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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
MERCOM, INC.
(Name of Issuer)
COMMON STOCK
$1.00 PAR VALUE
(Title of Class of Securities)
------------
58935D109
(CUSIP Number)
CABLE MICHIGAN, INC.
(Names of Persons Filing Statement)
John D. Filipowicz
Senior Vice President, Assistant
General Counsel & Assistant Secretary
CABLE MICHIGAN, INC.
105 Carnegie Center
Princeton, New Jersey 08540
Tel. No.: (609) 734-3700
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
September 30, 1997
(Date of Event which Requires Filing of
this Statement)
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If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of this Schedule
13D, and is filing this statement because of Rule 13d-1(b)(3) or (4), check
the following: [ ]
Note: This document is being electronically filed with the
Commission, using the EDGAR system. See Rule 13d-1(a) for other parties to
whom copies are to be sent.
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SCHEDULE 13D
CUSIP No. 58935D109
- ---------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Cable Michigan, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
N/A
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Pennsylvania
7 SOLE VOTING POWER
2,964,250 (see Item 5)
8 SHARED VOTING POWER
NUMBER OF SHARES -0-
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH 9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
2,964,250 (see Item 5)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,964,250
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
61.92%
14 TYPE OF REPORTING PERSON*
CO
Item 1. Security and Issuer.
The class of equity securities to which this statement
relates is the Common Stock, par value $1.00 per share (the "Common
Stock"), of Mercom, Inc., a Delaware corporation (the "Company"). The
principal executive offices of the Company are located at 105 Carnegie
Center, Princeton, New Jersey 08540.
Item 2. Identity and Background.
This statement is being filed on behalf of Cable Michigan,
Inc., a Pennsylvania corporation ("Cable Michigan"). Cable Michigan is
directly controlled by Kiewit Telecom Holdings Inc., a Delaware corporation
("Kiewit Telecom").
Kiewit Telecom owns 3,330,121 shares of Cable Michigan
Common Stock representing 48.47% of the outstanding Cable Michigan common
stock. Kiewit Telecom's ownership interest in Cable Michigan entitles
Kiewit Telecom to cast 48.47% of the votes of all outstanding shares of
Cable Michigan capital stock.
Kiewit Telecom is a subsidiary of Kiewit Diversified Group
Inc., a Delaware corporation ("KDG"), which is in turn a wholly owned
subsidiary of Peter Kiewit Sons' Inc., a Delaware corporation ("PKS"). KDG
owns 90% of the common stock and all of the preferred stock of Kiewit Telecom.
David C. McCourt, Chairman and Chief Executive Officer of Cable Michigan, owns
the remaining 10% of the common stock of Kiewit Telecom.
Cable Michigan is a cable television operator in the State of
Michigan. Kiewit Telecom was formed to invest in telecommunications
businesses that primarily serve residential customers. KDG is a holding
company for subsidiaries engaged in telecommunications, energy and mining
businesses. PKS, the ultimate parent of Kiewit Telecom and KDG, is the
holding company for subsidiaries engaged in construction, mining,
telecommunications and energy businesses.
The principal executive and business offices of Cable Michigan
are located at 105 Carnegie Center, Princeton, New Jersey 08540. The principal
executive and business offices of each of Kiewit Telecom, KDG and PKS are
located at 1000 Kiewit Plaza, Omaha, Nebraska 68131.
Information as to each executive officer and director of Cable
Michigan and PKS is set forth in Schedules A and B, respectively, attached
hereto, and such Schedules are incorporated herein by reference.
During the last five years, none of Cable Michigan, Kiewit
Telecom, KDG or PKS (the "Kiewit Entities") nor, to the best knowledge of the
Kiewit Entities, any of the persons listed on Schedules A and B attached
hereto, has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or has been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to the Distribution agreement dated September 5,
1997 among C-TEC Corporation (now known as Commonwealth Telephone
Enterprises, Inc. "CTE"), RCN Corporation and Cable Michigan (the
"Distribution Agreement"), which is attached as Exhibit 1 hereto and
incorporated herein by reference, (i) CTE borrowed $15 million (the "$15
Million Loan") pursuant to a $15,000,000 Credit Agreement dated as of June
30, 1997 by and among CTE, First Union National Bank ("First Union") and
the Lenders named therein (the "Credit Agreement") and, pursuant to a
Pledge Agreement dated as of June 30, 1997 (the "Pledge Agreement"), made
by CTE in favor of First Union, pledged 2,964,250 shares of Common Stock
(the "Shares") owned by it as security for the $15 Million Loan, (ii) CTE
contributed the Shares to Cable Michigan subject to such pledge, as
supplemented pursuant to a Pledge Agreement Supplement dated September 30,
1997 made by Cable Michigan in favor of First Union (the "Pledge Agreement
Supplement") (iii) Cable Michigan assumed CTE's obligations under the $15
Million Loan pursuant to an Assumption Agreement dated as of September 30,
1997, by and among CTE, Cable Michigan and First Union and (iv) CTE
distributed all of the common stock of Cable Michigan to the holders of
CTE's common equity.
Item 4. Purpose of Transaction.
The purpose of the contribution of the Shares to Cable
Michigan by CTE was for Cable Michigan to acquire a controlling interest
in the Company.
Cable Michigan intends to review from time to time the
Company's business affairs and financial position. Based on such evaluation
and review, as well as general economic, market and industry conditions
existing at the time, Cable Michigan may consider from time to time various
alternative courses of action both with respect to the business of the Company
and with respect to Cable Michigan's equity interest therein. Such actions
may include, if determined to be in the best interests of the Company, the
acquisition or disposition by the Company or its subsidiaries of businesses or
assets. Such actions may also include the acquisition by Cable Michigan or
its affiliates of additional Common Stock through open market purchases,
privately negotiated transactions, a tender offer, an exchange offer, a merger
or otherwise. Alternatively, such actions may involve the sale of all or a
portion of Cable Michigan's interest in the Company in the open market, in
privately negotiated transactions, through a public offering or otherwise.
Prior to the Distribution Date, CTE had proposed to acquire
the approximately 38% of the Company it did not already own for 8.75% of
the stock of Cable Michigan. The proposal was later suspended pending the
completion of the transactions under the Distribution Agreement. As the
current owner of the Shares, Cable Michigan reserves the right to
reconsider the proposal to acquire the remaining 38% of the Company on the
same or different terms. There can be no assurance as to the terms of any
such transaction or that any such transaction will take place.
Except as set forth herein, none of the Kiewit Entities nor, to
the best knowledge of the Kiewit Entities, any person named in Schedule A or B
attached hereto has any plans or proposals which relate to or would result in
(i) the acquisition by any person of additional securities of the Company, or
the disposition of securities of the Company; (ii) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (iii) a sale or transfer of a material
amount of assets of the Company or any of its subsidiaries; (iv) any change in
the present Board of Directors or management of the Company; (v) any material
change in the present capitalization or dividend policy of the Company; (vi)
any other material change in the Company's business or corporate structure;
(vii) changes in the Company's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control of the
Company by any person;(viii) the Common Stock becoming eligible for the
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); or (ix) any action
similar to any of those enumerated above. Notwithstanding the foregoing, the
Kiewit Entities reserve the right to effect any of such actions as they may
deem necessary or appropriate in the future.
Item 5. Interest in Securities of the Company.
(a) and (b) Cable Michigan is the beneficial owner of 2,964,250
shares of Common Stock, representing approximately 61.92% of the 4,787,060
shares of Common Stock which are outstanding.
Cable Michigan has the sole power to vote or direct the vote of
the Shares, subject to a default under the Pledge Agreement, as supplemented
by the Pledge Agreement Supplement. As described above, the Shares have been
pledged to secure the $15 Million Loan and consequently Cable Michigan may be
deemed to share the power to dispose or direct the disposition of the Shares.
Through their direct and indirect ownership of Cable Michigan, each of Kiewit
Telecom, KDG and PKS may, for purposes of Rule 13d-3 under the Securities
Exchange Act of 1934, be deemed to beneficially own the Shares.
Mark Haverkate beneficially owns 1000 shares of Common Stock.
Mr. Haverkate has sole power to vote or direct the vote, and to dispose or
direct the disposition of these shares, which represent less than 1% of the
outstanding shares of Common Stock.
Raymond B. Ostroski beneficially owns 4000 shares of Common
Stock. Mr. Ostroski has sole power to vote or direct the vote, and to dispose
or direct the disposition of these shares, which represent less than 1% of the
outstanding shares of Common Stock.
David C. McCourt's wife beneficially owns 50,000 shares of
Common Stock. Mr. McCourt disclaims beneficial ownership of such shares.
Except as set forth in this Item 5(a) and (b) none of the
Kiewit Entities, nor, to the best knowledge of the Kiewit Entities, any
persons named in Schedules A and B hereto, owns beneficially any shares of
Common Stock.
(c) Except for the transactions described above, no
transactions in the Common Stock have been effected during the past 60 days by
the Kiewit Entities or, to the best knowledge of the Kiewit Entities, by any
of the persons named in Schedules A and B hereto.
(d) Inapplicable.
(e) Inapplicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the
Company
The Shares have been pledged pursuant to the Pledge
Agreement, as supplemented by the Pledge Agreement Supplement, which are
attached hereto as Exhibit 3 and 4, respectively, and incorporated herein
by reference, to secure the obligations of Cable Michigan under the Credit
Agreement which is attached hereto as Exhibit 2 and incorporated herein by
reference. Cable Michigan assigned the obligations under the Credit
Agreement pursuant to the Assumption Agreement, which is attached hereto as
Exhibit 5 and is incorporated herein by reference.
To the best knowledge of Kiewit Entities, other than the
Distribution Agreement, there are no contracts, arrangements, understandings
or relationships (legal or otherwise) among the persons named in Item 2 or
between such persons and any other person, with respect to any securities of
the Company, including, but not limited to, transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option arrangements, puts
or calls, guarantees or profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit 1: Distribution Agreement dated as of September 5,
1997 among C-TEC Corporation, a Pennsylvania Corporation, Cable Michigan,
Inc., a Pennsylvania Corporation, and RCN Corporation, a Delaware corporation.
Exhibit 2: $15,000,000 Credit Agreement dated as of June 30,
1997 by and among C-TEC Corporation, First Union National Bank and the Lenders
referred to therein.
Exhibit 3: Pledge Agreement dated as of June 30, 1997, made by
C-TEC Corporation in favor of First Union National Bank.
Exhibit 4: Pledge Agreement Supplement dated September 30,
1997, made by Cable Michigan, Inc., in favor of First Union National Bank.
Exhibit 5: Assumption Agreement dated as of September 30, 1997,
by and among C-TEC Corporation, Cable Michigan, Inc. and First Union National
Bank.
SIGNATURES
After reasonable inquiry and to the best knowledge and belief
of the undersigned, the undersigned certifies that the information set forth
in this statement is true, complete and correct.
Date: October 10, 1997
CABLE MICHIGAN, INC.
By: /s/ John D. Filipowicz
---------------------------
Name: John D. Filipowicz
Title: Senior Vice President
General Counsel &
Assistant Secretary
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF CABLE MICHIGAN, INC.
The name, business address, citizenship, title and present
principal occupation or employment of each of the directors and executive
officers of Cable Michigan, Inc. are set forth below.
<TABLE>
<CAPTION>
Principal
Name and Occupation
Office Held Business Address Citizenship or Employment
- ----------- ---------------- ----------- -------------
<S> <C> <C> <C>
David C. McCourt 105 Carnegie Center, USA Chairman,
Chairman, Chief Executive Officer, Princeton, NJ 08540 Chief Executive
Director (Class III) Officer, Cable
Michigan;
Chairman,
Chief Executive
Officer, RCN
Mark Haverkate 105 Carnegie Center, USA President & Chief
President & Chief Operating Officer, Princeton, NJ 08540 Operating
Director (Class II) Officer, Cable
Michigan;
Executive Vice
President, RCN
Timothy J. Stoklosa 105 Carnegie Center, USA Executive Vice
Executive Vice President & Chief Princeton, NJ 08540 President & Chief
Financial Officer, Director (Class III) Financial Officer,
Cable Michigan;
Senior Vice
President &
Treasurer, RCN
Bruce C. Godfrey 105 Carnegie Center, USA Secretary, Cable
Secretary, Director (Class I) Princeton, NJ 08540 Michigan;
Executive Vice
President & Chief
Financial Officer,
RCN
John J. Gdovin 105 Carnegie Center, USA Senior Vice
Senior Vice President Princeton, NJ 08540 President, Cable
Michigan; Senior
Vice President,
Operations, RCN
John D. Filipowicz 105 Carnegie Center, USA Senior Vice
Senior Vice President, Assistant General Princeton, NJ 08540 President,
Counsel & Assistant Secretary Assistant
General Counsel
& Assistant
Secretary,
RCN & Cable
Michigan
Ralph S. Hromisin 105 Carnegie Center, USA Vice President &
Vice President & Chief Accounting Officer Princeton, NJ 08540 Chief Accounting
Officer,
Cable Michigan;
Vice President,
Chief Accounting
Officer, RCN
James J. Saile 105 Carnegie Center, USA Vice President of
Vice President Princeton, NJ 08540 Taxation, Cable
Taxation Michigan; Vice
President
Taxation, RCN
Gary D. Isaacs 105 Carnegie Center, USA Vice President of
Vice President Princeton, NJ 08540 Human
Human Resources Resources,
Cable Michigan;
Vice President
Human
Resources, RCN
Mark Dineen 105 Carnegie Center, USA Vice President,
Vice President Princeton, NJ 08540 Cable Michigan
Jeffery Decker 105 Carnegie Center, USA Controller, Cable
Controller Princeton, NJ 08540 Michigan
Raymond B. Ostroski 105 Carnegie Center, USA Attorney
Director (Class I) Princeton, NJ 08540
Frank M. Henry 239 Old River Road USA Chairman,
Director (Class III) Wilkes-Barre, PA 18703 Frank Martz
Coach Company
David C. Mitchell 267 E. Lake Road USA Retired
Director (Class II) P.O. Box 819 Corporate
Honeoye, NY 14471-0819 Executive Vice
President,
President of the
Telephone Group
and Director,
Rochester
Telephone
Corporation
Daniel E. Knowles 1 F Place USA Personnel
Director (Class I) Gouldsboro, PA 18424 Consultant
</TABLE>
Schedule B
DIRECTORS AND EXECUTIVE OFFICERS OF PETER KIEWIT SONS', INC.
The name, business address, citizenship, title and present principal
occupation or employment of each of the directors and executive officers of
Peter Kiewit Sons', Inc. ("PKS") are set forth below.
<TABLE>
<CAPTION>
Principal
Name and Occupation
Office Held Business Address Citizenship or Employment
- ----------- ---------------- ----------- -------------
<S> <C> <C> <C>
Walter Scott, Jr. 1000 Kiewit Plaza USA President,
President, Chairman, Director Omaha, NE 68131 Chairman, PKS
William L. Grewcock 1000 Kiewit Plaza USA Vice Chairman,
Vice Chairman, Omaha, NE 68131 PKS
Director
Kenneth E. Stinson 1000 Kiewit Plaza USA Chairman, Chief
Executive Vice President, Omaha, NE 68131 Executive Officer,
Director Kiewit
Construction
Group Inc.
Richard R. Jaros 1000 Kiewit Plaza USA Former President,
Director Omaha, NE 68131 KDG
Richard Geary 215 V Street USA President, Kiewit
Director Vancouver, WA 98661 Pacific Co.
James Q. Crowe 1000 Kiewit Plaza USA President, Chief
Executive Vice President, Omaha, NE 68131 Executive Officer,
Director Director, KDG
George B. Toll, Jr. 1000 Kiewit Plaza USA Executive Vice
Director Omaha, NE 68131 President, Kiewit
Construction
Group Inc.
Peter Kiewit, Jr. 2600 N. Central Ave. USA Attorney
Director Phoenix, AZ 85004
Robert B. Daugherty Guarantee Centre USA Chairman,
Director Suite 225 Valmont
Omaha, NE 68114 Industries Inc.
Charles M. Harper One Central Park Plaza USA Former Chairman,
Director Suite 1500 RJR Nabisco
Omaha, NE 68102 Holdings Corp.
Richard W. Colf 215 V Street USA Senior Vice
Director Vancouver, WA 98661 President,
Kiewit Pacific Co.
Bruce E. Grewcock 1000 Kiewit Plaza USA Chairman, Kiewit
Director Omaha, NE 68131 Mining Group Inc.
Matthew J. Johnson 1000 Kiewit Plaza USA Vice President -
Vice President - Legal Omaha, NE 68131 Legal, PKS
Tait P. Johnson 1000 Kiewit Plaza USA President, Gilbert
Director Omaha, NE 68131 Industrial
Corporation
Ann C. McCulloch 1000 Kiewit Plaza USA Vice President,
Vice President, Treasurer Omaha, NE 68131 Treasurer, PKS
Thomas C. Stortz 1000 Kiewit Plaza USA Vice President,
Secretary Omaha, NE 68131 General Counsel,
Kiewit
Construction
Group Inc.
Eric J. Mortensen 1000 Kiewit Plaza USA Controller, PKS
Controller Omaha, NE 68131
Douglas A. Obermier 1000 Kiewit Plaza USA Stock Registrar,
Stock Registrar and Assistant Omaha, NE 68131 PKS
Secretary
Tobin A. Schropp 1000 Kiewit Plaza USA KDG Tax
Assistant Secretary Omaha, NE 68131 Department
Allan K. Kirkwood 10704 Shoemaker Ave. USA Senior Vice
Director Santa Fe Springs, CA 90670 President, Kiewit
Pacific Co.
</TABLE>
Exhibit 1
DISTRIBUTION AGREEMENT
among
C-TEC CORPORATION,
CABLE MICHIGAN, INC.
and
RCN CORPORATION
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.1. Definitions.................................................. 2
ARTICLE 2
Restructuring
Section 2.1. The Restructuring............................................ 10
Section 2.2. Transfers of Certain Other Assets............................ 12
Section 2.3. Agreement Relating to Consents............................... 13
Section 2.4. Post Distribution Actions.................................... 14
ARTICLE 3
The Distribution
Section 3.1. Cooperation Prior to the Distribution........................ 14
Section 3.2. C-TEC Board Action; Conditions Precedent..................... 15
Section 3.3. The Distribution............................................. 16
Section 3.4. Stock Dividends to C-TEC..................................... 17
Section 3.5. Fractional Shares............................................ 17
ARTICLE 4
Indemnification
Section 4.1. Cable Michigan Indemnification of the C-TEC
Group and the RCN Group.................................... 18
Section 4.2. RCN Indemnification of the C-TEC Group and the Cable Michigan
Group....................................................... 18
Section 4.3. C-TEC Indemnification of Cable Michigan Group and RCN
Group...................................................... 19
Section 4.4. Insurance; Third Party Obligations........................... 20
Section 4.5. Notice and Payment of Claims................................. 20
Section 4.6. Notice and Defense of Third-Party Claims Other
Than Those for Shared Liabilities.......................... 21
Section 4.7. Notice and Defense of Third-Party Claims for Shared
Liabilities................................................ 22
Section 4.8. Contribution................................................. 24
Section 4.9. Non-Exclusivity of Remedies.................................. 24
ARTICLE 5
Employee Matters
Section 5.1. Employee Matters Generally................................... 24
ARTICLE 6
Certain Transitional Services
Section 6.1. Provision of Services........................................ 24
Section 6.2. Duration of Provision and Purchase of
Services................................................... 24
Section 6.3. Nature and Scope of Provision of Services.................... 25
Section 6.4. Charges and Payment for Services............................. 26
Section 6.5. Status as Independent Contractor............................. 26
Section 6.6. Exculpation; Force Majeure................................... 26
Section 6.7. No Transfer of Proprietary Rights............................ 27
ARTICLE 7
Access to Information
Section 7.1. Provision of Corporate Records............................... 27
Section 7.2. Access to Information........................................ 27
Section 7.3. Litigation Cooperation....................................... 28
Section 7.4. Reimbursement................................................ 28
Section 7.5. Retention of Records......................................... 28
Section 7.6. Confidentiality.............................................. 28
Section 7.7. Inapplicability of Article VII to Tax Matters................ 29
ARTICLE 8
Certain Other Agreements
Section 8.1. Intercompany Accounts and Agreements......................... 29
Section 8.2. Further Assurances and Consents.............................. 29
Section 8.3. Intellectual Property Rights and Licenses.................... 30
Section 8.4. Insurance.................................................... 30
ARTICLE 9
Miscellaneous
Section 9.1. Notices...................................................... 31
Section 9.2. Amendments; No Waivers....................................... 32
Section 9.3. Expenses..................................................... 32
Section 9.4. Successors and Assigns....................................... 33
Section 9.5. Governing Law................................................ 33
Section 9.6. Entire Agreement............................................. 33
Section 9.7. Tax Sharing Agreement; Set-Off; Certain Transfer
Taxes....................................................... 34
Section 9.8. Existing Arrangements........................................ 34
Section 9.9. Termination Prior to the Distribution........................ 34
Section 9.10. Captions..................................................... 34
Section 9.11. Dispute Resolution; Jurisdiction............................. 34
Section 9.12. Severability................................................. 35
SCHEDULE 1.01 - Shared Liabilities
SCHEDULE 5.01 - Employee Matters
SCHEDULE 6.01(i) - Services Provided by RCN to C-TEC Group
SCHEDULE 6.01(ii) - Services Provided by RCN to Cable Michigan Group
SCHEDULE 6.01(iii) - Services Provided by C-TEC to RCN Group
SCHEDULE 6.01(iv) - Services Provided by C-TEC to Cable Michigan Group
SCHEDULE 9.08 - Surviving Agreements
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT dated as of September 5, 1997 (the
"Agreement") among C-TEC Corporation, a Pennsylvania corporation ("C-TEC"),
Cable Michigan, Inc., a Pennsylvania corporation ("Cable Michigan"), and RCN
Corporation, a Delaware corporation ("RCN").
W I T N E S S E T H:
WHEREAS, Cable Michigan and RCN are wholly owned Subsidiaries
of C-TEC;
WHEREAS, the Board of Directors of C-TEC has determined that it
is in the best interest of C-TEC, its shareholders, Cable Michigan and RCN to
distribute to the holders of shares of Common Stock, par value $1.00 per
share, of C-TEC (the "C-TEC Common Stock") and to the holders of shares of
Class B Common Stock, par value $1.00 per share, of C-TEC (the "C-TEC Class B
Common Stock", and together with the C-TEC Common Stock, the "C-TEC Common
Equity") all of the outstanding shares of Common Stock, par value $1.00 per
share, of Cable Michigan (the "Cable Michigan Common Stock") owned by C-TEC
and all of the outstanding shares of Common Stock, par value $1.00 per share,
of RCN (the "RCN Common Stock") owned by C-TEC;
WHEREAS, C-TEC, Cable Michigan and RCN are concurrently
herewith entering into the Tax Sharing Agreement; and
WHEREAS, the parties hereto desire to set forth herein the
principal corporate transactions to be effected in connection with the
Distribution and certain other matters relating to the relationship and the
respective rights and obligations of the parties following the Distribution;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1. Definitions. The following terms, as used
herein, have the following meanings:
"Action" means any claim, suit, action, arbitration, inquiry,
investigation or other proceeding by or before any court, governmental or
other regulatory or administrative agency or commission or any other tribunal.
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control
with, such other Person. For the purposes of this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of this Agreement, no member of one Group shall be treated as an
Affiliate of any member of either of the other Groups.
"Cable Michigan Business" means the business of providing cable
television services to customers in certain locations in Michigan conducted
primarily by Cable Michigan and Mercom.
"Cable Michigan Common Stock" has the meaning set forth in
the second recital hereto.
"Cable Michigan Form 10" means the registration statement on
Form 10 filed by Cable Michigan with the Commission on July 9, 1997 to effect
the registration of Cable Michigan Common Stock pursuant to the 1934 Act in
connection with the Distribution, as such registration statement may be
amended from time to time.
"Cable Michigan Group" means Cable Michigan and its Subsidiaries
as of (and, except where the context clearly indicates otherwise, after) the
Effective Time (including all predecessors to such Persons). The members of
the Cable Michigan Group are Cable Michigan, Mercom and Mercom's Subsidiaries.
"Cable Michigan Indemnitees" has the meaning set forth in
Section 4.02.
"Cable Michigan Information Statement" means the information
statement that forms a part of the Cable Michigan Form 10 and is to be sent to
each holder of C-TEC Common Stock in connection with the Distribution.
"Cable Michigan Balance Sheet Liabilities" has the meaning
set forth in this Section 1.01 in the definition of "Cable Michigan
Liabilities".
"Cable Michigan Liabilities" means all (i) Liabilities of the
Cable Michigan Group under this Agreement or the other Distribution Documents,
(ii) except as otherwise specifically provided herein or in any other
Distribution Document, other Liabilities, whether arising before, on or after
the Distribution Date, of the parties hereto (or their respective
Subsidiaries) to the extent such Liabilities arise primarily from or relate
primarily to the management or conduct of the Cable Michigan Business prior to
the Effective Time (the Liabilities listed in clauses (i) and (ii) are
collectively referred to as "True Cable Michigan Liabilities") and (iii) 20%
of the Shared Liabilities. The Cable Michigan Liabilities include all
Liabilities set forth on the balance sheet of Cable Michigan as of June 30,
1997 included in the Cable Michigan Information Statement (the "Cable Michigan
Balance Sheet Liabilities").
"CCI" means Commonwealth Communications, Inc., a Pennsylvania
corporation and a wholly owned Subsidiary of C-TEC.
"CCS" means C-TEC Cable Systems, Inc., a Delaware corporation.
"Chimes" means Commonwealth Telecom Services, Inc., a
Pennsylvania corporation and a wholly owned Subsidiary of CCI.
"CLD" means Commonwealth Long Distance Company, a
Pennsylvania corporation and a wholly owned Subsidiary of RLD.
"CLD Distribution" has the meaning set forth in
Section 2.01(n).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Commonwealth Service Area" means the local telephone service
franchise area of CTCo as of the date of this Agreement together with the
Pennsylvania communities of Wilkes-Barre, Scranton and Harrisburg.
"Commonwealth Service Area Long Distance Business" means the
business of providing long distance telephone services to customers in the
Commonwealth Service Area conducted prior to the Restructuring primarily by
RLD and after the Restructuring primarily by CLD.
"Corporate Overhead Function" has the meaning defined in
this Section 1.01 in the definition of "RCN Business".
"CTCo" means Commonwealth Telephone Company, a Pennsylvania
corporation and a wholly owned Subsidiary of C-TEC.
"C-TEC Business" means, collectively, (i) the local telephone
service business conducted primarily by CTCo, (ii) the Commonwealth Service
Area Long Distance Business and (iii) the telecommunications, engineering and
technical services business conducted primarily by CCI.
"C-TEC Class B Common Stock" has the meaning set forth in
the second recital hereto.
"C-TEC Common Equity" has the meaning set forth in
the second recital hereto.
"C-TEC Common Stock" has the meaning set forth in
the second recital hereto.
"C-TEC Group" means C-TEC and its Subsidiaries (other than any
member of the Cable Michigan Group or the RCN Group). The members of the
C-TEC Group are C-TEC, CTCo, Commonwealth Long Distance Company, Commonwealth
Telecom Services, Inc., SRHC, Inc., TMH, Inc., Keystone Telecom Company, C-TEC
Cable Holdings, Inc., Mobile Plus, Inc., Mobile Plus of Iowa, Inc., Mobile
Plus Services, Inc., Mobilefone, Inc., Mobile Plus Services of Pennsylvania,
Inc. and C-TEC Cellular Centre County, Inc.
"C-TEC Indemnitees" has the meaning set forth in Section 4.01.
"C-TEC Liabilities" means all (i) Liabilities of the C-TEC Group
under this Agreement or the other Distribution Documents, (ii) except as
otherwise specifically provided herein or in any other Distribution Document,
other Liabilities, whether arising before, on or after the Distribution Date,
of the parties hereto (or their respective Subsidiaries) to the extent such
Liabilities arise primarily from or relate primarily to the management or
conduct of the C-TEC Business prior to the Effective Time (the Liabilities
listed in clauses (i) and (ii) are collectively referred to as "True C-TEC
Liabilities") and (iii) 50% of the Shared Liabilities. The C-TEC Liabilities
1997 included in C-TEC's quarterly report on Form 10-Q for the quarter ended
on such date other than the Cable Michigan Balance Sheet Liabilities and the
RCN Balance Sheet Liabilities.
"C-TEC Services" has the meaning set forth in Section 2.01(p).
"Distribution" means the distribution by C-TEC on the
Distribution Date of the Cable Michigan Common Stock and the RCN Common Stock
owned by C-TEC to the holders of C-TEC Common Equity as of the Record Date.
"Distribution Agent" means First Union National Bank.
"Distribution Date" means the business day as of which the
Distribution shall be effected.
"Distribution Documents" means all of the agreements and other
documents entered into in connection with the Restructuring, the Distribution
or the other transactions contemplated hereby, including, without limitation,
this Agreement and the Tax Sharing Agreement.
"Effective Time" means immediately prior to the close of
business on the Distribution Date.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, permits, licenses and governmental
restrictions, whether now or hereafter in effect, relating to the environment,
the effect of the environment on human health or to emissions, discharges,
releases, manufacturing, storage, processing, distribution, use, treatment,
disposal, transportation or handling of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic, radioactive or hazardous
substances or wastes or the clean-up or other remediation thereof.
"Fees" has the meaning set forth in Section 6.04.
"$15 Million Loan" has the meaning set forth in Section 2.01.
"Finally Determined" means, with respect to any Action or other
matter, that the outcome or resolution of such Action or matter has been
judicially determined by judgment or order not subject to further appeal or
discretionary review (or, in the case of any matter required to be resolved by
arbitration in accordance with Section 9.11(a), that the outcome or resolution
of such matter has been determined thereunder).
"Force Majeure" has the meaning set forth in Section 6.06(b).
"Form 10s" means, collectively, the Cable Michigan Form 10 and
the RCN Form 10.
"Group" means, as the context requires, the Cable Michigan
Group, the RCN Group or the C-TEC Group.
"Historical Services" has the meaning set forth in Schedule
6.01(ii).
"Indemnified Party" has the meaning set forth in Section 4.05.
"Indemnifying Party" has the meaning set forth in Section 4.05.
"Information Statements" means the RCN Information Statement and
the Cable Michigan Information Statement.
"Internal Cable Michigan Distribution" has the meaning set
forth in Section 2.01(k).
"International" means RCN International Holdings, Inc., a
Delaware corporation and a wholly owned Subsidiary of C-TEC.
"Letter Ruling" means the private letter ruling dated June 16,
1997, issued by the Internal Revenue Service with respect to the tax-free
nature of the Distribution.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under this
Agreement, any law (including Environmental Laws), rule, regulation, any
action, order, injunction or consent decree of any governmental agency or
entity, or any award of any arbitrator of any kind, and those arising under
any agreement, commitment or undertaking.
"Losses" means, with respect to any Person, any and all damage,
loss, liability and expense incurred or suffered by such Person (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any and all Actions or
threatened Actions).
"Managing Party" has the meaning set forth in Section 4.07.
"Mercom" means Mercom, Inc., a Delaware corporation and a
61.92% owned Subsidiary of C-TEC.
"Mercom Interest" has the meaning set forth in Section 2.01(a).
"Nasdaq" has the meaning set forth in Section 3.01(e).
"Nevada Finance" has the meaning set forth in Section 2.01(p).
"1933 Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Participating Party" has the meaning set forth in Section 4.07.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust or other entity or organization,
including a governmental or political subdivision or an agency or
instrumentality thereof.
"Pre-Distribution Policy" has the meaning set forth in Section
8.04.
"RCN Balance Sheet Liabilities" has the meaning set forth in
this Section 1.01 in the definition of "RCN Liabilities".
"RCN Business" means, collectively, (i) the business of
providing cable television services in certain locations in New Jersey, New
York and Pennsylvania conducted primarily by C-TEC Cable Systems, Inc., RCN
Telecom Services of Pennsylvania, Inc., C-TEC Cable Systems of New York,
ComVideo Systems, Inc. and C-TEC Cable System Services, Inc., (ii) the
business of providing voice, video and data services primarily to customers in
New York, New York and Boston, Massachusetts conducted primarily by RCN
Telecom Services, Inc., RCN Telecom Services of New York, Inc., RCN Telecom
Services of Massachusetts, Inc. and RCN-BecoCom, L.L.C., (iii) the long
distance telephone services business conducted primarily by RLD excluding the
Commonwealth Service Area Long Distance Business, (iv) the business of owning
a 40% equity interest in Megacable, S.A. de C.V., a Mexican corporation,
conducted primarily by International and (v) the corporate overhead function
(the "Corporate Overhead Function") conducted primarily by C-TEC Services,
Inc., a Pennsylvania corporation.
"RCN Common Stock" has the meaning set forth in the second
recital hereto.
"RCN Form 10" means the registration statement on Form 10 filed
by RCN with the Commission on July 9, 1997 to effect the registration of RCN
Common Stock pursuant to the 1934 Act in connection with the Distribution, as
such registration statement may be amended from time to time.
"RCN Group" means RCN and its Subsidiaries as of (and, except
where the context clearly indicates otherwise, after) the Effective Time
(including all predecessors to such Persons). The members of the RCN Group are
RCN, RCN Telecom Services of Pennsylvania, Inc., RCN Long Distance Company,
RCN International Holdings, Inc., RCN Telecom Services, Inc., RCN Telecom
Services of California, Inc., RCN Telecom Services of Delaware, Inc., RCN
Telecom Services of Illinois, Inc., RCN Telecom Services of Massachusetts,
Inc., RCN Telecom Services of Maryland, Inc., RCN Telecom Services of
Michigan, Inc., RCN Telecom Services of New York, Inc., FNY Holding Company,
Inc., Freedom New York L.L.C. (a Delaware limited liability company), RCN
Financial Services, Inc., RCN Corporate Services, Inc., RCN Telecom Services
of New Jersey, Inc., RCN Telecom Services of Virginia, Inc., RCN Telecom
Services of Philadelphia, Inc., RCN Telecom Services of Washington, Inc., RCN
Operating Services, Inc., RCN-BecoCom, L.L.C. (a Massachusetts limited
liability company), RCN Telecom Services of Washington, D.C., Inc., C-TEC
Services, Inc., C-TEC Financial Services, Inc., C-TEC Cable Systems, Inc.,
C-TEC Cable Systems of New York, Inc., ComVideo Systems, Inc., C-TEC Cable
System Services, Inc., C-TEC Fiber Systems of New Jersey, Inc., Fiberfone of
New York, Inc., Fiberfone of Pennsylvania, Inc., Fiberfone of New Jersey, Inc.,
Fiberfone of Michigan, Inc., TEC Air, Inc. and Homelink Communications of
Princeton.
"RCN Indemnitees" has the meaning set forth in Section 4.01.
"RCN Information Statement" means the information statement that
forms a part of the RCN Form 10 and is to be sent to each holder of C-TEC
Common Stock in connection with the Distribution.
"RCN Liabilities" means all (i) Liabilities of the RCN Group
under this Agreement or the other Distribution Documents, (ii) except as
otherwise specifically provided herein or in any other Distribution Document,
other Liabilities, whether arising before, on or after the Distribution Date,
of the parties hereto (or their respective Subsidiaries) to the extent such
Liabilities arise primarily from or relate primarily to the management or
conduct of the RCN Business (other than Shared Corporate Liabilities) prior to
the Effective Time (the Liabilities listed in clauses (i) and (ii) are
collectively referred to as "True RCN Liabilities") and (iii) 30% of the
Shared Liabilities. The RCN Liabilities include all Liabilities set forth on
the balance sheet of RCN as of June 30, 1997 included in the RCN Information
Statement (the "RCN Balance Sheet Liabilities").
"RCN PA" has the meaning set forth in Section 2.01(f).
"RCN PA Distribution" has the meaning set forth in Section
2.01(j).
"RCN Telecom" has the meaning set forth in Section 2.01(c).
"Record Date" means the date determined by C-TEC's Board of
Directors (or determined by a committee of such Board of Directors or by any
person pursuant to authority delegated to such committee or such person) as
the record date for determining the holders of C-TEC Common Equity entitled
to receive Cable Michigan Common Stock and RCN Common Stock pursuant to the
Distribution.
"Representatives" has the meaning set forth in Section 7.06.
"Restructuring" has the meaning set forth in the introductory
paragraph of Article 2.
"RLD" means RCN Long Distance Company (formerly known as
Commonwealth Long Distance Company), a Pennsylvania corporation and a wholly
owned Subsidiary of C-TEC.
"Services" has the meaning set forth in Section 6.01.
"Service Package" has the meaning set forth in Section 6.01.
"Service Provider" has the meaning set forth in Section 6.01.
"Service Recipient" has the meaning set forth in Section 6.01.
"Shared Corporate Liabilities" means Liabilities arising from
the operation of the Corporate Overhead Function prior to the Distribution Date
except to the extent such Liabilities (i) were reflected on the balance sheet
of C-TEC and its consolidated Subsidiaries as of June 30, 1997, (ii) arose
in the ordinary course of business since that date or (iii) have prior to
the date hereof been allocated by C-TEC for purposes of preparing its
consolidated financial statements.
"Shared Liability" means any Liability (whether arising before,
on or after the Distribution Date) of the parties hereto or their respective
Subsidiaries which (i) arises from or relates to the management or conduct
prior to the Effective Time of the businesses of C-TEC and its Subsidiaries
and (ii) is not a True C-TEC Liability, a True Cable Michigan Liability or a
True RCN Liability. Shared Liabilities include, without limitation,
Liabilities listed on Schedule 1.01 hereto.
"Shared Liability Claim" has the meaning set forth in Section
4.07.
"Subsidiary" means, with respect to any Person, any other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person.
"Tax" means Tax as such term is defined in the Tax Sharing
Agreement.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as
of the date hereof among C-TEC, Cable Michigan and RCN.
"Termination Notice" has the meaning set forth in Section
6.02(b).
"Third-Party Claim" has the meaning set forth in Section 4.06.
"Transition Period" has the meaning set forth in Section
6.02(a).
"True Cable Michigan Liabilities" has the meaning set forth
in this Section 1.01 in the definition of "Cable Michigan Liabilities".
"True C-TEC Liabilities" has the meaning set forth in this
Section 1.01 in the definition of "C-TEC Liabilities".
"True RCN Liabilities" has the meaning set forth in this
Section 1.01 in the definition of "RCN Liabilities".
ARTICLE 2
Restructuring
Prior to the date hereof, the parties have caused certain of
the transactions set forth in Sections 2.01(a) through (r) below to be
completed substantially in the order set forth below, and prior to the
Effective Time, the parties will cause the remaining transactions set forth
in subsections (a) through (r) of Section 2.01 to be completed
substantially in the order set forth below. The transactions set forth in
subsections (a) through (r) of Section 2.01 and the transactions set forth
in Section 2.02 are referred to herein collectively as the "Restructuring".
The parties may revise or change the order of the steps constituting the
Restructuring by mutual consent
Section 2.1. The Restructuring. (a) C-TEC will borrow $15
million (the "$15 Million Loan") from unrelated third party lenders (securing
the $15 Million Loan with its 61.92% interest in Mercom (the "Mercom
Interest")) and use the proceeds for general corporate purposes.
(b) Cable Michigan will borrow $110 million from unrelated
third party lenders and use the proceeds to repay $110 million of intercompany
indebtedness owed to CCS.
(c) CCS will borrow $110 million of new debt from unrelated
third party lenders and use $78.5 million of the proceeds plus $21.5
million of cash on hand to purchase common stock of RCN Telecom Services,
Inc. ("RCN Telecom") from RCN Telecom.
(d) CCS will use the $110 million received from Cable Michigan and
approximately $31.5 million from its own borrowing to retire existing third
party obligations with respect to long term indebtedness.
(e) C-TEC will borrow $75 million from unrelated third party
lenders and contribute the proceeds to RCN Telecom together with $14 million,
for a total of $89 million.
(f) CCS will contribute its common stock of RCN Telecom to RCN
Telecom Services of Pennsylvania, Inc., a Pennsylvania corporation ("RCN PA").
(g) CCS will capitalize all unpaid intercompany notes
receivable owed by its subsidiaries other than the amount repaid by Cable
Michigan described in Section 2.01(b).
(h) All other intercompany notes payable, and all accounts
payable, by a member of one Group to a member of another Group as of June
30, 1997 will be repaid through a series of transactions (including
dividends and contributions) that does not change the percentage ownership
or cash position of any of the entities involved, all as previously agreed
upon by the parties.
(i) RCN will enter into a letter agreement with RLD pursuant to
which RCN will agree to provide RLD up to $3.0 million of cash equity if
necessary to cover any cash flow deficiency of RLD from the Effective Time
through December 31, 2002.
(j) CCS will distribute all of the stock of RCN PA to C-TEC (the
"RCN PA Distribution").
(k) CCS will distribute all of the stock of Cable Michigan to C-TEC
(the "Internal Cable Michigan Distribution").
(l) CCI will transfer property relating to the expansion of
CTCo's local telephone business beyond its current franchise area, as well
as any liabilities related to such property, to Chimes.
(m) RLD will transfer the Commonwealth Service Area Long
Distance Business (including all related liabilities) to CLD.
(n) RLD will distribute the stock of CLD to C-TEC (the "CLD
Distribution").
(o) CCI will merge with and into C-TEC pursuant to state corporate
law.
(p) C-TEC will contribute all of its stock in RCN Telecom and all
of the stock of RLD, RCN PA, CCS, C-TEC Financial Services Inc., a Nevada
Corporation ("Nevada Finance"), C-TEC Services, Inc., a Pennsylvania
corporation ("C-TEC Services"), TEC Air, Inc., a Delaware corporation, and
International to RCN.
(q) RCN will contribute all of its stock in RCN Telecom and all
of the stock of RLD, International and Nevada Finance to RCN PA.
(r) C-TEC will contribute the Mercom Interest to Cable Michigan,
subject to the encumbrance referred to in subsection (a) above and in
connection therewith Cable Michigan will assume the obligations of C-TEC under
the loan referred to in subsection (a) above.
Section 2.2. Transfers of Certain Other Assets. If and to
the referred to in S[20~Section 2.01, effective prior to or as of the
Distribution Date or as soon as practicable after the Distribution Date,
subject to receipt of any necessary consents or approvals of third parties
or of governmental or regulatory agencies or authorities and subject to
Section 8.02, (a) C-TEC shall, or shall cause the relevant member of the
C-TEC Group to, assign, contribute, convey, transfer and deliver to Cable
Michigan or to one or more members of the Cable Michigan Group all of the
right, title and interest of C-TEC or such member of the C-TEC Group in and
to all assets (including all agreements), if any, held by any member of the
C-TEC Group that relate predominantly to the Cable Michigan Business and
Cable Michigan shall, or shall cause such member or members of the Cable
Michigan Group to, assume and take transfer of all liabilities associated
with such assets; (b) C-TEC shall, or shall cause the relevant member of
the C-TEC Group to assign, contribute, convey, transfer and deliver to RCN
or to one or more members of the RCN Group all of the right, title and
interest of C-TEC or such member of the C-TEC Group in and to all assets
(including all agreements), if any, held by any member of the C-TEC Group
that relate predominantly to the RCN Business and RCN shall, or shall cause
such member or members of the RCN Group to, assume and take transfer of all
liabilities associated with such assets; (c) Cable Michigan shall, or
shall cause the relevant member of the Cable Michigan Group to, assign,
convey, transfer and deliver to C-TEC or to one or more members of the C-
TEC Group all of the right, title and interest of Cable Michigan or such
member of the Cable Michigan Group in and to all assets (including all
agreements), if any, held by any member of the Cable Michigan Group that
relate predominantly to the C-TEC Business and C-TEC shall, or shall cause
such member or members of the C-TEC Group to assume and take transfer of
all liabilities associated with such assets; (d) Cable Michigan shall, or
shall cause the relevant member of the Cable Michigan Group to, assign,
convey, transfer and deliver to RCN or to one or more members of the RCN
Group all of the right, title and interest of Cable Michigan or such member
of the Cable Michigan Group in and to all assets (including all
agreements), if any, held by any member of the Cable Michigan Group that
relate predominantly to the RCN Business and RCN shall, or shall cause such
member or members of the RCN Group to, assume and take transfer of all
liabilities associated with such assets; (e) RCN shall, or shall cause
the relevant member of the RCN Group to, assign, convey, transfer and
deliver to C-TEC or to one or more members of the C-TEC Group all of the
right, title and interest of RCN or such member of the RCN Group in and to
all assets (including all agreements), if any, held by any member of the
RCN Group that relate predominantly to the C-TEC Business and C-TEC shall,
or shall cause such member or members of the C-TEC Group to, assume and
take transfer of all liabilities associated with such assets; and (f) RCN
shall, or shall cause the relevant member of the RCN Group to, assign,
convey, transfer and deliver to Cable Michigan or to one or more members of
the Cable Michigan Group all of the right, title and interest of RCN or
such member of the RCN Group in and to all assets (including all
agreements), if any, held by any member of the RCN Group that relate
predominantly to the Cable Michigan Business and Cable Michigan shall, or
shall cause such member or members of the Cable Michigan Group to, assume
and take transfer of all liabilities associated with such assets. For the
avoidance of doubt, it is understood that (i) CTCo shall not transfer to
any member of the RCN Group the mainframe computer owned by CTCo and (ii)
C-TEC Services shall assign to C-TEC or to one or more members of the C-TEC
Group all of its right, title and interest in the Facilities Management
Agreement dated October 1, 1992, as amended, between C-TEC Services and
Alltel Telecom Information Services, Inc., and such member or members of
the C-TEC Group shall assume the obligations of C-TEC Services under that
agreement.
Section 2.3. Agreement Relating to Consents. The obligations
of the parties to effect (or cause to be effected) the Restructuring shall be
subject to the receipt of all necessary consents of any third party or any
governmental or regulatory agency or authority. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not constitute an
agreement to transfer or assign any asset (including any agreement) or any
claim or right or any benefit arising thereunder or resulting therefrom if an
attempted assignment thereof, without the necessary consent of a third party
or a governmental or regulatory agency or authority, would constitute a breach
or other contravention thereof or in any way adversely affect the rights of
the Cable Michigan Group, the RCN Group or the C-TEC Group thereunder. Each of
Cable Michigan, RCN and C-TEC will, subject to Section 8.02, use their
reasonable efforts to obtain, or cause to be obtained, the consent of any
third party or any governmental or regulatory agency or authority, if any,
required in connection with the Restructuring. If any such required consent
for an assignment in the Restructuring is not obtained, or if an attempted
assignment of any asset (including any agreement) or any claim or right or
benefit arising thereunder would be ineffective or would adversely affect the
rights of the transferor with respect thereto so that the intended transferee
would not in fact receive all such rights, the intended transferor and the
intended transferee will cooperate in a mutually agreeable arrangement under
which the intended transferee would obtain the benefits and assume the
obligations thereunder in accordance with this Agreement, including
sub-contracting, sub-licensing or sub-leasing to such transferee, or under
which the transferor would enforce for the benefit of the transferee, with the
transferee assuming the transferor's obligations, any and all rights of the
transferor against a third party thereto.
Section 2.4. Post Distribution Actions. Following the
Distribution, (i) C-TEC agrees to conduct an offering of equity or
equity-linked securities in accordance with the terms of the Letter Ruling,
(ii) RCN agrees to establish an employee stock ownership plan in accordance
with the terms of the Letter Ruling and (iii) the parties agree to comply with
the other applicable requirements of the Letter Ruling.
ARTICLE 3
The Distribution
Section 3.1. Cooperation Prior to the Distribution. (a)
C-TEC and Cable Michigan have prepared, and Cable Michigan has filed with
the Commission, the Cable Michigan Form 10, which includes or incorporates
by reference the Cable Michigan Information Statement setting forth
appropriate disclosure concerning Cable Michigan and the Distribution. C-TEC
and Cable Michigan shall use reasonable efforts to cause the Cable Michigan
Form 10 to become effective under the 1934 Act as soon as practicable.
After the Form 10 becomes effective, C-TEC will mail the Cable Michigan
Information Statement to the holders of C-TEC Common Equity as of the
Record Date.
(b) C-TEC and RCN have prepared, and RCN has filed with the
Commission, the RCN Form 10, which includes or incorporates by reference the
RCN Information Statement setting forth appropriate disclosure concerning RCN
and the Distribution. C-TEC and RCN shall use reasonable efforts to cause the
RCN Form 10 to become effective under the 1934 Act as soon as practicable.
After the RCN Form 10 becomes effective, C-TEC will mail the RCN Information
Statement to the holders of C-TEC Common Equity as of the Record Date.
(c) C-TEC, Cable Michigan and RCN shall cooperate in preparing,
filing with the Commission and causing to become effective any registration
statements or amendments thereto that are appropriate to reflect the
establishment of or amendments to any employee benefit and other plans
contemplated by this Agreement.
(d) C-TEC, Cable Michigan and RCN shall take all such action as
may be necessary or appropriate under the securities or blue sky laws of states
or other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement.
(e) Cable Michigan and RCN have each prepared, filed and will
pursue an application to permit trading of the Cable Michigan Common Stock
and the RCN Common Stock, respectively, on the Nasdaq Stock Market
("Nasdaq").
Section 3.2. C-TEC Board Action; Conditions Precedent. (a)
C-TEC's Board of Directors shall, in its discretion, establish (or delegate
authority to establish) the Record Date and the Distribution Date and any
appropriate procedures in connection with the Distribution. In no event shall
the Distribution occur unless the following conditions shall have been and
continue to be satisfied:
(i) the Cable Michigan Form 10 and the RCN Form 10 shall
each have become effective under the 1934 Act;
(ii) the Cable Michigan Common Stock and the RCN Common Stock
to be delivered in the Distribution shall, in each case, have been approved
for trading on Nasdaq, subject to official notice of issuance;
(iii) the Board of Directors of C-TEC shall be satisfied
that (a) at the time of the Distribution and after giving effect to the
Distribution and other related transactions constituting part of the
Restructuring, C-TEC will not be insolvent (in that, both before and
immediately following the Distribution, (i) the fair market value of C-
TEC's assets would exceed C-TEC's liabilities, (ii) C-TEC would be able to
pay its liabilities as they mature and become absolute and (iii) C-TEC
would not have unreasonably small capital with which to engage in its
business) and (b) the Distribution will be permitted under Section 1551 of
the Pennsylvania Business Corporations Act.
(iv) C-TEC's Board of Directors shall have approved the
Distribution and shall not have abandoned, deferred or modified the
Distribution at any time prior to the Distribution Date;
(v) (i) Cable Michigan's Board of Directors, as named in the
Cable Michigan Information Statement, shall have been elected by C-TEC, as
sole stockholder of Cable Michigan, and Cable Michigan's certificate of
incorporation and bylaws, in substantially the forms filed as exhibits to the
Cable Michigan Form 10, shall be in effect and (ii) RCN's Board of Directors,
as named in the RCN Information Statement, shall have been elected by C-TEC,
as sole stockholder of RCN, and RCN's certificate of incorporation and bylaws,
in substantially the forms filed as exhibits to the RCN Form 10, shall be in
effect;
(vi) the Tax Sharing Agreement shall have been duly executed
and delivered by the parties thereto;
(vii) the Internal Revenue Service shall not have withdrawn the
Letter Ruling; and
(viii) the Restructuring shall have been consummated in all
material respects.
(b) In no event shall either the RCN PA Distribution or the
Internal Cable Michigan Distribution occur unless the Board of Directors of
CCS shall be satisfied that (a) at the time of the RCN PA Distribution or
the Internal Cable Michigan Distribution, as the case may be, and after
giving effect to the RCN PA Distribution or the Internal Cable Michigan
Distribution, as the case may be, CCS will not be insolvent (in that, both
before and immediately following the RCN PA Distribution or the Internal
Cable Michigan Distribution, as the case may be, (i) the fair market value
of CCS's assets would exceed CCS's liabilities, (ii) CCS would be able to
pay its liabilities as they mature and become absolute and (iii) CCS would
not have unreasonably small capital with which to engage in its business)
and (b) the RCN PA Distribution or the Internal Cable Michigan
Distribution, as the case may be, will be permitted under Section 170 of
the Delaware General Corporation Law.
(c) In no event shall the CLD Distribution occur unless the
Board of Directors of RLD shall be satisfied that (a) at the time of the
CLD Distribution and after giving effect to the CLD Distribution, RLD will
not be insolvent (in that, both before and immediately following the CLD
Distribution, (i) the Fair Market Value of RLD's Assets would exceed RLD's
liabilities, (ii) RLD would be able to pay its liabilities as they mature
and become absolute and (iii) RLD would not have unreasonably small
capital with which to engage in its business and (b) the CLD Distribution
will be permitted under Section 1551 of the Pennsylvania Business
Corporations Act.
Section 3.3. The Distribution. Subject to the terms and
conditions set forth in this Agreement, (i) on or prior to the Distribution
Date, C-TEC shall deliver to the Distribution Agent for the benefit of
holders of record of C-TEC Common Equity on the Record Date, stock
certificates, endorsed by C-TEC in blank, representing all of the then
outstanding shares of Cable Michigan Common Stock owned by C-TEC and all of
the then outstanding shares of RCN Common Stock owned by C-TEC, (ii) the
Distribution shall be effective immediately prior to the close of business,
New York City time, on the Distribution Date and (iii) C-TEC shall
instruct the Distribution Agent to distribute, on or as soon as practicable
after the Distribution Date, to each holder of record of C-TEC Common
Equity as of the Record Date one share of Cable Michigan Common Stock for
each four shares of C-TEC Common Equity so held and one share of RCN Common
Stock for each one share of C-TEC Common Equity so held. Cable Michigan
and RCN each agree to provide all certificates for shares of Cable Michigan
Common Stock and RCN Common Stock, respectively, that C-TEC shall require
(after giving effect to Section 3.04) in order to effect the Distribution.
Section 3.4. Stock Dividends. On or prior to the Distribution
Date:
(i) Cable Michigan shall issue to CCS as a stock dividend
the number of shares of Cable Michigan Common Stock as required to effect
the Distribution, as certified by the Distribution Agent. In connection
therewith, CCS shall deliver to Cable Michigan for cancellation the share
certificate currently held by it representing Cable Michigan Common
(ii) RCN shall issue to C-TEC as a stock dividend the number
of shares of RCN Common Stock as required to effect the Distribution, as
certified by the Distribution Agent. In connection therewith, C-TEC shall
deliver to RCN for cancellation the share certificate currently held by it
representing RCN Common Stock.
Section 3.5. Fractional Shares. No certificates representing
fractional shares of Cable Michigan Common Stock or RCN Common Stock will be
distributed in the Distribution. The Distribution Agent will be directed to
determine the number of whole shares and fractional shares of Cable Michigan
Common Stock and RCN Common Stock allocable to each holder of C-TEC Common
Stock as of the Record Date. Upon the determination by the Distribution Agent
of such number of fractional shares, as soon as practicable after the
Distribution Date, the Distribution Agent, acting on behalf of the holders
thereof, shall sell such fractional shares for cash on the open market and
shall disburse the appropriate portion of the resulting cash proceeds (net of
any costs of selling the fractional shares) to each holder entitled thereto.
ARTICLE 4
Indemnification
Section 4.1. Cable Michigan Indemnification of the C-TEC Group
and the RCN Group. (a) Subject to Section 4.04, on and after the Distribution
Date, Cable Michigan shall indemnify, defend and hold harmless the C-TEC Group
and the respective directors, officers, employees and Affiliates of each
Person in the C-TEC Group (the "C-TEC Indemnitees") and the RCN Group and the
respective directors, officers, employees and Affiliates of each Person in the
RCN Group (the "RCN Indemnitees") from and against any and all Losses incurred
or suffered by any of the C-TEC Indemnitees or the RCN Indemnitees,
respectively, (1) arising out of, or due to the failure of any Person in the
Cable Michigan Group to pay, perform or otherwise discharge, any of the Cable
Michigan Liabilities, (2) arising out of the breach by any member of the Cable
Michigan Group of any obligation under this Agreement or any of the other
Distribution Documents, (3) in the case of the C-TEC Indemnitees, arising out
of the performance of the Services under clause (iv) of Section 6.01 except to
the extent such Losses result from the gross negligence or willful misconduct
of a C-TEC Indemnitee or (4) in the case of the RCN Indemnitees, arising out
of the performance of Services under clause (ii) of Section 6.01 except to the
extent such Losses result from the gross negligence or willful misconduct of a
RCN Indemnitee.
(b) Subject to Section 4.04, Cable Michigan shall indemnify, defend
and hold harmless each of the C-TEC Indemnitees, each of the RCN Indemnitees
and each Person, if any, who controls any C-TEC Indemnitee or any RCN
Indemnitee within the meaning of either Section 15 of the 1933 Act or Section
20 of the 1934 Act from and against any and all Losses caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Cable Michigan Form 10 or any amendment thereof or the Cable Michigan
Information Statement (as amended or supplemented), or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such Losses are caused by any such
untrue statement or omission or alleged untrue statement or omission based
upon information furnished to Cable Michigan in writing by C-TEC expressly for
use therein.
Section 4.2. RCN Indemnification of the C-TEC Group and the
Cable Michigan Group. (a) Subject to Section 4.04, on and after the
Distribution Date, RCN shall indemnify, defend and hold harmless the C-TEC
Indemnitees and the Cable Michigan Group and the respective directors,
officers, employees and Affiliates of each Person in the Cable Michigan Group
(the "Cable Michigan Indemnitees") from and against any and all Losses incurred
or suffered by any of the C-TEC Indemnitees or the Cable Michigan Indemnitees,
respectively, (1) arising out of, or due to the failure of any Person in the
RCN Group to pay, perform or otherwise discharge, any of the RCN Liabilities,
(2) arising out of the breach by any member of the RCN Group of any obligation
under this Agreement or any of the other Distribution Documents or (3) in the
case of the C-TEC Indemnitees, arising out of the performance of the Services
under clause (iii) of Section 6.01 except to the extent such Losses result
from the gross negligence or willful misconduct of a C-TEC Indemnitee.
(b) Subject to Section 4.04, RCN shall indemnify, defend and hold
harmless each of the C-TEC Indemnitees, each of the Cable Michigan Indemnitees
and each Person, if any, who controls any C-TEC Indemnitee or any Cable
Michigan Indemnitee within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act from and against any and all Losses caused by any
untrue statement or alleged untrue statement of a material fact contained in
the RCN Form 10 or any amendment thereof or the RCN Information Statement (as
amended or supplemented), or caused by any omission or alleged omission to
state therein a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
insofar as such Losses are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished to RCN
in writing by C-TEC expressly for use therein.
Section 4.3. C-TEC Indemnification of Cable Michigan Group and
RCN Group. (a) Subject to Section 4.04, on and after the Distribution Date,
C-TEC shall indemnify, defend and hold harmless the Cable Michigan
Indemnitees and the RCN Indemnitees from and against any and all Losses
incurred or suffered by any of the Cable Michigan Indemnitees or the RCN
Indemnitees, respectively, (1) arising out of, or due to the failure of any
Person in the C-TEC Group to pay, perform or otherwise discharge, any of the
C-TEC Liabilities, (2) arising from any breach by any member of the C-TEC
Group of any obligation made under this Agreement or any of the other
Distribution Documents, or (3) in the case of the RCN Indemnitees, arising out
of the performance of the Services under clause (i) of Section 6.01 except to
the extent such Losses result from the gross negligence or willful misconduct
of a RCN Indemnitee.
(b) Subject to Section 4.04, C-TEC shall indemnify, defend and hold
harmless each of the Cable Michigan Indemnitees, each of the RCN Indemnitees
and each Person, if any, who controls any Cable Michigan Indemnitee or any RCN
Indemnitee within the meaning of either Section 15 of the 1933 Act or Section
20 of the 1934 Act from and against any and all Losses caused by any untrue
statement or alleged untrue statement of a material fact contained in either
of the Form 10s or any amendment thereof or either of the Information
Statements (as amended or supplemented), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that such
Losses are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information furnished to Cable Michigan or
RCN, as the case may be, in writing by C-TEC expressly for use therein.
Section 4.4. Insurance; Third Party Obligations. Any
indemnification pursuant to Section 4.01, 4.02 or 4.03 shall be paid net of the
amount of any insurance or other amounts that would be payable by any third
party to the Indemnified Party (as defined below) in the absence of this
Agreement (irrespective of time of receipt of such insurance or other amounts)
and net of any Tax Benefit (as defined in the Tax Sharing Agreement) to the
Indemnified Party attributable to the relevant payment or Liability. It is
expressly agreed that no insurer or any other third party shall be (i)
entitled to a benefit it would not be entitled to receive in the absence of
the foregoing indemnification provisions, (ii) relieved of the responsibility
to pay any claims to which it is obligated or (iii) entitled to any
subrogation rights with respect to any obligation hereunder.
Section 4.5. Notice and Payment of Claims. If any C-TEC
Indemnitee, Cable Michigan Indemnitee or RCN Indemnitee (the "Indemnified
Party") determines that it is or may be entitled to indemnification by any
party (the "Indemnifying Party") under Article IV (other than in connection
with any Action subject to Section 4.06 or 4.07), the Indemnified Party shall
deliver to the Indemnifying Party a written notice specifying, to the extent
reasonably practicable, the basis for its claim for indemnification and the
amount for which the Indemnified Party reasonably believes it is entitled to
be indemnified. Within 30 days after receipt of such notice, the Indemnifying
Party shall pay the Indemnified Party such amount in cash or other immediately
available funds unless the Indemnifying Party objects to the claim for
indemnification or the amount thereof. If the Indemnifying Party does not give
the Indemnified Party written notice objecting to such indemnity claim and
setting forth the grounds therefor within such 30-day period, the Indemnifying
Party shall be deemed to have acknowledged its liability for such claim and
the Indemnified Party may exercise any and all of its rights under applicable
law to collect such amount. In the event of such a timely objection by the
Indemnifying Party, the amount, if any, that is Finally Determined to be
required to be paid by the Indemnifying Party in respect of such indemnity
claim shall be paid by the Indemnifying Party to the Indemnified Party in cash
within 15 days after such indemnity claim has been so Finally Determined.
Section 4.6. Notice and Defense of Third-Party Claims Other
Than Those for Shared Liabilities. Promptly following the earlier of (i)
receipt of notice of the commencement by a third party of any Action against or
otherwise involving any Indemnified Party or (ii) receipt of information from a
third party alleging the existence of a claim against an Indemnified Party, in
either case, with respect to which indemnification may be sought pursuant to
this Agreement (a "Third-Party Claim"), the Indemnified Party shall give the
Indemnifying Party written notice thereof. The failure of the Indemnified Party
to give notice as provided in this Section 4.05 shall not relieve the
Indemnifying Party of its obligations under this Agreement, except to the
extent that the Indemnifying Party is prejudiced by such failure to give
notice. Within 30 days after receipt of such notice, the Indemnifying Party
may (i) by giving written notice thereof to the Indemnified Party, acknowledge
liability for such indemnification claim and at its option elect to assume the
defense of such Third-Party Claim at its sole cost and expense or (ii) object
to the claim for indemnification set forth in the notice delivered by the
Indemnified Party pursuant to the first sentence of this Section 4.06;
provided that if the Indemnifying Party does not within such 30-day period
give the Indemnified Party written notice objecting to such indemnification
claim and setting forth the grounds therefor, the Indemnifying Party shall be
deemed to have acknowledged its liability for such indemnification claim. If
the Indemnifying Party has acknowledged liability and elected to assume the
defense of a Third-Party Claim, (x) the defense shall be conducted by counsel
retained by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party, provided that the Indemnified Party shall have the right to
participate in such proceedings and to be represented by counsel of its own
choosing at the Indemnified Party's sole cost and expense; and (y) the
Indemnifying Party may settle or compromise the Third Party Claim without the
prior written consent of the Indemnified Party so long as such settlement
includes an unconditional release of the Indemnified Party from all claims
that are the subject of such Third Party Claim, provided that the Indemnifying
Party may not agree to any such settlement pursuant to which any remedy or
relief, other than monetary damages for which the Indemnifying Party shall be
responsible hereunder, shall be applied to or against the Indemnified Party,
without the prior written consent of the Indemnified Party, which consent
shall not be unreasonably withheld. If the Indemnifying Party does not assume
the defense of a Third-Party Claim for which it has acknowledged liability for
indemnification hereunder, the Indemnified Party will act in good faith with
respect thereto and may require the Indemnifying Party to reimburse it on a
current basis for its reasonable expenses of investigation, reasonable
attorneys' fees and reasonable out-of-pocket expenses incurred in defending
against such Third-Party Claim and the Indemnifying Party shall be bound by
the result obtained with respect thereto by the Indemnified Party; provided
that the Indemnifying Party shall not be liable for any settlement effected
without its consent, which consent shall not be unreasonably withheld. If the
Indemnifying Party objects to a claim for indemnification, (a) the
Indemnifying Party shall not be entitled to assume the defense of the related
Third-Party Claim, (b) the Indemnified Party shall act in good faith with
respect to such Third-Party Claim, (c) the dispute as to whether the
Indemnified Party is entitled to indemnification hereunder shall be resolved
in accordance with Section 9.11(a) hereof and (d) if it is determined that the
Indemnified Party is entitled to indemnification hereunder, the Indemnifying
Party will be responsible for all Losses of the Indemnified Party arising from
such Third-Party Claim. The Indemnifying Party shall pay to the Indemnified
Party in cash the amount, if any, for which the Indemnified Party is entitled
to be indemnified hereunder within 15 days after such Third-Party Claim has
been Finally Determined, in the case of a Third-Party Claim as to which the
Indemnifying Party has acknowledged liability or, in the case of any
Third-Party Claim as to which the Indemnifying Party has not acknowledged
liability, within 15 days after such Indemnifying Party's objection to
liability hereunder has been Finally Determined to be unfounded. This Section
4.06 shall govern all claims under this Article IV for indemnification against
Third-Party Claims except Third-Party Claims in respect of Shared Liabilities,
as to which Section 4.07 shall govern.
Section 4.7. Notice and Defense of Third-Party Claims for
Shared Liabilities. Promptly following the earlier of (i) receipt of notice
of the commencement of a Third-Party Claim in respect of a Shared Liability (a
"Shared Liability Claim") or (ii) receipt of information from a third party
alleging the existence of a Shared Liability Claim, the party receiving such
notice or information shall give the other parties written notice thereof. The
failure of the party receiving notice or information with respect to a Shared
Liability Claim in respect to give notice as provided in this Section 4.07
shall not relieve another party of its indemnification obligations under this
Agreement with respect thereto, except to the extent that such party is
prejudiced by such failure to give notice.
Each party hereto shall be entitled to participate in the
defense of such Shared Liability Claim if either the Shared Liability Claim
has been asserted or threatened against such party or such party has
acknowledged in writing its obligation to bear a portion of the potential
liability in respect of such Shared Liability Claim. (Each party that is so
entitled to participate in the defense of such Shared Liability Claim is
referred to herein as a "Participating Party".) Without limiting the terms of
Sections 4.01(a), 4.02(a) and 4.03(a), the party against whom the Shared
Liability Claim is made shall have management and administrative
responsibility in respect thereof; provided that if RCN is a Participating
Party it shall have management and administrative responsibility in respect
thereof. The party responsible for the management and administration of a
Shared Liability Claim is referred to herein as the "Managing Party" and such
management and administrative responsibility shall entail the defense of such
Shared Liability Claim, negotiation with claimants and potential claimants
(subject to the limitations in the following paragraph) and other reasonably
related activities. The Managing Party shall retain counsel selected by it
and reasonably satisfactory to the other Participating Parties, provided that
the other Participating Parties shall have the right to participate in such
proceedings and to be represented by counsel of its or their own choosing at
its or their sole cost and expense. The legal or other expenses in respect of
a Shared Liability Claim incurred by or on behalf of any person other than the
Managing Party shall not be Losses for purposes of this Agreement. All
parties hereto shall cooperate with the Managing Party and each other in the
defense or prosecution of such Shared Liability Claim.
In no event will the party against which the claim was made
admit any liability with respect to, or settle, compromise or discharge, any
Shared Liability Claim without the prior written consent of each other
Participating Party; provided, however, that the party against which the claim
was made may settle or compromise the Shared Liability Claim without the prior
written consent of the other Participating Parties if such party releases each
of the other Participating Parties from their respective indemnification
obligations hereunder with respect to such Shared Liability Claim and such
settlement, compromise or discharge would not otherwise adversely affect the
other Participating Parties. The Managing Party shall act in good faith with
respect to the Shared Liability Claim and may require the other parties to
reimburse it on a current basis for its reasonable expenses of investigation,
reasonable attorneys' fees and reasonable out-of-pocket expenses incurred in
defending against such Shared Liability Claim, and the other parties shall be
bound by the result obtained with respect thereto; provided that a
Participating Party shall not be liable for any settlement effected without
its consent, which consent shall not be unreasonably withheld. If a party
objects to, or does not within 30 days of notice acknowledge in writing its
indemnification obligations hereunder in respect of a portion of the liability
for a Shared Liability Claim, (a) such party shall not be entitled to
participate in the defense of such Shared Liability Claim, and (b) the dispute
as to whether such party is required to provide indemnification hereunder with
respect thereto shall be resolved in accordance with Section 9.11(a) hereof.
Each Indemnifying Party in respect of a Shared Liability Claim shall pay to
the Indemnified Party in cash the amount, if any, for which the Indemnified
Party is entitled to be indemnified hereunder by such Indemnifying Party
within 15 days after such Shared Liability Claim has been Finally Determined,
in the case of a Shared Liability Claim as to which the Indemnifying Party has
acknowledged liability or, in the case of any Shared Liability Claim as to
which the Indemnifying Party has not acknowledged liability, within 15 days
after such Indemnifying Party's objection to liability hereunder has been
Finally Determined to be unfounded.
Section 4.8. Contribution. If for any reason the
indemnification provided for in Section 4.01, 4.02 or 4.03 is unavailable to
any Indemnified Party, or insufficient to hold it harmless, then the
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect all relevant equitable considerations.
Section 4.9. Non-Exclusivity of Remedies. The remedies
provided for in this Article IV are not exclusive and shall not limit any
rights or remedies which may otherwise be available to any Indemnified Party
at law or in equity.
ARTICLE 5
Employee Matters
Section 5.1. Employee Matters Generally. With respect to
employee matters and employee benefits arrangements, the parties hereto agree
as set forth in Schedule 5.01. In the event of any conflict between the
provisions of this Agreement and Schedule 5.01 with respect to employee or
employee benefit matters, the provisions of Schedule 5.01 shall prevail.
ARTICLE 6
Certain Transitional Services
Section 6.1. Provision of Services. On the terms and
conditions set forth herein, and in order to assist in effecting an orderly
transition following the Distribution, (i) RCN will provide or cause to be
provided to the C-TEC Group, and C-TEC will purchase or cause to be purchased
from RCN (or the appropriate member of the RCN Group), the services set forth
on Schedule 6.01(i); (ii) RCN will provide or cause to be provided to the
Cable Michigan Group, and Cable Michigan will purchase or cause to be
purchased from RCN (or the appropriate member of the RCN Group), the services
set forth on Schedule 6.01(ii); (iii) C-TEC will provide or cause to be
provided to the RCN Group, and RCN will purchase or cause to be purchased from
C-TEC (or the appropriate member of the C-TEC Group), the services set forth on
Schedule 6.01(iii); and (iv) C-TEC will provide or cause to be provided to the
Cable Michigan Group, and Cable Michigan will purchase or cause to be
purchased from C-TEC (or the appropriate member of the C-TEC Group), the
services set forth on Schedule 6.01(iv). The services referred to in the
preceding sentence are referred to collectively as the "Services." As used
herein, (1) the term "Service Recipient" means, with respect to any given
Service, the recipient of such Service and for purposes of enforcing this
Agreement with C-TEC, RCN or Cable Michigan, as the case may be, shall be
treated as the recipient of all Services provided to its Group; (2) the term
"Service Provider" means, with respect to any given Service, the provider of
such Service and for purposes of such definition, C-TEC and RCN, as the case
may be, shall be treated as the provider of all Services provided by its Group;
and (3) the Services provided by a given Service Provider to a given Service
Recipient are referred to herein collectively as a "Service Package".
Section 6.2. Duration of Provision and Purchase of Services.
(a) The Services shall be provided and purchased in accordance with Section
6.01 for a period (the "Transition Period") (i) commencing on the Distribution
Date and (ii) ending, in the case of each Service Package, on the date that is
sixty (60) days after the date that either the relevant Service Provider or
the relevant Service Recipient gives notice that it is terminating this
Agreement with respect to the provision of that Service Package; provided that
RCN may not terminate this Agreement with respect to any of the Services set
forth in items 1 (customer service), 12 (programming administration), 13
(billing) and 16 (provision of third party programming) of Schedule 6.01(ii)
on less than one year advance notice to Cable Michigan.
(b) At any time during the Transition Period, the Service Recipient
may, at its election, terminate the provision of any Service that is being
provided to it by delivery of a notice to the applicable Service Provider (a
"Termination Notice"), which termination shall become effective with respect
to such Service sixty (60) days after the date of delivery of a Termination
Notice. If a Service ceases to be provided during the Transition Period, the
parties concerned will negotiate in good faith regarding a reduction in the
amount charged by the Service Provider to the Service Recipient for Services
under this Agreement.
Section 6.3. Nature and Scope of Provision of Services. The
nature, scope and timing of provision of the Services to be provided hereunder
shall be substantially consistent with the nature, scope and timing of the
comparable services provided to the Service Recipient (or its predecessor) by
the Service Provider (or its predecessor) prior to the Distribution; provided
that no Person shall be obligated to hire additional or replacement employees,
or increase the compensation of its existing employees, in order to provide
the Services hereunder. The Service Provider shall cause the employees
providing Services to use the same skill and care in the provision of the
Services as they exercise in performing such services for members of their own
Group.
Section 6.4. Charges and Payment for Services. The Service
Recipient shall (or shall cause the appropriate member of its Group to) pay the
Service Provider (or the appropriate member of its Group) fees in respect of
the Services set forth hereunder in Schedules 6.01(i), (ii), (iii) or (iv), as
applicable (the "Fees"). All Fees required to be paid hereunder shall be
invoiced monthly, and invoiced amounts shall be due and payable individually
by the Service Recipients in cash within thirty (30) days from date of receipt
of such invoice therefor. The parties agree to enter into good faith
negotiations to reduce the applicable Fees payable hereunder if the level or
quantity of any given Service provided hereunder is reduced at the request of
the Service Recipient.
Section 6.5. Status as Independent Contractor. C-TEC, Cable
Michigan and RCN agree that the relationship between any employee of one
company providing Services to another shall be that of an employee of an
independent contractor and not that of an employee, agent, partner or joint
venturer of the Service Recipient. C-TEC, Cable Michigan and RCN agree that
any individual providing services hereunder will not be treated as employees
of the Service Recipient for any purpose, including, without limitation, the
Federal Insurance Contributions Act, the Social Security Act, the Federal
Unemployment Tax Act, federal and state income tax withholding, state worker's
compensation insurance and similar laws covering the employer/employee
relationship.
Section 6.6. Exculpation; Force Majeure. (a) Neither C-TEC
(nor any C-TEC Indemnitee) nor RCN (nor any RCN Indemnitee) shall be liable to
any other Person for any Losses directly or indirectly arising out of, relating
to or in connection with the performance or non-performance by the C-TEC Group
or the RCN Group, respectively, of the Services hereunder, except to the
extent such Losses are attributable to gross negligence or willful misconduct
of the C-TEC Group or the RCN Group, respectively.
(b) Without limiting the provisions of Section 6.06(a), no Service
Provider hereunder shall be liable to any Service Recipient hereunder for any
delay or default in performance of the Services where occasioned by any cause
of any kind or extent beyond the Service Provider's control including, by way
of example, but not limitation, any act of God, any act, regulation or law of
any government, war, civil commotion, destruction of production facilities or
materials by fire, earthquake or storm, labor disturbance, epidemic, equipment
breakdown or failure, failure to obtain any consent or approval of a third
party necessary to provide the Services, or failure of suppliers, public
utilities or common carriers ("Force Majeure"). In claiming relief hereunder
the Service Provider shall promptly notify the Service Recipient in writing of
the Force Majeure causing delay or default in performance, the probable extent
to which it will be unable to perform, and the actions it intends to take to
remove such Force Majeure, to the extent reasonably possible to do so. The
Service Provider shall take reasonable action within its control to alleviate
the Force Majeure causing delay or default in performance.
Section 6.7. No Transfer of Proprietary Rights. No assignment
or transfer by a Group of any right or license in or to any technology,
software, intellectual property, know-how or other proprietary right owned,
licensed or held for use by such Group shall occur or be deemed to occur by
virtue of or in connection with the provision or purchase of Services by
either Group hereunder.
ARTICLE 7
Access to Information
Section 7.1. Provision of Corporate Records. Immediately
prior to or as soon as practicable following the Distribution Date, each Group
shall provide to each other Group all documents, contracts, books, records and
data (including but not limited to minute books, stock registers, stock
certificates and documents of title) in its possession relating to such other
Group or such other Group's business and affairs; provided that if any such
documents, contracts, books, records or data relate to all or to two of the
Groups or the business and operations of all Groups or to two of the Groups,
each such Group shall provide to the other Group or Groups true and complete
copies of such documents, contracts, books, records or data.
Section 7.2. Access to Information. From and after the
Distribution Date, each Group shall afford promptly to each other Group and its
accountants, counsel and other designated representatives reasonable access
during normal business hours to all documents, contracts, books, records,
computer data and other data in such Group's possession relating to such other
Group or the business and affairs of such other Group (other than data and
information subject to an attorney/client or other privilege), insofar as such
access is reasonably required by such other Group, including, without
limitation, for audit, accounting, litigation and disclosure and reporting
purposes.
Section 7.3. Litigation Cooperation. Each Group shall use
reasonable efforts to make available, upon written request, its directors,
officers, employees and representatives as witnesses to each other Group and
its accountants, counsel, and other designated representatives, and shall
otherwise cooperate with each other Group, to the extent reasonably required
in connection with any legal, administrative or other proceedings arising out
of any Group's business and operations prior to the Distribution Date in which
the requesting party may from time to time be involved.
Section 7.4. Reimbursement. Each Group providing information
or witnesses to any other Group, or otherwise incurring any expense in
connection with cooperating, under Sections 7.01, 7.02 or 7.03 shall be
entitled to receive from the recipient thereof, upon the presentation of
invoices therefor, payment for all costs and expenses as may be reasonably
incurred in providing such information, witnesses or cooperation.
Section 7.5. Retention of Records. Except as otherwise
required by law or agreed to in writing, each party shall, and shall cause the
members of its respective Group to, retain all information relating to any
other Group's business and operations in accordance with the past practice of
such party. Notwithstanding the foregoing, any party may destroy or otherwise
dispose of any such information at any time, provided that, prior to such
destruction or disposal, (i) such party shall provide not less than 90 days'
prior written notice to the other parties, specifying the information proposed
to be destroyed or disposed of, and (ii) if a recipient of such notice shall
request in writing prior to the scheduled date for such destruction or
disposal that any of the information proposed to be destroyed or disposed of
be delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the information as
was requested at the expense of the requesting party or parties.
Section 7.6. Confidentiality. Each party shall hold and shall
cause its Affiliates and its and their respective directors, officers,
employees, agents, consultants and advisors ("Representatives") to hold in
strict confidence all information concerning any other party or its Affiliates
unless (i) such person is compelled to disclose such information by judicial
or administrative process or, in the opinion of its counsel, by other
requirements of law or (ii) such information can be shown to have been (A) in
the public domain through no fault of such party or its Representatives or (B)
lawfully acquired after the Distribution Date on a non-confidential basis from
other sources. Notwithstanding the foregoing, such party may disclose such
information to its Representatives so long as such Persons are informed by
such party of the confidential nature of such information and are directed by
such party to treat such information confidentially. If a party or any of its
Representatives becomes legally compelled to disclose any documents or
information subject to this Section, such party will promptly notify the other
applicable party so that such other party may seek a protective order or other
remedy or waive compliance with this Section. If no such protective order or
other remedy is obtained or waiver granted, the party subject to compulsion
will furnish only that portion of the information which it is advised by
counsel is legally required and will exercise its reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded such
information. Each party agrees to be responsible for any breach of this
Section by its Representatives.
Section 7.7. Inapplicability of Article VII to Tax Matters.
Notwithstanding anything to the contrary in Article VII, Article VII shall not
apply with respect to information, records and other matters relating to Taxes,
all of which shall be governed by the Tax Sharing Agreement.
ARTICLE 8
Certain Other Agreements
Section 8.1. Intercompany Accounts and Agreements. Except as
otherwise provided in the Tax Sharing Agreement, Section 2.01 or Section 9.08,
all intercompany receivable, payable and loan balances in existence as of the
Distribution Date between the C-TEC Group, the Cable Michigan Group and the
RCN Group will be eliminated prior to the Effective Time by payment in full by
the party or parties owing any such obligation; provided that with respect to
all accounts receivable and accounts payable which arise between any member of
one such Group and any member of another such Group after August 31, 1997 and
before the Effective Time, if the amounts thereof cannot be determined prior
to the Distribution Date, then such balances shall be paid, in full, by the
party or parties owing such obligations as soon as practicable (but in no
event more than 30 days) after the Distribution Date other than
Distribution Dates. All transactions after June 30, 1997 and prior to the
close of business on the Distribution Date resulting in amounts payable by
a member of one Group to a member of another Group will be accounted for as
previously agreed by the parties.
Section 8.2. Further Assurances and Consents. In addition to
the actions specifically provided for elsewhere in this Agreement, each of the
parties hereto shall use its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws, regulations and agreements or
otherwise to consummate and make effective the transactions contemplated by
this Agreement, including but not limited to using its reasonable efforts to
obtain any consents and approvals and to make any filings and applications
necessary or desirable in order to consummate the transactions contemplated
by this Agreement; provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar charges) to
any third party from whom such consents or approvals are requested or to take
any action or omit to take any action if the taking of or the omission to take
such action would be unreasonably burdensome to the party, its Group or its
Group's business.
Section 8.3. Intellectual Property Rights and Licenses. None
of the Groups shall have any right or license in or to any technology,
software, intellectual property (including any trademark, service mark, patent
or copyright), know-how or other proprietary right owned, licensed or held for
use by another Group.
Section 8.4. Insurance. Notwithstanding anything contained
herein or in any Distribution Document to the contrary, nothing contained
herein or in any Distribution Document shall constitute an assignment or
transfer of any insurance policy or the rights thereunder to the extent any
such assignment or transfer would cause the coverage under such policy to be
reduced. If any such assignment or transfer would result in such a reduction,
the party that would have assigned or transferred such rights will enforce the
rights thereunder for the benefit of the party to whom such assignment or
transfer would have been made but for the effect of the preceding sentence and
shall hold any payment received in respect thereof in trust for such party.
Each party hereunder hereby appoints RCN Operating Services, Inc. as its agent
to administer any claim it or any member of its Group may have under any
insurance policy held by C-TEC or any of its Subsidiaries prior to the
Distribution Date (each, a "Pre-Distribution Policy") with respect to any
claim or occurrence arising prior to the Distribution Date. If, as a result of
any retrospective loss adjustment, stop loss, deductible, coverage limit or
other similar arrangement, any party (or any member of its Group) is required
to make any payment in respect of, or is not paid the full amount it may claim
under, any Pre-Distribution Policy, the amount of any such payment or
shortfall shall be allocated among the parties hereto in an equitable manner as
determined in good faith by RCN, and each party hereto shall make such
payments to the other parties hereto as shall be required in order to effect
such equitable allocation.
ARTICLE 9
Miscellaneous
Section 9.1. Notices. All notices and other communications to
any party hereunder shall be in writing (including telex, telecopy or similar
writing) and shall be deemed given when received addressed as follows:
If to C-TEC, to:
C-TEC Corporation
800 Route 309
P.O. Box 800
Dallas, PA 18612-9799
Telecopy: 717-675-0900
Attention: Michael I. Gottdenker, President
Copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopy: 212-450-4800
Attention: William L. Taylor
If to Cable Michigan, to:
Cable Michigan, Inc.
105 Carnegie Center
Princeton, NJ 08540
Telecopy: 609-734-7551
Attention: Mark Haverkate, President
Copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopy: 212-450-4800
Attention: William L. Taylor
If to RCN, to:
RCN Corporation
105 Carnegie Center
Princeton, NJ 08540
Telecopy: 609-951-8632
Attention: Michael J. Mahoney, President
Copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopy: 212-450-4800
Attention: William L. Taylor
Any party may, by written notice so delivered to the other
parties, change the address to which delivery of any notice shall thereafter
be made. All such notices shall be deemed received on the date of receipt by
the recipient thereof if received prior to 5 p.m. in the place of receipt and
such day is a business day in the place of receipt. Otherwise, any such notice
shall be deemed not to have been received until the next succeeding business
day in the place of receipt.
Section 9.2. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver
is in writing and signed, in the case of an amendment, by C-TEC, Cable
Michigan and RCN, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.
Section 9.3. Expenses. Except as specifically provided
otherwise in this Agreement or the Tax Sharing Agreement (including, without
limitation, in Articles IV and VI, Sections 7.04, 7.05, 8.01 and 9.07(c) and
Schedules 5.01 and 6.01 of this Agreement), all costs and expenses incurred
after the date hereof in connection with the preparation, execution and
delivery of the Distribution Documents and the consummation of the
Distribution and the other transactions contemplated hereby (including the
fees and expenses of all counsel, accountants and financial and other advisors
of each Group in connection therewith, and all expenses in connection with
preparation, filing and printing of the Form 10s and the Information
Statements) shall be Shared Liabilities; provided (i) that C-TEC shall be
responsible for and pay the fees, expenses and other amounts payable to the
lenders in respect of C-TEC's credit facilities (including the $15 Million
Loan) and all other fees and expenses incurred in connection therewith
(including the fees and expenses of C-TEC's counsel in connection with the
preparation and negotiation of all documentation relating to such credit
facilities), (ii) that Cable Michigan shall be responsible for and pay the
fees, expenses and other amounts payable to the lenders under Cable Michigan's
and Mercom's respective credit facilities and all other fees and expenses
incurred in connection therewith (including the fees and expenses of Cable
Michigan's and Mercom's counsel in connection with the preparation and
negotiation of all documentation relating to such credit facilities) and (iii)
that the RCN Group shall be responsible for and pay the fees, expenses and
other amounts payable to the lenders under the RCN Group's credit facilities
and all other fees and expenses incurred in connection therewith (including
the fees and expenses of counsel to the RCN Group in connection with the
preparation and negotiation of all documentation relating to such credit
facilities).
Section 9.4. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
Section 9.5. Governing Law. This Agreement shall be construed
in accordance with and governed by the law of the State of New York, without
regard to the conflicts of laws rules of such State.
Section 9.6. Entire Agreement. This Agreement and the other
Distribution Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and negotiations, both written and oral, between
the parties with respect to the subject matter hereof and thereof. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein or in the other Distribution Documents has been made or
relied upon by any party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder. To the extent that the provisions of this
Agreement are inconsistent with the provisions of any other Distribution
Document, the provisions of such other Distribution Document shall prevail.
Section 9.7. Tax Sharing Agreement; Set-Off; Certain Transfer
Taxes. (a) Except as otherwise provided herein, this Agreement shall not
govern any Tax, and any and all claims, losses, damages, demands, costs,
expenses or liabilities relating to Taxes shall be exclusively governed by the
Tax Sharing Agreement.
(b) If, at the time any party hereto is required to make any
payment to any other party under this Agreement, the party entitled to the
payment owes the obligor any amount under this Agreement or the Tax Sharing
Agreement, then such amounts shall be offset and the excess shall be paid by
the party liable for such excess.
(c) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest) incurred in
connection with Section 2.02 of this Agreement shall be borne and paid by the
Person who is receiving the property being transferred. The party or parties
that is or are required by applicable law to file any Return (as defined in the
Tax Sharing Agreement) or make any payment with respect to any such Tax shall
do so, and the other party or parties shall cooperate with respect thereto as
necessary. The non-paying party or parties shall reimburse the paying party
in accordance with this Section 9.07 within 5 business days after it or they
receive notice of the payment of such Tax.
Section 9.8. Existing Arrangements. Except as otherwise
contemplated hereby or as set forth on Schedule 9.08, all prior agreements and
arrangements, including those relating to goods, rights or services provided or
licensed, between any member of one Group and any member of another Group
shall be terminated effective as of the Distribution Date, if not theretofore
terminated. No such agreements or arrangements shall be in effect after the
Distribution Date unless embodied in the Distribution Documents or set forth
in Schedule 9.08.
Section 9.9. Termination Prior to the Distribution. The C-TEC
Board of Directors may at any time prior to the Distribution abandon the
Distribution and, by notice to Cable Michigan and RCN, terminate this
Agreement (whether or not the C-TEC Board of Directors has theretofore
approved this Agreement and/or the Distribution).
Section 9.10. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 9.11. Dispute Resolution; Jurisdiction. (a) Any
dispute between or among the parties arising out of or in connection with this
Agreement shall be submitted to arbitration. The arbitration shall be conducted
according to the Commercial Arbitration Rules of the American Arbitration
Association. The place of arbitration shall be New York, New York or such
other place as may be agreed upon by the parties to the dispute. In the case of
a dispute involving two parties, the parties to the dispute shall attempt to
agree upon one arbitrator, but if they are unable to agree, each shall appoint
an arbitrator, and the two arbitrators so appointed shall appoint a third
arbitrator. In the case of a dispute among three parties, each party to the
dispute shall appoint an arbitrator, and the three arbitrators shall select
from among themselves the chairman of the arbitration panel. Expenses of the
arbitrator(s) shall be divided equally between or among the parties.
(b) Judgment upon the award rendered by the arbitrator(s) under
Section 9.11(a) may be entered in any court having jurisdiction thereof, and
shall be enforceable against the parties. Without limiting the foregoing, any
suit, action or proceeding seeking to enforce any arbitration award rendered
under Section 9.11(a) may be brought in the United States District Court for
the Southern District of New York or any New York state court sitting in New
York City, Borough of Manhattan, and each of the parties hereby consents to
the jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding which
is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of
process on such party as provided in Section 9.01 shall be deemed effective
service of process on such party.
Section 9.12. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions, the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
IN WITNESS WHEREOF the parties hereto have caused this
Distribution Agreement to be duly executed by these respective authorized
officers as of the date first above written.
C-TEC CORPORATION
By: /s/ David C. McCourt
-----------------------
Name: David C. McCourt
Title: Chairman and Chief
Executive Officer
CABLE MICHIGAN, INC.
By: /s/ David C. McCourt
-----------------------
Name: David C. McCourt
Title: Chairman and Chief
Executive Officer
RCN CORPORATION
By: /s/ David C. McCourt
-----------------------
Name: David C. McCourt
Title: Chairman and Chief
Executive Officer
SCHEDULE 1.01
SHARED LIABILITIES
1. Shared Corporate Liabilities.
2. Liabilities under the 1933 Act or the 1934 Act arising from
acts or omissions of C-TEC prior to the Distribution Date, other than
Liabilities arising from the filing by C-TEC of a Current Report on Form 8-K
containing information on the C-TEC Group.
3. Certain fees and expenses in connection with the Restructuring
as provided in Section 9.03 of the Distribution Agreement.
SCHEDULE 5.01
EMPLOYEE MATTERS
ARTICLE 1
Definitions
Section 1.1. Definitions. (a) Capitalized terms used but not
defined in this Schedule 5.01 shall have the meaning given those terms in the
Distribution Agreement to which this Schedule 5.01 is attached. The following
terms, as used herein, shall have the following meaning:
"Cable Michigan Employees" means those individuals listed on the
payroll records of any member of the Cable Michigan Group immediately after
the Distribution Date.
"Cable Michigan Employee Group" means all Cable Michigan
Employees and Cable Michigan Retiree, including their respective
beneficiaries.
"Cable Michigan Retiree" means each individual who was
employed by any member of the Cable Michigan Group immediately prior to
such individual's retirement or other termination of employment from the
Companies or is otherwise listed on Exhibit 3 as a Cable Michigan Retiree.
"Companies" means the C-TEC Group, RCN Group and Cable Michigan
Group.
"C-TEC Employees" means those individuals listed on the payroll
records of any member of the C-TEC Group immediately after the Distribution
Date.
"C-TEC Equity-Based Plans" means the plans identified as such on
exhibit 2 hereto.
"C-TEC Employee Group" means all C-TEC Employees and C-TEC
Retirees, including their respective beneficiaries.
"C-TEC Retiree" means each individual who was employed by any
member of the C-TEC Group immediately prior to such individual's retirement
or other termination of employment from the Companies and who is not otherwise
a member of the Cable Michigan Employee Group or RCN Employee Group.
"Employee Benefit Plan" means any "employee benefit plan" (as
defined in Section 3(3) of ERISA) maintained at any time by any of the
Companies or their Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder.
"Health and Welfare Benefit Plans" means the plans as
identified in exhibit 4 hereto.
"RCN Employees" means those individuals listed on the payroll
records of any member of the RCN Group immediately after the Distribution Date.
"RCN Employee Group" means all RCN Employees and RCN Retirees,
including their respective beneficiaries.
"RCN Retiree" means all individuals who were employed by any
member of the RCN Group immediately prior to such individual's retirement or
other termination of employment from the Companies or is otherwise listed on
Exhibit 1 as a RCN Retiree.
"Shared Employee-Related Liabilities" means the liabilities or
classes of liabilities set forth on Exhibit 5 hereto.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Terms Sections
----- --------
Cable Michigan Assumed Liabilities 3.05
Cable Michigan DC Plan 3.01
Cable Michigan H&W Liabilities 3.04
C-TEC DB Plan 3.02
C-TEC DC Plan 3.01
C-TEC H&W Liabilities 3.04
C-TEC Retained Liabilities 3.05
CTERP 3.02
ESPP 3.03
IRS 3.01
Loss 5.02
RCN Assumed Liabilities 3.05
RCN DC Plan 3.01
RCN H&W Liabilities 3.04
Retained DC Assets and Liabilities 3.01
ARTICLE 2
Employees, Certain Agreements
Section 2.1. Employees. Subject to the terms and conditions
of this Agreement, effective at the time of the Distribution Date, C-TEC, Cable
Michigan and RCN or their respective Subsidiaries shall employ each C-TEC
Employee, Cable Michigan Employee or RCN Employee, respectively. No provision
of this Agreement, however, shall require any such entity to continue the
employment of any of their respective employees following the Distribution
Date.
Section 2.2. Certain Agreements; Shared Liabilities. (a)
Except as provided in this Section 2.02, this Agreement shall not apply or be
deemed to apply to any supplemental benefit arrangements accrued or reflected
on the books and accounts of C-TEC immediately prior to the Distribution Date,
the liability for which shall be assumed by C-TEC.
(b) C-TEC, RCN and Cable Michigan shall be 50%, 30% and 20%
liable, respectively, for the Shared Employee-Related Liabilities.
ARTICLE 3
Allocation of Assets and Liabilities
Section 3.1. C-TEC DC Plan. (a) (i) Effective not later than
the Distribution Date, Cable Michigan shall adopt or designate a profit-sharing
plan with a salary reduction arrangement that covers the Cable Michigan
Employee Group and meets the requirements of Sections 401(a) and 401(k) of the
Code ("Cable Michigan DC Plan"). Cable Michigan agrees that all service
credited under the C-TEC Corporation Common-Wealth Builder Savings Plan
("C-TEC DC Plan") as of the Distribution Date with respect to the Cable
Michigan Employee Group shall be credited under the Cable Michigan DC Plan for
all plan purposes, including eligibility and vesting.
(ii) Within 30 days after the adoption or designation of the
Cable Michigan DC Plan by Cable Michigan or as soon as practicable thereafter,
C-TEC shall cause an amount, in cash or in kind as C-TEC and Cable Michigan
shall agree, equivalent to the account balances of all members of the Cable
Michigan Employee Group under the C-TEC DC Plan as of the date of the
transfer, to be transferred from the trust maintained under the C-TEC DC Plan
to the trust maintained under the Cable Michigan DC Plan. Such transfer shall
include the number of any shares of Cable Michigan Common Stock, C-TEC Common
Stock and RCN Common Stock allocable or attributable to the account balances
of all members of the Cable Michigan Employee Group. Such transfer of assets
shall be made only after Cable Michigan has furnished to C-TEC, and C-TEC has
furnished to Cable Michigan, either (A) a copy of an Internal Revenue Service
("IRS") determination letter finding the Cable Michigan DC Plan or the C-TEC
DC Plan, as the case may be, to be a qualified plan meeting the requirements of
Sections 401(a) and 401(k) of the Code or (B) an opinion of counsel or written
representation from Cable Michigan or C-TEC, as the case may be, (with
appropriate indemnities), in either case, to the effect that the Cable
Michigan DC Plan or the C-TEC DC Plan, as the case may be, has been
established in accordance with the Code and ERISA, and an agreement that Cable
Michigan or C-TEC, as the case may be, will request a determination letter
from the IRS and make any and all changes to the Cable Michigan DC Plan or the
C-TEC DC Plan, as the case may be, necessary to receive a favorable
determination letter. Cable Michigan and C-TEC shall cooperate with each
other during the period beginning on the date hereof and ending on the date
the assets are transferred to the trust maintained under the Cable Michigan DC
Plan to ensure the ongoing operation and administration of the Cable Michigan
DC Plan and the C-TEC DC Plan with respect to the Cable Michigan Employee
Group.
(iii) Effective not later than the Distribution Date, RCN shall
adopt or designate a profit-sharing plan with a salary reduction arrangement
that covers the RCN Employee Group and meets the requirements of Sections
401(a) and 401(k) of the Code and which may also qualify as an "Employee Stock
Ownership Plan" within the meaning of Section 4975(e)(7) of the Code ("RCN DC
Plan"). RCN agrees that all service credited under the C-TEC DC Plan as of
such adoption or designation with respect to the RCN Employee Group shall be
credited under the RCN DC Plan for all plan purposes, including eligibility
and vesting.
(iv) Within 30 days after the adoption or designation of the
RCN DC Plan by RCN or as soon as practicable thereafter, C-TEC shall cause an
amount, in cash or in kind as C-TEC and RCN shall agree, equivalent to the
account balances of all members of the RCN Employee Group under the C-TEC DC
Plan as of the date of transfer to be transferred from the trust maintained
under the C-TEC DC Plan to the trust maintained under the RCN DC Plan. Such
transfer shall include the number of shares of any RCN Common Stock, C-TEC
Common Stock and Cable Michigan Common Stock allocable or attributable to the
account balances of all members of the RCN Employee Group. Such transfer of
assets shall be made only after RCN has furnished to C-TEC, and C-TEC has
furnished to RCN, either (A) a copy of an IRS determination letter finding the
RCN DC Plan or the C-TEC DC Plan, as the case may be, to be a qualified plan
meeting the requirements of Sections 401(a) and 401(k) of the Code or (B) an
opinion of counsel or written representation from RCN or C-TEC, as the case
may be, (with appropriate indemnities), in either case, to the effect that the
RCN DC Plan or the C-TEC DC Plan, as the case may be, has been established in
accordance with the Code and ERISA, and an agreement that RCN or C-TEC, as the
case may be, will request a determination letter from the IRS and make any and
all changes to the RCN DC Plan or the C-TEC DC Plan, as the case may be,
necessary to receive a favorable determination letter. RCN and C-TEC shall
cooperate with each other during the period beginning on the date hereof and
ending on the date the assets are transferred to the trust maintained under
the RCN DC Plan to ensure the ongoing operation and administration of the RCN
DC Plan and the C-TEC DC Plan with respect to the RCN Employee Group.
(v) Notwithstanding anything herein to the contrary, the
parties hereto agree that, during the one-year period following the
Distribution each such party shall endeavor to cause each Employee Benefit
Plan sponsored by such party that holds shares of C-TEC Common Stock, RCN
Common Stock or Cable Michigan Common Stock to enter into a customary form of
lock-up agreement in connection with any underwritten public offering of any
of such shares.
(b) C-TEC shall retain all assets and liabilities under the C-TEC
DC Plan except as otherwise provided in Section 3.01(a) ("Retained DC Assets
and Liabilities").
Section 3.2. C-TEC DB Plan and the CTERP. RCN shall retain
all assets and liabilities under the C-TEC Corporation Employees'
Retirement Plan (the "C-TEC DB Plan") and C-TEC shall retain all assets and
liabilities under the Commonwealth Telephone Employees' Retirement Plan
(the "CTERP"); provided, however, that at any time prior to or following
the Distribution, RCN and Cable Michigan shall agree to an allocation of
assets and/or liabilities under the C-TEC DB Plan as may be necessary to
avoid imposition of any excise tax under Section 4980(d)(1) of the Code.
Section 3.3. C-TEC Equity-Based Plans. (a) Stock options
outstanding under the C-TEC Equity-Based Plans will be adjusted so that
following the Distribution each holder thereof will hold options to purchase
shares of C-TEC Common Stock, RCN Common Stock and Cable Michigan Common
Stock, respectively. The number of shares subject to, and the exercise price
of, such options shall be adjusted to take into account the Distribution and
to ensure that the aggregate intrinsic value of the adjusted RCN, Cable
Michigan and C-TEC options after the record date in respect of the
Distribution is equal to, and not greater or less than, the aggregate intrinsic
value of the related C-TEC option prior to the record date in respect of the
Distribution.
(b) Each holder of Share Units and Restricted Stock (each as used
in the C-TEC Corporation Executive Stock Purchase Plan ("ESPP")) held by
Persons who are participants in the ESPP immediately prior to the Distribution
Date will be adjusted in an equitable manner in connection with the
Distribution.
(c) In partial consideration for all Services provided or to be
provided (including by any member of the RCN Group to any member of the C-TEC
Group or Cable Michigan Group or by any member of the C-TEC Group to
any member of the RCN Group or the Cable Michigan Group) and other
consideration provided pursuant to this Agreement (including the transfers
of assets and assumptions of liabilities as provided herein), RCN, C-TEC
and Cable Michigan shall use their best efforts to accomplish the foregoing
including, but not limited to, making such grants of options and issuing
such shares of C-TEC Common Stock, RCN Common Stock and Cable Michigan
Common Stock as may be required hereunder.
Section 3.4. Health and Welfare Plans. (a) C-TEC shall
assume and/or retain all assets and liabilities with respect to the C-TEC
Employee Group under the C-TEC health and welfare benefit plans listed on
Exhibit 4 hereto ("C-TEC H&W Liabilities").
(b) Cable Michigan shall assume and/or retain all assets and
liabilities with respect to the Cable Michigan Employee Group under the Cable
Michigan health and welfare benefit plans listed on Exhibit 4 hereto ("Cable
Michigan H&W Liabilities").
(c) RCN shall assume and/or retain all assets and liabilities
with respect to the RCN Employee Group under the RCN health and welfare
benefit plans listed on Exhibit 4 hereto ("RCN H&W Liabilities").
Section 3.5. Assumption of Liabilities Generally. (a) Except
as otherwise provided in, and subject to the terms and conditions of, this
Agreement, effective as of the Distribution Date Cable Michigan shall assume
and agree to pay when due, honor and discharge, the following ("Cable Michigan
Assumed Liabilities"):
(i) all obligations and liabilities arising under any
employment, separation or retirement agreement or arrangement to the extent
applicable to any member of the Cable Michigan Employee Group which has been
established or entered into by any of the Companies, whether or not listed on
any Exhibit attached hereto;
(ii) all obligations and liabilities arising under the Cable
Michigan DC Plan and the C-TEC Cable Systems of MI, Inc. Bargaining Unit
401(k) Plan;
(iii) all Cable Michigan H&W Liabilities;
(iv) all obligations and liabilities to any member of the
Cable Michigan Employee Group in respect of the continuation of coverage rules
under Sections 601 through 608 of ERISA and Section 4980B of the Code,
including all liabilities and obligations relating to qualifying events that
have occurred on or prior to the Distribution Date;
(v) all obligations and liabilities arising under any
federal, state, local or foreign law, order or regulation (including, without
limitation, ERISA and the Code) to the extent they relate to participation by
any member of the Cable Michigan Employee Group in any Employee Benefit Plan,
whether relating to events occurring on or prior to the Distribution Date or
arising by reason of the transactions contemplated by this Agreement or
otherwise; and
(vi) all statutory obligations and liabilities to any member
of the Cable Michigan Employee Group, which arise, directly or indirectly, by
reason of the transactions contemplated by this Agreement.
(b) Except as otherwise provided in, and subject to the terms and
conditions of, this Agreement, effective as of the Distribution Date RCN shall
assume and agree to pay when due, honor and discharge, the following ("RCN
Assumed Liabilities"):
(i) all obligations and liabilities arising under any
employment, separation or retirement agreement or arrangement to the extent
applicable to any member of the RCN Employee Group which has been established
or entered into by any of the Companies, whether or not listed on any Exhibit
attached hereto;
(ii) all obligations and liabilities arising under the RCN DC
Plan and the C-TEC DB Plan;
(iii) all obligations and liabilities to any member of the RCN
Employee Group in respect of the continuation of coverage rules under Sections
601 through 608 of ERISA and Section 4980B of the Code, including all
liabilities and obligations relating to qualifying events that have occurred
on or prior to the Distribution;
(iv) all obligations and liabilities arising under any
federal, state, local or foreign law, order or regulation (including, without
limitation, ERISA and the Code) to the extent they relate to participation by
any member of the RCN Employee Group in any Employee Benefit Plan, whether
relating to events occurring on or prior to the Distribution or arising by
reason of the transactions contemplated by this Agreement or otherwise; and
(v) all statutory obligations and liabilities to any member
of the RCN Employee Group which arises, directly or indirectly, by reason of
the transactions contemplated by this Agreement.
(c) Except as otherwise provided in, and subject to the terms and
conditions of, this Agreement, effective as of the Distribution Date C-TEC
shall retain and agree to pay when due, honor and discharge, the following
("C-TEC Retained Liabilities"):
(i) all obligations and liabilities arising under any
employment, separation or retirement agreement or arrangement to the extent
applicable to any member of the C-TEC Employee Group which has been
established or entered into by any of the Companies, whether or not listed on
any Exhibit attached hereto;
(ii) obligations and liabilities arising under the Retained DC
Assets and Liabilities and the CTERP;
(iii) all obligations and liabilities arising under any other
employee benefit plan or arrangement maintained at any time by any of the
Companies or any of their Subsidiaries to the extent applicable to any member
of the C-TEC Employee Group;
(iv) all obligations and liabilities to any member of the
C-TEC Employee Group in respect of the continuation of coverage rules under
Sections 601 through 608 of ERISA and Section 4980B of the Code, including all
liabilities and obligations relating to qualifying events that have occurred
on or prior to the Distribution Date;
(v) all obligations and liabilities arising under any
federal, state, local or foreign law, order or regulation (including, without
limitation, ERISA and the Code) to the extent they relate to participation by
any member of the C-TEC Employee Group in any Employee Benefit Plan, whether
relating to events occurring on or prior to the Distribution Date or arising
by reason of the transactions contemplated by this Agreement or otherwise; and
(vi) all statutory obligations and liabilities to any member
of the C-TEC Employee Group, which arise, directly or indirectly, by reason of
the transactions contemplated by this Agreement.
Section 3.6. Further Assurances. (a) On and after the date
hereof, C-TEC will, at the reasonable request of Cable Michigan, execute,
acknowledge and deliver all such endorsements, assurances, consents,
assignments, transfers, conveyances, powers of attorney and other instruments
and documents, and take such other actions necessary (i) to assign, transfer,
convey and deliver to Cable Michigan, acting in its fiduciary capacity, all the
assets to be transferred to Cable Michigan pursuant to Article III hereof and
(ii) to assist Cable Michigan in obtaining the consent and approval of all
governmental bodies and other Persons required to be obtained by Cable
Michigan to effect the transfer thereof and the assumption of the Cable
Michigan Assumed Liabilities by Cable Michigan or otherwise appropriate to
carry out the transactions contemplated hereby.
(b) On and after the date hereof, C-TEC will, at the reasonable
request of RCN, execute, acknowledge and deliver all such endorsements,
assurances, consents, assignments, transfers, conveyances, powers of attorney
and other instruments and documents, and take such other actions necessary (i)
to assign, transfer, convey and deliver to RCN, acting in its fiduciary
capacity, all the assets to be transferred to RCN pursuant to Article III
hereof, and (ii) to assist RCN in obtaining the consent and approval of all
governmental bodies and other Persons required to be obtained by RCN to effect
the transfer thereof and the assumption of the RCN Assumed Liabilities by RCN
or otherwise appropriate to carry out the transactions contemplated hereby.
(c) On and after the date hereof, each of Cable Michigan and RCN
will, at the reasonable request of C-TEC, execute, acknowledge and deliver all
such assumptions, endorsements and other instruments and documents, and take
such other actions necessary (i) to assume, pay, honor and discharge the Cable
Michigan Assumed Liabilities and RCN Assumed Liabilities, respectively, and
(ii) to assist C-TEC in obtaining the consent and approval of all governmental
bodies and other Persons required to be obtained by C-TEC to effect the
transfer of the assets to be transferred to Cable Michigan or RCN pursuant to
Article III hereof, respectively, and the assumption of the Cable Michigan
Assumed Liabilities and RCN Assumed Liabilities by Cable Michigan and RCN,
respectively, or otherwise appropriate to carry out the transactions
contemplated hereby.
ARTICLE 4
Representations and Warranties
Section 4.1. Certain C-TEC Representations. C-TEC hereby
represents and warrants to Cable Michigan and RCN on the date hereof, that the
C-TEC DC Plan has been established in accordance with the Code and ERISA, is
qualified under Section 401(a) of the Code, has been so qualified during the
period from its adoption to the date hereof and will be so qualified as of the
date of the transfers referred to in Section 3.01 and that the trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code.
ARTICLE 5
Indemnification
Section 5.1. Indemnification by Cable Michigan. Cable Michigan
agrees to indemnify and hold harmless each RCN Indemnitee and each C-TEC
Indemnitee from any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding)
(collectively, "Loss") incurred or suffered by each such RCN Indemnitee or
C-TEC Indemnitee, as the case may be, arising out of or related to the Cable
Michigan Assumed Liabilities.
Section 5.2. Indemnification by RCN. RCN agrees to indemnify
and hold harmless each Cable Michigan Indemnitee and each C-TEC Indemnitee
from any and all Losses, incurred or suffered by each such Cable Michigan
Indemnitee or C-TEC Indemnitee, as the case may be, arising out of or related
to the RCN Assumed Liabilities.
Section 5.3. Indemnification by C-TEC. C-TEC agrees to
indemnify and hold harmless each RCN Indemnitee and each Cable Michigan
Indemnitee from any and all Losses, incurred or suffered by each such Cable
Michigan Indemnitee or C-TEC Indemnitee, as the case may be, arising out of or
related to the C-TEC Retained Liabilities.
EXHIBIT 1
TO SCHEDULE 5.01
RCN RETIREES
None
EXHIBIT 2
TO SCHEDULE 5.01
C-TEC EQUITY-BASED PLANS
C-TEC Corporation 1994 Stock Option Plan, as amended
C-TEC Corporation 1996 Equity Incentive Plan
C-TEC Corporation Executive Stock Purchase Plan
EXHIBIT 3
TO SCHEDULE 5.01
CABLE MICHIGAN RETIREES
None
EXHIBIT 4
TO SCHEDULE 5.01
HEALTH AND WELFARE BENEFIT PLANS
C-TEC Health and Welfare Benefit Plans*
Health Care Plan
CFlex
Basic Life Insurance
Basic Accidental Death and Dismemberment
Long-Term Disability
Supplemental Life Insurance
Supplemental Accidental Death and Dismemberment
Supplemental Death Benefit
Employee Assistance Program
RCN Health and Welfare Benefit Plans*
Health Care Plan
CFlex
Basic Life Insurance
Basic Accidental Death and Dismemberment
Long-Term Disability
Supplemental Life Insurance
Supplemental Accidental Death and Dismemberment
Supplemental Death Benefit
Employee Assistance Program
- ---------------
* Benefits are made available to members of any collective bargaining unit
only to the extent provided for in an applicable collective bargaining
agreement.
Cable Michigan Health and Welfare Benefit Plans*
Health Care Plan
CFlex
Basic Life Insurance
Basic Accidental Death and Dismemberment
Long-Term Disability
Supplemental Life Insurance
Supplemental Accidental Death and Dismemberment
Supplemental Death Benefit
Employee Assistance Program
- ---------------
* Benefits are made available to members of any collective bargaining unit
only to the extent provided for in an applicable collective bargaining
agreement.
EXHIBIT 5
TO SCHEDULE 5.01
SHARED EMPLOYEE-RELATED LIABILITIES
Any or all liabilities arising out of or relating to the
actions or inaction of the employees and former employees of C-TEC Services,
occurring prior to the Distribution, but excluding any assets or liabilities
allocated pursuant to Article 3 of this Schedule 5.01.
SCHEDULE 6.01(i)
SERVICES PROVIDED BY RCN TO C-TEC GROUP
RCN will provide, or cause to be provided, the following
management and administrative services to the C-TEC Group:
1. Accounting
2. Payroll
3. Management supervision
4. Cash management
5. Human resources services and benefit plan administration
6. Insurance administration
7. Legal
8. Tax
9. Internal audit
10. Investor and public relations
11. Other miscellaneous administrative services
The Fee per year for these services will be 3.5% of the first
$175 million of revenue of the C-TEC Group and 1.75% of any additional revenue.
SCHEDULE 6.01(ii)
SERVICES PROVIDED BY RCN TO CABLE MICHIGAN GROUP
RCN will provide, or cause to be provided, the following
management and administrative services to the Cable Michigan Group:
1. Customer service
2. Marketing
3. Accounting
4. Payroll
5. Management supervision
6 Cash management
7. Human resources services and benefit plan administration
8. Insurance administration
9. Legal
10. Tax
11. Internal audit
12. Programming administration
13. Billing
14. Monthly cable guide
15. Investor and public relations
16. Provision of third party programming
17. Other miscellaneous administrative services
The total Fee per year for services listed in items 2-12, 15
and 17 will be 4.0% of the revenues of the Cable Michigan Group plus a direct
allocation of certain consolidated cable administrative functions consistent
with past practice prior to the date hereof.
The Fee for the customer service listed in item 1 and the
billing service listed in item 13 will be a pro rata share (based on the
relative number of subscribers) of the fees and expenses incurred by the RCN
Group to provide such customer and billing services for all relevant members
of the RCN Group and all relevant members of the Cable Michigan Group.
The Fee for the provision of monthly cable guides set forth in
item 14 and the third party programming set forth in item 16 shall be an
amount equal to the third party costs incurred by the RCN Group to provide
such guides and programming to the Cable Michigan Group.
The aggregate amount paid by the Cable Michigan Group to the RCN
Group and the C-TEC Group for the provision of administration and management
services of substantially the same nature, scope and timing as those provided
prior to the Distribution Date ("Historical Services") shall not exceed the
greater of (i) 6% of the consolidated gross revenues of the Cable Michigan
Group or (ii) such higher amount as is permitted under the applicable credit
facilities of the Cable Michigan Group. If, as a result of the effect of the
preceding sentence, the amount provided by Cable Michigan Group for Historical
Services is reduced, the amount of such reduction shall be borne by RCN
Companies and the C-TEC Group pro rata based on the relative amounts such
Groups would have charged the Michigan Group but for the effect of the
preceding sentence.
SCHEDULE 6.01(iii)
SERVICES PROVIDED BY C-TEC TO RCN GROUP
C-TEC will provide, or cause to be provided, the following
administrative service to the RCN Group:
1. Financial data processing applications
2. Lockbox services
3. Storage facilities
4. LAN and WAN support services
5. Building maintenance
6. Other miscellaneous administrative services
The fees for such services will be an allocated portion (based
on relative usage) of the cost incurred by the C-TEC Group to provide such
services to all three Groups).
SCHEDULE 6.01(iv)
SERVICES PROVIDED BY C-TEC TO CABLE MICHIGAN GROUP
C-TEC will provide, or cause to be provided, the following
administrative services to the Cable Michigan Group:
1. Financial data processing applications
2. Lockbox services
3. Storage facilities
4. LAN and WAN support services
5. Other miscellaneous administrative services
The fees for such services will be an allocated portion (based
on relative usage) of the cost incurred by the C-TEC Group to provide such
services to all three Groups).
The aggregate amount paid by the Cable Michigan Group to the RCN
Group and the C-TEC Group for the provision of Historical Services shall not
exceed the greater of (i) 6% of the consolidated gross revenues of the Cable
Michigan Group or (ii) such higher amount as is permitted under the applicable
credit facilities of the Cable Michigan Group. If, as a result of the effect
of the preceding sentence, the amount provided by Cable Michigan Group for
Historical Services is reduced, the amount of such reduction shall be borne by
RCN Companies and the C-TEC Group pro rata basis on the relative amounts such
Groups would have charged the Michigan Group but for the effect of the
preceding sentence.
SCHEDULE 9.08
SURVIVING AGREEMENTS
1. Distribution Documents
2. Communications Equipment Lease Agreement dated August 1,
1997 by and between CLD and CTCo (Switch Lease).
3. Communications Equipment Lease Agreement dated August 1,
1997 by and between RLD and CTCo (Switch Lease).
4. Commercial Lease Agreement dated December 17, 1997 by and
between RLD and CTCo and Amendment dated May 24, 1994
(Clarks Summit Switch Space Lease).
5. Reseller Agreement for Internet Access Service dated July
31, 1996 by and between RCN Operating Services, Inc. and
CTCo (epix Services).
6. Lease Agreement dated March 1, 1994 by and between CLD and
CTCo (DS-3 Lease from Clarks Summit to Elizabethville).
7. Interim Carrier Services Agreement dated August 1, 1997 by and
between RLD and CLD.
8. Communications Equipment Lease Agreement dated March 1,
1996 by and between C-TEC Cable Systems Services, Inc.
and CTCo.
9. Communications Equipment Lease Agreement dated March 1,
1996 by and between C-TEC Cable Systems of Pennsylvania,
Inc. (now known as RCN Telcom Services of Pennsylvania,
Inc.) and CTCo.
10. Service Agreement dated October 9, 1996 by and between CCI
and C-TEC Services Inc. (Maintenance of Princeton, NJ
Office Phone System).
11. Service Agreement dated March 12, 1996 by and between CCI
and RCN Operating Services, Inc. (Switch Monitoring and
Traffic Capacity Services).
12. Service Agreement dated March 12, 1996 by and between CCI
and CLD (Switch Monitoring and Traffic Capacity Services).
Subsequently, on August 1, 1997, this Service Agreement was
assigned by CLD to RLD.
Exhibit 2
==============================================================================
$15,000,000
CREDIT AGREEMENT
dated as of June 30, 1997,
by and among
C-TEC CORPORATION
as Borrower,
the Lenders referred to herein,
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
==============================================================================
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS........................................-1-
SECTION 1.1 Definitions........................................-1-
SECTION 1.2 General............................................-9-
SECTION 1.3 Other Definitions and Provisions...................-9-
ARTICLE II TERM LOAN FACILITY................................-10-
SECTION 2.1 Term Loan.........................................-10-
SECTION 2.2 Procedure for Advance of Loan.....................-10-
SECTION 2.3 Repayment of Loan.................................-11-
SECTION 2.4 Optional Prepayments of Loan......................-11-
SECTION 2.5 Notes.............................................-11-
ARTICLE III GENERAL LOAN PROVISIONS...........................-12-
SECTION 3.1 Interest..........................................-12-
SECTION 3.2 Notice and Manner of Conversion or Continuation
of Loans..........................................-14-
SECTION 3.3 Commitment Fee....................................-14-
SECTION 3.4 Manner of Payment.................................-15-
SECTION 3.5 Crediting of Payments and Proceeds................-15-
SECTION 3.6 Adjustments.......................................-15-
SECTION 3.7 Nature of Obligations of Lenders Regarding Loans;
Assumption by the Administrative Agent............-16-
SECTION 3.8 Changed Circumstances.............................-16-
SECTION 3.9 Indemnity.........................................-19-
SECTION 3.10 Capital Requirements..............................-19-
SECTION 3.11 Taxes.............................................-19-
SECTION 3.12 Change in Lending Office; Replacement Lenders.....-22-
ARTICLE IV CLOSING; CONDITIONS OF CLOSING AND BORROWING......-22-
SECTION 4.1 Closing...........................................-22-
SECTION 4.2 Conditions to Closing and Initial Loans...........-22-
SECTION 4.3 Conditions to All Loans...........................-25-
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BORROWER....-26-
SECTION 5.1 Representations and Warranties....................-26-
SECTION 5.2 Survival of Representations and Warranties, Etc...-26-
ARTICLE VI FINANCIAL INFORMATION AND NOTICES.................-26-
ARTICLE VII AFFIRMATIVE COVENANTS.............................-27-
ARTICLE VIII FINANCIAL COVENANTS...............................-27-
ARTICLE IX NEGATIVE COVENANTS................................-27-
ARTICLE X DEFAULT AND REMEDIES..............................-28-
SECTION 10.1 Events of Default.................................-28-
SECTION 10.2 Remedies..........................................-30-
SECTION 10.3 Rights and Remedies Cumulative; Non-Waiver; etc...-30-
ARTICLE XI THE ADMINISTRATIVE AGENT..........................-31-
SECTION 11.1 Appointment.......................................-31-
SECTION 11.2 Delegation of Duties..............................-31-
SECTION 11.3 Exculpatory Provisions............................-31-
SECTION 11.4 Reliance by the Administrative Agent..............-32-
SECTION 11.5 Notice of Default.................................-32-
SECTION 11.6 Non-Reliance on the Administrative Agent and Other
Lenders...........................................-32-
SECTION 11.7 Indemnification...................................-33-
SECTION 11.8 The Administrative Agent in Its Individual
Capacity..........................................-34-
SECTION 11.9 Resignation of the Administrative Agent; Successor
Administrative Agent..............................-34-
ARTICLE XII MISCELLANEOUS.....................................-34-
SECTION 12.1 Notices...........................................-34-
SECTION 12.2 Expenses; Indemnity...............................-35-
SECTION 12.3 Set-off...........................................-36-
SECTION 12.4 Governing Law.....................................-36-
SECTION 12.5 Consent to Jurisdiction...........................-36-
SECTION 12.6 Binding Arbitration; Waiver of Jury Trial.........-37-
SECTION 12.7 Reversal of Payments..............................-38-
SECTION 12.8 Injunctive Relief.................................-38-
SECTION 12.9 Accounting Matters................................-38-
SECTION 12.10 Successors and Assigns; Participations............-38-
SECTION 12.11 Amendments, Waivers and Consents..................-42-
SECTION 12.12 Performance of Duties.............................-42-
SECTION 12.13 All Powers Coupled with Interest..................-42-
SECTION 12.14 Survival of Indemnities...........................-42-
SECTION 12.15 Titles and Captions...............................-42-
SECTION 12.16 Severability of Provisions........................-42-
SECTION 12.17 Counterparts......................................-44-
SECTION 12.18 Term of Agreement.................................-42-
EXHIBITS
- --------
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Payment
Exhibit D - Form of Notice of Conversion/Continuation
Exhibit E - Form of Officer's Certificate
Exhibit F - Form of Assignment and Acceptance
Exhibit G - Form of Notice of Account Designation
Exhibit H - Form of Pledge Agreement
Exhibit I - Form of Assumption Agreement
SCHEDULES
Schedule 1.1(a) - Lenders and Commitments
Schedule 1.1(b) - Plan of Reorganization
CREDIT AGREEMENT, dated as of the 30 day of June, 1997, by and among
C-TEC CORPORATION ("C-TEC"), the Lenders who are or may become a party to this
Agreement, and FIRST UNION NATIONAL BANK, as Administrative Agent for the
Lenders.
STATEMENT OF PURPOSE
--------------------
C-TEC has requested, and the Lenders have agreed, to extend certain
credit facilities to the Borrower referred to below on the terms and
conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1 Definitions. The following terms when used in this
Agreement shall have the meanings assigned to them below:
"Administrative Agent" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant
to Section 11.9.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
12.1.
"Affiliate" means, with respect to any Person, any other Person (other
than a Subsidiary) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, such first Person or any of its Subsidiaries. The term "control" means
(a) the power to vote ten percent (10%) or more of the securities or other
equity interests of a Person having ordinary voting power, or (b) the
possession, directly or indirectly, of any other power to direct or cause the
direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit Agreement, as amended, restated or
otherwise modified from time to time.
"Applicable Law" means all applicable provisions of constitutions,
statutes, laws, rules, treaties, regulations and orders of all Governmental
Authorities and all orders and decrees of all courts and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in Section
3.1(c).
"Assignment and Acceptance" shall have the meaning assigned thereto in
Section 12.10.
"Assumption Agreement" means, with respect to any Person, any Assumption
Agreement executed in favor of the Administrative Agent for the ratable
benefit of the Administrative Agent and Lenders and substantially in the form
of Exhibit I, as amended, restated or otherwise modified.
"Assumption Date" means the date that CCSM has assumed all of the
Obligations under this Agreement pursuant to an Assumption Agreement in
accordance with Section 2.6.
"Base Rate" means, at any time, the higher of (a) the Prime Rate or (b)
the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
effect simultaneously with the corresponding change or changes in the Prime
Rate or the Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate based upon
the Base Rate as provided in Section 3.1(a).
"Borrower" means, prior to the Assumption Date, C-TEC in its capacity as
borrower hereunder, and on and after the Assumption Date, CCSM in its capacity
as borrower hereunder.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina and New York, New York, are open for
the conduct of their commercial banking business, and (b) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in Dollar
deposits in the London interbank market.
"Cable Systems Credit Facility" means the credit agreement dated as of
June 30, 1997, by and among C-TEC Cable Systems, Inc., ComVideo Systems, Inc.
and C-TEC Cable Systems of New York, Inc, as borrowers, First Union, as
administrative agent, and the lenders party thereto, as amended, restated or
otherwise modified.
"CCI" means Commonwealth Communications, Inc.
"CCSM" means Cable Michigan, Inc., and its successors.
"CCSM Credit Facility" means the credit agreement dated as of June 30,
1997, by and among CCSM, as borrower, First Union, as administrative agent,
and the lenders party thereto, as amended, restated or otherwise modified.
"C-TEC" means C-TEC Corporation, and its successors.
"C-TEC Credit Facility" means the credit agreement dated as of June 30,
1997, by and among C-TEC, as borrower, First Union, as administrative agent,
and the lenders party thereto, as amended, restated or otherwise modified.
"Closing Date" means the date of this Agreement or such later Business
Day upon which each condition described in Section 4.2 shall be satisfied or
waived in all respects in a manner acceptable to the Administrative Agent, in
its sole discretion.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"Combined" means, when used in reference to financial statements or
financial statement items of any Person prior to Assumption Date, such
statements or items on a combined basis in accordance with applicable
principles of combination under GAAP, and on and after the Assumption Date,
such statements or items on a consolidated basis in accordance with applicable
principles of consolidation under GAAP.
"Commitment" means (a) as to any Lender, the obligation of such Lender
to make the Loans to the account of the Borrower hereunder in an aggregate
principal amount not to exceed the amount set forth opposite such Lender's
name on Schedule 1.1(a), as such amounts may be reduced or modified at any
time or from time to time pursuant to the terms hereof and (b) as to all
Lenders, the aggregate commitment of all Lenders to make Loans. The
Commitment of all Lenders as of the Closing Date shall be Fifteen Million
Dollars ($15,000,000).
"Commitment Percentage" means, as to any Lender at any time, the ratio
of (a) the amount of the Commitment of such Lender to (b) the Commitment of
all of the Lenders.
"Commonwealth" means Commonwealth Telephone Company and its successors.
"Commonwealth Long Distance" means Commonwealth Long Distance Company
and its successors.
"Debt" means, with respect to any Person at any date and without
duplication, the sum of the following calculated in accordance with GAAP: (a)
all liabilities, obligations and indebtedness for borrowed money including but
not limited to obligations evidenced by bonds, debentures, notes or other
similar instruments of any such Person, (b) all obligations to pay the
deferred purchase price of property or services of any such Person, except
trade payables arising in the ordinary course of business not more than ninety
(90) days past due, (c) all obligations of any such Person as lessee under
Capital Leases, (d) all Debt of any other Person secured by a Lien on any
asset of any such Person, (e) all Guaranty Obligations of any such Person, (f)
all obligations, contingent or otherwise, of any such person relative to the
face amount of letters of credit, whether drawn or not drawn, and banker's
acceptances issued for the account of any such person and (g) all obligations
incurred by any such Person pursuant to Hedging Agreements.
"Default" means any of the events specified in Section 10.1 which with
the passage of time, the giving of notice or both, would constitute an Event
of Default.
"Designated Subsidiaries" means, prior to the Assumption Date,
Commonwealth, CCI and Commonwealth Long Distance, and any of their
Subsidiaries, and on and after the Assumption Date, all Subsidiaries (as such
term is defined in the CCSM Credit Facility) of the Borrower.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"Eligible Assignee" means, with respect to any assignment of the rights,
interest and obligations of a Lender hereunder, a Person that is at the time
of such assignment (a) a commercial bank organized under the laws of the
United States or any state thereof, having combined capital and surplus in
excess of $500,000,000, (b) a finance company, insurance company or other
financial institution which in the ordinary course of business extends credit
of the type extended hereunder and that has total assets in excess of
$1,000,000,000, (c) already a Lender hereunder (whether as an original party
to this Agreement or as the assignee of another Lender), (d) the successor
(whether by transfer of assets, merger or otherwise) to all or substantially
all of the commercial lending business of the assigning Lender, or (e) any
other Person that has been approved in writing as an Eligible Assignee by the
Borrower and the Administrative Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA Affiliate" means any Person who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Eurodollar Reserve Percentage" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve
requirement (including without limitation any basic, supplemental or emergency
reserves) in respect of Eurocurrency liabilities or any similar category of
liabilities for any Lender.
"Event of Default" means any of the events specified in Section 10.1,
provided that any requirement for passage of time, giving of notice, or both,
has been satisfied.
"FDIC" means the Federal Deposit Insurance Corporation, or any successor
thereto.
"Federal Funds Rate" means the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any
reason, such rate is not available, then "Federal Funds Rate" shall mean a
daily rate which is determined, in the opinion of the Administrative Agent, to
be the rate at which federal funds are being offered for sale in the national
federal funds market at 9:00 a.m. (Charlotte time). Rates for weekends or
holidays shall be the same as the rate for the most immediate preceding
Business Day.
"First Union" means First Union National Bank, a national banking
association, and its successors.
"Fiscal Year" means the fiscal year of the Borrower and its Designated
Subsidiaries ending on December 31.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a
consistent basis throughout the period indicated and consistent with prior
financial practice (except for changes in such practice with which the
Borrowers' independent certified public accountants have concurred).
"Interest Period" shall have the meaning assigned thereto in Section
3.1(b).
"Lender" means each Person executing this Agreement as a Lender set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to Section 12.10.
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Leverage Ratio" means as of any date of determination prior to the
Assumption Date, the ratio as of such date determined in accordance with
Section 8.1 of the C-TEC Credit Facility as incorporated by reference herein,
and on and after the Assumption Date, the ratio as of such date determined in
accordance with Section 9.1 of the CCSM Credit Facility as incorporated herein
by reference.
"LIBOR" means the rate for deposits in Dollars for a period equal to the
Interest Period selected which appears on the Telerate Page 3750 at
approximately 11:00 a.m. London time, two (2) Business Days prior to the
commencement of the applicable Interest Period. If, for any reason, such rate
is not available, then "LIBOR" shall mean the rate per annum at which, as
determined by the Administrative Agent, Dollars in the amount of $5,000,000
are being offered to leading banks at approximately 11:00 a.m. London time,
two (2) Business Days prior to the commencement of the applicable Interest
Period for settlement in immediately available funds by leading banks in the
London interbank market for a period equal to the Interest Period selected.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by the Administrative Agent pursuant
to the following formula:
LIBOR Rate = LIBOR
-----
1.00-Eurodollar Reserve Percentage
"LIBOR Rate Loan" means any Loan bearing interest at a rate based upon
the LIBOR Rate as provided in Section 3.1(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan" means any loan made to the Borrower pursuant to Section 2.1 and
all such Loans collectively as the context requires.
"Loan Documents" means, collectively, this Agreement, the Notes, any
Hedging Agreement executed by any Lender and each other document referenced in
Article IV or otherwise required to be delivered by or on behalf of the
Borrower or its Designated Subsidiaries pursuant to this Agreement, all as may
be amended, restated or otherwise modified.
"Material Adverse Effect" means a material adverse effect on the
business, operations or financial condition of the Borrower and its Designated
Subsidiaries, taken as a whole, or the ability of the Borrower to perform its
obligations under the Loan Documents to which it is a party.
"Mercom" means Mercom, Inc. and its successors.
"Mercom Pledge Agreement" means the pledge agreement with respect to the
capital stock of Mercom held by the Borrower executed by the Borrower in favor
of the Administrative Agent for the ratable benefit of itself and the other
Lenders, substantially in the form of Exhibit H, as amended, restated or
otherwise modified.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six
years.
"Net Income" means, with respect to any Person for any period, the net
income (or loss) of such Person for such period determined in accordance with
GAAP; provided, that there shall be excluded from net income the income of any
Person (other than a Wholly-Owned Subsidiary) in which such Person has an
ownership interest, except to the extent received in cash by such Person.
"Notes" means the term loan notes made by the Borrower payable to the
order of each Lender, substantially in the form of Exhibit A, evidencing the
Debt incurred by the Borrower pursuant to the Term Loan Facility, and any
amendments and modifications thereto, any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in
part.
"Notice of Account Designation" shall have the meaning assigned thereto
in Section 2.2(b).
"Notice of Borrowing" shall have the meaning assigned thereto in Section
2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 3.2.
"Notice of Payment" shall have the meaning assigned thereto in Section
2.4.
"Obligations" means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing
after the filing of any bankruptcy or similar petition) the Loans and (b) all
other fees and commissions (including attorney's fees), charges, indebtedness,
loans, liabilities, financial accommodations, obligations, covenants and
duties owing by the Borrower to the Lenders or the Administrative Agent, of
every kind, nature and description, direct or indirect, absolute or
contingent, due or to become due, contractual or tortious, liquidated or
unliquidated, and whether or not evidenced by any note, and whether or not for
the payment of money under or in respect of this Agreement, any Note, any
Hedging Agreement with a Lender or Affiliate thereof or any of the other Loan
Documents.
"Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 4.2.
"Other Taxes" shall have the meaning assigned thereto in Section 3.11(c).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of the
Borrower or any ERISA Affiliates or (b) has at any time within the preceding
six years been maintained for the employees of the Borrower or any of their
current or former ERISA Affiliates.
"Person" means an individual, corporation, partnership, limited
liability company, limited liability partnership, association, trust, business
trust, joint venture, joint stock company, pool, syndicate, sole
proprietorship, unincorporated organization, Governmental Authority or any
other form of entity or group thereof.
"Prime Rate" means, at any time, the rate of interest per annum publicly
announced from time to time by First Union as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day
such change in the Prime Rate occurs. The parties hereto acknowledge that the
rate announced publicly by First Union as its Prime Rate is an index or base
rate and shall not necessarily be its lowest or best rate charged to its
customers or other banks.
"Register" shall have the meaning assigned thereto in Section 12.10(d).
"Reorganization" means the reorganization described in Schedule 1.1(b),
as such Schedule may be supplemented or otherwise amended with the prior
written approval of the Required Lenders.
"Required Lenders" means, at any date, any combination of holders of at
least fifty-one percent (51%) of the aggregate unpaid principal amount of the
Notes, or if no amounts are outstanding under the Notes, any combination of
Lenders whose Commitment Percentages aggregate at least fifty-one percent
(51%).
"Solvent" means, as to the Borrower and its Designated Subsidiaries on a
particular date, that such Persons, taken as a whole and on a Combined basis
(a) have capital sufficient to carry on their business and transactions and
all business and transactions in which they are about to engage and are able
to pay their debts as they mature, (b) own property having a value, both at
fair valuation and at present fair saleable value, greater than the amount
required to pay their probable liabilities (including contingencies), and (c)
do not believe that they will incur debts or liabilities beyond their ability
to pay such debts or liabilities as they mature.
"Subsidiary" means as to any Person, any corporation, partnership or
other entity of which more than fifty percent (50%) of the outstanding capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity is at the time, directly or indirectly, owned by or
the management is otherwise controlled by such Person (irrespective of
whether, at the time, capital stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening
of any contingency).
"Taxes" shall have the meaning assigned thereto in Section 3.11(a).
"Termination Date" means June 30, 1999.
"Termination Event" means: (a) a "Reportable Event" described in
Section 4043 of ERISA (as to which the thirty (30) day notice requirement has
not been waived by the PBGC), or (b) the withdrawal of the Borrower or any
ERISA Affiliate from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the
filing of a notice of intent to terminate a Pension Plan under Section 4041(c)
of ERISA, or (d) the institution of proceedings under Section 4042 of ERISA to
terminate, or the appointment of a trustee with respect to, any Pension Plan
by the PBGC, or (e) any other event or condition which would reasonably
constitute grounds under Section 4042(a) of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan, or (f) the
partial or complete withdrawal of the Borrower or any ERISA Affiliate from a
Multiemployer Plan, or (g) the imposition of a Lien pursuant to Section 412 of
the Code or Section 302 of ERISA, or (h) any event or condition which results
in the reorganization or insolvency of a Multiemployer Plan under Sections
4241 or 4245 of ERISA, or (i) any event or condition which results in the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by PBGC of proceedings to terminate a Multiemployer Plan under
Section 4042 of ERISA.
"Term Loan Facility" means the term loan facility established pursuant
to Article II hereof.
"United States" means the United States of America.
"Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all of
the shares of capital stock or other ownership interests of which are,
directly or indirectly, owned or controlled by any Person and/or one or more
of its Wholly-Owned Subsidiaries.
SECTION 1.2 General. Unless otherwise specified, a reference in
this Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either
the singular or plural shall include the singular and plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter. Any reference herein to "Charlotte
time" shall refer to the applicable time of day in Charlotte, North Carolina.
Unless expressly specified otherwise, any references to the "transactions
contemplated by this Agreement" or the "transactions contemplated hereby" (or
similar references) shall not be a reference to the Reorganization. Unless
expressly specified otherwise, capitalized terms defined in Schedule 1.1(b)
are used herein with the meanings assigned to such terms in such Schedule.
SECTION 1.3 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings
when used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Incorporation by Reference. The definitions of all capitalized
terms used in the provisions of the C-TEC Credit Facility and the CCSM Credit
Facility which provisions are incorporated by reference herein, and which
definitions are not otherwise set forth herein, are also incorporated by
reference herein.
(c) Miscellaneous. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
TERM LOAN FACILITY
SECTION 2.1 Term Loan. Subject to the terms and conditions of
this Agreement, each Lender severally agrees to make a Loan to the Borrower on
or within ninety (90) days after the Closing Date. The Loan shall be funded
by the Lenders in a single advance during such ninety (90) day period and
shall be funded by each Lender in a principal amount equal to such Lender's
Commitment Percentage of the aggregate principal amount of the advance
requested by the Borrower. The aggregate principal amount of the Loan
requested by the Borrower during such ninety (90) day period shall not exceed
the total Commitment.
SECTION 2.2 Procedure for Advance of Loan.
(a) Requests for Borrowing. In connection with the advance of the
Loan pursuant to Section 2.1, the Borrower shall give the Administrative Agent
irrevocable prior written notice in the form attached hereto as Exhibit B (a
"Notice of Borrowing") not later than 11:00 a.m. (Charlotte time) (i) on the
same Business Day as a Base Rate Loan and (ii) at least three (3) Business
Days before a LIBOR Rate Loan, of its intention to borrow, specifying (A) the
date of such borrowing, which shall be a Business Day, (B) the amount of such
borrowing, (C) whether the Loan is to be a LIBOR Rate Loan or Base Rate Loan
or a combination thereof (provided that LIBOR Rate Loans shall not be
available until three (3) Business Days after the Closing Date) and the
amounts allocable to each and (D) in the case of a LIBOR Rate Loan, the
duration of the initial Interest Period applicable thereto. Notices received
after 11:00 a.m. (Charlotte time) shall be deemed received on the next
Business Day. The Administrative Agent shall promptly notify the Lenders of
receipt of the Notice of Borrowing.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Charlotte time)
on the proposed borrowing date, each Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in funds immediately available to the Administrative
Agent, such Lender's Commitment Percentage of the amount requested pursuant to
Section 2.2(a). The Borrower hereby irrevocably authorizes the Administrative
Agent to disburse the proceeds of the borrowing requested pursuant to Section
2.2(a) in immediately available funds by crediting or wiring such proceeds to
the deposit account of the Borrower identified in the most recent Notice of
Account Designation delivered by the Borrower to the Administrative Agent or
as may be otherwise agreed upon by the Borrower and the Administrative Agent
from time to time. The Administrative Agent shall not be obligated to
disburse the portion of the proceeds of the Loans requested pursuant to
Section 2.2(a) to the extent that any Lender has not made available to the
Administrative Agent its Commitment Percentage of such Loan.
SECTION 2.3 Repayment of Loan.
(a) Repayment on Termination Date. The Borrower shall repay the
outstanding principal amount of all Loans in full, together with all accrued
but unpaid interest thereon, on the Termination Date.
(b) Mandatory Repayment of Excess Loans. If at any time the
outstanding principal amount of all Loans exceeds the Commitment, the Borrower
shall repay immediately upon notice from the Administrative Agent, by payment
to the Administrative Agent for the account of the Lenders, the Loans in an
amount equal to such excess.
(c) Other Mandatory Prepayments. If (i) prior to the Assumption Date,
the Obligations under the C-TEC Credit Facility have been paid in full and the
Commitments thereunder terminated or (ii) on and after the Assumption Date,
the Obligations under the CCSM Credit Facility have been paid in full and the
Commitments thereunder terminated, the Borrower shall within three Business
Days repay the outstanding principal amount of the Loans in full, together
with all accrued but unpaid interest thereon and any other outstanding
Obligations.
SECTION 2.4 Optional Prepayments of Loan. The Borrower shall have
the right at any time and from time to time, upon at least three (3) Business
Days prior written notice in the form attached hereto as Exhibit C (a "Notice
of Payment") to the Administrative Agent, to prepay the Loan in whole or in
part without premium or penalty except as provided below. Each optional
prepayment of the Loan hereunder shall be in an aggregate principal amount of
at least $2,000,000 or any whole multiple of $500,000 in excess thereof, shall
be accompanied by any payment required under Section 3.9.
SECTION 2.5 Notes. Each Lender's Loan and the obligation of the
Borrower to repay such Loan shall be evidenced by a Note payable to the order
of such Lender. Each Note shall bear interest on the unpaid principal amount
thereof at the applicable interest rate per annum specified in Section 3.1.
SECTION 2.6 Assumption Agreement. C-TEC may not make the Mercom
Contribution unless C-TEC causes CCSM to execute an Assumption Agreement, a
supplement to the Mercom Pledge Agreement and any other documents reasonably
requested by the Administrative Agent such that CCSM becomes the Borrower
under this Agreement and assumes all outstanding Obligations hereunder and the
Collateral referred to in the Mercom Pledge Agreement continues as security
therefor. Each Lender and the Administrative Agent agrees that upon CSSM
becoming the Borrower under this Agreement and assuming all outstanding
Obligations, as contemplated by this Section 2.6, C-TEC shall be
unconditionally and absolutely released and discharged from all liability and
responsibility with respect to any Obligations, whether arising and existing
before or after the Assumption Date.
ARTICLE III
GENERAL LOAN PROVISIONS
SECTION 3.1 Interest.
(a) Interest Rate Options. Subject to the provisions of this Section
3.1, at the election of the Borrower, the aggregate principal balance of the
Loans or any portion thereof shall bear interest at the Base Rate or the LIBOR
Rate plus, in each case, the Applicable Margin as set forth below (provided
that the LIBOR Rate shall not be available until three (3) Business Days after
the Closing Date). The Borrower shall select the rate of interest and
Interest Period, if any, applicable to any Loan at the time a Notice of
Borrowing is given pursuant to Section 2.2 or at the time a Notice of
Conversion/Continuation is given pursuant to Section 3.2. Each Loan or
portion thereof bearing interest based on the Base Rate shall be a "Base Rate
Loan" and each Loan or portion thereof bearing interest based on the LIBOR
Rate shall be a "LIBOR Rate Loan". Any Loan or any portion thereof as to
which the Borrower has not duly specified an interest rate as provided herein
shall be deemed a Base Rate Loan.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 3.1(a), shall
elect an interest period (each, an "Interest Period") to be applicable to such
Loan, which Interest Period shall be a period of one (1), two (2), three (3),
or six (6) months with respect to each LIBOR Rate Loan; provided that:
(i) the Interest Period shall commence on the date of
advance of or conversion to any LIBOR Rate Loan and, in the case of
immediately successive Interest Periods, each successive Interest Period shall
commence on the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, that if any Interest Period with respect to
a LIBOR Rate Loan would otherwise expire on a day that is not a Business Day
but is a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate Loan
that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day of the
relevant calendar month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the Termination
Date and no interest period shall be selected by the Borrower which would
result in the repayment of any LIBOR Rate Loan pursuant to Section 2.3 prior
to the end of an Interest Period; and
(v) there shall be no more than ten (10) Interest Periods
outstanding at any time.
(c) Applicable Margin. The Applicable Margin provided for in Section
3.1(a) with respect to the Loans (the "Applicable Margin") shall (i) on the
Closing Date equal the percentages set forth in the certificate delivered
pursuant to Section 4.2(d)(iv) and (ii) for each fiscal quarter thereafter
prior to the Assumption Date be determined by reference to the Leverage Ratio
as of the end of the fiscal quarter immediately preceding the delivery of the
applicable Officer's Compliance Certificate as follows:
Applicable Margin Per Annum
Leverage Ratio Base Rate + LIBOR Rate +
-------------- ---------------------------
>3.00x 0.00% .750%
>2.50 < 3.00x 0.00% .625%
-
>2.00 < 2.50x 0.00% .500%
-
< 2.00x 0.00% .425%
-
and on and after the Assumption Date be determined by reference to the
Leverage Ratio as of the end of the fiscal quarter immediately preceding the
delivery of the applicable Officer's Compliance Certificate as follows:
Applicable Margin Per Annum
Leverage Ratio Base Rate + LIBOR Rate +
-------------- ---------------------------
>4.75x .125% 1.375%
>4.25 < 4.75x 0.00% 1.125%
-
>3.50 < 4.25x 0.00% .875%
-
< 3.50x 0.00% .625%
-
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the fifth (5th) Business Day after receipt by the
Administrative Agent of quarterly financial statements for the Borrower and
its Designated Subsidiaries and the accompanying Officer's Compliance
Certificate setting forth the Leverage Ratio of the Borrower and its Designated
Subsidiaries as of the most recent fiscal quarter end. Subject to Section
3.1(d), in the event the Borrower fails to deliver such financial statements
and certificate within the time required prior to the Assumption Date by
Section 6.2 of the C-TEC Credit Facility and on and after the Assumption Date
by Section 7.2 of the CCSM Credit Facility, the Applicable Margin shall be the
relevant highest Applicable Margin set forth above until the delivery of such
financial statements and certificate.
(d) Default Rate. Upon the occurrence and during the continuance of
an Event of Default, (i) the Borrower shall no longer have the option to
request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans which are past
due shall bear interest at a rate per annum two percent (2%) in excess of the
rate then applicable to LIBOR Rate Loans until the end of the applicable
Interest Period and thereafter at a rate equal to two percent (2%) in excess of
the rate then applicable to Base Rate Loans, and (iii) all outstanding Base
Rate Loans which are past due shall bear interest at a rate per annum equal to
two percent (2%) in excess of the rate then applicable to Base Rate Loans.
(e) Interest Payment and Computation. Interest on each Base Rate Loan
shall be payable in arrears on the last Business Day of each calendar quarter
commencing September 30, 1997; and interest on each LIBOR Rate Loan shall be
payable on the last day of each Interest Period applicable thereto, and if
such Interest Period extends over three (3) months, at the end of each three
(3) month interval during such Interest Period. Interest for all Base Rate
Loans provided hereunder and all fees shall be computed on the basis of a
365-day year or 366-day year, as applicable, and assessed for the actual
number of days elapsed. All interest for LIBOR Rate Loans provided hereunder
shall be computed on the basis of a 360-day year and assessed for the actual
number of days elapsed.
(f) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to
any of the Notes exceed the highest rate permissible under any Applicable Law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest
applicable rate, the rate in effect hereunder shall automatically be reduced
to the maximum rate permitted by Applicable Law and the Lenders shall at the
Administrative Agent's option promptly refund to the Borrower any interest
received by the Lenders in excess of the maximum lawful rate or shall apply
such excess to the principal balance of the Obligations. It is the intent
hereof that the Borrower not pay or contract to pay, and that neither the
Administrative Agent nor any Lender receive or contract to receive, directly
or indirectly in any manner whatsoever, interest in excess of that which may
be paid by the Borrower under Applicable Law.
SECTION 3.2 Notice and Manner of Conversion or Continuation of
Loans. Provided that no Event of Default has occurred and is then continuing,
the Borrower shall have the option to (a) convert at any time all or any
portion of its outstanding Base Rate Loans in a principal amount equal to
$2,000,000 or any whole multiple of $500,000 in excess thereof into one or
more LIBOR Rate Loans or (b) upon the expiration of any Interest Period, (i)
convert all or any part of its outstanding LIBOR Rate Loans in a principal
amount equal to $2,000,000 or a whole multiple of $500,000 in excess thereof
into Base Rate Loans or (ii) continue such LIBOR Rate Loans as LIBOR Rate
Loans. Whenever the Borrower desires to convert or continue Loans as provided
above, the Borrower shall give the Administrative Agent irrevocable prior
written notice in the form attached as Exhibit D (a "Notice of Conversion/
Continuation") not later than 11:00 a.m. (Charlotte time) three (3) Business
Days before the day on which a proposed conversion or continuation of such
Loan is to be effective specifying (A) the Loans to be converted or continued,
and, in the case of any LIBOR Rate Loan to be converted or continued, the last
day of the Interest Period therefor, (B) the effective date of such conversion
or continuation (which shall be a Business Day), (C) the principal amount of
such Loans to be converted or continued, and (D) the Interest Period to be
applicable to such converted or continued LIBOR Rate Loan. The Administrative
Agent shall promptly notify the Lenders of such Notice of
Conversion/Continuation.
SECTION 3.3 Commitment Fee. The Borrower shall pay to the
Administrative Agent, for the account of the Lenders, a non-refundable
commitment fee at a rate per annum equal to .20% of the average daily unused
portion of the Commitment for the period commencing on the forty-sixth day
after the Closing Date through the earlier of (i) the date when the
outstanding Term Loan equals the total Commitment and (ii) the date ninety (90)
days after the Closing Date. Such commitment fee shall be due and payable on
the date ninety (90) days after the Closing Date and shall be distributed by
the Administrative Agent to the Lenders pro rata in accordance with the
Lenders' respective Commitment Percentages.
SECTION 3.4 Manner of Payment. Each payment by the Borrower on
account of the principal of or interest on the Loans or of any fee, commission
or other amounts payable to the Lenders under this Agreement or any Note shall
be made not later than 1:00 p.m. (Charlotte time) on the date specified for
payment under this Agreement to the Administrative Agent at the Administrative
Agent's Office for the account of the Lenders (other than as set forth below)
pro rata in accordance with their respective Commitment Percentages, in
Dollars, in immediately available funds and shall be made without any set-off,
counterclaim or deduction whatsoever. Any payment received after such time
but before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment on
such date for the purposes of Section 10.1, but for all other purposes shall
be deemed to have been made on the next succeeding Business Day. Any payment
received after 2:00 p.m. (Charlotte time) shall be deemed to have been made on
the next succeeding Business Day for all purposes. Upon receipt by the
Administrative Agent of each such payment, the Administrative Agent shall
distribute to each Lender at its address for notices set forth herein its pro
rata share of such payment in accordance with such Lender's Commitment
Percentage and shall wire advice of the amount of such credit to each Lender.
Each payment to the Administrative Agent of Administrative Agent's fees or
expenses shall be made for the account of the Administrative Agent and any
amount payable to any Lender under Sections 3.8, 3.9, 3.10, 3.11 or 12.2 shall
be paid to the Administrative Agent for the account of the applicable Lender.
SECTION 3.5 Crediting of Payments and Proceeds. In the event that
the Borrower shall fail to pay any of the Obligations when due and the
Obligations have been accelerated pursuant to Section 10.2, all payments
received by the Lenders upon the Notes and the other Obligations and all net
proceeds from the enforcement of the Obligations shall be applied first to all
expenses then due and payable by the Borrower hereunder, then to all indemnity
obligations then due and payable by the Borrower hereunder, then to all
Administrative Agent's fees then due and payable, then to all commitment and
other fees and commissions then due and payable, then to accrued and unpaid
interest on the Notes (pro rata in accordance with all such amounts due) and
then to the principal amount of the Notes, in that order.
SECTION 3.6 Adjustments. If any Lender (a "Benefitted Lender")
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or if any Lender shall at any time receive any collateral in respect
to its Loans (whether voluntarily or involuntarily, by set-off or otherwise)
in a greater proportion than any such payment to and collateral received by
any other Lender, if any, in respect of such other Lender's Loans, or interest
thereon, such Benefitted Lender shall purchase for cash from the other Lenders
such portion of each such other Lender's Loans, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such Benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned to the extent of such
recovery, but without interest. The Borrower agrees that, to the fullest
extent allowed by law, each Lender so purchasing a portion of another Lender's
Loans may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Lender
were the direct holder of such portion.
SECTION 3.7 Nature of Obligations of Lenders Regarding Loans;
Assumption by the Administrative Agent. The obligations of the Lenders under
this Agreement to make the Loans are several and are not joint or joint and
several. Unless the Administrative Agent shall have received notice from a
Lender prior to a proposed borrowing date that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of the
amount to be borrowed on such date (which notice shall not release such Lender
of its obligations hereunder), the Administrative Agent may assume that such
Lender has made such portion available to the Administrative Agent on the
proposed borrowing date in accordance with Section 2.2(b) and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If such amount is made
available to the Administrative Agent on a date after such borrowing date,
such Lender shall pay to the Administrative Agent on demand an amount, until
paid, equal to the product of (a) the amount of such Lender's Commitment
Percentage of such borrowing, times (b) the daily average Federal Funds Rate
during such period as determined by the Administrative Agent, times (c) a
fraction the numerator of which is the number of days that elapse from and
including such borrowing date to the date on which such Lender's Commitment
Percentage of such borrowing shall have become immediately available to the
Administrative Agent and the denominator of which is 360. A certificate of
the Administrative Agent with respect to any amounts owing under this Section
shall be conclusive, absent manifest error. If such Lender's Commitment
Percentage of such borrowing is not made available to the Administrative Agent
by such Lender within three (3) Business Days of such borrowing date, the
Administrative Agent shall be entitled to recover such amount made available
by the Administrative Agent with interest thereon at the rate per annum
applicable to Base Rate Loans hereunder, on demand, from the Borrower. The
failure of any Lender to make its Commitment Percentage of any Loan available
shall not relieve it or any other Lender of its obligation, if any, hereunder
to make its Commitment Percentage of such Loan available on such borrowing
date, but no Lender shall be responsible for the failure of any other Lender
to make its Commitment Percentage of such Loan available on the borrowing date.
SECTION 3.8 Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate Availability. If with respect
to any Interest Period:
(i) at least three (3) Lenders (or in any event the Required
lenders) advise the Administrative Agent that, by reason of
circumstances affecting the foreign exchange and interbank markets
generally, deposits in eurodollars, in the applicable amounts are not
being quoted via Telerate Page 3750 or offered to such Lenders for such
Interest Period, or
(ii) at least three (3) Lenders (or in any event the Required
Lenders) advise the Administrative Agent that the LIBOR Rate as
determined by the Administrative Agent will not adequately and fairly
reflect the cost to such Lenders of funding their LIBOR Rate Loans for
such Interest Period,
then the Administrative Agent shall forthwith give prompt written notice
thereof to the Borrower and the Lenders. Thereafter, until the Administrative
Agent notifies the Borrower that such circumstances no longer exist, the
obligation of the Lenders to make LIBOR Rate Loans and the right of the
Borrower to convert any Loan to or continue any Loan as a LIBOR Rate Loan
shall be suspended, and the Borrower shall repay in full (or cause to be
repaid in full) the then outstanding principal amount of each such LIBOR Rate
Loans together with accrued interest thereon, on the last day of the then
current Interest Period applicable to such LIBOR Rate Loan or convert the then
outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan
as of the last day of such Interest Period. Unless the Borrower notifies the
Administrative Agent at least two Business Days before the date of any affected
borrowing or conversion or continuation specified in any applicable Notice of
Revolving Credit Borrowing, Notice of Term Loan Borrowing or Notice of
Conversion/Continuation that they elect not to borrow or convert or continue
Loans on the date specified therein, the Lenders shall make, convert or
continue the Loans in the amount specified by the Borrower in the applicable
notice, but such Loans shall be made, converted or continued as Base Rate Loans
instead of LIBOR Rate Loans.
(b) Laws Affecting LIBOR Rate Availability. If, after the date
hereof, the introduction of, or any change in, any Applicable Law or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by any Lender (or any of their
respective Lending Offices) with any request or directive (whether or not
having the force of law) of any such Authority, central bank or comparable
agency, shall make it unlawful or impossible for any of the Lenders (or any of
their respective Lending Offices) to honor its obligations hereunder to make
or maintain any LIBOR Rate Loan, such Lender shall promptly give notice
thereof to the Administrative Agent and the Administrative Agent shall
promptly give notice to the Borrower and the other Lenders. Thereafter, until
such Lender notifies the Administrative Agent and the Borrower that such
circumstances no longer exist, (i) the obligation of such Lender to make LIBOR
Rate Loans, convert Base Rate Loans into LIBOR Rate Loans or continue LIBOR
Rate Loans as LIBOR Rate Loans shall be suspended, and (ii) each LIBOR Rate
Loan of such Lender then outstanding shall be converted to a Base Rate Loan
either (A) on the last day of the then current Interest Period if such Lender
may lawfully continue to maintain and fund such Loan as a LIBOR Rate Loan to
such day or (B) immediately if such Lender shall determine that it may not
lawfully continue to maintain and fund such Loan as a LIBOR Rate Loan to such
day.
(c) Increased Costs. If, after the date hereof, the introduction of,
or any change in, any Applicable Law, or in the interpretation or
administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by any of the Lenders (or any of their respective Lending
Offices) with any request or directive (whether or not having the force of
law) of such Authority, central bank or comparable agency:
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with respect to
any Note or shall change the basis of taxation of payments to any of the
Lenders (or any of their respective Lending Offices) of the principal of or
interest on any Note or any other amounts due under this Agreement in respect
thereof (except for changes in the rate of tax on the overall net income of
any of the Lenders or any of their respective Lending Offices imposed by the
jurisdiction in which such Lender is organized or is or should be qualified to
do business or such Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any of the Lenders (or any of their respective Lending Offices),
other than any such amount included in the calculation of Eurodollar Reserve
Percentage, or shall impose on any of the Lenders (or any of their respective
Lending Offices) or the foreign exchange and interbank markets any other
condition affecting any Note;
and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or to reduce the yield or amount of
any sum received or receivable by any of the Lenders under this Agreement or
under the Notes in respect of a LIBOR Rate Loan, then such Lender shall
promptly notify the Administrative Agent, and the Administrative Agent shall
promptly notify the Borrower of such fact and demand compensation therefor
and, within fifteen (15) days after such notice by the Administrative Agent,
the Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender or Lenders for such increased cost or reduction. Each
Lender will promptly notify the Administrative Agent of any event of which it
has knowledge which will entitle such Lender to compensation pursuant to this
Section 3.8(c) and after receipt of such notice, the Administrative Agent will
promptly notify the Borrower of such event; provided, that neither any Lender
nor the Administrative Agent shall incur any liability whatsoever to any other
Lender or the Borrower in the event it fails to do so. The amount of such
compensation shall be determined, in the applicable Lender's sole discretion,
based upon the assumption that such Lender funded its Commitment Percentage of
the LIBOR Rate Loans in the London interbank market, as applicable, and using
any reasonable attribution or averaging methods which such Lender deems
appropriate and practical. A certificate of such Lender setting forth the
basis for determining such amount or amounts necessary to compensate such
Lender shall be forwarded to the Borrower through the Administrative Agent and
shall be conclusively presumed to be correct save for clearly demonstrable
error.
(d) The Borrower shall not be required to compensate a Lender for any
increased costs pursuant to this Section 3.8 incurred by such Lender more than
90 days prior to its request to the Administrative Agent for such compensation.
SECTION 3.9 Indemnity. The Borrower hereby indemnifies each of
the Lenders against any reasonable loss or expense (excluding any loss of
margin over the LIBOR Rate for the period after any such payment or conversion
or failure to borrow, prepay or convert) which may arise or be attributable to
each Lender's obtaining, liquidating or employing deposits or other funds
acquired to effect, fund or maintain any Loan (a) as a consequence of any
failure by the Borrower to make any payment when due of any amount due
hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the
Borrower to borrow on a date specified therefor in a Notice of Borrowing or
Notice of Continuation/Conversion or (c) due to any payment, prepayment or
conversion of any LIBOR Rate Loan on a date other than the last day of the
Interest Period therefor. The amount of such loss or expense shall be
determined, in good faith but otherwise in the applicable Lender's sole
discretion, based upon the assumption that such Lender funded its Commitment
Percentage of the LIBOR Rate Loans in the London interbank market, and using
any reasonable attribution or averaging methods which such Lender deems
appropriate and practical. A certificate of such Lender setting forth the
basis for determining such amount or amounts necessary to compensate such
Lender shall be forwarded to the Borrower through the Administrative Agent and
shall be conclusively presumed to be correct save for clearly demonstrable
error.
SECTION 3.10 Capital Requirements. If, after the date hereof,
either (a) the introduction of, or any change in, or in the interpretation of,
any Applicable Law or (b) compliance with any guideline or request from any
central bank or comparable agency or other Governmental Authority (whether or
not having the force of law), has or would have the effect of reducing the
rate of return on the capital of, or has affected or would affect the amount
of capital required to be maintained by, any Lender or any corporation
controlling such Lender as a consequence of, or with reference to the
Commitments and other commitments of this type, below the rate which the
Lender or such other corporation could have achieved but for such
introduction, change or compliance, then within five (5) Business Days after
written demand by any such Lender, the Borrower shall pay to such Lender from
time to time as specified in a reasonably detailed calculation by such Lender
additional amounts sufficient to compensate such Lender or other corporation
for such reduction. A certificate as to such amounts submitted to the
Borrower and the Administrative Agent by such Lender, shall, in the absence of
clearly demonstrable error, be presumed to be correct and binding for all
purposes. The Borrower will not be required to compensate a Lender for any
increased amounts to this Section 3.10 incurred by such Lender more than 90
days prior to its request to the Borrower for such compensation.
SECTION 3.11 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder or under the Notes shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholding, and all liabilities with respect thereto
excluding (i) taxes imposed on or measured by the overall net income of any
Lender or its Lending Office or the Administrative Agent or the Administrative
Agent's Office, as the case may be, and all franchise or similar taxes
measured by capital or net worth of such Lender or its Lending Office or the
Administrative Agent or the Administrative Agent's Office, as the case may be,
in each case imposed: (A) by the jurisdiction under the laws of which such
Lender or the Administrative Agent, as the case may be, is organized, or in
which its principal executive office is located, (B) by the jurisdiction in
which the Lending Office of such Lender or the Administrative Agent's Office,
as applicable, is located or (C) solely by reason of such Lender or the
Administrative Agent, as the case may be, doing business in the jurisdiction
imposing such tax, other than as a result of this Agreement or any Note or any
transaction contemplated hereby and (ii) in the case of each Lender, any
United States withholding tax imposed on such payments but only to the extent
that such Lender is subject to United States withholding tax at the time such
Lender first becomes a party to this Agreement (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under
any Note or to any Lender or the Administrative Agent, (A) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 3.11) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the amount such party would have received had no
such deductions been made, (B) the Borrower shall make such deductions, (C)
the Borrower shall pay the full amount deducted to the relevant taxing
authority or other authority in accordance with applicable law, and (D) the
Borrower shall deliver to the Administrative Agent evidence of such payment to
the relevant taxing authority or other authority in the manner provided in
Section 3.11(e).
(b) Refunds. If the Borrower pays any additional amount under Section
3.11 (a "Tax Payment") and any Lender or Affiliate thereof effectively obtains
a refund of tax or credit against tax by reason of the Tax Payment (a "Tax
Credit") and such Tax Credit is, in the reasonable judgement of such Lender or
Affiliate, attributable to such Tax Payment, then such Lender, after actual
receipt of such Tax Credit or actual receipt of the benefits thereof, shall
promptly reimburse the Borrower for such amount as such Lender shall reasonably
determine to be the proportion of the Tax Credit as would leave the Borrower
(after that reimbursement) in no better or worse position than it would have
been if the Tax Payment had not been required; provided, that no Lender shall
be required to make any reimbursement if it reasonably believes the making of
such reimbursement would cause it to lose the benefit of the Tax Credit or
would adversely affect in any other respect its tax position. Subject to the
other terms hereof, any claim by a Lender for a Tax Credit shall be made in a
manner, order and amount as such Lender determines in its sole and absolute
discretion. Except to the extent necessary to evaluate any Tax Credit, no
Lender shall be obligated to disclose information regarding its tax affairs or
computations to the Borrower, it being understood and agreed that in no event
shall any Lender be required to disclose information regarding its tax
position that it deems to be confidential (other than with respect to the Tax
Credit).
(c) Stamp and Other Taxes. In addition to the Taxes described in
Section 3.11(a), the Borrower shall pay any present or future stamp,
registration, recordation or documentary taxes or any other similar fees or
charges or excise or property taxes, levies of the United States or any state
or political subdivision thereof or any applicable foreign jurisdiction which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the Loans, the
other Loan Documents, or the perfection of any rights or security interest in
respect thereto (hereinafter referred to as "Other Taxes").
(d) Indemnity. The Borrower shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 3.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor.
(e) Evidence of Payment. Within thirty (30) days after the date of
any payment of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 12.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence
of payment satisfactory to the Administrative Agent.
(f) Delivery of Tax Forms. Each Lender organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver
to the Borrower, with a copy to the Administrative Agent, on the Closing Date
or concurrently with the delivery of the relevant Assignment and Acceptance,
as applicable, (i) two United States Internal Revenue Service Forms 4224 or
Forms 1001, as applicable (or successor forms) properly completed and
certifying in each case that such Lender is entitled to a complete exemption
from withholding or deduction for or on account of any United States federal
income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding taxes. Each such Lender further agrees to
deliver to the Borrower, with a copy to the Administrative Agent, a Form 1001
or 4224 and Form W-8 or W-9, or successor applicable forms or manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower,
certifying in the case of a Form 1001 or 4224 that such Lender is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes (unless in any such case an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders such forms inapplicable or the exemption to which such
forms relate unavailable and such Lender notifies the Borrower and the
Administrative Agent that it is not entitled to receive payments without
deduction or withholding of United States federal income taxes) and, in the
case of a Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(g) Survival. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 3.11 shall survive the payment in full of
the Obligations and the termination of the Commitments.
SECTION 3.12 Change in Lending Office; Replacement Lenders. (a)
Each Lender agrees that on the occurrence of any event giving rise to the
operation of Sections 3.8(b), 3.8(c), 3.10, 3.11(a) or 3.11(c) with respect to
such Lender, it will, if requested by the Borrower, use reasonable efforts
(subject to overall policy considerations of such Lender) to designate another
Lending Office for any Loans affected by such event; provided, that such
designation is made on such terms that such Lender and its Lending Office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of such
Section. Nothing in this Section 3.12(a) shall affect or postpone any of the
obligations of the Borrower or the rights of any Lender provided in Sections
3.8, 3.10 or 3.11.
(b) At any time within one hundred eighty (180) days after any payment
by the Borrower of any amount pursuant to or by reason of the operation of
Sections 3.8(b), 3.8(c), 3.10, 3.11(a) or 3.11(c), the Borrower, by writing
addressed to the Administrative Agent and each Lender that requested the
payment of such amount, may nominate or propose an Eligible Assignee that is
willing to become the assignee of the Commitment and other obligations of such
Lender (a "Replacement Lender") pursuant to Section 12.10(b), and within
fifteen (15) Business Days after receipt of such proposal from the Borrower,
each such Lender shall execute and deliver to the Administrative Agent an
Assignment and Acceptance of its entire Commitment in favor of the proposed
Replacement Lender in accordance with Section 12.10(b) unless, prior to the
expiration of such period, the Administrative Agent shall have notified the
Borrower and such Lender that the proposed Replacement Lender is not
reasonably acceptable to the Administrative Agent; provided, that in no event
will (i) any Lender be required to enter into an Assignment and Acceptance at
a price less than par plus accrued interest and prorated fees and other costs
due hereunder to the effective date thereof, (ii) either of the Administrative
Agent or Lenders be obligated to assist the Borrower in identifying any
Eligible Assignees that are willing to become such a Replacement Lender or
(iii) any such assignment be required if consummation conflicts with any
Applicable Law. The assignment fee payable to the Administrative Agent in
connection with any such assignment pursuant to Section 12.10(b) shall be for
the account of the Borrower.
SECTION 3.13 Use of Proceeds. The Borrower shall use the proceeds
of the Loans to make an RCN Capital Contribution or for general corporate
proposes.
ARTICLE IV
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 4.1 Closing. The closing shall take place at the
offices of Kennedy Covington Lobdell & Hickman, L.L.P. at 10:00 a.m. on June
30, 1997, or at such other place or on such other date as the Administrative
Agent and the Borrower shall mutually agree.
SECTION 4.2 Conditions to Closing and Initial Loans. The
obligation of the Lenders to close this Agreement and to make the initial
Loans is subject to the satisfaction of each of the following conditions:
(a) Executed Loan Documents. This Agreement, the Notes, the Mercom
Pledge Agreement and the other Loan Documents shall have been duly authorized,
executed and delivered to the Administrative Agent by the parties thereto,
shall be in full force and effect and no Default or Event of Default shall
exist, and the Borrower shall have delivered original counterparts thereof to
the Administrative Agent.
(b) Closing Certificates; etc.
(i) Officers's Certificate. The Administrative Agent
shall have received a certificate from the chief executive officer or chief
financial officer of the Borrower in form and substance satisfactory to the
Administrative Agent, to the effect that all representations and warranties of
the Borrower contained in this Agreement and the other Loan Documents are
true, correct and complete; that the Borrower is not in violation of any of
the covenants contained in this Agreement and the other Loan Documents; that,
after giving effect to the transactions contemplated by this Agreement, no
Default or Event of Default has occurred and is continuing; and that the
Borrower has satisfied each of the closing conditions.
(ii) Certificate of Secretary. The Administrative Agent
shall have received a certificate of the secretary or assistant secretary of
the Borrower certifying that attached thereto is a true and complete copy of
the articles of incorporation of the Borrower and all amendments thereto,
certified as of a recent date by the appropriate Governmental Authority in the
applicable jurisdiction; that attached thereto is a true and complete copy of
the bylaws of the Borrower, as in effect on the date of such certification;
that attached thereto is a true and complete copy of resolutions duly adopted
by the Board of Directors of the Borrower authorizing the borrowings
contemplated hereunder and the execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower is a party; and
as to the incumbency and genuineness of the signature of each officer of the
Borrower executing Loan Documents to which it is a party.
(iii) Certificates of Good Standing. The Administrative
Agent shall have received long-form certificates as of a recent date of the
good standing of the Borrower under the laws of its jurisdiction of
organization and a certificate of the relevant taxing authorities of such
jurisdiction certifying that the Borrower has filed required tax returns with
respect to any franchise taxes and owes no delinquent franchise taxes.
(iv) Opinions of Counsel. The Administrative Agent shall
have received favorable opinions of counsel to the Borrower addressed to the
Administrative Agent and the Lenders (A) with respect to the Borrower, the
Loan Documents and such other matters as the Lenders shall request and (B)
with respect to FCC and other regulatory matters, each in form and substance
satisfactory to the Administrative Agent.
(v) Insurance. The Administrative Agent shall have
received a certificate of insurance in form and substance satisfactory to the
Administrative Agent.
(c) Collateral.
(i) Filings and Recordings. All Form UCC-1 financing statements
that are necessary to perfect the security interests of the Lenders granted
under the Mercom Pledge Agreement in the capital stock of Mercom shall have
been delivered to the Administrative Agent for filing or recordation in all
appropriate locations and the Administrative Agent shall have received
evidence satisfactory thereto that upon such filing or recordation by the
Administrative Agent such security interests will constitute valid and
perfected first priority Liens subject to Liens described prior to the
Assumption Date in Section 9.2 of the C-TEC Credit Facility and on and after
the Assumption Date in Section 10.2 of the CCSM Credit Facility.
(ii) Pledged Stock. The Administrative Agent shall have
received original stock certificates evidencing the capital stock pledged
pursuant to the Mercom Pledge Agreement, together with an appropriate undated
stock power for each stock certificate duly executed in blank by the
registered owner thereof.
(d) Consents; Defaults.
(i) Governmental and Third Party Approvals. All necessary
approvals, authorizations and consents, if any be required, of any Person and
of all Governmental Authorities and courts having jurisdiction with respect to
the transactions contemplated by this Agreement and the other Loan Documents
shall have been obtained.
(ii) No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted,
threatened or proposed before any Governmental Authority to enjoin, restrain,
or prohibit, or to obtain substantial damages in respect of, or which is
related to or arises out of this Agreement or the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby, or which in
the Administrative Agent's good faith determination could reasonably be
expected to have a Material Adverse Effect.
(e) Financial Matters.
(i) Financial Condition Certificate. The Borrower shall
have delivered to the Administrative Agent a certificate, in form and
substance satisfactory to the Administrative Agent, and certified as accurate
by the chief executive officer or chief financial officer of the Borrower,
that (A) the Borrower and its Designated Subsidiaries, taken as a whole, are
Solvent, (B) the Borrower's payables are current and not past due, (C) attached
thereto is a pro forma balance sheet of the Borrower and its Designated
Subsidiaries setting forth on a pro forma basis the financial condition of the
Borrower and its Designated Subsidiaries on a Combined basis as of that date,
reflecting a pro forma basis the effect of the transactions contemplated
herein, including all fees and expenses in connection therewith, and
evidencing compliance on a pro forma basis with the covenants contained in
Article VIII hereof, (D) attached thereto are the financial projections
(including without limitation pro forma budgets for Capital Expenditures)
previously delivered to the Administrative Agent representing the good faith
opinions of the Borrower and senior management thereof as to the projected
results contained therein and (E) attached thereto is a calculation of the
Applicable Margin pursuant to Section 3.1(c).
(ii) Payment at Closing; Fee Letters. There shall have
been paid by the Borrower to the Administrative Agent and the Lenders any
accrued and unpaid fees or commissions due hereunder (including, without
limitation, legal fees and expenses), and to any other Person such amount as
may be due thereto in connection with the transactions contemplated hereby,
including all taxes, fees and other charges in connection with the execution,
delivery, recording, filing and registration of any of the Loan Documents.
(f) Miscellaneous.
(i) Notices of Borrowing. The Administrative Agent shall
have received a Notice of Borrowing from the Borrower in accordance with
Section 2.2(a) with respect to any Loans to be made on the Closing Date, and a
Notice of Account Designation specifying the account or accounts to which the
proceeds of any loans made after the Closing Date are to be disbursed.
(ii) Proceedings and Documents. All opinions, certificates
and other instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to
the Lenders. The Lenders shall have received copies of all other instruments
and other evidence as the Administrative Agent may reasonably request, in form
and substance satisfactory to the Lenders, with respect to the transactions
contemplated by this Agreement and the taking of all actions in connection
therewith.
(iii) Due Diligence and Other Documents. The Borrower shall
have delivered to the Administrative Agent such other documents, certificates
and opinions as the Administrative Agent reasonably requests certified by a
secretary or assistant secretary of the Borrower as a true and correct copy
thereof.
SECTION 4.3 Conditions to All Loans. The obligations of the
Lenders to make any Loan is subject to the satisfaction of the following
conditions precedent on the relevant borrowing date:
(a) Continuation of Representations and Warranties. The
representations and warranties contained in Article V shall be true and
correct on and as of such borrowing date with the same effect as if made on
and as of such date (except where such representation or warranty is
specifically made as of an earlier date in which case it shall remain true and
correct as of such earlier date).
(b) No Existing Default. No Default or Event of Default shall
have occurred and be continuing hereunder on the borrowing date with respect
to such Loan or after giving effect to the Loans to be made on such date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 5.1 Representations and Warranties. To induce the
Administrative Agent to enter into this Agreement and the Lenders to make the
Loans, (a) on the date hereof and on any borrowing date prior to the
Assumption Date, each representation and warranty contained in Article V of
the C-TEC Credit Facility is hereby made and confirmed by the Borrower in
favor of the Administrative Agent and Lenders and, in furtherance thereof, each
such representation and warranty is hereby incorporated by reference as if
fully set forth herein (provided that clause (i) of Section 5.1(d) of the
C-TEC Credit Facility as herein confirmed and incorporated by reference is
hereby qualified and made subject to any Governmental Approval contemplated by
Section 19 of the Mercom Pledge Agreement); and (b) and on any borrowing date
on and after the Assumption Date, each representation and warranty contained
in Article VI of the CCSM Credit Facility is hereby made and confirmed by the
Borrower in favor of the Administrative Agent and Lenders and, in furtherance
thereof, each such representation and warranty is hereby incorporated by
reference as if fully set forth herein.
SECTION 5.2 Survival of Representations and Warranties, Etc. All
representations and warranties incorporated by reference in this Article V and
all representations and warranties contained in any certificate, or any of the
Loan Documents (including but not limited to any such representation or
warranty made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall survive the Closing Date and
shall not be waived by the execution and delivery of this Agreement, any
investigation made by or on behalf of the Lenders or any borrowing hereunder.
ARTICLE VI
FINANCIAL INFORMATION AND NOTICES
Until all principal and interest on the Loans and all fees hereunder
have been paid in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 12.11 hereof, the Borrower will
(a) prior to the Assumption Date, comply with Article VI of the C-TEC Credit
Facility and in furtherance thereof, each section thereof is hereby
incorporated by reference as if fully set forth herein and (b) on and after the
Assumption Date, comply with Article VII of the CCSM Credit Facility and in
furtherance thereof, each section thereof is hereby incorporated by reference
as if fully set forth herein.
ARTICLE VII
AFFIRMATIVE COVENANTS
Until all of the principal and interest on the Loans and all fees
hereunder have been paid in full and the Commitments terminated, unless
consent has been obtained in the manner provided for in Section 12.11, the
Borrower will (a) prior to the Assumption Date, comply with Article VII of the
C-TEC Credit Facility and in furtherance thereof, each section thereof is
hereby incorporated by reference as if fully set forth herein and (b) on and
after the Assumption Date, comply with Article VIII of the CCSM Credit
Facility (other than Section 8.10 thereof) and in furtherance thereof, each
section thereof (other than Section 8.10 thereof) is hereby incorporated by
reference as if fully set forth herein. Any covenant of the Borrower to
deliver documents, certificates or other information to the Administrative
Agent shall be deemed complied with if the Borrower shall have complied with
such covenant pursuant to the C-TEC Credit Facility or the CCSM Credit
Facility, as the case may be.
ARTICLE VIII
FINANCIAL COVENANTS
Until all of the principal and interest on the Loans and fees hereunder
have been paid in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 12.11 hereof, the Borrower and its
Designated Subsidiaries on a Combined basis will (a) prior to the Assumption
Date, comply with Article VIII of the C-TEC Credit Facility and in furtherance
thereof, each section thereof is hereby incorporated by reference as if fully
set forth herein, and (b) on and after the Assumption Date, comply with
Article IX of the CCSM Credit Facility and in furtherance thereof, each
section thereof is hereby incorporated by reference as if fully set forth
herein.
ARTICLE IX
NEGATIVE COVENANTS
Until all of the principal and interest on the Loans and all fees
hereunder have been paid in full and the Commitments terminated, unless
consent has been obtained in the manner set forth in Section 12.11 hereof, the
Borrower will (a) prior to the Assumption Date, comply with Article IX of the
C-TEC Credit Facility and in furtherance thereof, each section thereof is
hereby incorporated by reference as if fully set forth herein, and (b) on and
after the Assumption Date, comply with Article X of the CCSM Credit Facility
and in furtherance thereof, each section thereof is hereby incorporated by
reference as if fully set forth herein.
ARTICLE X
DEFAULT AND REMEDIES
SECTION 10.1 Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or
regulation of any Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. The Borrower shall
default in any payment of principal of any Loan or Note when and as due
(whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise)
of interest on any Loan or Note or any fees hereunder, and such default shall
continue unremedied for five (5) Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed
to be made by the Borrower or any of its Designated Subsidiaries under this
Agreement, any Loan Document or any amendment hereto or thereto, shall at any
time prove to have been incorrect or misleading in any material respect when
made or deemed made.
(d) Default in Performance of Certain Covenants. The Borrower shall
default in the performance or observance of any covenant or agreement
contained, prior to the Assumption Date in Section 6.5(e) or Articles VIII or
IX (other than Sections 9.8 and 9.9) of the C-TEC Credit Facility and, on and
after the Assumption Date, in Section 7.5(e) or Articles IX or X (other than
Sections 9.8 and 9.9) of the CCSM Credit Facility, in each case as
incorporated by reference.
(e) Default in Performance of Other Covenants and Conditions. The
Borrower or any of its Designated Subsidiaries shall default in the
performance or observance of any term, covenant, condition or agreement
contained in this Agreement (other than as specifically provided for in this
Section 10.1) or any other Loan Document and such default shall continue for a
period of thirty (30) days after written notice thereof has been given to the
Borrower by the Administrative Agent.
(f) Hedging Agreement. Any termination payment shall be due by the
Borrower under any Hedging Agreement and such amount is not paid within five
(5) Business Days of the due date thereof.
(g) Debt Cross-Default. The Borrower or any of its Designated
Subsidiaries shall (i) default in the payment of any Debt (other than the
Notes) the aggregate outstanding amount of which Debt is in excess of
$1,000,000 beyond the period of grace if any, provided in the instrument or
agreement under which such Debt was created, (ii) default in the observance or
performance of any other agreement or condition relating to any Debt (other
than the Notes) the aggregate outstanding amount of which Debt is in excess of
$1,000,000 or contained in any instrument or agreement evidencing, securing or
relating thereto or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
holder or holders of such Debt (or a trustee or agent on behalf of such holder
or holders) to cause, with the giving of notice if required, any such Debt to
become due prior to its stated maturity (any applicable grace period having
expired) or (iii) prior to the Assumption Date, any Default or Event of
Default (as defined therein) under the C-TEC Credit Facility shall have
occurred and be continuing and on and after the Assumption Date, any Default
or Event of Default (as defined therein) under the CCSM Credit Facility shall
have occurred and be continuing.
(h) Change in Control. (i) Prior to the Assumption Date, any event of
default described in Section 10.1(h) of the C-TEC Credit Facility, which is
incorporated herein by reference as if set forth herein in its entirety and
(ii) as of and after the Assumption Date, any event of default described in
Section 11.1(h) of the CCSM Credit Facility which is incorporated herein by
reference as if set forth herein in its entirety.
(i) Voluntary Bankruptcy Proceeding. The Borrower or any of its
Designated Subsidiaries shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking
to take advantage of any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or composition for
adjustment of debts, (iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary case under
such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the taking
of possession by, a receiver, custodian, trustee, or liquidator of itself or of
a substantial part of its property, domestic or foreign, (v) admit in writing
its inability to pay its debts as they become due, (vi) make a general
assignment for the benefit of creditors, or (vii) take any corporate action
for the purpose of authorizing any of the foregoing.
(j) Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against the Borrower or any of its Designated Subsidiaries
in any court of competent jurisdiction seeking (i) relief under the federal
bankruptcy laws (as now or hereafter in effect) or under any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or adjustment of debts, or (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like for the Borrower or any of its
Designated Subsidiaries or for all or any substantial part of their respective
assets, domestic or foreign, and such case or proceeding shall continue
undismissed or unstayed for a period of sixty (60) consecutive days, or an
order granting the relief requested in such case or proceeding (including, but
not limited to, an order for relief under such federal bankruptcy laws) shall
be entered.
(k) Failure of Agreements. Any provision of this Agreement or of any
other Loan Document with respect to any material (in the reasonable judgement
thereof) rights and remedies of the Administrative Agent and Lenders hereunder
or thereunder shall for any reason cease to be valid and binding on the
Borrower or any of its Designated Subsidiaries party thereto or any such
Person shall so state in writing, or this Agreement or any other Security
Document shall for any reason cease to create a valid and perfected first
priority Lien on, or security interest in, any of the collateral purported to
be covered thereby, in each case other than in accordance with the express
terms hereof or thereof.
(l) Termination Event. The occurrence of any of the following events:
(i) any Borrower or any ERISA Affiliate fails to make full payment when due of
all amounts which, under the provisions of any Pension Plan or Section 412 of
the Code, the Borrower or any ERISA Affiliate is required to pay as
contributions thereto, (ii) an accumulated funding deficiency in excess of
$1,000,000 occurs or exists, whether or not waived, with respect to any
Pension Plan, (iii) a Termination Event or (iv) any Borrower or any ERISA
Affiliate as employers under one or more Multiemployer Plan makes a complete
or partial withdrawal from any such Multiemployer Plan and the plan sponsor of
such Multiemployer Plans notifies such withdrawing employer that such employer
has incurred a withdrawal liability requiring payments in an amount exceeding
$1,000,000.
(m) Judgment. A judgment or order for the payment of money which
causes the aggregate amount of all such judgments to exceed $500,000 in any
Fiscal Year shall be entered against the Borrower or any of its Designated
Subsidiaries by any court and such judgment or order shall continue
undischarged or unstayed for a period of thirty (30) days.
SECTION 10.2 Remedies. Upon the occurrence of an Event of Default,
with the consent of the Required Lenders, the Administrative Agent may, or
upon the request of the Required Lenders, the Administrative Agent shall, by
notice to the Borrower:
(a) Acceleration; Termination of Facilities. Declare the principal of
and interest on the Loans and the Notes at the time outstanding, and all other
amounts owed to the Lenders and to the Administrative Agent under this
Agreement or any of the other Loan Documents and all other Obligations, to be
forthwith due and payable, whereupon the same shall immediately become due and
payable without presentment, demand, protest or other notice of any kind, all
of which are expressly waived, anything in this Agreement or the other Loan
Documents to the contrary notwithstanding, and terminate the Credit Facility
and any right of the Borrower to request borrowings thereunder; provided, that
upon the occurrence of an Event of Default specified in Section 10.1(i) or
(j), the Credit Facility shall be automatically terminated and all Obligations
shall automatically become due and payable.
(b) Rights of Collection. Exercise on behalf of the Lenders all of
its other rights and remedies under this Agreement, the other Loan Documents
and Applicable Law, in order to satisfy all of the Borrower's Obligations.
SECTION 10.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy
given hereunder or under the Loan Documents or that may now or hereafter exist
in law or in equity or by suit or otherwise. No delay or failure to take
action on the part of the Administrative Agent or any Lender in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude
other or further exercise thereof or the exercise of any other right, power
or privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between the Borrower, the Administrative Agent and the
Lenders or their respective agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or any of the other Loan
Documents or to constitute a waiver of any Event of Default.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.1 Appointment. Each of the Lenders hereby irrevocably
designates and appoints First Union as Administrative Agent of such Lender
under this Agreement and the other Loan Documents and each such Lender
irrevocably authorizes First Union as Administrative Agent for such Lender, to
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties as
are expressly delegated to the Administrative Agent by the terms of this
Agreement and such other Loan Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement or such other Loan Documents, the
Administrative Agent shall not have any duties or responsibilities, except
those expressly set forth herein and therein, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or the other Loan
Documents or otherwise exist against the Administrative Agent.
SECTION 11.2 Delegation of Duties. The Administrative Agent may
execute any of its respective duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by the Administrative Agent with
reasonable care.
SECTION 11.3 Exculpatory Provisions. Neither the Administrative
Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates shall be (a) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or the other Loan Documents (except for actions
occasioned solely by its or such Person's own gross negligence or willful
misconduct), or (b) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or
any of its Designated Subsidiaries or any officer thereof contained in this
Agreement or the other Loan Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or the other
Loan Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the other Loan Documents or
for any failure of the Borrower or any of its Designated Subsidiaries to
perform its obligations hereunder or thereunder. The Administrative Agent
shall not be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement, or to inspect the properties, books or records
of the Borrower or any of its Designated Subsidiaries.
SECTION 11.4 Reliance by the Administrative Agent. The
Administrative Agent shall be entitled to rely, and shall be fully protected
in relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
unless such Note shall have been transferred in accordance with Section 12.10
hereof. The Administrative Agent shall be fully justified in failing or
refusing to take any action under this Agreement and the other Loan Documents
unless it shall first receive such advice or concurrence of the Required
Lenders (or, when expressly required hereby or by the relevant other Loan
Document, all the Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action except for its own gross negligence or willful
misconduct. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the Notes in
accordance with a request of the Required Lenders (or, when expressly required
hereby, all the Lenders), and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Notes.
SECTION 11.5 Notice of Default. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless it has received notice from a Lender or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, it shall promptly give
notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.
SECTION 11.6 Non-Reliance on the Administrative Agent and Other
Lenders. Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates has made any representations or
warranties to it and that no act by the Administrative Agent hereinafter
taken, including any review of the affairs of the Borrower or any of its
Designated Subsidiaries, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and its Designated Subsidiaries
and made its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking
or not taking action under this Agreement and the other Loan Documents, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and its Designated Subsidiaries. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder or by the other Loan Documents,
the Administrative Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Borrower or any of its Subsidiaries which may come into the possession of the
Administrative Agent or any of its respective officers, directors, employees,
agents, attorneys-in-fact, Designated Subsidiaries or Affiliates.
SECTION 11.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such and (to the extent not reimbursed
by the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to the respective amounts of their Commitment Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes or any Reimbursement Obligation) be
imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement or the other Loan Documents,
or any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Administrative Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the
Administrative Agent's bad faith, gross negligence or willful misconduct. The
agreements in this Section 12.7 shall survive the payment of the Notes, any
Reimbursement Obligation and all other amounts payable hereunder and the
termination of this Agreement.
SECTION 11.8 The Administrative Agent in Its Individual Capacity.
The Administrative Agent and its respective Subsidiaries and Affiliates may
make loans to, accept deposits from and generally engage in any kind of
business with the Borrower as though the Administrative Agent were not an
Administrative Agent hereunder. With respect to any Loans made or renewed by
it and any Note issued to it and with respect to any issued by it or
participated in by it, the Administrative Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not an Administrative Agent, and the terms
"Lender" and "Lenders" shall include the Administrative Agent in its
individual capacity.
SECTION 11.9 Resignation of the Administrative Agent; Successor
Administrative Agent. Subject to the appointment and acceptance of a
successor as provided below, the Administrative Agent may resign at any time
by giving notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Administrative Agent, which successor shall have minimum capital and surplus of
at least $500,000,000. If no successor Administrative Agent shall have been
so appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the Administrative Agent's giving of notice of
resignation, then the Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent, which successor shall have minimum
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Section 11.9 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as Administrative Agent.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to
be received by a party hereto (i) on the date of delivery if delivered by hand
or sent by telecopy, (ii) on the next Business Day if sent by recognized
overnight courier service and (iii) on the third Business Day following the
date sent by certified mail, return receipt requested. A telephonic notice to
the Administrative Agent as understood by the Administrative Agent will be
deemed to be the controlling and proper notice in the event of a discrepancy
with or failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it
at the following addresses, or any other address as to which all the other
parties are notified in writing.
If to the Borrower: C-TEC Corporation
105 Carnegie Center
Princeton, NJ 08540
Attention: Tim Stoklosa
Telephone No.: 609-734-3860
Telecopy No.: 609-734-3875
With copies to: Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: John Fouhey, Esq.
Telephone No.: 212-450-4000
Telecopy No.: 212-450-4800
If to First Union as First Union National Bank
Administrative Agent: One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 383-0281
Telecopy No.: (704) 383-0288
If to any Lender: To the Address set forth on Schedule 1.1(a) hereto
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any
subsequent office which shall have been specified for such purpose by written
notice to the Borrower and Lenders, as the Administrative Agent's Office
referred to herein, to which payments due are to be made and at which Loans
will be disbursed.
SECTION 12.2 Expenses; Indemnity. The Borrower will (a) pay all
reasonable out-of-pocket expenses of the Administrative Agent in connection
with: (i) the preparation, execution and delivery of this Agreement and each
other Loan Document, whenever the same shall be executed and delivered,
including without limitation all out-of-pocket syndication and due diligence
expenses and reasonable fees and disbursements of counsel for the
Administrative Agent, and (ii) the preparation, execution and delivery of any
waiver, amendment or consent by the Administrative Agent or the Lenders
relating to this Agreement or any other Loan Document, including without
limitation reasonable fees and disbursements of counsel for the Administrative
Agent and (b) at any time when a Default has occurred and is continuing (or at
any time thereafter with respect to any of the following undertaken during the
existence of a Default), pay all reasonable out-of-pocket expenses of the
Administrative Agent (and of the Lenders, but only if such Default is an Event
of Default) the enforcement of any rights and remedies of the Administrative
Agent and Lenders under the Credit Facility, including consulting with
appraisers, accountants, engineers, attorneys and other Persons concerning the
nature, scope or value of any right or remedy of the Administrative Agent or
any Lender hereunder or under any other Loan Document or any factual matters
in connection therewith, which expenses shall include without limitation the
reasonable fees and disbursements of such Persons, and (b) defend, indemnify
and hold harmless the Administrative Agent and the Lenders, and their
respective parents, Subsidiaries, Affiliates, employees, agents, officers and
directors, from and against any losses, penalties, fines, liabilities,
settlements, damages, costs and expenses, suffered by any such Person in
connection with any claim, investigation, litigation or other proceeding
(whether or not the Administrative Agent or any Lender is a party thereto) and
the prosecution and defense thereof, arising out of or in any way connected
with the Agreement, any other Loan Document or the Loans, including without
limitation reasonable attorney's and consultant's fees, except to the extent
that any of the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor.
SECTION 12.3 Set-off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during the
continuance thereof, the Lenders and any assignee or participant of a Lender
in accordance with Section 12.10 are hereby authorized by the Borrower at any
time or from time to time, without notice to the Borrower or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, time or
demand, including, but not limited to, indebtedness evidenced by certificates
of deposit, whether matured or unmatured) and any other indebtedness at any
time held or owing by the Lenders, or any such assignee or participant to or
for the credit or the account of the Borrower against and on account of the
Obligations irrespective of whether or not (a) the Lenders shall have made any
demand under this Agreement or any of the other Loan Documents or (b) the
Administrative Agent shall have declared any or all of the Obligations to be
due and payable as permitted by Section 10.2 and although such Obligations
shall be contingent or unmatured.
SECTION 12.4 Governing Law. This Agreement, the Notes and the
other Loan Documents, unless otherwise expressly set forth therein, shall be
governed by, construed and enforced in accordance with the laws of the State
of North Carolina, without reference to the conflicts or choice of law
principles thereof.
SECTION 12.5 Consent to Jurisdiction. The Borrower hereby
irrevocably consents to the personal jurisdiction of the state and federal
courts located in Mecklenburg County, North Carolina, in any action, claim or
other proceeding arising out of any dispute in connection with this Agreement,
the Notes and the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations. The Borrower
hereby irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by the Administrative Agent
or any Lender in connection with this Agreement, the Notes or the other Loan
Documents, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations, on behalf of itself or its
property, in the manner specified in Section 12.1. Nothing in this Section
12.5 shall affect the right of the Administrative Agent or any Lender to serve
legal process in any other manner permitted by Applicable Law or affect the
right of the Administrative Agent or any Lender to bring any action or
proceeding against the Borrower or its properties in the courts of any other
jurisdictions.
SECTION 12.6 Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to the Notes or any
other Loan Documents ("Disputes"), between or among parties to the Notes or
any other Loan Document shall be resolved by binding arbitration as provided
herein. Institution of a judicial proceeding by a party does not waive the
right of that party to demand arbitration hereunder. Disputes may include,
without limitation, tort claims, counterclaims, claims brought as class
actions, claims arising from Loan Documents executed in the future, or claims
concerning any aspect of the past, present or future relationships arising out
of or connected with the Loan Documents. Arbitration shall be conducted under
and governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association and Title 9 of
the U.S. Code. All arbitration hearings shall be conducted in Charlotte,
North Carolina. The expedited procedures set forth in Rule 51, et seq. of the
Arbitration Rules shall be applicable to claims of less than $500,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from
which all arbitrators are selected shall be comprised of licensed attorneys.
The single arbitrator selected for expedited procedure shall be a retired
judge from the highest court of general jurisdiction, state or federal, of the
state where the hearing will be conducted. Notwithstanding the foregoing,
this paragraph shall not apply to any Hedging Agreement that is a Loan
Document.
(b) Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE ADMINISTRATIVE
AGENT, EACH LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE
OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the preceding
binding arbitration provisions, the parties hereto and the other Loan
Documents preserve, without diminution, certain remedies that such Persons may
employ or exercise freely, either alone, in conjunction with or during a
Dispute. Each such Person shall have and hereby reserves the right to proceed
in any court of proper jurisdiction or by self help to exercise or prosecute
the following remedies: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale granted in
the Loan Documents or under applicable law or by judicial foreclosure and
sale, (ii) all rights of self help including peaceful occupation of property
and collection of rents, set off, and peaceful possession of property, (iii)
obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and in filing
an involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit the
power of an arbitrator to grant similar remedies that may be requested by a
party in a Dispute.
SECTION 12.7 Reversal of Payments. To the extent the Borrower
makes a payment or payments to the Administrative Agent for the ratable
benefit of the Lenders or the Administrative Agent receives any payment or
proceeds of the collateral which payments or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then,
to the extent of such payment or proceeds repaid, the Obligations or part
thereof intended to be satisfied shall be revived and continued in full force
and effect as if such payment or proceeds had not been received by the
Administrative Agent.
SECTION 12.8 Injunctive Relief; Punitive Damages.
(a) The Borrower recognizes that, in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lenders.
Therefore, the Borrower agrees that the Lenders, at the Lenders' option, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(b) The Administrative Agent, Lenders and Borrower hereby agree that
no such Person shall have a remedy of punitive or exemplary damages against
any other party to a Loan Document and each such Person hereby waives any
right or claim to punitive or exemplary damages that they may now have or may
arise in the future in connection with any Dispute, whether such Dispute is
resolved through arbitration or judicially.
SECTION 12.9 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by
the Borrower or any its Designated Subsidiaries to determine compliance with
any covenant contained herein, shall, except as otherwise expressly
contemplated hereby or unless there is an express written direction by the
Administrative Agent to the contrary agreed to by the Borrower, be performed
in accordance with GAAP as in effect from time to time.
SECTION 12.10 Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Administrative Agent and the
Lenders, all future holders of the Notes, and their respective successors and
assigns, except that the Borrower shall not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent
of each Lender.
(b) Assignment by Lenders. Each Lender may, with the consent of the
Administrative Agent and the Borrower, which consents shall not be
unreasonably withheld (and which consent of the Borrower shall not be required
during the continuance of an Event of Default), assign to one or more Eligible
Assignees all or a portion of its interests, rights and obligations under this
Agreement (including, without limitation, all or a portion of the Loans at the
time owing to it and the Notes held by it); provided that:
(i) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and obligations under
this Agreement;
(ii) if less than all of the assigning Lender's Commitment
is to be assigned, the Commitment so assigned shall not be less than
$5,000,000 (other than to an Assignee who is then a Lender under this
Agreement, the C-TEC Credit Facility, the CCSM Credit Facility or the Cable
Systems Credit Facility);
(iii) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance in the form of Exhibit F attached
hereto (an "Assignment and Acceptance"), together with any Note or Notes
subject to such assignment;
(iv) such assignment shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission or apply to or qualify the Loans or the
Notes under the blue sky laws of any state; and
(v) the assigning Lender shall pay to the Administrative
Agent an assignment fee of $3,000 upon the execution by such Lender of the
Assignment and Acceptance; provided that no such fee shall be payable upon any
assignment by a Lender to an Affiliate thereof.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be at least five (5) Business Days after the execution thereof, (A)
the assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Lender
hereby and (B) the Lender thereunder shall, to the extent provided in such
assignment, be released from its obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto
as set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation
of the names and addresses of the Lenders and the amount of the Loans with
respect to each Lender from time to time (the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each person whose
name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the
Borrower or Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of Exhibit F:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the
Register;
(iii) give prompt notice thereof to the Lenders and the
Borrower; and
(iv) promptly deliver a copy of such Assignment and
Acceptance to the Borrower.
Within five (5) Business Days after receipt of notice, the Borrower shall
execute and deliver to the Administrative Agent, in exchange for the
surrendered Note or Notes, a new Note or Notes to the order of such Eligible
Assignee in amounts equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and a new Note or Notes to the order of the
assigning Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note or Notes,
shall be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the assigned Notes delivered to the
assigning Lender. Each surrendered Note or Notes shall be canceled and
returned to the Borrower.
(f) Participations. Each Lender may sell participations to one or
more banks or other entities in all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Loans and the Notes held by it); provided that:
(i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment) shall remain unchanged;
(ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations;
(iii) such Lender shall remain the holder of the Notes held
by it for all purposes of this Agreement;
(iv) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement;
(v) such Lender shall not permit such participant the
right to approve any waivers, amendments or other modifications to this
Agreement or any other Loan Document other than waivers, amendments or
modifications which would reduce the principal of or the interest rate on any
Loan or Reimbursement Obligation, extend the term or increase the amount of
the Commitment, reduce the amount of any fees to which such participant is
entitled, extend any scheduled payment date for principal of any Loan or,
except as expressly contemplated hereby or thereby, release substantially all
of the Collateral; and
(vi) any such disposition shall not, without the consent of
the Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission to apply to qualify the Loans or the Notes
under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. The Administrative
Agent and the Lenders shall hold all non-public information with respect to
the Borrower obtained pursuant to the Loan Documents on a need-to-know basis
for making and administering the credit basis in accordance with their
customary procedures for handling confidential information; provided, that the
Administrative Agent may disclose information relating to this Agreement to
Gold Sheets and other similar bank trade publications, such information to
consist of deal terms and other information customarily found in such
publications. Any Lender may, in connection with any assignment, proposed
assignment, participation or proposed participation pursuant to this Section
12.10, disclose to the assignee, participant, proposed assignee or proposed
participant, any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; provided, that prior to any such disclosure,
each such assignee, proposed assignee, participant or proposed participant
shall agree with the Borrower or such Lender to preserve the confidentiality
of any confidential information relating to the Borrower received from such
Lender.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit any
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
SECTION 12.11 Amendments, Waivers and Consents. (a) Except as set
forth below, any term, covenant, agreement or condition of this Agreement or
any of the other Loan Documents may be amended or waived by the Lenders, and
any consent given by the Lenders, if, but only if, such amendment, waiver or
consent is in writing signed by the Required Lenders (or by the Administrative
Agent with the consent of the Required Lenders) and delivered to the
Administrative Agent and, in the case of an amendment, signed by the Borrower;
provided, that no amendment, waiver or consent shall (i) increase the amount
or extend the time of the obligation of the Lenders to make Loans, (ii) extend
the originally scheduled time or times of payment of the principal of any Loan
or the time or times of payment of interest on any Loan, (iii) reduce the rate
of interest or fees payable on any Loan, (iv) permit any subordination of the
principal or interest on any Loan, (v) release any Security Document (other
than as specifically permitted in this Agreement or the applicable Security
Document), (vi) amend the provisions of this Section 12.11 or the definition
of Required Lenders (vii) amend the provisions of Section 4.4 providing that
all payments to the Lenders shall be pro rata in accordance with their
respective Commitment Percentages or (viii) amend the several nature of the
obligations of the Lenders under this Agreement, without the prior written
consent of each Lender. In addition, no amendment, waiver or consent to the
provisions of Article XII shall be made without the written consent of the
Administrative Agent.
(b) Each provision hereof which is incorporated by reference from the
C-TEC Credit Facility or CCSM Credit Facility shall be incorporated herein as
amended from time to time pursuant to the terms in each case thereof, without
the requirement of any separate consent hereunder.
SECTION 12.12 Performance of Duties. The Borrower's obligations
under this Agreement and each of the Loan Documents shall be performed by the
Borrower at its sole cost and expense.
SECTION 12.13 All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Lenders, the Administrative
Agent and any Persons designated by the Administrative Agent or any Lender
pursuant to any provisions of this Agreement or any of the other Loan
Documents shall be deemed coupled with an interest and shall be irrevocable so
long as any of the Obligations remain unpaid or unsatisfied or the Credit
Facility has not been terminated.
SECTION 12.14 Survival of Indemnities. Notwithstanding any
termination of this Agreement, the indemnities to which the Administrative
Agent and the Lenders are entitled under the provisions of this Article XII
and any other provision of this Agreement and the Loan Documents shall
continue in full force and effect and shall protect the Administrative Agent
and the Lenders against events arising after such termination as well as
before.
SECTION 12.15 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement.
SECTION 12.16 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 12.17 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and shall be binding upon all parties, their successors and assigns, and all
of which taken together shall constitute one and the same agreement.
SECTION 12.18 Term of Agreement. This Agreement shall remain in
effect from the Closing Date through and including the date upon which all
Obligations shall have been indefeasibly and irrevocably paid and satisfied in
full. No termination of this Agreement shall affect the rights and
obligations of the parties hereto arising prior to such termination.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
[CORPORATE SEAL] C-TEC CORPORATION
By: /s/ Bruce C. Godfrey
----------------------------
Name: Bruce C. Godfrey
Title: EVP & CFO
FIRST UNION NATIONAL BANK, as
Administrative Agent and Lender
By: /s/ Jim F. Rodman
----------------------------
Name: Jim F. Rodman
Title: Senior Vice President
SCHEDULE 1.1(a): LENDERS AND COMMITMENTS
COMMITMENT
AND COMMITMENT
LENDER PERCENTAGE
- ------ --------------
First Union National Bank $15,000,000.00
One First Union Center, TW-10 100%
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 383-0281
Telecopy No.: (704) 382-0288
Exhibit 3
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT (as amended, restated or otherwise
modified, the "Pledge Agreement"), dated as of June 30, 1997 is made by C-TEC
Corporation, a Pennsylvania corporation ("C-TEC"), in favor of First Union
National Bank, a national banking association ("First Union"), as
Administrative Agent for the ratable benefit of itself and the Lenders
delivered pursuant to the Credit Agreement dated as of June 30, 1997 (as
amended, restated or otherwise modified, the "Credit Agreement") by and among
the Pledgor, the Lenders who are or may become party thereto (the "Lenders")
and First Union National Bank, as Administrative Agent (the "Administrative
Agent").
STATEMENT OF PURPOSE
--------------------
Pursuant to the terms of the Credit Agreement, the Lenders have
agreed to extend certain credit facilities to the Borrowers in the aggregate
amount of up to the Aggregate Commitment under the Credit Agreement.
C-TEC is the legal and beneficial owner of the shares of
Pledged Stock (as hereinafter defined) issued by Mercom, Inc. (the "Issuer").
In connection with the transactions contemplated by the Credit
Agreement, the Lenders have requested, and C-TEC has agreed to execute and
deliver this Pledge Agreement and the Pledged Stock (in accordance with the
terms hereof) to the Administrative Agent for the ratable benefit of the
itself and the Lenders.
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into and make available
Loans pursuant to the Credit Agreement, the Pledgor hereby agrees with the
Administrative Agent for the ratable benefit of itself and the Lenders as
follows:
1. Defined Terms. Unless otherwise defined herein, terms which
are defined in the Credit Agreement and used herein are so used as so defined,
and the following terms shall have the following meanings:
"Code" means the Uniform Commercial Code from time to time in
effect in the State of North Carolina.
"Collateral" means the Pledged Stock and all Proceeds.
"Pledge Agreement" means this Pledge Agreement, as amended,
restated or otherwise modified.
"Pledged Stock" means the shares of capital stock of the
Issuer listed on Schedule I hereto, together with all stock
certificates, options or rights of any nature whatsoever that may
be issued or granted by the Issuer to the Pledgor while this
Pledge Agreement is in effect.
"Pledgor" means C-TEC and, after the execution and delivery
of the Pledge Supplement in the form attached hereto as Exhibit A
as of the Assumption Date in accordance with Section 2.6 of the
Credit Agreement, Cable Michigan.
"Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the Code on the date hereof and, in any event,
shall include, without limitation, all dividends or other income
from the Pledged Stock, collections thereon, proceeds of sale
thereof or distributions with respect thereto.
2. Pledge and Grant of Security Interest. The Pledgor hereby
delivers to the Administrative Agent, for the ratable benefit of itself and
the Lenders, all the Pledged Stock and hereby grants to Administrative Agent,
for the ratable benefit of itself and the Lenders, a first priority security
interest in the Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
3. Stock Powers. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor.
4. Representations and Warranties. To induce the
Administrative Agent and Lenders to execute the Credit Agreement and make any
Loans and to accept the security contemplated hereby, the Pledgor hereby
represents and warrants that:
(a) the Pledgor has the corporate power, authority and
legal right to execute and deliver, to perform its obligations
under, and to grant the Lien on the Collateral pursuant to, this
Pledge Agreement and has taken all necessary corporate action to
authorize its execution, delivery and performance of, and grant of
the Lien on the Collateral pursuant to, this Pledge Agreement;
(b) this Pledge Agreement constitutes a legal, valid and
binding obligation of the Pledgor enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by the
availability of equitable remedies;
(c) except as contemplated by Section 19 hereof, the
execution, delivery and performance of this Pledge Agreement will
not violate any provision of any Applicable Law or contractual
obligation of the Pledgor and will not result in the creation or
imposition of any Lien on any of the properties or revenues of the
Pledgor pursuant to any Applicable Law or contractual obligation,
except as contemplated hereby;
(d) except as contemplated by Section 19 hereof, no
consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any
stockholder or creditor of the Pledgor or any Issuer), is required
in connection with the execution, delivery, performance, validity
or enforceability of this Pledge Agreement, except that certain
routine notification filings with the FCC, any applicable PUC and
any Governmental Authority that grants CATV Franchises with
respect to the Loan Documents may be required after the Closing
Date;
(e) no litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to
the knowledge of the Pledgor, threatened by or against the Pledgor
or against any of its properties or revenues with respect to this
Pledge Agreement or any of the transactions contemplated hereby;
(f) the shares of Pledged Stock listed on Schedule I
constitute all the issued and outstanding shares of all classes of
the capital stock of the Issuer;
(g) all the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable;
(h) the Pledgor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Stock listed on
Schedule I, free of any and all Liens or options in favor of, or
claims of, any other Person, except the Lien created by this
Pledge Agreement; and
(i) upon (i) filing of UCC-1 financing statements with the
jurisdictions set forth on Schedule II hereto and (ii) delivery to
the Administrative Agent of the stock certificates evidencing the
Pledged Stock, the Lien granted pursuant to this Pledge Agreement
will constitute a valid, perfected first priority Lien on the
Collateral (to the extent that such a security interest in such
collateral can be perfected under the Code by taking such action
(and subject to the requirements of Section 9-306 of the Code with
respect to any proceeds of Collateral and to the further
requirement that additional steps described in Section 5(a) hereof
may be necessary to perfect a security interest in dividends or
other distributions in kind)) enforceable as such against all
creditors of the Pledgor and any Persons purporting to purchase
any Collateral from the Pledgor.
5. Certain Covenants. The Pledgor covenants and agrees with
the Administrative Agent for the ratable benefit of the Administrative Agent
and the Lenders that, from and after the date of this Pledge Agreement until
the Obligations are paid in full and the Commitments are terminated:
(a) If the Pledgor shall, as a result of its ownership of
the Pledged Stock, become entitled to receive or shall receive any
stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with
any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option
or rights, whether in addition to, in substitution of, as a
conversion of, or in exchange for any shares of the Pledged Stock,
or otherwise in respect thereof, the Pledgor shall accept the same
as the agent of the Administrative Agent, hold the same in trust
for the Administrative Agent and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by
the Pledgor to the Administrative Agent, if required, together with
an undated stock power covering such certificate duly executed in
blank by the Pledgor, to be held by the Administrative Agent,
subject to the terms hereof, as additional collateral security for
the Obligations. In addition, any sums paid upon or in respect of
the Pledged Stock upon the liquidation or dissolution of the
Issuer shall be paid over to the Administrative Agent to be held
by it hereunder as additional collateral security for the
Obligations, and in case any distribution of capital shall be made
on or in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant to
the recapitalization or reclassification of the capital of the
Issuer or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Administrative Agent to be
held by it hereunder as additional collateral security for the
Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Stock shall be received by
the Pledgor, the Pledgor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or
property in trust for the Administrative Agent, segregated from
other funds of the Pledgor, as additional collateral security for
the Obligations.
(b) Without the prior written consent of the
Administrative Agent, the Pledgor will not (i) vote to enable, or
take any other action to permit, the Issuer to issue any stock or
other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of
the Issuer, (ii) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral,
or (iii) create, incur or permit to exist any Lien or option in
favor of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the Lien provided
for by this Pledge Agreement; provided, however, nothing contain
in the Section 5(b) shall prohibit the Mercom Contribution. The
Pledgor will defend the right, title and interest of the
Administrative Agent in and to the Collateral against the claims
and demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of
the Pledgor, the Pledgor will promptly and duly execute and
deliver such further instruments and documents and take such
further actions as the Administrative Agent may reasonably request
for the purposes of obtaining or preserving the full benefits of
this Pledge Agreement and of the rights and powers herein granted
provided, that unless an Event of Default shall have occurred and
be continuing, the Pledgor shall not be obligated to make any
filing with, or to seek or obtain any consent or authorization of,
any Governmental Authority of the nature described in Section 19
hereof. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any promissory
note, other instrument or chattel paper, such note, instrument or
chattel paper shall be immediately delivered to the Administrative
Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this
Pledge Agreement.
(d) The Pledgor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all
liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may
be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions
contemplated by this Pledge Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default
shall have occurred and be continuing and the Administrative Agent shall have
given notice to the Pledgor of the Administrative's Agent intent to exercise
its rights pursuant to Section 7 below, the Pledgor shall be permitted to
receive all dividends or other payments or distributions made upon or with
respect to the Pledged Stock in cash paid in accordance with the terms of the
Credit Agreement in respect of the Pledged Stock and to exercise all voting
and corporate rights with respect to the Pledged Stock; provided, that no vote
shall be cast or corporate right exercised or other action taken which, in the
Administrative Agent's judgment, exercised in a reasonable manner, would
impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, the Notes, any other Loan
Documents or this Pledge Agreement.
7. Rights of the Administrative Agent.
(a) If an Event of Default shall occur on or after the
Borrowing Date and be continuing and the Administrative Agent shall give
notice of its intent to exercise such rights to the Pledgor, (i) the
Administrative Agent shall have the right to receive any and all cash
dividends paid in respect of the Pledged Stock and make application thereof to
the Obligations in the order set forth in the Credit Agreement and (ii) all
shares of the Pledged Stock shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its
nominee may thereafter exercise, in a commercially reasonable manner but
otherwise in its discretion, (A) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders
of the Issuer or otherwise and (B) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining to such
shares of the Pledged Stock (including, without limitation, the right to
exchange any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of the Issuer, or upon the exercise by the Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such
shares of the Pledged Stock, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as it may determine), all without liability except to account for
property actually received by it, but the Administrative Agent shall have no
duty to the Pledgor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.
(b) The rights of the Administrative Agent and the Lenders
hereunder shall not be conditioned or contingent upon the pursuit by the
Administrative Agent or any Lender of any right or remedy against the Borrower
or against any other Person which may be or become liable in respect of all or
any part of the Obligations or against any collateral security therefor,
guarantee therefor or right of offset with respect thereto. Neither the
Administrative Agent nor any Lender shall be liable for any failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so, nor shall the Administrative Agent be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Pledgor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
8. Remedies. If an Event of Default shall occur and be
continuing, with the consent of the Required Lenders, the Administrative Agent
may, and upon the request of the Required Lenders, the Administrative Agent
shall, exercise on behalf of itself and the Lenders, all rights and remedies
granted in this Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, and in addition thereto,
all rights and remedies of a secured party under the Code. Without limiting
the generality of the foregoing with regard to the scope of the Administrative
Agent's remedies, the Administrative Agent, without demand of performance or
other demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to or upon the Pledgor,
the Issuer or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or
any part thereof, and/or may forthwith sell, assign, give option or options to
purchase or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Administrative Agent or any Lender
or elsewhere upon such terms and conditions as it may deem advisable and at
such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Administrative Agent or any Lender
shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole
or any part of the Collateral so sold, free of any right or equity of
redemption in the Pledgor, which right or equity is hereby waived or released.
The Administrative Agent shall apply any Proceeds from time to time held by it
and the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of
every kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral
or the rights of the Administrative Agent and the Lenders hereunder,
including, without limitation, reasonable attorneys' fees and disbursements of
counsel thereto, to the payment in whole or in part of the Obligations, in the
order set forth in the Credit Agreement, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of
the Code, need the Administrative Agent account for the surplus, if any, to
the Pledgor. To the extent permitted by applicable law, the Pledgor waives
all claims, damages and demands it may acquire against the Administrative
Agent or any Lender arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable
and proper if given at least 10 days before such sale or other disposition.
The Pledgor further waives and agrees not to assert any rights or privileges
which it may acquire under Section 9-112 of the Code.
9. Private Sales.
(a) The Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Administrative Agent shall be under no obligation to delay a sale
of any of the Pledged Stock for the period of time necessary to permit the
Issuer to register such securities for public sale under the Securities Act,
or under applicable state securities laws, even if the Issuer would agree to
do so.
(b) The Pledgor further agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section 9
valid and binding and in compliance with any and all other Applicable Laws.
The Pledgor further agrees that a breach of any of the covenants contained in
this Section 9 will cause irreparable injury to the Administrative Agent and
the Lenders not compensable in damages, that the Administrative Agent and the
Lenders have no adequate remedy at law in respect of such breach and, as a
consequence, that to the greatest extent permitted by law each and every
covenant contained in this Section 9 shall be specifically enforceable against
the Pledgor, and to the greatest extent permitted by law the Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default
has occurred under the Credit Agreement.
10. No Subrogation. Notwithstanding any payment or payments
made by the Pledgor hereunder, or any setoff or application of funds of the
Pledgor by the Administrative Agent or Lender, or the receipt of any amounts
by the Administrative Agent or any Lender with respect to any of the
Collateral, the Pledgor shall not be entitled to be subrogated to any of the
rights of the Administrative Agent or any Lender against the Borrower or
against any other collateral security held by the Administrative Agent or any
Lender for the payment of the Obligations, nor shall the Pledgor seek any
reimbursement from the Borrower in respect of payments made by the Pledgor in
connection with the Collateral, or amounts realized by the Administrative
Agent or any Lender in connection with the Collateral, until all amounts owing
to the Agents and Lenders on account of the Obligations are paid in full and
the Commitments are terminated. If any amount shall be paid to the Pledgor on
account of such subrogation rights at any time when all of the Obligations
shall not have been paid in full, such amount shall be held by the Pledgor in
trust for the Administrative Agent, segregated from other funds of the
Pledgor, and shall, forthwith upon receipt by the Pledgor, be turned over to
the Administrative Agent in the exact form received by the Pledgor (duly
indorsed by the Pledgor to the Administrative Agent, if required) to be
applied against the Obligations, whether matured or unmatured, in such order
as set forth in the Credit Agreement.
11. Amendments, etc. With Respect to the Obligations. The
Pledgor shall remain obligated hereunder, and the Collateral shall remain
subject to the Lien granted hereby, notwithstanding that, without any
reservation of rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of any of the Obligations made
by the Administrative Agent or any Lender may be rescinded by the
Administrative Agent or such Lender, and any of the Obligations continued, and
the Obligations, or the liability of the Borrower or any other Person upon or
for any part thereof, or any collateral security or guarantee therefor or
right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified accelerated, compromised,
waived, surrendered, or released by the Administrative Agent or any Lender,
and the Credit Agreement, the Notes, any other Loan Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Lenders (or the
Required Lenders, as the case may be) may deem advisable from time to time,
and any guarantee, right of offset or other collateral security at any time
held by the Administrative Agent or any Lender for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any other Lien at any time held by it as security
for the Obligations or any property subject thereto. The Pledgor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon this Pledge Agreement; the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred in
reliance upon this Pledge Agreement; and all dealings between the Borrower and
the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on
the other, shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Pledge Agreement. The Pledgor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrower or the Pledgor with respect to the
Obligations.
12. Regulatory Approval. The Pledgor will, at its expense,
promptly execute and deliver, or cause the execution and delivery of, all
applications, certificates, instruments, registration statements and all other
documents and papers the Administrative Agent may, to the extent commercially
reasonable, request or as may be required by law in connection with the
obtaining of any consent, approval, registration, qualification or
authorization of any Governmental Authority or of any other Person necessary
or appropriate for the effective exercise of any rights under this Pledge
Agreement, provided, that unless an Event of Default shall have occurred and
be continuing, the Pledgor shall not be obligated to make any filing with, or
to seek or obtain any consent or authorization of, any Governmental Authority
of the nature described in Section 19 hereof. Without limiting the generality
of the foregoing, if an Event of Default shall have occurred and be
continuing, the Pledgor shall take any action which the Administrative Agent
may, to the extent commercially reasonable, request in order to transfer and
assign to the Administrative Agent, or to such one or more third parties as
the Administrative Agent may designate, or to a combination of the foregoing,
each FCC License, PUC Authorization and CATV Franchise. To enforce the
provisions of this Section, the Administrative Agent is, at any time when an
Event of Default has occurred and is continuing, empowered to request the
appointment of a receiver from any court of competent jurisdiction. Such
receiver shall be instructed to seek from the applicable Governmental
Authority an involuntary transfer of control of each such FCC License, PUC
Authorization and CATV Franchise for the purpose of seeking a bona fide
purchaser to whom control will ultimately be transferred. The Pledgor hereby
agrees, so long as such Event of Default is continuing, to authorize such an
involuntary transfer of control upon the request of the receiver so appointed
and, if the Pledgor shall refuse to authorize the transfer, its approval may
be required by the court. Upon the occurrence and continuance of an Event of
Default, the Pledgor shall further use its best efforts to assist in obtaining
approval of the applicable Governmental Authority, if required, for any action
or transactions contemplated by this Pledge Agreement including, without
limitation, the preparation, execution and filing with the applicable
Governmental Authority of the assignor's or transferor's portion of any
application or applications for consent to the assignment of any FCC License,
PUC Authorization or CATV Franchise or transfer of control necessary or
appropriate under the rules and regulations of the applicable Governmental
Authority for the approval of the transfer or assignment of any portion of the
Collateral, together with any FCC License, PUC Authorization and CATV
Franchise. The Pledgor acknowledges that the assignment or transfer of each
FCC License, PUC Authorization and CATV Franchise is integral to the
Administrative Agent's and Lenders' realization of the value of the
Collateral, that there is no adequate remedy at law for failure by the Pledgor
to comply with the provisions of this Section and that such failure would
cause irreparable injury not adequately compensable in damages, and therefore
agrees that to the greatest extent permitted by law each and every covenant
contained in this Section may be specifically enforced, and to the greatest
extent permitted by law the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants.
13. Limitation on Duties Regarding Collateral. The
Administrative Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar securities and property for its own
account. Neither the Administrative Agent, any Lender nor any of their
respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or otherwise.
14. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral constitute
irrevocable powers coupled with an interest.
15. Severability. Any provision of this Pledge Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
16. Paragraph Headings. The paragraph headings used in this
Pledge Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
17. No Waiver; Cumulative Remedies. Neither the Administrative
Agent nor any Lender shall by any act (except by a written instrument pursuant
to Section 18 hereof) be deemed to have waived any right or remedy hereunder
or to have acquiesced in any Default or Event of Default or in any breach of
any of the terms and conditions hereof. No failure to exercise, nor any delay
in exercising, on the part of the Administrative Agent or any Lender, any
right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent or any Lender
of any right or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Administrative Agent or such Lender
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.
18. Waivers and Amendments; Successors and Assigns; Governing
Law. None of the terms or provisions of this Pledge Agreement may be amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and Administrative Agent; provided that (i) any provision of this
Pledge Agreement may be waived by the Administrative Agent in a letter or
agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent and (ii) any consent by the
Administrative Agent to any amendment, supplement or modification hereto shall
be subject to approval thereof by the Lenders or Required Lenders, as
applicable, in accordance with Section 13.11 of the Credit Agreement. This
Pledge Agreement shall be binding upon the successors and assigns of the
Pledgor and shall inure to the benefit of the Administrative Agent and the
Lenders and their respective successors and assigns. This Pledge Agreement
shall be governed by, and construed and interpreted in accordance with, the
laws of the State of North Carolina.
19. Regulatory Concerns. Notwithstanding any other provision to
the contrary contained in this Agreement, the ability of the Administrative
Agent to (i) transfer record ownership of the Pledged Stock into the name
of the Administrative Agent or its nominee pursuant to Section 7 hereof,
(ii) vote and give consents, ratifications and waivers with respect to the
Pledged Stock pursuant to Section 7 hereof and (iii) sell the Pledged Stock
pursuant to Section 8 or 9 hereof is subject to the Administrative Agent or
its nominee (a) obtaining, to the extent necessary under applicable laws
and regulations, the prior approval of the FCC, any PUC or any other
Governmental Authority having jurisdiction with respect to any Issuer and
its Subsidiaries and (b) making any additional filings, reports or
notifications required with respect to the exercise by the Administrative
Agent of the powers specified in clauses (i), (ii) and (iii) of this
section.
20. Notices. All notices and communications hereunder shall be
given to the addresses and otherwise in accordance with Section 12.1 of the
Credit Agreement.
21. Irrevocable Authorization and Instruction to Issuer. The
Pledgor hereby authorizes and instructs the Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and (b) is otherwise in
accordance with the terms of this Pledge Agreement, without any other or
further instructions from the Pledgor, and the Pledgor agrees that the Issuer
shall be fully protected in so complying.
22. Authority of Administrative Agent. The Pledgor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Pledge Agreement with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the Administrative
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Pledge Agreement
shall, as between the Administrative Agent and the Lenders, be governed by the
Credit Agreement and by such other agreements with respect thereto as may
exist from time to time among them, but, as between the Administrative Agent
and the Pledgor, the Administrative Agent shall be conclusively presumed to be
acting as agent for itself and the Lenders with full and valid authority so to
act or refrain from acting, and neither the Pledgor nor any Issuer shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
23. Consent to Jurisdiction. The Pledgor hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located
in Mecklenburg County, North Carolina, in any action, claim or other
proceeding arising out of any dispute in connection with this Pledge
Agreement, the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations. The Pledgor
hereby irrevocably consents to the service of a summons and complaint and
other process in any action, claim or proceeding brought by the Administrative
Agent or any Lender in connection with this Pledge Agreement, the other Loan
Documents, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations, on behalf of itself or its
property, in the manner specified in Section 20. Nothing in this Section 23
shall affect the right of the Administrative Agent or any Lender to serve
legal process in any other manner permitted by Applicable Law or affect the
right of the Administrative Agent or any Lender to bring any action or
proceeding against the Pledgors or their properties, individually or
collectively, in the courts of any other jurisdictions.
24. Binding Arbitration; Waiver of Jury Trial.
(a) Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT, EACH LENDER AND THE PLEDGOR HEREBY IRREVOCABLY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR
OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS PLEDGE
AGREEMENT OR THEREUNDER, THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(b) Binding Arbitration. Upon demand of any party, whether
made before or after institution of any judicial proceeding, any dispute,
claim or controversy arising out of, connected with or relating to this Pledge
Agreement or any other Loan Documents ("Disputes"), between or among parties
to this Agreement or any other Loan Document shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by a
party does not waive the right of that party to demand arbitration hereunder.
Disputes may include, without limitation, tort claims, counterclaims, claims
brought as class actions, claims arising from Loan Documents executed in the
future, or claims concerning any aspect of the past, present or future
relationships arising out or connected with the Loan Documents. Arbitration
shall be conducted under and governed by the Commercial Financial Disputes
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration
hearings shall be conducted in Charlotte, North Carolina. The expedited
procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be
applicable to claims of less than $500,000. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be
entered in any court having jurisdiction. The panel from which all
arbitrators are selected shall be comprised of licensed attorneys. The single
arbitrator selected for expedited procedure shall be a retired judge from the
highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted. Notwithstanding the foregoing, this paragraph
shall not apply to any Hedging Agreement that is a Loan Document.
(c) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto and the other
Loan Documents preserve, without diminution, certain remedies that such
Persons may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Each such Person shall have and hereby reserves the right
to proceed in any court of proper jurisdiction or by self help to exercise or
prosecute the following remedies: (i) all rights to foreclose against any
real or personal property or other security by exercising a power of sale
granted in the Loan Documents or under applicable law or by judicial
foreclosure and sale, (ii) all rights of self help including peaceful
occupation of property and collection of rents, set off, and peaceful
possession of property, (iii) obtaining provisional or ancillary remedies
including injunctive relief, sequestration, garnishment, attachment,
appointment of receiver and in filing an involuntary bankruptcy proceeding,
and (iv) when applicable, a judgment by confession of judgment. Preservation
of these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute.
25. Reorganization. Notwithstanding anything to the contrary
contained in this Agreement, no action required to be taken by the Pledgor or
the Issuer pursuant to the Reorganization shall be deemed to constitute an
Event of Default arising out of a breach of the terms of this Agreement;
provided, that if any such action conflicts with or otherwise results in any
breach of any provision of this Agreement, the Pledgor and the Issuer, or their
successors or assignees shall execute such amendments thereto and take all the
actions reasonably requested by the Administrative Agent in order that this
Agreement shall remain enforceable in accordance with its terms against such
Persons after the Reorganization.
26. Termination of Pledge Agreement. This Pledge Agreement
shall terminate upon the date when the obligations have been paid in full and
the Commitments terminated. Upon the termination of this Pledge Agreement, the
Administrative Agent will, at the expense of the Pledgor, deliver any
certificates evidencing the Pledged Stock and any other Collateral held by it
to the Pledgor and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence the termination of the Lien
created hereby on the Collateral.
IN WITNESS WHEREOF, the undersigned has caused this Pledge
Agreement to be executed under seal by its duly authorized officers as of the
date first above written.
[CORPORATE SEAL] C-TEC CORPORATION
By: /s/ Bruce C. Godfrey
---------------------------
Name: Bruce C. Godfrey
Title: EVP & CFO
ACKNOWLEDGEMENT AND CONSENT
The Issuer referred to in the foregoing Pledge Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to it. The
Issuer agrees to notify the Administrative Agent promptly in writing of the
occurrence of any of the events described in Section 5(a) of the Pledge
Agreement with respect to its shares.
[CORPORATE SEAL] MERCOM, INC.
ATTEST: By: /s/ Bruce C. Godfrey
----------------------------
Name: Bruce C. Godfrey
Title: EVP & CFO
SCHEDULE 1
To Pledge
Agreement
---------
DESCRIPTION OF PLEDGED STOCK
Class of Stock No. of
Issuer StockCertificate No. Shares
------ -------------------- ------
Mercom, Inc. common MCC 5243 761,483
Mercom, Inc. common MCC 5246 5,100
Mercom, Inc. common MCC 5252 2,944
Mercom, Inc. common MCC 5268 420
Mercom, Inc. common MCC 5269 13,000
Mercom, Inc. common MCC 5283 330
Mercom, Inc. common MCC 5401 330
Mercom, Inc. common MCC 5407 2,000
Mercom, Inc. common MCC 5410 142,800
Mercom, Inc. common MCC 5417 32,100
Mercom, Inc. common MCC 5427 5,000
Mercom, Inc. common MCC 5441 10,500
Mercom, Inc. common MF 46 4,000
Mercom, Inc. common MF 76 14,400
Mercom, Inc. common MF 78 4,000
Mercom, Inc. common MF 79 6,000
Mercom, Inc. common MF 90 16,000
Mercom, Inc. common MF 134 146
Mercom, Inc. common MF 151 400
Mercom, Inc. common MF 182 2,000
Mercom, Inc. common MF 183 5,000
Mercom, Inc. common MF 184 10,000
Mercom, Inc. common MF 191 1,241
Mercom, Inc. common MF 212 5,000
Mercom, Inc. common MF 1302 1,920,056
TOTAL 2,964,250
SCHEDULE II
To Pledge
Agreement
---------
UCC INFORMATION
Debtor Filing Jurisdiction
- ------ -------------------
C-TEC Corporation Secretary of State, New Jersey
C-TEC Corporation Mercer County, New Jersey
Exhibit A to Pledge Agreement
PLEDGE AGREEMENT SUPPLEMENT, dated as of ________________, 19__ (the
"Supplement"), made by C-TEC Cable Systems of Michigan, Inc. ("CCSM"), in
favor of First Union National Bank, a national banking corporation, as
Administrative Agent (in such capacity, the "Administrative Agent"), under the
Credit Agreement (as defined in the Pledge Agreement referred to below) for
the ratable benefit of itself and the Lenders (as so defined).
Reference is hereby made to that Pledge Agreement, dated as of ____________,
1997, made by C-TEC Corporation ("C-TEC") in favor of the Administrative Agent
(as amended, restated or otherwise modified as of the date hereof, the "Pledge
Agreement"). As a result of the Mercom Contribution, CCSM will own all of the
Pledged Shares under the Pledge Agreement and, in connection therewith, CCSM
has agreed to execute this Supplement to confirm that it is the Pledgor under
the Pledge Agreement. This Supplement supplements the Pledge Agreement, forms
a part thereof and is subject to the terms thereof. Terms defined in the
Pledge Agreement are used herein as therein defined.
CCSM hereby confirms that it is the Pledgor under the Pledge Agreement, bound
by each of the terms thereof, and grants and reaffirms the first priority
security interest in the Collateral granted to the Administrative Agent for
the ratable benefit of itself and the Lenders thereunder as collateral
security for the Obligations.
CCSM hereby represents and warrants that the representations and warranties
contained in paragraph 4 of the Pledge Agreement are true and correct on the
date of this Supplement with references therein to the "Pledge Agreement" to
mean the Pledge Agreement as supplemented by this Supplement.
CCSM hereby agrees to deliver to the Administrative Agent such certificates
and other documents and take such other action as shall be reasonably
requested by the Administrative Agent in order to effectuate the terms hereof
and the Pledge Agreement.
[Signature page follows]
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly
executed under seal and delivered as of the date first above written.
C-TEC CABLE SYSTEMS OF MICHIGAN, INC.
[CORPORATE SEAL] By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Exhibit 4
PLEDGE AGREEMENT SUPPLEMENT
---------------------------
PLEDGE AGREEMENT SUPPLEMENT, dated as of September 30, 1997 (the
"Supplement"), made by Cable Michigan, Inc. ("CCSM"), in favor of First Union
National Bank, a national banking corporation, as Administrative Agent (in
such capacity, the "Administrative Agent"), under the Credit Agreement (as
defined in the Pledge Agreement referred to below) for the ratable benefit of
itself and the Lenders (as so defined).
Reference is hereby made to that Pledge Agreement, dated as of June 30,
1997, made by C-TEC Corporation ("C-TEC") in favor of the Administrative Agent
(as amended, restated or otherwise modified as of the date hereof, the "Pledge
Agreement"). As a result of the Mercom Contribution, CCSM will own all of the
Pledged Shares under the Pledge Agreement and, in connection therewith, CCSM
has agreed to execute this Supplement to confirm that it is the Pledgor under
the Pledge Agreement and Mercom, Inc. has agreed to execute this Supplement to
confirm it remains the Issuer thereunder. This Supplement supplements the
Pledge Agreement, forms a part thereof and is subject to the terms thereof.
Terms defined in the Pledge Agreement are used herein as therein defined.
CCSM hereby confirms that it is the Pledgor under the Pledge Agreement,
bound by each of the terms thereof, and grants and reaffirms the first
priority security interest in the Collateral granted to the Administrative
Agent for the ratable benefit of itself and the Lenders thereunder as
collateral security for the Obligations.
CCSM hereby represents and warrants that the representations and
warranties contained in paragraph 4 of the Pledge Agreement are true and
correct on the date of this Supplement (taking into account any revisions to
Schedule I (because of the issuance of a replacement stock certificate) or
Schedule II to the Pledge Agreement accompanying this Supplement) with
references therein to the "Pledge Agreement" to mean the Pledge Agreement as
supplemented by this Supplement.
Mercom hereby confirms its acknowledgement of and consent to the Pledge
Agreement and the terms thereof and confirms it remains the Issuer thereunder.
CCSM hereby agrees to deliver to the Administrative Agent such
certificates and other documents and take such other action as shall be
reasonably requested by the Administrative Agent in order to effectuate the
terms hereof and the Pledge Agreement.
C-TEC is hereby released from all of its obligations as Pledgor under
the Pledge Agreement.
[Signature page follows]
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
duly executed under seal and delivered as of the date first above written.
CABLE MICHIGAN, INC.
[CORPORATE SEAL] By: /s/ Timothy J. Stoklosa
-----------------------
Name: Timothy J. Stoklosa
Title: Senior Vice President,
Treasurer
MERCOM, INC.
[CORPORATE SEAL] By: /s/ Timothy J. Stoklosa
-----------------------
Name: Timothy J. Stoklosa
Title: Senior Vice President,
Treasurer
The foregoing Pledge Agreement
Supplement executed by Cable
Michigan, Inc. is hereby agreed
to and accepted this ___ of September
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
-------------------
Name:
-----------------
Title:
----------------
SCHEDULE I
to Pledge
Agreement
Class of Stock Number of
Issuer Stock Certificate Number Shares
- ------ ----- ------------------ ------
Mercom, Inc. common MB 01699 2,964,250
SCHEDULE II
To Pledge
Agreement
UCC INFORMATION
Debtor Filing Jurisdiction
- ------ -------------------
Cable Michigan, Inc. Secretary of State, New Jersey
Cable Michigan, Inc. Mercer County, New Jersey
Exhibit 5
ASSUMPTION AGREEMENT
--------------------
THIS ASSUMPTION AGREEMENT, dated as of the 30th day of
September, 1997 (the "Agreement"), at 11:50 A.M. to the Credit Agreement
referred to below is entered into by and among C-TEC CORPORATION, a
corporation organized under the laws of New Jersey ("C-TEC"), CABLE MICHIGAN,
INC. ("CCSM"), a corporation organized under the laws of Pennsylvania, and
FIRST UNION NATIONAL BANK, a national banking association, as Administrative
Agent (the "Administrative Agent").
Statement of Purpose
--------------------
C-TEC Corporation, the Lenders and Administrative Agent are
parties to the $15,000,000 Credit Agreement dated as of June 30, 1997 (as
supplemented hereby and as further amended, restated or otherwise modified,
the "Credit Agreement").
Pursuant to Section 2.6 of the Credit Agreement and in
connection with the Mercom Contribution, CCSM is required to execute, among
other documents, an assumption agreement in order to become the Borrower under
the Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good
and valuable consideration, the parties hereto hereby agree as follows:
1.01 Assumption to CCSM. Pursuant to Section 2.6 of the Credit
Agreement, CCSM hereby irrevocably and unconditionally assumes all
Obligations, whether now or hereafter outstanding, and agrees that it is the
Borrower under the Credit Agreement as if a signatory thereof on the Closing
Date. CCSM shall comply with and be subject to and have the benefit of all of
the terms, conditions, covenants, agreements and obligations set forth
therein. CCSM hereby agrees that each reference to the "Borrower" in the
Credit Agreement and other Loan Documents shall be a reference to CCSM. CCSM
acknowledges that it has received a copy of the Credit Agreement and that it
has read and understands the terms thereof.
2.01 Effectiveness. This Agreement shall become effective as
of the time indicated above upon receipt by the Administrative Agent of (i) an
originally executed Note for each Lender executed by CCSM in exchange for the
Notes issued thereto by C-TEC Corporation, (ii) an originally executed
counterpart hereof, (iii) favorable legal opinions addressed to the
Administrative Agent and Lenders in form and substance satisfactory thereto
with respect to the validity and binding effect of this Assumption Agreement,
(iv) a supplement to the Mercom Pledge Agreement executed by CCSM to confirm
the pledge thereby of the stock of Mercom owned by CCSM and (v) such other
documents and closing certificates as may be reasonably requested by the
Administrative Agent consistent with the terms of Article IV of the Credit
Agreement to confirm that CCSM is the Borrower under the Credit Agreement.
3.01 General Provisions.
(a) Representations and Warranties. CCSM hereby represents and
warrants that as of the date hereof there are no claims or offsets against or
defenses or counterclaims to its obligations under the Credit Agreement or any
other Loan Document.
(b) Limited Effect. Except as supplemented hereby, the Credit
Agreement and each other Loan Document shall continue to be, and shall remain,
in full force and effect. This Agreement shall not be deemed (i) to be a
waiver of, or consent to , or a modification or amendment of, any other term
or condition of the Credit Agreement or (ii) to prejudice any right or rights
which the Agent or Lenders may now have or may have in the future under or in
connection with the Credit Agreement or the Loan Documents or any of the
instruments or agreements referred to therein, as the same may be amended or
modified from time to time.
(c) Costs and Expenses. CCSM hereby agrees to pay or reimburse
the Administrative Agent for all of its reasonable and customary out-of-pocket
costs and expenses incurred in connection with the preparation, negotiation and
execution of this Agreement, including, without limitation, the reasonable
fees and disbursements of counsel.
(d) Counterparts. This Agreement may be executed by one or
more of the parties hereto in any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
(e) Definitions. All capitalized terms used and not defined
herein shall have the meanings given thereto in the Credit Agreement.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
IN WITNESS WHEREOF the undersigned hereby causes this Agreement
to be executed and delivered as of the date first above written.
[CORPORATE SEAL] C-TEC CORPORATION
By: /s/ Timothy J. Stoklosa
Name: Timothy J. Stoklosa
Title: SVP, Treasurer
[CORPORATE SEAL] CABLE MICHIGAN, INC.
By: /s/ Timothy J. Stoklosa
----------------------------
Name: Timothy J. Stoklosa
Title: SVP, Treasurer
FIRST UNION NATIONAL BANK,
as Administrative Agent
By: /s/ Bruce W. Loftin
----------------------------
Name: Bruce W. Loftin
Title: Senior Vice President
