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