<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition periods from to
Commission file number 0-11053
COMMONWEALTH TELEPHONE ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2093008
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 CTE Drive
Dallas, Pennsylvania 18612-9774
(Address of principal executive offices)
(Zip Code)
(570) 631-2700
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock ($1.00 par value), as of September 30, 1999
Common Stock 19,925,327
Class B Common Stock 2,183,075
<PAGE>
COMMONWEALTH TELEPHONE ENTERPRISES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations-Quarters and Nine Months ended
September 30, 1999 and 1998
Condensed Consolidated Balance Sheets-
September 30, 1999 and December 31, 1998
Condensed Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended Nine months ended
September 30, September 30,
------------------------------- -----------------------------
1999 1998 1999 1998
-------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 67,672 $ 57,748 $ 191,927 $ 166,662
Costs and expenses, excluding
management fees and depreciation
and amortization 40,722 35,234 117,018 100,462
Management fees 1,045 2,021 4,734 5,834
Depreciation and amortization 11,524 9,780 32,981 27,323
----------- ----------- ----------- -----------
Operating income 14,381 10,713 37,194 33,043
Interest and dividend income 728 640 2,412 2,295
Interest expense (3,828) (3,370) (10,300) (9,572)
Other income (expense), net (169) (10) 212 246
----------- ----------- ----------- -----------
Income before income taxes 11,112 7,973 29,518 26,012
Provision for income taxes 5,058 3,748 13,928 11,981
----------- ----------- ----------- -----------
Income before equity in unconsolidated entities 6,054 4,225 15,590 14,031
Equity in income of unconsolidated entities 179 243 1,290 1,433
----------- ----------- ----------- -----------
Net income 6,233 4,468 16,880 15,464
Preferred stock dividend and accretion requirements - 1,062 - 3,187
----------- ----------- ----------- -----------
Net income to common shareholders $ 6,233 $ 3,406 $ 16,880 $ 12,277
=========== =========== =========== ===========
Basic earnings per average common share:
Net income available for common shareholders $ 0.28 $ 0.15 $ 0.76 $ 0.56
=========== =========== =========== ===========
Weighted average shares outstanding 22,107,865 22,017,524 22,093,286 22,052,284
Diluted earnings per average common share:
Net income available for common shareholders $ 0.27 $ 0.15 $ 0.74 $ 0.54
=========== =========== =========== ===========
Weighted average shares and common
stock equivalents outstanding 23,119,846 22,624,170 22,995,048 22,659,701
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments $ 15,120 $ 16,968
Accounts receivable and unbilled revenues,
net of reserve for doubtful accounts of $1,776 at
September 30, 1999 and $1,885 at December 31, 1998 44,635 41,178
Other current assets 25,102 20,991
--------- ---------
Total current assets 84,857 79,137
Property, plant and equipment, net of accumulated
depreciation of $271,503 at September 30, 1999 and
$251,226 at December 31, 1998 385,144 338,947
Investments 9,781 8,898
Deferred charges and other assets 6,353 5,156
Unamortized debt issuance costs 1,584 804
--------- ---------
Total assets $ 487,719 $ 432,942
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 9,010 $ 9,010
Accounts payable 29,674 35,672
Accrued expenses 40,532 36,359
Other current liabilities 4,428 4,516
--------- ---------
Total current liabilities 83,644 85,557
Long-term debt 200,581 116,838
Deferred income taxes and investment tax credits 46,821 44,094
Other deferred credits 15,081 9,717
Redeemable preferred stock - 52,000
Common shareholders' equity:
Common stock 26,061 26,059
Additional paid-in capital 223,219 223,584
Retained earnings 28,070 11,840
Treasury stock at cost, 3,952,880 shares at
September 30, 1999 and 3,979,983 shares at
December 31, 1998 (135,758) (136,747)
--------- ---------
Total common shareholders' equity 141,592 124,736
--------- ---------
Total liabilities and shareholders' equity $ 487,719 $ 432,942
========= =========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------------------
1999 1998
------------------ --------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 49,403 $ 28,992
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant & equipment (79,586) (59,738)
Other (1,775) (48)
-------- --------
Net cash used in investing activities (81,361) (59,786)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 90,500 30,500
Redemption of long-term debt (6,757) (6,757)
Preferred dividend (650) (1,950)
Proceeds from exercise of stock options 354 652
Preferred stock redemption (52,000) -
Debt issuance costs (1,367) -
Issuance of common stock 81 -
Other (51) (140)
-------- --------
Net cash provided by financing activities 30,110 22,305
-------- --------
Net (decrease) in cash and
temporary cash investments (1,848) (8,489)
-------- --------
Cash and temporary cash investments
at beginning of year 16,968 14,017
-------- --------
Cash and temporary cash investments at
September 30, $ 15,120 $ 5,528
======== ========
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest $ 6,892 $ 9,542
======== ========
Income taxes $ 11,825 $ 13,597
======== ========
</TABLE>
Supplemental Schedule of Noncash Financing and Investing Activities:
In 1998, accretion in the carrying value of redeemable preferred stock charged
to retained earnings was $1,237.
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars, Except Per Share Data)
1. The Condensed Consolidated Financial Statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, in the opinion of the
Management of the Company, the Condensed Consolidated Financial Statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial information. The Condensed
Consolidated Financial Statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K for
the fiscal year ended December 31, 1998.
2. Commonwealth Telephone Enterprises, Inc. ("CTE" or the "Company") consists
of Commonwealth Telephone Company ("CT"), the nation's ninth largest independent
local exchange carrier; CTSI, Inc. ("CTSI"), a competitive local exchange
carrier; and other operations ("Other"), which include Commonwealth
Communications ("CC"), an engineering services business, epix TM Internet
Services ("epix") and Commonwealth Long Distance Company ("CLD"), a reseller of
long-distance services.
Financial information by business segment is as follows:
<TABLE>
<CAPTION>
Quarter ended September 30, 1999 CT CTSI Other Consolidated
- ------------------------------------ --------- --------- --------- -------------
<S> <C> <C> <C> <C>
Sales $45,446 $11,339 $13,438 $70,223
Elimination of intersegment sales 2,335 161 55 2,551
External sales 43,111 11,178 13,383 67,672
Adjusted EBITDA 25,587 (1,354) 1,672 25,905
Depreciation and amortization 8,298 2,383 843 11,524
Operating income (loss) 17,289 (3,737) 829 14,381
Interest expense, net (954) - (2,146) (3,100)
Other income (expense), net (80) 16 (105) (169)
Income (loss) before income
taxes 16,255 (3,721) (1,422) 11,112
Provision (benefit) for income
taxes 6,755 (1,233) (464) 5,058
Quarter ended September 30, 1998 CT CTSI Other Consolidated
- ------------------------------------ -------- -------- -------- ------------
Sales $41,329 $ 6,288 $13,042 $60,659
Elimination of intersegment sales 2,163 83 665 2,911
External sales 39,166 6,205 12,377 57,748
Adjusted EBITDA 22,352 (2,016) 157 20,493
Depreciation and amortization 7,627 1,415 738 9,780
Operating income (loss) 14,725 (3,431) (581) 10,713
Interest expense, net (1,157) (1) (1,572) (2,730)
Other income (expense), net (61) 45 6 (10)
Income (loss) before income
taxes 13,507 (3,387) (2,147) 7,973
Provision (benefit) for income
taxes 5,575 (1,096) (731) 3,748
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine months ended September 30, 1999
- ------------------------------------
CT CTSI Other Consolidated
---------- --------- --------- -------------
<S> <C> <C> <C> <C>
Sales $132,254 $ 28,919 $38,126 $199,299
Elimination of intersegment sales 6,665 400 307 7,372
External sales 125,589 28,519 37,819 191,927
Adjusted EBITDA 73,655 (6,345) 2,865 70,175
Depreciation and amortization 24,416 6,127 2,438 32,981
Operating income (loss) 49,239 (12,472) 427 37,194
Interest expense, net (2,503) - (5,385) (7,888)
Other income (expense), net (195) 492 (85) 212
Income (loss) before income
taxes 46,541 (11,980) (5,043) 29,518
Provision (benefit) for income
taxes 19,352 (3,728) (1,696) 13,928
Nine months ended September 30, 1998
- ------------------------------------
CT CTSI Other Consolidated
--------- -------- -------- ------------
Sales $122,201 $ 15,298 $37,906 $175,405
Elimination of intersegment sales 6,701 214 1,828 8,743
External sales 115,500 15,084 36,078 166,662
Adjusted EBITDA 66,227 (6,878) 1,017 60,366
Depreciation and amortization 22,011 3,264 2,048 27,323
Operating income (loss) 44,216 (10,142) (1,031) 33,043
Interest expense, net (3,258) (1) (4,018) (7,277)
Other income (expense), net (259) 503 2 246
Income (loss) before income
taxes 40,699 (9,640) (5,047) 26,012
Provision (benefit) for income
taxes 16,788 (2,863) (1,944) 11,981
</TABLE>
3. The provision for income taxes is different than the amount computed by
applying the United States statutory federal tax rate primarily due to state
income taxes net of federal benefit.
4. At September 30, 1999, CTE has approximately 1,731,000 options outstanding
at exercise prices ranging from $8.73 to $39.813. During the first nine months
of 1999, 346,000 options were granted, 22,072 options were canceled and 29,103
options were exercised, yielding cash proceeds of $354.
5. Basic earnings per share amounts are based on net income after deducting, if
applicable, preferred stock dividend requirements and the charges to retained
earnings for the accretion in value of preferred stock divided by the weighted
average number of shares of Common Stock and Class B Common Stock outstanding
during the period.
Diluted earnings per share are based on net income after deducting preferred
stock dividend requirements and the charges to retained earnings for the
accretion in value of preferred stock divided by the weighted average number of
shares of Common Stock and Class B Common Stock outstanding during each period
after giving effect to stock options considered to be dilutive common stock
equivalents. For the quarter and nine months ended September 30, 1998, the
conversion of redeemable preferred stock into common stock is not assumed, since
the effect is anti-dilutive.
<PAGE>
The following table is a reconciliation of the numerators and denominators of
the basic and diluted per share computations for net income:
<TABLE>
<CAPTION>
Quarter ended Nine months ended
September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
------------ --------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 6,233 $ 4,468 $ 16,880 $ 15,464
Preferred stock dividends - 650 - 1,950
----------- ----------- ----------- -----------
Subtotal 6,233 3,818 16,880 13,514
Accretion of preferred stock - 412 - 1,237
----------- ----------- ----------- -----------
Total $ 6,233 $ 3,406 $ 16,880 $ 12,277
=========== =========== =========== ===========
Basic earnings per average common share:
Weighted average shares outstanding 22,107,865 22,017,524 22,093,286 22,052,284
=========== =========== =========== ===========
Net income available for common
shareholders $ 0.28 $ 0.15 $ 0.76 $ 0.56
=========== =========== =========== ===========
Diluted earnings per average common share:
Weighted average shares outstanding 22,107,865 22,017,524 22,093,286 22,052,284
Dilutive shares resulting from stock
options 1,011,981 606,646 901,762 607,417
Redeemable preferred stock * - - - -
----------- ----------- ----------- -----------
Weighted average shares and common
stock equivalents outstanding 23,119,846 22,624,170 22,995,048 22,659,701
=========== =========== =========== ===========
Net income available for common
shareholders $ 0.27 $ 0.15 $ 0.74 $ 0.54
=========== =========== =========== ===========
</TABLE>
* In 1998, conversion of redeemable preferred stock into 1,457,143 shares of
common stock using the "if converted" method is anti-dilutive.
6. The Company utilizes interest rate swap agreements to reduce the impact of
changes in interest rates on its floating rate debt. The swap agreements are
contracts to exchange floating rate for fixed interest payments periodically
over the life of the agreements without exchange of the underlying notional
amounts. The notional amounts of interest rate agreements are used to measure
interest to be paid or received and do not represent the amount of exposure to
credit loss. Amounts to be paid or received under interest rate swap agreements
are accrued and recognized over the life of the swap agreements as an adjustment
to interest expense. The fair value of the swap agreements are not recognized
in the consolidated financial statements since they are accounted for as hedges.
At September 30, 1999, the Company had outstanding five interest rate swap
agreements with commercial banks. These agreements have maturity dates ranging
from three to five years and converted $75,000 of variable rate borrowings at
5.26% to fixed rate debt at a weighted average of 5.96%.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Thousands of dollars except per share data)
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this Quarterly
Report is forward-looking, such as information relating to the effects of future
regulation and competition, statements made in relation to Year 2000 compliance
and statements made as to plans to construct and develop additional markets.
Such forward-looking information involves important risks and uncertainties that
could significantly affect expected results in the future differently than
expressed in any forward-looking statements made by, or on behalf of, the
Company. These risks and uncertainties include, but are not limited to,
uncertainties relating to the Company's ability to penetrate new markets and the
related cost of that effort, economic conditions, acquisitions and divestitures,
government and regulatory policies, the pricing and availability of equipment,
materials and inventories, technological developments, pending and future
litigation, penetration, churn rates, availability of future financing and
changes in the competitive environment in which the Company operates.
The following discussion should be read in conjunction with the attached
Condensed Consolidated Financial Statements and notes thereto and with the
Company's audited financial statements and notes thereto included in the
Company's Form 10-K for the fiscal year ended December 31, 1998.
RESULTS OF OPERATIONS:
QUARTERS ENDED SEPTEMBER 30, 1999 VS SEPTEMBER 30, 1998
The Company's sales increased 17.2% and were $67,672 and $57,748 for the
quarters ended September 30, 1999 and 1998, respectively. Contributing to the
sales increase of $9,924 were higher sales of CT of $3,945, CTSI of $4,973 and
Other of $1,006.
The Company's operating income was $14,381 for the quarter ended September 30,
1999 as compared to $10,713 for the quarter ended September 30, 1998. The
improvement in operating income was primarily the result of increased sales at
CT and CTSI and a reduction in management fees, partially offset by increased
costs at CTSI and increased consolidated depreciation expense.
Net income was $6,233 and $4,468 for the quarters ended September 30, 1999 and
1998, respectively. This increase reflects the higher operating income discussed
above, partially offset by higher interest expense and increased income taxes.
Net income to common shareholders was $6,233 or $0.27 per diluted average common
share for the quarter ended September 30, 1999 as compared to net income to
common shareholders of $3,406 or $0.15 per diluted average common share for the
quarter ended September 30, 1998. This increase primarily reflects the higher
net income discussed above and the redeemable preferred stock dividend and
accretion requirements charged to earnings in 1998 of $1,062 and the first
quarter 1999 preferred stock redemption that eliminated the Company's preferred
stock dividend and accretion requirements.
NINE MONTHS ENDED SEPTEMBER 30, 1999 VS SEPTEMBER 30, 1998
The Company's sales increased 15.2% and were $191,927 and $166,662 for the nine
months ended September 30, 1999 and 1998, respectively. Contributing to the
sales increase were higher sales of CT of $10,089, CTSI of $13,435 and Other of
$1,741.
The Company's operating income was $37,194 for the nine months ended September
30, 1999 as compared to $33,043 for the nine months ended September 30, 1998.
The improvement in operating income was primarily the result of increased sales
at CT and CTSI and a reduction in management fees, partially offset by increased
costs at CTSI and increased consolidated depreciation expense.
<PAGE>
Net income was $16,880 and $15,464 for the nine months ended September 30, 1999
and 1998, respectively. This increase primarily reflects the higher operating
income discussed above, partially offset by increased interest expense and
income taxes.
Net income to common shareholders was $16,880 or $0.74 per diluted average
common share for the nine months ended September 30, 1999 as compared to net
income to common shareholders of $12,277 or $0.54 per diluted average common
share for the nine months ended September 30, 1998. This increase primarily
reflects the Company's higher net income and the first quarter 1999 preferred
stock redemption that eliminated the Company's preferred stock dividend and
accretion requirements.
<TABLE>
<CAPTION>
Selected operating data:
September 30,
---------------------------
1999 1998 % Change
------- ------- ---------
<S> <C> <C> <C>
CT installed access lines 291,252 271,451 7.3%
CTSI installed access lines 73,406 35,933 104.3%
</TABLE>
COMMONWEALTH TELEPHONE COMPANY
Sales were $43,111 and $39,166 for the quarters ended September 30, 1999 and
1998, respectively. The sales increase of 10.1% is primarily due to higher
access and local service revenues resulting from an increase in installed access
lines of 19,801 or 7.3%. Vertical service revenue increased 37.7% primarily as a
result of a successful second quarter 1999 Caller ID sales campaign.
CT's sales were $125,589 and $115,500 for the nine months ended September 30,
1999 and 1998, respectively. The sales increase of 8.7% is primarily due to
higher access and local service revenues resulting from an increase in installed
access lines. CT's successful residential "add a line" promotional efforts
continue to contribute to access line growth.
The increase in access revenue includes interstate access revenue which
increased $1,609 and $2,668 for the three and nine months ended September 30,
1999, primarily resulting from the growth in access lines and minutes of use.
Interstate access revenue for the three and nine months ended September 30, 1999
includes a favorable impact of a National Exchange Carrier Association ("NECA")
settlement in the amount of $707.
State access revenue increased $675 and $3,689 for the three and nine months
ended September 30, 1999 primarily as a result of an increase in IntraLATA
minutes. Local service revenue increased $565 and $1,879 for the three and nine
months ended September 30, 1999 as a result of the increase in access lines.
Operating expenses excluding depreciation, amortization and management fees for
the quarter ended September 30, 1999 were $16,859 as compared to $15,443 for the
quarter ended September 30, 1998. Contributing to the increase of $1,416 or
9.2% is an increase in payroll and benefits resulting from annual salary
increases, new customer service and outside technician positions (due to
customer demand for new services, i.e. vertical and lines) and quarterly
performance-based incentives. An increase in advertising costs associated with
CT's vertical services sales efforts also contributed to the increase.
Operating expenses excluding depreciation, amortization and management fees were
$48,828 and $45,230 for the nine months ended September 30, 1999 and 1998,
respectively. The increase of $3,598 or 8.0% was due to an increase in payroll
and benefits resulting from annual salary increases, new customer service and
outside technician positions and incentive plan payouts based on quarterly
results. Also contributing to the increase were MIS expenses for customer
account processing and advertising costs associated with the successful second
quarter 1999 Caller ID sales campaign.
<PAGE>
CTSI
CTSI sales were $11,178 for the quarter ended September 30, 1999 as compared to
$6,205 for the same period in 1998. The increase of $4,973 primarily represents
an increase in local, toll and access revenues of $3,985 as a result of the
continued penetration in the Wilkes-Barre/Scranton, Harrisburg,
Lancaster/Reading, PA and Binghamton, NY markets and the 1999 expansion into the
Bucks, Chester and Montgomery County, PA market. Residential sales increased
$988. At September 30, 1999, CTSI had 73,406 installed access lines versus
35,933 installed access lines at September 30, 1998. In the three months ended
September 30, 1999, CTSI added 12,629 access lines.
CTSI revenues were $28,519 and $15,084 for the nine months ended September 30,
1999 and 1998, respectively. The increase of $13,435 or 89.1% is due to
increases in local, toll and access revenues associated with CTSI's continuing
penetration into the five markets noted above, including increased residential
sales of $2,213.
Operating expenses, excluding depreciation, amortization and management fees
were $12,356 and $8,004 for the quarters ended September 30, 1999 and 1998,
respectively. For the nine months ended September 30, 1999, operating expenses,
excluding depreciation, amortization and management fees were $34,175 as
compared to $21,434 for the nine months ended September 30, 1998. The increases
for both the three and nine month periods are a result of the continued growth
in the five markets noted above. These expenses represent employee-related
costs associated with sales, operations and support staff, building rental
expense, leased loop charges, long distance expense and terminating access from
independent local exchange carriers.
OTHER
Other sales were $13,383 and $12,377 for the quarters ended September 30, 1999
and 1998, respectively. The increase of $1,006 is due to increased epix sales
of $835 or 34.8% and increased CC sales of $851 or 12.8%, offset by a decline
in CLD sales of $680 or 20.6%.
For the nine months ended September 30, 1999, Other sales were $37,819 as
compared to $36,078 for the nine months ended September 30, 1998. The increase
of $1,741 is attributed to increased epix sales of $2,400 reflecting the
continued demand for dial-up and dedicated connection Internet access and
website development and hosting services; increases in CC sales of $1,740
(primarily business systems); and a decline in CLD revenues of $2,399. CLD
sales continue to decline as customers switch to alternate long-distance
providers due to CLD's above average industry rates. The Company expects this
trend to continue.
Other costs and expenses, excluding depreciation, amortization and management
fees were $11,507 and $11,787 for the three months ended September 30, 1999 and
1998, respectively. The decrease of $280 is due to lower costs of CLD due in
part to lower sales, offset by increased costs associated with the growth of
epix and increased sales of CC.
For the nine month period ended September 30, 1999, Other costs and expenses,
excluding depreciation, amortization and management fees were $34,015 as
compared to $33,798 for the nine months ended September 30, 1998. The increase
of $217 is primarily due to increased costs, primarily payroll and benefits,
transport and network costs associated with the growth of epix, increased costs
at CC due to higher sales, partially offset by a decline in CLD's costs due in
part to lower sales.
<PAGE>
ADJUSTED EBITDA - (Earnings before interest, taxes, depreciation and
amortization, other income (expense) and equity in income of unconsolidated
entities)
<TABLE>
<CAPTION>
Quarter ended Nine months ended
September 30, September 30,
---------------------- --------------------
1999 1998 1999 1998
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
CT $25,587 $22,352 $73,655 $66,227
CTSI (1,354) (2,016) (6,345) (6,878)
Other 1,672 157 2,865 1,017
------- ------- ------- -------
Total $25,905 $20,493 $70,175 $60,366
======= ======= ======= =======
</TABLE>
Adjusted EBITDA was $25,905 and $20,493 for the quarters ended September 30,
1999 and 1998, respectively. The increase of $5,412 or 26.4% is primarily due
to increased sales of CT and CTSI and a reduction in management fees, partially
offset by increased costs and expenses of CT and CTSI.
Adjusted EBITDA was $70,175 and $60,366 for the nine months ended September 30,
1999 and 1998, respectively. The increase of $9,809 or 16.2% is primarily due
to increased sales of CT and CTSI, partially offset by increased costs and
expenses of CT and CTSI. A reduction in management fees of $1,100 also
contributed to the increased Adjusted EBITDA.
The Company believes that Adjusted EBITDA is an alternate measure of operations
which (1) gauges the Company's ability to control costs and increase overall
profitability and (2) provides investors and research analysts with a benchmark
against certain other communications companies. Adjusted EBITDA is not a
measurement under U.S. GAAP and may not be comparable with other similarly
titled measures of other companies.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $1,744 or 17.8% for the quarter ended
September 30, 1999 as compared to the quarter ended September 30, 1998. For the
nine months ended September 30, 1999, depreciation and amortization increased
$5,658 or 20.7%. The increase for the three and nine month periods is due to a
higher depreciable plant balance as a result of CT and CTSI capital expenditures
during late 1998 and 1999.
INTEREST EXPENSE
Interest expense includes interest on CT's mortgage note payable to the National
Bank for Cooperatives, interest on CTE's revolving credit facility and
amortization of debt issuance costs. The Company used interest rate swaps on
$75,000 to hedge interest rate exposure. The differential to be paid or
received is accrued and recognized in interest expense and may change as
interest rates change. Interest expense was $3,828 and $3,370 for the quarters
ended September 30, 1999 and 1998, respectively. The increase is primarily due
to increased interest expense resulting from the $52,500 borrowing on the credit
facility associated with the preferred stock redemption in February, 1999,
partially offset by lower interest expense on CT's mortgage note payable to the
National Bank for Cooperatives.
Interest expense was $10,300 for the nine months ended September 30, 1999, as
compared to $9,572 for the nine months ended September 30, 1998. The increase
of $728 is due to increased interest expense resulting from the February, 1999
borrowing of $52,500 discussed above, partially offset by a reduction in
outstanding debt of $77,000 as a result of the October, 1998 common stock rights
offering. The Company borrowed $38,000 and $30,500 for the nine months ended
September 30, 1999 and 1998, respectively against its revolving credit facility
to fund CTSI's expansion.
<PAGE>
INCOME TAXES
The Company's effective income tax rates were 44.8% and 45.6% for the quarters
ended September 30, 1999 and 1998, respectively. For the nine months ended
September 30, 1999 and 1998, the Company's effective income tax rates were 45.2%
and 43.7%, respectively. The difference between the effective rates and the
amounts computed by applying the statutory federal rate is primarily
attributable to state income taxes net of federal benefit. The effective rate
is higher in 1999 since state tax benefits have not been fully realized on the
losses of CTSI due to valuation allowances offsetting state deferred tax assets
and state limitations on the amount of net operating loss carryforwards.
REGULATION
On February 26, 1999, the Federal Communications Commission ("FCC") released a
Declaratory Ruling determining that ISP traffic is interstate for jurisdictional
purposes, but that its current rules neither require nor prohibit the payment of
reciprocal compensation for such calls. In the absence of a federal rule, the
FCC determined that state commissions have authority to interpret and enforce
the reciprocal compensation provisions of existing interconnection agreements
and to determine the appropriate treatment of ISP traffic in arbitrating new
agreements. The FCC also requested comment on alternative federal rules to
govern compensation for such calls in the future. The Company's current
interconnection agreements with Bell Atlantic have been interpreted by the state
commissions in both Pennsylvania and New York to require payment of reciprocal
compensation on ISP calls. Both the Pennsylvania and New York commissions have
reaffirmed that reciprocal compensation is required for the termination of ISP
traffic. During the first nine months of 1999, CTSI recorded approximately $840
for reciprocal compensation revenues associated with ISP traffic.
The FCC instituted a rulemaking in 1998 to amend access charge rules for rate-
of-return Local Exchange Carriers ("LECs"). The FCC's proposal includes the
modification of LEC transport rate structure, the reallocation of costs in the
transport interconnection charge and amendments to reflect changes necessary to
implement universal service. This rulemaking is an outstanding issue at the FCC
and it is not possible to determine the impacts, if any, on CT's results of
operations.
Also in 1998, the FCC began a proceeding to consider a review of the FCC's
authorized rate-of-return for the interstate access services provided by
approximately 1,300 LECs, including CT. The FCC will determine if the
prevailing rate corresponds to current market conditions.
Under its alternative regulation plan approved in 1997, CTE is protected by an
exogenous event provision that recognizes and accounts for any state/federal
regulatory or legislative changes which affect revenues or expenses, thereby
allowing CT to rebalance rates (to a certain extent) to compensate for changes
in revenues and/or expenses due to such exogenous events.
On September 30, 1999, the Pennsylvania Public Utility Commission ("Pennsylvania
PUC") entered its final order to resolve numerous competitive issues raised
during the Global Settlement discussions. This order resolves petitions raised
by numerous parties that focus on issues such as rates for unbundled network
elements, collocation requirements, access charge reductions, universal service,
competitive services designation and many others. Bell Atlantic appealed the
order in various state and federal courts. The ultimate outcome of these
appeals cannot be predicted, nor can the effects on the Company's results of
operations.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Cash and temporary cash investments $ 15,120 $ 16,968
Working capital $ 1,213 $ (6,420)
Long-term debt (including current maturities) $209,591 $125,848
Nine months ended September 30,
1999 1998
-------- --------
Net cash provided by operating activities $ 49,403 $ 28,992
Investing activities:
Additions to property, plant and equipment $ 79,586 $ 59,738
</TABLE>
Cash and temporary cash investments was $15,120 at September 30, 1999 as
compared to $16,968 at December 31, 1998. The Company's working capital ratio
was 1.01 to 1 at September 30, 1999 as compared to 0.92 to 1 at December 31,
1998.
For the nine months ended September 30, 1999, the Company's net cash provided by
operating activities was $49,403 comprised of net income of $16,880, non-cash
depreciation and amortization of $32,981, partially offset by other non-cash
items and working capital changes of ($458). Net cash used in investing
activities of $81,361 consisted primarily of additions to property, plant and
equipment of $79,586. Net cash provided by financing activities of $30,110
consisted primarily of borrowings on the revolving credit facility of $90,500,
partially offset by the preferred stock redemption of ($52,000) and redemption
of long-term debt of ($6,757).
The Company currently has adequate resources to meet its short-term obligations,
including cash on hand of $15,120 and $146,000 of availability under its
revolving credit facilities at September 30, 1999.
In June, 1999 the Company amended and restated the provisions of its $125,000
unsecured revolving credit facility to provide for an increase in the aggregate
commitments under the revolving credit facility to $240,000, extend the maturity
of the revolving credit facility and make certain other changes in the covenants
and terms applicable to the credit facility. Also, in September of 1999, CT
negotiated an unsecured, 364-day revolving line of credit agreement that will
provide an additional $30,000 of borrowing capacity. The Company presently
intends to use the funds provided to continue building networks, working capital
and general corporate purposes.
The Company expects that the further expansion of the CTSI business will require
significant capital to fund the network development and operations, including
funding the development of its fiber optic networks and funding operating
losses. The Company's operations have required and will continue to require
substantial capital investments for the design, construction and development of
additional networks and services. Sources of funding for the Company's further
capital requirements may include financing from public offerings or private
placements of equity and/or debt securities, and bank loans. There can be no
assurance that additional financing will be available to the Company or, if
available, that it can be obtained on a timely basis and on acceptable terms.
Failure to obtain such financing could result in the delay or curtailment of the
Company's development and expansion plans and expenditures.
The Company anticipates that future cash flows will be used principally to
support operations and finance growth of the business and, thus, the Company
does not intend to pay cash dividends on the Company's common equity in the
foreseeable future. The payment of any cash dividends in the future will be at
the discretion of the Company's Board of Directors. The declaration of any
dividends and the amount thereof will depend on a number of factors, including
the Company's financial condition, capital requirements, funds from operations,
future business prospects and such other factors as the Company's Board of
Directors may deem relevant.
<PAGE>
As a result of factors such as the significant expenses associated with the
development of new networks and services, the Company anticipates that its
operating results could vary significantly from period to period.
YEAR 2000 READINESS DISCLOSURE
The Company has certain financial, administrative and operational systems which
are not Year 2000 compliant. The Company has performed a study to identify
those specific systems which require remediation and developed a plan to correct
such situations in a timely fashion. The plan includes procedures which are
designed to ensure that those systems for which the Company is dependent on
external vendors' remediation efforts will be Year 2000 compliant by the end of
1999. The Company has identified the following plan phases: (i) awareness,
which includes defining the problems presented; (ii) inventory, which includes a
detailed evaluation, by system, of the size and complexity of Year 2000
problems, if any; (iii) assessment, which consists of evaluating the Year 2000
compliance status of the inventory, through contact with vendors, and the
solutions required; (iv) renovation, which includes the actual repair, upgrade,
replacement or re-engineering of various systems; (v) validation, which includes
testing of affected systems; (vi) implementation, whereby renovated systems are
placed in production; and (vii) post implementation, which includes contingency
planning.
For those internal systems that require corrective action, the Company has
contracted with its information systems services provider to rewrite the
relevant programming code. During 1998, the Company converted its suite of
financial systems to an Oracle system. Such system is expected to ensure Year
2000 compliance in financial applications, enable the Company to process and
report its financial transactions more efficiently and provide a greater level
of detailed information to facilitate management's analysis which is critical to
its business decisions.
The Company is employing a team approach across its MIS, financial and
operational groups in addressing the above issues, as well as utilizing the
assistance of external consultants in the case of the Oracle implementation.
The Company completed renovation of its mission-critical systems. Non-critical
systems' renovation is also complete with the understanding that vendors will
continue to be monitored for patches and/or upgrades to their systems. The
Company continues to test its mission-critical systems. The Company does not
anticipate that mission-critical Information Technology (IT) projects will be
deferred or delayed as a result of the Year 2000 efforts.
The Year 2000 compliance status of interconnected third party networks is not
yet fully known. The Company has made and expects to continue to make inquiry
of interconnected third party networks and industry work groups addressing the
Year 2000 issues concerning testing and readiness. While the Company
understands that members of the US public switched telephone network are,
individually and collectively, working on remediation and testing of Year 2000
network issues, there can be no assurances that remediation or test results will
be complete or available for all configuration of interconnected software and
equipment used by the Company in connection with the network.
The most reasonably likely risks of failure by the Company or its supplier to
resolve the Year 2000 problem would be an inability to provide service for the
Company's customers and an inability on the part of the Company to timely
process service requests and billings for its customers. As a result, while the
Company believes its plan for Year 2000 remediation and testing of its
operational telephone networks is on schedule, the Company is unable to
determine the impact that any system interruption in interconnected third party
networks would have on the Company's business, financial condition and results
of operations.
<PAGE>
The Company has, over many years, sold, leased and maintained telephone
equipment manufactured by third parties and owned by the Company's customers,
known as Customer Premises Equipment ("CPE"), which is attached to the Company's
network. Certain CPE, including Private Branch Exchanges ("PBXs"), include
certain date-sensitive features, such as voice messaging and customer-owned cost
accounting systems. These systems or features may encounter Year 2000
processing problems resulting in system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities. The Company has, to the best of its ability, contacted affected
customers to inform them of any known Year 2000 issues with equipment supplied
by the Company.
Currently the Company is engaging with customers in various phases of their Year
2000 problems and solutions, and manufacturer or customer decisions to provide
or install such solutions. Whether manufacturers or owners will make or
complete necessary CPE repairs on a timely basis is not yet fully known. As a
result, the Company is unable to determine the impact that any CPE interruption
would have on the Company's business, financial condition or results of
operations.
Although the total costs to remedy the Year 2000 issues cannot be precisely
estimated and may change over time, the Company incurred costs of approximately
$1,000 during the first nine months of 1999 and anticipates spending an
aggregate of approximately $700 during the remainder 1999. This amount includes
the costs associated with the Company's current contingency plans. These costs
will be expensed as incurred, unless new systems are purchased that should be
capitalized in accordance with Generally Accepted Accounting Principles.
Some of the costs represent ongoing investment in systems upgrades, the timing
of which is being accelerated in order to facilitate Year 2000 readiness.
There is no assurance that the Company's Year 2000 readiness plan will progress
as intended. The Company continues to refine its Year 2000 remediation efforts
and the associated costs. Based on the information most currently available,
the Company does not believe that its cost of Year 2000 remediation will be
material. The Company continues to review and update its comprehensive
contingency plan in the event of network, system or hardware failure and
continues to monitor associated cost estimates.
The above discussion contains statements that are "forward-looking". The above
information is based on CTE's current best estimates, which were derived using
numerous assumptions. Given the complexity of these issues and possible as yet
unidentified risks, actual results may vary materially from those anticipated
and discussed above. Specific factors that might cause such differences
include, among others, the availability and cost of personnel trained in this
area, the ability to locate and correct all affected computer codes, the timing
and success of remedial efforts of our third party suppliers and similar
uncertainties. No assurance can be given that third parties, on whom the
Company depends for essential services (such as electric utilities,
interexchange carriers, software and hardware equipment suppliers, etc.), will
convert their critical systems and processes in a timely manner. Failure or
delay by any of these parties could significantly disrupt the Company's
business, financial condition or results of operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The table below provides information about the Company's interest rate
swaps. Notional amounts are used to calculate the contractual payments to be
exchanged under the contract. The estimated fair value amounts have been
provided to the Company by the financial institutions with which it has swap
contracts using appropriate valuation methodologies.
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands)
Approximate
Maturity Notional Fair Value as of
Date Fixed rate amount September 30, 1999
--------- ----------- -------- -------------------
<S> <C> <C> <C> <C>
Variable to fixed:
Hedge 1 2002 6.00% $15,000 $105
Hedge 2 2002 6.01% $10,000 $ 47
Hedge 3 2004 (a) 5.78% $20,000 $ 55
Hedge 4 2002 (b) 6.13% $15,000 $(87)
Hedge 5 2002 6.36% $15,000 $(62)
</TABLE>
(a) with an option to terminate the contract in 2002
(b) extendible to 2004
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(4) Instruments defining the rights of security holders,
including indentures
(a) Amended and restated credit agreement dated as of June
22, 1999 by and among Commonwealth Telephone
Enterprises, Inc. as borrower, the Lenders referred to
therein, First Union National Bank as Administrative
Agent, CIBC Inc., as Syndication Agent, PNC Bank,
National Association, as Documentation Agent and First
Union Capital Markets Corp., as Lead Arranger.
(b) Line of credit agreement dated as of September 30,
1999 by and between Commonwealth Telephone Company as
borrower and the CoBank, ACB.
(10) Material contracts
(a) Commonwealth Telephone Enterprises, Inc. Executive
Stock Purchase Plan as amended and restated,
effective December 21, 1998.
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 15, 1999 Commonwealth Telephone Enterprises, Inc.
/s/ John Butler
John Butler
Executive Vice President and
Chief Financial Officer
<PAGE>
============================================================================
$240,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of June 22, 1999,
by and among
COMMONWEALTH TELEPHONE ENTERPRISES, INC
as Borrower,
the Lenders referred to herein,
FIRST UNION NATIONAL BANK,
as Administrative Agent
CIBC INC.,
as Syndication Agent,
PNC BANK, NATIONAL ASSOCIATION,
as Documentation Agent
and
FIRST UNION CAPITAL MARKETS CORP.
acted as Lead Arranger
============================================================================
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of the 22nd day of June,
1999, by and among COMMONWEALTH TELEPHONE ENTERPRISES, INC., formerly known as
C-TEC Corporation, a corporation organized under the laws of the Commonwealth of
Pennsylvania ("CTE" or the "Borrower"), the Lenders who are or may become a
party to this Agreement, as Lenders, CIBC Inc., as Syndication Agent, PNC Bank,
National Association, as Documentation Agent and FIRST UNION NATIONAL BANK, a
national banking association, as Administrative Agent for the Lenders.
STATEMENT OF PURPOSE
--------------------
The Borrower, certain financial institutions (the "Prior Lenders") and
First Union National Bank, as administrative agent therefor, are parties to that
certain credit agreement dated as of June 30, 1997 (as amended, restated or
otherwise modified prior to the date hereof, the "Prior Credit Agreement") under
the terms of which the Prior Lenders provided the Borrower with a $125,000,000
revolving credit facility. The Borrower, the Lenders (including certain of the
Prior Lenders) and the Administrative Agent now desire to amend and restate the
provisions of the Prior Credit Agreement to (a) provide for an increase in the
aggregate commitments under such revolving credit facility, (b) extend the
maturity date of such revolving credit facility and (c) make certain other
changes in the covenants and other terms applicable to such revolving credit
facility, in each case, pursuant to the terms hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1 Definitions. The following terms when used in this Agreement
-----------
shall have the meanings assigned to them below:
"Adjusted Net Worth" of the Borrower means, as of the last day of any
------------------
fiscal quarter, the Net Worth of the Borrower as at such date calculated on a
pro forma basis excluding the aggregate amount of Excludable CTSI Losses for
- ---------
each Fiscal Year or a portion thereof during the period from April 1, 1999
through the end of such fiscal quarter.
"Adjusted Operating Cash Flow" means, with respect to any Person for any
----------------------------
period, the total of the following for such period calculated in accordance with
GAAP: (a) Operating Cash Flow less (b) the sum of (i) cash taxes, (ii) cash
----
dividends and other distributions and redemptions paid with respect to capital
stock and (iii) Capital Expenditures.
"Administrative Agent" means First Union in its capacity as Administrative
--------------------
Agent hereunder, and any successor thereto appointed pursuant to Section 11.9.
<PAGE>
"Administrative Agent's Office" means the office of the Administrative
-----------------------------
Agent specified in or determined in accordance with the provisions of Section
12.1.
"Affiliate" means, with respect to any Person, any other Person (other than
---------
a Subsidiary) which directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such first
Person or any of its Subsidiaries. The term "control" means (a) the power to
vote ten percent (10%) or more of the securities or other equity interests of a
Person having ordinary voting power, or (b) the possession, directly or
indirectly, of any other power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"Agreement" means this Amended and Restated Credit Agreement, as further
---------
amended, restated, supplemented or otherwise modified from time to time.
"Applicable Law" means all applicable provisions of constitutions, laws,
--------------
statutes, ordinances, rules, treaties, regulations, Governmental Approvals and
orders of Governmental Authorities and all orders and decrees of all courts and
arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in Section
-----------------
3.1(c).
"Arbitration Rules" shall have the meaning assigned thereto in Section
-----------------
12.6(a).
"Assignment and Acceptance" shall have the meaning assigned thereto in
-------------------------
Section 12.10.
"Base Rate" means, at any time, the higher of (a) the Prime Rate and (b)
---------
the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
----
effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate based upon the
--------------
Base Rate as provided in Section 3.1(a).
"Borrower" means CTE in its capacity as borrower hereunder.
--------
"Business Day" means (a) for all purposes other than as set forth in clause
------------
(b) below, any day other than a Saturday, Sunday or legal holiday on which banks
in Charlotte, North Carolina and New York, New York, are open for the conduct of
their commercial banking business, and (b) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and
that is also a day for trading by and between banks in Dollar deposits in the
London interbank market.
"Calculation Date" shall have the meaning assigned thereto in Section
----------------
3.1(c).
"Capital Asset" means, with respect to the Borrower and its Subsidiaries,
-------------
any asset that should, in accordance with GAAP, be classified and accounted for
as a capital asset on a Consolidated balance sheet of the Borrower and its
Subsidiaries.
2
<PAGE>
"Capital Expenditures" means, with respect to the Borrower and its
--------------------
Subsidiaries for any period, the aggregate cost of all Capital Assets acquired
by the Borrower and its Subsidiaries (other than Capital Assets acquired in
accordance with the terms hereof with the proceeds from casualty insurance or
condemnations) during such period determined in accordance with GAAP.
"Capital Lease" means any lease of any property by the Borrower or any of
-------------
its Subsidiaries, as lessee, that should, in accordance with GAAP, be classified
and accounted for as a capital lease on a Consolidated balance sheet of the
Borrower and its Subsidiaries.
"Change in Control" means (a) the acquisition of ownership, directly or
-----------------
indirectly, beneficially or of record, by any Person or group (within the
meaning of Rule 13d-5 under the Securities Exchange Act of 1934 as in effect on
the date hereof), other than one or more of, or a group consisting entirely or
in part of, Level 3 Communications, Inc., its controlled Affiliates, RCN
Corporation and David C. McCourt, of shares representing more than thirty
percent 30% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Borrower or (b) occupation of a majority of the
seats (other than vacant seats) on the Board of Directors of the Borrower by
Persons who were neither (i) nominated by the Board of Directors of the Borrower
nor (ii) appointed by directors so nominated.
"Closing Date" means the date of this Agreement or such later Business Day
------------
upon which each condition described in Section 4.2 shall be satisfied or waived
in all respects in a manner acceptable to the Administrative Agent, in its sole
discretion.
"CoBank Facilities" means one or more credit, loan or similar agreements,
-----------------
in existence as of the date hereof or entered into no later than September 1,
1999, extended to Commonwealth Telephone Company by CoBank, ACB ("CoBank"), or
by CoBank along with other lenders, as same may be amended, restated,
supplemented, renewed, extended, refunded or replaced from time to time.
"Code" means the Internal Revenue Code of 1986, and the rules and
----
regulations thereunder, each as amended or modified from time to time.
"Commitment" means (a) as to any Lender, the obligation of such Lender to
----------
make the Loans to the account of the Borrower hereunder in an aggregate
principal amount not to exceed the amount set forth opposite such Lender's name
on Schedule 1.1, as such amounts may be reduced or modified at any time or from
------------
time to time pursuant to the terms hereof and (b) as to all Lenders, the
aggregate commitment of all Lenders to make Loans. The Commitment of all
Lenders as of the Closing Date shall be Two Hundred Forty Million Dollars
($240,000,000).
"Commitment Percentage" means, as to any Lender at any time, the ratio of
---------------------
(a) the amount of the Commitment of such Lender to (b) the Commitment of all of
the Lenders.
"Consolidated" means, when used with reference to financial statements or
------------
financial statement items of the Borrower and its Subsidiaries, such statements
or items on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.
3
<PAGE>
"CTE" means Commonwealth Telephone Enterprises, Inc. (formerly known as
---
C-TEC Corporation), and its successors.
"CTSI" means Commonwealth Telephone Services, Inc., a Pennsylvania
----
corporation, and its successors.
"CTSI Losses" means, for any period, the net loss of CTSI for such period,
-----------
determined in accordance with GAAP.
"Debt" means, with respect to the Borrower and its Subsidiaries at any date
----
and without duplication, the sum of the following calculated in accordance with
GAAP: (a) all liabilities, obligations and indebtedness for borrowed money
including but not limited to obligations evidenced by bonds, debentures, notes
or other similar instruments of any such Person, (b) all obligations to pay the
deferred purchase price of property or services of any such Person, except trade
payables arising in the ordinary course of business not more than ninety (90)
days past due (c) all obligations of any such Person as lessee under Capital
Leases, (d) all Debt of any other Person secured by a Lien on any asset of the
Borrower or any of its Subsidiaries, (e) all Guaranty Obligations of any such
Person, (f) all obligations, contingent or otherwise, of any such Person
relative to the face amount of letters of credit, whether or not drawn, and
banker's acceptances issued for the account of any such Person, and (g) all net
payment obligations incurred by any such Person pursuant to Hedging Agreements.
"Default" means any of the events specified in Section 10.1 which with the
-------
passage of time, the giving of notice or both, would constitute an Event of
Default.
"Disqualified Stock" means any capital stock of a Person that by its terms
------------------
(a) has any scheduled interest or dividend payment, (b) upon the passage of time
or occurrence of any event has any redemption or similar payment due, (c) is
required to be redeemed or repurchased at the option of any holder or otherwise
or (d) is convertible into Debt or is convertible to another security which
contains any such terms.
"Disputes" shall have the meaning set forth in Section 12.6.
--------
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
--------------
currency of the United States.
"Eligible Assignee" means, with respect to any assignment of the rights,
-----------------
interest and obligations of a Lender hereunder, a Person that is at the time of
such assignment (a) a commercial bank organized or licensed under the laws of
the United States or any state thereof, having combined capital and surplus in
excess of $500,000,000, (b) a commercial bank organized under the laws of any
other country that is a member of the Organization of Economic Cooperation and
Development, or a political subdivision of any such country, having combined
capital and surplus in excess of $500,000,000, (c) a finance company, insurance
company or other financial institution which in the ordinary course of business
extends credit of the type extended hereunder and that has total assets in
excess of $1,000,000,000, (d) already a Lender
5
<PAGE>
hereunder (whether as an original party to this Agreement or as the assignee of
another Lender), (e) the successor (whether by transfer of assets, merger or
otherwise) to all or substantially all of the commercial lending business of the
assigning Lender, (f) a special-purpose investment fund which is organized for
the specific purpose of making, acquiring participations in, or investing in
loans of the type made pursuant to this Agreement, or (g) any other Person that
has been approved in writing as an Eligible Assignee by the Borrower and the
Administrative Agent.
"Employee Benefit Plan" means any employee benefit plan within the meaning
---------------------
of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower
or any ERISA Affiliate or (b) has at any time within the preceding six years
been maintained for the employees of the Borrower or any current or former ERISA
Affiliate.
"Environmental Laws" means any and all federal, foreign, state, provincial
------------------
and local laws, statutes, ordinances, rules, regulations, permits, licenses,
approvals, and orders of courts or Governmental Authorities relating to the
protection of human health or the environment, including, but not limited to,
requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
-----
rules and regulations thereunder, each as amended or modified from time to time.
"ERISA Affiliate" means any Person who together with the Borrower is
---------------
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Eurodollar Reserve Percentage" means, for any day, the percentage
-----------------------------
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City.
"Event of Default" means any of the events specified in Section 10.1,
----------------
provided that any requirement for passage of time, the giving of notice or both,
has been satisfied.
"Excludable CTSI Losses" means, for a period constituting all or any
----------------------
portion of a Fiscal Year, CTSI Losses for such period, not to exceed during any
Fiscal Year an aggregate amount equal to (a) in the case of Fiscal Year 1999,
$8,000,000 and (b) in the case of each subsequent Fiscal Year, the projected
CTSI Losses for such Fiscal Year as set forth in the budget for such Fiscal Year
delivered by the Borrower pursuant to Section 6.1(c), provided that the amount
---------
of such CTSI Losses, for purposes of this definition, shall be subject to the
approval of the Required Lenders.
"FCC" means the Federal Communications Commission or any successor
---
Governmental Authority.
5
<PAGE>
"FCC License" means any license, permit, consent, certificate of
-----------
compliance, franchise, approval, waiver or authorization granted or issued by
the FCC.
"FDIC" means the Federal Deposit Insurance Corporation, or any successor
----
thereto.
"Federal Funds Rate" means the rate per annum (rounded upwards, if
------------------
necessary, to the next higher 1/100th of 1%) representing the daily effective
overnight federal funds rate as quoted by the Administrative Agent and confirmed
in Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any
reason, such rate is not available, then "Federal Funds Rate" shall mean a daily
rate which is determined, in the opinion of the Administrative Agent, to be the
rate at which federal funds are being offered for sale in the national federal
funds market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays
shall be the same as the rate for the most immediate preceding Business Day.
"First Union" means First Union National Bank, a national banking
-----------
association, and its successors.
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries
-----------
ending on December 31.
"Fixed Charges" means, for any period, the sum of the following determined
-------------
on a Consolidated basis, without duplication, for the Borrower and its
Subsidiaries in accordance with GAAP: (a) Interest Expense and (b) scheduled
principal payments with respect to Debt.
"GAAP" means generally accepted accounting principles, as recognized by the
----
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board, consistently applied and maintained on a consistent basis
throughout the period indicated and consistent with the prior financial practice
of the Borrower and its Subsidiaries (except for changes in such practice with
which the Borrower's independent certified public accountants have concurred).
"Governmental Approvals" means all authorizations, consents, approvals,
----------------------
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities, including without limitation any FCC License or PUC
Authorization.
"Governmental Authority" means any nation, province, state or political
----------------------
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing, including
without limitation the FCC and any PUC.
"Guaranty Obligation" means, with respect to the Borrower and its
-------------------
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt of any other Person and, without limiting
6
<PAGE>
the generality of the foregoing, any obligation, direct or indirect, contingent
or otherwise, of any such Person (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt (whether arising by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
condition or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided, that
--------
the term Guaranty Obligation shall not include endorsements for collection or
deposit in the ordinary course of business.
"Hazardous Materials" means any substances or materials (a) which are or
-------------------
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Applicable Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Environmental Law or common law, (d) the discharge or emission or release of
which requires a permit or license under any Environmental Law or other
Governmental Approval, (e) which are deemed to constitute a nuisance or a
trespass or which pose a health or safety hazard to Persons or neighboring
properties, (f) which consist of underground or aboveground storage tanks,
whether empty, filled or partially filled with any substance, or (g) which
contain without limitation asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest rate
-----------------
swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrower under this Agreement, and any
confirming letter executed pursuant to such hedging agreement, all as amended,
restated, supplemented or otherwise modified from to time.
"Interest Expense" means, with respect to any Person for any period, the
----------------
interest expense as determined for such period in accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in Section
---------------
3.1(b).
"Lender" means each Person executing this Agreement as a Lender set forth
------
on the signature pages hereto and each Person that hereafter becomes a party to
this Agreement as a Lender pursuant to Section 12.10.
"Lending Office" means, with respect to any Lender, the office of such
--------------
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Leverage Ratio" means as of any date of determination, the ratio as of
--------------
such date determined in accordance with Section 8.1.
7
<PAGE>
"LIBOR" means the rate of interest per annum determined on the basis of the
-----
rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a
period equal to the applicable Interest Period which appears on the Dow Jones
Market Screen 3750 at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period. If, for any
reason, such rate does not appear on Dow Jones Market Screen 3750, then "LIBOR"
shall be determined by the Administrative Agent, to be the arithmetic average of
the rate per annum at which deposits in Dollars in minimum amounts of at least
$5,000,000 would be offered by first class banks in the London interbank market
to the Administrative Agent at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of the applicable Interest Period for a
period equal to such Interest Period and in an amount substantially equal to the
amount of the applicable Loan. Each calculation by the Administrative Agent of
LIBOR shall be conclusive and binding for all purposes, absent manifest error.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the
----------
next higher 1/100th of 1%) determined by the Administrative Agent pursuant to
the following formula:
LIBOR Rate = LIBOR
----------------------------------
1.00-Eurodollar Reserve Percentage
"LIBOR Rate Loan" means any Loan bearing interest at a rate based upon the
---------------
LIBOR Rate as provided in Section 3.1(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest, hypothecation or encumbrance of any kind in respect
of such asset. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement relating to such asset.
"Loan" means any loan made to the Borrower pursuant to Section 2.1 and all
----
such Loans collectively as the context requires.
"Loan Documents" means, collectively, this Agreement, the Notes, any
--------------
Hedging Agreement executed by any Lender (or Affiliate thereof) and each other
document referenced in Article V or otherwise required to be delivered by or on
behalf of the Borrower or its Subsidiaries pursuant to this Agreement all as may
be amended, restated or otherwise modified.
"Material Adverse Effect" means a material adverse effect on the business,
-----------------------
operations or financial condition of the Borrower and its Subsidiaries, taken as
a whole, or the ability of the Borrower to perform its obligations under the
Loan Documents to which it is a party.
"Material Contract" means any written contract or other agreement of the
-----------------
Borrower or any of its Subsidiaries (other than one evidencing Debt, providing
for the acquisition or construction of Capital Assets or the making of any
Investment (including by way of merger) permitted by Section 9.3 (and, if
applicable, Section 9.4)) involving monetary liability of any such Person in an
amount in excess of $3,000,000 per annum.
8
<PAGE>
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
------------------
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make or has accrued an obligation to make,
contributions within the preceding six (6) years.
"Net Cash Proceeds" means, as applicable with respect to the Borrower or
-----------------
any of its Subsidiaries, (a) with respect to any sale or other disposition of
assets, the gross cash proceeds received by the Borrower or any of its
Subsidiaries from such sale less the sum of (i) all income taxes and other taxes
----
assessed by a Governmental Authority as a result of such sale and any other
reasonable fees and expenses incurred in connection therewith and (ii) the
principal amount of, premium, if any, and interest on any Debt secured by a Lien
on the asset (or a portion thereof) sold, which Debt is required to be repaid in
connection with such sale, (b) with respect to any issuance of Debt, the gross
cash proceeds received by the Borrower or any of its Subsidiaries therefrom less
----
all legal, underwriting and other reasonable fees and expenses incurred in
connection therewith and the amount thereof applied to repay existing Debt
permitted by Section 9.1 and (c) with respect to any payment under an insurance
policy or in connection with a condemnation proceeding, the amount of cash
proceeds received by the Borrower or any of its Subsidiaries from an insurance
company or Governmental Authority, as applicable, net of all reasonable expenses
of collection.
"Net Income" means, with respect to the Borrower and its Subsidiaries, for
----------
any period of determination, the net income (or loss) of the Borrower and its
Subsidiaries for such period, determined on a Consolidated basis in accordance
with GAAP; provided that there will be excluded (a) the net income (or loss) of
--------
any Person, other than a Wholly-Owned Subsidiary, in which the Borrower or any
of its Subsidiaries has a joint interest with a third party, except to the
extent of the amount of dividends or distributions actually paid to the Borrower
or any of its Subsidiaries during such period by such Person, (b) except to the
extent included pursuant to the foregoing clause (a), the net income (or loss)
of any Person accrued prior to the date it becomes a Subsidiary of the Borrower
or any of its Subsidiaries or is merged into or consolidated with the Borrower
or any of its Subsidiaries or that Person's assets are acquired by the Borrower
or any of its Subsidiaries, (c) the net income (if positive) of any Subsidiary
of the Borrower to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary to the Borrower or any of its
Subsidiaries of such net income (i) is not at the time permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute rule or governmental regulation applicable to such Subsidiary or (ii)
would be subject to any taxes payable on such dividends or distributions and (d)
any extraordinary gains or losses attributable to asset sales, as determined in
accordance with GAAP, including any related tax effects on such Person.
"Net Worth" means, with respect to the Borrower and its Subsidiaries at any
---------
time and without duplication, total assets of such Persons, less total
----
liabilities of such Persons, in each case determined on a Consolidated basis in
accordance with GAAP.
"Non-Recourse" means, with respect to all indebtedness and other
------------
liabilities of any Person (an "Obligation") in which an investment has been made
by the Borrower or any Subsidiary pursuant to Section 9.3(e)(ii), (a) neither
the Borrower nor any of its Subsidiaries (i) provides credit support (including
any undertaking, agreement or instrument which would
9
<PAGE>
constitute Debt), (ii) is directly or indirectly liable or (iii) constitutes the
lender (except pursuant to an investment permitted by Section 9.3(e)(ii)), in
each case for any such Obligation and (b) no default with respect to such
Obligation (including any rights which the holders thereof may have to take
enforcement action against the relevant Person or its assets) would permit (upon
notice, lapse of time or both) any holder of any Debt of the Borrower or its
Subsidiaries to declare a default on such Debt or cause the payment thereof to
be accelerated or payable prior to its stated maturity.
"Notes" means the revolving credit notes made by the Borrower payable to
-----
the order of each Lender, substantially in the form of Exhibit A, evidencing the
---------
Debt incurred by the Borrower pursuant to the Revolving Credit Facility, and any
amendments and modifications thereto, any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in part.
"Notice of Account Designation" shall have the meaning assigned thereto in
-----------------------------
Section 2.2(b).
"Notice of Borrowing" shall have the meaning assigned thereto in Section
-------------------
2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned thereto
---------------------------------
in Section 3.2.
"Notice of Prepayment" shall have the meaning assigned thereto in Section
--------------------
2.3(d).
"Obligations" means, in each case, whether now in existence or hereafter
-----------
arising: (a) the principal of and interest on (including interest accruing after
the filing of any bankruptcy or similar petition) the Loans and (b) all other
fees and commissions (including attorney's fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing
by the Borrower to the Lenders or the Administrative Agent, in each case under
or in respect of any Loan Document of every kind, nature and description, direct
or indirect, absolute or contingent, due or to become due, contractual or
tortious, liquidated or unliquidated, and whether or not evidenced by any note.
"Officer's Compliance Certificate" shall have the meaning assigned thereto
--------------------------------
in Section 6.2.
"Operating Cash Flow" means, with respect to the Borrower and its
-------------------
Subsidiaries for any period, the following, determined on a Consolidated basis,
without duplication in accordance with GAAP: (a) Net Income, plus (b) to the
----
extent deducted in determining Net Income, (i) income and franchise taxes, (ii)
Interest Expense, (iii) depreciation, amortization (including amortization of
goodwill and other intangibles) and other non-cash charges, and (iv) any items
of extraordinary, unusual or non-recurring loss, minus (c) to the extent
-----
included in determining Net Income, any items of extraordinary, unusual or non-
recurring gain (together with any related provision for taxes on such gain).
For any acquisition or sale permitted hereunder by such Person during any period
of calculation, the definition of Operating Cash Flow shall be adjusted on a pro
---
forma basis in a manner reasonably satisfactory to the Administrative Agent to
- -----
give
10
<PAGE>
effect to such acquisition or sale as if such acquisition or sale occurred on
the first day of such period.
"Other Taxes" shall have the meaning assigned thereto in Section 3.11(c).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
agency.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
------------
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for the employees of the Borrower or any
ERISA Affiliates or (b) has at any time within the preceding six (6) years been
maintained for the employees of the Borrower or any of its current or former
ERISA Affiliates.
"Person" means an individual, corporation, partnership, limited liability
------
company, association, trust, business trust, joint venture, joint stock company,
pool, syndicate, sole proprietorship, unincorporated organization, Governmental
Authority or any other form of entity or group thereof.
"Prime Rate" means, at any time, the rate of interest per annum publicly
----------
announced from time to time by First Union as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day such
change in such prime rate occurs. The parties hereto acknowledge that the rate
announced publicly by First Union as its prime rate is an index or base rate and
shall not necessarily be its lowest or best rate charged to its customers or
other banks.
"PUC" means any state regulatory agency or body that exercises jurisdiction
---
over the rates or services or the acquisition, construction or operation of any
telecommunications system or any person who owns, constructs or operates any
telecommunications system, in each case by reason of the nature or type of the
business subject to regulation and not pursuant to laws and regulations of
general applicability to Persons conducting business in said state.
"PUC Authorization" means any license, permit, consent, certificate of
-----------------
compliance, franchise, approval, waiver or authorization granted or issued by a
PUC.
"Register" shall have the meaning assigned thereto in Section 12.10(d).
--------
"Required Lenders" means, at any date, any combination of holders of at
----------------
least fifty-one percent (51%) of the aggregate unpaid principal amount of the
Loans, or if no Loans are outstanding, any combination of Lenders whose
Commitment Percentages aggregate at least fifty-one percent (51%).
"Revolving Credit Facility" means the revolving credit facility established
-------------------------
pursuant to Article II hereof.
"Significant Subsidiary" means, as of any date of determination, (i) any
----------------------
Subsidiary whose assets exceed five percent (5%) of the total consolidated
assets of the Borrower and its Subsidiaries as of the end of the most recently
completed fiscal quarter or (ii) any Subsidiary
11
<PAGE>
whose revenue exceeds five percent (5%) of the total revenue of the Borrower and
its Subsidiaries as of the end of the most recently completed fiscal quarter for
the period of four (4) consecutive fiscal quarters ending on such fiscal quarter
end.
"Solvent" means, as to the Borrower and its Subsidiaries, taken as a whole,
-------
on a particular date, that such Persons (a) have capital sufficient to carry on
their businesses and transactions and all businesses and transactions in which
they are about to engage and are able to pay their debts as they mature, (b) own
property having a value, both at fair valuation and at present fair saleable
value, greater than the amount required to pay their probable liabilities
(including contingencies), and (c) do not believe that they will incur debts or
liabilities beyond their ability to pay such debts or liabilities as they
mature.
"Subsidiary" means as to any Person, any corporation, partnership, limited
----------
liability company or other entity of which more than fifty percent (50%) of the
outstanding capital stock or other ownership interests having ordinary voting
power to elect a majority of the Board of Directors or other managers of such
corporation, partnership, limited liability company or other entity is at the
time, directly or indirectly, owned by or the management is otherwise controlled
by such Person (irrespective of whether, at the time, capital stock or other
ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency). Unless otherwise
qualified, references to "Subsidiary" or "Subsidiaries" herein shall refer to
those of the Borrower.
"Taxes" shall have the meaning assigned thereto in Section 3.11(a).
-----
"Termination Date" means the earliest of the dates referred to in Section
----------------
2.6.
"Termination Event" means: (a) a "Reportable Event" described in Section
-----------------
4043 of ERISA (as to which the thirty (30) day notice requirement has not been
waived by the PBGC), or (b) the withdrawal of the Borrower or any ERISA
Affiliate from a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a
notice of intent to terminate a Pension Plan under Section 4041(e) or the
treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings under Section 4042 of ERISA to
terminate, or the appointment of a trustee with respect to, any Pension Plan by
the PBGC, or (e) any other event or condition which would reasonably constitute
grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, or (f) the partial or
complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer
Plan, or (g) the imposition of a Lien pursuant to Section 412 of the Code or
Section 302 of ERISA, or (h) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245
of ERISA, or (i) any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of
proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.
"Total Debt" means with respect to any Person at any date and without
----------
duplication, the sum of the following calculated without duplication in
accordance with GAAP: (a) all liabilities,
12
<PAGE>
obligations and indebtedness for borrowed money including but not limited to
obligations evidenced by bonds, debentures, notes or other similar instruments
of any such Person, (b) all obligations to pay the deferred purchase price of
property or services of any such Person, except trade payables arising in the
ordinary course of business not more than ninety (90) days past due, (c) all
obligations, contingent or otherwise, of any such Person relative to face amount
of letters of credit, whether or not drawn, and bankers' acceptances issued for
the account of any such Person which in an aggregate amount exceed $10,000,000
outstanding at any one time, (d) all obligations of any such Person as lessee
under Capital Leases and (e) all Guaranty Obligations of any such Person with
respect to any obligations of another Person that would constitute a part of
Total Debt of such Person.
"United States" means the United States of America.
-------------
"Wholly-Owned" means, with respect to a Subsidiary, that all of the shares
------------
of capital stock or other ownership interests of such Subsidiary are, directly
or indirectly, owned or controlled by the Borrower and/or one or more of its
Wholly-Owned Subsidiaries (except for directors' qualifying shares required by
Applicable Law to be owned by a Person other than the Borrower).
SECTION 1.2 General. Unless otherwise specified, a reference in this
-------
Agreement to a particular article, section, subsection, Schedule or Exhibit is a
reference to that article, section, subsection, Schedule or Exhibit of this
Agreement. Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter. Any reference herein to "Charlotte time"
shall refer to the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 Other Definitions and Provisions.
--------------------------------
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
------------------------
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words
-------------
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
ARTICLE II
REVOLVING CREDIT FACILITY
-------------------------
SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions of
----------------------
this Agreement, each Lender severally agrees to make Loans to the Borrower from
time to time from the Closing Date through, but not including, the Termination
Date as requested by the Borrower
13
<PAGE>
in accordance with the terms of Section 2.2; provided, that (a) the aggregate
--------
principal amount of all outstanding Loans (after giving effect to any amount
requested) shall not exceed the Commitment of all Lenders and (b) the principal
amount of outstanding Loans from any Lender to the Borrower shall not at any
time exceed such Lender's Commitment. Each Loan by a Lender shall be in a
principal amount equal to such Lender's Commitment Percentage of the aggregate
principal amount of Loans requested on such occasion. Subject to the terms and
conditions hereof, the Borrower may borrow, repay and reborrow Loans hereunder
until the Termination Date.
SECTION 2.2 Procedure for Advances of Loans.
-------------------------------
(a) Requests for Borrowing. The Borrower shall give the Administrative
----------------------
Agent irrevocable prior written notice in the form attached hereto as Exhibit B
---------
(a "Notice of Borrowing") not later than 11:00 a.m. (Charlotte time) (i) on the
same Business Day as each Base Rate Loan and (ii) at least three (3) Business
Days before each LIBOR Rate Loan, of its intention to borrow, specifying (A) the
date of such borrowing, which shall be a Business Day, (B) the amount of such
borrowing, which shall be (x) with respect to Base Rate Loans in an aggregate
principal amount of $1,000,000 or a whole multiple of $500,000 in excess
thereof, and (y) with respect to LIBOR Rate Loans, in an aggregate principal
amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof, (C)
whether the Loans are to be LIBOR Rate Loans or Base Rate Loans (provided that
LIBOR Rate Loans shall not be available until three (3) Business Days after the
Closing Date) and (D) in the case of a LIBOR Rate Loan, the duration of the
initial Interest Period applicable thereto. A Notice of Borrowing received
after 11:00 a.m. (Charlotte time) shall be deemed received on the next Business
Day. The Administrative Agent shall promptly notify the Lenders of each Notice
of Borrowing.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Charlotte time) on
---------------------
the proposed borrowing date, each Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in funds immediately available to the Administrative Agent,
such Lender's Commitment Percentage of the Loans to be made on such borrowing
date. The Borrower hereby irrevocably authorizes the Administrative Agent to
disburse the proceeds of the borrowing requested pursuant to this Section 2.2 in
immediately available funds by crediting or wiring such proceeds to the deposit
account of the Borrower identified in the most recent notice substantially in
the form of Exhibit G (a "Notice of Account Designation") delivered by the
---------
Borrower to the Administrative Agent or as may be otherwise agreed upon by the
Borrower and the Administrative Agent from time to time. Subject to Section 3.7
hereof, the Administrative Agent shall not be obligated to disburse the portion
of the proceeds of any Loan requested pursuant to this Section 2.2 to the extent
that any Lender has not made available to the Administrative Agent its
Commitment Percentage of such Loan.
SECTION 2.3 Repayment of Loans.
------------------
(a) Repayment on Termination Date. The Borrower shall repay the
-----------------------------
outstanding principal amount of all Loans in full, together with all accrued but
unpaid interest thereon, on the Termination Date.
14
<PAGE>
(b) Mandatory Repayment of Excess Loans. If at any time the outstanding
-----------------------------------
principal amount of all Loans exceeds the Commitment, the Borrower shall repay
immediately upon notice from the Administrative Agent, by payment to the
Administrative Agent for the account of the Lenders, the Loans in an amount
equal to such excess.
(c) Other Mandatory Repayments.
--------------------------
(i) Sale of Assets. The Borrower shall make mandatory principal
--------------
payments of the Loans in amounts equal to 100% of the aggregate Net Cash
Proceeds in excess of $2,000,000 received after the date hereof by the Borrower
or any of its Subsidiaries from any sale, trade or other disposition of assets
permitted by Section 9.5(e), including without limitation, from any sale of
capital stock or any other equity ownership interest in any Subsidiary;
provided, that (A) such payment shall be made only at such time as such Net Cash
- --------
Proceeds required to be paid but not previously applied equal $250,000 or any
whole multiple thereof (at which time the entire unapplied amount shall be paid)
and (B) unless any Default in the payment of any interest or fees under this
Agreement or Event of Default has occurred and is continuing, no such payment
shall be required if and to the extent such Net Cash Proceeds are reinvested in
the business of the Borrower and its Subsidiaries within two hundred seventy
(270) days after such sale, trade or disposition. Any investment permitted by
Sections 9.3(d) or 9.3(e) may satisfy the reinvestment requirement of this
Section 2.3(c)(i); provided that any such investment constituting a direct
--------
purchase of replacement assets shall not reduce the applicable amount of
permitted investments provided for in Section 9.3(d) and Section 9.3(e) and any
such investment constituting a purchase of capital stock or any other equity
interest shall reduce such applicable amount.
(ii) Insurance. The Borrower shall make mandatory principal payments
---------
of the Loans in amounts equal to 100% of the Net Cash Proceeds received by the
Borrower or any of its Subsidiaries from any insurance policy if such Net Cash
Proceeds (i) exceed $500,000 in the aggregate for any loss or series of related
losses and (ii) are not reinvested in the business of the Borrower and its
Subsidiaries within two hundred seventy (270) days of receipt; provided, that if
--------
any Default in the payment of any interest or fees under this Agreement or Event
of Default has occurred and is continuing at the time of such receipt, the
Borrower shall not have the option to make any such reinvestment and shall make
such mandatory payment in accordance with paragraph (iv) of this Section 2.3(c).
Any investment permitted by Sections 9.3(d) or 9.3(e) may satisfy the
reinvestment requirement of this Section 2.3(c)(ii); provided that any such
--------
investment constituting a direct purchase of replacement assets shall not reduce
the applicable amount of permitted investments provided for in Section 9.3(d)
and 9.3(e) and any such investment constituting a purchase of capital stock or
any other equity interest shall reduce such applicable amount.
(iii) Issuance of Debt. The Borrower shall make mandatory principal
----------------
payments of the Loans in amounts equal to 100% of the Net Cash Proceeds from the
issuance of any Debt of the Borrower or any of its Subsidiaries incurred after
the Closing Date not permitted by Section 9.1 (but otherwise consented to by the
Required Lenders), if after the issuance of such Debt, the Leverage Ratio
exceeds 3.0 to 1.0. (For purposes of determining the Leverage Ratio with
respect to this Section 2.3(c)(iii), Total Debt of the Borrower and its
Subsidiaries shall be
15
<PAGE>
calculated on each date that the Borrower or any of its Subsidiaries receives
any such Net Cash Proceeds.)
(iv) Notice; Manner of Payments. Upon the occurrence of any event
--------------------------
triggering the repayment requirement under this Section 2.3(c), the Borrower
shall give prompt written notice of such event and the amount of the
corresponding prepayment to the Administrative Agent and upon receipt of such
notice, the Administrative Agent shall promptly so notify the Lenders. Each
mandatory prepayment required under Section 2.3(c) shall be made within three
(3) Business Days of such event and shall be applied to repay the outstanding
principal amount of Loans.
(d) Optional Repayments. The Borrower may at any time and from time to
-------------------
time repay the Loans, in whole or in part, upon at least three (3) Business
Days' irrevocable notice to the Administrative Agent with respect to LIBOR Rate
Loans and one (1) Business Day irrevocable notice with respect to Base Rate
Loans, in the form attached hereto as Exhibit C (a "Notice of Prepayment")
---------
specifying the date and amount of repayment and whether the repayment is of
LIBOR Rate Loans, Base Rate Loans, or a combination thereof, and, if of a
combination thereof, the amount allocable to each. Upon receipt of such notice,
the Administrative Agent shall promptly notify each Lender. If any such notice
is given, the amount specified in such notice shall be due and payable on the
date set forth in such notice. Partial repayments shall be in an aggregate
amount of $1,000,000 or a whole multiple of $500,000, in excess thereof with
respect to Base Rate Loans, and $2,000,000 or a whole multiple of $1,000,000 in
excess thereof with respect to LIBOR Rate Loans.
(e) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not
-------------------------------------------
repay any LIBOR Rate Loan under this Section 2.3 on any day other than on the
last day of the Interest Period applicable thereto unless such repayment is
accompanied by any amount required to be paid pursuant to Section 3.9.
SECTION 2.4 Revolving Credit Notes. Each Lender's Loans and the obligation
----------------------
of the Borrower to repay such Loans shall be evidenced by a Note payable to the
order of such Lender. Each Note shall bear interest on the unpaid principal
amount thereof at the applicable interest rate per annum specified in Section
3.1.
SECTION 2.5 Permanent Reduction of the Commitment.
-------------------------------------
(a) Voluntary Reduction. The Borrower shall have the right at any time and
-------------------
from time to time, upon at least five (5) Business Days prior written notice to
the Administrative Agent, to permanently reduce, without premium or penalty, (i)
the entire Commitment at any time or (ii) portions of the Commitment, from time
to time, in an aggregate principal amount not less than $2,000,000 or any whole
multiple of $500,000 in excess thereof, such partial reduction to be applied to
reduce each Lender's Commitment pro rata in accordance with its Commitment.
(b) Repayment of Principal. Each permanent reduction permitted pursuant to
----------------------
this Section 2.5 shall be accompanied by a payment of principal sufficient to
reduce the aggregate principal amount of Loans to the Commitment as so reduced.
Any reduction of the Commitment
16
<PAGE>
to zero shall be accompanied by payment of all outstanding Obligations and, if
such reduction is permanent, termination of the Commitment and Revolving Credit
Facility. If the reduction of the Commitment requires the repayment of any LIBOR
Rate Loan, such repayment shall be accompanied by any amount required to be paid
pursuant to Section 3.9 hereof.
SECTION 2.6 Termination of Revolving Credit Facility. The Revolving Credit
----------------------------------------
Facility shall terminate on the earliest of (a) June 22, 2004, (b) the date of
termination of the Commitments in whole by the Borrower pursuant to Section
2.5(a), and (c) the date of termination of the Commitments in whole by the
Administrative Agent on behalf of the Lenders pursuant to Section 10.2(a).
ARTICLE III
GENERAL LOAN PROVISIONS
-----------------------
SECTION 3.1 Interest.
--------
(a) Interest Rate Options. Subject to the provisions of this Section 3.1,
---------------------
at the election of the Borrower, Loans shall bear interest at (A) the Base Rate
plus the Applicable Margin or (B) the LIBOR Rate plus the Applicable Margin
- ---- ----
(provided that the LIBOR Rate shall not be available until three (3) Business
- ---------
Days after the Closing Date). The Borrower shall select the rate of interest
and Interest Period, if any, applicable to any Loan at the time a Notice of
Borrowing is given or at the time a Notice of Conversion/Continuation is given.
Each Loan or portion thereof bearing interest based on the Base Rate shall be a
"Base Rate Loan", each Loan or portion thereof bearing interest based on the
LIBOR Rate shall be a "LIBOR Rate Loan." Any Loan or any portion thereof as to
which the Borrower has not duly specified an interest rate as provided herein
shall be deemed a Base Rate Loan.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
----------------
Borrower, by giving notice at the times described in Section 3.1(a), shall elect
an interest period (each, an "Interest Period") to be applicable to such Loan,
which Interest Period shall be a period of one (1), two (2), three (3), or six
(6) months with respect to each LIBOR Rate Loan; provided that:
--------
(i) the Interest Period shall commence on the date of advance
of or conversion to any LIBOR Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided, that if any Interest Period with respect to a LIBOR Rate
--------
Loan would otherwise expire on a day that is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
17
<PAGE>
(iii) any Interest Period with respect to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the relevant calendar
month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the Termination
Date, and no interest period shall be selected by the Borrower which would
result in the repayment of any LIBOR Rate Loan prior to the end of an Interest
Period; and
(v) there shall be no more than ten (10) Interest Periods
outstanding at any time.
(c) Applicable Margin. The Applicable Margin provided for in Section
-----------------
3.1(a) with respect to any Loan (the "Applicable Margin") shall be based upon
the table set forth below and shall be determined and adjusted quarterly on the
date (each, a "Calculation Date") ten (10) Business Days after the date by which
the Borrower provides an Officer's Compliance Certificate for the most recently
ended fiscal quarter of the Borrower; provided, however, that (a) the initial
--------
Applicable Margin shall be based on the table set forth below by reference to
the Leverage Ratio as of the most recent fiscal quarter end preceding the
Closing Date, as reflected in the certificate delivered pursuant to Section
4.2(d)(ii) and shall remain at that Pricing Level until the first Calculation
Date occurring after the Closing Date and, thereafter the Pricing Level shall be
determined by reference to the Leverage Ratio as of the fiscal quarter end of
the Borrower preceding the applicable Calculation Date, and (b) if the Borrower
fails to provide an Officer's Compliance Certificate as required by Section 6.2
for the most recently ended fiscal quarter of the Borrower by the latest date
permitted by Section 6.2 (a "Deadline Date"), the Applicable Margin from the
date ten (10) Business Days after such Deadline Date (which shall also be a
Calculation Date) shall be based on Pricing Level I (as shown below) until such
time as an appropriate Officer's Compliance Certificate is provided, at which
time the Pricing Level shall be determined by reference to the Leverage Ratio as
of the fiscal quarter end of the Borrower for which such Officer's Compliance
Certificate has been provided and the adjustment thereto made ten (10) Business
Days after the delivery thereof. The Applicable Margin shall be effective from
one Calculation Date until the next Calculation Date. Notwithstanding the
foregoing, if the Officer's Compliance Certificate has not been provided in
accordance with Section 6.2, the Applicable Margin shall be effective from the
most recently determined Calculation Date until the date ten (10) Business Days
after the date on which the Officer's Compliance Certificate is provided to the
Administrative Agent. Any adjustment in the Applicable Margin shall be
applicable to all Loans then existing or subsequently made or issued.
18
<PAGE>
SECTION 3.2 Notice and Manner of Conversion or Continuation of Loans.
--------------------------------------------------------
Provided that no Event of Default has occurred and is then continuing, the
Borrower shall have the option to (a) convert at any time following the third
Business Day after the Closing Date all or any portion of any outstanding Base
Rate Loans in a principal amount equal to $2,000,000 or any whole multiple of
$1,000,000 in excess thereof into one or more LIBOR Rate Loans and (b) upon the
expiration of any Interest Period, (i) convert all or any part of its
outstanding LIBOR Rate Loans in a principal amount equal to $1,000,000 or a
whole multiple of $500,000 in excess thereof into Base Rate Loans or (ii)
continue such LIBOR Rate Loans as LIBOR Rate Loans. Whenever the Borrower
desires to convert or continue Loans as provided above, the Borrower shall give
the Administrative Agent irrevocable prior written notice in the form attached
as Exhibit D (a "Notice of Conversion/ Continuation") not later than 11:00 a.m.
---------
(Charlotte time) three (3) Business Days before the day on which a proposed
conversion or continuation of such Loan is to be effective specifying (A) the
Loans to be converted or continued, and, in the case of any LIBOR Rate Loan to
be converted or continued, the last day of the Interest Period therefor, (B) the
effective date of such conversion or continuation (which shall be a Business
Day), (C) the principal amount of such Loans to be converted or continued, and
(D) the Interest Period to be applicable to such converted or continued LIBOR
Rate Loan. The Administrative Agent shall promptly notify the Lenders of such
Notice of Conversion/Continuation.
SECTION 3.3 Fees.
----
(a) Commitment Fee. Commencing on the Closing Date, the Borrower shall pay
--------------
to the Administrative Agent, for the account of the Lenders, a non-refundable
commitment fee at a rate per annum equal to (i) if the Leverage Ratio as of the
most recent Calculation Date is greater than 2.50 to 1.00, .500% or (ii) if the
Leverage Ratio as of such date is equal to or less than 2.50 to 1.00, .375% on
the average daily unused portion of the Commitment. The commitment fee shall be
payable in arrears on the last Business Day of each calendar quarter during the
term of this Agreement commencing June 30, 1999, and on the Termination Date.
Such commitment fee shall be distributed by the Administrative Agent to the
Lenders pro rata in accordance with the Lenders' respective Commitment
--- ----
Percentages.
(b) Administrative Agent's and Other Fees. In order to compensate the
-------------------------------------
Administrative Agent for structuring and syndicating the Loans and for its
obligations hereunder, the Borrower agrees to pay to the Administrative Agent,
for its account, the fees set forth in the separate fee letter agreement
executed by the Borrower and the Administrative Agent dated April 19, 1999.
SECTION 3.4 Manner of Payment. Each payment by the Borrower on account of
-----------------
the principal of or interest on the Loans or of any fee, commission or other
amounts payable to the Lenders under this Agreement or any Note shall be made
not later than 1:00 p.m. (Charlotte time) on the date specified for payment
under this Agreement to the Administrative Agent at the Administrative Agent's
Office for the account of the Lenders (other than as set forth below) pro rata
--- ----
in accordance with their respective Commitment Percentages, in Dollars, in
immediately available funds and shall be made without any set-off, counterclaim
or deduction whatsoever. Any payment received after such time but before 2:00
p.m. (Charlotte time) on such day shall be deemed a payment on such date for the
purposes of Section 10.1, but for all other purposes shall
20
<PAGE>
be deemed to have been made on the next succeeding Business Day. Any payment
received after 2:00 p.m. (Charlotte time) shall be deemed to have been made on
the next succeeding Business Day for all purposes. Upon receipt by the
Administrative Agent of each such payment, the Administrative Agent shall
distribute to each Lender at its address for notices set forth herein its pro
---
rata share of such payment in accordance with such Lender's Commitment
- ----
Percentage and shall wire advice of the amount of such credit to each Lender.
Each payment to the Administrative Agent of Administrative Agent's fees or
expenses shall be made for the account of the Administrative Agent and any
amount payable to any Lender under Sections 3.8, 3.9, 3.10, 3.11 or 12.2 shall
be paid to the Administrative Agent for the account of the applicable Lender.
Subject to Section 3.1(b)(ii) if any payment under this Agreement or any Note
shall be specified to be made upon a day which is not a Business Day, it shall
be made on the next succeeding day which is a Business Day and such extension of
time shall in such case be included in computing any interest if payable along
with such payment.
SECTION 3.5 Crediting of Payments and Proceeds. In the event that the
----------------------------------
Borrower shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 10.2, all payments received by the
Lenders upon the Notes and the other Obligations and all net proceeds from the
enforcement of the Obligations shall be applied first to all expenses then due
and payable by the Borrower hereunder, then to all indemnity obligations then
due and payable by the Borrower hereunder, then to all Administrative Agent's
fees then due and payable, then to all commitment and other fees and commissions
then due and payable, then to accrued and unpaid interest on the Notes (pro rata
--- ----
in accordance with all such amounts due) and then to the principal amount of the
Notes, in that order.
SECTION 3.6 Adjustments. If any Lender (a "Benefited Lender") shall at any
-----------
time receive any payment of all or part of the Obligations owing to it, or
interest thereon, or if any Lender shall at any time receive any collateral in
respect to the Obligations owing to it (whether voluntarily or involuntarily, by
set-off or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender, if any, in respect of the Obligations
owing to it such other Lender, or interest thereon, such Benefited Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Loans, or shall provide such other Lenders with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause such
Benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, that if all or any portion
--------
of such excess payment or benefits is thereafter recovered from such Benefited
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned to the extent of such recovery, but without interest. The Borrower
agrees that each Lender so purchasing a portion of another Lender's Loans may
exercise all rights of payment (including, without limitation, rights of set-
off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.
SECTION 3.7 Nature of Obligations of Lenders Regarding Loans; Assumption
------------------------------------------------------------
by the Administrative Agent. The obligations of the Lenders under this Agreement
- ---------------------------
to make the Loans are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be
21
<PAGE>
borrowed on such date (which notice shall not release such Lender of its
obligations hereunder), the Administrative Agent may assume that such Lender has
made such portion available to the Administrative Agent on the proposed
borrowing date in accordance with Section 2.2(b) and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If such amount is made available to the
Administrative Agent on a date after such borrowing date, such Lender shall pay
to the Administrative Agent on demand an amount, until paid, equal to the
product of (a) the amount not made available by such Lender in accordance with
the terms hereof, times (b) the daily average Federal Funds Rate during such
-----
period as determined by the Administrative Agent, times (c) a fraction the
-----
numerator of which is the number of days that elapse from and including such
borrowing date to the date on which such amount not made available by such
Lender in accordance with the terms hereof shall have become immediately
available to the Administrative Agent and the denominator of which is 360. A
certificate of the Administrative Agent with respect to any amounts owing under
this Section 3.7 shall be conclusive, absent manifest error. If such Lender's
Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three (3) Business Days after such
borrowing date, the Administrative Agent shall be entitled to recover such
amount made available by the Administrative Agent with interest thereon at the
rate per annum applicable to Base Rate Loans hereunder, on demand, from the
Borrower. The failure of any Lender to make available its Commitment Percentage
of any Loan requested by the Borrower shall not relieve it or any other Lender
of its obligation, if any, hereunder to make its Commitment Percentage of such
Loan available on the borrowing date, but no Lender shall be responsible for the
failure of any other Lender to make its Commitment Percentage of such Loan
available on the borrowing date.
SECTION 3.8 Changed Circumstances.
---------------------
(a) Circumstances Affecting LIBOR Rate Availability. If with respect to
-----------------------------------------------
any Interest Period:
(i) at least three (3) Lenders (or in any event the Required Lenders)
advise the Administrative Agent that, by reason of circumstances affecting the
foreign exchange and interbank markets generally, deposits in eurodollars, in
the applicable amounts are not being quoted via Dow Jones Market Screen Page
3750 or offered to such Lenders for such Interest Period, or
(ii) at least three (3) Lenders (or in any event the Required Lenders)
advise the Administrative Agent that the LIBOR Rate as determined by the
Administrative Agent will not adequately and fairly reflect the cost to such
Lenders of funding their LIBOR Rate Loans for such Interest Period,
then the Administrative Agent shall forthwith give prompt written notice thereof
to the Borrower and the Lenders. Thereafter, until the Administrative Agent
notifies the Borrower that such circumstances no longer exist, the obligation of
the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert
any Loan to or continue any Loan as a LIBOR Rate Loan shall be suspended, and
the Borrower shall repay in full (or cause to be repaid in full) the then
outstanding
22
<PAGE>
principal amount of each such LIBOR Rate Loans together with accrued interest
thereon, on the last day of the then current Interest Period applicable to such
LIBOR Rate Loan or convert the then outstanding principal amount of each such
LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period.
Unless the Borrower notifies the Administrative Agent at least two Business Days
before the date of any affected borrowing or conversion or continuation
specified in any applicable Notice of Borrowing or Notice of
Conversion/Continuation that they elect not to borrow or convert or continue
Loans on the date specified therein, the Lenders shall make, convert or continue
the Loans in the amount specified by the Borrower in the applicable notice, but
such Loans shall be made, converted or continued as Base Rate Loans instead of
LIBOR Rate Loans.
(b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the
--------------------------------------
introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its respective Lending Office) with any
request or directive (whether or not having the force of law) of any such
Authority, central bank or comparable agency, shall make it unlawful or
impossible for any of the Lenders (or any of their respective Lending Offices)
to honor its obligations hereunder to make or maintain any LIBOR Rate Loan, such
Lender shall promptly give notice thereof to the Administrative Agent and the
Administrative Agent shall promptly give notice to the Borrower and the other
Lenders. Thereafter, until such Lender notifies the Administrative Agent and the
Borrower that such circumstances no longer exist, (i) the obligation of such
Lender to make LIBOR Rate Loans, convert Base Rate Loans into LIBOR Rate Loans
or continue LIBOR Rate Loans as LIBOR Rate Loans shall be suspended, and (ii)
each LIBOR Rate Loan of such Lender then outstanding shall be converted to a
Base Rate Loan either (A) on the last day of the then current Interest Period if
such Lender may lawfully continue to maintain and fund such Loan as a LIBOR Rate
Loan to such day or (B) immediately if such Lender shall determine that it may
not lawfully continue to maintain and fund such Loan as a LIBOR Rate Loan to
such day.
(c) Increased Costs. If, after the date hereof, the introduction of, or
---------------
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Lenders (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of such Governmental
Authority, central bank or comparable agency:
(i) shall subject any of the Lenders (or any of their respective
Lending Offices) to any tax, duty or other charge with respect to any Note or
shall change the basis of taxation of payments to any of the Lenders (or any of
their respective Lending Offices) of the principal of or interest on any Note or
any other amounts due under this Agreement in respect thereof (except for
changes in the rate of tax on the overall net income of any of the Lenders or
any of their respective Lending Offices imposed by the jurisdiction in which
such Lender is organized or is or should be qualified to do business or such
Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit, insurance or capital or similar requirement against
assets of, deposits with or for
23
<PAGE>
the account of, or credit extended by any of the Lenders (or any of their
respective Lending Offices), other than any such amount included in the
calculation of Eurodollar Reserve Percentage, or shall impose on any of the
Lenders (or any of their respective Lending Offices) or the foreign exchange and
interbank markets any other condition affecting any Note;
and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or to reduce the yield or amount of
any sum received or receivable by any of the Lenders under this Agreement or
under the Notes in respect of a LIBOR Rate Loan, then such Lender shall promptly
notify the Administrative Agent, and the Administrative Agent shall promptly
notify the Borrower of such fact and demand compensation therefor and, within
fifteen (15) days after such notice by the Administrative Agent, the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender or Lenders for such increased cost or reduction. Each Lender will
promptly notify the Administrative Agent of any event of which it has knowledge
which will entitle such Lender to compensation pursuant to this Section 3.8(c)
and, after receipt of such notice, the Administrative Agent will promptly notify
the Borrower of such event; provided, that neither any Lender nor the
--------
Administrative Agent shall incur any liability whatsoever to any other Lender or
the Borrower in the event it fails to do so. The amount of such compensation
shall be determined, in the applicable Lender's sole discretion, based upon the
assumption that such Lender funded its Commitment Percentage of the LIBOR Rate
Loans in the London interbank market, as applicable, and using any reasonable
attribution or averaging methods which such Lender deems appropriate and
practical. A certificate of such Lender setting forth the basis for determining
such amount or amounts necessary to compensate such Lender shall be forwarded to
the Borrower through the Administrative Agent and shall be conclusively presumed
to be correct save for clearly demonstrable error.
(d) The Borrower shall not be required to compensate a Lender for any
increased costs pursuant to this Section 3.8 incurred by such Lender more than
90 days prior to its request to the Administrative Agent for such compensation.
SECTION 3.9 Indemnity. The Borrower hereby indemnifies each of the Lenders
against any reasonable loss or expense (excluding any loss of margin over the
LIBOR Rate for the period after any such payment or conversion or failure to
borrow, prepay or convert) which may arise or be attributable to each Lender's
obtaining, liquidating or employing deposits or other funds acquired to effect,
fund or maintain any Loan (a) as a consequence of any failure by the Borrower to
make any payment when due of any amount due hereunder in connection with a LIBOR
Rate Loan, (b) due to any failure of the Borrower to borrow on a date specified
therefor in a Notice of Borrowing or Notice of Continuation/Conversion or (c)
due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date
other than the last day of the Interest Period therefor. The amount of such loss
or expense shall be determined, in good faith but otherwise in the applicable
Lender's sole discretion, based upon the assumption that such Lender funded its
Commitment Percentage of the LIBOR Rate Loans in the London interbank market,
and using any reasonable attribution or averaging methods which such Lender
deems appropriate and practical. A certificate of such Lender setting forth the
basis for determining such amount or amounts necessary to compensate such Lender
shall be forwarded to the Borrower through the Administrative Agent and shall be
conclusively presumed to be correct save for clearly demonstrable error.
24
<PAGE>
SECTION 3.10 Capital Requirements. If, after the date hereof, either (a)
--------------------
the introduction of, or any change in, or in the interpretation of, any
Applicable Law or (b) compliance with any guideline or request from any central
bank or comparable agency or other Governmental Authority (whether or not having
the force of law), has or would have the effect of reducing the rate of return
on the capital of, or has affected or would affect the amount of capital
required to be maintained by, any Lender or any corporation controlling such
Lender as a consequence of, or with reference to the Commitments and other
commitments of this type, below the rate which the Lender or such other
corporation could have achieved but for such introduction, change or compliance,
then within five (5) Business Days after written demand by any such Lender, the
Borrower shall pay to such Lender from time to time as specified in a reasonably
detailed calculation by such Lender additional amounts sufficient to compensate
such Lender or other corporation for such reduction. A certificate as to such
amounts submitted to the Borrower and the Administrative Agent by such Lender,
shall, in the absence of clearly demonstrable error, be presumed to be correct
and binding for all purposes. The Borrower will not be required to compensate a
Lender for any increased amounts to this Section 3.10 incurred by such Lender
more than 90 days prior to its request to the Borrower for such compensation.
SECTION 3.11 Taxes.
-----
(a) Payments Free and Clear. Any and all payments by the Borrower
-----------------------
hereunder or under the Notes shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholding, and all liabilities with respect thereto excluding (i)
taxes imposed on or measured by the overall net income of any Lender or its
Lending Office or the Administrative Agent or the Administrative Agent's Office,
as the case may be, and (ii) all franchise or similar taxes measured by capital
or net worth of such Lender or its Lending Office or the Administrative Agent or
the Administrative Agent's Office, as the case may be, in each case imposed: (A)
by the jurisdiction under the laws of which such Lender or the Administrative
Agent, as the case may be, is organized, or in which its principal executive
office is located, (B) by the jurisdiction in which the Lending Office of such
Lender or the Administrative Agent's Office, as applicable, is located or (C)
solely by reason of such Lender or the Administrative Agent, as the case may be,
doing business in the jurisdiction imposing such tax, other than as a result of
this Agreement or any Note or any transaction contemplated hereby and (ii) in
the case of each Lender, any United States withholding tax imposed on such
payments but only to the extent that such Lender is subject to United States
withholding tax at the time such Lender first becomes a party to this Agreement
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under any Note or to any Lender or the Administrative
Agent, (A) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 3.11) such Lender or the Administrative Agent
(as the case may be) receives an amount equal to the amount such party would
have received had no such deductions been made, (B) the Borrower shall make such
deductions, (C) the Borrower shall pay the full amount deducted to the relevant
taxing authority or other authority in accordance with applicable law, and (D)
the Borrower shall deliver to the Administrative Agent evidence of such payment
to the relevant taxing authority or other authority in the manner provided in
Section 3.11(e).
25
<PAGE>
(b) Refunds. If the Borrower pays any additional amount under Section 3.11
-------
(a "Tax Payment") and any Lender or Affiliate thereof effectively obtains a
refund of tax or credit against tax by reason of the Tax Payment (a "Tax
Credit") and such Tax Credit is, in the reasonable judgement of such Lender or
Affiliate, attributable to such Tax Payment, then such Lender, after actual
receipt of such Tax Credit or actual receipt of the benefits thereof, shall
promptly reimburse the for such amount as such Lender shall reasonably determine
to be the proportion of the Tax Credit as would leave the Borrower (after that
reimbursement) in no better or worse position than it would have been if the Tax
Payment had not been required; provided, that no Lender shall be required to
--------
make any reimbursement if it reasonably believes the making of such
reimbursement would cause it to lose the benefit of the Tax Credit or would
adversely affect in any other respect its tax position. Subject to the other
terms hereof, any claim by a Lender for a Tax Credit shall be made in a manner,
order and amount as such Lender determines in its sole and absolute discretion.
Except to the extent necessary to evaluate any Tax Credit, no Lender shall be
obligated to disclose information regarding its tax affairs or computations to
the Borrower, it being understood and agreed that in no event shall any Lender
be required to disclose information regarding its tax position that it deems to
be confidential (other than with respect to the Tax Credit).
(c) Stamp and Other Taxes. In addition to the Taxes described in Section
---------------------
3.11(a), the Borrower shall pay any present or future stamp, registration,
recordation or documentary taxes or any other similar fees or charges or excise
or property taxes, levies of the United States or any state or political
subdivision thereof or any applicable foreign jurisdiction which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement, the Loans, the other Loan Documents,
or the perfection of any rights or security interest in respect thereto
(hereinafter referred to as "Other Taxes").
(d) Indemnity. The Borrower shall indemnify each Lender and the
---------
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 3.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor.
(e) Evidence of Payment. Within thirty (30) days after the date of any
-------------------
payment of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 12.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.
(f) Delivery of Tax Forms. Each Lender organized under the laws of a
---------------------
jurisdiction other than the United States or any state thereof shall deliver to
the Borrower, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any United States federal income taxes, and
(ii) an Internal Revenue Service
26
<PAGE>
Form W-8 or W-9 or successor applicable form, as the case may be, to establish
an exemption from United States backup withholding taxes. Each such Lender
further agrees to deliver to the Borrower, with a copy to the Administrative
Agent, a Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Borrower,
certifying in the case of a Form 1001 or 4224 that such Lender is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes (unless in any such case an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which renders
such forms inapplicable or the exemption to which such forms relate unavailable
and such Lender notifies the Borrower and the Administrative Agent that it is
not entitled to receive payments without deduction or withholding of United
States federal income taxes) and, in the case of a Form W-8 or W-9, establishing
an exemption from United States backup withholding tax.
(g) Survival. Without prejudice to the survival of any other agreement of
--------
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 3.11 shall survive the payment in full of the Obligations and
the termination of the Commitments.
SECTION 3.12 Change of Lending Office; Replacement Lenders. (a) Each
---------------------------------------------
Lender agrees that on the occurrence of any event giving rise to the operation
of Sections 3.8(b), 3.8(c), 3.10, 3.11(a) or 3.11(c) with respect to such
Lender, it will, if requested by the Borrower, use reasonable efforts (subject
to overall policy considerations of such Lender) to designate another Lending
Office for any Loans affected by such event; provided, that such designation is
--------
made on such terms that such Lender and its Lending Office suffer no economic,
legal or regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of such Section. Nothing in this Section
3.12(a) shall affect or postpone any of the obligations of any Borrower or the
rights of any Lender provided in Sections 3.8, 3.10 or 3.11.
(b) At any time within one hundred eighty (180) days after any payment by
the Borrower of any amount pursuant to or by reason of the operation of Sections
3.8(b), 3.8(c), 3.10, 3.11(a) or 3.11(c), the Borrower, by writing addressed to
the Administrative Agent and each Lender that requested the payment of such
amount, may nominate or propose an Eligible Assignee that is willing to become
the assignee of the Commitment and other obligations of such Lender (a
"Replacement Lender") pursuant to Section 12.10(b), and within fifteen (15)
Business Days after receipt of such proposal from the Borrower, each such Lender
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance of its entire Commitment in favor of the proposed Replacement Lender
in accordance with Section 12.10(b) unless, prior to the expiration of such
period, the Administrative Agent shall have notified the Borrower and such
Lender that the proposed Replacement Lender is not reasonably acceptable to the
Administrative Agent; provided, that in no event will (i) any Lender be required
--------
to enter into an Assignment and Acceptance at a price less than par plus accrued
interest and prorated fees and other costs due hereunder to the effective date
thereof, (ii) either of the Administrative Agent or Lenders be obligated to
assist the Borrower in identifying any Eligible Assignees that are willing
27
<PAGE>
to become such a Replacement Lender or (iii) any such assignment be required if
consummation conflicts with any Applicable Law. The assignment fee payable to
the Administrative Agent in connection with any such assignment pursuant to
Section 12.10(b) shall be for the account of the Borrower.
SECTION 3.13 Use of Proceeds. The Borrower shall use the proceeds of the
---------------
Loans (a) to repay in full all Debt of the Borrower not otherwise permitted
under this Agreement, (b) to finance investments and acquisitions by the
Borrower permitted by this Agreement and (c) for Capital Expenditures, working
capital and general corporate purposes of the Borrower.
ARTICLE IV
CLOSING; CONDITIONS OF CLOSING AND BORROWING
--------------------------------------------
SECTION 4.1 Closing. The closing shall take place at the offices of
-------
Kennedy Covington Lobdell & Hickman, L.L.P. at 10:00 a.m. on June 22, 1999, or
at such other place or on such other date and time as the parties hereto shall
mutually agree.
SECTION 4.2 Conditions to Closing and Initial Loans. The obligation of the
---------------------------------------
Lenders to close this Agreement and to make the initial Loans is subject to the
satisfaction of each of the following conditions:
(a) Executed Loan Documents. This Agreement, the Notes and the other Loan
-----------------------
Documents shall have been duly authorized, executed and delivered to the
Administrative Agent by the parties thereto, shall be in full force and effect
and no Default or Event of Default shall exist, and the Borrower shall have
delivered original counterparts thereof to the Administrative Agent.
(b) Closing Certificates; etc.
--------------------------
(i) Officer's Certificate. The Administrative Agent shall have
---------------------
received a certificate from the chief executive officer or chief financial
officer of the Borrower in form and substance satisfactory to the Administrative
Agent, to the effect that all representations and warranties of the Borrower
contained in this Agreement and the other Loan Documents are true, correct and
complete; that the Borrower is not in violation of any of the covenants
contained in this Agreement and the other Loan Documents; that, after giving
effect to the transactions contemplated by this Agreement, no Default or Event
of Default has occurred and is continuing; and that the Borrower has satisfied
each of the closing conditions.
(ii) Certificate of Secretary. The Administrative Agent shall
------------------------
have received a certificate of the secretary or assistant secretary of the
Borrower certifying that attached thereto is a true and complete copy of the
articles of incorporation of the Borrower and all amendments thereto, each
certified as of a recent date by the appropriate Governmental Authority in the
applicable jurisdiction; that attached thereto is a true and complete copy of
the bylaws of the Borrower, each as in effect on the date of such certification;
that attached thereto is a true and complete copy of resolutions duly adopted by
the Board of Directors of the Borrower authorizing
28
<PAGE>
the borrowings contemplated hereunder and the execution, delivery and
performance of this Agreement and the other Loan Documents to which the Borrower
is a party; and as to the incumbency and genuineness of the signature of each
officer of the Borrower executing Loan Documents to which it is a party.
(iii) Certificates of Good Standing. The Administrative Agent
-----------------------------
shall have received long-form certificates as of a recent date of the good
standing of the Borrower under the laws of its jurisdiction of organization and
a certificate of the relevant taxing authorities of such jurisdiction certifying
that such Person has filed required tax returns with respect to any franchise
taxes and owes no delinquent franchise taxes.
(iv) Opinions of Counsel. The Administrative Agent and the
-------------------
Lenders shall have received favorable opinions of counsel to the Borrower
addressed to the Administrative Agent and the Lenders (A) with respect to the
Borrower, the Loan Documents and such other matters as the Lenders shall request
and (B) with respect to FCC and other regulatory matters, each in form and
substance satisfactory to the Administrative Agent.
(v) Insurance. The Administrative Agent shall have received a
---------
certificate of insurance in form and substance satisfactory to the
Administrative Agent.
(c) Consents; Defaults.
------------------
(i) Governmental and Third Party Approvals. All necessary
--------------------------------------
approvals, authorizations and consents, if any be required, of any Person and of
all Governmental Authorities and courts having jurisdiction with respect to the
transactions contemplated by this Agreement and the other Loan Documents shall
have been obtained.
(ii) No Injunction, Etc. No action, proceeding, investigation,
-------------------
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of this
Agreement or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby, or which in the Administrative Agent's good
faith determination could reasonably be expected to have a Material Adverse
Effect.
(d) Financial Matters.
-----------------
(i) Financial Statements. The Administrative Agent shall have
--------------------
received the financial statements described in Section 5.1(n) all in form and
substance satisfactory to the Administrative Agent and prepared in accordance
with GAAP.
(ii) Financial Condition Certificate. The Borrower shall have
-------------------------------
delivered to the Administrative Agent a certificate, in form and substance
satisfactory to the Administrative Agent, and certified as accurate by the chief
executive officer, chief financial officer, vice president of finance or
treasurer of the Borrower, that (A) the Borrower and its Subsidiaries, taken as
a whole, are Solvent, (B) the Borrower's payables are current and not past due,
(C) attached thereto are calculations evidencing compliance as of March 31, 1999
with the
29
<PAGE>
covenants contained in Sections 8.1 and 8.2 and the Borrower's Net Worth as of
March 31, 1999, (D) the financial projections previously delivered to the
Administrative Agent represent the good faith estimates (based on reasonable
assumptions of senior management) of the financial condition and operations of
the Borrower and its Subsidiaries and (E) attached thereto is a calculation of
the Applicable Margin pursuant to Section 3.1(c).
(iii) Payment at Closing; Fee Letters. The Borrower shall have
-------------------------------
paid to the Administrative Agent and the Lenders the fees set forth or
referenced in Section 3.3 and any other accrued and unpaid fees or commissions
due hereunder (including, without limitation, legal fees and expenses) and to
any other Person such amount as may be due thereto in connection with the
transactions contemplated hereby, including all taxes, fees and other charges in
connection with the execution, delivery, recording, filing and registration of
any of the Loan Documents.
(e) Miscellaneous.
-------------
(i) Notice of Borrowing. The Administrative Agent shall have
-------------------
received a Notice of Borrowing from the Borrower in accordance with Section
2.2(a) with respect to any Loans to be made on the Closing Date, and a Notice of
Account Designation specifying the account or accounts to which the proceeds of
any Loans made after the Closing Date are to be disbursed.
(ii) Proceedings and Documents. All opinions, certificates and
-------------------------
other instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to
the Administrative Agent. The Administrative Agent shall have received copies of
all other instruments reasonably requested thereby, with respect to the
transactions contemplated by this Agreement.
(iii) Capital Expenditures Spending Plan. The Borrower shall have
----------------------------------
delivered to the Administrative Agent a spending plan, in form and substance
acceptable to the Administrative Agent, reflecting all Capital Expenditures
planned for the Fiscal Year 1999.
(iv) Due Diligence and Other Documents. The Borrower shall have
---------------------------------
delivered to the Administrative Agent such other documents, certificates and
opinions as the Administrative Agent may reasonably request.
(f) Refinancing. On the Closing Date, (i) all loans under the Prior Credit
-----------
Agreement ("Existing Loans") made by any Prior Lender who is not a Lender
hereunder shall be repaid in full and the commitments and other obligations and
rights (except as expressly set forth in the Prior Credit Agreement) of such
Prior Lender shall be terminated, (ii) all outstanding Existing Loans shall be
deemed Loans hereunder and the Administrative Agent shall make such transfers of
funds as are necessary in order that the outstanding balance of such Loans,
together with any Loans funded on the Closing Date, reflect the Commitments of
the Lenders hereunder, (iii) there shall have been paid in cash in full all
accrued but unpaid interest due on the Existing Loans to but excluding the
Closing Date, (iv) there shall have been paid in cash in full all accrued but
unpaid fees under the Prior Credit Agreement due to but excluding the Closing
Date and all other
30
<PAGE>
amounts, costs and expenses then owing to any of the Prior Lenders and/or First
Union, as administrative agent under the Prior Agreement for which the Borrower
has been invoiced at least one Business Day prior to the Closing Date.
SECTION 4.3 Conditions to All Loans. The obligations of the Lenders to
-----------------------
make any Loan is subject to the satisfaction of the following conditions
precedent on the relevant borrowing date:
(a) Continuation of Representations and Warranties. The
----------------------------------------------
representations and warranties contained in Article V shall be true and
correct on and as of such borrowing date with the same effect as if
made on and as of such date except for any representation and warranty
made as of an earlier date, which representation and warranty shall
remain true and correct as of such earlier date.
(b) No Existing Default. No Default or Event of Default shall have
-------------------
occurred and be continuing hereunder on the borrowing date with respect to such
Loan or after giving effect to the Loans to be made on such date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
----------------------------------------------
SECTION 5.1 Representations and Warranties. To induce the Administrative
------------------------------
Agent and Lenders to enter into this Agreement and to induce the Lenders to make
the Loans, the Borrower hereby represents and warrants to the Administrative
Agent and Lenders both before and after giving effect to the transactions
contemplated hereunder that:
(a) Organization; Power; Qualification. Each of the Borrower and its
----------------------------------
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization, except
where the failure to obtain such qualification and authorization could not
reasonably be expected to have a Material Adverse Effect. The jurisdictions in
which the Borrower and its Subsidiaries are organized and qualified to do
business as of the Closing Date are described on Schedule 5.1(a).
---------------
(b) Ownership. Each Subsidiary of the Borrower as of the Closing Date is
---------
listed on Schedule 5.1(b). As of the Closing Date, the capitalization of the
---------------
Borrower and its Subsidiaries consists of the number of shares, authorized,
issued and outstanding, of such classes and series, with or without par value,
described on Schedule 5.1(b). All outstanding shares have been duly authorized
---------------
and validly issued and are fully paid and nonassessable, with no personal
liability attaching to the ownership thereof, and not subject to any preemptive
or similar rights. The shareholders of the Subsidiaries of the Borrower and the
number of shares owned by each as of the Closing Date are described on Schedule
--------
5.1(b). As of the Closing Date, there are no
- ------
31
<PAGE>
outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever, which are
convertible into, exchangeable for or otherwise provide for or permit the
issuance of capital stock of the Borrower or its Subsidiaries, except as
described on Schedule 5.1(b) or granted to employees and directors of the
---------------
Borrower and its Subsidiaries pursuant to duly authorized employee benefit
plans.
(c) Authorization of Agreement, Loan Documents and Borrowing. Each of the
--------------------------------------------------------
Borrower and its Subsidiaries has the right, power and authority and has taken
all necessary corporate and other action to authorize the execution, delivery
and performance of this Agreement and each of the other Loan Documents to which
it is a party in accordance with their respective terms. This Agreement and
each of the other Loan Documents have been duly executed and delivered by the
duly authorized officers of the Borrower and each of its Subsidiaries party
thereto, and each such document constitutes the legal, valid and binding
obligation of the Borrower or its Subsidiary party thereto, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar state or federal
laws from time to time in effect which affect the enforcement of creditors'
rights in general and the availability of equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.
---------------------------------------------------------------------
The execution, delivery and performance by the Borrower and its Subsidiaries of
the Loan Documents to which each such Person is a party, in accordance with
their respective terms, the borrowings hereunder and the transactions
contemplated hereby do not and will not, by the passage of time, the giving of
notice or otherwise, (i) violate any Applicable Law relating to the Borrower or
any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute
a default under the articles of incorporation, bylaws or other organizational
documents of the Borrower or any of its Subsidiaries or any indenture, agreement
or other instrument to which such Person is a party or by which any of its
properties may be bound or any Governmental Approval relating to such Person, or
(iii) result in or require the creation or imposition of any Lien upon or with
respect to any property now owned or hereafter acquired by such Person other
than Liens arising under the Loan Documents or (iv) require any consent or
authorization of, filing with, or other act in respect of, an arbitrator or
Governmental Authority and no consent of any other Person is required in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement.
(e) Compliance with Law; Governmental Approvals. Each of the Borrower and
-------------------------------------------
its Subsidiaries (i) has all Governmental Approvals required by any Applicable
Law for it to conduct its business, each of which is in full force and effect,
is final and not subject to review on appeal and is not the subject of any
pending or, to the best of its knowledge, threatened attack by direct or
collateral proceeding, and (ii) is in compliance with each Governmental Approval
applicable to it and in compliance with all other Applicable Laws relating to it
or any of its respective properties, except in each case with respect to
subclauses (i) and (ii) where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
(f) Tax Returns and Payments. Each of the Borrower and its Subsidiaries
------------------------
has duly filed or caused to be filed all federal, state, local and other tax
returns required by Applicable Law to be filed, and has paid, or made adequate
provision for the payment of, all federal, state,
32
<PAGE>
local and other taxes, assessments and governmental charges or levies upon it
and its property, income, profits and assets which are due and payable, except
where the failure to so file or cause to be filed such return or pay taxes could
not reasonably be expected to have a Material Adverse Effect. Such returns
accurately reflect in all material respects all liability for taxes of the
Borrower and its Subsidiaries for the periods covered thereby. No Governmental
Authority has asserted any Lien or other claim against the Borrower or any
Subsidiary thereof with respect to unpaid taxes which has not been discharged or
resolved; provided, that the Borrower or such Subsidiary may contest such Lien
or other claim in good faith so long as adequate reserves are maintained in
accordance with GAAP. The charges, accruals and reserves on the books of the
Borrower and any of its Subsidiaries in respect of federal, state, local and
other taxes for all Fiscal Years and portions thereof since the organization of
the Borrower and any of its Subsidiaries are in the judgment of the Borrower
adequate.
(g) Intellectual Property Matters. Except where the failure to own or
-----------------------------
possess such intellectual property rights could not reasonably be expected to
have a Material Adverse Effect, each of the Borrower and its Subsidiaries owns
or possesses rights to use all franchises, licenses, copyrights, copyright
applications, patents, patent rights or licenses, patent applications,
trademarks, trademark rights, service mark, service mark rights, trade names,
trade name rights, copyrights and rights with respect to the foregoing which are
required to conduct its business. Except to the extent any revocation,
termination or infringement could not reasonably be expected to have a Material
Adverse Effect, no event has occurred which permits, or after notice or lapse of
time or both would permit, the revocation or termination of any such rights, and
neither the Borrower nor any Subsidiary thereof is liable to any Person for
infringement under Applicable Law with respect to any such rights as a result of
its business operations.
(h) Environmental Matters. Except for matters that could not reasonably be
---------------------
expected to have a Material Adverse Effect:
(i) The properties and all operations conducted in connection
therewith of the Borrower and its Subsidiaries are in compliance with, and to
the best of their knowledge have been in compliance with, all applicable
Environmental Laws, and there is no contamination at, under or about such
properties or such operations which could interfere with the continued operation
of such properties or impair the fair saleable value thereof;
(ii) Neither the Borrower nor any Subsidiary thereof has
received any notice of violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters, Hazardous Materials, or
compliance with Environmental Laws, nor does the Borrower or any Subsidiary
thereof have knowledge or reason to believe that any such notice will be
received or is being threatened;
(iii) To the best of the Borrower's and each of its Subsidiaries'
knowledge, hazardous Materials have not been transported or disposed to or from
the properties owned, leased or operated by the Borrower and its Subsidiaries in
violation of, or in a manner or to a location which could give rise to liability
under, Environmental Laws, nor have any Hazardous Materials been generated,
treated, stored or disposed of at, on or under any of such
33
<PAGE>
properties in violation of, or in a manner that could give rise to liability
under, any applicable Environmental Laws;
(iv) No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary thereof is or will be
named as a potentially responsible party with respect to such properties or
operations conducted in connection therewith, nor are there any consent decrees
or other decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any
Environmental Law with respect to Borrower, any Subsidiary or such properties or
such operations; and
(v) Except as set forth on Schedule 5.1(h), at any time since
--------------
the Borrower or any of its Subsidiaries has owned, leased or operated any of its
properties, or to the best of their knowledge, prior to such time, there has
been no release, or to the best of the Borrower's and each of its Subsidiaries'
knowledge, threat of release, of Hazardous Materials at or from properties
owned, leased or operated by the Borrower or any Subsidiary, now or in the past,
in violation of or in amounts or in a manner that could give rise to liability
under Environmental Laws.
(i) ERISA.
-----
(i) As of the Closing Date, neither the Borrower nor any ERISA
Affiliate maintains or contributes to, or has any obligation under, any Employee
Benefit Plans other than those identified on Schedule 5.1(i);
---------------
(ii) The Borrower and each ERISA Affiliate is in compliance with
all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans except for
any required amendments for which the remedial amendment period as defined in
Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that
is intended to be qualified under Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified, and each trust related to
such plan has been determined to be exempt under Section 501(a) of the Code. No
liability has been incurred by the Borrower or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan
or any Multiemployer Plan;
(iii) No Pension Plan has been terminated under Section 4041(e)
or 4042 of ERISA, nor has any accumulated funding deficiency (as defined in
Section 412 of the Code) been incurred (without regard to any waiver granted
under Section 412 of the Code), nor has any funding waiver from the Internal
Revenue Service been received or requested with respect to any Pension Plan, nor
has the Borrower or any ERISA Affiliate failed to make any contributions or to
pay any amounts due and owing as required by Section 412 of the Code, Section
302 of ERISA or the terms of any Pension Plan prior to the due dates of such
contributions under Section 412 of the Code or Section 302 of ERISA, nor has
there been any event requiring any disclosure under Section 4041(c)(3)(C) or
4063(a) of ERISA with respect to any Pension Plan;
34
<PAGE>
(iv) Neither the Borrower nor any ERISA Affiliate has: (A)
engaged in a nonexempt prohibited transaction described in Section 406 of the
ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC which
remains outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid, (C) failed to make a required contribution or
payment to a Multiemployer Plan, or (D) failed to make a required installment or
other required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably expected
to occur; and
(vi) No proceeding, claim, lawsuit and/or investigation is
existing or, to the best knowledge of the Borrower after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) currently maintained or contributed to by the Borrower or
any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
(j) Margin Stock. Neither the Borrower nor any Subsidiary thereof is
------------
engaged principally or as one of its activities in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each
such term is defined or used, directly or indirectly, in Regulation U of the
Board of Governors of the Federal Reserve System). No part of the proceeds of
any of the Loans or Letters of Credit will be used for purchasing or carrying
margin stock or for any purpose which violates, or which would be inconsistent
with, the provisions of Regulation T, U or X of such Board of Governors.
(k) Government Regulation. Neither the Borrower nor any Subsidiary thereof
---------------------
is an "investment company" or a company "controlled" by an "investment company"
(as each such term is defined or used in the Investment Company Act of 1940, as
amended) and neither the Borrower nor any Subsidiary thereof is, or after giving
effect to any Loan will be, subject to regulation under the Public Utility
Holding Company Act of 1935 or the Interstate Commerce Act, each as amended.
(l) Material Contracts. Schedule 5.1(l) sets forth a complete and accurate
------------------ ---------------
list of all Material Contracts of the Borrower and its Subsidiaries in effect as
of the Closing Date not listed on any other Schedule hereto; other than as set
forth in Schedule 5.1(l), each such Material Contract is, and after giving
--------------
effect to the consummation of the transactions contemplated by the Loan
Documents will be, in full force and effect in accordance with the terms
thereof. The Borrower and its Subsidiaries have delivered to the Administrative
Agent a true and complete copy of each Material Contract requested thereby and
required to be listed on Schedule 5.1(l) or any other Schedule hereto.
(m) Employee Relations. Each of the Borrower and any of its Subsidiaries
------------------
has a stable work force in place and is not, as of the Closing Date, party to
any collective bargaining agreement nor has any labor union been recognized as
the representative of its employees except as set forth on Schedule 5.1(m). The
---------------
Borrower knows of no pending, threatened or contemplated
35
<PAGE>
strikes, work stoppage or other collective labor disputes involving its
employees or those of its Subsidiaries.
(n) Financial Statements. The (i) audited Consolidated balance sheet of
--------------------
the Borrower and its Subsidiaries as of December 31, 1998 and the related
audited statements of income and retained earnings and cash flows for the Fiscal
Year then ended and (ii) unaudited Consolidated balance sheet of the Borrower
and its Subsidiaries as of March 31, 1999 and related unaudited interim
statements of income and retained earnings, copies of which have been furnished
to the Administrative Agent and each Lender, are in all material respects
complete and correct and fairly present on a Consolidated basis the assets,
liabilities and financial position of the Borrower and its Subsidiaries as at
such dates, and the results of the operations and changes of financial position
for the periods then ended (other than customary year-end adjustments for
unaudited financial statements). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
(except that such unaudited statements may not contain notes required by GAAP).
The Borrower and its Subsidiaries, on a Consolidated basis, have no Debt,
obligation or other unusual forward or long-term commitment which is not fairly
reflected in the foregoing financial statements or in the notes thereto.
(o) No Material Adverse Change. Since December 31, 1998, there has been no
--------------------------
material adverse change in the properties, business, operations, or financial
condition of the Borrower and its Subsidiaries and no event has occurred or
condition arisen that could reasonably be expected to have a Material Adverse
Effect.
(p) Solvency. As of the Closing Date and after giving effect to each Loan
--------
made hereunder, the Borrower and its Subsidiaries, taken as a whole, will be
Solvent.
(q) Titles to Properties. Each of the Borrower and its Subsidiaries has
--------------------
such title to the real property owned by it as is necessary or desirable to the
conduct of its business and valid and legal title to all of its personal
property and assets, including, but not limited to, those reflected on the
balance sheets of the Borrower and its Subsidiaries delivered pursuant to
Section 5.1(n), except those which have been disposed of by the Borrower or its
Subsidiaries subsequent to such date which dispositions have been in the
ordinary course of business or as otherwise expressly permitted hereunder and
except where the failure to obtain such titles could not reasonably be expected
to have a Material Adverse Effect.
(r) Liens. None of the properties and assets of the Borrower or any
-----
Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to
Section 9.2.
(s) Debt and Guaranty Obligations. Schedule 5.1(s) is a complete and
----------------------------- ---------------
correct listing of all Debt of the Borrower and its Subsidiaries as of the
Closing Date in excess of $1,000,000.
(t) Litigation. Except for matters existing on the Closing Date and set
----------
forth on Schedule 5.1(t), there are no actions, suits or proceedings pending
---------------
nor, to the knowledge of the Borrower, threatened against or in any other way
relating adversely to or affecting the Borrower or any Subsidiary thereof or any
of their respective properties in any court or before any
36
<PAGE>
arbitrator of any kind or before or by any Governmental Authority that could
reasonably be expected to have a Material Adverse Effect.
(u) FCC and PUC Regulatory Matters.
------------------------------
(i) Schedule 5.1(u) hereto sets forth, as of the date hereof, a true
--------------
and complete list of the following information for each FCC License or PUC
Authorization issued to the Borrower or any of its Subsidiaries: (A) for all FCC
Licenses, the name of the licensee, the type of service and the expiration
dates; and (B) for each PUC Authorization, the geographic area covered by such
PUC Authorization, the services that may be provided thereunder and the
expiration date, if any.
(ii) As of the date hereof and except for matters that could not
reasonably be expected to have a Material Adverse Effect, (A) the FCC Licenses
and PUC Authorizations specified on Schedule 5.1(u) hereto are valid and in full
force and effect without conditions except for such conditions as are generally
applicable to holders of such FCC Licenses and PUC Authorizations; (B) no event
has occurred and is continuing which could reasonably be expected to (1) result
in the imposition of a material forfeiture or the revocation, termination or
adverse modification of any such FCC License or PUC Authorization or (2)
materially and adversely affect any rights of the Borrower or any of its
Subsidiaries thereunder; and (C) the Borrower has no reason to believe and has
no knowledge that such FCC Licenses and PUC Authorizations will not be renewed
in the ordinary course.
(iii) All of the material properties, equipment and systems owned,
leased or managed by the Borrower and its Subsidiaries are in good repair,
working order and condition and are and will be in compliance with all terms and
conditions of the FCC Licenses and PUC Authorizations and all standards or rules
imposed by any Governmental Authority or as imposed under any agreements with
telephone companies and customers, except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect.
(iv) Except where the failure to pay such fees and charges could not
reasonably be expected to have a Material Adverse Effect, the Borrower and each
of its Subsidiaries have paid all franchise, license or other fees and charges
which have become due pursuant to any Governmental Approval in respect of its
business operations and has made appropriate provision as is required by GAAP
for any such fees and charges which have accrued.
(v) Absence of Defaults. No event has occurred or is continuing which
-------------------
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a default
or event of default by the Borrower or any Subsidiary thereof under any Material
Contract or judgment, decree or order (except where such default could not
reasonably be expected to have a Material Adverse Effect) to which the Borrower
or its Subsidiaries is a party or by which the Borrower or its Subsidiaries or
any of their respective properties may be bound; provided, that the
representation and warranty in this clause (v) shall not be incorrect solely on
account of any such event relating to a Material Contract if the Borrower or any
of its Subsidiaries is contesting the claimed default in good faith so long as
adequate reserves are maintained in accordance with GAAP.
37
<PAGE>
(w) Year 2000 Compliance. The Borrower and its Subsidiaries have (i)
--------------------
initiated a review and assessment of all areas within any of their business and
operations (including those affected by suppliers, vendors and customers) that
could be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Borrower and its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to
date, implemented that plan in accordance with that timeline (it being
understood that the plan and timeline in effect on any particular date may
reflect adjustments from the initial or any other plan and timeline previously
developed). Based on the foregoing, the Borrower and its Subsidiaries (i)
believe that all computer applications of the Borrower and its Subsidiaries that
are material to their businesses and operations, taken as a whole, are
reasonably expected on a timely basis to be able to perform properly date-
sensitive functions for all dates before, on and after January 1, 2000 (that is,
be "year 2000 compliant"), except to the extent that any failure to be year 2000
compliant could not reasonably be expected to have a Material Adverse Effect and
(ii) have no reason to believe that all computer applications of its suppliers,
vendors and customers that are material to the Borrower's and its Subsidiaries'
businesses and operations, taken as a whole, are not reasonably expected on a
timely basis to be year 2000 compliant, except to the extent that any failure to
be year 2000 compliant could not reasonably be expected to have a Material
Adverse Effect .
(x) Senior Debt Status. The Obligations of the Borrower and each of its
------------------
Subsidiaries under this Agreement and each of the other Loan Documents ranks and
shall continue to rank pari passu to all senior unsecured debt of each such
----------
Person.
(y) Accuracy and Completeness of Information. All written information,
----------------------------------------
reports and other papers and data produced by or on behalf of the Borrower or
any Subsidiary thereof and furnished to the Lenders were, at the time the same
were so furnished, complete and correct in all respects to the extent necessary
to give the recipient a true and accurate knowledge of the subject matter. No
document furnished or written statement made to the Administrative Agent or the
Lenders by the Borrower or any Subsidiary thereof in connection with the
negotiation, preparation or execution of this Agreement or any of the Loan
Documents contains or will contain any untrue statement of a fact material to
the creditworthiness of the Borrower or its Subsidiaries or omits or will omit
to state a fact necessary in order to make the statements contained therein not
misleading. All projections provided by or on behalf of the Borrower to the
Administrative Agent and Lenders hereunder constitute good faith estimates based
on reasonable assumptions of senior management of the Borrower as of the date
delivered. The Borrower is not aware of any facts which it has not disclosed in
writing to the Administrative Agent having a Material Adverse Effect, or insofar
as the Borrower can now foresee, could reasonably be expected to have a Material
Adverse Effect.
SECTION 5.2 Survival of Representations and Warranties, Etc. All
-----------------------------------------------
representations and warranties set forth in this Article V and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
made under this
38
<PAGE>
Agreement shall be made or deemed to be made at and as of the Closing Date and
at and as of the date of each Loan hereunder (except those that are expressly
made as of a specific date), shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement, any investigation made
by or on behalf of the Lenders or any borrowing hereunder.
ARTICLE VI
FINANCIAL INFORMATION AND NOTICES
---------------------------------
Until all of the principal and interest on the Loans and all fees hereunder
have been paid in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 12.11 hereof, the Borrower will
furnish or cause to be furnished to the Administrative Agent at the
Administrative Agent's Office at the address set forth in Section 12.1 and to
the Lenders at their respective addresses as set forth on Schedule 1.1, or such
------------
other office as may be designated by the Administrative Agent and Lenders from
time to time:
SECTION 6.1 Financial Statements and Projections.
------------------------------------
(a) Quarterly Financial Statements. As soon as practicable and in any
------------------------------
event within forty-five (45) days after the end of each fiscal quarter (other
than the fourth fiscal quarter ending December 31 of each Fiscal Year), an
unaudited Consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the close of such fiscal quarter and unaudited Consolidated
and consolidating statements of income, retained earnings and cash flows for the
fiscal quarter then ended and that portion of the Fiscal Year then ended,
including the notes thereto, all in reasonable detail setting forth in
comparative form the corresponding figures as of the end of and for the
corresponding period in the preceding Fiscal Year and prepared by the Borrower
in accordance with GAAP and, if applicable, containing disclosure of the effect
on the financial position or results of operations of any change in the
application of accounting principles and practices during the period, and
certified by the chief financial officer of the Borrower to present fairly in
all material respects the financial condition of the Borrower and its
Subsidiaries on a Consolidated and consolidating basis as of their respective
dates and the results of operations of the Borrower and its Subsidiaries for the
respective periods then ended, subject to normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any event
---------------------------
within ninety (90) days after the end of each Fiscal Year, an audited
Consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the close of such Fiscal Year and audited Consolidated and
consolidating statements of income, retained earnings and cash flows for the
Fiscal Year then ended, including the notes thereto, all in reasonable detail
setting forth in comparative form the corresponding figures as of the end of and
for the preceding Fiscal Year and prepared by an independent certified public
accounting firm of recognized national standing in accordance with GAAP and
accompanied by a report thereon by such certified public accountants that is not
qualified with respect to scope limitations imposed by the Borrower or any of
its Subsidiaries or with respect to accounting principles followed by the
Borrower or any of its Subsidiaries not in accordance with GAAP.
39
<PAGE>
(c) Annual Budget and Financial Projections. As soon as practicable and in
---------------------------------------
any event within ninety (90) days after the beginning of each Fiscal Year, a
budget of the Borrower and its Subsidiaries for such Fiscal Year, as approved by
the Board of Directors of the Borrower and substantially similar in form and
scope as the budget for the 1999 Fiscal Year delivered to the Administrative
Agent prior to closing.
SECTION 6.2 Officer's Compliance Certificate. At each time financial
--------------------------------
statements are delivered pursuant to Sections 6.1 (a) or (b), a certificate of
the chief financial officer or the treasurer of the Borrower in the form of
Exhibit E attached hereto (an "Officer's Compliance Certificate").
- ---------
SECTION 6.3 Accountants' Certificate. At each time financial statements
------------------------
are delivered pursuant to Section 6.1(b), a certificate of the independent
public accountants certifying such financial statements addressed to the
Administrative Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the certification
of such financial statements, they obtained no knowledge of any Default or Event
of Default or, if such is not the case, specifying such Default or Event of
Default and its nature and period of existence; and
(b) confirming the calculations of the Borrower and its Subsidiaries
required to establish whether or not such Persons are in compliance with the
financial covenants set forth in Article VIII hereof as at the end of each
respective period.
SECTION 6.4 Other Reports.
-------------
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent public
accountants in connection with their auditing function, including, without
limitation, any management report and any management responses thereto;
(b) As soon as available and in any event within ninety (90) days after
the end of the Fiscal Year of the Borrower, an updated Schedule 5.1(u)
---------------
accompanied by a report identifying any FCC License or PUC Authorization lost,
surrendered or canceled during such period, and within ten (10) Business Days
after the receipt by the Borrower or any of its Subsidiaries of notice that any
FCC License or PUC Authorization has been lost or canceled, copies of any such
notice accompanied by a report describing the measures undertaken by either
Borrower or any of its Subsidiaries to prevent such loss or cancellation (and
the anticipated impact, if any, that such loss or cancellation will have upon
the business of either Borrower or any of its Subsidiaries); and
(c) Such other information regarding the operations, business affairs and
financial condition of the Borrower or any of its Subsidiaries as the
Administrative Agent or any Lender, may reasonably request.
40
<PAGE>
SECTION 6.5 Notice of Litigation and Other Matters. Prompt (but in no
--------------------------------------
event later than ten (10) days after an officer of the Borrower obtains
knowledge thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by or before
any Governmental Authority and all actions and proceedings in any court or
before any arbitrator against or involving the Borrower or any Subsidiary
thereof or any of their respective properties, assets or businesses which in
such case could reasonably be expected to have a Material Adverse Effect;
(b) any notice of any violation received by the Borrower or any Subsidiary
thereof from any Governmental Authority including, without limitation, any
notice of violation of Environmental Laws which in any such case could
reasonably be expected to have a Material Adverse Effect;
(c) any labor controversy that has resulted in, or threatens to result in,
a strike or other work action against the Borrower or any Subsidiary thereof,
where such labor controversy could reasonably be expected to have a Material
Adverse Effect;
(d) any attachment, judgment, lien, levy or order exceeding $250,000 that
may be assessed against or threatened against the Borrower or any Subsidiary
thereof;
(e) (i) any Default or Event of Default, or (ii) any event which
constitutes or which with the passage of time or giving of notice or both would
constitute a default or event of default under any Material Contract unless such
default could not reasonably be expected to have a Material Adverse Effect;
provided, that the failure to give notice with respect to any such event
- --------
relating to a Material Contract shall not constitute a Default or Event of
Default hereunder if the Borrower or any of its Subsidiaries is contesting the
claimed default in good faith so long as adequate reserves are maintained in
accordance with GAAP; and
(f) (i) any unfavorable determination letter from the Internal Revenue
Service regarding the qualification of an Employee Benefit Plan under Section
401(a) of the Code (along with a copy thereof), (ii) all notices received by the
Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension
Plan or to have a trustee appointed to administer any Pension Plan, (iii) all
notices received by the Borrower or any ERISA Affiliate from a Multiemployer
Plan sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA and (iv) the Borrower obtaining knowledge or
reason to know that the Borrower or any ERISA Affiliate has filed or intends to
file a notice of intent to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA.
SECTION 6.6 Accuracy of Information. All written information, reports,
-----------------------
statements and other papers and data furnished by or on behalf of the Borrower
to the Administrative Agent or any Lender whether pursuant to this Article VI or
any other provision of this Agreement, shall, at the time the same is so
furnished, comply with Section 5.1(y).
41
<PAGE>
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
Until all of the principal and interest on the Loans and all fees hereunder
have been paid in full and the Commitments terminated, unless consent has been
obtained in the manner provided for in Section 12.11, Borrower will, and will
cause each of its Subsidiaries to:
SECTION 7.1 Preservation of Corporate Existence and Related Matters.
-------------------------------------------------------
Except as permitted by Section 9.4, preserve and maintain its separate corporate
existence and all rights, franchises, licenses and privileges necessary to the
conduct of its business, and qualify and remain qualified as a foreign
corporation and authorized to do business in each jurisdiction, except where the
failure to qualify and remain qualified as a foreign corporation could not
reasonably be expected to have a Material Adverse Effect.
SECTION 7.2 Maintenance of Property. Protect and preserve all properties
-----------------------
useful in and material to its business, including copyrights, patents, trade
names, service marks and trademarks; maintain in good working order and
condition all buildings, equipment and other tangible real and personal
property; and from time to time make or cause to be made all renewals,
replacements and additions to such property necessary for the conduct of its
business, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
SECTION 7.3 Insurance. Maintain insurance with financially sound and
---------
reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses and as may be required by
Applicable Law, and on the Closing Date and from time to time thereafter deliver
to the Administrative Agent upon its request a detailed list of the insurance
then in effect, stating the names of the insurance companies, the amounts and
rates of the insurance, the dates of the expiration thereof and the properties
and risks covered thereby.
SECTION 7.4 Accounting Methods and Financial Records. Maintain a system of
----------------------------------------
accounting, and keep such books, records and accounts (which shall be true and
complete in all material respects) as may be required or as may be necessary to
permit the preparation of financial statements in accordance with GAAP and in
compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 7.5 Payment and Performance of Obligations. Pay and perform all
--------------------------------------
Obligations under this Agreement and the other Loan Documents, and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices, except, in each case, when any failure to pay or perform could not
reasonably be expected to have a Material Adverse Effect; provided, that the
--------
Borrower or such Subsidiary may contest any item described in clause (a) or (b)
of this Section 7.5 in good faith so long as adequate reserves are maintained
with respect thereto in accordance with GAAP.
42
<PAGE>
SECTION 7.6 Compliance With Laws and Approvals. Observe and remain in
----------------------------------
compliance with all Applicable Laws and maintain in full force and effect all
Governmental Approvals, in each case applicable to the conduct of its business,
except where failure to comply with Applicable Laws or maintain Government
Approvals could not reasonably be expected to have a Material Adverse Effect.
SECTION 7.7 Environmental Laws. In addition to and without limiting the
------------------
generality of Section 7.6, (a) comply with, and ensure such compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply with and maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws, (b) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws, and promptly comply with all lawful orders and directives of
any Governmental Authority regarding Environmental Laws, except where failure to
so comply, obtain, maintain, conduct or complete such actions under such clauses
(a) and (b) could not reasonably be expected to have a Material Adverse Effect,
and (c) defend, indemnify and hold harmless the Administrative Agent and the
Lenders, and their respective parents, Subsidiaries, Affiliates, employees,
agents, officers and directors, from and against any claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise, arising out of, or in any way
relating to the presence of Hazardous Materials, or the violation of,
noncompliance with or liability under any Environmental Laws applicable to the
operations of the Borrower or any such Subsidiary, or any orders, requirements
or demands of Governmental Authorities related thereto, including, without
limitation, reasonable attorney's and consultant's fees, investigation and
laboratory fees, response costs, court costs and litigation expenses, except to
the extent that any of the foregoing directly result from the gross negligence
or willful misconduct of the party seeking indemnification therefor.
SECTION 7.8 Compliance with ERISA. In addition to and without limiting the
---------------------
generality of Section 7.6, (a) comply with all applicable material provisions of
ERISA and the regulations and published interpretations thereunder with respect
to all Employee Benefit Plans, (b) not take any action or fail to take action
the result of which could be a liability to the PBGC or to a Multiemployer Plan,
(c) not participate in any prohibited transaction that could result in any
material civil penalty under ERISA or tax under the Code, (d) operate each
Employee Benefit Plan in such a manner that will not incur any material tax
liability under Section 4980B of the Code or any material liability to any
qualified beneficiary as defined in Section 4980B of the Code and (e) furnish to
the Administrative Agent upon the Administrative Agent's request such additional
information about any Employee Benefit Plan as may be reasonably requested by
the Administrative Agent.
SECTION 7.9 Compliance With Agreements. Comply in all respects with each
--------------------------
term, condition and provision of all leases, agreements and other instruments
entered into in the conduct of its business including, without limitation, any
Material Contract, except where failure to so comply could not reasonably be
expected to have a Material Adverse Effect; provided, that no such failure
--------
relating to a Material Contract or other lease, agreement or instrument shall
constitute a Default or Event of Default hereunder if the Borrower or any of its
Subsidiaries is
43
<PAGE>
contesting the claimed default in good faith so long as adequate reserves are
maintained in accordance with GAAP.
SECTION 7.10 Conduct of Business. Engage only in businesses in
-------------------
substantially the same fields as the businesses conducted on the Closing Date
and in lines of business directly related thereto.
SECTION 7.11 Visits and Inspections. Permit representatives of the
----------------------
Administrative Agent or any Lender, from time to time and, upon reasonable
notice during normal business hours at its own expense (except that the Borrower
shall pay all such expenses when an Event of Default shall have occurred and be
continuing, to visit and inspect its properties; inspect, audit and make
extracts from its books, records and files, including, but not limited to,
management letters prepared by independent accountants; and discuss with its
principal officers, and its independent accountants, its business, assets,
liabilities, financial condition, results of operations and business prospects.
SECTION 7.12 Year 2000 Compatibility. Take all actions reasonably
-----------------------
necessary to ensure that the Borrower's material computer based systems are able
to operate and effectively process data which includes dates on and after
January 1, 2000, except to the extent that the failure to take such action could
not reasonably be expected to have a Material Adverse Effect.
ARTICLE VIII
FINANCIAL COVENANTS
-------------------
Until all of the principal and interest on the Loans and fees hereunder
have been paid in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 12.11 hereof, the Borrower and its
Subsidiaries on a Consolidated basis will not:
SECTION 8.1 Leverage Ratio. As of any fiscal quarter end, permit the ratio
--------------
(the "Leverage Ratio") of (a) Total Debt of the Borrower and its Subsidiaries as
of such fiscal quarter end to (b) Operating Cash Flow of the Borrower and its
Subsidiaries for the period of four (4) consecutive fiscal quarters ending on
such fiscal quarter end to be greater than 4.25 to 1.0.
SECTION 8.2 Interest Coverage Ratio. As of any fiscal quarter end, permit
-----------------------
the ratio of (a) Operating Cash Flow of the Borrower and its Subsidiaries for
the period of four (4) consecutive fiscal quarters ending on such fiscal quarter
end to (b) Interest Expense of the Borrower and its Subsidiaries for the period
of four (4) consecutive fiscal quarters ending on such fiscal quarter end to be
less than 3.00 to 1.00.
SECTION 8.3 Adjusted Fixed Charge Coverage Ratio. As of the end of each
------------------------------------
fiscal quarter ending after the second anniversary of the Closing Date, permit
the ratio of (a) Adjusted Operating Cash Flow for the Borrower and its
Subsidiaries for the period of four (4) consecutive fiscal quarters ending on
such fiscal quarter end to (b) Fixed Charges of the Borrower and its
Subsidiaries for the period of four (4) consecutive fiscal quarters ending on
such fiscal quarter end, to be less than (i) from the fiscal quarter ending
after the second anniversary of the Closing
44
<PAGE>
Date through and including December 31, 2001, 0.85 to 1.0 and (ii) as of January
1, 2002 and thereafter, 1.05 to 1.0.
SECTION 8.4 Minimum Net Worth. As of any fiscal quarter end, permit the
-----------------
Adjusted Net Worth of the Borrower to be less than seventy-five percent (75%) of
the Net Worth of Borrower as of the most recent fiscal quarter end preceding the
Closing Date, plus, thirty-five percent (35%) of the Net Income of the Borrower
for the period from April 1, 1999 through the end of such fiscal quarter.
ARTICLE IX
NEGATIVE COVENANTS
------------------
Until all of the principal and interest on the Loans and fees hereunder
have been paid in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 12.11 hereof, the Borrower will not
and will not permit any of its Subsidiaries to:
SECTION 9.1 Limitations on Debt. Create, incur, assume or suffer to exist
-------------------
any Debt except:
(a) the Obligations;
(b) Debt incurred in connection with a non-speculative Hedging Agreement
(a copy of which shall be delivered to the Administrative Agent by the Borrower
promptly after execution thereof);
(c) Debt existing on the Closing Date and not otherwise permitted or
referenced in this Section 9.1, as set forth on Schedule 5.1(s) in the case of
---------------
Debt in excess of $1,000,000 and the renewal and refinancing (but not the
increase above the amount of principal outstanding with respect to any such Debt
at the Closing Date other than borrowings under lines of credit up to the
maximum amount described in Schedule 5.1(s)) of any of the foregoing;
(d) Debt of the Borrower and its Subsidiaries incurred in connection with
Capital Leases, purchase money Debt of the Borrower and its Subsidiaries and
other Debt in an aggregate amount not to exceed $40,000,000 on any date of
determination (which may be secured to the extent permitted by Sections 9.2(f)
and 9.2(g));
(e) Debt of the Borrower payable solely to any Subsidiary or Debt of any
Subsidiary payable to solely to the Borrower or to another Subsidiary; and
(f) Debt under the CoBank Facilities, in an aggregate principal amount at
any time outstanding not to exceed $125,000,000.
SECTION 9.2 Limitations on Liens. Create, incur, assume or suffer to
--------------------
exist, any Lien on or with respect to any of its assets or properties (including
without limitation shares of capital
45
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stock or other ownership interests of any Subsidiary), real or personal, whether
now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired or which are
being contested in good faith if adequate reserves are maintained to the extent
required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors, or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings if adequate reserves are maintained to the extent
required by GAAP;
(c) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under workers'
compensation, unemployment insurance or similar legislation;
(d) Liens constituting encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property,
which in the aggregate are not substantial in amount and which do not, in any
case, detract from the value of such property or impair the use thereof in the
ordinary conduct of business;
(e) Liens not otherwise permitted by this Section 9.2 and in existence on
the Closing Date and described on Schedule 9.2 and any Liens on any refinanced
------------
Debt permitted by Section 9.1(c);
(f) (i) Liens evidencing the interest of the lessor under any Capital
Lease permitted by Section 9.1(d) and any contractual or statutory liens in
favor of the lessor with respect to any leased property; and (ii) Liens securing
purchase money Debt permitted under Sections 9.1(d); provided that (A) such
--------
Liens shall be created within ninety (90) days after the acquisition of the
related asset, (B) such Liens do not at any time encumber any property other
than the property financed by such Debt, (C) the amount of Debt secured thereby
is not increased and (iv) the principal amount of Debt secured by any such Lien
shall at no time exceed one hundred percent (100%) of the original purchase
price of such property at the time it was acquired;
(g) other Liens securing Debt otherwise permitted under Section 9.1, the
principal amount of which outstanding at any one time in the aggregate does not
exceed $500,000;
(h) Liens securing Debt permitted by Section 9.1(f); and
(i) Liens securing Debt permitted by 9.1(d) which Debt was assumed in
connection with an acquisition permitted by Section 9.3(c), (d) or (e); provided
--------
that (A) such Liens were created prior to such acquisition and not in
contemplation thereof, (B) such Liens do not at any time encumber any property
other than the property subject to such Lien prior to the acquisition,
46
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(C) the amount of Debt secured thereby is not increased and (iv) the principal
amount of Debt secured by any such Lien shall at no time exceed one hundred
percent (100%) of the original purchase price of such property at the time it
was acquired.
SECTION 9.3 Limitations on Loans, Advances, Investments and Acquisitions.
------------------------------------------------------------
Purchase, own, invest in or otherwise acquire, directly or indirectly, any
capital stock, interests in any partnership or joint venture (including without
limitation the creation or capitalization of any Subsidiary), evidence of Debt
or other obligation or security, substantially all or a portion of the business
or assets of any other Person or any other investment or interest whatsoever in
any other Person, or make or permit to exist, directly or indirectly, any loans,
advances or extensions of credit to, or any investment in cash or by delivery of
property in, any Person, or enter into, directly or indirectly, any commitment
or option in respect of the foregoing, except:
(a) (i) investments existing on the Closing Date in Subsidiaries existing
on the Closing Date and further investments by the Borrower and/or any
Subsidiary in the form of intercompany loans permitted by Section 9.1(e), (ii)
investments after the date of this Agreement in any Wholly Owned Subsidiary and
(iii) the other existing loans, advances and investments described on Schedule
--------
9.3;
- ---
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within one hundred twenty (120) days from the date of acquisition
thereof, (ii) commercial paper maturing no more than one hundred twenty (120)
days from the date of creation thereof and at the time of purchase having the
highest rating obtainable from either Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. or Moody's Investors Service, Inc.,
(iii) certificates of deposit maturing no more than one hundred twenty (120)
days from the date of creation thereof issued by commercial banks incorporated
under the laws of the United States of America or any state thereof, or branches
of any foreign bank registered and licensed under the applicable laws of the
United States of America or any state thereof, each having combined capital,
surplus and undivided profits of not less than $500,000,000 and having a rating
of "A" or better by a nationally recognized rating agency, (iv) time deposits
maturing no more than thirty (30) days from the date of creation thereof with
commercial banks or savings banks or savings and loan associations each having
membership either in the FDIC or the deposits of which are insured by the FDIC
and in amounts not exceeding the maximum amounts of insurance thereunder, or (v)
money market mutual funds;
(c) investments by the Borrower or any Subsidiary in the form of
acquisitions of all or substantially all of the business or a line of business
(whether by the acquisition of capital stock, assets or any combination of both)
of any other Person using either (i) only the capital stock of the Borrower or
(ii) capital stock of the Borrower and other consideration permitted by this
Section 9.3 as consideration for such acquisition; provided that the Borrower or
--------
any of its Subsidiaries may not use Disqualified Stock as consideration;
(d) investments not otherwise permitted by Section 9.3(c) by the Borrower
or any of its Subsidiaries in Persons constituting Subsidiaries (after giving
effect to any such investment) in the form of acquisitions of all or
substantially all of the business or a line of business (whether
47
<PAGE>
by the acquisition of capital stock, assets or any combination thereof) of any
other Person, in an amount not to exceed $85,000,000 in the aggregate during the
term of this Agreement; and
(e) loans, advances or other investments by the Borrower or any of its
Subsidiaries in Persons not constituting Subsidiaries (after giving effect to
any such investment) of the Borrower in an aggregate amount not to exceed
$40,000,000 (calculated on a cumulative basis except, in the case of loans and
advances, net of any principal amount repaid); provided that: (i) the Borrower
--------
and its Subsidiaries may make or hold loans, advances and other investments in
Persons not constituting Subsidiaries (after giving effect to any such
investment) in addition to the amount of investments permitted to be made or
held pursuant to the prior clause of this Section 9.3(e) in an aggregate
additional amount not to exceed $85,000,000 (calculated after giving effect to
any such investment from the date such investment is made or held pursuant to
this clause (i) on a cumulative basis and without netting any repayment of the
principal amount of any loan or advance), so long as (A) such investment is
----------
designated by the Borrower as being made or held pursuant to the provisions of
clause (i) above and (B) all indebtedness and other liabilities of any Person in
which such an investment is made or held pursuant to clause (i) above are Non-
Recourse to the Borrower and its Subsidiaries and (iii) no loan, advance or
other investment may be made pursuant to either clause of this Section 9.3(e) if
any Event of Default has occurred and is continuing.
SECTION 9.4 Limitations on Mergers and Liquidation. Merge, consolidate or
--------------------------------------
enter into any similar combination with any other Person or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution) except:
(a) any Wholly-Owned Subsidiary of the Borrower may merge with any other
Wholly-Owned Subsidiary of the Borrower;
(b) any Wholly-Owned Subsidiary may merge into the Person such Wholly-
Owned Subsidiary was formed to acquire in connection with an acquisition
permitted by Section 9.3(c);
(c) any Wholly-Owned Subsidiary of the Borrower may wind-up into the
Borrower or any other Wholly-Owned Subsidiary of the Borrower; and
(d) the Borrower or any of its Wholly-Owned Subsidiaries may merge or
consolidate with any other Person, provided, that, (i) the Borrower or such
--------
Wholly-Owned Subsidiary is the surviving corporation after such merger or
consolidation and (ii) the Borrower and its Subsidiaries are in pro forma
compliance after such merger or consolidation with all terms and covenants
contained in this Agreement and the other Loan Documents.
SECTION 9.5 Limitations on Sale of Assets. Convey, sell, lease, assign,
-----------------------------
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any equity interest in any
Subsidiary or Affiliate, any receivables and leasehold interests and any sale-
leaseback or similar transaction), whether now owned or hereafter acquired
except:
(a) the sale of inventory in the ordinary course of business;
48
<PAGE>
(b) the sale of assets no longer used or usable in the business of the
Borrower or any of its Subsidiaries;
(c) the transfer of assets to the Borrower or any other Wholly-Owned
Subsidiaries pursuant to Section 9.4(c);
(d) the sale or discount of accounts receivable arising in the ordinary
course of business in connection with the compromise or collection thereof; and
(e) the sale of assets that for the twelve-month period ending immediately
prior to such sale generated less than fifteen percent (15%) of the Operating
Cash Flow of the Borrower and its Subsidiaries; provided, that during the term
--------
of this Agreement, aggregate sales of assets under this subsection may not
exceed twenty-five percent (25%) of Operating Cash Flow; and provided further
----------------
that the Borrower and its Subsidiaries will comply with Section 2.3(c) with
respect to the proceeds of any sale under this Section 9.5(e). For purposes of
this Section 9.5(e), Operating Cash Flow shall be calculated for the period of
four consecutive fiscal quarters immediately preceding the relevant measurement
date for which financial information has been delivered pursuant to Sections 6.1
and 6.2.
SECTION 9.6 Limitations on Exchange and Issuance of Capital Stock. Issue,
-----------------------------------------------------
sell or otherwise dispose of any class or series of capital stock of it that, by
its terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of an event or passage of time would be,
(a) convertible or exchangeable into Debt or (b) required to be redeemed or
repurchased, including at the option of the holder, in whole or in part, or has,
or upon the happening of an event or passage of time would have, a redemption or
similar payment due (other than in any case by the giving of an optional notice
of redemption by the issuer thereof).
SECTION 9.7 Transactions with Affiliates. Directly or indirectly: (a) make
----------------------------
any loan or advance to, or purchase or assume any note or other obligation to or
from, any of its officers, directors, shareholders or other Affiliates, or to or
from any member of the immediate family of any of its officers, directors,
shareholders or other Affiliates, or subcontract any operations to any of its
Affiliates, or (b) enter into, or be a party to, any other transaction not
described in clause (a) above with any of its Affiliates (any transaction
described in clause (a) or (b), an "Affiliate Transaction"), except, in each
case, pursuant to the reasonable requirements of its business and upon fair and
reasonable terms that are no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not its Affiliate; provided,
--------
that the foregoing provisions of this Section shall not prohibit: (i) agreements
with or for the benefit of employees of the Borrower or any of its Subsidiaries
regarding bridge home loans and other loans necessitated by the relocation of
such employee or regarding short-term hardship advances, routine advances for
business expenses in the ordinary course of business, or other loans in an
aggregate amount outstanding not to exceed $1,000,000 if each such loan is
approved by the Board of Directors of the Borrower; (ii) any transaction solely
among the Borrower and its Wholly-Owned Subsidiaries; (iii) the Borrower making
any dividend or distribution permitted by Section 9.6; (iv) any borrowing or
payment of principal or interest on any Debt permitted by Section 9.1; (v) any
Affiliate Transaction pursuant to agreements or other arrangements in effect
49
<PAGE>
on the date hereof or otherwise consistent with past practice (and any renewal,
replacement or modification of any such agreement or arrangement on terms that
are not materially more adverse to the Borrower), (vi) any Affiliate Transaction
in which the amount involved does not exceed $100,000, or (vii) the consummation
of any Affiliate Transaction described on Schedule 9.7.
------------
SECTION 9.8 Certain Accounting Changes. Change its Fiscal Year end, or
--------------------------
make any change in its accounting treatment and reporting practices except as
required or permitted by GAAP and in accordance with Section 12.9.
SECTION 9.9 Restrictive Agreements. Enter into any Debt which contains
----------------------
any negative pledge on assets or which restricts, limits or otherwise encumbers
(a) its ability to incur Liens on or with respect to any of its assets or
properties other than the assets or properties securing such Debt or (b) the
ability of any Subsidiary to make any payment to the Borrower (in the form of
dividends, intercompany advances or otherwise); provided, that any Debt
permitted to be refinanced pursuant to Section 9.1(c) may, after any such
refinancing include terms that are not materially more restrictive than the
terms in existence on the Closing Date with respect to such Debt.
ARTICLE X
DEFAULT AND REMEDIES
--------------------
SECTION 10.1 Events of Default. Each of the following shall constitute
-----------------
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. The Borrower shall default
----------------------------------------
in any payment of principal of any Loan or Note when and as due (whether at
maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment when
---------------------
and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan or Note or any fees hereunder, and such default shall
continue unremedied for five (5) Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed to be
-----------------
made by the Borrower or any of its Subsidiaries under this Agreement, any Loan
Document or any amendment hereto or thereto, shall at any time prove to have
been incorrect or misleading in any material respect when made or deemed made.
(d) Default in Performance of Certain Covenants. The Borrower shall
-------------------------------------------
default in the performance or observance of any covenant or agreement contained
in Sections 6.5(e) or Articles VIII or IX (other than Sections 9.8 or 9.9) of
this Agreement.
50
<PAGE>
(e) Default in Performance of Other Covenants and Conditions. The Borrower
--------------------------------------------------------
or any Subsidiary thereof shall default in the performance or observance of any
term, covenant, condition or agreement contained in this Agreement (other than
as specifically provided for otherwise in this Section 10.1) or any other Loan
Document and such default shall continue for a period of thirty (30) days after
written notice thereof has been given to the Borrower by the Administrative
Agent or any Lender.
(f) Hedging Agreement. Any termination payment shall be due by the
-----------------
Borrower under any Hedging Agreement and such amount is not paid within five (5)
Business Days of the due date thereof.
(g) Debt Cross-Default. The Borrower or any of its Subsidiaries shall (i)
------------------
default in the payment of any Debt (other than the Notes) the aggregate
outstanding amount of which Debt is in excess of $1,000,000 beyond the period of
grace if any, provided in the instrument or agreement under which such Debt was
created, or (ii) default in the observance or performance of any other agreement
or condition relating to any Debt (other than the Notes) the aggregate
outstanding amount of which Debt is in excess of $1,000,000 or contained in any
instrument or agreement evidencing, securing or relating thereto or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).
(h) Change in Control. A Change in Control shall occur.
-----------------
(i) Voluntary Bankruptcy Proceeding. The Borrower or any Significant
-------------------------------
Subsidiary thereof shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to
take advantage of any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of debts,
(iii) consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy laws or
other laws, (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property, domestic or foreign, (v) admit in writing its inability to pay
its debts as they become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of authorizing any
of the foregoing.
(j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
---------------------------------
be commenced against the Borrower or any Significant Subsidiary thereof in any
court of competent jurisdiction seeking (i) relief under the federal bankruptcy
laws (as now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding up or
adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like for the Borrower or any Significant Subsidiary thereof or
for all or any substantial part of their respective assets, domestic or foreign,
and such case or proceeding shall continue without dismissal or stay for a
period of sixty (60) consecutive days, or
51
<PAGE>
an order granting the relief requested in such case or proceeding (including,
but not limited to, an order for relief under such federal bankruptcy laws)
shall be entered.
(k) Failure of Agreements. Any provision of this Agreement or any
---------------------
provision of any other Loan Document with respect to any material (in the
reasonable judgement thereof) rights and remedies of the Administrative Agent
and Lenders hereunder and thereunder shall for any reason cease to be valid and
binding on the Borrower or Subsidiary party thereto or any such Person shall so
state in writing.
(l) Termination Event. The occurrence of any of the following events:
-----------------
(i) the Borrower or any ERISA Affiliate fails to make full payment when due of
all amounts which, under the provisions of any Pension Plan or Section 412 of
the Code, the Borrower or any ERISA Affiliate is required to pay as
contributions thereto, (ii) an accumulated funding deficiency in excess of
$1,000,000 occurs or exists, whether or not waived, with respect to any Pension
Plan, (iii) a Termination Event or (iv) the Borrower or any ERISA Affiliate as
employers under one or more Multiemployer Plan makes a complete or partial
withdrawal from any such Multiemployer Plan and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$1,000,000.
(m) Judgment. A judgment or order for the payment of money which causes
--------
the aggregate amount of all such judgments to exceed $500,000 in any Fiscal Year
shall be entered against the Borrower or any of its Subsidiaries by any court
and such judgment or order shall continue without discharge or stay for a period
of thirty (30) days.
(n) Licenses; Franchises. Any FCC License or PUC Authorization of the
--------------------
Borrower or any Subsidiary should expire or terminate or be revoked or otherwise
lost, which in any such case could reasonably be expected to have a Material
Adverse Effect.
SECTION 10.2 Remedies. Upon the occurrence of an Event of Default, with
--------
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower:
(a) Acceleration; Termination of Facilities. Declare the principal of and
---------------------------------------
interest on the Loans and the Notes at the time outstanding, and all other
amounts owed to the Lenders and to the Administrative Agent under this Agreement
or any of the other Loan Documents and all other Obligations, to be forthwith
due and payable, whereupon the same shall immediately become due and payable
without presentment, demand, protest or other notice of any kind, all of which
are expressly waived, anything in this Agreement or the other Loan Documents to
the contrary notwithstanding, and/or terminate the Revolving Credit Facility and
any right of the Borrower to request borrowings thereunder; provided, that upon
--------
the occurrence of an Event of Default specified in Section 10.1(i) or (j), the
Revolving Credit Facility shall be automatically terminated and all Obligations
shall automatically become due and payable without presentment, demand, protest
or other notice of any kind, all of which are expressly waived, anything in this
Agreement or in any other Loan Document to the contrary notwithstanding.
52
<PAGE>
(b) Rights of Collection. Exercise on behalf of the Lenders all of its
--------------------
other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrower's Obligations.
SECTION 10.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
-----------------------------------------------
enumeration of the rights and remedies of the Administrative Agent and
the Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the other Loan Documents or that may now or hereafter exist
at law or in equity or by suit or otherwise. No delay or failure to take action
on the part of the Administrative Agent or any Lender in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
or shall be construed to be a waiver of any Event of Default. No course of
dealing between the Borrower, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.
ARTICLE XI
THE ADMINISTRATIVE AGENT
------------------------
SECTION 11.1 Appointment. Each of the Lenders hereby irrevocably
-----------
designates and appoints First Union as Administrative Agent of such Lender under
this Agreement and the other Loan Documents for the term hereof and each such
Lender irrevocably authorizes First Union as Administrative Agent for such
Lender, to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Administrative Agent by the terms of this
Agreement and such other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, the Administrative
Agent shall not have any duties or responsibilities, except those expressly set
forth herein and therein, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or the other Loan Documents or
otherwise exist against the Administrative Agent. Any reference to the
Administrative Agent in this Article XI shall be deemed to refer to the
Administrative Agent solely in its capacity as Administrative Agent and not in
its capacity as a Lender.
SECTION 11.2 Delegation of Duties. The Administrative Agent may
--------------------
execute any of its respective duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by the Administrative Agent with
reasonable care.
53
<PAGE>
SECTION 11.3 Exculpatory Provisions. Neither the Administrative Agent
----------------------
nor any of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or the other Loan Documents (except for actions occasioned by its or
such Person's own gross negligence or willful misconduct), or (b) responsible in
any manner to any of the Lenders for any recitals, statements, representations
or warranties made by the Borrower or any of its Subsidiaries or any officer
thereof contained in this Agreement or the other Loan Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or the other Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the other Loan
Documents or for any failure of the Borrower or any of its Subsidiaries to
perform its obligations hereunder or thereunder. The Administrative Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of the
Borrower or any of its Subsidiaries.
SECTION 11.4 Reliance by the Administrative Agent. The Administrative
------------------------------------
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless such Note shall have been
transferred in accordance with Section 12.10 hereof. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement and the other Loan Documents unless it shall first receive such advice
or concurrence of the Required Lenders (or, when expressly required hereby or by
the other relevant Loan Document, all the Lenders) as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action except for its own gross negligence or
willful misconduct. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes in accordance with a request of the Required Lenders (or, when expressly
required hereby, all the Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
SECTION 11.5 Notice of Default. The Administrative Agent shall not be
-----------------
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless it has received notice from a Lender or the Borrower referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, it shall promptly give notice thereof to the Lenders.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or,
when expressly required
54
<PAGE>
hereby, all the Lenders); provided that unless and until the Administrative
--------
Agent shall have received such directions, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interests of the Lenders, except to the extent that other provisions of
this Agreement expressly require that any such action be taken or not be taken
only with the consent and authorization or the request of the Lenders or
Required Lenders, as applicable.
SECTION 11.6 Non-Reliance on the Administrative Agent and Other Lenders.
----------------------------------------------------------
Each Lender expressly acknowledges that neither the Administrative Agent nor
any of its respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates has made any representations or warranties to it and
that no act by the Administrative Agent hereafter taken, including any review of
the affairs of the Borrower or any of its Subsidiaries, shall be deemed to
constitute any representation or warranty by the Administrative Agent to any
Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and its Subsidiaries and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Borrower and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Administrative Agent hereunder or by the other Loan Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Borrower or
any of its Subsidiaries which may come into the possession of the Administrative
Agent or any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates.
SECTION 11.7 Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent in its capacity as such and (to the extent not reimbursed
by the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to the respective amounts of their Commitment Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes or any Reimbursement Obligation) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
--------
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions,
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judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's bad faith, gross negligence or willful misconduct. The
agreements in this Section 11.7 shall survive the payment of the Notes, any
Reimbursement Obligation and all other amounts payable hereunder and the
termination of this Agreement.
SECTION 11.8 The Administrative Agent in Its Individual Capacity. The
---------------------------------------------------
Administrative Agent and its respective Subsidiaries and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Borrower as though the Administrative Agent were not the Administrative
Agent hereunder. With respect to any Loans made or renewed by it and any Note
issued to it and with respect to any issued by it or participated in by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
SECTION 11.9 Resignation of the Administrative Agent; Successor
--------------------------------------------------
Administrative Agent. Subject to the appointment and acceptance of a
- --------------------
successor as provided below, the Administrative Agent may resign at any time by
giving notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Administrative Agent, which successor shall have minimum capital and surplus of
at least $500,000,000. If no successor Administrative Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the Administrative Agent's giving of notice of
resignation, then the Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent, which successor shall have minimum
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 11.9 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Administrative Agent.
ARTICLE XII
MISCELLANEOUS
-------------
SECTION 12.1 Notices.
-------
(a) Method of Communication. Except as otherwise provided in this
-----------------------
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service
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<PAGE>
and (iii) on the third Business Day following the date sent by certified mail,
return receipt requested. A telephonic notice to the Administrative Agent as
understood by the Administrative Agent will be deemed to be the controlling and
proper notice in the event of a discrepancy with or failure to receive a
confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at the
---------------------
following addresses, or any other address as to which all the other parties are
notified in writing.
If to the Borrower: Commonwealth Telephone Enterprises, Inc.
Attention: John Butler
Telephone No.:
Telecopy No.:
With copies to: Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: John Fouhey, Esq.
Telephone No.: 212-450-4000
Telecopy No.: 212-450-4800
If to First Union as First Union National Bank
Administrative Agent: One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 383-0281
Telecopy No.: (704) 383-0288
If to any Lender: To the Address set forth on Schedule 1.1 hereto
------------
(c) Administrative Agent's Office. The Administrative Agent hereby
-----------------------------
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders, as the Administrative Agent's Office referred to herein,
to which payments due are to be made and at which Loans will be disbursed.
SECTION 12.2 Expenses; Indemnity. The Borrower will (a) pay all
-------------------
reasonable out-of-pocket expenses of the Administrative Agent in connection
with: (i) the preparation, execution and delivery of this Agreement and each
other Loan Document, whenever the same shall be executed and delivered,
including without limitation all out-of-pocket syndication and due diligence
expenses and reasonable fees and disbursements of counsel for the Administrative
Agent and (ii) the preparation, execution and delivery of any waiver, amendment
or consent by the Administrative Agent or the Lenders relating to this Agreement
or any other Loan Document,
57
<PAGE>
including without limitation reasonable fees and disbursements of counsel for
the Administrative Agent, (b) at any time when a Default has occurred and is
continuing (or at any time thereafter with respect to any of the following
undertaken during the existence of a Default), pay all reasonable out-of-pocket
expenses of the Administrative Agent (and of the Lenders, but only if such
Default is an Event of Default) in connection with the enforcement of any rights
and remedies of the Administrative Agent and Lenders under the Revolving Credit
Facility, including consulting with appraisers, accountants, engineers,
attorneys and other Persons concerning the nature, scope or value of any right
or remedy of the Administrative Agent or any Lender hereunder or under any other
Loan Document or any factual matters in connection therewith, which expenses
shall include without limitation the reasonable fees and disbursements of such
Persons, and (c) defend, indemnify and hold harmless the Administrative Agent
and the Lenders, and their respective parents, Subsidiaries, Affiliates,
employees, agents, officers and directors, from and against any losses,
penalties, fines, liabilities, settlements, damages, costs and expenses,
suffered by any such Person in connection with any claim, investigation,
litigation or other proceeding (whether or not the Administrative Agent or any
Lender is a party thereto) and the prosecution and defense thereof, arising out
of or in any way connected with the Agreement, any other Loan Document or the
Loans, including without limitation reasonable attorney's and consultant's fees,
except to the extent that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking indemnification therefor.
SECTION 12.3 Set-off. In addition to any rights now or hereafter
-------
granted under Applicable Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during the continuance
thereof, the Lenders and any assignee or participant of a Lender in accordance
with Section 12.10 are hereby authorized by the Borrower at any time or from
time to time, without notice to the Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, time or demand, including, but not
limited to, indebtedness evidenced by certificates of deposit, whether matured
or unmatured) and any other indebtedness at any time held or owing by the
Lenders, or any such assignee or participant to or for the credit or the account
of the Borrower against and on account of the Obligations irrespective of
whether or not (a) the Lenders shall have made any demand under this Agreement
or any of the other Loan Documents or (b) the Administrative Agent shall have
declared any or all of the Obligations to be due and payable as permitted by
Section 10.2 and although such Obligations shall be contingent or unmatured.
Notwithstanding the preceding sentence, each Lender agrees to notify the
Borrower and the Administrative Agent after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
SECTION 12.4 Governing Law. This Agreement, the Notes and the other
-------------
Loan Documents, unless otherwise expressly set forth therein, shall be governed
by, construed and enforced in accordance with the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.
SECTION 12.5 Consent to Jurisdiction. The Borrower hereby irrevocably
-----------------------
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of any dispute in
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connection with this Agreement, the Notes and the other Loan Documents, any
rights or obligations hereunder or thereunder, or the performance of such rights
and obligations. The Borrower hereby irrevocably consents to the service of a
summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this
Agreement, the Notes or the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner specified in Section 12.1.
Nothing in this Section 12.5 shall affect the right of the Administrative Agent
or any Lender to serve legal process in any other manner permitted by Applicable
Law or affect the right of the Administrative Agent or any Lender to bring any
action or proceeding against the Borrower or its properties in the courts of any
other jurisdictions.
SECTION 12.6 Binding Arbitration; Waiver of Jury Trial.
-----------------------------------------
(a) Binding Arbitration. Upon demand of any party, whether made before or
-------------------
after institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to the Notes or any other Loan
Documents ("Disputes"), between or among parties to the Notes or any other Loan
Document shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, claims brought as class actions, claims
arising from Loan Documents executed in the future, disputes as to whether a
matter is subject to arbitration, or claims concerning any aspect of the past,
present or future relationships arising out of or connected with the Loan
Documents. Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in Charlotte, North Carolina. The expedited procedures set
forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims
-- ----
of less than $1,000,000. All applicable statutes of limitations shall apply to
any Dispute. A judgment upon the award may be entered in any court having
jurisdiction. Notwithstanding any of the foregoing to the contrary, any
arbitration proceeding demanded hereunder shall begin within ninety (90) days
after such demand thereof and shall be concluded within one-hundred and twenty
(120) days after such demand. These time limitations may not be extended unless
a party hereto shows cause for extension and then such extension shall not
exceed a total of sixty (60) days. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted. The parties hereto do not waive any applicable Federal or state
substantive law except as provided herein. Notwithstanding the foregoing, this
paragraph shall not apply to any Hedging Agreement that is a Loan Document.
(b) Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER AND THE BORROWER
----------
HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO
ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS.
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<PAGE>
HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the preceding
--------------------------------
binding arbitration provisions, the parties hereto and the other Loan Documents
preserve, without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute. Each
such Person shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the following
remedies: (i) all rights to foreclose against any real or personal property or
other security by exercising a power of sale granted in the Loan Documents or
under applicable law or by judicial foreclosure and sale, (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary bankruptcy
proceeding, and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
SECTION 12.7 Reversal of Payments. To the extent the Borrower makes a
--------------------
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or proceeds of the
collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.
SECTION 12.8 Injunctive Relief; Punitive Damages.
-----------------------------------
(a) The Borrower recognizes that, in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lenders.
Therefore, the Borrower agrees that the Lenders, at the Lenders' option, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(b) The Administrative Agent, the Lenders and the Borrower (on behalf of
itself and its Subsidiaries) hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved through
arbitration or judicially.
SECTION 12.9 Accounting Matters. All financial and accounting
------------------
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower or any of its Subsidiaries to
60
<PAGE>
determine compliance with any covenant contained herein, shall, except as
otherwise expressly contemplated hereby or unless there is an express written
direction by the Administrative Agent to the contrary agreed to by the Borrower,
be performed in accordance with GAAP as in effect from time to time.
SECTION 12.10 Successors and Assigns; Participations.
--------------------------------------
(a) Benefit of Agreement. This Agreement shall be binding upon and inure
--------------------
to the benefit of the Borrower, the Administrative Agent and the Lenders, all
future holders of the Notes, and their respective successors and assigns, except
that the Borrower shall not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of each Lender.
(b) Assignment by Lenders. Each Lender may, with the consent of the
---------------------
Administrative Agent and Borrower, which consents shall not be unreasonably
withheld (and which consent of the Borrower shall not be required during the
continuance of an Event of Default), assign to one or more Eligible Assignees
all or a portion of its interests, rights and obligations under this Agreement
and the other Loan Documents (including, without limitation, all or a portion of
the Loans at the time owing to it and the Notes held by it); provided that:
--------
(i) each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Lender's rights and obligations under this
Agreement;
(ii) if less than all of the assigning Lender's Commitment is to be
assigned, the Commitment so assigned shall not be less than $5,000,000;
(iii) the parties to each such assignment shall execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance in the form of Exhibit F attached hereto (an
---------
"Assignment and Acceptance"), together with any Note or Notes subject to such
assignment;
(iv) such assignment shall not, without the consent of the Borrower,
require the Borrower to file a registration statement with the Securities and
Exchange Commission or apply to or qualify the Loans or the Notes under the blue
sky laws of any state;
(v) the assigning Lender shall pay to the Administrative Agent an
assignment fee of $3,000 upon the execution by such Lender of the Assignment and
Acceptance; provided that no such fee shall be payable upon any assignment by a
--------
Lender to an Affiliate thereof or to another Lender or its Affiliate; and
(vi) no consent of the Administrative Agent or Borrower shall be
required for any such assignment by any Lender to an Affiliate thereof which is
an Eligible Assignee.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5)
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Business Days after the execution thereof, (A) the assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereby and (B) the Lender thereunder
shall, to the extent provided in such assignment, be released from its
obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
---------------------------------
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
--------
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Loans with respect
to each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders may treat each person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and
---------------------
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of Exhibit F:
---------
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the
Borrower; and
(iv) promptly deliver a copy of such Assignment and Acceptance
to the Borrower.
Within five (5) Business Days after receipt of notice, the Borrower shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such Eligible Assignee in
amounts equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and a new Note or Notes to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the assigned Notes delivered to the assigning Lender. Each surrendered Note
or Notes shall be canceled and returned to the Borrower.
(f) Participations. Each Lender may sell participations to one or more
--------------
banks or other entities (other than the Borrower or any Affiliate thereof) in
all or a portion of its rights and
62
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obligations under this Agreement (including, without limitation, all or a
portion of its Loans and the Notes held by it); provided that:
--------
(i) such Lender's obligations under this Agreement (including,
without limitation, its Commitment) shall remain unchanged;
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations;
(iii) such Lender shall remain the holder of the Notes held by it for
all purposes of this Agreement;
(iv) the Borrower, the Administrative Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement;
(v) such Lender shall not permit such participant the right to
approve any waivers, amendments or other modifications to this Agreement or any
other Loan Document other than waivers, amendments or modifications which would
reduce the principal of or the interest rate on any Loan or Reimbursement
Obligation, extend the term or increase the amount of the Commitment, reduce the
amount of any fees to which such participant is entitled, extend any scheduled
payment date for principal of any Loan or, except as expressly contemplated
hereby or thereby, release substantially all of the Collateral; and
(vi) any such disposition shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission to apply to qualify the Loans or the Notes
under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. The Administrative Agent
------------------------------------------
and the Lenders shall hold all non-public information with respect to the
Borrower obtained pursuant to the Loan Documents on a need to know basis for
making and administering the credit in accordance with their customary
procedures for handling confidential information; provided, that the
--------
Administrative Agent may disclose information relating to this Agreement to Gold
----
Sheets and other similar bank trade publications, such information to consist of
- ------
deal terms and other information customarily found in such publications and
provided further, that the Administrative Agent and Lenders may disclose any
such information to the extent such disclosure is required by law or requested
by any Governmental Authority. Any Lender may, in connection with any
assignment, proposed assignment, participation or proposed participation
pursuant to this Section 12.10, disclose to the assignee, participant, proposed
assignee or proposed participant, any information relating to the Borrower
furnished to such Lender by or on behalf of the Borrower; provided, that prior
--------
to any such disclosure, each such assignee, proposed assignee, participant or
proposed participant shall agree with the Borrower or such Lender to preserve
the confidentiality of any confidential information relating to the Borrower
received from such Lender in accordance with this Section.
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(h) Certain Pledges or Assignments. Nothing herein shall prohibit any
------------------------------
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
(i) SPC Designation. Notwithstanding the above provisions of Section
---------------
12.10, any Lender, pursuant to a designation agreement mutually agreed to and
executed by such Lender (in such capacity, the "Granting Lender" ), the
Administrative Agent and the Borrower, may grant to a special purpose funding
vehicle (an "SPC") organized by the Granting Lender, the option to fund on
behalf of such Granting Lender all of any part of any Loan that such Granting
Lender would otherwise be obligated to make pursuant to this Agreement; provided
that (i) the SPC shall have no commitment to make any such Loan, but if an SPC
elects not to exercise such option or otherwise fails to provide all or any part
of such Loan, the Granting Lender shall be obligated to make such Loan pursuant
to the terms hereof, (ii) any rights of any such SPC shall be derivative of the
rights of the Granting Lender and (iii) each SPC shall be subject to all of the
restrictions upon the Granting Lender herein contained. The making of a Loan by
an SPC hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Loan were made by the Granting Lender. Each party
hereto hereby agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding senior indebtedness of any SPC, it will not
institute against, or join any other person in instituting against, such SPC,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States or any State thereof, provided
--------
that the Granting Lender for each SPC hereby agrees to indemnify, save and hold
- ----
harmless each other party hereto for any loss, cost, damage and expense
(including attorney's fees and expenses) arising out of their inability to
institute any such proceeding against its SPC. In addition, notwithstanding
anything to the contrary contained in this Section 12.10, any SPC may with
notice to, but without the prior written consent of, the Borrower and the
Administrative Agent and without paying any assignment fee therefor, assign all
or a portion of its interests in any Loans made thereby to its Granting Lender
or to any financial institutions providing liquidity and/or credit facilities to
or for the account of such SPC to fund the Loans made by such SPC or to support
the securities (if any) issued by such SPC to fund such Loans (but nothing
contained herein shall be construed in derogation of the obligation of the
Granting Lender to make Loans hereunder).
Notwithstanding any grant or assignment referred to in this Section 12.10 (i);
(i) such Granting Lender's obligations under this Agreement (including, without
limitation, its Commitment) shall remain unchanged; (ii) such Granting Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations; (iii) such Granting Lender shall remain the holder of the
Notes held by it for all purposes of this Agreement; (iv) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Granting Lender in connection with such Granting Lender's
rights and obligations under this Agreement; (v) such Granting Lender shall not
permit such grantee or assignee the right to approve any waivers, amendments or
other modifications to this Agreement or any other Loan Document, and (vi) any
such disposition shall not, without the consent of the Borrower, require the
Borrower to file a registration statement with the Securities and Exchange
Commission to apply to qualify the Loans or the Notes under the blue sky law of
any state. Notwithstanding anything to the contrary contained in this Agreement,
any SPC may disclose on a confidential basis any non-public
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information relating to its funding of Loans to any rating agency, commercial
paper dealer or provider of any surety or guarantee to such SPC. This Section
may not be amended without the prior written consent of each Granting Lender,
all or any part of whose Loan is being funded by an SPC at the time of such
amendment.
SECTION 12.11 Amendments, Waivers and Consents. Except as set forth below,
--------------------------------
any term, covenant, agreement or condition of this Agreement or any of the other
Loan Documents (other than any Hedging Agreement, the terms and conditions of
which may be amended, modified or waived by the parties thereto) may be amended
or waived by the Lenders, and any consent given by the Lenders, if, but only if,
such amendment, waiver or consent is in writing signed by the Required Lenders
(or by the Administrative Agent with the consent of the Required Lenders) and
delivered to the Administrative Agent and, in the case of an amendment, signed
by the Borrower; provided, that no amendment, waiver or consent shall, without
--------
the prior written consent of each Lender affected thereby:
(a) (i) increase the Commitment of any Lender, (ii) reduce the rate of
interest or fees payable on any Loan or (iii) reduce or forgive the principal
amount of any Loan, (iv) extend the originally scheduled time or times of
payment of the principal of any Loan or the time or times of payment of interest
on any Loan or any fee or commission with respect thereto, or (v) permit any
subordination of the principal or interest on any Loan; or
(b) (i) release the Borrower from the Obligations hereunder, (ii) permit
any assignment (other than as specifically permitted in this Agreement) of any
of the Borrower's rights and obligations hereunder, (iii) amend the provisions
of this Section 12.11 or the definition of Required Lenders or any other
provision requiring the consent or approval of all Lenders under the Loan
Documents (iv) amend the provisions of Section 4.4 providing that all payments
to the Lenders shall be pro rata in accordance with their respective Commitment
Percentages or (v) amend the several nature of the obligations of the Lenders
under this Agreement.
In addition, no amendment, waiver or consent to the provisions of Article XI
shall be made without the written consent of the Administrative Agent.
SECTION 12.12 Performance of Duties. The Borrower's obligations under this
---------------------
Agreement and each of the other Loan Documents shall be performed by the
Borrower at its sole cost and expense.
SECTION 12.13 All Powers Coupled with Interest. All powers of attorney and
--------------------------------
other authorizations granted to the Lenders, the Administrative Agent and any
Persons designated by the Administrative Agent or any Lender pursuant to any
provisions of this Agreement or any of the other Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied or the Revolving Credit Facility has
not been terminated.
SECTION 12.14 Survival of Indemnities. Notwithstanding any termination of
-----------------------
this Agreement, the indemnities to which the Administrative Agent and the
Lenders are entitled under the provisions of this Article XII and any other
provision of this Agreement and the Loan
65
<PAGE>
Documents shall continue in full force and effect and shall protect the
Administrative Agent and the Lenders against events arising after such
termination as well as before.
SECTION 12.15 Titles and Captions. Titles and captions of Articles,
-------------------
Sections and subsections in, and the table of contents of, this Agreement are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
SECTION 12.16 Severability of Provisions. Any provision of this Agreement
--------------------------
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 12.17 Counterparts. This Agreement may be executed in any number
------------
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.
SECTION 12.18 Term of Agreement. This Agreement shall remain in effect
-----------------
from the Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination or in respect of any provision
of this Agreement which survives such termination.
[Signature pages to follow]
66
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
[CORPORATE SEAL] COMMONWEALTH TELEPHONE ENTERPRISES, INC. (formerly
known as C-TEC Corporation)
By: /s/ John Butler
------------------------------
Name: JOHN BUTLER
--------------------------
Title: EVP/CFO
-------------------------
[Signature Pages Continued]
<PAGE>
FIRST UNION NATIONAL BANK, as Administrative Agent
and Lender
By: /s/ C. Mark Hedrick
---------------------------
Name: C. Mark Hedrick
----------------------
Title: Vice President
---------------------
[Signature Pages Continued]
<PAGE>
COBANK ACB
By: /s/ John P. Cole
------------------------
Name: John P. Cole
-------------------
Title: Vice President
------------------
[Signature Pages Continued]
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Jeffrey E. Hauser
---------------------------
Name: JEFFREY E. HAUSER
--------------------
Title: VICE PRESIDENT
--------------------
[Signature Pages Continued]
<PAGE>
CIBC INC.
By: /s/ Tefta Ghilaga
----------------------------------------
Name: Tefta Ghilaga
---------------------------------
Title: Executive Director
---------------------------------
CIBC World Markets Corp. As Agent
<PAGE>
FLEET NATIONAL BANK
By: /s/ Christine Campanelli
-------------------------------
Name: Christine Campanelli
------------------------
Title: Vice President
------------------------
[Signature Pages Continued]
<PAGE>
DRESDNER BANK AG,
New York and Grand Cayman Branches
By: /s/ Patrick A. Keleher
-----------------------------
Name: PATRICK A. KELEHER
----------------------
Title: Vice President
----------------------
[Signature Pages Continued]
/s/ Helen Ng, P.E.
Helen Ng, P.E.
Assistant Vice President
<PAGE>
NATIONSBANK, N.A.
By: /s/ Pamela S. Kurtzman
----------------------------
Name: PAMELA S.KURTZMAN
---------------------
Title: VICE PRESIDENT
---------------------
[Signature Pages Continued]
<PAGE>
MELLON BANK, N.A.
-----------------
By: /s/ Thomas P. Joyce
-------------------------
Name: Thomas P. Joyce
------------------
Title: Vice President
------------------
[Signature Pages Continued]
-------------------------
<PAGE>
CRESTAR BANK
By: /s/ J. Eric Millham
------------------------
Name: J. Eric Millham
------------------
Title: Vice President
-----------------
[Signature Pages Continued]
<PAGE>
STATE STREET BANK AND TRUST COMPANY
By: /s/ Hamilton H. Wood, Jr.
------------------------------
Name: Hamilton H. Wood, Jr.
----------------------
Title: Vice President
----------------------
[Signature Pages Continued]
<PAGE>
MERITA BANK PLC
By: /s/ Charles J. Lansdown
-------------------------------
Name: Charles J. Lansdown
------------------------
Title: Senior Vice President
------------------------
[Signature Pages Continued]
By: /s/ Andrew J. Ragusa
----------------------------------
Name: Andrew J. Ragusa
---------------------------
Title: Assistant Vice President
---------------------------
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Thomas G. Gunder
------------------------------
Name: Thomas G. Gunder
-----------------------
Title: V. P.
-----------------------
<PAGE>
EXHIBIT 4 (B)
Loan No. S0667
CoBANK, ACB
-----------
LINE OF CREDIT AGREEMENT
------------------------
THIS LINE OF CREDIT AGREEMENT (this "Agreement") is made and entered into
as of September 30, 1999, by and between the CoBANK, ACB ("CoBank") and
COMMONWEALTH TELEPHONE COMPANY (the "Borrower").
SECTION 1. The Loan. On the terms and conditions set forth in this
Agreement, and subject to Section 11, CoBank agrees to make loans to the
Borrower during the period set forth below in an aggregate principal amount up
to $30,000,000 at any one time outstanding (the "Loan"). Within the limits of
the Loan, the Borrower may borrow, repay and reborrow.
SECTION 2. Purpose and Use of Proceeds. The proceeds of the Loan shall be
applied by the Borrower to finance the operating needs of the Borrower. The
Borrower agrees that the proceeds of the Loan shall be used for only the purpose
set forth in this Section 2.
SECTION 3. Availability. Subject to Section 11, the Loan will be made on
any day on which CoBank is open for business (a "Business Day"), except any day
when Federal Reserve Banks are closed, by wire transfer of immediately available
funds to such account or accounts as the Borrower may designate, provided that
--------
(i) an authorized officer of the Borrower shall have provided CoBank with at
least one Business Days' prior written notice of the date on which the Loan is
to be made (the "Funding Date"), unless the Borrower elects to have a portion of
the Loan accrue interest at a LIBOR Rate (as defined in Section 4(A)(2)), in
which case the Borrower shall have provided such notice two Banking Days (as
defined below) prior to the Funding Date and the Funding Date shall be a Banking
Day, and (ii) the Funding Date so designated shall not be later than 364 days
after the date hereof. A "Banking Day" means a Business Day on which dealings
in U.S. dollar deposits are carried out in the London Interbank Market and banks
are open for business in New York, New York and London, England.
SECTION 4. Interest and Fees.
(A) The unpaid principal balance of the Loan shall accrue interest
at the rate or rates selected by the Borrower in accordance with this
Subsection (A).
(1) Floating Rate Option. As to any portion of the unpaid
principal balance of the Loan selected by the Borrower (any such portion,
and any portion selected pursuant to Subsection (A)(2), is hereinafter
referred to as a "Portion" of the Loan), interest shall accrue pursuant to
this floating rate option at a rate per annum for each day during a weekly
period from and including the first Business Day of such week to but not
including the first Business Day of the following week (the "Floating
Rate") equal at all times to the rate of interest established by CoBank on
the first Business Day of such
1
<PAGE>
week. The rate established by CoBank may not exceed CoBank's "National
Variable Rate" (as hereinafter defined) on that day and shall be effective
until the first Business Day of the next week (or if later, the first
Business Day where a rate is established for these purposes). Each change
in the rate shall be applicable to all balances subject to this option and
information about the then current rate shall be made available upon
telephonic request. The term "National Variable Rate" shall mean the rate
of interest established by CoBank from time to time as its National
Variable Rate, which Rate is intended by CoBank to be a reference rate, and
CoBank may charge other borrowers rates at, above, or below that rate.
(2) LIBOR Option. As to any Portion or Portions of the Loan
selected by the Borrower, interest shall accrue pursuant to this LIBOR
option at a fixed annual interest rate (a "LIBOR Rate") equal to the sum of
LIBOR (as hereinafter defined) plus a margin (the "LIBOR Margin") equal to
----
the Applicable Margin (subject to Subsection (B)). Under this option, the
interest rate on any Portion of the Loan, in minimum amounts of $100,000,
may be fixed for an Interest Period of 1 month, 2 months, 3 months, 6
months, or 9 months but not beyond the Maturity Date. The term "LIBOR"
shall mean the interest rate (rounded upwards, if necessary, to the next
higher 1/100th of 1%) indicated by Telerate as having been quoted by the
British Bankers Association at 11:00 a.m., London time, on the date (which
must be a Banking Day) the Borrower elects to fix a rate under this LIBOR
option, for the offering of U.S. dollar deposits in the London Interbank
Market for the Interest Period selected by the Borrower. The term "month"
or "months" shall mean a period commencing two Banking Days after the date
the Borrower elects to fix a rate under this LIBOR option and ending on the
numerically corresponding day in the next calendar month or the month that
is 2, 3, 6, or 9 months thereafter, as the case may be; provided, however,
-------- -------
that (i) in the event such ending date is not a Banking Day, such period
shall be extended to the next Banking Day unless such next Banking Day
falls in the next calendar month, in which case such period shall end on
the next preceding Banking Day; and (ii) if there is no numerically
corresponding day in the ending month, then such period shall end on the
last Banking Day in such month.
(3) Selection And Changes of Rates. The Borrower shall select
the applicable interest rate option or options at the time it gives CoBank
written notice of the Funding Date pursuant to Section 3. The Borrower may,
on any Banking Day, elect to have the LIBOR Rate apply to any Portion of
the Loan then accruing interest at the Floating Rate. In addition, with
respect to any Portion of the Loan accruing interest pursuant to the LIBOR
Rate, the Borrower may, subject to Subsection (A)(2), two Banking Days
prior to the last day of the Interest Period for such Portion, elect to fix
the interest rate accruing on such Portion for an Interest Period at a
LIBOR Rate. In the absence of any such refix, interest shall automatically
accrue on such Portion of the Loan at the Floating Rate. Notwithstanding
the foregoing, in the event the Borrower elects to have any Portion of the
Loan accruing interest at the LIBOR Rate and the last day of the Interest
Period for such Portion is not a Banking Day, then interest shall accrue on
such Portion at the Floating Rate until the LIBOR Rate becomes effective.
From time to time
2
<PAGE>
the Borrower may elect on a Business Day and upon payment of the Surcharge
(as defined in, and calculated pursuant to, Section 6), to convert all, but
not part, of any Portion of the Loan accruing interest pursuant to the
LIBOR Rate to accrue interest at the Floating Rate or pursuant to the LIBOR
Rate for an Interest Period selected in accordance with Subsection (A)(2);
provided, however, that any such conversion to a LIBOR Rate shall not be
-------- -------
effective until two Banking Days after such election, which can only be
made on a Banking Day. Except for the initial selection, all interest rate
selections provided for herein shall be made by telephonic or written
request of an authorized employee of the Borrower by 12:00 noon, Eastern
time, on the relevant day.
(4) Accrual of Interest. Interest shall accrue pursuant to any
LIBOR Rate selected by the Borrower from and including the first day of the
applicable Interest Period to but excluding the last day of the Interest
Period. If the Borrower elects to refix the interest rate on any Portion of
the Loan pursuant to Subsection (A)(3), the first day of the new Interest
Period shall be the last day of the preceding Interest Period. In the
absence of any such refix, interest shall accrue on such Portion at the
Floating Rate from and including the last day of such Interest Period. If
the Borrower elects to convert from the LIBOR Rate to the Floating Rate or
to the LIBOR Rate upon payment of the Surcharge as provided in Subsection
(A)(3), interest at the existing LIBOR Rate shall accrue through the day
before such conversion and either (i) the first day of any new Interest
Period shall be the date of such conversion, or (ii) interest at the
Floating Rate shall accrue on the Portion of the Loan so converted from and
including the date of conversion.
(B) Applicable Margin. For purposes hereof, the "Applicable Margin"
used to determine the LIBOR Rate shall mean the interest rate margin determined
by the Total Leverage Ratio (as defined in Section 13(J) hereof) in accordance
with the following schedule:
Total Leverage Ratio Applicable Margin LIBOR Loans
-------------------- -----------------------------
Less than or equal to 1.35x +.50%
Greater than 1.35x +.75%
The Total Leverage Ratio of the Borrower will be determined based on the most
recent financial statements and financial covenant certificate delivered to
CoBank pursuant to Section 13(I)(8) hereof, and changes in the Applicable Margin
will not be made until the third Business Day after receipt thereof.
Notwithstanding the foregoing: (1) at closing and until receipt of the first
set of financial statements and financial covenant certificate required pursuant
to Section 13(I)(8), the Applicable Margin shall be .75% for loans bearing
interest at the LIBOR Rate (unless, at closing, the Borrower furnishes its most
recent quarterly financial statement and financial covenant certificate showing
that the Borrower is entitled to a lower rate); and (2) changes in the
Applicable Margin shall be applicable to the Portion of the Loan bearing
interest at the LIBOR Rate, regardless of when made. In the event the Borrower
fails to timely provide the financial statements and financial covenant
certificate referred to in Section 13(I)(8), then, without prejudice to CoBank's
rights under Section 16 hereof, the Applicable Margin shall be .75% for the
Portion of the Loan bearing interest at the LIBOR Rate until it does so
regardless of the Total
3
<PAGE>
Leverage Ratio.
(C) Payment and Calculation. Interest shall be payable monthly
in arrears by the twentieth (20th) day of the following month, upon any
prepayment and at maturity, and shall be calculated on the actual number of
days the Loan is outstanding on the basis of a year consisting of 360 days.
In calculating accrued interest, the date the Loan is made shall be
included and the date any principal amount of the Loan is repaid or prepaid
shall be excluded as to such amount.
(D) Default Rate. If prior to maturity the Borrower fails to
make any payment or investment required to be made under the terms of this
Agreement or the Note (including this Section 4), then, at CoBank's option
in each instance, such payment or investment shall accrue interest at 2%
per annum in excess of the Floating Rate. After maturity, whether by reason
of acceleration or otherwise, the unpaid principal balance of the Loan
shall automatically accrue interest at 2% per annum in excess of the
Floating Rate. All interest provided for in this Subsection (D) shall be
payable on demand and shall be calculated from and including the date such
payment was due to but excluding the date paid on the basis of a year
consisting of 360 days.
(E) Origination Fee. On the Funding Date, the Borrower shall
pay or shall cause to be paid to CoBank a non-refundable origination fee in
the amount of $37,500.
(F) Commitment Fee. In consideration of the Loan, the Borrower
shall pay a commitment fee on the average daily unused Portion of the Loan
at the rate of 1/4 of 1% per annum (calculated on a 360 day basis), payable
monthly in arrears by the twentieth (20th) day of the following month. Such
fee shall be payable for each month (or portion thereof) occurring during
the original or any extended term of the Loan.
SECTION 5. Principal Repayment and Maturity. The principal balance
of the Loan shall be repaid on the first Business Day following the last
day of the term of the Loan, as the term may be renewed from time to time.
The term of the Loan shall be from the date hereof, up to 364 days after
the date hereof (the "Maturity Date"). On the Maturity Date, the amount of
the then unpaid principal balance of the Loan and any and all other amounts
due and owing hereunder or under any other Loan Document shall be due and
payable. If any Payment Date is not a Business Day, then the principal
installment then due shall be paid on the next Business Day and shall
continue to accrue interest until paid. The Borrower shall have the right,
upon at least three Business Days' prior written notice to CoBank, to
permanently reduce or terminate the Loan, provided, however, no reduction
-------- -------
or termination shall be permitted if, after giving effect thereto and to
any prepayment made therewith, the aggregate principal balance of the Loan
then outstanding would exceed the Loan as so reduced.
SECTION 6. Prepayment. The Borrower may, on one Business Day's prior
written notice, prepay in full or in part: (i) any Portion of the Loan
accruing interest at the Floating Rate, and (ii) any Portion of the Loan
accruing interest at the LIBOR Rate. Notwithstanding the foregoing, the
Borrower's right to prepay any Portion of the Loan accruing interest at the
LIBOR
4
<PAGE>
Rate shall be conditioned upon the payment of a surcharge (the "Surcharge")
equal to the present value of any funding losses incurred by CoBank as a
result of such prepayment. The Surcharge, including the amount of any
funding losses, shall be determined and calculated as follows:
(A) Determine the difference between: (i) CoBank's cost of funds
(determined in accordance with its standard methodology) on the date the
interest rate was fixed to fund the Portion of the Loan being prepaid;
minus (ii) CoBank's cost of funds (determined in accordance with such
-----
methodology) on the date of prepayment to fund a new loan with a weighted
average life equal to the weighted average life over the remainder of the
selected Interest Period of the Portion of the Loan being prepaid. If such
difference is negative, then no Surcharge is payable.
(B) If such difference is positive, divide the result determined
in Subsection (A) by 12.
(C) For each month or part thereof during which the Portion of
the Loan prepaid was scheduled to have been outstanding, multiply the
amount determined in Subsection (B) by that part of the Portion of the Loan
prepaid that was scheduled to have been outstanding during such month (such
that there is a monthly calculation for each month during which the Portion
of the Loan prepaid was scheduled to have been outstanding).
(D) Determine the present value of each monthly calculation made
under Subsection (C) based upon the scheduled time that interest on the
Portion of the Loan prepaid would have been payable and a discount rate
equal to the rate set forth in Subsection (A)(ii).
(E) Add all of the calculations made under Subsection (D). The
result shall be the Surcharge.
A hypothetical example illustrating the above described calculation of the
Surcharge is attached as Schedule 3 hereto.
-------- -
SECTION 7. Note. The Borrower's obligation to repay the Loan shall
be evidenced by a promissory note in form and content acceptable to CoBank
(as the same may be amended, modified, supplemented, extended or restated
from time to time and any promissory note that may be issued from time to
time in substitution, renewal, replacement or exchange therefor, the
"Note").
SECTION 8. Manner and Time of Payment. If any date on which payment
is due hereunder is not a Business Day, the payment shall be made on the
next succeeding Business Day. The Borrower shall make each payment under
this Agreement and under the Note by wire transfer of immediately available
funds or by check. Wire transfers shall be made to ABA No. 307088754 for
advice to and credit of "CoBANK" (or to such other account as CoBank may
designate by notice) with sufficient information to identify the source and
application of such funds. The Borrower shall give CoBank telephonic notice
no later than 12:00 noon, Eastern time, of its intent to pay by wire
transfer. Wire transfers received after 3:00 p.m., Eastern time, shall be
credited on the next Business Day. Checks shall be mailed or delivered to
CoBank at
5
<PAGE>
Department 167, Denver, Colorado 80291-0167 (or to such other address as
CoBank may designate by notice). Credit for payment by check will not be
given until the next Business Day after receipt of the check or the actual
receipt of immediately available funds, whichever is later.
SECTION 9. Capitalization. The Borrower agrees to purchase non-
voting participation certificates in CoBank as CoBank may from time to time
require in accordance with its bylaws and capital plan (as each may be
amended from time to time), except that the maximum amount of non-voting
participation certificates that the Borrower may be required to purchase in
connection with a loan may not exceed the maximum amount permitted by the
bylaws at the time the Agreement relating to such loan is entered into or
such loan is renewed or refinanced by CoBank. In connection with the
foregoing, the Borrower hereby acknowledges receipt, prior to the execution
of this Agreement, of CoBank's bylaws, a written description of the terms
and conditions under which the equity is issued, CoBank's Loan-Based
Capital Plan, CoBank's most recent annual report, and if more recent than
CoBank's latest annual report, its latest quarterly report. All such
investments and all other equities which the Borrower may now own or
hereafter acquire or be allocated in CoBank shall be subject to a statutory
first lien in favor of CoBank.
SECTION 10. Security. Except as provided in Section 9 hereof, the
Loan shall be unsecured.
SECTION 11. Conditions Precedent. CoBank's obligation to make the
Loan hereunder is subject to satisfaction of each of the following
conditions precedent on or before the Funding Date:
(A) Loan Documents. That CoBank receive duly executed originals
of this Agreement, the Note, and all other instruments and documents
contemplated hereby or thereby (collectively, the "Loan Documents").
(B) Authorization. That CoBank receive copies of all corporate
documents and proceedings of the Borrower authorizing the execution,
delivery, and performance of the Loan Documents, certified by the Secretary
of the Borrower.
(C) Approvals. That CoBank receive evidence satisfactory to it
that all federal and state consents and approvals (including, without
limitation, all regulatory approvals) which are necessary for, or required
as a condition of, the validity and enforceability of the Loan Documents.
(D) Opinion of Counsel. That CoBank receive an opinion of
counsel for the Borrower (who shall be acceptable to CoBank) in form and
content acceptable to CoBank.
(E) Fees, Expenses and Capital. That the Borrower pay the fee
set forth in Section 4(E) hereof and the costs and expenses required by
Section 20 hereof to be paid by the Borrower.
(F) Event of Default. That no Event of Default (as that term
is defined in
6
<PAGE>
Section 15) exists, and that there has occurred no event which with the
passage of time or the giving of notice, or both, could become an Event of
Default (each such event, a "Default").
(G) Representations and Warranties. That the representations
and warranties of the Borrower contained in this Agreement and any other
Loan Document be true and correct in all material respects on and as of the
Funding Date, as though made on and as of such date.
(H) No Material Adverse Change. That from December 31, 1998 to
the Funding Date there shall not have occurred any material adverse change
in the business, financial condition or results of operations of the
Borrower; provided, however, that any special dividend made pursuant to
-------- -------
Section 14(H) shall not be taken into consideration in determining whether
such a material adverse change has occurred (any such material adverse
change is hereinafter referred to as a "Material Adverse Change").
(I) No Injunction. That no court or other government body or
public authority shall have issued an order which shall then be in effect
restraining or prohibiting the completion of the transactions contemplated
hereby.
(J) Closing Certificate. That CoBank receive a certificate, in
the form attached hereto as Exhibit A, dated the Funding Date, signed by
---------
the President, Chief Financial Officer or Treasurer of the Borrower,
certifying as to the truth and accuracy of the representations and
warranties of the Borrower under the Loan Documents and the satisfaction of
each of the conditions applicable to the making of the Loan specified
herein.
(K) Factual Matters. That CoBank receive a certificate (the
"Factual Matters Certificate"), in the form attached hereto as Exhibit B,
---------
dated the Funding Date, signed by the President, Chief Financial Officer or
Treasurer of the Borrower, certifying as to the matters set forth therein.
SECTION 12. Representations and Warranties. To induce CoBank to
make advances hereunder, and recognizing that CoBank is relying hereon, the
Borrower represents and warrants, as of the date of this Agreement and as
of the Funding Date, as follows:
(A) Organization; Power; Etc. The Borrower (i) is duly
organized, validly existing, and in good standing under the laws of its
state of incorporation; (ii) is duly qualified to do business and is in
good standing in each jurisdiction in which the character of its properties
or the nature of its business requires such qualification; (iii) has all
requisite corporate and legal power to own and operate its assets and to
carry on its business and to enter into and perform its obligations under
the Loan Documents; (iv) has duly and lawfully obtained and maintained all
licenses, certificates, permits, authorizations, approvals, and the like
which are necessary in the conduct of its business or which may be
otherwise required by law; and (v) is eligible to borrow from CoBank.
(B) Due Authorization; No Violations; Etc. The execution and
delivery by
7
<PAGE>
the Borrower of, and the performance by the Borrower of its obligations
under, the Loan Documents have been duly authorized by all requisite
corporate action on the part of the Borrower and do not and will not (i)
violate any provision of any law, rule or regulation, any judgment, order
or ruling of any court or governmental agency, the articles of
incorporation or bylaws of the Borrower, or any agreement, indenture,
mortgage, or other instrument to which the Borrower is a party or by which
the Borrower or any of its properties is bound, or (ii) be in conflict
with, result in a breach of, or constitute with the giving of notice or
lapse of time, or both, a default under any such agreement, indenture,
mortgage, or other instrument. All actions on the part of the shareholders
of the Borrower necessary in connection with the execution and delivery by
the Borrower of, and the performance by the Borrower of its obligations
under, the Loan Documents have been taken and remain in full force and
effect as of the date hereof.
(C) Consents. No consent, permission, authorization, order, or
license of any governmental authority is necessary in connection with the
execution, delivery, performance, or enforcement of the Loan Documents
except such as have been obtained and are in full force and effect, except
to the extent that the failure to do so would not reasonably be expected to
have a Material Adverse Effect.
(D) Binding Agreement. Each of the Loan Documents is, or when
executed and delivered will be, the legal, valid, and binding obligation of
the Borrower, enforceable against the Borrower in accordance with its
terms, subject only to limitations on enforceability imposed by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditors' rights generally, and (ii) general equitable
principles.
(E) Compliance with Laws. The Borrower is in compliance in all
material respects with all federal, state, and local laws, rules,
regulations, ordinances, codes, and orders (collectively, "Laws"), the
failure to comply with which could have a material adverse effect on the
condition, financial or otherwise, operations, properties, or business of
the Borrower, or on the ability of the Borrower to perform its obligations
under the Loan Documents, except as the Borrower has disclosed on
Schedule 1 hereto.
---------- .
(F) Environmental Compliance. Without limiting the provisions
of Subsection (E), all property owned or leased by the Borrower and all
operations conducted by it are in compliance in all material respects with
all Laws relating to environmental protection, the failure to comply with
which could have a material adverse effect on the condition, financial or
otherwise, operations, properties, or business of the Borrower, or on the
ability of the Borrower to perform its obligations under the Loan
Documents, except as the Borrower has disclosed on Schedule 1 hereto.
----------
(G) Litigation. There are no existing legal, arbitration, or
governmental actions or proceedings to which the Borrower is a party or to
which any of its property is subject which could have a material adverse
effect on the condition, financial or otherwise, operations, properties or
business of the Borrower or on the ability of the Borrower to perform its
obligations under the Loan Documents, and to the best of the Borrower's
knowledge, no such actions or proceedings are threatened or contemplated.
8
<PAGE>
(H) Financial Statements; No Material Adverse Change; Etc. The
audited financial statements of the Borrower for the fiscal year ended
December 31, 1998, and the unaudited financial statements of the Borrower
for the period ended June 30, 1999, submitted to CoBank in connection with
the Loan fairly and fully present in all material respects the financial
condition of the Borrower, and the results of the Borrower's operations for
the periods covered thereby and were prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied and any system
of accounts to which the Borrower is subject (except as otherwise disclosed
therein). Since December 31, 1998, there has been no Material Adverse
Change. All budgets, projections, feasibility studies, and other
documentation submitted by the Borrower to CoBank were based upon
assumptions that management of the Borrower believed were reasonable and
realistic at the time submitted, and as of the date hereof, management of
the Borrower is unaware of any fact or event which would cause any
assumption made therein not to be reasonable or realistic in any material
respect.
(I) Principal Place of Business; Records. The principal place
of business and chief executive office of the Borrower and the place where
the records required by Section 13(G) are kept is at the address of the
Borrower shown in Section 19.
(J) Subsidiaries. The Borrower has no subsidiaries.
(K) Employee Benefit Plans. Except as disclosed on Schedule 1
----------
hereto, the Borrower is in compliance in all material respects with the
applicable provisions of the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations
thereunder.
(L) Taxes. The Borrower has filed or caused to be filed all
federal, state and local tax returns that are required to be filed, and has
paid all taxes as shown on said returns or on any assessment received by
the Borrower to the extent that such taxes have become due, or are being
contested by the Borrower in good faith and by appropriate proceedings and
then only to the extent adequate reserves have been set aside on the
Borrower's books therefor.
(M) Investment Company Act; Public Utility Holding Company Act.
The Borrower is not an "investment company" as that term is defined in, and
is not otherwise subject to regulation under, the Investment Company Act of
1940, as amended. The Borrower is not a "holding company" as that term is
defined in, and is not otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935, as amended.
(N) Use of Proceeds. The funds to be borrowed hereunder will be
used only as contemplated hereby. No part of such funds will be used to
purchase any "margin securities" or otherwise in violation of the
regulations of the Federal Reserve System.
(O) Factual Matters Certificate. The information about the
Borrower contained in paragraphs 2 through 9 of the Factual Matters
Certificate delivered to CoBank will be true and complete with respect to
the matters addressed therein as of the Funding Date .
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Notwithstanding paragraph 1 of such Factual Matters Certificate, the
representations made in this Subsection (O) are not limited by the
Borrower's knowledge.
SECTION 13. Affirmative Covenants. Unless otherwise agreed to in
writing by CoBank, while this Agreement is in effect the Borrower agrees
to:
(A) Corporate Existence. Preserve and keep in full force and
effect its corporate existence and good standing in the jurisdiction of its
incorporation, and its qualification to transact business and good standing
in all places in which the character of its properties or the nature of its
business requires such qualification.
(B) Compliance with Laws and Agreements. Comply in all material
respects with (i) all Laws, the failure to comply with which could have a
material adverse effect on its condition, financial or otherwise,
operations, properties, or business, or on its ability to perform its
obligations under the Loan Documents; and (ii) all agreements, indentures,
mortgages, and other instruments to which it is a party or by which it or
any of its property is bound.
(C) Compliance with Environmental Laws. Without limiting the
provisions of Subsection (B), comply in all material respects with, and
cause all persons occupying or present on any properties owned or leased by
it to so comply with, all Laws relating to environmental protection, the
failure to comply with which could have a material adverse effect on its
condition, financial or otherwise, operations, properties, or business, or
on its ability to perform its obligations under the Loan Documents.
(D) Licenses; Permits; Etc. Duly and lawfully obtain and
maintain in full force and effect all licenses, certificates, permits,
authorizations, approvals, and the like which are material to the conduct
of its business or which may be required by Law.
(E) Insurance. Maintain insurance with insurance companies or
associations reasonably acceptable to CoBank in such amounts and covering
such risks as are usually carried by companies engaged in the same or
similar business and similarly situated. All such policies insuring any
collateral provided for in any Loan Document shall provide for loss payable
clauses or endorsements in form and content reasonably required by CoBank.
At the request of CoBank, all policies (or such other proof of compliance
with this Section 13(E) as may be reasonably satisfactory) shall be
delivered to CoBank.
(F) Property Maintenance. Maintain and preserve at all times
its property, and each and every part and parcel thereof, in good repair,
working order and condition, ordinary wear and tear excepted.
(G) Books and Records. Keep adequate records and books of
account in accordance with GAAP consistently applied and any system of
accounts to which the Borrower is subject.
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(H) Inspection. Permit CoBank or its agents, during normal
business hours or at such other times as the parties may agree, to examine
its properties, books, and records, and to discuss its affairs, finances,
operations, and accounts with its officers, directors, employees, and
independent certified public accountants. Notwithstanding the provisions of
Section 20, any such examination not made in connection with the
preservation or enforcement of CoBank's rights and remedies hereunder and
under the other Loan Documents shall be made at CoBank's expense.
(I) Reports and Notices. Furnish to CoBank:
(1) Annual Financial Statements. As soon as available, but
in no event later than 90 days after the end of each fiscal year of
the Borrower occurring during the term hereof, annual financial
statements of the Borrower and all of its subsidiaries whose accounts
are at the time in question, in accordance with GAAP, consolidated
with those of the Borrower (such subsidiaries, together with the
Borrower, collectively, the "Companies") prepared on a consolidated
basis (on a "Consolidated Basis") in accordance with GAAP consistently
applied (except for changes with which the Borrower's independent
public accountants concur) and any system of accounts to which the
Companies are subject. Such financial statements shall: (i) be audited
by independent certified public accountants of recognized national
standing selected by the Borrower; (ii) be accompanied by a report of
such accountants containing an opinion acceptable to CoBank; (iii) be
prepared in reasonable detail and in comparative form for the
preceding fiscal year; and (iv) include a balance sheet, a statement
of income, a statement of retained earnings, a statement of cash
flows, and all notes and schedules relating thereto required by GAAP.
In addition, such audited consolidated annual financial statements
shall be accompanied by unaudited consolidating annual financial
statements, including a balance sheet, a statement of income, a
statement of retained earnings, and a statement of cash flows, each
likewise set forth in comparative form.
(2) Quarterly Financial Statements. As soon as available but
in no event later than 45 days after the end of each of the first
three fiscal quarters of each fiscal year of the Borrower occurring
during the term hereof, unaudited quarterly financial statements of
each of the Companies and unaudited quarterly financial statements of
the Companies prepared on a Consolidated Basis, in each case in
accordance with GAAP consistently applied (except for changes with
which the Borrower's independent public accountants concur) and any
system of accounts to which the Companies are subject (except for the
omission of footnotes and for the effect of normal year-end audit
adjustments). Such financial statements shall: (i) be prepared in
reasonable detail and set forth in comparative form corresponding
figures for the corresponding period of the preceding fiscal year, and
(ii) include a balance sheet, a statement of income for such quarter
and for the period year-to-date, and such other quarterly statements
of the Companies as CoBank may specifically request, which quarterly
statements shall include any and all supplements thereto.
(3) Notice of Default. Promptly after becoming aware
thereof, notice
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of (i) the occurrence of any Default or Event of Default hereunder or
under any other Loan Document, or (ii) the occurrence of any breach,
default, event of default, or other event which with the giving of
notice or lapse of time, or both, could become a breach, default, or
event of default under any agreement, indenture, mortgage, or other
instrument (other than the Loan Documents) to which it is a party or
by which it or any of its property is bound or affected if the effect
of such breach, default, event of default, or other event is to
accelerate, or to permit the acceleration of, the maturity of any
indebtedness under such agreement, indenture, mortgage, or other
instrument; provided, however, that the failure to give
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such notice shall not affect the right and power of CoBank to exercise
any and all of the remedies specified herein.
(4) Notice of Non-Environmental Litigation. Promptly after
the commencement thereof, notice of the commencement of all actions,
suits, or proceedings before any court, arbitrator, or governmental
department, commission, board, bureau, agency, or instrumentality
affecting the Borrower as to which there is a reasonable possibility
that it would have a material adverse effect on its condition,
financial or otherwise, operations, properties, or business or on its
ability to perform its obligations under the Loan Documents.
(5) Notice of Environmental Litigation. Without limiting
the provisions of Subsection (I)(4), promptly after receipt thereof,
notice of the receipt of all pleadings, orders, complaints,
indictments, or other communications alleging a condition that may
require the Borrower to undertake or to contribute to a cleanup or
other response under Laws relating to environmental protection, or
which seeks penalties, damages, injunctive relief, or criminal
sanctions related to alleged violations of such Laws, or which claims
personal injury or property damage to any person as a result of
environmental factors or conditions or as to which there is a
reasonable possibility that it would have a material adverse effect on
the condition, financial or otherwise, operations, properties, or
business of the Borrower or on its ability to perform its obligations
under the Loan Documents.
(6) Regulatory and Other Notices. Promptly after receipt
thereof, copies of any filings or communications sent to or notices or
other communications received from any governmental authority,
including without limitation, the Pennsylvania Public Utility
Commission (the "Commission"), the Federal Communications Commission
(the "FCC"), and the Securities and Exchange Commission (the "SEC"),
relating to any noncompliance by the Borrower with any Law or with
respect to any matter or proceeding the effect of which could have a
material adverse effect on its condition, financial or otherwise,
operations, properties, or business or on its ability to perform its
obligations under the Loan Documents.
(7) Material Adverse Change. Prompt notice of any matter
which has resulted or could result in a material adverse effect on the
condition, financial or otherwise, operations, properties, or business
of the Borrower or on its ability to perform its obligations under the
Loan Documents.
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(8) ERISA Reportable Events. Within 10 days after the
Borrower becomes aware of the occurrence of any Reportable Event (as
defined in Section 4043 of ERISA) as to which there is a reasonable
possibility that it would have a material adverse effect on the
condition, financial or otherwise, operations, properties, or business
of the Borrower, a statement describing such Reportable Event and the
actions proposed to be taken in response to such Reportable Event.
(9) SEC Filings. Promptly upon the filing thereof, copies
of any and all reports on Forms 10-K, 10-Q and 8-K and any and all
proxy statements filed by Commonwealth Telephone Enterprises, Inc.
with the SEC.
(10) Other Information. Such other information regarding
the financial or operational condition of the Borrower as CoBank may,
from time to time, reasonably request.
(J) Financial Covenants.
(1) Total Leverage Ratio. Maintain at all times, on a
Consolidated Basis, a Total Leverage Ratio not in excess of 3.5:1.0.
The term "Total Leverage Ratio" shall mean the ratio of Indebtedness
to Operating Cash Flow. The term "Indebtedness" shall mean, without
duplication, (i) obligations for borrowed money, (ii) obligations
representing the deferred purchase price of property or services other
than accounts payable arising in connection with the purchase of
inventory on terms customary in the trade, (iii) obligations, whether
or not assumed, secured by liens or payable out of the proceeds or
production from property now or hereafter owned or acquired, (iv)
obligations which are evidenced by notes, acceptances, or other
instruments, (v) capitalized agreements, (vi) fixed rate hedging
obligations that are due (after giving effect to any period of grace
or notice requirement applicable thereto) and remain unpaid, and (vii)
fixed payment obligations under guaranties that are due and remain
unpaid, all calculated on a Consolidated Basis. The term "Operating
Cash Flow" shall mean the sum of (a) pre-tax income, or deficit, as
the case may be, excluding extraordinary gains or losses and the write
up of any asset, (b) total interest expense (including non-cash
interest), (c) depreciation and amortization expense and other non-
cash charges, (d) accrued and unpaid management fees, (e) minority
interest, to the extent deducted in the calculation of pre-tax income,
or deficit, and (f) non-recurring transaction expenses incurred in
connection with the negotiation and execution of the Loan Documents,
all calculated on a Consolidated Basis. For purposes of determining
any applicable ratio, Operating Cash Flow shall be measured for the
then most recently completed four fiscal quarters, adjusted to give
effect to any acquisition, sale, or other disposition of any operation
during the period of calculation, as if such acquisition, sale, or
other disposition occurred on the first day of such period of
calculation.
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(2) Interest Coverage Ratio. Maintain at all times, on
a Consolidated Basis, an Interest Coverage Ratio of at least 2.0:1.0.
The term "Interest Coverage Ratio" shall mean the ratio derived by
dividing (i) Operating Cash Flow by (ii) cash interest expense for the
then most recently completed four fiscal quarters (determined in
accordance with GAAP).
(3) Equity to Total Capitalization Ratio. Maintain at
all times, on a Consolidated Basis, an Equity to Total Capitalization
Ratio of not less than 30.0%. The term "Equity to Total Capitalization
Ratio" shall mean the ratio derived by dividing (i) the amount derived
by subtracting total liabilities from total assets by (ii) the amount
derived by subtracting total liabilities from total assets and adding
total Indebtedness (determined in accordance with GAAP).
SECTION 14. Negative Covenants. Unless otherwise agreed to in
writing by CoBank, while this Agreement is in effect, the Borrower shall
not:
(A) Borrowings. Create, incur, assume, or allow to exist,
directly or indirectly, any indebtedness or liability for borrowed money,
for the deferred purchase price of property or services, or for the lease
of real or personal property which lease is required to be capitalized
under GAAP or which is treated as an operating lease under regulations
applicable to it but which otherwise would be required to be capitalized
under GAAP (a "Capital Lease"), except for (i) obligations to CoBank, (ii)
accounts payable to trade creditors and current operating liabilities
(other than for borrowed money) incurred in the ordinary course of its
business, and (iii) (a) other unsecured obligations and (b) Capital Leases,
so long as no Default or Event of Default exists at the time of, or would
result from, the creation, incurrence, assumption, or existence of any such
obligation or Capital Lease referred to in this clause (iii).
(B) Liens. Create, incur, assume, or allow to exist any
mortgage, deed of trust, deed to secure debt, pledge, lien (including the
lien of an attachment, judgment, or execution), security interest, or other
encumbrance of any kind upon any of its property, real or personal. The
foregoing restrictions shall not apply to (i) liens in favor of CoBank;
(ii) liens for taxes, assessments, or governmental charges that are not
past due, or are being contested in good faith and by appropriate
proceedings and then only to the extent adequate reserves have been set
aside therefor; (iii) liens, pledges, and deposits under workers'
compensation, unemployment insurance, and social security laws; (iv) liens,
deposits, and pledges to secure the performance of bids, tenders, contracts
(other than contracts for the payment of money), and like obligations
arising in the ordinary course of its business as conducted on the date
hereof; (v) liens imposed by law in favor of mechanics, materialmen,
warehousemen, lessors and like persons that secure obligations that are not
past due, or are being contested in good faith and by appropriate
proceedings and then only to the extent adequate reserves have been set
aside therefor; (vi) liens constituting encumbrances in the nature of
zoning restrictions, easements, and rights or restrictions of record on the
use of real property of the Borrower that do not materially detract from
the value of such real property or impair the use thereof in the business
of the Borrower; and (vii) Capital Leases not secured by any property which
is not subject to such lease.
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(C) Mergers; Acquisitions; Etc. (i) Merge or consolidate
with any other entity or (ii) acquire all or substantially all of the
assets of any person or entity, or form or create any new subsidiary, or
commence operations under any other name, organization, or entity,
including any joint venture; provided, however, that the Borrower may enter
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into any such transaction described in this clause (ii) involving any
entity or entities engaged in, or assets to be used by the Borrower in, the
telecommunications business without the written agreement of CoBank if no
Default or Event of Default exists at the time of, or would occur as the
result of, any such transaction, including, without limitation, any Event
of Default as described in Section 15(J) and any Default occurring as the
result of a breach of Subsection (F) or Section 13(J).
(D) Transfer of Assets. Sell, transfer, lease, enter into any
contract for the sale, transfer or lease of, or otherwise dispose of, any
of its assets, except as provided in the Mortgage or the Security Agreement
(each as defined in the Borrower's Loan Agreement No. T0268 dated March 29,
1994 with CoBank), as the case may be.
(E) Loans and Investments. After the date hereof, make any
loan or advance to, invest in, purchase, or make any commitment to purchase
any stock, bonds, notes, or other securities of, or guarantee, assume, or
otherwise become obligated or liable with respect to the obligations of,
any person or entity (each, whether made directly or indirectly, an
"Investment") in an amount in excess of $1,000,000 as to any single
Investment or in excess of $5,000,000 as to all such Investments existing
at any time, determined for the Companies, on a Consolidated Basis, other
than (i) stock or other securities of CoBank; (ii) Class C stock of the
Rural Telephone Bank; (iii) securities or deposits issued, guaranteed, or
fully insured as to payment by the United States of America or any agency
or instrumentality thereof; (iv) interest bearing deposit accounts (which
may be represented by certificates of deposit) in national or state banks
or savings and loan associations which have (or the parent of which has)
outstanding securities rated by a nationally recognized rating organization
(a "Rating Agency") in either of the two highest rating categories (without
regard to modifiers) for short term securities or in any of the three
highest rating categories (without regard to modifiers) for long term
securities or any equivalent successor rating category; (v) bankers'
acceptances drawn on and accepted by commercial banks which have (or the
parent of which has) outstanding securities rated by a Rating Agency in
either of the two highest rating categories (without regard to modifiers)
for short term securities or in any of the three highest rating categories
(without regard to modifiers) for long term securities or any equivalent
successor rating categories; (vi) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, any
State or Territory of the United States of America or the District of
Columbia, or any political subdivision of any of the foregoing, which are
rated by a Rating Agency in either of the two highest rating categories
(without regard to modifiers) for short term securities or in any of the
three highest rating categories (without regard to modifiers) for long term
securities or any equivalent successor rating categories; (vii) commercial
or finance company paper which is rated by a Rating Agency rated in any of
the two highest rating categories (without regard to modifiers) for short
term securities or any equivalent successor rating categories; (viii)
corporate debt securities or preferred stock rated by a Rating Agency in
any of the three highest rating categories (without regard to modifiers)
for long term securities or any equivalent successor rating categories; and
(ix) repurchase agreements with banking or financial institutions which
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have (or the parent of which has) outstanding securities rated by a Rating
Agency in either of the two highest rating categories (without regard to
modifiers) for short term securities or in any of the three highest rating
categories (without regard to modifiers) for long term securities or any
equivalent successor rating categories with respect to any of the foregoing
obligations or securities.
(F) Change in Business. Engage in any business activities or
operations substantially different from or unrelated to the Borrower's
current business activities or operations.
(G) Disposition of Licenses. Sell, assign, transfer, or
otherwise dispose of, in any way, any registrations, licenses, franchises,
grants, permits, or other governmental approvals necessary or useful in the
operation of its business.
(H) Dividends and Distributions. Make, declare, or pay any
dividend or other distribution of assets to shareholders of the Borrower
during any fiscal year (i) if a Default or Event of Default then exists or
would occur as the result thereof, or (ii) which, in the aggregate with all
other such dividends or distributions during such fiscal year, exceeds the
amount of the after tax net income of the Borrower for the immediately
preceding fiscal year (determined in accordance with GAAP consistently
applied). Notwithstanding the foregoing, the Company may, on or before
December 31, 1999, pay a special dividend to Commonwealth Telephone
Enterprises, Inc. in an aggregate amount not to exceed $30,000,000.
(I) Transactions with Affiliates. Enter into any transaction
with any affiliate except upon fair and reasonable terms no less favorable
to it than would obtain in a comparable arm's-length transaction with a
person or entity that was not an affiliate.
SECTION 15. Events of Default. Each of the following shall
constitute an "Event of Default" hereunder:
(A) Payment Default. The failure by the Borrower to make any
payment of principal, interest, fees, Surcharge or investment required to
be made hereunder, under the Note, or under any other Loan Document when
due, and such payment or investment is not made within five (5) Business
Days thereafter.
(B) Representations and Warranties. Any representation or
warranty made by the Borrower herein or in any other Loan Document, or any
factual statement made in the Factual Matters Certificate, shall prove to
have been false or misleading in any material respect on or as of the date
made.
(C) Certain Affirmative Covenants. The failure by the
Borrower to perform or comply with any covenant set forth in Section 13
(other than Sections 13(A) and 13(I)(3), (4), (5), (6) and (7)), and such
failure continues for thirty (30) days after written notice thereof shall
have been delivered by CoBank to the Borrower.
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(D) Other Covenants and Agreements. The failure by the
Borrower to perform or comply with any other covenant or agreement
contained herein, including, without limitation, any covenant excluded
under Subsection (C).
(E) Cross-Default. The occurrence of any breach, default,
event of default, or event which with the giving of notice or lapse of
time, or both, could become a default or event of default under (i) any
Loan Document other than this Agreement, or (ii) the terms of any agreement
(other than the Loan Documents) between the Borrower and CoBank, including,
without limitation, any guaranty, loan agreement, security agreement,
mortgage, deed to secure debt, or deed of trust.
(F) Other Indebtedness. The occurrence of any breach,
default, event of default, or event which with the giving of notice or
lapse of time, or both, could become a default or event of default under
any agreement, indenture, mortgage, or other instrument by which the
Borrower or any of its property is bound or affected (other than the Loan
Documents) if the effect of such breach, default, event of default, or
event is to accelerate, or to permit the acceleration of, the maturity of
any indebtedness in excess of $1,000,000 under such agreement, indenture,
mortgage, or other instrument.
(G) Judgments. Judgments, decrees, or orders for the payment
of money in an aggregate amount in excess of $1,000,000 shall be rendered
against any of the Borrower and either (i) enforcement proceedings shall
have been commenced; or (ii) such judgments, decrees, and orders shall
continue unsatisfied and in effect for a period of forty-five (45)
consecutive days without being vacated, discharged, satisfied, or stayed
pending appeal.
(H) Insolvency, Etc. The Borrower (i) shall become insolvent
or shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they come due; or (ii) shall suspend its
business operations or a material part thereof or make an assignment for
the benefit of creditors; or (iii) shall apply for, consent to, or
acquiesce in the appointment of a trustee, receiver, or other custodian for
it or any of its property or, in the absence of such application, consent,
or acquiescence, a trustee, receiver, or other custodian is so appointed;
or (iv) shall commence with respect to it or have commenced against it any
proceeding under any bankruptcy, reorganization, arrangement, readjustment
of debt, dissolution, or liquidation law or statute of any jurisdiction;
provided, however, that, with respect to any proceeding commenced against
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the Borrower, the Borrower shall have failed to obtain a dismissal, stay,
or other nullification within sixty (60) days after such commencement.
(I) Eligibility. The failure by the Borrower to maintain its
eligibility to borrow from CoBank.
SECTION 16. Remedies Upon Event of Default.
(A) Automatic Acceleration. Upon the occurrence of an Event
of Default under Section 15(H), the entire unpaid principal balance of the
Note, all accrued interest thereon, and all other amounts payable under
this Agreement, the Note, and all other agreements between
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CoBank and the Borrower shall become immediately due and payable without
protest, presentment, demand, or further notice of any kind, all of which
are hereby expressly waived by the Borrower.
(B) Acceleration; Etc. Upon the occurrence of an Event of
Default other than under Section 15(H), upon notice to the Borrower, CoBank
may declare the entire unpaid principal balance of the Note, all accrued
interest thereon, and all other amounts payable under this Agreement and
all other agreements between CoBank and the Borrower, to be immediately due
and payable. Upon such a declaration, the unpaid principal balance of the
Note and all such other amounts shall become immediately due and payable,
without protest, presentment, demand, or further notice of any kind, all of
which are hereby expressly waived by the Borrower.
(C) Enforcement. Upon the occurrence of an Event of Default,
CoBank may proceed to protect, exercise, and enforce such rights and
remedies as may be provided by agreement or under law including, without
limitation, the rights and remedies provided for in the Note and any of the
other Loan Documents. Each and every one of such rights and remedies shall
be cumulative and may be exercised from time to time, and no failure on the
part of CoBank to exercise, and no delay in exercising, any right or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise
of any right or remedy preclude any other or future exercise thereof, or
the exercise of any other right. In addition, CoBank may hold and/or set
off and apply against the Borrower's indebtedness any and all cash,
accounts, securities, or other property in CoBank's possession or under its
control.
(D) Application of Payments. After acceleration of the Loan,
all amounts received by CoBank shall be applied to the amounts owing
hereunder, under the Note, and the other Loan Documents in whatever order
and manner as CoBank shall elect.
SECTION 17. Complete Agreement; Amendment. This Agreement, the
Note, and the other Loan Documents are intended by the parties to be a
complete and final expression of their agreement. No amendment,
modification, or waiver of any provision hereof or thereof, nor any consent
to any departure of the Borrower herefrom or therefrom, shall be effective
unless approved by CoBank and contained in a writing signed by or on behalf
of CoBank, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 18. Applicable Law. Except to the extent governed by
applicable federal law, this Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, without
reference to choice of law doctrine.
SECTION 19. Notices. All notices hereunder shall be in writing
and shall be deemed to be duly given upon delivery, if delivered by
"Express Mail," overnight courier, messenger or other form of hand delivery
or sent by telegram or facsimile transmission, or three (3) days after
mailing if sent by certified or registered mail, to the parties at the
following addresses (or such other address for a party as shall be
specified by like notice):
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If to CoBank, as follows: If to the Borrower, as follows:
CoBank, ACB Commonwealth Telephone Company
200 Galleria Parkway 100 CTE Drive
Suite 1900 Dallas, Pennsylvania 18612
Atlanta, Georgia 30339-5946 Attn: Chief Financial Officer
Attn: Rural Utility Banking Group Fax No.: (570) 675-0900
Fax No.: (770) 618-3202
SECTION 20. Costs and Expenses. The Borrower shall reimburse
CoBank on demand for all reasonable out-of-pocket costs and expenses
incurred by CoBank in connection with the origination, negotiation, and
preparation of this Agreement and all other Loan Documents, and the
preservation and enforcement of CoBank's rights and remedies hereunder and
thereunder, including, without limitation: (i) costs and expenses
(including intangible and other taxes and any recording fees or expenses)
incurred by CoBank to obtain, perfect, maintain, determine the priority of,
or release any security contemplated hereunder; and (ii) fees and expenses
of any outside counsel retained by CoBank to assist CoBank with respect to
any matter contemplated by this Section or to review this Agreement and all
other Loan Documents and advise CoBank as to its rights and remedies
hereunder or thereunder; and (iii) fees and expenses of any outside counsel
retained by CoBank to represent it in any litigation involving the parties
hereto, including but not limited to, bankruptcy, receivership, or similar
proceedings.
SECTION 21. Effectiveness; Severability. This Agreement shall
continue in effect until all indebtedness and obligations of the Borrower
hereunder and under all other Loan Documents shall have been fully and
finally repaid or the Maturity Date, whichever is later. Any provision of
the Loan Documents which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
provisions hereof or thereof.
SECTION 22. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower and CoBank and their
respective successors and assigns, except that the Borrower may not assign
or transfer its rights or obligations hereunder without the prior written
consent of CoBank. Without the consent of, but with notice to, the
Borrower, CoBank may (i) sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this
Agreement, provided, however, that after any such sale of participations,
-------- -------
the Borrower shall continue to deal solely and directly with CoBank with
respect to this Agreement and the other Loan Documents, or (ii) assign to
one or more banks or other entities all or a portion of its rights and
obligations under this Agreement.
SECTION 23. Consent to Jurisdiction. To the maximum extent
permitted by law, the Borrower agrees that any legal action or proceeding
with respect to this Agreement or any of the
19
<PAGE>
other Loan Documents may be brought in the courts of the Commonwealth of
Pennsylvania or of the United States of America for the Middle District of
Pennsylvania, all as CoBank may elect. By execution of this Agreement, the
Borrower hereby irrevocably submits to each such jurisdiction, expressly
waiving any objection it may have to the laying of venue by reason of its
present or future domicile. Nothing contained herein shall affect the right
of CoBank to commence legal proceedings or otherwise proceed against the
Borrower in any other jurisdiction or to serve process in any manner
permitted or required by law.
SECTION 24. Obligations Absolute. The obligation of the Borrower
to make all payments required to be made under this Agreement shall be
independent of any action by the Commission with respect to rates and/or
disallowance of debt.
SECTION 25. Defined Terms. For convenience of reference, set
forth below opposite each defined term used in this Agreement is the
location in this Agreement of the definition of such term:
Defined Term Location
------------ --------
Agreement Introductory Paragraph
Applicable Margin Section 4
Banking Day Section 3
Borrower Introductory Paragraph
Business Day Section 3
Capital Lease Section 14(A)
CoBank Introductory Paragraph
Commission Section 13(I)(6)
Companies Section 13(I)(1)
Consolidated Basis Section 13(I)(1)
Default Section 11(I)
Equity to Total Capitalization Ratio Section 13(J)(3)
Event of Default Section 15
Factual Matters Certificate Section 11(N)
FCC Section 13(I)(6)
Floating Rate Section 4(A)(1)
Funding Date Section 3
GAAP Section 12(H)
Governmental Authority Section 16(E)
Indebtedness Section 13(J)(1)
Interest Coverage Ratio Section 13(J)(2)
Interest Period Section 4(A)(2)(a)
Investment Section 14(E)
Laws Section 12(E)
20
<PAGE>
LIBOR Section 4(A)(2)(a)
LIBOR Rate Section 4(A)(2)(a)
LIBOR Margin Section 4(A)(2)(a)
Loan Section 1
Loan Documents Section 11(A)
Material Adverse Change Section 11(K)
Maturity Date Section 5
National Variable Rate Section 4(A)(1)
Note Section 7
Operating Cash Flow Section 13(J)(1)
Payment Date Section 5
Portion Section 4(A)(1)
Rating Agency Section 14(E)
SEC Section 13(I)(6)
Surcharge Section 6
Total Leverage Ratio Section 13(J)(1)
SECTION 26. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be
executed, attested, sealed, and delivered and CoBank has caused this
Agreement to be executed and delivered, each by its duly authorized
officers, as of the date first shown above.
CoBANK, ACB COMMONWEALTH TELEPHONE
COMPANY
By:_______________________________ By:___________________________
Title: ________________________ Title:_____________________
21
<PAGE>
SCHEDULE 1
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
AND OTHER MATTERS
Section 12(E) - "Compliance with Laws": none
Section 12(F) - "Environmental Compliance": none
Section 12(K) - "Employee Benefit Plans": none
<PAGE>
COMMONWEALTH TELEPHONE ENTERPRISES INC
EXECUTIVE
STOCK PURCHASE PLAN
As Amended and Restated, Effective December 21, 1998
1. Purpose. The purpose of the Commonwealth Telephone Enterprises
-------
Inc. Executive Stock Purchase Plan is to strengthen the mutuality of interests
between executives and shareholders. The Plan offers certain executives of
Commonwealth Telephone Enterprises Inc. and its affiliated companies the
opportunity to defer the receipt of a portion of their compensation on a pre-tax
basis and to have the deferred amounts reflect the value of the common stock of
Commonwealth Telephone Enterprises Inc.. Further, Commonwealth Telephone
Enterprises Inc. will credit matching contributions equal to 100% of the
executive's deferrals. Subject to certain limitations as described herein,
matching contributions will be credited to executives' matching accounts in the
form of hypothetical shares of Common Stock of Commonwealth Telephone
Enterprises Inc.. Subject to executives' elections regarding the timing of
payment, a number of shares of Common Stock of Commonwealth Telephone
Enterprises Inc. equal to the number of hypothetical share units credited to the
executive's matching contribution account will be paid to the executive if he or
she remains an employee for three years following the purchase. The Plan, as
amended and restated, effective December 21, 1998, shall apply only to
Participants who are credited with service to the Company on or after December
21, 1998. The Plan as in effect immediately preceding the amendment and
restatement of the Plan, effective December 21, 1998 shall continue to apply to
Participants who are not credited with service to the Company after December 20,
1998.
2. Definitions. Unless the context otherwise requires, the following
-----------
words as used herein shall have the following meanings:
"Account" means the Deferral Account, the Matching Account and the
-------
Distribution Account, which are bookkeeping accounts established pursuant to the
Plan and maintained in the names of the respective Participants, to which all
amounts deferred and earnings allocated under the Plan shall be credited, and
from which all amounts distributed under the Plan shall be debited.
"Administrator" means the Company or any person or entity to which the
-------------
Board delegates this function under Section 10.
"Affiliated Company" means each corporation, 100% of the stock of which is
------------------
owned, directly or indirectly, by the Company.
"Annual Compensation" shall mean, with respect to any Eligible Employee in
-------------------
any calendar year, the sum of (i) such Eligible Employee's annual base salary
for such year plus (ii) the short term bonus received by such Eligible Employee
in respect of Company performance
<PAGE>
EXHIBIT A
during such year. The Administrator shall have the sole discretion to determine
an Eligible Employee's Annual Compensation as of any relevant time in accordance
with the provisions of the Plan.
"Applicable Dividends" means, with respect to a Share Unit, the aggregate
--------------------
number of Share Units credited to a Participant's Account under Section 5.3 (or
to a Participant's Matching Account under Section 6, as applicable) as the
result of a dividend paid by the Company in respect of Shares.
"Applicable Election Date" means the following:
------------------------
(a) except as provided in (b), with respect to the deferral of base
compensation earned during any payroll period, December 31 of the calendar year
immediately preceding the commencement of such payroll period;
(b) with respect to the deferral of base compensation earned during
any payroll period in the first calendar year for which an Employee is an
Eligible Employee, the first day of the first calendar quarter following his or
her becoming an Eligible Employee, provided that the Applicable Election Date
with respect to the deferral of such base compensation earned by an Employee who
is an Eligible Employee as of the Effective Date shall be the Effective Date;
(c) with respect to any short term bonus, December 31 of the calendar
year immediately preceding the calendar year in which the bonus is payable; and
(d) with respect to accumulated balances of an Account:
(i) except as otherwise provided in (ii) below, by June 30 of the
calendar year preceding the calendar year in which all or any portion of the
Account would be distributable; and
(ii) for accumulated Account balances that, but for an
executive's further deferral election, would be distributable in 1998 or 1999,
within 10 days of the adoption of this amendment and restatement of the Plan;
provided that except as otherwise provided in Section 7, the date for payment of
any amount attributable to an election made pursuant to an Election Form with
respect to accumulated balances shall not be earlier than the first day of the
second calendar year beginning after the date such portion of the Account would
have been payable but for such election.
"Board" means the board of directors of the Company.
-----
<PAGE>
"Change in Control" means:
-----------------
(a) The acquisition by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), other than Level 3 Telecom Holdings, Inc. and
any affiliate of Level 3 Telecom Holdings, Inc., of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50%
of either (i) the then outstanding Shares or (ii) the combined voting power of
the Company's then outstanding voting securities;
(b) Effective upon the consummation of any such transaction, approval
by the shareholders of the Company of a reorganization, merger or consolidation,
in each case, with respect to which persons who were the shareholders of the
Company immediately prior to such reorganization, merger or consolidation, do
not, immediately thereafter, own more than 50% of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merged or consolidated company's then outstanding voting securities, or a
liquidation or dissolution of the Company or the sale of all or substantially
all of the assets of the Company; or
(c) The replacement of more than 50% of the members of the Board with
persons who were not nominated or otherwise designated by the remaining members
of the Board.
"CMI" means Cable Michigan, Inc., a Pennsylvania corporation.
---
"CMI Share Unit" means a hypothetical share of Common Stock of CMI, par
--------------
value $1.00, credited to Participant's CMI Distribution Account.
"Company" means Commonwealth Telephone Enterprises Inc., a Pennsylvania
-------
corporation; provided that for purposes of the definition of the term "Change in
Control," the term "Company" shall also mean CMI or RCN, as applicable.
"Deferral Account" means the bookkeeping account established by the
----------------
Administrator for each Participant to reflect the Share Units credited with
respect to such Participant pursuant to Section 5.
"Deferral Date" means the date or dates on which base compensation, short
-------------
term bonus or an accumulated Account balance to which any Election Form relates
would otherwise have been paid.
"Disability" means a disability with respect to which a Participant is
----------
eligible for and receiving benefits under a long-term disability program
sponsored by the Company or an Affiliated Company.
<PAGE>
"Distribution" means the distribution by C-TEC Corporation to its
------------
stockholders of Shares (the "Distribution"), effective as of October 1, 1997.
"Distribution Account" means the bookkeeping account established for each
--------------------
Participant to reflect the Share Units, the CMI Share Units and the RCN Share
Units credited with respect to each individual who was a Participant in the C-
TEC Corporation Executive Stock Purchase Plan immediately preceding the
Distribution and who, immediately after the Distribution, was an employee of the
Company.
"CMI Distribution Account" means the portion of the Distribution Account to
------------------------
which are credited CMI Share Units which were deemed credited to the
Participant's Distribution Account as of the Distribution, plus additional CMI
Share Units thereafter credited in accordance with Section 4.4.
"RCN Distribution Account" means the portion of the Distribution Account to
------------------------
which are credited RCN Share Units which were deemed credited to the
Participant's Distribution Account as of the Distribution, plus additional RCN
Share Units thereafter credited in accordance with Section 4.5.
"RCN Distribution Account" means the portion of the Distribution Account to
------------------------
which are credited Share Units which were deemed credited to the Participant's
Distribution Account as of the Distribution, plus additional Share Units
thereafter credited in accordance with Sections 5 and 6.
"Dividend Payment Date" means the date on which a dividend is paid by the
---------------------
Company with respect to Shares.
"Effective Date" means October 1, 1997. The effective date of this
--------------
amendment and restatement of the Plan is December 21, 1998.
"Election Form" means the election form described in Section 5.5.
-------------
"Eligible Employee" means an Employee who is designated by the Board as
-----------------
eligible to participate in the Plan and who has completed one full calendar
quarter of employment with the Company or an Affiliated Company, provided,
however, that the Board may, in its sole discretion, designate as Eligible
Employees and Participants, persons who were active participants in the C-TEC
Corporation Executive Stock Purchase and who in respect of such participation
were granted Share Units hereunder in connection with the Distribution.
"Employee" means an employee of the Company or an Affiliated Company.
--------
<PAGE>
"Entry Date" means, for any Eligible Employee, the first day of the first
----------
calendar quarter following his or her becoming an Eligible Employee, provided
that the Entry Date of any Employee who is an Eligible Employee as of the
Effective Date shall be the Effective Date.
"Fair Market Value" of a Share on any given day means:
-----------------
(a) The closing price per Share on the national securities exchange
on which the Shares are principally traded on the next preceding date on which
there was a sale of Shares on such exchange; or
(b) If the Shares are not listed or admitted to trading on any such
exchange, the closing price per Share on the Nasdaq National Market on the next
preceding date on which there was a sale of Shares, or if such closing price is
not available, the average of the highest reported bid and lowest reported asked
prices per Share as reported by NASDAQ on the next preceding date on which such
bid and asked prices were reported; or
(c) If the Shares are not then listed on any securities exchange or
prices therefor are not then quoted in NASDAQ, the value determined by the
Administrator in good faith.
"Fund" means the fund maintained under the Trust Agreement.
----
"Matching Account" means the bookkeeping account established by the
----------------
Administrator for each Participant to reflect Share Units credited pursuant to
Section 6.
"Participant" means any Eligible Employee or former Eligible, Employee who
-----------
has elected to participate in the Plan as described in Section 4, or who has an
undistributed amount credited to a Deferral Account or a Matching Account or who
was issued Share Units hereunder in connection with the Distribution.
"Plan" means Commonwealth Telephone Enterprises Inc. Executive Stock
----
Purchase Plan, as set forth herein, and as amended from time to time.
"Pre-Tax Contribution" means the amount of a Participant's contribution to
--------------------
the Plan as determined under Section 5.1, reduced by any applicable employment
taxes.
"Purchase Date" means, with respect to a Deferral Date or a Dividend
-------------
Payment Date, the date or dates on which the Trustee purchases Shares to reflect
the Pre-Tax Contributions made on such Deferral Date or the dividends paid on
such Dividend Payment Date. The Trustee may purchase Shares from the Company or
on the open market.
<PAGE>
"RCN" means RCN Corporation, a Delaware corporation.
---
"RCN Share Unit" means a hypothetical share of Common Stock of RCN, par
--------------
value $1.00, credited to Participant's RCN Distribution Account.
"Share Units" means units credited to a Participant's Deferral Account
-----------
under Sections 5.2 and 5.3 and units credited to a Participant's Matching
Account under Section 6.
"Shares" means Common Stock of the Company, par value $1.00 per share.
------
"Trust Agreement" means the agreement of trust entered into between the
---------------
Company and the Trustee for purposes of the Plan.
"Trustee" means the individual(s) or corporate trustee appointed as trustee
-------
under the Trust Agreement.
"Unforeseeable Emergency" means an unanticipated emergency that is caused
-----------------------
by an event beyond the control of the Participant and that would result in
severe financial hardship to the Participant if early withdrawal were not
permitted.
3. Shares. Not more than 400,000 Shares and Share Units in the
------
aggregate without duplication, may be issued under the Plan, subject to
adjustment as provided in Section 13.2.
4. Eligibility to Participate; Initial Credits.
-------------------------------------------
4.1. Eligibility to Participate. Any Eligible Employee shall be
--------------------------
eligible to participate in the Plan. An Eligible Employee shall become a
Participant by delivering to the Administrator an executed Election Form and
such other forms as may be required by the Administrator.
4.2. Initial Credits. As of the Distribution, the Distribution
---------------
Account of each individual who was a Participant in the C-TEC Corporation
Executive Stock Purchase Plan immediately preceding the Distribution and who,
immediately after the Distribution, was an employee of the Company, shall be
credited with such number of Share Units, CMI Share Units and RCN Share Units,
rounded, in each case to the nearest 0.0001 of a share, equal to the sum of
4.2.1. The number of shares of stock of the Company, CMI
and RCN that would have been issued in the Distribution if each share unit
representing a
<PAGE>
share of Common Stock of C-TEC Corporation and credited to the Participant's
Deferral Account were a bona fide share of Common Stock of C-TEC Corporation;
plus
4.2.2. The number of shares of stock of the Company, CMI
and RCN issuable in the Distribution with respect to such Participant's matching
shares credited under the C-TEC Corporation Executive Stock Purchase Plan.
4.3. CTE Distribution Account. Effective immediately after the
------------------------
Distribution, the portion of each Participant's CTE Distribution Account
attributable to the Participant's Deferral Account under the C-TEC Corporation
Executive Stock Purchase Plan shall be credited to the Participant's Deferral
Account. Effective immediately after the Distribution, the portion of each
Participant's CTE Distribution Account attributable to matching shares issuable
under the C-TEC Corporation Executive Stock Purchase Plan shall be credited to
the Participant's Matching Account, provided that such Matching Share Units
shall be subject to forfeiture pursuant to Section 6, based on the lapse of time
from the date of the Participant's deferral election as of which the matching
shares to which such Matching Shares are attributable were credited pursuant to
the C-TEC Corporation Executive Stock Purchase Plan. In all respects
thereafter, the value of the portion of the CTE Distribution Account credited to
the Deferral Account shall be determined as if it were invested and reinvested
as part of the Deferral Account pursuant to Section 5, and the value of the
portion of the CTE Distribution account credited to the Matching Account shall
be determined as if it were invested and reinvested as part of the Matching
Account pursuant to Section 6.
4.4. CMI Distribution Account. In all respects commencing
------------------------
immediately after the Distribution, the value of the portion of the CMI
Distribution Account attributable to the Participant's Deferral Account under
the C-TEC Corporation Executive Stock Purchase Plan shall be determined as if it
were invested and reinvested as part of the Deferral Account pursuant to Section
5.2 and Section 5.3, and the value of the portion of the CMI Distribution
Account attributable to matching shares under the C-TEC Corporation Executive
Stock Purchase Plan shall be determined as if it were invested and reinvested as
part of the Matching Account pursuant to Section 6; provided, however, that for
purposes of this Section 4.4, each reference to the Company and to Shares shall
be deemed to be a reference to CMI and shares of Common Stock of CMI, and
provided further, provided that the value of the portion of the CMI Distribution
Account attributable to matching shares under the C-TEC Corporation Executive
Stock Purchase Plan shall be subject to forfeiture pursuant to Section 6, of the
Participant's deferral election as of which the matching shares to which such
Matching Shares are attributable were credited pursuant to the C-TEC Corporation
Executive Stock Purchase Plan.
4.5. RCN Distribution Account. In all respects commencing
------------------------
immediately after the Distribution, the value of the portion of the RCN
Distribution Account attributable to the Participant's Deferral Account under
the C-TEC Corporation Executive Stock Purchase Plan shall be determined as if it
were invested and reinvested as part of the Deferral
<PAGE>
Account pursuant to Section 5.2 and Section 5.3, and the value of the portion of
the RCN Distribution Account attributable to matching shares under the C-TEC
Corporation Executive Stock Purchase Plan shall be determined as if it were
invested and reinvested as part of the Matching Account pursuant to Section 6;
provided, however, that for purposes of this Section 4.4, each reference to the
Company and to Shares shall be deemed to be a reference to RCN and shares of
Common Stock of RCN, and provided further, provided that the value of the
portion of the RCN Distribution Account attributable to matching shares under
the C-TEC Corporation Executive Stock Purchase Plan shall be subject to
forfeiture pursuant to Section 6, of the Participant's deferral election as of
which the matching shares to which such Matching Shares are attributable were
credited pursuant to the C-TEC Corporation Executive Stock Purchase Plan.
5. Pre-Tax Contributions.
---------------------
5.1. Election to Participate.
-----------------------
5.1.1. Deferral of Base Compensation. An Eligible
-----------------------------
Employee may elect to receipt of all or a portion (in whole percentages) of his
or her base compensation payable by the Company or an Affiliated Company
attributable to any payroll period beginning on or after the Entry Date by
executing an Election Form and filing it with the Administrator on or before the
Applicable Election Date. Deferrals by any Eligible Employee pursuant to this
Section 5.1.1 shall not exceed 20% of such Eligible Employee's projected base
compensation for the year in question, as determined by the Administrator from
time to time. Subject to the foregoing, each Eligible Employee shall specify on
such Election Form the schedule of Deferral Dates on which such aggregate amount
is to be withheld and contributed to the Plan.
5.1.2. Deferral of Bonus. Subject to Section 5.1.3,
-----------------
an Eligible Employee may elect to defer receipt of all or a portion (in whole
percentages) of his or her short term bonus payable by the Company or an
Affiliated Company on or after the Entry Date by executing an Election Form and
filing it with the Administrator on or before the Applicable Election Date.
5.1.3. Limitations on Pre-Tax Contributions. An
------------------------------------
Eligible Employee's Pre-Tax Contribution under Sections 5.1.1 and 5.1.2 for any
calendar year shall not exceed 20% of such Eligible Employee's Annual
Compensation for such year. The Administrator shall adjust the Eligible
Employee's Pre-Tax Contributions as it determines necessary to meet the
requirements of this Section 5.1.3.
5.2. Crediting Accounts. On any Purchase Date, but as of
------------------
the applicable Deferral Date, the Company shall credit each Participant's
Deferral Account with a number of Share Units, rounded to the nearest 0.0001 of
a Share, determined as follows:
<PAGE>
5.2.1. an amount, rounded down to the next lowest whole
number, obtained by dividing:
5.2.1.1. the amount of all Participants' Pre-Tax
Contributions attributable to such Deferral Date that is invested on such
Purchase Date; by
5.2.1.2. the average per Share cost paid by the
Trustee on such Purchase Date with respect to such Deferral Date; provided,
however, that if the Trustee purchases (or notionally purchases) the Shares from
the Company, the Trustee's average per Share cost, for purposes of this Section
5.2, shall be the Fair Market Value per Share on such Deferral Date;
5.2.2. multiplied by a fraction:
5.2.2.1. the numerator of which is the Participant's
Pre-Tax Contribution attributable to such Deferral Date; and
5.2.2.2. the denominator of which is all
Participants' Pre-Tax Contributions attributable to such Deferral Date.
5.3. Crediting of Dividends to Accounts.
----------------------------------
5.3.1. Cash Dividends. If the Company pays a cash
--------------
dividend with respect to Shares, then as of the Dividend Payment Date, the
Company shall credit each Participant's Deferral Account with a number of Share
Units determined as follows:
5.3.1.1. an amount, rounded to the nearest 0.0001
of a Share, obtained by dividing
5.3.1.1.1. the amount of the dividend paid on such
Dividend Payment Date with respect to a Share multiplied by the number of Share
Units credited to all Participants' Accounts on the record date for such
Dividend; by
5.3.1.1.2. the average per Share cost paid by the
Trustee on the Purchase Date with respect to such Dividend Payment Date;
provided, however, that if the Trustee purchases (or notionally purchases) the
- --------
Shares from the Company, the Trustee's average per Share cost, for purposes of
this Section 5.3, shall be the Fair Market Value per Share on such Dividend
Payment Date;
<PAGE>
5.3.1.2. multiplied by a fraction:
5.3.1.2.1. the numerator of which is the number of
Share Units credited to the Participant's Deferral Account on the record date
for such Dividend; and
5.3.1.2.2. the denominator of which is the number of
Share Units credited to all Participants' Accounts on the record date for such
Dividend.
5.3.2. Share Dividends. If the Company pays a dividend
---------------
with respect to Shares in the form of additional Shares, then as of the Dividend
Payment Date, the Company shall credit each Participant's Deferral Account with
a number of Share Units equal to the product of:
5.3.2.1. the Share Units credited to the Participant's
Deferral Account on the record date for such Dividend; and
5.3.2.2. the number of Shares payable as a dividend
for each outstanding Share.
5.3.3. Extraordinary Dividends. Except as set forth in
-----------------------
Sections 5.3.1 and 5.3.2, dividends and distributions in respect of Shares shall
be treated in accordance with Section 13.2.
5.4. Treatment of Excess Cash. An amount representing the
------------------------
amount received by the Trustee under Section 5.6.1 and not used to purchase
Shares shall be allocated in any reasonable manner by the Administrator,
including, but not limited to, allocating such amounts as of the next Deferral
Date among Participants' Deferral Accounts pro-rata or in proportion to
Participant's Pre-Tax Contributions attributable to such Deferral Date. Amounts
shall be allocated to the purchase of Shares in the order in which received by
the Trustee.
5.5. Election Form. Each Election Form shall be in form and
-------------
substance satisfactory to the Administrator, and shall set forth:
5.5.1. the amount of base compensation and/or short term
bonus to be deferred and the Deferral Date(s) on which such deferrals are to be
effected, subject to Section 5.1.3;
<PAGE>
EXHIBIT A
5.5.2. the date on which distributions shall commence
under Section 7;
5.5.3. if distributions are to commence under Section
7, whether such distributions will be a single sum or in installments; and
5.5.4. the beneficiary or beneficiaries to whom
benefits should be paid in the event of the Participant's death.
An Election Form providing for the deferral of all or a portion of
base compensation or short term bonus shall remain in effect until revoked or
replaced by a new Election Form.
5.6. Funding.
-------
5.6.1. On or as soon as administratively practicable
following each Deferral Date, an amount equal to the amount deferred by all
Participants shall be paid by the Company to the Trustee, and shall thereafter
be held by the Trustee in accordance with the terms of the Trust Agreement.
5.6.2. Amounts contributed to the Trustee under the
Trust Agreement and assets purchased with such amounts shall be subject to the
claims of the Company's creditors and creditors of Affiliated Companies.
5.6.3. To the extent that any benefits provided under
the Plan are actually paid from the Fund, the Company shall have no further
obligation with respect to such benefits.
5.6.4. Except as provided in Section 5.6.1, neither
the Company nor any Affiliated Company shall be required to segregate or
physically to set aside any funds or asset to satisfy any right to payment of
amounts credited to any Deferral Account. Neither a Participant, nor any
beneficiary nor any other person shall be deemed to have any property interest,
legal or equitable, in any specific asset of the Company or any Affiliated
Company or of the Fund with respect to any right to payment of any amount
pursuant Section 5. To the extent that any person acquires any right to receive
payments under the Plan of an amount credited to an Account, such right to
payment shall be no greater than, nor shall it have any preference or priority
over, the rights, of any unsecured general creditor of the Company or any
Affiliated Company.
<PAGE>
5.7. Voting Rights. Share Units represent a hypothetical
-------------
number of shares for bookkeeping purposes only. Accordingly, Participants shall
have no voting rights or any other rights of a shareholder with respect to such
Share Units.
5.8. Unforeseeable Emergency. In the event of an
-----------------------
Unforeseeable Emergency as determined by the Administrator, a Participant may
receive a lump sum payment in an amount necessary to meet the emergency, but not
in excess of the amount credited to his
Deferral Account. Such amount shall be paid in Shares, and the Participant's
Deferral Account shall be debited accordingly.
5.9. Beneficiary Designation. Each Participant shall
-----------------------
designate on his or her Election Form the beneficiary or beneficiaries who shall
receive payments of Shares under Section 7 upon the Participant's death. A
Participant may amend any beneficiary designation by filing a written amendment
thereof with the Administrator. If the Participant has not made an effective
beneficiary designation, or if the designated beneficiary predeceases the
Participant, the Participant's beneficiary shall be the Participant's estate.
5.10. Cash Entitlement Only. Any provision of this Plan to
---------------------
the contrary notwithstanding, unless and until such time as the Plan is approved
by the shareholders of the Company, a Share Unit credited under this Section 5
shall represent only the right to be paid in cash the Fair Market Value of a
Share at the time otherwise herein provided for such payment.
5.11. Non Pro Rata Deferrals. Notwithstanding any other
----------------------
provision of this Section 5, with respect to the payment under Section 7 of any
Excess Share Units, as hereinafter defined, the Administrator in its sole
discretion may distribute, in lieu of one Share or the Fair Market Value
thereof, an amount in cash equal to the value per Share used for purposes of
Sections 5.2.1.2 and 5.3.1.1.2 in crediting such Excess Share Unit to the
applicable Deferral Account. For purposes of this Section 5.11, "Excess Share
Units" shall mean that number of Share Units credited to such Deferral Account
in excess of the number of Share Units that would have been so credited had the
Participant elected a "Pro Rata Deferral"; and a "Pro Rata Deferral" shall mean
a deferral on any Deferral Date of a percentage of base compensation not in
excess of 20%.
<PAGE>
6. Matching Contributions.
----------------------
6.1. Matching Share Unit Credits. As of each Deferral
---------------------------
Date, the Company shall credit to each Participant's Matching Account, Share
Units equal to the number of whole Share Units standing to the credit of such
Participant's Deferral Account under Section 5.2 as of such Deferral Date (less
any Share Units in respect of which Shares have previously been issued under
this Section 6.1). All Shares issued under this Section shall be subject to
forfeiture as provided in Section 6.2. The number and value of Matching Share
Units credited to each Participant's Matching Account shall be determined as if
it were invested and reinvested on the same basis as the Deferral Account
pursuant to Section 5.
6.2. Forfeiture of Matching Share Units. Shares
----------------------------------
credited to Participants' Matching Accounts under Section 6.1 shall be subject
to the following terms:
6.2.1. If the Participant terminates employment
with the Company and all Affiliated Companies, RCN or CMI, as the case may be,
prior to the lapse of 12 consecutive full calendar quarters following the date
as of which Share Units are credited under Section 6.1, other than due to death
or disability, the Participant shall forfeit all rights to the Shares and the
Shares shall be released forfeited from the Participant's Matching Account.
Share Units credited to a Participant's Matching Account shall vest if the
Participant remains employed by the Company or any Affiliated Company, RCN or
CMI, as the case may be, until the lapse of 12 consecutive full calendar
quarters following the date as of which such Share Units are credited under
Section 6.1, or if earlier, upon (i) a Change in Control or (ii) the
Participant's termination of employment with the Company and all Affiliated
Companies, RCN or CMI, as the case may be, due to death or disability.
6.2.2. Share Units credited to Participants'
Matching Accounts represent a hypothetical number of Shares, for bookkeeping
purposes only. Accordingly, Participants shall have no voting rights or any
other rights of a shareholder with respect to such Share Units. Notwithstanding
the foregoing, however, the Company may, but shall not be required to, establish
a procedure pursuant to which a Participant may direct the Trustee regarding the
voting of a number of Shares held pursuant to the Trust Agreement equal to the
number of Share Units credited to the Participant's Matching Account.
7. Commencement and Form of Distribution. Amounts
-------------------------------------
representing Share Units credited to a Participant's Account shall be
distributed as follows:
7.1. Commencement Date.
-----------------
<PAGE>
7.1.1. In General. Subject to Sections 7.1.2
----------
and 7.3, as soon as administratively practicable following the earlier of (i)
the Participant's termination of employment with the Company and all Affiliated
Companies, RCN or CMI, as the case may be, or (ii) the date or dates designated
by the Participant in his or her Election Form (which shall not be earlier than
following the lapse of 12 consecutive full calendar quarters following the
applicable Deferral Date), the Company shall commence to issue or pay to the
Participant:
7.1.1.1. A number of Shares equal to
the number of whole Share Units credited to the Participant's Account, plus an
amount of cash in lieu of fractional Share Units if no subsequent distribution
dates are anticipated;
7.1.1.2. A number of shares of Common
Stock of CMI equal to the number of whole CMI Share Units credited to the
Participant's Account, plus an amount of cash in lieu of fractional CMI Share
Units if no subsequent distribution dates are anticipated; and
7.1.1.3. A number of shares of Common
Stock of RCN equal to the number of whole RCN Share Units credited to the
Participant's Account, plus an amount of cash in lieu of fractional RCN Share
Units if no subsequent distribution dates are anticipated.
7.1.2. Change in Control.
-----------------
7.1.2.1. As soon as administratively
practicable following a Change in Control of the Company, the Company shall
commence to issue or pay to the Participant a number of Shares equal to the
number of whole Share Units credited to the Participant's Account, plus an
amount of cash in lieu of fractional Share Units, or, as determined by the
Administrator, cash having a value equal to the value of the Participant's
Account.
7.1.2.2. As soon as administratively
practicable following a Change in Control of CMI, the Company shall commence to
issue or pay to the Participant a number of shares of Common Stock of CMI equal
to the number of whole CMI Share Units credited to the Participant's Account,
plus an amount of cash in lieu of fractional CMI Share Units, or, as determined
by the Administrator, cash having a value equal to the value of the
Participant's Account.
7.1.2.3. As soon as administratively
practicable following a Change in Control of RCN, the Company shall commence to
issue or pay to the Participant a number of shares of Common Stock of RCN equal
to the number of whole RCN Share Units credited to the Participant's Account,
plus an amount of cash in lieu of
<PAGE>
fractional RCN Share Units, or, as determined by the Administrator, cash having
a value equal to the value of the Participant's Account.
7.2. Form of Payment. Cash shall be paid in a single
---------------
sum payment and shares shall be issued, as elected by the Participant in the
applicable Election Form, in a single payment or in substantially equal
quarterly installments over ten years. The Administrator may accelerate any such
installment for any reason, in its sole discretion.
7.3. Payment following Death of Participant.
--------------------------------------
Notwithstanding the election made by the Participant under Section 5.5, as soon
as administratively practicable following the death of a Participant, the
Company shall issue to the Participant's beneficiary or beneficiaries (as
designated in accordance with Section 5.9), a number of Shares equal to the
number of Share Units credited to the Participant's Deferral Account and cash in
lieu of fractional Share Units plus the amount of cash, if any, allocated to
such Account at the time of such distribution, plus the value, in cash or stock,
as determined by the Administrator, of CMI Share Units and RCN Share Units
credited to the Participant's Distribution Account.
7.4. Shares Subject to Distribution. The Shares
------------------------------
distributed under the Plan may be unissued shares or treasury shares, including
Shares held in the Fund and Shares bought on the open market. Shares distributed
under the Plan shall be validly issued, fully paid and non-assessable.
8. Nonassignment. The rights and privileges
-------------
conferred under this Plan and any Shares issued under Section 6.1 for so long as
such Shares remain subject to forfeiture pursuant to the terms of Section 6.2
shall not be transferred, assigned, pledged or hypothecated in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of such right or privilege or Shares (which
Shares are subject to forfeiture) contrary to the provisions hereof, including
the levy of any attachment or similar process thereon, shall be without effect.
9. Incapacity of Recipient. Any Shares or cash payable
-----------------------
under the Plan, including Shares distributable from escrow under Section 6.2, to
a person who is under a legal disability may be made to or for the benefit of
such person in such of the following ways as the Administrator shall determine:
<PAGE>
9.1. to such person;
9.2. to the legal representative of such person;
9.3. to a near relative of such person to be used for such
person's benefit; or
9.4. to pay the expenses of support, maintenance or
education of such person.
The Administrator shall not be required to see to the application by any
third party of payments made pursuant to this Section.
10. Administration. The Plan shall be administered by the
--------------
Company or by any person or entity to which the Board delegates administrative
responsibilities under the Plan. The Administrator shall be responsible for and
shall have sole discretion with respect to:
10.1. the maintenance of any records necessary in
connection with the operation of the Plan;
10.2. calculating amounts to be credited to Participants'
Deferral Accounts and Matching Accounts, and the amount of payments due to
Participants and beneficiaries from such Accounts;
10.3. interpreting the provisions of the Plan;
10.4. directing the Trustee to pay benefits out of the
Fund; and
10.5. otherwise administering the Plan in accordance with
its terms.
11. Claims Procedures. At any time that the Administrator
-----------------
makes a determination adverse to a Participant or beneficiary with respect to a
claim for benefits or participation under the Plan, the Administrator shall
notify the claimant in writing of such determination, setting forth:
11.1. the specific reason for such determination;
11.2. a reference to the specific provision or provisions
of the Plan on which such determination is based;
<PAGE>
11.3. a description of any additional material or
information necessary to perfect the claim, and an explanation of the reason
that such material is required; and
11.4. an explanation of the rights and procedures set
- -forth in this Section 10.
A person who receives notice of an adverse determination by the
Administrator with respect to a claim may request, within 60 days of receipt of
such notice, that the Administrator review the previous determination. This
request may be made on behalf of a claimant by a duly authorized representative.
The claimant or representative may review pertinent documents and submit issues
and comments with respect to the controversy to the Administrator. The
Administrator shall render a decision within 60 days of receipt of a request for
review, which decision shall be in writing and shall set forth the specific
reasons for the decision reached and the specific provisions of the Plan on
which the decision is based. A copy of the ruling shall be forwarded to the
claimant.
12. Employee Benefit Plans. The Plan shall not in any way
----------------------
effect a Participant's right to participate in any pension, profit-sharing,
incentive, thrift, group insurance, death benefit, stock option, termination pay
or similar plans of the Company or any Affiliated Company, which are now in
effect or may hereafter be adopted, to the extent that the Participant is
entitled to participate under the applicable terms and provisions of such plans.
Contributions and benefits under the Plan shall not be included in determining a
Participant's benefits under any retirement plan qualified under section 401(a)
of the Internal Revenue Code of 1986, as amended, in which such Participant may
participate, except as may otherwise be provided in such other plan.
13. Amendment and Termination.
-------------------------
13.1. The Plan shall remain in effect until terminated by
the Board. The Board shall have the power to amend or terminate the Plan at any
time, and to freeze or suspend contributions to the Plan at any time, provided
that the amendment or termination of the Plan shall not impair the rights of any
Participant with respect to any amount credited to an Account at the time of
amendment or termination without the Participant's consent. The Board may submit
certain amendments to the shareholders for their approval in order to comply
with Rule 16b-3, or for any other reason.
13.2. With the exception of the events described in
Sections 5.3.1 and 5.3.2, in the event that the Board determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split,
<PAGE>
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Board to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the Board
may, in such manner as it may deem equitable, make such adjustments and take
such actions in respect of Shares and Share Units hereunder as it deems
appropriate, desirable or necessary.
14. Miscellaneous.
-------------
14.1. The existence of the Plan and the execution of an
Election Form, and any actions undertaken thereunder, shall not confer upon tell
Participant any right to continued employment by the Company or any Affiliated
Company, CTE or CMI, as the case may be.
14.2. The Plan shall be administered under and in
accordance with the laws of Delaware.
14.3. The terms of the Plan and the Election Forms and the
decisions of the Administrator shall be binding upon the Company and all
Affiliated Companies, their successors and assigns, and each Participant and his
or her heirs and legal representatives.
14.4. Prior to any distribution of Shares to the
Participant hereunder, the Participant and the Company shall enter into a
mutually satisfactory arrangement to satisfy applicable federal, state, local or
other tax withholding requirements with respect to the distribution.
Any taxes imposed on a Participant shall be the sole responsibility of the
Participant. Without limiting the generality of the foregoing, if any
(contribution or payment under the Plan obligates the Company or an Affiliated
Company, CTE or CMI, as the case may be, to deduct or withhold an amount for
purposes of federal, state, local or other taxes, such obligation may be
satisfied by (1) deducting such taxes from any contributions or payments made
pursuant to the Plan or any cash compensation payable with respect to the
Participant or (2) the remittance by the Participant of an amount equal to the
amount required to be deducted or withheld prior to such contribution or
payment, as determined by the Company or the Affiliated Company, RCN or CMI, as
the case may be, in its sole discretion.
14.5. Effect of Denial of Tax Treatment. Pre-tax
---------------------------------
Contributions under Section 5 and issuances of Shares under Section 6 are
intended to be taxable to Participants no earlier than the time that Shares or
other amounts ire distributed by the Trustee or the escrow
<PAGE>
agent, as the case may be. If, in the sole determination of the Administrator,
taxation of any such amount to Participants is accelerated to any earlier time,
the Administrator shall cause that number of Shares or other amounts to be
distributed to Participants equal in value to the accelerated income.
14.6. Section 16. The Administrator may issue special
----------
rules relating to participation by Employees who are subject to Section 16 of
the Securities Exchange Act of 1934, as amended from time to time.
COMMONWEALTH TELEPHONE
ENTERPRISES INC.
By:______________________________________
Date:____________________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BE REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 15,120
<SECURITIES> 0
<RECEIVABLES> 44,635
<ALLOWANCES> 1,776
<INVENTORY> 11,036
<CURRENT-ASSETS> 84,857
<PP&E> 656,647
<DEPRECIATION> 271,503
<TOTAL-ASSETS> 487,719
<CURRENT-LIABILITIES> 83,644
<BONDS> 200,581
0
0
<COMMON> 26,061
<OTHER-SE> 115,531
<TOTAL-LIABILITY-AND-EQUITY> 487,719
<SALES> 0
<TOTAL-REVENUES> 191,927
<CGS> 0
<TOTAL-COSTS> 108,769
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,187
<INTEREST-EXPENSE> 10,300
<INCOME-PRETAX> 29,518
<INCOME-TAX> 13,928
<INCOME-CONTINUING> 16,880
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,880
<EPS-BASIC> 0.76
<EPS-DILUTED> 0.74
</TABLE>
