EXHIBIT 10.3
EXECUTION COPY
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "AGREEMENT") is dated as of October 5, 2004,
and entered into by and among CHOICE ONE COMMUNICATIONS INC., a Delaware
corporation ("COC"), CHOICE ONE COMMUNICATIONS INTERNATIONAL INC., a Delaware
corporation ("COCIN") and US XCHANGE INC., a Delaware corporation ("USEX"), each
as a debtor-in-possession (COC, COCIN, and USEX, together with any Subsidiary
thereof added to this Agreement by means of a supplement in the form of Exhibit
B hereto, are sometimes collectively referred to herein as the "Borrowers" or
"Pledgors" and individually as a "Borrower" or "Pledgor"); and GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation having an office at 000 Xxxxxxx 0,
Xxxxxxx, XX 00000-0000, as Agent (the "Agent") for the Lenders and Swap Issuer
(collectively, the "Benefitted Parties") under the Credit Agreement (as defined
below).
RECITALS:
A. Pledgors are the legal and beneficial owners of (i) the issued and
outstanding Capital Stock (as defined below) of each issuer (individually, a
"Subsidiary" and collectively, the "Subsidiaries") described in Part I of
Exhibit A attached hereto and (ii) the indebtedness (the "Pledged Debt")
described in Part II of Exhibit A and issued by the obligors named therein.
B. The Pledgors have entered into a certain Senior Secured, Super-Priority
Debtor-in-Possession Credit Agreement dated as of October 5, 2004 (as the same
may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") with Agent, the Lenders and Swap Issuer, pursuant to which
Lenders have agreed to make loans and other financial accommodations available
to Borrowers.
C. Pledgors and Swap Issuer are parties to the Hedging Agreement pursuant
to which Swap Issuer has agreed to extend certain financial accommodations
available to Pledgors;
D. The Pledgors have entered into a certain Security Agreement dated as of
October 5], 2004 (as the same may be amended; supplemented or otherwise modified
from time to time, the "Security Agreement") with Agent, pursuant to which
Pledgors shall grant a security interest to Agent, on behalf of the Benefitted
Parties, to secure the payment and performance of the Obligations.
E. In order to further secure the payment and performance of the
Liabilities (as defined below), the Pledgors have agreed to pledge to Agent, as
pledgee (the "Pledgee"), on behalf of the Benefitted Parties, all of the Capital
Stock of each Subsidiary now or hereafter owned by the Pledgors and all of the
Pledged Debt of each Subsidiary now or hereafter owned by the Pledgors.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to extend credit and make other financial accommodations to the
Borrowers under the Credit Agreement and to induce Swap Issuer to make the
financial accommodations to Debtors under the Hedging Agreement and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgors hereby agree with Pledgee, as Agent, on behalf of the
Benefitted Parties, as follows:
1. Defined Terms. Unless otherwise defined herein, all capitalized terms
used herein shall have the meanings given them in the Credit Agreement. The
following term, as used herein, has the meaning set forth below:
"Capital Stock" shall mean any and all shares, interests, participations
or other equivalents (however designated) in a company, entity or Person of any
kind, including, without limitation, any capital stock of a corporation and any
and all ownership interests in a Person (other than a corporation), including,
without limitation, partnership interests and membership interests.
2. Pledge. Each Pledgor hereby pledges, assigns, hypothecates, transfers,
delivers and grants to Pledgee, as Agent, on behalf of the Benefitted Parties, a
first lien on and first priority security interest in (a) all of the Capital
Stock of each Subsidiary now or at any time hereafter owned by such Pledgor
including, without limitation, those set forth on Part I of Exhibit A, together
with all of the certificates evidencing such shares of Capital Stock, and all
options, warrants and other rights to purchase the shares of Capital Stock of
such Subsidiary held by such Pledgor together with the Capital Stock of such
Subsidiary underlying such options, warrants and other rights (collectively, the
"Pledged Shares"), (b) the Pledged Debt owned by such Pledgor together with all
of the instruments evidencing such Pledged Debt, all security entitlements with
respect to such Pledged Debt and all interest, cash, instruments and other
property or other proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such Pledged Debt,
(c) any other property of such Pledgor described in Section 4 below now or
hereafter delivered to, or in the possession or custody of, Pledgee, as Agent,
on behalf of the Benefitted Parties, and (d) any and all proceeds of any of the
foregoing, as collateral security for (i) the prompt and complete payment when
due (whether at the stated maturity, by acceleration or otherwise) of the
Secured Obligations (as such term is defined in the Security Agreement) and (ii)
the due and punctual payment and performance by such Pledgor of its obligations
and liabilities under, arising out of or in connection with this Agreement (all
of the foregoing being hereinafter referred to collectively as the
"Liabilities"). The property described pursuant to each of subsections (a), (b),
(c), and (d) of this Section 2 shall hereinafter be referred to collectively as
the "Pledged Collateral". All certificates or instruments representing or
evidencing the Pledged Shares and the Pledged Debt shall be delivered to and
held by or on behalf of Pledgee, as Agent, on behalf of the Benefitted Parties
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed undated instruments of transfer or assignments
in blank, all in form and substance satisfactory to Pledgee. Pledgee shall
maintain possession and custody of the certificates representing the Pledged
Shares in accordance with Section 5 below and shall return the Pledged Shares in
accordance with such Section. The Pledgors covenant and agree that they
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shall, at the request of Pledgee, ensure that the Pledged Shares are registered
in the name of Pledgee, or at Pledgee's option, its nominee.
3. Representations and Warranties of Pledgors. Each Pledgor represents and
warrants to Pledgee, as Agent, on behalf of the Benefitted Parties that:
(a) Part I of Exhibit A, and the Pledge Amendments (as defined
below), if any, set forth (i) the authorized Capital Stock of each
Subsidiary, (ii) the number of shares of Capital Stock of each Subsidiary
that are issued and outstanding as of the date hereof, (iii) the number of
shares of Capital Stock of each Subsidiary that are held in its treasury
and (iv) the percentage of the issued and outstanding shares of Capital
Stock of each Subsidiary held by such Pledgor. The Pledgors are the record
and beneficial owners of, and have good and marketable title to, the
Pledged Shares, and such shares are and will remain free and clear of all
pledges, liens, hypothecations, charges, security interests and other
encumbrances and restrictions whatsoever, except the Permitted
Encumbrances and the liens and security interests created by this
Agreement;
(b) Part II of Exhibit A, and the Pledge Amendments, if any,
correctly set forth (i) all Pledged Debt of each Pledgor, (ii) the obligor
and payee of each item of Pledged Debt, and (iii) the principal amount of
each item of Pledged Debt. The Pledgors are the record and beneficial
owners of, and have good and marketable title to, the Pledged Debt, and
such Pledged Debt is and will remain free and clear of all pledges, liens,
hypothecations, charges, security interests and other encumbrances and
restrictions whatsoever, except the Permitted Encumbrances and the liens
and security interests created by this Agreement;
(c) there are no outstanding options, warrants or other agreements
with respect to the Pledged Shares;
(d) this Agreement is the legal, valid and binding obligation of
each Pledgor, enforceable against each Pledgor in accordance with its
terms, except as limited by applicable bankruptcy, moratorium,
reorganization and other similar laws affecting the enforcement of
creditors' rights generally;
(e) the Pledged Shares have been duly and validly authorized and
issued, are fully paid and non-assessable, have not been transferred in
violation of any applicable securities laws, and represent all of the
issued and outstanding shares of Capital Stock or equity interest of each
Subsidiary;
(f) no consent, approval or authorization of or designation or
filing with any governmental or regulatory authority on the part of any
Pledgor (other than the Financing Orders) is required in connection with
the pledge and security interest granted under this Agreement;
(g) the execution, delivery and performance of this Agreement will
not violate any provision of any applicable law or regulation or of any
order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, or of the
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charter, constituting documents or by-laws of any Pledgor or any
Subsidiary or of any securities issued by any Pledgor or any Subsidiary or
of any mortgage, indenture, lease, contract, or other agreement,
instrument or undertaking to which any Pledgor or any Subsidiary is a
party or which purports to be binding upon any Pledgor or any Subsidiary
or upon any of their respective assets, and will not result in the
creation or imposition of any lien, hypothecation, charge or encumbrance
on or security interest in any of the assets of any Pledgor or any
Subsidiary except as contemplated by this Agreement; and
(h) provided that Pledgee remains in continuous possession of the
Pledged Shares, the pledge, assignment and delivery of the Pledged Shares
pursuant to this Agreement creates a valid first lien on and perfected
first priority security interest in such Pledged Shares and the proceeds
thereof in favor of Pledgee, as Agent, on behalf of the Benefitted
Parties, subject to no prior pledge, lien, mortgage, hypothecation,
security interest, charge, option or encumbrance, other then the Permitted
Encumbrances, or to any agreement purporting to grant to any third party a
security interest in the property or assets of any Pledgor which would
include the Pledged Shares. Each Pledgor covenants and agrees that it will
defend, in favor of Pledgee as Agent, on behalf of the Benefitted Parties,
Pledgee's right, title and security interest in and to the Pledged Shares
and the proceeds thereof against the claims and demands of all other
Persons.
4. Stock Dividends, Distributions, Etc.
(a) If, while this Agreement is in effect, any Pledgor shall become
entitled to receive or shall receive (i) any share certificate (including,
without limitation, any certificate representing a stock dividend or a
stock distribution in connection with any reclassification, increase or
reduction of capital, or issued in connection with any reorganization), or
any options or rights, whether as an addition to, in substitution for, or
in exchange for any of the Pledged Shares, or (ii) any share certificate
in connection with the purchase or acquisition by Pledgor of a new
company, such Pledgor agrees, in each case, to accept the same as
Pledgee's agent and to hold the same in trust for Pledgee, and to deliver
the same forthwith to Pledgee in the exact form received, with the
endorsement of such Pledgor when necessary and/or with appropriate undated
powers duly executed in blank, to be held by Pledgee subject to the terms
hereof, as additional collateral security for the Liabilities. Each
Pledgor shall promptly deliver to Pledgee (i) a pledge amendment, duly
executed by Pledgor, in substantially the form of Exhibit B hereto (a
"Pledge Amendment") with respect to such additional share certificates,
and (ii) any financing statements, financing change statements or
amendments to financing statements as requested by Pledgor. Each Pledgor
hereby authorizes Pledgee to attach each Pledge Amendment to this
Agreement.
(b) In case any distribution of Capital Stock shall be made on or in
respect of the Pledged Shares or any property shall be distributed upon or
with respect to the Pledged Shares pursuant to the recapitalization or
reclassification of the Capital Stock of the issuer thereof or pursuant to
the reorganization thereof, the property so distributed shall be promptly
delivered to Pledgee to be held by it as additional collateral security
for the Liabilities. All sums of money and property so paid or distributed
in respect of the
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Pledged Shares which are received by a Pledgor shall, until paid or
delivered to Pledgee, be held by such Pledgor in trust for the benefit of
Pledgee as additional collateral security for the Liabilities. In case of
any distribution of any (i) dividends and other distributions paid or
payable in cash in respect of any Pledged Shares in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus, and (ii) cash
paid, payable or otherwise distributed in respect of principal or in
redemption of or in exchange for any Pledged Shares so long as Obligations
are owed to the Benefitted Parties, such sums received shall be applied to
the Revolving Loan under the Credit Agreement.
5. Voting Rights; Dividends; Irrevocable Proxy.
(a) So long as no Event of Default has occurred and is continuing,
each Pledgor shall be entitled (subject to the other provisions hereof,
including, without limitation, Section 8 below) to exercise its voting and
other consensual rights with respect to the Pledged Shares and otherwise
exercise the incidents of ownership thereof in any manner not inconsistent
with this Agreement, the Credit Agreement, or any other Loan Document.
Each Pledgor hereby grants, to the extent permitted by applicable law, to
Pledgee or its nominee, as Agent, on behalf of the Benefitted Parties, an
IRREVOCABLE PROXY to exercise, to the extent permitted by applicable law,
all voting and corporate rights relating to the Pledged Shares in any
instance, including, without limitation, to give or withhold written
consent of shareholders, call special meetings of shareholders and vote at
such meetings and to approve any merger or amalgamation involving a
Subsidiary as a constituent corporation, which proxy shall be effective,
at the discretion of Pledgee, upon the occurrence and during the
continuance of an Event of Default upon written notice to the Pledgor
(provided, however, that failure to provide such notice shall not affect
the validity of the proxy) and which proxy shall terminate only upon
payment in full of the Liabilities. After the occurrence and during the
continuance of an Event of Default and upon request of Pledgee, each
Pledgor agrees to deliver to Pledgee, to the extent permitted by
applicable law, such further evidence of such irrevocable proxy or such
further irrevocable proxies to vote the Pledged Shares as Pledgee may
request. The proxy set forth in this Section 5(a) is irrevocable and is
coupled with an interest.
(b) In the event that any Pledgor, as record and beneficial owner of
the Pledged Shares, shall have received or shall have become entitled to
receive, any cash dividends or other distributions in the ordinary course
after the occurrence and during the continuance of an Event of Default,
such Pledgor shall deliver to Pledgee and Pledgee shall be entitled to
receive and retain, as Agent, on behalf of the Benefitted Parties, all
such cash or other distribution which shall be applied pursuant to the
terms of the Credit Agreement.
(c) Subject to any sale or other disposition by Pledgee of the
Pledged Shares or other property pursuant to this Agreement, upon full
payment, satisfaction and termination of all of the Liabilities and the
termination pursuant to Section 15 hereof of the liens and security
interests hereby granted, the Pledged Shares and any other property
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then held as part of the Pledged Shares in accordance with the provisions
of this Agreement shall be returned to such Pledgor or to such other
Person as shall be legally entitled thereto.
6. Rights of Pledgee. Neither Pledgee nor any Benefitted Party shall be
liable for failure to collect or realize upon the Liabilities or any collateral
security or guaranty therefor, or any part thereof, or for any delay in so
doing, nor shall Pledgee or any Benefitted Party be under any obligation to take
any action whatsoever with regard thereto. Any or all of the Pledged Shares held
by Pledgee hereunder may, to the extent permitted by applicable law, if an Event
of Default has occurred and is continuing, without notice, be registered in the
name of Pledgee or its nominee, and Pledgee or its nominee may thereafter
without notice exercise, to the extent permitted by applicable law, all voting
and corporate rights at any meeting with respect to a Subsidiary and exercise,
to the extent permitted by applicable law, any and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining to
any of the Pledged Shares as if it were the absolute owner thereof, including,
without limitation, the right to vote in favor of, and to exchange at its
discretion any and all of the Pledged Shares upon, the merger, amalgamation,
consolidation, reorganization, recapitalization or other readjustment with
respect to a Subsidiary or upon the exercise by such Subsidiary or Pledgee of
any right, privilege or option pertaining to any of the Pledged Shares, and in
connection therewith, to deposit and deliver any and all of the Pledged Shares
with any committee, depository, transfer agent, registrar or other designated
agency upon such terms and conditions as Pledgee may determine, all without
liability except to account for property actually received by Pledgee (and, as
more particularly described in Section 7 below, to account for the surplus, if
any, to any Pledgor), but Pledgee shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing. Pledgee is hereby released from all
responsibility for any depreciation in or loss of value of the Pledged Shares.
7. Remedies.
(a) Subject to Section 7(b) below, upon the occurrence and during
the continuance of an Event of Default, and subject to the five (5) days'
notice provision set forth in Section 8.2 of the Credit Agreement, Pledgee
may exercise in respect of the Pledged Collateral, to the extent permitted
by applicable law, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party under the Uniform Commercial Code ("UCC") in effect in the
State of New York from time to time, whether or not the UCC applies to the
affected Pledged Collateral. Subject to Section 7(b) below, Pledgee also,
without demand of performance or other demand, advertisement or notice of
any kind (except the notice specified below of time and place of public or
private sale) to or upon any Pledgor or any other Person (all and each of
which demands, advertisements and/or notices are hereby expressly waived),
may, to the extent permitted under applicable law, forthwith collect,
receive, appropriate and realize upon the Pledged Shares, or any part
thereof, and/or may forthwith sell, assign, give an option or options to
purchase, contract to sell or otherwise dispose of (including the
disposition by merger) and deliver said Pledged Shares, or any part
thereof, in one or more portions at one or more public or private sales or
dispositions,
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at any exchange or broker's board or at any of Pledgee's offices or
elsewhere upon such terms and conditions as Pledgee may deem advisable and
at such prices as it may deem best, for any combination of cash and/or
securities or other property or on credit or for future delivery without
assumption of any credit risk, with the right to Pledgee upon any such
sale, public or private, to purchase the whole or any part of said Pledged
Shares so sold, free of any right or equity of redemption in any Pledgor,
which right or equity is hereby expressly waived or released. Subject to
Section 7(b) below, Pledgee shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization, sale or
disposition, pursuant to the terms of the Credit Agreement. Such Pledgor
shall remain liable for any deficiency remaining unpaid after such
application. Only after so paying over such net proceeds and after the
payment by Pledgee of any other amount required by any provision of law,
including, without limitation, Section 9-615 of the UCC, need Pledgee
account for the surplus, if any, to any Pledgor. Subject to Section 7(b)
below, each Pledgor agrees that Pledgee need not give more than ten days'
notice of the time and place of any public sale or of the time after which
a private sale or other intended disposition is to take place and that
such notice is reasonable notification of such matters. Subject to Section
7(b) below, no notification need be given to a Pledgor if it has signed
after default a statement renouncing or modifying any right to
notification of sale or other intended disposition.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Agent shall be permitted to exercise any remedy, whether
provided for herein, otherwise available to it, or provided to secured
parties under the UCC (whether or not the UCC applies to the affected
Pledged Collateral), in the nature of a sale, liquidation or other
disposition (including the disposition by merger) of, or foreclosure on,
any interest of any Pledgor in the Pledged Collateral only upon five
business days' prior written notice to such Pledgor, counsel approved by
the Bankruptcy Court for the Committee, if any, the United States Trustee,
counsel to the Prepetition Agent and counsel to the Bridge Lender Steering
Committee.
8. No Disposition, Etc. Each Pledgor agrees that it will not sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with respect
to, the Pledged Shares, nor will any Pledgor create, incur or permit to exist
any pledge, lien, mortgage, hypothecation, security interest, charge, option or
any other encumbrance with respect to any of the Pledged Shares, or any interest
therein, or any proceeds thereof, except for Permitted Encumbrances and the lien
and security interest provided for by this Agreement. Each Pledgor agrees that
it will not vote to enable, and will not otherwise permit, any Subsidiary to (a)
issue any stock or other securities of any nature in addition to or in exchange
or substitution for the Pledged Shares other than issuances of shares and
options to purchase shares as described in Schedule A, or (b) dissolve,
liquidate, retire any of its Capital Stock, reduce its capital or merge,
amalgamate or consolidate with any other Person except as allowed pursuant to
Schedule A.
9. Sale of Pledged Shares.
(a) The Pledgors recognize that Pledgee may be unable to effect a
public sale or disposition (including, without limitation, any disposition
in connection with a merger
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or amalgamation of any Subsidiary) of any or all the Pledged Shares by
reason of certain prohibitions contained in the Securities Act of 1933
(the "Act"), and applicable state or federal securities laws, but may be
compelled to resort to one or more private sales or dispositions thereof
to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. The
Pledgors acknowledge and agree that any such private sale or disposition
may result in prices and other terms (including the terms of any
securities or other property received in connection therewith) less
favorable to the seller than if such sale or disposition were a public
sale or disposition and, notwithstanding such circumstances, agree that
any such private sale or disposition shall be deemed to be reasonable and
affected in a commercially reasonable manner. Pledgee shall be under no
obligation to delay a sale or disposition of any of the Pledged Shares in
order to permit any Pledgor or any applicable Subsidiary to register such
securities for public sale under the Act, or under applicable state,
provincial or federal or other securities laws, even if such Pledgor or
the applicable Subsidiary would agree to do so. Notwithstanding the
foregoing, upon request of the Agent, each Pledgor agrees that, at its own
expense, following the occurrence and continuation of an Event of Default,
it will register such securities under the Act or take such other actions
under any applicable federal or state securities laws as may be necessary
for a public sale of the Pledged Shares, including furnishing such legal
opinions as Agent may reasonably request.
(b) Each Pledgor further agrees to do or cause to be done all such
other acts and things as may be necessary to make such sales or
dispositions of the Pledged Shares valid and binding and in compliance
with any and all applicable laws, regulations, orders, writs, injunctions,
decrees or awards of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such
sales or dispositions, all at such Pledgor's expense. Each Pledgor further
agrees that a breach of any of the covenants contained in Sections 4,
5(a), 5(b), 8, 9 and 10 will cause irreparable injury to Pledgee and the
Benefitted Parties and that Pledgee and the Benefitted Parties have no
adequate remedy at law in respect of such breach and, as a consequence,
agrees, without limiting the right of Pledgee to seek and obtain specific
performance of other obligations of any Pledgor contained in this
Agreement, that each and every covenant referenced above shall be
specifically enforceable against each Pledgor, and each Pledgor hereby
waives and agrees not to assert any defenses against an action for
specific performance of such covenants.
(c) Each Pledgor further agrees to indemnify and hold harmless
Pledgee and each Benefitted Party, their respective successors and
assigns, their respective officers, directors, employees and agents, and
any Person in control of any thereof, from and against any loss,
liability, claim, damage and expense, including, without limitation,
reasonable legal fees and expenses (in this paragraph collectively called
the "Indemnified Liabilities"), under federal, provincial and state
securities laws or otherwise insofar as such Indemnified Liability (i)
arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact contained in any registration statement,
prospectus or offering memorandum or in any preliminary prospectus or
preliminary offering memorandum or in any amendment or supplement to any
thereof or in any other
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writing prepared in connection with the offer, sale or resale of all or
any portion of the Pledged Shares or other Collateral unless such untrue
statement of material fact was provided by Pledgee or such Benefitted
Party or another party not an Affiliate of any Pledgor specifically for
inclusion therein, or (ii) arises out of or is based upon any omission or
alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, such
indemnification to remain operative regardless of any investigation made
by or on behalf of Pledgee or any successor thereof, or any Person in
control of any thereof. In connection with a public sale or other
distribution, each Pledgor will provide customary indemnification to any
underwriters, their successors and assigns, officers and directors and
each Person who controls any such underwriter (within the meaning of the
Act). If and to the extent that the foregoing undertakings in this
paragraph may be unenforceable for any reason, each Pledgor agrees to make
the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. The
obligations of each Pledgor under this paragraph (c) shall survive any
termination of this Agreement.
(d) Each Pledgor further agrees to waive any and all rights of
subrogation it may have against each Subsidiary upon the sale or
disposition of all or any portion of the Pledged Shares by Pledgee
pursuant to the terms of this Agreement until all of the Liabilities have
been indefeasibly paid in full.
10. Purchaser of Pledged Shares. Upon any sale of any of the Pledged
Shares hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Pledged Shares so sold, and such purchaser or purchasers shall
not be obligated to see to the application of any part of the purchase money
paid over to Pledgee or such officer or be answerable in any way for the
misapplication or non-application thereof.
11. Further Assurances. Each Pledgor agrees that at any time and from time
to time upon the written request of Pledgee, each Pledgor will execute and
deliver all stock powers, financing statements, financing change statements and
such further documents and do such further acts and things as Pledgee may
reasonably request consistent with the provisions hereof in order to effect the
purposes of this Agreement.
12. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. No Waiver; Cumulative Remedies. Pledgee shall not by any act, delay,
omission or otherwise be deemed to have waived any of its remedies hereunder,
and no waiver by Pledgee shall be valid unless in writing and signed by Pledgee,
and then only to the extent therein set forth. A waiver by Pledgee of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Pledgee would otherwise have on any further occasion. No
course of dealing between any Pledgor and Pledgee or any Benefitted Party and no
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failure to exercise, nor any delay in exercising on the part of Pledgee, any
right, power or privilege hereunder or under the Loan Documents shall impair
such right or remedy or operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
14. Successors; Applicable Law. This Agreement and all obligations of each
Pledgor hereunder shall be binding upon the successors and assigns of each
Pledgor, and shall, together with the rights and remedies of Pledgee and the
Benefitted Parties hereunder, inure to the benefit of Pledgee and the Benefitted
Parties and their respective successors and permitted assigns, except that the
Pledgors shall not have any right to assign their rights or obligations under
this Agreement or any interest herein without the prior written consent of
Pledgee. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND
5-1402 OF THE GENERAL OBLIGATIONS LAW BUT OTHERWISE WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES) AND, TO THE EXTENT APPLICABLE, THE BANKRUPTCY CODE.
15. Termination. This Agreement and the liens and security interests
granted hereunder shall terminate and Pledgee shall return the Pledged Shares to
the Pledgors when both of the following have occurred: (a) indefeasible payment
in full of the Liabilities, and (b) termination of all Commitments under the
Credit Agreement.
16. Possession of Collateral. Beyond the exercise of reasonable care to
assure the safe custody of the Pledged Shares in the physical possession of
Pledgee pursuant hereto, Pledgee, any Benefitted Party, or any nominee of any of
them, shall have no duty or liability to collect any sums due in respect thereof
or to protect, preserve or exercise any rights pertaining thereto (including any
duty to ascertain or take action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to the Pledged Shares and any duty
to take any necessary steps to preserve rights against any parties with respect
to the Pledged Shares), and shall be relieved of all responsibility for the
Pledged Shares upon surrendering them to the Pledgors. Each Pledgor assumes the
responsibility for being and keeping itself informed of the financial condition
of the Subsidiaries and of all other circumstances bearing upon the risk of
non-payment of the Liabilities, and Pledgee shall have no duty to advise any
Pledgor of information known to Pledgee regarding such condition or any such
circumstance. Pledgee shall have no duty to inquire into the powers of any
Subsidiary or its respective officers, directors or agents thereof acting or
purporting to act on their behalf.
17. Survival of Representations. All representations and warranties of
Pledgor contained in this Agreement shall survive the execution and delivery of
this Agreement.
18. Taxes and Expenses. The Pledgors will upon demand pay to Pledgee, as
Agent, on behalf of the Benefitted Parties, (a) any taxes (excluding income
taxes, franchise taxes or other taxes levied on gross earnings, profits or the
like of Pledgee or any of the Benefitted Parties) payable or ruled payable by
any federal, provincial or state authority in respect of this
10
Agreement, together with interest and penalties, if any, and (b) all reasonable
expenses, including the reasonable fees and expenses of counsel for Pledgee and
each Benefitted Party and of any experts and agents that Pledgee or the
Benefitted Parties may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Pledged Shares, (iii) the exercise or
enforcement of any of the rights of Pledgee or the Benefitted Parties hereunder,
or (iv) the failure of any Pledgor to perform or observe any of the provisions
hereof.
19. Pledgee Appointed Attorney-In-Fact. Each Pledgor hereby irrevocably
appoints Pledgee as each Pledgor's attorney-in-fact, with full authority in the
place and stead of Pledgor and in the name of each Pledgor or otherwise, from
time to time in Pledgee's discretion, to take any action and to execute any
instrument that Pledgee deems reasonably necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to Pledgor representing any
dividend, interest payment or other distribution in respect of the Pledged
Shares or any part thereof and to give full discharge for the same, when and to
the extent permitted by this Agreement.
20. Regulatory Approval. If an Event of Default shall have occurred and is
continuing, upon the request of the Agent, the Pledgors will, at their expense,
promptly execute and deliver, or cause the execution and delivery of, all
applications, certificates, instruments, registration statements and all other
documents and papers the Agent may reasonably request or may be required by law
in connection with the obtaining of any consent, approval, registration,
qualification or authorization of the FCC or any applicable PUC (collectively,
the "Regulatory Authorities") or of any other Person necessary or reasonably
appropriate for the effective exercise of any rights under this Pledge
Agreement. Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing, the Pledgors shall take any
action which the Agent may reasonably request in order to transfer and assign to
the Agent or to such one or more third parties as the Agent may designate, or to
a combination of the foregoing, each Communications License. Upon the occurrence
and during the continuation of an Event of Default, the Pledgors shall further
use their best efforts to assist in obtaining approval of the Regulatory
Authorities, if required or desirable in the reasonable judgment of the Agent,
for any action or transactions contemplated by this Pledge Agreement including,
without limitation, the preparation, execution and filing with the Regulatory
Authorities of the assignor's or transferor's portion of any application or
applications for consent to the assignment of any Communications License or
transfer of control necessary or reasonably desirable, in the judgment of the
Agent, under the rules and regulations of the Regulatory Authorities for the
approval of the Regulatory Authorities for the approval of the transfer or
assignment of any portion of the Collateral, together with any Communications
License. The Pledgors acknowledge that the assignment or transfer of each
Communications License is integral to the Agent's and the Benefitted Parties'
realization of the value of the Collateral, that there is no adequate remedy at
law for failure by the Pledgors to comply with the provisions of this Section
and that such failure would cause irreparable injury not adequately compensable
in damages, and therefore agree that each and every covenant contained in this
Section may be specifically enforced, and the Pledgors hereby waive and agree
not to assert any defenses against an action for specific performance of such
covenants.
11
21. Notices. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other parties, or whenever any of the parties desires to give or serve upon any
other parties any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be deemed to have been validly served, given or
delivered: (a) upon the earlier of actual receipt and three (3) Business Days
after deposit in the United States Mail, registered or certified mail, return
receipt requested, with proper postage prepaid; (b) upon transmission, when sent
by telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 21); (c) one (1)
Business Day after deposit with a reputable overnight courier with all charges
prepaid or (d) when delivered, if hand-delivered by messenger, all of which
shall be addressed to the party to be notified and sent to the address or
facsimile number indicated below or to such other address (or facsimile number)
as may be substituted by notice given as herein provided. The giving of any
notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to any
Person (other than Borrower Representative or Agent) designated herein to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
Notices shall be delivered to the following addresses:
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
000 Xxxxxxx 0
Xxxxxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxxx, Account Manager
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
with copies to:
General Electric Capital Corporation
000 Xxxxxxx 0
Xxxxxxx, XX 00000
Attention: Xxxxxxx Docu
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
General Electric Capital Corporation
000 Xxxxxxx 0
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
12
and
(B) If to any Debtor, to Borrower Representative, at
Choice One
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
with copies to:
Choice One
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxx XxXxxxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
Weil, Gotshal & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
and
(C) If to the Bridge Lender Steering Committee, at
Choice One Bridge Lender Steering Committee
c/o Xxx Xxxxxxxxx, Esq.
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
22. Changes in Writing. No amendment, modification, termination or waiver
of any provision of this Agreement or consent to any departure by any Pledgor
therefrom shall in any event be effective without the written concurrence of
Pledgee and such Pledgor, and then only to the extent specifically set forth in
such writing.
13
23. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
24. Counterparts. This Agreement may be executed by facsimile transmission
in any number of counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute this Agreement
by signing any such counterpart.
25. Entire Agreement. This Agreement and the other Loan Documents embody
the entire agreement among the parties hereto and supersede all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the subject matter hereof, and may not be contradicted or
varied by evidence of prior, contemporaneous or subsequent oral agreements or
discussions of the parties hereto.
26. CONSENT TO JURISDICTION. EACH PLEDGOR HEREBY CONSENTS AND AGREES THAT
THE BANKRUPTCY COURT SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES AMONG THE PLEDGORS, AGENT AND BENEFITTED PARTIES PERTAINING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT AGENT AND PLEDGORS ACKNOWLEDGE THAT ANY APPEALS FROM THE
BANKRUPTCY COURT MAY HAVE TO BE HEARD BY A COURT OTHER THAN THE BANKRUPTCY
COURT; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.
EACH PLEDGOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PLEDGOR HEREBY WAIVES
ANY OBJECTION THAT SUCH PLEDGOR MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH PLEDGOR AT THE ADDRESS SET FORTH IN SECTION 21 OF THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
SUCH PLEDGOR'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
UNITED STATES MAILS, PROPER POSTAGE PREPAID.
27. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST
14
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, BENEFITTED PARTIES
AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
28. Acknowledgment and Attachment. Pledgors and Agent hereby acknowledge
that (a) value has been given and (b) each Pledgor has rights in the Pledged
Shares. Pledgors and Agent agree that Agent's security interest in the Pledged
Shares shall attach as of the date hereof. The Pledgors hereby instruct the
issuers of the Pledged Collateral to sign Acknowledgments in the form attached
hereto and authorize such issuers to comply with instructions of the Agent
without further consent or instructions from the Pledgors The Pledgors agree
that, in the event that any limited liability company or partnership interests
in the Pledged Collateral are deemed to be "securities" under Section 8-102 of
the UCC, this Agreement shall give to the Agent, for benefit of the Benefitted
Parties, "control" of any partnership or limited liability company interests in
the Pledged Collateral within the meaning of such term in Section 8-106(c).
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers on the date first
above written.
CHOICE ONE COMMUNICATIONS INC.
US XCHANGE INC.
CHOICE ONE COMMUNICATIONS INTERNATIONAL
INC., each as a Pledgor
By: /S/ Xxxx Xxxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Chief Financial Officer
Signature Page to Pledge Agreement
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /S/ Xxxxxxxxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
Signature Page to Pledge Agreement
ACKNOWLEDGMENT
The undersigned hereby (i) acknowledges receipt of a copy of the foregoing
Pledge Agreement, (ii) waives any rights or requirement at any time hereafter to
receive a copy of such Pledge Agreement in connection with the registration of
any Pledged Shares (as defined therein) in the name of Pledgee or its nominee or
the exercise of voting rights by Pledgee and (iii) agrees promptly to note on
its books and records the grant of the security interest in the stock of the
undersigned as provided in such Pledge Agreement. The undersigned consents to
the execution and delivery of the foregoing Pledge Agreement and the security
interests created thereby and absolutely postpones any and all rights to a Lien
on the Pledged Shares to the rights of Pledgee with respect to the Pledged
Shares hereunder. The undersigned hereby agrees to comply with any instruction
received from the Agent with regards to the Pledged Collateral without any
consent or further instructions from the Pledgor or other registered owner. The
undersigned agree that, in the event that any limited liability company or
partnership interests in the Pledged Collateral are deemed to be "securities"
under Section 8-102 of the UCC, this Agreement shall give to the Agent, for
benefit of the Lenders, "control" of any partnership or limited liability
company interests in the Pledged Collateral within the meaning of such term in
Section 8-106(c).
Dated: _____________________
CHOICE ONE COMMUNICATIONS INC.
CHOICE ONE COMMUNICATIONS OF NEW YORK INC.
CHOICE ONE COMMUNICATIONS OF CONNECTICUT INC.
CHOICE ONE COMMUNICATIONS OF MAINE INC.
CHOICE ONE COMMUNICATIONS OF MASSACHUSETTS INC.
CHOICE ONE OF NEW HAMPSHIRE INC.
CHOICE ONE COMMUNICATIONS OF OHIO INC.
CHOICE ONE COMMUNICATIONS OF PENNSYLVANIA INC.
CHOICE ONE COMMUNICATIONS OF RHODE ISLAND INC.
CHOICE ONE COMMUNICATIONS OF VERMONT INC.
CHOICE ONE COMMUNICATIONS INTERNATIONAL INC.
CHOICE ONE ONLINE INC.
CHOICE ONE COMMUNICATIONS OF VIRGINIA INC.
CHOICE ONE COMMUNICATIONS SERVICES INC.
US XCHANGE INC.
US XCHANGE OF INDIANA, L.L.C.
US XCHANGE OF ILLINOIS, L.L.C.
US XCHANGE OF MICHIGAN, L.L.C.
US XCHANGE OF WISCONSIN, L.L.C., each as a Borrower
By: /S/ Xxxx Xxxxxxxxx
------------------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Chief Financial Officer
Signature Page to Pledge Agreement
