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EXHIBIT 10.11
LOAN AGREEMENT
LOAN AGREEMENT ("Agreement") made as of August 29, 1997, by and between
HORIZON PERSONAL COMMUNICATIONS, INC., an Ohio corporation ("Borrower"), and
RURAL TELEPHONE FINANCE COOPERATIVE, a South Dakota cooperative association
("Lender").
RECITALS
WHEREAS, Borrower heretofore holds or hereafter may hold licenses to
provide Personal Communications Services ("PCS") in such service areas
including, but not necessarily limited to, the Athens, Chillicothe and
Zanesville, Ohio; and Huntington and Parkersburg, West Virginia Basic Trading
Areas ("BTAs"); and
WHEREAS, Borrower has requested Lender to make the Loan to Borrower
described in Schedule 1 hereto; and
WHEREAS, Lender is willing to make the Loan upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, Borrower and Lender do hereby agree as follows:
1. CONSTRUCTION AND DEFINITION OF TERMS
All accounting terms not specifically defined herein shall have the
meanings assigned to them as determined by generally accepted accounting
principles. In addition to the terms defined elsewhere in this Agreement unless
the context otherwise requires, when used herein, the following terms shall have
the following meanings:
"ADJUSTMENT DATE" shall mean the termination date for a Fixed Rate
period applicable to a Fixed Rate Advance as selected by Borrower in accordance
with the terms and conditions hereunder.
"ADVANCE" shall mean an Advance as defined in Section 2.02.
"BUSINESS DAY" shall mean any day that Lender is open for business.
"CASH MARGINS" for any year shall mean net income plus depreciation,
amortization and any other non-cash charges, less any non-cash credits and
principal on long-term debt payable in such year, as calculated on a
consolidated basis for Borrower and all its Subsidiaries.
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"CERTIFIED" shall mean that the information, statement, schedule,
report or other document required to be "Certified" shall contain a
representation of a duly authorized officer of Borrower that such information,
statement, schedule, report or other document is true and correct and complete.
"CLOSING" shall mean the first date on which funds are advanced to
Borrower hereunder.
"COLLATERAL" shall mean the Mortgaged Property, as such term is defined
in the Mortgage, and all proceeds, cash and non-cash, including insurance
proceeds, of the foregoing, whether in the possession of Borrower or any other
person and certain equity interests described in, and pledged to Lender pursuant
to the Pledge Agreement.
"COMMITMENT" shall have the meaning set forth in Schedule 1 hereto.
"EBITDA" for any year shall mean net income plus income taxes, interest
expense, and depreciation and amortization expense, as calculated on a
consolidated basis for Borrower and all its Subsidiaries.
"EVENT OF DEFAULT" shall mean any of the events described in Section 8
hereof.
"EXCESS CASH FLOW" shall be calculated on a consolidated basis for
Borrower and all its Subsidiaries and shall mean net cash flow from operations
as evidenced by Borrower's most recent audited statement of cash flow less
budgeted capital expenditures less budgeted principal payable on all short and
long-term debt with budgeted figures coming from Borrower's operating and
capital budget for such next fiscal year as submitted to Lender.
"FCC" shall mean the Federal Communications Commission or any successor
agency thereof.
"FIXED RATE" shall mean the standard fixed interest rate per annum
provided for in Section 2.03 of this Agreement plus two hundred and fifty (250)
basis points.
"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.
"LEASES" shall mean any lease of property by which Borrower 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.
"LIEN" shall mean any statutory or common law consensual or
non-consensual mortgage, pledge, security interest encumbrance, lien, right of
set-off, claim or charge of any kind, including, without limitation, any
conditional sale or other title retention transaction, any lease transaction in
the nature thereof and any secured transaction under the Uniform Commercial Code
of any jurisdiction.
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"LOAN" shall mean the loan or loans by the Lender to Borrower, pursuant
to this Agreement and the Note, in an aggregate principal amount not to exceed
the Commitment.
"MAKE-WHOLE PREMIUM" shall mean the excess, if any, of (i) the present
value of the amount of interest that would have accrued during the applicable
Fixed Rate period on that portion of the Loan to be prepaid or converted over
(ii) the present value of the amount of interest Lender would earn if that
portion of the Loan to be prepaid or converted was reinvested for the remainder
of the applicable Fixed Rate period in U.S. Treasury obligations with a maturity
comparable to the remaining term of the applicable Fixed Rate period. For
purposes of calculating the present value in (i) and (ii) above, the discount
rate will be the rate of interest accruing on the U.S. Treasury obligations in
(ii) above.
"MATURITY DATE" shall mean the maturity date defined in the Note.
"MINIMUM NET WORTH TEST" shall be calculated on a consolidated basis
for the Borrower and all its Subsidiaries, and shall mean an equity to total
asset ratio of at least forty (40) percent. Equity shall be determined by
subtracting total liabilities from total assets.
"MORTGAGE" shall mean the mortgage and security agreement described in
Schedule 1.
"NET WORTH" shall be calculated on a consolidated basis for the
Borrower and all its Subsidiaries taken as a whole and arrived at by subtracting
total liabilities from total assets.
"NOTE" shall mean the promissory note designated OH 803-A-01 executed
and delivered by Borrower at or prior to Closing pursuant to Subsection 5.02(a)
hereof, and all renewals, replacements and extensions thereof.
"OBLIGATIONS" shall include the full and punctual performance of all
present and future duties, covenants and responsibilities due to the Lender by
Borrower under this Agreement, the Note, the Other Agreements, all present and
future obligations of Borrower to the Lender for the payment of money under this
Agreement, the Note, the Other Agreements, extending to all principal amounts,
interest, late charges and all other charges and sums, as well as all costs and
expenses payable by Borrower under this Agreement, the Note, the Other
Agreements, and any and all other present and future monetary liabilities of
Borrower to the Lender, whether direct or indirect, contingent or noncontingent,
matured or unmatured, accrued or not accrued, related or unrelated to this
Agreement whether or not of the same character or class as Borrower's
obligations under this Agreement and the Note, whether or not secured under any
other document instrument or statutory or common law provision, as well as all
renewals, refinancings, consolidations, recastings and extensions of any of the
foregoing.
"OTHER AGREEMENTS" shall mean any and all promissory notes, security
agreements, assignments, subordination agreements, pledge or hypothecation
agreements, mortgages, deeds of trust leases, contracts, guaranties, instruments
and documents now and hereafter existing between the Lender and Borrower,
executed and/or delivered pursuant to this Agreement or guaranteeing, securing
or in any other manner relating to any of the Obligations, including, the
instruments and documents referred to in Subsection 5.02 hereof.
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"PAYMENT DATE" shall mean the last day of each of the months referred
to in Schedule 1 hereto.
"PAYMENT NOTICE" shall mean the notice furnished to the Borrower
quarterly indicating the precise amount of principal and/or interest due on the
next ensuing Payment Date, such notice to be sent to the Borrower at least ten
(10) days before such Payment Date.
"PERSON" shall include natural persons, corporations, associations,
partnerships, joint ventures, trusts, governments and agencies and departments
thereof, and every other entity of every kind.
"PLEDGE AGREEMENT" or "PLEDGE" shall Mean the Pledge and Security
Agreement by and between Horizon Telcom, Inc. and Lender dated as of even date
herewith.
"PRIMARY GUARANTOR" shall mean Borrower's parent corporation, Horizon
Telcom, Inc.
"SUBORDINATED CAPITAL CERTIFICATE" or "SCC" shall mean a subordinated
certificate representing an investment in the Lender purchased by the Borrower
in connection with the Loan.
"SUBSIDIARY" at any time means any entity which is at the time
beneficially owned or controlled directly or indirectly by the Borrower, by one
or more such entities or by the Borrower and one or more such entities.
"TERMINATION DATE" shall mean that date which is four (4) years from
the date hereof.
"VARIABLE RATE" shall mean the standard monthly variable rate
established by the Lender from time to time for long-term loans similarly
classified pursuant to Lender's policies and procedures then in effect, plus two
hundred and fifty (250) basis points. The variable rate as of the date of this
Agreement is 6.65%.
"VENDOR GUARANTOR" or "VENDOR" shall mean Motorola, Inc.
2. LOAN
2.01 LOAN. The Lender agrees to make the Loan to Borrower subject
to all of the terms and conditions of this Agreement and the Other Agreements.
2.02 ADVANCES. The Lender agrees to make, and the Borrower agrees
to request on the terms and conditions of this Agreement, Advances from time to
time at the office of the Lender in Herndon, Virginia, or at such other place as
the Lender may designate, not to exceed the Commitment; provided, however, that
Lender shall not be obligated to make any further Advances hereunder for the
build-out of Borrower's PCS system until Borrower provides Lender with
then-existing executed leasehold agreements and pole attachment agreements, in
form and substance satisfactory to Lender. The Borrower shall give the Lender at
least two (2) Business Days' prior written notice of the date on which each
Advance is to be made. On the Termination
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Date, the Lender may stop advancing funds and reduce the Commitment to the
aggregate amount theretofore advanced. The obligation of the Borrower to repay
the Advances shall be evidenced by the Note.
2.03 PAYMENT, AMORTIZATION AND INTEREST RATE.
(a) Payment. The Borrower shall pay on each Payment Date quarterly
installments, in an amount as calculated by the Lender in accordance with this
Agreement of principal and/or interest as shown in the Payment Notice, except
that if not sooner paid, any balance of the principal amount and interest
accrued thereon and all other amounts due hereunder shall be due and payable on
the Maturity Date. Payment of principal hereunder shall commence 16 quarters
after the first full quarter following the initial Advance of funds in
accordance with the repayment schedule as set forth in Schedule 1 and shall
continue to be made on each subsequent Payment Date until the Maturity Date or
such earlier date as all amounts due hereunder and on account of the Note shall
have been paid in full. Payment of interest hereunder is due on each Payment
Date in which a principal balance is outstanding. Principal will be amortized in
accordance with the method stated in Schedule 1 hereto.
At the Lender's option, all payments shall be applied first to late payment
charges due, as hereinafter provided, then to interest accrued to the date of
such payment, and then to the reduction of principal balance outstanding.
No provision of this Agreement or the Note shall require the payment or permit
the collection, of interest in excess of the highest rate permitted by
applicable law.
(b) Interest Rate. Each Advance shall be initially made at the Variable
Rate. Interest shall be computed from the actual number of days elapsed on the
basis of a year of 365 days until the first Payment Date following the Initial
Advance. Thereafter, interest shall continue to be computed for the actual
number of days elapsed on the basis of a year of 365 days unless a Fixed Rate is
applicable to the Loan, in which case interest shall be computed on the basis of
a 30-day month and 360-day year. Notwithstanding anything to the contrary
herein, the total amount of Borrower's Fixed Rate debt at any given time
hereunder shall not exceed seventy five percent (75%) of the Commitment.
(i) Variable Rate. If Advances are made at the Variable
Rate, such Variable Rate shall apply until the
Maturity Date, except as provided herein below.
(ii) Fixed Rate. If the Borrower elects a Fixed Rate, such
Fixed Rate as is available and in effect for loans
similarly classified pursuant to Lender's policies
and procedures then in effect at the time of the
election shall apply to such Advance until the
Adjustment Date. Upon notice given by the Borrower
five (5) Business Days prior to such Adjustment Date,
Borrower may elect to reset the interest rate to such
Fixed Rate as is available and in effect at the time
of such Adjustment Date. Such reset Fixed Rate shall
apply to that portion of the outstanding principal
balance of the Loan elected to have a Fixed Rate from
the Adjustment Date until a
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new Adjustment Date or the Maturity Date. If Borrower
does not elect to reset the Fixed Rate, the Variable
Rate shall apply to the outstanding principal balance
of the Loan that had been bearing interest at the
Fixed Rate prior to such Adjustment Date, from such
Adjustment Date to the Maturity Date.
(iii) Conversion to Different Interest Program.
(A) Variable Rate to Fixed Rate. Subject to the
conditions set forth herein, the Borrower
may convert from the Variable Rate to the
Fixed Rate for a portion of the principal
amount of the Commitment then outstanding at
any time Provided the Lender offers a Fixed
Rate at such time, subject to the seventy
five percent (75%) Fixed Rate debt
limitation set forth above.
(B) Fixed Rate to Variable Rate. The Borrower
may convert from a Fixed Rate to the
Variable Rate: (1) on an Adjustment Date or
(2) at any other time, provided that the
Borrower shall pay Lender any applicable
Make-Whole Premium.
2.04 PREPAYMENTS. (a) Optional Prepayment. If the Loan bears
interest at the Variable Rate the Borrower may opt to prepay the Loan or any
portion thereof, as the case may be, at any time subject to the terms hereof and
provided that the Borrower shall pay a prepayment fee in an amount established
by Lender, up to maximum of fifty (50) basis points times the amount being
prepaid. If the Loan bears interest at the Fixed Rate, the Borrower may opt to
prepay the Loan on an Adjustment Date or any such other date provided that the
Borrower shall pay a prepayment fee in an amount established by Lender, up to a
maximum of fifty (50) basis points times the amount being prepaid plus any
applicable Make-Whole Premium. All prepayments shall be accompanied by payment
of accrued and unpaid interest on the amount of and to the date of the
prepayment. All prepayments shall be applied first to fees, second to the
payment of accrued and unpaid interest and then to the unpaid balance of the
principal amount of the Loan.
(b) Mandatory Prepayment. Beginning once Borrower's audited fiscal
year-end EBITDA is greater than zero, Lender shall have the option, to be
elected annually, to require Borrower to make annual mandatory prepayments of
the Loan in an amount equal to fifty percent (50%) of Borrower's Excess Cash
Flow within 120 days of the close of Borrower's fiscal year. All mandatory
prepayments shall be applied first to fees, second to the payment of accrued and
unpaid interest, and then proratably to the unpaid balance of the principal
amount of the Loan or any other loans by and between Borrower and Lender in
inverse order of Maturity Date. All mandatory prepayments shall not be subject
to a prepayment fee.
2.05 5% SUBORDINATED CAPITAL CERTIFICATES. The Borrower shall
purchase SCCs which in the aggregate shall not exceed the amount specified in
Schedule 1 hereto. Unless otherwise requested in writing by the Borrower prior
to the initial Advance and approved by the Lender, the Borrower agrees to
purchase SCCs with each Advance in the amount of five percent
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(5%) of each such Advance, and each such SCC shall be paid for with proceeds of
such Advance. The Lender agrees to deliver the SCCs on or about the date on
which the SCCs have been paid for in full. The SCCs shall bear no interest and
shall mature in accordance with the terms thereof.
3. SECURITY
As security for the payment and performance of all of the Obligations,
Borrower has (i) entered into the Mortgage pledging and granting to the Lender a
prior and continuing security interest in the Collateral that may be secured by
the Mortgage that shall continually exist until all Obligations have been paid
in full; (ii) had its parent corporation, Horizon Telcom, Inc., ("Horizon
Telecom" or "Primary Guarantor") execute the Pledge Agreement with Lender
pursuant to which Horizon Telcom pledged certain interests as described therein;
(iii) obtained an unsecured guaranty in amounts, form and substance reasonably
satisfactory to Lender, from the Primary Guarantor and the Vendor Guarantor, and
(iv) provided a collateral assignment in form and substance reasonably
satisfactory to Lender, of Borrower's equipment purchase agreement with Vendor
and all other material operating contracts. If reasonably required by the Lender
at any time, Borrower shall make notations, satisfactory to the Lender, on its
books and records disclosing the existence of the Lender's security interest in
the Collateral. Borrower agrees that, with respect to the Collateral which is
subject to Article 9 of the Uniform Commercial Code, the Lender shall have, but
not be limited to, all the rights and remedies of a secured party under the
Uniform Commercial Code. The Lender shall have no liability or duty, either
before or after the occurrence of an Event of Default hereunder, on account of
loss of or damage to, or to collect or enforce any of its rights against the
Collateral, or to preserve any rights against account debtors or other parties
with prior interests in the Collateral.
4. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, Borrower represents
and warrants to the Lender as of the date of this Agreement that:
4.01 GOOD STANDING. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, 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.
4.02 AUTHORITY. Borrower has corporate power and authority to enter
into this Agreement and the Mortgage, to make the borrowings hereunder, to
execute and deliver all documents and instruments required hereunder and to
incur and perform the obligations provided for herein, in the Mortgage and in
the Note, all of which have been duly authorized by all necessary and proper
corporate and other action, and no consent or approval of any person, including,
without limitation, the Primary Guarantor, Vendor Guarantor and any public
authority or regulatory body, which has not been obtained is required as a
condition to the validity or enforceability hereof or thereof.
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4.03 BINDING AGREEMENT. This Agreement has been duly and properly
executed by Borrower, constitutes the valid and legally binding obligation of
Borrower and is fully enforceable against Borrower in accordance with its terms,
subject only to laws affecting the rights of creditors generally, the exercise
of judicial discretion in accordance with general principles of equity or
because waivers of statutory or common law rights or remedies may be limited.
4.04 NO CONFLICTING AGREEMENTS. The execution, delivery of and
performance by Borrower of this Agreement, the Mortgage and the Note, and the
transactions contemplated hereby or thereby, will not (a) violate any provision
of law, any order, rule or regulation of any court or other agency of
government, any award of any arbitrator, the charter or bylaws of Borrower, or
any indenture, contract, agreement, mortgage, deed of trust or other instrument
to which Borrower is a party or by which it or any of its property is bound; or
(b) be in conflict with, result in a breach of or constitute (with due notice
and/or lapse of time) a default under, any such award, indenture, contract,
agreement, mortgage, deed of trust or other instrument or result in the creation
or imposition of any Lien (other than contemplated hereby) upon any of the
property or assets of Borrower.
4.05 LITIGATION. There are no judgments, claims, actions, suits or
proceedings pending or, to the knowledge of Borrower, threatened against or
affecting Borrower or its properties, at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, which may result in any material adverse
change in the business, operations, prospects, properties or assets or in the
condition, financial or otherwise, of Borrower, and Borrower is not to its
knowledge, in default with respect to any judgment, order, writ, injunction,
decree, rule or regulation of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would have a material adverse effect on Borrower.
4.06 FINANCIAL CONDITION. The financial statements, business plans,
and other materials submitted by Borrower in connection with the proposed
financing hereunder as delivered to Lender up to the date of this Agreement are,
in all material respects, complete and correct and fairly present the financial
condition, and as to business plans, management's best intentions, assumptions
and projections as of the date thereto submitted, of the Borrower. There are no
liabilities of the Borrower, direct or indirect, fixed or contingent, as of the
date of such statements or business plans which are not reflected therein. There
has been no material adverse change in the financial condition or operations of
the Borrower from that set forth in said financial statements or business plans
except changes previously disclosed in writing to the Lender prior to the date
hereof.
4.07 TAXES. Borrower has paid or caused to be paid all federal,
state and local taxes to the extent that such taxes have become due, unless the
Borrower is contesting in good faith any such tax. Borrower has filed or caused
to be filed all federal, state and local tax returns which are required to be
filed by Borrower.
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4.08 TITLE TO PROPERTIES. Borrower has good and marketable title to
all of its real property and owns all of its other properties and assets,
including the Collateral, free and clear of any liens, except for those liens
which have been specifically acknowledged by Lender under Section 3.02 of the
Mortgage.
4.09 LICENSES AND PERMITS. Borrower has duly obtained and now holds
all licenses, permits, certifications, approvals and the like necessary to own
and operate their property and business that are required by federal, state and
local laws of the jurisdictions in which Borrower conducts its business and each
remains valid and in full force and effect.
4.10 SUBSIDIARIES. Borrower has no Subsidiaries other than
Subsidiaries heretofore disclosed to the Lender, or hereafter formed or acquired
with the prior written consent of the Lender.
4.11 CERTAIN INDEBTEDNESS. There is no Indebtedness of Borrower
owing to any employee, officer, shareholder or director of the board of Borrower
other than accrued salaries, commissions and the like.
4.12 LOCATION OF OFFICE. The chief place of business of the
Borrower and the office where its records concerning accounts and contract
rights are kept is identified in Schedule 1 hereto.
4.13 REQUIRED APPROVALS. No license, consent, permit or approval of
any governmental agency or authority is required to enable the Borrower to enter
into this Agreement or to perform any of its obligations provided for herein
except as disclosed on Schedule 1 hereto and except with respect to regulatory
approvals which may be required in connection with the Lender's enforcement of
certain remedies hereunder.
4.14 ERISA. Each pension plan of Borrower and its Subsidiaries
providing benefits for employees of Borrower or such Subsidiary covered by Title
IV of the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereto ("ERISA"), is in compliance with ERISA in all material
respects, and no material liability to the Pension Benefit Guaranty Corporation
("PBGC") or to a multiemployer plan has been, or is expected by Borrower or its
Subsidiaries to be, incurred by Borrower or such Subsidiaries.
5. CONDITIONS OF LENDING
The Lender shall have no obligation to make the initial Advance to
Borrower hereunder unless, as of the date of Closing, each of the following
conditions precedent shall be satisfied as provided below.
5.01 LEGAL MATTERS. All legal matters incident to the consummation
of the transactions hereby contemplated shall be satisfactory to counsel for the
Lender and to such local counsel as counsel for the Lender may retain.
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5.02 DOCUMENTS. There shall have been delivered to the Lender,
fully completed and duly executed (when applicable), the following, reasonably
satisfactory to the Lender and its counsel:
(a) This Agreement and the Note.
(b) Certified copies, satisfactory to the Lender, of all
such corporate documents and proceedings of the
Borrower authorizing the transactions herein
contemplated.
(c) A written opinion from Borrower's and Primary
Guarantor's counsel addressing such legal matters as
the Lender or its counsel shall reasonably require.
(d) The Borrower shall have (i) executed the Mortgage;
(ii) if any real property is owned by Borrower,
recorded a valid and binding Mortgage granting Lender
a first lien in all real property owned by Borrower,
(iii) filed financing statements in all jurisdictions
necessary to provide Lender a first priority,
perfected security interest in all Collateral which
may be perfected by the filing of financing
statements; and (iv) delivered such other documents
as are necessary to create or continue a perfected
security interest in favor of the Lender in the
Collateral.
(e) The Pledge Agreement dated as of even date herewith.
(f) Unsecured guaranties in amounts, form and substance
satisfactory to Lender, from the Primary Guarantor
and the Vendor Guarantor.
(g) A collateral assignment of Borrower's PCS
Infrastructure Sale and Purchase Agreement with
Vendor.
(h) All existing leasehold agreements and pole attachment
agreements for those sites where Borrower intends to
build out its PCS system.
5.03 GOVERNMENT APPROVALS. The Borrower shall have furnished to the
Lender true and correct copies of all certificates, authorizations and consents,
including without limitation the consents referred to in Section 4.13 hereof,
necessary for the execution, delivery or performance by the Borrower of this
Agreement, the Note and the Mortgage.
5.04 REPRESENTATIONS, WARRANTIES AND MATERIAL CHANGE. At Closing
and at the date of every subsequent Advance hereunder, all covenants,
representations and warranties set forth in this Agreement shall be true and
correct on and as of such time with the same effect as though such covenants,
representations and warranties had been made on and as of such date; no Event of
Default specified in Section 8 and no event which, with the lapse of time or the
notice and lapse of time specified in Section 8 would become such an Event of
Default shall have occurred and be continuing or will have occurred after giving
effect to the Advance on the books of the
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Borrower, there shall have occurred no material adverse change in the business
or condition, financial or otherwise from the most recent financial statements
submitted to Lender prior to the date of this Agreement by Borrower in
connection with the proposed financing hereunder, of the Borrower, the Primary
Guarantor or Vendor Guarantor.
5.05 MORTGAGE FILING. Within ten (10) days of acquiring any real
property or fixtures, the Borrower shall cause the Mortgage to be duly recorded
as a first mortgage on all real property and the Mortgage or other appropriate
documentation shall have been duly filed, recorded or indexed as a security
interest in personal property wherever the Lender shall have reasonably
requested, all in accordance with applicable law, and the Borrower shall have
caused satisfactory evidence thereof to be furnished to the Lender.
5.06 SPECIAL CONDITIONS. At Closing and at the time of every
subsequent Advance hereunder, the Lender and its counsel shall be fully
satisfied that the Borrower has complied and will continue to comply with any
special conditions identified in Schedule 1 hereto.
5.07 REQUISITIONS. The Borrower will request Advances in form and
substance satisfactory to the Lender. Pursuant to the terms and conditions
hereof, the Lender will wire the proceeds of the requested Advance to an account
as directed by the Borrower.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees with the Lender that until all of the
Obligations have been paid in full, Borrower will:
6.01 MEMBERSHIP. Remain, or Horizon Telcom will remain, a member or
an affiliate of a member in good standing of the Lender.
6.02 FINANCIAL REPORTS AND OTHER INFORMATION. Furnish, in form and
substance reasonably satisfactory to Lender (a) a full and complete report of
Borrower and its Subsidiaries' consolidated 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 Borrower, which shall include (i)
annual financial statements prepared on a consolidated basis and audited by
independent public accountants selected by Borrower and reasonably acceptable to
Lender, accompanied by an opinion of such accountants reasonably acceptable to
Lender, and (ii) unaudited annual consolidating financial statements of Borrower
and its Subsidiaries; (b) unaudited quarterly financial statements of Borrower
and its Subsidiaries prepared on a consolidated basis which shall include a
balance sheet, a statement of income and a statement of cash flows for such
quarter and year-to-date with comparisons to budget for such quarter and
year-to-date, within 60 days after the end of each fiscal quarter of Borrower,
(c) quarterly management or statistical reports which shall include subscriber,
penetration, coverage and other operating statistics, within 60 days after the
end of each fiscal quarter of Borrower, (d) an operating budget, capital budget
and updated 10-year financial projections, prior to the beginning of each fiscal
year of Borrower, (e) such other information, reports or statements concerning
the operations, business affairs and/or financial condition of Borrower and its
Subsidiaries as the Lender may reasonably request from time to time; and (f)
promptly upon
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their becoming available, information regarding any and all material changes or
modifications of licenses, permits, certifications, approvals and the like
necessary for Borrower to own or operate its business or a substantial part of
its business.
6.03 FINANCIAL BOOKS; LENDER RIGHT OF INSPECTION. 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
Borrower, in accordance with methods of accounting prescribed by the state
regulatory body having jurisdiction over the Borrower, or in the absence of such
regulatory body or such prescription, by the FCC or in accordance with generally
accepted accounting principles. Upon reasonable notice to the Borrower, 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 Borrower and its Subsidiaries and
pertaining to the Borrower's and its Subsidiaries' property or business, for the
sole purpose of determining compliance by the Borrower of its obligations under
this agreement.
6.04 FINANCIAL COVENANTS. So operate its business as to achieve on
the last day of each fiscal year the thresholds set forth below.
(a) Annual Cash Flow. Borrower shall achieve annual cash
flow as measured by EBITDA in amounts in excess of:
<TABLE>
<S> <C> <C> <C>
1998 None 2002 $ 6,900,000
1999 ($900,000) 2003 $10,600,000
2000 $1,100,000 2004 $13,000,000
2001 $4,500,000 2005 $15,200,000
</TABLE>
(b) Covered POPS: Borrower shall build-out its PCS
network so as to achieve coverage percentages based on the total number of
population equivalents (POPs) covered by Borrower's FCC licensed or partitioned
area equal to or greater than the percentages established as follows:
<TABLE>
<S> <C> <C> <C>
1998 None 2002 78.0%
1999 78.0% 2003 78.0%
2000 78.0% 2004 78.0%
2001 78.0% 2005 78.0%
</TABLE>
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<PAGE> 13
(c) Wireless Subscribers. Borrower shall have total
wireless subscribers equal to or greater than the numbers established as
follows:
<TABLE>
<S> <C> <C> <C>
1998 None 2002 34,000
1999 16,000 2003 38,000
2000 22,000 2004 42,000
2001 28,000 2005 46,000
</TABLE>
6.05 ANNUAL CERTIFICATE. Within 120 days after the close of each
calendar year, commencing with the year in which the initial Advance hereunder
shall have been made, deliver to the Lender a written statement signed by the
president, chief executive officer or chairman stating that to the best of said
person's knowledge, the Borrower has fulfilled all of its Obligations under this
Agreement, the Note, and the Mortgage throughout such year or, if there has been
a default in the fulfillment of any such Obligations, specifying each such
default known to said person and the nature and status thereof.
6.06 USE OF PROCEEDS. Use Advances made hereunder and under the
Note only for the purposes identified in Schedule 1 hereto and for the payment
of the costs, expenses and fees incident to this Agreement and for no other
purpose whatsoever without the prior written consent of the Lender.
6.07 SPECIAL AFFIRMATIVE COVENANTS. During the term hereof, Lender
and its counsel shall be fully satisfied that the Borrower has complied and will
continue to comply with any special affirmative covenants identified in Schedule
1 hereto.
7. NEGATIVE COVENANTS.
7.01 NOTICE. Borrower covenants and agrees with the Lender that
Borrower will not directly or indirectly, without giving written notice to the
Lender thirty (30) days prior to the effective date of any change:
(a) Change Location of Chief Place of Business. Change
the location of the Borrower's chief place of
business.
(b) Change of Name. Change the name of Borrower.
7.02 CONSENT. Borrower covenants and agrees with the
Lender that Borrower and its Subsidiaries will not directly or indirectly,
without the prior written consent of the Lender:
(a) Control. Merge, consolidate, liquidate, alter or
permit alteration of control of the Borrower. Control
shall be as defined by regulations for telephone
companies issued by the FCC.
(b) Subsidiaries/Line of Business. Form or acquire any
Subsidiaries or engage in any other business besides
that of the telecommunications business.
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<PAGE> 14
(c) Additional Indebtedness. Borrow money on a secured or
unsecured basis from any other lender or incur any
additional secured or unsecured Indebtedness; or
enter into or allow any of its Subsidiaries to enter
into any Leases, unless at that time Borrower meets
the Minimum Net Worth Test; provided, however,
Borrower 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 Borrower's consolidated total assets.
If Borrower meets the Minimum Net Worth Test, then
Borrower and its Subsidiaries may incur additional
Indebtedness or enter into Leases without prior
written approval of Lender provided the Borrower
meets the Minimum Net Worth Test after incurring such
additional Indebtedness or entering into such Leases;
provided, further, however, Borrower 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.
(d) Vendor Contract. Terminate its equipment purchase
agreement with Vendor.
7.03 DIVIDENDS AND OTHER CASH DISTRIBUTIONS. The Borrower 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) (a) Borrower meets the
Minimum Net Worth Test and (b) Borrower has a current assets to current
liabilities ratio of 1.5:1. In no event may the Borrower make such a
distribution or payment when there is unpaid any due Installment of principal
and/or Interest on the Note or if the Borrower is otherwise in material default
of any provision of this Agreement or would be in material default hereunder as
a result of such distribution or payment.
7.04 LIMITATIONS ON CONTRACTS; DEPOSITS OF FUNDS. The Borrower will
not without the approval in writing of the Lender: (a) enter into any contract
or contracts (i) for management of its business or any substantial part thereof,
(ii) for the operation or maintenance of all or any substantial part of its
property, or (iii) for the use by others of any of the Collateral in excess of
$100,000; provided, however, that such approval shall not be required for any
contract less than $100,000 which in form and substance substantially conforms
with contracts in general use in the Borrower's industry by companies of size
and character similar to Borrower or which substantially conform to contracts
which are currently in existence that Borrower is a party to; or (b) deposit any
of its funds, regardless of the source thereof, in any bank which is not insured
by the Federal Deposit Insurance Corporation or the successor thereof.
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<PAGE> 15
7.05 LIMITATIONS ON LOANS, INVESTMENTS AND OTHER OBLIGATIONS. The
Borrower will not without the written approval of the Lender, hereafter make any
loan or advance to, or make any investment in, or purchase or make any
commitment to purchase any stock, bonds, notes or other securities of, or
guaranty, assume or otherwise become obligated or liable with respect to the
obligations of, any person, firm or corporation, except (i) securities or
deposits issued, guaranteed or fully insured as to payment by the United States
Government or any agency thereof; (ii) Subordinated Capital Certificates or
other certificates and securities of the Lender or of National Rural Utilities
Cooperative Finance Corporation; (iii) investments and 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 (iv) investments incidental to loans made by Lender.
7.06 SALE OF ASSETS. The Borrower and any Subsidiary of the
Borrower may not without prior written approval of the Lender, sell, lease or
transfer any Collateral unless the fair market value of such asset is less that
$250,000 and the aggregate value of assets sold, leased or transferred in any
12-month period is less than $1,000,000. For purposes of this Section 7.06,
Borrower may sell those investments which are permitted in Section 7.05 above
without obtaining the prior written approval of Lender. Furthermore, Borrower
may sell, lease or transfer inventory, customer premise equipment and PABX
equipment without obtaining the prior written approval of Lender. The proceeds
of such sale, lease or transfer (other than the sale of handsets and accessories
to retail customers), less ordinary and reasonable expenses incident to such
sale transaction, must be (i) immediately applied as prepayment (subject to any
applicable prepayment fees) proratably of the Note or any other notes by and
between Borrower and Lender (when permitted under the respective terms of each
loan agreement by and between Borrower and Lender); or (ii) used to buy
replacement property as may be designated by Lender at the time of any such
prepayment or (iii) set aside as a deposit in an account selected by the
Borrower. Notwithstanding anything to the contrary herein, Borrower may not
sell, lease, partition or disaggregate any of its PCS licenses or service area,
without obtaining the prior written consent of Lender.
7.07 SPECIAL NEGATIVE COVENANTS. During the term hereof, Lender and
its counsel shall be fully satisfied that the Borrower has complied and will
continue to comply with any special negative covenants identified in Schedule 1
hereto.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
(a) REPRESENTATION AND WARRANTIES. Any representation or
warranty made herein, in any of the Other Agreements
or in any statement, report, certificate, opinion,
financial statement or other document furnished or to
be furnished in connection with this Agreement or the
Other Agreements shall be false or misleading in any
material respect.
15
<PAGE> 16
(b) PAYMENT. Failure of Borrower to make any of the
payment Obligations, including, without limitation,
any sum due the Lender under this Agreement or any of
the Other Agreements, when and as the same shall
become due, whether at the due date thereof, by
demand, by acceleration or otherwise.
(c) OTHER COVENANTS. Failure of Borrower to observe or
perform any warranty, covenant or condition to be
observed or performed by Borrower under this
Agreement or any of the Other Agreements.
(d) CORPORATE EXISTENCE. The Borrower shall forfeit or
otherwise be deprived of its corporate charter,
franchises, permits, easements, consents or licenses
required to carry on any material portion of its
business.
(e) OTHER OBLIGATIONS. Default by the Borrower in the
payment when due of any money owed by the Borrower,
whether principal, interest premium or otherwise,
under any other agreement for borrowing money in an
amount in excess of five percent (5%) of Borrower's
consolidated total assets, whether or not such
borrowing is secured.
(f) BANKRUPTCY. A court shall enter a decree or order for
relief with respect to the Borrower or any Subsidiary
or guarantor in an involuntary case under any
applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official, or ordering the
winding up or liquidation of its affairs, and such
decree or order shall remain unstayed and in effect
for a period of sixty (60) consecutive days or the
Borrower or any Subsidiary or guarantor shall
commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or
hereafter in effect, or under any such law, or
consent to the appointment or taking of possession by
a receiver, liquidator, assignee, custodian or
trustee, of a substantial part of its property, or
make any general assignment for the benefit of
creditors. Notwithstanding anything to the contrary
herein, if the Primary Guarantor shall be subject to
the provisions hereunder, then Borrower shall have
thirty (30) days after the occurrence of such event
to provide Lender with an executed substitute
guaranty, in a form and from a guarantor,
satisfactory to Lender. Failure to provide such
substitute guaranty within such thirty (30) day
timeframe shall constitute an Event of Default
hereunder.
(g) DISSOLUTION OR LIQUIDATION. Other than as provided in
subsection (f) above, the dissolution or liquidation
of the Borrower or any Subsidiary or guarantor, or
failure by the Borrower or any Subsidiary or
guarantor promptly to forestall or remove any
execution, garnishment or attachment of such
consequence as will materially impair its ability to
continue its
16
<PAGE> 17
business or fulfill its obligations and such
execution, garnishment or attachment shall not be
vacated within sixty (60) days. Notwithstanding
anything to the contrary herein, if the Primary
Guarantor shall be subject to the provisions
hereunder, then Borrower shall have thirty (30) days
after the occurrence of such event to provide Lender
with an executed substitute guaranty, in a form and
from a guarantor, satisfactory to Lender. Failure to
provide such substitute guaranty within such thirty
(30) day timeframe shall constitute an Event of
Default hereunder.
(h) FINAL JUDGMENT. A final non-appealable judgment in
excess of $100,000 shall be entered against the
Borrower and shall remain unsatisfied or without a
stay for a period of sixty (60) days.
(i) GUARANTOR DEFAULT. Default by the Primary Guarantor
in the payment when due of any money owed to Lender
under any applicable guaranty between Lender and such
guarantor(s) related to this Loan.
9. RIGHTS AND REMEDIES
9.01 RIGHTS AND REMEDIES OF THE LENDER. Upon the occurrence of an
Event of Default the Lender may, subject to:
(i) thirty (30) days' prior written notice during which
time Borrower shall have the opportunity to cure said
Event of Default except with respect to Obligations
pursuant to 8(b) for which Borrower shall be provided
five (5) days' prior written notice, and 8(f) and
8(g) above which shall require no notice or demand
and shall have no period to cure; and
(ii) compliance, if required, with the rules and
regulations of the FCC and any state public service
or utilities commission having jurisdiction;
exercise in any jurisdiction in which enforcement hereof is sought, the
following rights and remedies, in addition to all rights and remedies available
to the Lender under applicable law, all such rights and remedies being
cumulative and enforceable alternatively, successively or concurrently:
(a) Declare all unpaid principal outstanding on the Note,
all accrued and unpaid interest thereon, and all
other Obligations to be immediately due and payable
and the same shall thereupon become immediately due
and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly
waived.
(b) Institute any proceeding or proceedings to enforce
the Obligations owed to, or any liens in favor of the
Lender.
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<PAGE> 18
(c) Pursue all rights and remedies available to the
Lender that are contemplated by the Mortgage or the
Pledge in the manner, upon the conditions, and with
the effect provided in the Mortgage or the Pledge,
including but not limited to a suit for specific
performance, injunctive relief or damages.
9.02 CUMULATIVE NATURE OF REMEDIES. Nothing herein shall limit the
right of the Lender, subject to notice and right to cure provisions contained
herein, to pursue all rights and remedies available to a creditor following the
occurrence of an Event of Default subject to compliance, if required, with the
rules and regulations of the FCC and any state public service or utilities
commission having jurisdiction. Each right, power and remedy of the Lender in
this Agreement and/or the Other Agreements shall be cumulative and concurrent
and recourse to one or more rights or remedies shall not constitute a waiver or
any other right, power or remedy.
9.03 COSTS AND EXPENSES. Borrower agrees to pay and to be liable
for any and all expenses, including attorney's fees and court costs, incurred by
the Lender in exercising or enforcing any of its rights hereunder or under the
Other Agreements, together with interest thereon at the rate and determined in
the manner provided in the Mortgage. Subject to the Mortgage and applicable law,
the Lender may apply all Collateral and proceeds of all Collateral to the
Obligations in any manner which the Lender, in its sole discretion, deems
appropriate, and Borrower shall continue to be liable for any deficiency.
9.04 LATE PAYMENT CHARGES. If payment of any principal and/or
interest due under the terms of the Note is not received at the office of the
Lender in Herndon, Virginia, or as the Lender may otherwise designate to the
Borrower, within such time period as the Lender may prescribe from time to time
in its policies in connection with any late payment charges (such unpaid amount
of principal and/or interest being herein called the "delinquent amount" and the
period beginning after such due date until payment of the delinquent amount
being herein called the late-payment period), the Borrower will pay to the
Lender, in addition to all other amounts due under the terms of the Note, the
Mortgage, and this Agreement any late-payment charge as may be fixed by the
Lender from time to time, on the delinquent amount for the late-payment period.
Provided, however, no late payment charge shall exceed an amount equal to the
then prevailing bank prime rate published in the "Money Rates" column of the
Eastern edition of the Wall Street Journal plus three percent (3%) per annum on
the delinquent amount computed over the late-payment period on the basis of a
365-day year.
9.05 LENDER' SETOFF. The Lender shall have the right in addition to
all other rights and remedies available to it to setoff and to recover against
any or all of the Obligations due to Lender, any monies now and hereafter owing
to Borrower by the Lender, including but not limited to any monies owed by
Lender to Borrower as a result of Borrower's SCC investments. Borrower waives
all rights of setoff, deduction, recoupment or counterclaim.
10. MISCELLANEOUS
10.01 PERFORMANCE FOR BORROWER. Borrower agrees and hereby
authorizes that the Lender may, in its sole discretion, but the Lender shall not
be obligated to, advance funds on
18
<PAGE> 19
behalf of Borrower without prior notice to Borrower, in order to insure
Borrower's compliance with any material covenant, warranty, representation or
agreement of Borrower made in or pursuant to this Agreement or any of the Other
Agreements, to preserve or protect any right or interest of the Lender in the
Collateral or under or pursuant to this Agreement or any of the Other
Agreements, including without limitation, the payment of any insurance premiums
or taxes and the satisfaction or discharge of any judgment or any Lien upon the
Collateral or other property or assets of Borrower, provided, however, that the
making of any such advance by the Lender shall not constitute a waiver by the
Lender of any Event of Default with respect to which such advance is made nor
relieve Borrower of any such Event or Default, Borrower shall pay to the Lender
upon demand all such advances made by the Lender with interest thereon at the
rate and determined in the manner provided in the Note. All such advances shall
be deemed to be included in the Obligations and secured by the security interest
granted the Lender hereunder to the extent permitted by law.
10.02 EXPENSES AND FILING FEES. Whether or not any of the
transactions contemplated hereby shall be consummated, Borrower agrees to pay to
the Lender at Closing or thirty (30) days after the execution and delivery
hereof, whichever is earlier, all expenses of the Lender in connection with the
filing or recordation of all financing statements and instruments as may be
required by the Lender at the time of, or subsequent to, the execution of this
Agreement including, without limitation, all documentary stamps, recordation and
transfer taxes and other costs and taxes incident to recordation of any document
or instrument in connection herewith. Borrower agrees to save harmless and
indemnify the Lender from and against any liability resulting from the failure
to pay any required documentary stamps, recordation and transfer taxes,
recording costs, or any other expenses incurred by the Lender in connection with
this Agreement. The provisions of this Subsection 10.02 shall survive the
execution and delivery of this Agreement and the payment of all other
Obligations.
10.03 WAIVERS BY BORROWER. Borrower hereby waives, to the extent the
same may be waived under applicable law: (a) in the event the Lender seeks to
repossess any or all of the Collateral by judicial proceedings, any bond(s) or
demand(s) for possession which otherwise may be necessary or required; (b)
presentment demand for payment protest and notice of non-payment and all
exemptions; and (c) substitution, impairment exchange or release of any
collateral security for any of the Obligations. Borrower agrees that the tender
may exercise any or all of its rights and/or remedies hereunder and under the
Other Agreements without resorting to and without regard to security or sources
of liability with respect to any of the Obligations.
10.04 WAIVERS BY THE LENDER. Neither any failure nor any delay on
the part of the Lender in exercising any right, power or remedy hereunder or
under any of the Other Agreements shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
10.05 LENDER'S RECORDS. Absent bad faith or manifest error, every
statement of account or reconciliation rendered by the Lender to Borrower with
respect to any of the Obligations shall be presumed conclusively to be correct
and shall contribute an account stated
19
<PAGE> 20
between the Lender and Borrower unless, within forty five (45) Business Days
after such statement or reconciliation shall have been mailed, postage prepaid,
to Borrower, the Lender shall receive written notice of specific objection
thereto.
10.06 MODIFICATIONS. No modification or waiver of any provision of
this Agreement, the Note, the Mortgage, the Pledge or any of the Other
Agreements, and no consent to any departure by Borrower therefrom shall in any
event be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand upon Borrower in any case shall name
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
10.07 NOTICES. All notices, requests and other communications
provided for herein including, without limitation, any modifications of, or
waivers, requests or consents under, this Agreement shall be given or made in
writing (including, without limitation, by telecopy) and delivered to the
intended recipient at the "Address for Notices" specified below, or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement all such
communications shall be deemed to have been duly given when personally delivered
or, in the case of a mailed or telecopied notice, upon receipt in each case
given or addressed as provided for herein. The Address for Notices of the
respective parties are as follows:
Rural Telephone Finance Cooperative
Woodland Park
2201 Cooperative Way
Herndon, Virginia 20171-3025
Attention: Chief Executive Officer
Fax 703-709-6776
The Borrower:
The address set forth in
Schedule 1 hereto
10.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) THE PERFORMANCE AND CONSTRUCTION OF THIS AGREEMENT
AND THE NOTE, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
VIRGINIA.
(b) BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES COURTS LOCATED IN
VIRGINIA AND OF ANY STATE COURT SO LOCATED FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
20
<PAGE> 21
CONTEMPLATED HEREBY. BORROWER IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING 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.
(c) EACH OF THE BORROWER 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 AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
10.09 HOLIDAY PAYMENTS. If any payment to be made by the Borrower
hereunder shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in computing any interest in respect of such payment.
10.10 SURVIVAL; SUCCESSORS AND ASSIGNS. All covenants, agreements,
representations and warranties made herein and in the Other Agreements shall
survive Closing and the execution and delivery to the Lender of the Note, and
shall continue in full force and effect until all of the Obligations have been
paid in full. Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of such
party. All covenants, agreements, representations and warranties by or on behalf
of Borrower which are contained in this Agreement and the Other Agreements shall
inure to the benefit of the successors and assigns of the Lender.
10.11 USE OF TERMS. The use of any gender or the neuter herein shall
also refer to the other gender or the neuter and the use of the plural shall
also refer to the singular, and vice versa.
10.12 SEVERABILITY. If any term, provision or condition, or any part
thereof, of this Agreement or any of the Other Agreements shall for any reason
be found or held invalid or unenforceable by any court or governmental agency of
competent jurisdiction, such invalidity or unenforceability shall not affect the
remainder of such term, provision or condition nor any other term, provision or
condition, and this Agreement, the Note, and the Other Agreements shall survive
and be construed as if such invalid or unenforceable term, provision or
condition had not been contained therein.
10.13 MERGER AND INTEGRATION. This Agreement and the attached
exhibits and matters incorporated by reference contain the entire agreement of
the parties hereto with respect to the matters covered and the transactions
contemplated hereby, and no other agreement, statement or promise made by any
party hereto, or by any employee, officer, agent or attorney of any party
hereto, which is not contained herein, shall be valid or binding.
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<PAGE> 22
10.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
10.15 HEADINGS. The headings and sub-headings contained in this
Agreement are intended to be used for convenience only and do not constitute
part of this Agreement.
10.16 ASSIGNMENT. The Lender may assign its rights and obligations
under this Agreement and the Other Agreements without the consent of the
Borrower, provided, however, that no such assignment shall result in terms or
conditions less favorable to Borrower. The Borrower may not assign any of its
rights or obligations under this Agreement or the Other Agreements without the
prior written consent of the Lender.
10.17 RIGHT TO INSPECT. The Borrower shall permit representatives of
the Lender at any time during normal business hours to inspect and make
abstracts from the books and records pertaining to the Collateral, and permit
representatives of the Lender to be present at Borrower's place of business to
receive copies of all communications and remittances relating to the Collateral,
all in such manner as the Lender may reasonably require.
10.18 CONSENT TO PATRONAGE CAPITAL DISTRIBUTIONS. Borrower hereby
consents that the amount of any distributions with respect to Borrower's
patronage which are made in written notices of allocation (as defined in Section
1388 of the Internal Revenue Code of 1986, as amended ("Code") including any
other comparable successor provision) and which are received from Lender will be
taken into account by Borrower at their stated dollar amounts in the manner
provided in Section 1385(a) of the Code in the taxable year in which such
written notices of allocation are received. Although Lender makes no
representations, warranties or assurances of future actions hereby, Lender
currently retires patronage capital in two different classes as follows: (a)
Class One - 70% of the patronage capital is retired in cash shortly after the
end of the year in which it was allocated and (b) Class Two - 30% of the
patronage capital allocation is retired on Lender's Board approved rotation
cycle, which is currently 15 years.
10.19 FURTHER ASSURANCES. The Borrower will, upon demand of the
Lender, make, execute, acknowledge and deliver all such further and supplemental
indentures of mortgage, deeds of trust mortgages, financing statements,
continuation statements, security agreements and/or any other instruments and
conveyances as may be reasonably requested by the Lender to effectuate the
intention of this Agreement and to provide for the securing and payment of the
principal of and interest on the Note according to the terms thereof.
10.20 LENDER'S APPROVAL. Wherever prior written approval or consent
of Lender is required under the terms and conditions of this Agreement, Lender
hereby agrees to not unreasonably withhold or delay said approval.
10.21 SCHEDULE 1. Schedule 1 attached hereto is an integral part of
this Agreement.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement under seal as of the date first above written.
HORIZON PERSONAL COMMUNICATIONS, INC.
By:
----------------------------------
Title:
-------------------------------
(SEAL)
Attest:
-----------------------------
Secretary
RURAL TELEPHONE FINANCE COOPERATIVE
By:
----------------------------------
Title: Assistant Secretary-Treasurer
(SEAL)
Attest:
-----------------------------
Associate Secretary-Treasurer
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<PAGE> 24
SCHEDULE 1
1. The "Commitment" shall mean $23,557,965.
2. The Mortgage defined in Section 1 is the Mortgage and Security
Agreement by and between Borrower and Lender dated as of even date
herewith.
3. The months relating to the Payment Date are March, June, September and
December.
4. In accordance with Section 2.03, the Loan shall amortize quarterly as
follows: (i) interest only for four (4) years, followed by (ii)
principal payments due in equal quarterly installments, plus accrued
interest based on the following schedule:
<TABLE>
<CAPTION>
PERCENT [%] OF PRINCIPAL
QUARTER YEAR PAID PER QUARTER/YEAR
-------------------------------------------------------------------------------
<S> <C> <C>
17-20 5 2.50%/10.0%
-------------------------------------------------------------------------------
21-24 6 3.75%/15.0%
-------------------------------------------------------------------------------
25-28 7 3.75%/15.0%
-------------------------------------------------------------------------------
29-32 8 5.00%/10.0%
-------------------------------------------------------------------------------
33-36 9 5.00%/20.0%
-------------------------------------------------------------------------------
37-40 10 5.00%/20.0%
-------------------------------------------------------------------------------
</TABLE>
5. The amount referred to in Section 2.05 is $1,177,898.
6. The chief place of business referred to in Section 4.12 and the address
of Borrower referred to in Section 10.07 is PO Box 480, 68 East Main
Street, Chillicothe, OH 45601.
7. The government authorities referred to in Section 4.13 is the FCC.
8. The special conditions referred to in Section 5.06 are as follows:
A. Prior to the initial Advance of any funds hereunder,
Lender shall receive in form and substance satisfactory to Lender,
copies of the following:
(1) All management, maintenance, service and other
material agreements executed by Borrower, including
its PCS Infrastructure Purchase and Sale Agreement by
and between Borrower and Vendor.
(2) Borrower's executed Articles of Incorporation and
Bylaws.
(3) All agreements and other documents evidencing
Borrower's stock ownership and tax sharing
arrangements with Horizon Telcom. All of the
Borrower's equity instruments and tax sharing
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<PAGE> 25
arrangements must have terms and conditions
reasonably satisfactory to Lender.
(4) All credit documentation related to Borrower's PCS
license debt with the FCC.
(5) Evidence of the uncontested award to Borrower by the
FCC of 30 MHz C-Block PCS licenses for the 5 BTAs
identified in the Recitals on page 1, hereto.
(6) Evidence that Horizon Telcom has become a member of
Lender.
B. On or prior to the date of the initial Advance under the Loan,
the Primary Guarantor shall have received all necessary regulatory and
lender approvals to: make its equity investments; pledge its ownership
interest in the Borrower; and execute and perform under the Primary
Guaranty.
C. On or prior to the date of the initial Advance under the Loan,
Borrower's capitalization shall consist of a minimum of $6,060,000.
Additionally, on or prior to the initial advance under the Loan,
Borrower shall have entered into firm equity subscription agreements
with Horizon Telcom, in form and substance satisfactory to Lender, that
provides for additional capital contributions which in the aggregate
total $9,450,000 according to the following schedule: $250,000 by June
30, 1997, $250,000 by September 30, 1997; $250,000 by December 31,
1997; $3,900,000 by January 31, 1998; $1,000,000 by December 31,1998;
$800,000 by January 31, 1999; $1,000,000 by December 31, 1999;
$1,000,000 by December 31, 2000; and $1,000,000 by December 31, 2001.
The equity subscription agreements shall state that Lender shall be a
third party beneficiary with regard to enforcing payments under the
equity subscription agreements. Borrower agrees and covenants to
require those individuals or entities who are acquiring additional
shares under the equity subscription agreements to enter into pledge
and security agreements in form and substance satisfactory to Lender,
and pledge such additional shares to Lender.
D. On or prior to the date of the initial Advance under the Loan,
Borrower and Horizon Telcom shall have entered into a tax sharing
arrangement in form and substance satisfactory to Lender that provides
for Borrower's receipt of cash payments on the following dates equal to
the lesser of (a) $3,244,000 by December 31, 1997; $3,202,000 by
December 31, 1998; $2,174,000 by December 31, 1999; $1,563,000 by
December 31, 2000 and $376,000 by December 31, 2001; or (b) a positive
dollar amount equivalent to 34% of Borrower's book net loss for such
year (if any). The tax sharing agreement shall not be modified,
transferred or terminated by either party without Lender's prior
written consent. Lender must be named as a third party beneficiary in
the tax sharing agreement with regard to enforcing payments under the
agreement.
25
<PAGE> 26
To the extent that Borrower and/or Horizon Telcom 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 Horizon Telcom shall provide
Borrower an additional cash payment in accordance with the above schedule (if
the December 31st contribution was underestimated) or Borrower at Horizon
Telcom's option shall provide Horizon Telcom a refund payment (if the December
31st contribution was overestimated). Notwithstanding the timing of any true-ups
and whenever the year's final tax return is filed, Horizon Telcom shall continue
to be liable for any necessary payments in accordance with the above schedule.
9. The purposes referred to in Section 6.06 are as follows:
To finance up to $22,380,067 of Vendor supplied PCS equipment
and engineering services and its non-Vendor related capital
expenditures and microwave relocation expenses in the 5 BTAs
identified in the Recitals on page 1, hereto; to provide for
working capital; and to purchase up to $1,177,898 of SCCs.
10. The special affirmative covenants referred to in Section 6.07
are:
A. Borrower shall submit to Lender copies of all of its
cell site leasehold and pole attachment agreements
(collectively the "Cell Site Agreements"). Such Cell Site
Agreements shall be in form and content reasonably
satisfactory to Lender and at all times 90% of such Cell Site
Agreements shall cover a term of at least 10 years and have
assignability and equipment removal provisions for the benefit
of Lender and its assignees, or otherwise be pre-approved by
Lender.
B. Borrower shall adopt and maintain the calendar year
as its fiscal year.
11. The special negative covenants referred to in Section 7.07 are
not applicable.
26
