Accounts
ANNEXES
ANNEX A - Commitment Amounts
ANNEX B - Financial Covenant Information
ANNEX C - Amortization Schedule
vi
LOAN AND SECURITY AGREEMENT ("AGREEMENT") dated as of February 4, 1999
among KMC TELECOM III, INC., a Delaware corporation ("KMC III"), KMC TELECOM
LEASING III LLC, a Delaware limited liability company ("KMC LEASING III" and
together with KMC III the "BORROWERS"), the financial institutions signatory
hereto from time to time, as lenders (the "LENDERS"), Lucent Technologies Inc.,
as agent for the Lenders (in such capacity, the "AGENT") and State Street Bank
and Trust Company, as collateral agent for the Lenders (in such capacity, the
"COLLATERAL AGENT").
WHEREAS, the Borrowers have requested the Lenders to extend credit to the
Borrowers;
WHEREAS, the Lenders are willing to extend such credit to the Borrowers
subject to, and on the terms and conditions of, this Agreement;
Accordingly, in consideration of the mutual promises contained herein, the
Borrowers, the Agent, the Collateral Agent and the Lenders agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. As used in this Agreement, the following words
and terms shall have the meanings specified below:
"ACCESS LINES" shall mean the total number of installed business lines that
provide service to a business customer of a Borrower including "resale",
"on-net" and "unbundled network element"; PROVIDED, that resale shall constitute
no more than twenty-five percent (25%) of the total Access Lines.
"ACCOUNTS" shall mean all present and future rights of any Borrower to
payment for goods sold or leased or for services rendered which are not
evidenced by instruments or chattel paper, and whether or not they have been
earned by performance.
"ADDITIONAL PURCHASE AGREEMENT" shall mean a purchase agreement between any
Borrower and an Additional Vendor relating to the purchase of Telecommunications
Equipment on terms and conditions reasonably satisfactory to the Agents, if such
purchase agreement contemplates Telecommunications Equipment purchases in excess
of $5,000,000 in any one year or $15,000,000 in the aggregate, otherwise on the
terms and conditions reasonably satisfactory to the Collateral Agent.
"ADDITIONAL VENDOR" shall mean a vendor of Telecommunications Equipment
other than Lucent, which Additional Vendor shall be reasonably satisfactory to
the Agent if the Additional Purchase Agreement the Additional Vendor is a party
to contemplates Telecommunications Equipment purchases in excess of $5,000,000
in any one year or $15,000,000 in the aggregate, otherwise on the terms and
conditions reasonably satisfactory to the Collateral Agent.
"AFFILIATE" shall mean any Person other than any Lender directly or
indirectly controlling, controlled by or under common control with any Borrower
and any officer or shareholder of such Person or any Borrower, which shareholder
beneficially owns at least ten percent (10%) of the Equity Interests of such
Person or any Borrower. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by",
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, that
beneficial ownership of at least 10% of the Equity Interests of a Person shall
be deemed to constitute control.
"AGED EQUIPMENT" shall mean Telecommunications Equipment, which has been in
commercial operation for more than twelve months.
"AGENTS" shall mean collectively, the Agent and the Collateral Agent.
"APPLICABLE MARGIN" shall mean with respect to each Loan bearing interest
based upon the Base Rate and each Loan bearing interest based upon the LIBO
Rate, the rate per annum set forth under the relevant column headings opposite
the applicable Total Leverage Ratio.
APPLICABLE MARGIN
--------------------------------------------------------------------------------
BEFORE THE STEP DOWN DATE AFTER THE STEP DOWN DATE
Applicable Applicable Applicable Applicable
Total Leverage Margin for Margin for Margin for Margin for
Ratio Base Rate LIBOR Loans Base Rate LIBOR Loans
Loans Loans
--------------- ------------ ----------- ------------ -------------
Greater than 3.25% 4.25% 2.75% 3.75%
or equal to
12.0 to 1.0
Less than 12.0 3.00% 4.00% 2.50% 3.50%
but greater
than or equal
to 10.0 to 1.0
Less than 10.0 2.75% 3.75% 2.25% 3.25%
but greater
than or equal
to 8.0 to 1.0
Less than 8.0 2.50% 3.50% 2.00% 3.00%
but greater
than or equal
to 6.0 to 1.0
Less than 6.0 2.25% 3.25% 1.75% 2.75%
to 1.0
2
The Total Leverage Ratio on the Initial Funding Date shall be greater than 12.0
to 1.0. Thereafter such Ratio shall be determined on the notes of the financial
statements provided pursuant to SECTION 5.06; PROVIDED that if the Borrower
fails thereby to deliver such financial statements, without otherwise limiting
the rights of the Lenders under the Agreement, the Total Leverage Ratio shall be
deemed greater than 12.0 to 1.0 until such time as such financial statements are
delivered. Any change in the Applicable Margin shall be effective as of the
fifth Business Day following the Agent's receipt of such financial statements.
"ASSIGNMENT AGREEMENT" shall mean an assignment agreement entered into in
connection with an assignment pursuant to SECTION 11.08 substantially in the
form of EXHIBIT O hereof.
"BASE LIBO RATE" shall mean, during any Interest Period, the rate of
interest per annum (rounded upward to the nearest whole multiple of 1/16 of
1.0%, if such rate is not such a multiple) equal to the rate of interest
notified to the Agent by the Reference Bank at which Dollar deposits in the
approximate amount of the Loans to be made or continued as, or converted into,
LIBOR Loans for such Interest Period and having a maturity comparable to such
Interest Period would be offered by the London lending office of the Reference
Bank in the London interbank market at approximately 11:00 a.m. (London time)
two (2) Business Days prior to the commencement of such Interest Period.
"BASE RATE" shall mean the higher of (i) a rate per annum equal to the
corporate base rate, prime rate or base rate of interest, as applicable,
announced by the Reference Bank from time to time, changing when and as such
rate changes, it being understood that such rate of interest is not necessarily
the lowest or best rate charged by the Reference Bank to its customers, and (ii)
the sum of the Federal Funds Effective Rate plus one-half percent (0.50%) per
annum.
"BASE RATE LOAN" shall mean a Loan, or portion thereof, during any period
in which it bears interest at a rate based upon the Base Rate.
"BENEFIT PLAN" shall mean a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which any
Borrower or any ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"BORROWER" shall mean either KMC III or KMC Leasing III.
"BUSINESS" shall mean with respect to (i) KMC III, the business of
designing, developing, constructing, operating and maintaining the Systems owned
by it, all equipment used and useful in connection therewith including but not
limited to Switch Equipment and (ii) KMC Leasing III, the business of owning and
leasing Telecommunications Equipment.
3
"BUSINESS DAY" shall mean (a) any day not a Saturday, Sunday or legal
holiday in the State of New York or New Jersey, on which banks are open for
business in New York and New Jersey and (b) with respect to all notices,
determinations, fundings and payments in connection with the LIBO Rate or LIBOR
Loans, any day that is a Business Day pursuant to CLAUSE (A) above and that is
also a day on which trading is carried on by and between banks in the London
interbank market.
"CAPITALIZATION" shall mean funded equity capitalization of KMC Holdings.
"CAPITALIZED LEASE OBLIGATIONS" shall mean Debt represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, and the amount of such Debt shall be the
capitalized amount of such obligations determined in accordance with GAAP.
"CASH ADVANCE" shall have the meaning set forth in SECTION 2.03(A).
"CHANGE OF CONTROL" shall mean (A) Xxxxxx X. Xxxxxx ceases to have senior
management responsibilities with respect to the Borrowers or KMC Holdings, (B)
KMC Holdings no longer beneficially owns all the outstanding Equity Interests of
KMC IHC, the Borrowers and their respective subsidiaries, if any, (C) a "person"
or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act) becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 35% of the total voting power of the Voting Stock of
KMC Holdings on a fully diluted basis and such ownership represents a greater
percentage of the total voting power of the Voting Stock of KMC Holdings, on a
fully diluted basis, than is held by the Existing Stockholders on such date, or
(D) individuals who on the Closing Date constitute the Board of Directors
(together with any new directors whose election by the Board of Directors or
whose nomination by the Board of Directors for election by KMC Holdings'
stockholders was approved by a vote of at least a majority of the members of the
Board of Directors then in office who either were members of the Board of
Directors on the Closing Date or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
members of the Board of Directors then in office.
"CLOSING DATE" shall mean the date on which this Agreement is executed and
delivered by the parties hereto.
"COLLATERAL" shall mean, all property and interests in property now owned
or hereafter acquired by any Borrower in or upon which a security interest, lien
or mortgage is granted to the Collateral Agent by any Borrower, whether under
this Agreement or the other Loan Documents.
4
"COLLATERAL ASSIGNMENT OF LEASES" shall mean the Collateral Assignment of
Leases in the form of EXHIBIT B attached hereto, to be executed and delivered
pursuant to SECTION 4.01.
"COLLATERAL ASSIGNMENT OF LICENSES" shall mean the Collateral Assignment of
Licenses in the form of EXHIBIT C attached hereto, to be executed and delivered
pursuant to SECTION 4.01.
"COLLECTION ACCOUNTS" AND "COLLECTION AGENT" shall have the meanings given
to such terms in SECTION 8.04.
"COMMITMENT" shall mean Lenders' commitment to make Loans as set forth in
SECTION 2.01.
"COMMITMENT AMOUNT" shall mean (a) as to any Lender, such Lender's
Commitment Amount as set forth opposite such Lender's name on ANNEX A to this
Agreement or in the most recent Assignment Agreement executed by such Lender and
(b) as to all Lenders, the aggregate of all Lenders' Commitment Amounts, which
aggregate commitment shall be Six Hundred Million Dollars ($600,000,000) on the
Closing Date, as such amount may be adjusted from time to time in accordance
with this Agreement.
"COMMITMENT TERMINATION DATE" shall mean February 1, 2002.
"COMMON STOCK" shall mean with respect to any Person, all Equity Interests
of such Person that are generally entitled to (i) vote in the election of
directors of such Person or (ii) if such Person is not a corporation, vote or
otherwise participate in the selection of the governing body, partners, managers
or others that will control the management and policies of such Person.
"COMPLETED SYSTEM" shall mean any System which is fully operational, which
if contemplated by the KMC III Tier III Plan, shall have a Lucent 5-ESS Switch
Equipment or other comparable Switch Equipment manufactured by Lucent deployed,
which shall be switching paid traffic on its owned Telecommunications Equipment,
and which shall have sales, customer service and billing systems operational to
the satisfaction of the Agent and the Requisite Lenders and consistent with the
then current operating Systems of any Borrower or any Subsidiary of KMC Holdings
(without regard to installation of fiber), with switching capabilities, and with
respect to which all Governmental Approvals have been obtained and connectivity
to at least one major interexchange carrier point-of-presence has been achieved.
"CONSOLIDATED" or "cONSOLIDATED" refers, with respect to any Person, to the
consolidation of the accounts of such Person and its Subsidiaries, if any, in
accordance with GAAP; PROVIDED that with respect to KMC Holdings, unless
otherwise indicated, its Subsidiaries shall not include any Excluded
Subsidiaries.
"CONSOLIDATED DEBT" shall mean, with respect to KMC Holdings on a
consolidated basis, at any date, the sum of the following determined on a
consolidated basis, without duplication, in accordance with GAAP: (a) all
liabilities, obligations and indebtedness for borrowed money, including, but not
limited to, obligations evidenced by bonds, debentures, notes or other similar
instruments of any Borrower, KMC Holdings or KMC IHC, (b) all obligations to pay
the deferred purchase price of property or services of any Borrower, KMC
Holdings or KMC IHC (exclusive of rent for real property under leases that would
not be capitalized in accordance with GAAP), including, but not limited to, all
obligations under noncompetition agreements, except trade payables arising in
the ordinary course of business not more than ninety (90) days past due, (c) all
obligations of any Borrower, KMC Holdings or KMC IHC as lessee under capital
leases (exclusive of the interest component thereof), (d) all Debt of any other
Person secured by a Lien on any asset of any Borrower, KMC Holdings or KMC IHC,
(e) all guaranty obligations of any Borrower, KMC Holdings or KMC IHC, (f) all
obligations, contingent or otherwise, of any Borrower, KMC Holdings or KMC IHC
relative to the face amount of letters of credit, whether or not drawn, and
banker's acceptances issued for the account of any Borrower or KMC Holdings, (g)
all obligations to redeem, repurchase, exchange, defease or otherwise make
payments in respect of capital stock or other securities of any Borrower, KMC
Holdings or KMC IHC at any time prior to the third annual anniversary of the
Termination Date, and (h) all termination payments which would be due and
payable by any Borrower or KMC Holdings pursuant to any hedging agreement.
"Consolidated Debt" shall not include any intercompany Debt between the Borrower
and KMC IHC, between KMC Holdings and KMC IHC or between any Borrower and KMC
Holdings.
"CONTAMINANT" shall mean any pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum derived
substance or waste, or any constituent of any such substance or waste.
"CONTRIBUTED CAPITAL" shall mean, with respect to the Borrowers, at any
date of determination, all contributed capital to such Borrowers including all
funded equity (other than Disqualified Stock) and all Qualified Intercompany
Loans.
"CONTRIBUTION AGREEMENT" shall mean the Contribution Agreement among the
Borrowers of even date herewith substantially in the form of Exhibit R.
"CREDIT ADVANCE" shall have the meaning set forth in SECTION 2.03(A).
"DEBT" shall mean, with respect to any Person, (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations which have been incurred in connection
with the acquisition of property or services (including, without limitation,
obligations to pay the deferred purchase price of property or services),
excluding trade payables and accrued expenses incurred in the ordinary course of
5
business, (iv) obligations as lessee under leases which shall have been or
should be, in accordance with GAAP, recorded as capital or operating leases, (v)
all Guarantees of such Person, including without limitation, all debt of any
other Person which is secured by a Lien on property of such Person, (vi) all
reimbursement obligations, contingent or otherwise, with respect to letters of
credit or banker's acceptances issued for the account of any Borrower, and (vii)
all indebtedness, obligations or other liabilities in respect of any Interest
Rate Agreement, PROVIDED that Debt shall not include any liability for Federal,
state, local or other taxes, and PROVIDED, FURTHER, that the amount outstanding
at any time of any Debt issued with original issue discount is the principal
amount of such Debt less the remaining unamortized portion of the original issue
discount of such Debt at such time as determined in conformity with GAAP, and
that with respect to any high-yield Debt, the amount thereof shall not include
fees incurred in raising such Debt or overfunded amounts set aside solely to pay
interest. Notwithstanding any other provision of the foregoing definition, any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business not more than 90 days past due and
not in dispute (and for which such Borrower has adequate reserves in accordance
with GAAP) shall not be deemed to be "Debt" of any Borrower for purposes of this
definition. Furthermore, guarantees of (or obligations with respect to letters
of credit supporting) Debt otherwise included in the determination of such
amount shall not be included.
"DEFAULT" shall mean any event which but for the passage of time or giving
of notice, or both, would constitute an Event of Default.
"DISQUALIFIED STOCK" shall mean any Equity Interest of a Person, to the
extent that it is (i) redeemable, payable or required to be purchased or
otherwise retired or extinguished or convertible into Debt or other liability,
obligation, covenant or duty of or binding upon, or any term or condition to be
observed by or binding upon such Person or any of its assets, (1) at a fixed or
determinable date, whether by operation of a sinking fund or otherwise, (2) at
the option of any other Person or (3) upon the occurrence of a condition not
solely within the control of such Person such as a redemption required to be
made utilizing future earnings, in each case prior to the third anniversary
after the Termination Date or (ii) convertible into Equity Interests which have
the features set forth in clause (i).
"DOLLARS" or "$" shall mean lawful money of the United States of America.
"EASEMENTS" shall have the meaning given to such term in SECTION 3.20.
"EBITDA" shall mean, with respect to any Person, for any period, an amount
equal to (i) Net Income PLUS (ii) the sum of the following, to the extent
deducted in determining Net Income: (A) income and franchise taxes, (B) interest
expense, (C) amortization, depreciation and other non-cash charges, MINUS (iii)
the sum of interest income plus extraordinary gains, as determined in accordance
with GAAP as calculated at the end of such period.
"ENVIRONMENTAL LAWS" shall mean all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidance, orders and consent decrees
6
or other binding determination of any Governmental Authority relating to
protection of the environment, the handling, disposal or Release of Contaminants
and occupational safety and health. Such laws and regulations include but are
not limited to the Resource Conservation and Recovery Act, 33 U.S.C. ss. 6901 eT
SEq., as amended; the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601 eT SEq., as amended; the Toxic Substances
Control Act, 15 U.S.C. ss. 2601 eT SEq., as amended; the Clean Water Act, 33
U.S.C. ss. 1251 eT SEq., as amended; the Clean Air Act, 42 U.S.C. ss. 7401 ET
seq., as amended; state and federal environmental lien and environmental cleanup
programs; the Occupational Safety and Health Act, 29 U.S.C. ss. 651 eT Seq.; and
U.S. Department of Transportation regulations related to the transportation of
hazardous materials, each as from time to time hereafter in effect.
"EQUITY AFFILIATE" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"EQUITY INTEREST" shall mean, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, membership
units, partnership interests or any other participation right or other interest
in the nature of an equity interest in such Person or any option, warrant or
other security convertible into any of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" shall mean (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the IRC) as any Borrower, (ii) any partnership or other trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the IRC) with any Borrower and (iii) any member of the same
affiliated service group (within the meaning of Section 414(m) of the IRC) as
any Borrower, any corporation described in CLAUSE (I) above or any partnership
or trade or business described in CLAUSE (II) above.
"EUROCURRENCY LIABILITIES" shall have the meaning assigned to that term in
Regulation D of the Federal Reserve Board, as in effect from time to time.
"EVENT OF DEFAULT" shall have the meaning given to such term in ARTICLE IX.
"EVENT OF LOSS" shall mean, with respect to any item of Collateral, the
actual or constructive loss of such item of Collateral or the use thereof, due
to theft, destruction, damage beyond repair or damage from any reason whatsoever
which is not reimbursable by insurance, to an extent which makes repair
7
uneconomical, or rendition thereof unfit for normal use, or the condemnation,
confiscation or seizure of, or requisition of title to or use of, such item of
Collateral by any Governmental Authority or any other Person, acting under or
deemed to be acting under color of any Governmental Authority.
"EXCESS OPERATING CASH FLOW" in respect of the Borrowers for any fiscal
quarter shall mean Net Income of the Borrowers plus non-cash interest expense,
depreciation and amortization and any other non-cash items of the Borrowers,
MINUS scheduled principal payments on the Loans, lease payments and capital
expenditures PLUS OR MINUS changes in working capital of the Borrowers, as
appropriate.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934.
"EXCLUDED SUBSIDIARY" shall mean (a) any Subsidiary of KMC Holdings other
than a Borrower or a Person which directly or indirectly beneficially owns
Equity Interests in any Borrower; PROVIDED that (i) at the time such other
Subsidiary was created or acquired, no Default or Event of Default shall have
occurred and be continuing before or after giving effect to the creation or
acquisition of such Subsidiary, and (ii) no portion of the Required
Contributions or the Commitment Amount shall have been or shall be used to fund
the acquisition or operations of such Subsidiary, and KMC Holdings has external
sources of funding (other than the Required Contributions and the Commitment
Amount) to finance the acquisition and operations of such Subsidiary, or (b) any
other Subsidiary of KMC Holdings which KMC Holdings or any Borrower requests the
Lenders to designate as such, and which designation is agreed to by the
Requisite Lenders.
"EXISTING STOCKHOLDERS" shall mean Xxxxxx X. Xxxxxx, his Equity Affiliates,
Nassau Capital Partners L.P., NAS Partners I L.L.C. or their respective
successors, and their Equity Affiliates.
"FCC" shall mean the Federal Communications Commission or any successor
commission or agency of the United States of America having jurisdiction over
any Borrower or any System.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to (a) the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Government Securities; or (b) if such rate is not so
published for any day which is a Business Day, the average of the quotations at
approximately 10:30 a.m. (New York time) for such day on such transactions
received by the Reference Bank from three federal funds brokers of recognized
standing selected by it.
8
"FEDERAL RESERVE BOARD" shall mean the Board of Governors of the Federal
Reserve System or any successor thereto.
"FEE LETTER" shall mean the letter agreement dated as of February 3, 1999
among the Borrowers, KMC Holdings, KMC IHC, the Agent and the Collateral Agent.
"FINANCIALS" shall have the meaning given to such term in SECTION 3.03.
"FIXED CHARGES" shall mean, with respect to any period for the Borrowers on
a combined basis, the sum of the following amounts calculated at the end of such
period with respect to such period without duplication and in accordance with
GAAP:
(i) the product of two multiplied by scheduled principal and interest
payments with respect to Debt for the six month period then ending, (ii)
capital expenditures for the four quarter period then ending, (iii) the
product of two multiplied by income tax payments for the six month period
then ending, and (iv) the product of two multiplied by cash dividend
payments for the six month period then ending.
"FIXED CHARGE COVERAGE RATIO" shall have the meaning assigned to such term
in SECTION 7.02(C).
"FUNDING DATE" shall mean any date after the Initial Funding Date but prior
to the Commitment Termination Date upon which Loans are made, in each case,
subject to the satisfaction of all conditions precedent contained in SECTION
4.02 and, (i) if the aggregate principal amount of Loans outstanding exceeds the
Level 1 Lending Limit, SECTION 4.03 and (ii) if the aggregate principal amount
of Loans outstanding exceeds the Level 2 Lending Limit, SECTION 4.04.
"GOVERNMENTAL APPROVAL" shall mean, with respect to any Borrower, any
license, permit, franchise or certificate of public convenience and necessity
issued to any Borrower by the FCC, any PUC or any other Governmental Authority
in connection with any System.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, local or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"GUARANTEE" shall mean any obligation, contingent or otherwise, of any
Person guaranteeing any indebtedness of any other Person (the "Primary Obligor")
in any manner, whether directly or indirectly, and including any obligation of
such Person, direct or indirect, (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
9
such indebtedness; (ii) to purchase property, securities or services for the
purpose of assuring the owner of such indebtedness of the payment of such
indebtedness; or (iii) to maintain working capital, equity capital, net worth,
liquidity or other financial statement condition of the Primary Obligor so as to
enable the Primary Obligor to pay such indebtedness.
"HIGH YIELD DEBT" shall mean any Debt issued by KMC Holdings which by its
terms is unsecured, is issued either in a registered public offering or a
private placement of notes, bonds or other securities, has a maturity date not
earlier than 367 days after the Termination Date, does not restrict the payment
of Obligations and the proceeds of which are made available to KMC III as a
capital contribution (other than Disqualified Stock) or as Qualified
Intercompany Loans.
"INDENTURE" shall mean the Indenture dated as of January 29, 1998 between
KMC Holdings, as Issuer and The Chase Manhattan Bank, as Trustee, relating to
KMC Holdings' 12 1/2% Senior Discount Notes due 2008.
"INITIAL FUNDING DATE" shall mean the date upon which, subject to the
satisfaction of all conditions precedent contained in SECTIONS 4.01 and 4.02, or
the waiver thereof by the Agent and the Requisite Lenders, the initial Loans are
made.
"INTELLECTUAL PROPERTY DOCUMENTS" shall mean (i) the Trademark Security
Agreement of even date herewith, in the form of EXHIBIT Q attached hereto,
executed by the Borrowers in favor of the Collateral Agent for the benefit of
the Agents and the Lenders, as amended, restated or otherwise modified from time
to time and (ii) any other trademark, patent or copyright security agreement
executed pursuant to SECTION 5.16 by any Borrower.
"INTEREST EXPENSE" shall mean for any period, the total interest expense
(including, without limitation, interest expense attributable to capital leases)
determined on a combined basis, without duplication, for the Borrowers in
accordance with GAAP.
"INTEREST PERIOD" shall mean, with respect to each LIBOR Loan, the interest
period applicable to such LIBOR Loan as set forth in the applicable Notice of
Borrowing or Notice of Conversion or Continuation.
"INTEREST RATE AGREEMENT" shall mean for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"INVESTMENT" shall mean, as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of securities, or of a beneficial
interest in securities, of any other Person, and any direct or indirect loan,
advance (other than deposits with financial institutions available for
withdrawal on demand, prepaid expenses, advances to employees, officers and
directors and similar items, each made or incurred in the ordinary course of
10
business), or capital contribution by that Person to any other Person, including
all Debt of such other Person to that Person, but excluding accounts owed by
that other Person in the ordinary course of business. Investments shall exclude
(i) extensions of trade credit on commercially reasonable terms in accordance
with normal trade practices and (ii) the repurchase of securities of any Person
by such Person. The amount of any Investment shall be determined in conformity
with GAAP.
"IRC" shall mean the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder, and any successor
statutes or rules and regulations.
"IRS" shall mean the Internal Revenue Service or any successor agency.
"KMC HOLDINGS" shall mean KMC Telecom Holdings, Inc., a Delaware
corporation.
"KMC HOLDINGS GUARANTY" shall mean the unlimited guaranty of KMC Holdings
in the form of EXHIBIT G-1 attached hereto.
"KMC IHC" shall mean KMC Telecom III Holding, Inc., a Delaware corporation.
"KMC IHC GUARANTY" shall mean the unlimited guaranty of KMC IHC in the form
of EXHIBIT G-2 attached hereto.
"KMC TIER III - TIER IV PLAN" shall mean a business plan in form and
substance satisfactory to the Agent and the Lenders setting forth among other
things the projected sources, uses and schedule for the design, development and
construction by KMC III of an agreed upon number of Tier III Cities and Tier IV
Cities.
"KMC III" shall mean KMC Telecom III, Inc., a Delaware corporation.
"KMC III TIER III PLAN" shall mean the business plan of KMC III attached as
EXHIBIT A hereto together with the information contained on a computer diskette
entitled "KMC III 27 Tier III City Plan" which diskette has previously been
delivered to the Agent, as such KMC III Tier III Plan may be amended from time
to time with the prior written consent of the Requisite Lenders.
"KMC LEASING III" shall mean KMC Telecom Leasing III LLC, a Delaware
limited liability company.
"LENDERS" shall have the meaning given to such term in the heading.
"LENDING OFFICE" shall mean, with respect to a Lender or Agent, any office,
branch, subsidiary or affiliate of such Lender or Agent.
11
"LEVEL 1 LENDING LIMIT" shall mean Loans in an aggregate principal amount
of $125,000,000.
"LEVEL 2 LENDING LIMIT" shall mean Loans in an aggregate principal amount
of $250,000,000.
"LIBO RATE" shall mean, for any Interest Period with respect to LIBOR Loans
comprising part of the same borrowing, the rate of interest per annum equal to
the per annum rate of interest displayed on the Dow Xxxxx Market Screen Page
3750, as being the one-month, two-month, three-month or six-month, as
applicable, reserve adjusted "London Interbank Offered Rate", PROVIDED, that if
such rate is not displayed or published, then the rate of interest per annum
(rounded upward to the nearest whole multiple of 1/16 of 1.0%, if such rate is
not such a multiple) shall be determined by the Agent as follows:
LIBO Rate = Base LIBO rate
---------------------------------------
1.00 - LIBOR Reserve Percentage
"LIBOR INTEREST PAYMENT DATE" shall mean, with respect to a LIBOR Loan, the
last day of each Interest Period applicable to such Loan, and, if such Interest
Period has a duration of more than three months, on each day which occurs during
such Interest Period every three months from the first day of such Interest
Period.
"LIBOR INTEREST RATE DETERMINATION DATE" shall mean each date of
calculating the LIBO Rate for purposes of determining the interest rate with
respect to an Interest Period. The LIBOR Interest Rate Determination Date for
any LIBOR Loan shall be the second Business Day prior to the first day of the
related Interest Period for such LIBOR Loan.
"LIBOR LOAN" shall mean a Loan, or portion thereof, during any period in
which it bears interest at a rate based upon the LIBO Rate.
"LIBOR RESERVE PERCENTAGE" shall mean for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1.0%) in effect on such day (whether or not applicable to
any Lender) for United States domestic banks under regulations issued from time
to time by the Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency Liabilities having a term comparable
to such Interest Period.
"LIEN" shall mean any mortgage, pledge, deed of trust, assignment, lien,
charge, encumbrance or security interest of any kind, or the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement, but excluding easements, rights of way or similar
encumbrances on real property which are in the ordinary course and which do not
12
materially affect the value, use and insurability of title of such real
property.
"LOAN" shall mean any loan made to any Borrower pursuant to Section
2.01(a).
"LOAN DOCUMENTS" shall mean all agreements, instruments and documents,
including, without limitation, security agreements, loan agreements, notes,
guarantees, mortgages, deeds of trust, subordination agreements, pledges, powers
of attorney, consents, assignments, contracts, notices, leases, financing
statements, Interest Rate Agreements between any Borrower, KMC Holdings or KMC
IHC and the Agent, the Collateral Agent or the Lenders and all other written
matter whether heretofore, now, or hereafter executed by or on behalf of any
Borrower or any other Person in connection with the transactions contemplated
hereby and delivered to the Agent, the Collateral Agent or the Lenders, together
with all agreements and documents referred to therein or contemplated thereby;
PROVIDED, that the documents executed in connection with the purchase by the
Agent or any Lender of Equity Interests in KMC Holdings shall not constitute
Loan Documents.
"LUCENT" shall mean Lucent Technologies Inc., a Delaware corporation.
"LUCENT PURCHASE AGREEMENT" shall mean General Agreement as amended dated
as of December 22, 1998 among KMC III and certain KMC III Affiliates and Lucent
for the purchase of Telecommunications Equipment, as such Agreement may be
modified or amended from time to time.
"MANAGEMENT AGREEMENT" shall mean the Management Agreement dated as of
December 18, 1998, as amended as of January 29, 1999, among KMC Holdings, KMC
III, KMC Leasing III, KMC Telecom International, Inc., KMC Telecom II, Inc., KMC
Telecom of Virginia, Inc., KMC Telecom Leasing I LLC, KMC Telecom Leasing II LLC
and KMC IHC.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, a
material adverse effect upon the condition (financial or otherwise), operations
or properties of such Person, or upon the ability of such Person to perform
under the Loan Documents.
"MAXIMUM RATE" shall have the meaning given to such term in SECTION 2.12.
"MORTGAGES" shall mean mortgages or deeds of trust in favor of the
Collateral Agent, with respect to any Borrower's (i) owned Real Property and
(ii) other interests in those items of real property and Easements, as specified
by the Collateral Agent, which mortgages and deeds of trust shall be in form and
substance satisfactory to the Agents.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by any Borrower or an ERISA Affiliate.
13
"NET INCOME" shall mean, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"NOTE" shall mean a promissory note of the Borrowers substantially in the
form of Exhibit E attached hereto.
"NOTICE OF BORROWING" shall mean a notice substantially in the form of
EXHIBIT H-1 attached hereto.
"NOTICE OF CONVERSION/CONTINUATION" shall have the meaning given to such
term in SECTION 2.06(B).
"OBLIGATIONS" shall mean all the obligations of any Borrower now or
hereafter existing under this Agreement or any other Loan Document to which any
Borrower is a party, whether for principal, interest, fees, expenses,
reimbursement, indemnification or otherwise. Obligations shall include, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements, and paralegals' fees which accrue after the commencement of any
case or proceeding in bankruptcy after the insolvency of, or for the
reorganization of any Borrower, in each case, whether or not allowed in such
proceeding.
"PARTICIPANTS" shall have the meaning given to such term in SECTION
11.08(B).
"PAYMENT ACCOUNT" shall mean an account of the Agent as designated from
time to time by the Agent by notice to the Borrowers and the Lenders.
"PAYMENT DATE" shall mean the first day of January, April, July and October
in each calendar year, but if any such date is not a Business Day, the next
succeeding Business Day, commencing April 1, 1999.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"PERIODIC REPORTING CERTIFICATE" shall mean a periodic reporting
certificate in the form of EXHIBIT F attached hereto.
"PERMITTED LIENS" shall have the meaning given to such term in SECTION
6.01.
"PERSON" shall mean any natural person, corporation, division of a
corporation, business trust, joint venture, association, company, partnership,
unincorporated organization or other legal entity, or a government or any agency
or political subdivision thereof.
14
"PLAN" shall mean any employee benefit plan as defined in Section 3(3) of
ERISA (other than a Multiemployer Plan) in respect of which any Borrower or any
ERISA Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"PLEDGE AGREEMENT" shall mean a pledge agreement substantially in the form
of EXHIBIT L attached hereto.
"PREPAYMENT PREMIUM" shall mean(a) with respect to the period commencing on
the Initial Funding Date and ending on the first annual anniversary thereof,
three percent (3.0%) of the amount prepaid, (b) with respect to the period
commencing thereafter and ending on the second annual anniversary of the Initial
Funding Date, two percent (2.0%) of the amount prepaid, (c) with respect to the
period commencing thereafter and ending on the third annual anniversary of the
Initial Funding Date, one percent (1.0%) of the amount prepaid, and (d) at all
times thereafter, $0.
"PRINCIPAL PAYMENTS" shall mean, for any period, total required Debt
amortization (including, without limitation, the principal payments attributable
to capital leases) determined on a combined basis, without duplication, for the
Borrowers in accordance with GAAP.
"PRO RATA SHARE" shall mean with respect to all matters relating to any
Lender the percentage obtained by dividing (1) at any time prior to the date on
which the Loans are funded, the Commitment Amount of such Lender by the
Commitment Amount of all Lenders, and (2) on and after the date on which the
Loans are funded, the aggregate outstanding principal balance of the Loans held
by such Lender, by the aggregate outstanding principal balance of the Loans held
by all Lenders.
"PUC" shall mean any state Governmental Authority having utility or
telecommunications regulatory authority over any Borrower or any System.
"PURCHASE DEBT" shall have the meaning given to such term in SECTION
6.13(IV).
"QUALIFIED INTERCOMPANY LOAN" shall mean a loan to a Borrower from KMC
Holdings or KMC IHC, which loan is expressly subordinated to the Obligations on
terms and conditions satisfactory to the Agent, has a maturity date occurring on
or after the third annual anniversary of the Termination Date, and requires no
cash payment of principal or interest prior to the scheduled maturity date of
such loan.
"REAL PROPERTY" shall have the meaning given to such term in SECTION 3.20.
"REFERENCE BANK" shall mean (i) if Lucent is the Agent, First Union
National Bank and (ii) if Lucent is no longer the Agent, such financial
institution as the Agent may designate (and which may be the Agent or any
Affiliate of the Agent), PROVIDED, that such financial institution shall be a
15
commercial banking institution organized under the laws of the United States (or
any state thereof) or a United States branch or agency of a foreign commercial
banking institution, and, in each case, has combined capital and surplus of at
least $250,000,000.
"REGISTER" shall have the meaning given to such term in SECTION
11.08(C)(III).
"RELEASE" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or
property.
"REMEDIAL ACTION" shall mean actions required to (1) clean up, remove,
treat or in any other way address Contaminants in the environment; (2) prevent
the Release or threat of Release or prevent or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the environment; or (3) perform preremedial studies and
investigations and postremedial monitoring and care.
"REPORTABLE EVENT" shall mean any reportable event as defined in Section
4043 of ERISA unless the reporting requirement with respect to such reportable
event has been waived by the PBGC or other appropriate Governmental Authority.
"REQUIRED CONTRIBUTION" shall have the meaning assigned to such term in the
KMC Holdings Guaranty.
"REQUISITE LENDERS" shall mean (i) so long as Lucent shall hold not less
than 66 2/3% of the Loans and Commitments, Lucent and Lenders holding a majority
of the remaining Loans and Commitments and (ii) if Lucent shall no longer hold
at least 66 2/3% of the Loans and Commitments, Lenders holding at least 66 2/3
of the Loans and Commitments.
"SOLVENT" shall mean, at any time of determination, with respect to any
Person:
(i) the assets of such Person, at a fair valuation, are in excess of
the total amount of its debts (including, without limitation, contingent
liabilities); and
(ii) the present fair saleable value of its assets is greater than its
probable liability on its existing debts as such debts become absolute and
matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as
they mature; and
(iv) it has capital sufficient to carry on its business as conducted.
16
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or mature liability.
"STEP DOWN DATE" shall mean the date on which the Borrower has
completed Systems in 18 of 27 Tier 3 III cities.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Equity Interests
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, officers or trustees thereof is held by such Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the such Person for
financial statement purposes.
"SWITCH EQUIPMENT" shall mean telecommunications switches and associated
electronics.
"SYSTEM" shall mean each telephone, telecommunications or information
system (including, without limitation, any voice, video transmission, data or
Internet services) and any related, ancillary or complementary services, as
described in the KMC III Tier III Plan or the KMC III Tier III-Tier IV Plan, and
all replacements, enhancements or additions thereto.
"TAX SHARING AGREEMENT" shall mean that certain Tax Allocation Agreement
dated as of December 18, 1998, amended as of January 29, 1999, among KMC
Holdings, KMC III, KMC Telecom International, Inc., KMC Telecom II, Inc., KMC
Telecom Inc., KMC Telecom of Virginia, Inc., KMC Telecom Leasing I LLC, KMC
Telecom Leasing II LLC, KMC Leasing III and KMC IHC.
"TAXES" shall mean any and all license, documentation, recording and
registration fees, and all taxes, including, without limitation, income (other
than net income taxes, franchise taxes and capital taxes imposed on the Lenders,
the Agent or the Collateral Agent other than by withholding), gross receipts,
sales, value-added, use, excise, personal property (tangible and intangible),
real estate and stamp, documentary, transfer or recording taxes, levies,
imposts, deductions, duties, assessments, fees, charges, and withholdings of any
nature whatsoever, whether or not presently in existence, together with any
penalties, fines, additions to tax, or interest thereon, imposed by any taxing
authority or other Governmental Authority.
"TELECOMMUNICATIONS EQUIPMENT" shall mean fiber optic cable, Lucent 5-ESS
Switch Equipment or other comparable Switch Equipment manufactured by Lucent,
transmission equipment and other ancillary equipment necessary for the
17
installation and operation of a switch room or central office and co-location
with other telecommunications providers that will enable a Borrower to offer
telephony services, including voice, data and video, as well as all software and
hardware associated with the network operating center and back office systems
(including operations support systems, billing systems and data services),
together with all related support, construction and installation costs
associated with an operational system and services set forth in SCHEDULE 1.01(A)
connected therewith, provided that such costs (other than the cost of any
services set forth on SCHEDULE 1.01(A)) are capitalized in accordance with GAAP.
"TEMPORARY CASH INVESTMENTS" shall mean (i) Investments in marketable,
direct obligations issued or guaranteed by the United States of America, or of
any governmental agency or political subdivision thereof, maturing within 365
days of the date of purchase; (ii) Investments in certificates of deposit issued
by a bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500,000,000 and rated at least A by
Standard & Poor's Ratings Service and A-2 by Xxxxx'x Investors Service, Inc.
maturing within 365 days of purchase; or (iii) Investments not exceeding 365
days in duration in money market funds that invest substantially all of such
funds' assets in the Investments described in the preceding CLAUSES (I) and
(II).
"TERMINATION DATE" shall mean January 1, 2007.
"TERMINATION EVENT" shall mean (i) a Reportable Event with respect to a
Benefit Plan; (ii) the withdrawal of any Borrower or any ERISA Affiliate from a
Benefit Plan during a plan year in which any Borrower or such ERISA Affiliate
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii)
the imposition of an obligation on any Borrower or any ERISA Affiliate under
Section 4041 of ERISA to provide affected parties written notice of intent to
terminate a Benefit Plan in a distress termination described in Section 4041(c)
of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Benefit
Plan; (v) any event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan; or (vi) the partial or complete withdrawal of any
Borrower or any ERISA Affiliate from a Multiemployer Plan.
"THIRD PARTY INTERACTIVES" shall mean all Persons with whom any Borrower
exchanges data electronically in the ordinary course of business, including,
without limitation, customers, suppliers, third-party vendors, subcontractors,
processors-converters, shippers and warehousemen.
"TIER III CITIES" shall mean cities each with a population between 100,000
and 750,000 in which KMC III shall operate a System.
"TIER IV CITIES" shall mean cities served out of a KMC III Tier III
City.
18
"TOTAL DEBT" shall mean, with respect to the Borrowers, at any date, the
sum of the following, determined on a combined basis without duplication: (a)
all liabilities, obligations and indebtedness for borrowed money, including, but
not limited to, obligations evidenced by bonds, debentures, notes or other
similar instruments, (b) all obligations to pay the deferred purchase price of
property or services (exclusive of any rent for real property pursuant to a
lease that would not be capitalized in accordance with GAAP), including, but not
limited to, all obligations under non-competition agreements, except trade
payables arising in the ordinary course of business not more than ninety (90)
days past due, (c) all obligations as lessee under capital leases (exclusive of
the interest component thereof that is not capitalized) (d) all Debt of any
other Person secured by a Lien on any asset of any Borrower, (e) all guaranty
obligations, (f) all obligations, contingent or otherwise, relative to the face
amount of letters of credit, whether or not drawn and banker's acceptances
issued for the account of any Borrower, (g) all obligations to redeem,
repurchase, exchange, defease or otherwise make payments in respect of capital
stock or other securities at any time prior to the third annual anniversary of
the Termination Date, and (h) all termination payments which would be due and
payable by any Borrower thereof pursuant to any Interest Rate Agreement or
hedging agreement. "Total Debt" shall not include any intercompany Debt between
the Borrowers, or any Borrower and KMC Holdings or any Borrower and KMC IHC.
"TOTAL LEVERAGE RATIO" shall mean the ratio of (i) Total Debt as of the
last day of any fiscal quarter, to (ii) the product of (A) two multiplied by (B)
EBITDA of the Borrowers on a combined basis for the most recently ended six
month period.
"TRIGGER DATE" shall mean the date on which KMC III shall have fourteen
(14) Completed Systems.
"VOTING STOCK" shall mean securities of any class or classes of a
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"YEAR 2000 CORRECTIVE ACTIONS" shall mean, as to each Borrower, all actions
necessary to eliminate such Borrower's Year 2000 Problems, including, without
limitation, computer code enhancements and revisions, upgrades and replacements
of Year 2000 Date-Sensitive Systems/Components, and coordination of such
enhancements, revisions, upgrades and replacements with Third Party
Interactives.
"YEAR 2000 CORRECTIVE PLAN" shall mean, with respect to each Borrower, a
comprehensive plan to eliminate all of its Year 2000 Problems on or before
September 30, 1999, including without limitations (i) computer code enhancements
or revisions, (ii) upgrades or replacements of Year 2000 Date-Sensitive
Systems/Components, (iii) test and validation procedures, (iv) an implementation
time line and budget and (v) designation of specific employees who will be
responsible for planning, coordinating and implementing each phase or subpart of
the Year 2000 Corrective Plan.
19
"YEAR 2000 DATE-SENSITIVE SYSTEM/COMPONENT" shall mean any system software,
network software, applications software, database, computer file, embedded
microchip, firmware or hardware that accepts, creates, manipulates, sorts,
sequences, calculates, compares or outputs calendar-related data accurately;
such systems and components shall include, without limitation, mainframe
computers, file server/client system, computer workstations, routers, hubs,
other network-related hardware, and other computer-related software, firmware or
hardware and information processing and delivery systems of any kind and
telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.
"YEAR 2000 IMPLEMENTATION TESTING" shall mean, as to each Borrower, (i) the
performance of test and validation procedures regarding Year 2000 Corrective
Actions on a unit basis and a system wide basis, (ii) the performance of test
and validation procedures regarding data exchanges among the Borrowers' Year
2000 Date-Sensitive Systems/Components and data exchanges with Third Party
Interactives, and (iii) the design and implementation of additional Corrective
Actions, the need for which has been demonstrated by test and validation
procedures.
"YEAR 2000 PROBLEMS" shall mean with respect to each Borrower limitations
on the capacity or readiness of any such Borrower's Year 2000 Date-Sensitive
Systems/Components to accurately accept, create, manipulate, sort, sequence,
calculate, compare or output calendar date information with respect to calendar
year 1999 or any subsequent calendar year beginning on or after January 1, 2000
(including leap year computations), including, without limitation, exchanges of
information among Year 2000 Date-Sensitive Systems/Components of the Borrowers
and exchanges of information among the Borrowers and Year 2000 Date-Sensitive
Systems/Components of Third Party Interactives and functionality of peripheral
interfaces, firmware and embedded microchips.
SECTION 1.02. ACCOUNTING TERMS. Except as otherwise herein specifically
provided, each accounting term used herein shall have the meaning given to it
under generally accepted accounting principles ("GAAP") applied on a consistent
basis.
SECTION 1.03. OTHERS DEFINED IN NEW YORK UNIFORM COMMERCIAL CODE. All other
terms contained in this Agreement (and which are not otherwise specifically
defined herein) shall have the meanings provided by the Uniform Commercial Code
of the State of New York (the "CODE") to the extent the same are used or defined
therein.
ARTICLE II
LOANS
SECTION 2.01. AGREEMENT TO LEND. (a) Each Lender severally agrees, on the
terms and conditions hereinafter set forth, to make term loans to the Borrowers,
from time to time, on and after the Initial Funding Date and until but not
including the Commitment Termination Date in an aggregate amount not to exceed
20
such Lender's Commitment Amount; PROVIDED that (i) until the Borrowers shall
have satisfied the condition in SECTION 4.03, the maximum amount of Loans that
may be borrowed from the Lenders shall not exceed $125,000,000 and (ii) until
the Borrowers shall have satisfied the conditions set forth in SECTION 4.04, the
maximum amount of Loans that may be borrowed from all Lenders shall not exceed
$250,000,000.
(b) Loans which are repaid or prepaid may not be reborrowed.
SECTION 2.02. LOANS. (a) The proceeds of the Loans made by Lucent under
this Agreement shall be used by the Borrowers solely to purchase
Telecommunications Equipment manufactured or produced by Lucent and to pay
transactions costs incurred in connection with the execution, delivery and
performance of the Loan Documents; PROVIDED that
(i) if the Borrower shall fail to raise, on or prior to the six
month anniversary of the Initial Funding Date, at least $200,000,000 of
additional funded equity (other than Disqualified Stock) or High Yield
Debt but shall have contributed any amounts so raised to KMC IHC and KMC
IHC shall have contributed such amounts to KMC III as either additional
funded equity or Qualified Intercompany Loans, the aggregate principal
amount of the Loans that the Borrower may use for Telecommunications
Equipment not manufactured or produced by Lucent shall not exceed the
lesser of
(x) the sum of (1) the aggregate amount of Commitments that
Lucent shall have syndicated to one or more financial
institutions without recourse to or credit support from Lucent
PLUS (2) $37,500,000 and
(y) 35% of the aggregate principal amount of the Loans
outstanding, or
(ii) if the Borrower shall have raised at least $200,000,000 of such
additional funded equity (other than Disqualified Stock) or High Yield Debt
the net proceeds of which shall have been contributed as set forth in
clause (i) above, the aggregate principal amount of the Loans that the
Borrower may use for Telecommunications Equipment not manufactured or
produced by Lucent shall not exceed the lesser of
(x ) the aggregate amount of Commitments that Lucent shall
have syndicated to one or more financial institutions without
recourse to or credit support from Lucent and
(y ) 35% of the aggregate principal amount of the Loans
outstanding.
Except as set forth in SCHEDULE 1.01(A), Loans with respect to
Telecommunications Equipment purchases may not be made to finance (1) soft costs
(including installation, delivery and engineering costs) in excess of fifteen
percent (15%) of the invoiced price for the related Switch Equipment or (2) any
21
support or installation costs associated with an operational system that would
not be capitalized in accordance with GAAP.
(b) Each Base Rate Loan shall be in a minimum principal amount of
$1,000,000. Each LIBOR Loan shall be in a minimum principal amount of
$5,000,000.
(c) In any calendar month not more than one Loan may be requested.
SECTION 2.03. PROCEDURE FOR LOAN REQUEST AND BORROWING COMMITMENT. (a) A
Borrower requesting a Loan shall deliver to the Agent a Notice of Borrowing
substantially in the form of EXHIBIT H-1 attached hereto on or before 11:00 a.m.
(New York time) at least five (5) Business Days prior to the date on which such
Loan is requested to be made if such Loan is requested to be a LIBOR Loan and at
least three (3) Business Days prior to the date on which such Loan is requested
to be made if such Loan is requested to be a Base Rate Loan, which notice, once
given, shall be irrevocable; PROVIDED, that a Notice of Borrowing requesting a
Cash Advance (as hereinafter defined) must be received by the Agent at least
seven (7) Business Days prior to the date on which such Cash Advance is
requested to be made if the amount of the requested Cash Advance is greater than
$50,000,000 and PROVIDED, FURTHER, that in no event may the amount of any
requested Cash Advance exceed $100,000,000. The Loans may be made (i) in cash in
accordance with the provisions of SECTION 2.03(B) (a "Cash Advance") and/or (ii)
by means of a credit against amounts due to Lucent under the Lucent Purchase
Agreement (or other agreement with Lucent), in accordance with the provisions of
SECTION 2.03(C) (a "Credit Advance"). The Loans made on the Initial Funding Date
shall be Base Rate Loans and thereafter may be continued as Base Rate Loans or
converted into LIBOR Loans in the manner provided in SECTION 2.06 and subject to
the other conditions and limitations therein set forth and set forth in this
ARTICLE II. In the case of a Loan the proceeds of which will be used to purchase
or reimburse any Borrower for Telecommunications Equipment (including any
Telecommunications Equipment being purchased or reimbursed under the Lucent
Purchase Agreement), the Notice of Borrowing delivered to the Agent will include
a schedule supporting one hundred percent (100%) of Telecommunications Equipment
requested to be funded. To the extent any portion of the Loans are not used to
fund Telecommunications Equipment manufactured or produced by Lucent, such
schedule will detail all invoices for equipment, third party labor, permits,
other third party costs and all capitalized internal costs of the Borrowers with
respect to such Telecommunications Equipment permitted under GAAP. All invoices
over $25,000 will be attached to such schedule and delivered to the Agent and
when combined with the above-described capitalized internal costs will support
seventy percent (70%) of the total requested funding. In addition, if the
Telecommunications Equipment is being purchased or reimbursed under the Lucent
Purchase Agreement, and the Agent so requests, a certificate of delivery and
acceptance in the form of EXHIBIT P shall be attached to the Notice of
Borrowing. In the case of a Loan the proceeds of which will be used to pay or
reimburse any Borrower for transaction costs, the Notice of Borrowing will
include a copy of the invoice from the provider of the service or other
appropriate supporting documentation. The Notice of Borrowing shall, with
respect to any Loans requested, specify whether such requested Loans are to be
22
made as Cash Advances or Credit Advances, are to bear interest as Base Rate
Loans or LIBOR Loans, and if such requested Loans are to be LIBOR Loans, the
requested Interest Period for such Loans.
(b) If any Notice of Borrowing requests that a Cash Advance be made on the
date specified therein to finance amounts theretofore paid by any Borrower
(other than with the proceeds of Loans) under invoices submitted to the
Borrower, such Notice of Borrowing shall identify such invoices pursuant to
SECTION 2.03(A), and, in accordance with SECTION 2.03(D), each Lender will make
available to the Agent such Lender's Pro Rata Share of such Cash Advance.
Notwithstanding the foregoing, Lucent shall have the right, upon giving the
Borrower not less than 30 days prior written notice, to require that the
Borrower request Cash Advances to finance amounts previously paid by the
Borrower (other than with the proceeds of Loans) under invoices submitted to the
Borrower by Lucent pursuant to the Lucent Purchase Agreement.
(c) If any Notice of Borrowing requests that a Credit Advance be made on
the date specified therein to finance amounts then due under invoices submitted
to a Borrower, such Borrowing Notice shall identify such invoices pursuant to
SECTION 2.03(A), and, in accordance with SECTION 2.03(D), each Lender (other
than Lucent) will make available to the Agent such Lender's Pro Rata Share of
such Credit Advance.
(d) The Agent agrees, promptly upon receipt of a Notice of Borrowing, to
notify each Lender of the date and amount of the Loan proposed thereunder and
the amount of such Lender's Pro Rata Share therein. So long as no Event of
Default has occurred and is continuing and upon fulfillment of the applicable
conditions set forth in ARTICLE IV, each such Lender (other than Lucent in the
case of a Credit Advance) severally agrees, on or before 12:00 P.M. (New York
time) on the date of each proposed Loan, to pay into the Payment Account, an
amount equal to such Lender's Pro Rata Share of such Loan in dollars and in same
day funds. After the Agent's receipt of such Lender's Loan proceeds, the Agent
shall make available such proceeds to the Borrower requesting the Loan (in the
case of a Cash Advance), Lucent (in the case of a Credit Advance) or the Person
entitled to payment thereof at the bank account(s) specified in the Notice of
Borrowing on the date specified in such Notice of Borrowing in Dollars in
immediately available funds, it being understood that Lucent shall have no
obligation to make available to the Agent any funds for any Loan in respect of a
Credit Advance.
(e) Unless the Agent has received written notice from a Lender prior to the
date of any proposed Loan that such Lender will not make available to the Agent
such Lender's Pro Rata Share of such Loan, the Agent may, but is not obligated
to, assume that such Lender has made its Pro Rata Share of such Loan available
to the Agent on the date of such Loan in accordance with PARAGRAPH (D) above,
and the Lenders may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If such Pro Rata Share is not, in
fact, paid to Agent by such Lender when due, the Agent will be entitled to
recover such amount on demand from such Lender or the Borrower which received
the proceeds of such Loan without set-off, counterclaim or deduction of any
23
kind, together with interest thereon, for each day from the date such amount is
made available to such Borrower until the date such amount is repaid to the
Agent either by such Borrower or such Lender, at, (1) in the case of such
Borrower, the interest rate applicable to such Loan, and (2) in the case of such
Lender, the Federal Funds Effective Rate. Nothing in this SECTION 2.03(E) or
elsewhere in this Agreement or the other Loan Documents shall be deemed to
require Agent to advance funds on behalf of any Lender or to relieve any Lender
from its obligation to fulfill its Commitment hereunder or to prejudice any
rights that the Borrower may have against any Lender as a result of any default
by such Lender hereunder. Without limiting the foregoing, with respect to any
Lender which for any reason fails to make timely payment to the Agent of its Pro
Rata Share of any Loan, the Agent, in addition to other rights and remedies
which it may have, shall be entitled to withhold or set off from any payments
due to such Lender hereunder, an amount equal to the Pro Rata Share required to
have been paid by such Lender plus interest as described above, and to withhold
from such Lender any right of consent provided to such Lender by ARTICLE V or VI
of this Agreement and to bring an action or suit against such Lender in a court
of competent jurisdiction to recover such Pro Rata Share thereof and any related
interest thereon. If such Lender shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Lender's applicable Pro Rata
Share of such Loan for purposes of this Agreement. If both such Lender and such
Borrower shall have repaid the corresponding amount, the Agent shall promptly
return to such Borrower its corresponding amount.
SECTION 2.04. THE NOTES. Each Borrower shall execute and deliver to each
Lender a Note to evidence the Commitment of that Lender. Each Note shall be in
the principal amount of the Commitment Amount of the applicable Lender, dated
the Initial Funding Date, stated to mature on the Termination Date and
substantially in the form of EXHIBIT E. The Notes payable to a Lender shall
represent the obligation of the Borrower to pay the amount of each Lender's
Commitment Amount or, if less, the applicable Lender's Pro Rata Share of the
aggregate unpaid principal amount of all Loans to the Borrower together with
interest thereon as prescribed in SECTION 2.05. The aggregate principal amount
of all the Notes shall not exceed the aggregate Commitments of all the Lenders.
The Agent is hereby authorized by such Borrower to record in the Register the
date and amount of each Loan made to such Borrower, and to record therein the
date and amount of each payment on each Loan made to such Borrower, and such
recordation shall be conclusive evidence against such Borrower of the amounts
owing to the Lenders with respect to the Loans in the absence of manifest error;
PROVIDED, that the failure of the Agent to register any such information on such
schedule shall not in any manner affect the obligation of such Borrower to repay
the Loans made to such Borrower in accordance with the terms of this Agreement.
SECTION 2.05. INTEREST ON LOANS. (a) GENERAL. Subject to the provisions of
SECTIONS 2.05(B), 2.06 and 2.07, each Loan shall bear interest at the rate per
annum equal to (i) the Base Rate plus the Applicable Margin, computed on the
basis of a 365 or 366 day year, as applicable, or (ii) the LIBO Rate plus the
Applicable Margin, computed on the basis of a 360 day year, as selected by the
requesting Borrower in the Notice of Borrowing and the Notice of
Continuation/Conversion with respect to such Loan.
24
(b) DEFAULT INTEREST. If any Borrower shall default in the payment of the
principal of or interest on any Loan or any other amount becoming due hereunder
on its due date and such default shall continue uncured for three days, then the
Borrowers shall, on demand, from the Agent, thereafter pay interest on all Loans
at a rate that is four percent (4.00%) per annum above the rates of interest
otherwise payable on all the Loans (assuming the Total Leverage Ratio is greater
than 12.0 to 1.0) from the date such payment is due to the date such payment
default is either cured or waived in writing by the Requisite Lenders. If any
other Event of Default shall occur and be continuing and shall be declared by
the Agent upon the direction of the Requisite Lenders, then the Borrowers shall,
on demand, thereafter pay interest on all the Loans at a rate that is two
percent (2.00%) per annum above the rates of interest otherwise payable on the
Loans (assuming the Total Leverage Ratio is greater than 12.0 to 1.0) from the
date of the occurrence of such Event of Default until the date such Event of
Default has been cured or waived in writing by the Requisite Lenders; PROVIDED
that if an Event of Default described in the first sentence of this CLAUSE (B)
shall occur at any time that an Event of Default described in this second
sentence has occurred and is continuing, then the rate of interest described in
the first sentence of this CLAUSE (B) shall apply. After the occurrence and
during the continuance of any Event of Default, the Borrowers shall be subject
to the limitations on borrowings of, conversions into and continuations as LIBOR
Loans set forth in SECTION 2.06(A).
SECTION 2.06. CONVERSION OR CONTINUATION. (a) Subject to the provisions of
SECTION 2.07, each Borrower shall have the option (i) to convert all or any part
of its outstanding Loans, in a minimum amount of $5,000,000 and integral
multiples of $1,000,000 in excess of that amount, from Loans that are Base Rate
Loans to LIBOR; (ii) to convert all or any part of its outstanding Loans from
LIBOR Loans to Base Rate Loans on the expiration of the Interest Period
applicable thereto; and (iii) upon the expiration of any Interest Period
applicable to its outstanding LIBOR Loan to continue all such LIBOR Loans as a
LIBOR Loan; PROVIDED that no outstanding Loans may be converted into, or
continued as, LIBOR Loans when any Default or Event of Default has occurred and
is continuing.
(b) Whenever a Borrower elects to convert or continue Loans under this
SECTION 2.06, such Borrower shall deliver to the Agent a written notice
substantially in the form of that attached hereto as EXHIBIT H-2 (a "NOTICE OF
CONVERSION/ CONTINUATION"), signed by an authorized officer of such Borrower (i)
no later than 10:00 a.m. (New York time) two (2) Business Days in advance of the
requested conversion date, in the case of a conversion into Base Rate Loans, and
(ii) no later than 10:00 a.m (New York time) three (3) Business Days in advance
of the requested conversion or continuation date, in the case of a conversion
into, or continuation of, LIBOR Loans. The Notice of Conversion/Continuation
shall specify (1) the conversion or continuation date (which shall be a Business
Day), (2) the amount and type of the Loans to be converted or continued, (3) the
nature of the requested conversion or continuation, and (4) in the case of a
conversion into, or continuation of, LIBOR Loans, the requested Interest Period.
Promptly after receipt of a Notice of Conversion/Continuation pursuant to this
SECTION 2.06(B), the Agent shall notify the Lenders by telecopy, telephone or
other similar form of transmission, of the requested conversion or continuation.
In the event that a Borrower should fail to provide a Notice of
25
Conversion/Continuation with respect to any LIBOR Loans as provided above, such
Loans, on the last day of the Interest Period with respect to such Loans, shall
convert to Base Rate Loans.
(c) Any Notice of Conversion/Continuation for conversion to, or
continuation of, Loans made pursuant to this SECTION 2.06 shall be irrevocable
and the applicable Borrower shall be bound to convert or continue in accordance
therewith.
SECTION 2.07. SPECIAL PROVISIONS GOVERNING LIBOR LOANS. Notwithstanding any
other provisions to the contrary contained in this Agreement, the following
provisions shall govern with respect to LIBOR Loans as to the matters covered:
(a) AMOUNT OF LIBOR LOANS. Each continuation of or conversion to LIBOR
Loans shall be in a minimum amount of $5,000,000 and in integral multiples of
$1,000,000 in excess of that amount.
(b) DETERMINATION OF INTEREST PERIOD. By giving notice as set forth in
SECTION 2.06(B), a Borrower shall have the option, subject to the other
provisions of this SECTION 2.07, to specify whether the Interest Period for such
LIBOR Loan shall be a one, two, three or six month period. The determination of
Interest Periods shall be subject to the following provisions:
(i) In the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the preceding
Interest Period expires.
(ii) If any Interest Period would otherwise expire on a day which is
not a Business Day, the Interest Period shall be extended to expire on the
next succeeding Business Day; PROVIDED that if the next succeeding
Business Day occurs in the following calendar month, then such Interest
Period shall expire on the immediately preceding Business Day.
(iii) A Borrower may not select an Interest Period for any LIBOR Loan,
which Interest Period expires later than the maturity date of such Loan.
(iv) A Borrower may not select an Interest Period with respect to any
portion of such Borrower's Loans which extends beyond an installment
payment date for such Loans unless, after giving effect to such selection,
the portion of such Loans not subject to Interest Periods ending after
such installment payment date is equal to or greater than the principal
due on such installment payment date.
(v) There shall be no more than four (4) Interest Periods in effect
at any one time.
26
(c) DETERMINATION OF INTEREST RATE. As soon as practicable after 10:00 a.m.
(New York time) on the LIBOR Interest Rate Determination Date, the Agent shall
determine (which determination, absent manifest error, shall be presumptively
correct) the interest rate for the LIBOR Loans for which an interest rate is
then being determined and shall promptly give notice thereof (in writing or by
telephone confirmed in writing) to the applicable Borrower. In the event that on
any LIBOR Interest Rate Determination Date the Agent shall have determined
(which determination, absent manifest error, shall be presumptively correct and
binding upon all parties) that:
(i) adequate and fair means do not exist for ascertaining the
applicable interest rates by reference to which the LIBO Rate then being
determined is to be fixed; or
(ii) the LIBO Rate plus the Applicable Margin for any Interest Period
for such Loans will not adequately reflect the cost to any Lender of
making, funding or maintaining its LIBOR Loan for such Interest Period,
the Agent shall forthwith so notify the applicable Borrower and the
Lender, whereupon:
(A) each LIBOR Loan will automatically, on the last day of the
then existing Interest Period therefor, convert into a Base
Rate Loan; and
(B) the obligation of the Lenders to make, or to convert Loans
into, LIBOR Loans shall be suspended until the Agent shall
notify the applicable Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
(d) ILLEGALITY. Notwithstanding any other provision of this Agreement, if
any Lender shall notify the Agent that the introduction of or any change in or
in the interpretation of any law or regulation makes it unlawful, or any central
bank or other Governmental Authority asserts that it is unlawful, for any Lender
to perform its obligations hereunder to make LIBOR Loans or to fund or maintain
LIBOR Loans hereunder, (i) the obligation of the Lenders to make, or to convert
Loans into or to continue Loans as, LIBOR Loans shall be suspended until the
Agent shall notify the Borrowers and the Lenders that the circumstances causing
such suspension no longer exist and (ii) the Borrowers shall on the termination
of the Interest Period then applicable thereto, or on such earlier date required
by law, prepay in full all LIBOR Loans then outstanding together with accrued
interest thereon, or convert all such LIBOR Loans into Base Rate Loans in
accordance with SECTION 2.06.
(e) COMPENSATION. In addition to such amounts as are required to be paid by
the Borrowers pursuant to the other Sections of this ARTICLE II, the Borrowers
agree to compensate any Lender for all losses, expenses and liabilities,
including, without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
27
to fund or maintain such Lender's LIBOR Loans (including the Applicable Margin
component thereof) to the Borrowers, which such Lender may sustain (i) if for
any reason a funding of any LIBOR Loans does not occur on a date specified
therefor in a Notice of Borrowing or Notice of Conversion/Continuation, or a
successive Interest Period does not commence after notice therefor is given
pursuant to SECTION 2.06 as a result of any act or omission of any Borrower,
(ii) if any voluntary or mandatory prepayment of any LIBOR Loans occurs for any
reason on a date which is not the last scheduled day of an Interest Period,
(iii) as a consequence of any required conversion of LIBOR Loans to Base Rate
Loans as a result of any of the events indicated in SECTION 2.07(D), or (iv) as
a consequence of any other failure by the Borrower to repay LIBOR Loans when
required by the terms of this Agreement.
(f) BOOKING OF LIBOR LOANS; DISCRETION AS TO MANNER OF FUNDING. The Lenders
may make, carry or transfer LIBOR Loans at, to, or for the account of, any of
their respective branch offices or the office of any of their respective
affiliates. Each Lender shall be entitled to fund and maintain its funding of
all or any part of its Loans in any manner it sees fit, it being understood that
for purposes of this Agreement all determinations hereunder shall be made
assuming each Lender had actually funded and maintained each LIBOR Loan through
the purchase of deposits of Dollars in the London Interbank market having a
maturity corresponding to each Loan's Interest Period and bearing an interest
rate equal to the LIBO Rate for such Interest Period.
SECTION 2.08. PAYMENTS. (a) Interest on each LIBOR Loan shall be payable in
arrears on each LIBOR Interest Payment Date and, if such LIBOR Loan is paid in
full other than on such LIBOR Interest Payment Date, on such other date.
Interest on each Base Rate Loan will be payable in arrears on each Payment Date
and, if such Base Rate Loan is paid in full other than on such Payment Date, on
such other date.
(b) Subject to the provisions of SECTIONS 2.09 and 9.02, the outstanding
principal balance of the Loans made to the Borrowers shall be payable in twenty
consecutive quarterly payments commencing on the Payment Dates set forth in
Annex C. On each such Payment Date, the Borrowers shall pay an amount equal to
the product of the percentage set forth on Annex C opposite such Payment Date
multiplied by the aggregate principal amount of the Loans made.
(c) Payments made with respect to the Loans by each Borrower shall be
applied by the Agent first to unpaid and accrued fees and interest and then to
the outstanding unpaid principal balance of the Loans of such Borrower;
PROVIDED, that upon the occurrence and during the continuance of an Event of
Default, all payments and prepayments with respect to the Obligations and all
proceeds of Collateral shall be applied in the following order by the Agent; (it
being understood that the order of priority set forth in the following clauses
may be altered upon direction from the Requisite Lenders to the Agent):
(1) first, to pay Obligations in respect of any expenses then due and
payable by the Borrowers to the Agents or the Lenders;
28
(2) second, to pay Obligations in respect of any reimbursement or
indemnities then due and payable to the Agents or the Lenders;
(3) third, to pay Obligations in respect of any fees due and owing to the
Agent or the Collateral Agent;
(4) fourth, to pay Obligations in respect of the commitment fee and any
other fees and commissions then due and owing to the Agents or the Lenders;
(5) fifth, to pay Obligations in respect of any accrued and unpaid interest
due in respect of Loans;
(6) sixth, to pay termination payments due and payable pursuant to any
Interest Rate Agreement or other hedging agreement;
(7) to the ratable payment or prepayment of principal of any outstanding
Loans; and
(8) to the ratable payment of all other Obligations.
SECTION 2.09. OPTIONAL AND MANDATORY PREPAYMENT OF LOANS; OPTIONAL AND
MANDATORY REDUCTION OF COMMITMENT AMOUNT. (a) Provided that no Event of Default
has occurred and is continuing, the Borrowers shall have the right upon the
provision of sixty (60) days' prior written notice to the Agent, which notice,
once given, shall be irrevocable, on any Payment Date with respect to any Base
Rate Loans and on the last day of the applicable Interest Period with respect to
any LIBOR Loans, to prepay the outstanding principal of the Base Rate Loans in a
minimum principal amount of $1,000,000 and increments of $250,000 in excess
thereof, or the outstanding principal of the LIBOR Loans in a minimum principal
amount of $5,000,000 and increments of $1,000,000 in excess thereof, together,
in each case, with accrued interest thereon and the aggregate Prepayment Premium
applicable thereto. The amount of principal so prepaid shall be applied to the
remaining principal payments of the type of Loans prepaid (i.e. Base Rate Loans
or LIBOR Loans) in the inverse order of maturity.
(b) Upon the occurrence of any Event of Loss in excess of $1,000,000 with
respect to any item of Collateral that is not repaired or replaced, or any
Events of Loss which, in the aggregate, exceed $5,000,000 with respect to any
item or items of Collateral that are not repaired or replaced (in each case,
other than an item of Collateral no longer used or useful in the Business) such
that after such repair or replacement it has a value at least equal to its value
prior to the occurrence of such Event of Loss, the Borrower shall make a
principal prepayment within thirty (30) days of such Event of Loss in an amount
equal to the replacement value of the item of Collateral which suffered such
Event of Loss, together with accrued interest thereon (but without the
29
Prepayment Premium) with such principal payment to be applied, to outstanding
principal balance of the Loans.
(c) The Borrowers shall prepay Loans in a principal amount equal to (i) all
the net proceeds of any sales of assets of any Borrower other than sales in the
ordinary course of business, which proceeds are not reinvested within 270 days
after receipt thereof in replacement assets, plus, in the case of any Loans held
by Lenders other than Lucent, the applicable Prepayment Premium, and (ii) the
proceeds of insurance policies paid to any Borrower and not applied within 270
days after any such payment to replacing, rebuilding or restoring the Collateral
which was the subject of insurance loss, without any Prepayment Premium, in each
case, within five (5) days after the expiration of the applicable 270 day
period.
(d) Provided that no Event of Default has occurred and is continuing and
that the Borrower can demonstrate to the Agent that it has adequate funds as to
ensure that all work to be performed with respect to any System then under
construction shall be performed and that each such System shall be a Completed
System on or before December 31, 2000, the Borrowers shall have the right upon
the provision of thirty days' prior written notice to the Agent, which notice,
once given, shall be irrevocable, on any Payment Date, to reduce the Commitment
Amount of all the Lenders. Each such reduction shall be in a minimum principal
amount of $1,000,000 and increments of $250,000 in excess thereof.
(e) Any reduction in the Commitment Amount of all the Lenders shall be
allocated to each Lender based on its Pro Rata Share. All prepayments of
principal shall be applied to the remaining principal payments of the type of
Loans prepaid in the inverse order of maturity.
SECTION 2.10. FEES. (a) The Borrowers shall pay and the Borrowers shall be
jointly and severally liable to the Agent for the account of the Lenders for
payment of a nonutilization fee calculated on a per annum basis and equal to (1)
in the case of each Lender other than Lucent, the product of (x) 1.25% per annum
multiplied by (y) the average unused Commitment Amount of such Lender for the
quarterly period preceding a Payment Date (PROVIDED that until the conditions
set forth in SECTION 4.03 and SECTION 4.04 have been satisfied, such
nonutilization fee shall be paid only on the Commitment Amount which together
with Loans then outstanding aggregate $250,000,000) and (2) in the case of
Lucent, the product of (x) 1.25% per annum multiplied by (y) the lesser of (A)
the average of the unused Commitment Amount of Lucent and (B) the average of the
excess of (I) $250,000,000 over (II) the principal amount of Loans held by
Lucent, in each case, for the quarterly period preceding a Payment Date. Such
fees shall be payable on each Payment Date following such last day of a quarter
beginning on the Payment Date following the Closing Date until and including the
Payment Date following the Commitment Termination Date:
In the event that at any time the Borrowers fails to comply with the
requirements of SECTION 2.03(D) for any calendar year, the nonutilization fees
shall be increased by 100 basis points for the entire calender year with payment
of such increment in the nonutilization fee being due and payable not later than
the last Business Day of such calendar year.
30
(b) The Borrowers shall pay and the Borrowers shall be jointly and
severally liable to the Agent and the Collateral Agent, for payment of an annual
administrative fee and a collateral monitoring fee at the times and in the
amounts set forth in the Fee Letters.
(c) The Borrowers shall on the Closing Date pay the Agent the underwriting
fee and the structuring fee referred to in the Fee Letter.
(d) All fees once paid shall be nonrefundable.
SECTION 2.11. MANNER OF PAYMENT; SPECIAL TAX CONSIDERATIONS. (a) All
payments by the Borrowers hereunder and under the Notes shall be made to the
Agent by wire transfer or other electronic payment method to the Payment Account
or to such bank account as the Agent may designate, for the account of the
Lenders in Dollars in immediately available funds by 11:00 a.m., New York time,
on the date on which such payment shall be due. The Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or other fees ratably (other than amounts payable pursuant
to SECTION 2.13) to each Lender in accordance with SECTION 10.07. Interest in
respect of any Loan hereunder shall accrue from the day such Loan is made up to
and including the day prior to the date on which such Loan is paid in full.
Payments received after 12:00 p.m. shall not be given credit until the next
Business Day, and the Borrowers shall be liable for interest, if any, accruing
on such payment until the next Business Day.
(b)(1) Any and all payments by each Borrower hereunder shall be made free
and clear of and without deduction for any and all Taxes. If any Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the other Loan Documents to any Lender or Agent, (A) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this SECTION 2.11) such Lender or Agent receives an amount equal to the sum it
would have received had no such deductions been made, (B) such Borrower shall
make such deductions, and (C) such Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law. If a withholding tax of the United States of America or any
other Governmental Authority shall be or become applicable (y) after the date of
this Agreement, to the payments by any Borrower made to the Lending Office or
any other office that a Lender may claim as its Lending Office, or (z) after
such Lender's selection and designation of any other Lending Office, to such
payments made to such other Lending Office, such Lender shall use reasonable
efforts to make, fund and maintain its Loans through another Lending Office of
such Lender in another jurisdiction so as to reduce to the greatest extent
possible, but not increase, the applicable Borrower's liability hereunder, if
the making, funding or maintenance of such Loans through such other Lending
Office of such Lender does not, in the judgment of such Lender, otherwise
materially adversely affect such Loans, such Lender's obligations under its
Commitment or such Lender. Notwithstanding anything to the contrary hereunder,
if a Person becomes a Lender under this Agreement pursuant to SECTION 11.08, the
31
Borrowers shall in no event be required to increase any payment pursuant to
paragraph (b) of this SECTION 2.11 by an amount that would exceed the amount of
any increase that would be required to be made under paragraph (b) of this
SECTION 2.11 to the assigning Lender.
(2) The Borrowers will jointly and severally indemnify each Lender and the
Agent and hold them harmless for the full amount of Taxes (including, without
limitation, any Taxes imposed by any Governmental Authority on amounts payable
under this SECTION 2.11 or any other documentary taxes, assessments or charges
made by any Governmental Authority by reason of the execution and delivery of
this Agreement or any other Loan Document) paid by such Lender or the Agent (as
the case may be) and any liability (including penalties, interest, and expenses)
arising therefrom or with respect thereto. This indemnification shall be made
within thirty (30) days after the date such Lender or the Agent (as the case may
be) makes written demand therefor. A certificate as to any additional amount
payable to any Lender or the Agent under this SECTION 2.11 submitted to the
Borrowers and the Agent (if a Lender is so submitting) by such Lender or the
Agent shall show in reasonable detail the amount payable and the calculations
used to determine such amount. With respect to such deduction or withholding for
or on account of any Taxes and to confirm that all such Taxes have been paid to
the appropriate Governmental Authorities, the Borrowers shall promptly (and in
any event not later than thirty (30) days after receipt) furnish to each Lender
and the Agent such certificates, receipts and other documents as may be required
(in the reasonable judgment of such Lender or the Agent) to establish any tax
credit to which such Lender or the Agent may be entitled.
(3) Within thirty (30) days after the date of any payment of Taxes on
amounts payable hereunder by any Borrower, such Borrower will furnish to the
Agent, at its address referred to in SECTION 11.01, the original or a certified
copy of a receipt evidencing payment thereof.
(4) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of such Borrower contained
in this SECTION 2.11 shall survive the payment in full of principal and interest
hereunder and the termination of this Agreement.
(5) Each Lender that is not created or organized under the laws of the
United States of America or a political subdivision thereof shall deliver to the
Borrowers and the Agent on or before the effective date hereof, or, if later,
the date on which such Lender becomes a Lender pursuant to SECTION 11.08, a true
and accurate certificate executed in duplicate by a duly authorized officer of
such Lender, in a form satisfactory to the Borrowers and the Agent, to the
effect:
(A) that such Lender is capable under the provisions of an applicable tax
treaty concluded by the United States of America (in which case the
certificate shall be accompanied by two original, executed copies of Form
32
1001 of the IRS or any successor form) or under Section 1442 of the IRC
(in which case the certificate shall be accompanied by two original,
executed copies of Form 4224 of the IRS or any successor form) of
receiving payments of interest hereunder exempt from or at a reduced rate
of deduction or withholding of United States federal income tax, or
(B) if such Lender is not a "bank" within the meaning of Section
881(c)(3)(A) of the IRC and intends to claim exemption from U.S. federal
withholding tax under Section 871(h) or Section 881(c) of the IRC with
respect to payments of "portfolio interest", (i) that such Lender is not a
"bank" within the meaning of Section 881(c) of the IRC, is not a 10
percent shareholder (within the meaning of Section 871(h)(3)(B) of the
IRC) of any Borrower and is not a controlled foreign corporation related
to any Borrower (within the meaning of Section 864(d)(4) of the IRC), (ii)
that such Lender claims complete exemption from U.S. federal withholding
tax on payments of interest by the Borrowers under this Agreement and the
other Loan Documents and (iii) that the Lender has received in replacement
of any Note held by or assigned to it, a QFL Note in accordance with this
SECTION 2.11(B).
Each such Lender further agrees to deliver to the Borrowers and the Agent from
time to time a true and accurate certificate executed in duplicate by a duly
authorized officer of such Lender substantially in a form satisfactory to the
Borrowers and the Agent, before or promptly upon the occurrence of any event
requiring a change in the most recent certificate previously delivered by it to
the Borrowers and the Agent pursuant to this SECTION 2.11(B)(5). Further, each
Lender which delivers a certificate accompanied by Form 1001 of the IRS
covenants and agrees to deliver to the Borrower and the Agent within fifteen
(15) days prior to the date on which the first payment becomes payable to it
hereunder or under any Note, and every third anniversary of such date
thereafter, on which this Agreement is still in effect, another such certificate
and two accurate and complete original signed copies of Form 1001 (or any
successor form or forms required under the IRC or the applicable regulations
promulgated thereunder), and each Lender that delivers a certificate accompanied
by Form 4224 of the IRS covenants and agrees to deliver to the Borrower and the
Agent within fifteen (15) days prior to the beginning of each subsequent taxable
year of such Lender during which this Agreement is still in effect, another such
certificate and two accurate and complete original signed copies of IRS Form
4224 (or any successor form or forms required under the IRC or the applicable
regulations promulgated thereunder). Each such certificate shall certify as to
one of the following:
(a) that such Lender is capable of receiving payments of interest hereunder
exempt from or at a reduced rate of deduction or withholding of United States of
America federal income tax;
(b) that such Lender is not capable of receiving payments of interest
hereunder exempt from or at a reduced rate of deduction or withholding of United
States federal income tax as specified therein but is capable of recovering the
33
full amount of any such deduction or withholding from a source other than the
Borrowers and will not seek any such recovery from the Borrowers; or
(c) that, as a result of the adoption of or any change in any law, treaty,
rule, regulation, guideline or determination of a Governmental Authority or any
change in the interpretation or application thereof by a Governmental Authority
after the date such Lender became a party hereto, such Lender is not capable of
receiving payments of interest hereunder without deduction or withholding of
United States of America federal income tax as specified therein and that it is
not capable of recovering the full amount of the same from a source other than
the Borrowers.
Each Lender shall promptly furnish to the Borrowers and the Agent such
additional documents as may be reasonably required by the Borrowers or the Agent
to establish any exemption from or reduction of any Taxes required to be
deducted or withheld and which may be obtained without undue expense to such
Lender
(6) For a period with respect to which a Lender has failed to provide the
Agent and the Borrowers with the appropriate form described in this SECTION
2.11(B)(5) (other than if such failure is due to a change in law occurring
subsequent to the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under this SECTION 2.11
with respect to Taxes imposed by the United States by reason of such failure;
PROVIDED, that should a Lender become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrowers shall take such steps as such
Lender shall reasonably request to assist such Lender to recover such Taxes.
(7) Any Lender that is not a "bank" within the meaning of Section
881(c)(3)(A) of the IRC and satisfies the applicable requirements of SECTION
2.11(B)(5) (a "Qualified Foreign Lender") shall upon receipt of the written
request of the Agent or the Borrowers and may, upon its own written request to
the Agent, exchange any Note held by or assigned to it for a qualified foreign
lender Note ( a "QFL Note"). A QFL Note shall be in the form of the Note
attached as Exhibit E but shall contain the following legend,"This Note is a QFL
Note, and as such, ownership of the obligation represented by such QFL Note may
be transferred only in accordance with Section 2.11 of the Loan and Security
Agreement." Any QFL Note issued in replacement of any existing Note pursuant to
this Section shall be (i) dated the Closing Date, (ii) issued in the name of the
entity in whose name such existing Note was issued and (iii) issued in the same
principal amount as such existing Note. Any Note replaced pursuant to this
Section is sometimes referred to herein as a "Replaced Note".
(8) Each Borrower agrees that, upon the request of or delivery of a request
to a Qualified Foreign Lender pursuant to paragraph (7) of this SECTION 2.11(B),
it shall execute and deliver a QFL Note to the Agent in replacement of the
Replaced Note surrendered in connection with such request conforming to the
requirements of this paragraph. Each Qualified Foreign Lender shall surrender
its Note in connection with any replacement pursuant to this SECTION 2.11. Upon
34
receipt by the Agent, in connection with any replacement, of a QFL Note and the
existing Note to be replaced by such QFL Note in accordance with this paragraph,
the Agent shall forward the QFL Note to the Lender which has surrendered its
Note for replacement by such QFL Note and shall forward the surrendered Note to
the relevant Borrower marked "canceled". Once issued, QFL Notes (i) shall be
deemed to and shall be "Notes" for all purposes under the Loan Documents, (ii)
may not be exchanged for Notes which are not QFL Notes, notwithstanding anything
to the contrary in the Loan Documents and (iii) shall at all times thereafter be
QFL Notes, including, without limitation, following any transfer or assignment
thereof.
(9) Notwithstanding anything to the contrary in the Loan Documents, the QFL
Notes are registered obligations as to both principal and interest with a
Borrower and transfer of the obligations underlying such QFL Note may be
effected only by surrender of the QFL Note to such Borrower and either
reissuance by such Borrower of such QFL Note to the transferee or issuance by
such Borrower of a new QFL Note to the transferee. A QFL Note shall only
evidence the Lender's or an assignee's right, title and interest in and to the
related obligation, and in no event is a QFL Note to be considered a bearer
instrument or obligation. This SECTION 2.11 shall be construed so that the
obligations underlying the QFL Notes are at all times maintained in "registered
form" within the meaning of Sections 871(h)(2) and 881(c)(3) of the IRC.
(c)(1) If a Borrower pays any additional amount under this SECTION 2.11
and, as a result, any Lender, together with the Agent, subsequently, in their
sole discretion and based on their own interpretation of any relevant laws (but
acting in good faith) receive or are granted a final and non-appealable credit
against or deduction from or in respect of any tax payable by such Lender, or
obtain any other final and non-appealable relief in respect of any tax, which in
the opinion of such Lender and the Agent, acting in good faith, is both
reasonably identifiable and quantifiable by them without requiring any Lender,
the Agent or their professional advisers to expend a material amount of time or
incur a material cost in so identifying or quantifying (any of the foregoing, to
the extent so reasonably identifiable and quantifiable, being referred to as a
"SAVING"), such Lender shall, to the extent that it can do so without prejudice
to the retention of the Saving, reimburse such Borrower promptly after such
identification and quantification with the amount of such Saving; PROVIDED, that
any such Saving shall be reduced by any costs incurred by such Lender or the
Agent in obtaining such Saving.
(2) Nothing in this SECTION 2.11(C) shall require any Lender to disclose to
any Person any information regarding its tax affairs or to arrange its tax and
other affairs in any particular manner.
SECTION 2.12. MAXIMUM LAWFUL INTEREST RATE. Notwithstanding any provision
contained herein, the total liability of the Borrowers for payment of interest
pursuant hereto and the Notes, including any other charges or other amounts, to
the extent such charges and other amounts are deemed to be interest, shall not
exceed the maximum amount of such interest permitted by law to be charged,
35
collected, or received from the Borrowers (the "MAXIMUM RATE"). If any payments
by any Borrower for the account of any Lender include interest in excess of the
Maximum Rate, such Lender shall apply such excess to the reduction of the unpaid
principal amount owing by such Borrower, or if none is due, such excess shall be
returned to such Borrower.
SECTION 2.13. FUNDING ISSUES. (a) INCREASED COSTS. If, due to either (i)
the introduction after the date hereof of, or any change after the date hereof
in or in the interpretation of, any applicable law, rule or regulation by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof or (ii) compliance by any Lender after
the date hereof with any final request or final directive issued after the date
hereof (whether or not having the force of law) by any such Governmental
Authority, central bank or comparable agency, and, as a result of any of the
events set forth in the above CLAUSES (I) and (II), (x) there shall be any
increase in the cost to such Lender in maintaining its Commitment under this
Agreement or funding or maintaining its Pro Rata Share of the Loans under this
Agreement, or (y) any Lender is subjected to any charge or withholding on its
obligations hereunder, or changes in the basis of taxation of payments to any
Lender in connection with any of the foregoing (except for changes in the rate
of tax on overall net income of any Lender) (collectively, "INCREASED COSTS"),
then the Borrowers shall, from time to time, pay, to the Agent for the benefit
of such Lender within 15 days after such Lender shall have provided notice to
the Agent (and the Agent shall have provided notice to the Borrowers) of such
Increased Cost, an amount sufficient to compensate such Lender for such
Increased Cost, as provided herein. A certificate setting forth in reasonable
detail the computation of the amount of such Increased Cost (which increase in
cost shall be determined by such Lender's reasonable allocation of the aggregate
of such cost increases resulting from such event), submitted to the Borrowers by
such Lender, absent manifest error, shall be conclusive and binding for all
purposes.
(b) INCREASED CAPITAL. If any Lender which is subject to minimum capital
requirements determines that compliance by such Lender, with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by such Lender, or any corporation controlling such
Lender, and such Lender reasonably determines that the amount of such capital is
increased by or based upon any commitment to lend hereunder or making or
maintaining Loans, then, upon demand by such Person, the Borrowers agree to,
within five (5) days of such demand, pay to such Person, from time to time as
specified by such Person, additional amounts sufficient to compensate such
Person in the light of such circumstances, to the extent that such Person
reasonably determines such increase in capital to be allocable to such Person's
commitment or maintenance of Loans hereunder. A certificate as to the amount of
such increased cost, submitted to the Borrowers by the applicable Person, absent
manifest error, shall be conclusive and binding on the Borrowers for all
purposes.
(c) REPLACEMENT OF LENDER. If any Borrower, as a result of the requirements
of either SECTION 2.13(A) or SECTION 2.13(B), shall be required to pay any
particular Lender (an "AFFECTED LENDER") the additional amounts referred to in
36
such Section, which costs are not imposed by the other Lenders, and such
additional amounts are material, then such Borrower shall be entitled to find a
replacement Lender, reasonably acceptable to the Agents (the Agents' consent to
such replacement Lender not to be unreasonably withheld), to replace the
Affected Lender. The Affected Lender and the replacement Lender shall execute an
Assignment Agreement with respect to all of the Affected Lender's Commitments
and all Loans owing to the Affected Lender and comply with the other provisions
of SECTION 11.08(c). Upon the payment by the replacement Lender to the Affected
Lender of the then outstanding principal amount of Loans owing to the Affected
Lender, together with accrued interest thereon, and the payment by the Borrower
to the Affected Lender of any compensation required with respect to LIBOR Loans
pursuant to SECTION 2.07(E), the replacement Lender shall succeed to all of the
Affected Lender's rights and obligations under this Agreement and the other Loan
Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to the Agent, the Collateral Agent
and the Lenders that:
SECTION 3.01. ORGANIZATION; POWERS. (a) Such Borrower (i) is a corporation
or limited liability company duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and (ii) is
qualified to do business in the jurisdiction in which its principal place of
business is located and in every other jurisdiction where such qualification is
necessary;
(b) such Borrower has the power and authority to own its properties, to
carry on its business as now conducted; and
(c) such Borrower has the power and authority to execute and deliver and
perform this Agreement and the other Loan Documents to which it is a party, to
borrow hereunder, and will have the power to execute and deliver any Mortgages
and Collateral Assignments of Leases or other instruments to be delivered by it
subsequent to the date hereof.
SECTION 3.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance of this Agreement and the other Loan Documents to which such
Borrower is a party, and the Loans hereunder:
(a) have been duly authorized by such Borrower's Board of Directors or
managers and, if necessary, such Borrower's stockholders or members;
(b) (1) do not violate (i) any existing provision of law applicable to the
Borrower and not immaterial to its business, (ii) such Borrower's Certificate of
Incorporation or by-laws or other organizational documents, as the case may be,
or (iii) any applicable order of any court or other governmental agency, and (2)
do not conflict with, result in a breach of or constitute (with due notice or
37
lapse of time or both) a default under any indenture, agreement for borrowed
money, bond, note or other similar instrument or any other material agreement to
which such Borrower is a party or by which such Borrower or any of its property
is bound;
(c) do not result in the creation or imposition of any Lien of any nature
whatsoever upon any property or assets of such Borrower other than the Liens
granted pursuant to this Loan Agreement or the other Loan Documents;
(d) constitute legal, valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their respective terms; and
(e) do not, as of the date of execution hereof, require any governmental
consent, filing, registration or approval except as set forth on SCHEDULE 3.02.
SECTION 3.03. FINANCIAL STATEMENTS. The Borrowers have furnished to the
Agent and the Lenders the audited consolidated financial statements of KMC
Holdings dated as of December 31, 1997, and the unaudited consolidated financial
statements for the fiscal quarter ended September 30, 1998 and for the period
ended October 31, 1998, which statements are attached hereto as EXHIBIT I
(collectively, the "FINANCIALS"). The Financials have been prepared in
accordance with GAAP applied on a basis consistent with that of preceding
periods and are complete and correct in all material respects. As of the date of
the Financials, (a) the Financials fairly represent KMC Holdings' financial
position and results of operations; and (b) there are no omissions from the
Financials or any other facts or circumstances not reflected in the Financials
which are or may be material according to GAAP.
SECTION 3.04. NO MATERIAL ADVERSE CHANGE. There has been no material
adverse change in the condition (financial or otherwise), operations or
properties of such Borrower since the date of the Financials.
SECTION 3.05. LITIGATION. Except as set forth on SCHEDULE 3.05, there are
no actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of such Borrower against
or affecting such Borrower or any property or rights of such Borrower as to
which there is a reasonable possibility of an adverse determination and which,
if adversely determined, would individually or in the aggregate materially
impair the right of any Borrower to carry on business substantially as now being
conducted or as presently contemplated or would result in any Material Adverse
Effect.
SECTION 3.06. TAX RETURNS. Such Borrower has filed or caused to be filed
all Federal, state and local tax returns which are required to be filed and has
paid or caused to be paid all taxes as shown on such returns or on any
assessment received by it to the extent that such taxes have become due, except
such taxes the amount, applicability or validity of which are being contested in
38
good faith by appropriate proceedings and with respect to which such Borrower
shall have set aside on its books adequate reserves with respect to such taxes
as are required by GAAP.
SECTION 3.07. NO DEFAULTS. Such Borrower is not in default (i) with respect
to any judgment, writ, injunction, decree, rule or regulation of any
Governmental Authority which is likely to have a Material Adverse Effect, or
(ii) in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any material agreement or instrument to
which such Borrower is a party or by which any of its assets are bound, which is
likely to have a Material Adverse Effect.
SECTION 3.08. PROPERTIES. Such Borrower has good and marketable title to
all its material properties and assets and all Collateral of such Borrower is
free and clear of all Liens of any nature whatsoever, except Permitted Liens.
SECTION 3.09. LICENSES, MATERIAL AGREEMENTS, INTELLECTUAL PROPERTY. (a)
Such Borrower has made or will make application for and expects to receive all
Governmental Approvals and approvals of any Governmental Authority having
jurisdiction over such Borrower, which Governmental Approvals and approvals are
necessary or appropriate for the construction and operation of the Systems as
contemplated in the KMC III Tier III Plan, other than immaterial municipal
business permits. Such Governmental Approvals and approvals are correctly listed
on SCHEDULE 3.09(A) and constitute the only material licenses, permits or
franchises or other Governmental Approvals of any Governmental Authority
required in connection with the Systems as are presently operating. All such
Governmental Approvals are in full force and effect, are duly issued in the name
of, or validly assigned to, such Borrower and such Borrower has the power and
authority to operate thereunder.
(b) SCHEDULE 3.09(B) accurately and completely lists all material
agreements to which such Borrower is a party, including, without limitation, all
purchase agreements, construction contracts, right of way or right of occupancy
agreements, lease agreements, consulting, employment, management and related
agreements. All the foregoing agreements are valid, subsisting and in full force
and effect and neither such Borrower, nor, to the best of such Borrower's
knowledge and belief, any other parties, are in material default thereunder.
Such Borrower has given true and complete copies of all such agreements to the
Agent and the Lenders.
(c) Such Borrower owns or possesses all the patents, trademarks, service
marks, trade names, copyrights and licenses, and all rights with respect to the
foregoing (the "INTELLECTUAL PROPERTY"), necessary for the conduct of its
business as presently conducted without any known conflict with the rights of
others. SCHEDULE 3.09(C) accurately and completely lists all Intellectual
Property owned or possessed by or licensed to such Borrower. Such Borrower has
entered into Intellectual Property Documents with respect to its Intellectual
Property, as requested by the Agent (or the Requisite Lenders).
39
SECTION 3.10. COMPLIANCE WITH LAWS. Except as disclosed on SCHEDULE 3.10,
the operations of such Borrower comply in all material respects with all
applicable federal, state or local laws and regulations, including Environmental
Laws. Except as disclosed on SCHEDULE 3.10, none of the operations of such
Borrower is subject to any judicial or administrative proceeding alleging the
violation of any Environmental Laws. Except as disclosed on SCHEDULE 3.10, such
Borrower neither knows nor reasonably should know that any of the operations of
such Borrower is the subject of federal or state investigation evaluating
whether any Remedial Action is needed to respond to a Release. Except as
disclosed on SCHEDULE 3.10, the Borrower has not filed any notice under any
federal or state law indicating past or present treatment, storage or disposal
of a hazardous waste or reporting a Release. Except as disclosed on SCHEDULE
3.10, such Borrower has no contingent liability of which such Borrower has
knowledge or reasonably should have knowledge in connection with any Release.
SECTION 3.11. ERISA. Neither such Borrower nor any ERISA Affiliate of such
Borrower maintains or contributes to any Plan other than a Plan listed on
SCHEDULE 3.11 hereto. Each Plan which is intended to be qualified under Section
401(a) of the IRC has been determined by the IRS to be so qualified, and each
trust related to any such Plan has been determined to be exempt from federal
income tax under Section 501(a) of the IRC. Except as disclosed on SCHEDULE
3.11, neither such Borrower nor any ERISA Affiliate maintains or contributes to
any employee welfare benefit plan within the meaning of Section 3(1) of ERISA
which provides benefits to employees after termination of employment other than
as required by Section 601 of ERISA. Neither such Borrower nor any ERISA
Affiliate has breached any of the responsibilities, obligations or duties
imposed on it by ERISA or regulations promulgated thereunder with respect to any
Plan which breach could result in a Material Adverse Effect. No Plan has
incurred any accumulated funding deficiency (as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the IRC), whether waived or not waived. Neither such
Borrower nor any ERISA Affiliate nor any fiduciary of any Plan which is not a
Multiemployer Plan (i) has engaged in a nonexempt "prohibited transaction"
described in Section 406 of ERISA or Section 4975 of the IRC or (ii) has taken
or failed to take any action which would constitute or result in a Termination
Event. Neither such Borrower nor any ERISA Affiliate has incurred any liability
to the PBGC which remains outstanding and which could result in a Material
Adverse Effect, other than the payment of premiums, and there are no premium
payments which have become due which are unpaid. Schedule B to the most recent
annual report filed with the IRS with respect to each Plan is complete and
accurate. Since the date of each such Schedule B, there has been no adverse
change in the funding status or financial condition of the Plan relating to such
Schedule B. Neither such Borrower nor any ERISA Affiliate has (i) failed to make
a required contribution or payment to a Multiemployer Plan or (ii) made a
complete or partial withdrawal under Sections 4203 or 4205 of ERISA from a
Multiemployer Plan. Neither such Borrower nor any ERISA Affiliate has failed to
make a required installment or any other required payment under Section 412 of
the IRC on or before the due date for such installment or other payment. Neither
such Borrower nor any ERISA Affiliate is required to provide security to a Plan
under Section 401(a)(29) of the IRC due to a Plan amendment that results in an
increase in current liability for the plan year.
40
SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Such Borrower is not an "investment company" as that term is defined in, and is
not otherwise subject to regulation under, the Investment Company Act of 1940.
Such Borrower is not a "holding company" as that term is defined in, and is not
otherwise subject to regulation under, the Public Utility Holding Company Act of
1935.
SECTION 3.13. FEDERAL RESERVE REGULATIONS. Such Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
of the United States), and no part of the proceeds of the Loans made to such
Borrower will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin stock
or for any purpose that violates, or is inconsistent with, the provisions of
Regulation T, U or X of said Board of Governors.
SECTION 3.14. COLLATERAL. The security interests granted by ARTICLE VIII,
and the accompanying financing statements, when duly filed in the offices and
jurisdictions set forth on SCHEDULE 3.14 create valid and perfected first
priority Liens in and to the Collateral of such Borrower, enforceable against
other Persons in all jurisdictions securing the payment, as applicable, of the
Obligations hereunder. Upon filing such financing statements, to the extent that
the filing of a financing statement is sufficient to perfect a security
interest, no further action is required to perfect the Liens of the Agent in
favor of the Lenders in the Collateral of such Borrower described in SECTION
8.01.
SECTION 3.15. CHIEF PLACE OF BUSINESS. As of the Closing Date, the chief
executive office and principal place of business address of such Borrower is
0000 Xxxxx 000, Xxxxxxxxxx, Xxx Xxxxxx 00000. If any change in any such location
occurs, such Borrower shall notify the Agent thereof not later than ten days
after the occurrence thereof. As of the date of execution hereof, the books and
records of such Borrower and all chattel paper and all records of account are
located at the principal place of business or chief executive office of such
Borrower and if any change in such location occurs, such Borrower shall notify
the Collateral Agent thereof not later than ten days after the occurrence
thereof.
SECTION 3.16. OTHER CORPORATE NAMES. Except as set forth on SCHEDULE 3.16,
such Borrower has not used and does not now use and will not use any corporate
or fictitious name.
SECTION 3.17. INSURANCE. SCHEDULE 3.17 contains a description of all
insurance which such Borrower maintains or has maintained on its behalf. All of
such insurance is in full force and effect.
41
SECTION 3.18. KMC III TIER III PLAN. The KMC III Tier III Plan represents
good faith projections of future financial performance of the Borrowers for the
periods set forth therein. Such document has been prepared on the basis of the
assumptions set forth therein, which the Borrowers believe are reasonable in
light of current and reasonably foreseeable business conditions.
SECTION 3.19. CAPITALIZATION AND SUBSIDIARIES. The classes of Equity
Interests, number of authorized shares, number of outstanding shares and par
values or other designations of the Equity Interests or other equity securities
or beneficial interests of such Borrower are correctly set forth on SCHEDULE
3.19. All the outstanding shares of Equity Interests or other equity securities
or beneficial interests of such Borrower are duly and validly issued, fully paid
and nonassessable, and none of such issued and outstanding shares, equity
securities or beneficial interests has been issued in violation of, or is
subject to, any preemptive or subscription rights. There are no: (A) outstanding
shares of Equity Interests or other equity securities or beneficial interests or
other securities convertible into or exchangeable for shares of Equity Interests
or other equity securities or other beneficial interests of such Borrower, (B)
outstanding rights of subscription, warrants, calls, options, contracts or other
agreements of any kind, issued, made or granted to or with any Person under
which such Borrower may be obligated to issue, sell, purchase, retire or redeem
or otherwise acquire or dispose of any shares of Equity Interests or other
equity securities or beneficial interests of such Borrower, or (C) Subsidiaries
of such Borrower. KMC Holdings beneficially owns, directly or indirectly, all
the Equity Interests of such Borrower and KMC IHC.
SECTION 3.20. REAL PROPERTY, LEASES AND EASEMENTS. Such Borrower leases or
owns the real property described on SCHEDULE 3.20. Set forth on SCHEDULE 3.20 is
a list of (i) all real property leased or owned by such Borrower (the "REAL
PROPERTY") and (ii) all easements, rights of way, rights of occupancy, licenses
and similar rights with respect to real property granted to such Borrower not
otherwise disclosed to the Collateral Agent and the Lenders on a title report
delivered to the Collateral Agent and the Lenders pursuant to the terms hereof
(together with all easements, rights of way, rights of occupancy, licenses and
similar rights with respect to real property granted to such Borrower which are
so disclosed, collectively, the "EASEMENTS"). Also set forth on SCHEDULE 3.20 is
a street address of the Real Property locations described above, including a
description of such properties' current use. Except as set forth in SCHEDULE
3.20, such Borrower's interests in the Real Property and the Easements are
sufficient in order for such Borrower to conduct its business and operations as
presently conducted.
SECTION 3.21. SOLVENCY. After giving effect to any Loans made to such
Borrower hereunder, the disbursement of the proceeds of such Loans pursuant to
the Borrower's instructions and the execution, delivery and performance of each
of the Loan Documents and transactions contemplated thereby, such Borrower is
Solvent and is not contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation of all or a
substantial portion of its property, and has no knowledge of any Person
contemplating the filing of any such petition against such Borrower.
42
SECTION 3.22. BROKERS, ETC. Except as otherwise described on SCHEDULE 3.22,
such Borrower has not dealt with any broker, finder, commission agent or other
similar Person in connection with the Loans or the transactions being effected
contemporaneously with this Agreement, and such Borrower covenants and agrees to
indemnify and hold harmless the Agent, and the Lenders from and against, any
broker's fee, finder's fee or commission in connection with such transactions.
SECTION 3.23. NO MATERIAL MISSTATEMENTS. Neither any report, financial
statement, exhibit or schedule furnished by or on behalf of such Borrower to the
Agent, or any Lender in connection with the negotiation of this Agreement and
the other Loan Documents or included herein or therein, nor any other
information required to be furnished pursuant to the provisions of ARTICLE V
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein not materially misleading.
SECTION 3.24. YEAR 2000 PROBLEMS. Such Borrower has made a full and
complete assessment of the Year 2000 Problems and has a realistic and achievable
program for remediating the Year 2000 Problems on a timely basis. Based on such
assessment and program, such Borrower does not reasonably anticipate that Year
2000 Problems will have a Material Adverse Effect.
ARTICLE IV
CONDITIONS FOR LOANS
The obligations of each Lender to make Loans hereunder are subject to the
accuracy, as of the Initial Funding Date and as of the date of making of each of
the Loans after the Initial Funding Date, of the representations and warranties
contained in ARTICLE III (except that any representations or warranties that
relate to a specified date shall only be reaffirmed as of such date) and the
other Loan Documents, to the performance by such Borrower of its obligations to
be performed hereunder on or before the date of such Loan and to the
satisfaction of the following further conditions:
SECTION 4.01. CONDITIONS PRECEDENT TO INITIAL LOANS. In the case of the
Loans to be made on the Initial Funding Date:
(a) All then applicable legal matters incident to this Agreement and the
other Loan Documents shall be reasonably satisfactory to the Agent and its
counsel.
(b) The Agent and the Collateral Agent, as applicable, shall have received
payment in full of the fees set forth in the Fee Letter, and all the other
documented out-of-pocket costs and expenses of the Agent and the Lenders
incurred on or prior to the Initial Funding Date, including, without limitation,
reasonable attorneys' and paralegals' fees and expenses and the fees and
expenses incurred in connection with preparation of any environmental audits.
43
(c) (1) The Agent and the Collateral Agent shall have received the
following items, in each case in form and substance satisfactory to the Agent,
the Collateral Agent and the Lenders:
(i) the Financials;
(ii) the KMC III Tier III Plan showing in reasonable detail and
specifying any material underlying assumptions, for the subsequent nine (9)
year period, the Borrower's anticipated revenues and expenses and projected
statements of cash flow and information with respect to projected capital
expenditures and changes in working capital over such period, and a
detailed Systems construction and buildout schedule;
(iii) certificates substantially in the form of EXHIBITS J-1, J-2 and
J-3 hereto, dated the Initial Funding Date or dated the Closing Date and a
reaffirmation of such certificate dated the Initial Funding Date, of the
secretaries or assistant secretaries of each Borrower, KMC Holdings and KMC
IHC, certifying (1) the names and true signatures of the officers
authorized to sign each Loan Document to which any Borrower, KMC Holdings
and KMC IHC is a party, (2) the resolutions of the Board of Directors of
KMC III, KMC Holdings or KMC IHC approving the transactions contemplated by
the Loan Documents to which each is a party, (3) KMC III's, KMC Holdings'
or KMC IHC's bylaws, and (A) only with respect to the certificate of KMC
Holdings, (x) a true and correct copy of the Indenture, (y) true and
correct copies of the Management Agreement and the Tax Sharing Agreement
and (z) that KMC Holdings has made the Required Contributions to and (B)
only with respect to KMC IHC, that KMC IHC has made the Required
Contributions to KMC III;
(iv) the written opinions of special, regulatory and local counsel for
each Borrower, KMC Holdings and KMC IHC, dated the Initial Funding Date,
addressed to the Agent, the Collateral Agent and the Lenders satisfactory
to (and containing only such qualifications and limitations as are
satisfactory to) the Agents and its counsel, which opinions shall be
substantially in the forms set forth in EXHIBITS K-1, K-2 and K-3,
respectively, attached hereto;
(v) certificates of appropriate public officials dated not more than
30 days prior to the Initial Funding Date, as to the legal existence or
qualification, and good standing of each Borrower, KMC Holdings and KMC IHC
from such Person's jurisdiction of organization and from the jurisdiction
in which such Person has its principal place of business;
44
(vi) each Borrower's, KMC Holdings' and KMC IHC's Certificate of
Incorporation, as amended, modified or supplemented on or prior to the
Initial Funding Date, each certified to be true, correct and complete by
the Secretary of State of the state in which such Person is organized;
(vii) completed Year 2000 questionnaire executed by the Borrower;
(viii) the Notes duly executed and delivered by the Borrowers; and
(ix) this Agreement duly executed and delivered by the Borrowers.
(2) The Collateral Agent shall have received the following items in each
case in form and substance satisfactory to the Collateral Agent and the Lenders:
(i) the Pledge Agreements duly executed by (A) KMC IHC with respect to
the Equity Interests in KMC III and (B) KMC III with respect to the Equity
Interests in KMC Leasing III together with, in the case of KMC III, stock
certificates and, in each case, undated stock powers executed in blank in
form and substance satisfactory to the Collateral Agent and the Lenders;
(ii) the KMC Holdings Guaranty, duly executed by KMC Holdings;
(iii) the KMC IHC Guaranty, duly executed by KMC IHC;
(iv) loss payable endorsements substantially in the form of EXHIBIT M
attached hereto with respect to each Borrower's insurance policies relating
to the Collateral, and insurance certificates required by SECTION 5.04(G)
from nationally recognized insurance brokers with respect to each
Borrower's insurance policies;
(v) with respect to each Borrower's then existing Collection Accounts,
Restricted Account Agreements substantially in the form of EXHIBIT N
attached hereto, duly executed by applicable Borrower and the financial
institutions maintaining the Collection Accounts;
(vi) a Collateral Assignment of Licenses duly executed by each
Borrower, together with consents to assignment of licenses and rights from
Persons designated by the Collateral Agent and the Lender duly executed by
such Persons, including agreements as to default notices, cure rights,
waiver of lien rights, conveyance of nondisturbance rights and other terms
satisfactory to the Collateral Agent and the Lenders (provided the
Borrowers shall have the post-closing period provided for in SECTION 5.08
45
with respect to obtaining the consents to Collateral Assignment of Licenses
required pursuant to such Section);
(vii) a Collateral Assignment of Leases duly executed by each
Borrower, together with consents to assignment, duly executed by the
appropriate Persons, including agreements as to default notices, cure
rights, waiver of lien rights, conveyance of nondisturbance rights and
other terms satisfactory to the Collateral Agent and the Lenders with
respect to those leased properties specified by the Collateral Agent or the
Requisite Lenders, together with landlord waivers in the form of EXHIBIT D
hereto executed by the appropriate landlord with respect to those leased
properties specified by the Collateral Agent or the Requisite Lenders;
(viii) completed environmental questionnaires and indemnity agreement
executed by each Borrower and Phase I Environmental Reports with respect to
premises described on SCHEDULE 3.10 (if any);
(ix) an Access Agreement executed and delivered by Kamine Development
Corp. with respect to the Borrower's premises located at 0000 Xxxxx 000,
Xxxxx 000, Xxxxxxxxxx, Xxx Xxxxxx in form and substance satisfactory to the
Collateral Agent and the Lenders;
(x) a Trademark Security Agreement in the form of EXHIBIT Q hereto,
duly executed and delivered by the Borrowers;
(xi) a Contribution Agreement in the form of EXHIBIT R hereto, duly
executed and delivered by the Borrowers.
(d) The Agent or the Collateral Agent, as applicable, shall have
satisfactorily completed its review of any Additional Purchase Agreements,
construction and maintenance contracts, right of way agreements and
interconnection agreements related to the Systems being financed with the Loans
made on the Initial Funding Date.
(e) The Collateral Agent shall have received evidence satisfactory to it
and the Lenders that its security interests in the Collateral have been properly
perfected and constitute first and prior security interests subject only to
Permitted Liens, including by (i) filing Mortgages, the Collateral Assignment of
Licenses, the Collateral Assignment of Leases, leasehold mortgages and UCC-1
financing statements in certain filing and recording offices, (ii) filing the
Trademark Security Agreement in the United States Patent and Trademark Office,
(iii) obtaining consents to the Collateral Assignments of Licenses and the
Collateral Assignments of Leases (provided the Borrowers shall have the
post-closing period provided for in SECTION 5.08 with respect to obtaining the
consents to certain Collateral Assignments of Licenses required pursuant to such
46
Section) and (iv) taking possession of stock certificates and other instruments,
in each case, as requested by the Collateral Agent or the Requisite Lenders.
(f) The Collateral Agent shall have received evidence satisfactory to it,
including the results of searches conducted in the mortgage recording, UCC, tax
Lien and judgment filing records in each appropriate filing office or
jurisdiction, that there are no Liens against the Collateral except Permitted
Liens.
(g) The Agent shall have received evidence satisfactory that no Borrower
has any Debt other than as described in SECTION 6.13 and that the holders of any
such Debt described in CLAUSES (V) and (VII) of SECTION 6.13 have executed
subordination and standstill agreements satisfactory to the Collateral Agent and
the Lenders.
(h) The Collateral Agent, as it or the Requisite Lenders may require, shall
have obtained or waived in writing with respect to each real estate and material
equipment lease and each mortgage of any Borrower relating to the Systems being
financed with the initial Loan made after the Closing Date (i) the right from
the applicable lessors and mortgagees to cure all payment defaults under such
leases and mortgages by making payment directly to the applicable lessors and
mortgagees and (ii) landlord waivers and consents, as the Collateral Agent or
the Requisite Lenders may require, with respect to each leased facility.
(i) The Agent shall have satisfactorily completed their due diligence
investigation of the Borrowers and the Systems and the Borrowers' other assets,
and their respective officers and directors including, without limitation,
environmental reviews, engineering reviews, review of material agreements of the
Borrowers and review of easement matters.
(j) All right of way agreements with respect to each System under
construction shall be sufficient to allow full operation of such System and,
upon request of the Collateral Agent or the Requisite Lenders shall be
assignable to the Collateral Agent or its designee.
(k) KMC Holdings or KMC IHC, by either the making of capital contributions
or Qualified Intercompany Loans, shall have contributed or loaned cash to KMC
III in an aggregate amount equal to at least $58,500,000.
(l) Without the prior written consent of the Lenders, there shall not have
been any change in the ownership of 5% or more of the Voting Stock of KMC
Holdings.
SECTION 4.02. CONDITIONS PRECEDENT TO ALL LOANS. In the case of each Loan
hereunder:
(a) The representations and warranties of each Borrower set forth in
ARTICLE III or in any other Loan Document shall be true and correct in all
material respects on and as of the date of such Loan with the same effect as
47
though such representations and warranties had been made on and as of such date,
except that any representations or warranties that relate to a specified date
shall only be reaffirmed as of such date.
(b) At the time of each such Loan, and after giving effect to such Loan,
each Borrower shall be in compliance with all the terms and provisions set forth
herein on its part to be observed or performed, and no Event of Default or
Default shall have occurred and be continuing.
(c) At the time of each such Loan and after giving effect to each such
Loan, there shall have been no material adverse change in the condition
(financial or otherwise), operations, properties or prospects of any Borrower
since the date of the Financials.
(d) Such Loan, when combined with Loans previously made to the Borrowers,
shall not exceed the Commitment Amount.
(e) All legal matters incident to such Loan and the Loan Documents shall be
satisfactory to the Agent and its counsel.
(f) The Agent shall have received a Notice of Borrowing for the Loan and
acceptance certificate and invoices required by SECTION 2.03.
(g) The Collateral Agent shall have first priority Liens on all personal
and real property assets that comprise or relate to each System to be funded by
such Loan, shall have received collateral assignments of all material third
party agreements relating to such Systems, consented to by the applicable third
parties, as requested by the Agents, and shall have received evidence that all
necessary Governmental Approvals for such System have been obtained.
(h) The Collateral Agent shall have received copies of such lien waivers
and other acknowledgments from Persons constructing the Systems, any
subcontractors or vendors (including Lucent or each Additional Vendor) with
respect to the construction of the Systems as the Agent may reasonably request.
(i) All fees and expenses which are due and payable to the Agents on or
prior to the date of the advance of such Loan shall have been paid.
(j) The Agent or the Collateral Agent, as applicable, shall have
satisfactorily completed their review of any Additional Purchase Agreements,
construction and maintenance contracts related to the Systems being financed
with such Loan and the interconnection agreements for each System being financed
with such Loan.
(k) The Collateral Agent shall have obtained or waived in writing with
respect to each real estate and material equipment lease, each mortgage, and
each material third party agreement relating to the Systems being financed with
such Loan (i) the right from the applicable lessors and mortgagees to cure all
48
payment defaults under such leases and mortgages by making payments directly to
the applicable lessors and mortgagees, as the Agents may request, (ii) landlord
waivers and consents, as the Agents may require, with respect to each leased
facility, and (iii) consents to collateral assignment, as the Agent or the
Requisite Lenders may require, with respect to each such material third party
agreement.
(l) There shall not have occurred in the opinion of the Agents, any
material adverse change in any two of the three members of (i) KMC III's or KMC
Leasing III's, (ii) KMC Holdings' or (iii) KMC IHC's senior management team,
which shall comprise its Chief Executive Officer, Chief Financial Officer and
Executive Vice President - Field Sales and Operations.
(m) If a Loan is requested to finance Aged Equipment, the Agent or the
Requisite Lenders, if it or they so elect, shall have obtained an appraisal of
such Aged Equipment from an appraiser selected by the Agent, which appraisal
shall be satisfactory to the Collateral Agent and the Requisite Lenders, and the
cost of which shall be borne by such Borrower.
(n) Each Borrower shall have delivered to the Agents such other
certificates, documents, legal opinions or other information as the Agent may
reasonably request.
SECTION 4.03. CONDITIONS PRECEDENT TO LOANS IN EXCESS OF THE LEVEL 1
LENDING LIMIT. The obligation to make Loans hereunder in excess of the Level 1
Lending Limit shall be subject to the satisfaction of the condition that the
Borrowers shall have received an additional $35,000,000 of funded equity or
Qualified Intercompany Loans.
SECTION 4.04. CONDITIONS PRECEDENT TO LOANS IN EXCESS OF THE LEVEL 2
LENDING LIMIT. The obligation to make Loans hereunder in excess of the Level 2
Lending Limit shall be subject to the satisfaction of the following further
conditions:
(a) Lucent shall have assigned or sold participations in its Loans and/or
Commitment, without recourse to or credit support from Lucent, so that, after
giving effect to the Loans being made on such Funding Date, the aggregate Loans
of Lucent do not exceed $250,000,000.
(b) KMC Holdings or KMC IHC shall have obtained through the sale of Equity
Interests (other than Disqualified Stock) in KMC Holdings or High Yield Debt of
either KMC Holdings or KMC IHC net cash proceeds of not less than $300,000,000
and, either by the making of capital contributions or Qualified Intercompany
Loans, KMC Holdings or KMC IHC shall have contributed or loaned such net cash
proceeds to KMC III.
(c) Prior to December 31, 1999 the Borrowers shall have delivered the KMC
III Tier III - Tier IV Plan.
49
(d) the Borrowers shall have revised financial covenants in accordance with
the KMC III Tier III-Tier IV Plan in a manner that is acceptable to the Agent
and the Requisite Lenders. Under review.
ARTICLE V
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that so long as this Agreement shall
remain in effect, any Commitment hereunder shall be outstanding or any
Obligations hereunder or under any of the other Loan Documents are unpaid,
unless the Requisite Lenders shall have otherwise given prior written consent:
SECTION 5.01. CORPORATE AND FRANCHISE EXISTENCE. Such Borrower shall
preserve and maintain its corporate existence, rights, franchises, licenses and
privileges in its jurisdiction of its organization, and in all other
jurisdictions in which such qualification is necessary in view of its business
and operations and property and preserve, protect and keep in full force and
effect its material rights and its Governmental Approvals.
SECTION 5.02. COMPLIANCE WITH LAWS, ETC. Such Borrower shall comply in all
material respects with all laws and regulations applicable to it, including,
without limitation, Environmental Laws, regulations promulgated by the FCC and
any PUC, and other telecommunications laws and regulations, and all material
contractual obligations applicable to it.
SECTION 5.03. MAINTENANCE OF PROPERTIES. Such Borrower shall at all times
maintain in good repair, working order and condition, excepting ordinary wear
and tear, all its properties material to its operations and make all appropriate
repairs, replacements and renewals thereof, in each case consistent with prudent
industry practices and sound business judgment and with respect to the
maintenance of machinery and equipment, in compliance with applicable government
regulations, manufacturers' warranty requests and any licensing requirements.
SECTION 5.04. INSURANCE.
(a) COVERAGE. Without limiting any of the other obligations or liabilities
of such Borrower under this Agreement, such Borrower shall carry and maintain,
and require each contractor retained in connection with the construction of any
System to carry and maintain, each at its own expense, at least the minimum
insurance coverage set forth in this SECTION 5.04. Such Borrower shall also
carry and maintain any other insurance that the Collateral Agent or the
Requisite Lenders may reasonably require from time to time. All insurance
carried pursuant to this SECTION 5.04 shall be placed with such insurers that
50
have an A.M. Best rating of A:X or better, or as may be acceptable to the
Collateral Agent and the Requisite Lenders. Such coverage shall be in such form,
with terms, conditions, limits and deductibles as shall be acceptable to the
Collateral Agent and the Requisite Lenders.
(b) CONSTRUCTION PERIOD. During the period from, and including the
commencement of construction of any System, to and including the completion of
construction of any System, such Borrower shall maintain in full force and
effect, pay all premiums when due in respect of, and comply with all terms and
conditions of the following coverages:
(i) ALL RISK BUILDER'S RISK. The Borrower shall maintain all risk
builder's risk insurance covering physical loss or damage to such System
including, but not limited to, fire and extended coverage, collapse, flood,
earth movement, and comprehensive boiler and machinery coverage (including
electrical malfunction and mechanical breakdown). Such insurance shall
cover all property during construction and testing, as well as any and all
materials, equipment and machinery intended for such System during off-site
storage and inland transit and, if necessary, during ocean and air transit.
All transit coverage shall be on a "warehouse to warehouse" basis. The all
risk builder's risk policy shall be written on a replacement cost basis for
the full construction cost of such System or in an amount acceptable to the
Collateral Agent and the Requisite Lenders and shall contain an agreed
amount endorsement waiving any coinsurance penalty. Coverage shall not
exclude resultant damage caused by faulty workmanship, design or materials
nor shall it exclude machinery and equipment under guarantee or warranty;
and
(ii) COMPREHENSIVE OR COMMERCIAL GENERAL LIABILITY. Such Borrower
shall maintain comprehensive general liability insurance written on an
occurrence basis with a limit of liability not less than $1,000,000.
Coverage shall include, but not be limited to, premises/operations,
explosion, collapse, and underground hazards, broad form contractual,
independent contractors products/completed operations, broad form property
damage, and personal injury liability. Such insurance shall not exclude
coverage for punitive or exemplary damages where insurable by law; and
(iii) WORKERS' COMPENSATION/EMPLOYER'S LIABILITY. Such Borrower shall
maintain workers' compensation insurance in accordance with statutory
provisions covering accidental injury, illness or death of an employee of
such Borrower while at work or in the scope of his or her employment with
such Borrower and employer's liability insurance in an amount not less
than $1,000,000. Such coverage shall not contain any occupational disease
exclusions; and
(iv) AUTOMOBILE LIABILITY. Such Borrower shall maintain automobile
liability insurance covering owned, non-owned, leased, hired or borrowed
vehicles against bodily injury or property damage. Such coverage shall
have a limit of not less than $1,000,000; and
51
(v) EXCESS/UMBRELLA LIABILITY. Such Borrower shall maintain excess
or umbrella liability insurance in an amount not less than $25,000,000
written on an occurrence basis providing coverage limits in excess of the
insurance limits required under SECTION 5.04(B)(II), (B)(III) (employer's
liability only), and (b)(iv). Such insurance shall follow from the primary
insurances and drop down in case of exhaustion of underlying limits and/or
aggregates. Such insurance shall not exclude coverage for punitive or
exemplary damages where insurable by law.
(c) CONTRACTOR INSURANCE COVERAGE. Such Borrower shall cause each
contractor retained in connection with the construction of any System to carry
and maintain, in full force and effect, such insurance and such bonds as such
contractor is required to maintain pursuant to the following:
(i) BOND. Such contractor shall maintain performance and payment
bonds written in a form and by a surety acceptable to the Agent and the
Requisite Lenders. Such bonds shall cover all payments, performance,
material and other obligations of such contractor and all subcontractors.
The applicable performance and payment bonds shall, at all times, be in an
amount equal to the full value of the construction contracts. Each bond
shall cover the faithful performance of the construction contract. Such
Borrower and the Collateral Agent shall be named as obligees under each
bond; and
(ii) COMPREHENSIVE OR COMMERCIAL GENERAL LIABILITY. Such contractor
shall maintain comprehensive general liability insurance covering the
construction of such System written on an occurrence basis with a limit of
liability not less than $25,000,000. Coverage shall include, but not be
limited to, premises/operations, explosion, collapse, and underground
hazards, sudden and accidental pollution, broad form contractual,
independent contractors, products/completed operations, broad form
property damage, and personal injury liability. Such insurance may be
written in any combination of primary and excess/umbrella forms. The
products completed operations coverage shall be extended to cover such
System for two years after completion of such System. Such insurance shall
not exclude coverage for punitive or exemplary damages where insurable by
law; and
(iii) WORKERS' COMPENSATION/EMPLOYER'S LIABILITY. Such contractor
shall maintain workers' compensation insurance in accordance with
statutory provisions covering accidental injury, illness or death of an
employee of such contractor while at work or in the scope of his or her
employment with such contractor and employer's liability insurance in an
amount not less than $25,000,000 written in any combination of primary and
excess/umbrella policies, and
(iv) AUTOMOBILE LIABILITY. Such contractor shall maintain automobile
liability insurance covering owned, non-owned, leased, hired or borrowed
52
vehicles against bodily injury or property damage. Such coverage shall
have a limit of not less than $25,000,000 written in any combination of
primary and excess/umbrella policies.
(d) OPERATIONS PERIOD. Beginning on the completion date of each System,
such Borrower shall maintain in full force and effect, pay all premiums when due
in respect of, and comply with all terms and conditions of the following
insurance coverages for each System.
(i) ALL RISK PROPERTY INSURANCE. Such Borrower shall maintain all
risk property insurance covering such System against physical loss or
damage, including but not limited to fire and extended coverage, collapse,
flood, earth movement and comprehensive boiler and machinery coverage
(including electrical malfunction and mechanical breakdown). Such
insurance shall cover each and every component of such System and shall
not contain any exclusion for resultant damage caused by faulty
workmanship, design or materials. Coverage shall be written on a
replacement cost basis in an amount acceptable to the Agents. Such
insurance policy shall contain an agreed amount endorsement waiving any
coinsurance penalty; and
(ii) BUSINESS INTERRUPTION. As an extension of the coverage required
under SECTION 5.04(D)(I), such Borrower shall maintain business
interruption insurance in an agreed amount equal to twelve (12) months
projected loss of net profits, continuing expenses and debt service
payments of such System and shall contain an agreed amount endorsement
waiving any coinsurance penalty. Contingent business interruption
insurance shall also be included to cover the major suppliers and
customers of the Borrowers. Coverage shall be included for expediting
expenses in an amount not less than $1,000,000. Such insurance shall also
cover service interruption. Deductibles shall not exceed thirty (30) days;
and
(iii) COMPREHENSIVE OR COMMERCIAL GENERAL LIABILITY INSURANCE. Such
Borrower shall maintain comprehensive general liability insurance written
on an occurrence basis with a limit of not less than $1,000,000. Such
coverage shall include, but not be limited to, premises/operations,
explosion, collapse, underground hazards, contractual liability,
independent contractors, products, completed operations, property damage
and personal injury liability. Such insurance shall not exclude coverage
for punitive or exemplary damages where insurable by law; and
(iv) WORKERS' COMPENSATION/EMPLOYER'S LIABILITY. Such Borrower shall
maintain workers' compensation insurance in accordance with statutory
provisions covering accidental injury, illness or death of an employee of
such Borrower while at work or in the scope of his or her employment with
such Borrower and employer's liability insurance in an amount not less
than $1,000,000. Such coverage shall not contain any occupational disease
exclusions; and
53
(v) AUTOMOBILE LIABILITY. Such Borrower shall maintain automobile
liability insurance covering owned, non-owned, leased, hired or borrowed
vehicles against bodily injury or property damage. Such coverage shall
have a limit of not less than $1,000,000; and
(vi) EXCESS/UMBRELLA LIABILITY. Such Borrower shall maintain excess
or umbrella liability insurance in an amount not less than $25,000,000
written on an occurrence basis providing coverage limits in excess of the
insurance limits required under SECTIONS 5.04(D)(III), (D)(IV) (employer's
liability only), and (D)(V). Such insurance shall follow from the primary
insurances and drop down in case of exhaustion of underlying limits and/or
aggregates. Such insurance shall not exclude coverage for punitive or
exemplary damages where insurable by law.
(e) ENDORSEMENTS. Such Borrower shall cause all insurance carried and
maintained in accordance with this SECTION 5.04 to be endorsed as follows:
(i) Such Borrower shall be the named insured and the Collateral
Agent shall be an additional named insured and loss payee with respect to
policies described in SECTION 5.04(B)(I), (D)(I) and (D)(II). Such
Borrower shall be the named insured and the Collateral Agent shall be an
additional insured with respect to policies described in SECTION
5.04(B)(II), (B)(III) (to the extent allowed by law), (B)(IV),
(B)(V),(D)(III), (D)(IV) (to the extent allowed by law), (D)(V) and
(D)(VI). Such Borrower and the Collateral Agent shall be additional
insureds under all insurances carried by contractors under SECTION 5.04(C)
to the extent allowed by law. All policies shall provide that any
obligation imposed upon such Borrower and/or any contractor, including but
not limited to the obligation to pay premiums, shall be the sole
obligation of such Borrower and/or the contractor and not that of the
Agent, the Collateral Agent or any Lender; and
(ii) with respect to policies described in SECTION 5.04(B)(I), (D)(I)
and (D)(II), the interests of the Collateral Agent shall not be
invalidated by any action or inaction of such Borrower, or any other
Person, and shall insure the Collateral Agent regardless of any breach or
violation by such Borrower, any contractor or any other Person, of any
warranties, declarations or conditions of such policies, and
(iii) inasmuch as the liability policies are written to cover more
than one insured, all terms, conditions, insuring agreements and
endorsements, with the exception of the limits of liability, shall operate
in the same manner as if there were a separate policy covering such
insured; and
(iv) the insurers thereunder shall waive all rights of subrogation
against the Agent, the Collateral Agent, or the Lenders, any right of
setoff or counterclaim and any other right to deduction, whether by
attachment or otherwise; and
54
(v) such insurance shall be primary without right of contribution of
any other insurance carried by or on behalf of the Agent, the Collateral
Agent or the Lenders with respect to their interests as such in such
System; and
(vi) if such insurance is canceled for any reason whatsoever,
including nonpayment of premium, or any changes are initiated by such
Borrower or carrier which affect the interests of the Collateral Agent,
such cancellation or change shall not be effective as to the Collateral
Agent until thirty (30) days, except in the case of non-payment of premium
which shall be ten (10) days, after receipt by the Collateral Agent of
written notice sent by registered mail from such insurer.
(f) CERTIFICATIONS. On the Initial Funding Date, and at each policy
renewal, but not less than annually, such Borrower shall provide to the
Collateral Agent approved certification from each insurer or by an authorized
representative of each insurer. Such certification shall identify the
underwriters, the type of insurance, the limits, deductibles, and term thereof
and shall specifically list the special provisions delineated for such insurance
required for this SECTION 5.04.
(g) INSURANCE REPORT. Concurrently with the furnishing of all certificates
referred to in this SECTION 5.04, the Borrower shall furnish the Agent with an
opinion from an independent insurance broker, acceptable to the Agents, stating
that all premiums then due have been paid and that, in the opinion of such
broker, the insurance then maintained by such Borrower is in accordance with
this section. Furthermore, upon its first knowledge, such broker shall advise
the Agent promptly in writing of any default in the payment of any premiums or
any other act or omission, on the part of any Person, which might invalidate or
render unenforceable, in whole or in part, any insurance provided by such
Borrower hereunder.
(h) APPLICATION OF PAYMENTS. All payments received by such Borrower from
any insurance referred in SECTION 5.04(B)(I), (D)(I) and (D)(II) shall be
promptly delivered directly to the Agent, which amounts shall be applied by the
Agent, upon request by such Borrower and provision to the Agent of detailed
information, including a construction schedule and cost estimates, which
establish to the reasonable satisfaction of the Agent and the Requisite Lenders
that the amounts available and the proposed schedule are adequate to restore,
replace or rebuild the property subject to insurance payments in a timely
manner, to such restoration, replacement or rebuilding unless an Event of
Default or Default shall have occurred and be continuing or such Borrower shall
have failed to make such request within thirty (30) days after receipt of such
amounts by Agents, in which case such amounts shall be applied in the Requisite
Lenders' sole discretion to the repayment of the Obligations or such
restoration, replacement or rebuilding.
(i) GENERAL. The Agents shall be entitled, upon reasonable advance notice,
to review and/or receive copies of such Borrower's (or other appropriate
party's) books and records regarding all insurance policies carried and
maintained with respect to each System and the Borrower's obligations under this
SECTION 5.04. Notwithstanding anything to the contrary herein, no provision of
this Agreement or any other Loan Document shall impose on the Collateral Agent,
55
or any Lender any duty or obligation to verify the existence or adequacy of the
insurance coverage maintained by such Borrower, nor shall the Collateral Agent,
the Agent or any Lender be responsible for any representations or warranties
made by or on behalf of such Borrower to any insurance broker, company or
underwriter. The Agent at the direction of the Requisite Lenders or the Agent,
at its sole option, may obtain such insurance if not provided by the Borrower;
in such event, such Borrower shall reimburse the Collateral Agent or the Agent
upon demand for the cost thereof together with interest, and such costs shall
constitute Obligations secured by the Collateral.
(j) PERFORMANCE BY KMC HOLDINGS. The obligations of such Borrower under
this SECTION 5.04 may be performed by KMC Holdings on behalf of such Borrower.
SECTION 5.05. OBLIGATIONS AND TAXES. Such Borrower shall pay all its
indebtedness and obligations promptly and in accordance with their terms and pay
and discharge promptly all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a Lien upon
such properties or any part thereof; PROVIDED that such Borrower shall not be
required to pay and discharge or to cause to be paid and discharged any such
tax, assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings diligently pursued,
and the Borrower shall set aside on its books such reserves as are required by
GAAP with respect to any such tax, assessment, charge, levy or claim so
contested.
SECTION 5.06. FINANCIAL STATEMENTS, REPORTS, ETC. Such Borrower shall
furnish to the Agent and the Lenders (except as otherwise provided herein):
(a) within one hundred twenty (120) days after the end of each fiscal year
of such Borrower, two sets of annual consolidated and consolidating financial
statements for KMC Holdings (one excluding Excluded Subsidiaries and one
including Excluded Subsidiaries), and combined financial statements for the
Borrowers, including the balance sheets and statements of operations, income,
stockholders' equity and cash flows, for such fiscal year, prepared in
accordance with GAAP, which consolidated financial statements and other above
described financial information shall have been audited by a nationally
recognized independent certified public accounting firm satisfactory to the
Agent, and accompanied by such independent certified public accounting firm's
unqualified opinion;
(b) within forty-five (45) days after the end of each month and each fiscal
quarter during each fiscal year of such Borrowers, consolidated and
consolidating unaudited balance sheets and statements of operations for KMC
Holdings, and combined unaudited balance sheets and statements of operations for
the Borrower and consolidated and consolidating statements of stockholders'
equity and cash flows of KMC Holdings, and combined consolidated statements of
stockholders' equity and cash flows of the Borrowers as of the end of each such
month or fiscal quarter, as applicable, and for the then elapsed portion of the
fiscal year; PROVIDED that with respect to the consolidated and consolidating
56
unaudited balance sheets and statements of operations for KMC Holdings and
statements of stockholders' equity and cash flows of KMC Holdings delivered as
of the end of each fiscal quarter, such Borrower shall provide two sets of such
statements (one excluding Excluded Subsidiaries and one including Excluded
Subsidiaries); PROVIDED, further, that such Borrower shall not be required to
deliver the items described in this SECTION 5.06(B) on a monthly basis at any
time that, and only for so long as, the Borrowers have achieved positive EBITDA;
(c) concurrently with provision of the financial statements referred to in
CLAUSES (A) and (B) above, a certificate of KMC Holdings' independent certified
public accountant or KMC Holdings' chief financial officer, as applicable, to
the effect that the financial statements referred to in CLAUSE (A) or (B) above,
present fairly the financial position and results of operations of KMC Holdings,
and the Borrowers and as having been prepared in accordance with GAAP
consistently applied, in each case, subject to normal year end audit adjustments
except for the statements referred to in CLAUSE (A) above;
(d) concurrently with (a) above, and any statements delivered pursuant to
(b) above in respect of the month of March and the period ending March 31, the
month of June and the period ending June 30 or the month of September and the
period ending September 30, a Periodic Reporting Certificate of the chief
financial officer of KMC Holdings setting forth the calculations contemplated in
ARTICLE VII, the number of Completed Systems and certifying as to the fact that
such Person has examined the provisions of this Agreement and that no Event of
Default or any Default, shall have occurred and be continuing or if such an
event has occurred, a statement explaining its nature and extent and setting
forth the steps the Borrowers propose to take to cure such Event of Default;
(e) (i) not later than December 1 of each calendar year, consolidating and
consolidated projected and annual revenue and income statements, including
detailed revenue and expense statements, balance sheets and cash flow statements
for KMC Holdings for the succeeding fiscal year, such statements to be
reasonably acceptable to the Agents, and (ii) not later than July 1, 1999, an
annual operating budget on a monthly basis for such calendar year and not later
than January 15 of each calendar year beginning January 15, 2000, an annual
operating budget on a quarterly basis for such calendar year, with each such
budget to be in compliance with the KMC III Tier III Plan;
(f) to the Agent, all material agreements or licenses affecting the
Governmental Approvals of the any Borrower or any System promptly after any
execution, or material amendment thereto;
(g) to the Agent, promptly upon their becoming available, copies of any
material periodic or special documents, statements or other information filed by
any Borrower with the FCC, PUC or other Governmental Authority in connection
with the construction and/or operation of any System or with respect to the
57
transactions contemplated by any of the Loan Documents, and copies of any
material notices and other material communications from the FCC, PUC or from any
other Governmental Authority;
(h) immediately upon any officer of any Borrower obtaining knowledge of any
condition or event (i) which either constitutes an Event of Default or a
Default, (ii) which renders any representation or warranty contained herein
materially false or misleading, or when made, renders any document materially
false or misleading, or (iii) which would result in any financial results for
any fiscal year to materially deviate from the financial results projected for
such fiscal year in the KMC III Tier III Plan or the financial projections
described in CLAUSE (E) above, a certificate signed by an authorized officer of
such Borrower specifying in reasonable detail the nature and period of existence
thereof and what corrective action such Borrower has taken or proposes to take
with respect thereto;
(i) within thirty (30) days after the end of each fiscal year of such
Borrower, a certificate signed by an authorized officer of such Borrower (x)
setting forth all the Real Property, Easements, licenses, rights of way and
other similar interests in real property acquired by such Borrower in the
preceding year and (y) confirming that no Default or Event of Default has
occurred and is continuing;
(j) evidence in the manner set forth in SECTION 5.04(E) of insurance
complying with SECTION 5.04;
(k) following the written request of the Agent, not later than forty-five
(45) days after the end of each fiscal month, reports on accounts receivable and
accounts payable of such Borrower in such detail and format as may be reasonably
requested by the Agent;
(l) promptly upon the filing thereof, copies of all registration statements
and annual, quarterly, monthly or other regular reports which such Borrower or
KMC Holdings files with the Securities and Exchange Commission; and
(m) promptly from time to time such other information regarding the
operations (including, without limitation, construction budgeting and System
completion), business affairs and condition (financial or otherwise) of such
Borrower or KMC Holdings as the Agent may reasonably request.
SECTION 5.07. LITIGATION AND OTHER NOTICES. Such Borrower shall give the
Agent prompt written notice upon obtaining knowledge of the following: (a) all
Events of Default or Defaults and all events of default or any event that would
become an event of default upon notice or lapse of time or both under any of the
terms or provisions of any note, or of any other evidence of indebtedness or
agreement or contract governing the borrowing of money in excess of $250,000 in
the aggregate of such Borrower; (b) any levy, attachment, execution or other
process against any of its property or assets, real or personal, in an amount in
excess of $250,000 of such Borrower; (c) the filing or commencement of any
action, suit or proceeding by or before any court or any Governmental Authority
58
which, if adversely determined against it, would result in a Material Adverse
Effect; (d) any material adverse notice, letter or other correspondence of any
kind from the FCC or the PUC relating to the Governmental Approvals or any
System; (e) any default under any other material license, agreement or contract
to which it is a party; and (f) any matter which has resulted in, or which such
Borrower reasonably believes will result in, a Material Adverse Effect on such
Borrower.
SECTION 5.08. MORTGAGES; LANDLORD CONSENTS; LICENSES AND OTHER AGREEMENTS.
As security for the Obligations, such Borrower, with respect to each Completed
System, and each System which is not a Completed System but which is requested
to be financed with the proceeds of Loans (a) shall execute promptly and deliver
to the Collateral Agent (1) Mortgages in favor of the Collateral Agent and
satisfactory to the Agents with respect to any real property purchased by such
Borrower on which a switch or network operating center is located, and, at the
request of the Agents, with respect to any other real property purchased by the
Borrower, together with lender's title policies for any such real property
satisfactory to the Agents, if requested by the Agents, (2) leasehold mortgages
or collateral assignments of leases, landlord waivers or consents, and
appropriate Uniform Commercial Code fixture financing statements, in each case
satisfactory to the Agents with respect to any real property leased by such
Borrower and on which Switch Equipment or a network operating center is located,
and at the request of the Agents, with respect to any other leased real property
of such Borrower, (3) Mortgages or collateral assignments and consents
satisfactory to the Agents with respect to such Borrower's Easements and rights
of way, as requested by the Agents, (4) collateral assignments of leases and
lessor consents, satisfactory to and as requested by the Agents, with respect to
any long-haul fiber leased by such Borrower and (5) with respect to each
Completed System or System, at all times from and after the date on which such
Borrower requests funding for such other Completed System or System, collateral
assignments and within 45 days thereafter the consents to such assignments from
the applicable third Persons, for each other material lease, license, contract
or other agreement or instrument entered into by the Borrower after the date
hereof, as required by the Collateral Agent and (b) (1) update Schedule 1 to the
Collateral Assignment of Licenses to cover all Governmental Approvals obtained
by such Borrower after the Closing Date and agreements entered into by such
Borrower after the Closing Date with third Persons, (2) obtain consents to
collateral assignments from the licensors granting the Governmental Approvals
referred to in CLAUSE (B)(1) above and from those third Persons referred to in
CLAUSE (B)(1) above that are specified by the Agents, such consents to
collateral assignment to be in form and substance satisfactory to the Agents and
(3) update Schedule 1 to the Collateral Assignment of Leases to cover all leases
referred to in CLAUSE (A)(2) above.
SECTION 5.09. ERISA. Such Borrower shall comply in all material respects
with the applicable provisions of ERISA and furnish to the Agent, (i) as soon as
possible, and in any event within thirty (30) days after such Borrower or any
officer of such Borrower knows or has reason to know that any Reportable Event
with respect to any Plan has occurred or any Termination Event has occurred, a
statement of an officer of such Borrower setting forth details as to such
Reportable Event or Termination Event and the corrective action that such
Borrower proposes to take with respect thereto, together with a copy of the
59
notice of any such Reportable Event given to the PBGC, and (ii) promptly after
receipt thereof, a copy of any notice such Borrower may receive from the PBGC
relating to the intention of the PBGC to terminate any Plan or to appoint a
trustee to administer any such Plan.
SECTION 5.10. ACCESS TO PREMISES AND RECORDS. Such Borrower shall permit
representatives of the Agents to have access to such Borrower's books and
records and to the Collateral and the premises of such Borrower at reasonable
times upon reasonable notice and to make such excerpts from such records as such
representatives deem necessary and to inspect the Collateral.
SECTION 5.11. DESIGN AND CONSTRUCTION. Such Borrower shall design,
construct, equip and operate its Systems substantially as previously disclosed
to Lenders in the KMC III Tier III Plan and in accordance with prudent industry
standards.
SECTION 5.12. ENVIRONMENTAL NOTICES. If such Borrower shall (a) receive
written notice that any violation of any Environmental Law may have been
committed or is about to be committed by such Borrower, (b) receive written
notice that any administrative or judicial complaint or order has been filed or
is about to be filed against such Borrower alleging violations of any
Environmental Law or requiring such Borrower to take any action in connection
with any Release of any Contaminant into the environment, or (c) receive any
written notice from a Governmental Authority or private party alleging that such
Borrower may be liable or responsible for costs associated with a response to or
cleanup of a Release or any damages caused thereby, such Borrower shall provide
the Agent with a copy of such notice within twenty (20) Business Days of such
Borrower's receipt thereof.
SECTION 5.13. AMENDMENT OF ORGANIZATIONAL DOCUMENTS. Such Borrower shall
notify the Agent and the Collateral Agent of any amendment to its Certificate of
Incorporation or other organizational documents within ten (10) days of the
occurrence of any such event, and provide the Collateral Agent with copies of
any amendments certified by the secretary of such Borrower and of all other
relevant documentation. Such Borrower shall promptly deliver to the Collateral
Agent such financing statements executed by such Borrower which the Agents may
request as a result of any such event.
SECTION 5.14. THIRD PARTY AGREEMENTS AND DELIVERY AND ACCEPTANCE
Certificates. Such Borrower shall provide the Collateral Agent with (i) copies
of all interconnection agreements, right of way agreements, easement agreements,
real property leases, construction agreements, equipment purchase agreements,
fiber leases, telephone line leases, state and local franchise agreements and
other agreements with municipalities, that in each case relate to each System of
such Borrower, promptly after execution of each such agreement; PROVIDED, that
with respect to certain of the foregoing categories of agreements specified by
the Agent or the Requisite Lenders, such Borrower shall be permitted to provide
the Agent with inventories of the particular types of agreements in lieu of
delivering copies of the agreements, which inventories shall be (x) in form and
substance satisfactory to the Agents and (y) updated by the applicable Borrower
60
promptly following the execution of any additional agreement of the type
inventoried; PROVIDED, FURTHER, that nothing in the foregoing proviso shall
limit the Collateral Agent's ability to, at any time, request and receive a copy
of any third party agreement from the applicable Borrower, and (ii) (A) if the
Lenders are funding a Completed System, a delivery and acceptance certificate
substantially in the form of EXHIBIT P hereto with respect to such Completed
System and (B) otherwise, copies of delivery and acceptance certificates
substantially in the form of EXHIBIT P hereto with respect to each item of
Telecommunications Equipment with an invoiced purchase price in excess of
$250,000, in each case, where such certificates are not required to be delivered
to the Agent pursuant to SECTION 2.03(A), promptly after completion of such
System or acceptance of such item of Equipment, as applicable.
SECTION 5.15. ACCOUNTS PAYABLE. Such Borrower shall pay each of its
accounts payable in accordance with its practices as of the Closing Date but in
any event no later than sixty (60) days after the due date, PROVIDED, that such
Borrower shall not be required to pay any account payable as long as the
validity thereof shall be contested in good faith by appropriate protest or
proceedings and such Borrower shall have set aside adequate reserves with
respect thereto in accordance with GAAP.
SECTION 5.16. INTELLECTUAL PROPERTY. Such Borrower shall enter into
Intellectual Property Documents, in form and substance satisfactory to the Agent
and the Requisite Lenders, with respect to all the Intellectual Property owned
by such Borrower.
SECTION 5.17. FISCAL YEAR. Such Borrower shall maintain a fiscal year
ending on December 31.
SECTION 5.18. COMPLETED SYSTEMS. On or prior to December 31, 1999, the
Borrowers shall have Completed Systems in ten (10) Tier III Cities. On or prior
to December 31, 2000, the Borrower shall have Completed Systems in twenty-seven
(27) Tier 3 III Cities.
SECTION 5.19. YEAR 2000 PROBLEMS. On or prior to March 31, 1999, each
Borrower shall complete and deliver to the Agent a Year 2000 Corrective Plan. On
or prior to April 30, 1999, each Borrower shall implement Year 2000 Corrective
Actions. On or prior to June 30, 1999, each Borrower shall complete Year 2000
Corrective Actions and Year 2000 Implementation Testing. On or prior to
September 30, 1999, each Borrower shall eliminate all Year 2000 Problems, except
where the failure to correct the same could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate.
SECTION 5.20. SUBSIDIARY GUARANTEES AND PLEDGES. Such Borrower shall (i)
cause each Person which becomes a Subsidiary of such Borrower to execute a
guaranty of the Obligations substantially in the form of EXHIBIT G hereto, but
exclusive of any financial covenants, (ii) execute a contribution agreement in
form and substance acceptable to the Agent, (iii) execute a Pledge Agreement
pursuant to which all the Equity Interests in such Person will be pledged to the
Collateral Agent, PROVIDED that in the event such Person is an indirect
Subsidiary of such Borrower, such Borrower shall cause each applicable
61
Subsidiary of such Borrower to pledge all the Equity Interests in such Person to
the Collateral Agent, (iv) execute a security agreement pursuant to which such
Person shall provide to the Collateral Agent for the benefit of the Lenders a
Lien on and security interest in all of such Person's tangible and intangible
personal property, real property leaseholds, fixtures, and easement rights and
(v) enter into such other agreements and provide such other instruments
(including opinions of counsel) as the Agent may reasonably request.
SECTION 5.21. ACCOUNTING; MAINTENANCE OF RECORDS. Such Borrower shall
maintain a system of accounting established and administered in accordance with
GAAP. Such Borrower shall keep and maintain in all material respects, proper
books of record and account in which entries in conformity with GAAP shall be
made of all dealings and transactions in relation to their respective businesses
and activities.
SECTION 5.22. FURTHER ASSURANCES. Such Borrower agrees to do such further
acts and things and to execute and deliver to the Agent or the Collateral Agent
such additional assignments, agreements, powers and instruments, at such
Borrower's expense, as the Agent or the Collateral Agent may reasonably require
or deem advisable to carry into effect the purposes of this Agreement and the
other Loan Documents or to better assure and confirm unto the Agent or the
Collateral Agent its rights, powers and remedies hereunder and thereunder.
ARTICLE VI
NEGATIVE COVENANTS
Each Borrower covenants and agrees with the Agent, the Collateral Agent and
the Lenders that as long as this Agreement shall remain in effect, any
Commitment hereunder shall be outstanding or any Obligations hereunder or under
any of the Loan Documents shall be unpaid, unless the Requisite Lenders shall
have otherwise given prior written consent:
SECTION 6.01. LIENS, ETC. Such Borrower shall not create, incur, assume or
suffer to exist, directly or indirectly, any Lien upon or with respect to any of
its properties or the Collateral, now owned or hereafter acquired, or upon any
proceeds, products, issues, income or profits therefrom except for the following
("PERMITTED LIENS"):
(i) Liens granted pursuant to the Loan Documents;
(ii) Liens securing any Purchase Debt to the extent that the Liens
cover only the subject assets purchased with such Purchase Debt;
(iii) Liens for taxes, assessments or governmental charges or levies
on such Borrower's property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are being
diligently contested in good faith and by appropriate proceedings and for
which such Borrower shall have set aside reserves on its books as required
by GAAP;
62
(iv) Liens imposed by law, such as landlord's, carrier's,
warehousemen's and mechanic's liens, which liens shall be waived in
writing to the extent waivable, and with respect to obligations not yet
due or being contested in good faith by appropriate proceedings and in
either case for which the such Borrower shall have set aside reserves on
its books as required by GAAP;
(v) Liens arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security benefits other than any Lien imposed by ERISA; or
(vi) Liens incurred or deposits made in the ordinary course of
business to secure surety bonds provided that such Liens shall extend only
to cash collateral for such surety bonds.
SECTION 6.02. USE OF PROCEEDS. Such Borrower shall not use the proceeds of
any Loan for any purpose other than as provided in SECTION 2.02.
SECTION 6.03. SALE OF ASSETS, CONSOLIDATION, MERGER, ETC. Such Borrower
shall not consolidate with or merge into any other Person, or without the prior
written consent of the Requisite Lenders, sell, lease, transfer or otherwise
dispose of any Collateral, except for (a) sales of inventory in the ordinary
course of business and (b) any sale, lease, transfer or other disposition of
assets no longer used or useful in the conduct of the Business for the fair
market value thereof not to exceed $250,000 in the aggregate.
SECTION 6.04. DIVIDENDS AND DISTRIBUTIONS; SALE OF EQUITY INTERESTS. (a)
Such Borrower shall not purchase, redeem or otherwise acquire any Equity
Interest in such Borrower, declare or make or pay any dividends in any fiscal
year of such Borrower on any class or classes of stock or membership units,
return capital of the Borrower to its stockholders or members, make any other
distribution on or in respect of any shares of any class of capital stock or
membership units of such Borrower or make other payments to any shareholder or
member of such Borrower (including in the form of compensation, loan, expense
reimbursement or management fee); PROVIDED, that provided no Event of Default or
Default has occurred and is continuing or would result therefrom, (i) such
Borrower may make payments of fees or compensation for services which are in the
nature of management, corporate overhead or administrative services to the
extent permitted by SECTION 6.05, (ii) provided further, that (A) during the
previous four fiscal quarters of the Borrowers, EBITDA equaled at least
eighty-five percent (85%) of "Estimated EBITDA" (as defined below) and such
Estimated EBITDA is a positive number, (B) during the previous four fiscal
quarters of the Borrowers, the Borrowers maintained a Fixed Charge Coverage
Ratio of at least 1.10 to 1.00, (C) with respect to the next four fiscal
63
quarters of the Borrowers, EBITDA for the Borrower, as projected in the most
recent financial information furnished pursuant to SECTION 5.06(E), is projected
to equal at least eighty-five percent (85%) of Estimated EBITDA for such fiscal
quarters and such Estimated EBITDA is a positive number, and (D) with respect to
the next four fiscal quarters of the Borrowers, the Fixed Charge Coverage Ratio
as projected in the most recent financial information submitted to the Agent and
the Lenders pursuant to SECTION 5.06(E), is projected to equal at least 1.10 to
1.00, the Borrower may pay to KMC IHC and KMC IHC may pay to KMC Holdings
dividends in the amount necessary to make scheduled principal and interest
payments under the Indenture, and any other amounts due under the Indenture
(including Sections 4.14 and 7.07 thereunder). Estimated EBITDA shall mean
"EBITDA" as calculated in the KMC III Tier III Plan. (b) Such Borrower shall not
sell or issue any additional Equity Interests other than to KMC IHC in
connection with the contribution of additional cash equity into such Borrower;
PROVIDED that any such Equity Interests are pledged to the Collateral Agent for
the benefit of the Agents and the Lenders.
SECTION 6.05. MANAGEMENT FEES AND PERMITTED CORPORATE OVERHEAD. Such
Borrower shall not pay or enter into any arrangement to pay any fee or
compensation, or reimburse expenses of, an Affiliate or any other Person for
services which are in the nature of management, corporate overhead or
administrative services except to the extent provided for in the KMC III Tier
III Plan, the Management Agreement or as described on SCHEDULE 6.11 attached
hereto.
SECTION 6.06. GUARANTEES; THIRD PARTY SALES AND LEASES. Such Borrower shall
not directly or indirectly, (i) assume any obligation or indebtedness of another
Person, (ii) make or assume any Guarantee, or (iii) finance any third party
sales or leases, other than its obligations under SECTION 2.13.
SECTION 6.07. INVESTMENTS. Such Borrower shall not, directly or indirectly,
make any Investments except:
(i) Temporary Cash Investments;
(ii) Investments in certificates of deposit, repurchase agreements,
money market or other cash management accounts, bankers acceptances and
short term Eurodollar time deposits with financial institutions having a
long term deposit rating of at least A+ from Xxxxx'x Investors Service,
Inc. or Standard & Poor's Ratings Group, respectively;
(iii) Investments in commercial paper rated P1 or A1 by Xxxxx'x
Investors Service, Inc. or Standard & Poor's Ratings Group respectively.
SECTION 6.08. SUBSIDIARIES. Such Borrower shall not create or acquire any
Subsidiary other than with the prior written consent of the Requisite Lenders.
64
SECTION 6.09. PERMITTED ACTIVITIES. Such Borrower shall not engage in any
business or activity other than the operation of its Business in accordance with
the KMC III Tier III Plan without the prior written consent of the Requisite
Lenders.
SECTION 6.10. DISPOSITION OF LICENSES, ETC. Such Borrower shall not sell,
assign, transfer or otherwise dispose or attempt to dispose of in any way any
Governmental Approval or any other licenses, permits or approvals (i) prior to
the Trigger Date, material, in each case, to the operation of any System in
accordance with the KMC III Tier III Plan and (ii) on or after the Trigger Date,
the assignment, transfer or disposal of which would result in a Material Adverse
Effect, without the prior written consent of the Requisite Lenders.
SECTION 6.11. TRANSACTIONS WITH AFFILIATES. Except for the Management
Agreement, the Tax Sharing Agreement or as set forth on SCHEDULE 6.11, such
Borrower shall not directly or indirectly, enter into any transaction,
including, without limitation, leases or other agreements for the purchase or
use of any goods or services, with any Affiliate, except in the ordinary course
of and pursuant to reasonable requirements of such Borrower's business upon fair
and reasonable terms no less favorable to such Borrower than it would obtain in
a comparable arm's length transaction with an unaffiliated Person.
SECTION 6.12. ERISA. Such Borrower shall not:
(A) engage, or permit any ERISA Affiliate to engage, in any prohibited
transaction described in Section 406 of ERISA or 4975 of the IRC for which a
statutory or class exemption is not available or a private exemption has not
been previously obtained from the United States Department of Labor;
(B) permit to exist any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the IRC), whether or not waived;
(C) fail, or permit any ERISA Affiliate to fail, to pay timely required
contributions or annual installments due with respect to any waived funding
deficiency to any Benefit Plan;
(D) terminate, or permit any ERISA Affiliate to terminate, any Benefit Plan
which would result in any material liability of such Borrower under Title IV of
ERISA;
(E) fail to make any contribution or payment to any Multiemployer Plan
which such the Borrower or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining thereto;
(F) amend, or permit any ERISA Affiliate to amend, a Plan resulting in an
increase in current liability for the plan year such that such Borrower is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or
65
(G) fail, or permit any ERISA Affiliate to fail, to pay any required
installment under Section 412 of the IRC on or before the due date for such
installment or other payment.
SECTION 6.13. INDEBTEDNESS. Such Borrower shall not enter into any
commitment for, create or suffer to exist any Debt or any other obligations for
the deferred purchase price of property or services except:
(i) the Obligations;
(ii) the obligations arising under any Loan Document;
(iii) obligations under leases contemplated in the KMC III Tier III
Plan and the Schedules to this Agreement;
(iv) obligations under Capitalized Leases, financing leases or loan
agreements or similar debt documents with respect to the financing and
contemplated purchase of office equipment, vehicles and non-essential
telecommunications equipment, not to exceed an aggregate amount for the
Borrowers of $5,000,000 at any time ("PURCHASE Debt");
(v) additional unsecured Debt subordinate to the payment of the
Obligations on terms and conditions approved by the Agents but in no event
to exceed an aggregate amount for the Borrowers of $1,000,000 in principal
amount outstanding at any time;
(vi) performance bonds executed solely in connection with the
construction of Systems in the ordinary course of business; and
(vii) Qualified Intercompany Loans.
SECTION 6.14. PREPAYMENT AND DEBT DOCUMENTS. (a) Such Borrower shall not
voluntarily prepay any Debt, except the Obligations in accordance with the terms
hereof.
(b) Such Borrower shall not amend any agreement relating to Debt other than
the Obligations in any manner which would increase the amount of principal,
interest or fees on such debt, or accelerate any payments of such Debt.
SECTION 6.15. SALE AND LEASEBACK TRANSACTIONS. Such Borrower shall not,
directly or indirectly, enter into any arrangement with any Person providing for
such Borrower to lease or rent property that any Borrower, KMC Holdings or KMC
IHC has sold or will sell or otherwise transfer to such Person.
66
SECTION 6.16. MARGIN REGULATION. Such Borrower shall not use or permit any
other Person to use any portion of the proceeds of any credit extended under
this Agreement in any manner which might cause the extension of credit made by
any Lender or the application of such proceeds to violate the Securities Act of
1933 or Securities Exchange Act of 1934 (or any successor statute) or to violate
Regulation G, Regulation U, or Regulation X, or any other regulation of the
Federal Reserve Board, in each case, as in effect on the date or dates of such
extension of credit and such use of proceeds.
SECTION 6.17. MANAGEMENT AND TAX SHARING AGREEMENTS. Such Borrower shall
not amend the Management Agreement or the Tax Sharing Agreement in any manner
that would have a material adverse effect on the Lenders, the Borrowers or the
transactions contemplated hereby.
ARTICLE VII
FINANCIAL COVENANTS
Such Borrower covenants and agrees with the Agent and the Lenders that as
long as this Agreement shall remain in effect, any Commitment hereunder shall be
outstanding or the Obligations hereunder or under any of the Loan Documents
shall be unpaid, unless the Requisite Lenders shall have otherwise given prior
written consent:
SECTION 7.01. FINANCIAL COVENANTS PRIOR TO ACHIEVING POSITIVE EBITDA. Until
the earlier to occur of (i) July 1, 2002 and (ii) the date on which the
BORROWERS shall have achieved positive EBITDA for all the Borrowers on a
combined basis for two consecutive fiscal quarters as determined by reference to
the financial statements submitted pursuant to SECTION 5.06:
(a) TOTAL DEBT TO CONTRIBUTED CAPITAL. The Borrowers shall not, at any
time, commencing with the fiscal quarter ending December 31, 1999, permit the
ratio of the Total Debt to Contributed Capital to exceed 1.00 to 1.00.
(b) MINIMUM REVENUES. As of the last day of each fiscal quarter, the
Borrowers shall on a combined basis have revenues at least equal to the lesser
of (i) 85% of the amount projected for such date in the KMC III Tier III Plan
and (ii) such projected amount for such date minus $1,000,000 in the KMC III
Tier III Plan, which amount is set forth in ITEM 1 on ANNEX B attached hereto.
(c) EBITDA.
(i) As of the last day of each fiscal quarter occurring on or after
the Closing Date to and including the fiscal quarter ending March 31, 2002,
the Borrowers shall not permit the EBITDA losses for the Borrowers on a
67
combined basis for the two fiscal quarters then ending to exceed the
greater of (A) 115% of such losses projected for each such date in the KMC
III Tier III Plan, which amount is set forth in ITEM 2 on ANNEX B attached
hereto and (B) $5,000,000 less than the aggregate amount of EBITDA
projected for each such date in the KMC III Tier III Plan, which amount is
set forth in ITEM 2 on ANNEX B attached hereto.
(ii) As of the last day of each fiscal quarter thereafter, the
Borrowers shall not permit EBITDA for the Borrowers on a combined basis for
the two fiscal quarters then ending to be less than the greater of (A) 85%
of the amount of EBITDA projected for each such date in the KMC III Tier
III Plan, which amount is set forth in ITEM 3 on ANNEX B attached hereto
and (B) $5,000,000 less than the aggregate amount of EBITDA projected for
each such date in the KMC III Tier III Plan, which amount is set forth as
ITEM 3 on ANNEX B attached hereto.
(d) CAPITAL EXPENDITURES. As of the last day of each fiscal quarter, the
Borrowers shall not permit capital expenditures on a combined, cumulative basis
beginning on the Closing Date to exceed the amounts set forth in ITEM 4 on ANNEX
B attached hereto.
(e) MINIMUM ACCESS LINES. As of the last day of each fiscal quarter
beginning with the fiscal quarter ending September 30, 2000, the Borrowers shall
have in place at least seventy-five percent (75%) of the Access Lines projected
for each such date in the KMC III Tier III Plan, which amounts are set forth in
ITEM 5 on Annex B attached hereto.
SECTION 7.02. FINANCIAL COVENANTS AFTER ACHIEVING POSITIVE EBITDA. On and
after the earlier of (i) July 1, 2002, and (ii) the date on which the Borrowers
have achieved positive EBITDA on a combined basis for two consecutive fiscal
quarters as determined by reference to the financial statements submitted
pursuant to SECTION 5.06:
(a) MAXIMUM TOTAL LEVERAGE RATIO. As of the last day of each fiscal
quarter, commencing with the fiscal quarter ended September 30, 2002, the
Borrowers shall not permit the Total Leverage Ratio to be greater than the
following:
MAXIMUM TOTAL
FISCAL QUARTER ENDING LEVERAGE RATIO
--------------------- --------------
9/30/02 10.0 to 1.0
12/31/02 8.0 to 1.0
3/31/03 5.0 to 1.0
6/30/03 5.0 to 1.0
9/30/03 4.0 to 1.0
12/31/03 3.0 to 1.0
Last Day of Each Fiscal
Quarter Thereafter 2.0 to 1.0
68
(b) MINIMUM DEBT SERVICE COVERAGE RATIO. As of the last day of each fiscal
quarter, commencing with the fiscal quarter ended March 31, 2003, the Borrowers
shall not permit the ratio of (1) EBITDA for the Borrowers on a combined basis
for the most recently ended six month period, to (2) Interest Expense for the
most recently ended six month period plus Principal Payments required during the
most recently ended six month period to be less than the following:
MINIMUM DEBT SERVICE
FISCAL QUARTER ENDING COVERAGE RATIO
--------------------- --------------------
3/31/03 1.0 to 1.0
6/30/03 1.0 to 1.0
9/30/03 1.0 to 1.0
12/31/03 1.5 to 1.0
3/31/04 1.5 to 1.0
Last Day of Each Fiscal
Quarter Thereafter 2.0 to 1.0
(c) MINIMUM FIXED CHARGE COVERAGE RATIO. As of the last day of each fiscal
quarter, commencing with the fiscal quarter ended December 31, 2003, the
Borrowers shall not permit the ratio of (1) the product of two times the EBITDA
for the Borrowers on a combined basis for the most recently ended six month
period to (2) Fixed Charges for the Borrowers (such ratio being referred to as
the "FIXED CHARGE COVERAGE RATIO") to be less than the following:
MINIMUM FIXED CHARGE
FISCAL QUARTER ENDING COVERAGE RATIO
--------------------- --------------------
12/31/03 to 6/30/06 0.5 to 1.0
Last Day of Each Fiscal
Quarter Thereafter 1.0 to 1.0
(d) MAXIMUM CONSOLIDATED LEVERAGE RATIO. As of the last day of each fiscal
quarter, commencing with the fiscal quarter ended September 30, 2002, the
Borrowers shall not permit the ratio of (1) Consolidated Debt to (2) the product
of two times the sum of EBITDA for KMC Holdings and its Subsidiaries (excluding
its Excluded Subsidiaries) on a consolidated basis for the most recently ended
six month period to be greater than the following:
69
MAXIMUM TOTAL
FISCAL QUARTER ENDING LEVERAGE RATIO
--------------------- --------------------
9/30/02 35.0 to 1.0
12/31/02 25.0 to 1.0
3/31/03 20.0 to 1.0
6/30/03 15.0 to 1.0
9/31/03 12.0 to 1.0
12/31/03 11.0 to 1.0
3/31/04 10.0 to 1.0
6/30/04 10.0 to 1.0
9/30/04 10.0 to 1.0
12/31/04 10.0 to 1.0
3/31/05 10.0 to 1.0
6/30/05 10.0 to 1.0
9/30/05 10.0 to 1.0
12/31/05 10.0 to 1.0
3/31/06 8.0 to 1.0
6/30/06 8.0 to 1.0
9/30/06 8.0 to 1.0
12/31/06 8.0 to 1.0
Last Day of Each Fiscal Quarter
Thereafter 6.0 to 1.0
ARTICLE VIII
COLLATERAL SECURITY
SECTION 8.01. COLLATERAL SECURITY. (a) To secure payment and performance of
all the Obligations, each of the Borrowers hereby grants to the Collateral Agent
for the benefit of the Agent, and the Lenders, to the extent permitted by law, a
right of setoff against and a continuing security interest in and to all such
Borrower's tangible and intangible personal property, fixtures and real property
leasehold and easement interests, whether now owned or existing, or hereafter
acquired or arising, wheresoever located, including, without limitation, all the
following property, or interests in property: (a) all machinery, equipment,
Telecommunications Equipment and fixtures, including without limitation, fiber
optic and other cables, transmission and switching equipment, transmission
facilities, connection equipment, conduit, carrier pipes, junctions,
regenerators, power sources, alarm systems, electronics, structures and shelters
and cable laying equipment; (b) all Accounts, accounts receivable, other
receivables, contract rights, leases, chattel paper, investment property, and
general intangibles of such Borrower (including, without limitation, goodwill,
going concern value, patents, trademarks, trade names, service marks,
blueprints, designs, product lines and research and development), including,
without limitation, all the Borrower's rights under all present and future
Governmental Approvals, permits, licenses and franchises heretofore or hereafter
granted to Borrower for the operation and ownership of its Systems (excluding
licenses and permits issued by the FCC, any PUC or any other Governmental
Authority to the extent, and only to the extent, it is unlawful to grant a
security interest in such licenses and permits, but including, to the maximum
extent permitted by law, all rights incident or appurtenant to such licenses and
70
permits, including, without limitation, the right to receive all proceeds
derived from or in connection with the sale, assignment or transfer of such
licenses and permits), whether now owned or hereafter acquired by such Borrower,
or in which the Borrower may now have or hereafter acquire an interest; (c) all
instruments, letters of credit, documents of title, policies and certificates of
insurance, securities, bank deposits, deposit accounts (including such
Borrower's Collection Accounts), checking accounts and cash now or hereafter
owned by such Borrower, or in which such Borrower may now have or hereafter
acquire an interest; (d) all inventory, including all merchandise, raw
materials, work in process, finished goods and supplies, now or hereafter owned
by the Borrower or in which the Borrower may now have or hereafter acquire an
interest; (e) all such Borrower's leasehold interest in any real property, all
such Borrower's licenses, easements and rights of way with respect to real
property; (f) all accessions, additions or improvements to, substitutions for
and all proceeds and products of, all the foregoing, including proceeds of
insurance; and (g) all books, records, documents, computer tapes and discs
relating to all the foregoing.
SECTION 8.02. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN. Such Borrower shall execute and deliver to the Collateral
Agent for the benefit of the Agents and the Lenders, prior to the Initial
Funding Date, and at any time or times thereafter at the request of the
Collateral Agent or the Requisite Lenders, all financing statements or other
documents (and pay the cost of filing or recording the same in all public
offices deemed necessary by the Collateral Agent), as the Collateral Agent or
the Requisite Lenders may request, in a form satisfactory to the Collateral
Agent and the Requisite Lenders, to perfect and keep perfected the security
interest in the Collateral granted by such Borrower to the Collateral Agent or
to otherwise protect and preserve the Collateral and the Collateral Agent's
security interest therein or to enforce the Collateral Agent's security interest
in the Collateral. Should such Borrower fail to do so, the Collateral Agent is
authorized to sign any such financing statements as such Borrower's agent. Such
Borrower further agrees that a carbon, photographic or other reproduction of
this Agreement or of a financing statement is sufficient as a financing
statement.
SECTION 8.03. APPOINTMENT OF THE COLLATERAL AGENT AS THE BORROWERS'
ATTORNEY-IN-FACT. Such Borrower hereby irrevocably designates, makes,
constitutes and appoints the Collateral Agent (and all persons designated by the
Collateral Agent) as its true and lawful attorney-in-fact, and authorizes the
Collateral Agent, in its or the Collateral Agent's name, to, following the
occurrence and during the continuance of an Event of Default: (i) demand payment
of the Borrower's Accounts; (ii) enforce payment of such Borrower's Accounts by
legal proceedings or otherwise; (iii) exercise all such Borrower's rights and
remedies with respect to proceedings brought to collect an Account; (iv) sell or
assign any Account upon such terms, for such amount and at such time or times as
the Collateral Agent deems advisable; (v) settle, adjust, compromise, extend or
renew an Account; (vi) discharge and release any Account; (vii) prepare, file
and sign such Borrower's name on any proof of claim in bankruptcy or other
similar document against an account debtor of such Borrower; (viii) notify the
post office authorities to change the address for delivery of such Borrower's
mail to an address designated by the Collateral Agent, and open and deal with
all mail addressed to the Borrower; (ix) do all acts and things which are
necessary, in the Collateral Agent's discretion (as advised by the Requisite
Lenders), to fulfill such Borrower's obligations under this Agreement; (x) take
71
control in any manner of any item of payment or proceeds thereof; (xi) have
access to any lockbox or postal box into which such Borrower's mail is
deposited; (xii) endorse such Borrower's name upon any items of payment or
proceeds thereof and deposit the same in the Collateral Agent's account on
account of the Obligations; (xiii) endorse such Borrower's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto; and (xiv) sign such Borrower's
name on any verification of Accounts and notices thereof to account debtors.
SECTION 8.04. COLLECTION OF ACCOUNTS AND RESTRICTED ACCOUNT ARRANGEMENTS.
Such Borrower hereby represents and warrants that each depository account
("COLLECTION ACCOUNT") now maintained by it at any bank ("COLLECTION AGENT") for
the collection of checks and cash constituting proceeds of Accounts and sales of
other personal property which are part of the Collateral is identified on
SCHEDULE 8.04 attached hereto and made a part hereof. With respect to each
Collection Account, such Borrower shall, no later than the Initial Funding Date,
deliver to the Collateral Agent, a "RESTRICTED ACCOUNT AGREEMENT" substantially
in the form of EXHIBIT N attached hereto and made a part hereof, duly executed
and delivered by such Borrower and the applicable Collection Agent, authorizing
and directing such Collection Agent, upon receipt of written notice from the
Collateral Agent that an Event of Default has occurred and is continuing, to
deposit all checks and cash received into a restricted account (a "RESTRICTED
ACCOUNT") and remit all amounts deposited in such Restricted Account to the
Collateral Agent's account specified in such Restricted Account Agreement until
such time as the Collection Agent receives written notice from the Collateral
Agent rescinding such instruction. Such Borrower shall, following the occurrence
and during the continuance of an Event of Default and any subsequent request by
the Agent therefor, take such further action as the Collateral Agent or the
Requisite Lenders may reasonably deem desirable to effect the transfer of
exclusive ownership and control of the Restricted Accounts and all Collection
Accounts to the Collateral Agent. Until all the Obligations have been
indefeasibly paid in full, such Borrower agrees not to enter into any agreement
or execute and deliver any direction which would modify, impair or adversely
affect the rights and benefits of the Collateral Agent under any Restricted
Account Agreement. Such Borrower shall not open, establish or maintain any
Collection Account (other than those identified on SCHEDULE 8.04 hereto) without
first having delivered to the Collateral Agent a duly executed and delivered
Restricted Account Agreement with respect to such Collection Account. Such
Borrower shall notify the Collateral Agent in writing not less than five (5)
days prior to the date it shall open or establish any Collection Account other
than an account described on SCHEDULE 8.04 hereto.
SECTION 8.05. CURE RIGHTS. Such Borrower expressly authorizes the
Collateral Agent and the Agent, and the Collateral Agent (as directed by the
Requisite Lenders) and the Agent may, but shall not be required to, at any time
and from time to time, to take any and all action that it reasonably determines
to be necessary or desirable to cure any default or violation (including a
payment default) of such Borrower in connection with any real estate lease,
license agreement, Governmental Approval or any other material lease, agreement
or contract entered into with respect to the Systems.
72
ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
SECTION 9.01. EVENTS OF DEFAULT. The following events shall each constitute
an "EVENT OF DEFAULT":
(a) any Borrower shall fail to pay the principal of or interest on its
Notes or any other amounts payable hereunder or under any of the other Loan
Documents when due, whether as scheduled, at a date fixed for prepayment, by
acceleration or otherwise, and five (5) Business Days shall have elapsed; or
(b) any Borrower shall fail to observe or perform any other covenant,
condition or agreement to be observed or performed by it in any of the Loan
Documents, and such Borrower fails to cure such breach within ten (10) Business
Days after written notice thereof unless the breach relates to a covenant
contained in SECTIONS 5.04, or ARTICLE VI (other than SECTION 6.05 or SECTION
6.07) or VII, in which case no notice or grace period shall apply, or unless the
breach relates to SECTION 5.06, in which case an Event of Default shall occur on
the thirtieth day following the breach without any notice requirement, unless
the breach shall have been cured before such date; or
(c) any representation or warranty made by any Borrower, KMC Holdings or
KMC IHC in connection with this Agreement or any other Loan Document, or the
Loans or any statement or representation made in any report, certificate,
financial statement or other instrument furnished by or on behalf of such
Borrower, KMC Holdings or KMC IHC pursuant to this Agreement or any other Loan
Document, shall prove to have been false or misleading in any material respect
when made or delivered or when deemed made in accordance with the terms hereof
or thereof; or
(d) any Borrower, KMC Holdings or KMC IHC shall fail to make any payment
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) on any other obligation for borrowed money in excess of $250,000 with
respect to any Borrower or KMC IHC or in excess of $1,000,000 with respect to
KMC Holdings, and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such indebtedness;
or any other default or event under any agreement or instrument relating to any
indebtedness for borrowed money in excess of $250,000 with respect to any
Borrower or KMC IHC or in excess of $1,000,000 with respect to KMC Holdings, or
any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument if the effect of such
default or event is to accelerate, or to permit the acceleration of, the
maturity of such indebtedness in excess of $250,000 with respect to any Borrower
or KMC IHC or in excess of $1,000,000 with respect to KMC Holdings; or any such
indebtedness in excess of $250,000 with respect to any Borrower or KMC IHC or in
excess of $1,000,000 with respect to KMC Holdings shall be declared to be due
and payable or required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof; or
73
(e) any Borrower, KMC Holdings or KMC IHC shall (i) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator or similar
official for such Borrower, KMC Holdings or KMC IHC or for a substantial part of
its property, (ii) make a general assignment for the benefit of creditors, (iii)
become unable, or admit in writing its inability, to pay its debts as they
become due, (iv) voluntarily or involuntarily dissolve, liquidate or wind up its
affairs, or (v) take action for the purpose of effecting any of the foregoing;
or
(f) a proceeding under any bankruptcy, reorganization, arrangement of
debts, insolvency or receivership law is filed by or against any Borrower, KMC
Holdings or KMC IHC, or any Borrower or KMC Holdings takes any action to
authorize any of the foregoing matters, and in the case of any such proceeding
instituted against any Borrower, KMC Holdings or KMC IHC (but not instituted by
any Borrower, KMC Holdings or KMC IHC), either such proceeding shall remain
undismissed or unstayed for a period of 60 days or any of the actions sought in
such proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee or other similar official for
any Borrower, KMC Holdings or KMC IHC or any substantial part of its property)
shall be granted or shall occur; or
(g) a Termination Event occurs which the Requisite Lenders in good faith
believe would subject any Borrower to a material liability; or
(h) the plan administrator of any Plan applies under Section 412(d) of the
IRC for a waiver of the minimum funding standards of Section 412(a) of the IRC
and the Requisite Lenders in good faith believe that the approval of such waiver
could subject any Borrower or any ERISA Affiliate to material liability; or
(i) any of the Governmental Approvals or any other license, Governmental
Approval or other governmental consent or approval necessary for the continuing
operation of the Borrower or any System or any other material Governmental
Approval or approval of or material filing with the FCC, any PUC or any other
Governmental Authority with respect to the conduct by any Borrower of its
business and operations, including its Business, shall not be obtained or shall
cease to be in full force and effect, which in respect of any of the
Governmental Approvals shall, in the case of an order of the FCC, any PUC or
other Governmental Authority having jurisdiction with respect thereto, revoking,
or deciding not to renew, any such Governmental Approval, occur upon the
issuance of such order, and, in the case of any other order revoking or
terminating any of the Governmental Approvals or deciding not to renew such
Governmental Approvals prior to the termination thereof, occur when such order
becomes final, and, in each case, with respect to any such event occurring on or
after the Trigger Date, such event is also reasonably likely to result in a
Material Adverse Effect; or
74
(j) the FCC, any PUC or any other Governmental Authority, by final order,
determines that the existence or performance of this Agreement or any other Loan
Document will result in a revocation, suspension or material adverse
modification of any of the Governmental Approvals for any System, and with
respect to any such event occurring on and after the Trigger Date, such
determination is reasonably likely to result in a Material Adverse Effect; or
(k) for any reason any Loan Document shall not be in full force and effect
or shall not be enforceable in accordance with its terms, or any security
interest or lien granted pursuant thereto with respect to Collateral having an
aggregate value of $500,000 or greater shall fail to be perfected or to have its
intended priority, or any Borrower or any Affiliate thereof shall contest the
validity of any Lien granted under, or shall disaffirm its obligations under any
Loan Document; or
(l) any Borrower shall default under any Lucent Purchase Agreement or
Additional Purchase Agreement, which default shall not have been cured or waived
within the applicable grace period thereunder unless such Borrower is contesting
such default in good faith by appropriate protest or proceedings and shall have
set aside adequate reserves in accordance with GAAP; or
(m) for any reason, any Borrower ceases to operate any System or ceases to
own any of its Governmental Approvals necessary for the continuing operation of
any System, and with respect to any such event occurring on or after the Trigger
Date, such cessation is reasonably likely to result in a Material Adverse
Effect; or
(n) a judgment or judgments for the payment of money in excess of $250,000
individually or $500,000 in the aggregate at any one time shall have been
rendered against any Borrower and the same shall have remained unsatisfied and
in effect for any period of sixty (60) days during which no stay of execution
shall have been obtained; or
(o) any Borrower is enjoined, restrained or in any way prevented by the
order of any court or administrative or regulatory agency from conducting its
business in any material respect with respect to any one or more of its Systems
and with respect to any such event occurring on or after the Trigger Date, such
event is reasonably likely to result in a Material Adverse Effect; or
(p) any Borrower becomes subject to any liabilities, costs, expenses,
damages, fines or penalties which could reasonably be expected to have a
Material Adverse Effect arising out of or related to (i) any Remedial Action in
response to a Release or threatened Release at any location of any Contaminant
into the indoor or outdoor environment or (ii) any material violation of any
Environmental Law; or
(q) a Change of Control shall occur; or
75
(r) KMC Holdings shall fail to observe or perform any covenant, condition
or agreement to be observed or performed by it in the KMC Holdings Guaranty; or
(s) KMC IHC shall fail to observe or perform any covenant, conditions or
agreement to be observed by it in the KMC IHC Guaranty; or
(t) any Borrower shall fail to observe or perform any covenant, condition
or agreement to be observed or performed by it in any material agreement (other
than a Loan Document or an agreement referred to in SECTION 9.01(D)), such
Borrower fails to cure such breach within ten (10) Business Days after written
notice thereof, and with respect to any such failure occurring on or after the
Trigger Date, such failure is reasonably likely to result in a Material Adverse
Effect, unless such Borrower is contesting such covenant, condition or agreement
by appropriate protest or proceedings and shall have set aside adequate reserves
in accordance with GAAP.
SECTION 9.02. TERMINATION OF COMMITMENT; ACCELERATION. Upon the occurrence
and at any time during the continuance of any Event of Default, the Agent shall
upon direction from the Requisite Lenders:
(a) by notice to the Borrowers, terminate Lenders' Commitment to make Loans
hereunder; or
(b) by notice to the Borrower, declare the Obligations to be immediately
due and payable, whereupon all the Obligations shall be immediately due and
payable without further notice of any kind, PROVIDED, that if an Event of
Default described in SECTION 9.01(F) shall exist or occur, all the Obligations
shall automatically, without declaration or notice of any kind, be immediately
due and payable and the Commitment shall be automatically terminated.
SECTION 9.03. WAIVERS. Demand, presentment, protest and notices of
nonpayment, protest, dishonor and acceptance are hereby waived by each Borrower.
Each Borrower also waives the benefit of all valuation, appraisal and exemption
laws and the posting of any bond required of the Collateral Agent, the Agent or
any Lender in connection with any judicial process to realize on the Collateral,
to enforce any judgment or other court order entered in favor of the Collateral
Agent, the Agent or any Lender or to enforce by specific performance, temporary
restraining order, or preliminary or permanent injunction, this Agreement or any
other Loan Documents. Each Borrower waives the right, if any, to the benefit of,
or to direct the application of, any Collateral. Each Borrower hereby
acknowledges that none of the Collateral Agent, the Agent or any Lender has any
obligation to resort to any Collateral or make claim against any other Person
before seeking payment or performance from any Borrower.
76
SECTION 9.04. RIGHTS AND REMEDIES GENERALLY. If an Event of Default occurs
and is continuing, the Agent and the Collateral Agent shall have, in addition to
any other rights and remedies contained in this Agreement or in any of the other
Loan Documents, all the rights and remedies of a secured party under the Code or
other applicable laws, which rights and remedies shall be cumulative, and none
exclusive, to the extent permitted by law. In addition to all such rights and
remedies, the sale, lease or other disposition of the Collateral, or any part
thereof, by the Collateral Agent or the Agent after the occurrence of an Event
of Default may be for cash, credit or any combination thereof, and the
Collateral Agent or the Agent may purchase all or any part of the Collateral at
public or, if permitted by law, private sale, and in lieu of actual payment of
such purchase price, may set off the amount of such purchase price against the
Obligations then owing. Any sales of the Collateral may be adjourned from time
to time with or without notice. The Agent or the Collateral Agent, may, in its
sole discretion, cause the Collateral to remain on the premises of any Borrower,
at the expense of the Borrower, pending sale or other disposition of the
Collateral. The Agent or the Collateral Agent shall have the right to conduct
such sales on the premises of any Borrower, at the expense of the Borrowers, or
elsewhere, on such occasion or occasions as it may see fit.
SECTION 9.05. ENTRY UPON PREMISES AND ACCESS TO INFORMATION. If an Event of
Default occurs and is continuing, the Agent and the Collateral Agent shall have
the right to enter upon the premises of any Borrower where any Collateral is
located (or is believed to be located) without any obligation to pay rent to
such Borrower, or any other place or places where the Collateral is believed to
be located and kept, and render the Collateral unusable or remove the Collateral
therefrom to the premises of the Agent or the Collateral Agent or any agent of
the Agent or the Collateral Agent, for such time as the Agent or the Collateral
Agent may desire, in order effectively to collect or liquidate the Collateral,
and/or the Agent or the Collateral Agent may require any Borrower to assemble
the Collateral and make it available to the Agent or the Collateral Agent at a
place or places to be designated by the Agent or the Collateral Agent. If an
Event of Default occurs and is continuing, the Agent or the Collateral Agent
shall have the right to obtain access to any Borrower's data processing
equipment, computer hardware and software relating to the Collateral and to use
all of the foregoing and the information contained therein in any manner the
Agent or the Collateral Agent deems appropriate.
SECTION 9.06. SALE OR OTHER DISPOSITION OF COLLATERAL BY THE AGENT. Any
notice required to be given by the Agent or the Collateral Agent of a sale,
lease or other disposition or other intended action by the Agent or the
Collateral Agent with respect to any of the Collateral which is deposited in the
United States mails, registered or certified, postage prepaid and duly addressed
to the Borrowers at the address specified in SECTION 11.01, at least ten days
prior to such proposed action shall constitute fair and reasonable notice to the
Borrowers of any such action. The net proceeds realized by the Agent or the
Collateral Agent upon any such sale or other disposition, after deduction for
the expense of retaking, holding, preparing for sale, selling or the like and
the reasonable attorneys' fees and legal expenses incurred by the Agent or the
Collateral Agent in connection therewith, shall be applied as provided herein
toward satisfaction of the Obligations. The Agent or the Collateral Agent, as
applicable, shall account to the Borrowers for any surplus realized upon such
sale or other disposition, and the Borrowers shall remain liable for any
deficiency. The commencement of any action, legal or equitable, or the rendering
of any judgment or decree for any deficiency shall not affect the Collateral
Agent's security interest in the Collateral. The Borrowers agree that the
77
Collateral Agent has no obligation to preserve rights to the Collateral against
any other parties. The Agent and the Collateral Agent are hereby granted a
license or other right to use, without charge, the Borrowers' labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, and the Borrowers' rights under all licenses and all
franchise agreements shall inure to the Agent's and the Collateral Agent's
benefit until the Obligations are paid in full.
SECTION 9.07. GOVERNMENTAL APPROVALS. In connection with the enforcement by
the Agent or the Collateral Agent of any remedies available to it as a result of
any Event of Default, each Borrower agrees that it shall join and cooperate
fully with, at the request of the Agent or the Collateral Agent, any receiver
referred to below and/or the successful bidder or bidders at any foreclosure
sale in a filing of an application (and furnishing any additional information
that may be required in connection with such application or which the Agent, the
Collateral Agent or the Requisite Lenders may believe relevant to such
application) with the FCC, any PUC and all other applicable Governmental
Authorities, requesting their prior approval of (i) the operation or abandonment
of all or the portion of any System and/or (ii) the transfer of control of such
Borrower or assignment of all licenses, certificates, Governmental Approvals,
approvals and permits, issued to each Borrower by the FCC, any PUC or any such
Governmental Authorities with respect to any System and the operation thereof,
to the Agent or the Collateral Agent, the receiver or to the successful bidder
or bidders. In connection with the foregoing, the Borrower shall take such
further actions, and execute all such instruments, as the Agent, the Collateral
Agent or the Requisite Lenders reasonably deems necessary or desirable. Each
Borrower agrees that the Agent or the Collateral Agent may enforce any
obligation of such Borrower as set forth in this section by an action for
specific performance. In addition, each Borrower hereby irrevocably constitutes
and appoints the Agent and the Collateral Agent and any agent or officer thereof
(which appointment is coupled with an interest) as its true and lawful
attorney-in-fact with full irrevocable power and authority and in the place and
stead of such Borrower and in the name of such Borrower or in its own name, from
time to time in its discretion after the occurrence and during the continuance
of an Event of Default and in connection with the foregoing, for the purpose of
executing on behalf and in the name of the Borrower any and all of the
above-referenced instruments and to take any and all appropriate action in
furtherance of the foregoing. THE EXERCISE OF ANY RIGHTS OR REMEDIES HEREUNDER
OR UNDER ANY OTHER LOAN DOCUMENT BY ANY LENDER, THE AGENT OR THE COLLATERAL
AGENT THAT MAY REQUIRE FCC, ANY PUC OR ANY OTHER GOVERNMENTAL AUTHORITY APPROVAL
SHALL BE SUBJECT TO OBTAINING SUCH APPROVAL. PENDING THE RECEIPT OF ANY FCC, ANY
PUC OR ANY OTHER GOVERNMENTAL AUTHORITY APPROVAL, NO BORROWER SHALL DO ANYTHING
TO DELAY, HINDER, INTERFERE OR OBSTRUCT THE EXERCISE OF THE AGENT'S OR THE
COLLATERAL AGENT'S RIGHTS OR REMEDIES HEREUNDER IN OBTAINING SUCH APPROVALS.
78
SECTION 9.08. APPOINTMENT OF RECEIVER OR TRUSTEE. In connection with the
exercise of its remedies under this Agreement, the Agent or the Collateral Agent
may, upon the occurrence of an Event of Default, obtain the appointment of a
receiver or trustee to assume, upon receipt of all necessary judicial, FCC, any
PUC or other Governmental Authority consents or approvals, control of or
ownership of any of the Governmental Approvals. Such receiver or trustee shall
have all rights and powers provided to it by law or by court order or provided
to the Agent or the Collateral Agent under this Agreement. Upon the appointment
of such trustee or receiver, the Borrowers agree to cooperate, to the extent
necessary or appropriate, in the expeditious preparation, execution and filing
of an application to the FCC, any PUC or any other Governmental Authority or for
consent to the transfer of control or assignment of any Borrower's Governmental
Approvals to the receiver or trustee.
SECTION 9.09. RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default, each
Lender and each holder of any Note is hereby authorized at any time or from time
to time, without notice to any Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all balances held by it at any of its offices for the account of any
Borrower (regardless of whether such balances are then due to such Borrower) and
any other properties or assets any time held or owing by that Lender or that
holder to or for the credit or for the account of any Borrower against and on
account of any of the Obligations which are not paid when due. Any Lender or
holder of any Note exercising a right to set off or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participation in each such other Lender's or holder's Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
set off or otherwise received with each other Lender or holder in accordance
with their respective Pro Rata Shares. Each Borrower agrees, to the fullest
extent permitted by law, that (a) any Lender or holder may exercise its right to
set off with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amount so set off to other
Lenders and holders and (b) any Lender or holder so purchasing a participation
in the Loans made or other Obligations held by other Lenders or holders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other Obligations in the amount of such
participation. Notwithstanding the foregoing, if all or any portion of the
set-off amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of set-off, the purchase of participations
by that Lender shall be rescinded and the purchase price restored without
interest. Each Borrower hereby agrees that the foregoing provisions are intended
to be construed so as to satisfy the requirements of Section 553 of the Federal
Bankruptcy Code or amendments thereto (including any requirement of mutuality of
obligations therein).
79
ARTICLE X
THE AGENT AND THE COLLATERAL AGENT
SECTION 10.01. APPOINTMENT OF AGENT. (a) Lucent Technologies Inc. is hereby
appointed to act as contractual representative on behalf of all Lenders under
this Agreement and the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this ARTICLE
X. The provisions of this SECTION 10.01 are solely for the benefit of the Agent
and the Lenders and no Borrower or any other Person shall have any rights as a
third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Loan Documents, the
Agent shall act solely as an agent of the Lenders and does not assume and shall
not be deemed to have assumed any obligation toward or relationship of agency or
trust with or for any Borrower or any other Person. The Agent shall have no
duties or responsibilities except for those expressly set forth in this
Agreement and the other Loan Documents. Notwithstanding the use of the defined
term "Agent", it is expressly understood and agreed that the Agent shall not
have any fiduciary responsibilities to any Lender by reason of this Agreement
and that the Agent is merely acting as the representative of the Lenders with
only those duties as are expressly set forth in this Agreement and the other
Loan Documents. In its capacity as the Lenders' contractual representative, the
Agent (i) does not assume any fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders within the meaning of Section 9-105 of the UCC
and (iii) is acting as an independent contractor, the rights and duties of which
are limited to those expressly set forth in this Agreement and the other Loan
Documents. Each of the Lenders agrees to assert no claim against the Agent on
any agency theory or any other theory of liability for breach of fiduciary duty,
all of which claims each Lender waives. Neither the Agent nor any of its
Affiliates nor any of their respective officers, directors, employees, agents or
representatives shall be liable to any Lender for any action taken or omitted to
be taken by it hereunder or under any other Loan Document, or in connection
herewith or therewith, except for damages caused by its or their own gross
negligence or willful misconduct.
(b) If the Agent shall request instructions from all Lenders, Requisite
Lenders or all affected Lenders with respect to any act or action (including
failure to act) in connection with this Agreement or any other Loan Document,
then the Agent shall be entitled to refrain from such act or taking such action
unless and until the Agent shall have received instructions from all Lenders,
Requisite Lenders, or all affected Lenders, as the case may be, and the Agent
shall not incur liability to any Person by reason of so refraining. The Agent
shall be fully justified in failing or refusing to take any action hereunder or
under any other Loan Document (a) if such action would, in the opinion of the
Agent, be contrary to law or the terms of this Agreement or any other Loan
Document, (b) if such action would, in the opinion of the Agent, expose the
Agent to liabilities beyond the limits of this Agreement or (c) if the Agent
shall not first be indemnified to its satisfaction against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. Without limiting the foregoing, no Lender shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder or under any other Loan Document in accordance
with the instructions of all Lenders, Requisite Lenders or all affected Lenders,
as applicable.
80
SECTION 10.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its
Affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the other Loan Documents, except for
damages caused by its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (a) may treat
the payee of any Note as the holder thereof until the Agent receives written
notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (b) may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of any
Borrower or to inspect the Collateral (including the books and records); (e)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 10.03. LUCENT AND AFFILIATES. With respect to its Commitments
hereunder, Lucent shall have the same rights and powers under this Agreement and
the other Loan Documents as any other Lender and may exercise the same as though
it were not the Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include Lucent in its individual capacity. Lucent
and its Affiliates may lend money to, invest in, and generally engage in any
kind of business with, any Borrower, any of its Affiliates and any Person who
may do business with or own securities of any Borrower or any such Affiliate,
all as if Lucent were not the Agent and without any duty to account therefor to
the Lenders. Lucent and its Affiliates may accept fees and other consideration
from any Borrower for services in connection with this Agreement or otherwise
without having to account for the same to Lenders. Lucent may also purchase or
hold Equity Interests or warrants in KMC Holdings, KMC IHC or the Borrower and
make subordinated loans to any Borrower. Each Lender acknowledges the potential
conflict of interest between Lucent as a Lender holding disproportionate
interests in the Loans, Lucent as a member or subordinated debt holder of the
Borrower, Lucent as a vendor under the Lucent Purchase Agreement and Lucent as
Agent.
SECTION 10.04. LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial information given it by the Borrowers and such other
documents and information as it has deemed appropriate, made its own credit and
81
financial analysis of the Borrowers and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
SECTION 10.05. INDEMNIFICATION. Each of the Lenders agrees to indemnify the
Agent (to the extent not reimbursed by the Borrowers and without limiting the
obligations of Borrowers hereunder), ratably according to their respective Pro
Rata Shares, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or omitted by the Agent
in connection therewith; PROVIDED, that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. Without limiting the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that the Agent is not reimbursed for such expenses by the Borrowers.
SECTION 10.06. SUCCESSOR AGENT. The Agent may resign at any time by giving
not less than thirty (30) days' prior written notice thereof to Lenders and the
Borrowers. Upon any such resignation, the Requisite Lenders shall have the right
to appoint a successor Agent. If no successor Agent shall have been so appointed
by the Requisite Lenders and shall have accepted such appointment within 30 days
after the resigning Agent's giving notice of resignation, then the resigning
Agent may, on behalf of Lenders, appoint a successor Agent, which shall be a
Lender, if a Lender is willing to accept such appointment, or otherwise shall be
a commercial bank or financial institution or a subsidiary of a commercial bank
or financial institution if such commercial bank or financial institution is
organized under the laws of the United States of America or of any State thereof
and has a combined capital and surplus of at least $300,000,000. If no successor
Agent has been appointed pursuant to the foregoing, by the 30th day after the
date such notice of resignation was given by the resigning Agent, such
resignation shall become effective and the Requisite Lenders shall thereafter
perform all the duties of Agent hereunder until such time, if any, as the
Requisite Lenders appoint a successor Agent as provided above. Any successor
Agent appointed by the Requisite Lenders hereunder shall be subject to the
approval of Borrowers, such approval not to be unreasonably withheld or delayed;
PROVIDED that such approval shall not be required if a Default or an Event of
Default shall have occurred and be continuing. Upon the acceptance of any
82
appointment as Agent hereunder by a successor Agent, such successor Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Agent. Upon the earlier of the acceptance of any appointment as
Agent hereunder by a successor Agent or the effective date of the resigning
Agent's resignation, the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any
indemnity rights or other rights in favor of such resigning Agent shall
continue. After any resigning Agent's resignation hereunder, the provisions of
this SECTION 10.06 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement and the other Loan
Documents.
SECTION 10.07. PAYMENTS; NON-FUNDING LENDERS; INFORMATION; ACTIONS IN
CONCERT.
(a) LOANS; PAYMENTS. Whenever the Agent receives a payment of principal,
interest, fee or premium (if any) or other payment, or whenever the Agent makes
an application of funds, in connection with the Loans or the Notes (including,
without limitation, any payment or application from any Collateral), the Agent
will on the date such payment is received or applied, if on or prior to 11:00
a.m. (Eastern time) on such date, or otherwise on the next Business Day, pay
over to each Lender as instructed by such Lender in writing, an amount equal to
such Lender's Pro Rata Share of such payment provided that such Lender has
funded all Loans required to be made by it and has purchased all participation
required to be purchased by it under this Agreement and the other Loan Documents
as of such date. To the extent that any Lender (a "NON-FUNDING LENDER") has
failed to fund all such payments and Loans or failed to fund the purchase of all
such participation, the Agent shall be entitled to set off the funding
short-fall against that Non-Funding Lender's Pro Rata Share of all payments
received from the Borrowers. All payments by Agent shall be made by wire
transfer to such Lender's account (as specified by such Lender) not later than
2:00 p.m. (Eastern time) on the applicable Business Day.
(b) RETURN OF PAYMENTS. (i) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by the Agent from the Borrowers and such related payment is not
received by Agent, then the Agent will be entitled to recover such amount from
such Lender on demand without set-off, counterclaim or deduction of any kind.
(ii) If the Agent determines at any time that any amount received by
the Agent under this Agreement must be returned to any Borrower or paid to
any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other
Loan Document, the Agent will not be required to distribute any portion
thereof to any Lender. In addition, each Lender will repay to Agent on
demand any portion of such amount that the Agent has distributed to such
Lender, together with interest at such rate, if any, as the Agent is
required to pay to any Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
83
(c) NON-FUNDING LENDERS. The failure of any Non-Funding Lender to make any
portion of its Loans or any payment required by it hereunder on the date
specified therefor shall not relieve any other Lender (each such other Lender,
an "OTHER LENDER") of its obligations to make any such Loan on such date, but
neither any Other Lender nor the Agent shall be responsible for the failure of
any Non-Funding Lender to make any Loan. Notwithstanding anything set forth
herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a
"Lender" (or be included in the calculation of "Requisite Lenders" or "Requisite
Revolving Lenders" hereunder) for any voting or consent rights under or with
respect to any Loan Document.
(d) DISSEMINATION OF INFORMATION. The Agent will use reasonable efforts to
provide Lenders with any notice of Default or Event of Default received by the
Agent from, or delivered by the Agent to, the Borrowers, with notice of any
Event of Default of which the Agent has actually become aware and with notice of
any action taken by the Agent following any Event of Default; PROVIDED that the
Agent shall not be liable to any Lender for any failure to do so, except to the
extent that such failure is attributable to the Agent's gross negligence or
willful misconduct. Lenders acknowledge that the Borrowers are required to
provide financial statements and other documents to Lenders pursuant to this
Agreement and agree that the Agent shall have no duty to provide the same to
Lenders.
(e) ACTIONS IN CONCERT. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of set-off) without
first obtaining the prior written consent of the Agent and Requisite Lenders, it
being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Notes shall be taken in concert and at the
direction or with the consent of Agent.
SECTION 10.08. COLLATERAL MATTERS.
(a) The Collateral Agent, at the written direction of the Requisite
Lenders, may release any Lien upon any Collateral (i) upon the termination of
the Commitments and payment and satisfaction of all Loans and all other
Obligations and which the Agent has been notified in writing are then due and
payable; (ii) constituting property being sold or disposed of if the applicable
Borrower certifies to the Collateral Agent that the sale or disposition is made
in compliance with SECTION 6.03 (and the Agent may rely conclusively on any such
certificate, without further inquiry); or (iii) constituting property leased to
the applicable Borrower under a lease which has expired or been terminated in a
transaction permitted under this Agreement or which will expire imminently and
which has not been, and is not intended by such Borrower to be, renewed or
extended and with respect to which such Borrower has not exercised any purchase
option. The Collateral Agent may not release all or substantially all the
Collateral without the consent of the Lenders. Upon request by the Collateral
84
Agent or the Borrowers at any time, the Lenders will confirm in writing the
Collateral Agent's authority to release any Liens pursuant to this SECTION
10.08(A).
(b) Upon receipt by the Collateral Agent of any authorization required
pursuant to SECTION 10.08(A) from the Requisite Lenders or Lenders, as
applicable, of the Collateral Agent's authority to release any Liens upon
particular types or items of Collateral, and upon at least five (5) Business
Days' prior written request by the applicable Borrower, and provided that no
Event of Default has occurred and is then continuing, the Collateral Agent shall
(and is hereby irrevocably authorized by the Lenders to) execute such documents
as may be necessary to evidence the release of the Liens upon such Collateral;
PROVIDED, that (i) the Collateral Agent shall not be required to execute any
such document on terms which, in the Collateral Agent's opinion, would expose
the Collateral Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens (other than those expressly being released) upon (or
obligations of the applicable Borrower in respect of) all interests retained by
the applicable Borrower, including (without limitation) the proceeds of any
sale, all of which shall continue to constitute part of the Collateral.
(c) The Collateral Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by any Borrower or is
cared for, protected or insured or has been encumbered, or, other than a duty to
act without recklessness, willful misconduct or gross (but not mere) negligence,
that the Liens have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the pursuant to this SECTION
10.08 or pursuant to any of the Loan Documents, it being understood and agreed
that in respect of the Collateral, or any act, omission or event related
thereto, the Collateral Agent may act in any manner it may deem appropriate, in
its reasonable business judgment, given the Collateral Agent's own interest in
the Collateral in its capacity as one of the Lenders and that the Collateral
Agent shall have no other duty or liability whatsoever to any Lender as to any
of the foregoing.
SECTION 10.09. AGENCY FOR PERFECTION. Each Lender hereby appoints each
other Lender as agent for the purpose of perfecting the Lenders' security
interest in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession. Should any Lender (other than the Collateral
Agent) obtain possession of any such Collateral, such Lender shall notify the
Collateral Agent thereof, and, promptly upon the Collateral Agent's request
therefor shall deliver such Collateral to the Collateral Agent.
SECTION 10.10. CONCERNING THE COLLATERAL AND THE RELATED LOAN DOCUMENTS AND
THE COLLATERAL AGENT. (a) Each Lender authorizes and directs the Collateral
Agent to enter into this Agreement and the other Loan Documents relating to the
Collateral, for the ratable benefit of the Lenders. The exercise by the
Collateral Agent or the Requisite Lenders of their respective powers set forth
85
in this Agreement or the other Loan Documents relating to the Collateral,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders; PROVIDED that the Collateral Agent shall not
without the consent of the Requisite Lenders take any action in accordance with
the terms of this Agreement or the other Loan Documents relating to the
Collateral (other than, in the exercise of its reasonable judgment, actions to
preserve the value of the Collateral).
(b) The Collateral Agent with respect to the administration of the
Collateral shall have the same rights, obligations and status as the Agent as
are set forth in SECTION 10.01, 10.02, 10.03, 10.04, 10.05, and 10.06 above.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. NOTICES; ACTION ON NOTICES, ETC. (a) Notices and other
communications provided for herein shall be in writing and shall be delivered by
a courier service of recognized standing (specifying one (1) day delivery), or
by registered or certified mail, postage prepaid, return receipt requested (or,
if by telecopy communications equipment of the sending party, delivered by such
equipment) addressed, if to the Borrowers, at KMC Telecom III, Inc., 0000 Xxxxx
000, Xxxxx 000, Xxxxxxxxxx, XX 00000; Attention: President; (telecopy no. (908)
719-8775, confirmation no. (000) 000-0000) with a copy to Xxxx X. Xxxxxxx Esq.,
Xxxxxx Xxxx & Xxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000; (telecopy no.
(000) 000-0000, confirmation no. (000) 000-0000), if to the Agent, at Lucent
Technologies Inc., 000 Xxxx Xxxxxx Xxxx, Xxxxxx, XX 00000; Attention: Financing
Operations Group (telecopy no. (000) 000-0000), and if to the Collateral Agent,
at ____________________________, Attention:_________________________________
(telecopy no. ______________, confirmation no. ______________). All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given (a) five Business Days
after mailing when sent by registered or certified mail, postage prepaid, return
receipt requested, or (b) upon receipt, if by courier service or any telecopy
communications equipment of the sender, in each case addressed to such party as
provided in this Section or in accordance with the latest unrevoked direction
from such party.
(b) Each Borrower agrees that the Agent or the Collateral Agent may act
upon any notice, consent, certificate, cable, telex or other instrument or
writing believed by the Agent or the Collateral Agent to be genuine, that the
Agent or the Collateral Agent may consult with legal counsel, selected by the
Agent or the Collateral Agent and shall not be liable to any Borrower for any
action taken or omitted to be taken in good faith by Lender in accordance with
the advice of such counsel.
86
SECTION 11.02. NO WAIVERS; AMENDMENTS. (a) No failure or delay of the
Agent, the Collateral Agent or any Lender to exercise any right hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, preclude any other or further
exercise thereof or the exercise of any other right. No waiver of any provision
of this Agreement or any other Loan Document nor consent to any departure by any
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by the Agent and the Requisite Lenders, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on any Borrower in any case shall entitle
any Borrower to any other or further notice or demand in similar or other
circumstances.
(b) Subject to the provisions of this SECTION 11.02(B), the Requisite
Lenders (or the Agent with the consent in writing of the Requisite Lenders) and
the Borrowers may enter into agreements supplemental hereto for the purpose of
adding or modifying any provisions to the Loan Documents or changing in any
manner the rights of the Lenders or the Borrowers hereunder or waiving any Event
of Default or Default hereunder; PROVIDED that no such supplemental agreement
shall, without the consent of each Lender affected thereby and in the case of
clause (vii) below, so long as Lucent shall have any unused Commitment Amount
without the consent of Lucent:
(i) Postpone or extend the Commitment Termination Date, the maturity
date for the loans or any other date fixed for any payment of principal of,
or interest on, the Loans or any fees or other amounts payable to such
Lender except with respect to (A) any modifications of the provisions
relating to prepayments of Loans and other Obligations and (B) a waiver of
the application of the default rate of interest pursuant to SECTION
2.05(B).
(ii) Reduce the principal amount of any Loans, or reduce the rate or
extend the time of payment of interest or fees thereon.
(iii) Reduce the percentage specified in the definition of Requisite
Lenders or any other percentage of Lenders specified to be the applicable
percentage in this Agreement to act on specified matters or amend the
definition of "Pro Rata Share".
(iv) Increase the amount of any Commitment of any Lender hereunder or
increase any Lender's Pro Rata Share.
(v) Permit any Borrower to assign its rights under this Agreement.
(vi) Release all or substantially all the Collateral.
(vii) Amend Section 2.02.
(viii) Amend this SECTION 11.02(B).
87
No amendment of any provision of this Agreement relating to the Agent or the
Collateral Agent shall be effective without the written consent of the Agent or
the Collateral Agent, as applicable.
SECTION 11.03. GOVERNING LAW AND JURISDICTION. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CONFLICTS OF
LAWS PRINCIPLES. THE BORROWERS, THE AGENT, THE COLLATERAL AGENT AND THE LENDERS
CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN THE
CITY AND STATE OF NEW YORK AND WAIVE ANY OBJECTION RELATING TO IMPROPER VENUE OR
FORUM NON CONVENIENCE TO THE CONDUCT OF ANY PROCEEDING BY SUCH COURT.
SECTION 11.04. EXPENSES. The Borrowers will pay all documented
out-of-pocket third-party expenses (including in each case all reasonable
attorneys' and paralegals' fees and related expenses and costs), (i) incurred by
the Agent and the Collateral Agent in connection with the negotiation,
preparation and execution of the Loan Documents (whether or not the transactions
contemplated hereby shall be consummated), (ii) incurred by the Agents, in
connection with the administration of the Loan Documents, and the creation,
perfection, priority and protection of the Liens in the Collateral, and (iii)
incurred by the Agent, the Collateral Agent or any Lender in connection with the
enforcement of the rights of the Agent, the Collateral Agent or any Lender in
connection with this Agreement, any other Loan Documents or the Collateral, or
any restructuring or workout of this Agreement or the other Loan Documents.
SECTION 11.05. EQUITABLE RELIEF. Each Borrower recognizes that, in
the event it fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or any other Loan Document, any remedy at law
may prove to be inadequate relief to the Agent, the Collateral Agent and the
Lenders; therefore, such Borrower agrees that the Agent or the Collateral Agent,
if it so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
SECTION 11.06. INDEMNIFICATION; LIMITATION OF LIABILITY. (a) The Borrowers
agree to protect, indemnify and hold harmless the Agent, the Collateral Agent
each Lender and each of their respective officers, affiliates, directors,
employees, attorneys, accountants, consultants, representatives and agents
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements (including, without limitation,
payment by the Agent, the Collateral Agent or any Lender of any obligations due
or past due under any contract or agreement to which any Borrower is or becomes
a party) of any kind or nature whatsoever (including, without limitation, the
88
fees and disbursements of counsel for and consultants of such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitees shall be designated a party thereto), which may
be imposed on, incurred by, or asserted against such Indemnitees (whether
direct, indirect, or consequential and whether based on any federal or state
laws or other statutory regulations, including, without limitation, securities,
environmental and commercial laws and regulations, under common law or at
equitable cause or on contract or otherwise) in any manner relating to or
arising out of this Agreement or any of the other Loan Documents, or any act,
event or transaction related or attendant thereto, the agreements of the Agent,
the Collateral Agent or the Lenders contained herein, the making of Loans, the
management of such Loans or the Collateral (including any liability under
Environmental Laws) or the use or intended use of the proceeds of such Loans
hereunder (collectively, the "INDEMNIFIED MATTERS"); PROVIDED that no Borrower
shall have any obligation to any Indemnitee hereunder with respect to
Indemnified Matters caused by or resulting from the willful misconduct or gross
negligence of such Indemnitee; PROVIDED, FURTHER that the Borrowers shall not
have any obligation to any Indemnitee hereunder with respect to taxes that are
imposed on the net income of any Indemnitee or any franchise or doing business
taxes imposed on any Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrowers
shall contribute the maximum portion which they are permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees.
(b) To the extent permitted by applicable law, no claim may be made by the
Borrowers or any other Person against the Agent, the Collateral Agent, any
Lender or any of their respective affiliates, directors, officers, employees,
agents, attorneys, accountants, representatives or consultants for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by any of the Loan Documents or any act, omission or
event occurring in connection therewith; and the Borrowers hereby waive, release
and agree not to xxx upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
SECTION 11.07. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
warranties and representations made by any Borrower in any Loan Document shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Obligations. The confidentiality
obligations of each Borrower in SECTION 11.16, the indemnification obligations
of each Borrower in SECTION 11.06, and to the extent the second sentence of
SECTION 11.13 is applicable, all covenants of each Borrower, survive the
repayment of the Obligations.
SECTION 11.08. SUCCESSORS AND ASSIGNS; ASSIGNMENTS; PARTICIPATIONS.
(a) GENERAL. The terms and provisions of the Loan Documents shall be
binding upon and inure to the benefit of the Borrowers, the Agent, the
Collateral Agent and the Lenders and their respective successors and assigns,
except that (i) no Borrower shall have any right to assign its rights or
89
obligations under the Loan Documents and (ii) any assignment by any Lender must
be made in compliance with SUBSECTION (C) below. With respect to any Borrower,
successors and assigns shall include, without limitation, any receiver, trustee
or debtor-in-possession of or for such Borrower. Notwithstanding the foregoing,
any Lender may at any time, without the consent of the Borrowers or the Agent,
assign all or any portion of its rights under this Agreement and its Notes to a
Federal Reserve Bank or to an affiliate of such Lender; PROVIDED that no such
assignment shall release the transferor Lender from its obligations hereunder.
The Agent shall be entitled to utilize its Register to determine the payee of
any Note for all purposes hereof. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
(b) PARTICIPATIONS.
(i) Subject to the terms set forth in this SECTION 11.08(B), any
Lender may, in the ordinary course of its business and in accordance with
applicable law, at any time sell to one or more banks or other entities
("PARTICIPANTS") participating interests in any Loan owing to such Lender,
any Note held by such Lender, any Commitment of such Lender or any other
interest of such Lender under the Loan Documents on a pro rata or non-pro
rata basis. Notice of such participation to the Agent shall be required
prior to any participation becoming effective with respect to a Participant
which is not a Lender or an Affiliate thereof. In the event of any such
sale by a Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the holder of any
such Note for all purposes under the Loan Documents, such Lender shall be
solely responsible for any withholding taxes or any filing or reporting
requirements in connection therewith relating to such Participant, all
amounts payable by the Borrowers under this Agreement shall be determined
as if such Lender had not sold such participating interests, and the
Borrowers and the Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under
the Loan Documents except that, for purposes of SECTION 2.13, the
Participants shall be entitled to the same rights as if they were Lenders,
PROVIDED that no Participant shall be entitled to receive any greater
amount pursuant to SECTION 2.13 than such Lender would have been entitled
to receive in respect of the amount of the participation transferred to
such Participant had no transfer occurred.
(ii) Each Lender shall retain the sole right to approve, without the
consent of any Participant, any amendment, modification or waiver of any
provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Loan or Commitment in which such Participant has
an interest which forgives principal, interest or fees or reduces the
90
interest rate or fees payable pursuant to the terms of this Agreement with
respect to any such Loan or Commitment, postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or fees on, any
such Loan or Commitment, or releases all or substantially all the
Collateral, if any, securing any such Loan.
(iii) The Borrowers agree that each Participant shall be deemed to
have the right of setoff provided in SECTION 9.09 in respect to its
participating interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest were owing
directly to it as a Lender under the Loan Documents; PROVIDED that each
Lender shall retain the right of setoff provided in SECTION 9.09 with
respect to the amount of participating interests sold to each Participant
except to the extent such Participant exercises its right of setoff. The
Lenders agree to share with each Participant, and each Participant, by
exercising the right of setoff provided in SECTION 9.09, agrees to share
with each Lender, any amount received pursuant to the exercise of its right
of setoff, such amounts to be shared in accordance with SECTION 9.09 as if
each Participant were a Lender.
(c) ASSIGNMENTS.
(i) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more banks or
other entities ("PURCHASERS") all or a portion of its rights and
obligations under this Agreement (including, without limitation, its
Commitment and the Loans owing to it hereunder) in accordance with the
provisions of this SECTION 11.08(C). Each assignment shall be of a
constant, and not a varying, ratable percentage of all of the assigning
Lender's rights and obligations under this Agreement. Such assignment shall
be evidenced by an Assignment Agreement in form and substance reasonably
satisfactory to the Agent and shall not be permitted hereunder unless such
assignment is either for all of such Lender's rights and obligations under
the Loan Documents or, for Loans and Commitments in an aggregate principal
amount equal to the lesser of $5,000,000 (which minimum amount may be
waived by the Requisite Lenders after the occurrence of a Default) and such
Lender's Commitment Amount.
(ii) Upon (i) delivery to the Agent of a notice of assignment (a
"NOTICE OF ASSIGNMENT"), together with any consent required hereunder, and
(ii) payment of a $3,500 processing fee to the Agent for processing such
assignment if such assignment is to a Person which is not an affiliate of
the assigning Lender, such assignment shall become effective on the
effective date specified in such Notice of Assignment. The assigning Lender
shall be obligated to reimburse the Agent for all other costs and expenses
associated with the preparation and execution of such assignment (including
reasonable attorneys' fees arising out of such preparation and execution of
such assignment). The Notice of Assignment shall contain a representation
by the Purchaser to the effect that none of the consideration used to make
the purchase of the Commitment and Loans under the applicable assignment
agreement are "plan assets" as defined under ERISA and that the rights and
interests of the Purchaser in and under the Loan Documents will not be
91
"plan assets" under ERISA. On and after the effective date of such
assignment, such Purchaser, if not already a Lender, shall for all purposes
be a Lender party to this Agreement and any other Loan Documents executed
by the Lenders and shall have all the rights and obligations of a Lender
under the Loan Documents, to the same extent as if it were an original
party hereto, and no further consent or action by the Borrowers, the
Lenders or the Agent shall be required to release the transferor Lender
with respect to the percentage of the aggregate Commitment and Loans
assigned to such Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this SECTION 11.08(C)(II), the transferor Lender, the
Agent and the Borrowers shall make appropriate arrangements so that
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case
in principal amounts reflecting their Commitment and their Loans, as
adjusted pursuant to such assignment.
(iii) The Agent shall maintain at its address referred to in SECTION
11.01 a copy of each assignment delivered to and accepted by it pursuant to
this SECTION 11.08 and a register (the "REGISTER") for the recordation of
the names and addresses of the Lenders and the Commitment of and principal
amount of the Loans owing to, each Lender from time to time and whether
such Lender is an original Lender or the assignee of another Lender
pursuant to an assignment under this SECTION 11.08. The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrowers, the Agent and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection
by the Borrowers or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
SECTION 11.09. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement or any other Loan Document shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby.
SECTION 11.10. COVER PAGE, TABLE OF CONTENTS AND SECTION HEADINGS. The
cover page, Table of Contents and section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of or be taken into consideration in interpreting this
Agreement.
SECTION 11.11. COUNTERPARTS. This Agreement may be signed in counterparts
with the same effect as if the signatures thereof and hereto were upon the same
instrument.
SECTION 11.12. APPLICATION OF PAYMENTS. Notwithstanding any contrary
provision contained in this Agreement or in any of the other Loan Documents,
upon the occurrence and during the continuance of any Event of Default, each
Borrower irrevocably waives the right to direct the application of any and all
payments at any time or times hereafter received by the Agent or any Lender from
92
such Borrower or with respect to any of the Collateral, and such Borrower does
hereby irrevocably agree that the Agent or any Lender shall have the continuing
exclusive right to apply and reapply any and all payments received at any time
or times hereafter, whether with respect to the Collateral or otherwise, against
the Obligations in such manner as the Agent or any Lender may deem advisable,
notwithstanding any entry by the Agent or any Lender upon any of its books and
records, subject, however, to the provisions of SECTION 2.08(C).
SECTION 11.13. MARSHALLING; PAYMENTS SET ASIDE. Neither the Agent nor the
Agent shall be under any obligation to xxxxxxxx any assets in favor of any
Borrowers or the other party or against or in payment of any or all of the
Obligations. To the extent that any Borrower makes a payment or payments to any
Agent or any Lender, or the Agent, the Collateral Agent any Lender enforces its
security interests or exercises its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
SECTION 11.14. SERVICE OF PROCESS. EACH BORROWER WAIVES PERSONAL SERVICE OF
ANY PROCESS UPON IT AND, CONSENTS THAT ALL SERVICE OF PROCESS SHALL BE MADE BY
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO EACH BORROWER AT THE
ADDRESS INDICATED IN SECTION 11.01 AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) BUSINESS DAYS AFTER SAME SHALL HAVE BEEN POSTED AS AFORESAID.
SECTION 11.15. WAIVER OF JURY TRIAL, ETC. EACH OF THE BORROWERS, THE AGENT,
THE COLLATERAL AGENT AND THE LENDERS WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE
IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
BETWEEN THE AGENT, THE COLLATERAL AGENT OR ANY LENDER AND ANY BORROWER ARISING
OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
THEREWITH OR THE TRANSACTIONS RELATED THERETO. EACH OF THE BORROWERS, THE AGENT,
THE COLLATERAL AGENT AND THE LENDERS HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT ANY OF THEM MAY FILE AS AN ORIGINAL COUNTERPART OR A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
93
SECTION 11.16. CONFIDENTIALITY. No Borrower shall at any time before or
after payment in full and satisfaction of all of the Obligations, reveal,
divulge or make known, or knowingly permit to be so revealed, divulged or made
known, to any Person (including Persons within its own organization who do not
have a definite need to know for the purpose of performance of this Agreement),
the terms or conditions of the Fee Letter; PROVIDED that the foregoing shall not
apply to information required to be disclosed by order of a court of competent
jurisdiction or in connection with any governmental investigation (in each case
to the extent disclosure is required, but no further) so long as such Borrower
notifies the Agent in writing of any circumstances of which such Borrower is
aware that may lead to such a requirement or order, so as to allow the Agent to
take steps to contest such order or investigation; PROVIDED, FURTHER, that the
foregoing shall not apply to information which is required to be disclosed by
such Borrower or information which in the reasonable determination of such
Borrower is desirable for it to disclose, pursuant to federal or state
securities laws, pursuant to the rules or regulations of the FCC, any PUC or
other applicable Governmental Authority, or to Persons who are consultants,
advisors (including but not limited to attorneys and auditors), officers,
directors or employees of such Borrower, provided that each such Person is
required by such Borrower to keep such information confidential.
SECTION 11.17. ENTIRE AGREEMENT, ETC. This Agreement (including all
schedules and exhibits referred to herein), the Notes, the Fee Letters and all
other Loan Documents constitute the entire contract between the parties hereto
with respect to the subject matter hereof and thereof and shall supersede and
take the place of any other instrument purporting to be an agreement of the
parties hereto relating to such subject matter.
SECTION 11.18. NO STRICT CONSTRUCTION. The parties hereto have
participated, jointly in the negotiation and drafting of this Agreement. In the
event of any ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of authorship of any provisions of this Agreement. IN WITNESS WHEREOF,
94
the parties hereto have caused this Agreement to be duly executed by their duly
authorized officers as of the day and year first above written.
KMC TELECOM III, INC., as Borrower
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------------
Name:
Title:
KMC TELECOM LEASING III LLC, as Borrower
By: KMC Telecom III, Inc., as Sole Member
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------------
Name:
Title:
LUCENT TECHNOLOGIES INC., as Agent
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:__________________________________________
Name:
Title:
95
ANNEX A
COMMITMENT AMOUNTS
LOANS
Lender Commitment Amount
Lucent Technologies Inc. $600,000,000
TOTAL COMMITMENTS $600,000,000
ANNEX B
FINANCIAL COVENANT INFORMATION (IN THOUSANDS)
FISCAL
QUARTER ENDED ITEM 1 ITEM 2 ITEM 3 ITEM 4 ITEM 5
------------- ------ ------ ------ ------ ------
03/31/99 - ( 7,569) 50,000 N/A
06/30/99 - (15,136) 82,358 N/A
09/30/99 - (21,386) 185,677 N/A
12/31/99 - (25,541) 261,795 N/A
03/31/06 1,432 (32,100) 308,626 N/A
06/30/00 3,544 (35,968) 330,861 N/A
09/30/00 6,157 (34,535) 340,094 24,904
12/31/00 9,910 (32,520) 349,103 39,079
03/31/01 14,398 (32,458) 354,383 56,130
06/30/01 19,502 (29,651) 363,120 75,667
09/30/01 24,803 (22,120) 369,979 95,809
12/31/01 30,860 (15,784) 376,514 118,887
03/31/02 37,328 ( 7,243) 381,737 143,599
06/30/02 44,176 3,783 399,183 169,991
ANNEX C
AMORTIZATION SCHEDULE
PAYMENT DATE PERCENTAGE REDUCTION
May 1, 2002 2.5%
August 1, 2002 2.5%
November 1, 2002 2.5%
February 1, 2003 2.5%
May 1, 2003 5.0%
August 1, 2003 5.0%
November 1, 2003 5.0%
February 1, 2004 5.0%
May 1, 2004 5.0%
August 1, 2004 5.0%
November 1, 2004 5.0%
February 1, 2005 5.0%
May 1, 2005 5.0%
August 1, 2005 5.0%
November 1, 2005 5.0%
February 1, 2006 5.0%
May 1, 2006 7.5%
August 1, 2006 7.5%
November 1, 2006 7.5%
Termination Date 7.5%
--------
1 Under review.
