<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 30, 1997
------------------------------
Audio Communications Network, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Florida 0-7762 59-0690530
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1000 Legion Place, Suite 1515, Orlando, Florida 32801
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 649-8877
----------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial Statements of Business Acquired.
It is impracticable for the Registrant to file the financial
information of the business acquired hereunder at this time and such information
will be filed by amendment to this Form 8-K within sixty days from the date
hereof.
(b) Pro-forma financial information.
It is impracticable for the Registrant to file the pro-forma financial
information required hereunder at this time and such information will be filed
by amendment to this Form 8-K within sixty days from the date hereof.
(c) Exhibits.
2.1* Asset Purchase Agreement, dated as of November 19, 1996, by and
between the Registrant and Suncom Communications L.L.C.
99.1**Press release of the Registrant, dated May 30, 1997.
99.2**Note Assumption Agreement and Note, dated as of May 30, 1997, by
and among the Registrant, Suncom, Inc. and Midwest Mezzanine
Fund, L.P.
99.3**Credit Agreement, dated as of May 30, 1997, by and among the
Registrant, PNC Bank, National Association individually and as
Agent, SunTrust Bank, Central Florida, N.A. and Lehman
Commercial Paper Inc.
_______________
* Incorporated by reference to the Registrant's Current Report on Form
8-K dated November 19, 1996.
** Filed herewith.
-2-
<PAGE>
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.
Audio Communications Network, Inc.
Dated: July 2, 1997 By: /s/ David Unger
---------------------------
David Unger
Executive Vice President
-3-
<PAGE>
EXHIBIT INDEX
-------------
Number Exhibit
- ------ -------
99.1 Press Release of the Registrant, dated May 30, 1997
99.2 Note Assumption Agreement and Note, dated as of May
30, 1997, by and among the Registrant, SunCom, Inc.
and Midwest Mezzanine Fund, L.P.
99.3 Credit Agreement, dated as of May 30, 1997, by and
among the Registrant, PNC Bank, National Association
individually and as Agent, SunTrust Bank, Central
Florida, N.A. and Lehman Commercial Paper Inc.
<PAGE>
EXHIBIT 99.1
PRESS RELEASE
FOR IMMEDIATE RELEASE
MAY 30, 1997
AUDIO COMMUNICATIONS NETWORK, INC. (NASD OTC: "AUCM") today announced it has
completed the business combination with Suncom Communications, L.L.C. Under the
terms of the agreement, Audio acquired the assets and business of Suncom, in
exchange for which Audio issued 2.1 million shares of its common stock to
Suncom, which is approximately 48% of Audio's outstanding common stock. The
transaction was approved by Audio's board of directors, including its
independent directors, and the board received the opinion of Key Trust Company
of Ohio, N.A. that the agreement was fair from a financial point of view to the
shareholders of Audio.
Additionally, Suncom consummated the agreement with A.J. Schell, Audio's
Chairman and Chief Executive Officer, to acquire Mr. Schell's position in Audio.
Suncom now owns approximately 2.7 million shares or approximately 62%, of the
outstanding common stock of Audio.
Mr. Schell remains as Chairman, Mitchell Kleinhandler becomes president, and
David Unger assumes the position Executive Vice President of Audio. In addition,
Suncom will designate four of the eight members of Audio's board of directors.
Audio shareholders are expected to vote on a proposal to be submitted at the
1997 annual meeting to increase the size of the Board to nine, with the ninth
member being nominated by Suncom.
Audio owns Muzak(R) franchises in Baltimore, Maryland, Fresno, California,
Jacksonville, Florida and Kansas City and St. Louis, Missouri. Suncom is the
Muzak(R) affiliate serving large portions of the Carolinas, including Charlotte,
Raleigh-Durham, Winston Salem and Greensboro, as well as large portions of
Arizona, including Phoenix.
"Suncom provides an exciting opportunity with their market penetration in some
of the most dramatically explosive markets in the country today in terms of
growth and economy," said Al Schell, Chairman/CEO of Audio. "It is gratifying to
see the positive results of our strategic growth plan and I am delighted Suncom
has become a part of our future."
The Muzak(R) product is distributed globally to over 200,000 subscribers via
direct broadcast satellite (DBS), SCA radio transmission and on Perma Tape
Services . The DBS satellite system now delivers 16 different channels of music
from light rock and classical jazz and oldies. The system also provides a
variety of marketing, computer, data and video systems which are currently being
used by a number of Fortune 500 companies. Additionally, Muzak(R)'s Dish(R)
Network for Business from EchoStar provides cable television programming and 60
channels of new, exciting digital recorded music formats to Muzak(R) customers.
FOR ADDITIONAL INFORMATION, CONTACT:
Al Schell, (407) 649-8877
Chairman, Audio Communications Network, Inc.
<PAGE>
EXHIBIT 99.2
NOTE ASSUMPTION AGREEMENT
THIS NOTE ASSUMPTION AGREEMENT (this "Agreement") is made as of May 30,
1997, by and among AUDIO COMMUNICATIONS NETWORK, INC., a Florida corporation
(the "Company"), SUNCOM, INC., a Delaware corporation ("Suncom") and MIDWEST
MEZZANINE FUND, L.P., a Delaware limited partnership ("Midwest").
RECITALS
A. The Company agreed to purchase substantially all the assets of Suncom
Communications, L.L.C., a Delaware limited liability company (the "Seller") and
to assume substantially all of the Seller's liabilities (the "Acquisition"),
pursuant to the terms and conditions of an Asset Purchase Agreement dated as of
November 19, 1996 (the "Asset Purchase Agreement").
B. The Company has sold and assigned its assets, rights and certain
obligations under the Asset Purchase Agreement to Suncom.
C. The Seller is indebted to Midwest pursuant to the terms of a
subordinated note in the original principal amount of $4,750,000 dated as of
September 14, 1995 (the "Subordinated Note"), which was issued pursuant to the
terms of a Note and Warrant Purchase Agreement dated as of September 14, 1995
(the "Note and Warrant Purchase Agreement").
D. The consent of Midwest to the Acquisition is required by the terms of
the Asset Purchase Agreement and the Note and Warrant Purchase Agreement.
E. As a condition to giving its consent to the Acquisition pursuant to
the terms of the Asset Purchase Agreement, Midwest has required that the Company
and Suncom enter into this Agreement and assume the obligations of the Seller
under the Subordinated Note, all obligations under the Note and Warrant Purchase
Agreement other than the obligations evidenced by the Subordinated Note
remaining with the Seller.
AGREEMENTS
In consideration of the recitals and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
Definitions
-----------
1 In addition to the capitalized terms defined elsewhere in this
Agreement, the following capitalized terms shall have the following respective
meanings when used in this Agreement:
"ACN-Maryland" means Audio Communications Network, Inc., a Maryland
corporation.
"ACN-Missouri" means Audio Communications Network, Inc., a Missouri
corporation.
"Acquisition" has the meaning ascribed to it in Recital A.
"Acquiring Group" means the Company, AMN, ACN-Missouri, ACN-Maryland and
Florida.
"Affiliate" as applied to any specified Person means any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such specified Person. The term "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of 10% or more of the voting power (or in the case of a Person which
is not a corporation, 10% or more of the ownership interest, beneficial or
otherwise) of such Person or the power otherwise to direct or cause the
direction of the management and policies of that Person, whether through voting,
by contract or otherwise. For purposes of this paragraph, "voting power" of any
Person means the total number of votes which may be cast by the holders of the
total number of outstanding shares of stock of any class or classes of such
Person in any election of directors of such Person. For purposes of this
Agreement, all members, management employees, managers, officers and partners of
a Person (and all spouses and lineal descendants of any such member, management
employee, manager, officer or partner) shall be deemed to be Affiliates of such
a Person.
"Agent" means PNC Bank, National Association, a national banking
association in its capacity as agent for the Senior Lenders.
"Allonge" means the Allonge among the Company, Suncom, the Seller and
Midwest evidencing the assumption by the Company and Suncom of the obligations
under the Subordinated Note.
"AMN" means American Music Network, Inc., a California corporation.
"Asset Purchase Agreement" has the meaning ascribed to it in Recital A.
"Assets" means all the tangible and intangible assets of the Company and
all of its Subsidiaries after giving effect to the Acquisition.
"Balance Sheet" has the meaning ascribed to in Section 5.7.
"Borrowers" means the Company and Suncom. "Borrower" means any of the
Borrowers.
2
<PAGE>
"Business" means the business of operating a Muzak(R) franchise in the
Geographic Areas and the business communications and data services, messaging on
"hold," in-store advertising, sound masking, video conferencing and drive-thru
sales, installation and service business conducted by the Seller at the time of
the Acquisition.
"Cash Sale Event" means a cash transaction involving the sale of over 50%
of the profits interests represented by Membership Interests.
"Change of Control Event" means (a) a sale, issuance, transfer,
disposition, transaction, action or event (or series of sales, issuances,
transfers, dispositions, transactions, actions or events) after which the Seller
owns capital stock of the Company possessing (under normal circumstances) less
than 51% of the total number of votes which may be cast by the holders of the
total number of outstanding shares of stock of any class or classes of the
Company in any election of directors of the Company, (b) an action, event or
circumstance which results in the office of President of the Company being held
by a Person other than Mitchell Kleinhandler, (c) an action of the Board of
Directors of the Company after which the Compensation Committee of the Company
either does not exist or does not include at least one representative of each of
Midwest and CMS or the transferee of their respective interests in the Seller
or, if SunCom Management, L.L.C. purchases all of CMS's interests in the Seller,
one representative of Midwest and CMNY Capital II, L.P. or the transferee of
their respective interests in the Seller (other than an action which Midwest's
representative on such Board of Directors votes in favor of) and (d) a sale,
issuance, transfer, disposition, transaction, action or event (or series of
sales, issuances, transfers, dispositions, transactions, actions or events)
after which (i) SunCom Management, L.L.C., owns less than 10% of the outstanding
Common Units of the Seller or (ii) Mitchell Kleinhandler has less than $475,000
invested in the Seller (directly or indirectly through SunCom Management,
L.L.C., Global Communications L.L.C. or otherwise).
"Charter" means the articles of incorporation or certificate of
incorporation, as the case may be.
"Closing" means the closing under the Asset Purchase Agreement, Stock
Purchase Agreement and Senior Loan Agreement.
"Closing Date" shall have the meaning given it in Section 3.1.
"CMS" means CMS Interactive Communications Partners, L.P., a Delaware
limited partnership.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations promulgated thereunder.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $0.25 par value per
share.
"Common Units" means the Common Units of the Seller.
"Company" means Audio Communications Network, Inc., a Florida corporation.
3
<PAGE>
"Companies" means the Company, Suncom and each Subsidiary of the Company,
including ACN-Maryland, ACN-Missouri, AMN, and Florida as of the Closing.
"Consent" means the written consent of Midwest to the Acquisition addressed
to the Borrowers and the Seller.
"Coverage Ratio" means, for any period, (a) the EBITDA for such period,
divided by (b) the sum of (i) all scheduled principal payments and cash interest
accrued by the Company and its Subsidiaries during such period with respect to
Indebtedness for money borrowed, plus (ii) all foreign, federal, state and local
income tax liabilities of the Company paid for such period, plus (iii) all
dividends or other distributions paid by the Company during such period to its
shareholders, plus (iv) all capital expenditures for such period, plus (v)
payments under capitalized leases for such period, plus (vi) the amount of all
Schell Payments for such period.
"Default" means any event or condition, the occurrence of which would, with
the lapse of time or the giving of notice, or both, constitute an Event of
Default under Section 10.1.
"EBITDA" means, for any period, an amount determined on a consolidated
basis in accordance with GAAP equal to (a) the Company's consolidated net
revenue for such period, less (b) the cost of goods sold producing such revenue
for such period, less (c) the sales, general and administrative expenses
incurred in the ordinary course of the Companies' business for such period which
excludes explicitly (i) the amount of the provision for foreign, federal, state,
and local income taxes for such period, (ii) the amount of amortization of
closing or other acquisition or financing costs, goodwill and other intangibles
for such period, if any, (iii) the amount of interest expense (including non-
cash interest expense and (without duplication) the original issue discount
attributable to the Subordinated Note) and interest income during such period,
(iv) depreciation expense, (v) the amount of all Schell Payments for such
period, and (vii) the amount of nonrecurring extraordinary income and expense
items for such period. For purposes of calculating EBITDA for the Coverage
Ratio and the Leverage Ratio, EBITDA for periods ending prior to June 30, 1998
shall be calculated as follows:
For the period ended September 30, 1997: EBITDA for the quarter ended
September 30, 1997 times 4;
For the period ended December 31, 1997: the sum of EBITDA for last two
quarters ended December 31, 1997 times 2;
For the period ended March 31, 1998: the sum of EBITDA for last three
quarters ended March 31, 1998 times 1.33;
"Employees" means all managers, officers and employees of the Companies.
"Environmental Laws" means all laws, rules and regulations relating to
environmental matters, including, without limitation, those relating to fines,
orders, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the release of Hazardous
Materials and to the generation, use, storage, transportation, handling or
disposal of Hazardous Materials, in any manner
4
<PAGE>
applicable to the Company or its Subsidiaries or any of their respective
properties.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules and regulations promulgated thereunder.
"ERISA Affiliate" means the Company and any trade or business (whether or
not incorporated) that is a member of a group of which the Company is a member
and which is treated as a single employer under Section 414(b) or (c) of the
Code.
"Event of Default" has the meaning specified in Section 10.1.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon)
owned, leased, operated or used by any of the Companies. "Facility" means any
one of the Facilities.
"FCC" meaning the U.S. Federal Communications Commission.
"Fiscal Year" means any 12-month period ending December 31.
"Florida" means Florida Sound Engineering Company, a Florida corporation.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Guarantee" of any Person shall mean any obligation of such Person
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any agreement to
indemnify or hold harmless any other Person, any performance bond or other
suretyship arrangement and any other form of assurance against loss, except
endorsement of negotiable or other instruments for deposit or collection in the
ordinary course of business.
"Geographic Areas" has the meaning specified in Section 5.19.
"Guarantors" means AMN, ACN-Missouri, ACN-Maryland and Florida.
"Guarantor" means any of the Guarantors.
"Guaranty" means the Guaranty to be delivered by the Guarantors to Midwest
in a form satisfactory to Midwest.
"Hazardous Materials" means (a) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous waste," "restricted
hazardous waste," "toxic pollutants," "contaminants," "pollutants," "toxic
substances" or words of similar import under any Environmental Laws, (b) any
oil, petroleum or petroleum derived substances, (c) asbestos in any form which
is or could become friable, radon gas, urea formaldehyde foam insulation, or
transformers or other electrical equipment which contain any oil or dielectric
fluid containing polychlorinated biphenyls, and (d) any other chemicals,
materials or substances, exposure to which is prohibited, limited or regulated
by any governmental authority.
5
<PAGE>
"Holder" means any Person(s) holding the Subordinated Note.
"Indebtedness" of any Person shall mean any and all indebtedness,
obligations or liabilities (whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, or joint or several)
of such Person for or in respect of: (i) borrowed money, (ii) amounts raised
under or liabilities in respect of any note purchase or acceptance credit
facility, (iii) reimbursement obligations (contingent or otherwise) under any
letter of credit, currency swap agreement, interest rate swap, cap, collar or
floor agreement or other interest rate management device, (iv) any other
transaction (including forward sale or purchase agreements, capitalized leases
and conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements (but not including trade payables and accrued expenses incurred in
the ordinary course of business which are not represented by a promissory note
or other evidence of indebtedness and which are either (x) not more than ninety
(90) days past due and do not exceed $250,000 outstanding at any one time (net
of Indebtedness owing to the Companies by such Person) or otherwise (y) not more
than sixty (60) days past due), or (v) any Guarantee of Indebtedness for
borrowed money.
"Investment" as applied to any Person means (a) any direct or indirect
purchase or other acquisition or holding by such Person of any notes,
obligations, instruments, stock, securities or ownership interest of any other
Person and (b) any capital contribution by such Person to any other Person.
"IRR" means the yield (expressed on an annual basis) on Midwest's
$4,750,000 cash investment in the Seller through the Subordinated Note and
Warrant calculated on the basis of the cash received by Midwest from the Seller
for principal and interest with respect to the Subordinated Note and the Net
Sale Proceeds received by Midwest or that Midwest would have received if it had
elected (and had the unrestricted right) to sell its Warrants (or the Preferred
Units for which the Warrants are exercisable) in a Cash Sale Event. The IRR
shall be calculated from September 14, 1995 on a quarterly basis.
"Leverage Ratio" means, as at any time, an amount equal to (a) the
Company's Indebtedness for borrowed money, including without limitation the
Senior Debt and the obligations evidenced by the Subordinated Note, plus the
face amount of all letters of credit, contingent liabilities and each Guarantee
at such time on a consolidated basis, divided by (b) EBITDA for the four
consecutive quarterly periods ending as of such time.
"Lien" means any mortgage, deed of trust, lien, security interest, pledge,
lease, conditional sale contract, claim, charge, easement, right of way,
assessment, restriction and other encumbrance of every kind.
"Major Customers" means any customers of any of the Companies that during
the previous Fiscal Year represented 5% or more of the Company's sales (on a
consolidated basis).
"Membership Interests" means the issued and outstanding equity interests of
the members of the Seller, including the Preferred Units and the Common Units of
the Seller.
"Net Sale Proceeds" means (i) the proceeds that Midwest received for the
Warrants or the
6
<PAGE>
Preferred Units in a Cash Sale Event, or if Midwest had the unrestricted right
to participate in a Cash Sale Event but elected not to participate, the proceeds
that Midwest would have received for the Warrants or the Preferred Units if
Midwest had elected to participate in the Cash Sale Event, less (ii) the costs
----
and expenses in connection with the sale of the Warrants or the Preferred Units
(including, without limitation, all commissions, brokerage fees and attorneys
fees) that were incurred by Midwest, or, if Midwest had the unrestricted right
to participate in a Cash Sale Event but elected not to participate, a reasonable
estimate of all such costs and expenses that would have been incurred by Midwest
in connection with the sale of the Warrants or the Preferred Units if Midwest
had elected to participate in such Cash Sale Event, less (iii) the exercise
----
price for the Warrants.
"Operative Documents" means this Agreement, the Subordinated Note, the
Guaranty, and the Subordination Agreement.
"Option" means the option to purchase 1,000,000 Shares issued to the Seller
pursuant to the Option Agreement between the Company and the Seller.
"Pension Plan" means any employee pension benefit plan (within the meaning
of Section 3(2) of ERISA) that is (i) subject to Title IV of ERISA or the
minimum funding requirements of Section 412 of the Code and (ii) sponsored or
participated in by the Company or any ERISA Affiliate or under or to which the
Company or, any ERISA Affiliate has any present or future liability or
obligations.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Plan" means any employee benefit plan as defined in Section 3(3) of ERISA.
"Preferred Units" means the Preferred Units of the Seller for which the
Warrants are exercisable.
"Pro Forma Balance Sheet" means a consolidated balance sheet of the
Company, consistent with the Balance Sheet, as of the Closing Date and after
giving effect to the Acquisition and the borrowing under the Senior Loan
Agreement and this Agreement in the form attached as Schedule 5.7.
"Projected Financial Statements" means the annual and monthly projected
consolidated income statements and cash flow statements through December 31,
2004 in the form attached hereto as Schedule 5.7.
"Put Option" has the meaning specified in the Warrant Agreement.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment.
"Revolving Loan" has the meaning ascribed to it in Section 4.4.
7
<PAGE>
"Sale Event" means (a) the closing of (i) a sale of 50% or more of the
assets utilized by any of the Companies in the Business in bulk in one
transaction or in a series of transactions or (ii) the sale of the stock of any
of the Companies, in each case if the EBITDA of the Company the assets or stock
of which is being sold (on a stand-alone basis for the most recently completed
fiscal year) represented 15% or more of the EBITDA of the Company (on a
consolidated basis) and (b) the closing of a sale, transfer or other disposition
or transaction, including the reorganization, consolidation or merger of the
Company with any other Person, after which the Seller owns less than 51% of the
outstanding capital stock of the Company.
"Schell Payments" means the payments to A.J. Schell pursuant to Section 7
of the Employment Agreement dated as of the date hereof between the Company and
A.J. Schell.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means Suncom Communications L.L.C., a Delaware limited liability
company.
"Senior Debt" means Indebtedness of the Company under the Senior Loan
Agreement.
"Senior Event of Default" means an Event of Default (as such term is
defined in the Senior Loan Agreement) or any default under (i) the Senior Notes,
(ii) any loan or financing agreement that the Company enters into from time to
time to refinance the Company's obligations presently evidenced by the Senior
Notes, or (iii) any note or instrument issued pursuant thereto.
"Senior Lenders" means the banks that are party to the Senior Loan
Agreement.
"Senior Loan Agreement" means that certain Credit Agreement concerning a
$32,000,000 Revolving Credit Facility among the Agent, the Senior Lenders and
the Company in effect on the Closing Date as amended pursuant to the terms of
this Agreement and the Subordination Agreement or any other loan or financing
agreement, entered into in accordance with the terms of this Agreement to
refinance the Company's obligations evidenced by the Senior Notes.
"Senior Loan Documents" means the Senior Loan Agreement, the Senior Notes
and each agreement and instrument executed in connection with the closing under
the Senior Loan Agreement as of the date hereof.
"Senior Notes" means the revolving notes issued by the Company in favor of
the Senior Lenders pursuant to the Senior Loan Agreement.
"Shares" has the meaning ascribed to it in Section 5.4.
"Stock Purchase" means the stock purchase contemplated by the Stock
Purchase Agreement.
"Stock Purchase Agreement" means that certain Stock Purchase Agreement
between the Seller and A.J. Schell, dated as of November 19, 1996.
8
<PAGE>
"Subordinated Note" means the Subordinated Note of the Seller dated
September 14, 1995 in the original principal amount of $4,750,000 and all notes
issued in exchange therefore, the obligations under which instrument are being
assumed by the Company and Suncom pursuant to the terms of this Agreement.
"Subordination Agreement" means the Debt Subordination Agreement among
Midwest, the Companies and the Agent dated the Closing Date and satisfactory in
form and substance to Midwest.
"Subsidiary" means any Person in which securities or other ownership
interests representing more than 50% of the ordinary voting power or capital or
profits interest are, at the time as of which any determination is being made,
owned or controlled by any Borrower or one or more Subsidiaries of any Borrower
or by any Borrower and one or more Subsidiaries of any Borrower.
"Warrant Agreement" means that certain Warrant Agreement dated September
14, 1995 between Midwest and the Seller.
"Warrants" means the Warrants issued pursuant to the Warrant Agreement
evidencing a right to 9 1/2% of all distributions of the Seller.
1 Accounting Terms and Determinations. All accounting determinations
-----------------------------------
hereunder shall be made in accordance with GAAP. No changes in accounting
principles required by GAAP shall affect the financial covenants or terms
contained in this Agreement; provided that the Company shall prepare footnotes
to each certificate and other financial reports required to be delivered
hereunder that show the differences between the financial statements delivered
which reflect such changes and the basis for calculating financial covenant
compliance without reflecting such changes.
ARTICLE II
Authorization and Assumption of the Note
----------------------------------------
.1 Authorization. The Company and Suncom will, prior to the Closing,
-------------
authorize the entering into of this Agreement.
.2 Assumption of the Subordinated Note. Effective as of the Closing,
-----------------------------------
each of the Company and Suncom, jointly and severally, hereby assumes the
Subordinated Note, and agree to perform and discharge the obligations of the
Seller under the Subordinated Note and agree to be bound by and comply with all
of the terms and conditions of the Subordinated Note as if each of them was an
original signatory thereto.
ARTICLE III
Closing; Delivery
-----------------
1 Closing. The Closing will be held at the offices of Venable Baetjer
-------
and Howard, LLP, 1800 Mercantile Bank & Trust Building, Two Hopkins Plaza,
Baltimore, Maryland, on May 30, 1997
9
<PAGE>
(the "Closing Date"), at 10:00 a.m., E.D.T. time, or at such other time, date
and place as may be agreed to in writing by the Company and the Purchaser.
2 Delivery. At the Closing, (i) the Company and Suncom will execute and
--------
deliver to Midwest the Allonge and (ii) after all the conditions set forth in
Article IV have been satisfied, Midwest will execute and deliver the Allonge and
the Consent.
ARTICLE IV
Conditions to Assignment and Assumption of Subordinated Note
------------------------------------------------------------
The obligation of Midwest to consent to the Acquisition is subject to the
fulfillment to its satisfaction at or prior to the Closing of each of the
following conditions:
.1 Representations and Warranties. The representations and warranties
------------------------------
contained in Article V shall be true and correct when made, and shall be true
and correct as of the Closing as if made at the Closing.
.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed or complied with by the Company and Suncom, as
the case may be, at or prior to the Closing shall have been performed or
complied with.
.3 Acquisition and Stock Purchase. As of the Closing, the Asset
------------------------------
Purchase Agreement and the Stock Purchase Agreement will be in full force and
effect, will not have been amended, modified or rescinded and the conditions set
forth in the Asset Purchase Agreement and the Stock Purchase Agreement will have
been satisfied in full (without any waiver of any material condition by the
Seller, the Company, Suncom or A.J. Schell, as the case may be, unless approved
by Midwest in writing). Concurrently with the assignment to, and assumption by,
the Company and Suncom of the Subordinated Note, the Acquisition and the Stock
Purchase shall have been consummated in accordance with the terms and provisions
of the Asset Purchase Agreement and the Stock Purchase Agreement, as the case
may be. At or prior to the Closing, the Company and Suncom shall have delivered
to Midwest true and complete copies of the Asset Purchase Agreement and the
Stock Purchase Agreement and all documents and instruments delivered pursuant
thereto on or before the Closing Date.
.4 Senior Financing. The Senior Lenders, the Agent and the Companies
----------------
shall have duly executed and delivered the Senior Loan Agreement (the terms and
provisions of which will be satisfactory to Midwest) and pursuant to the Senior
Loan Agreement the Senior Lenders shall have made available for draw by the
Company amounts necessary under the $32,000,000 revolving loan (the "Revolving
Loan") sufficient to consummate the Acquisition and refinance the bank
obligations of the Borrowers and their Subsidiaries. At the Closing, all
conditions precedent to the funding of the Revolving Loan contemplated by the
Senior Loan Agreement shall have been satisfied. No Senior Event of Default or
event which with the lapse of time or notice or both would constitute a Senior
Event of Default shall have occurred, and no term or condition of the Senior
Loan Agreement or the Revolving Loan shall have been modified, amended or
waived. At or prior to the Closing, the Company and Suncom shall have delivered
to Midwest true and complete copies of the Senior Loan Agreement, the Senior
Loan Documents and all
10
<PAGE>
documents and instruments delivered pursuant to the Revolving Loan on or before
the Closing Date.
.5 Compliance Certificates. At the Closing, each of the Company and
-----------------------
Suncom shall have delivered to Midwest a certificate executed by its respective
President, dated the Closing Date, certifying (i) to the fulfillment of the
conditions specified in Sections 4.1 through 4.4 of this Agreement, (ii) that
all representations and warranties of the Company and Suncom in the Senior Loan
Agreement are true and correct, and (iii) such other matters as Midwest shall
have reasonably requested.
.6 Secretary's Certificates--Company. At the Closing, the Company
---------------------------------
shall have delivered to Midwest copies of each of the following, in each case
certified to be in full force and effect on the Closing Date by the Secretary of
the Company:
(i) the Charter of the Company as of the Closing certified by the
Secretary of State of the State of Florida as of a date not earlier than
April 3, 1997;
(ii) the by-laws of the Company as of the Closing, the form and
substance of which are reasonably satisfactory to Midwest;
(iii) resolutions of the Board of Directors and shareholders, if
necessary, of the Company, the form and substance of which are reasonably
satisfactory to Midwest; authorizing the execution, delivery and
performance of the Operative Documents to which the Company is a party and
the transactions contemplated thereby; and
(iv) the signature and incumbency of the officers of the Company
executing the Operative Documents to which the Company is a party.
.1 Secretary's Certificates--Suncom. At the Closing, Suncom shall
--------------------------------
have delivered to Midwest copies of each of the following, in each case
certified to be in full force and effect on the Closing Date by the Secretary of
Suncom:
(i) the Charter of Suncom as of the Closing certified by the
Secretary of State of the State of Delaware as of a date not more than
fifteen days prior to the Closing Date;
(ii) the by-laws of Suncom as of the Closing, the form and substance
of which are reasonably satisfactory to Midwest;
(iii) resolutions of the Board of Directors and stockholders, if
necessary, of Suncom, the form and substance of which are reasonably
satisfactory to Midwest, authorizing the execution, delivery and
performance of this Agreement and the other Operative Documents to which
Suncom is a party and the transactions contemplated hereby and thereby; and
(iv) the signature and incumbency of the officers of Suncom executing
this Agreement and the other Operative Documents to which Suncom is a
party.
.1 Secretary's Certificates -- AMN. At the Closing, AMN shall have
-------------------------------
delivered to Midwest
11
<PAGE>
copies of each of the following, in each case certified to be in full force and
effect on the Closing Date by the Secretary of AMN:
(i) the Charter of AMN as of the Closing certified by the Secretary
of State of the State of California;
(ii) the by-laws of AMN as of the Closing, the form and substance of
which are reasonably satisfactory to Midwest;
(iii) resolutions of the Board of Directors and shareholders, if
necessary, of AMN, the form and substance of which are reasonably
satisfactory to Midwest, authorizing the execution, delivery and
performance of the Operative Documents to which AMN is a party and the
transactions contemplated thereby; and
(iv) the signature and incumbency of the officers of AMN executing
the Operative Documents to which AMN is a party.
.1 Secretary's Certificates--ACN-Missouri. At the Closing, ACN-
--------------------------------------
Missouri shall have delivered to Midwest copies of each of the following, in
each case certified to be in full force and effect on the Closing Date by the
Secretary of ACN-Missouri:
(i) the Charter of ACN-Missouri as of the Closing certified by the
Secretary of State of the State of Missouri;
(ii) the by-laws of ACN-Missouri as of the Closing, the form and
substance of which are reasonably satisfactory to Midwest;
(iii) resolutions of the Board of Directors and shareholders, if
necessary, of ACN-Missouri, the form and substance of which are reasonably
satisfactory to Midwest, authorizing the execution, delivery and
performance of the Operative Documents to which ACN-Missouri is a party and
the transactions contemplated thereby; and
(iv) the signature and incumbency of the officers of ACN-Missouri
executing the Operative Documents to which ACN-Missouri is a party.
.1 Secretary's Certificates--ACN-Maryland. At the Closing, ACN-
--------------------------------------
Maryland shall have delivered to Midwest copies of each of the following, in
each case certified to be in full force and effect on the Closing Date by the
Secretary of ACN-Maryland:
(i) the Charter of ACN-Maryland as of the Closing certified by the
Secretary of State of the State of Maryland;
(ii) the by-laws of ACN-Maryland as of the Closing, the form and
substance of which are reasonably satisfactory to Midwest;
12
<PAGE>
(iii) resolutions of the Board of Directors and shareholders, if
necessary, of ACN-Maryland, the form and substance of which are reasonably
satisfactory to Midwest, authorizing the execution, delivery and
performance of the Operative Documents to which ACN-Maryland is a party and
the transactions contemplated thereby; and
(iv) the signature and incumbency of the officers of ACN-Maryland
executing the Operative Documents to which ACN-Maryland is a party.
.1 Secretary's Certificates -- Florida. At the Closing, Florida
-----------------------------------
shall have delivered to Midwest copies of each of the following, in each case
certified to be in full force and effect on the Closing Date by the Secretary of
Florida.
(i) the Charter of Florida as of the Closing certified by the
Secretary of State of the State of Florida;
(ii) the by-laws of Florida as of the Closing, the form and substance
of which are reasonably satisfactory to Midwest;
(iii) resolutions of the Board of Directors and shareholders, if
necessary, of Florida, the form and substance of which are reasonably
satisfactory to Midwest, authorizing the execution, delivery and
performance of the Operative Documents to which Florida is a party and the
transactions contemplated thereby; and
(iv) the signature and incumbency of the officers of Florida
executing the Operative Documents to which Florida is a party.
.1 Guaranty. At or prior to the Closing, each of the Guarantors
--------
shall have executed the Guaranty in favor of, and delivered such Guaranty to,
Midwest.
.2 Good Standing Certificates. At the Closing, the Company shall
--------------------------
have delivered a certificate of good standing or authorization to do business as
a foreign corporation, as the case may be, relating to each of the Companies
from the Secretary of State of each of the jurisdictions listed opposite each of
such Companies' names on Schedule 5.1, in each case dated after April 1, 1997.
.3 Legal Opinions. At the Closing, the Company and Suncom shall have
--------------
delivered to Midwest the opinion of each of Baer, Marks & Upham, and Holland &
Knight, dated the Closing Date, addressed to Midwest and in a form acceptable to
Midwest.
.4 Proceedings and Documents. As of the Closing, all corporate and
-------------------------
other proceedings in connection with the transactions contemplated hereby, by
the Asset Purchase Agreement, by the Operative Documents and by the Senior Loan
Agreement, and all documents and instruments incident to such transactions,
shall be reasonably satisfactory in form and substance to Midwest, and Midwest
shall have received at or prior to the Closing copies of all such legal
documents or proceedings taken in connection with the consummation of the
transactions as it shall have reasonably requested.
13
<PAGE>
.5 Qualifications. As of the Closing, all authorizations, approvals
--------------
or permits of, or filings with any governmental authority that are required by
law in connection with the lawful assignment to, and assumption by, the Company
and Suncom of the Subordinated Note shall have been duly obtained by the Company
and Suncom, and shall be effective on and as of the Closing.
.6 Consents. At or prior to the Closing, the Company, Suncom and
--------
each of the Guarantors shall have received in writing consents required of third
parties for the consummation of the transactions contemplated hereby, by the
other Operative Documents, by the Senior Loan Agreement and all material
consents required by the Asset Purchase Agreement pursuant to any law, contract,
agreement or instrument by which any of the Company, Suncom or any of the
Guarantors is bound or to which it is subject, including without limitation, the
Senior Loan Documents.
.7 Subordination Agreement. As of the Closing, Midwest, the Company,
-----------------------
Suncom and the Agent, both in its capacity as a Senior Lender and as agent for,
and on behalf of, the Senior Lenders, shall have entered into the Subordination
Agreement.
.8 Fees and Expenses. At the Closing, the Company and Suncom shall
-----------------
have paid or reimbursed Midwest for costs and expenses that the Company and
Suncom is obligated to pay or reimburse pursuant to Section 8.8 of this
Agreement.
ARTICLE V
Representations and Warranties of the Company
---------------------------------------------
Each of the Company and Suncom, jointly and severally, hereby represents
and warrants to Midwest as set forth below, and acknowledges that Midwest is
entering into this Agreement and consenting to the Acquisition in reliance on
the truth and accuracy of such representations and warranties. For purposes of
this Agreement, except as otherwise specifically provided in this Agreement, all
representations and warranties in this Article V shall be deemed to be made
immediately after the consummation of Acquisition.
.1 Organization and Standing. Each of the Companies is a corporation
-------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction set forth opposite its name on Schedule 5.1 under the column headed
"Jurisdiction". Each of the Companies is duly licensed or qualified to do
business and is in good standing in each jurisdiction listed opposite its name
on Schedule 5.1 under the column headed "Foreign Qualification", which are all
the jurisdictions where the property owned or leased by it or the nature of the
business transacted by it makes such licensing or qualification necessary.
Suncom was organized on April 17, 1997 and, from the date of formation through
the time immediately prior to the Closing, had not engaged in any business other
than in connection with the transactions contemplated hereby.
.2 Legal Power. Each of the Companies has the requisite legal power
-----------
and authority to own all the properties owned by it and to conduct the Business
as being conducted by the Seller and the Acquiring Group prior to the Closing
and as proposed to be conducted by the Companies after the
14
<PAGE>
Closing. Each of the Companies has all requisite legal power and authority to
enter into this Agreement and the other Operative Documents, and to carry out
and perform its obligations under the terms of this Agreement, the Subordinated
Note and the other Operative Documents to which each of such Companies is a
party. Each of the Borrowers has all requisite legal power and authority to
assume and perform the obligations under the Subordinated Note.
.3 Subsidiaries. ACN-Missouri, ACN-Maryland, AMN, Florida and Suncom
------------
constitute all of the Company's Subsidiaries. The Company has good title to
100% of the outstanding capital stock of such Subsidiaries (the "Subsidiary
Shares"), free and clear in each case of any Lien other than the Lien in favor
of the Agent. All Subsidiary Shares have been validly issued, and are fully
paid and nonassessable.
.4 Capital. The authorized capital stock of the Company consists of
-------
8,000,000 shares of Common Stock, of which 4,450,000 shares of Common Stock (the
"Shares") are issued and outstanding. The Seller owns 2,697,986 Shares. All of
the Shares have been validly issued and are fully paid and nonassessable. Except
as set forth on Schedule 5.4 and except for the Option, there are no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon the Company for the purchase or acquisition of any
of the equity interests in the Company or otherwise providing for the "put" or
"call" of any of the equity interests of the Company. All outstanding Shares
have been issued in accordance with all federal and state securities laws.
.5 Authorization and Binding Effect. All corporate action on the part
--------------------------------
of each Borrower and its directors and shareholders necessary for the
authorization, execution, delivery and performance by such Borrower of this
Agreement and other Operative Documents to which a Borrower is a party and the
consummation of the transactions contemplated hereby and thereby has been taken.
All corporate action on the part of each Guarantor and its directors and
shareholders necessary for the authorization, execution, delivery and
performance by such Guarantor of the Guaranty has been taken. This Agreement is
and, upon their execution and delivery each of the other Operative Documents to
which a Borrower is a party, will be, a legal, valid and binding obligation of
such Borrower, enforceable against each Borrower in accordance with their
respective terms. Upon its execution and delivery by each Guarantor, the
Guaranty will be a legal, valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms.
.6 No Violation. Neither the execution and delivery of this Agreement
------------
or any of the other Operative Documents, the consummation of the transactions
provided for herein and therein or contemplated hereby and thereby, including
the assumption of the Subordinated Note, nor the fulfillment by any of the
Companies of the terms hereof or thereof, will (a) conflict with or result in a
breach of any provision of the Charter or by-laws of any of the Companies, (b)
result in a default, give rise to any right of termination, cancellation,
acceleration or imposition of any Lien upon any assets of any of the Companies
other than in favor of the Senior Lenders, or require any consent or approval
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, loan, distribution agreement, license, agreement, lease or instrument
or obligation to which any of the Companies is a party or by which any of the
Companies or any of their respective assets may be bound other than consents or
approvals the absence of which would not have a material adverse effect on any
of the Companies, or (c) violate any law, judgment, order, writ, injunction,
decree, statute, rule or regulation of any court,
15
<PAGE>
administrative agency, bureau, board, commission, office, authority, department
or other governmental entity applicable to any of the Companies or any of their
respective assets.
.7 Financial Statements. The Company has furnished Midwest with the
--------------------
following:
(a) the audited consolidated balance sheet of the Company and the audited
balance sheet of the Seller, each as of December 31, 1996 and the audited
consolidated statements of income and cash flows of the Company and the audited
statements of income and cash flows of the Seller, each as of such date (such
December 31, 1996 balance sheets being referred to as the "Balance Sheets" and
December 31, 1996 being referred to as the "Balance Sheet Date"), the unaudited
consolidated balance sheet and statement of income of the Company as of March
31, 1997 for the three-month period then ended and the unaudited balance sheet
and statements of income of the Seller as of March 31, 1997 for the three-month
period then ended (collectively with such audited statements, the "Financial
Statements"); and
(b) the Company's Pro Forma Balance Sheet and Projected Financial
Statements.
The Financial Statements have been prepared in accordance with GAAP and present
fairly, in all material respects, the financial positions of the Company on a
consolidated basis and the Seller as of such dates, and the results of the
operations of the Company on a consolidated basis and the Seller for the periods
then ended (except that the unaudited statements omit footnotes and are subject
to normal year-end adjustments). The Pro Forma Balance Sheet and the Projected
Financial Statements have been prepared by the Company in good faith, based upon
information and assumptions reasonably believed by the Company to be sound and
accurate, and represent, to the best knowledge and belief of the Company and
Suncom, the financial position of the Company on a consolidated basis as of the
Closing after the consummation of the Acquisition and reasonable forecasts as to
the Company's future operations and financial performance.
.1 Absence of Undisclosed Liabilities. None of the Companies have any
----------------------------------
liabilities (fixed or contingent, including, without limitation, any tax,
warranty or product liabilities) which are, or Indebtedness which is, required
under GAAP to be, but is not, fully reflected on or provided for in the Pro
Forma Balance Sheet. Neither the Company nor Suncom knows, nor has reasonable
grounds to know, of any basis for the assertion against any of the Companies of
any material liabilities of any of the Companies not adequately reflected or
reserved against on the Pro Forma Balance Sheet other than legal and other fees
incurred in connection with the Acquisition and related transactions. For
purposes of this Section 5.8, "material liabilities" means liabilities in excess
of $150,000 in the aggregate.
.2 Absence of Certain Changes. Except as disclosed on Schedule 5.9,
--------------------------
since the Balance Sheet Date, there has not been (a) any occurrence, condition
or development that has materially and adversely affected, or is likely to
materially and adversely affect, the business, affairs, assets, prospects,
operations, employee relations or condition, financial or otherwise, of any of
the Companies, (b) any sale, transfer or other disposition of assets or
cancellation of any claims other than in the ordinary course of the Sellers' or
any of the Companies' business, (c) any material increase in salaries or other
compensation or employee benefits with respect to any employees of the Seller or
any of the Companies, (d) the occurrence of any material transaction by the
Seller or any of the Companies other than in the ordinary
16
<PAGE>
course of business and except for the transactions contemplated by the Senior
Loan Agreement and the Asset Purchase Agreement or (e) any collective bargaining
negotiations involving the Seller or any of the Companies.
.3 Contracts, Leases and Other Agreements. Except for those contracts,
--------------------------------------
agreements and instruments set forth on Schedule 5.10, this Agreement, the
Senior Loan Agreement, the Subordination Agreement and the Asset Purchase
Agreement and all documents executed in connection therewith (collectively, the
"Contracts"), none of the Companies is a party to any (a) distributorship, sales
representative, franchise, marketing, license or warranty agreement; (b) lease
agreement concerning any real property or any material personal property; or (c)
contract, lease, agreement, plan, arrangement, obligation or commitment (i)
evidencing Indebtedness for money borrowed or any guarantee of such
Indebtedness; (ii) relating to the subordination of any Indebtedness; (iii)
involving aggregate payments, delivery or licensing by or to any of the
Companies of money, goods or other assets or services other than inventory
having, in each case, an aggregate value of more than $25,000; (iv) that would
otherwise be considered a material contract; (v) that is a requirements or
output contract; (vi) that is out of the ordinary course of business; or (vii)
that is, or is reasonably likely to be, materially adverse to the Business or
the properties or financial condition of any of the Companies. To the best
knowledge and belief of the Company, all the Contracts are valid and in full
force and effect, and no material breach or default, or event which, with notice
or lapse of time or both, would constitute any such material breach or default
by any of the Companies exists with respect thereto. Neither the Seller nor, to
the Company's or Suncom's knowledge, any of the Companies has received any
notice of cancellation or non-renewal of any of the Contracts. The Contracts are
sufficient for, and constitute all contracts, agreements, leases, licenses and
other commitments necessary for the conduct of the Business as conducted by the
Seller and the Acquiring Group immediately prior to the Closing and as proposed
to be conducted by the Companies after the Closing. Suncom will be the owner of
all of the rights of the Seller under the contracts and agreements to be
assigned to Suncom pursuant to the Asset Purchase Agreement. No Contracts nor
any rights thereunder will be impaired by the consummation of the transactions
contemplated by this Agreement, the Asset Purchase Agreement or the Stock
Purchase Agreement. No Contract being entered into by Suncom to replace or in
substitution for a contract of the Seller that is not being assigned by the
Seller (the "Nonassigned Contracts") is on terms materially more adverse to
Suncom than were the comparable terms of the Nonassigned Contract to the Seller.
.4 Employment Relations, Arrangements and ERISA. Except as set forth
--------------------------------------------
on Schedule 5.11, (a) there is no pending or, to the best of the Company's and
Suncom's knowledge, threatened labor dispute, work stoppage or strike relating
to any of the Companies; (b) none of the Companies has been involved in or
charged with any unfair labor practices or equal employment opportunity or age
discrimination type claims; (c) neither the Company nor any ERISA Affiliate has
any union contract, collective bargaining agreement, employment contract,
deferred compensation agreement or bonus, incentive, profit-sharing, pension,
retirement or other employee benefit plan in force and effect, or any informal
understanding with respect to any of the foregoing; or (d) neither the Company
nor any ERISA Affiliate sponsors, maintains, or has any liability with respect
to and has not previously sponsored or maintained or made any contributions to,
any Plan. All of the Company's and its ERISA Affiliates' Plans and the Pension
Plans that are intended to be qualified plans under Section 401(a) of the Code
are so qualified and have received current favorable determination letters from
the Internal Revenue Service. To the best of the Company's and Suncom's
knowledge, all of the Company's and its ERISA Affiliates'
17
<PAGE>
Plans comply in all material respects with ERISA, and have been administered in
compliance with ERISA and the Code. With respect to each of such Plans and
related trusts, to the best of the Company's and Suncom's knowledge, none of the
Companies has any liability for any failure to comply with ERISA or the Code or
for any action or failure to act in connection with administration of the Plans.
No Pension Plan has incurred any "accumulated funding deficiency" within the
meaning of Section 302 of ERISA or Section 412 of the Code. No Pension Plan has
any amount of unfunded benefit liabilities as defined in Section 4001(a)(18) of
ERISA. Neither the Company, any of its Plans, nor the Plans of an ERISA
Affiliate has engaged in any transaction in violation of Section 406 of ERISA or
any prohibited transaction within the meaning of Section 4975(c)(1) of the Code
for which no exemption exists and is applicable. No reportable event (as defined
in Section 4043(b) of ERISA) has occurred with respect to any Pension Plan and
to the best knowledge and belief of the Company and Suncom, no proceeding has
been commenced to terminate any Pension Plan. Neither the Company nor any ERISA
Affiliate has sponsored, maintained, contributed to or otherwise incurred any
liability to or respecting any "multiemployer pension plan" as defined in
Section 3(37) of ERISA. Neither the Company nor any ERISA Affiliate has
withdrawn from or suffered the termination of a multiemployer pension plan under
circumstances that could subject the Company to liability. The Company does not
have any present or future liability in respect of post-retirement health or
medical benefits for retired employees of the Company, except as contemplated by
the Employment Agreement of even date between the Company and A.J. Schell and
except as provided by COBRA.
.5 Arrangements with Affiliates. There are no existing contracts or
----------------------------
arrangements or proposed transactions between any of the Companies and any
Affiliate of any of the Companies other than the Operative Documents, the Option
for 1,000,000 shares of Common Stock of the Company granted to the Seller under
and as contemplated by the Asset Purchase Agreement, the Employment Agreement
dated as of the date hereof between the Company and A.J. Schell and the
Employment Agreement of Kleinhandler and the Company and Unger and the Company
dated as of the date hereof and the employment arrangements in effect as of the
date hereof with Aaron Kleinhandler and Sharon Kleinhandler providing for the
payment of annual compensation of $160,000 and $100,000, respectively. None of
the Employees is subject to any restrictive covenant other than in favor of one
of the Companies or any other similar agreement of which the Company or Suncom
is aware which would prohibit such Employee from being employed by the Company.
.6 Tax Liabilities. Seller and each of the Companies has filed all
---------------
federal, state, and local tax reports and returns required by any law or
regulation to be filed by it or except for extensions duly obtained, and has
duly paid all taxes, duties and charges for the period covered by such returns
and reports. To the best knowledge and belief of the Company and Suncom, the
reserves for taxes reflected on the Balance Sheets are adequate in amount for
the payment of all liabilities for all taxes (whether or not disputed) of the
Companies accrued through the Balance Sheet Date and the Seller has no liability
for federal, state or local taxes of any nature that might impose transferee
liability on any of the Companies. None of the Companies nor the Seller is a
party to any pending action or proceeding, nor to the best knowledge and belief
of the Company and Suncom, is any such action or proceeding threatened, by any
governmental authority for the assessment or collection of taxes.
.7 Insurance. Each of the Companies maintains in effect insurance on
---------
its assets, and upon its business and operations, against loss, damage, risks,
hazards and liabilities of the kinds customarily
18
<PAGE>
insured against by businesses engaged in the same or similar businesses in
adequate amounts and all insurance required to be carried by it by law or by any
contract to which it is a party.
.8 Litigation. Except as set forth on Schedule 5.15 there are no
----------
actions, suits, proceedings or investigations (whether or not purportedly on
behalf of any of the Companies) pending or, to the best of the Company's or
Suncom's knowledge, any actions, suits, proceedings or investigations threatened
in writing (nor to the best knowledge and belief of the Company or Suncom, does
any basis exist therefor) against or affecting any of the Companies or any of
their respective assets, properties or business at law or in equity, before or
by any federal, state, municipal or other governmental department, commission,
board, agency or instrumentality, domestic or foreign, nor has any such action,
suit, proceeding or investigation been pending for the past two years. None of
the Companies is operating under or subject to, nor in default with respect to,
any order, writ, injunction or decree of any court or federal, state, municipal
or other governmental department, commission, board, agency or instrumentality,
foreign or domestic, and none of the Companies has been charged or threatened in
writing with a charge of violation, or under investigation with respect to
possible violation, of any provision of any federal, state, municipal or local
law or administrative ruling or regulation relating to it or its business,
affairs, assets, prospects, operations, employee relations or condition,
financial or otherwise.
.9 Consents. All consents, approvals, qualifications, orders or
--------
authorizations of, or filings with, any governmental authority, and all consents
under any contracts, agreements or instruments by which any of the Companies is
bound or to which any of the Companies is subject, and required in connection
with any of the Companies' valid execution, delivery or performance of this
Agreement and the other Operative Documents by any of the Companies and the
assumption the Subordinated Note, and the consummation of any other transaction
contemplated hereby or thereby have been obtained or made except where the
failure to obtain such items in connection with the Acquisition will not have a
material adverse effect on the Business of any of the Companies on a
consolidated basis.
.10 Assets. The Companies have good and, as to real estate, marketable
------
title to the assets reflected on the Pro Forma Balance Sheet, free and clear of
all Liens, other than the Liens of the Senior Lenders and Permitted Liens, and
such assets, together with the cash being borrowed for working capital purposes
pursuant to the Senior Loan Agreement and the rights under the Contracts and
Proprietary Rights (as defined below), constitute all the assets and rights
necessary to conduct the Business as conducted by the Seller immediately prior
to the Closing and as proposed to be conducted by the Companies after the
Closing.
.11 Proprietary Rights. Each of the Companies has the right to carry,
------------------
transmit or furnish all works or programming carried, transmitted or furnished
by it to its customers, including the customers of the Seller prior to the
Closing. Each of the Companies owns or is authorized to use all patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights and copyrights necessary to conduct the Business as
conducted by the Seller and the Acquiring Group immediately prior to the Closing
and as proposed to be conducted by the Companies after the Closing or which are
necessary in connection with the performance of any contract or proposal to
which any of the Companies is a party including, without limitation the right to
utilize the Muzak(R) mark (collectively, "Proprietary Rights"), without conflict
with or infringement upon any valid rights of others, and the use
19
<PAGE>
of such Proprietary Rights will not infringe upon or, to the best knowledge
and belief of the Company and Suncom, conflict with, the asserted rights of
others.
.12 Licenses and Permits. Each of the Companies is the owner of, or
--------------------
has the legal right to use, all licenses, permits, exceptions, franchises,
variances, waivers, approvals and other authorizations, including those relating
to communications matters (including without limitation, those licenses
necessary to operate or utilize any radio system necessary to service the
customers of the Acquiring Group and the Seller), of, by or from governmental
authorities or other Persons necessary for each of the Companies to conduct the
Business as conducted by the Seller and the Acquiring Group in all material
respects immediately prior to the Closing and as proposed to be conducted by the
Companies after the Closing (the "Permits"). A complete list of all geographic
areas served by the Companies' business is set forth on Schedule 5.19 (the
"Geographic Areas"). To the best of the Company's and Suncom's knowledge,
neither Muzak nor any of its Affiliates has authorized any other Person to
provide any background or foreground music subscription service within the
Geographic Areas. Each of the Companies is conducting the Business in
accordance with the material terms and provisions of the Permits and each of the
Permits is in full force and effect and no proceedings are pending or threatened
which might result in a modification, revocation, termination or suspension of
any Permits. None of the Permits nor any of the rights thereunder will be
impaired by the consummation of the Acquisition or the transactions contemplated
by this Agreement or any of the other Operative Documents.
.13 Compliance with Law and Other Instruments. None of the Companies
-----------------------------------------
is in default under or in violation of, the provisions of any mortgage,
indenture, contract, agreement, instrument, judgment, decree, order, statute,
rule or regulation or enforcement action by any governmental agency to which it
is subject and which, due to such default or violation, would have a material
adverse effect on Suncom or on any of the Companies on a consolidated basis.
Neither the Company nor Suncom has any knowledge of any change to any law,
statute, rule or regulation which could have a material adverse effect on the
ability of the Companies to conduct the Business as conducted by the Seller and
the Acquiring Group immediately prior to the Closing and as proposed to be
conducted by the Companies after the Closing. Each of the Companies has
authority and right under all applicable FCC rules, regulations, and orders and
the terms of the Contracts to distribute the transmission of music programming
and other information offered by the Seller and the Acquiring Group to its
customers (whether by satellite, telephone line, FM subcarrier or otherwise)
prior to the Closing and by the Companies after the Closing and to utilize all
radio frequencies utilized in connection therewith, and has the right to utilize
or operate all the facilities utilized in connection with the Business
including, without limitation, any business radio systems, other than permits or
authorizations under local and state law that are immaterial to the Business of
each of the Companies.
.14 Environmental. Each of the Companies and each of their
-------------
respective Facilities are in material compliance with the requirements of all
applicable Environmental Laws. None of the Companies nor the Seller has
received any claim or notice of violation, Lien, complaint, suit, order or other
claim or notice to the effect that it is or may be liable to any Person as a
result of the (i) environmental condition of any Facility or any other property
or (ii) the Release or threatened Release of any Hazardous Materials. None of
the Companies, nor the Seller, nor any Facility is the subject of any federal or
state investigation or judicial or administrative proceeding evaluating whether
any remedial action is needed to respond to a Release of any Hazardous
Materials, regardless of whether such Release originated or
20
<PAGE>
may originate on any Facility. None of the Companies, the Seller, any lessee of
the Facilities, any previous owner of the Facilities nor any other Person, has
(a) used, generated or stored any Hazardous Materials on any Facility except in
accordance with all Environmental Laws or (b) released or disposed of any
Hazardous Materials on any Facility.
.15 Fees and Commissions. None of the Companies nor any of their
--------------------
respective Affiliates has retained a finder, broker, agent, financial advisor or
other intermediary (collectively, a "Company Intermediary") in connection with
the transactions contemplated by this Agreement (except that the Company
retained and will pay all fees required to be paid to Key Trust Company, of Ohio
N.A., in connection with the Acquisition) and the Company and Suncom agree to
indemnify and hold harmless Midwest from liability for any compensation to any
Company Intermediary and the fees and expenses of defending against such
liability or alleged liability.
.16 Disclosure. This Agreement, the schedules and exhibits hereto,
----------
and the financial statements and other written materials that will be delivered
or are referred to herein as having been delivered to Midwest, do not and will
not contain any untrue statement of a material fact and do not and will not omit
to state a material fact necessary in order to make the statements contained
therein or herein not misleading in the light of the circumstances under which
they were made. There are no facts relating to the business, affairs, assets,
prospects, operations, employee relations or condition, financial or otherwise,
of Suncom or the Companies on a consolidated basis that could materially
adversely affect the same which has not been disclosed in writing to Midwest by
the Company.
ARTICLE VI
[RESERVED]
ARTICLE VII
Reporting and Prepayment
------------------------
For so long as the Subordinated Note is outstanding:
1 Accounting. Each of the Company and Suncom will maintain and will
----------
cause each of its Subsidiaries to maintain a system of accounting established
and administered in accordance with GAAP and all financial statements or
information delivered under Section 7.2 will be prepared in accordance with GAAP
except as otherwise set forth in Section 7.2.
2 Financial Statements and Other Information. The Borrowers will
------------------------------------------
deliver to the Holder:
1 as soon as available after the end of each month, but in no event
later than 30 days after the end of each month, the unaudited, consolidated
financial statements of the Company, for each month, respectively, including,
without limitation, statements of profit and loss, cash flow statements and
balance sheets. Each such financial statement shall be prepared in accordance
with GAAP (subject to normal year-end adjustments and without footnotes) and on
a basis consistent with the annual audited statements
21
<PAGE>
of the Company delivered pursuant to Section 7.2(b) and on a basis consistent
with such statements prepared in prior periods. In addition, each such financial
statement delivered after the completion of a fiscal quarter shall be:
1 accompanied by (A) a comparison of such financial statements
with the forecasts for such corresponding periods most recently
provided in accordance with Section 7.2(c) below and a detailed
explanation of any increase or decrease of more than 15% from the
revenues, cost of goods sold or operating expenses set forth in
such forecasts, (B) exhibits setting forth the Company's
calculation and computation of the Company's financial covenants
contained in this Agreement and (C) the profit and loss statements
for comparative periods of the Company's previous fiscal year; and
2 delivered to the Holder along with a certificate signed by the
Chief Financial Officer of the Company in the form of Schedule
7.2(a);
2 annual audited consolidated financial statements of the
Company, including, without limitation, statements of profit and loss, cash flow
statements and balance sheets ("Financials"), as soon as available and, in any
event, within 90 days after the end of each of the Borrower's fiscal years,
which Financials:
1 shall be prepared in accordance with GAAP,
2 shall be accompanied by an opinion, without material
qualification (including, without limitation, any qualification
arising from the scope of the audit or with respect to the
continuance of each of the Company and its Subsidiaries as going
concerns) of a "Big 6" certified public accounting firm, that such
Financials fairly present, in all material respects, the financial
position of the companies being reported upon at the end of such
fiscal year and the results of their operations and cash flows for
such year in conformity with GAAP and that its examination of such
Financials has been made in accordance with generally accepted
auditing standards and included such tests of the accounting
records and other auditing procedures as it considered necessary
in the circumstances, and
3 shall be accompanied by (A) a certificate of such accountants
stating that, in making the examination necessary for the issuance
of the opinion referred to in clause (ii) of this Section 7.2(b),
no knowledge was obtained of any Default or Event of Default (or
as certified by such accountants, a Default or Event of Default
has occurred and is continuing, and, if such is the case, a
statement as to the nature thereof), (B) a written acknowledgment
by such accountants that the Holder is relying on the opinions
referred to in clause (ii) of this Section 7.2(b) and (C) all
internal management letters prepared by financial officers of the
Company, if any;
3 not later than 30 days prior to the beginning of each Fiscal Year
of the Company (except for the 1998 Fiscal Year, which must be provided no later
than January 1, 1998), an annual business
22
<PAGE>
plan, including forecasts by quarter of such fiscal year's pro forma financial
statements of each of the Companies (on a consolidated basis), Suncom and their
respective Subsidiaries. All such forecasts shall be prepared on a basis
consistent with the audited balance sheets of the Company delivered pursuant to
Section 7.2(b), shall include statements of profit and loss, statements of cash
flow, balance sheets, and detailed business assumptions, and shall be
accompanied by a certificate of the Chief Financial Officer of the Company that
such forecasts present, on a pro forma basis, and in accordance with the
Company's then current assumptions of future conditions, the Company's best good
faith estimate and projection of the Companies' results (on a consolidated
basis) for the periods described;
4 if requested by the Holder, not later than such time as provided
to the Senior Lender, all reports delivered to the Senior Lender;
5 if requested by the Holder, within 10 days after receipt thereof,
copies of all other reports, if any, submitted to the Company by independent
public accountants in connection with any annual or interim audit of the books
of the Company and its Subsidiaries made by such accountants, including any
management letters;
6 a copy of each financial statement, report and return that the
Company or any of its Subsidiaries files with the Commission or any stock
exchange;
7 a copy of each offer to purchase or sell any securities of the
Company or material assets of the Company or Suncom or any of their respective
Subsidiaries;
8 promptly, but in no event later than 10 days after the Company's
or Suncom's learning thereof, written notice of: (i) any pending or threatened
material litigation (for purposes hereof litigation with less than $100,000 in
issue shall not be considered material) affecting the Company, Suncom or any of
their respective Subsidiaries whether or not the claim is considered by the
Company to be covered by insurance; and (ii) any pending or threatened
administrative or arbitration proceeding or investigation, or the receipt by the
Company, Suncom or any of their respective Subsidiaries of any notice or order
from any regulatory body or agency having jurisdiction over the Company, Suncom
or any of their respective Subsidiaries, which proceeding, investigation, notice
or order may materially and adversely affect the operations, affairs, condition,
business or assets of the Company on a consolidated basis:
9 prompt notice of receipt by the Company, Suncom or any of their
respective Subsidiaries of notice of any event described in Section 4043 of
ERISA and the Regulations thereunder, other than a termination, partial
termination or merger of a Plan or a transfer of a Plan's assets;
10 prior to any termination, partial termination or merger of a Plan
or a transfer of a Plan's assets, notices thereof;
11 prompt notice of the Company's, Suncom's or their respective
Subsidiary's opening or closing of any material office or facility or of any
change in the Company's, Suncom's or their respective Subsidiary's name;
23
<PAGE>
12 promptly upon the occurrence thereof, notice of any Default or
Event of Default under this Agreement which notice will specify the nature and
period of existence thereof and the actions taken or proposed to be taken with
respect thereto;
13 notice of the termination or cancellation of any contract with a
Major Customer;
14 promptly, but in no event later than 10 days after the occurrence
thereof, notice of: (i) any disputes with customers that may have a material
financial impact on the Company, on a consolidated basis; (ii) any material
labor dispute, strike, walkout or expiration or termination of a labor contract;
(iii) any Senior Event of Default or default under any instrument evidencing
Indebtedness of the Company and any other contract material to the Company on a
consolidated basis; (iv) the establishment by the Company, Suncom or any of
their respective Subsidiaries of any Plan that is subject to the minimum funding
standards of Section 301 et seq., of ERISA or the commencement of contributions
-- ----
by the Company, Suncom or any of their respective Subsidiaries to any
multiemployer plan within the meaning of Section 3(37) of ERISA; or (v) any
other event which has had, or could reasonably be expected to have, a material
adverse impact on the business, affairs, assets, prospects, operations, employee
relations or condition, financial or otherwise, of the Company on a consolidated
basis; and
15 with reasonable promptness, such other data and information as
from time to time may be reasonably requested by the Holder and such data as the
Company or Suncom may from time to time furnish to holders of its securities in
their capacities as such.
3 Inspection Rights. The Company and Suncom will permit the Holder
-----------------
upon at least two days' prior notice to visit and inspect the properties of the
Company, Suncom and their respective Subsidiaries, review its and their books
and records (and to make extracts therefrom), and to discuss its and their
affairs, finances and accounts with its and their officers and personnel, all at
such reasonable times and as often as the Holder may reasonably request, without
unreasonably interfering with the conduct of its business. Such Holder will not
disseminate the information obtained as a result of such inspection to third
parties that are not Affiliates or agents of such Holder.
4 Optional Prepayments. The Company and Suncom may at its option,
--------------------
provided the holder of the Senior Debt, if any, consents in writing to such
prepayment and such prepayment would not constitute a Default hereunder, prepay
the Subordinated Note in whole or in part at any time by giving written notice
thereof to the holder of the Subordinated Note not less than 30 nor more than 60
days prior to the date fixed for such prepayment in such notice. Each such
prepayment (other than a prepayment in full) shall be in an aggregate amount not
less than $400,000. Each optional prepayment shall be made by delivering to the
holder of the Subordinated Note the principal amount of the Subordinated Note so
to be prepaid together with interest accrued on such principal amount to the
date of prepayment, plus, (i) for any prepayment on or prior to September 14,
1997, a prepayment premium equal to 4% of the principal amount to be prepaid and
(ii) for any prepayment after September 14, 1997 but on or prior to September
14, 1998, a prepayment premium equal to 2% of the principal amount to be
prepaid. All notices of prepayment shall specify the amount to be prepaid,
together with the premium (if any) to be paid thereon and the date fixed for
such prepayment. Notwithstanding the foregoing, the prepayment premiums
described above shall be decreased by 50% in the event (y) the Subordinated Note
24
<PAGE>
is prepaid in full within 20 days after the closing of a Cash Sale Event in
which Midwest exercised its Put Option, or had the right to exercise its Put
Option without being subject to any restriction in the Warrant Agreement, and
(z) taking into account, among other things, the Net Sale Proceeds that Midwest
received upon the exercise of its Put Option or would have received if it had
elected and had the unrestricted right to fully exercise its Put Option, the IRR
of Midwest with respect to the Subordinated Note and the Warrants equals or
exceeds 30%.
5 Maturity, etc. In the case of any prepayment of the Subordinated
-------------
Note, whether mandatory or optional, the principal amount of the Subordinated
Note to be prepaid shall become due and payable on the date fixed for such
prepayment, together with interest accrued on such principal amount to such date
and the applicable prepayment premium (if any).
ARTICLE VIII
Affirmative Covenants
---------------------
For so long as the Subordinated Note is outstanding:
1 Insurance. Each of the Company and Suncom agrees to maintain or
---------
cause to be maintained, with financially sound and reputable insurers insurance
with respect to its assets and business and the assets and business of any
Subsidiary against loss or damage of the kinds customarily insured against by
similarly situated businesses, in amounts it reasonably believes to be adequate,
and at the request of the Holder shall furnish the Holder with evidence of the
same. The Company and Suncom agree to deliver copies of each such policy and
all renewals to the Holder upon request therefor.
2 Payment of Taxes and Trade Accounts. Each of the Company and
-----------------------------------
Suncom agrees to pay or cause to be paid all taxes, assessments and other
governmental charges levied upon any of its assets or those of any Subsidiary or
in respect of its or their respective franchises, businesses, income or profits,
all trade accounts payable in accordance with usual and customary business
terms, and all claims for work, labor or materials, which if unpaid might become
a lien or charge upon any asset of the Company, Suncom or any Subsidiary, before
the same become delinquent, except that (unless and until foreclosure, sale or
other similar proceedings shall have been commenced) no such charge need be paid
if being contested in good faith and by appropriate measures promptly initiated
and diligently conducted if (a) such reserve or other appropriate provision, if
any, as shall be required by GAAP shall have been made therefor, and (b) such
contest does not have a material adverse effect on the financial condition of
the Company, Suncom or any Subsidiary or the ability of the Company, Suncom or
any Subsidiary to pay any Indebtedness and no assets are in imminent danger of
forfeiture.
3 Payment of Indebtedness. Each of the Company and Suncom shall pay,
-----------------------
and cause each Subsidiary to pay, all amounts owed on any Indebtedness of the
Company, Suncom and each Subsidiary as and when the same shall become due and
payable by the lapse of time, by declaration, by call for redemption or
otherwise.
4 Compliance With Laws. Each of the Company and Suncom agrees to
--------------------
use its best efforts to comply, and shall use its best efforts to cause each
Subsidiary to comply, in all material respects with
25
<PAGE>
all laws, rules, regulations, judgments, orders and decrees of any governmental
or regulatory authority applicable to it and its respective assets, and with all
contracts, and agreements to which it is a party or shall become a party, and to
perform all obligations which it has or shall incur.
5 Existence and Property. Each of the Company and Suncom agrees to
----------------------
preserve, protect and maintain, and cause each Subsidiary to preserve, protect
and maintain, (a) its legal existence, and (b) all rights, franchises,
accreditations, privileges, permits, licenses and properties, the failure of
which to preserve, protect and maintain might have a material adverse effect on
the business, affairs, assets, prospects, operations or condition, financial or
otherwise, of the Company on a consolidated basis.
6 Employee Benefit Plans. Each of the Company and Suncom shall
----------------------
maintain and operate, and shall cause each Subsidiary to maintain and operate,
each Plan that the Company, Suncom or any Subsidiary sponsors, maintains, or
contributes to, in compliance in all material respects with all applicable
requirements of ERISA and the Age Discrimination in Employment Act, and in
compliance in all material respects, with all applicable requirements of the
Code for obtaining any tax benefits respecting such Plan claimed by the Company,
Suncom or such Subsidiary. Each of the Company and Suncom shall pay, and cause
each Subsidiary to pay, promptly when due under the terms of any Plan, or any
collective bargaining agreement relating to any Plan, or otherwise when due (or
required to avoid any excise tax or necessity for governmental waiver) under any
applicable law respecting any Plan, all amounts that the Company, Suncom or any
Subsidiary is required to pay to or in respect of any Plan, where nonpayment
could have a material adverse effect on the business, assets, prospects,
condition (financial or otherwise), affairs or operations of the Company, Suncom
or any Subsidiary. Each of the Company and Suncom shall (i) deliver to the
Holder any annual report required to be filed pursuant to Section 103 of ERISA
in connection with each Plan; (ii) notify the Holder as soon as practicable of
any "Reportable Event" (as defined under Section 4043 of ERISA); and (iii)
deliver to the Holder, such additional information concerning any Plan or any
other such employee benefit plan as may be reasonably requested.
7 Attendance at Board Meetings. Each Borrower shall permit a
----------------------------
representative of the Holder to attend as an observer all meetings of its board
of directors and those of its Subsidiaries and all subcommittees thereof if such
Holder does not have a representative on such Board of Directors. Each Borrower
shall give the Holder the same written notice of each such meeting (including
telephone meetings) as is given such directors or such subcommittee. The Holder
will be entitled to receive all written materials and other information given to
the directors in connection with such meetings at the same time such materials
and information are given to the directors. If the board of directors of a
Borrower or any of its Subsidiaries proposes to take any action by written
consent in lieu of a meeting of its directors or of any subcommittee thereof,
written notice thereof shall be given to the Holder at least three days prior to
the effective date of such consent describing in reasonable detail the nature
and substance of such action. The Borrowers will jointly and severally reimburse
the Holder for all reasonable travel expenses incurred by such representative in
connection with attending any such meetings or other functions of a Borrower or
any Subsidiary.
8 Fees and Expenses. The Company and Suncom will jointly and
-----------------
severally bear all of their respective expenses in connection with this
Agreement and the other Operative Documents, and the transactions contemplated
hereby and thereby, and will also reimburse Midwest for or pay any expenses
Midwest incurs (including, without limitation, the reasonable fees incurred in
connection with due
26
<PAGE>
diligence and the reasonable legal fees and disbursements of Hopkins & Sutter)
in connection with the negotiation of and closing under this Agreement, the
other Operative Documents and the Amendment Agreement between the Seller and
Midwest and the transactions contemplated hereby and thereby, including, without
limitation, all expenses incurred in connection with (i) the preparation of,
negotiation of, closing under, amendment of, waiver under, or enforcement of, or
the preservation of any rights under, this Agreement, the Subordinated Note and
the other Operative Documents, (ii) any stamp and other taxes (other than income
taxes) payable with respect to this Agreement and the Subordinated Note and
(iii) any filing with any governmental agency with respect to the Purchaser's
purchase of the Subordinated Note. The Company and Suncom will also bear,
jointly and severally, the legal fees and disbursements of counsel to the Holder
in connection with any mutually agreed upon amendments to this Agreement, the
Subordinated Note and the other Operative Documents, or any amendments proposed
by the Company or Suncom whether or not effected, or in connection with the
consummation of any future transaction related thereto. The Company agrees to
pay or reimburse Midwest at the Closing for the estimated legal fees and
disbursements of Hopkins & Sutter incurred in connection with the preparation
of, negotiation of and closing under this Agreement and the Amendment Agreement
between the Seller and Midwest.
9 Right of First Offer. (a) If Midwest desires to dispose of all
--------------------
or part of the Subordinated Note (the "Offered Note"), other than to partners or
Affiliates of Midwest or any other Person managed by the same individuals that
manage Midwest or indirectly through participations, pursuant to the terms of a
written offer received from a bona fide third party, Midwest will promptly upon
receipt of such third-party offer give written notice (the "Offer Notice") to
the Company (x) stating the terms of the third-party offer, including (i) the
purchase price, (ii) the other terms and conditions of payment, and (iii) such
other material terms upon which Midwest has agreed to dispose of the Offered
Note, including the name(s) of the proposed purchaser(s,) if then known, and (y)
making an offer to sell the Offered Note (the "Offer") to the Company pursuant
to this Section at the price and on the other terms described in the Offer
Notice.
1 The Company shall have the right irrevocably to elect to purchase
the Offered Note by giving written notice thereof ("Acceptance Notice") to
Midwest within 30 days of the date the Offer Notice was given to the Company
("Acceptance Date"). In the event that the Offer has been accepted in its
entirety by the timely delivery of an Acceptance Notice, Midwest shall sell the
Offered Note to the Company and the Company shall be required to purchase the
Offered Note on the terms and conditions set forth in the Offer Notice. In the
event that the Company (i) does not deliver the Acceptance Notice to Midwest by
the Acceptance Date or (ii) otherwise rejects the Offer, Midwest may sell the
Offered Note to a purchaser(s) on the terms no more favorable to such
purchaser(s) than those stated in the Offer Notice; provided, however, that if
such sale does not occur within a period ending 180 days after the Acceptance
Date, then the Subordinated Note shall again be subject to this Section 8.9.
Any subsequent sale of the Subordinated Note by the new holder thereof shall
also be subject to this Section 8.9. For purposes of this Section 8.9 the
"Company" shall also include a purchaser of substantially all of the Company's
assets.
27
<PAGE>
ARTICLE IX
Negative Covenants
------------------
For so long as the Subordinated Note is outstanding:
1 Indebtedness Incurred. The Company and Suncom shall not, and
---------------------
shall not permit any Subsidiary to, issue, incur, assume or permit to exist any
Indebtedness, except (a) the Subordinated Note, (b) Indebtedness outstanding
under the Senior Loan Agreement and the Senior Notes (such Indebtedness
determined on the basis of the principal, interest rates, and advance rates set
forth in Senior Loan Agreement and Senior Notes as in effect on the date
hereof), or, if Indebtedness under such Senior Loan Agreement has been repaid in
full and terminated, Indebtedness under another Senior Loan Agreement in an
aggregate principal amount not to exceed the then outstanding principal amount
and interest of the Revolving Loan refinanced (and financing costs associated
with such financing) and at a rate per annum not in excess of prime plus 2%, (c)
Indebtedness secured by Permitted Liens described in Section 9.2 (i), (iii), (v)
and (viii), (d) Indebtedness secured by Permitted Liens described in Section
9.2(ii) and (vi) to the extent the acquisition of the capital assets pursuant to
which such Indebtedness was incurred is in compliance with Section 9.11, (e)
Indebtedness for unsecured trade payables and non-capitalized lease payables
incurred in the ordinary course, (f) Indebtedness owed by the Company or Suncom
to any Subsidiary provided such Indebtedness is unsecured and by its terms
subordinate in right of payment to the payment in full of the Indebtedness
evidenced by the Subordinated Note, (g) the Schell Payments, and (h) other
Indebtedness existing on the date hereof not to exceed $50,000.
2 Liens. The Company and Suncom shall not, and shall not permit any
-----
Subsidiary to, create or permit to exist any Lien with respect to any assets now
or hereafter existing or acquired, except the following (herein collectively
called the "Permitted Liens"): (i) Liens for current taxes or special
assessments not delinquent or for taxes or special assessments being contested
in good faith and by appropriate proceedings that do not subject the Company,
Suncom or any Subsidiary to penalties under the Code and for which adequate
reserves shall have been established and are then being maintained in accordance
with GAAP; (ii) Liens in connection with the acquisition of tangible property
after the date hereof and attaching only to the property acquired; (iii) Liens
incurred in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other forms of governmental insurance or
benefits; (iv) Liens in favor of the Senior Lenders; (v) mechanics', workers',
materialmen's and other like Liens arising in the ordinary course of business in
respect of obligations which are not delinquent or which are being contested in
good faith and by appropriate proceedings and for which adequate reserves shall
have been established and are then maintained in accordance with GAAP; (vi)
Liens in connection with capitalized leases, which Liens attach only to the
property leased; (vii) easements, municipal and zoning ordinances and rights of
way restrictions not interfering with the ordinary conduct of the Business or
eliminated within 30 days of being imposed; and (viii) Liens or deposits
required by law as a condition to the transaction of business in the ordinary
course.
3 Mergers, Consolidations, Sales. Except as contemplated by the
------------------------------
Asset Purchase Agreement, the Company and Suncom shall not, and shall not permit
any Subsidiary to, be a party to any merger or consolidation with any other
Person, or purchase or otherwise acquire all or substantially all
28
<PAGE>
of the assets or stock of any class of, or any partnership or joint venture
interest in, any other Person for more than $50,000, or sell, transfer, convey
or lease all or any substantial part of its assets to any other Person.
4 Liquidation, Dissolution. Neither the Company nor Suncom shall
------------------------
liquidate, dissolve or, except as required by the acceptance of additional
capital contributions, effect a recapitalization or reorganization in any form
of transaction.
5 Charter. Neither the Company nor Suncom will amend their
-------
respective Charters in any material respect.
6 Restricted Payments. Except as contemplated by this Agreement and
-------------------
except for dividends or distributions by wholly-owned Subsidiaries of the
Company to the Company, neither the Company nor Suncom shall, and nor shall
either of them permit any Subsidiary to, (i) purchase or redeem any capital
stock or other equity interests, warrants or options or (ii) declare or pay any
dividends or distributions with respect to any capital stock or other equity
interest or set aside any funds for any such purpose. The Company shall not
grant, or allow the exercise of, any redemption rights, put rights or other
similar rights with respect to its equity interests (including options) to any
holder of its equity securities (contingent or otherwise) or contract rights the
value of which appreciates in accordance with the value of the Company's or
Suncom's value or earnings. This Section 9.6 shall not prohibit the granting of
stock options pursuant to plans in effect on the date hereof or similar plans.
7 Subsidiary Payments. The Company and Suncom shall not, and shall
-------------------
not permit any Subsidiary to, enter into or permit to exist any agreement or
undertaking (other than this Agreement and the Senior Loan Agreement) which
prohibits, restricts or limits the ability of any Subsidiary to pay dividends or
distributions to the Company or Suncom, or otherwise to transfer assets to or
engage in transactions with the Company or Suncom.
8 Transactions with Affiliates. Neither the Company nor Suncom will
----------------------------
enter into or maintain, or permit any Subsidiary to enter into or maintain, any
transaction or agreement with any of its Affiliates or any Subsidiary's
Affiliates, except those arrangements identified in and having the material
terms identified in Section 5.12 hereof and except those entered into in the
ordinary course of business and upon fair and reasonable terms no less favorable
to the Company, Suncom or any Subsidiary than would be obtained by the Company,
Suncom or any Subsidiary in a comparable arm's length transaction with a Person
who is not the Company's, Suncom's or any Subsidiary's Affiliate. Neither the
Company nor Suncom will transfer any assets to any of the other Subsidiaries of
the Company.
9 Investments. Neither the Company nor Suncom will establish any
-----------
Subsidiaries. The Company will not make or permit to exist, or permit any
Subsidiary to make or permit to exist, any Investment other than: (i) the
Acquisition, (ii) Investments in obligations issued by, or guaranteed by, the
United States Government, (iii) Investments in negotiable certificates of
deposit or money market securities issued by any commercial bank in the United
States or (iv) Investments by any of the Companies consisting of extensions of
credit terms to its customers in the ordinary course of business.
29
<PAGE>
10 Advances. Neither the Company nor Suncom will make, or permit any
--------
Subsidiary to make, any loans or advances to, or guarantees for the benefit of,
any Person, other than (i) travel and expense allowances to employees not to
exceed $50,000 in the aggregate at any one time and (ii) similar loans to
employees not to exceed $15,000 per employee, not to exceed $75,000 in the
aggregate at any one time.
11 Capital Expenditures. Neither the Company nor Suncom will make,
--------------------
or permit any Subsidiary to make, any capital expenditure (including, without
limitation, payments with respect to capitalized leases) or any other
acquisition of assets in an amount in excess of the following amounts with
respect to each Fiscal Year set forth below:
30
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Capital Expenditure
----------- -------------------
<S> <C>
1997 $4,250,000
1998 $4,150,000
1999 $4,300,000
2000 $4,500,000
2001 $4,700,000
2002 $4,750,000
2003 $4,700,000
2004 $4,700,000
</TABLE>
Up to $1,000,000 of any amount not used in any Fiscal Year may be applied to
increase the permitted amount for the immediately succeeding Fiscal Year only,
provided no Default or Event of Default would otherwise be caused thereby.
1 New Business. Neither the Company nor Suncom will enter into, or
------------
will permit any Subsidiary to enter into, the ownership, management or operation
of any business other than the Business or businesses substantially similar to
the Business.
2 Employee Benefit Plan Liability. Neither the Company nor Suncom
-------------------------------
will withdraw, or will permit any Subsidiary to withdraw, in whole or in part
from any multiemployer pension plan within the meaning of Section 3(37) of ERISA
if such withdrawal or partial withdrawal would subject the Company or any such
Subsidiary to liability under Subtitle E of Title IV of ERISA. Neither the
Company nor Suncom will establish or maintain, or permit any Subsidiary to
establish or maintain, any defined benefit plan within the meaning of Section
3(35) of ERISA that has at any time an amount of unfunded benefit liabilities as
defined in Section 4001(a)(18) of ERISA. Neither the Company nor Suncom will
incur, or will permit any Subsidiary to incur, any present or future liability
in respect of post-retirement health or medical benefits for retired employees
of the Company.
3 Environmental Liabilities. Each of the Company and Suncom will use
-------------------------
diligent efforts, and will cause each Subsidiary to use diligent efforts, (i)
not to violate any Environmental Laws and (ii) to prevent any of the Facilities
from violating any Environmental Laws.
4 Fiscal Year. Neither the Company nor Suncom will change its fiscal
-----------
year from a year ending December 31 of each year.
5 Compensation. Neither the Company, Suncom or any Subsidiary will
------------
pay annual compensation to Mitchell Kleinhandler or David Unger in excess of the
amounts provided for in the Employment Agreements entered into as of the date
hereof. For purposes of this Section 9.16, "compensation" shall be deemed to
include (i) any contributions to any 401(k) plan, (ii) contributions to any
pension plan, (iii) all bonuses, (iv) all deferred compensation, (v) amounts
payable in connection with rights granted that appreciate in accordance with the
value of the Company's, Suncom's or any Subsidiary's equity or its earnings,
(vi) the value of all stock options or similar contingent equity interests and
(vii) any other employee benefits.
31
<PAGE>
6 Coverage Ratio. Neither the Company nor Suncom shall permit the
--------------
Coverage Ratio for the four consecutive quarterly periods ending on the dates
indicated below to be less than the ratio set forth below opposite such dates.
<TABLE>
<CAPTION>
Fiscal Quarter Ending
Calendar Year 3/31 6/30 9/30 12/31
------------- ---- ---- ---- -----
<S> <C> <C> <C> <C>
1997 --- --- 1.0 1.0
1998 1.0 1.0 1.0 1.0
1999 1.0 1.0 1.0 1.03
2000 1.03 1.03 1.03 1.03
2001 1.03 1.03 1.03 1.03
2002 1.03 1.03 1.03 1.03
2003 1.03 1.03 1.03 1.03
2004 1.03 1.03 1.03 1.03
</TABLE>
1 Leverage Ratio. Neither the Company nor Suncom shall not permit
--------------
the Leverage Ratio as of the dates indicated below to be greater than the ratios
set forth below opposite such dates.
<TABLE>
<CAPTION>
Calendar Year 3/31 6/30 9/30 12/31
------------- ---- ---- ---- -----
<S> <C> <C> <C> <C>
1997 --- --- 5.0 5.0
1998 5.0 5.0 5.0 4.6
1999 4.6 4.6 4.6 3.9
2000 3.9 3.9 3.9 3.2
2001 3.2 3.2 3.2 3.0
2002 3.0 3.0 3.0 3.0
2003 3.0 3.0 3.0 2.8
2004 2.8 2.8 2.8 2.5
</TABLE>
ARTICLE X
Events of Default
-----------------
.1 Events of Default Defined; Acceleration of Maturity. If any one
---------------------------------------------------
or more of the following events (herein called "Events of Default") shall have
occurred:
(a) all or any part of the principal of the Subordinated Note is not
paid within two business days of the date when and as the same shall become due
and payable, whether at the maturity thereof, by acceleration, by notice of
prepayment, whether mandatory or optional, or otherwise;
(b) all or any part of the interest on the Subordinated Note is not
paid within two business days of the date such interest shall become due and
payable;
32
<PAGE>
(c) all or any part of any other amount owing under this Agreement to
the Holder (including mandatory prepayments) is not paid within two business
days of the date when such other amount is due and payable;
(d) default shall occur in the observance or performance of any
covenant contained Article IX of this Agreement, provided that, if such default
is subject to being cured, it shall not constitute an Event of Default if such
default is cured within 15 days of the earlier of the Company's or Suncom's
knowledge that an Event of Default has occurred or notice from the Holder to the
Company of the occurrence thereof;
(e) default shall occur in the observance or performance in any
material respect of any of the other covenants or agreements of the Company
contained in this Agreement or the Operative Documents which is not remedied
within 15 days of the earlier of the Company's knowledge that an Event of
Default has occurred or notice from the Holder to the Company of the occurrence
thereof;
(f) any Senior Event of Default or any default in the terms governing
other Indebtedness of the Company, Suncom or any Subsidiaries in the aggregate
outstanding amount of $250,000 or more shall occur and remain uncured for 15
days;
(g) a receiver, conservator, custodian, liquidator or trustee of the
Company, Suncom or any Subsidiary or of all or any of the assets of any of them,
is appointed by court order and such order remains in effect for more than 60
days; or an order for relief is entered under the federal bankruptcy laws with
respect to the Company, Suncom or any Subsidiary; or any of the material assets
of any of them is sequestered by court order and such order remains in effect
for more than 60 days; or a petition is filed against the Company, Suncom or any
Subsidiary under the bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and is not dismissed within 60 days after
such filing;
(h) the Company, Suncom or any Subsidiary files a petition in
voluntary bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition against it under any such law;
(i) the Company, Suncom or any Subsidiary makes a general assignment
for the benefit of its creditors, or admits in writing its inability to pay its
debts generally as they become due, or consents to the appointment of a
receiver, conservator, custodian, liquidator or trustee of the Company, Suncom
or any Subsidiary, or of all or any part of the assets of any of them;
(j) final judgment for the payment of money in excess of $250,000
shall be rendered by a court of record against the Company, Suncom or any of its
Subsidiaries, and the Company, Suncom or such Subsidiary shall not (i) discharge
the same or provide for its discharge in accordance with its terms or (ii)
procure a stay of execution thereof within 60 days from the date of entry
thereof and within said period of 60 days, or such longer period during which
execution of such judgment shall have been stayed, appeal therefrom and cause
the execution thereof to be stayed during such appeal including, without
33
<PAGE>
limitation, by providing adequate bond for such judgment;
(k) any representation, warranty or certification made by the Company,
Suncom or any of its officers in this Agreement or made by the Company, Suncom
in any Operative Documents or in any certificate, financial statement, or other
instrument delivered under or pursuant to any provision hereof or thereof shall
prove to have been false or incorrect in any material respect on the date or
dates as of which they were made;
(l) Mitchell Kleinhandler shall either die, become permanently
disabled or legally incapacitated, or cease to devote 100% or more of all of his
business time and attention to the Company's business (for whatever reason,
whether by resignation, removal or otherwise); provided, however, that it shall
not be an Event of Default if a successor of such person who is acceptable to
the Holder in its sole discretion is employed by the Company within 90 days of
such occurrence;
(m) failure of the Company's cumulative EBITDA for any period set
forth on Schedule 10.1(m) to equal or exceed the Projected 80% Cumulative EBITDA
set forth opposite such period on Schedule 10.1(m); or
(n) the occurrence of a Sale Event or a Change of Control Event;
then, except as set forth in the next sentence, when any Event of Default
described in clause (a), (b), (c), (d), (e), (j), (k), (l), (m), or (n) above
has occurred and shall be continuing or an Event of Default occurs under clause
(f) and the Senior Lender or holder of such indebtedness accelerates the Senior
Debt or such other indebtedness, the principal of the Subordinated Note and the
interest accrued thereon and all other amounts due hereunder (the "other
payments") shall, upon written notice from the Holder forthwith become and be
due and payable, if not already due and payable, without presentment, further
demand or other notice of any kind. When any Event of Default described in
clause (g), (h) or (i) above has occurred, then the principal of the
Subordinated Note, the interest accrued thereon and the other payments shall
immediately become due and payable, upon the occurrence thereof, without
presentment, demand or notice of any kind. If any principal, installment of
interest or other payment is not paid in full on the due date thereof (whether
by maturity, prepayment (whether mandatory or optional), or acceleration) or any
Event of Default has occurred and is continuing, then the outstanding principal
balance of the Subordinated Note, any overdue installment of interest (to the
extent permitted by applicable law), including interest accruing after the
commencement of any proceeding under any bankruptcy or insolvency law, and all
other payments will bear additional interest from the due date of such payment,
or from and after an Event of Default, at a rate equal to the lesser of (i) the
highest rate allowed by applicable law or (ii) an amount equal to the then
applicable interest rate on the Subordinated Note plus 4% per annum (the
"Default Rate"), compounded monthly, until the payment is received or the Event
of Default is cured, if permitted, or waived. If payment of the Subordinated
Note is accelerated, then the outstanding principal balance thereof shall bear
interest at the Default Rate from and after the Event of Default. The Company
and Suncom shall pay to the Holders of the Subordinated Note all reasonable out-
of-pocket costs and expenses, incurred by such holders in any effort to collect
the Subordinated Note and the other payments, including the reasonable attorneys
fees and expenses for services rendered in connection therewith, and pay
interest on such costs and expenses to the extent not paid when demanded at the
Default Rate.
34
<PAGE>
.1 Suits for Enforcement. If any Event of Default specified in
---------------------
Section 10.1 above has occurred and is continuing, the Holder may proceed to
protect and enforce the Holder's rights either by suit in equity or by action at
law, or both, whether for the specific performance of any covenant or agreement
contained in this Agreement, or in aid of the exercise of any power granted in
this Agreement, or to enforce any other legal or equitable right or remedy of
the Holder.
.2 Indemnification. The Company and Suncom shall, jointly and
---------------
severally, indemnify, defend and hold the Holder harmless from, against and in
respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest, penalties
and reasonable attorneys' fees (collectively, "claims"), that the Holder shall
incur or suffer, which arise, result from, or relate to (i) any breach of, or
failure by the Company, Suncom or any Subsidiary to perform, any of its
representations, warranties, covenants or agreements in this Agreement or the
other Operative Documents or in any schedule, certificate, exhibit or other
instrument furnished or to be furnished by the Company, Suncom or any Subsidiary
hereunder or thereunder, or in the Charter or by-laws of the Company, Suncom or
any Subsidiary and (ii) any release of Hazardous Materials on or from the
Facilities or claims of any governmental agencies or other Person arising under
any Environmental Law.
.3 Delays or Omissions. No failure to exercise or delay in the
-------------------
exercise of any right, power or remedy accruing to any holder of either of the
Subordinated Note upon any breach or default of the Company or Suncom under this
Agreement shall impair any such right, power or remedy of such holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring.
.4 Remedies Cumulative. All remedies, under either this Agreement,
-------------------
the Subordinated Note, by law or otherwise afforded to the Holder shall be
cumulative and not alternative.
ARTICLE XI
Miscellaneous
-------------
.1 Consent to Amendments; Waivers. Except as otherwise expressly
------------------------------
provided herein, the provisions of this Agreement may be amended or waived at
any time only by the written agreement of the Company, Suncom and the Holder.
Any waiver, permit, consent or approval of any kind or character on the part of
the Holder of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing.
.2 Survival of Terms. All representations, warranties and covenants
-----------------
contained herein or made in writing by any party in connection herewith will
survive the execution and delivery of this Agreement and any investigation made
at any time by or on behalf of the Holder.
.3 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and
35
<PAGE>
inure to the benefit of the respective successors of the parties hereto, whether
so expressed or not and the permitted assigns of the parties hereto including,
without limitation and without need of any express assignment, subsequent
Holders of the Subordinated Note. This Agreement and the rights and obligations
of the Company shall not be assigned without the prior written consent of the
Holder.
.4 Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement unless the consummation of the transaction contemplated hereby is
materially adversely affected thereby.
.5 Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
.6 Notices. Any notices required or permitted to be sent hereunder
-------
shall be delivered personally or mailed, certified mail, return receipt
requested and postage prepaid, or delivered by commercial overnight courier
service, with charges prepaid, to the following addresses, or such other address
as any party hereto designates by written notice to the Company, and shall be
deemed to have been given upon delivery, if delivered personally, three days
after mailing, if mailed, or one business day after delivery to the courier, if
delivered by overnight courier service:
If to the Company or Suncom or any Subsidiary, to:
Audio Communications Network, Inc.
1000 Legion Place, Suite 1515
Orlando, Florida 32801
Attn: President
with a copy to:
Baer, Marks & Upham
805 Third Avenue
New York, New York 10022
Attn: Stanley E. Bloch, Esq.
If to the Purchaser:
Midwest Mezzanine Fund, L.P.
208 South LaSalle Street
Suite 510
Chicago, Illinois 60604
Attn: David A. Gezon
36
<PAGE>
with a copy to:
Hopkins & Sutter
Three First National Plaza
Suite 4300
Chicago, Illinois 60602
Attn: Van E. Holkeboer
Any party may change the address to which notices to it are to be sent by
written notice given to the other parties hereto.
.1 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by the internal law, and not the law of conflicts, of
the State of New York, applicable to contracts made and wholly to be performed
in that state.
.2 Exhibits and Schedules. All exhibits and schedules hereto are an
----------------------
integral part of this Agreement.
.3 Exchange, Transfer, or Replacement of Securities. Upon surrender
------------------------------------------------
by any holder to the Company or Suncom of any certificate or instrument
evidencing securities of the Company or Suncom (collectively, the "securities"),
the Company at its own expense will issue in exchange therefor and deliver to
such holder, a new certificate(s) or instrument(s) evidencing such securities
that are being exchanged, in such denominations as may be requested by the
holder. Upon surrender for transfer of any Subordinated Note, the Company and
Suncom at their own expense will at the option of the Holder execute and
deliver, in the name of the transferee designated by the Holder, one or more
Subordinated Notes of the same type and of a like aggregate principal amount or
confirm its assumption of the obligations evidenced by the Subordinated Note.
All Subordinated Notes issued upon any exchange or transfer, upon issuance, will
be the legal and valid obligations of the Company and Suncom, evidencing the
same debt, and entitled to the same benefits as the Subordinated Notes
surrendered for transfer or exchange. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of any security, and
in case of any such loss, theft or destruction, upon delivery of an indemnity
agreement, or in case of any such mutilation, upon surrender and cancellation of
such security, the Company and Suncom, at their own expense will issue and
deliver to the holder a new security of like tenor, in lieu of such lost,
stolen, destroyed or mutilated security. Any new security issued in exchange
for, or upon the loss, theft or destruction of the security, all as provided
herein, shall be in substantially the form of the security so exchanged, lost,
stolen or destroyed.
.4 Final Agreement. This Agreement, together with the Subordinated
---------------
Note, and the other Operative Documents, constitutes the final agreement of the
parties concerning the matters referred to herein and therein.
.5 Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument.
37
<PAGE>
.6 Further Cooperation. At any time and from time to time, and at
-------------------
its own expense, the Company shall promptly execute and deliver all such
documents and instruments, and do all such acts and things, as the Holder may
reasonably request in order to further effect the purposes of this Agreement.
.7 Participations. The Holder may transfer, grant or assign
--------------
participations in an aggregate amount not to exceed 49% of its interest in the
Subordinated Note. In the case of any such participation, the participant shall
not have any rights under this Agreement or any other Operative Documents. At
the election of the Holder, and upon notification by the Holder to the Company
and Suncom that the Holder has transferred, granted or assigned a participation
in the Holder's interests in the Subordinated Note, such notice to identify the
participant and the amount and nature of the participation and payment
directions, the Company and Suncom shall, until further notice from the Holder,
pay any interest, principal payments or other distributions directly to such
participant in respect to such participation; provided, however, that no such
election may be made with respect to a participation for less than 15% and such
election shall not give the participant rights under this Agreement.
.8 WAIVERS. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT OR AS
-------
REQUIRED BY APPLICABLE LAW, EACH OF THE COMPANY AND SUNCOM WAIVES: (I)
PRESENTMENT, DEMAND AND PROTEST, AND NOTICE OF PRESENTMENT WITH RESPECT TO THIS
AGREEMENT OR THE SUBORDINATED NOTE, AND (II) ITS RIGHT TO A JURY TRIAL IN THE
EVENT OF ANY LITIGATION INSTITUTED IN RESPECT OF THIS AGREEMENT, THE
SUBORDINATED NOTE OR ANY OF THE OTHER OPERATIVE DOCUMENTS. EACH OF THE COMPANY
AND SUNCOM ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO
MIDWEST'S ENTERING INTO THIS AGREEMENT AND THAT MIDWEST IS RELYING UPON THE
FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH THE COMPANY AND SUNCOM. EACH OF
THE COMPANY AND SUNCOM WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE
FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY
WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
.9 CONSENT TO FORUM. AS PART OF THE CONSIDERATION FOR NEW VALUE
----------------
RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF
BUSINESS OF THE COMPANY OR SUNCOM, EACH OF THE COMPANY AND SUNCOM HEREBY
CONSENTS AND AGREES THAT THE UNITED STATES DISTRICT COURT SITTING IN CHICAGO,
ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY OR SUNCOM, ON THE ONE HAND, AND HOLDER, ON THE
OTHER HAND, PERTAINING TO, ARISING OUT OF, OR RELATING TO THIS AGREEMENT, THE
SUBORDINATED NOTE OR ANY OF THE OTHER OPERATIVE DOCUMENTS. EACH OF THE COMPANY
AND SUNCOM WAIVES ANY OBJECTION BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. EACH OF THE COMPANY AND SUNCOM HEREBY
--------------------
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
38
<PAGE>
COMPLAINT AND OTHER PROCESS MAY BE MADE BY COMPLYING WITH THE PROVISIONS FOR
GIVING NOTICE AS SET FORTH IN THIS AGREEMENT. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO AFFECT THE RIGHT OF ANY HOLDER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY ANY HOLDER
OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION
UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
[The balance of this page is intentionally blank.
Signature pages follow.]
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
AUDIO COMMUNICATIONS NETWORK, INC.
By:
-------------------------------
President
SUNCOM, INC.
By:
-------------------------------
President
MIDWEST MEZZANINE FUND, L.P.
By: TCC Mezzanine Management I,
L.P., its general partner
By: TCC Mezzanine Management, Inc.,
its general partner
By:
-------------------------------
David A. Gezon, President
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 5.1 Organization and Qualification
Schedule 5.7 Pro Forma Balance Sheet and Projected Financial Statements
Schedule 5.9 Absence of Certain Changes
Schedule 5.10 Contracts, Leases and Other Agreements
Schedule 5.11 Employment Relations, Arrangements and ERISA
Schedule 5.15 Litigation
Schedule 5.19 Geographic Areas
Schedule 7.2(a) Compliance Certificate
Schedule 10.1(m) Projected 80% Cumulative EBITDA
</TABLE>
<PAGE>
Schedule 7.2(a)
COMPLIANCE CERTIFICATE
----------------------
This Certificate is given by AUDIO COMMUNICATIONS NETWORK, INC. (the
"Company"), pursuant to Section 7.2(a) of that certain Note Assumption Agreement
(the "Note Agreement") between the Company, Suncom, Inc., and Midwest Mezzanine
Fund, L.P. (the "Purchaser"). By executing this certificate the chief financial
officer of the Company does hereby certify on behalf of the Company to Midwest
Mezzanine Fund, L.P. that:
(i) Attached hereto are the financial statements for the Company for the
monthly period ending __________, 19___, and such financial statements fairly
present the financial condition of the Company at the end of such period;
(ii) I have reviewed the terms of the Note Agreement and have made, or
caused to be made under my supervision, a review in reasonable detail of the
transactions and conditions of the Company and its Subsidiaries during the
accounting period covered by such financial statements;
(iii) Such review has not disclosed the existence during or at the end of
such accounting period, and I have no knowledge of the existence as of the date
hereof, of any condition or event that constitutes a Default or an Event of
Default, except as set forth in Exhibit A hereto which includes a description of
the nature and period of existence of such Default or an Event of Default and
what action the Company has taken, is undertaking and proposes to take with
respect thereto; and
(iv) The Company is in compliance with the covenants contained in Sections
9.11, 9.16, 9.17, and 9.18 of the Note Agreement, as demonstrated on Exhibit B
hereto, except as set forth below or described in Exhibit A.
IN WITNESS WHEREOF, the Company has caused this Certificate to be executed
by its chief financial officer this _____ day of ____________________, 199____.
AUDIO COMMUNICATIONS NETWORK, INC.
By:___________________________________
Its:__________________________________
<PAGE>
EXHIBIT A
---------
Defaults or Events of Default
A-1
<PAGE>
EXHIBIT B
---------
Calculation of Financial Covenants
B-1
<PAGE>
SCHEDULE 10.1(m)
----------------
80% Cumulative EBITDA
B-2
<PAGE>
Exhibit 99.2
The rights of the holder of this Note to receive payment are subject and
subordinate to the payment of all obligations of the maker or obligor to
Midlantic Bank, N.A., or its successors or assigns (the "Senior Lender"),
pursuant to the terms of a Debt and Warrant Subordination Agreement dated as of
September 14, 1995 by and among the Senior Lender, Midwest Mezzanine Fund, L.P.,
a Delaware limited partnership, and SunCom Communications L.L.C., a Delaware
limited liability company.
SUNCOM COMMUNICATIONS L.L.C.
SUBORDINATED NOTE
-----------------
September __, 1995
$4,750,000 New York, New York
SUNCOM COMMUNICATIONS L.L.C., a Delaware limited liability company
(the "Corporation"), for value received, hereby promises to pay to Midwest
Mezzanine Fund, L.P., a Delaware limited partnership ("Midwest Mezzanine"), its
successors and assigns, the principal sum of Four Million Seven Hundred Fifty
Thousand Dollars ($4,750,000) (the "Principal Sum"), and to pay interest
(computed on the basis of a 360-day year) on the unpaid principal balance hereof
from the date of this Note at a rate per annum equal to Twelve and 27/100's
percent (12.27%).
The Principal Sum shall be payable in quarterly installments on the
first day of January, April, July, and October (each a "Quarterly Payment
Date"), beginning January 1, 2000 in the amount of $250,000. Notwithstanding
anything herein to the contrary, the entire outstanding principal balance hereof
shall be due and payable in full on July 1, 2004. Interest shall be payable
quarterly in arrears on each Quarterly Payment Date, whether or not any
principal payment is then paid or owing, commencing October 1, 1995.
This Note is issued under and pursuant to the terms and provisions of
the Note and Warrant Purchase Agreement dated as of September 14, 1995 by and
between the Corporation and Midwest Mezzanine, as amended and in effect from
time to time (the "Note Purchase Agreement") and this Note and the holder hereof
is entitled to all of the rights and benefits provided for thereby or referred
to therein, to which Note Purchase Agreement reference is hereby made for a
statement thereof.
If any principal or installment of interest is not paid in full on the
due date thereof (taking into account any applicable grace periods) (whether by
maturity, prepayment or acceleration), and upon and during the continuance of
any Event of Default (as defined in the Note Purchase Agreement), the
outstanding principal balance of this Note and any overdue installment of
interest (to the extent permitted by applicable law) shall bear interest at a
rate equal to the lesser of (i) the highest rate allowed by applicable law and
(ii) Sixteen and 27/100's percent (16.27%) until such
<PAGE>
payment is paid in full or such Event of Default is cured or waived in
accordance with the terms of the Note Purchase Agreement.
All payments on or in respect of this Note, including principal,
interest and premium thereon, shall be made in such coin and currency of the
United States of America as at the time of payment is legal tender for the
payment of public and private debts by check mailed and addressed to the holder
hereof at 208 South LaSalle Street, Suite 510, Chicago, Illinois 60604, or, at
the option of the holder hereof, in such manner and at such other place in the
United States of America as the holder hereof, shall have designated to the
Corporation in writing pursuant to the provisions of the Note Purchase
Agreement. Whenever a payment to be made hereunder shall be due on a day which
is not a business day in Chicago, Illinois, such payment shall be made on the
next succeeding business day and such extension of time shall be included in the
computation of the payment of interest hereunder.
This Note may be prepaid pursuant to the terms set forth in the Note
Purchase Agreement. Any prepayment shall be applied first against any accrued
and unpaid expenses owing under the Note Purchase Agreement, then against any
premium or penalty that may be due on account of such prepayment, then against
accrued interest, and then against principal payments due thereafter in the
inverse order of their maturities. Under certain circumstances as specified in
the Note Purchase Agreement, the principal of this Note may be subject to
mandatory prepayments and may be declared due and payable in the manner and with
the effect provided in the Note Purchase Agreement.
The Corporation hereby waives diligence, presentment, demand, protest
and notice of every kind whatsoever. The failure of the holder hereof to
exercise any of its rights hereunder in any particular instance shall not
constitute a waiver of the same or of any other right in that or any subsequent
instance.
This Note shall be binding upon the Corporation, its successors, and
assigns, and shall inure to the benefit of the Midwest Mezzanine, its
successors, and assigns.
<PAGE>
This Note is a contract made under and governed by, and shall be
construed and enforced in accordance with, the laws of the State of New York,
without regard to conflict of laws principles.
SUNCOM COMMUNICATIONS L.L.C.
By: SunCom Management L.L.C., its manager
By: Global Communications I. L.L.C.
a managing member
By:
-------------------------------------
Mitchell Kleinhandler, a member
and
By: Creative Media Music Enterprises,
L.L.C., a managing member
By:
-------------------------------------
David Unger, a member
<PAGE>
Exhibit 99.3
$32,000,000 REVOLVING CREDIT FACILITY
CREDIT AGREEMENT
by and among
AUDIO COMMUNICATIONS NETWORK, INC.
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, As Agent
Dated as of May 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. CERTAIN DEFINITIONS..........................................................................................1
1.1 Certain Definitions......................................................................................1
1.2 Construction..........................................................................................16
1.2.1Number; Inclusion.16
1.2.2Determination.16
1.2.3Agent's Discretion and Consent.16
1.2.4Documents Taken As a Whole.17
1.2.5Headings.17
1.2.6Implied References to this Agreement.17
1.2.7Persons.17
1.2.8Modifications to Documents.17
1.2.9From, To and Through.17
1.2.10Shall; Will.17
1.3 Accounting Principles.................................................................................18
2. REVOLVING CREDIT FACILITY...................................................................................18
2.1 Revolving Credit Commitments..........................................................................18
2.1.1Automatic Reduction of Commitment.18
2.1.2Voluntary Reduction of Commitment.19
2.2 Nature of Banks' Obligations with Respect to Revolving Credit Loans...................................20
2.3 Commitment Fees.......................................................................................20
2.4 Revolving Credit Facility Fee.........................................................................20
2.5 Revolving Credit Loan Requests........................................................................20
</TABLE>
- - 1 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- -----
<S> <C> <C>
2.6 Making Revolving Credit Loans.........................................................................21
2.7 Revolving Credit Notes................................................................................21
2.8 Use of Proceeds.......................................................................................21
3. INTEREST RATES..............................................................................................22
3.1 Interest Rate Options.................................................................................22
3.1.1Revolving Credit Interest Rate Options.22
3.1.2Rate Quotations.22
3.2 Interest Periods......................................................................................22
3.2.1Ending Date and Business Day.23
3.2.2Amount of Borrowing Tranche.23
3.2.3Termination Before Expiration Date.23
3.2.4Renewals.23
3.3 Interest After Default................................................................................23
3.3.1Interest Rate.23
3.3.2Other Obligations.23
3.3.3Acknowledgment.24
3.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available........................24
3.4.1Unascertainable.24
3.4.2Illegality; Increased Costs; Deposits Not Available.24
3.4.3Agent's and Bank's Rights.25
3.5 Selection of Interest Rate Options....................................................................25
</TABLE>
- - 2 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- -----
<S> <C> <C>
4. PAYMENTS....................................................................................................25
4.1 Payments..............................................................................................25
4.2 Pro Rata Treatment of Banks...........................................................................26
4.3 Interest Payment Dates................................................................................26
4.4 Voluntary Prepayments.................................................................................26
4.4.1Right to Prepay.26
4.5 Mandatory Prepayments.................................................................................27
4.5.1Excess Cash Flow.27
4.5.2Sale of Assets.28
4.5.3Equity Infusion.28
4.5.4Reduction of Commitment.28
4.5.5Application Among Interest Rate Options.28
4.6 Additional Compensation in Certain Circumstances......................................................29
4.6.1Increased Costs or Reduced Return Resulting from Taxes, Reserves, Capital
Adequacy Requirements, Expenses, Etc.29
4.6.2Indemnity.30
5. REPRESENTATIONS AND WARRANTIES..............................................................................30
5.1 Representations and Warranties........................................................................30
5.1.1Organization and Qualification.30
5.1.2Capitalization and Ownership.31
5.1.3Subsidiaries.31
5.1.4Power and Authority.31
5.1.5Validity and Binding Effect.32
5.1.6No Conflict.32
</TABLE>
- - 3 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- -----
<S> <C> <C>
5.1.7Litigation.32
5.1.8Title to Properties.32
5.1.9Financial Statements.33
5.1.10Use of Proceeds; Margin Stock.33
5.1.11Full Disclosure.34
5.1.12Taxes.34
5.1.13Consents and Approvals.34
5.1.14No Event of Default; Compliance with Instruments.34
5.1.15Patents, Trademarks, Copyrights, Licenses, Etc.35
5.1.16Security Interests.36
5.1.17Contract and License Collateral36
5.1.18Status of the Pledged Collateral.36
5.1.19Insurance.37
5.1.20Compliance with Laws.37
5.1.21Material Contracts; Burdensome Restrictions.37
5.1.22Investment Companies; Regulated Entities.37
5.1.23Plans and Benefit Arrangements.38
5.1.24Employment Matters.39
5.1.25Environmental Matters.39
5.1.26Senior Debt Status.40
5.1.27Scope of Business.40
5.2 Updates to Schedules..................................................................................41
6. CONDITIONS OF LENDING.......................................................................................41
6.1 First Loans...........................................................................................41
6.1.1Officer's Certificate.41
6.1.2Secretary's Certificate.42
6.1.3Delivery of Loan Documents.42
6.1.4Opinion of Counsel.42
6.1.5Legal Details.42
6.1.6Payment of Fees.43
</TABLE>
- - 4 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- -----
<S> <C> <C>
6.1.7Subordinated Lender's Consent.43
6.1.8Consents.43
6.1.9Officer's Certificate Regarding MACs.43
6.1.10No Violation of Laws.43
6.1.11No Actions or Proceedings.44
6.1.12Insurance Policies; Certificates of Insurance; Endorsements.44
6.1.13Schell Purchase.44
6.1.14Filing Receipts; Payoff.44
6.1.15Subscriber Reports.44
6.2 Each Additional Loan..................................................................................44
7. COVENANTS...................................................................................................45
7.1 Affirmative Covenants.................................................................................45
7.1.1Preservation of Existence, Etc.45
7.1.2Payment of Liabilities, Including Taxes, Etc.45
7.1.3Maintenance of Insurance.46
7.1.4Maintenance of Properties and Leases.47
7.1.5Maintenance of Patents, Trademarks, Etc.47
7.1.6Visitation Rights.47
7.1.7Keeping of Records and Books of Account.47
7.1.8Plans and Benefit Arrangements.47
7.1.9Compliance with Laws.48
7.1.10Use of Proceeds.48
7.1.11Further Assurances.48
7.1.12Subordination of Intercompany Loans.48
7.1.13Maintenance of Accounts at PNC Bank.48
7.1.14Interest Rate Protection48
7.2 Negative Covenants....................................................................................49
7.2.1Indebtedness.49
7.2.2Liens.49
</TABLE>
- - 5 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- -----
<S> <C> <C>
7.2.3Guaranties.49
7.2.4Loans and Investments.50
7.2.5Dividends and Related Distributions.50
7.2.6Liquidations, Mergers, Consolidations, Acquisitions.50
7.2.7Dispositions of Assets or Subsidiaries.51
7.2.8Affiliate Transactions; Advances.52
7.2.9Subsidiaries, Partnerships and Joint Ventures.52
7.2.10Continuation of or Change in Business.52
7.2.11Plans and Benefit Arrangements.52
7.2.12Fiscal Year.53
7.2.13Issuance of Stock.53
7.2.14Changes in Documents; Restrictive Agreements.53
7.2.15Capital Expenditures and Leases.54
7.2.16Minimum Fixed Charge Coverage Ratio.54
7.2.17Maximum Leverage Ratio.55
7.2.18Minimum Interest Coverage Ratio.55
7.2.19Attrition Limitations.55
7.3 Reporting Requirements................................................................................55
7.3.1Quarterly Financial Statements.56
7.3.2Annual Financial Statements.56
7.3.3Certificate of the Borrower.56
7.3.4Notice of Default.57
7.3.5Notice of Litigation.57
7.3.6Certain Events.57
7.3.7Budgets, Forecasts, Other Reports and Information.58
7.3.8Notices Regarding Plans and Benefit Arrangements.58
8. DEFAULT.....................................................................................................60
8.1 Events of Default.....................................................................................60
8.1.1Payments Under Loan Documents.60
8.1.2Breach of Warranty.60
</TABLE>
- - 6 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- -----
<S> <C> <C>
8.1.3Breach of Covenants, etc.60
8.1.4Breach of Other Covenants.60
8.1.5Defaults in Other Agreements or Indebtedness.60
8.1.6Final Judgments or Orders.61
8.1.7Loan Document Unenforceable.61
8.1.8Uninsured Losses; Proceedings Against Assets.61
8.1.9Notice of Lien or Assessment.61
8.1.10Insolvency.62
8.1.11Events Relating to Plans and Benefit Arrangements.62
8.1.12Cessation of Business.62
8.1.13Change of Control.62
8.1.14Involuntary Proceedings.62
8.1.15Voluntary Proceedings.63
8.2 Consequences of Event of Default......................................................................63
8.2.1Events of Default Other Than Bankruptcy, Insolvency or Reorganization
Proceedings.63
8.2.2Bankruptcy, Insolvency or Reorganization Proceedings.63
8.2.3Set-off.64
8.2.4Suits, Actions, Proceedings.64
8.2.5Application of Proceeds.64
8.2.6Other Rights and Remedies.65
8.3 Notice of Sale........................................................................................65
9. THE AGENT...................................................................................................65
9.1 Appointment...........................................................................................65
9.2 Delegation of Duties..................................................................................66
9.3 Nature of Duties; Independent Credit Investigation....................................................66
</TABLE>
- - 7 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- -----
<S> <C> <C>
9.4 Actions in Discretion of Agent; Instructions From the Banks...........................................66
9.5 Reimbursement and Indemnification of Agent by the Borrower............................................67
9.6 Exculpatory Provisions; Limitation of Liability.......................................................67
9.7 Reimbursement and Indemnification of Agent by Banks...................................................68
9.8 Reliance by Agent.....................................................................................69
9.9 Notice of Default.....................................................................................69
9.10 Notices...........................................................................................69
9.11 Banks in Their Individual Capacities..............................................................69
9.12 Holders of Notes..................................................................................70
9.13 Equalization of Banks.............................................................................70
9.14 Successor Agent...................................................................................70
9.15 Agent's Fee.......................................................................................71
9.16 Availability of Funds.............................................................................71
9.17 Calculations......................................................................................72
9.18 Beneficiaries.....................................................................................72
10. MISCELLANEOUS.........................................................................................72
</TABLE>
- - 8 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- -----
<S> <C> <C>
10.1 Modifications, Amendments or Waivers..............................................................72
10.1.1Increase of Commitment; Extension or Expiration Date.73
10.1.2Extension of Payment; Reduction of Principal Interest or Fees; Modification of
Terms of Payment.73
10.1.3Release of Collateral or Guarantor.73
10.1.4Miscellaneous73
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.........................................74
10.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes.................................74
10.4 Holidays..........................................................................................75
10.5 Funding by Branch, Subsidiary or Affiliate........................................................75
10.5.1Notional Funding.75
10.5.2Actual Funding.75
10.6 Notices...........................................................................................76
10.7 Severability......................................................................................76
10.8 Governing Law.....................................................................................76
10.9 Prior Understanding...............................................................................76
10.10 Duration; Survival................................................................................77
10.11 Successors and Assigns............................................................................77
10.12 Confidentiality...................................................................................78
10.13 Counterparts......................................................................................78
</TABLE>
- - 9 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- -----
<S> <C> <C>
10.14 Agent's or Bank's Consent.........................................................................78
10.15 Exceptions........................................................................................79
10.16 Consent To Forum; Waiver Of Jury Trial............................................................79
10.17 Tax Withholding Clause............................................................................79
10.18 Joinder of Guarantors.............................................................................80
</TABLE>
- - 10 -
<PAGE>
<TABLE>
<CAPTION>
LIST OF SCHEDULES AND EXHIBITS
<S> <C>
SCHEDULE
SCHEDULE 1.1(B) - COMMITMENTS OF BANKS AND ADDRESSES FOR
NOTICES
SCHEDULE 1.1(M) - MUZAK LICENSES
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 5.1.1 - QUALIFICATIONS TO DO BUSINESS
SCHEDULE 5.1.2 - CAPITALIZATION
SCHEDULE 5.1.3 - SUBSIDIARIES
SCHEDULE 5.1.7 - LITIGATION
SCHEDULE 5.1.8 - OWNED AND LEASED REAL PROPERTY
SCHEDULE 5.1.13 - CONSENTS AND APPROVALS
SCHEDULE 5.1.15 - PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES,
ETC.
SCHEDULE 5.1.18 - PARTNERSHIP AGREEMENTS; LLC AGREEMENTS
SCHEDULE 5.1.19 - INSURANCE POLICIES
SCHEDULE 5.1.21 - MATERIAL CONTRACTS
SCHEDULE 5.1.23 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 5.1.25 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 5.1.27.1 - LOAN PARTIES' TERRITORIES
SCHEDULE 5.1.27.2 - NAMES USED BY LOAN PARTIES AND SUNCOM
SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS
SCHEDULE 7.2.8 - CERTAIN EMPLOYMENT AND OPTION AGREEMENTS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(G)(1) - GUARANTOR JOINDER
EXHIBIT 1.1(I)(1) - INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT 2.5 - LOAN REQUEST
EXHIBIT 7.3.3 - QUARTERLY COMPLIANCE CERTIFICATE
</TABLE>
- 11 -
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of May 30, 1997 and is made by and
among AUDIO COMMUNICATIONS NETWORK, INC., a Florida corporation (the
"Borrower"), each of the Guarantors (as hereinafter defined), the BANKS (as
hereinafter defined), and PNC BANK, NATIONAL ASSOCIATION, in its capacity as
agent for the Banks under this Agreement (hereinafter referred to in such
capacity as the "Agent").
WITNESSETH:
WHEREAS, the Borrower has requested the Banks to provide a revolving
credit facility to the Borrower in an aggregate principal amount not to exceed
$32,000,000; and
WHEREAS, the revolving credit facility shall be used for the
Borrower's working capital and general corporate purposes; and
WHEREAS, the Banks are willing to provide such credit upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1.CERTAIN DEFINITIONS
-------------------
1.1 Certain Definitions.
-------------------
In addition to words and terms defined elsewhere in this Agreement,
the following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
Acquisition Subsidiary shall mean Suncom, Inc., a Delaware corporation
----------------------
and a wholly-owned Subsidiary of the Borrower which will effect the Suncom Asset
Purchase.
Affiliate as to any Person shall mean any other Person (i) which
---------
directly or indirectly controls, is controlled by, or is under common control
with such Person, (ii) which beneficially owns or holds 5% or more of any class
of the voting or other equity interests of such Person, or (iii) 5% or more of
any class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
1
<PAGE>
Agent shall mean PNC Bank, National Association, and its successors and
-----
assigns.
Agent's Fee shall have the meaning assigned to that term in Section
-----------
9.15.
Agent's Letter shall have the meaning assigned to that term in Section
--------------
9.15.
Agreement shall mean this Credit Agreement, as the same may be
---------
supplemented or amended from time to time, including all schedules and exhibits.
Annual Statements shall have the meaning assigned to that term in
-----------------
Section 5.1.9(i).
Applicable Margin shall mean, at any time during which the Borrower's
-----------------
Leverage Ratio falls within the ranges set forth below, and with respect to
Base-Rate Loans or Euro-Rate Loans, the amounts set forth below opposite such
ranges for such types of Loans:
<TABLE>
<CAPTION>
Applicable Margin
- -----------------
Leverage Ratio Base-Rate Loans Euro-Rate Loans
-------------- --------------- ---------------
<S> <C> <C>
greater than 3.5:1 1.75% 3.25%
greater than 3.0:1 but less
than or equal to 3.5:1 1.50% 3.00%
greater than 2.5:1 but less
than or equal to 3.0:1 1.25% 2.75%
greater than 2.0:1 but
less than or equal to 2.5:1 1.00% 2.50%
less than or equal to 2.0:1 0.50% 2.00%
</TABLE>
Notwithstanding the foregoing table, the Applicable Margin from the Closing Date
through receipt of the September 30, 1997 financial statements shall be 1.75%
for Base-Rate Loans and 3.25% for Euro-Rate Loans.
Assignment and Assumption Agreement shall mean an Assignment and
-----------------------------------
Assumption Agreement by and among a Purchasing Bank, a Transferor Bank and the
Agent, as Agent and on behalf of the remaining Banks, substantially in the form
of Exhibit 1.1(A).
--------------
2
<PAGE>
Attrition Rate shall mean in respect of customer locations of the Loan
--------------
Parties whose subscription agreements may, without violating the provisions of
such agreements, be terminated or not renewed in any fiscal quarter, the ratio,
expressed as a percentage, of (x) the number of such locations which do
terminate or are not renewed to (y) the number of all such locations, excluding
from both (x) and (y) those locations billed by the Borrower as an accommodation
to other MUZAK affiliates and franchisees under regional or national account
programs.
Authorized Officer shall mean those individuals, designated by written
------------------
notice to the Agent from the Borrower, authorized to execute notices, reports
and other documents on behalf of the Loan Parties required hereunder. The
Borrower may amend such list of individuals from time to time by giving written
notice of such amendment to the Agent.
Banks shall mean the financial institutions named on Schedule 1.1(B) and
-----
their respective and assigns as permitted hereunder, each of which is referred
to herein as a Bank.
Base Rate shall mean the greater of (i) the interest rate per annum
---------
announced from time to time by the Agent at its Principal Office as its then
prime rate, which rate may not be the lowest rate then being charged commercial
borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus .5% per
annum.
Benefit Arrangement shall mean at any time an "employee benefit plan,"
-------------------
within the meaning of Section 3(3) of ERISA, which is neither a Plan nor a
Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to by any member of the ERISA Group.
Borrower shall mean Audio Communications Network, Inc., a corporation
--------
organized and existing under the laws of the State of Florida.
Borrowing Date shall mean, with respect to any Loan, the date for the
--------------
making thereof or the renewal or conversion thereof at or to the same or a
different Interest Rate Option, which shall be a Business Day.
Borrowing Tranche shall mean specified portions of Loans outstanding as
-----------------
follows: (i) any Loans to which a Euro-Rate Option applies which become subject
to the same Interest Rate Option under the same Loan Request by the Borrower and
which have the same Interest Period shall constitute one Borrowing Tranche, and
(ii) all Loans to which a Base Rate Option applies shall constitute one
Borrowing Tranche.
Business Day shall mean any day other than a Saturday or Sunday or a
------------
legal holiday on which commercial banks are authorized or required to be closed
for business in Philadelphia, Pennsylvania.
Closing Date shall mean the date hereof.
------------
Collateral shall mean the Pledged Collateral, the Contract and License
----------
Collateral and the UCC Collateral.
3
<PAGE>
Commitment Fee shall have the meaning assigned to that term in Section
--------------
2.3.
Conditional MUZAK Assignment shall mean the Conditional Assignment of
----------------------------
MUZAK License Agreements dated the Closing Date by and among the Company, the
Agent and MUZAK relating to the MUZAK Licenses.
Contract and License Collateral shall mean the property of the Loan
-------------------------------
Parties in which security interests are to be granted under the Conditional
MUZAK Assignment.
Defaulting Bank shall have the meaning assigned to that term in Section
---------------
9.16.2.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money
-----------------------------
of the United States of America.
EBITDA for any period of determination shall mean (i) the sum of net
------
income, depreciation, amortization, other non-cash charges to net income, cash
interest expense, income taxes paid, Schell Agreement Payments and non-recurring
expenses which do not exceed in the aggregate during the period of determination
$500,000 minus (ii) nonrecurring extraordinary income and non-cash credits to
net income, in each case of the Borrower and its Subsidiaries for such period
determined and consolidated in accordance with GAAP.
Environmental Complaint shall mean any written complaint setting forth a
-----------------------
cause of action for personal or property damage or natural resource damage or
equitable relief, order, notice of violation, citation, request for information
issued pursuant to any Environmental Laws by an Official Body, subpoena or other
written notice of any type relating to, arising out of, or issued pursuant to,
any of the Environmental Laws or any Environmental Conditions, as the case may
be.
Environmental Conditions shall mean any conditions of the environment,
------------------------
including the workplace, the ocean, natural resources (including flora or
fauna), soil, surface water, groundwater, any actual or potential drinking water
supply sources, substrata or the ambient air, relating to or arising out of, or
caused by, the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, emptying, discharging,
injecting, escaping, leaching, disposal, dumping, threatened release or other
management or mismanagement of Regulated Substances resulting from the use of,
or operations on, any Property.
Environmental Laws shall mean all federal, state, local and foreign Laws
------------------
and regulations, including permits, licenses, authorizations, bonds, orders,
judgments, and consent decrees issued, or entered into, pursuant thereto,
relating to pollution or protection of human health or the environment or
employee safety in the workplace.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
-----
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
4
<PAGE>
ERISA Group shall mean, at any time, the Borrower and all other entities
-----------
which, together with the Borrower, are treated as a single employer under
Section 414 of the Internal Revenue Code.
Euro-Rate shall mean, with respect to the Loans comprising any Borrowing
---------
Tranche to which the Euro-Rate Option applies for any Interest Period, the
interest rate per annum determined by the Agent by dividing (the resulting
quotient rounded upward to the nearest 1/100th of 1% per annum) (i) the rate of
interest determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the average of
the London interbank offered rates of interest per annum for Dollars set forth
on Telerate display page 3750 or such other display page on the Telerate System
as may replace such page to evidence the average of rates quoted by banks
designated by the British Bankers' Association (or appropriate successor or, if
the British Bankers' Association or its successor ceases to provide such quotes,
a comparable replacement determined by the Agent), two (2) Business Days prior
to the first day of such Interest Period for an amount comparable to such
Borrowing Tranche and having a borrowing date and a maturity comparable to such
Interest Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve
Percentage. The Euro-Rate may also be expressed by the following formula:
Euro-Rate =Telerate page 3750 quoted by British Bankers'
Association or appropriate successor
------------------------------------
1.00 - Euro-Rate Reserve Percentage
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option
outstanding on the effective date of any change in the Euro-Rate Reserve
Percentage as of such effective date. The Agent shall give prompt notice to the
Borrower of the Euro-Rate as determined or adjusted in accordance herewith,
which determination shall be conclusive absent manifest error.
Euro-Rate Reserve Percentage shall mean the maximum percentage
----------------------------
(expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined
by the Agent which is in effect during any relevant period, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities") of a member bank in such System.
Event of Default shall mean any of the events described in Section 8.1
----------------
and referred to therein as an "Event of Default."
Excess Cash Flow shall be computed as of the close of each fiscal year
----------------
by taking the difference between EBITDA for such fiscal year and Fixed Charges
for such fiscal year. All determinations of Excess Cash Flow shall be based on
the immediately preceding fiscal year and shall be made following the delivery
by the Borrower to the Agent of the Borrower's audited financial statements for
such preceding year.
Existing Bank Indebtedness shall mean (i) as to the Borrower,
--------------------------
Indebtedness owing pursuant to the Second Amended and Restated Loan Agreement
dated December 21, 1995 effective January 2, 1996
5
<PAGE>
with Sun Trust Bank, Central Florida, N.A., the principal amount outstanding of
which as of March 31, 1997 was $10,000,000, and (ii) as to Suncom, Indebtedness
owing pursuant to the Term Loan Agreement dated September 14, 1995 with
Midlantic Bank, National Association (predecessor to PNC Bank), as amended, the
principal amount outstanding of which as of March 31, 1997 was $14,000,000.
Expiration Date shall mean, with respect to the Revolving Credit
---------------
Commitments, May 15, 2004.
FCC shall mean the Federal Communications Commission.
---
Facility Fees shall mean the fees referred to in Section 2.4.
-------------
Federal Funds Effective Rate for any day shall mean the rate per annum
----------------------------
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
--------
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
Financial Projections shall have the meaning assigned to that term in
---------------------
Section 5.1.9(ii).
Fixed Charge Coverage Ratio shall mean the ratio of EBITDA to
---------------------------
Fixed Charges.
Fixed Charges shall mean for any period of determination the sum of cash
-------------
interest expense, income taxes paid, scheduled reductions of the Commitments (to
the extent that outstanding Senior Debt exceeds the Commitments), Schell
Agreement Payments, scheduled payments of principal under Subordinated Debt (as
adjusted for prepayments), capital expenditures and payments under capitalized
leases, in each case of the Borrower and its Subsidiaries for such period
determined and consolidated in accordance with GAAP.
GAAP shall mean generally accepted accounting principles as are in
----
effect from time to time, subject to the provisions of Section 1.3, and applied
on a consistent basis both as to classification of items and amounts.
Guarantor shall mean each of the parties to this Agreement which is
---------
designated as a "Guarantor" on the signature page hereof (including each
Subsidiary of the Borrower) and each other Person which joins this Agreement as
a Guarantor after the date hereof pursuant to Section 10.18.
Guaranty of any Person shall mean any obligation of such Person
--------
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any agreement to
indemnify or hold harmless any other Person, any performance bond or other
suretyship arrangement and any other form of assurance against loss, except
endorsement of negotiable or
6
<PAGE>
other instruments for deposit or collection in the ordinary course of
business.
Guaranty Agreement shall mean the Guaranty and Suretyship Agreement
------------------
executed and delivered by each of the Guarantors to the Agent for the benefit
of the Banks.
Historical Statements shall have the meaning assigned to that term in
---------------------
Section 5.1.9(i).
Indebtedness shall mean, as to any Person at any time, any and all
------------
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management device,
(iv) any other transaction (including forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are either (x)
not more than ninety (90) days past due and do not exceed $250,000 outstanding
at any one time (net of Indebtedness owing to the Borrower or any other Loan
Party by such Person) or otherwise (y) not more than sixty (60) days past due),
or (v) any Guaranty of Indebtedness for borrowed money.
Ineligible Security shall mean any security which may not be
-------------------
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
Insolvency Proceeding shall mean, with respect to any Person, (a) case,
---------------------
action or proceeding with respect to such Person (i) before any court or any
other Official Body under any bankruptcy, insolvency, reorganization or other
similar Law now or hereafter in effect, or (ii) for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of any Loan Party or otherwise relating to liquidation,
dissolution, winding-up or relief of such Person, or (b) any general assignment
for the benefit of creditors, composition, marshaling of assets for creditors,
or other, similar arrangement in respect of such Person's creditors generally or
any substantial portion of its creditors; undertaken under any Law.
Intercompany Subordination Agreement shall mean a Subordination
------------------------------------
Agreement among the Loan Parties in the form attached hereto as Exhibit
-------
1.1(I)(1).
- ---------
Interest Coverage Ratio shall mean the ratio of (x) EBITDA to (y) cash
-----------------------
interest expense.
Interest Period shall have the meaning assigned to such term in
---------------
Section 3.2.
Interest Rate Option shall mean any Euro-Rate Option or Base Rate
--------------------
Option.
Interim Statements shall have the meaning assigned to that term in
------------------
Section 5.1.9(i).
7
<PAGE>
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as
---------------------
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
Labor Contracts shall mean all employment agreements, employment
---------------
contracts, collective bargaining agreements and other agreements among any Loan
Party or Subsidiary of a Loan Party and its employees.
Law shall mean any law (including common law), constitution, statute,
---
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body and including without
limitation any of the foregoing issued by the FCC.
Leverage Ratio shall mean the ratio (x) of the Borrower's Senior Debt to
--------------
(y) EBITDA.
Lien shall mean any mortgage, deed of trust, pledge, lien, security
----
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
LLC Interests shall have the meaning given to such term in Section
-------------
5.1.3.
Loan Documents shall mean this Agreement, the Agent's Letter, the
--------------
Conditional MUZAK Assignment, the Subordination Agreement, the Notes, the Pledge
Agreement, the Security Agreement, and any other instruments, certificates or
documents delivered or contemplated to be delivered hereunder or thereunder or
in connection herewith or therewith, as the same may be supplemented or amended
from time to time in accordance herewith or therewith, and Loan Document shall
-------------
mean any of the Loan Documents.
Loan Parties shall mean the Borrower and the Guarantors.
------------
Loan Request shall have the meaning given to such term in Section 2.5.
------------
Mandatory Prepayment Date shall have the meaning assigned to that term in
-------------------------
Section 4.5.1.
Material Adverse Change shall mean any set of circumstances or events which
-----------------------
(a) has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of this Agreement or any other
Loan Document, (b) is or could reasonably be expected to be material and adverse
to the business, properties, assets, financial condition, results of operations
or prospects of the Loan Parties taken as a whole, (c) impairs materially or
could reasonably be expected to impair materially the ability of the Loan
Parties taken as a whole to duly and punctually pay or perform its material
Indebtedness, or (d) impairs materially or could reasonably be expected to
impair materially the ability of the Agent or any of the Banks, to the extent
permitted, to enforce their legal remedies pursuant to this Agreement or any
other Loan Document.
8
<PAGE>
Month, with respect to an Interest Period under the Euro-Rate Option,
-----
shall mean the interval between the days in consecutive calendar months
numerically corresponding to the first day of such Interest Period. If any Euro-
Rate Interest Period begins on a day of a calendar month for which there is no
numerically corresponding day in the month in which such Interest Period is to
end, the final month of such Interest Period shall be deemed to end on the last
Business Day of such final month.
Multiemployer Plan shall mean any employee benefit plan which is a
------------------
"Multiemployer Plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrower or any member of the ERISA Group is then making or accruing
an obligation to make contributions.
Multiple Employer Plan shall mean a Plan which has two or more
----------------------
contributing sponsors (including the Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
MUZAK shall mean MUZAK Limited Partnership, a Delaware limited
-----
partnership.
MUZAK Licenses shall mean the licenses listed on Schedule 1.1(M).
-------------- ---------------
Notices shall have the meaning assigned to that term in Section 10.6.
-------
Obligation shall mean any obligation or liability of any of the Loan
----------
Parties to the Agent or any of the Banks, howsoever created, arising or
evidenced, direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this Agreement,
the Notes, the Agent's Letter, any other Loan Document or under any interest
rate protection arrangements or fixed rate Indebtedness referred to in Section
7.1.14.
Official Body shall mean any national, federal, state, local or other
-------------
government or political subdivision or any agency, authority, bureau, central
bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
Partnership Interests shall have the meaning given to such term in
---------------------
Section 5.1.3.
PBGC shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Investments shall mean:
---------------------
(i)direct obligations of the United States of America or any agency or
instrumentality thereof or obligations backed by the full faith and credit of
the United States of America maturing in twelve (12) months or less from the
date of acquisition;
(ii)commercial paper maturing in 180 days or less rated not lower than A-1,
by Standard & Poor's or P-1 by Moody's Investors Service, Inc. on the date of
acquisition.
(iii)demand deposits, time deposits or certificates of deposit maturing
within one year in
9
<PAGE>
commercial banks whose obligations are rated A-1, A or the equivalent or better
by Standard & Poor's on the date of acquisition; and
(iv)the ownership of the Acquisition Subsidiary and other of Borrower's
Subsidiaries.
Permitted Liens shall mean:
---------------
(i)Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business and which are not yet due and payable;
(ii)Pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation, or to participate in any fund in
connection with workmen's compensation, unemployment insurance, old-age pensions
or other social security programs;
(iii)Liens of mechanics, materialmen, warehousemen, carriers, or other like
Liens, securing obligations incurred in the ordinary course of business that are
not yet due and payable and Liens of landlords securing obligations to pay lease
payments that are not yet due and payable or in default;
(iv)Good-faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, not in excess of the aggregate amount
due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(v)Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs the
use of such property or the value thereof, and none of which is violated in any
material respect by existing or proposed structures or land use;
(vi)Liens and security interests in favor of the Agent for the benefit
of the Banks or otherwise to secure any of the Obligations;
(vii)Liens on property leased by any Loan Party or Subsidiary of a
Loan Party under capital and operating leases permitted in Section 7.2.15
securing obligations of such Loan Party or Subsidiary to the lessor under such
leases;
(viii)Any Lien existing on the date of this Agreement and described on
Schedule 1.1(P), provided that the principal amount secured thereby is not
hereafter increased, and no additional assets become subject to such Lien;
(ix)Purchase Money Security Interests, provided that the aggregate amount
of loans and deferred payments secured by such Purchase Money Security Interests
shall not exceed $1,000,000 (excluding for the purpose of this computation any
loans or deferred payments secured by Liens described on Schedule 1.1(P)) to the
---------------
extent such Purchase Money Security Interests do not have debt service in excess
of $250,000 per year; and
10
<PAGE>
(x)The following, (A) if the validity or amount thereof is being
contested in good faith by stayed and continue to be stayed or (B) if a final
judgment is entered and such judgment is discharged, stayed or bonded within
thirty (30) days of entry, and in either case they do not materially affect the
Collateral or, in the aggregate, materially impair the ability of any Loan Party
to perform its Obligations hereunder or under the other Loan Documents:
(1)Claims or Liens for taxes, assessments or charges due and payable
and subject to interest or penalty, provided that the applicable Loan Party
maintains such reserves or other appropriate provisions as shall be
required by GAAP and pays all such taxes, assessments or charges forthwith
upon the commencement of proceedings to foreclose any such Lien;
(2)Claims, Liens or encumbrances upon, and defects of title to, real
or personal property other than the Collateral, including any attachment of
personal or real property or other legal process prior to adjudication of a
dispute on the merits; or
(3)Claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsentual Liens.
(4)Liens resulting from final judgments or orders described in
Section 8.1.6.
Person shall mean any individual, corporation, partnership, limited
------
liability company, association, joint-stock company, trust, unincorporated
organization, joint venture, government or political subdivision or agency
thereof, or any other entity.
Plan shall mean at any time an employee pension benefit plan
----
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and is maintained by any member
of the ERISA Group for employees of any member of the ERISA Group.
Pledge Agreement shall mean the Pledge Agreement dated the Closing
----------------
Date by and among the Borrower and the Agent on behalf of the Banks dated the
Closing Date in respect of the Pledged Collateral.
Pledged Collateral shall mean the Subsidiary Shares, the Partnership
------------------
Interests and LLC Interests owned by the Borrower in all of its Subsidiaries,
all of which shall be subject to the Pledge Agreement.
PNC Bank shall mean PNC Bank, National Association, its successors
--------
and assigns.
Potential Default shall mean any event or condition which with notice,
-----------------
passage of time or a determination by the Agent or the Required Banks, or any
combination of the foregoing, would constitute an Event of Default.
Principal Office shall mean the main banking office of the Agent in
----------------
Philadelphia, Pennsylvania.
11
<PAGE>
Prior Security Interest shall mean a valid and enforceable perfected
-----------------------
first-priority security interest under the Uniform Commercial Code in the UCC
Collateral and the Pledged Collateral and the Contract and License Collateral
which is subject only to Liens for taxes not yet due and payable to the extent
such prospective tax payments are given priority by statute or Purchase Money
Security Interests as permitted hereunder.
Prohibited Transaction shall mean any prohibited transaction as defined
----------------------
in Section 4975(c) of the Internal Revenue Code or Section 406(a) or (b) of
ERISA which is not exempt under Section 4975(d) of the Internal Revenue Code or
Section 408 of ERISA and for which neither an individual nor a class exemption
has been issued by the United States Department of Labor.
Property shall mean all real property, both owned and leased, of any Loan
--------
Party or Subsidiary of a Loan Party.
Purchase Money Security Interest shall mean Liens upon tangible personal
--------------------------------
property securing loans to any Loan Party or Subsidiary of a Loan Party or
deferred payments by such Loan Party or Subsidiary for the purchase of such
tangible personal property.
Purchasing Bank shall mean a Bank which becomes a party to this
---------------
Agreement by executing an Assignment and Assumption Agreement.
Ratable Share shall mean the proportion that a Bank's Commitment bears
-------------
to the Commitments of all of the Banks.
Reference Bank shall mean PNC Bank.
--------------
Regulated Substances shall mean any substance, including any solid,
--------------------
liquid, semisolid, gaseous, thermal, thoriated or radioactive material, refuse,
garbage, wastes, chemicals, petroleum products, by-products, co-products,
impurities, dust, scrap, heavy metals, defined as a "hazardous substance,"
"pollutant," "pollution," "contaminant," "hazardous or toxic substance,"
"extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous
waste," "industrial waste," "residual waste," "solid waste," "municipal waste,"
"mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste," or
"regulated substance" or any related materials, substances or wastes as now or
hereafter defined pursuant to any Environmental Laws, ordinances, rules,
regulations or other directives of any Official Body, the generation,
manufacture, extraction, processing, distribution, treatment, storage, disposal,
transport, recycling, reclamation, use, reuse, spilling, leaking, dumping,
injection, pumping, leaching, emptying, discharge, escape, release or other
management or mismanagement of which is regulated by the Environmental Laws.
Regulation U shall mean Regulation U, T, G or X as promulgated by the
------------
Board of Governors of the Federal Reserve System, as amended from time to time.
Reportable Event shall mean a reportable event described in Section
----------------
4043(b) of ERISA and regulations thereunder with respect to a Plan or
Multiemployer Plan.
12
<PAGE>
Required Banks shall mean:
--------------
(i)if there are no Loans outstanding, Banks whose Commitments aggregate
at least 66b% of the Commitments of all of the Banks, or
(ii)if there are Loans outstanding, any Bank or group of Banks if the
Loans of such Banks then outstanding aggregates at least 66b% of the total
principal amount of all of the Loans then outstanding.
Revolving Credit Base Rate Option or Base Rate Option shall mean the option
--------------------------------- ----------------
of the Borrower to have Revolving Credit Loans bear interest at the rate and
under the terms and conditions set forth in Section 3.1.1(i).
Revolving Credit Commitment or Commitment shall mean, as to any Bank at
--------------------------- ----------
any time, the amount initially set forth opposite its name on Schedule 1.1(B) in
---------------
the column labeled "Amount of Commitment for Revolving Credit Loans," and
thereafter on Schedule I to the most recent Assignment and Assumption Agreement,
----------
and Revolving Credit Commitments or Commitments shall mean the aggregate
-------------------------------------------
Revolving Credit Commitments of all of the Banks.
Revolving Credit Euro-Rate Option or Euro-Rate Option shall mean the
--------------------------------- ----------------
option of the Borrower to have Revolving Credit Loans bear interest at the rate
and under the terms and conditions set forth in Section 3.1.1(ii).
Revolving Credit Loans or Loans shall mean collectively and Revolving
---------------------- ----- ---------
Credit Loan shall mean separately all Revolving Credit Loans or any Revolving
- -----------
Credit Loan made by the Banks or one of the Banks to the Borrower pursuant to
Section 2.1.
Revolving Credit Notes or Notes shall mean collectively and Revolving
---------------------- -----
Credit Note or Note shall mean separately all the Revolving Credit Notes of the
Borrower in the form of Exhibit 1.1(R) evidencing the Revolving Credit Loans
--------------
together with all amendments, extensions, renewals, replacements, refinancings
or refundings thereof in whole or in part.
Revolving Facility Usage shall mean at any time the sum of the Revolving
------------------------
Credit Loans outstanding.
Schell Agreement Payments shall mean payments to Al Schell pursuant to
-------------------------
Section 7 of the Employment Agreement between him and the Borrower dated as of
the Closing Date, a complete copy of which has been delivered to the Banks.
Section 20 Subsidiary shall mean the Subsidiary of the bank holding
---------------------
company controlling any Bank, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
Security Agreement shall mean the Security Agreement executed and
------------------
delivered by each of the Loan Parties to the Agent for the benefit of the Banks.
13
<PAGE>
Senior Debt shall mean the Borrower's consolidated Indebtedness for
-----------
borrowed money (including the Obligations) but excluding amounts owing to
Subordinated Lender which are subject to the Subordination Agreement plus the
face amount of all letters of credit, contingent liabilities and Guaranties.
Shares shall have the meaning assigned to that term in Section 5.1.2.
------
Standard & Poor's shall mean Standard & Poor's Ratings Services, a division
-----------------
of The McGraw-Hill Companies, Inc.
Subordinated Lender shall mean Midwest Mezzanine Fund, L.P., a Delaware
-------------------
limited partnership.
Subordination Agreement shall mean any of the several subordination
-----------------------
agreements dated the Closing Date by and among (i) the Borrower, the Agent on
behalf of the Banks, the Subordinated Lender and Acquisition Subsidiary in the
form attached hereto as Exhibit 1.1(I)(2) and (ii) the Intercompany
-----------------
Subordination Agreement.
Subsidiary of any Person at any time shall mean (i) any corporation or
----------
trust of which 50% or more (by number of shares or number of votes) of the
outstanding capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more directors or trustees (regardless of any
contingency which does or may suspend or dilute the voting rights) is at such
time owned directly or indirectly by such Person or one or more of such Person's
Subsidiaries, (ii) any partnership of which such Person is a general partner or
of which 50% or more of the partnership interests is at the time directly or
indirectly owned by such Person or one or more of such Person's Subsidiaries,
(iii) any limited liability company of which such Person is a member or of which
50% or more of the limited liability company interests is at the time directly
or indirectly owned by such Person or one or more of such Person's Subsidiaries
or (iv) any corporation, trust, partnership, limited liability company or other
entity which is controlled or capable of being controlled by such Person or one
or more of such Person's Subsidiaries.
Subsidiary Shares shall have the meaning assigned to that term in
-----------------
Section 5.1.3.
Suncom shall mean Suncom Communications LLC, a Delaware limited liability
------
company.
Suncom Asset Purchase shall mean the purchase of substantially all of the
---------------------
Suncom's assets pursuant to the Asset Purchase Agreement dated November 19,
1996 between Suncom and Acquisition Subsidiary as assignee of the Borrower, a
complete copy of which, including any amendments, has been delivered to the
Agent.
Transferor Bank shall mean the selling Bank pursuant to an Assignment and
---------------
Assumption Agreement.
UCC Collateral shall mean the property of the Loan Parties in which security
--------------
interests are to be granted under the Security Agreement.
14
<PAGE>
Uniform Commercial Code shall have the meaning assigned to that term
-----------------------
in Section 5.1.16.
Warrant shall mean the Option Agreement between Suncom and the
-------
Borrower dated the date hereof relating to 1,000,000 shares of the Borrower's
stock.
1.2 Construction.
------------
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1 Number; Inclusion.
-----------------
references to the plural include the singular, the plural, the part
and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 Determination.
-------------
references to "determination" of or by the Agent or the Banks shall
be deemed to include good-faith estimates by the Agent or the Banks (in the
case of quantitative determinations) and good-faith beliefs by the Agent or the
Banks (in the case of qualitative determinations) and such determination shall
be conclusive absent manifest error;
1.2.3 Agent's Discretion and Consent.
------------------------------
whenever the Agent or the Banks are granted the right herein to act
in its or their sole discretion or to grant or withhold consent such right shall
be exercised in good faith;
Documents Taken As a Whole.
--------------------------
the words "hereof," "herein," "hereunder," "hereto" and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other Loan
Document as a whole and not to any particular provision of this Agreement or
such other Loan Document;
1.2.5 Headings.
--------
the section and other headings contained in this Agreement or such
other Loan Document and the Table of Contents (if any), preceding this Agreement
or such other Loan Document are for reference purposes only and shall not
control or affect the construction of this Agreement or such other Loan Document
or the interpretation thereof in any respect;
1.2.6 Implied References to this Agreement.
------------------------------------
article, section, subsection, clause, schedule and exhibit references
are to this Agreement or other Loan Document, as the case may be, unless
otherwise specified;
15
<PAGE>
1.2.7 Persons.
-------
reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement or such other Loan Document, as the case may be, and reference to
a Person in a particular capacity excludes such Person in any other capacity;
1.2.8 Modifications to Documents.
--------------------------
reference to any agreement (including this Agreement and any other
Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
1.2.9 From, To and Through.
--------------------
relative to the determination of any period of time, "from" means
"from and including," "to" means "to but excluding," and "through" means
"through and including"; and
1.2.10 Shall; Will.
-----------
references to "shall" and "will" are intended to have the same
meaning.
Accounting Principles.
---------------------
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
-------- -------
used in Section 7.2 (and all defined terms used in the definition of any
accounting term used in Section 7.2) shall have the meaning given to such terms
(and defined terms) under GAAP as in effect on the date hereof applied on a
basis consistent with those used in preparing the Annual Statements referred to
in Section 5.1.9(i). In the event of any change after the date hereof in GAAP,
and if such change would result in the inability to determine compliance with
the financial covenants set forth in Section 7.2 based upon the Borrower's
regularly prepared financial statements by reason of the preceding sentence,
then the parties hereto agree to endeavor, in good faith, to agree upon an
amendment to this Agreement that would adjust such financial covenants in a
manner that would not affect the substance thereof, but would allow compliance
therewith to be determined in accordance with the Borrower's financial
statements at that time.
16
<PAGE>
2. REVOLVING CREDIT FACILITY
-------------------------
2.1 Revolving Credit Commitments.
----------------------------
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, each Bank severally agrees to
make Revolving Credit Loans to the Borrower at any time or from time to time on
or after the date hereof to the Expiration Date provided that after giving
effect to such Loan the aggregate amount of Loans from such Bank shall not
exceed such Bank's Revolving Credit Commitment. Within such limits of time and
amount and subject to the other provisions of this Agreement, the Borrower may
borrow, repay and reborrow pursuant to this Section 2.1.
2.1.1 Automatic Reduction of Commitment.
---------------------------------
The Commitment shall automatically reduce (and the Borrower shall make
any payments required under Section 4.5.4) on the last day of each March, June,
September and December by the amount set forth below:
<TABLE>
<CAPTION>
Quarter Ended Reduction in Commitment ($)
------------- -----------------------
<S> <C>
September 30, 1997 250,000
December 31, 1997 250,000
March 31, 1998 250,000
June 30, 1998 250,000
September 30, 1998 375,000
December 31, 1998 375,000
March 31, 1999 375,000
June 30, 1999 375,000
September 30, 1999 500,000
December 31, 1999 500,000
March 31, 2000 500,000
June 30, 2000 500,000
September 30, 2000 875,000
December 31, 2000 875,000
March 31, 2001 875,000
June 30, 2001 875,000
September 30, 2001 1,000,000
December 31, 2001 1,000,000
March 31, 2002 1,000,000
June 30, 2002 1,000,000
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
September 30, 2002 1,500,000
December 31, 2002 1,500,000
March 31, 2003 1,500,000
June 30, 2003 1,500,000
September 30, 2003 1,750,000
December 31, 2003 1,750,000
March 31, 2004 1,750,000
May 15, 2004 All remaining amounts
</TABLE>
2.1.2 Voluntary Reduction of Commitment.
---------------------------------
The Borrower shall have the right at any time and from time to time
upon five (5) Business Days' prior written notice to the Agent to reduce
permanently, in a minimum amount of $500,000 and whole multiples of $100,000 of
principal, or terminate the Commitments, without penalty or premium except as
hereinafter set forth, provided that any such reduction or termination shall be
accompanied by prepayment of the Notes, together with outstanding Commitment
Fees, and the full amount of interest accrued on the principal sum to be prepaid
(and all amounts referred to in Section 4.6.2 hereof), to the extent that the
aggregate amount thereof then outstanding exceeds the Commitment as so reduced
or terminated. Such reductions shall be applied currently to the next-following
scheduled reduction of the Commitments or, at the Borrower's request, pro rata
among all remaining reductions of the Commitments pursuant to Section 2.1.1. All
notices to reduce the Commitment shall be irrevocable.
2.2 Nature of Banks' Obligations with Respect to Revolving Credit Loans.
-------------------------------------------------------------------
Each Bank shall be obligated to participate in each request for
Revolving Credit Loans pursuant to Section 2.5 in accordance with its Ratable
Share. The aggregate of each Bank's Revolving Credit Loans outstanding hereunder
to the Borrower at any time shall never exceed its Revolving Credit Commitment.
The obligations of each Bank hereunder are several. The failure of any Bank to
perform its obligations hereunder shall not affect the Obligations of the
Borrower to any other party nor shall any other party be liable for the failure
of such Bank to perform its obligations hereunder. The Banks shall have no
obligation to make Revolving Credit Loans hereunder on or after the Expiration
Date.
18
<PAGE>
2.3 Commitment Fees.
---------------
Accruing from the date hereof until the Expiration Date, the Borrower
agrees to pay to the Agent for the account of each Bank, as consideration for
such Bank's Revolving Credit Commitment hereunder, a nonrefundable commitment
fee (the "Commitment Fee") equal to .5% per annum (computed on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed) on the
average daily difference between the amount of (i) such Bank's Revolving Credit
Commitment as the same may be constituted from time to time and the (ii) the
principal amount of such Bank's Ratable Share of Revolving Credit Usage. All
Commitment Fees shall be payable in arrears on the last Business Day of each
March, June, September and December after the date hereof and on the Expiration
Date or upon acceleration of the Notes.
2.4 Revolving Credit Facility Fee.
-----------------------------
The Borrower agrees to pay to the Agent for the account of each Bank,
as consideration for such Bank's Revolving Credit Commitment, nonrefundable
facility fees as required on the Closing Date by the Agent or one or more Banks.
2.5 Revolving Credit Loan Requests.
------------------------------
Except as otherwise provided herein, the Borrower may from time to
time prior to the Expiration Date request the Banks to make Revolving Credit
Loans, or renew or convert the Interest Rate Option applicable to existing
Revolving Credit Loans pursuant to Section 3.2 by delivering to the Agent, not
later than 10:00 a.m., Philadelphia time, (i) three (3) Business Days prior to
the proposed Borrowing Date with respect to the making of Revolving Credit Loans
to which the Euro-Rate Option applies or the conversion to or the renewal of the
Euro-Rate Option for any Loans; and (ii) one (1) Business Day prior to either
the proposed Borrowing Date with respect to the making of a Revolving Credit
Loan to which the Base Rate Option applies or the last day of the preceding
Interest Period with respect to the conversion to the Base Rate Option for any
Loan, of a duly completed request therefor substantially in the form of
Exhibit 2.5 or a request by telephone immediately confirmed in writing by
- -----------
letter, facsimile or telex in such form (each, a "Loan Request"), it being
understood that the Agent may rely on the authority of any individual making
such a telephonic request without the necessity of receipt of such written
confirmation. Each Loan Request shall be irrevocable and shall specify (i) the
proposed Borrowing Date; (ii) the aggregate amount of the proposed Loans
comprising each Borrowing Tranche, which shall be in integral multiples of
$100,000 and not less than $1,000,000 for each Borrowing Tranche to which the
Euro-Rate Option applies and not less than the lesser of $300,000 or the maximum
amount available for Borrowing Tranches to which the Base Rate Option applies;
(iii) whether the Euro-Rate Option or Base Rate Option shall apply to the
proposed Loans comprising the applicable Borrowing Tranche; and (iv) in the case
of a Borrowing Tranche to which the Euro-Rate Option applies, an appropriate
Interest Period for the Loans comprising such Borrowing Tranche.
19
<PAGE>
2.6 Making Revolving Credit Loans.
-----------------------------
The Agent shall, promptly after receipt by it of a Loan Request
pursuant to Section 2.5, notify the Banks of its receipt of such Loan Request
specifying: (i) the proposed Borrowing Date and the time and method of
disbursement of the Revolving Credit Loans requested thereby; (ii) the amount
and type of each such Revolving Credit Loan and the applicable Interest Period
(if any); and (iii) the apportionment among the Banks of such Revolving Credit
Loans as determined by the Agent in accordance with Section 2.2. Each Bank shall
remit the principal amount of each Revolving Credit Loan to the Agent such that
the Agent is able to, and the Agent shall, to the extent the Banks have made
funds available to it for such purpose and subject to Section 6.2, fund such
Revolving Credit Loans to the Borrower in U.S. Dollars and immediately available
funds at the Principal Office prior to 2:00 p.m., Philadelphia time, on the
applicable Borrowing Date, provided that if any Bank fails to remit such funds
--------
to the Agent in a timely manner, the Agent may elect in its sole discretion to
fund with its own funds the Revolving Credit Loans of such Bank on such
Borrowing Date, and such Bank shall be subject to the repayment obligation in
Section 9.16.
2.7 Revolving Credit Notes.
----------------------
The Obligation of the Borrower to repay the aggregate unpaid principal
amount of the Revolving Credit Loans made to it by each Bank, together with
interest thereon, shall be evidenced by a Revolving Credit Note dated the
Closing Date payable to the order of such Bank in a face amount equal to the
Revolving Credit Commitment of such Bank.
2.8 Use of Proceeds.
---------------
The proceeds of the Revolving Credit Loans shall be used to repay
Existing Bank Indebtedness and for the Borrower's working capital and general
corporate needs and in accordance with Section 7.1.10.
20
<PAGE>
INTEREST RATES
--------------
3.1 Interest Rate Options.
---------------------
The Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Loans as selected by it from the Base Rate Option or
Euro-Rate Option set forth below applicable to the Loans, it being understood
that, subject to the provisions of this Agreement, the Borrower may select
different Interest Rate Options and different Interest Periods to apply
simultaneously to the Loans comprising different Borrowing Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or any
portion of the Loans comprising any Borrowing Tranche, provided that there shall
--------
not be at any one time outstanding more than four (4) Borrowing Tranches in the
aggregate among all of the Loans accruing interest at a Euro-Rate Option. If at
any time the designated rate applicable to any Loan made by any Bank exceeds
such Bank's highest lawful rate, the rate of interest on such Bank's Loan shall
be limited to such Bank's highest lawful rate.
3.1.1 Revolving Credit Interest Rate Options.
--------------------------------------
The Borrower shall have the right to select from the following
Interest Rate Options applicable to the Revolving Credit Loans, except that the
Euro-Rate Option may not be selected if there exists an Event of Default or
Potential Default:
(i) Revolving Credit Base Rate Option: A fluctuating rate per
---------------------------------
annum (computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed) equal to the Base Rate plus the Applicable Margin, such
interest rate to change automatically from time to time effective as of the
effective date of each change in the Base Rate; or
(ii) Revolving Credit Euro-Rate Option: A rate per annum
---------------------------------
(computed on the basis of a year of 360 days and actual days elapsed) equal to
the Euro-Rate plus the Applicable Margin.
3.1.2 Rate Quotations.
---------------
The Borrower may call the Agent on or before the date on which a Loan
Request is to be delivered to receive an indication of the rates then in effect,
but it is acknowledged that such projection shall not be binding on the Agent or
the Banks nor affect the rate of interest which thereafter is actually in effect
when the election is made.
21
<PAGE>
3.2 Interest Periods.
----------------
On the Closing Date, the Loans shall bear interest at the Base Rate Option.
Thereafter, at any time when the Borrower shall select, convert to or renew a
Euro-Rate Option, the Borrower shall notify the Agent thereof at least three (3)
Business Days prior to the effective date of such Euro-Rate Option by delivering
a Loan Request. The notice shall specify an interest period (the "Interest
Period") during which such Interest Rate Option shall apply, such Interest
Period to be one, two, three or six Months. Notwithstanding the preceding
sentence, the following provisions shall apply to any selection of, renewal of,
or conversion to Euro-Rate Option:
3.2.1 Ending Date and Business Day.
----------------------------
any Interest Period which would otherwise end on a date which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in the next calendar month, in which case such Interest
Period shall end on the immediately preceding Business Day;
3.2.2 Amount of Borrowing Tranche.
---------------------------
each Borrowing Tranche of Euro-Rate Loans shall be in integral
multiples of $100,000 and not less than $1,000,000;
3.2.3 Termination Before Expiration Date.
----------------------------------
the Borrower shall not select, convert to or renew an Interest Period
for any portion of the Loans that would end after the Expiration Date;
3.2.4 Renewals.
--------
in the case of the renewal of a Euro-Rate Option at the end of an
Interest Period, the first day of the new Interest Period shall be the last day
of the preceding Interest Period, without duplication in payment of interest for
such day; and
3.3 Interest After Default.
----------------------
To the extent permitted by Law, upon the occurrence of an Event of Default
and until such time such Event of Default shall have been cured or waived:
3.3.1 Interest Rate.
-------------
the rate of interest for each Loan otherwise applicable pursuant to
Section 3.1 shall be increased to a rate equal to the rate of interest otherwise
applicable plus an additional 2.0% per annum; and
22
<PAGE>
3.3.2 Other Obligations.
-----------------
each other Obligation hereunder if not paid when due shall bear
interest at a rate per annum equal to the sum of the rate of interest applicable
under the Revolving Credit Base Rate Option plus an additional 2.0% per annum
from the time such Obligation becomes due and payable and until it is paid in
full.
Acknowledgment.
--------------
The Borrower acknowledges that the increase in rates referred to in
this Section 3.3 reflects, among other things, the fact that such Loans or other
amounts have become a substantially greater risk given their default status and
that the Banks are entitled to additional compensation for such risk; and all
such interest shall be payable by Borrower upon demand by Agent.
3.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not
--------------------------------------------------------------------
Available.
- ---------
3.4.1 Unascertainable.
---------------
If on any date on which a Euro-Rate would otherwise be determined, the
Agent shall have determined that:
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
(ii) a contingency has occurred which materially and adversely
affects the secondary market for negotiable certificates of deposit maintained
by dealers of recognized standing relating to the London interbank eurodollar
market relating to the Euro-Rate, the Agent shall have the rights specified in
Section 3.4.3.
3.4.2 Illegality; Increased Costs; Deposits Not Available.
---------------------------------------------------
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any Loan to which a
Euro-Rate Option applies has been made impracticable or unlawful by compliance
by such Bank in good faith with any Law or any interpretation or application
thereof by any Official Body or with any request or directive of any such
Official Body (whether or not having the force of Law), or
(ii) such Euro-Rate Option will not adequately and fairly
reflect the cost to such Bank of the establishment or maintenance of any such
Loan, or
(iii) after making all reasonable efforts, deposits of the
relevant amount in Dollars for the relevant Interest Period for a Loan to which
a Euro-Rate Option applies, respectively, are not available to such Bank with
respect to such Loan, in the London interbank market,
23
<PAGE>
then the Agent shall have the rights specified in Section 3.4.3.
Agent's and Bank's Rights.
-------------------------
In the case of any event specified in Section 3.4.1 above, the Agent
shall promptly so notify the Banks and the Borrower thereof, and in the case of
an event specified in Section 3.4.2 above, such Bank shall promptly so notify
the Agent and endorse a certificate to such notice as to the specific
circumstances of such notice, and the Agent shall promptly send copies of such
notice and certificate to the other Banks and the Borrower. Upon such date as
shall be specified in such notice (which shall not be earlier than the date such
notice is given), the obligation of (A) the Banks, in the case of such notice
given by the Agent, or (B) such Bank, in the case of such notice given by such
Bank, to allow the Borrower to select, convert to or renew a Euro-Rate Option
shall be suspended until the Agent shall have later notified the Borrower, or
such Bank shall have later notified the Agent, of the Agent's or such Bank's, as
the case may be, determination that the circumstances giving rise to such
previous determination no longer exist, of which notice shall be promptly given.
If at any time the Agent makes a determination under Section 3.4.1 and the
Borrower has previously notified the Agent of its selection of, conversion to or
renewal of a Euro-Rate Option and such Interest Rate Option has not yet gone
into effect, such notification shall be deemed to provide for selection of,
conversion to or renewal of the Base Rate Option otherwise available with
respect to such Loans. If any Bank notifies the Agent of a determination under
Section 3.4.2, the Borrower shall, on the date specified in such notice, either
convert such Loan to the Base Rate Option otherwise available with respect to
such Loan or prepay such Loan in accordance with Section 4.4. Absent due notice
from the Borrower of conversion or prepayment, such Loan shall automatically be
converted to the Base Rate Option otherwise available with respect to such Loan
upon such specified date.
3.5 Selection of Interest Rate Options.
----------------------------------
If the Borrower fails to select a new Interest Period to apply to
any Borrowing Tranche of Loans under the Euro-Rate Option at the expiration of
an existing Interest Period applicable to such Borrowing Tranche in accordance
with the provisions of Section 3.2 the Borrower shall be deemed to have
converted such Borrowing Tranche to the Revolving Credit Base Rate Option
commencing upon the last day of the existing Interest Period.
24
<PAGE>
4.PAYMENTS
--------
4.1 Payments.
--------
All payments and prepayments to be made in respect of principal, interest,
Commitment Fees, Facility Fees, Agent's Fee or other fees or amounts due from
the Borrower hereunder shall be payable prior to 11:00 a.m., Philadelphia time,
on the date when due without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived by the Borrower, and without set-off,
counterclaim or other deduction of any nature, and an action therefor shall
immediately accrue. Such payments shall be made to the Agent at the Principal
Office for the ratable accounts of the Banks with respect to the Loans in U.S.
Dollars and in immediately available funds, and the Agent shall promptly
distribute such amounts to the Banks in immediately available funds, provided
--------
that in the event payments are received by 11:00 a.m., Philadelphia time, by the
Agent with respect to the Loans and such payments are not distributed to the
Banks on the same day received by the Agent, the Agent shall pay the Banks the
Federal Funds Effective Rate with respect to the amount of such payments for
each day held by the Agent and not distributed to the Banks. The Agent's and
each Bank's statement of account, ledger or other relevant record shall, in the
absence of manifest error, be conclusive as the statement of the amount of
principal of and interest on the Loans and other amounts owing under this
Agreement and shall be deemed an "account stated."
4.2 Pro Rata Treatment of Banks.
---------------------------
Each borrowing shall be allocated to each Bank according to its Ratable
Share, and each selection of, conversion to or renewal of any Interest Rate
Option and each payment or prepayment by the Borrower with respect to principal,
interest, Commitment Fees, or other fees (except for the Agent's Fee) or amounts
due from the Borrower hereunder to the Banks with respect to the Loans, shall
(except as provided in Section 3.4.3 in the case of an event specified in
Section 3.4 [Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits
Not Available], 4.4 [Voluntary Prepayments] or 4.6 [Additional Compensation in
Certain Circumstances]) be made in proportion to the applicable Loans
outstanding from each Bank and, if no such Loans are then outstanding, in
proportion to the Ratable Share of each Bank.
4.3 Interest Payment Dates.
----------------------
Interest on Loans to which the Base Rate Option applies shall be due and
payable in arrears on the last Business Day of each March, June, September and
December after the date hereof and on the Expiration Date or upon acceleration
of the Notes. Interest on Loans to which the Euro-Rate Option applies shall be
due and payable on the last day of each Interest Period for those Loans and, if
such Interest Period is longer than three (3) Months, also on the 90th day of
such Interest Period. Interest on mandatory prepayments of principal under
Section 4.5 shall be due on the date such mandatory prepayment is due. Interest
on the principal amount of each Loan or other monetary Obligation shall be due
and payable on demand after such principal amount or other monetary Obligation
becomes due and payable (whether on the stated maturity date, upon acceleration
or otherwise).
25
<PAGE>
4.4 Voluntary Prepayments.
---------------------
4.4.1 Right to Prepay.
---------------
The Borrower shall have the right at its option from time to time to
prepay the Loans in whole or part without premium or penalty, except as provided
in Section 4.6:
(i) at any time with respect to any Loan to which the
Base Rate Option applies,
on the last day of the applicable Interest Period with
respect to Loans to which a Euro-Rate Option applies,
(iii) on the date specified in a notice by any Bank
pursuant to Section 3.4 [Euro-Rate Unascertainable] with respect to any Loan to
which a Euro-Rate Option applies.
Whenever the Borrower desires to prepay any part of the Loans, it shall
provide a prepayment notice to the Agent at least one (1) Business Day prior to
the date of prepayment of Loans setting forth the following information:
(x) the date, which shall be a Business Day, on which the proposed
prepayment is to be made;
(y) a statement indicating the application of the prepayment between the
Revolving Credit Loans; and
(z) the total principal amount of such prepayment, which shall not be
less than $300,000.
All prepayment notices shall be irrevocable. The principal amount of
the Loans for which a prepayment notice is given, together with interest on such
principal amount except with respect to Loans to which the Base Rate Option
applies, shall be due and payable on the date specified in such prepayment
notice as the date on which the proposed prepayment is to be made. Except as
provided in Section 3.4.3 if the Borrower prepays a Loan but fails to specify
the applicable Borrowing Tranche which the Borrower is prepaying, the prepayment
shall be applied (i) first to Loans to which the Base Rate Option applies, then
(ii) to Loans to which the Euro-Rate Option applies. Any prepayment hereunder
shall be subject to the Borrower's Obligation to indemnify the Banks under
Section 4.6.2, provided that the Borrower may, instead of making repayments of
-------------
Revolving Credit Loans bearing interest at the Euro-Rate at such time and paying
indemnity under Section 4.6.2 incident to such repayment, direct the Agent in
writing to place the amount of such prepayment which remains after repayment of
Revolving Credit Loans bearing interest at the Base Rate in an interest-bearing
cash collateral account in the Borrower's name and controlled by the Agent.
Amounts in such account shall be applied from time to time to pay Revolving
Credit Loans bearing interest at the Euro-Rate at the end of their respective
Interest Periods.
26
<PAGE>
4.5 Mandatory Prepayments.
---------------------
4.5.1 Excess Cash Flow.
----------------
Within five (5) Business Days of delivery of the Borrower's annual
financial statements pursuant to Section 7.3.2, but in any event no later than
April 7 of each year during the term hereof (each, a "Mandatory Prepayment
Date"), the Commitments shall automatically be reduced by an amount equal to 75%
of Excess Cash Flow for the fiscal year ended December 31, 1997 and 50% of
Excess Cash Flow in respect of each subsequent fiscal year and the Borrower
shall make all payments required by Section 4.5.4.
4.5.2 Sale of Assets.
--------------
Within five (5) Business Days of any sale of assets authorized by
Section 7.2.7(iv), the Commitments shall automatically be reduced by an amount
equal to the net proceeds (after the repayment of any Indebtedness secured by
Permitted Liens with respect to such assets, all taxes, direct costs and
expenses, including legal fees demonstrated to the reasonable satisfaction of
the Agent) of such sale to the selling Loan Party (as calculated in good faith
by the Borrower) and the Borrower shall make all payments required by Section
4.5.4 except that proceeds not exceeding $100,000 can be retained by the
Borrower.
4.5.3 Equity Infusion.
---------------
Within five (5) days of the funding of any sale (other than a sale to
the Borrower or a Subsidiary of the Borrower) for cash of any securities or
equity or capital shares of any Loan Party, Borrower shall retain (so long as
there exists no Event of Default at the time of such sale) and use in its
operations an amount equal to the net proceeds to such Person up to a maximum of
$5,000,000 in the aggregate on a cumulative basis and the Commitments shall
automatically be reduced by an amount equal to the net proceeds in excess of
$5,000,000 (or all of such net proceeds if there exists an Event of Default at
the time of such sale) and the Borrower shall make all payments required by
Section 4.5.4.
4.5.4 Reduction of Commitment.
-----------------------
Whenever the principal amount of the Revolving Facility Usage exceed the
Commitment (whether because of a reduction thereof pursuant to Sections 2.1,
4.5.1, 4.5.2 or 4.5.3 or otherwise), the Borrower shall make a payment of
principal sufficient to reduce such excess to zero ($0), together with interest
accrued thereon. Reductions of the Commitments pursuant to this Section 4.5
shall be applied to reduce the Commitments in the inverse order of scheduled
reductions of the Commitments pursuant to Section 2.1.1.
27
<PAGE>
4.5.5 Application Among Interest Rate Options.
---------------------------------------
All prepayments required pursuant to this Section 4.5 shall first be
applied among the Interest Rate Options to the principal amount of the Loans
subject to the Base Rate Option, then to Loans subject to a Euro-Rate Option.
Any prepayment hereunder shall be subject to the Borrower's Obligation to
indemnify the Banks under Section 4.6.2, provided that the Borrower may, instead
-------------
of making repayments of Revolving Credit Loans bearing interest at the Euro-Rate
at such time and paying indemnity under Section 4.6.2 incident to such
repayment, direct the Agent in writing to place the amount of such prepayment
which remains after repayment of Revolving Credit Loans bearing interest at the
Base Rate in an interest-bearing cash collateral account in the Borrower's name
and controlled by the Agent. Amounts in such account shall be applied from time
to time to pay Revolving Credit Loans bearing interest at the Euro-Rate at the
end of their respective Interest Periods.
4.6 Additional Compensation in Certain Circumstances.
------------------------------------------------
4.6.1 Increased Costs or Reduced Return Resulting from
------------------------------------------------
Taxes, Reserves, Capital Adequacy Requirements, Expenses,
---------------------------------------------------------
Etc.
----
If any Law, guideline or interpretation or any change in any Law,
guideline or interpretation or application thereof by any Official Body charged
with the interpretation or administration thereof or compliance with any request
or directive (whether or not having the force of Law) of any central bank or
other Official Body:
(i) subjects any Bank to any tax or changes the basis
of taxation with respect to this Agreement, the Notes, the Loans or payments by
the Borrower of principal, interest, Commitment Fees, or other amounts due from
the Borrower hereunder or under the Notes (except for taxes on the overall net
income of such Bank),
(ii) imposes, modifies or deems applicable any
reserve, special deposit or similar requirement against credits or commitments
to extend credit extended by, or assets (funded or contingent) of, deposits with
or for the account of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets (funded or contingent) of, or
letters of credit, other credits or commitments to extend credit extended by,
any Bank, or (B) otherwise applicable to the obligations of any Bank under this
Agreement,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank with respect to this Agreement, the Notes or the making, maintenance or
funding of any part of the Loans (or, in the case of any capital adequacy or
similar requirement, to have the effect of reducing the rate of return on any
Bank's capital, taking into
28
<PAGE>
consideration such Bank's customary policies with respect to capital adequacy)
by an amount which such Bank in its sole discretion deems to be material, such
Bank shall from time to time promptly notify the Borrower and the Agent of the
amount determined in good faith (using any averaging and attribution methods
employed in good faith) by such Bank to be necessary to compensate such Bank for
such increase in cost, reduction of income, additional expense or reduced rate
of return. Such notice shall set forth in reasonable detail the basis for such
determination and the calculation of such amount. No additional costs shall be
assessed prior to notice to the Borrower of such additional cost. Such amount
shall be due and payable by the Borrower to such Bank ten (10) Business Days
after such notice is given.
Indemnity.
---------
In addition to the compensation required by Section 4.6.1, the Borrower
shall indemnify each Bank against all reasonable liabilities, losses or expenses
(including loss of margin, any loss or expense incurred in liquidating or
employing deposits from third parties and any loss or expense incurred in
connection with funds acquired by a Bank to fund or maintain Loans subject to a
Euro-Rate Option) which such Bank sustains or incurs as a consequence of any
(i) payment, prepayment, conversion or renewal of any Loan
to which a Euro-Rate Option applies on a day other than the last day of the
corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or prepayment
is then due, but not including mandatory prepayments required by a Bank and made
pursuant to a notice delivered under Section 3.4.3 in respect of the
availability of the Revolving Credit Euro-Rate Option),
(ii) attempt by the Borrower to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any Loan Requests under
Section 2.5 or Section 3.2 or notice relating to prepayments under Section 4.4,
or
(iii) default by the Borrower in the performance or
observance of any covenant or condition contained in this Agreement or any other
Loan Document, including any failure of the Borrower to pay when due (by
acceleration or otherwise) any principal, interest, Commitment Fee or any other
amount due hereunder.
If any Bank sustains or incurs any such loss or expense, it shall from
time to time notify the Borrower of the amount determined in good faith by such
Bank (which determination may include such assumptions, allocations of costs and
expenses and averaging or attribution methods as such Bank shall deem
reasonable) to be necessary to indemnify such Bank for such loss or expense.
Such notice shall set forth in reasonable detail the basis for and calculation
of such determination. Such amount shall be due and payable by the Borrower to
such Bank ten (10) Business Days after such notice is given.
29
<PAGE>
5. REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representations and Warranties.
------------------------------
The Loan Parties, jointly and severally, represent and warrant to the Agent
and each of the Banks as follows:
5.1.1 Organization and Qualification.
------------------------------
Each Loan Party and each Subsidiary of each Loan Party is a corporation,
partnership or limited liability company duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each Loan
Party and each Subsidiary of each Loan Party has the lawful power to own or
lease its properties and to engage in the business it presently conducts or
proposes to conduct. Each Loan Party and each Subsidiary of each Loan Party is
duly licensed or qualified and in good standing in each jurisdiction listed on
Schedule 5.1.1 and in all other jurisdictions where the property owned or leased
- --------------
by it or the nature of the business transacted by it or both makes such
licensing or qualification necessary.
5.1.2 Capitalization and Ownership.
----------------------------
As of the Closing Date, the authorized capital stock of the Borrower
consists of 8,000,000 shares, of which approximately 4,450,000 shares (referred
to herein as the "Shares") are issued and outstanding and are owned as indicated
on Schedule 5.1.2. All of the Shares have been validly issued and are fully
--------------
paid and nonassessable. Except as shown on Schedule 5.1.2, there are no
--------------
options, warrants or other rights outstanding to purchase any such shares except
for the Warrant.
5.1.3 Subsidiaries.
------------
Schedule 5.1.3 states the name of each of the Borrower's Subsidiaries,
--------------
its jurisdiction of incorporation, its authorized capital stock, the issued and
outstanding shares (referred to herein as the "Subsidiary Shares") and the
owners thereof if it is a corporation, its outstanding partnership interests
(the "Partnership Interests") if it is a partnership and its outstanding limited
liability company interests, interests assigned to managers thereof and the
voting rights associated therewith (the "LLC Interests") if it is a limited
liability company. The Borrower and each Subsidiary of the Borrower has good
and marketable title to all of the Subsidiary Shares, Partnership Interests and
LLC Interests it purports to own, free and clear in each case of any Lien
(except pursuant to Section 324 of the Delaware General Corporation Law, the
Borrower not being aware of any such Liens). All Subsidiary Shares, Partnership
Interests and LLC Interests have been validly issued, and all Subsidiary Shares
are fully paid and nonassessable (except for claims incident Section 630 of the
New York Business Corporation Law or similar provisions under the applicable law
of the states of incorporation of any Loan Party, the Borrower not being aware
of any such claims). All capital contributions and other consideration required
to be made or paid in connection with the issuance of the Partnership Interests
and LLC Interests have been made or paid, as the case may be. There are no
options, warrants or other rights outstanding to purchase any such Subsidiary
Shares, Partnership Interests of LLC Interests except as indicated on Schedule
--------
5.1.3.
- -----
30
<PAGE>
5.1.4 Power and Authority.
-------------------
Each Loan Party has full power to enter into, execute, deliver and carry
out this Agreement and the other Loan Documents to which it is a party, to incur
the Indebtedness contemplated by the Loan Documents and to perform its
Obligations under the Loan Documents to which it is a party, and all such
actions have been duly authorized by all necessary proceedings on its part.
Validity and Binding Effect.
---------------------------
This Agreement has been duly and validly executed and delivered by each
Loan Party, and each other Loan Document which any Loan Party is required to
execute and deliver on or after the date hereof will have been duly executed and
delivered by such Loan Party on the required date of delivery of such Loan
Document. This Agreement and each other Loan Document constitutes, or will
constitute, legal, valid and binding obligations of each Loan Party which is or
will be a party thereto on and after its date of delivery thereof, enforceable
against such Loan Party in accordance with its terms, except to the extent that
enforceability of any of such Loan Document may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or limiting the right of specific
performance.
5.1.6 No Conflict.
-----------
Neither the execution and delivery of this Agreement or the other Loan
Documents by any Loan Party nor the consummation of the transactions herein or
therein contemplated or compliance with the terms and provisions hereof or
thereof by any of them will conflict with, constitute a default under or result
in any breach of (i) the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents of any Loan Party or (ii) any Law or any material
agreement or instrument or order, writ, judgment, injunction or decree to which
any Loan Party or any of its Subsidiaries is a party or by which it or any of
its Subsidiaries is bound or to which it is subject, or result in the creation
or enforcement of any Lien, charge or encumbrance whatsoever upon any property
(now or hereafter acquired) of any Loan Party or any of its Subsidiaries (other
than Liens granted under the Loan Documents).
5.1.7 Litigation.
----------
Except as shown on Schedule 5.1.7, there are no actions, suits,
--------------
proceedings or investigations pending or, to the knowledge of any Loan Party,
threatened against such Loan Party or any Subsidiary of such Loan Party at law
or equity before any Official Body which individually or in the aggregate may
result in any Material Adverse Change. None of the Loan Parties or any
Subsidiaries of any Loan Party is in violation of any order, writ, injunction or
any decree of any Official Body which may result in any Material Adverse Change.
31
<PAGE>
5.1.8 Title to Properties.
-------------------
The real property owned or leased by each Loan Party and each Subsidiary
of each Loan Party is described on Schedule 5.1.8. Each Loan Party and each
--------------
Subsidiary of each Loan Party has good and valid title to or valid leasehold
interest in all properties, assets and other rights which it purports to own or
lease or which are reflected as owned or leased on its books and records, free
and clear of all Liens and encumbrances except Permitted Liens, and subject to
the terms and conditions of the applicable leases. All leases of real property
are in full force and effect without the necessity for any consent which has not
previously been obtained upon consummation of the transactions contemplated
hereby.
5.1.9 Financial Statements.
--------------------
(i) Historical Statements. The Borrower has
---------------------
delivered to the Agent copies of its and Suncom's audited consolidated year-end
financial statements for and as of the end of the fiscal year ended December,
1996 (the "Annual Statements"). In addition, the Borrower has delivered to the
Agent copies of its unaudited pro forma consolidated interim closing balance
sheet as of Closing Date (the "Interim Statements") (the Annual and Interim
Statements being collectively referred to as the "Historical Statements"). The
Historical Statements were compiled from the books and records maintained by
Borrower's and Suncom's management, and to the best of the Borrower's knowledge
are: correct and complete and fairly represent the consolidated financial
condition of Suncom and the Borrower and its Subsidiaries as of their dates and
the results of operations for the fiscal periods then ended and have been
prepared in accordance with GAAP consistently applied, subject (in the case of
the Interim Statements) to normal year-end audit adjustments.
(ii) Financial Projections. The Borrower has
---------------------
delivered to the Agent a pro forma opening balance sheet and financial
projections of the Borrower and its Subsidiaries for the period January 1, 1997
through December 31, 2004 derived from various assumptions of the Borrower's
management (the "Financial Projections"). The Financial Projections represent a
reasonable range of possible results in light of the history of the business,
present and foreseeable conditions and the intentions of the Borrower's
management. The Financial Projections accurately reflect the liabilities of the
Borrower and its Subsidiaries upon consummation of the transactions contemplated
hereby as of the Closing Date.
(iii) Accuracy of Financial Statements. Neither the
--------------------------------
Borrower nor any Subsidiary of the Borrower has any material liabilities,
contingent or otherwise, or forward or long-term commitments that are not
disclosed in the Historical Statements or in the notes thereto, and except as
disclosed therein there are no unrealized or anticipated losses from any
commitments of the Borrower or any Subsidiary of the Borrower which may cause a
Material Adverse Change. Since December 31, 1996, no Material Adverse Change has
occurred.
32
<PAGE>
5.1.10 Use of Proceeds; Margin Stock.
-----------------------------
The Loan Parties intend to use the proceeds of the Loans in accordance
with Sections 2.8 and 7.1.10. None of the Loan Parties or any Subsidiaries of
any Loan Party engages or intends to engage principally, or as one of its
important activities, in the business of extending credit for the purpose,
immediately, incidentally or ultimately, of purchasing or carrying margin stock
(within the meaning of Regulation U). No part of the proceeds of any Loan has
been or will be used, immediately, incidentally or ultimately, to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or to refund Indebtedness originally
incurred for such purpose, or for any purpose which entails a violation of or
which is inconsistent with the provisions of the regulations of the Board of
Governors of the Federal Reserve System. None of the Loan Parties or any
Subsidiary of any Loan Party holds or intends to hold margin stock in such
amounts that more than 25% of the reasonable value of the assets of any Loan
Party or Subsidiary of any Loan Party are or will be represented by margin
stock.
5.1.11 Full Disclosure.
---------------
Neither this Agreement nor any other Loan Document, nor any certificate,
statement, agreement or other documents furnished to the Agent or any Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to any Loan Party which materially adversely affects the business,
property, assets, financial condition, results of operations or prospects of any
Loan Party or Subsidiary of any Loan Party which has not been set forth in this
Agreement or in the certificates, statements, agreements or other documents
furnished in writing to the Agent and the Banks prior to or at the date hereof
in connection with the transactions contemplated hereby.
5.1.12 Taxes.
-----
All federal, state, local and other tax returns required to have been
filed with respect to each Loan Party and each Subsidiary of each Loan Party
have been filed, and payment or adequate provision has been made for the payment
of all taxes, fees, assessments and other governmental charges which have or may
become due pursuant to said returns or to assessments received, except to the
extent that such taxes, fees, assessments and other charges are being contested
in good faith by appropriate proceedings diligently conducted and for which such
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made. There are no agreements or waivers extending the
statutory period of limitations applicable to any federal income tax return of
any Loan Party or Subsidiary of any Loan Party for any period.
33
<PAGE>
5.1.13 Consents and Approvals.
----------------------
Except for the filing of financing statements in the state and county
filing offices, no consent, approval, exemption, order or authorization of, or a
registration or filing with, any Official Body or any other Person is required
by any Law or any agreement in connection with the execution, delivery and
carrying out of this Agreement and the other Loan Documents by any Loan Party,
except as listed on Schedule 5.1.13, all of which shall have been obtained or
---------------
made on or prior to the Closing Date except as otherwise indicated on Schedule
--------
5.1.13.
- ------
5.1.14 No Event of Default; Compliance with Instruments.
------------------------------------------------
No event has occurred and is continuing and no condition exists or will
exist after giving effect to the borrowings or other extensions of credit to be
made on the Closing Date under or pursuant to the Loan Documents which
constitutes an Event of Default or Potential Default. None of the Loan Parties
or any Subsidiaries of any Loan Party is in violation of (i) any term of its
certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability company
agreement or other organizational documents or (ii) any material agreement or
instrument to which it is a party or by which it or any of its properties may be
subject or bound where such violation would constitute a Material Adverse
Change.
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.
----------------------------------------------
.1.15.1 Each Loan Party and each Subsidiary of each Loan
Party owns or possesses all the material patents, trademarks, service marks,
trade names, copyrights, licenses, registrations, franchises, permits and rights
necessary to own and operate its properties and to carry on its business as
presently conducted and planned to be conducted by such Loan Party or
Subsidiary, without known possible, alleged or actual conflict with the rights
of others. All material patents, trademarks, service marks, trade names,
copyrights, licenses, registrations, franchises and permits of each Loan Party
and each Subsidiary of each Loan Party are listed and described on Schedule
--------
5.1.15.
- ------
.1.15.2 The Borrower possesses all approvals necessary
for it to conduct its business as presently conducted, including, without
limitation, those business licenses described on Schedule 5.1.15.1 hereof,
-----------------
except where the failure to possess any such approval will not constitute a
Material Adverse Change. Subject to obtaining any necessary approvals of any
Official Body in connection with the exercise by the Agent and the Banks of
their rights as a secured party, the execution, delivery and performance of each
Loan Document to which the Borrower is party by the Borrower and the
transactions contemplated thereby do not and will not require any additional
registration with, consent or approval of, or notice to, or other action to,
with or by any Official Body, except filings, consents or notices which have
been, or will in due course, be made, obtained or given.
(i) The Borrower has the authority and the right under
all applicable FCC rules, regulations and orders and the terms of the Service
Agreement to distribute the transmission of music programming and other
information offered by the Borrower to its customers (whether by satellite,
telephone line, FM subcarrier or otherwise) and to utilize all radio frequencies
34
<PAGE>
necessary in connection therewith.
(ii) The Borrower is the owner of, or has the
legal right to use, all licenses, permits, exceptions, franchises, variances,
waivers, approvals and other authorizations, including those relating to
communications matters (including, without limitation, those licenses necessary
to operate or utilize any radio system necessary to service the Borrower's
customers) of, by or from Official Bodies or other Persons necessary for the
Borrower to conduct its business and has such other licenses issued or issuable
by the FCC as may be necessary for the conduct of the Borrower's business.
Governmental Regulation. The Borrower is not
-----------------------
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, the Investment Company Act of
1940 or any other Law such that its ability to incur indebtedness is limited or
its ability to consummate the transactions contemplated hereby is materially
impaired. Furthermore, the Borrower is not as of the date hereof subject to rate
regulation pursuant to any Law.
5.1.16 Security Interests.
------------------
.1.16.1 The Liens and security interests granted
to the Agent for the benefit of the Banks pursuant to the Conditional MUZAK
Assignment, the Pledge Agreement and the Security Agreement in the Collateral
constitute and will continue to constitute Prior Security Interests under the
Uniform Commercial Code as in effect in each applicable jurisdiction (the
"Uniform Commercial Code") or other applicable Law entitled to all the rights,
benefits and priorities provided by the Uniform Commercial Code or such Law.
Except for any motor vehicles owned by any Loan Party, upon the filing of
financing statements relating to said security interests in each office and in
each jurisdiction where required in order to perfect the security interests
described above, taking possession of any stock certificates or other
certificates evidencing the Pledged Collateral all such action as is necessary
or advisable to establish such rights of the Agent will have been taken, and
there will be upon execution and delivery of the Pledge Agreement, the
Conditional MUZAK Assignment and the Security Agreement, such filings and such
taking of possession, no necessity for any further action in order to preserve,
protect and continue such rights, except the filing of continuation statements
with respect to such financing statements within six months prior to each five-
year anniversary of the filing of such financing statements. All filing fees and
other expenses in connection with each such action have been or will be paid by
the Borrower.
5.1.17 Contract and License Collateral
-------------------------------
All documents setting forth, evidencing or constituting the
Contract and License Collateral have been delivered to the Agent on behalf of
the Banks. The MUZAK Licenses and the Service Agreement are as of the Closing
Date valid and enforceable obligations of the parties thereto and all consents,
transfers or assignments necessary to cause the Borrower or Acquisition
Subsidiary to have all the rights, powers and privileges described or purported
to be granted therein shall have been given and made.
35
<PAGE>
5.1.18 Status of the Pledged Collateral.
--------------------------------
All the shares of capital stock, Partnership Interests or LLC Interests
included in the Pledged Collateral to be pledged pursuant to the Pledge
Agreement are or will be upon issuance validly issued and nonassessable and
owned beneficially and of record by the pledgor free and clear of any Lien or
restriction on transfer, except as otherwise provided by the Pledge Agreement
and except as the right of the Banks to dispose of the Shares, Partnership
Interests or LLC Interests may be limited by the Securities Act of 1933, as
amended, and the regulations promulgated by the Securities and Exchange
Commission thereunder and by applicable state securities laws. There are no
shareholder, partnership, limited liability company or other agreements or
understandings with respect to the shares of capital stock, Partnership
Interests or LLC Interests included in the Pledged Collateral except for the
partnership agreements and limited liability company agreements described on
Schedule 5.1.18. The Loan Parties have delivered true and correct copies of
- ---------------
such partnership agreements and limited liability company agreements to the
Agent.
5.1.19 Insurance.
---------
Schedule 5.1.19 lists all insurance policies (other than insurance in
---------------
connection with Plans or Benefit Arrangements) and other bonds to which any Loan
Party or Subsidiary of any Loan Party is a party, all of which are valid and in
full force and effect. No notice has been given or claim made and to the best
of the Borrower's knowledge no grounds exist to cancel or avoid any of such
policies or bonds or to reduce the coverage provided thereby. Such policies and
bonds provide adequate coverage from reputable and financially sound insurers in
amounts sufficient to insure the assets and risks of each Loan Party and each
Subsidiary of each Loan Party in accordance with prudent business practice in
the industry of the Loan Parties and their Subsidiaries.
5.1.20 Compliance with Laws.
--------------------
The Loan Parties and their Subsidiaries are in compliance in all
material respects with all applicable Laws (other than Environmental Laws which
are specifically addressed in Section 5.1.25) in all jurisdictions in which any
Loan Party or Subsidiary of any Loan Party is presently or will be doing
business except where the failure to do so would not constitute a Material
Adverse Change.
5.1.21 Material Contracts; Burdensome Restrictions.
-------------------------------------------
Schedule 5.1.21 lists all material contracts relating to the business
---------------
operations of each Loan Party and each Subsidiary of any Loan Party, excluding
all employee benefit plans and Labor Contracts. All such material contracts are
valid, binding and enforceable upon such Loan Party or Subsidiary and each of
the other parties thereto in accordance with their respective terms, and there
is no default thereunder, to the Loan Parties' knowledge, with respect to
parties other than such Loan Party or Subsidiary. None of the Loan Parties or
their Subsidiaries is bound by any contractual obligation, or subject to any
restriction in any organization document, or any requirement of Law which could
reasonably result in a Material Adverse Change.
36
<PAGE>
5.1.22 Investment Companies; Regulated Entities.
----------------------------------------
None of the Loan Parties or any Subsidiaries of any Loan Party is an
"investment company" registered or required to be registered under the
Investment Company Act of 1940 or under the "control" of an "investment company"
as such terms are defined in the Investment Company Act of 1940 and shall not
become such an "investment company" or under such "control." None of the Loan
Parties or any Subsidiaries of any Loan Party is subject to any other Federal
state statute or regulation limiting its ability to incur Indebtedness for
borrowed money.
5.1.23 Plans and Benefit Arrangements.
------------------------------
Except as set forth on Schedule 5.1.23:
---------------
(i) To the Borrower's knowledge, each Benefit
Arrangement and Plan is maintained in compliance in all material respects with
any applicable provisions of ERISA and the Internal Revenue Code. To the
Borrower's knowledge, there has been no Prohibited Transaction with respect to
any Benefit Arrangement, any Plan, any Multiemployer Plan or any Multiple
Employer Plan which could result in a Material Adverse Change. The Borrower and
all other members of the ERISA Group have made when due any and all
contributions required to be made under any agreement relating to a
Multiemployer Plan or a Multiple Employer Plan. With respect to each Plan and
Multiemployer Plan, the Borrower and each other member of the ERISA Group (i)
have not incurred any liability to the PBGC, and (ii) have not had asserted
against them any penalty for failure to fulfill the minimum funding requirements
of ERISA.
(ii) Neither the Borrower nor any other member of the
ERISA Group has instituted proceedings to terminate any Plan.
(iii) Neither the Borrower nor any other member of the
ERISA Group has been notified that it has incurred any material withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower nor any other member of the ERISA Group has been notified
by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan
or Multiple Employer Plan has been terminated within the meaning of Title IV of
ERISA and, to the best knowledge of the Borrower, no Multiemployer Plan or
Multiple Employer Plan is in reorganization within the meaning of Title IV of
ERISA.
(iv) To the extent that any Benefit Arrangement is
insured, the Borrower and all other members of the ERISA Group have paid when
due all premiums required to be paid for all periods through the date hereof. To
the extent that any Benefit Arrangement is funded other than with insurance, the
Borrower and all other members of the ERISA Group have made when due all
contributions required to be paid for all periods through the date hereof.
(v) As of the date hereof, no member of the ERISA Group
has maintained, sponsored or otherwise contributed to any Plan that is subject
to Title IV of ERISA, other than such a Plan which is a "Multiemployer Plan"
within the meaning of Section 4001(a)(3) of ERISA.
37
<PAGE>
Employment Matters.
------------------
Each of the Loan Parties and each of their Subsidiaries is in compliance
with the Labor Contracts and all applicable federal, state and local labor and
employment Laws including those related to equal employment opportunity and
affirmative action, labor relations, minimum wage, overtime, child labor,
medical insurance continuation, worker adjustment and relocation notices,
immigration controls and worker and unemployment compensation, where the failure
to comply would constitute a Material Adverse Change. To the knowledge of any
Loan Party, there are no outstanding grievances, arbitration awards or appeals
therefrom arising out of the Labor Contracts or current or threatened strikes,
picketing, handbilling or other work stoppages or slowdowns at facilities of any
of the Loan Parties or any of their Subsidiaries which in any case would
constitute a Material Adverse Change. The Borrower has made available to the
Agent true and correct copies of each of the Labor Contracts.
5.1.25 Environmental Matters.
---------------------
Except as disclosed on Schedule 5.1.25:
---------------
(i) None of the Loan Parties or any Subsidiaries of
any Loan Party has received any Environmental Complaint from any Official Body
or private Person alleging that such Loan Party or Subsidiary or any prior or
subsequent owner of any of the Property is a potentially responsible party under
the Comprehensive Environmental Response, Cleanup and Liability Act, 42 U.S.C.
(S) 9601, et seq., and none of the Loan Parties has any reason to believe that
such an Environmental Complaint might be received. There are no pending or, to
any Loan Party's knowledge, threatened Environmental Complaints relating to any
Loan Party or Subsidiary of any Loan Party or, to any Loan Party's knowledge,
any prior or subsequent owner of any of the Property pertaining to, or arising
out of, any Environmental Conditions.
(ii) There are no circumstances known to the
Borrower at, on or under any of the Property that constitute a breach of or non-
compliance with any of the Environmental Laws, and there are no past or present
Environmental Conditions at, on or under any of the Property or, to any Loan
Party's knowledge, at, on or under adjacent property, that prevent compliance
with the Environmental Laws at any of the Property.
(iii) Neither any of the Property nor any structures,
improvements, equipment, fixtures, activities or facilities thereon or
thereunder contain or use Regulated Substances except in compliance with
Environmental Laws. There are no processes, facilities, operations, equipment or
other activities at, on or under any of the Property, or, to any Loan Party's
knowledge, at, on or under adjacent property, that currently result in the
release or threatened release of Regulated Substances onto any of the Property,
except to the extent that such releases or threatened releases are not a breach
of or otherwise not a violation of the Environmental Laws.
(iv) To the best of Borrower's knowledge, there are
no aboveground storage tanks, underground storage tanks or underground piping
associated with such tanks, used for the management of Regulated Substances at,
on or under any of the Property that (a) do not have,
38
<PAGE>
to the extent required by Environmental Laws, a full operational secondary
containment system in place, and (b) are not otherwise in compliance with all
Environmental Laws. To the best of Borrower's knowledge, there are no abandoned
underground storage tanks or underground piping associated with such tanks,
previously used for the management of Regulated Substances at, on or under any
of the Property that have not either been closed in place in accordance with
Environmental Laws or removed in compliance with all applicable Environmental
Laws and no contamination associated with the use of such tanks exists on any of
the Property that is not in compliance with Environmental Laws.
(v) Each Loan Party and each Subsidiary of any
Loan Party has all material permits, licenses, authorizations, plans and
approvals necessary under the Environmental Laws for the conduct of the business
of such Loan Party or Subsidiary as presently conducted. Each Loan Party and
each Subsidiary of any Loan Party has submitted all material notices, reports
and other filings required by the Environmental Laws to be submitted by it to an
Official Body which pertain to past and current operations on any of the
Property.
(vi) To the best of Borrower's knowledge, all past
and present on-site generation, storage, processing, treatment, recycling,
reclamation, disposal or other use or management of Regulated Substances at, on,
or under any of the Property and all off-site transportation, storage,
processing, treatment, recycling, reclamation, disposal or other use or
management of Regulated Substances have been done in accordance with the
Environmental Laws.
5.1.26 Senior Debt Status.
------------------
The Obligations of each Loan Party under this Agreement, the Notes, the
Guaranty Agreement and each of the other Loan Documents to which it is a party
do rank and will rank senior in priority of payment with all other Indebtedness
of such Loan Party except Indebtedness of such Loan Party to the extent secured
by Permitted Liens. There is no Lien upon or with respect to any of the
properties or income of any Loan Party or Subsidiary of any Loan Party which
secures indebtedness or other obligations of any Person except for Permitted
Liens.
5.1.27 Scope of Business.
-----------------
.1.27.1 Geographic Areas of the Borrower's Business.
-------------------------------------------
A complete list of all geographic areas served by the Borrower's business as of
the Closing Date is set forth on Schedule 5.1.27.1. The Borrower has no
-----------------
knowledge that Muzak Limited Partnership or any Affiliate of Muzak limited
partnership has authorized any other Person to provide any background or
foreground music subscription service within any of the geographic areas
described on said Schedule 5.1.27.1. All of the Loan Parties' books and records
-----------------
are maintained at the address set forth on Schedule A to the Security Agreement.
----------
.1.27.1 Business Name. The only names by which any
-------------
Loan Party or Suncom is known or under which the Borrower or Suncom is
conducting or has within the past five (5) years conducted its business are as
set forth on Schedule 5.1.27.2.
-----------------
39
<PAGE>
.1.27.3 Suncom Asset Purchase. The Suncom Asset
---------------------
Purchase has been completed as of the Closing Date.
5.2 Updates to Schedules.
-------------------------
Should any of the information or disclosures provided on any of the
schedules attached hereto become outdated or incorrect in any material respect,
the Borrower shall promptly provide the Agent in writing with such revisions or
updates to such schedule as may be necessary or appropriate to update or correct
same; provided, however, that if any of the updated information or any such
--------
revised schedule would reflect an Event of Default, Potential Default or
Material Adverse Change, then the underlying schedule shall not be deemed to
have been amended by such information unless and until the Required Banks, in
their sole and absolute discretion, shall have accepted such updated information
in writing.
6.CONDITIONS OF LENDING
---------------------
The obligation of each Bank to make Loans hereunder is subject to the
performance by each of the Loan Parties of its Obligations to be performed
hereunder at or prior to the making of any such Loans and to the satisfaction of
the following further conditions:
6.1 First Loans.
-----------
On the Closing Date:
6.1.1 Officer's Certificate.
---------------------
The representations and warranties of each of the Loan Parties contained
in Section 5 and in each of the other Loan Documents shall be true and accurate
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and each of the Loan Parties shall
have performed and complied with all covenants and conditions hereof and
thereof, no Event of Default or Potential Default shall have occurred and be
continuing or shall exist; and there shall be delivered to the Agent for the
benefit of each Bank a certificate of each of the Loan Parties, dated the
Closing Date and signed by the Chief Executive Officer, President or Chief
Financial Officer of each of the Loan Parties, to each such effect.
Secretary's Certificate.
-----------------------
There shall be delivered to the Agent for the benefit of each Bank a
certificate dated the Closing Date and signed by the Secretary or an Assistant
Secretary of each of the Loan Parties, certifying as appropriate as to:
(i) all action taken by each Loan Party in
connection with
40
<PAGE>
this Agreement and the other Loan Documents;
(ii) the names of the officer or officers
authorized to sign this Agreement and the other Loan Documents and the true
signatures of such officer or officers and specifying the Authorized Officers
permitted to act on behalf of each Loan Party for purposes of this Agreement and
the true signatures of such officers, on which the Agent and each Bank may
conclusively rely; and
(iii) as to the Borrower, a "long-form"
certificate of good standing certified by the appropriate state official and as
to each Loan Party copies of its organizational documents, including its
certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, and limited liability company
agreement as in effect on the Closing Date certified by the Secretary of such
Person, together with certificates from the appropriate state officials as to
the continued existence and good standing of each Loan Party in each state where
organized or qualified to do business.
6.1.3 Delivery of Loan Documents.
--------------------------
The Pledge Agreement, the Conditional MUZAK Assignment, Notes,
Subordination Agreement and Security Agreement and all financing statements
relating thereto shall have been duly executed and delivered to the Agent for
the benefit of the Banks, together with all appropriate financing statements and
appropriate stock powers and certificates evidencing the Shares, the Partnership
Interests and the LLC Interests.
6.1.4 Opinion of Counsel.
------------------
There shall be delivered to the Agent for the benefit of each Bank (x) a
written opinion of Baer, Marks & Upham, LLP counsel for the Loan Parties (who
may rely on the opinions of such other counsel as may be acceptable to the
Agent), dated the Closing Date and in form and substance satisfactory to the
Agent and its counsel as to such matters incident to the transactions
contemplated herein as the Agent may reasonably request and (y) copies of the
opinions of counsel to the seller and the buyer in the Suncom Asset Purchase on
which the Agent and the Banks shall, by the terms thereof, be entitled to rely.
6.1.5 Legal Details.
-------------
All legal details and proceedings in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be in form and
substance reasonably satisfactory to the Agent and counsel for the Agent, and
the Agent shall have received all such other counterpart originals or certified
or other copies of such documents and proceedings in connection with such
transactions, in form and substance satisfactory to the Agent and said counsel,
as the Agent or said counsel may reasonably request.
41
<PAGE>
6.1.6 Payment of Fees.
---------------
The Borrower shall have paid or caused to be paid to the Agent for
itself and for the account of the Banks to the extent not previously paid the
Facility Fees, all other commitment and other fees accrued through the Closing
Date and the costs and expenses, including reasonable attorneys' fees and
expenses, for which the Agent and the Banks are entitled to be reimbursed.
6.1.7 Subordinated Lender's Consent.
-----------------------------
The Loan Parties shall have delivered to the Agent evidence satisfactory
to the Agent that Subordinated Lender has consented to the Suncom Asset
Purchase, the repayment of the Existing Bank Indebtedness and the effectuation
of the transactions contemplated in the Loan Documents, and Subordinated Lender
shall have executed and delivered to the Agent the Subordination Agreement.
6.1.8 Consents.
--------
All material consents required to effectuate the transactions
contemplated hereby as set forth on Schedule 5.1.13 shall have been obtained and
---------------
the Agent shall have received evidence of the approval by the FCC of the
transfer of the microwave radio facilities operating under call signs WNTP325,
WNTP522, WNTG947 and WNTG948 incident to the Suncom Asset Purchase.
6.1.9 Officer's Certificate Regarding MACs.
------------------------------------
Since December 31, 1996, no Material Adverse Change shall have occurred;
prior to the Closing Date, there shall have been no material change in the
management of any Loan Party or Subsidiary of any Loan Party other than as
contemplated in documents executed in connection with the Suncom Asset Purchase
and delivered to the Agent; and there shall have been delivered to the Agent for
the benefit of each Bank a certificate dated the Closing Date and signed by the
Chief Executive Officer, President or Chief Financial Officer of each Loan Party
to each such effect.
6.1.10 No Violation of Laws.
--------------------
The making of the Loans shall not contravene any Law applicable to any
Loan Party or any of the Banks.
No Actions or Proceedings.
-------------------------
No action, proceeding, investigation, regulation or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain or prohibit, or to obtain damages
in respect of, this Agreement, the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby or which, in the Agent's sole
but reasonable discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents.
42
<PAGE>
6.1.12 Insurance Policies; Certificates of Insurance;
----------------------------------------------
Endorsements.
------------
The Loan Parties shall have delivered evidence acceptable to the Agent
that adequate insurance in compliance with Section 7.1.3 is in full force and
effect and that all premiums then due thereon have been paid, together with a
certified copy of each Loan Party's casualty insurance policy or policies
evidencing coverage satisfactory to the Agent, with additional insured, in form
and substance satisfactory to the Agent and its counsel naming the Agent as
additional insured, and lender loss payee.
6.1.13 Schell Purchase.
---------------
The Loan Parties shall have delivered evidence acceptable to the Agent that
substantially all of the shares of stock of the Borrower owned by A.J. Schell
shall have been purchased by Suncom.
6.1.14 Filing Receipts; Payoff.
-----------------------
The Agent shall have received (1) if possible, copies of all filing
receipts and acknowledgments issued by any governmental authority to evidence
any recordation or filing necessary to perfect the Lien of the Banks on the
Collateral or other satisfactory evidence of such recordation and filing and (2)
a payoff letter in respect of the Existing Bank Indebtedness, the conditions in
which having been satisfied and termination statements and similar items in
respect of which shall have been delivered to the Agent.
6.1.15 Subscriber Reports.
------------------
The Banks shall have received a report satisfactory in form and substance
satisfactory to the Agent describing the Borrower's, Suncom's and (if
applicable) Acquisition Subsidiary's subscriber attrition, subscription growth,
subscription contract agings, subscriber location and other information
reasonably requested by the Agent.
6.2 Each Additional Loan.
--------------------
At the time of making any Loans other than Loans made on the Closing Date
and after giving effect to the proposed extensions of credit: the
representations and warranties of the Loan Parties contained in Section 5 and in
the other Loan Documents shall be true on and as of the date of such additional
Loan (after taking into account updates and revisions to schedules in accordance
with Section 5.2) with the same effect as though such representations and
warranties had been made on and as of such date (except for representations and
warranties which expressly relate solely to an earlier date or time, which
representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein) and the Loan Parties shall have
performed and complied with all covenants and conditions hereof; no Event of
Default or Potential Default shall have occurred and be continuing or shall
exist; the making of the Loans shall not contravene any Law applicable to any
Loan Party or Subsidiary of any Loan Party or any of the Banks; and the Borrower
shall have delivered to the Agent a duly executed and completed Loan Request.
43
<PAGE>
7.COVENANTS
---------
7.1 Affirmative Covenants.
---------------------
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans and interest thereon and satisfaction of all of the
Loan Parties' other Obligations under the Loan Documents and termination of the
Commitments, the Loan Parties shall comply at all times with the following
affirmative covenants:
7.1.1 Preservation of Existence, Etc.
------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain its legal existence as a corporation, limited partnership or limited
liability company and its license or qualification and good standing in each
jurisdiction in which its ownership or lease of property or the nature of its
business makes such license or qualification necessary, except as otherwise
expressly permitted in Section 7.2.6.
7.1.2 Payment of Liabilities, Including Taxes, Etc.
--------------------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries to, duly
pay and discharge all liabilities to which it is subject or which are asserted
against it, promptly as and when the same shall become due and payable,
including all taxes, assessments and governmental charges upon it or any of its
properties, assets, income or profits, prior to the date on which penalties
attach thereto, except to the extent that such liabilities, including taxes,
assessments or charges, are being contested in good faith and by appropriate and
lawful proceedings diligently conducted and for which such reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made, but only to the extent that failure to discharge any such liabilities
would not result in any additional liability which would adversely affect to a
material extent the financial condition of any Loan Party or Subsidiary of any
Loan Party or the Collateral, provided that the Loan Parties and their
--------
Subsidiaries will pay all such liabilities forthwith upon the commencement of
proceedings to foreclose any Lien which may have attached as security therefor.
44
<PAGE>
Maintenance of Insurance.
------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries to,
insure its properties and assets against loss or damage by fire and such other
insurable hazards as such assets are commonly insured (including fire, extended
coverage, property damage, workers' compensation, public liability and business
interruption insurance) and against other risks in such amounts as similar
properties and assets are insured by prudent companies in similar circumstances
carrying on similar businesses, and with reputable and financially sound
insurers, including self-insurance to the extent customary, all as reasonably
determined by the Agent. At the request of the Agent, the Loan Parties shall
deliver to the Agent and each of the Banks (x) on the Closing Date and annually
thereafter an original certificate of insurance signed by the Loan Parties'
independent insurance broker describing and certifying as to the existence of
the insurance on the Collateral required to be maintained by this Agreement and
the other Loan Documents, together with a copy of the endorsement described in
the next sentence attached to such certificate and (y) from time to time a
summary schedule indicating all insurance then in force with respect to each of
the Loan Parties. Such policies of insurance shall contain special
endorsements, in form and substance acceptable to the Agent, which shall (i)
specify the Agent as an additional insured, and lender loss payee as its
interests may appear, with the understanding that any obligation imposed upon
the insured (including the liability to pay premiums) shall be the sole
obligation of the applicable Loan Parties and not that of the Agent or the
Banks, (ii) provide that the interest of the Banks shall be insured regardless
of any breach or violation by the applicable Loan Parties of any warranties,
declarations or conditions contained in such policies or any action or inaction
of the applicable Loan Parties or others insured under such policies, (iii)
provide a waiver of any right of the insurers to set off or counterclaim or any
other deduction, whether by attachment or otherwise, (iv) provide that any and
all rights of subrogation which the insurers may have or acquire shall be, at
all times and in all respects, junior and subordinate to the prior payment in
full of the Indebtedness hereunder and that no insurer shall exercise or assert
any right of subrogation until such time as the Indebtedness hereunder has been
paid in full and the Commitments have terminated, (v) provide, except in the
case of public liability insurance and workmen's compensation insurance, that
all insurance proceeds for losses of less than $500,000 shall be adjusted with
and payable to the applicable Loan Parties and that all insurance proceeds for
losses of $500,000 or more shall be adjusted with and payable to the Agent, (vi)
include effective waivers by the insurer of all claims for insurance premiums
against the Agent, (vii) provide that no cancellation of such policies for any
reason nor any change therein shall be effective until at least thirty (30) days
after receipt by the Agent of written notice of such cancellation or change or
ten (10) days in respect of non-payment of premium, (viii) be primary without
right of contribution of any other insurance carried by or on behalf of any
additional insureds with respect to their respective interests in the
Collateral, and (ix) provide that inasmuch as the policy covers more than one
insured, all terms, conditions, insuring agreements and endorsements (except
limits of liability) shall operate as if there were a separate policy covering
each insured. The applicable Loan Parties shall notify the Agent promptly of
any occurrence causing a material loss or decline in value of the Collateral and
the estimated (or actual, if available) amount of such loss or decline.
45
<PAGE>
Maintenance of Properties and Leases.
------------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain in good repair, working order and condition (ordinary wear and tear
excepted) in accordance with the general practice of other businesses of similar
character and size, all of those properties useful or necessary to its business,
and from time to time, such Loan Party will make or cause to be made all
appropriate repairs, renewals or replacements thereof.
7.1.5 Maintenance of Patents, Trademarks, Etc.
---------------------------------------
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain in full force and effect all patents, trademarks, service marks, trade
names, copyrights, licenses, franchises, permits and other authorizations
necessary for the ownership and operation of its properties and business if the
failure so to maintain the same would constitute a Material Adverse Change.
7.1.6 Visitation Rights.
-----------------
Each Loan Party shall, and shall cause each of its Subsidiaries to,
permit any of the officers or authorized employees or representatives of the
Agent or any of the Banks to visit and inspect any of its properties and to
examine and make excerpts from its books and records and discuss its business
affairs, finances and accounts with its officers, all in such detail and at such
times and as often as any of the Banks may reasonably request, provided that
--------
each Bank shall provide the Borrower and the Agent with reasonable notice prior
to any visit or inspection and such visit or inspection shall be conducted in a
reasonable manner. In the event any Bank desires to conduct an audit of any
Loan Party, such Bank shall make a reasonable effort to conduct such audit
contemporaneously with any audit to be performed by the Agent.
7.1.7 Keeping of Records and Books of Account.
---------------------------------------
The Borrower shall, and shall cause each Subsidiary of the Borrower to,
maintain and keep proper books of record and account which enable the Borrower
and its Subsidiaries to issue financial statements in accordance with GAAP and
as otherwise required by applicable Laws of any Official Body having
jurisdiction over the Borrower or any Subsidiary of the Borrower, and in which
full, true and correct entries shall be made in all material respects of all its
dealings and business and financial affairs.
7.1.8 Plans and Benefit Arrangements.
------------------------------
The Borrower shall, and shall cause each other member of the ERISA Group
to, comply with ERISA, the Internal Revenue Code and other applicable Laws
applicable to Plans and Benefit Arrangements except where such failure, alone or
in conjunction with any other such failure, would not result in a Material
Adverse Change. Without limiting the generality of the foregoing, the Borrower
shall cause all of its Plans and all Plans maintained by any member of the ERISA
Group to be funded in accordance with the minimum funding requirements of ERISA
and shall make, and cause each member of the ERISA Group to make, in a timely
manner, all contributions due under the Plans, Benefit Arrangements and
Multiemployer Plans.
46
<PAGE>
7.1.9 Compliance with Laws.
--------------------
Each Loan Party shall, and shall cause each of its Subsidiaries to,
comply with all applicable Laws, including all Environmental Laws, in all
respects, provided that it shall not be deemed to be a violation of this Section
--------
7.1.9 if any failure to comply with any Law would not result in fines,
penalties, remediation costs, other similar liabilities or injunctive relief
which in the aggregate would constitute a Material Adverse Change.
7.1.10 Use of Proceeds.
---------------
The Loan Parties will use the proceeds of the Loans only for general
corporate purposes and for working capital and to repay the Existing Bank
Indebtedness. The Loan Parties' use of the proceeds of the Loans will not
contravene any applicable Law or any provision hereof.
7.1.11 Further Assurances.
------------------
Each Loan Party shall, from time to time, at its expense, faithfully
preserve and protect the Agent's Lien on and Prior Security Interest in the
Collateral as a continuing first priority perfected Lien, subject only to
Permitted Liens, and shall do such other acts and things as the Agent in its
sole discretion may deem necessary or advisable from time to time in order to
preserve, perfect and protect the Liens granted under the Loan Documents and to
exercise and enforce its rights and remedies thereunder with respect to the
Collateral.
7.1.12 Subordination of Intercompany Loans.
-----------------------------------
Each Loan Party shall cause any intercompany Indebtedness, loans or
advances owed by any Loan Party to any other Loan Party to be subordinated
pursuant to the terms of the Intercompany Subordination Agreement.
7.1.13 Maintenance of Accounts at PNC Bank.
-----------------------------------
The Borrower and Acquisition Subsidiary shall maintain the principal
depository and operating accounts at PNC Bank.
47
<PAGE>
7.1.14 Interest Rate Protection
------------------------
The Borrower and Acquisition Subsidiary shall maintain an interest rate
cap contract for a minimum of two (2) years after the Closing Date with a strike
price of not more than 7% per annum and a contract amount of not less than
$16,000,000. The amount of (i) Suncom's interest rate protection
agreements (whether caps or otherwise) with PNC Bank existing on the Closing
Date and (ii) Suncom's fixed rate Indebtedness bearing an annual interest rate
not in excess of 10.25% shall be applied to satisfy such $16,000,000
requirement. Such interest rate protection contracts entered into on or after
the Closing Date shall be entered into with PNC Bank, unless its fees and rates
are not equal to or better than competitive bids received by the Borrower for
substantially identical contracts. The fixed rate Indebtedness shall be
provided by PNC Bank unless PNC Bank is unwilling to match the terms of another
Person's binding commitment to provide such Indebtedness and, if provided by PNC
Bank, shall be Obligations hereunder.
7.2 Negative Covenants.
------------------
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans and interest thereon and satisfaction of all of the
Loan Parties' other Obligations hereunder and termination of the Commitments,
the Loan Parties shall comply with the following negative covenants:
7.2.1 Indebtedness.
------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on Schedule 7.2.1
--------------
(including any extensions or renewals thereof, provided there is no increase in
--------
the amount thereof or other significant change in the terms thereof unless
otherwise specified on Schedule 7.2.1) ;
--------------
(iii) Capitalized and operating leases as and to the
extent permitted under Section 7.2.15;
(iv) Indebtedness secured by Purchase Money Security
Interests which are described in item (ix) of the definition of Permitted Liens;
and
(v) Indebtedness of a Loan Party to another Loan Party
which is subordinated in accordance with the provisions of Section 7.1.12.
48
<PAGE>
7.2.2 Liens.
-----
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens.
7.2.3 Guaranties.
----------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time, directly or indirectly, become or be liable in
respect of any Guaranty, or assume, guarantee, become surety for, endorse or
otherwise agree, become or remain directly or contingently liable upon or with
respect to any obligation or liability of any other Person, except for
Guaranties of Indebtedness of the Loan Parties permitted hereunder and except or
contemplated in the Subordination Agreement.
7.2.4 Loans and Investments.
---------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time make or suffer to remain outstanding any loan or
advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) or limited
liability company interest in, or any other investment or interest in, or make
any capital contribution to, any other Person, or agree, become or remain liable
to do any of the foregoing, except:
(i) trade credit extended on usual and
customary terms in the ordinary course of business and Loans to employees not to
exceed $100,000 outstanding at any one time;
(ii) advances to employees to meet expenses
incurred by such employees in the ordinary course of business and other loans to
employees not to exceed $100,000 outstanding at any one time;
(iii) Permitted Investments; and
(iv) loans, advances and investments in other
Loan Parties.
7.2.5 Dividends and Related Distributions.
-----------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests or limited liability company interests on
account of the purchase, redemption, retirement or acquisition of its shares of
capital stock (or warrants, options or rights therefor), partnership interests
or limited liability company interests, except dividends or other distributions
payable to another Loan Party.
49
<PAGE>
7.2.6 Liquidations, Mergers, Consolidations, Acquisitions.
---------------------------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person,
provided that:
- --------
(i) any Loan Party other than the Borrower may consolidate or merge
into another Loan Party which is wholly-owned by one or more of the other Loan
Parties;
(ii) the Borrower may acquire for not more than $3,000,000 the
business assets of another Person related to provision of background or
foreground music services if the following conditions are met as to this item
(ii): (a) such assets are acquired by the Borrower or a Subsidiary of the
Borrower, (b) any Subsidiary of the Borrower established in connection with the
acquisition shall become a Guarantor pursuant to the terms of this Agreement,
including Section 10.18 hereof, (c) no Potential Default or Event of Default
shall exist after such acquisition; (d) upon and after the completion of such
acquisition, the Commitments exceed the Revolving Credit Usage by at least
$2,000,000 and (e) the Borrower has delivered to the Banks financial analyses of
such acquisition demonstrating to the reasonable satisfaction of the Agent and
the Banks pro forma compliance with the financial covenants set forth in
--- -----
Sections 7.2.16, 7.2.17 and 7.2.18 after such acquisition.
7.2.7 Dispositions of Assets or Subsidiaries.
--------------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or assets,
tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest, partnership interests or limited liability company interests of a
Subsidiary of such Loan Party), except:
(i) transactions involving the sale or lease of
inventory or sale or lease of equipment in the ordinary course of business;
(ii) any sale, transfer or lease of assets by any
wholly owned Subsidiary of such Loan Party to another Loan Party;
(iii) any sale, transfer or lease of assets having
a value not in excess of $500,000 which are replaced by substitute assets
acquired or leased within the parameters of Section 7.2.15, provided such
--------
substitute assets are subject to the Banks' Prior Security Interest; or
(iv) any sale, transfer or lease of assets, other
than those specifically excepted pursuant to clauses (i) through (iii) above,
which is approved by the Required Banks so long as the proceeds (net of amounts
to repay any Indebtedness secured by Permitted Liens on such assets, taxes,
direct cost expenses, including legal fees, as reasonably calculated by the
Borrower) are applied as a mandatory prepayment of the Commitments in accordance
with the provisions of Section 4.5
50
<PAGE>
above except that such proceeds not exceeding $100,000 may be retained by the
Borrower.
Affiliate Transactions; Advances.
--------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, enter into or carry out any transaction (including purchasing
property or services from or selling property or services) with any Affiliate of
any Loan Party unless such transaction is not otherwise prohibited by this
Agreement, is entered into in the ordinary course of business upon fair and
reasonable arm's-length terms and conditions which are fully disclosed to the
Agent and is in accordance with all applicable Law. The employment and option
agreements described in Schedule 7.2.8 shall not be deemed to violate this
--------------
Section 7.2.8.
7.2.9 Subsidiaries, Partnerships and Joint Ventures.
---------------------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, own or create directly or indirectly any Subsidiaries other
than (i) any Subsidiary which has joined this Agreement as Guarantor on the
Closing Date; and (ii) any Subsidiary formed after the Closing Date which joins
this Agreement as a Guarantor pursuant to Section 10.18, provided that the
Required Banks shall have consented to such formation and joinder and that such
Subsidiary and the Loan Parties, as applicable, shall grant and cause to be
perfected first priority Liens to the Agent for the benefit of the Banks in the
assets held by, and stock of or other ownership interests in, such Subsidiary.
No Loan Party shall become or agree to become (1) a general or limited partner
in any general or limited partnership, except that the Loan Parties may be
general or limited partners in other Loan Parties, (2) a member or manager of,
or hold a limited liability company interest in, a limited liability company,
except that the Loan Parties may be members or managers of, or hold limited
liability company interests in, other Loan Parties, or (3) a joint venturer or
hold a joint venture interest in any joint venture.
7.2.10 Continuation of or Change in Business.
-------------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, engage in any business other than substantially as conducted
and operated by such Loan Party or Subsidiary during the present fiscal year,
and such Loan Party or Subsidiary shall not permit any material change in such
business.
7.2.11 Plans and Benefit Arrangements.
------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to:
(i) fail to satisfy the minimum funding requirements
of ERISA and the Internal Revenue Code with respect to any Plan;
(ii) engage in a Prohibited Transaction with any Plan,
Benefit Arrangement or Multiemployer Plan which would constitute a Material
Adverse Change;
51
<PAGE>
permit the aggregate actuarial present value of all vested benefit liabilities
under each Plan as disclosed in the most recent actuarial report completed with
respect to such Plan, if any, to exceed, as of any actuarial valuation date, the
fair market value of the assets of such Plan;
(iv) after receipt of notice from any Multiemployer
Plan, fail to make any contribution to such Multiemployer Plan that the Borrower
or any member of the ERISA Group may be required to make under any agreement
relating to such Multiemployer Plan;
(v) withdraw (completely or partially) from any
Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to
withdraw) from any Multiple Employer Plan, where any such withdrawal is likely
to result in a Material Adverse Change;
(vi) terminate, or institute proceedings to terminate,
any Plan, where such termination is likely to result in a Material Adverse
Change;
(vii) make any amendment to any Plan, with respect to
which amendment, security is required under Section 307 of ERISA; or
(viii) fail to give any and all notices and make all
disclosures and governmental filings required under ERISA or the Internal
Revenue Code, where such failure is likely to result in a Material Adverse
Change.
7.2.12 Fiscal Year.
-----------
The Borrower shall not, and shall not permit any Subsidiary of the
Borrower to, change its fiscal year end from December 31.
7.2.13 Issuance of Stock.
-----------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, issue any additional shares of its capital stock or any
options, warrants or other rights in respect thereof, except for: (a) in
accordance with Section 4.5.3, (b) the Warrant and (c) stock of the Borrower
issued to employees, directors or representatives of any of the Loan Parties
pursuant to stock option or stock purchase plans, employment contracts, as fees
or compensation or otherwise in the ordinary course of business.
7.2.14 Changes in Documents; Restrictive Agreements.
--------------------------------------------
.2.14.1 Each of the Loan Parties shall not, and shall
not permit any of its Subsidiaries to, amend in any respect its certificate of
incorporation (including any provisions or resolutions relating to capital
stock), by-laws, certificate of limited partnership, partnership agreement,
certificate of formation, limited liability company agreement or other
organizational documents without providing at least thirty (30) calendar days'
prior written notice to the Agent and the Banks and, in the event such change
would be materially adverse to the Banks as determined by the Agent in its sole
discretion, obtaining the prior written consent of the Required Banks.
52
<PAGE>
.2.14.2 Each of the Loan Parties shall not, and shall not
permit any Subsidiary to, amend or modify any provision of any of the documents
relating to amounts owing to Subordinated Lender, including the Subordination
Agreement.
.2.14.3 The Borrower and Acquisition Subsidiary shall
not, and shall not permit any Subsidiary to agree to restrict or limit the
granting of any Lien to the Agent or any Bank or, except as provided in the Loan
Documents, the declaration or payment of any dividend to the Borrower.
7.2.15 Capital Expenditures and Leases.
-------------------------------
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, make any payments in the aggregate in any fiscal year on
account of the purchase or lease of any assets which if purchased would
constitute fixed assets or which if leased would constitute a capitalized lease
which exceed the amount set forth below:
<TABLE>
<CAPTION>
Year Limit ($)
---- -----
<S> <C>
1997 4,000,000
1998 3,900,000
1999 4,100,000
2000 4,250,000
2001 4,450,000
2002 4,650,000
2003 4,900,000
</TABLE>
Up to $1,000,000 of any such amount not used in such year may be applied to
increase the permitted amount for the immediately following year provided no
Potential Default or Event of Default would otherwise be caused thereby.
7.2.16 Minimum Fixed Charge Coverage Ratio.
-----------------------------------
The Loan Parties shall not permit the Fixed Charge Coverage Ratio,
calculated as of the end of each fiscal quarter for the prior four (4) fiscal
quarters (or if such period does not include the four (4) fiscal quarters after
the Closing Date, for the number of full fiscal quarters which have elapsed
since the Closing Date), to be less than 1.05 to 1.0 from the Closing Date until
December 31, 1998 and 1.1 to 1.0 thereafter.
53
<PAGE>
Maximum Leverage Ratio.
----------------------
The Loan Parties shall not at any time permit the Leverage Ratio for the prior
four (4) fiscal quarters to exceed the ratio set forth below for the periods
specified below:
Period Ratio
------------
Closing Date through December 30, 19984.0:1
December 31, 1998 through December 30, 19993.5:1
December 31, 1999 through December 30, 20003.0:1
December 31, 2000 through December 30, 20032.5:1
December 31, 2003 and thereafter2.25:1
For the following periods in 1997 only, the Leverage Ratio shall be
calculated by multiplying the EBITDA by the following factors: for the fiscal
quarter ended June 30, 1997, the factor is 4; for the two fiscal quarters ended
September 30, 1997, the factor is 2; and for the three fiscal quarters December
31, 1997, the factor is 4/3. Calculations in respect of the EBITDA for the
fiscal quarter ending June 30, 1997 shall be adjusted by including on a pro
forma basis Suncom's results from April 1, 1997 through the Closing Date.
7.2.18 Minimum Interest Coverage Ratio.
-------------------------------
The Loan Parties shall not permit the Interest Coverage Ratio calculated as
of the end of each fiscal quarter for the prior four (4) fiscal quarters (or if
such period does not include the four (4) fiscal quarters after the Closing
Date, for the number of full fiscal quarters which have elapsed since the
Closing Date), to be less than the ratio set forth below for the four period
specified below:
Period Ratio
------------
Closing Date through December 30, 19982.25:1
December 31, 1998 through December 30, 19992.50:1
December 31, 1999 through December 30, 20002.75:1
December 31, 2000 and thereafter3.00:1
7.2.19 Attrition Limitations.
---------------------
The Loan Parties shall not permit the Attrition Rate in any two (2) consecutive
fiscal quarters to exceed 10%.
54
<PAGE>
7.3 Reporting Requirements.
----------------------
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Loans and interest thereon and satisfaction of all of the
Loan Parties' other Obligations hereunder and under the other Loan Documents and
termination of the Commitments, the Loan Parties will furnish or cause to be
furnished to the Agent and each of the Banks:
7.3.1 Quarterly Financial Statements.
------------------------------
As soon as available and in any event within forty-five (45) calendar days
after the end of each of the first three fiscal quarters in each fiscal year,
financial statements of the Borrower, consisting of a consolidated and
consolidating balance sheet as of the end of such fiscal quarter and related
consolidated and consolidating statements of income, stockholders' equity and
cash flows for the fiscal quarter then ended and the fiscal year through that
date, all in reasonable detail and certified (subject to normal year-end audit
adjustments) by the Chief Executive Officer, President or Chief Financial
Officer of the Borrower as having been prepared in accordance with GAAP,
consistently applied, and setting forth in comparative form the respective
financial statements for the corresponding date and period in the previous
fiscal year.
7.3.2 Annual Financial Statements.
---------------------------
As soon as available and in any event within ninety (90) days after the end
of each fiscal year of the Borrower, financial statements of the Borrower
consisting of a consolidated and consolidating balance sheet as of the end of
such fiscal year, and related consolidated and consolidating statements of
income, stockholders' equity and cash flows for the fiscal year then ended, all
in reasonable detail and setting forth in comparative form the financial
statements as of the end of and for the preceding fiscal year, and certified by
independent certified public accountants of nationally recognized standing
satisfactory to the Agent. The certificate or report of accountants shall be
free of qualifications (other than any consistency qualification that may result
from a change in the method used to prepare the financial statements as to which
such accountants concur) and shall not indicate the occurrence or existence of
any event, condition or contingency which would materially impair the prospect
of payment or performance of any covenant, agreement or duty of any Loan Party
under any of the Loan Documents. The Loan Parties shall deliver with such
financial statements and certification by their accountants a letter of such
accountants to the Agent and the Banks substantially (i) to the effect that,
based upon their ordinary and customary examination of the affairs of the
Borrower, performed in connection with the preparation of such consolidated
financial statements, and in accordance with generally accepted auditing
standards, they are not aware of the existence of any condition or event which
constitutes an Event of Default or Potential Default or, if they are aware of
such condition or event, stating the nature thereof and confirming the
Borrower's calculations with respect to the certificate to be delivered pursuant
to Section 7.3.3 with respect to such financial statements and (ii) to the
effect that the Banks are intended to rely upon such accountant's certification
of the annual financial statements and that such accountants authorize the Loan
Parties to deliver such reports and certificate to the Banks on such
accountants' behalf.
55
<PAGE>
7.3.3 Certificate of the Borrower.
---------------------------
Concurrently with the financial statements of the Borrower furnished to the
Agent and to the Banks pursuant to Sections 7.3.1 and 7.3.2 a certificate of the
Borrower signed by the Chief Executive Officer, President or Chief Financial
Officer of the Borrower, in the form of Exhibit 8.3.4, to the effect that,
-------------
except as described pursuant to Section 7.3.4, (i) the representations and
warranties of the Borrower contained in Section 5 and in the other Loan
Documents are true on and as of the date of such certificate (after taking into
account schedule revisions and updates pursuant to Section 5.2) with the same
effect as though such representations and warranties had been made on and as of
such date (except for representations and warranties which expressly relate
solely to an earlier date or time) and the Loan Parties have performed and
complied with all covenants and conditions hereof, (ii) no Event of Default or
Potential Default exists and is continuing on the date of such certificate and
(iii) containing calculations in sufficient detail to demonstrate compliance as
of the date of such financial statements with all financial covenants contained
in Section 7.2. The certificate delivered with the annual financial statements
pursuant to Section 7.3.2 shall include a determination in reasonable detail of
the Excess Cash Flow and the amount of the mandatory prepayment of Excess Cash
Flow pursuant to Section 4.5.1 applicable to such fiscal year.
7.3.4 Notice of Default.
-----------------
Promptly after any officer of any Loan Party has learned of the occurrence
of an Event of Default or Potential Default, a certificate signed by the Chief
Executive Officer, President or Chief Financial Officer of such Loan Party
setting forth the details of such Event of Default or Potential Default and the
action which the such Loan Party proposes to take with respect thereto.
7.3.5 Notice of Litigation.
--------------------
Promptly after the commencement thereof, notice of all actions, suits,
proceedings or investigations before or by any Official Body or any other Person
against any Loan Party or Subsidiary of any Loan Party which relate to the
Collateral, involve a claim or series of claims outstanding for more than thirty
(30) days or in excess of $250,000 in the aggregate or which if adversely
determined would constitute a Material Adverse Change.
7.3.6 Certain Events.
--------------
Written notice to the Agent:
(i) at least thirty (30) calendar days prior thereto, with respect to
any proposed sale or transfer of assets pursuant to Section 7.2.7(iii) or (iv),
(ii) within the time limits set forth in Section 7.2.14, any amendment
to the organizational documents of any Loan Party; and
(iii) at least thirty (30) calendar days prior thereto, with respect to
any change in any Loan Party's locations from the locations set forth in
Schedule A to the Security Agreement.
- ----------
56
<PAGE>
Budgets, Forecasts, Other Reports and Information.
-------------------------------------------------
Promptly upon their becoming available to the Borrower:
(i) the annual budget and any forecasts or projections of the
Borrower, to be supplied not later than thirty (30) days prior to commencement
of the fiscal year to which any of the foregoing may be applicable (but, in the
case of such forecasts or projections in respect of fiscal year 1998, at any
time on or before December 31, 1997),
(ii) any reports including management letters submitted to the
Borrower by independent accountants in connection with any annual, interim or
special audit,
(iii) any reports, notices or proxy statements generally distributed by
the Borrower to its stockholders on a date no later than the date supplied to
such stockholders,
(iv) regular or periodic reports, including Forms 10-K, 10-Q and 8-K,
registration statements and prospectuses, filed by the Borrower with the
Securities and Exchange Commission,
(v) a copy of any order in any proceeding to which the Borrower or
any of its Subsidiaries is a party issued by any Official Body,
(vi) reports of the type described in Section 6.1.15, and
(vii) such other reports and information as any of the Banks may from
time to time reasonably request. The Borrower shall also notify the Banks
promptly upon the Borrower becoming aware of the enactment or adoption of any
Law which may result in a Material Adverse Change.
7.3.8 Notices Regarding Plans and Benefit Arrangements.
------------------------------------------------
.3.8.1 Certain Events
--------------
Within thirty (30) days after becoming aware of the occurrence thereof,
notice (including the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with respect thereto) of:
(i) notice of any Reportable Event with respect to the Borrower or
any other member of the ERISA Group is provided to the PBGC,
(ii) any Prohibited Transaction which could subject the Borrower or
any other member of the ERISA Group to a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue
Code in connection with any Plan, any Benefit Arrangement or any trust created
thereunder, and which penalty or tax is likely to result in a Material Adverse
Change,
(iii) the Borrower or any member of the ERISA Group receives notice of
assessment of withdrawal liability with respect to any Multiemployer Plan, which
is likely to result in a Material Adverse Change,
57
<PAGE>
(iv) any cessation of operations (by the Borrower or any other member
of the ERISA Group) at a facility in the circumstances described in Section 4062
(e) of ERISA which is likely to result in a Material Adverse Change,
(v) withdrawal by the Borrower or any other member of the ERISA Group
from a Multiple Employer Plan which is likely to result in a Material Adverse
Change,
(vi) a failure by the Borrower or any other member of the ERISA Group
to make a contribution to a Plan required to avoid imposition of a Lien under
Section 302(f) of ERISA,
(vii) the adoption of an amendment to a Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA, or
(viii) any change in the actuarial assumptions or funding methods used
for any Plan, where the effect of such change is likely to result in a Material
Adverse Change.
.3.8.2 Notices of Involuntary Termination and Annual Reports.
-----------------------------------------------------
Within thirty (30) days after receipt thereof, copies of all notices
received by the Borrower or any other member of the ERISA Group of the PBGC's
intent to terminate any Plan administered or maintained by the Borrower or any
member of the ERISA Group, or to have a trustee appointed to administer any such
Plan; and at the request of the Agent or any Bank, the most recent annual report
(IRS Form 5500 series) and all accompanying schedules filed with the Internal
Revenue Service and the most recent actuarial reports, if any, of each Plan
maintained by the Borrower or any other member of the ERISA Group.
.3.8.3 Notice of Voluntary Termination.
-------------------------------
Promptly upon the filing thereof, copies of any Form 5310, or any successor
to Form 5310 required to be, filed with the PBGC in connection with the
termination of any Plan.
DEFAULT
-------
8.1 Events of Default.
-----------------
An Event of Default shall mean the occurrence or existence of any one or
more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
58
<PAGE>
8.1.1 Payments Under Loan Documents.
-----------------------------
The Borrower shall fail to pay any principal of any Loan (including
mandatory prepayments or the payment due at maturity) or shall fail to pay any
interest on any Loan or, after such principal, interest or other amount becomes
due in accordance with the terms hereof or thereof or shall fail to pay any
other Obligations or any other amount owing hereunder or under the other Loan
documents ten (10) days after notice is given to the Borrower thereof;
8.1.2 Breach of Warranty.
------------------
Any representation or warranty made at any time by any of the Loan
Parties herein or by any of the Loan Parties in any other Loan Document, or in
any certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;
8.1.3 Breach of Covenants, etc.
-------------------------
Any of the Loan Parties shall default in the observance or performance
of any covenant contained in Section 7.2 (other than Section 7.2 and 7.2) or
Section 7.2 (other than Section 7.2.11);
8.1.4 Breach of Other Covenants.
-------------------------
Any of the Loan Parties shall default in the observance or performance
of any other covenant, condition or provision hereof or of any other Loan
Document and such default shall continue unremedied for a period of fifteen (15)
Business Days after any officer of any Loan Party becomes aware of the
occurrence thereof (such grace period to be applicable only in the event such
default can be remedied by corrective action of the Loan Parties as determined
by the Agent in its sole discretion);
8.1.5 Defaults in Other Agreements or Indebtedness.
--------------------------------------------
A default or event of default shall occur at any time under the terms of
any other agreement involving borrowed money or the extension of credit or any
other Indebtedness under which any Loan Party or Subsidiary of any Loan Party
may be obligated as a borrower or guarantor in excess of $250,000 in the
aggregate, and such breach, default or event of default consists of the failure
to pay (beyond any period of grace permitted with respect thereto, and is not
otherwise waived by the holder thereof) any indebtedness when due (whether at
stated maturity, by acceleration or otherwise) or if such breach or default
permits or causes the acceleration of any indebtedness or the termination of any
commitment to lend and is not otherwise waived by the holder thereof. (Without
limiting the foregoing, a default under the Note Assumption Agreement dated as
of the Closing Date between Subordinated Lender and certain of the Loan Parties
shall, after the expiration of any applicable notice or cure periods provided
for therein, be an Event of Default hereunder, irrespective of (and specifically
in recognition of) any differences between the default provisions of this
Agreement and such Note Assumption Agreement);
59
<PAGE>
8.1.6 Final Judgments or Orders.
-------------------------
Any final judgments or orders for the payment of money the uninsured
portion of which is in excess of $250,000 in the aggregate shall be entered
against any Loan Party by a court having jurisdiction in the premises, which
judgment is not discharged, vacated, bonded or stayed pending appeal within a
period of thirty (30) days from the date of entry;
8.1.7 Loan Document Unenforceable.
---------------------------
Any of the Loan Documents shall cease to be legal, valid and binding
agreements enforceable against the party executing the same or such party's
successors and assigns (as permitted under the Loan Documents) in accordance
with the respective terms thereof or shall in any way be terminated (except in
accordance with its terms) or become or be declared ineffective or inoperative
or shall in any way be challenged or contested or cease to give or provide the
respective Liens, security interests, rights, titles, interests, remedies,
powers or privileges intended to be created thereby;
8.1.8 Uninsured Losses; Proceedings Against Assets.
--------------------------------------------
There shall occur any material uninsured damage to or loss, theft or
destruction of any of the Collateral in excess of $250,000 or the Collateral or
any other of the Loan Parties' or any of their Subsidiaries' assets are
attached, seized, levied upon or subjected to a writ or distress warrant; or
such come within the possession of any receiver, trustee, custodian or assignee
for the benefit of creditors and the same is not cured, bonded against, stayed
or dismissed within thirty (30) days thereafter;
8.1.9 Notice of Lien or Assessment.
----------------------------
A notice of Lien or assessment in excess of $250,000 which is not a
Permitted Lien is filed of record with respect to all or any part of any of the
Loan Parties' or any of their Subsidiaries' assets by the United States, or any
department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, including the PBGC, or any taxes or
debts owing at any time or times hereafter to any one of these becomes payable
and the same is not paid, stayed or bonded within thirty (30) days after the
same becomes payable (except to the extent such is being contested in good faith
and appropriate reserves have been taken under GAAP on the financial statements
of the Borrower);
Insolvency.
----------
Any Loan Party or any Subsidiary of a Loan Party ceases to be solvent or
admits in writing its inability to pay its debts as they mature;
60
<PAGE>
8.1.11 Events Relating to Plans and Benefit
------------------------------------
Arrangements.
- ------------
Notwithstanding the provisions of Section 8.1.3, any of the following
occurs: (i) notice is provided to the PBGC of any Reportable Event, which the
Agent determines in good faith constitutes grounds for the termination of any
Plan by the PBGC or the appointment of a trustee to administer or liquidate any
Plan, and such Reportable Event is continuing; (ii) proceedings shall have been
instituted or other action taken by the PBGC to terminate any Plan; (iii) a
trustee shall be appointed to administer or liquidate any Plan; (iv) the PBGC
shall give notice of its intent to institute proceedings to terminate any Plan
or Plans or to appoint a trustee to administer or liquidate any Plan; (v) the
Borrower or any other member of the ERISA Group shall make any amendment to a
Plan with respect to which security is required under Section 307 of ERISA; (vi)
the Borrower or any other member of the ERISA Group shall withdraw completely or
partially from a Multiemployer Plan; (vii) the Borrower or any other member of
the ERISA Group shall withdraw (or shall be deemed under Section 4062(e) of
ERISA to withdraw) from a Multiple Employer Plan; and, with respect to any of
the events specified in (i), (ii), (iii), (iv), (v), (vi), or (vii), the Agent
determines in good faith that any such occurrence would result in a Material
Adverse Change;
8.1.12 Cessation of Business.
---------------------
Any Loan Party or Subsidiary of a Loan Party ceases to conduct its
business as contemplated, except as expressly permitted under Section 7.2.6 or
7.2.7, or any Loan Party or Subsidiary of a Loan Party is enjoined, restrained
or in any way prevented by court order from conducting all or any material part
of its business and such injunction, restraint or other preventive order is not
dismissed or stayed within thirty (30) days after the entry thereof;
8.1.13 Change of Control.
-----------------
There shall occur either of the following: (i) Suncom shall cease to be
represented on the board of directors of the Borrower by fewer than four (4)
directors and fewer than five (5) directors from and after the date of the
Borrower's annual shareholders meeting next following the Closing Date, or (ii)
Suncom owns less than 51% of the voting control of the Borrower, or (iii) both
Mitchell Kleinhandler and David W. Unger shall cease to be president and
executive vice president, respectively, of the Borrower, or (iv) both Mitchell
Kleinhandler and David W. Unger shall cease being managing members, directly or
indirectly, of Suncom;
61
<PAGE>
8.1.14 Involuntary Proceedings.
-----------------------
A proceeding shall have been instituted in a court having jurisdiction
in the premises seeking a decree or order for relief in respect of any Loan
Party or Subsidiary of a Loan Party in an involuntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, or for the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, conservator (or similar official) of any Loan Party or
Subsidiary of a Loan Party for any substantial part of its property, or for the
winding-up or liquidation of its affairs, and such proceeding shall remain
undismissed or unstayed and in effect for a period of sixty (60) consecutive
days or such court shall enter a decree or order granting any of the relief
sought in such proceeding; or
8.1.15 Voluntary Proceedings.
---------------------
Any Loan Party or Subsidiary of a Loan Party shall commence a voluntary
case under any applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect, shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall consent to the
appointment or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator, conservator (or other similar official) of itself or for
any substantial part of its property or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action in furtherance of any of the foregoing.
8.2 Consequences of Event of Default.
--------------------------------
8.2.1 Events of Default Other Than Bankruptcy,
----------------------------------------
Insolvency or Reorganization Proceedings.
- ----------------------------------------
If an Event of Default specified under Sections 8.1.1 through 8.1.13
shall occur and be continuing, the Banks and the Agent shall be under no further
obligation to make Loans and the Agent may, and upon the request of the Required
Banks, shall by written notice to the Borrower, declare the unpaid principal
amount of the Notes then outstanding and all interest accrued thereon, any
unpaid fees and all other Indebtedness of the Borrower to the Banks hereunder
and thereunder to be forthwith due and payable, and the same shall thereupon
become and be immediately due and payable to the Agent for the benefit of each
Bank without presentment, demand, protest or any other notice of any kind, all
of which are hereby expressly waived; and
8.2.2 Bankruptcy, Insolvency or Reorganization
----------------------------------------
Proceedings.
- -----------
If an Event of Default specified under Section 8.1.14 or 8.1.15 shall
occur, the Banks shall be under no further obligations to make Loans hereunder
and the unpaid principal amount of the then outstanding and all interest accrued
thereon, any unpaid fees and all other Indebtedness of the Borrower to the Banks
hereunder and thereunder shall be immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived; and
62
<PAGE>
Set-off.
-------
If an Event of Default shall occur and be continuing, any Bank to whom
any Obligation is owed by any Loan Party hereunder or under any other Loan
Document or any participant of such Bank which has agreed in writing to be bound
by the provisions of Section 9.13 and any branch, Subsidiary or Affiliate of
such Bank or participant anywhere in the world shall have the right, in addition
to all other rights and remedies available to it, without notice to such Loan
Party, to set-off against and apply to the then unpaid balance of all the Loans
and all other Obligations of the Borrower and the other Loan Parties hereunder
or under any other Loan Document any debt owing to, and any other funds held in
any manner for the account of, the Borrower or such other Loan Party by such
Bank or participant or by such branch, Subsidiary or Affiliate, including all
funds in all deposit accounts (whether time or demand, general or special,
provisionally credited or finally credited, or otherwise) now or hereafter
maintained by the Borrower or such other Loan Party for its own account (but not
including funds held in custodian or trust accounts) with such Bank or
participant or such branch, Subsidiary or Affiliate. Such right shall exist
whether or not any Bank or the Agent shall have made any demand under this
Agreement or any other Loan Document, whether or not such debt owing to or funds
held for the account of the Borrower or such other Loan Party is or are matured
or unmatured and regardless of the existence or adequacy of any Collateral,
Guaranty or any other security, right or remedy available to any Bank or the
Agent; and
8.2.4 Suits, Actions, Proceedings.
---------------------------
If an Event of Default shall occur and be continuing, and whether or not
the Agent shall have accelerated the maturity of Loans pursuant to any of the
foregoing provisions of this Section 8.2, the Agent or any Bank, if owed any
amount with respect to the Notes may proceed to protect and enforce its rights
by suit in equity, action at law and/or other appropriate proceeding, whether
for the specific performance of any covenant or agreement contained in this
Agreement or the Notes, including as permitted by applicable Law the obtaining
of the ex parte appointment of a receiver, and, if such amount shall have become
-- -----
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of the Agent or such Bank; and
8.2.5 Application of Proceeds.
-----------------------
From and after the date on which the Agent has taken any action pursuant
to this Section 8.2 and until all Obligations of the Loan Parties have been paid
in full, any and all proceeds received by the Agent from any sale or other
disposition of the Collateral, or any part thereof, or the exercise of any other
remedy by the Agent, shall be applied as follows:
(i) first, to reimburse the Agent and the
Banks for out-of-pocket costs, expenses and disbursements, including reasonable
attorneys' and paralegals' fees and legal expenses, incurred by the Agent or the
Banks in connection with realizing on the Collateral or collection of any
Obligations of any of the Loan Parties under any of the Loan Documents,
including advances made by the Banks or any one of them or the Agent for the
reasonable maintenance, preservation, protection or enforcement of, or
realization upon, the Collateral, including advances for taxes, insurance,
repairs and the like and reasonable expenses incurred to sell or otherwise
realize on, or prepare for sale or other realization
63
<PAGE>
on, any of the Collateral;
(ii) second, to the repayment of all
Indebtedness then due and unpaid of the Loan Parties to the Banks incurred under
this Agreement or any of the other Loan Documents, whether of principal,
interest, fees, expenses or otherwise, in such manner as the Agent may determine
in its discretion; and
(iii) the balance, if any, as required by
Law.
8.2.6 Other Rights and Remedies.
-------------------------
In addition to all of the rights and remedies contained in this
Agreement or in any of the other Loan Documents, the Agent shall have all of the
rights and remedies of a secured party under the Uniform Commercial Code or
other applicable Law, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by Law. The Agent may, and upon the
request of the Required Banks shall, exercise all post-default rights granted to
the Agent and the Banks under the Loan Documents or applicable Law.
8.3 Notice of Sale.
--------------
Any notice required to be given by the Agent of a sale, lease,
or other disposition of the Collateral or any other intended action by the
Agent, if given ten (10) Business Days prior to such proposed action, shall
constitute commercially reasonable and fair notice thereof to the Borrower.
9.THE AGENT
---------
9.1 Appointment.
-----------
Each Bank hereby irrevocably designates, appoints and
authorizes PNC Bank to act as Agent for such Bank under this Agreement and to
execute and deliver or accept on behalf of each of the Banks the other Loan
Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note
by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent
to take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and any other instruments and agreements referred to
herein, and to exercise such powers and to perform such duties hereunder as are
specifically delegated to or required of the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto. PNC Bank agrees to act as
the Agent on behalf of the Banks to the extent provided in this Agreement.
64
<PAGE>
Delegation of Duties.
--------------------
The Agent may perform any of its duties hereunder by or
through agents or employees (provided such delegation does not constitute a
--------
relinquishment of its duties as Agent) and, subject to Sections 9.5 and 9.6,
shall be entitled to engage and pay for the advice or services of any attorneys,
accountants or other experts concerning all matters pertaining to its duties
hereunder and to rely upon any advice so obtained.
9.3 Nature of Duties; Independent Credit Investigation.
--------------------------------------------------
The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. Without limiting the generality of the foregoing,
the use of the term "agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable Law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties. Each
Bank expressly acknowledges (i) that the Agent has not made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of any of the Loan Parties, shall be deemed to constitute
any representation or warranty by the Agent to any Bank; (ii) that it has made
and will continue to make, without reliance upon the Agent, its own independent
investigation of the financial condition and affairs and its own appraisal of
the creditworthiness of each of the Loan Parties in connection with this
Agreement and the making and continuance of the Loans hereunder; and (iii)
except as expressly provided herein, that the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Bank
with any credit or other information with respect thereto, whether coming into
its possession before the making of any Loan or at any time or times thereafter.
65
<PAGE>
9.4 Actions in Discretion of Agent; Instructions From the Banks.
-----------------------------------------------------------
The Agent agrees, upon the written request of the Required Banks, to take
or refrain from taking any action of the type specified as being within the
Agent's rights, powers or discretion herein, provided that the Agent shall not
--------
be required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or any other Loan Document or applicable
Law. In the absence of a request by the Required Banks, the Agent shall have
authority, in its sole discretion, to take or not to take any such action,
unless this Agreement specifically requires the consent of the Required Banks or
all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section
9.6. Subject to the provisions of Section 9.6, no Bank shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks, or in the absence of such instructions, in the absolute
discretion of the Agent.
9.5 Reimbursement and Indemnification of Agent by the Borrower.
----------------------------------------------------------
The Borrower unconditionally agrees to pay or reimburse the Agent and hold
the Agent harmless against (a) liability for the payment of all reasonable out-
of-pocket costs, expenses and disbursements, including fees and expenses of
counsel (including the allocated costs of staff counsel), appraisers and
environmental consultants, incurred by the Agent (i) in connection with the
development, negotiation, preparation, printing, execution, administration,
syndication, interpretation and performance of this Agreement and the other Loan
Documents, (ii) relating to any requested amendments, waivers or consents
pursuant to the provisions hereof, (iii) in connection with the enforcement of
this Agreement or any other Loan Document or collection of amounts due hereunder
or thereunder or the proof and allowability of any claim arising under this
Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (iv) in any workout or restructuring or in
connection with the protection, preservation, exercise or enforcement of any of
the terms hereof or of any rights hereunder or under any other Loan Document or
in connection with any foreclosure, collection or bankruptcy proceedings, and
(b) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent,
in its capacity as such, in any way relating to or arising out of this Agreement
or any other Loan Documents or any action taken or omitted by the Agent
hereunder or thereunder, provided that the Borrower shall not be liable for any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements if the same results from the
Agent's gross negligence or willful misconduct, or if the Borrower was not given
notice of the subject claim and the opportunity to participate in the defense
thereof, at its expense (except that the Borrower shall remain liable to the
extent such failure to give notice does not result in a loss to the Borrower),
or if the same results from a compromise or settlement agreement entered into
without the consent of the Borrower, which shall not be unreasonably withheld.
In addition, the Borrower agrees to reimburse and pay all reasonable out-of-
pocket expenses of the Agent's regular employees and agents engaged periodically
to perform audits of the Loan Parties' books, records and business properties;
the Agent will seek such reimbursement for no more than two (2) such audits in
each year unless they are conducted during or incident to an Event of Default.
66
<PAGE>
9.6 Exculpatory Provisions; Limitation of Liability.
-----------------------------------------------
Neither the Agent nor any of its directors, officers, employees, agents,
attorneys or Affiliates shall (a) be liable to any Bank for any action taken or
omitted to be taken by it or them hereunder, or in connection herewith including
pursuant to any Loan Document, unless caused by its or their own gross
negligence or willful misconduct, (b) be responsible in any manner to any of the
Banks for the effectiveness, enforceability, genuineness, validity or the due
execution of this Agreement or any other Loan Documents or for any recital,
representation, warranty, document, certificate, report or statement herein or
made or furnished under or in connection with this Agreement or any other Loan
Documents, or (c) be under any obligation to any of the Banks to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions hereof or thereof on the part of the Loan Parties, or the financial
condition of the Loan Parties, or the existence or possible existence of any
Event of Default or Potential Default. No claim may be made by any of the Loan
Parties, any Bank, the Agent or any of their respective Subsidiaries against the
Agent, any Bank or any of their respective directors, officers, employees,
agents, attorneys or Affiliates, or any of them, for any special, indirect or
consequential damages or, to the fullest extent permitted by Law, for any
punitive damages in respect of any claim or cause of action (whether based on
contract, tort, statutory liability, or any other ground) based on, arising out
of or related to any Loan Document or the transactions contemplated hereby or
any act, omission or event occurring in connection therewith, including the
negotiation, documentation, administration or collection of the Loans, and each
of the Loan Parties, (for itself and on behalf of each of its Subsidiaries), the
Agent and each Bank hereby waive, releases and agree never to sue upon any claim
for any such damages, whether such claim now exists or hereafter arises and
whether or not it is now known or suspected to exist in its favor. Each Bank
agrees that, except for notices, reports and other documents expressly required
to be furnished to the Banks by the Agent hereunder or given to the Agent for
the account of or with copies for the Banks, the Agent and each of its
directors, officers, employees, agents, attorneys or Affiliates shall not have
any duty or responsibility to provide any Bank with an credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Loan Parties which may come
into the possession of the Agent or any of its directors, officers, employees,
agents, attorneys or Affiliates.
67
<PAGE>
9.7 Reimbursement and Indemnification of Agent by Banks.
---------------------------------------------------
Each Bank agrees to reimburse and indemnify the Agent (to the extent not
reimbursed by the Borrower and without limiting the Obligation of the Borrower
to do so) in proportion to its Ratable Share from and against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements, including attorneys' fees and disbursements
(including the allocated costs of staff counsel), and costs of appraisers and
environmental consultants, of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder, provided that
--------
no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (a) if the same results from the Agent's gross negligence or
willful misconduct, or (b) if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense
(except that such Bank shall remain liable to the extent such failure to give
notice does not result in a loss to the Bank), or (c) if the same results from a
compromise and settlement agreement entered into without the consent of such
Bank, which shall not be unreasonably withheld. In addition, each Bank agrees
promptly upon demand to reimburse the Agent (to the extent not reimbursed by the
Borrower and without limiting the Obligation of the Borrower to do so) in
proportion to its Ratable Share for all amounts due and payable by the Borrower
to the Agent in connection with the Agent's periodic audit of the Loan Parties'
books, records and business properties.
9.8 Reliance by Agent.
-----------------
The Agent shall be entitled to rely upon any writing, telegram, telex or
teletype message, resolution, notice, consent, certificate, letter, facsimile,
statement, order or other document or conversation by telephone or otherwise
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons, and upon the advice and opinions of counsel and
other professional advisers selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action hereunder unless it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
9.9 Notice of Default.
-----------------
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Potential Default or Event of Default unless the Agent has received
written notice from a Bank or the Borrower referring to this Agreement,
describing such Potential Default or Event of Default and stating that such
notice is a "notice of default."
9.10 Notices.
-------
The Agent shall promptly send to each Bank a copy of all notices received
from the Borrower pursuant to the provisions of this Agreement or the other Loan
Documents promptly upon receipt thereof. The Agent shall promptly notify the
Borrower and the other Banks of each change in the Base Rate and the effective
date thereof.
68
<PAGE>
9.11 Banks in Their Individual Capacities.
------------------------------------
With respect to its Revolving Credit Commitment, the Revolving Credit
Loans, made by it and any other rights and powers given to it as a Bank
hereunder or under any of the other Loan Documents, the Agent shall have the
same rights and powers hereunder as any other Bank and may exercise the same as
though it were not the Agent, and the term "Banks" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. PNC Bank and
its Affiliates and each of the Banks and their respective Affiliates may,
without liability to account, except as prohibited herein, make loans to, accept
deposits from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking or trust business with, the Loan Parties
and their Affiliates, in the case of the Agent, as though it were not acting as
Agent hereunder and in the case of each Bank, as though such Bank were not a
Bank hereunder. The Banks acknowledge that, pursuant to such activities, the
Agent or its Affiliates may (i) receive information regarding the Loan Parties
(including information that may be subject to confidentiality obligations in
favor of the Loan Parties) and acknowledge that the Agent shall be under no
obligation to provide such information to them, and (ii) accept fees and other
consideration from the Loan Parties for services in connection with this
Agreement and otherwise without having to account for the same to the Banks.
9.12 Holders of Notes.
----------------
The Agent may deem and treat any payee of any Note as the owner thereof for
all purposes hereof unless and until written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any request, authority
or consent of any Person who at the time of making such request or giving such
authority or consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
9.13 Equalization of Banks.
---------------------
The Banks and the holders of any participations in any Notes agree among
themselves that, with respect to all amounts received by any Bank or any such
holder for application on any Obligation hereunder or under any Note or under
any such participation, whether received by voluntary payment, by realization
upon security, by the exercise of the right of set-off or banker's lien, by
counterclaim or by any other non-pro rata source, equitable adjustment will be
made in the manner stated in the following sentence so that, in effect, all such
excess amounts will be shared ratably among the Banks and such holders in
proportion to their interests in payments under the Notes, except as otherwise
provided in Section 3.4.3 or Section 4.6. The Banks or any such holder
receiving any such amount shall purchase for cash from each of the other Banks
an interest in such Bank's Loans in such amount as shall result in a ratable
participation by the Banks and each such holder in the aggregate unpaid amount
under the Notes, provided that if all or any portion of such excess amount is
--------
thereafter recovered from the Bank or the holder making such purchase, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, together with interest or other amounts, if any, required by law
(including court order) to be paid by the Bank or the holder making such
purchase.
69
<PAGE>
9.14 Successor Agent.
---------------
The Agent may resign as Agent by giving not less than thirty (30) days'
prior written notice to the Borrower. If the Agent shall resign under this
Agreement, then either (a) the Required Banks shall appoint from among the Banks
a successor agent for the Banks, subject to the consent of the Borrower, such
consent not to be unreasonably withheld, or (b) if a successor agent shall not
be so appointed and approved within the thirty (30) day period following the
Agent's notice to the Banks of its resignation, then the Agent shall appoint,
with the consent of the Borrower, such consent not to be unreasonably withheld,
a successor agent who shall serve as Agent until such time as the Required Banks
appoint and the Borrower consents to the appointment of a successor agent. Upon
its appointment pursuant to either clause (a) or (b) above, such successor agent
shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall mean such successor agent, effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. After the resignation of any Agent hereunder, the
provisions of this Section 9 shall inure to the benefit of such former Agent and
such former Agent shall not by reason of such resignation be deemed to be
released from liability for any actions taken or not taken by it while it was an
Agent under this Agreement.
9.15 Agent's Fee.
-----------
The Borrower shall pay to the Agent a nonrefundable fee (the "Agent's Fee")
under the terms of a letter (the "Agent's Letter") between the Borrower and
Agent, as amended from time to time.
9.16 Availability of Funds.
---------------------
9.16.1 The Agent may assume that each Bank has made or will
make the proceeds of a Loan available to the Agent unless the Agent shall have
been notified by such Bank on or before the close of business on the Business
Day preceding the Borrowing Date with respect to such Loan. The Agent may, in
reliance upon such assumption (but shall not be required to), make available to
the Borrower a corresponding amount.
9.16.2 A Bank who fails to pay the Agent its Ratable Share
of any Revolving Credit Loans made available by the Agent on such Bank's behalf,
or who fails to pay any other amounts owing by it to the Agent (including,
without limitation, amounts due under Section 9.7), is a "Defaulting Bank." The
Agent is entitled to recover from such Defaulting Bank all such amounts owing by
such Defaulting Bank on demand. If the Defaulting Bank does not pay such
amounts on the Agent's demand, the Agent shall promptly notify the Borrower and
the Borrower shall pay such amounts within five Business Days of the Borrower's
receipt of such notice. In addition, the Defaulting Bank or the Borrower shall
pay to the Agent for its own account interest on such amount for each day from
the date such amount was made available by the Agent to the Borrower to the date
it is recovered by the Agent at a rate per annum equal to the then applicable
rate of interest for Revolving Credit Loans; plus, in each case, the expenses
and losses, if any, incurred as a result of the Defaulting Bank's failure to
perform its obligations. Nothing contained herein shall be deemed to relieve
any Bank of its obligation to fulfill its Commitment
70
<PAGE>
hereunder or to prejudice any rights which the Borrower may have against any
Bank as a result of any default by such Bank hereunder, including, without
limitation, the right of the Borrower to seek reimbursement from any Defaulting
Bank for any amounts paid by the Borrower under this Section 9.16.2 on account
of such Defaulting Bank's default.
9.16.3 The failure of any Bank to fund its Ratable Share of
a Revolving Credit Loan shall not relieve any other Bank of its obligation to
fund its Ratable Share of a Revolving Credit Loan. Conversely, no Bank shall be
responsible for the failure of another Bank to fund its Ratable Share of a
Revolving Loan.
9.16.4 The Agent shall not be obligated to transfer to a
Defaulting Bank any payments made by the Borrower to the Agent for the
Defaulting Bank's benefit nor shall a Defaulting Bank be entitled to the sharing
of any payments hereunder. Amounts payable to a Defaulting Bank shall instead
be paid to or retained by the Agent. The Agent may hold and, in its discretion,
re-lend to the Borrowers the amount of all such payments received by it for the
account of such Defaulting Bank. For purposes of voting or consenting to
matters with respect to any matter in the Loan Documents and determining Ratable
Shares, such Defaulting Bank shall be deemed not to be a "Bank" and such
Defaulting Bank's Revolving Credit Loan Commitment shall be deemed to be zero
(-0-). This Section 9.16 shall remain effective with respect to such Defaulting
Bank until (x) the Liabilities shall have been declared or shall have become
immediately due and payable or (y) the Required Banks, the Agent and the
Borrower shall have waived such Defaulting Bank's default in writing. The
operation of this Section 9.16 shall not be construed to increase or otherwise
affect the Revolving Credit Loan Commitment of any Bank, or relieve or excuse
the performance by the Borrower of its duties and obligations hereunder.
9.16.5 If the failure by a Defaulting Bank to fund a Loan
effectively reduces the full availability of the Commitment, then the Commitment
Fee payable pursuant to Section 2.3 shall be recalculated and reduced
proportionately for the period of such effective unavailability and when paid
shall be distributed to the Banks which are not Defaulting Banks in respect
thereof.
9.17 Calculations.
------------
In the absence of gross negligence or willful misconduct, the Agent shall
not be liable for any error in computing the amount payable to any Bank whether
in respect of the Loans, fees or any other amounts due to the Banks under this
Agreement. In the event an error in computing any amount payable to any Bank is
made, the Agent, the Borrower and each affected Bank shall, forthwith upon
discovery of such error, make such adjustments as shall be required to correct
such error, and any compensation therefor will be calculated at the Federal
Funds Effective Rate.
71
<PAGE>
9.18 Beneficiaries.
-------------
Except as expressly provided herein, the provisions of this Section 9 are
solely for the benefit of the Agent and the Banks, and the Loan Parties shall
not have any rights to rely on or enforce any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for any
of the Loan Parties.
10.MISCELLANEOUS
-------------
10.1 Modifications, Amendments or Waivers.
------------------------------------
With the written consent of the Required Banks, the Agent, acting on behalf
of all the Banks, and the Borrower, on behalf of the Loan Parties, may from time
to time enter into written agreements amending or changing any provision of this
Agreement or any other Loan Document or the rights of the Banks or the Loan
Parties hereunder or thereunder, or may grant written waivers or consents to a
departure from the due performance of the Obligations of the Loan Parties
hereunder or thereunder. Any such agreement, waiver or consent made with such
written consent shall be effective to bind all the Banks and the Loan Parties;
provided, that, without the written consent of all the Banks, no such agreement,
- --------
waiver or consent may be made which will:
10.1.1 Increase of Commitment; Extension or Expiration Date.
----------------------------------------------------
Increase the amount of the Revolving Credit Commitment of any Bank
hereunder or extend the Expiration Date;
10.1.2 Extension of Payment; Reduction of Principal Interest or
--------------------------------------------------------
Fees; Modification of Terms of Payment.
- --------------------------------------
Whether or not any Loans are outstanding, extend the time for payment of
principal or interest of any Loan (excluding the due date of any mandatory
prepayment of a Loan or any mandatory Commitment reduction in connection with
such a mandatory prepayment hereunder except for mandatory reductions of the
Commitments on the Expiration Date), the Commitment Fee or any other fee payable
to any Bank, or reduce the principal amount of or the rate of interest borne by
any Loan or reduce the Commitment Fee or any other fee payable to any Bank, or
otherwise affect the terms of payment of the principal of or interest of any
Loan, the Commitment Fee or any other fee payable to any Bank;
10.1.3 Release of Collateral or Guarantor.
----------------------------------
Except for sales of assets permitted by Section 7.2.7, release any
Collateral consisting of capital stock or other ownership interests of any Loan
Party or its Subsidiary or substantially all of the assets of any Loan Party any
Guarantor from its Obligations under the Guaranty Agreement or any other
security for any of the Loan Parties' Obligations; or
72
<PAGE>
10.1.4 Miscellaneous
-------------
Amend Section 4.2 [Pro Rata Treatment of Banks], 9.6 [Exculpatory
Provisions, Etc.] or 9.13 [Equalization of Banks] or this Section 10.1, alter
any provision regarding the pro rata treatment of the Banks, change the
definition of Required Banks, or change any requirement providing for the Banks
or the Required Banks to authorize the taking of any action hereunder;
provided, further, that no agreement, waiver or consent which would modify the
- --------
interests, rights or obligations of the Agent in its capacity as Agent shall be
effective without the written consent of the Agent.
No Implied Waivers; Cumulative Remedies; Writing Required.
---------------------------------------------------------
No course of dealing and no delay or failure of the Agent or any Bank
in exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Agent and the Banks under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which they would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of any Bank of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
73
<PAGE>
10.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes.
-----------------------------------------------------------------
The Borrower agrees unconditionally upon demand to pay or reimburse to each
Bank (other than the Agent, as to which the Borrower's Obligations are set forth
in Section 9.5) and to save such Bank harmless against (i) liability for the
payment of all reasonable out-of-pocket costs, expenses and disbursements
(including fees and expenses of counsel (including allocated costs of staff
counsel) for each Bank except with respect to (a) and (b) below), incurred by
such Bank (a) in connection with the administration and interpretation of this
Agreement, and other instruments and documents to be delivered hereunder, (b)
relating to any amendments, waivers or consents pursuant to the provisions
hereof, (c) in connection with the enforcement of this Agreement or any other
Loan Document, or collection of amounts due hereunder or thereunder or the proof
and allowability of any claim arising under this Agreement or any other Loan
Document, whether in bankruptcy or receivership proceedings or otherwise, and
(d) in any workout or restructuring or in connection with the protection,
preservation, exercise or enforcement of any of the terms hereof or of any
rights hereunder or under any other Loan Document or in connection with any
foreclosure, collection or bankruptcy proceedings, or (ii) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against such Bank, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by such Bank hereunder or thereunder, provided that
--------
the Borrower shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements (A) if the same results from such Bank's gross
negligence or willful misconduct, or (B) if the Borrower was not given notice of
the subject claim and the opportunity to participate in the defense thereof, at
its expense (except that the Borrower shall remain liable to the extent such
failure to give notice does not result in a loss to the Borrower), or (C) if the
same results from a compromise or settlement agreement entered into without the
consent of the Borrower, which shall not be unreasonably withheld. The Banks
will attempt to minimize the fees and expenses of legal counsel for the Banks
which are subject to reimbursement by the Borrower hereunder by considering the
usage of one law firm to represent the Banks and the Agent if appropriate under
the circumstances. The Borrower agrees unconditionally to pay all stamp,
document, transfer, recording or filing taxes or fees and similar impositions
now or hereafter reasonably determined by the Agent or any Bank to be payable in
connection with this Agreement or any other Loan Document, and the Borrower
agrees unconditionally to save the Agent and the Banks harmless from and against
any and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
impositions.
74
<PAGE>
10.4 Holidays.
--------
Whenever payment of a Loan to be made or taken hereunder shall be due
on a day which is not a Business Day such payment shall be due on the next
Business Day and such extension of time shall be included in computing interest
and fee, except that the Loans shall be due on the Business Day preceding the
Expiration Date if the Expiration Date is not a Business Day. Whenever any
payment or action to be made or taken hereunder (other than payment of the
Loans) shall be stated to be due on a day which is not a Business Day, such
payment or action shall be made or taken on the next following Business Day
(except as provided in Section 3.2 with respect to Interest Periods under the
Euro-Rate Option), and such extension of time shall not be included in computing
interest or fees, if any, in connection with such payment or action.
10.5 Funding by Branch, Subsidiary or Affiliate.
------------------------------------------
10.5.1 Notional Funding.
----------------
Each Bank shall have the right from time to time, without notice to the
Borrower, to deem any branch, Subsidiary or Affiliate (which for the purposes of
this Section 10.5 shall mean any corporation or association which is directly or
indirectly controlled by or is under direct or indirect common control with any
corporation or association which directly or indirectly controls such Bank) of
such Bank to have made, maintained or funded any Loan to which the Euro-Rate
Option applies at any time, provided that immediately following (on the
--------
assumption that a payment were then due from the Borrower to such other office),
and as a result of such change, the Borrower would not be under any greater
financial obligation pursuant to Section 4.6 than it would have been in the
absence of such change. Notional funding offices may be selected by each Bank
without regard to such Bank's actual methods of making, maintaining or funding
the Loans or any sources of funding actually used by or available to such Bank.
10.5.2 Actual Funding.
--------------
Each Bank shall have the right from time to time to make or maintain any
Loan by arranging for a branch, Subsidiary or Affiliate of such Bank to make or
maintain such Loan subject to the last sentence of this Section 10.5.2. If any
Bank causes a branch, Subsidiary or Affiliate to make or maintain any part of
the Loans hereunder, all terms and conditions of this Agreement shall, except
where the context clearly requires otherwise, be applicable to such part of the
Loans to the same extent as if such Loans were made or maintained by such Bank,
but in no event shall any Bank's use of such a branch, Subsidiary or Affiliate
to make or maintain any part of the Loans hereunder cause such Bank or such
branch, Subsidiary or Affiliate to incur any cost or expenses payable by the
Borrower hereunder or require the Borrower to pay any other compensation to any
Bank (including any expenses incurred or payable pursuant to Section 4.6 which
would otherwise not be incurred.
75
<PAGE>
10.6 Notices.
-------
All notices, requests, demands, directions and other communications (as
used in this Section 10.6, collectively referred to as "notices") given to or
made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by any
method contemplated by subparts (a) through (e) below to the respective parties
at the addresses and numbers set forth under their respective names on Schedule
--------
1.1(B) hereof or in accordance with any subsequent unrevoked written direction
- ------
from any party to the others. All notices shall, except as otherwise expressly
herein provided, be effective (a) in the case of telex or facsimile, when
received, (b) in the case of hand-delivered notice, when hand-delivered, (c) in
the case of telephone, when telephoned, provided, however, that in order to be
--------
effective, telephonic notices must be confirmed in writing no later than the
next day by letter, facsimile or telex, (d) if given by first-class postage
prepaid, return receipt requested, upon receipt or refusal, and (e) if given by
any other means (including by air courier), when delivered; provided, that
--------
notices to the Agent shall not be effective until received. Any Bank giving any
notice to any Loan Party shall simultaneously send a copy thereof to the Agent,
and the Agent shall promptly notify the other Banks of the receipt by it of any
such notice.
10.7 Severability.
------------
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
10.8 Governing Law.
-------------
This Agreement shall be deemed to be a contract under the Laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed and enforced in accordance with the internal laws of the Commonwealth
of Pennsylvania without regard to its conflict of laws principles.
10.9 Prior Understanding.
-------------------
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
76
<PAGE>
10.10 Duration; Survival.
------------------
All representations and warranties of the Loan Parties contained herein or
made in connection herewith shall survive the making of Loans and shall not be
waived by the execution and delivery of this Agreement, any investigation by the
Agent or the Banks, the making of Loans or payment in full of the Loans. All
covenants and agreements of the Loan Parties contained in Sections 7.1 and 7.2
herein shall continue in full force and effect from and after the date hereof so
long as the Borrower may borrow hereunder and until termination of the
Commitments and payment in full of the Loans. All covenants and agreements of
the Borrower contained herein relating to the payment of principal, interest,
premiums, additional compensation or expenses and indemnification, including
those set forth in the Notes, Section 4 and Sections 9.5, 9.7 and 10.3, shall
survive payment in full of the Loans and termination of the Commitments.
10.11 Successors and Assigns.
----------------------
(i) This Agreement shall be binding upon and shall inure to the
benefit of the Banks, the Agent, the Loan Parties and their respective
successors and assigns, except that none of the Loan Parties may assign or
transfer any of its rights and Obligations hereunder or any interest herein.
Each Bank may, at its own cost, make assignments of or sell participations in
all or any part of its Commitments and the Loans made by it to one or more banks
or other entities, subject to the prior consent of the Borrower and the Agent
with respect to any assignee, such consent not to be unreasonably withheld,
provided that (1) no consent of the Borrower shall be required in the case of an
- --------
assignment by a Bank to an Affiliate of such Bank, and (2) assignment may not be
made in amounts less than $5,000,000. In the case of an assignment, upon receipt
by the Agent of the Assignment and Assumption Agreement, the assignee shall
have, to the extent of such assignment (unless otherwise provided therein), the
same rights, benefits and obligations as it would have if it had been a
signatory Bank hereunder, the Commitments shall be adjusted accordingly, and
upon surrender of any Note subject to such assignment, the Borrower shall
execute and deliver a new Note to the assignee in an amount equal to the amount
of the Revolving Credit Commitment assumed by it and a new Revolving Credit Note
to the assigning Bank in an amount equal to the Revolving Credit Commitment
retained by it hereunder. The assigning Bank shall pay to the Agent a service
fee in the amount of $3,500 for each assignment. In the case of a participation,
the participant shall only have the rights specified in Section 8.2.3 (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto and not to include any voting rights except with
respect to changes of the type referenced in Sections 10.1.1, 10.1.2, or
10.1.3), all of such Bank's obligations under this Agreement or any other Loan
Document shall remain unchanged, and all amounts payable by any Loan Party
hereunder or thereunder shall be determined as if such Bank had not sold such
participation.
Any assignee or participant which is not incorporated under the Laws
of the United States of America or a state thereof shall deliver to the Borrower
and the Agent the form of certificate described in Section 10.17 relating to
federal income tax withholding. Each Bank may furnish any publicly available
information concerning any Loan Party or its Subsidiaries and any other
77
<PAGE>
information concerning any Loan Party or its Subsidiaries in the possession of
such Bank from time to time to assignees and participants (including prospective
assignees or participants), provided that such assignees and participants agree
--------
to be bound by the provisions of Section 10.12.
(iii) Notwithstanding any other provision in this Agreement, any
Bank may at any time pledge or grant a security interest in all or any portion
of its rights under this Agreement, its Note and the other Loan Documents to any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR Section 203.14 with notice to but without the consent of the
Borrower or the Agent. No such pledge or grant of a security interest shall
release the transferor Bank of its obligations hereunder or under any other Loan
Document.
10.12 Confidentiality.
---------------
The Agent and the Banks each agree to keep confidential all information
obtained from any Loan Party or its Subsidiaries which is nonpublic and
confidential or proprietary in nature (including any information the Borrower
specifically designates as confidential), except as provided below, and to use
such information only in connection with their respective capacities under this
Agreement and for the purposes contemplated hereby. The Agent and the Banks
shall be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
agreement of such Persons to maintain the confidentiality, (ii) to assignees and
participants as contemplated by Section 10.11, (iii) to the extent requested by
any bank regulatory authority or, with notice to the Borrower, as otherwise
required by applicable Law or by any subpoena or similar legal process, or in
connection with any investigation or proceeding arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
known to be subject to confidentiality restrictions, or (v) if the Borrower
shall have given its prior consent in writing to such disclosure.
10.13 Counterparts.
------------
This Agreement may be executed by different parties hereto on any number of
separate counterparts, each of which, when so executed and delivered, shall be
an original, and all such counterparts shall together constitute one and the
same instrument.
10.14 Agent's or Bank's Consent.
-------------------------
Whenever the Agent's or any Bank's consent is required to be obtained under
this Agreement or any of the other Loan Documents as a condition to any action,
inaction, condition or event, the Agent and each Bank shall be authorized to
give or withhold such consent in its sole and absolute discretion and to
condition its consent upon the giving of additional collateral, the payment of
money or any other matter.
78
<PAGE>
10.15 Exceptions.
----------
The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
--------------------------------------
EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF PHILADELPHIA COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN
PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 10.6 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE BANKS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
79
<PAGE>
10.17 Tax Withholding Clause.
----------------------
Each Bank or assignee or participant of a Bank that is not incorporated
under the Laws of the United States of America or a state thereof agrees that it
will deliver to each of the Borrower and the Agent two (2) duly completed copies
of the following: (i) Internal Revenue Service Form W-9, 4224 or 1001, or other
applicable form prescribed by the Internal Revenue Service, certifying that such
Bank, assignee or participant is entitled to receive payments under this
Agreement and the other Loan Documents without deduction or withholding of any
United States federal income taxes, or is subject to such tax at a reduced rate
under an applicable tax treaty, or (ii) Internal Revenue Service Form W-8 or
other applicable form or a certificate of such Bank, assignee or participant
indicating that no such exemption or reduced rate is allowable with respect to
such payments. Each Bank, assignee or participant required to deliver to the
Borrower and the Agent a form or certificate pursuant to the preceding sentence
shall deliver such form or certificate as follows: (A) each Bank which is a
party hereto on the Closing Date shall deliver such form or certificate at least
five (5) Business Days prior to the first date on which any interest or fees are
payable by the Borrower hereunder for the account of such Bank; (B) each
assignee or participant shall deliver such form or certificate at least five (5)
Business Days before the effective date of such assignment or participation
(unless the Agent in its sole discretion shall permit such assignee or
participant to deliver such form or certificate less than five (5) Business Days
before such date in which case it shall be due on the date specified by the
Agent). Each Bank, assignee or participant which so delivers a Form W-8, W-9,
4224 or 1001 further undertakes to deliver to each of the Borrower and the Agent
two (2) additional copies of such form (or a successor form) on or before the
date that such form expires or becomes obsolete or after the occurrence of any
event requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, either certifying that such Bank,
assignee or participant is entitled to receive payments under this Agreement and
the other Loan Documents without deduction or withholding of any United States
federal income taxes or is subject to such tax at a reduced rate under an
applicable tax treaty or stating that no such exemption or reduced rate is
allowable. The Agent shall be entitled to withhold United States federal income
taxes at the full withholding rate unless the Bank, assignee or participant
establishes an exemption or that it is subject to a reduced rate as established
pursuant to the above provisions.
80
<PAGE>
10.18 Joinder of Guarantors.
---------------------
Any Subsidiary of the Borrower which is required to join this Agreement as
a Guarantor pursuant to Section 7.2.9 shall execute and deliver to the Agent (i)
a Guarantor Joinder in substantially the form attached hereto as Exhibit
-------
1.1(G)(1) pursuant to which it shall join as a Guarantor or party (as the case
- ---------
may be) each of the documents to which the Guarantors are parties (including
without limitation, the Security Agreement, the Subordination Agreement and the
Guaranty); (ii) documents in the forms described in Section 6.1 [First Loans]
modified as appropriate to relate to such Subsidiary; and (iii) documents
necessary to grant and perfect Prior Security Interests to the Agent for the
benefit of the Banks in all Collateral held by such Subsidiary and all of the
issued and outstanding capital stock of such Subsidiary. The Loan Parties shall
deliver such Guarantor Joinder and related documents to the Agent within five
(5) Business Days after the date of the filing of such Subsidiary's articles of
incorporation if the Subsidiary is a corporation, the date of the filing of its
certificate of limited partnership if it is a limited partnership or the date of
its organization if it is an entity other than a limited partnership or
corporation.
81
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
ATTEST: AUDIO COMMUNICATIONS NETWORK, INC., a Florida corporation
By:
----
- --------------- Title:
----
[Seal]
By:
----
Title:
----
PNC BANK, NATIONAL ASSOCIATION, individually
and as Agent
By:
----
Title:
----
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
----
Title:
----
LEHMAN COMMERCIAL PAPER INC.
By:
----
Title:
----
GUARANTORS:
AMERICAN MUSIC NETWORK, INC., a California
corporation
By:
----
Title:
----
82
<PAGE>
AUDIO COMMUNICATIONS NETWORK,
INC., a Missouri corporation
By:
----
Title:
----
FLORIDA SOUND ENGINEERING COMPANY, a Florida
corporation
By:
----
Title:
----
AUDIO COMMUNICATIONS NETWORK, INC., a
Maryland corporation
By:
----
Title:
----
SUNCOM, INC., a Delaware corporation
By:
----
Title:
----
83
<PAGE>
SCHEDULE 1.1(B)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
Page 1 of 3
<TABLE>
<CAPTION>
Part 1 - Commitments of Banks and Addresses for Notices to Banks
- ----------------------------------------------------------------
Bank Commitment Ratable Share
---- ---------- -------------
<S> <C> <C>
PNC Bank, N.A.
One Garret Mountain Plaza
West Paterson, NJ 07424
Attention: Jill Gateman
Telephone (201) 881-5058
Telecopy: (201) 881-5234 $16,500,000 51.56%
SunTrust Bank, Central Florida,
N.A.
200 South Orange Avenue
Orlando, FL 32801
Christopher J. Aguilar
Telephone (407) 237-5210
Telecopy: (407) 237-4253 $12,500,000 39.06%
Lehman Commercial Paper Inc.
200 Vesey Street, 10th Floor
World Financial Center
New York, NY 10285-0900
Attention: Dennis Dee, Esq.
Telephone (212) 526-4059
Telecopy: (212) 528-0819 $ 3,000,000 9.38%
Total $32,000,000 100%
</TABLE>
1
<PAGE>
SCHEDULE 1.1(B)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
Page 2 of 3
Part 2 - Addresses for Notices to Borrower and Guarantors:
AGENT
PNC Capital Markets, Inc.
1600 Market Street, 21st Floor
Philadelphia, PA 19103
Attention: Jill Gateman
Telephone: (215) 585-6966
Telecopy: (215) 585-7669
WITH COPIES TO
Arlene Ohler
PNC Bank, N.A.
One PNC Plaza, 4th Floor Annex
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Telephone: (412) 762-3627
Telecopy: (412) 762-8672
and
Peter W. Laberee, Esquire
Buchanan Ingersoll, Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103-2985
Telephone: (215) 665-3817
Telecopy: (215) 665-8760
BORROWER AND GUARANTORS:
Name: Audio Communications Network, Inc.
Address: 1000 Legion Place, Suite 1515
Orlando, FL 32801
Attention: Mitchell Kleinhandler or David Unger
Telephone: (407) 649-8877
2
<PAGE>
Telecopy: (407) 649-8873
WITH A COPY TO:
Baer Marks & Upham
805 Third Avenue
New York, NY 10022
Telephone: (212) 702-5944
Telecopy: (212) 702-5941
Attention: Stanley E. Bloch, Esquire
3
