<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. 4)*
Mercom, Inc.
--------------------------------------------------------
(Name of Issuer)
Common Stock, par value $1.00 per share
--------------------------------------------------------
(Title of Class of Securities)
58935D109
--------------------------------------------------------
(CUSIP Number)
Copy to:
Joel C. Cohen Jill Sugar Factor
Avalon Cable of Michigan, Inc. Kirkland & Ellis
201 East 69th Street, Penthouse G 200 E. Randolph Drive
New York, NY 10021 Chicago, Illinois 60601
212/421-0600 312/861-2000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 6, 1998
--------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
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
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following pages)
Page 1 of 19 Pages
<PAGE>
- ----------------------- ----------------------
CUSIP NO. 58935D109 13D PAGE 2 OF 19 PAGES
- ----------------------- ----------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Avalon Cable of Michigan, Inc. (formerly Cable Michigan, Inc.)
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
Not Applicable (See Item 3)
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Pennsylvania
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 2,964,250 (See Item 5)
-----------------------------------------------------------
BENEFICIALLY SHARED VOTING POWER
8
OWNED BY 0 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,964,250 (See Item 5)
-----------------------------------------------------------
PERSON SHARED DISPOSITIVE POWER
10
WITH 0 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,964,250 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
61.9% (See Item 5)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ----------------------- ----------------------
CUSIP NO. 58935D109 13D PAGE 3 OF 19 PAGES
- ----------------------- ----------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Avalon Cable of Michigan Holdings, Inc.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
Not Applicable
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 2,964,250 (See Item 5)
-----------------------------------------------------------
BENEFICIALLY SHARED VOTING POWER
8
OWNED BY 0 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,964,250 (See Item 5)
-----------------------------------------------------------
PERSON SHARED DISPOSITIVE POWER
10
WITH 0 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,964,250 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
61.9% (See Item 5)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ----------------------- ----------------------
CUSIP NO. 58935D109 13D PAGE 4 OF 19 PAGES
- ----------------------- ----------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Avalon Cable Holdings, LLC
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
Not Applicable
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 2,964,250 (See Item 5)
-----------------------------------------------------------
BENEFICIALLY SHARED VOTING POWER
8
OWNED BY 0 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,964,250 (See Item 5)
-----------------------------------------------------------
PERSON SHARED DISPOSITIVE POWER
10
WITH 0 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,964,250 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
61.9% (See Item 5)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
OO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ----------------------- ----------------------
CUSIP NO. 58935D109 13D PAGE 5 OF 19 PAGES
- ----------------------- ----------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
ABRY Broadcast Partners III, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
Not Applicable
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 2,964,250 (See Item 5)
-----------------------------------------------------------
BENEFICIALLY SHARED VOTING POWER
8
OWNED BY 0 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,964,250 (See Item 5)
-----------------------------------------------------------
PERSON SHARED DISPOSITIVE POWER
10
WITH 0 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,964,250 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
61.9% (See Item 5)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ----------------------- ----------------------
CUSIP NO. 58935D109 13D PAGE 6 OF 19 PAGES
- ----------------------- ----------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
ABRY Equity Investors, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
Not Applicable
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 2,964,250 (See Item 5)
-----------------------------------------------------------
BENEFICIALLY SHARED VOTING POWER
8
OWNED BY 0 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,964,250 (See Item 5)
-----------------------------------------------------------
PERSON SHARED DISPOSITIVE POWER
10
WITH 0 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,964,250 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
61.9% (See Item 5)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ----------------------- ----------------------
CUSIP NO. 58935D109 13D PAGE 7 OF 19 PAGES
- ----------------------- ----------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
ABRY Holdings III, Inc.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
Not Applicable
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 2,964,250 (See Item 5)
-----------------------------------------------------------
BENEFICIALLY SHARED VOTING POWER
8
OWNED BY 0 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,964,250 (See Item 5)
-----------------------------------------------------------
PERSON SHARED DISPOSITIVE POWER
10
WITH 0 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,964,250 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
61.9% (See Item 5)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ----------------------- ----------------------
CUSIP NO. 58935D109 13D PAGE 8 OF 19 PAGES
- ----------------------- ----------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Royce Yudkoff
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
Not Applicable
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Massachusetts
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 2,964,250 (See Item 5)
-----------------------------------------------------------
BENEFICIALLY SHARED VOTING POWER
8
OWNED BY 0 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,964,250 (See Item 5)
-----------------------------------------------------------
PERSON SHARED DISPOSITIVE POWER
10
WITH 0 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,964,250 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
61.9% (See Item 5)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
The following information amends the Schedule 13D dated October 10, 1997 as
previously amended (as amended, the "Schedule 13D").
Unless otherwise indicated, each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Schedule 13D.
Item 2. Identity and Background.
-----------------------
The response set forth in Item 2 of the Schedule 13D is hereby amended and
supplemented by the following information:
This Statement is being filed by each of the following persons pursuant to
Rule 13d-1(f) promulgated by the Securities and Exchange Commission pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"): (i) Avalon Cable of Michigan, Inc., a Pennsylvania corporation, formerly
known as Cable Michigan, Inc. ("Avalon Michigan"), by virtue of its ownership of
the shares of common stock, par value $1.00 per share, of Mercom (the "Mercom
Common Stock") covered by this Statement; (ii) Avalon Cable of Michigan
Holdings, Inc., a Delaware corporation ("Holdings"), by virtue of it being the
sole shareholder of Avalon Michigan; (iii) Avalon Cable Holdings, LLC, a
Delaware limited liability company ("Avalon LLC"), by virtue of it being the
sole shareholder of Holdings; (iv) ABRY Broadcast Partners III, L.P., a Delaware
limited partnership ("ABRY III"), by virtue of it being the controlling member
of Avalon LLC; (v) ABRY Equity Investors, L.P., a Delaware limited partnership
("AEI"), by virtue of it being the general partner of ABRY III; (vi) ABRY
Holdings III, Inc., a Delaware corporation ("ABRY Inc."), by virtue of it being
the general partner of AEI; and (vii) Royce Yudkoff, an individual resident of
the State of Massachusetts ("Yudkoff"), by virtue of being the controlling
shareholder of ABRY Inc. Avalon Michigan, Holdings, Avalon LLC, ABRY III, AEI,
ABRY Inc. and Yudkoff are sometimes referred to herein individually as a
"Reporting Person" and collectively as the "Reporting Persons." ABRY III, AEI
and ABRY Inc. are sometimes referred to herein collectively as the "ABRY
Entities."
On November 6, 1998 ("Closing Date"), pursuant to an Agreement and Plan of
Merger dated as of June 3, 1998, amended and restated on July 15, 1998 and
further amended on August 11, 1998 (as amended from time to time, the "Merger
Agreement") among Cable Michigan, Inc., a Pennsylvania corporation ("Cable
Michigan"), Holdings and Avalon Cable of Michigan, Inc., a Pennsylvania
corporation and a wholly owned subsidiary of Holdings ("Merger Subsidiary"),
Merger Subsidiary merged with and into Cable Michigan (the "Merger"). In the
Merger, Cable Michigan became a wholly owned subsidiary of Holdings and each
share of common stock of Cable Michigan outstanding immediately prior to the
effective time of the Merger, including each share of common stock of Cable
Michigan owned by the other Level 3 Companies and the persons named on Schedule
A to Amendment Number 3 to the Schedule 13D, was converted into the right
to receive $40.50 in cash per share. Also in the Merger, Cable Michigan changed
its name to "Avalon Cable of Michigan, Inc." Such corporation is referred to
herein as Avalon Michigan. At the time of the Merger, Cable Michigan owned
2,964,250 shares of Mercom Common Stock (the "Shares"). Such ownership has
previously been reported on this Schedule 13D.
Information with respect to each of the Reporting Persons is given solely
by such Reporting Person, and no Reporting Person assumes responsibility for the
accuracy or completeness of
Page 9 of 19 Pages
<PAGE>
information given by another Reporting Person. By their signature on this
Statement, each of the Reporting Persons agrees that this Statement is filed on
behalf of such Reporting Person.
The Reporting Persons may be deemed to constitute a "group" for purposes of
Section 13(d)(3) of the Exchange Act. The Reporting Persons expressly disclaim
that they have agreed to act as a group other than as described in this
Statement.
Certain information required by this Item 2 concerning the directors,
executive officers and controlling persons of Avalon Michigan, Holdings, Avalon
LLC and ABRY Inc. is set forth on Schedule A attached hereto, which is
incorporated herein by reference.
Holdings is a holding company that was formed to invest in Avalon Michigan
and other cable television businesses that primarily serve residential
customers. The address of the principal business and principal office of
Holdings is 201 East 69th Street, Penthouse G, New York, New York 10021.
Avalon LLC is a holding company that was formed to invest in Holdings and
other cable television businesses that primarily serve residential customers.
The address of the principal business and principal office of Avalon LLC is 201
East 69th Street, Penthouse G, New York, New York 10021.
The principal business of each of the ABRY Entities is to make investments
in common and preferred stock and other interests in business organizations,
domestic or foreign, with the principal objective of appreciation of capital
invested. The address of the principal business and principal office of each of
the ABRY Entities is c/o ABRY Partners, Inc., 18 Newbury Street, Boston,
Massachusetts 02116.
During the past five years, none of the Reporting Persons nor, to the best
knowledge of the Reporting Persons, any of the persons listed on Schedule A
attached hereto, has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors). During the past five years, none of the
Reporting Persons was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activity 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.
-------------------------------------------------
The response set forth in Item 3 of the Schedule 13D is hereby amended and
supplemented by the following information:
As discussed in Item 1 above, on the Closing Date, the Merger was
consummated. At the time of the Merger, Cable Michigan owned the Shares.
Page 10 of 19 Pages
<PAGE>
As a result of the Merger, the Reporting Persons may be deemed to be the
beneficial owners of the Shares as discussed in detail in Item 5 below.
Item 4. Purpose of Transaction.
----------------------
The response set forth in Item 4 of the Schedule 13D is hereby amended and
supplemented by the following information:
As discussed in Item 2 above, the Merger was consummated on the Closing
Date.
In connection with the Merger, the following new directors (the "Avalon
Designees") were elected to the Board of Directors of Mercom (the "Board"):
David W. Unger, Joel C. Cohen, Jay M. Grossman and Peggy J. Koenig. The Avalon
Designees replaced and succeeded the following members of the Board who were
affiliated with Cable Michigan through the time of the Merger (the "Cable
Michigan Designees"): Bruce C. Godfrey, Michael J. Mahoney, David C. McCourt,
and Raymond B. Ostroski. On the Closing Date, the Cable Michigan Designees
voluntarily resigned from the Board, and the Avalon Designees were elected to
the Board. As a result, the Avalon Designees presently constitute a majority of
the Board. Also on the Closing Date, the following were elected as the
executive officers of Mercom: (i) Joel C. Cohen as President, Chief Executive
Officer and Secretary; (ii) Peter Polimino as Vice President of Finance; (iii)
Peter Luscombe as Vice President of Engineering; (iv) Mark Dineen as Vice
President of the Michigan Cluster; (v) Peggy J. Koenig as Vice President and
Assistant Secretary; (vi) Jay M. Grossman as Vice President and Assistant
Secretary; and (vii) David W. Unger as Assistant Secretary. The Avalon
Designees and such newly elected officers hold similar positions with Avalon
LLC, Holdings and Avalon Michigan.
As previously reported, on September 10, 1998, Mercom and Cable Michigan
(now known as Avalon Michigan) entered into an Agreement and Plan of Merger
providing for the acquisition by Cable Michigan of all of the outstanding shares
of Mercom that it did not own. Upon the consummation of the merger contemplated
by such agreement, Mercom Common Stock will cease to be authorized to be quoted
by the National Quotation Bureau, Inc. and the OTC Bulletin Board and will be
eligible for termination of registration under the Exchange Act pursuant to
Section 12(g)(4) of the Exchange Act.
Item 5. Interest in Securities of the Company.
-------------------------------------
The response set forth in Item 5 of the Schedule 13D is hereby amended and
restated by the following information:
Avalon Michigan owns the Shares, which represent approximately 61.9% of the
Mercom Common Stock issued and outstanding as of the Closing Date. Avalon
Michigan has the sole power
Page 11 of 19 Pages
<PAGE>
to vote or to direct the vote of and the sole power to dispose or direct the
disposition of the Shares. Holdings may be deemed to be the beneficial owner of
the Shares by virtue of its interest in Avalon Michigan. Such beneficial
ownership would represent approximately 61.9% of such Mercom Common Stock issued
and outstanding as of the Closing Date. As a result of the Merger, LTTH and the
persons named on Schedule A to Amendment Number 3 to the Schedule 13D ceased
to be beneficial owners of any shares of common stock of Cable Michigan (now
known as Avalon Michigan).
As of the Closing Date, Avalon LLC owns all of the outstanding equity
interests of Holdings and, as such, exercises voting control over Holdings.
Consequently, by virtue of the voting control exercised by Avalon LLC as the
controlling shareholder of Holdings, Avalon LLC may be deemed to beneficially
own the Shares. By virtue of the relationship between Avalon LLC and ABRY III
described in Item 2, ABRY III may be deemed to possess indirect beneficial
ownership of the Shares beneficially owned by Avalon LLC. By virtue of the
relationship between ABRY III and AEI described in Item 2, AEI may be deemed to
possess indirect beneficial ownership of the Shares beneficially owned by ABRY
III, and, by virtue of the relationship between ABRY III, AEI and ABRY Inc.
described in Item 2, ABRY Inc. may be deemed to possess indirect beneficial
ownership of the Shares beneficially owned by ABRY III.
As of the Closing Date, Yudkoff owns all of the outstanding equity
interests of ABRY Inc. and, as such, exercises voting control over ABRY Inc. By
virtue of the voting control exercised by Yudkoff over ABRY Inc., Yudkoff may be
deemed to possess indirect beneficial ownership of the Shares beneficially owned
by ABRY Inc.
As possible beneficial owners of the Shares, each of Holdings, Avalon LLC,
ABRY III, AEI, ABRY Inc. and Yudcoff would have sole power to vote or direct the
vote and the sole power to dispose or direct the disposition of their interest
in the Shares.
The filing of this Statement shall not be construed as an admission by any
of the Reporting Persons that such person is, for the purpose of Section 13(d)
or 13(g) of the Exchange Act, the beneficial owner of any securities covered by
this Statement.
All such ownership percentages of the Mercom Common Stock reported herein
are based on the representation of the Company to the Reporting Persons that, as
of October 16, 1998, there were 4,787,060 shares of Mercom Common Stock issued
and outstanding.
Except as otherwise set forth in this Statement, none of the Reporting
Persons or, to the best knowledge of such persons, the persons named in Schedule
A to this statement has effected any transactions in the Mercom Common Stock
during the past 60 days.
No person other than the Reporting Persons has the right to receive or the
power to direct the receipt of dividends from the proceeds from the sale of the
Shares.
Page 12 of 19 Pages
<PAGE>
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
---------------------------------------------------------------------
to Securities of the Company.
----------------------------
The response set forth in Item 6 of the Schedule 13D is hereby amended and
supplemented by the following information:
Reference is made to the information disclosed under Items 2 and 4 of this
Statement which is incorporated by reference in response to this Item.
To finance a portion of the Merger, Avalon Michigan and its affiliates
obtained financing through a syndicate of banks, financial institutions and
other entities, including Lehman Commercial Paper, Inc., for a senior secured
credit facility of approximately $321,000,000 (the "Senior Credit Facility").
The Senior Credit Facility consists of (i) a $30.0 million seven-year revolving
credit facility, (ii) a $120.9 million seven-year term loan, and (iii) a $170.0
million eight-year term loan. The Senior Credit Facility contains customary
financial and other covenants. The summary of the Senior Credit Facility is
qualified in its entirety by reference to the Senior Credit Facility which is
attached hereto as Exhibit 99.8 and is incorporated herein by reference.
In connection with the Senior Credit Facility, to guaranty the repayment of
such facility: (i) Avalon Michigan has pledged all of the shares of Mercom
Common Stock that it owns; (ii) Holdings has pledged all of the shares of Avalon
Michigan that it owns; and (iii) Avalon LLC has pledged all of the shares of
Holdings that it owns. Such guaranty was made pursuant to the Guarantee and
Collateral Agreement which is attached hereto as Exhibit 99.9 and is
incorporated herein by reference.
Item 7. Materials to be Filed as Exhibits.
---------------------------------
The response set forth in Item 7 of the Schedule 13D is hereby amended and
supplemented by the following information:
Exhibit 99.8: Senior Credit Agreement, dated as of November 6, 1998,
among Avalon Cable of New England LLC, a Delaware
limited liability company, Avalon Michigan, Avalon
Cable Finance, Inc., a Delaware corporation, Avalon
Cable of Michigan LLC, Lehman Brothers Inc. and Lehman
Commercial Paper Inc.
Exhibit 99.9: Guarantee and Collateral Agreement, dated as of
November 6, 1998 made by Avalon LLC, Avalon Cable LLC,
a Delaware limited liability company, Avalon Cable of
New England Holdings, Inc., a
Page 13 of 19 Pages
<PAGE>
Delaware corporation, Avalon Cable Holdings Finance,
Inc., a Delaware corporation, Holdings and Avalon
Michigan in favor of Lehman Commercial Paper Inc., as
Administrative Agent, for the banks and other financial
institutions from time to time parties to the
agreement.
Exhibit 99.10: Agreement of Joint Filing, dated as of November 6,
1998, among Avalon Michigan, Holdings, Avalon LLC, ABRY
III, AEI, ABRY Inc. and Yudkoff.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 6, 1998
AVALON CABLE OF MICHIGAN, INC. (FORMERLY CABLE
MICHIGAN, INC.)
By: /s/ Joel C. Cohen
-----------------------------------
Print Name: Joel C. Cohen
Its: President
AVALON CABLE OF MICHIGAN HOLDINGS, INC.
By: /s/ Joel C. Cohen
------------------------------------
Print Name: Joel C. Cohen
Its: President
AVALON CABLE HOLDINGS, LLC
By: ABRY BROADCAST PARTNERS III, L.P.,
its Managing Member
By: ABRY EQUITY INVESTORS, L.P.,
its General Partner
Page 14 of 19 Pages
<PAGE>
By: ABRY HOLDINGS III, INC.,
its General Partner
By: /s/ Peni Garber
---------------------------------
Print Name: Peni Garber
Its: Secretary
ABRY BROADCAST PARTNERS III, L.P.
By: ABRY EQUITY INVESTORS, L.P.,
its General Partner
By: ABRY HOLDINGS III, INC.,
its General Partner
By: /s/ Peni Garber
---------------------------------
Print Name: Peni Garber
Its: Secretary
ABRY EQUITY INVESTORS, L.P.
By: ABRY HOLDINGS III, INC.,
its General Partner
By: /s/ Peni Garber
---------------------------------
Print Name: Peni Garber
Its: Secretary
ABRY HOLDINGS III, INC.,
By: /s/ Peni Garber
---------------------------------
Print Name: Peni Garber
Its: Secretary
/s/ Royce Yudkoff
-------------------------------------
ROYCE YUDKOFF
Page 15 of 19 Pages
<PAGE>
SCHEDULE A
----------
The following table sets forth the names, addresses and principal
occupations of the executive officers and directors of Avalon Cable of Michigan,
Inc. Each such person is a citizen of the United States.
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ---- ---------------- --------------------
David W. Unger 201 East 69th Street Chairman of the Board
Penthouse G
New York, NY 10021
Joel C. Cohen 201 East 69th Street President, Chief Executive
Penthouse G Officer, Secretary and Director
New York, NY 10021
Peter Polimino 201 East 69th Street Vice President - Finance
Penthouse G
New York, NY 10021
Peter Luscombe 201 East 69th Street Vice President - Engineering
Penthouse G
New York, NY 10021
Mark Dineen 201 East 69th Street Vice President - Michigan Cluster
Penthouse G
New York, NY 10021
Jay M. Grossman 18 Newbury Street Vice President, Assistant
Boston, MA 02116 Secretary and Director
Peggy J. Koenig 18 Newbury Street Vice President, Assistant
Boston, MA 02116 Secretary and Director
Royce Yudkoff 18 Newbury Street Director
Boston, MA 02116
Page 16 of 19 Pages
<PAGE>
SCHEDULE A (continued)
----------------------
The following table sets forth the names, addresses and principal
occupations of the executive officers and directors of Avalon Cable of Michigan
Holdings, Inc. Each such person is a citizen of the United States.
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ---- ---------------- --------------------
David W. Unger 201 East 69th Street Chairman of the Board
Penthouse G
New York, NY 10021
Joel C. Cohen 201 East 69th Street President, Chief Executive
Penthouse G Officer, Secretary and Director
New York, NY 10021
Peter Polimino 201 East 69th Street Vice President - Finance
Penthouse G
New York, NY 10021
Peter Luscombe 201 East 69th Street Vice President - Engineering
Penthouse G
New York, NY 10021
John F. Dee 201 East 69th Street Vice President - New England
Penthouse G Cluster
New York, NY 10021
Jay M. Grossman 18 Newbury Street Vice President, Assistant
Boston, MA 02116 Secretary and Director
Peggy J. Koenig 18 Newbury Street Vice President, Assistant
Boston, MA 02116 Secretary and Director
Royce Yudkoff 18 Newbury Street Director
Boston, MA 02116
Page 17 of 19 Pages
<PAGE>
SCHEDULE A (continued)
----------------------
The following table sets forth the names, addresses and principal
occupations of the executive officers, managers and members of Avalon Cable
Holdings, LLC. Each such person (or, in the case of ABRY Broadcast Partners
III, L.P., such entity's representative) is a citizen of the United States.
<TABLE>
<CAPTION>
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ---- ---------------- --------------------
<S> <C> <C>
ABRY Broadcast Partners III, 18 Newbury Street Managing Member
L.P., c/o Jay M. Grossman Boston, MA 02116
David W. Unger 201 East 69th Street Member and Chairman
Penthouse G
New York, NY 10021
Joel C. Cohen 201 East 69th Street Member, President, Chief
Penthouse G Executive Officer, Secretary
New York, NY 10021 and Manager
Stephen Jarossy 91 Annin Road Member
West Caldwell, NJ 07006
Peter Polimino 201 East 69th Street Vice President - Finance
Penthouse G
New York, NY 10021
Peter Luscombe 201 East 69th Street Vice President - Engineering
Penthouse G
New York, NY 10021
John F. Dee 201 East 69th Street Vice President - New England
Penthouse G Cluster
New York, NY 10021
Mark Dineen 201 East 69th Street Vice President - Michigan
Penthouse G Cluster
New York, NY 10021
Jay M. Grossman 18 Newbury Street Manager, Vice President and
Boston, MA 02116 Assistant Secretary
Peggy J. Koenig 18 Newbury Street Manager, Vice President and
Boston, MA 02116 Assistant Secretary
Royce Yudkoff 18 Newbury Street Manager
Boston, MA 02116
</TABLE>
Page 18 of 19 Pages
<PAGE>
SCHEDULE A (continued)
----------------------
The following table sets forth the names, addresses and principal
occupations of the executive officers, directors and principal stockholders of
ABRY Holdings III, Inc. Each such person is a citizen of the United States.
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ---- ---------------- --------------------
Royce Yudkoff 18 Newbury Street President, Director and
Boston, MA 02116 Sole Shareholder
Peni Garber 18 Newbury Street Secretary and Director
Boston, MA 02116
Page 19 of 19 Pages
<PAGE>
EXHIBIT 99.8
EXECUTION COPY
================================================================================
$320,888,000
SENIOR CREDIT AGREEMENT
among
AVALON CABLE OF NEW ENGLAND LLC
AVALON CABLE OF MICHIGAN, INC.,
AVALON CABLE FINANCE, INC. and
AVALON CABLE OF MICHIGAN LLC,
as Borrowers,
The Several Lenders
from Time to Time Parties Hereto,
LEHMAN BROTHERS INC.,
as Advisor and Arranger,
FLEET BANK OF MASSACHUSETTS, N.A. ,
as Syndication Agent,
UNION BANK OF CALIFORNIA, N.A.
as Documentation Agent
and
LEHMAN COMMERCIAL PAPER INC.
as Administrative Agent
Dated as of November 5, 1998
================================================================================
<PAGE>
i
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS........................................................2
1.1 Defined Terms.........................................................2
1.2 Other Definitional Provisions........................................35
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS...................................35
2.1 Term Loan Commitments................................................35
2.2 Incremental Term Loan Commitments....................................35
2.3 Procedure for Term Loan Borrowing....................................36
2.4 Repayment of Term Loans..............................................37
2.5 Revolving Credit Commitments.........................................39
2.6 Procedure for Revolving Credit Borrowing.............................40
2.7 Repayment of Loans; Evidence of Debt.................................40
2.8 Commitment Fees, etc.................................................41
2.9 Termination or Reduction of Revolving Credit Commitments and
Tranche A Term Loan Commitments......................................42
2.10 Optional Prepayments.................................................42
2.11 Mandatory Prepayments and Commitment Reductions......................43
2.12 Conversion and Continuation Options..................................44
2.13 Minimum Amounts and Maximum Number of Eurodollar Tranches............45
2.14 Interest Rates and Payment Dates.....................................45
2.15 Computation of Interest and Fees.....................................46
2.16 Inability to Determine Interest Rate.................................46
2.17 Pro Rata Treatment and Payments......................................47
2.18 Requirements of Law..................................................50
2.19 Taxes................................................................51
2.20 Indemnity............................................................53
2.21 Change of Lending Office.............................................54
2.22 Lender Replacement...................................................54
SECTION 3. LETTERS OF CREDIT.................................................55
3.1 L/C Commitment.......................................................55
3.2 Procedure for Issuance of Letter of Credit...........................55
3.3 Fees and Other Charges...............................................56
3.4 L/C Participations...................................................56
3.5 Reimbursement Obligation of the Borrower.............................57
3.6 Obligations Absolute.................................................57
3.7 Letter of Credit Payments............................................58
3.8 Applications.........................................................58
SECTION 4. REPRESENTATIONS AND WARRANTIES....................................59
4.1 Financial Condition..................................................59
4.2 No Change............................................................61
<PAGE>
Page
----
4.3 Existence; Compliance with Law.......................................61
4.4 Corporate Power; Authorization; Enforceable Obligations..............61
4.5 No Legal Bar.........................................................62
4.6 No Material Litigation...............................................62
4.7 No Default...........................................................62
4.8 Ownership of Property; Liens.........................................62
4.9 Intellectual Property................................................62
4.10 Taxes................................................................63
4.11 Federal Regulations..................................................63
4.12 Labor Matters........................................................63
4.13 ERISA................................................................63
4.14 Investment Company Act; Other Regulations............................64
4.15 Capital Stock; Subsidiaries..........................................64
4.16 Use of Proceeds......................................................64
4.17 Environmental Matters................................................65
4.18 Accuracy of Information, etc.........................................66
4.19 Security Documents...................................................66
4.20 Solvency.............................................................67
4.21 Senior Indebtedness..................................................67
4.22 Year 2000 Matters....................................................67
SECTION 5. CONDITIONS PRECEDENT..............................................67
5.1 Conditions to Initial Extension of Credit............................67
5.2 Conditions to Each Extension of Credit...............................71
SECTION 6. AFFIRMATIVE COVENANTS.............................................72
6.1 Financial Statements.................................................72
6.2 Certificates; Other Information......................................73
6.3 Payment of Obligations...............................................75
6.4 Conduct of Business and Maintenance of Existence, etc................75
6.5 Maintenance of Property; Insurance...................................75
6.6 Inspection of Property; Books and Records; Discussions...............75
6.7 Notices..............................................................76
6.8 Environmental Laws...................................................76
6.9 Interest Rate Protection.............................................77
6.10 Additional Collateral, etc...........................................77
6.11 Further Assurances...................................................79
SECTION 7. NEGATIVE COVENANTS................................................79
7.1 Financial Condition Covenants........................................80
7.2 Limitation on Indebtedness...........................................82
7.3 Limitation on Liens..................................................84
7.4 Limitation on Fundamental Changes....................................85
7.5 Limitation on Disposition of Property................................86
7.6 Limitation on Restricted Payments....................................87
7.7 Limitation on Capital Expenditures...................................89
7.8 Limitation on Investments............................................89
ii
<PAGE>
Page
----
7.9 Limitation on Optional Payments and Modifications of
Debt Instruments, etc................................................91
7.10 Limitation on Transactions with Affiliates...........................91
7.11 Limitation on Sales and Leasebacks...................................91
7.12 Limitation on Changes in Fiscal Periods..............................92
7.13 Limitation on Negative Pledge Clauses................................92
7.14 Limitation on Restrictions on Subsidiary Distributions...............92
7.15 Limitation on Lines of Business......................................92
7.16 Limitation on Amendments to Acquisition Documentation................92
SECTION 8. EVENTS OF DEFAULT.................................................92
SECTION 9. THE AGENTS........................................................98
9.1 Appointment..........................................................98
9.2 Delegation of Duties.................................................99
9.3 Exculpatory Provisions...............................................99
9.4 Reliance by Agents...................................................99
9.5 Notice of Default...................................................100
9.6 Non-Reliance on Agents and Other Lenders............................100
9.7 Indemnification.....................................................100
9.8 Agent in Its Individual Capacity....................................101
9.9 Successor Agents....................................................101
9.10 Authorization to Release Liens......................................102
9.11 The Arranger........................................................102
SECTION 10. MISCELLANEOUS...................................................102
10.1 Amendments and Waivers..............................................102
10.2 Notices.............................................................103
10.3 No Waiver; Cumulative Remedies......................................104
10.4 Survival of Representations and Warranties..........................104
10.5 Payment of Expenses; Indemnification................................105
10.6 Successors and Assigns; Participations and Assignments..............106
10.7 Adjustments; Set-off................................................108
10.8 Counterparts........................................................109
10.9 Severability........................................................109
10.10 Integration........................................................109
10.11 GOVERNING LAW......................................................110
10.12 Submission To Jurisdiction; Waivers................................110
10.13 Acknowledgments....................................................110
10.14 Confidentiality....................................................111
10.15 Release of Collateral Security and Guarantee Obligations...........111
10.16 Delivery of Lender Addenda.........................................111
10.17 WAIVERS OF JURY TRIAL..............................................112
iii
<PAGE>
ANNEXES:
A Pricing Grid
SCHEDULES:
4.4 Consents, Authorizations, Filings and Notices
4.15 Capital Stock; Subsidiaries
4.19 UCC Filing Jurisdictions
7.2(d) Existing Indebtedness
7.3(f) Existing Liens
7.8 Investments
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Assignment and Acceptance
E-1 Form of Legal Opinion of Kirkland & Ellis
E-2 Form of Legal Opinion of Bienstock & Clark
E-3 Form of Legal Opinion of Kirkpatrick & Lockhart
F-1 Form of Tranche A Term Note
F-2 Form of Tranche B Term Note
F-3 Form of Revolving Credit Note
G Form of Prepayment Option Notice
H Form of Exemption Certificate
I Form of Lender Addendum
iv
<PAGE>
SENIOR CREDIT AGREEMENT, dated as of November 5, 1998, among AVALON CABLE
OF NEW ENGLAND LLC, a Delaware limited liability company (the "New England
Borrower"), AVALON CABLE OF MICHIGAN, INC., a Pennsylvania corporation (the
"Michigan Borrower"), AVALON CABLE FINANCE, INC., a Delaware corporation (the
"Finance Borrower"), and, following the Reorganization, AVALON CABLE OF MICHIGAN
LLC, a Delaware limited liability company (the "Michigan LLC Borrower"), as
borrowers hereunder, the several banks and other financial institutions or
entities from time to time parties to this Agreement (the "Lenders"), LEHMAN
BROTHERS INC., as advisor and arranger (in such capacity, the "Arranger"),
FLEET BANK OF MASSACHUSETTS, N.A., as syndication agent hereunder (in such
capacity, the "Syndication Agent"), UNION BANK OF CALIFORNIA, N.A, as
documentation agent (in such capacity, the "Documentation Agent") and LEHMAN
COMMERCIAL PAPER INC., as administrative agent hereunder (in such capacity, the
"Administrative Agent").
W I T N E S S E T H:
-------------------
WHEREAS, the Michigan Borrower is a subsidiary of Avalon Cable of Michigan
Holdings, Inc. ("Michigan Holdings"), the New England Borrower is a subsidiary
of Avalon Cable LLC ("New England Holdings"), and the Finance Borrower is a
subsidiary of Avalon Cable Holdings Finance, Inc. ("Finance Holdings");
WHEREAS, Finance Holdings is a subsidiary of New England Holdings, and New
England Holdings is a subsidiary of Avalon Cable of New England Holdings, Inc.
("Avalon New England");
WHEREAS, Michigan Holdings and Avalon New England are subsidiaries of
Avalon Cable Holdings LLC ("Avalon Cable");
WHEREAS, Michigan Holdings has entered into a Merger Agreement, dated as of
June 3, 1998 (together with all schedules and exhibits attached thereto and any
and all amendments, supplements and modifications thereto and as the same may be
hereafter amended, supplemented or otherwise modified from time to time in
accordance with this Agreement (the "Merger Agreement"), pursuant to which
Michigan Holdings will acquire Cable Michigan, Inc., a Pennsylvania corporation
("Cable Michigan"), through a merger of the Michigan Borrower into Cable
Michigan (the "Merger");
WHEREAS, as permitted by the Merger Agreement, Cable Michigan has entered
into an agreement to acquire the 1,822,810 shares of Mercom, Inc. ("Mercom")
that it does not currently own (the "Mercom Acquisition");
<PAGE>
2
WHEREAS, (i) Cable Michigan is seeking to acquire (A) a cable television
system from Nova Cablevision, Inc., Nova Cablevision VI, L.P. and Nova
Cablevision VII, L.P. (the "Nova Acquisition"), (B) a cable television system
from Cross Country Cable TV, Inc. (the "Cross Country Acquisition") and (C) the
assets of Traverse Internet, Inc. (the "Traverse Acquisition" and, together with
the Nova Acquisition and the Cross Country Acquisition, the "Additional Michigan
Acquisitions"), and (ii) the New England Borrower has also agreed to acquire all
of the cable system assets of Taconic Technology Corp. (the "Taconic
Acquisition");
WHEREAS, Avalon Cable and its Subsidiaries intend to finance the Merger,
the Mercom Acquisition, the Additional Michigan Acquisitions and the Taconic
Acquisition (collectively, the "Acquisition Transactions"), to refinance and
continue certain existing indebtedness and to pay related premiums, fees and
expenses from the following sources: (a) $105,000,000 in borrowings under the
Bridge Credit Agreement, (b) approximately $80,000,000 in new equity received
from the proceeds of equity investments in Avalon Cable and its Subsidiaries by
ABRY III, other institutional investors and members of the Company's management,
(c) an $18,000,000 capital contribution to the Borrowers from the Holding
Companies funded by a borrowing of ABRY Bridge Subordinated Debt and (d)
approximately $300,888,000 of borrowings under the credit facilities provided
for herein; and
WHEREAS, the Borrowers are and will be operated as separate entities but
are and will be operated on an integrated basis in connection with their
respective financial resources; the Borrowers conduct their operations on a
combined basis with shared management, purchasing, planning, financial controls
and other functions; and the access of all Borrowers to the credit facilities
provided for herein benefits all Borrowers in connection with their various
businesses;
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
this Section 1.1 shall have the respective meanings set forth in this
Section 1.1.
"ABRY": ABRY Partners, Inc.
"ABRY Bridge Subordinated Debt": Indebtedness of one or more of the
Holding Companies (a) the principal amount of which outstanding at any time
(i) prior to the Permanent Securities Issuance Date, does not exceed
$18,000,000 as of the Closing Date, which principal amount may be increased
to the extent of (A) any additional such
<PAGE>
3
Indebtedness the proceeds of which are used to pay cash interest under the
Bridge Credit Agreement and the Exchange Note Indenture and (B) any
Indebtedness issued in respect of accrued but unpaid interest on such
Indebtedness (including interest on interest), provided that the rate of
such interest shall at no time exceed the rate of interest from time to
time on the Bridge Loans (or if such Loans are refinanced, on such
refinancing Indebtedness) plus 1% per annum and (ii) after the Permanent
Securities Issuance Date, does not exceed at any time an amount equal to
the sum of (A) the amount described in clause (a)(i) above (but only to the
extent not refinanced with the proceeds of Permanent Securities or Fill-in
Equity Proceeds), provided that any portion of such amount may not be
reborrowed after it is paid, (B) $30,000,000 (the proceeds of which may be
utilized solely for Investments permitted by Section 7.8(i) and (1)) plus
(C) accrued but unpaid interest on such Indebtedness (including interest on
interest) described in clause (ii)(A) and (B) above, (b) that is owed to
Avalon Cable, (c) that is funded by Avalon Cable with the proceeds from
Indebtedness of Avalon Cable that is owed to ABRY, ABRY III or any other
Control Investment Affiliate of ABRY, (d) on which no cash payments of
interest shall be made as long as any loans under the Bridge Credit
Agreement or any Exchange Notes remain outstanding, provided that interest
due and payable on such Indebtedness may be added to the principal amount
outstanding under such Indebtedness rather than being paid in cash, (e) as
to which the payment of principal of (and premium, if any) and interest and
other payment obligations in respect of such Indebtedness shall be
subordinate to the prior payment in full of the obligations of the Holding
Companies under the Guarantee and Collateral Agreement pursuant to
customary subordination provisions providing for at least the following:
(i) no payments of principal of (or premium, if any) or otherwise due in
respect of such Indebtedness may be permitted for so long as any Default or
Event of Default exists under Section 8(a), (ii) in the event that any
other Default exists, the Administrative Agent shall have the right to give
notice to Avalon Cable and the Holding Companies of a payment blockage, and
thereafter no payments of principal of (or premium, if any) or otherwise
due in respect of such Indebtedness may be made for a period of 179 days
from the date of such notice and (iii) upon the occurrence of any Event of
Default specified in clause (i) or (ii) of paragraph (f) of Section 8 with
respect to Avalon Cable or any of its Subsidiaries, no payments of
principal of (or premium, if any) or otherwise due in respect of such
Indebtedness may be made, (f) that shall automatically be converted into
common equity of Avalon Cable within 18 months of the date of issuance
thereof, unless it has been refinanced with Permitted Refinancing
Indebtedness and (g) the documentation for which shall not contain any
events of default other than a payment default.
"ABRY Management Agreement": the Management and Consulting Services
Agreement entered into as of May 29, 1998 and amended and restated as of
November 6, 1998 by and among ABRY Partners, Inc., the Michigan Borrower
and the New England Borrower, and any successor agreement; provided that
any such successor agreement
<PAGE>
4
shall not modify the ABRY Management Agreement as in effect as of November
6, 1998 in any material respect, taken as a whole, adverse to the Borrowers
and their Subsidiaries or the Administrative Agent or the Lenders.
"Acquisition Agreements": the Merger Agreement and the documentation
pursuant to which the Mercom Acquisition, the Additional Michigan
Acquisitions and the Taconic Acquisition shall be effected.
"Acquisition Documentation": collectively, the Acquisition Agreements
and all schedules, exhibits, annexes and amendments thereto and all side
letters and agreements affecting the terms thereof or entered into in
connection therewith, in each case, as amended, supplemented or otherwise
modified from time to time.
"Acquisition Transactions": as defined in the recitals hereto.
"Adjusted Consolidated EBITDA": for any period, Consolidated EBITDA
for such period; provided that for purposes of calculating Consolidated
EBITDA of the Borrowers and their Subsidiaries for any period, (i) the
Consolidated EBITDA of any Person or attributable to any business acquired
by any Borrower or any of their Subsidiaries during such period (including,
without limitation, the acquisition of Cable Michigan pursuant to the
Merger and the acquisitions of Amrac and Pegasus) shall be included on a
pro forma basis for such period (assuming the consummation of such
acquisition occurred on the first day of such period and giving pro forma
effect to any non-recurring expenses, non-recurring costs and cost
reductions within the first year after such acquisition the Borrowers
anticipate if the Borrowers deliver to the Administrative Agent an
officer's certificate, executed by the chief financial or accounting
officer of any of the Borrowers, certifying to and describing and
quantifying with reasonable specificity such non-recurring expenses, non-
recurring costs and cost reductions) if the consolidated balance sheet of
such acquired Person or business, as the case may be, and its consolidated
Subsidiaries as at the end of the period preceding the acquisition of such
Person or business, as the case may be, and the related consolidated
statements of income and stockholders' equity and of cash flows for the
period in respect of which Consolidated EBITDA is to be calculated (A) have
been previously provided to the Administrative Agent and the Lenders and
(B) either (I) have been reported on without a qualification arising out of
the scope of the audit by independent certified public accountants of
nationally recognized standing or (II) have been found acceptable by the
Administrative Agent and (ii) the Consolidated EBITDA of any Person or
attributable to any business Disposed of by any Borrower or any of its
Subsidiaries during such period shall be excluded on a pro forma basis for
such period (assuming the consummation of such Disposition occurred on the
first day of such period).
"Adjustment Date": as defined in the Pricing Grid.
<PAGE>
5
"Administrative Agent": as defined in the preamble hereto.
"Affiliate": as to any specified Person, any other Person controlling
or controlled by or under common control with such specified Person. For
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Agents": the collective reference to the Syndication Agent, the
Documentation Agent and the Administrative Agent.
"Aggregate Exposure": with respect to any Lender at any time, an
amount equal to (a) until the Closing Date, the aggregate amount of such
Lender's Commitments at such time and (b) thereafter, the sum of (i) the
aggregate then unpaid principal amount of such Lender's Tranche B Term
Loans, (ii) the amount of such Lender's Revolving Credit Commitment then in
effect or, if the Revolving Credit Commitments have been terminated, the
amount of such Lender's Revolving Extensions of Credit then outstanding and
(iii) the amount of such Lender's unused Tranche A Term Loan Commitment
then in effect plus the aggregate then unpaid principal amount of such
Lender's Tranche A Term Loans.
"Aggregate Exposure Percentage": with respect to any Lender at any
time, the ratio (expressed as a percentage) of such Lender's Aggregate
Exposure at such time to the Aggregate Exposure of all Lenders at such
time.
"Agreement": this Senior Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
"Amrac": as defined in Section 4.1(d).
"Applicable Margin": (a) with respect to the Tranche A Term Loans
and the Revolving Credit Loans, (i) at all times prior to the earlier of
(A) the date which is two full fiscal quarters after the Closing Date and
(B) the Permanent Securities Issuance Date, 2.00% per annum for Base Rate
Loans and 3.00% per annum for Eurodollar Loans and (ii) thereafter, the
rate per annum determined pursuant to the Pricing Grid and (b) with respect
to the Tranche B Term Loans, 2.75% per annum for Base Rate Loans and 3.75%
per annum for Eurodollar Loans.
<PAGE>
6
"Application": an application, in such form as the Issuing Lender may
specify from time to time, requesting the Issuing Lender to open a Letter
of Credit.
"Approved Fund": with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial
loans and is managed or advised by the same investment advisor as such
Lender or by an Affiliate of such investment advisor.
"Arranger": as defined in the preamble hereto.
"Asset Sale": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by
clause (a), (b), (c), (d), (e), (f) or (i) of Section 7.5) which yields
gross proceeds to the Borrowers or any of their Subsidiaries (valued at the
initial principal amount thereof in the case of non-cash proceeds
consisting of notes or other debt securities and valued at fair market
value in the case of other non-cash proceeds) in excess of $500,000.
"Asset Swap": any transaction or transactions, with any other Person
or Persons, involving the Disposition to one or more Persons of assets
owned by one or more of the Borrowers and/or any of their Subsidiaries
comprising one or more cable television systems, or portions thereof, and
related assets, and, substantially contemporaneously with such Disposition,
the acquisition by one or more of the Borrowers and/or any of their
Subsidiaries, of assets comprising one or more other cable television
systems, or portions thereof, and related assets, owned by such other
Person or Persons.
"Assignee": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"Available Revolving Credit Commitment": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a) such
Lender's Revolving Credit Commitment then in effect over (b) such Lender's
Revolving Extensions of Credit then outstanding.
"Avalon Cable": as defined in the recitals hereto.
"Avalon Cable Indebtedness": Indebtedness of any of the Borrowers (a)
that is owed to Avalon Cable (and may not be transferred by Avalon Cable to
any other Person), (b) that is funded with the proceeds of equity
investments in Avalon Cable made by ABRY, ABRY III, any other Control
Investment Affiliate of ABRY or any other owner of Capital Stock of Avalon
Cable, (c) the proceeds of which are used to finance the
<PAGE>
7
acquisition by such Borrower of assets used or useful in a Permitted
Business, (d) as to which the payment of principal of (and premium, if
any) and interest and other payment obligations in respect of such
Indebtedness shall be subordinate to the prior payment in full of the
Obligations pursuant to customary subordination provisions providing that,
among other things, no payments of principal of (or premium, if any) or
interest on or otherwise due in respect of such Indebtedness may be made so
long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or any Agent
hereunder (other than contingent and indemnification obligations), (e) no
amount of the principal of which shall mature or otherwise be mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, prior to
the date that is ten years and six months following the Closing Date, (f)
the rate of interest payable on which shall at no time exceed the rate per
annum payable from time to time on the loans under the Bridge Credit
Agreement (or if such loans are refinanced, on such refinancing
Indebtedness) plus 1% per annum and (g) that is either (i) in existence on
the date hereof, (ii) additional such Indebtedness in an aggregate
principal amount at any one time outstanding not to exceed (x) $10,000,000
at any one time prior to the first anniversary of the Closing Date or (y)
$20,000,000 at any time thereafter, or (iii) additional such Indebtedness
issued to pay interest on such Indebtedness permitted by clauses (i) and
(ii) above and this clause (iii).
"Avalon Credit Agreement": the Credit Agreement, dated as of May 28,
1998, by and among Avalon Cable of New England LLC, as borrower, the
subsidiary guarantors party thereto, the lenders party thereto, Lehman
Commercial Paper Inc., as administrative agent, and Lehman Brothers Inc.,
as arranger, as amended, modified or supplemented to the date hereof.
"Avalon New England": as defined in the recitals hereto.
"Base Rate": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate"
shall mean the rate of interest per annum publicly announced from time to
time by the Reference Lender as its prime or base rate in effect at its
principal office in New York City (the Prime Rate not being intended to be
the lowest rate of interest charged by the Reference Lender in connection
with extensions of credit to debtors). Any change in the Base Rate due to
a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such change
in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Base Rate Loans": Loans the rate of interest applicable to which is
based upon the Base Rate.
<PAGE>
8
"Benefitted Lender": as defined in Section 10.7.
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrowers": initially, the Michigan Borrower, the New England
Borrower and the Finance Borrower and, after the Reorganization, the
Michigan LLC Borrower, the New England Borrower and the Finance Borrower.
"Borrowing Date": any Business Day specified by the Borrowers as a
date on which the Borrowers request the relevant Lenders to make Loans
hereunder.
"Bridge Credit Agreement": that certain $105,000,000 Bridge Credit
Agreement, dated as of the date hereof, by and among certain of the Holding
Companies, the lenders party thereto, Lehman Commercial Paper Inc, as
administrative agent, and the other parties thereto, including any related
notes, instruments and other agreements executed by the Holding Companies
or any of their Subsidiaries in connection therewith, and in each case as
amended, supplemented, or otherwise modified, from time to time in
accordance with Section 8(n).
"Bridge Loan Conversion Date": the date, if any, on which the bridge
loans made pursuant to the Bridge Credit Agreement convert to term loans in
accordance with such Bridge Credit Agreement.
"Business Day": (i) for all purposes other than as covered by clause
(ii) below, a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) and which is also a day for
trading by and between banks in Dollar deposits in the London interbank
eurodollar market.
"Cable Michigan": as defined in the recitals hereto.
"Cable Michigan Credit Agreement": the Credit Agreement, dated as of
June 30, 1997, as amended as of September 29, 1997, by and among Cable
Michigan, as borrower, the lenders referred to therein and First Union
National Bank, as administrative agent, as amended, modified or
supplemented to the date hereof.
"CapEx Carryforward Amount": as defined in Section 7.7.
<PAGE>
9
"Capital Expenditures": for any period, with respect to any Person,
the aggregate (without duplication) of all expenditures by such Person and
its Subsidiaries for the acquisition or leasing (pursuant to a capital
lease) of fixed or capital assets or additions to equipment (including
replacements, capitalized repairs and improvements during such period)
which should be capitalized under GAAP on a combined consolidated balance
sheet of such Person and its Subsidiaries (excluding expenditures made with
the proceeds of insurance and awards of condemnation).
"Capital Lease Obligations": as to any Person, the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under
GAAP, and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants, rights or options to purchase any of
the foregoing.
"Cash Equivalents": (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government
or any agency or instrumentality thereof having maturities of not more than
one year from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of not more than one year from the
date of acquisition, bankers' acceptances with maturities of not more than
one year from the date of acquisition and overnight bank deposits, in each
case with (A) Brown Brothers Harriman or (B) any other domestic commercial
bank having capital and surplus in excess of $500 million and a Thompson
Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described
in clauses (ii) and (iii) above entered into with any financial institution
meeting the qualifications specified in clause (iii) above, (v) commercial
paper having the highest rating obtainable from Moody's Investors Service,
Inc. or one of the two highest ratings from Standard & Poor's with
maturities of not more than one year from the date of acquisition and (vi)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i)-(v) of this definition.
"Closing Date": the date on which the conditions precedent set forth
in Section 5.1 shall have been satisfied.
<PAGE>
10
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all Property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commitment": as to any Lender, the sum of the Tranche A Term Loan
Commitment, the Tranche B Term Loan Commitment and the Revolving Credit
Commitment of such Lender.
"Commitment Fee Rate": 1/2 of 1% per annum.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with any of the Borrowers within the meaning
of Section 4001 of ERISA or is part of a group which includes the Borrowers
and which is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"Confidential Information Memorandum": the Confidential Information
Memorandum dated September 1998 and furnished to the initial Lenders.
"Consolidated Current Assets": at any date, all amounts (other than
cash and Cash Equivalents) which would, in conformity with GAAP, be set
forth opposite the caption "total current assets" (or any like caption) on
a combined consolidated balance sheet of the Borrowers and their
Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all amounts which
would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a combined consolidated
balance sheet of the Borrowers and their Subsidiaries at such date, but
excluding (a) the current portion of any Funded Debt of the Borrowers and
their Subsidiaries and (b) without duplication of clause (a) above, all
Indebtedness consisting of Revolving Credit Loans to the extent otherwise
included therein.
"Consolidated Debt Service": for any period, the sum of (a)
Consolidated Interest Expense for such period plus (b) scheduled payments
on account of principal of Indebtedness of the Borrowers or any of their
Subsidiaries (including scheduled principal payments in respect of the Term
Loans) for the period of the next four consecutive quarters, provided that
for purposes of Section 7.1 the principal payments on the Tranche
<PAGE>
11
B Term Loans required to be made under Section 2.4 in fiscal year 2006
shall not be included in the calculation of Consolidated Debt Service.
"Consolidated Debt Service Coverage Ratio": for any period, the ratio
of (a) Adjusted Consolidated EBITDA for such period to (b) Consolidated
Debt Service for such period.
"Consolidated EBITDA": for any period, Consolidated Net Income for
such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period,
the sum of (a) provisions for income tax expense (including without
limitation, any franchise taxes imposed in lieu of income taxes), (b)
Consolidated Interest Expense, amortization or writeoff of deferred
financing fees, debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with Indebtedness
(including the Loans and Letters of Credit) and Hedge Agreements, (c)
depreciation and amortization expense, (d) amortization of intangibles
(including, but not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including,
whether or not otherwise includable as a separate item in the statement of
such Consolidated Net Income for such period, losses on sales of assets
outside of the ordinary course of business) and (f) any other non-cash
charges (including non-cash interest expense and other non-cash items of
the type described in clause (b) above), and minus, to the extent included
in the statement of such Consolidated Net Income for such period, the sum
of (i) interest income (except to the extent deducted in determining
Consolidated Interest Expense), (ii) any extraordinary, unusual or non-
recurring income or gains (including, whether or not otherwise includable
as a separate item in the statement of such Consolidated Net Income for
such period, gains on the sales of assets outside of the ordinary course of
business) and (iii) any other non-cash income, all as determined on a
combined consolidated basis.
"Consolidated Fixed Charge Coverage Ratio": for any period, the ratio
of (a) Adjusted Consolidated EBITDA for such period to (b) Consolidated
Fixed Charges for such period.
"Consolidated Fixed Charges": for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period, (b)
provision for cash income taxes paid by the Borrowers or any of their
Subsidiaries on a consolidated basis during such period, (c) Capital
Expenditures with respect to maintenance (other than those made with the
proceeds of casualty insurance) and (d) scheduled payments made during such
period on account of principal of Indebtedness of the Borrowers or any of
their Subsidiaries (including scheduled principal payments in respect of
the Term Loans, provided that for purposes of Section 7.1 the principal
payments on the Tranche B Term Loans required to
<PAGE>
12
be made under Section 2.4 in fiscal year 2006 shall not be included in the
calculation of Consolidated Fixed Charges).
"Consolidated Interest Coverage Ratio": as at the last day of any
fiscal period, the ratio of (a) Adjusted Consolidated EBITDA for the period
of four consecutive fiscal quarters then ending to (b) Consolidated
Interest Expense for such four-quarter period (or, in the case of the
calculation thereof as at the last day of the fiscal quarters ending March
31, 1999, June 30, 1999 and September 30, 1999, for the periods of one, two
and three quarters then ending multiplied by four, two and four-thirds,
respectively).
"Consolidated Interest Expense": for any period, total cash interest
expense (including that attributable to Capital Lease Obligations) of the
Borrowers and their Subsidiaries for such period with respect to all
outstanding Indebtedness of the Borrowers and their Subsidiaries
(including, without limitation, all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs and benefits under Hedge Agreements in respect of
interest rates to the extent such net costs and benefits are allocable to
such period in accordance with GAAP), provided that there shall be included
in Consolidated Interest Expense for such period (i) in the case of the
acquisition during such period of any Person or business, the interest
expense (calculated as set forth above) for the period (the "Pre-
Acquisition Period") from the first day of the period in question to the
date of such acquisition in respect of Indebtedness of such Person or
Indebtedness assumed in connection with the acquisition of such business,
as the case may be, that remains outstanding after such acquisition as an
obligation of any of the Borrowers or any of their Subsidiaries and (ii)
the amount of interest that would have accrued during the Pre-Acquisition
Period on any Indebtedness incurred to finance such acquisition (on the
assumption that the interest rate in effect on the date of incurrence of
such Indebtedness was in effect throughout the Pre-Acquisition Period),
provided, further, that there shall be excluded from Consolidated Interest
Expense for such period (i) in the case of the Disposition during such
period of any Person or business, the interest expense (calculated as set
forth above) for the period (the "Pre-Disposition Period") from the first
day of the period in question to the date of such Disposition in respect of
Indebtedness of such Person or Indebtedness assumed by the buyer in
connection with the Disposition of such business, as the case may be, and
(ii) the amount of the interest accrued during the Pre-Disposition Period
on any Indebtedness repaid with the Net Cash Proceeds of such Disposition
and provided, further, that dividends paid pursuant to Section 7.6(e)
during such period shall be deemed to constitute Consolidated Interest
Expense for such period.
"Consolidated Leverage Ratio": as at the last day of any fiscal
quarter, the ratio of (a) Consolidated Total Debt then outstanding to (b)
Adjusted Consolidated EBITDA for the period of four consecutive fiscal
quarters ending on such day (or, in the case of the
<PAGE>
13
calculation thereof as at the last day of the fiscal quarter ending
December 31, 1998 for the period of three consecutive fiscal quarters then
ending multiplied by four-thirds).
"Consolidated Net Income": for any period, the consolidated net
income (or loss) of the Borrowers and their Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or loss) of any Person accrued prior to the date
it becomes a Subsidiary of any of the Borrowers or is merged into or
consolidated with any of the Borrowers or any of their Subsidiaries, (b)
the income (or loss) of any Person (other than a Subsidiary of any of the
Borrowers) in which any of the Borrowers or any of their Subsidiaries has
an ownership interest, except to the extent that any such income is
actually received by any of the Borrowers or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of
any Subsidiary of any of the Borrowers to the extent that the declaration
or payment of dividends or similar distributions by such Subsidiary is not
at the time permitted by the terms of any Contractual Obligation (other
than under any Loan Document) or Requirement of Law applicable to such
Subsidiary.
"Consolidated Senior Debt": all Consolidated Total Debt other than
Subordinated Debt.
"Consolidated Senior Debt Ratio": as at the last day of any fiscal
quarter, the ratio of (a) Consolidated Senior Debt then outstanding to (b)
Adjusted Consolidated EBITDA for the period of four consecutive fiscal
quarters ending on such day (or, in the case of the calculation thereof as
at the last day of the fiscal quarter ending December 31, 1998, for the
period of three consecutive fiscal quarters then ending multiplied by four-
thirds).
"Consolidated Total Debt": at any date, the aggregate principal
amount of all Indebtedness of the Borrowers and their Subsidiaries at such
date, determined on a combined consolidated basis in accordance with GAAP.
"Consolidated Working Capital": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current
Liabilities on such date.
"Continuing Managers": the managers of Avalon Cable on the Closing
Date, after giving effect to the Acquisition Transactions completed on such
Date and the other transactions contemplated hereby, and each other
manager, if, in each case, such other manager's nomination for election to
the board of managers of Avalon Cable is recommended by at least 66-2/3% of
the then Continuing Managers or such other manager receives the vote of the
Permitted Investors in his or her election by the equityholders of Avalon
Cable.
<PAGE>
14
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"Control Investment Affiliate": as to any Person, any other Person
which (a) directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person and (b) is organized by the former
such Person primarily for the purpose of making equity or debt investments
in one or more companies. For purposes of this definition, "control" of a
Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether by contract
or otherwise.
"C-TEC Credit Agreement": the Credit Agreement, dated as of June 30,
1997, by and among C-TEC Corporation, as Borrower, the lenders referred to
therein and First Union National Bank, as administrative agent.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Disposition": with respect to any Property, any sale, lease, sale
and leaseback, assignment, conveyance, transfer or other disposition
thereof; the terms "Dispose" and "Disposed of" shall have correlative
meanings.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Domestic Subsidiary": any Subsidiary of any of the Borrowers
organized under the laws of any jurisdiction within the United States of
America.
"ECF Percentage": with respect to any fiscal year of the Borrowers,
100%; provided, that, with respect to any fiscal year of the Borrowers, the
ECF Percentage shall be 75% if the Consolidated Leverage Ratio on the last
day of such fiscal year is not greater than 5.0 to 1.0.
"Environmental Laws": any and all laws, rules, orders, regulations,
statutes, ordinances, guidelines, codes, decrees, or other legally
enforceable requirements (including, without limitation, common law) of any
international authority, foreign government, the United States, or any
state, local, municipal or other governmental authority, regulating,
relating to or imposing liability or standards of conduct concerning
protection of the environment or protection of human health, from
environmental hazards, as has been, is now, or may at any time hereafter
be, in effect.
<PAGE>
15
"Environmental Permits": any and all permits, licenses, approvals,
registrations, notifications, exemptions and any other authorization
required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board) maintained by a
member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum determined on
the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period
appearing on Page 3750 of the Dow Jones Markets screen as of 11:00 A.M.,
London time, two Business Days prior to the beginning of such Interest
Period. In the event that such rate does not appear on Page 3750 of the
Dow Jones Markets screen (or otherwise on such screen), the "Eurodollar
Base Rate" for purposes of this definition shall be determined by reference
to such other comparable publicly available service for displaying
eurodollar rates as may be selected by the Administrative Agent or, in the
absence of such availability, by reference to the rate at which the
Reference Lender is offered Dollar deposits at or about 11:00 A.M., London
time, two Business Days prior to the beginning of such Interest Period in
the London interbank eurodollar market for delivery on the first day of
such Interest Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
<PAGE>
16
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans
the then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of time,
or both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrowers, the excess,
if any, of (a) the sum, without duplication, of (i) Consolidated Net Income
for such fiscal year, (ii) an amount equal to the amount of all non-cash
charges (including depreciation and amortization) deducted in arriving at
such Consolidated Net Income, (iii) decreases in Consolidated Working
Capital for such fiscal year, (iv) an amount equal to the aggregate net
non-cash loss on the Disposition of Property by the Borrowers and their
Subsidiaries during such fiscal year (other than sales of inventory in the
ordinary course of business), to the extent deducted in arriving at such
Consolidated Net Income, (v) the net increase during such fiscal year (if
any) in deferred tax accounts of the Borrowers and (vi) any CapEx
Carryforward Amount from the prior fiscal year that is not used in such
fiscal year over (b) the sum, without duplication, of (i) an amount equal
to the amount of all non-cash credits included in arriving at such
Consolidated Net Income, (ii) the aggregate amount actually paid by the
Borrowers and their Subsidiaries in cash during such fiscal year on account
of Capital Expenditures (excluding the principal amount of Indebtedness
incurred in connection with such expenditures and any such expenditures
financed with the proceeds of any Reinvestment Deferred Amount), (iii) the
aggregate amount of all prepayments of Revolving Credit Loans during such
fiscal year to the extent accompanying permanent optional reductions of the
Revolving Credit Commitments and all optional prepayments of the Term Loans
during such fiscal year, (iv) the aggregate amount of all regularly
scheduled principal payments of Funded Debt (including, without limitation,
the Term Loans) of the Borrowers and their Subsidiaries made during such
fiscal year (other than in respect of any revolving credit facility to the
extent there is not an equivalent permanent reduction in commitments
thereunder), (v) increases in Consolidated Working Capital for such fiscal
year, (vi) an amount equal to the aggregate net non-cash gain on the
Disposition of Property by the Borrowers and their Subsidiaries during such
fiscal year (other than sales of inventory in the ordinary course of
business), to the extent included in arriving at such Consolidated Net
Income, (vii) the net decrease during such fiscal year (if any) in deferred
tax accounts of the Borrowers, (viii) the CapEx Carryforward Amount for
such fiscal year, (ix) any cash payments made during such period in
permanent satisfaction of non-current liabilities of the Borrowers and
their
<PAGE>
17
Subsidiaries, (x) any Restricted Payments permitted under Section 7.6 and
made in cash during such fiscal year, (xi) any cash payments made during
such fiscal year pursuant to Investments permitted under Section 7.8(e),
(i) and (l) and (xiii) an amount equal to 50% of the aggregate Tranche B
Prepayment Amounts and Incremental Facility B Prepayment Amounts payable
during such fiscal year that are not accepted by Accepting Lenders (as such
terms are defined in Section 2.17(d)).
"Excess Cash Flow Application Date": as defined in Section 2.11(c).
"Exchange Note Indenture": the indenture, dated as of the date
hereof, relating to the Exchange Notes by and among the borrowers under
the Bridge Credit Agreement, as issuers, and the Exchange Note Trustee, as
amended, supplemented or otherwise modified from time to time in accordance
with Section 8(n).
"Exchange Note Trustee": on any date of determination, the trustee
under the Exchange Note Indenture.
"Exchange Notes": those certain notes of the borrowers under the
Bridge Credit Agreement, to be issued in exchange for certain term loans
made pursuant to the Bridge Credit Agreement, as such notes may be amended,
modified and supplemented from time to time.
"Excluded Foreign Subsidiaries": any Foreign Subsidiary in respect of
which either (i) the pledge of all of the Capital Stock of such Subsidiary
as Collateral or (ii) the guaranteeing by such Subsidiary of the
Obligations, would, in the good faith judgment of the Borrowers, result in
adverse tax consequences to the Borrowers.
"Existing Credit Facilities": the Cable Michigan Credit Agreement,
the C-TEC Credit Agreement and the Avalon Credit Agreement.
"Facility": each of the Revolving Credit Facility, the Tranche A Term
Loan Facility, the Tranche B Term Loan Facility and, if established, the
Incremental Facility.
"Federal Funds Effective Rate": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by
the Reference Lender from three federal funds brokers of recognized
standing selected by it.
<PAGE>
18
"Fee Letter": the fee letter, dated as of June 3, 1998, with respect
to the Facilities.
"Fill-in Equity Proceeds": proceeds from the issuance of shares of
Capital Stock of any of the Holding Companies and/or from the making of
capital contributions to any of the Holding Companies, in either case at or
about the time of the issuance of the Permanent Securities, which shares
are issued or capital contributions are made for the purpose of providing
sufficient gross proceeds to cause the requirements of the definition of
Permanent Securities Issuance Date to be satisfied.
"Finance Holdings": as defined in the recitals hereto.
"Foreign Subsidiary": any Subsidiary of any of the Borrowers that is
not a Domestic Subsidiary.
"Funding Office": the office of the Administrative Agent set forth in
Section 10.2.
"GAAP": generally accepted accounting principles in the United States
of America as in effect from time to time, except that for purposes of
Section 7.1, GAAP shall be determined on the basis of such principles in
effect on the date hereof and consistent with those used in the preparation
of the most recent audited financial statements delivered pursuant to
Section 4.1(b).
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by the Holding Companies, the
Borrowers and each Subsidiary Guarantor, substantially in the form of
Exhibit A, as the same may be amended, supplemented or otherwise modified
from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any Property constituting direct or indirect security therefor, (ii) to
<PAGE>
19
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase Property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection or standard contractual
indemnities entered into, in each case, in the ordinary course of business.
The amount of any Guarantee Obligation of any guaranteeing person shall be
deemed to be the lower of (a) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing
person may be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum amount
for which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation shall
be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrowers in good faith.
"Guarantors": the collective reference to (a) the Subsidiary
Guarantors and (b)(i) prior to the Reorganization, the Holding Companies
and (ii) upon consummation of the Reorganization, Avalon Cable, Avalon New
England, New England Holdings, Finance Holdings and the Michigan Borrower.
"Hedge Agreements": all swaps, caps or collar agreements or similar
arrangements entered into by the Borrowers providing for protection against
fluctuations in interest rates or currency exchange rates or the exchange
of nominal interest obligations, either generally or under specific
contingencies and total return swaps with respect to any debt or equity
securities.
"Holding Companies": collectively, Avalon Cable, Avalon New England,
Michigan Holdings, New England Holdings and Finance Holdings and, upon
consummation of the Reorganization, the Michigan Borrower.
"Incremental B Term Loan": any loan under the Incremental Facility
that has a customary "B loan" structure, namely, the amortization on such
loan is nominal until the year prior to the final maturity thereof and the
interest rate margin applicable to which is fixed (other than limited
reductions therein based upon the satisfaction of performance-based
financial ratio tests).
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20
"Incremental Facility": an additional term loan facility, if any,
established pursuant to Section 2.2.
"Incremental Facility B Lender": each Incremental Facility Lender
which is the holder of an Incremental B Term Loan.
"Incremental Facility Lender": each lender which has a commitment
under the Incremental Facility or is the holder of an Incremental Term
Loan.
"Incremental Term Loan": any loan made under an Incremental Facility.
"Indebtedness": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of Property or services (other
than accounts or trade payables and accrued expenses incurred in the
ordinary course of such Person's business and not overdue more than 180
days), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such Property), (e) all
Capital Lease Obligations of such Person, (f) the face amount of all
obligations of such Person, contingent or otherwise, as an account party
under acceptance, letter of credit or similar facilities, (g) all
obligations then due and owing of such Person to purchase, redeem, retire
or otherwise acquire for value any Capital Stock of such Person, (h) all
Guarantee Obligations of such Person in respect of obligations of the kind
referred to in clauses (a) through (g) above; (i) all obligations of the
kind referred to in clauses (a) through (h) above secured by (or for which
the holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any Lien on Property (including, without
limitation, accounts and contract rights) owned by such Person, whether or
not such Person has assumed or become liable for the payment of such
obligation and (j) for the purposes of Section 8(e) only, all obligations
of such Person in respect of Hedge Agreements; provided, however, that in
no event shall Avalon Cable Indebtedness be deemed to constitute
Indebtedness. The amount of any Indebtedness under clause (j) shall be the
net amount, including any net termination payments that would be required
to be paid to a counterparty on such date if a termination of the
applicable Hedge Agreement were to occur on such date rather than the
notional amount of the applicable Hedge Agreement.
"Indemnified Liabilities": as defined in Section 10.5.
"Indemnitee": as defined in Section 10.5.
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21
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, copyrights, copyright licenses, patents,
patent licenses, trademarks, trademark licenses, technology, know-how and
processes, and all rights to sue at law or in equity for any infringement
or other impairment thereof, including the right to receive all proceeds
and damages therefrom.
"Interest Payment Date": (a) as to any Base Rate Loan, the last day
of each March, June, September and December to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any
Eurodollar Loan having an Interest Period of three months or less, the last
day of such Interest Period, (c) as to any Eurodollar Loan having an
Interest Period longer than three months, each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period
and the last day of such Interest Period and (d) as to any Loan (other than
any Revolving Credit Loan that is a Base Rate Loan), the date of any
repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two, three or six or
(if available to all Lenders under the relevant Facility) nine months
thereafter, as selected by the Borrowers in their notice of borrowing or
notice of conversion, as the case may be, given with respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six or (if available to all Lenders under the relevant
Facility) nine months thereafter, as selected by the Borrowers by
irrevocable notice to the Administrative Agent not less than three Business
Days prior to the last day of the then current Interest Period with respect
thereto; provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
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22
(ii) any Interest Period that would otherwise extend beyond the
Scheduled Revolving Credit Termination Date or beyond the date final
payment is due on the Tranche A Term Loans or the Tranche B Term
Loans, as the case may be, shall end on the Revolving Credit
Termination Date or such due date, as applicable;
(iii) any Interest Period 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 a calendar month; and
(iv) the Borrowers shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan in connection with any scheduled payment
of principal with respect thereto.
"Investments": as defined in Section 7.8.
"Issuing Lender": any Lender designated as the "Issuing Lender" in a
written notice from the Administrative Agent and the Borrowers to the
Lenders.
"L/C Commitment": $10,000,000.
"L/C Fee Payment Date": the last day of each March, June, September
and December and the last day of the Revolving Credit Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": the collective reference to all the Revolving
Credit Lenders other than the Issuing Lender.
"Lender Addendum": with respect to any initial Lender, a Lender
Addendum, substantially in the form of Exhibit I, to be executed and
delivered by such Lender on the Closing Date as provided in Section 10.16.
"Lenders": as defined in the preamble hereto.
"Letters of Credit": as defined in Section 3.1(a).
<PAGE>
23
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
and any capital lease having substantially the same economic effect as any
of the foregoing).
"Loan": any loan made by any Lender pursuant to this Agreement.
"Loan Documents": this Agreement, the Security Documents, the
Applications and the Notes.
"Loan Parties": the Holding Companies, the Borrowers and each
Subsidiary of any of the Borrowers which is a party to a Loan Document.
"Majority Facility Lenders": with respect to any Facility, the
holders of more than 66 2/3% (or 50% after the Permanent Securities
Issuance Date) of the aggregate unpaid principal amount of the Term Loans
or the Total Revolving Extensions of Credit, as the case may be,
outstanding under such Facility (or, (i) in the case of the Revolving
Credit Facility prior to any termination of the Revolving Credit
Commitments, the holders of more than 66 2/3% (or 50% after the Permanent
Securities Issuance Date) of the Total Revolving Credit Commitments and
(ii) in the case of the Tranche A Term Loan Facility prior to any
expiration or termination of the Tranche A Term Loan Commitments, the
holders of more than 66 2/3% (or 50% after the Permanent Securities
Issuance Date) of the sum of (A) the aggregate unpaid principal amount of
the Tranche A Term Loans and (B) the then unused amount of the Tranche A
Term Loan Commitments).
"Majority Revolving Credit Facility Lenders": the Majority Facility
Lenders in respect of the Revolving Credit Facility.
"Material Adverse Effect": a material adverse effect on (a) the
Acquisition Transactions, taken as a whole, (b) the business, operations,
property, or condition (financial or otherwise) of the Borrowers and their
Subsidiaries taken as a whole or (c) the validity or enforceability of this
Agreement or any of the other Loan Documents or the rights or remedies,
taken as a whole, of the Administrative Agent or the Lenders hereunder or
thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos,
pollutants, contaminants, radioactivity, and any other
<PAGE>
24
substances of any kind, whether or not any such substance is defined as
hazardous or toxic under any Environmental Law, that is regulated pursuant
to or could reasonably be expected to give rise to liability under any
Environmental Law.
"Mercom": as defined in the recitals hereto.
"Mercom Acquisition": as defined in the recitals hereto.
"Mercom Acquisition Agreement": the Agreement and Plan of Merger,
dated as of September 10, 1998, by and among Cable Michigan, Mercom and
Mercom Acquisition, Inc.
"Mercom Intercompany Loan": the Term Credit Agreement between Mercom
and Cable Michigan, originally dated as of November 26, 1989, as amended
and restated as of August 16, 1995, as further amended and restated as of
September 29, 1997 and as the same may be further amended from time to
time; provided that any such further amendment shall not modify the Mercom
Intercompany Loan as in effect as of September 29, 1997 in any material
respect, taken as a whole, adverse to the Borrowers and their Subsidiaries
or the Administrative Agent or the Lenders.
"Mercom Management Agreement": the Management Agreement between Mercom
and Cable Michigan, dated as of January 1, 1997, as may be amended from
time to time; provided that any such amendment shall not modify the Mercom
Management Agreement as in effect as of January 1, 1997 in any material
respect, taken as a whole, adverse to the Borrowers and their Subsidiaries
or the Administrative Agent or the Lenders.
"Merger" as defined in the recitals hereto.
"Michigan Holdings": as defined in the recitals hereto.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received and excluding any portion of such deferred payment constituting
interest) of such Asset Sale or Recovery Event, net of attorneys' fees,
accountants' fees, investment banking fees, amounts required to be applied
to the repayment of
<PAGE>
25
Indebtedness secured by a Lien expressly permitted hereunder on any asset
which is the subject of such Asset Sale or Recovery Event (other than any
Lien pursuant to a Security Document), relocation expenses and other
customary fees and expenses actually incurred in connection therewith and
net of (i) taxes paid or reasonably estimated to be payable as a result
thereof (after taking into account any available tax credits or deductions
and any tax sharing arrangements) and (ii) any reserve established in
accordance with GAAP or amounts deposited in escrow for adjustment in
respect of the sale price of such asset or assets or for indemnities with
respect to any Asset Sale (provided that such amounts shall be Net Cash
Proceeds to the extent and at the time released or not required to be so
used) and (b) in connection with any issuance or sale of equity securities
or debt securities or instruments or the incurrence of loans, the cash
proceeds received from such issuance or incurrence, net of attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.
"New England Holdings": as defined in the recitals hereto.
"Non-Excluded Taxes": as defined in Section 2.19(a).
"Non-U.S. Lender": as defined in Section 2.19(d).
"Notes": the collective reference to any promissory note evidencing
Loans.
"Obligations": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any of the Borrowers,
whether or not a claim for post-filing or post-petition interest is allowed
in such proceeding) the Loans and all other obligations and liabilities of
the Borrowers to the Administrative Agent or to any Lender (or, in the case
of Hedge Agreements, any affiliate of any Lender), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
this Agreement, any other Loan Document, the Letters of Credit, any Hedge
Agreement entered into with any Lender or any affiliate of any Lender or
any other document made, delivered or given in connection herewith or
therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be paid by the
Borrowers pursuant hereto) or otherwise.
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26
"Other Taxes": any and all present or future stamp or documentary,
excise or property taxes, charges or levies arising from any payment made
hereunder or from the execution, delivery or enforcement of, or otherwise
with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 10.6(b).
"Payment Office": the office of the Administrative Agent set forth in
Section 10.2.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA (or any successor).
"Pegasus": as defined in Section 4.1(e).
"Permanent Securities": the Senior Subordinated Notes and the Senior
Discount Notes.
"Permanent Securities Issuance Date": the date on which (a) the
Borrowers and the Holding Companies shall have received at least
$200,000,000 in gross proceeds from the issuance of the Permanent
Securities and/or Fill-in Equity Proceeds and (b) the Holding Companies
shall have received at least $100,000,000 in gross proceeds from the
issuance of the Senior Discount Notes and/or Fill-in Equity Proceeds.
"Permitted Investors": the collective reference to ABRY and its
Control Investment Affiliates.
"Permitted Refinancing Indebtedness": any Indebtedness of any of the
Holding Companies issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace or refund any ABRY Bridge
Subordinated Debt; provided that: (A) the initial principal amount (or
accreted value, if applicable) of such Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus accrued and
unpaid interest on the ABRY Bridge Subordinated Debt so extended,
refinanced, renewed, replaced or refunded (plus the amount of reasonable
fees and expenses incurred in connection therewith); (B) such Indebtedness
is subordinated in right of payment to the obligations of such Holding
Company under the Guarantee and Collateral Agreement on terms at least as
favorable to the Lenders as those contained in the documentation governing
the ABRY Bridge Subordinated Debt being extended, refinanced, renewed,
replaced, defeased or refunded; (C) no portion of such Indebtedness matures
or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or
in part, on or prior to the date
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27
that is six months after the tenth anniversary of the Closing Date; (D) the
interest on such Permitted Refinancing Indebtedness shall not be paid in
cash prior to maturity and no sinking fund shall be required to be
established for the payment of interest; (E) the rate of interest on which
shall at no time be greater than 1% above the rate of interest then
applicable to the loans under the Bridge Credit Agreement or any
Indebtedness the net proceeds of which are used to refinance such loans;
(F) all other terms and conditions of such Indebtedness shall be at least
as favorable to the Holding Companies as those contained in the
documentation governing the ABRY Bridge Subordinated Debt.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prepayment Option Notice": as defined in Section 2.15(d).
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
"Projections": as defined in Section 6.2(c).
"Property": any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock.
"Recovery Event": any settlement of or payment in respect of any
property or casualty insurance claim or any condemnation proceeding
relating to any asset of the Borrowers or any of their Subsidiaries,
provided that such settlement or payment has a value in excess of $500,000.
"Reference Lender": Bankers Trust Company.
"Register": as defined in Section 10.6(d).
"Regulation U": Regulation U of the Board as in effect from time to
time.
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28
"Reimbursement Obligation": the obligation of the Borrowers to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment
Event, the aggregate Net Cash Proceeds received by any of the Borrowers or
any of their Subsidiaries in connection therewith which are not applied to
prepay the Term Loans or reduce the Revolving Credit Commitments pursuant
to Section 2.11(b) as a result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect of
which the Borrowers have delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
Officer stating that no Default or Event of Default has occurred and is
continuing and that the Borrowers (directly or indirectly through a
Subsidiary) intend and expect to use all or a specified portion of the Net
Cash Proceeds of an Asset Sale or Recovery Event to acquire assets useful
in their business.
"Reinvestment Prepayment Amount": with respect to any Reinvestment
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire
assets (directly or through the purchase of the Capital Stock of a Person)
useful in the Borrowers' business.
"Reinvestment Prepayment Date": with respect to any Reinvestment
Event, the earlier of (a) the date occurring one year after such
Reinvestment Event and (b) the date on which the Borrowers shall have
determined not to, or shall have otherwise ceased to, acquire assets useful
in the Borrowers' business with all or any portion of the relevant
Reinvestment Deferred Amount.
"Reorganization": the related series of substantially simultaneous
transactions pursuant to which (i) all of the assets of the Michigan
Borrower (other than, at the option of the Michigan Borrower, the Capital
Stock of Mercom and any Subsidiary of the Michigan Borrower organized for
purposes of consummating the Mercom Acquisition) and Mercom (other than, at
the option of the Michigan Borrower, the Capital Stock of Wholly Owned
Subsidiaries of Mercom) are transferred to the Michigan LLC Borrower; (ii)
all of the liabilities of the Michigan Borrower and Mercom (other than
liabilities hereunder and, at the option of the Michigan Borrower,
intercompany debt) are transferred to and expressly assumed by the Michigan
LLC Borrower; (iii) the Michigan Borrower ceases to be a Borrower hereunder
and becomes a Guarantor and a guarantor under the Bridge Credit Agreement
and the Exchange Notes and (iv) Michigan Holdings ceases to be a borrower
under the Bridge Credit Agreement and an obligor under the
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29
Exchange Notes and becomes a guarantor of the Indebtedness under the Bridge
Credit Agreement and the Exchange Notes, provided that all the foregoing
shall be completed pursuant to documentation in form and substance
reasonably satisfactory to the Administrative Agent and that the
Administrative Agent shall have received, on behalf of the Lenders, such
legal opinions with respect thereto as the Administrative Agent shall have
reasonably requested to cover those matters relating to the Loan Documents
that are addressed in the legal opinions delivered on the Closing Date
pursuant to Section 5.1(n) (which legal opinions delivered in connection
with the Reorganization shall be in substantially the same form as those
delivered on the Closing Date).
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC
Reg. (S) 4043.
"Required Facilities Majority Lenders": the Majority Facility Lenders
in respect of each Facility.
"Required Lenders": at any time, the holders of more than (A) until
the Permanent Securities Issuance Date, 66 2/3% and (B) thereafter, 50% of
(a) until the Closing Date, the Commitments and (b) thereafter, the sum of
(i) the aggregate unpaid principal amount of the Term Loans then
outstanding, (ii) until the Tranche A Term Loan Commitments shall have
expired or been terminated, the then unused amount of the Tranche A Term
Loan Commitments and (iii) the Total Revolving Credit Commitments then in
effect or, if the Revolving Credit Commitments have been terminated, the
Total Revolving Extensions of Credit then outstanding.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"Responsible Officer": the chief executive officer, president, vice
president of finance or chief financial officer of any of the Borrowers,
but in any event, with respect to financial matters, the chief financial
officer or vice president of finance of either of the Borrowers.
"Restricted Payments": as defined in Section 7.6.
"Revolving Credit Commitment": as to any Lender, the obligation of
such Lender, if any, to make Revolving Credit Loans and participate in
Letters of Credit, in an
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30
aggregate principal and/or face amount not to exceed the amount set forth
under the heading "Revolving Credit Commitment" opposite such Lender's name
on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the
case may be, in the Assignment and Acceptance pursuant to which such Lender
became a party hereto, as the same may be changed from time to time
pursuant to the terms hereof. The original amount of the Total Revolving
Credit Commitments is $30,000,000.
"Revolving Credit Commitment Period": the period from and including
the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Facility ": the Revolving Credit Commitments and
the extensions of credit made thereunder.
"Revolving Credit Lender": each Lender which has a Revolving Credit
Commitment or which is the holder of Revolving Credit Loans.
"Revolving Credit Loans": as defined in Section 2.5.
"Revolving Credit Percentage": as to any Revolving Credit Lender at
any time, the percentage which such Lender's Revolving Credit Commitment
then constitutes of the Total Revolving Credit Commitments (or, at any time
after the Revolving Credit Commitments shall have expired or terminated,
the percentage which the aggregate principal amount of such Lender's
Revolving Credit Loans then outstanding constitutes of the aggregate
principal amount of the Revolving Credit Loans then outstanding).
"Revolving Credit Termination Date": October 31, 2005.
"Revolving Extensions of Credit": as to any Revolving Credit Lender
at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Credit Loans made by such Lender then outstanding
and (b) such Lender's Revolving Credit Percentage of the L/C Obligations
then outstanding.
"SEC": the Securities and Exchange Commission (or successors thereto
or an analogous Governmental Authority).
"Security Documents": the collective reference to the Guarantee and
Collateral Agreement and all other security documents hereafter delivered
to the Administrative Agent granting a Lien on any Property of any Person
to secure the obligations and liabilities of any Loan Party under any Loan
Document.
<PAGE>
31
"Senior Discount Note Indenture": the Indenture to be entered into by
the Senior Discount Note Issuers in connection with the issuance of the
Senior Discount Notes, together with all instruments and other agreements
to be entered into by the issuers governing the terms of the Senior
Discount Notes in connection therewith, as amended, supplemented or
otherwise modified from time to time in accordance with Section 8(n).
"Senior Discount Note Issuers": (i) prior to the Reorganization, New
England Holdings, Michigan Holdings and Finance Holdings and (ii) after the
Reorganization, New England Holdings and Finance Holdings.
"Senior Discount Notes": the senior discount notes of the Senior
Discount Note Issuers referred to in the proviso to Section 7.2(f)(i).
"Senior Subordinated Note Indenture": the Indenture to be entered into
by the Borrowers in connection with the issuance of the Senior Subordinated
Notes, together with all instruments and other agreements governing the
terms of the Senior Subordinated Notes to be entered into by the Borrowers
in connection therewith, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with Section 7.9.
"Senior Subordinated Note Issuance Date": the date upon which the
Borrowers shall have received at least $100,000,000 in gross proceeds from
the issuance of the Senior Subordinated Notes.
"Senior Subordinated Notes": the senior subordinated notes of the
Borrowers referred to in Section 7.2(f)(i).
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of
all "liabilities of such Person, contingent or otherwise", as of such date,
as such quoted terms are determined in accordance with applicable federal
and state laws governing determinations of the insolvency of debtors, (b)
the "present fair saleable value", as such quoted term is determined in
accordance with applicable federal and state laws governing determinations
of the insolvency of debtors, of the assets of such Person will, as of such
date, be greater than the amount that will be required to pay the liability
of such Person on its debts as such debts become absolute and matured, (c)
such Person will not have, as of such date, an unreasonably small amount of
capital with which to conduct its business, and (d) such
<PAGE>
32
Person will be able to pay its debts as they mature. For purposes of this
definition, (i) "debt" means liability on a "claim", and (ii) "claim" means
any (x) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right
to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured and (iii) the Borrowers may assume, so
long as no Default or Event of Default shall have occurred and be
continuing at the time such assumption is made, that all or a portion of
the outstanding Term Loans or other Indebtedness of the Borrowers will be
refinanced at the maturity thereof.
"Specified Change of Control": a "Change of Control" as defined in the
Senior Subordinated Note Indenture or the Senior Discount Note Indenture.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of any of the Borrowers.
"Subsidiary Guarantor": each Subsidiary of any of the Borrowers other
than any Excluded Foreign Subsidiary, provided that neither Mercom nor any
of its Subsidiaries shall be considered a Subsidiary Guarantor until the
consummation of the Mercom Acquisition.
"Supermajority Lenders": at any time, the holders of more than (A)
until the Permanent Securities Issuance Date, 90% and (B) thereafter, 66
2/3% of (a) until the Closing Date, the Commitments and (b) thereafter, the
sum of (i) the aggregate unpaid principal amount of the Term Loans then
outstanding, (ii) until the Tranche A Term Loan Commitments shall have
expired or been terminated, the then unused amount of the Tranche A Term
Loan Commitments and (iii) the Total Revolving Credit Commitments then in
effect or, if the Revolving Credit Commitments have been terminated, the
Total Revolving Extensions of Credit then outstanding.
"Term Loan Facilities": the collective reference to the Tranche A Term
Loan Facility, the Tranche B Term Loan Facility and, if established, the
Incremental Facility.
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33
"Term Loan Lenders": the collective reference to the Tranche A Term
Loan Lenders, the Tranche B Term Loan Lenders, and any Incremental Facility
lenders.
"Term Loans": the collective reference to the Tranche A Term Loans,
Tranche B Term Loans and any Incremental Term Loans made pursuant to
Section 2.2.
"Total Revolving Credit Commitments": at any time, the aggregate
amount of the Revolving Credit Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the aggregate
amount of the Revolving Extensions of Credit of the Revolving Credit
Lenders outstanding at such time.
"Tranche A Term Loan": as defined in Section 2.1.
"Tranche A Term Loan Borrowing Period": as defined in Section 2.1.
"Tranche A Term Loan Commitment": as to any Lender, the obligation of
such Lender, if any, to make Tranche A Term Loans to the Borrowers
hereunder in an aggregate principal amount not to exceed the amount set
forth under the heading "Tranche A Term Loan Commitment" opposite such
Lender's name on Schedule 1 to the Lender Addendum delivered by such
Lender, or, as the case may be, in the Assignment and Acceptance pursuant
to which such Lender became a party hereto, as the same may be changed from
time to time pursuant to the terms hereof. The aggregate amount of the
Tranche A Term Loan Commitments on the Closing Date shall be $120,888,000.
"Tranche A Term Loan Facility ": the Tranche A Term Loan Commitments
and the Tranche A Term Loans made thereunder.
"Tranche A Term Loan Lender": each Lender which has a Tranche A Term
Loan Commitment or is the holder a Tranche A Term Loan.
"Tranche A Term Loan Percentage": as to any Tranche A Term Loan
Lender at any time, the percentage which such Lender's Tranche A Term Loan
Commitment then constitutes of the aggregate Tranche A Term Loan
Commitments (or, at any time after the Closing Date, the percentage which
the aggregate principal amount of such Lender's Tranche A Term Loans then
outstanding constitutes of the aggregate principal amount of the Tranche A
Term Loans then outstanding).
"Tranche B Term Loan": as defined in Section 2.1.
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34
"Tranche B Term Loan Commitment": as to any Tranche B Term Loan
Lender, the obligation of such Lender, if any, to make a Tranche B Term
Loan to the Borrowers hereunder in a principal amount not to exceed the
amount set forth under the heading "Tranche B Term Loan Commitment"
opposite such Lender's name on Schedule 1 to the Lender Addendum delivered
by such Lender, or, as the case may be, in the Assignment and Acceptance
pursuant to which such Lender became a party hereto, as the same may be
changed from time to time pursuant to the terms hereof. The aggregate
amount of the Tranche B Term Loan Commitments on the Closing Date shall be
$170,000,000.
"Tranche B Term Loan Facility ": the Tranche B Term Loan Commitments
and the Tranche B Term Loans made thereunder.
"Tranche B Term Loan Lender": each Lender which has a Tranche B Term
Loan Commitment or which is the holder of a Tranche B Term Loan.
"Tranche B Term Loan Percentage": as to any Lender at any time, the
percentage which such Lender's Tranche B Term Loan Commitment then
constitutes of the aggregate Tranche B Term Loan Commitments (or, at any
time after the Closing Date, the percentage which the aggregate principal
amount of such Lender's Tranche B Term Loans then outstanding constitutes
of the aggregate principal amount of the Tranche B Term Loans then
outstanding); provided, that solely for purposes of calculating the amount
of each installment of Tranche B Term Loans (other than the last
installment) payable to a Term Loan Lender pursuant to Section 2.4(b), such
Term Loan Lender's Tranche B Term Loan Percentage shall be calculated
without giving effect to any portion of any prior mandatory or optional
prepayment attributable to such Term Loan Lender's Tranche B Term Loans
which shall have been declined by such Term Loan Lender (or, in the case of
any Term Loan Lender which shall have acquired its Tranche B Term Loans by
assignment from another Person, by such other Person).
"Transferee": as defined in Section 10.15.
"Type": as to any Loan, its nature as a Base Rate Loan or a
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
"Wholly Owned Subsidiary": as to any Person, any other Person all of
the Capital Stock of which (other than directors' qualifying shares
required by law) is owned by such Person directly and/or through other
Wholly Owned Subsidiaries.
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35
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is
a Wholly Owned Subsidiary of any of the Borrowers.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Holding Companies, the Borrowers and their
Subsidiaries not defined in Section 1.1 and accounting terms partly defined in
Section 1.1, to the extent not defined, shall have the respective meanings given
to them under GAAP.
(c) 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, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments. Subject to the terms and conditions
hereof, (a) (i) each Tranche A Term Loan Lender severally agrees to make a term
loan (each loan made pursuant to this Section, a "Tranche A Term Loan") to the
Borrowers on the Closing Date in an amount not to exceed the amount of the
Tranche A Term Loan Commitment of such Lender and, in any event, not less than
such Lender's pro rata share of $95,888,000 and (ii) each Tranche A Term Loan
Lender severally agrees to make Tranche A Term Loans to the Borrowers from time
to time during the period from the Closing Date to and including March 31, 1999
(the "Tranche A Term Loan Borrowing Period") in an aggregate amount not to
exceed the amount of such Lender's Tranche A Term Loan Commitment that remains
unused after the Closing Date and (b) each Tranche B Term Loan Lender severally
agrees to make a term loan (a "Tranche B Term Loan") to the Borrowers on the
Closing Date in an amount not to exceed the amount of the Tranche B Term Loan
Commitment of such Lender. The Term Loans may from time to time be Eurodollar
Loans or Base Rate Loans, as determined by the Borrowers and notified to the
Administrative Agent in accordance with Sections 2.12 and 2.13.
2.2 Incremental Term Loan Commitments. (a) The Borrowers may, by
notice to the Administrative Agent, request that an additional term loan
facility be established under this Agreement in accordance with the provisions
of this Section. The maximum amount of such
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36
facility shall be $75,000,000, and it may be increased to such amount in one or
more stages. Prior to the Permanent Securities Issuance Date such facility may
be in an amount up to $25,000,000 if approved by the Administrative Agent, and
after the Permanent Securities Issuance Date such facility may be in an amount
up to $50,000,000 if approved by the Administrative Agent and up to $75,000,000
if approved by the Administrative Agent and by the Required Lenders in
accordance with Section 10.1, provided (i) only those lenders which commit to do
so at the time such facility is requested to be established (including Persons
that are not Lenders prior to making such commitment) shall participate in such
facility (the "Participating Lenders") and all other terms and conditions
applicable to such facility shall be consistent with the terms and conditions of
this Agreement, (ii) no loan made thereunder shall have a final maturity earlier
than the final maturity of the Tranche B Term Loans, (iii) the proceeds of the
loans under such facility may be used only to finance acquisitions permitted
hereunder, repay related Indebtedness and pay fees and expenses related thereto,
(iv) no loans may be made under such facility after the third anniversary of the
Closing Date and (v) the interest rate, commitment fee rate and amortization
schedule for such facility shall be determined by the Borrowers and the
Participating Lenders. Upon receipt of such notice the Administrative Agent
shall seek to obtain the agreement of the Required Lenders to approve a request
to establish an additional term loan facility in an aggregate principal amount
greater than $50,000,000 but not in excess of $75,000,000.
(b) If (and only if) the Administrative Agent or the Required
Lenders, as required, shall have agreed to establish such additional term loan
facility, such term loan facility shall be established pursuant to documentation
consistent herewith and otherwise in form and substance reasonably satisfactory
to the Administrative Agent and shall become effective on a date mutually agreed
upon with the Borrowers.
2.3 Procedure for Term Loan Borrowing. (a) The Borrowers shall give
the Administrative Agent irrevocable notice (which notice must be received by
the Administrative Agent prior to 10:00 A.M., New York City time, one Business
Day prior to the anticipated Closing Date) requesting that the Term Loan Lenders
make the Term Loans on the Closing Date and specifying the amount to be
borrowed. The Term Loans made on the Closing Date shall initially be Base Rate
Loans, and no Term Loan may be converted into or continued as a Eurodollar Loan
having an Interest Period in excess of one month prior to the date which is 30
days after the Closing Date. Upon receipt of such notice the Administrative
Agent shall promptly notify each Term Loan Lender thereof. Not later than 12:00
Noon, New York City time, on the Closing Date each Term Loan Lender shall make
available to the Administrative Agent at the Funding Office an amount in
immediately available funds equal to the Term Loan or Term Loans to be made by
such Lender. The Administrative Agent shall make available to the Borrowers the
aggregate of the amounts made available to the Administrative Agent by the Term
Loan Lenders in like funds as received by the Administration Agent.
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37
(b) After the Closing Date and during the Tranche A Term Loan
Borrowing Period, the Borrowers may borrow under the Tranche A Term Loan
Commitments to finance Acquisition Transactions (including repayment of related
Indebtedness and fees and expenses related thereto) on not more than five
Borrowing Dates, provided that the Borrowers shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 12:00 Noon, New York City time, (a) three Business Days prior to the
requested Borrowing Date, in the case of Eurodollar Loans, or (b) one Business
Day prior to the requested Borrowing Date, in the case of Base Rate Loans),
specifying (i) the amount of the Tranche A Term Loans to be borrowed, (ii) the
requested Borrowing Date and (iii) in the case of Eurodollar Loans, the length
of the initial Interest Period therefor. Each borrowing after the Closing Date
under the Tranche A Term Loan Commitments shall be in an amount equal to (x) in
the case of Base Rate Loans, $1,000,000 or a whole multiple thereof (or, if the
then aggregate unused Tranche A Term Loan Commitments are less than $1,000,000,
such lesser amount) and (y) in the case of Eurodollar Loans, $5,000,000 or a
whole multiple of $1,000,000 in excess thereof. Upon receipt of any such notice
from the Borrowers, the Administrative Agent shall promptly notify each Tranche
A Term Loan Lender thereof. Each Tranche A Term Loan Lender will make the amount
of its pro rata share of each borrowing available to the Administrative Agent
for the account of the Borrowers at the Funding Office prior to 12:00 Noon, New
York City time, on the Borrowing Date requested by the Borrowers in funds
immediately available to the Administrative Agent. Such borrowing will then be
made available to the Borrowers by the Administrative Agent in like funds as
received by the Administrative Agent.
2.4 Repayment of Term Loans. (a) The Tranche A Term Loans of each
Tranche A Lender shall mature in 20 consecutive quarterly installments,
commencing on January 31, 2001, each of which shall be in an amount equal to
such Lender's Tranche A Term Loan Percentage multiplied by the product of (i)
the aggregate principal of the Tranche A Term Loans made hereunder and (ii) the
percentage set forth below opposite such installment:
Installment Percentage
----------- ----------
January 31, 2001 1.25%
April 30, 2001 1.25%
July 31, 2001 1.25%
October 31, 2001 1.25%
January 31, 2002 2.50%
April 30, 2002 2.50%
July 31, 2002 2.50%
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38
October 31, 2002 2.50%
January 31, 2003 5.00%
April 30, 2003 5.00%
July 31, 2003 5.00%
October 31, 2003 5.00%
January 31, 2004 6.25%
July 31, 2004 6.25%
April 30, 2004 6.25%
October 31, 2004 6.25%
January 31, 2005 10.00%
April 30, 2005 10.00%
July 31, 2005 10.00%
October 31, 2005 10.00%
(b) The Tranche B Term Loan of each Tranche B Lender shall mature in
24 consecutive quarterly installments, commencing on January 31, 2001, each of
which shall be in an amount equal to such Lender's Tranche B Term Loan
Percentage multiplied by the product of (i) the aggregate principal of the
Tranche B Term Loans made hereunder and (ii) the percentage set forth below
opposite such installment:
Installment Percentage
----------- ----------
January 31, 2001 .25%
April 30, 2001 .25%
July 31, 2001 .25%
October 31, 2001 .25%
January 31, 2002 .25%
April 30, 2002 .25%
July 31, 2002 .25%
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39
October 31, 2002 .25%
January 31, 2003 .25%
April 30, 2003 .25%
July 31, 2003 .25%
October 31, 2003 .25%
January 31, 2004 .25%
April 30, 2004 .25%
July 31, 2004 .25%
October 31, 2004 .25%
January 31, 2005 .25%
April 30, 2005 .25%
July 31, 2005 .25%
October 31, 2005 .25%
January 31, 2006 .25%
April 30, 2006 .25%
July 31, 2006 47.25%
October 31, 2006 47.25%
2.5 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrowers from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Revolving
Credit Percentage of the L/C Obligations then outstanding, does not exceed the
amount of such Lender's Revolving Credit Commitment. During the Revolving Credit
Commitment Period the Borrowers may use the Revolving Credit Commitments by
borrowing, prepaying the Revolving Credit Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof. The
Revolving Credit Loans may from time to time be Eurodollar Loans or Base Rate
Loans, as determined by the Borrowers and notified to the Administrative Agent
in accordance with Sections 2.6 and 2.14,
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40
provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after
the day that is one month prior to the Revolving Credit Termination Date.
(b) The Borrowers shall repay all outstanding Revolving Credit Loans
on the Revolving Credit Termination Date.
2.6 Procedure for Revolving Credit Borrowing. The Borrowers may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day, provided that the Borrowers shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business
Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or
(b) one Business Day prior to the requested Borrowing Date, in the case of Base
Rate Loans), specifying (i) the amount and Type of Revolving Credit Loans to be
borrowed, (ii) the requested Borrowing Date and (iii) in the case of Eurodollar
Loans, the length of the initial Interest Period therefor. Each borrowing under
the Revolving Credit Commitments shall be in an amount equal to (x) in the case
of Base Rate Loans, $1,000,000 or a whole multiple thereof (or, if the then
aggregate Available Revolving Credit Commitments are less than $1,000,000, such
lesser amount) and (y) in the case of Eurodollar Loans, $5,000,000 or a whole
multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from
the Borrowers, the Administrative Agent shall promptly notify each Revolving
Credit Lender thereof. Each Revolving Credit Lender will make the amount of its
pro rata share of each borrowing available to the Administrative Agent for the
account of the Borrowers at the Funding Office prior to 12:00 Noon, New York
City time, on the Borrowing Date requested by the Borrowers in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrowers by the Administrative Agent in like funds as received
by the Administrative Agent.
2.7 Repayment of Loans; Evidence of Debt. (a) The Borrowers hereby
unconditionally promise to pay to the Administrative Agent for the account of
the appropriate Revolving Credit Lender or Term Loan Lender, as the case may be,
(i) the then unpaid principal amount of each Revolving Credit Loan of such
Revolving Credit Lender on the Revolving Credit Termination Date (or such
earlier date on which the Loans become due and payable pursuant to Section 8)
and (ii) the principal amount of each Tranche A Term Loan and each Tranche B
Term Loan of such Term Loan Lender in installments according to the amortization
schedule set forth in Section 2.4 (or on such earlier date on which the Loans
become due and payable pursuant to Section 8). The Borrowers hereby further
agree to pay interest on the unpaid principal amount of the Loans from time to
time outstanding from the date hereof until payment in full thereof at the rates
per annum, and on the dates, set forth in Section 2.14.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrowers to such Lender
resulting from each Loan of
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41
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent, on behalf of the Borrowers, shall
maintain the Register pursuant to Section 10.6(e), and a subaccount therein for
each Lender, in which shall be recorded (i) the amount of each Loan made
hereunder and any Note evidencing such Loan, the Type thereof and each Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrowers to each Lender hereunder
and (iii) both the amount of any sum received by the Administrative Agent
hereunder from the Borrowers and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.7(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrowers therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrowers to repay (with applicable interest) the Loans made
to such Borrowers by such Lender in accordance with the terms of this Agreement.
(e) The Borrowers agree that, upon the request to the Administrative
Agent by any Lender, the Borrowers will execute and deliver to such Lender a
promissory note of the Borrowers evidencing any Tranche A Term Loans, Tranche B
Term Loans or Revolving Credit Loans, as the case may be, of such Lender,
substantially in the form of Exhibit F-1, F-2 or F-3, respectively, with
appropriate insertions as to date and principal amount.
(f) All of the obligations of the Borrowers hereunder shall be joint
and several; provided, however, that in no event shall the maximum liability of
any Borrower exceed the amount for which such Borrower can become liable as a
guarantor under applicable federal and state laws relating to the insolvency of
debtors.
2.8 Commitment Fees, etc. (a) The Borrowers agree to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the Closing Date to the last
day of the Revolving Credit Commitment Period, computed at the Commitment Fee
Rate on the average daily amount of the Available Revolving Credit Commitment of
such Lender during the period for which payment is made, payable quarterly in
arrears on the last day of each March, June, September and December and on the
Revolving Credit Termination Date, commencing on the first of such dates to
occur after the date hereof.
(b) The Borrowers agree to pay to the Administrative Agent for the
account of each Tranche A Term Loan Lender a commitment fee for the period from
and including the
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42
Closing Date to the last day of the Tranche A Term Loan Borrowing Period,
computed at the Commitment Fee Rate on the average daily amount of the undrawn
Tranche A Term Loan Commitment of such Lender during the period for which
payment is made, payable quarterly in arrears on the last day of each March,
June, September and December and on the last day of the Tranche A Term Loan
Borrowing Period, commencing on the first of such dates to occur after the date
hereof.
(c) The Borrowers agree to pay to the Administrative Agent the fees in
the amounts and on the dates from time to time agreed to in writing by the
Borrowers and the Administrative Agent.
2.9 Termination or Reduction of Revolving Credit Commitments and
Tranche A Term Loan Commitments. The Borrowers shall have the right, upon not
less than three Business Days' notice to the Administrative Agent (a) to
terminate the Revolving Credit Commitments or, from time to time, to reduce the
amount of the Revolving Credit Commitments; provided that no such termination or
reduction of Revolving Credit Commitments shall be permitted if, after giving
effect thereto and to any prepayments of the Revolving Credit Loans made on the
effective date thereof, the Total Revolving Extensions of Credit would exceed
the Total Revolving Credit Commitments or (b) to terminate the Tranche A Term
Loan Commitments or, from time to time, to reduce the amount of the Tranche A
Term Loan Commitments. Any such reduction shall be in an amount equal to
$1,000,000, or a whole multiple thereof, and shall reduce permanently the
Revolving Credit Commitments or the Tranche A Term Loan Commitments, as the case
may be, then in effect. Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Revolving Credit Lender or
Tranche A Term Loan Lender, as the case may be, thereof.
2.10 Optional Prepayments. The Borrowers may at any time and from time
to time prepay the Loans (other than Tranche B Term Loans), in whole or in part,
without premium or penalty, upon irrevocable notice delivered to the
Administrative Agent at least three Business Days prior thereto in the case of
Eurodollar Loans and at least one Business Day prior thereto in the case of Base
Rate Loans, which notice shall specify the date and amount of prepayment and
whether the prepayment is of Eurodollar Loans or Base Rate Loans; provided, that
if a Eurodollar Loan is prepaid on any day other than the last day of the
Interest Period applicable thereto, the Borrowers shall also pay any amounts
owing pursuant to Section 2.20. The Borrowers may at any time and from time to
time prepay the Tranche B Term Loans, in whole or in part, upon irrevocable
notice delivered to the Administrative Agent at least three Business Days prior
thereto in the case of Eurodollar Loans and at least one Business Day prior
thereto in the case of Base Rate Loans, which notice shall specify the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans or Base
Rate Loans; provided that Tranche B Term Loans may only be prepaid pursuant to
this Section 2.10 at a price equal to (i) 102% of the principal amount thereof
prior to the first anniversary of the Closing Date and (ii) 101% of the
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43
principal amount thereof on or after the first anniversary and prior to the
second anniversary of the Closing Date and at par thereafter (it being
understood that the prepayment premiums specified in this proviso shall not be
applicable to prepayments made as required by Section 2.11); provided, further,
that if a Eurodollar Loan is prepaid on any day other than the last day of the
Interest Period applicable thereto, the Borrower shall also pay any amounts
owing pursuant to Section 2.20. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with (except in the case of
Revolving Credit Loans which are Base Rate Loans) accrued interest to such date
on the amount prepaid. Partial prepayments of Term Loans and Revolving Credit
Loans shall be in an aggregate principal amount of $1,000,000 or a whole
multiple thereof.
2.11 Mandatory Prepayments and Commitment Reductions. (a) Unless the
Required Facilities Majority Lenders shall otherwise agree, if any Fill-in
Equity Proceeds shall be received, any Capital Stock shall be sold or issued
(but only when the Consolidated Leverage Ratio is equal to or greater than 5.00
to 1.00), or any Indebtedness shall be incurred, by any of the Holding
Companies, any of the Borrowers or any of their Subsidiaries (excluding (i) any
Indebtedness incurred in accordance with Section 7.2 as in effect on the date of
this Agreement, (ii) any Indebtedness of Avalon Cable the proceeds of which are
used to fund ABRY Bridge Subordinated Debt, (iii) any ABRY Bridge Subordinated
Debt, (iv) any Permitted Refinancing Indebtedness, (v) the Exchange Notes, (vi)
any Indebtedness incurred by any Holding Company in connection with a borrowing
from any other Holding Company, (vii) any Capital Stock issued by Avalon Cable
to fund Avalon Cable Indebtedness, (viii) any Capital Stock issued to finance
Capital Expenditures or Investments permitted hereunder, (ix) any Indebtedness
constituting a Guarantee Obligation and (x) resales of common equity or common
equity options of Avalon Cable referred to in Section 7.6(b)), an amount equal
to, without duplication, 100% of such Fill-in Equity Proceeds and of the Net
Cash Proceeds of such issuance of Capital Stock or incurrence of Indebtedness
shall be applied on the date of such issuance or incurrence toward the
prepayment of the Term Loans and the reduction of the Tranche A Term Loan
Commitments and Revolving Credit Commitments as set forth in Section 2.11(d),
provided that the Net Cash Proceeds of the Senior Discount Notes and any such
Fill-in Equity Proceeds may be applied to prepay the Indebtedness under the
Bridge Credit Agreement and the Exchange Note Indenture and, thereafter, to
prepay the Indebtedness under the ABRY Bridge Subordinated Debt described in
clause (a)(i) of the definition of such term and Permitted Refinancing
Indebtedness in respect thereof before any portion of such Net Cash Proceeds and
Fill-in Equity Proceeds shall be applied in accordance with this Section and
provided, further, that certain other circumstances in which the requirements of
this Section 2.11(a) are modified are set forth in the second proviso to Section
7.2(f)(i).
(b) Unless the Required Facilities Majority Lenders shall otherwise
agree, if on any date any of the Borrowers or any of their Subsidiaries shall
receive Net Cash Proceeds from
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44
any Asset Sale or Recovery Event then, unless a Reinvestment Notice shall be
delivered in respect thereof, 100% of such Net Cash Proceeds shall be applied on
such date toward the prepayment of the Term Loans and the reduction of the
Revolving Credit Commitments as set forth in Section 2.11(d); provided, that,
notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount
equal to the Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied toward the prepayment of the Term Loans and
the reduction of the Revolving Credit Commitments as set forth in Section
2.11(d).
(c) Unless the Required Facilities Majority Lenders shall otherwise
agree, if, for any fiscal year of the Borrowers, commencing with the fiscal year
ending December 31, 1999, there shall be Excess Cash Flow, the Borrowers shall,
on the relevant Excess Cash Flow Application Date, apply the ECF Percentage of
such Excess Cash Flow toward the prepayment of the Term Loans and the reduction
of the Revolving Credit Commitments as set forth in Section 2.11(d). Each such
prepayment and commitment reduction shall be made on a date (an "Excess Cash
Flow Application Date") no later than five days after the earlier of (i) the
date on which the financial statements of the Borrowers referred to in Section
6.1(a), for the fiscal year with respect to which such prepayment is made, are
required to be delivered to the Lenders and (ii) the date such financial
statements are actually delivered.
(d) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to this Section shall be applied, first, to
the prepayment of the Term Loans and, second, to reduce permanently any unused
available amounts of the Tranche A Term Loan Commitments (it being understood
that in such case the Borrowers may retain the related amount of cash), and
third, to reduce permanently the Revolving Credit Commitments. Any such
reduction of the Revolving Credit Commitments shall be accompanied by prepayment
of the Revolving Credit Loans to the extent, if any, that the Total Revolving
Extensions of Credit exceed the amount of the Total Revolving Credit Commitments
as so reduced, provided that if the aggregate principal amount of Revolving
Credit Loans then outstanding is less than the amount of such excess (because
L/C Obligations constitute a portion thereof), the Borrowers shall, to the
extent of the balance of such excess, replace outstanding Letters of Credit
and/or deposit an amount in cash in a cash collateral account established with
the Administrative Agent for the benefit of the Lenders on terms and conditions
satisfactory to the Administrative Agent. The application of any prepayment
pursuant to this Section shall be made, first, to Base Rate Loans and, second,
to Eurodollar Loans in such a manner as to minimize break funding cost set forth
in Section 2.20 hereof. Each prepayment of the Loans under this Section (except
in the case of Revolving Credit Loans that are Base Rate Loans) shall be
accompanied by accrued interest to the date of such prepayment on the amount
prepaid.
2.12 Conversion and Continuation Options. (a) The Borrowers may elect
from time to time to convert Eurodollar Loans to Base Rate Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such
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45
conversion of Eurodollar Loans may only be made on the last day of an Interest
Period with respect thereto. The Borrowers may elect from time to time to
convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent
at least three Business Days' prior irrevocable notice of such election (which
notice shall specify the length of the initial Interest Period therefor),
provided that no Base Rate Loan under a particular Facility may be converted
into a Eurodollar Loan (i) when any Event of Default has occurred and is
continuing and the Administrative Agent or the Majority Facility Lenders in
respect of such Facility have determined in its or their sole discretion not to
permit such conversions or (ii) after the date that is one month prior to the
final scheduled termination or maturity date of such Facility. Upon receipt of
any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrowers giving
irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in Section 1.1, of
the length of the next Interest Period to be applicable to such Loans, provided
that no Eurodollar Loan under a particular Facility may be continued as such (i)
when any Event of Default has occurred and is continuing and the Administrative
Agent has or the Majority Facility Lenders in respect of such Facility have
determined in its or their sole discretion not to permit such continuations or
(ii) after the date that is one month prior to the final scheduled termination
or maturity date of such Facility, and provided, further, that if the Borrowers
shall fail to give any required notice as described above in this paragraph or
if such continuation is not permitted pursuant to the preceding proviso such
Loans shall be automatically converted to Base Rate Loans on the last day of
such then expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.
2.13 Minimum Amounts and Maximum Number of Eurodollar Tranches.
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that (a) after giving effect
thereto, the aggregate principal amount of the Eurodollar Loans comprising each
Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof and (b) no more than twelve Eurodollar Tranches
shall be outstanding at any one time.
2.14 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum equal
to the Base Rate plus the Applicable Margin.
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46
(c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement
Obligations (whether or not overdue) shall bear interest at a rate per annum
which is equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section plus 2%
or (y) in the case of Reimbursement Obligations, the rate applicable to Base
Rate Loans under the Revolving Credit Facility plus 2%, and (ii) if all or a
portion of any interest payable on any Loan or Reimbursement Obligation or any
commitment fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the rate then applicable
to Base Rate Loans under the relevant Facility plus 2% (or, in the case of any
such other amounts that do not relate to a particular Facility, the rate then
applicable to Base Rate Loans under the Revolving Credit Facility plus 2%), in
each case, with respect to clauses (i) and (ii) above, from the date of such
non-payment until such amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
shall be payable from time to time on demand.
2.15 Computation of Interest and Fees. (a) Interest, fees and
commissions payable pursuant hereto shall be calculated on the basis of a 360-
day year for the actual days elapsed, except that, with respect to Base Rate
Loans the rate of interest on which is calculated on the basis of the Prime
Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrowers and the relevant Lenders
of each determination of a Eurodollar Rate. Any change in the interest rate on a
Loan resulting from a change in the Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrowers and the relevant Lenders of the effective date
and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrowers and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrowers, deliver to the
Borrowers a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.14(a) or (b).
2.16 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
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47
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate in
accordance with the terms hereof for such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrowers and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as Base Rate
Loans, (y) any Loans under the relevant Facility that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as Base Rate Loans and (z) any outstanding Eurodollar Loans under the
relevant Facility shall be converted, on the last day of the then current
Interest Period with respect thereto, to Base Rate Loans. Until such notice has
been withdrawn by the Administrative Agent (which the Administrative Agent shall
be obligated to do when the circumstances giving rise to such notice no longer
exist), no further Eurodollar Loans under the relevant Facility shall be made or
continued as such, nor shall the Borrowers have the right to convert Loans under
the relevant Facility to Eurodollar Loans.
2.17 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrowers
from the Lenders hereunder, each payment by the Borrowers on account of any
commitment fee and any reduction of the Commitments of the Lenders shall be made
pro rata according to the respective Tranche A Term Loan Commitments, Tranche B
Term Loan Commitments, Revolving Credit Commitments or commitments under the
Incremental Facility (if any), as the case may be, of the relevant Lenders or
Incremental Facility lenders (if any), as the case may be. Each payment (other
than prepayments) in respect of principal or interest in respect of the Loans,
each payment in respect of fees payable hereunder and each payment in respect of
Reimbursement Obligations, shall be applied to the amounts of such obligations
owing to the Lenders pro rata according to the respective amounts then due and
owing to the Lenders.
(b) Each mandatory prepayment required by Section 2.11 to be applied to
Term Loans shall be allocated between the Term Loan Facilities pro rata
according to the respective outstanding principal amounts of Term Loans under
such Facilities. Each optional prepayment in respect of the Term Loans shall be
allocated among the Term Loan Facilities pro rata according to the respective
outstanding principal amounts of the Term Loans under such Facilities. Each
payment (including each prepayment) of the Term Loans outstanding under any
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48
Term Loan Facility shall be allocated among the Term Loan Lenders holding such
Term Loans pro rata based on the principal amount of such Term Loans held by
such Term Loan Lenders, and shall be applied to the installments of such Term
Loans pro rata based on the remaining outstanding principal amount of such
installments. Amounts prepaid on account of the Term Loans may not be
reborrowed.
(c) Each payment (including each prepayment) by the Borrowers on account
of principal of and interest on the Revolving Credit Loans shall be made pro
rata according to the respective outstanding principal amounts of the Revolving
Credit Loans then held by the Revolving Credit Lenders.
(d) Notwithstanding anything to the contrary in Sections 2.10, 2.11 or
2.17, so long as any Tranche A Term Loans are outstanding, each Tranche B Term
Loan Lender and each Incremental Facility B Lender (if any) may, at its option,
decline all or any portion of any optional prepayment or mandatory payment
applicable to the Tranche B Term Loans or Incremental B Term Loans (if any) of
such Tranche B Term Loan Lender or Incremental Facility B Lender, as the case
may be; accordingly, with respect to the amount of any optional prepayment
described in Section 2.10 or mandatory prepayment described in Section 2.11
that is allocated to Tranche B Term Loans (such amount, the "Tranche B
Prepayment Amount") or Incremental B Term Loans (if any) (such amount, the
"Incremental Facility B Prepayment Amount") at any time when Tranche A Term
Loans remain outstanding, the Borrowers will, (i) in the case of any optional
prepayment which the Borrowers wish to make, not later than twenty Business Days
prior to the date on which the Borrowers wish to make such optional prepayment,
and (ii) in the case of any mandatory prepayment required to be made pursuant to
Section 2.11, in lieu of applying such amount to the prepayment of Tranche B
Term Loans or Incremental B Term Loans (if any), as provided in paragraph
Section 2.11(d), on the date specified in Section 2.11 for such prepayment, give
the Administrative Agent telephonic notice (promptly confirmed in writing)
requesting that the Administrative Agent prepare and provide to each such Lender
a notice (each, a "Prepayment Option Notice") as described below. As promptly
as practicable after receiving such notice from the Borrower, the Administrative
Agent will send to each such Lender a Prepayment Option Notice, which shall be
in the form of Exhibit G, and shall include an offer by the Borrowers to prepay
on the date (each a "Prepayment Date") that is ten Business Days after the date
of the Prepayment Option Notice, the relevant Term Loans of such Lender by an
amount equal to the portion of the Tranche B Prepayment Amount or the
Incremental Facility B Prepayment Amount, as the case may be, indicated in such
Lender's Prepayment Option Notice as being applicable to such Lender's Term
Loans. On the Prepayment Date, (i) the Borrowers shall pay to the
Administrative Agent the aggregate amount necessary to prepay that portion of
the outstanding relevant Term Loans in respect of which such Lenders have
accepted prepayment as described above (such Lenders, the "Accepting Lenders"),
and such amount shall be applied to reduce the Tranche B Prepayment Amount or
the Incremental Facility B Prepayment Amount, as the case may be, with respect
to each Accepting Lender and (ii) the
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49
Borrowers shall pay to the Administrative Agent an amount equal to 50% of the
portion of the Tranche B Prepayment Amount and the Incremental Facility B
Prepayment Amount not accepted by the Accepting Lenders, and such amount shall
be applied to the prepayment of the Tranche A Term Loans.
(e) All payments (including prepayments) to be made by the Borrowers
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders, at the Payment Office, in Dollars and in immediately
available funds. The Administrative Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such extension
would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day. In the case of
any extension of any payment of principal pursuant to the preceding two
sentences, interest thereon shall be payable at the then applicable rate during
such extension.
(f) Unless the Administrative Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the amount that
would constitute its share of such borrowing available to the Administrative
Agent, the Administrative Agent may assume that such Lender is making such
amount available to the Administrative Agent, and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrowers a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this paragraph shall be
conclusive in the absence of manifest error. If such Lender's share of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon (and no
other interest) at the rate per annum applicable to Base Rate Loans under the
relevant Facility, on demand, from the Borrowers.
(g) Unless the Administrative Agent shall have been notified in writing by
the Borrowers prior to the date of any payment being made hereunder that the
Borrowers will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrowers are making such payment, and
the Administrative Agent may, but shall not be
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50
required to, in reliance upon such assumption, make available to the Lenders
their respective pro rata shares of a corresponding amount. If such payment is
not made to the Administrative Agent by the Borrowers within three Business Days
of such required date, the Administrative Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available pursuant
to the preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing herein
shall be deemed to limit the rights of the Administrative Agent or any Lender
against the Borrowers.
2.18 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any Application or
any Eurodollar Loan made by it, or change the basis of taxation of payments
to such Lender in respect thereof (except for Non-Excluded Taxes covered by
Section 2.19 and changes in the rate of tax on the overall net income of
such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrowers shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes
entitled to claim any additional amounts pursuant to this Section, it shall
promptly notify the Borrowers (with a copy to the Administrative Agent) of the
event by reason of which it has become so entitled, provided that the Borrowers
shall not be required to compensate a Lender pursuant to this paragraph for any
amounts incurred more than six months prior to the date that such Lender
notifies the Borrowers of such Lender's intention to claim compensation
therefor; and provided, further, that, if the circumstances giving rise to such
claim have a retroactive effect, then such six-month period shall be extended to
include the period of such retroactive effect.
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51
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrowers (with a copy to the Administrative
Agent) of a written request therefor, the Borrowers shall pay to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction; provided that the Borrowers shall not be required to compensate a
Lender pursuant to this paragraph for any amounts incurred more than six months
prior to the date that such Lender notifies the Borrowers of such Lender's
intention to claim compensation therefor; and provided, further, that if the
circumstances giving rise to such claim have a retroactive effect, then such
six-month period shall be extended to include the period of such retroactive
effect.
(c) A certificate as to any additional amounts payable pursuant to
this Section submitted by any Lender to the Borrowers (with a copy to the
Administrative Agent) shall be presumptively correct. The obligations of the
Borrowers pursuant to this Section shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
2.19 Taxes. (a) All payments made by the Borrowers under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on any Agent or any Lender as a result of a present or
former connection between such Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
such Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
other Loan Document). If any such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes
are required to be withheld from any amounts payable to any Agent or any Lender
hereunder, the amounts so payable to such Agent or such Lender shall be
increased to the extent necessary to yield to such Agent or such Lender (after
payment of all Non-Excluded Taxes and Other Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement,
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52
provided, however, that the Borrowers shall not be required to increase any such
amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that
are attributable to such Lender's or Transferee's failure to comply with the
requirements of paragraph (d) or (e) of this Section or (ii) that are United
States withholding taxes imposed on amounts payable to such Lender at the time
the Lender becomes a party to this Agreement, except to the extent that such
Lender's assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrowers with respect to such Non-Excluded Taxes
pursuant to this Section 2.19(a).
(b) In addition, the Borrowers shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrowers, as promptly as possible thereafter the Borrowers shall send to the
Administrative Agent for the account of the relevant Agent or Lender, as the
case may be, a certified copy of an original official receipt received by the
Borrowers showing payment thereof. If the Borrowers fail to pay any Non-
Excluded Taxes or Other Taxes when due to the appropriate taxing authority or
fail to remit to the Administrative Agent the required receipts or other
required documentary evidence, the Borrowers shall indemnify the Agents and the
Lenders for any incremental taxes, interest or penalties that may become payable
by any Agent or any Lender as a result of any such failure. The agreements in
this Section 2.19 shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
(d) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
deliver to the Borrowers and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest," together with any other certificate or
statement of exemption required under the C ode or Regulations issued
thereunder, a statement substantially in the form of Exhibit I and a Form W-8,
or any subsequent versions thereof or successors thereto properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from, or a
reduced rate of, U.S. federal withholding tax on all payments by the Borrowers
under this Agreement and the other Loan Documents. Such forms shall be delivered
by each Non-U.S. Lender on or before the date it becomes a party to this
Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender
shall promptly notify the Borrowers at any time it determines that it is no
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53
longer in a position to provide any previously delivered certificate to the
Borrowers (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this
paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant
to this paragraph that such Non-U.S. Lender is not legally able to deliver.
(e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the
Borrowers are located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrowers (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law or reasonably requested by the Borrowers, such properly completed and
executed documentation prescribed by applicable law as will permit such payments
to be made without withholding or at a reduced rate, provided that such Lender
is legally entitled to complete, execute and deliver such documentation and in
such Lender's reasonable judgment such completion, execution or submission would
not materially prejudice the legal position of such Lender.
(f) If the Administrative Agent or any Lender receives a refund or
otherwise would have received a refund but for the offset of the amount of such
refund against the Lender's Non-Excluded Taxes ("Tax Refund"), which in the good
faith judgment of such Lender is allocable to Non-Excluded Taxes paid by any
Borrower, it shall promptly pay such Tax Refund to the Borrower, net of all out-
of-pocket expenses of such lender incurred in obtaining such Tax Refund,
provided, however, that such Borrower agrees to promptly return such Tax Refund
to the Administrative Agent or the applicable Lender, as the case may be, if it
receives notice from the Administrative Agent or applicable Lender that such
Administrative Agent or Lender is required to repay such Tax Refund but only if
such repayment is required because the initial Tax Refund was permitted in
error.
2.20 Indemnity. The Borrowers agree to indemnify each Lender and to
hold each Lender harmless from any loss or expense (other than any loss of
Applicable Margin) which such Lender may sustain or incur as a consequence of
(a) default by the Borrowers in making a borrowing of, conversion into or
continuation of Eurodollar Loans after the Borrowers have given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by the Borrowers in making any prepayment after the Borrowers have given
a notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment (or any payment due to acceleration or in respect of
recovery) or conversion of Eurodollar Loans on a day which is not the last day
of an Interest Period with respect thereto. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of such Interest Period (or, in the
case of a failure to borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each
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54
case at the applicable rate of interest for such Loans provided for herein
(excluding, however, the Applicable Margin included therein, if any) over (ii)
the amount of interest (as reasonably determined by such Lender) which would
have accrued to such Lender on such amount by placing such amount on deposit for
a comparable period with leading banks in the London interbank eurodollar
market. A certificate as to any amounts payable pursuant to this Section
submitted to the Borrowers by any Lender shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
2.21 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.18 or 2.19(a)
with respect to such Lender, it will, if requested by the Borrowers, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section shall affect
or postpone any of the obligations of any Borrowers or the rights of any Lender
pursuant to Section 2.18 or 2.19(a).
2.22 Lender Replacement. The Borrowers shall be permitted to (a)
replace any Lender which defaults in its obligation to make Loans hereunder and
(b) replace any Lender which requests reimbursement for amounts owing pursuant
to Section 2.18 or 2.19(a); provided that (A) (i) such replacement does not
conflict with any Requirement of Law, (ii) no Default or Event of Default shall
have occurred and be continuing at the time of such replacement, (iii) prior to
any such replacement pursuant to clause (b) above such Lender shall have taken
no action under Section 2.21 so as to eliminate the continued need for payment
of amounts owing pursuant to Section 2.18 or 2.19(a), (iv) the Borrowers shall
be liable to such replaced Lender under Section 2.20 if any Eurodollar Loan
owing to such replaced Lender shall be purchased other than on the last day of
the Interest Period relating thereto, (v) the Borrowers shall reimburse the
replaced Lender for all its costs and expenses incurred in connection with such
replacement, (vi) such replacement must occur, if such replacement is to occur
pursuant to clause (a) above, prior to the cure of the applicable default or, if
such replacement is to occur pursuant to clause (b) above, within 30 days after
the date on which the Lender proposed to be replaced shall have made the
applicable reimbursement request, and (vii) any such replacement shall not be
deemed to be a waiver of any rights which the Borrowers, the Administrative
Agent or any other Lender shall have against the replaced Lender and (B) in the
case of replacement of a Lender under this Section, (i) the replacement
financial institution shall purchase, at par, all Loans and other amounts owing
to such replaced Lender on or prior to the date of replacement, (ii) the
replacement financial institution, if not already a Lender, shall be reasonably
satisfactory to the Administrative Agent and, if the replaced Lender is a
Revolving Credit Lender, the Issuing Bank, (iii) the replaced Lender shall be
obligated to make such replacement in accordance with
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the provisions of Section 10.6(c), and (iv) until such time as such replacement
shall be consummated, the Borrower shall pay all additional amounts (if any)
required pursuant to Section 2.18 or 2.19(a).
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the other Revolving Credit
Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters
of Credit") for the account of the Borrowers on any Business Day during the
Revolving Credit Commitment Period in such form as may be approved from time to
time by the Issuing Lender; provided that the Issuing Lender shall have no
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the
aggregate amount of the Available Revolving Credit Commitments would be less
than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii)
expire no later than the earlier of (x) the first anniversary of its date of
issuance and (y) the date which is five Business Days prior to the Scheduled
Revolving Credit Termination Date, provided that any Letter of Credit with a
one-year term may provide for the renewal thereof for additional one-year
periods (which shall in no event extend beyond the date referred to in clause
(y) above).
(b) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.
(c) The Issuing Lender shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrowers may from
time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
will process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed to by the
Issuing Lender and the Borrowers. The Issuing Lender shall furnish a copy of
such Letter of Credit to the Borrowers promptly following the issuance thereof.
The Issuing Lender may not issue any Letter of Credit unless it has first
confirmed with the
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56
Administrative Agent that, after giving effect to the issuance thereof, the
aggregate amount of the Available Revolving Credit Commitments would not be less
than zero. The Issuing Lender shall promptly furnish to the Administrative
Agent, which shall in turn promptly furnish to the Lenders, notice of the
issuance of each Letter of Credit (including the amount thereof).
3.3 Fees and Other Charges. (a) The Borrowers will pay a fee on the
aggregate undrawn face amount of all outstanding Letters of Credit at a per
annum rate equal to the Applicable Margin then in effect with respect to
Eurodollar Loans under the Revolving Credit Facility, to be shared ratably among
the Revolving Credit Lenders and payable quarterly in arrears on each L/C Fee
Payment Date after the issuance date. In addition, the Borrowers shall pay to
the Issuing Lender for its own account a fronting fee on the aggregate undrawn
face amount of all outstanding Letters of Credit of 1/4 of 1% per annum or such
other rate as shall be agreed upon between the Issuing Lender and the Borrowers,
payable quarterly in arrears on each L/C Fee Payment Date after the Issuance
Date.
(b) In addition to the foregoing fees, the Borrowers shall pay or
reimburse the Issuing Lender for such normal and customary costs and expenses as
are incurred or charged by the Issuing Lender in issuing, negotiating, effecting
payment under, amending or otherwise administering any Letter of Credit issued
by it.
3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Percentage in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Revolving Credit Percentage of the amount of such draft,
or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Lender under any Letter of Credit is paid to
the Issuing Lender within three Business Days after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
Funds Effective Rate during the period from and including the date such payment
is required to the date on which such payment is immediately available to the
Issuing Lender, times
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57
(iii) a fraction the numerator of which is the number of days that elapse during
such period and the denominator of which is 360. If any such amount required to
be paid by any L/C Participant pursuant to Section 3.4(a) is not made available
to the Issuing Lender by such L/C Participant within three Business Days after
the date such payment is due, the Issuing Lender shall be entitled to recover
from such L/C Participant, on demand, such amount with interest thereon
calculated from such due date at the rate per annum applicable to Base Rate
Loans under the Revolving Credit Facility. A certificate of the Issuing Lender
submitted to any L/C Participant with respect to any amounts owing under this
Section shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with Section 3.4(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Issuing Lender), or any payment of interest on account thereof, the Issuing
Lender will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. The Borrowers agree, in
accordance with the terms of the provisions of this Section, to reimburse the
Issuing Lender on each date on which the Issuing Lender notifies the Borrowers
of the date and amount of a draft presented under any Letter of Credit and paid
by the Issuing Lender for the amount of (a) such draft so paid and (b) any
taxes, fees, charges or other costs or expenses incurred by the Issuing Lender
in connection with such payment. Each such payment shall be made to the Issuing
Lender at its address for notices specified herein in lawful money of the United
States of America and in immediately available funds. Interest shall be payable
on any and all amounts remaining unpaid by the Borrowers under this Section from
the date such amounts become payable (whether at stated maturity, by
acceleration or otherwise) until payment in full at the rate set forth in (i)
until the second Business Day following the date of the applicable drawing,
Section 2.14(b) and (ii) thereafter, Section 2.14(c). Each drawing under any
Letter of Credit shall (unless an event of the type described in clause (i) or
(ii) of Section 8(f) shall have occurred and be continuing with respect to any
of the Borrowers, in which case the procedures specified in Section 3.4 for
funding by L/C Participants shall apply) constitute a request by the Borrowers
to the Administrative Agent for a borrowing pursuant to Section 2.6 of Base Rate
Loans in the amount of such drawing. The Borrowing Date with respect to such
borrowing shall be the date of such drawing.
3.6 Obligations Absolute. The Borrowers' obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff,
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58
counterclaim or defense to payment which the Borrowers may have or have had
against the Issuing Lender, any beneficiary of a Letter of Credit or any other
Person. The Borrowers also agree with the Issuing Lender that the Issuing Lender
shall not be responsible for, and the Borrowers' Reimbursement Obligations under
Section 3.5 shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Borrowers and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
any claims whatsoever of the Borrowers against any beneficiary of such Letter of
Credit or any such transferee. The Issuing Lender shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Issuing Lender. The Borrowers agree that
any action taken or omitted by the Issuing Lender under or in connection with
any Letter of Credit or the related drafts or documents, if done in the absence
of gross negligence or willful misconduct and in accordance with the standards
or care specified in the Uniform Commercial Code of the State of New York, shall
be binding on the Borrowers and shall not result in any liability of the Issuing
Lender to the Borrowers.
3.7 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrowers of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrowers in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.
3.8 Applications. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
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59
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement and
to make the Loans and issue or participate in the Letters of Credit, the
Borrowers hereby jointly and severally represent and warrant to each Agent and
each Lender that:
4.1 Financial Condition. (a) The unaudited pro forma combined
consolidated balance sheet of the Borrowers and their consolidated Subsidiaries
as at June 30, 1998 (including the notes thereto) (the "Pro Forma Balance
Sheet"), copies of which have heretofore been furnished to each Lender, has been
prepared giving effect (as if such events had occurred on such date) to (i) the
consummation of the Acquisition Transactions and the Reorganization, (ii) the
Loans to be made hereunder to fund the Acquisition Transactions and the loans to
be made under the Bridge Credit Agreement to fund the Acquisition Transactions
and the use of proceeds thereof and (iii) the payment of fees and expenses in
connection with the foregoing. The Pro Forma Balance Sheet has been prepared
based on the best information reasonably available to the Borrowers as of the
date of delivery thereof and on good faith estimates and assumptions believed
reasonable at the time made, and presents fairly in all material respect on a
pro forma basis the estimated financial position of Borrowers and their
consolidated Subsidiaries as at June 30, 1998, assuming that the events
specified in the preceding sentence had occurred on such date.
(b) The audited consolidated balance sheets of Cable Michigan as at
December 31, 1997, December 31, 1996 and December 31, 1995 and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
PricewaterhouseCoopers LLP, present fairly in all material respects the
consolidated financial condition of Cable Michigan as at such dates, and the
consolidated results of its operations and its consolidated cash flows for the
respective fiscal years then ended. The unaudited consolidated balance sheet of
Cable Michigan as at June 30, 1998, and the related unaudited consolidated
statements of income and cash flows for the six-month period ended on such date,
present fairly in all material respects the consolidated financial condition of
Cable Michigan as at such date, and the consolidated results of its operations
and its consolidated cash flows for the six-month period then ended (subject to
normal year-end audit adjustments and the absence of footnote disclosure). All
such financial statements, including the related notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved. Cable Michigan and its Subsidiaries do not have any material Guarantee
Obligations, contingent liabilities and liabilities for taxes, or any long-term
leases or unusual forward or long-term commitments, including, without
limitation, any interest rate or foreign currency swap or exchange transaction
or other obligation in respect of derivatives, which are not reflected in the
most recent financial statements referred to in this paragraph but which would
in accordance with GAAP be so reflected in a consolidated balance sheet of Cable
Michigan as of the Closing Date other than tax liabilities accrued in the
ordinary course of business subsequent to the date of such financial statements,
Indebtedness to be paid off on the
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Closing Date and Indebtedness permitted under Section 7.2. During the period
from December 31, 1997 to and including the date hereof there has been no
Disposition by Cable Michigan of any material part of its business or Property
other than as contemplated in the Merger Agreement and the Mercom Agreement.
(c) The unaudited consolidated balance sheets of the New England
Borrower as at December 31, 1997 and the related statements of income and of
cash flows for the fiscal year ended on such date, present fairly in all
material respects the financial condition of the New England Borrower as at such
date, and the results of its operations and its cash flows for the fiscal year
then ended. The unaudited balance sheet of the New England Borrower as at June
30, 1998, and the related unaudited statements of income and cash flows for the
six-month period ended on such date, present fairly in all material respects the
financial condition of the New England Borrower as at such date, and the results
of its operations and its cash flows for the six-month period then ended
(subject to normal year-end audit adjustments and the absence of footnote
disclosure). All such financial statements, including the related notes thereto,
have been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as disclosed therein). The New England Borrower does
not have any material Guarantee Obligations, contingent liabilities and
liabilities for taxes, or any long-term leases or unusual forward or long-term
commitments, including, without limitation, any interest rate or foreign
currency swap or exchange transaction or other obligation in respect of
derivatives, which are not reflected in the most recent financial statements
referred to in this paragraph but which would in accordance with GAAP be so
reflected in a balance sheet of the New England Borrower as of the Closing Date
other than tax liabilities accrued in the ordinary course of business subsequent
to the date of such financial statements, Indebtedness to be paid off on the
Closing Date and Indebtedness permitted under Section 7.2. During the period
from December 31, 1997 to and including the date hereof there has been no
Disposition by the New England Borrower of any material part of its business or
Property.
(d) The audited balance sheets of AMRAC Clear View, a Limited
Partnership ("Amrac") (acquired by the New England Borrower in May 1998) as at
December 31, 1997, December 31, 1996 and December 31, 1995 and the related
statements of income and of cash flows for the fiscal years ended on such dates,
reported on by and accompanied by an unqualified report from Greenfield, Altman,
Brown, Berger & Katz, P.C., present fairly in all material respects the
financial condition of Amrac as at such dates, and the results of its operations
and its cash flows for the respective fiscal years then ended. The audited
balance sheet of Amrac as at May 28, 1998 and the related audited statements of
income and cash flows for the period ended on such date, reported on and
accompanied by an unqualified report from PricewaterhouseCoopers LLP, present
fairly in all material respects the financial condition of Amrac as at such
date, and the results of its operations and its cash flows for the respective
period then ended. All such financial statements, including the related notes
thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved.
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(e) The audited combined balance sheets of Pegasus Cable Television,
Inc. and Pegasus Cable Television of Connecticut, Inc. (collectively, "Pegasus")
(acquired by the New England Borrower in July 1998) as at December 31, 1997,
December 31, 1996 and December 31, 1995 and the related combined statements of
income and of cash flows for the fiscal years ended on such dates, reported on
by and accompanied by an unqualified report from PricewaterhouseCoopers LLP,
present fairly in all material respects the combined financial condition of
Pegasus as at such date, and the combined results of its operations and its
combined cash flows for the respective fiscal years then ended. All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved.
4.2 No Change. Since December 31, 1997 there has been no development
or event which has had or could reasonably be expected to have a Material
Adverse Effect (it being understood that the consummation on the Closing Date of
the transactions contemplated by this Agreement shall not constitute or be
deemed to have a Material Adverse Effect).
4.3 Existence; Compliance with Law. Each of the Holding Companies, the
Borrowers and their Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority or the limited liability company power and
authority, as the case may be, and the legal right, to own and operate its
Property, to lease the Property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation or limited liability company, as the case may be, and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of Property or the conduct of its business requires such qualification
except to the extent that the failure to be so qualified and/or in good standing
could not reasonably be expected to have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law, except to the extent that the failure
to comply therewith could not, in the aggregate, reasonably be expected to have
a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan
Party has the corporate power and authority or the limited liability company
power and authority, as the case may be, and the legal right, to make, deliver
and perform the Loan Documents to which it is a party and, in the case of the
Borrowers, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrowers, to
authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Acquisition Transactions, the borrowings hereunder, under
the Bridge Credit Agreement or with the execution, delivery, performance,
validity or enforceability of this Agreement or any of the Loan Documents,
except (i) consents, authorizations, filings and notices described in Schedule
4.4, which consents, authorizations, filings and notices have been
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62
obtained or made and are in full force and effect other than such consents,
authorizations, filings and notices the failure to obtain or make could not
reasonably be expected to have a Material Adverse Effect and (ii) the filings
referred to in Section 4.19. Each Loan Document has been duly executed and
delivered on behalf of each Loan Party thereto. This Agreement constitutes, and
each other Loan Document upon execution will constitute, a legal, valid and
binding obligation of each Loan Party thereto, enforceable against each such
Loan Party in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
4.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any material Contractual Obligation of any of the
Borrowers or any of their Subsidiaries and will not result in, or require, the
creation or imposition of any Lien on any of their respective properties or
revenues pursuant to any Requirement of Law or any such material Contractual
Obligation (other than the Liens created by the Security Documents). No
Contractual Obligation applicable to any of the Borrowers or any of their
Subsidiaries could reasonably be expected to have a Material Adverse Effect.
4.6 No Material Litigation. No litigation, proceeding or, to the
knowledge of the Borrowers, investigation of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of any of the Borrowers,
threatened by or against any of the Borrowers or any of their Subsidiaries or
against any of their respective properties or revenues (a) with respect to any
of the Loan Documents or any of the transactions contemplated hereby or thereby,
or (b) which could reasonably be expected to have a Material Adverse Effect.
4.7 No Default. None of the Borrowers nor any of their Subsidiaries is
in default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrowers and their
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its real property material to the conduct of the business, and good title to, or
a valid leasehold interest in, all its other Property material to the conduct of
the business, and none of such Property is subject to any Lien except as
permitted by Section 7.3.
4.9 Intellectual Property. Each of the Borrowers and each of their
Subsidiaries owns, or is licensed to use, all material Intellectual Property
necessary for the conduct of its
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63
business as currently conducted. To the knowledge of the Borrowers, no material
claim has been asserted and is pending by any Person challenging or questioning
the use of any material Intellectual Property or the validity or effectiveness
of any material Intellectual Property, nor do any of the Borrowers know of any
valid basis for any such claim. The use of Intellectual Property by the
Borrowers and their Subsidiaries does not infringe on the rights of any Person
in any material respect.
4.10 Taxes. Each of the Borrowers and each of their Subsidiaries has
filed or caused to be filed all material Federal, state, local and foreign tax
returns which are required to be filed and has paid all taxes shown to be due
and payable on said returns or on any material assessments made against it or
any of its Property and all other material taxes, fees or other charges imposed
on it or any of its Property by any Governmental Authority (other than any the
amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Borrowers or their Subsidiaries, as
the case may be); no tax Lien has been filed (other than Liens permitted by
Section 7.3), and, to the knowledge of the Borrowers, no claim is being
asserted, with respect to any material tax, fee or other charge.
4.11 Federal Regulations. No part of the proceeds of any Loans will be
used for any purpose which violates the provisions of the Regulations of the
Board.
4.12 Labor Matters. There are no strikes or other labor disputes
against any of the Borrowers or any of their Subsidiaries pending or, to the
knowledge of the Borrowers, threatened that (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect. Hours worked by
and payment made to employees of the Borrowers and their Subsidiaries have not
been in violation of the Fair Labor Standards Act or any other applicable
Requirement of Law dealing with such matters that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect. All
payments due from the Borrowers or any of their Subsidiaries on account of
employee health and welfare insurance that (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect if not paid have
been paid or accrued as a liability on the books of the Borrowers or the
relevant Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan which,
individually or when taken into account with all other such occurrences, could
reasonably be expected to have a Material Adverse Effect, and each Plan has
complied in all material respects with the applicable provisions of ERISA and
the Code. No termination of a Single Employer Plan has occurred which could
reasonably be expected to have a Material Adverse Effect, and no Lien in favor
of the PBGC or a Plan has
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64
arisen, during such five-year period. The present value of all accrued benefits
under each Single Employer Plan (based on those assumptions used to fund such
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits by a material amount. None of the
Borrowers nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan which has resulted or could reasonably be
expected to result in a material liability under ERISA, and none of the
Borrowers nor any Commonly Controlled Entity would become subject to any
material liability under ERISA if any of the Borrowers or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation
is made or deemed made. To the knowledge of the Borrowers or any Commonly
Controlled Entity after reasonable review, no such Multiemployer Plan is in an
ERISA Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
4.15 Capital Stock; Subsidiaries. (a) All outstanding shares of
Capital Stock of the Borrowers are duly authorized, validly issued, fully paid
and non-assessable. All outstanding shares of Capital Stock and other Equity
Interests of each Subsidiary of each Borrower are duly authorized, validly
issued, fully paid and non-assessable and, except as set forth on Schedule 4.15,
owned directly or indirectly by such Borrower beneficially and of record, free
and clear of any Lien other than Liens created pursuant to the Security
Documents.
(b) The Subsidiaries listed on Schedule 4.15 constitute all the
Subsidiaries of the Borrowers at the date hereof. Schedule 4.15 sets forth as of
the Closing Date the name and jurisdiction of incorporation of each Subsidiary
and, as to each such Subsidiary, the percentage of each class of Capital Stock
owned by any Loan Party.
(c) Except as set forth on Schedule 4.15, there are on the date hereof
no outstanding subscriptions, options, warrants, calls, rights or other
agreements or commitments (other than stock options granted to employees or
directors and directors' qualifying shares) of any nature relating to any
Capital Stock of the Borrowers or any Subsidiary.
4.16 Use of Proceeds. The proceeds of the Term Loans shall be used to
finance a portion of the Acquisition Transactions, repay the Existing Credit
Facilities and to pay related fees and expenses. The proceeds of the Revolving
Credit Loans and the Letters of Credit shall be
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used to finance working capital needs and general corporate purposes in the
ordinary course of business, including acquisitions permitted hereby.
4.17 Environmental Matters. Other than exceptions to any of the
following that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect:
(a) the Borrowers and their Subsidiaries: (i) are, and within the
period of all applicable statutes of limitation have been, in compliance
with all applicable Environmental Laws; (ii) hold all Environmental Permits
(each of which is in full force and effect) required for any of their
current or intended operations or for any property owned, leased, or
otherwise operated by any of them; (iii) are, and within the period of all
applicable statutes of limitation have been, in compliance with all of
their Environmental Permits; and (iv) reasonably believe that: each of
their Environmental Permits will be timely renewed and complied with,
without material expense; any additional Environmental Permit that may be
required of any of them will be timely obtained and complied with, without
material expense; and compliance with any Environmental Law that is or is
expected to become applicable to any of them will be timely attained and
maintained, without material expense.
(b) Materials of Environmental Concern are not present at, on, under,
in, or about any real property now or formerly owned, leased or operated by
any of the Borrowers or any of their Subsidiaries, or at any other location
(including, without limitation, any location to which Materials of
Environmental Concern have been sent for re-use or recycling or for
treatment, storage, or disposal) which could reasonably be expected to (i)
give rise to liability of any of the Borrowers or any of their Subsidiaries
under any applicable Environmental Law or otherwise result in costs to any
of the Borrowers or any of their Subsidiaries, or (ii) interfere with any
of the Borrowers' or any of their Subsidiaries' continued operations, or
(iii) impair the fair saleable value of any real property owned or leased
by any of the Borrowers or any of their Subsidiaries.
(c) There is no judicial, administrative, or arbitral proceeding
(including any notice of violation or alleged violation) under or relating
to any Environmental Law to which any of the Borrowers or any of their
Subsidiaries is, or to the knowledge of any of the Borrowers or any of
their Subsidiaries will be, named as a party that is pending or, to the
knowledge of any of the Borrowers or any of their Subsidiaries, threatened.
(d) None of the Borrowers or any of their Subsidiaries has received
any written request for information, or been notified that it is a
potentially responsible party under or relating to the federal
Comprehensive Environmental Response, Compensation, and
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66
Liability Act or any similar Environmental Law, or with respect to any
Materials of Environmental Concern.
(e) None of the Borrowers or any of their Subsidiaries has entered
into or agreed to any consent decree, order, or settlement or other
agreement, or is subject to any judgment, decree, or order or other
agreement, in any judicial, administrative, arbitral, or other forum for
dispute resolution, relating to compliance with or liability under any
Environmental Law.
(f) None of the Borrowers or any of their Subsidiaries has assumed or
retained, by contract or operation of law, any liabilities of any kind,
fixed or contingent, known or unknown, under any Environmental Law or with
respect to any Material of Environmental Concern.
4.18 Accuracy of Information, etc. Subject to the next succeeding
sentence and to the qualifications provided therein, no statement or information
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other document, certificate or statement furnished
to the Administrative Agent or the Lenders or any of them, by or on behalf of
any Loan Party for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, taken as a whole, contained as of the
date such statement, information, document or certificate was so furnished (or,
in the case of the Confidential Information Memorandum, as of the date of this
Agreement), any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements contained herein or
therein, taken as a whole, not misleading. The projections and pro forma
financial information contained in the materials referenced above are based upon
good faith estimates and assumptions believed by management of the Borrowers to
be reasonable at the time made, it being recognized by the Lenders that such
financial information as it relates to future events is not to be viewed as fact
and that actual results during the period or periods covered by such financial
information may differ from the projected results set forth therein by a
material amount. To the knowledge of the Borrowers, as of the date hereof, the
representations and warranties contained in the Acquisition Agreements are true
and correct in all material respects.
4.19 Security Documents. The Guarantee and Collateral Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. In the case of the Pledged Stock
described in the Guarantee and Collateral Agreement, when any stock certificates
representing such Pledged Stock, together with appropriate endorsements are
delivered to the Administrative Agent, and in the case of the other Collateral
described in the Guarantee and Collateral Agreement, when financing statements
in appropriate form are filed in the offices specified on Schedule 4.19 (which
financing statements have been duly completed
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67
and executed and delivered to the Administrative Agent) and such other filings
as are specified on Schedule 3 to the Guarantee and Collateral Agreement (all of
which filings have been duly completed or provided for), the Guarantee and
Collateral Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such
Collateral (other than Fixtures) which can be perfected by such taking of
possession or filing of financing statements and the proceeds thereof, as
security for the Obligations, in each case prior and superior in right to any
other Person (except, in the case of Collateral other than Pledged Stock, Liens
permitted by Section 7.3).
4.20 Solvency. Each Loan Party is, and after giving effect to the
Acquisition Transactions and the incurrence of all Indebtedness and obligations
being incurred in connection herewith and therewith will be and will continue to
be, Solvent.
4.21 Senior Indebtedness. The Obligations will constitute "Senior
Indebtedness" of the Borrowers under and as defined in the Senior Subordinated
Note Indenture (when and if entered into). The obligations of each Subsidiary
Guarantor under the Guarantee and Collateral Agreement will constitute
"Guarantor Senior Indebtedness" of such Subsidiary Guarantor under and as
defined in the Senior Subordinated Note Indenture (when and if entered into).
4.22 Year 2000 Matters. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the Borrowers'
computer systems material to the conduct of the business of the Borrowers and
any of their Subsidiaries and (ii) equipment containing embedded microchips
(including systems and equipment supplied by others or with which Borrowers'
systems interface) material to the conduct of the business of the Borrowers and
any of their Subsidiaries and the testing of all such systems and equipment, as
so reprogrammed, will be completed by June 30, 1999. The cost to the Borrowers
of such reprogramming and testing and of the reasonably foreseeable consequences
of year 2000 to the Borrowers and their Subsidiaries (including, without
limitation, reprogramming errors and the failure of others' systems or
equipment) will not result in a Default or a Material Adverse Effect. Except for
such of the reprogramming referred to in the preceding sentence as may be
necessary, the computer and management information systems of the Borrowers and
their Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue to be, sufficient to permit the Borrowers and their Subsidiaries to
conduct their business without Material Adverse Effect.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial Loan requested to be made by it is subject to the
satisfaction, immediately prior to or concurrently with the making of such Loan
on the Closing Date, of the following conditions precedent:
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(a) Loan Documents. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the
Borrowers, (ii) the Guarantee and Collateral Agreement, executed and
delivered by a duly authorized officer of the Holding Companies, the
Borrowers and each Subsidiary Guarantor and (iii) for the account of each
relevant Lender, Notes conforming to the requirements hereof and executed
and delivered by a duly authorized officer of the Borrowers.
(b) Bridge Credit Agreement. The Administrative Agent shall have
received true and correct copies, certified by a duly authorized officer of
the Borrowers, of the Bridge Credit Agreement and any notes and other
documents executed and delivered by the Holding Companies pursuant thereto.
(c) Acquisition Transactions. The following transactions shall have
been consummated, in each case on terms and conditions reasonably
satisfactory to the Lenders:
(i) the Merger;
(ii) the Holding Companies shall have received in the
aggregate at least $80,000,000 from the proceeds of equity investments
in Avalon Cable and its Subsidiaries by ABRY, other institutional
investors and members of the Avalon Cable's management, and the
proceeds of such investments shall have been utilized to finance the
Merger and such other of the Acquisition Transactions as shall be then
completed or invested in the Capital Stock of, or contributed to the
common equity of, the Borrowers;
(iii) the Bridge Credit Agreement shall have become
effective in accordance with its terms, the Holding Companies shall
have received proceeds of loans thereunder in an aggregate amount
equal to $105,000,000, and the proceeds of such borrowings shall have
been utilized to finance the Merger and such other of the Acquisition
Transactions as shall be then completed, or invested in the Capital
Stock of, or contributed to the common equity of the Borrowers;
(iv) the Holding Companies shall have received proceeds of
ABRY Bridge Subordinated Debt in an aggregate amount equal to
$18,000,000, and the proceeds of such borrowings shall have been
invested in the Capital Stock of, or contributed to the common equity
of, the Borrowers and utilized to finance the Merger and such other of
the Acquisition Transactions as shall be then completed.
(d) Pro Forma Balance Sheet: Financial Statements. The Lenders shall
have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated
financial statements of
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69
Cable Michigan for the 1997, 1996 and 1995 fiscal years and (iii) unaudited
interim consolidated financial statements of Cable Michigan and the New
England Borrower as of and for the six-month period ended June 30, 1998 and
such financial statements shall not, in the reasonable judgment of the
Lenders, reflect any material adverse change in the consolidated financial
condition of Cable Michigan, as reflected in the financial statements or
projections contained in the Confidential Information Memorandum.
(e) Approvals. All governmental and third party approvals necessary
(it being agreed that with respect to approvals required to transfer
control of franchises as a result of the Merger, only approvals to transfer
franchises in which 90% of the Basic Subscribers (as defined in the Merger
Agreement) are located are necessary) in connection with the Merger
Agreement, the continuing operations of the Holding Companies, the
Borrowers and their Subsidiaries and the transactions contemplated hereby
(except for the Acquisition Transactions other than the Merger) shall have
been obtained and be in full force and effect (other than with respect to
the Merger, the CARS Microwave License for the Mercom transmitter in
Allegan, Michigan), and all applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on the
Merger or the financing contemplated hereby.
(f) Related Agreements. The Administrative Agent shall have received
(in a form reasonably satisfactory to the Administrative Agent), with a
copy for each Lender, true and correct copies, certified as to authenticity
by the Borrowers, of the Acquisition Documentation (to the extent executed)
and such other documents or instruments as may be reasonably requested by
the Administrative Agent, including, without limitation, a copy of any debt
instrument, security agreement or other material contract to which the Loan
Parties may be a party.
(g) Termination of Existing Credit Facilities. The Administrative
Agent shall have received evidence reasonably satisfactory to the
Administrative Agent and the Syndication Agent that the Existing Credit
Facilities shall be simultaneously terminated, all amounts thereunder shall
be simultaneously paid in full and arrangements reasonably satisfactory to
the Administrative Agent shall have been made for the termination of Liens
and security interests granted in connection therewith (except that the
Liens created by the New England Borrower in favor of Lehman Commercial
Paper Inc., as administrative agent, to secure the obligations and
liabilities of the New England Borrower under the Avalon Credit Agreement
shall not be terminated but shall be continued and shall secure the
Obligations (as defined in the Guarantee and Collateral Agreement), among
which are obligations under such Credit Agreement that are being refinanced
by this Credit Agreement).
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(h) Fees. The Lenders, Syndication Agent and the Administrative
Agent shall have received all fees required to be paid, and all expenses
for which invoices have been presented (including reasonable fees,
disbursements and other charges of counsel to the Agents), on or before the
Closing Date. All such amounts will be paid with proceeds of Loans made on
the Closing Date and will be reflected in the funding instructions given by
the Borrowers to the Administrative Agent on or before the Closing Date.
(i) Business Plan. The Lenders shall have received a reasonably
satisfactory financial plan for fiscal years 1998-2007.
(j) Solvency Opinion. The Lenders shall have received a reasonably
satisfactory solvency opinion from a firm satisfactory to the
Administrative Agent which shall document the solvency of the Borrowers and
their Subsidiaries considered as a whole after giving effect to the
transactions contemplated hereby.
(k) Lien Searches. The Administrative Agent shall have received the
results of a recent lien search in each of the jurisdictions where assets
of the Borrowers and their Subsidiaries are located, and such search shall
reveal no Liens on any of the assets of the Borrowers or their Subsidiaries
except for Liens permitted by Section 7.3.
(l) Expenses. The Administrative Agent shall have received
satisfactory evidence that the fees and expenses to be incurred in
connection with the Acquisition Transactions and the financing thereof
shall not exceed $25,000,000.
(m) Closing Certificate. The Administrative Agent shall have
received a certificate of each Loan Party, dated the Closing Date,
substantially in the form of Exhibit C, with appropriate insertions and
attachments.
(n) Legal Opinions. The Administrative Agent shall have received the
following executed legal opinions:
(i) the legal opinion of Kirkland & Ellis, counsel to the
Borrowers and their Subsidiaries, substantially in the form of Exhibit
F-1;
(ii) the legal opinion of Bienstock & Clark, special
regulatory counsel to the Borrowers and their Subsidiaries,
substantially in the form of Exhibit F-2; and
(iii) the legal opinion of Kirkpatrick & Lockhart,
Pennsylvania counsel to the Borrowers and their subsidiaries,
substantially in the form of Exhibit F-3.
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71
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(o) Pledged Stock; Stock Power; Pledged Notes. The Administrative
Agent shall have received (i) the certificates representing the shares of
Capital Stock pledged pursuant to the Guarantee and Collateral Agreement,
together with an undated stock power for each such certificate executed in
blank by a duly authorized officer of the pledgor thereof and (ii) each
promissory note pledged to the Administrative Agent pursuant to the
Guarantee and Collateral Agreement endorsed (without recourse) in blank (or
accompanied by an executed transfer form in blank satisfactory to the
Administrative Agent) by the pledgor thereof.
(p) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement)
required by the Security Documents or under law or reasonably requested by
the Administrative Agent to be filed, registered or recorded in order to
create in favor of the Administrative Agent, for the benefit of the
Lenders, a perfected Lien on the Collateral described therein, prior and
superior in right to any other Person (other than with respect to Liens
expressly permitted by Section 7.3), shall be in proper form for filing,
registration or recordation.
(q) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of Section 5.3 of the
Guarantee and Collateral Agreement.
(r) No Breach Under Engagement Letter, Commitment Letter or Fee
Letter. None of the Holding Companies or the Borrowers shall be in breach
or violation of any of its obligations under the Engagement Letter, the
Commitment Letter (as such terms are defined in the Bridge Credit
Agreement) or the Fee Letter, and each of the Engagement Letter and the Fee
Letter shall be in full force and effect.
(s) ABRY Commitment to Fund Bridge Loan Interest. The Administrative
Agent shall have received evidence, in form and substance satisfactory to
it, that ABRY III shall have irrevocably committed to make loans from time
to time to Avalon Cable the proceeds of which will be sufficient to provide
ABRY Subordinated Debt to pay all interest due on the Bridge Loans and the
Exchange Notes through the third anniversary of the Closing Date.
5.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
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72
(a) Representations and Warranties. Each of the representations and
warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct in all material respects on and as of such date
as if made on and as of such date except for representations and warranties
expressly stated to relate to a specific earlier date, in which case such
representations and warranties shall have been true and correct in all
material respects as of such earlier date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrowers
hereunder shall constitute a representation and warranty by the Borrowers as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrowers hereby jointly and severally agree that, so long as the
Commitments remain in effect, any Letter of Credit remains outstanding or any
Loan or other amount (other than contingent and indemnification obligations) is
owing to any Lender or any Agent hereunder, each of the Borrowers shall and
shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent (which
shall promptly forward a copy thereof to each Lender):
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrowers, a copy of the audited combined
consolidated balance sheet of (i) the Borrowers and their consolidated
Subsidiaries and (ii) the Senior Discount Note Issuers and their
consolidated Subsidiaries, in each case, as at the end of such year and the
related audited combined consolidated statements of income and of cash
flows for such year, setting forth in each case in comparative form the
figures for the previous year, reported on without a "going concern" or
like qualification or exception, or qualification arising out of the scope
of the audit, by PricewaterhouseCoopers LLP or other independent certified
public accountants of nationally recognized standing, provided that the
delivery of the Borrowers' annual report on Form 10-K shall be deemed to
satisfy the requirements of this paragraph;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrowers, the unaudited combined consolidated balance sheet of
(i) the Borrowers and their consolidated Subsidiaries and (ii) the Senior
Discount Note Issuers and their consolidated Subsidiaries,
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73
in each case, as at the end of such quarter and the related unaudited
combined consolidated statements of income and of cash flows for such
quarter and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the previous
year, certified by a Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit adjustments and the
absence of certain footnotes), provided that the Borrowers shall furnish
such financial information for the quarter ended September 30, 1998 not
later than December 15, 1998, provided, further, that the delivery of the
Borrower's quarterly report on Form 10-Q shall be deemed to satisfy the
requirements of this paragraph; and
(c) as soon as available, but in any event not later than 45 days
after the end of each month occurring during each fiscal year of the
Borrowers (other than the third, sixth, ninth and twelfth such month),
commencing with the month of November, 1998, the unaudited combined
consolidated balance sheets of the Borrowers and their Subsidiaries as at
the end of such month and the related unaudited combined consolidated
statements of income and of cash flows for such month and the portion of
the fiscal year through the end of such month, setting forth in each case
in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments and the absence of certain
footnotes); provided that the Borrowers shall furnish such financial
information for each month ending on or prior to March 31, 1999 not later
than 60 days after the end of such month;
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such officer, as the case may be, and disclosed
therein).
6.2 Certificates; Other Information. Furnish to the Administrative
Agent (which shall promptly forward a copy to each Lender), or, in the case of
clause (h), to the relevant Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer of each
of the Borrowers stating that, after due inquiry, such Responsible Officer
has obtained no knowledge of any Default or Event
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74
of Default except as specified in such certificate and (ii) in the case of
quarterly or annual financial statements, (x) a Compliance Certificate
containing all information and calculations necessary for determining
compliance by the Borrowers and their Subsidiaries with the provisions of
this Agreement referred to therein as of the last day of the fiscal quarter
or fiscal year of the Borrowers, as the case may be, and (y) to the extent
not previously disclosed to the Administrative Agent, a listing of any
county or state within the United States where any Loan Party keeps
inventory or equipment and of any Intellectual Property acquired by any
Loan Party since the date of the most recent list delivered pursuant to
this clause (y) (or, in the case of the first such list so delivered, since
the Closing Date);
(c) as soon as available, and in any event no later than 45 days
after the end of each fiscal year of the Borrowers, a detailed consolidated
budget for the following fiscal year (including a projected combined
consolidated balance sheet of the Borrowers and their Subsidiaries as of
the end of the following fiscal year, and the related consolidated
statements of projected cash flow, projected changes in financial position
and projected income),and, as soon as available, significant revisions, if
any, of such budget and projections with respect to such fiscal year,
submitted to the Board for approval (collectively, the "Projections"),
which Projections shall in each case be accompanied by a certificate of a
Responsible Officer stating that such Projections are based on reasonable
estimates, information and assumptions at the time made in light of the
circumstances then existing and that such Responsible Officer has no reason
to believe that such Projections are incorrect or misleading in any
material respect;
(d) if the Administrative Agent reasonably so requests, within 45
days after the end of each fiscal quarter of the Borrowers, a narrative
discussion and analysis of the financial condition and results of
operations of Borrowers and their Subsidiaries for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, as compared to the portion of the Projections
covering such periods and to the comparable periods of the previous year;
(e) as soon as possible and in any event prior to the effectiveness
thereof, copies to the Agent of substantially final drafts of any proposed
amendment, supplement, waiver or other modification with respect to the
Acquisition Agreements;
(f) within five days after the same are sent, copies of all financial
statements and reports which any of the Holding Companies or either the
Borrowers sends to the holders of any class of its debt securities or
public equity securities and, within five days after the same are filed,
copies of all financial statements and reports which any of the Holding
Companies or the Borrowers may make to, or file with, the SEC;
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75
(g) as soon as possible and in any event within five days of
obtaining knowledge thereof, any notice that any Governmental Authority may
deny any application for an Environmental Permit sought by, or revoke or
refuse to renew any Environmental Permit held by, the Borrowers or any of
their respective Subsidiaries; and
(h) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrowers or their Subsidiaries, as the case may be, or except
where the failure to pay such obligation could not reasonably be expected to
have a Material Adverse Effect.
6.4 Conduct of Business and Maintenance of Existence, etc. (a)(i)
Preserve, renew and keep in full force and effect its corporate existence and
(ii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business, except,
in each case, as otherwise permitted by Section 7.4 and except, in the case of
clause (ii) above, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; and (b) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all material
tangible Property and systems useful and necessary in its business in good
working order and condition, ordinary wear and tear and damage occurring as a
result of a casualty event excepted and (b) maintain with financially sound and
reputable insurance companies insurance on all its Property in at least such
amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business.
6.6 Inspection of Property; Books and Records; Discussions. (a)
Keep proper books of records and account in which full, true and correct (in all
material respects) entries in conformity with GAAP and all Requirements of Law
shall be made of all dealings and transactions in relation to its business and
activities and (b) permit representatives of any Lender at its own expense to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time and as often as may reasonably
be desired and to discuss the business, operations, properties and financial and
other condition of the Holding Companies, the Borrowers and their Subsidiaries
with officers and employees of the
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76
Borrowers and their Subsidiaries and with its independent certified public
accountants (such visits and inspections shall be coordinated by the Lenders to
the extent reasonably practicable).
6.7 Notices. Promptly give notice to the Administrative Agent and
each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of any of the Holding Companies, any of the Borrowers or any of
their Subsidiaries or (ii) litigation, proceeding or, to the knowledge of
the Borrower, investigation which may exist at any time between any of the
Holding Companies, any of the Borrowers or any of their Subsidiaries and
any Governmental Authority, which in either case, if not cured or if
adversely determined, as the case may be, could reasonably be expected to
have a Material Adverse Effect;
(c) the following events, as soon as possible and in any event within
30 days after any of the Borrowers knows or has reason to know thereof
unless any such event could not, individually or in the aggregate, result
in any liability which could reasonably be expected to have a Material
Adverse Effect: (i) the occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or either of a Plan or any
withdrawal from, or the termination, ERISA Reorganization or Insolvency of,
any Multiemployer Plan or (ii) the institution of proceedings or the taking
of any other action by the PBGC or any of the Borrowers or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal
from, or the termination, ERISA Reorganization or Insolvency of, any Plan;
and
(d) any development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Holding Companies, the relevant Borrower or the
relevant Subsidiary proposes to take with respect thereto.
6.8 Environmental Laws. (a) Comply with, and ensure compliance by
all tenants and subtenants, if any, with, all applicable Environmental Laws, and
obtain and comply with and maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws. For purposes of this Section 6.8(a), noncompliance shall be deemed not to
<PAGE>
constitute a breach of this covenant, provided that, upon learning of any actual
or suspected noncompliance, the Borrowers shall, in a timely fashion, undertake
reasonable efforts to achieve compliance and, provided, further, that in any
case, such noncompliance, and any other noncompliance with any Environmental
Law, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Environmental Laws. For purposes of this
Section 6.8(b), noncompliance shall be deemed not to constitute a breach of this
covenant, provided that, upon learning of any actual or suspected noncompliance,
the Borrowers shall, in a timely fashion, undertake reasonable efforts to
achieve compliance and, provided, further, that in any case, such noncompliance,
and any other noncompliance with any Environmental Law, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
6.9 Interest Rate Protection. In the case of the Borrowers, (a) within
60 days after the Closing Date, enter into and maintain in effect at all times
until the date of issuance of the Senior Subordinated Notes, Hedge Agreements to
the extent necessary to provide that at least 50% of the aggregate principal
amount of the Term Loans is subject to interest rate protection and (b) maintain
in effect at all times after the date of issuance of the Senior Subordinated
Notes Hedge Agreements to the extent necessary to provide that at least 50% of
the aggregate principal amount of the Term Loans and the Senior Subordinated
Notes is subject to either a fixed rate or interest rate protection for a period
of not less than three years thereafter. Hedge Agreements entered into pursuant
to this Section shall have terms and conditions reasonably satisfactory to the
Administrative Agent and the Borrowers.
6.10 Additional Collateral, etc. (a) With respect to any Property
acquired after the Closing Date by any of the Holding Companies, any of the
Borrowers or any of their Subsidiaries (other than (x) any real property or the
Capital Stock of any new Subsidiary, (y) any Property subject to a Lien
expressly permitted by Section 7.3(g) and (z) Property acquired by an Excluded
Foreign Subsidiary) as to which the Administrative Agent, for the benefit of the
Lenders, does not have a perfected Lien, promptly (i) execute and deliver to the
Administrative Agent such amendments to the Guarantee and Collateral Agreement
or such other documents as the Administrative Agent deems necessary or advisable
to grant to the Administrative Agent, for the benefit of the Lenders, a security
interest in such Property and (ii) take all actions necessary or advisable to
grant to the Administrative Agent, for the benefit of the Lenders, a perfected
first priority security interest in such Property, including without limitation,
the filing of Uniform Commercial Code financing statements in such jurisdictions
as may be required by the Guarantee and Collateral Agreement or by law or as may
be reasonably requested by the Administrative Agent.
<PAGE>
78
(b) With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $2,500,000 acquired after
the Closing Date by any of the Borrowers or any of their Subsidiaries (other
than any such real property owned by an Excluded Foreign Subsidiary subject to a
Lien expressly permitted by Section 7.3(g)), promptly (i) execute and deliver a
first priority mortgage in favor of the Administrative Agent, for the benefit of
the Lenders, covering such real property, (ii) if requested by the
Administrative Agent, provide the Lenders with (x) title and extended coverage
insurance covering such real property in an amount at least equal to the
purchase price of such real estate (or such other amount as shall be reasonably
specified by the Administrative Agent) as well as a current ALTA survey thereof,
together with a surveyor's certificate and (y) any consents or estoppels
reasonably deemed necessary or advisable by the Administrative Agent in
connection with such mortgage or deed of trust, each of the foregoing in form
and substance reasonably satisfactory to the Administrative Agent and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(c) With respect to any new Subsidiary (other than an Excluded Foreign
Subsidiary) created or acquired after the Closing Date (which, for the purposes
of this paragraph, shall include any existing Subsidiary that ceases to be an
Excluded Foreign Subsidiary and, upon the completion of the Mercom Acquisition,
Mercom and its Subsidiaries), by any of the Borrowers or any of their
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent
deems necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary which is owned by any of the Borrowers or
any of their Subsidiaries, (ii) deliver to the Administrative Agent the
certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of any of
the Borrowers or such Subsidiary, as the case may be, (iii) cause such new
Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and
(B) to take such actions necessary or advisable to grant to the Administrative
Agent for the benefit of the Lenders a perfected first priority security
interest in the Collateral described in the Guarantee and Collateral Agreement
with respect to such new Subsidiary, including, without limitation, the filing
of Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Guarantee and Collateral Agreement or by law or as may be
requested by the Administrative Agent, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by any of the Borrowers or any of their
Subsidiaries, promptly (i) execute
<PAGE>
79
and deliver to the Administrative Agent such amendments to the Guarantee and
Collateral Agreement as the Administrative Agent deems necessary or advisable in
order to grant to the Administrative Agent, for the benefit of the Lenders, a
perfected first priority security interest in the Capital Stock of such new
Subsidiary which is owned by any of the Borrowers or any of their Subsidiaries
(provided that in no event shall more than 65% of the total outstanding Capital
Stock of any such new Subsidiary be required to be so pledged), (ii) deliver to
the Administrative Agent the certificates representing such Capital Stock,
together with undated stock powers, in blank, executed and delivered by a duly
authorized officer of any of the Borrowers, or such Subsidiary, as the case may
be, and take such other action as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the Lien of the Administrative Agent
thereon, and (iii) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
6.11 Further Assurances. In the case of the Borrowers, from time to
time execute and deliver, or cause to be executed and delivered, such additional
instruments, certificates or documents, and take all such actions, as the
Administrative Agent may reasonably request, for the purposes of implementing or
effectuating the provisions of this Agreement and the other Loan Documents, or
of more fully perfecting or renewing the rights of the Administrative Agent and
the Lenders with respect to the Collateral (or with respect to any additions
thereto or replacements or proceeds thereof or with respect to any other
property or assets hereafter acquired by the Borrowers which may be deemed to be
part of the Collateral) pursuant hereto or thereto. Upon the exercise by the
Administrative Agent or any Lender of any power, right, privilege or remedy
pursuant to this Agreement or the other Loan Documents which requires any
consent, approval, recording, qualification or authorization of any Governmental
Authority, the Borrowers will execute and deliver, or will cause the execution
and delivery of, all applications, certifications, instruments and other
documents and papers that the Administrative Agent or such Lender may be
required to obtain from the Borrowers or any of their Subsidiaries for such
governmental consent, approval, recording, qualification or authorization.
SECTION 7. NEGATIVE COVENANTS
The Borrowers hereby jointly and severally agree that, so long as the
Commitments remain in effect, any Letter of Credit remains outstanding or any
Loan or other amount is owing to any Lender or any Agent hereunder (other than
contingent and indemnification obligations), each of the Borrowers shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly:
<PAGE>
80
7.1 Financial Condition Covenants.
(a) Consolidated Leverage Ratio. (i) Prior to the earlier to occur of
the Senior Subordinated Note Issuance Date and the Permanent Securities Issuance
Date, permit the Consolidated Leverage Ratio as at the last day of any quarter
ending during any test period set forth below to exceed the ratio set forth
below opposite such test period:
<TABLE>
<CAPTION>
Consolidated
Test Period Leverage Ratio
----------------------- --------------
<S> <C>
12/31/98 to 6/30/00 6.50 to 1.0
7/1/00 to 9/30/00 6.25 to 1.0
10/1/00 to 9/30/01 6.00 to 1.0
10/01/01 to 9/30/02 5.25 to 1.0
10/01/02 to 9/30/03 4.25 to 1.0
10/01/03 and thereafter 3.25 to 1.0
</TABLE>
(ii) On or after the earlier to occur of the Senior Subordinated Note
Issuance Date and the Permanent Securities Issuance Date, permit the
Consolidated Leverage Ratio as at the last day of any quarter ending during any
test period set below to exceed the ratio set forth below opposite such test
period:
<TABLE>
<CAPTION>
Consolidated
Test Period Leverage Ratio
----------------------- --------------
<S> <C>
12/31/98 to 6/30/00 6.90 to 1.0
7/1/00 to 9/30/01 6.50 to 1.0
10/01/01 to 9/30/02 6.25 to 1.0
10/01/02 to 9/30/03 5.25 to 1.0
10/01/03 to 9/30/05 4.75 to 1.0
10/01/05 and thereafter 4.25 to 1.0
</TABLE>
(b) Consolidated Senior Debt Ratio. On or after the earlier to occur
of the Senior Subordinated Note Issuance Date and the Permanent Securities
Issuance Date, permit the Consolidated Senior Debt Ratio as at the last day of
any quarter ending during any test period set forth below to exceed the ratio
set forth below opposite such test period:
<PAGE>
81
<TABLE>
<CAPTION>
Consolidated
Test Period Senior Debt Ratio
----------- -----------------
<S> <C>
12/31/98 to 9/30/00 5.00 to 1.0
10/01/00 to 9/30/01 4.50 to 1.0
10/01/01 to 9/30/02 4.00 to 1.0
10/01/02 and thereafter 3.50 to 1.0
</TABLE>
(c) Consolidated Interest Coverage Ratio. (i) Prior to the Permanent
Securities Issuance Date, permit the Consolidated Interest Coverage Ratio as at
the last day of any quarter ending during any test period set forth below to be
less than the ratio set forth below opposite such test period:
<TABLE>
<CAPTION>
Consolidated Interest
Test Period Coverage Ratio
----------- ---------------------
<S> <C>
3/31/99 to 9/30/00 1.75 to 1.0
10/01/00 to 9/30/01 2.00 to 1.0
10/01/01 to 9/30/02 2.25 to 1.0
10/01/02 to 9/30/03 2.50 to 1.0
10/01/03 to 9/30/04 2.75 to 1.0
10/01/04 and thereafter 3.50 to 1.0
</TABLE>
(ii) On or after the Permanent Securities Issuance Date, permit the
Consolidated Interest Coverage Ratio as at the last day of any quarter ending
during any test period set forth below to be less than the ratio set forth below
opposite such test period:
<TABLE>
<CAPTION>
Consolidated Interest
Test Period Coverage Ratio
----------- ---------------------
<S> <C>
3/31/99 to 9/30/02 1.50 to 1.0
10/01/02 to 9/30/03 2.00 to 1.0
10/01/03 and thereafter 2.25 to 1.0
</TABLE>
(d) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated
Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters
of the Borrowers, commencing with the period ending December 31, 1999, to be
less than 1.25 to 1.0.
(e) Consolidated Debt Service Coverage Ratio. Permit the Consolidated
Debt Service Coverage Ratio for any period of four consecutive fiscal quarters
of the Borrowers, commencing with the period ending December 31, 1999, to be
less than 1.25 to 1.0.
<PAGE>
82
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document
(including, without limitation, Indebtedness incurred pursuant to Section
2.2);
(b) Indebtedness of any of the Borrowers to any other Borrower or to
any Subsidiary and of any Wholly Owned Subsidiary Guarantor to any of the
Borrowers or any other Subsidiary and the Mercom Intercompany Loan;
(c) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate
principal amount not to exceed $5,000,000 at any one time outstanding;
(d) Indebtedness outstanding on the date hereof and listed on Schedule
7.2(d) and any refinancings, refundings, renewals or extensions thereof
(without any increase in the principal amount thereof or any shortening of
the maturity of any principal amount thereof);
(e) Guarantee Obligations made in the ordinary course of business by
the Borrowers or any of their Subsidiaries of obligations of the Borrowers
or any Subsidiary Guarantor;
(f) (i) Indebtedness of the Borrowers in respect of senior
subordinated notes in an aggregate principal amount not to exceed
$150,000,000, provided that all the terms and conditions of such
Indebtedness are reasonably satisfactory to the Administrative Agent, as
evidenced by its prior written approval thereof, and provided, further,
that the proceeds of such Indebtedness are used (A) if the aggregate gross
proceeds of such senior subordinated notes, when added to the aggregate
gross proceeds of the senior discount notes referred to below and any Fill-
in Equity Proceeds, are in an aggregate amount equal to at least
$200,000,000 and if reasonably contemporaneously with the issuance thereof
there shall have been issued by Senior Discount Note Issuers senior
discount notes the aggregate gross proceeds of which, when added to the
aggregate amount of any Fill-in Equity Proceeds, are in an amount equal to
at least $100,000,000 and all the terms and conditions of such senior
discount notes are reasonably satisfactory to the Administrative Agent, as
evidenced by its prior written approval thereof, first, to prepay any
portion of the Indebtedness under the Bridge Credit Agreement remaining
after application of the proceeds of the Senior Discount Notes and such
Fill-in Equity Proceeds to the prepayment of such Indebtedness and second,
to prepay the outstanding Indebtedness under (i) the ABRY Bridge
Subordinated Debt described in clause (a)(i) of the definition of such term
and (ii) any Permitted Refinancing Indebtedness with respect to such ABRY
<PAGE>
83
Subordinated Debt, in each case remaining after application of the proceeds
of the Senior Discount Notes to the prepayment of such Indebtedness, (B) if
clause (A) is not applicable and the aggregate gross proceeds of such
senior subordinated notes are in an amount equal to at least $100,000,000,
first to prepay the Term Loans in accordance with Section 2.11(a)
(disregarding the provisos to such Section) to the extent necessary to
cause the ratio of (i) Consolidated Senior Debt outstanding after giving
effect to such prepayment to (2) Adjusted Consolidated EBITDA for the
period of four consecutive fiscal quarters ending on the last day of the
then most recently ended fiscal quarter for which financial statements
shall have been delivered to the Administrative Agent pursuant to Section
6.1 (or, if such fiscal quarter is the fiscal quarter ending September 30,
1998 or December 31, 1998, for the period of two or three consecutive
fiscal quarters then ending, respectively, multiplied by two or four-
thirds, respectively) to equal 4.5 to 1.0, second, to prepay the
Indebtedness under the Bridge Credit Agreement and third, to prepay the
outstanding Indebtedness under (i) the ABRY Bridge Subordinated Debt
described in clause (a)(i) of the definition of such term and (ii) any
Permitted Refinancing Indebtedness with respect to such ABRY Subordinated
Debt and (C) to the extent that neither clause (A) nor clause (B) is
applicable or, if clause (A) or (B) is applicable and any such proceeds
remain after application in accordance with such clause (A) or clause (B),
as the case may be, for application in accordance with Section 2.11(a)
(disregarding the provisos to such Section); and (ii) Guarantee Obligations
of any Subsidiary Guarantor in respect of Indebtedness incurred by the
Borrowers pursuant to clause (i), provided that such Guarantee Obligations
are subordinated to the obligations of such Subsidiary Guarantor under the
Guarantee and Collateral Agreement to the same extent as the obligations of
the Borrowers in respect of the senior subordinated notes referred to in
said clause are subordinated to the Obligations;
(g) the guarantee by the Borrowers of Indebtedness of any of their
Subsidiaries so long as the incurrence of such Indebtedness by such
Subsidiary is permitted to be incurred by another provision of this
Section;
(h) Indebtedness consisting of customary indemnification, adjustments
of purchase price or similar obligations, in each case incurred or assumed
in connection with the acquisition of any business or assets; and
(i) additional Indebtedness of the Borrowers or any of their
Subsidiaries in an aggregate principal amount (for the Borrowers and all
Subsidiaries) not to exceed $10,000,000 at any one time outstanding;
provided, however, that such additional Indebtedness shall have terms and
conditions which are no more restrictive on the Borrowers than the terms
and conditions hereof.
<PAGE>
84
7.3 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its Property, whether now owned or hereafter acquired, except
for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrowers or their
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the Property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrowers or any of their Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule 7.3(f),
securing Indebtedness permitted by Section 7.2(d), provided that no such
Lien is spread to cover any additional Property after the Closing Date and
that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrowers or any other
Subsidiary incurred pursuant to Section 7.2(c) to finance the acquisition
of fixed or capital assets, provided that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any Property other than
the Property financed by such Indebtedness and (iii) the amount of
Indebtedness secured thereby is not increased;
(h) (i) Liens on property of a Person existing at the time such Person
is merged into or consolidated with any of the Borrowers or any of their
Subsidiaries; provided that such Liens were not created in contemplation of
such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with such
<PAGE>
85
Borrower or such Subsidiary, and (ii) Liens on property existing at the
time of acquisition thereof by any of the Borrowers or any of their
Subsidiaries, provided that such Liens were not created in contemplation of
such acquisition and only extend to the property so acquired;
(i) leases or subleases permitted by Section 7.5 granted to third
Persons not materially interfering with the ordinary course of business of
the Borrowers or any of their Subsidiaries;
(j) Liens created pursuant to the Security Documents;
(k) Liens arising from judgments or decrees which do not result in an
Event of Default under Section 8(h);
(l) all building codes and zoning ordinances and other laws,
ordinances, regulations, rules, orders or determinations of any federal,
state, county, municipal or other Governmental Authority now or hereafter
enacted;
(m) Liens consisting of rights of set-off of a customary nature or
bankers' liens on amounts on deposit, whether arising by contract or
operation of law, incurred in the ordinary course of business;
(n) Liens on insurance policies and the proceeds thereof securing the
financing of premiums with respect thereto;
(o) Liens solely on any cash earnest money deposits made by any of the
Borrowers or any of the Subsidiary Guarantors in connection with any letter
of intent or purchase agreement entered into by it in connection with an
Investment permitted under Section 7.8(i) or (l); and
(p) Liens in favor of Exchange Note Trustee (in its individual
capacity) created under the Exchange Note Indenture.
7.4 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of all or substantially all
of its Property or business, except that:
(a) any Subsidiary of any Borrower may be merged or consolidated with
or into such Borrower (provided that such Borrower shall be the continuing
or surviving corporation) or with or into any Subsidiary Guarantor
(provided that the Subsidiary Guarantor shall be the continuing or
surviving corporation);
<PAGE>
86
(b) any Subsidiary of any Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to such Borrower or any
Subsidiary Guarantor;
(c) the Reorganization and the Mercom Acquisition may be completed;
and
(d) any Borrower or any Subsidiary may effect, pursuant to any such
transaction, any transaction that, if it were structured as a Disposition
of assets, would be permitted by Section 7.5 and that would not result in
the occurrence of an event described in Section 8(k).
7.5 Limitation on Disposition of Property. Dispose of any of its
Property (including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any shares of such Subsidiary's Capital Stock to any Person,
except:
(a) the Disposition of obsolete, worn out or surplus property in the
ordinary course of business;
(b) the sale of inventory, the sale or lease of equipment and the
license of Intellectual Property, in each case in the ordinary course of
business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to any of
the Borrowers or any Subsidiary Guarantor;
(e) Restricted Payments permitted under Section 7.6;
(f) Dispositions of Cash Equivalents, provided that the aggregate
consideration received therefor is at least equal to the aggregate fair
market value of the Cash Equivalents so Disposed of;
(g) any Asset Swap, provided that (i) no Default or Event of Default
shall exist and be continuing or result therefrom, (ii) if and to the
extent that the Borrowers and their Subsidiaries receive consideration for
the cable television system or systems (or portions thereof) and related
assets transferred by them in connection with such Asset Swap that is in
addition to the cable television systems (or portions thereof) and related
assets received upon Disposition thereof, such Asset Swap shall be deemed
to be a Disposition of assets and shall be permitted only if the provisions
of Sections 7.5(h) and 2.11(b) shall be complied with in connection
therewith and (iii) the aggregate book value of assets Disposed of pursuant
to Asset Swaps shall not exceed (x) prior to the first anniversary of
<PAGE>
87
the Closing Date, 15% or (y) thereafter, 25% of the aggregate book value of
the combined consolidated total assets of the Borrowers and their
Subsidiaries as reflected in the Pro Forma Balance Sheet;
(h) the Disposition of other assets having a book value, when added to
(i) amounts deemed to be Dispositions pursuant to Section 7.5(g), (ii) if
the equity interests in any Borrower are sold in a transaction described in
the proviso to Section 8(k), an amount equal to the aggregate book value of
the assets of such Borrower at the time of such sale and (iii) the
aggregate book value of assets disposed of pursuant to transactions
permitted by Section 7.4(d), not to exceed in the aggregate (x) prior to
the first anniversary of the Closing Date, $15,000,000 or (y) thereafter,
$25,000,000; and
(i) any Recovery Event, provided, that the requirements of Section
2.11(b) are complied with in connection therewith.
7.6 Limitation on Restricted Payments. Declare or pay any dividend
(other than dividends payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Capital Stock of any of the Borrowers or
any Subsidiary, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Borrowers or any Subsidiary (collectively,
"Restricted Payments"), except that:
(a) any Subsidiary may make Restricted Payments to any of the
Borrowers or any Subsidiary Guarantor;
(b) so long as no Default or Event of Default shall have occurred and
be continuing, the Borrowers may pay dividends or make cash distributions
on their Capital Stock, the proceeds of which are used to permit Avalon
Cable to (i) purchase Avalon Cable's common equity or common equity options
from present or former officers or employees of Avalon Cable or the Holding
Companies, the Borrowers or any Subsidiary upon the death, disability or
termination of employment of such officer or employee, provided, that the
aggregate amount of payments under this clause (i) subsequent to the date
hereof (net of any proceeds received by Avalon Cable and contributed to the
Borrowers subsequent to the date hereof in connection with resales of any
common equity or common equity options so purchased) shall not exceed
$500,000 and (ii) pay management fees to ABRY and its Control Investment
Affiliates expressly permitted by Section 7.10;
(c) the Borrowers may pay dividends or make cash distributions on
their Capital Stock, the proceeds of which are used to permit the Holding
Companies to (i) pay
<PAGE>
88
corporate overhead expenses incurred in the ordinary course of business not
to exceed $250,000 in any fiscal year and (ii) pay any taxes or make
distributions to pay taxes which are due and payable by (x) Avalon Cable,
the Holding Companies and the Borrowers as part of a consolidated group or
(y) holders of equity interests in the Holding Companies, in each case to
the extent that (A) such taxes are allocable to the operations of the
Borrowers and their Subsidiaries, franchise or entity taxes or taxes
resulting from the holding of the Capital Stock of the Borrowers or the
Holding Companies (but limited, in the case of taxes based upon taxable
income, to the extent that cumulative taxable net income subsequent to the
Closing Date is positive) or (B) such taxes are related to the Avalon Cable
Indebtedness;
(d) the Borrowers may pay dividends or make cash dividends on their
Capital Stock with the proceeds of the Senior Subordinated Notes to the
extent necessary to make the prepayments permitted by clause (A) of the
second proviso to Section 7.2(f)(i);
(e) on or after the fifth anniversary of the issuance of the Senior
Discount Notes, so long as no Default or Event of Default shall have
occurred and be continuing or would have occurred on the last day of the
then most recently ended fiscal quarter for which financial statements
shall have been delivered to the Lenders pursuant to Section 6.1 if the
covenants set forth in Section 7.1 were recomputed to give effect to the
assumption that the payment thereof was made on such last day and if, but
for the making thereof the Holding Companies would not be able to deduct
the interest accrued and unpaid on the Senior Discount Notes as an expense
in computing the Federal income taxes payable in respect of their
operations, the Borrowers may pay dividends or make cash distributions
on their Capital Stock the proceeds of which shall be used to pay any
unpaid interest payable on the Senior Discount Notes; provided, however,
that no Restricted Payment shall be permitted pursuant to this paragraph
(e) in respect of interest payable on the Senior Discount Notes subsequent
to the fifth anniversary of the date of issuance thereof unless the
condition specified above in this paragraph with respect to compliance with
Section 7.1 would be satisfied if the required covenant level for the
Consolidated Leverage Ratio specified in Section 7.1(a) were 4.0 to 1.0;
(f) payments or distributions to dissenting stockholders pursuant to
transactions permitted hereunder;
(g) any Borrower may pay any dividend or make any distribution so
long as simultaneously therewith a capital contribution in an equal amount
is made to another Borrower; and
(h) the Reorganization and the Mercom Acquisition may be completed.
<PAGE>
89
7.7 Limitation on Capital Expenditures. Make or commit to make any
Capital Expenditure, except (a) Capital Expenditures of the Borrowers and their
Subsidiaries in the ordinary course of business during 1998 or during any fiscal
year thereafter in amount not exceeding in any fiscal year set forth below the
amount set forth opposite such fiscal year below:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1999 $19,000,000
2000 $23,000,000
2001 $23,000,000
2002 $12,000,000
2003 $12,000,000
2004 $7,500,000
2005 $7,500,000
2006 $8,000,000
</TABLE>
provided, that (i) up to 50% of any such amount referred to above, if not so
expended in the fiscal year for which it is permitted (as to such fiscal year,
the "CapEx Carryforward Amount"), may be carried over for expenditure in the
next succeeding fiscal year and (ii) Capital Expenditures made pursuant to this
clause (a) during any fiscal year shall be deemed made, first, in respect of
amounts permitted for such fiscal year as provided above and second, in respect
of amounts carried over from the prior fiscal year pursuant to subclause (i)
above and (b) Capital Expenditures made with the proceeds of any Reinvestment
Deferred Amount.
7.8 Limitation on Investments. Make any advance, loan, extension of
credit (by way of guaranty or otherwise) or capital contribution to, or purchase
any Capital Stock, bonds, notes, debentures or other debt securities of, or any
assets constituting an ongoing business from, or make any other investment in,
any other Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Investments arising in connection with the incurrence of
Indebtedness permitted by Section 7.2(b) and (e);
(d) loans and advances to employees of the Holding Companies, the
Borrowers or any Subsidiaries of the Borrowers in the ordinary course of
business (including, without limitation, for travel, entertainment and
relocation expenses) in an aggregate amount for the Borrowers and their
Subsidiaries not to exceed $500,000 at any one time outstanding;
<PAGE>
90
(e) the Acquisition Transactions and the Reorganization;
(f) Investments in assets useful in the Borrowers' business made by
the Borrowers or any of their Subsidiaries with the proceeds of any
Reinvestment Deferred Amount;
(g) Investments (other than those relating to the incurrence of
Indebtedness permitted by Section 7.8(c)) by the Borrowers or any of their
Subsidiaries in any of the Borrowers or any Person that, prior to such
Investment, is a Subsidiary Guarantor;
(h) Investments consisting of promissory notes and other deferred
payment obligations of Persons to which the Borrowers and their
Subsidiaries shall have made Dispositions of assets permitted by Section
7.5, provided that the aggregate principal amount thereof does not exceed
$2,500,000 at any one time outstanding;
(i) any Investment arising from the acquisition by the Borrowers and
their Subsidiaries of any cable television system or systems (or portions
thereof) and related assets in connection with any Asset Swap, provided
that (i) to the extent that the Borrowers and their Subsidiaries give
consideration for the cable television system or systems (or portions
thereof) and related assets acquired by them in connection with such Asset
Swap that is in addition to the cable television system or systems (or
portions thereof) and related assets transferred by them as consideration
therefor, such Asset Swap shall be deemed to constitute an Investment and
shall be permitted only if the provisions of Section 7.8(l) shall be
complied with in connection therewith, (ii) immediately prior and after
giving effect to such Investment no Default or Event of Default shall have
occurred and be continuing and (iii) the aggregate book value of the assets
acquired pursuant to this paragraph in any fiscal year of the Borrowers
shall not exceed (x) prior to the first anniversary of the Closing Date,
15% or (y) thereafter, 25%, of the aggregate book value of the combined
consolidated total assets of the Borrowers and their Subsidiaries as
reflected in the Pro Forma Balance Sheet;
(j) prior to the completion of the Mercom Acquisition, the Mercom
Intercompany Loan;
(k) any Investment existing on the Closing Date and set forth on
Schedule 7.8 and any amendment, modification, restatement, supplement,
extension, renewal, refunding, replacement, refinancing, in whole or in
part, thereof;
(l) in addition to Investments otherwise expressly permitted by this
Section, Investments by the Borrowers or any of their Subsidiaries the
aggregate consideration for which (whether consisting of cash (whether paid
directly or through the exercise of dissenters' rights), shares of Capital
Stock of Avalon Cable or otherwise), when added to
<PAGE>
91
the aggregate amount deemed to be Investments pursuant to Section 7.8(i),
does not exceed the sum of (i) $25,000,000 plus (ii) the aggregate amount,
if any, of the Incremental Facility theretofor established; and
(m) security and other deposits permitted by Section 7.3(d).
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments, etc. (a) Make or offer to make any optional or voluntary payment,
prepayment, repurchase or redemption of, or otherwise voluntarily or optionally
defease, the Indebtedness under the Senior Subordinated Notes, or segregate
funds for any such payment, prepayment, repurchase, redemption or defeasance,
(b) amend, modify or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the terms of the Senior
Subordinated Notes or the Senior Subordinated Note Indenture (other than any
such amendment, modification, waiver or other change which (i) would extend the
maturity or reduce the amount of any payment of principal thereof, reduce the
rate or extend the date for payment of interest thereon or relax any covenant or
other restriction applicable to any of the Borrowers or any of their
Subsidiaries and (ii) does not involve the payment of a consent fee), (c)
designate any Indebtedness (other than the Obligations) as "Designated Senior
Indebtedness" for the purposes of the Senior Subordinated Note Indenture or (d)
amend its certificate of incorporation in any manner determined by the
Administrative Agent to be adverse to the Lenders.
7.10 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than any of the
Borrowers or any Subsidiary Guarantor) unless such transaction is (a) otherwise
permitted under this Agreement, (b) in the ordinary course of business of such
Borrower or such Subsidiary, as the case may be, and (c) upon fair and
reasonable terms no less favorable to such Borrower or such Subsidiary, as the
case may be, than it would obtain in a comparable arm's length transaction with
a Person which is not an Affiliate. Notwithstanding the foregoing, the
Borrowers and their Subsidiaries may (i) pay to ABRY and its Control Investment
Affiliates fees and expenses pursuant to the ABRY Management Agreement and (ii)
complete all transactions necessary to complete the Reorganization and the
Mercom Acquisition.
7.11 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrowers or any Subsidiary of
real or personal property which has been or is to be sold or transferred by such
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of such Borrower or such Subsidiary.
<PAGE>
92
7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year
of the Borrowers to end on a day other than December 31 or change the Borrowers'
method of determining fiscal quarters.
7.13 Limitation on Negative Pledge Clauses. Enter into or suffer to
exist or become effective any agreement which prohibits or limits the ability of
any of the Borrowers or any of their Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its Property or revenues, whether now owned
or hereafter acquired, to secure the Obligations or, in the case of any
Guarantor, its obligations under the Guarantee and Collateral Agreement, other
than (a) this Agreement and the other Loan Documents and (b) any agreements
governing any purchase money Liens or Capital Lease Obligations otherwise
permitted hereby (in which case, any prohibition or limitation shall only be
effective against the assets financed thereby).
7.14 Limitation on Restrictions on Subsidiary Distributions. Enter
into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary to (a) make Restricted Payments in
respect of any Capital Stock of such Subsidiary of a Borrower held by, or pay
any Indebtedness owed to, any of the Borrowers or any other Subsidiary, (b) make
Investments in any of the Borrowers or any other Subsidiary or (c) transfer any
of its assets to any of the Borrowers or any other Subsidiary, except for such
encumbrances or restrictions existing under or by reason of (i) any restrictions
existing under the Loan Documents, (ii) any restrictions with respect to a
Subsidiary imposed pursuant to an agreement which has been entered into in
connection with the Disposition of all or substantially all of the Capital Stock
or assets of such Subsidiary and (iii) any restrictions on the ability of the
Borrower or any Subsidiary to transfer any such asset imposed by the provisions
of the documentation pursuant to which there shall have been created a Lien on
such asset permitted by Section 7.3.
7.15 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses in which
the Borrowers and their Subsidiaries are engaged on the date of this Agreement
(after giving effect to the Acquisition) or which are reasonably related,
ancillary or complimentary thereto.
7.16 Limitation on Amendments to Acquisition Documentation. Amend,
supplement or otherwise modify the terms and conditions of the Acquisition
Documentation except to the extent that any such amendment, supplement or
modification, taken as a whole, could not reasonably be expected to have a
Material Adverse Effect.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
<PAGE>
93
(a) The Borrowers shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrowers shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) Any Loan Party shall default in the observance or performance of
any agreement contained in clause (i) or (ii) of Section 6.4(a) (with
respect to the Holding Companies and the Borrowers only), Section 6.7(a) or
Section 7 or Section 5 of the Guarantee and Collateral Agreement; or
(d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a period of 30 days after the
date upon which the Borrowers receive notice of such default from the
Administrative Agent or any Lender; or
(e) The Holding Companies, the Borrowers or any of their Subsidiaries
shall (i) default in making any payment of any principal of any
Indebtedness (including, without limitation, any Guarantee Obligation, but
excluding the Loans) on the scheduled or original due date with respect
thereto; or (ii) default in making any payment of any interest on any such
Indebtedness beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created; or (iii) default in
the observance or performance of any other agreement or condition relating
to any such Indebtedness 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 beneficiary of such Indebtedness (or a
trustee or agent on behalf of such holder or beneficiary) to cause, with
the giving of notice if required, such Indebtedness to become due prior to
its stated maturity or (in the case of any such Indebtedness constituting a
Guarantee Obligation) to become payable; provided, that a default, event or
condition described in clause (i), (ii) or (iii) of this paragraph (e)
shall not at any time constitute an Event of Default unless, at such time,
one or more defaults, events or conditions of the type described in clauses
(i), (ii) and (iii) of this paragraph (e) shall have occurred and be
continuing with respect to
<PAGE>
94
Indebtedness the outstanding principal amount of which exceeds in the
aggregate $2,500,000; or
(f)(i) Any of the Holding Companies, any of the Borrowers or any of
their Subsidiaries shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking
to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or any of the
Holding Companies, any of the Borrowers or any of their Subsidiaries shall
make a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against any of the Holding Companies, any of the
Borrowers or any of their Subsidiaries any case, proceeding or other action
of a nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against any of the Holding Companies, any of
the Borrowers or any of their Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) any of the Holding Companies, any of the
Borrowers or any of their Subsidiaries shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of
the acts set forth in clause (i), (ii), or (iii) above; or (v) any of the
Holding Companies, any of the Borrowers or any of their Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g)(i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of any of
the Borrowers or any Commonly Controlled Entity, (iii) a Reportable Event
shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement
of proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) any of the Borrowers or
any Commonly Controlled Entity shall, or in the reasonable opinion of the
<PAGE>
95
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or ERISA Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vi)
above, such event or condition, together with all other such events or
conditions, if any, could, in the sole judgment of the Required Lenders,
reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against any of
the Holding Companies, any of the Borrowers or any of their Subsidiaries
involving for the Holding Companies, the Borrowers and their Subsidiaries
taken as a whole a liability (not paid or fully covered by insurance as to
which the relevant insurance company has acknowledged coverage) of
$2,500,000 or more, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 30 days from
the entry thereof; or
(i) Any of the Security Documents shall cease, for any reason, to be
in full force and effect (except for expiration in accordance with its
terms), or any Loan Party or any Affiliate of any Loan Party shall so
assert, or any Lien created by any of the Security Documents shall cease to
be enforceable and of the same effect and (to the extent previously
perfected) priority purported to be created thereby as to Collateral having
an aggregate value in excess of $1,000,000; or
(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect, except in accordance with its terms, or any Loan Party or any
Affiliate of any Loan Party shall so assert; or
(k)(i) The Permitted Investors shall cease to have the power to vote
or direct the voting of securities having a majority of the ordinary voting
power for the election of the managers of Avalon Cable (determined on a
fully diluted basis); (ii) the Permitted Investors shall cease to own of
record and beneficially an amount of common stock of Avalon Cable equal to
at least 90% of the amount of common stock of Avalon Cable owned by the
Permitted Investors of record and beneficially as of the Closing Date;
(iii) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), excluding the Permitted Investors, shall become, or obtain rights
(whether by means or warrants, options or otherwise) to become, the
"beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act), directly or indirectly, of more than 35% of the outstanding
common stock of Avalon Cable; (iv) the board of managers of Avalon Cable
shall cease to consist of a majority of Continuing Managers; (v) prior to
the Reorganization, (A) Avalon Cable shall cease, directly or indirectly,
to own and control, of record and beneficially, 100% of each class of
outstanding Capital Stock of Michigan
<PAGE>
96
Holdings and 55% of the ordinary voting power of the outstanding Capital
Stock of New England Holdings, in each case, free and clear of all Liens
(except Liens created by the Guarantee and Collateral Agreement); or (B)
Michigan Holdings and New England Holdings shall cease, directly or
indirectly, to own and control, of record and beneficially, 100% of each
class of outstanding Capital Stock of each of the Borrowers, free and clear
of all Liens (except Liens created by the Guarantee and Collateral
Agreement), and any Lien consisting of a right to require a distribution of
equity interests described in the proviso to this paragraph), (vi) after
the Reorganization, (A) Avalon Cable shall cease, directly or indirectly,
to own and control, of record and beneficially, 80% of the ordinary voting
power of the outstanding Capital Stock of New England Holdings or (B) New
England Holdings shall cease, directly or indirectly, to own and control,
of record and beneficially, 100% of each class of outstanding Capital Stock
of each of the Borrowers, free and clear of all Liens (except Liens created
by the Guarantee and Collateral Agreement and any Lien consisting of a
right to require a distribution of equity interests described in the
proviso to this paragraph); provided, however, that no Event of Default
shall be deemed to have occurred under clause (v) or (vi) of this paragraph
if (A) all of the equity interests in any Borrower shall be distributed by
the holder of such equity interests to the holder of its equity interests
and, substantially simultaneously with such distribution, such distributed
equity interests, or an option to purchase all such distributed equity
interests, are sold to a third party for consideration at least equal to
the fair market value of such distributed equity interests and a Borrower
shall receive the Net Cash Proceeds of such sale and any other
consideration received in connection with such sale, and (B) the sale
described in clause (A) above, if it were deemed to be a Disposition of all
the assets of such Borrower covered by Section 7.5(h), would be permitted
by said Section; or (vii) a Specified Change of Control shall occur;
(l) The Senior Subordinated Notes or the guarantees thereof shall
cease, for any reason, to be validly subordinated to the Obligations or the
obligations of the Subsidiary Guarantors under the Guarantee and Collateral
Agreement, as the case may be, as provided in the Senior Subordinated Note
Indenture, or any Loan Party, any Affiliate of any Loan Party, the trustee
in respect of the Senior Subordinated Notes or the holders of at least 25%
in aggregate principal amount of the Senior Subordinated Notes shall so
assert;
(m) Any Holding Company shall (i) conduct, transact or otherwise
engage in, or commit to conduct, transact or otherwise engage in, any
business or operations other than those incidental to their ownership of
the Capital Stock of the Borrowers and Subsidiaries thereof; (ii) incur,
create, assume or suffer to exist any Indebtedness or other financial
obligations, except (A) nonconsensual obligations imposed by operation of
law, (B) pursuant to the Loan Documents to which it is a party, (C)
obligations with respect to its Capital Stock, (D) pursuant to the Bridge
Credit Agreement and related documents, (E)
<PAGE>
97
Senior Discount Notes in an aggregate principal amount not to exceed
$150,000,000, (F) ABRY Bridge Subordinated Debt, (G) any Permitted
Refinancing Indebtedness, (H) the Exchange Notes, (I) any Indebtedness of
Avalon Cable the proceeds of which are used to fund ABRY Bridge
Subordinated Debt, (J) any Indebtedness that refinances the obligations
under the Bridge Credit Agreement, the Exchange Notes or the Senior
Discount Notes, provided that (x) the principal amount thereof shall not be
increased, (y) the maturity thereof shall be the same or later than the
Indebtedness being refinanced, and (z) the terms and conditions thereof
shall be reasonably satisfactory to the Required Lenders, as evidenced by
prior written approval thereof, (K) any Guarantee Obligations in respect of
Indebtedness and other obligations described in clauses (A) through (J)
immediately preceding , (L) the assumption by the Michigan Borrower on or
subsequent to the date of the Reorganization of Avalon Cable Indebtedness
owed by the New England Borrower that is outstanding on the date hereof,
provided that the New England Borrower shall be released from its
obligations thereunder, the terms and conditions of such Avalon Cable
Indebtedness shall remain unchanged and such Avalon Cable Indebtedness
shall be subordinated to the obligations of Michigan Borrower under the
Guarantee and Collateral Agreement to the same extent as the obligations of
the New England Borrower under such Avalon Cable Indebtedness are
subordinated to the Obligations and (M) obligations incidental to each of
the foregoing clauses (A) through (L); (iii) own, lease, manage or
otherwise operate any properties or assets (including cash (other than cash
received in connection with dividends made by the Borrowers in accordance
with Section 7.6 pending application in the manner contemplated by said
Section) and cash equivalents) other than the ownership of shares of
Capital Stock of the Borrowers and Subsidiaries thereof; or (iv) enter into
any merger, consolidation or amalgamation that would result in a Default or
Event of Default;
(n) The Bridge Credit Agreement, the Exchange Note Indenture, the
Senior Discount Note Indenture, any document or instrument pursuant to or
under which any Indebtedness created or issued under any of the foregoing
shall be refinanced or the agreement pursuant to which ABRY III shall make
the commitment referred to in Section 5.1(s) shall, without the prior
written consent of the Required Lenders, be amended, supplemented or
otherwise modified except for any such amendment, supplement or other
modification which (1) would extend the maturity or reduce the amount of
any payment of principal of any Indebtedness created or issued thereunder,
reduce the rate or extend the date for payment of interest on any such
Indebtedness or relax any covenant or other restriction applicable to any
of the Holding Companies or any of their Subsidiaries and (2) does not
involve the payment of a consent fee;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to any of the
Borrowers, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other
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98
amounts owing under this Agreement and the other Loan Documents (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) shall immediately become due and payable, and (B)
if such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Majority Revolving Credit
Facility Lenders, the Administrative Agent may, or upon the request of the
Majority Revolving Credit Facility Lenders, the Administrative Agent shall, by
notice to the Borrowers declare the Revolving Credit Commitments to be
terminated forthwith, whereupon the Revolving Credit Commitments shall
immediately terminate; and (ii) 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 Borrowers, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to this paragraph, the Borrowers shall at such time
deposit in a cash collateral account opened by the Administrative Agent an
amount equal to the aggregate then undrawn and unexpired amount of such Letters
of Credit. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrowers hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrowers hereunder and under the other Loan Documents shall have been paid
in full, the balance, if any, in such cash collateral account shall be returned
to the Borrowers (or such other Persons as may be lawfully entitled thereto).
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Agents as the agents of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes each Agent, in
such capacity, 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 such Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, no Agent shall have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions,
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99
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against any Agent.
9.2 Delegation of Duties. Each Agent may execute any of its 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. No Agent shall be responsible for the negligence or
misconduct of any agents or attorneys in-fact selected by it with reasonable
care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except to the extent that any of the foregoing are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Loan Party or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agents under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or for any failure
of any Loan Party a party thereto to perform its obligations hereunder or
thereunder. The Agents 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 any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
9.4 Reliance by Agents. Each Agent shall be entitled to rely, and shall
be fully protected in relying, upon any instrument, writing, resolution, notice,
consent, certificate, affidavit, letter, 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 Avalon Cable or the Loan Parties), independent
accountants and other experts selected by the Administrative Agent. The Agents
may deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. Each Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders (or, if so specified by this Agreement, all 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. Each Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the
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other Loan Documents in accordance with a request of the Required Lenders (or,
if so specified by this Agreement, all 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 Loans.
9.5 Notice of Default. No Agent shall be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless
such Agent has received notice from a Lender, the Holding Companies or the
Borrowers 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, the Administrative Agent
shall give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, all 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.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly
acknowledges that neither the Agents nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by any Agent hereinafter
taken, including any review of the affairs of a Loan Party or any affiliate of a
Loan Party, shall be deemed to constitute any representation or warranty by any
Agent to any Lender. Each Lender represents to the Agents that it has,
independently and without reliance upon any 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 Loan Parties and their
affiliates 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 any 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
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, no Agent shall have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Loan Party or any affiliate of a Loan Party which may
come into the possession of such Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent in its
capacity as such (to the extent not reimbursed by the Holding Companies or the
Borrowers and without
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limiting the obligation of the Holding Companies or the Borrowers to do so),
ratably according to their respective Aggregate Exposure Percentages in effect
on the date on which indemnification is sought under this Section (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with such Aggregate Exposure Percentages immediately prior to such date), 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 Loans) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of, the Commitments,
this Agreement, any of 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 such 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 which are found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from such Agent's gross negligence or willful misconduct. The
agreements in this Section 9.7 shall survive the payment of the Loans and all
other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with any Loan Party as though such Agent was not an Agent. With respect to its
Loans made or renewed by it and with respect to any Letter of Credit issued or
participated in by it, each 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 Agent, and the terms "Lender" and "Lenders" shall
include each Agent in its individual capacity.
9.9 Successor Agents. The Administrative Agent may resign as
Administrative Agent upon 10 days' notice to the Lenders and the Borrowers. If
the Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
shall (unless an Event of Default under Section 8(a) or Section 8(f) with
respect to any of the Borrowers shall have occurred and be continuing) be
subject to approval by the Borrowers (which approval shall not be unreasonably
withheld or delayed), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor
agent has accepted appointment as Administrative Agent by the date that is 10
days following a retiring Administrative Agent's notice of resignation, the
retiring
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Administrative Agent's resignation shall nevertheless thereupon become
effective, and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. The Syndication Agent may, at
any time, by notice to the Lenders and the Administrative Agent, resign as
Syndication Agent hereunder, whereupon the duties, rights, obligations and
responsibilities hereunder shall automatically be assumed by, and inure to the
benefit of, the Administrative Agent, without any further act by the Syndication
Agent, the Administrative Agent or any Lender. After any retiring Agent's
resignation as Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
9.10 Authorization to Release Liens. Notwithstanding anything to the
contrary contained herein or in any other Loan Document, the Administrative
Agent is hereby irrevocably authorized by each of the Lenders (without
requirement of notice to or consent of any Lender except as expressly required
by Section 10.1) to take any action reasonably requested by the Borrowers to
release any Lien covering any Property of any of the Borrowers or any of their
Subsidiaries that is the subject of a Disposition which is permitted by this
Agreement or which has been consented to in accordance with Section 10.1.
9.11 The Arranger. The Arranger, in its capacity as such, shall have no
duties or responsibilities, and shall incur no liability, under this Agreement
and the other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement or any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may, or
(with the written consent of the Required Lenders) the Agents and each Loan
Party party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan
Documents (including amendments and restatements hereof or thereof) for the
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights of the Lenders or of the Loan Parties
hereunder or thereunder or (b) waive, on such terms and conditions as may be
specified in the instrument of waiver, any of the requirements of this Agreement
or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) forgive the principal amount or extend the
final scheduled date of maturity of any Loan or Reimbursement Obligation, extend
the scheduled date of any amortization payment in respect of any Term Loan,
reduce the stated rate of any interest (it being agreed that
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modifications of the financial definitions that may effect interest rate step-
downs pursuant to the definition of Applicable Margin shall not be deemed to be
a reduction in the stated rated of interest) or fee payable hereunder or extend
the scheduled date of any payment thereof, or increase the amount or extend the
expiration date of any Commitment of any Lender, in each case without the
consent of each Lender directly affected thereby; (ii) amend, modify or waive
any provision of this Section or reduce any percentage specified in the
definition of Required Lenders, Supermajority Lenders or Required Facilities
Majority Lenders, cause the Aggregate Exposure of all the Lenders to exceed
$396,000,000, consent to the assignment or transfer by any of the Borrowers of
any of its rights and obligations under this Agreement and the other Loan
Documents, release all or substantially all of the Collateral or release all or
substantially all of the Subsidiary Guarantors from their guarantee obligations
under the Guarantee and Collateral Agreement, in each case without the consent
of all Lenders; (iii) amend, modify or waive any condition precedent to any
extension of credit under the Revolving Credit Facility set forth in Section 5.2
(including, without limitation, the waiver of an existing Default or Event of
Default required to be waived in order for such extension of credit to be made)
without the consent of any Majority Revolving Credit Facility Lenders; (iv)
reduce the percentage specified in the definition of Majority Facility Lenders
with respect to any Facility without the written consent of all Lenders under
such Facility; (v) amend, modify or waive any provision of Section 9 without the
consent of any Agent directly affected thereby; (vi) amend, modify or waive any
provision of Section 2.17 without the consent of each Lender directly affected
thereby; (vii) amend, modify or waive any provision of Section 3 without the
consent of the Issuing Lender; (viii) amend, modify or waive the phrase "Unless
the Required Facilities Majority Lenders shall otherwise agree" set forth in
clauses (a), (b) and (c) of Section 2.11 without the consent of all Lenders or
(ix) amend, modify or waive any provision of Section 7.6 without the consent of
the Supermajority Lenders. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Loan Parties, the Lenders, the Administrative Agent and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders
and the Administrative Agent shall be restored to their former position and
rights hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon. Any such waiver, amendment, supplement or
modification shall be effected by a written instrument signed by the parties
required to sign pursuant to the foregoing provisions of this Section; provided,
that delivery of an executed signature page of any such instrument by facsimile
transmission shall be effective as delivery of a manually executed counterpart
thereof.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed (a) in the case of the Borrowers, their Subsidiaries and the
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Administrative Agent, as follows and (b) in the case of the Lenders, as set
forth on Schedule I to the Lender Addendum to which such Lender is a party or,
in the case of a Lender which becomes a party to this Agreement pursuant to an
Assignment and Acceptance, in such Assignment and Acceptance or (c) in the case
of any party, to such other address as such party may hereafter notify to the
other parties hereto:
The Borrowers: c/o ABRY Partners, Inc.
18 Newbury Street
Boston, Massachusetts 02166
Attention: Peggy Koenig
Telecopy: 617-859-8797
Telephone: 617-859-8521
The Administrative Agent: Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michael O'Brien
Telecopy: (212) 528-0819
Telephone: (212) 526-0437
with a copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gregory Weiss
Telecopy: (212) 455-2502
Telephone: (212) 455-7080
provided that any notice, request or demand to or upon any Agent or any Lender
shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of any Agent or any Lender, any right, remedy,
power or privilege hereunder or under the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or
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statement delivered pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the making of the Loans and other
extensions of credit hereunder.
10.5 Payment of Expenses; Indemnification. The Borrowers agree (a)
to pay or reimburse the Agents for all their reasonable out-of-pocket costs and
expenses incurred in connection with the syndication of the Facilities (other
than fees payable to syndicate members) and the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements and other charges of counsel to the
Administrative Agent, (b) to pay or reimburse each Lender and the Agents for all
its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, including, without limitation, the fees and
disbursements of counsel (including the allocated fees and disbursements and
other charges of in-house counsel) to each Lender and of counsel to the Agents,
(c) to pay, indemnify, and hold each Lender and the Agents harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold each
Lender, the Agents, their respective affiliates and their respective officers,
directors, trustees, employees, agents, controlling persons and advisors (each,
an "Indemnitee") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (excluding taxes
imposed on the overall net income (including franchise taxes based on net
income) of each Lender or Agent) with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other Loan
Documents and any such other documents, including, without limitation, any of
the foregoing relating to the use of proceeds of the Loans or the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of any of the Borrowers, any of its Subsidiaries or any of the
Properties and the reasonable fees and disbursements and other charges of legal
counsel in connection with claims, actions or proceedings by any indemnitee
against the Borrowers hereunder (all the foregoing in this clause (d),
collectively, the "Indemnified Liabilities"), provided, that the Borrowers shall
have no obligation hereunder to any Indemnitee with respect to Indemnified
Liabilities to the extent such Indemnified Liabilities are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of such Indemnitee or such
Indemnitee's officers, directors, trustees, employees, agents, controlling
persons or advisors. Without limiting the foregoing, and to the extent permitted
by applicable law, the Borrowers agree not to assert and to cause their
Subsidiaries not to assert, and hereby
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waive and agree to cause their Subsidiaries so to waive, all rights for
contribution or any other rights of recovery with respect to all claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses
of whatever kind or nature, under or related to Environmental Laws, that any of
them might have by statute or otherwise against any Indemnitee, except to the
extent such rights are based upon the gross negligence or willful misconduct of
such Indemnitee, or such Indemnitee's officers, directors, trustees, employees,
agents, controlling person or advisors. The agreements in this Section shall
survive repayment of the Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrowers,
the Lenders, the Agents, all future holders of the Loans and their respective
successors and assigns, except that the Borrowers may not assign or transfer any
of their rights or obligations under this Agreement without the prior written
consent of the Agents and each Lender.
(b) Any Lender may, without the consent of the Borrowers or the
Agents, in accordance with applicable law, at any time sell to one or more
banks, financial institutions or other entities (each, a "Participant")
participating interests in any Loan owing to such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the other Loan
Documents. In the event of any such sale by a Lender of a participating interest
to a Participant, such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrowers and the Agents shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event shall
any Participant under any such participation have any right to approve any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Loans or
any fees payable hereunder, or postpone the date of the final maturity of the
Loans, in each case to the extent subject to such participation. The Borrowers
agree that if amounts outstanding under this Agreement and the Loans are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, provided that, in purchasing
such participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the proceeds thereof as provided in Section 10.7(a) as
fully as if it were a Lender hereunder. The Borrowers also agree that each
Participant shall be entitled to the benefits of Sections 2.18, 2.19 and 2.20
with respect to its participation in the Commitments and the Loans outstanding
from time to time
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as if it was a Lender; provided that, in the case of Section 2.19, such
Participants shall have complied with the requirements of said Section and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable law
and upon written notice to the Administrative Agent, at any time and from time
to time assign to any Lender or any affiliate or Approved Fund of any Lender or,
with the consent of the Borrowers, (if the Assignee will be a Revolving Credit
Lender) the Issuing Lender and the Administrative Agent (which, in each case,
shall not be unreasonably withheld or delayed), to an additional bank, financial
institution or other entity (an "Assignee") all or any part of its rights and
obligations under this Agreement pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit E, executed by such Assignee and such
Assignor (and, where the consent of the Borrowers, (if the Assignee will be a
Revolving Credit Lender) the Issuing Lender or the Administrative Agent is
required pursuant to the foregoing provisions, by the Borrowers, (if the
Assignee will be a Revolving Credit Lender) the Issuing Lender and such other
Persons) and delivered to the Administrative Agent for its acceptance and
recording in the Register; provided that no such assignment to an Assignee
(other than any Lender or any affiliate or Approved Fund of any Lender) shall be
in an aggregate principal amount of less than $5,000,000 (other than in the case
of an assignment of all of a Lender's interests under this Agreement), unless
otherwise agreed by the Borrowers and the Administrative Agent. Any such
assignment need not be ratable as among the Facilities. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) 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 hereunder with a Commitment and/or
Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of an Assignor's rights and obligations under this Agreement, such Assignor
shall cease to be a party hereto). Notwithstanding any provision of this
Section, the consent of the Borrowers shall not be required for any assignment
which occurs at any time when any Event of Default shall have occurred and be
continuing.
(d) The Administrative Agent shall, on behalf of the Borrowers,
maintain at its address referred to in Section 10.2 a copy of each Assignment
and Acceptance delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrowers, the Administrative Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of the Loans and any
Notes evidencing such Loans recorded therein for all purposes of this Agreement.
Any assignment of any Loan, whether or
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not evidenced by a Note, shall be effective only upon appropriate entries with
respect thereto being made in the Register. Any assignment or transfer of all or
part of a Loan evidenced by a Note shall be registered on the Register only upon
surrender to the Administrative Agent for registration of assignment or transfer
of the Note evidencing such Loan, accompanied by a duly executed Assignment and
Acceptance; thereupon one or more new Notes in the same aggregate principal
amount shall be issued to the designated Assignee, and the old Notes shall be
returned by the Administrative Agent to the Borrowers marked "cancelled". The
Register shall be available for inspection by the Borrowers or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
Assignor and an Assignee (and, in any case where the consent of any other Person
is required by Section 10.6(c), by each such other Person) together with payment
to the Administrative Agent of a registration and processing fee of $3,500
(except that no such registration and processing fee shall be payable in the
case of an Assignee which is already a Lender or is an affiliate or Approved
Fund of any Lender or a Person under common management with a Lender), the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Lenders and the Borrowers. On or prior to such effective
date, the Borrowers, at their own expense, upon request, shall execute and
deliver to the Administrative Agent (in exchange for the Revolving Credit Note
and/or applicable Term Notes, as the case may be, of the assigning Lender) a new
Revolving Credit Note and/or applicable Term Notes, as the case may be, to the
order of such Assignee in an amount equal to the Revolving Credit Commitment
and/or applicable Term Loans, as the case may be, assumed or acquired by it
pursuant to such Assignment and Acceptance and, if the Assignor has retained a
Revolving Credit Commitment and/or Term Loans, as the case may be, upon request,
a new Revolving Credit Note and/or Term Notes, as the case may be, to the order
of the Assignor in an amount equal to the Revolving Credit Commitment and/or
applicable Term Loans, as the case may be, retained by it hereunder. Such new
Note or Notes shall be dated the Closing Date and shall otherwise be in the form
of the Note or Notes replaced thereby.
(f) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
10.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement provides for payments to be allocated to a particular Lender or to the
Lenders under a particular Facility, if any Lender (a "Benefitted Lender") shall
at any time receive any payment of all or part of the Obligations owing to it,
or receive any collateral in respect thereof (whether voluntarily or
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involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 8(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Obligations, such Benefitted Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Obligations, or shall provide such other Lenders with the
benefits of any such collateral, as shall be necessary to cause such Benefitted
Lender to share the excess payment or benefits of such collateral ratably with
each of the Lenders; provided, however, 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.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrowers,
any such notice being expressly waived by the Borrowers to the extent permitted
by applicable law, upon any amount becoming due and payable by the Borrowers
hereunder (whether at the stated maturity, by acceleration or otherwise), to set
off and appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrowers, as the case may be. Each Lender agrees
promptly to notify the Borrowers and the Administrative Agent after any such
setoff and application made by such Lender, provided that the failure to give
such notice shall not affect the validity of such setoff and application.
10.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrowers and the Administrative Agent.
10.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability 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.
10.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrowers, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by
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the Administrative Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. Each of the Borrowers
hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
applicable Borrower at its address set forth in Section 10.2 or at such
other address of which the Administrative Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 10.12 any special, exemplary, punitive or consequential
damages.
10.13 Acknowledgments. Each of the Borrowers hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
<PAGE>
111
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrowers arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between the Administrative Agent and Lenders, on one hand, and
the Borrowers, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrowers and the Lenders.
10.14 Confidentiality. Each of the Agents and the Lenders, on behalf
of itself and each of its affiliates, agents, directors, officers, employees and
advisors, agrees to keep confidential all non-public information provided to it
by any Loan Party pursuant to this Agreement that is designated by such Loan
Party as confidential; provided that nothing herein shall prevent any Agent or
any Lender from disclosing any such information (a) to the Administrative Agent,
any other Lender or any affiliate, agent, director, officer, employee or advisor
of any Lender, (b) to any Participant or Assignee (each, a "Transferee") or
prospective Transferee which agrees to comply with the provisions of this
Section, (c) any of its employees, directors, agents, attorneys, accountants and
other professional advisors, (d) upon the request or demand of any Governmental
Authority having jurisdiction over it, (e) in response to any order of any court
or other Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in connection with any
litigation or similar proceeding, (g) which has been publicly disclosed other
than in breach of this Section 10.14, (h) to the National Association of
Insurance Commissioners or any similar organization or any nationally recognized
rating agency that requires access to information about a Lender's investment
portfolio in connection with ratings issued with respect to such Lender or (i)
in connection with the exercise of any remedy hereunder or under any other Loan
Document.
10.15 Release of Collateral Security and Guarantee Obligations.
Notwithstanding anything to the contrary contained herein or in the Guarantee
and Collateral Agreement, upon request of the Borrowers, the Administrative
Agent shall (without notice to or vote or consent of any Lender) take action
having the effect of releasing any Collateral and/or guarantee obligations
provided for in the Guarantee and Collateral Agreement to the extent necessary
to permit consummation, by the relevant Person in accordance with the terms of
this Agreement and the other Loan Documents, of any transaction not prohibited
hereunder.
10.16 Delivery of Lender Addenda. Each initial Lender shall become
a party to this Agreement by delivering to the Administrative Agent and the
Syndication Agent a Lender Addendum duly executed by such Lender, the Borrowers
and each Agent.
<PAGE>
112
10.17 WAIVERS OF JURY TRIAL. THE BORROWERS, THE AGENTS AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
AVALON CABLE OF NEW ENGLAND LLC
By:
-----------------------------
Name:
Title:
AVALON CABLE OF MICHIGAN, INC., as
Borrower until completion of the
Reorganization
By:
------------------------------
Name:
Title:
AVALON CABLE FINANCE, INC.
By:
------------------------------
Name:
Title:
<PAGE>
113
AVALON CABLE OF MICHIGAN LLC, as
Borrower effective on completion of the
Reorganization
By: ___________________________________
Name:
Title:
LEHMAN BROTHERS INC., as Arranger
By: ___________________________________
Name:
Title:
LEHMAN COMMERCIAL PAPER INC., as
Administrative Agent and as a Lender
By: ___________________________________
Name:
Title:
FLEET BANK, N.A., as Syndication Agent
By: ___________________________________
Name:
Title:
<PAGE>
114
UNION BANK OF CALIFORNIA, N.A., as
Documentation Agent
By: ______________________________
Name:
Title:
<PAGE>
Annex A
-------
PRICING GRID FOR REVOLVING CREDIT LOANS
AND TRANCHE A TERM LOANS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Consolidated Applicable Margin for Applicable Margin for
Leverage Ratio Eurodollar Loans Base Rate Loans
- --------------------------------------------------------------------------------
<S> <C> <C>
equal to or greater than 3.00% 2.00%
6.0 to 1.0
- --------------------------------------------------------------------------------
less than 6.0 to 1.0 and 2.75% 1.75%
equal to or greater than
5.5 to 1.0
- --------------------------------------------------------------------------------
less than 5.5 to .10 and 2.50% 1.50%
equal to or greater than
5.0 to 1.0
- --------------------------------------------------------------------------------
less than 5.0 to 1.0 and 2.25% 1.25%
equal to or greater than
4.5 to 1.0
- --------------------------------------------------------------------------------
less than 4.5 to 1.0 and 2.00% 1.00%
equal to or greater than
4.0 to 1.0
- --------------------------------------------------------------------------------
less than 4.0 to 1.0 1.75% .75%
- --------------------------------------------------------------------------------
</TABLE>
Changes in the Applicable Margin with respect to Revolving Credit Loans or
Tranche A Term Loans resulting from changes in the Consolidated Leverage Ratio
shall become effective on the date (the "Adjustment Date") on which financial
statements are delivered to the Lenders pursuant to Section 6.1 (but in any
event not later than the 45th day after the end of each of the first three
quarterly periods of each fiscal year or the 90th day after the end of each
fiscal year, as the case may be) and shall remain in effect until the next
change to be effected pursuant to this paragraph. If any financial statements
referred to above are not delivered within the time periods specified above,
then, until such financial statements are delivered, the Consolidated Leverage
Ratio as at the end of the fiscal period that would have been covered thereby
shall for the purposes of this definition be deemed to be greater than 6.0 to 1.
In addition, at all times while an Event of Default shall have occurred and be
continuing, the Consolidated Leverage Ratio shall for the purposes of this
definition be deemed to be greater than 6.0 to 1.
<PAGE>
EXHIBIT 99.9
EXHIBIT A
================================================================================
GUARANTEE AND COLLATERAL AGREEMENT
made by
AVALON CABLE HOLDINGS LLC
and the other entities listed
on Annex I hereto
in favor of
LEHMAN COMMERCIAL PAPER INC.
as Administrative Agent
Dated as of October __, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINED TERMS.................................................. 2
1.1 Definitions...................................................... 2
1.2 Other Definitional Provisions.................................... 6
SECTION 2. GUARANTEE...................................................... 6
2.1 Guarantee........................................................ 6
2.2 Right of Contribution............................................ 7
2.3 No Subrogation................................................... 7
2.4 Amendments, etc. with respect to the Borrower Obligations........ 7
2.5 Guarantee Absolute and Unconditional............................. 8
2.6 Reinstatement.................................................... 9
2.7 Payments......................................................... 9
SECTION 3. GRANT OF SECURITY INTEREST..................................... 9
SECTION 4. REPRESENTATIONS AND WARRANTIES................................. 10
4.1 Existence: Compliance with Law................................... 10
4.2 Corporate Power; Authorization; Enforceable Obligations.......... 10
4.3 No Legal Bar..................................................... 11
4.4 No Material Litigation........................................... 11
4.5 No Default....................................................... 11
4.6 Intellectual Property............................................ 11
4.7 Taxes............................................................ 12
4.8 Labor Matters.................................................... 12
4.9 Investment Company Act; Other Regulations........................ 12
4.10 Accuracy of Information, etc.................................... 12
4.11 Security Documents.............................................. 12
4.12 Solvency........................................................ 13
4.13 Senior Indebtedness............................................. 13
4.14 Title; No Other Liens........................................... 13
4.15 Perfected First Priority Liens.................................. 13
4.16 Chief Executive Office.......................................... 14
4.17 Inventory and Equipment......................................... 14
4.18 Farm Products................................................... 14
4.19 Pledged Securities.............................................. 14
4.20 Receivables..................................................... 15
4.21 Intellectual Property........................................... 15
4.22 Vehicles........................................................ 15
i
<PAGE>
Page
----
SECTION 5. COVENANTS...................................................... 15
5.1 Payment of Obligations........................................... 16
5.2 Conduct of Business and Maintenance of Existence, etc............ 16
5.3 Inspection of Property; Books and Records; Discussions........... 16
5.4 Additional Collateral, etc....................................... 16
5.5 Limitation of Activities of the Grantors......................... 18
5.6 Delivery of Instruments and Chattel Paper........................ 18
5.7 Maintenance of Insurance......................................... 18
5.8 Payment of Obligations........................................... 19
5.9 Maintenance of Perfected Security Interest; Further Documentation 19
5.10 Changes in Locations, Name, etc................................. 19
5.11 Notices......................................................... 20
5.12 Pledged Securities.............................................. 20
5.13 Receivables..................................................... 21
5.14 Intellectual Property........................................... 21
5.15 Vehicles........................................................ 23
SECTION 6. REMEDIAL PROVISIONS............................................ 23
6.1 Certain Matters Relating to Receivables.......................... 23
6.2 Communications with Obligors; Grantors Remain Liable............. 24
6.3 Pledged Stock.................................................... 24
6.4 Proceeds to be Turned Over To Administrative Agent............... 25
6.5 Application of Proceeds.......................................... 26
6.6 Code and Other Remedies.......................................... 26
6.7 Registration Rights.............................................. 27
6.8 Waiver; Deficiency............................................... 28
SECTION 7. THE ADMINISTRATIVE AGENT....................................... 28
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc...... 28
7.2 Duty of Administrative Agent..................................... 30
7.3 Execution of Financing Statements................................ 30
7.4 Authority of Administrative Agent................................ 31
SECTION 8. MISCELLANEOUS.................................................. 31
8.1 Amendments in Writing............................................ 31
8.2 Notices.......................................................... 31
8.3 No Waiver by Course of Conduct; Cumulative Remedies.............. 31
8.4 Enforcement Expenses; Indemnification............................ 32
8.5 Successors and Assigns........................................... 32
8.6 Set-Off.......................................................... 32
ii
<PAGE>
Page
----
8.7 Counterparts..................................................... 33
8.8 Severability..................................................... 33
8.9 Section Headings................................................. 33
8.10 Integration..................................................... 33
8.11 GOVERNING LAW................................................... 33
8.12 Submission To Jurisdiction; Waivers............................. 33
8.13 Acknowledgements................................................ 34
8.14 Additional Grantors............................................. 34
8.15 Releases........................................................ 34
8.16 WAIVER OF JURY TRIAL............................................ 35
ANNEXES:
1 Assumption Agreement
SCHEDULES:
1 Notice Addresses of Guarantors
2 Description of Pledged Securities
3 Filings and Other Actions Required to Perfect Security Interests
4 Location of Jurisdiction of Organization and Chief Executive Office
5 Location of Inventory and Equipment
6 Intellectual Property
7 Contracts
8 Vehicles
9 Existing Prior Liens
iii
<PAGE>
FORM OF
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of November___, 1998,
made by each of the signatories hereto (together with any other entity that may
become a party hereto as provided herein, the "Grantors"), in favor of LEHMAN
COMMERCIAL PAPER INC., as Administrative Agent (in such capacity, the
"Administrative Agent") for the banks and other financial institutions (the
"Lenders") from time to time parties to the Credit Agreement, dated as of
October __, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among AVALON CABLE OF NEW ENGLAND, LLC, a
Delaware limited liability company (the "New England Borrower"), AVALON CABLE OF
MICHIGAN, INC., a Pennsylvania corporation (the "Michigan Borrower") and AVALON
CABLE FINANCE, INC., a Delaware corporation (the "Finance Borrower" and together
with the New England Borrower and the Michigan Borrower, the "Borrowers"), as
joint and several borrowers hereunder, AVALON CABLE HOLDINGS, LLC, a Delaware
limited liability company ("Avalon Cable"), AVALON CABLE OF NEW ENGLAND
HOLDINGS, INC., a Delaware corporation ("Avalon New England"), AVALON CABLE LLC,
a Delaware limited liability company ("Avalon Cable LLC"), AVALON CABLE HOLDINGS
FINANCE, INC., a Delaware corporation ("Avalon Finance Holdings") and AVALON
CABLE OF MICHIGAN HOLDINGS, INC., a Delaware corporation ("Avalon Michigan" and
together with Avalon Cable, Avalon New England, Avalon Cable LLC and Avalon
Finance Holdings, the "Holding Companies"), the several banks and other
financial institutions or entities from time to time parties to this Agreement
(the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger (in such
capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent
(in such capacity, the "Syndication Agent"), and LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent.
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit to the Borrowers upon the terms and subject
to the conditions set forth therein;
WHEREAS, the Borrowers are members of an affiliated group of companies
that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement will be used in part to enable the Borrowers to make valuable
transfers to one or more of the other Grantors in connection with the operation
of their respective businesses;
WHEREAS, the Borrowers and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and
<PAGE>
2
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrowers under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the
Borrowers thereunder, each Grantor hereby agrees with the Administrative Agent,
for the ratable benefit of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm
Products, Instruments, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
"Agreement": this Guarantee and Collateral Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations and
all other obligations and liabilities of the Borrowers (including, without
limitation, interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Loans and Reimbursement
Obligations and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding,
relating to any of the Borrowers, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) to the Administrative
Agent or any Lender (or, in the case of any Hedge Agreement referred to
below, any Affiliate of any Lender), whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
this Agreement, the other Loan Documents, any Letter of Credit or any Hedge
Agreement entered into by any of the Borrowers with any Lender (or any
Affiliate of any Lender) or any other document made, delivered or given in
connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by the Borrowers pursuant to the terms of any of the foregoing
agreements).
<PAGE>
3
"Collateral": as defined in Section 3.
"Collateral Account": any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.
"Copyrights": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to
obtain all renewals thereof.
"Copyright Licenses": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
Schedule 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.
"General Intangibles": all "general intangibles" as such term is
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture without
the consent of any other party thereto, would not give any other party to
such contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); provided, that
the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in
any Receivable or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement (including, without limitation, Section 2)
or any other Loan Document to which such Guarantor is a party, in each case
whether on account of guarantee obligations,
<PAGE>
4
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to
the Administrative Agent or to the Lenders that are required to be paid by
such Guarantor pursuant to the terms of this Agreement or any other Loan
Document).
"Guarantors": the collective reference to each Grantor other than the
Borrowers.
"Hedge Agreements": as to any Person, all interest rate swaps, caps
or collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks and the Trademark Licenses,
and all rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and damages
therefrom.
"Intercompany Note": any promissory note evidencing loans made by any
Grantor to the Parent or any of its Subsidiaries.
"Issuers": the collective reference to each issuer of a Pledged
Security.
"New York UCC": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Obligations": (i) in the case of each Borrower, its Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Parent": means Avalon Cable Holding LLC.
"Patents": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in Schedule 6, (ii) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in Schedule
6, and (iii) all rights to obtain any reissues or extensions of the
foregoing.
"Patent License": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in Schedule 6.
<PAGE>
5
"Pledged Notes": all promissory notes listed on Schedule 2, all
Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business).
"Pledged Securities": the collective reference to the Pledged Notes
and the Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on Schedule 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-
306(1) of the Uniform Commercial Code in effect in the State of New York on
the date hereof and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon
or distributions or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
"Subsidiary Guarantor": each Guarantor that is a direct or indirect
Subsidiary of a Borrower.
"Trademarks": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including, without
limitation, any of the foregoing referred to in Schedule 6, and (ii) the
right to obtain all renewals thereof.
"Trademark License": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any of the foregoing referred to
in Schedule 6.
"Vehicles": all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any
state and, in any event including,
<PAGE>
6
without limitation, the vehicles listed on Schedule 8 and all tires and
other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
"hereto" 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, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Lenders and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrowers when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and the obligations of each
Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrowers may be free from any Borrower
Obligations.
(e) No payment made by any of the Borrowers, any of the Guarantors,
any other guarantor or any other Person or received or collected by the
Administrative Agent or any Lender
<PAGE>
7
from any Borrower, any of the Guarantors, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Borrower Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such Guarantor in respect of the
Borrower Obligations or any payment received or collected from such Guarantor in
respect of the Borrower Obligations), remain liable for the Borrower Obligations
up to the maximum liability of such Guarantor hereunder until the Borrower
Obligations are paid in full, no Letter of Credit shall be outstanding and the
Commitments are terminated.
2.2 Right of Contribution. Each Subsidiary Guarantor hereby agrees
that to the extent that a Subsidiary Guarantor shall have paid more than its
proportionate share of any payment made hereunder, such Subsidiary Guarantor
shall be entitled to seek and receive contribution from and against any other
Subsidiary Guarantor hereunder which has not paid its proportionate share of
such payment. Each Subsidiary Guarantor's right of contribution shall be subject
to the terms and conditions of Section 2.3. The provisions of this Section 2.2
shall in no respect limit the obligations and liabilities of any Subsidiary
Guarantor to the Administrative Agent and the Lenders, and each Subsidiary
Guarantor shall remain liable to the Administrative Agent and the Lenders for
the full amount guaranteed by such Subsidiary Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against any Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from any Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the Lenders by the any of the
Borrowers on account of the Borrower Obligations are paid in full, no Letter of
Credit shall be outstanding and the Commitments are terminated. If any amount
shall be paid to any Guarantor on account of such subrogation rights at any time
when all of the Borrower Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Administrative Agent and
the Lenders, segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to the Administrative Agent in
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations. Each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender and any of the Borrower Obligations
<PAGE>
8
continued, and the Borrower Obligations, or the liability of 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 and the other Loan Documents and any other documents executed
and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders or all Lenders, as the case may be) may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time held
by the Administrative Agent or any Lender for the payment of the Borrower
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 Lien at any time held by it as security for the
Borrower Obligations or for the guarantee contained in this Section 2 or any
property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon the guarantee contained in this Section 2 or acceptance
of the guarantee contained in this Section 2; the Borrower Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between any of the
Borrowers and any of the Guarantors, on the one hand, and the Administrative
Agent and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guarantee
contained in this Section 2. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon any
of the Borrowers or any of the Guarantors with respect to the Borrower
Obligations. Each Guarantor understands and agrees that the guarantee contained
in this Section 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of the
Credit Agreement or any other Loan Document, any of the Borrower Obligations or
any other collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by the Administrative
Agent or any Lender, (b) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by any Borrower or any other Person against the Administrative Agent
or any Lender, or (c) any other circumstance whatsoever (with or without notice
to or knowledge of such Borrower or such Guarantor) which constitutes, or might
be construed to constitute, an equitable or legal discharge of any of the
Borrowers for the Borrower Obligations, or of such Guarantor under the guarantee
contained in this Section 2, in bankruptcy or in any other instance. When making
any demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Guarantor, the Administrative Agent or any Lender may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such rights
and remedies as it may have against any Borrower, any other Guarantor or any
other Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Lender to make any such demand, to pursue such other
rights or remedies or to collect any payments from any of the Borrowers, any
other
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9
Guarantor or any other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of any of the
Borrowers, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any Lender against any Guarantor. For the purposes
hereof "demand" shall include the commencement and continuance of any legal
proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, any
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at the
Payment Office specified in the Credit Agreement.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Administrative Agent,
and hereby grants to the Administrative Agent, for the ratable benefit of the
Lenders, a security interest in, all of the following property now owned or at
any time hereafter acquired by such Grantor or in which such Grantor now has or
at any time in the future may acquire any right, title or interest
(collectively, 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 such Grantor's Obligations,:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
<PAGE>
10
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Pledged Securities;
(k) all Vehicles;
(l) all Investment Property;
(m) all deposit accounts and other bank accounts;
(n) all books and records pertaining to the Collateral; and
(o) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the Borrowers thereunder, each Grantor hereby represents and
warrants to the Administrative Agent and each Lender that:
4.1 Existence: Compliance with Law. Each of the Grantors (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power and authority or
the limited liability company power and authority, as the case may be, and the
legal right, to own and operate its Property, to lease the Property it operates
as lessee and to conduct the business in which it is currently engaged, (c) is
duly qualified as a foreign corporation or limited liability company, as the
case may be, and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of Property or the conduct of its business
requires such qualification except to the extent that the failure to be so
qualified and/or in good standing could not reasonably be expected to have a
Material Adverse Effect and (d) is in compliance with all Requirements of Law,
except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.2 Corporate Power; Authorization; Enforceable Obligations. Each
Grantor has the corporate power and authority or the limited liability company
power and authority, as the case may be, and the legal right, to make, deliver
and perform the Loan Documents to which it is a party. Each Grantor has taken
all necessary corporate action to authorize the execution,
<PAGE>
11
delivery and performance of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Acquisition, the borrowings under the Credit Agreement,
under the Bridge Credit Agreement or with the execution, delivery, performance,
validity or enforceability of this Agreement or any of the Loan Documents,
except (i) consents, authorizations, filings and notices described in Schedule
4.4, which consents, authorizations, filings and notices have been obtained or
made and are in full force and effect other than such consents, authorizations,
filings and notices the failure to obtain or make could not reasonably be
expected to have a Material Adverse Effect and (ii) the filings referred to in
Section [4.19]. Each Loan Document has been duly executed and delivered on
behalf of each Loan Party thereto. This Agreement constitutes, and each other
Loan Document upon execution will constitute, a legal, valid and binding
obligation of each Loan Party thereto, enforceable against each such Loan Party
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
4.3 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings under the Credit Agreement and the use of the proceeds thereof will
not violate any Requirement of Law or any Contractual Obligation of any of the
Grantors and will not result in, or require, the creation or imposition of any
Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation (other than the Liens
created by the Security Documents).
4.4 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of any of the Grantors, threatened by or against any of the
Grantors or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) which could reasonably be expected to have a Material
Adverse Effect.
4.5 No Default. None of the Grantors are in default under or with
respect to any of their Contractual Obligations in any respect which could
reasonably be expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
4.6 Intellectual Property. Each of the Grantors owns, or is licensed
to use, all material Intellectual Property necessary for the conduct of its
business as currently conducted. To the knowledge of the Grantors, no material
claim has been asserted and is pending by any Person challenging or questioning
the use of any material Intellectual Property or the validity or effectiveness
of any material Intellectual Property, nor do any of the Grantors know of any
valid basis for any such claim. The use of Intellectual Property by the Grantors
does not infringe on the rights of any Person in any material respect.
<PAGE>
12
4.7 Taxes. Each of the Grantors has filed or caused to be filed all
material Federal, state, local and foreign tax returns which are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its Property and all other material
taxes, fees or other charges imposed on it or any of its Property by any
Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Grantors, as the case may be); no tax Lien has been filed (other
than Permitted Liens), and, to the knowledge of the Grantors, no claim is being
asserted, with respect to any material tax, fee or other charge.
4.8 Labor Matters. There are no strikes or other labor disputes
against any of the Grantors pending or, to the knowledge of the Grantors,
threatened that (individually or in the aggregate) could reasonably be expected
to have a Material Adverse Effect. Hours worked by and payment made to employees
of the Grantors have not been in violation of the Fair Labor Standards Act or
any other applicable Requirement of Law dealing with such matters that
(individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect. All payments due from the Grantors on account of
employee health and welfare insurance that (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect if not paid have
been paid or accrued as a liability on the books of the Grantors.
4.9 Investment Company Act; Other Regulations. No Grantor is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No
Grantor is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
4.10 Accuracy of Information, etc. Subject to the next succeeding
sentence and to the qualifications provided therein, no statement or information
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other document, certificate or statement furnished
to the Administrative Agent or the Lenders or any of them, by or on behalf of
any Grantor for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, taken as a whole, contained as of the
date such statement, information, document or certificate was so furnished (or,
in the case of the Confidential Information Memorandum, as of the date of this
Agreement), any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements contained herein or
therein, taken as a whole, not misleading. There is no fact known to any Grantor
that could reasonably be expected to have a Material Adverse Effect that has not
been expressly disclosed herein, in the other Loan Documents, in the
Confidential Information Memorandum or in any other documents, certificates and
statements furnished to the Administrative Agent and the Lenders for use in
connection with the transactions contemplated hereby and by the other Loan
Documents.
[4.11 Security Documents. (a) This Agreement is effective to create
in favor of the Administrative Agent, for the benefit of the Lenders, a legal,
valid and enforceable security
<PAGE>
13
interest in the Collateral herein and in the proceeds thereof. In the case of
the Pledged Stock described herein, when any stock certificates representing
such Pledged Stock are delivered to the Administrative Agent, and in the case of
the other Collateral described herein, when financing statements in appropriate
form are filed in the offices specified on Schedule 4.19(a) to the Credit
Agreement (which financing statements have been duly completed and executed and
delivered to the Administrative Agent) and such other filings as are specified
on Schedule 3 to this Agreement (all of which filings have been duly completed),
this Agreement shall constitute a fully perfected Lien on, and security interest
in, all right, title and interest of the Loan Parties in such Collateral and the
proceeds thereof, as security for the Obligations, in each case prior and
superior in right to any other Person (except, in the case of Collateral other
than Pledged Stock, Liens permitted by Section 7.3 of the Credit Agreement).
(b) Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
4.19(b) to the Credit Agreement, each such Mortgage shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in the Mortgaged Properties and the proceeds thereof, as
security for the Obligations (as defined in the relevant Mortgage), in each case
prior and superior in right to any other Person other than Liens permitted by
the Credit Agreement that have priority by operation of law.]
4.12 Solvency. Each Grantor is, and after giving effect to the
Acquisition and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
4.13 Senior Indebtedness. The obligations of each Subsidiary
Guarantor hereunder will constitute "Guarantor Senior Indebtedness" of such
Subsidiary Guarantor under and as defined in the Senior Subordinated Note
Indenture (when and if entered into).
4.14 Title; No Other Liens. Except for the security interest granted
to the Administrative Agent for the ratable benefit of the Lenders pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by the
Credit Agreement, such Grantor owns each item of the Collateral free and clear
of any and all Liens or claims of others. No financing statement or other public
notice with respect to all or any part of the Collateral is on file or of record
in any public office, except such as have been filed in favor of the
Administrative Agent, for the ratable benefit of the Lenders, pursuant to this
Agreement or as are permitted by the Credit Agreement.
4.15 Perfected First Priority Liens. This Agreement (a) is effective
to create in favor of the Administrative Agent, for the benefit of the Lenders,
a legal, valid and enforceable security interest in the Collateral described
therein and proceeds thereof. In the case of the Pledged Stock described in
this Agreement, when any stock certificates representing such Pledged Stock are
delivered to the Administrative Agent, and in the case of the other Collateral
described in this Agreement, when financing statements in appropriate form are
filed in the
<PAGE>
14
offices specified on Schedule 4.19(a) of the Credit Agreement (which financing
statements have been duly completed and executed and delivered to the
Administrative Agent) and such other filings as are specified on Schedule 3 (all
of which filings have been duly completed), this Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Loan Parties in such Collateral and the proceeds thereof, as security for
the Obligations (as defined herein), in each case prior and superior in right to
any other Person (except, in the case of Collateral other than Pledged Stock,
Liens permitted by Section 7.3 of the Credit Agreement).
(b) Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
4.19(b) of the Credit Agreement, each such Mortgage shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in the Mortgaged Properties and the proceeds thereof, as
security for the Obligations (as defined in the relevant Mortgage), in each case
prior and superior in right to any other Person other than Liens permitted by
Section 7.3 of the Credit Agreement that have priority by operation of law.
4.16 Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 4.
4.17 Inventory and Equipment. On the date hereof, the Inventory and
the Equipment (other than mobile goods) are kept at the locations listed on
Schedule 5.
4.18 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
4.19 Pledged Securities. (a) The shares of Pledged Stock pledged by
such Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
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15
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement and the Permitted Liens.
4.20 Receivables. (a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) The amounts represented by such Grantor to the Lenders from time
to time as owing to such Grantor in respect of the Receivables will at such
times be accurate.
4.21 Intellectual Property. (a) Schedule 6 lists all Intellectual
Property owned by such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property is valid,
subsisting, unexpired and enforceable, has not been abandoned and does not
infringe the intellectual property rights of any other Person.
(c) Except as set forth in Schedule 6, on the date hereof, none of the
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property or such Grantor's ownership interest
therein, or (ii) which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect on the value of any material Intellectual
Property.
4.22 Vehicles. Schedule 8 is a complete and correct list of all
Vehicles owned by such Grantor on the date hereof.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and
the Lenders that, from and after the date of this Agreement until the
Obligations ______ ______ ______ entered into in the ordinary course of business
shall have been paid in full, no Letter of Credit shall be outstanding and the
Commitments shall have terminated:
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16
5.1 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Grantors, as the case may be.
5.2 Conduct of Business and Maintenance of Existence, etc.
(a)(i) Preserve, renew and keep in full force and effect its corporate existence
and (ii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business, except,
in each case, as otherwise permitted by Section 7.4 and except, in the case of
clause (ii) above, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; and (b) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.3 Inspection of Property; Books and Records; Discussions. (a) Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities and (b) permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Grantors with
officers and employees of the Grantors and with its independent certified public
accountants (such visits and inspections shall be coordinated by the Lenders to
the extent reasonably practicable).
5.4 Additional Collateral, etc. (a) With respect to any Property
acquired after the Closing Date by any of the Grantors (other than (x) any real
property or the Capital Stock of any new Subsidiary, (y) any Property subject to
a Lien expressly permitted by Section 7.3(g) and (z) Property acquired by an
Excluded Foreign Subsidiary) as to which the Administrative Agent, for the
benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Guarantee and
Collateral Agreement or such other documents as the Administrative Agent deems
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a security interest in such Property and (ii) take all actions
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first priority security interest in such Property,
including without limitation, the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Guarantee and
Collateral Agreement or by law or as may be requested by the Administrative
Agent.
(b) With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $2,500,000 acquired after
the Closing Date by any of the Grantors (other than any such real property owned
by an Excluded Foreign Subsidiary subject to a Lien expressly permitted by
Section 7.3(g)), promptly (i) execute and deliver a first priority Mortgage in
favor of the Administrative Agent, for the benefit of the Lenders, covering such
real
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17
property, (ii) if requested by the Administrative Agent, provide the Lenders
with (x) title and extended coverage insurance covering such real property in an
amount at least equal to the purchase price of such real estate (or such other
amount as shall be reasonably specified by the Administrative Agent) as well as
a current ALTA survey thereof, together with a surveyor's certificate and (y)
any consents or estoppels reasonably deemed necessary or advisable by the
Administrative Agent in connection with such mortgage or deed of trust, each of
the foregoing in form and substance reasonably satisfactory to the
Administrative Agent and (iii) if requested by the Administrative Agent, deliver
to the Administrative Agent legal opinions relating to the matters described
above, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(c) With respect to any new Subsidiary (other than an Excluded Foreign
Subsidiary) created or acquired after the Closing Date (which, for the purposes
of this paragraph, shall include any existing Subsidiary that ceases to be an
Excluded Foreign Subsidiary), by any of the Grantors, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Guarantee and
Collateral Agreement as the Administrative Agent deems necessary or advisable to
grant to the Administrative Agent, for the benefit of the Lenders, a perfected
first priority security interest in the Capital Stock of such new Subsidiary
which is owned by any of the Grantors, (ii) deliver to the Administrative Agent
the certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of any of
the Grantors, as the case may be, (iii) cause such new Subsidiary (A) to become
a party to the Guarantee and Collateral Agreement and (B) to take such actions
necessary or advisable to grant to the Administrative Agent for the benefit of
the Lenders a perfected first priority security interest in the Collateral
described in the Guarantee and Collateral Agreement with respect to such new
Subsidiary, including, without limitation, the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required by the Guarantee
and Collateral Agreement or by law or as may be requested by the Administrative
Agent, and (iv) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by any of the Grantors, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Guarantee and
Collateral Agreement as the Administrative Agent deems necessary or advisable in
order to grant to the Administrative Agent, for the benefit of the Lenders, a
perfected first priority security interest in the Capital Stock of such new
Subsidiary which is owned by any of the Grantors (provided that in no event
shall more than 65% of the total outstanding Capital Stock of any such new
Subsidiary be required to be so pledged), (ii) deliver to the Administrative
Agent the certificates representing such Capital Stock, together with undated
stock powers, in blank, executed and delivered by a duly authorized officer of
any of the Grantors, as the case may be, and take such other action as may be
necessary or, in the opinion of the Administrative Agent, desirable to perfect
the Lien of the Administrative Agent thereon, and (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions
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18
shall be in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
5.5 Limitation of Activities of the Grantors. In the case of the
Grantors, notwithstanding anything to the contrary in the Senior Credit
Agreement or any other Loan Document, (i) conduct, transact or otherwise engage
in, or commit to conduct, transact or otherwise engage in, any business or
operations other than those incidental to their ownership of the Capital Stock
of the Borrowers and Subsidiaries thereof; (ii) incur, create, assume or suffer
to exist any Indebtedness or other liabilities or financial obligations, except
(A) nonconsensual obligations imposed by operation of law, (B) pursuant to the
Loan Documents to which it is a party, (C) obligations with respect to its
Capital Stock, (D) pursuant to the Bridge Credit Agreement, (E) Senior Discount
Notes in an aggregate principal amount not to exceed $150,000,000, (F) pursuant
to the ABRY Junior Bridge Facility, and (G) any Indebtedness that refinances the
obligations under the Bridge Credit Agreement, the ABRY Junior Bridge Facility
or the Senior Discount Notes, provided that (x) the principal amount thereof
shall not be increased, (y) the maturity thereof shall be the same or later than
the Indebtedness being refinanced, and (z) the terms and conditions thereof
shall be reasonably satisfactory to the Required Lenders, as evidenced by prior
written approval thereof; (iii) own, lease, manage or otherwise operate any
properties or assets (including cash (other than cash received in connection
with dividends made by the Borrowers in accordance with Section 7.6 pending
application in the manner contemplated by said Section) and cash equivalents)
other than the ownership of shares of Capital Stock of the Borrowers and
Subsidiaries thereof; or (iv) enter into any merger, consolidation or
amalgamation except with another Grantor or pursuant to the Reorganization.
5.6 Delivery of Instruments and Chattel Paper. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
5.7 Maintenance of Insurance. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory, Equipment and Vehicles against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the Administrative
Agent and (ii) to the extent requested by the Administrative Agent, insuring
such Grantor, the Administrative Agent and the Lenders against liability for
personal injury and property damage relating to such Inventory, Equipment and
Vehicles, such policies to be in such form and amounts and having such coverage
as may be reasonably satisfactory to the Administrative Agent and the Lenders.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as insured party or
loss payee, (iii) if reasonably requested by the Administrative Agent, include
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19
a breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Administrative Agent.
(c) The Borrowers shall deliver to the Administrative Agent and the
Lenders a report of a reputable insurance broker with respect to such insurance
substantially concurrently with the delivery by the Borrowers to the
Administrative Agent of its audited financial statements for each fiscal year
and such supplemental reports with respect thereto as the Administrative Agent
may from time to time reasonably request.
5.8 Payment of Obligations. Such Grantor will pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all its material obligations of whatever nature, except where the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrowers or their Subsidiaries,
as the case may be.
5.9 Maintenance of Perfected Security Interest; Further Documentation.
(a) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest having at least the priority described in
Section 4.3 and shall defend such security interest against the claims and
demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and the
Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
5.10 Changes in Locations, Name, etc. Such Grantor will not, except
upon 15 days' prior written notice to the Administrative Agent and delivery to
the Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any additional
location at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5 [other than for temporary transfers
of immaterial amounts of
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20
inventory, or for transfer of Equipment for periods not exceeding 3 months
for the limited purposes of repair];
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
5.11 Notices. Such Grantor will advise the Administrative Agent and
the Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.12 Pledged Securities. (a) If such Grantor shall 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 in respect of
the Capital Stock of any Issuer, 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, such Grantor shall accept the same as the agent of
the Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any 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 Securities or any property shall be
distributed upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
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 Securities shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the
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21
Administrative Agent, hold such money or property in trust for the Lenders,
segregated from other funds of such Grantor, as additional collateral security
for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
such Grantor will not (i) vote to enable, or take any other action to permit,
any 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 any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Credit Agreement), (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 Pledged Securities or Proceeds thereof,
or any interest therein, except for the security interests created by this
Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Grantor or the Administrative Agent to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Pledged Securities issued by it and will comply with such terms insofar as such
terms are applicable to it, (ii) it will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in Section
5.8(a) with respect to the Pledged Securities issued by it and (iii) the terms
of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with
respect to the Pledged Securities issued by it.
5.13 Receivables. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions or calls
into doubt the validity or enforceability of more than 5% of the aggregate
amount of the then outstanding Receivables.
5.14 Intellectual Property. (a) Such Grantor (either itself or
through licensees) will (i) continue to use each material Trademark owned or
licensed by such Grantor on each and every trademark class of goods applicable
to its current line as reflected in its current catalogs, brochures and price
lists in order to maintain such Trademark in full force free from any claim of
abandonment for non-use, (ii) maintain as in the past the quality of products
and services offered under such Trademark, (iii) use such Trademark with the
appropriate notice of registration and all other notices and legends required by
applicable Requirements of Law, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent, for the ratable benefit of the Lenders, shall obtain a
perfected security interest in such mark pursuant to this Agreement, and (v) not
(and not permit any licensee or
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22
sublicensee thereof to) do any act or knowingly omit to do any act whereby such
Trademark may become invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of the Copyrights may become invalidated or otherwise impaired.
Such Grantor will not (either itself or through licensees) do any act whereby
any material portion of the Copyrights owned by such Grantor may fall into the
public domain.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor will notify the Administrative Agent and the Lenders
promptly if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property is reasonably likely
to become forfeited, abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office, the United States Copyright Office or any court or
tribunal in any country) regarding such Grantor's ownership of, or the validity
of, any material Intellectual Property or such Grantor's right to register the
same or to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent within five Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Administrative
Agent may request to evidence the Administrative Agent's and the Lenders'
security interest in any Copyright, Patent or Trademark and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
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23
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
5.15 Vehicles. (a) No Vehicle shall be removed from the state which
has issued the certificate of title/ownership therefor for a period in excess of
4 months.
(b) With respect to any Vehicles acquired by such Grantor subsequent
to the date hereof, within 30 days after the date of acquisition thereof, all
applications for certificates of title/ownership indicating the Administrative
Agent's first priority security interest in the Vehicle covered by such
certificate, and any other necessary documentation, shall be filed in each
office in each jurisdiction which the Administrative Agent shall deem advisable
to perfect its security interests in the Vehicles.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. (a) The Administrative
Agent shall have the right to make test verifications of the Receivables in any
manner and through any medium that it reasonably considers advisable, and each
Grantor shall furnish all such assistance and information as the Administrative
Agent may require in connection with such test verifications. At any time and
from time to time, upon the Administrative Agent's request and at the expense of
the relevant Grantor, such Grantor shall cause independent public accountants or
others satisfactory to the Administrative Agent to furnish to the Administrative
Agent reports showing reconciliations, aging and test verifications of, and
trial balances for, the Receivables.
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Receivables, subject to the Administrative Agent's
direction and control, and the Administrative Agent may curtail or terminate
said authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any
event, within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in Section 6.5, and (ii) until so turned
over, shall be held by such Grantor in trust for the Administrative Agent and
the
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24
Lenders, segregated from other funds of such Grantor. Each such deposit of
Proceeds of Receivables shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
(c) At the Administrative Agent's request, each Grantor shall deliver
to the Administrative Agent all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
6.2 Communications with Obligors; Grantors Remain Liable. (a) The
Administrative Agent in its own name or in the name of others may at any time
after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables and parties to the Contracts to
verify with them to the Administrative Agent's satisfaction the existence,
amount and terms of any Receivables or Contracts.
(b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Receivables and parties to the Contracts that the
Receivables and the Contracts have been assigned to the Administrative Agent for
the ratable benefit of the Lenders and that payments in respect thereof shall be
made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Receivables and Contracts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) or Contract by reason of or arising out of this Agreement or the
receipt by the Administrative Agent or any Lender of any payment relating
thereto, nor shall the Administrative Agent or any Lender be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto) or Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given notice to the
relevant Grantor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, in each case paid in the normal
course of business of the relevant Issuer and consistent with past practice, to
the extent permitted in the Credit Agreement, and to exercise all voting and
corporate rights with respect to the Pledged Securities; provided, however, that
no vote shall be cast or corporate right exercised or other action taken which,
in the Administrative Agent's reasonable judgment, would impair the
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25
Collateral or which would be inconsistent with or result in any violation of any
provision of the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in the order set forth in Section 6.5, and (ii) any or all of the
Pledged Securities shall be registered in the name of the Administrative Agent
or its nominee, and the Administrative Agent or its nominee may thereafter
exercise (x) all voting, corporate and other rights pertaining to such Pledged
Securities at any meeting of shareholders of the relevant Issuer or Issuers or
otherwise and (y) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to such Pledged
Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Securities pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In addition to
the rights of the Administrative Agent and the Lenders specified in Section 6.1
with respect to payments of Receivables, if an Event of Default shall occur and
be continuing, all Proceeds received by any Grantor consisting of cash, checks
and other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds
received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion
and control. All Proceeds while held by the Administrative Agent in a Collateral
Account (or by such Grantor in trust for the Administrative Agent and the
Lenders) shall
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26
continue to be held as collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in Section 6.5.
6.5 Application of Proceeds. At such intervals as may be agreed upon
by the Borrowers and the Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the Administrative Agent's
election, the Administrative Agent may apply all or any part of Proceeds
constituting Collateral, whether or not held in any Collateral Account, and any
proceeds of the guarantee set forth in Section 2, in payment of the Obligations
in the following order:
First, to pay incurred and unpaid fees and expenses of the
Administrative Agent under the Loan Documents;
Second, to the Administrative Agent, for application by it towards
payment of amounts then due and owing and remaining unpaid in respect of
the Obligations, pro rata among the Lenders according to the amounts of the
Obligations then due and owing and remaining unpaid to the Lenders;
Third, to the Administrative Agent, for application by it towards
prepayment of the Obligations, pro rata among the Lenders according to the
amounts of the Obligations then held by the Lenders; and
Fourth, any balance of such Proceeds remaining after the Obligations
shall have been paid in full, no Letters of Credit shall be outstanding and
the Commitments shall have terminated shall be paid over to the Borrowers
or to whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC
or any other applicable law. Without limiting the generality of the foregoing,
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 any Grantor 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,
lease, 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, 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
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27
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 any Grantor, which right or
equity is hereby waived and released. Each Grantor further agrees, at the
Administrative Agent's request, to assemble the Collateral and make it available
to the Administrative Agent at places which the Administrative Agent shall
reasonably select, whether at such Grantor's premises or elsewhere. The
Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 6.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith 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, to the payment
in whole or in part of the Obligations, in such order as the Administrative
Agent may elect, 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 New York UCC, need the
Administrative Agent account for the surplus, if any, to any Grantor. To the
extent permitted by applicable law, each Grantor 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.
6.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the relevant
Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall designate
and to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.
(b) Each Grantor 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
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28
investment and not with a view to the distribution or resale thereof. Each
Grantor 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 thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Grantor 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 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Grantor, and such Grantor 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.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the New
York UCC. Each Grantor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. (a)
Each Grantor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, each
Grantor hereby gives the Administrative Agent the power and right, on behalf of
such Grantor, without notice to or assent by such Grantor, to do any or all of
the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or Contract or with respect to any other
<PAGE>
29
Collateral and file any claim or take any other action or proceeding in any
court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such moneys
due under any Receivable or Contract or with respect to any other
Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in such
Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or procure any
insurance called for by the terms of this Agreement and pay all or any part
of the premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 6.6
or 6.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (2) ask or demand for, collect, and receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral; (3)
sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (4) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (5) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (6) settle, compromise
or adjust any such suit, action or proceeding and, in connection therewith,
give such discharges or releases as the Administrative Agent may deem
appropriate; (7) assign any Copyright, Patent or Trademark (along with the
goodwill of the business to which any such Copyright, Patent or Trademark
pertains), throughout the world for such term or terms, on such conditions,
and in such manner, as the Administrative Agent shall in its sole
discretion determine; and (8) generally, sell, transfer, pledge and make
any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes, and do, at the Administrative
Agent's option and such Grantor's expense, at any time, or from time to
time, all acts and things which the Administrative Agent deems necessary to
protect, preserve or realize upon the Collateral and the Administrative
Agent's and the Lenders' security interests therein and to effect the
intent of this Agreement, all as fully and effectively as such Grantor
might do.
<PAGE>
30
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection
with actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due Revolving Credit Loans that are Base Rate Loans and
past due Term Loans that are Base Rate Loans under the Credit Agreement, from
the date of payment by the Administrative Agent to the date reimbursed by the
relevant Grantor, shall be payable by such Grantor to the Administrative Agent
on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 Duty of Administrative Agent. 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 New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective officers,
directors, 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 any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent and the Lenders hereunder are solely to
protect the Administrative Agent's and the Lenders' interests in the Collateral
and shall not impose any duty upon the Administrative Agent or any Lender to
exercise any such powers. The Administrative Agent and the Lenders shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-402 of
the New York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of
<PAGE>
31
the Administrative Agent under this Agreement. A photographic or other
reproduction of this Agreement shall be sufficient as a financing statement or
other filing or recording document or instrument for filing or recording in any
jurisdiction.
7.4 Authority of Administrative Agent. Each Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this 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 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 Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Grantor and the Administrative
Agent, provided that any provision of this Agreement imposing obligations on any
Grantor may be waived by the Administrative Agent in a written instrument
executed by the Administrative Agent
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 10.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. 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.
<PAGE>
32
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees
to pay or reimburse each Lender and the Administrative Agent for all its costs
and expenses incurred in collecting against such Guarantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Agreement and the other Loan Documents to which such Guarantor is a party,
including, without limitation, the fees and disbursements of counsel (including
the allocated fees and expenses of in-house counsel) to each Lender and of
counsel to the Administrative Agent.
(b) Each Guarantor 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 Agreement.
(c) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Lenders harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement to the extent the
Borrowers would be required to do so pursuant to Section 10.5 of the Credit
Agreement.
(d) The agreements in this Section shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns; provided
that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 Set-Off. Each Grantor hereby irrevocably authorizes the
Administrative Agent and each Lender at any time and from time to time pursuant
to Section 10.7(b) of the Credit Agreement, without notice to such Grantor or
any other Grantor, any such notice being expressly waived by each Grantor, to
set-off and appropriate and apply any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of such Grantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or such
Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although
<PAGE>
33
such obligations, liabilities and claims may be contingent or unmatured. The
Administrative Agent and each Lender shall notify such Grantor promptly of any
such set-off and the application made by the Administrative Agent or such Lender
of the proceeds thereof, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the
Administrative Agent and each Lender under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Administrative Agent or such Lender may have.
8.7 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.8 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability 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.
8.9 Section Headings. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
8.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Grantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such
<PAGE>
34
action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the
same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 8.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, exemplary, punitive or consequential
damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative
Agent and Lenders, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Grantors and the Lenders.
8.14 Additional Grantors. Each Subsidiary of each Borrower that is
required to become a party to this Agreement pursuant to Section 6.10(c) of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
8.15 Releases. (a) At such time as the Loans, the Reimbursement
Obligations and the other Obligations other than standard contractual
indemnities entered into in the ordinary course of business shall have been paid
in full, the Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby, and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral
<PAGE>
35
shall revert to the Grantors. At the request and sole expense of any Grantor
following any such termination, the Administrative Agent shall deliver to such
Grantor any Collateral held by the Administrative Agent hereunder, and execute
and deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the Administrative Agent, at the request and sole expense of such Grantor,
shall execute and deliver to such Grantor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral. At the request and sole expense of the Borrowers, a Subsidiary
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Subsidiary Guarantor shall be sold, transferred or
otherwise disposed of in a transaction permitted by the Credit Agreement;
provided that the Borrowers shall have delivered to the Administrative Agent, at
least ten Business Days prior to the date of the proposed release, a written
request for release identifying the relevant Subsidiary Guarantor and the terms
of the sale or other disposition in reasonable detail, including the price
thereof and any expenses in connection therewith, together with a certification
by the Borrowers stating that such transaction is in compliance with the Credit
Agreement and the other Loan Documents.
8.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
[NAME OF GRANTOR]
By:________________________________
Title:
<PAGE>
Annex 1 to
Guarantee and Collateral Agreement
----------------------------------
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the "Additional
Grantor"), in favor of LEHMAN COMMERCIAL PAPER INC., as administrative agent (in
such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") parties to the Credit Agreement referred to below.
All capitalized terms not defined herein shall have the meaning ascribed to them
in such Credit Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, AVALON CABLE OF NEW ENGLAND, LLC, a Delaware limited liability
company (the "New England Borrower"), AVALON CABLE OF MICHIGAN, INC., a
Pennsylvania corporation (the "Michigan Borrower") and AVALON CABLE FINANCE,
INC., a Delaware corporation (the "Finance Borrower" and together with the New
England Borrower and the Michigan Borrower, the "Borrowers"), as joint and
several borrowers hereunder, AVALON CABLE HOLDINGS, LLC, a Delaware limited
liability company ("Avalon Cable"), AVALON CABLE OF NEW ENGLAND HOLDINGS, INC.,
a Delaware corporation ("Avalon New England"), AVALON CABLE LLC, a Delaware
limited liability company ("Avalon Cable LLC"), AVALON CABLE HOLDINGS FINANCE,
INC., a Delaware corporation ("Avalon Finance Holdings") and AVALON CABLE OF
MICHIGAN HOLDINGS, INC., a Delaware corporation ("Avalon Michigan" and together
with Avalon Cable, Avalon New England, Avalon Cable LLC and Avalon Finance
Holdings, the "Holding Companies"), the Lenders and the Administrative Agent
have entered into a Credit Agreement, dated as of October__, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrowers and certain
of their Affiliates (other than the Additional Grantor) have entered into the
Guarantee and Collateral Agreement, dated as of October__, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee and
Collateral Agreement") in favor of the Administrative Agent for the benefit of
the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to become a
party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;
<PAGE>
2
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering this
Assumption Agreement, the Additional Grantor, as provided in Section 8.15 of the
Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and
Collateral Agreement as a Grantor thereunder with the same force and effect as
if originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. The information set forth in Annex 1-A hereto is hereby
added to the information set forth in Schedules ____________/4/ to the Guarantee
and Collateral Agreement. The Additional Grantor hereby represents and warrants
that each of the representations and warranties contained in Section 4 of the
Guarantee and Collateral Agreement is true and correct on and as the date hereof
(after giving effect to this Assumption Agreement) as if made on and as of such
date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By: Name:
-------------------------------
Title:
- --------------------
/4/ Refer to each Schedule which needs to be supplemented.
<PAGE>
EXHIBIT 99.10
AGREEMENT RE JOINT FILING OF
SCHEDULE 13D
------------
The undersigned hereby agrees as follows:
(i) Each of them is individually eligible to use the Schedule 13D to
which this Exhibit is attached, and such Schedule 13D is filed on behalf of each
of them; and
(ii) Each of them is responsible for the timely filing of such
Schedule 13D and any amendments thereto, and for the completeness and accuracy
of the information concerning such person contained therein; but none of them is
responsible for the completeness or accuracy of the information concerning the
other persons making the filing, unless such person knows or has reason to
believe that such information is inaccurate.
Dated: November 6, 1998
AVALON CABLE OF MICHIGAN, INC. (FORMERLY
CABLE MICHIGAN, INC.)
By: /s/ Joel C. Cohen
-----------------------------------
Print Name: Joel C. Cohen
Its: President
AVALON CABLE OF MICHIGAN HOLDINGS, INC.
By: /s/ Joel C. Cohen
-----------------------------------
Print Name: Joel C. Cohen
Its: President
AVALON CABLE HOLDINGS, LLC
By: ABRY BROADCAST PARTNERS III, L.P.,
its Managing Member
By: ABRY EQUITY INVESTORS, L.P.,
its General Partner
By: ABRY HOLDINGS III, INC.,
its General Partner
By: /s/ Peni Garber
-----------------------------
Print Name: Peni Garber
Its: Secretary
<PAGE>
ABRY BROADCAST PARTNERS III, L.P.
By: ABRY EQUITY INVESTORS, L.P.,
its General Partner
By: ABRY HOLDINGS III, INC.,
its General Partner
By: /s/ Peni Garber
-----------------------------
Print Name: Peni Garber
Its: Secretary
ABRY EQUITY INVESTORS, L.P.
By: ABRY HOLDINGS III, INC.,
its General Partner
By: /s/ Peni Garber
-----------------------------
Print Name: Peni Garber
Its: Secretary
ABRY HOLDINGS III, INC.,
By: /s/ Peni Garber
-------------------------------
Print Name: Peni Garber
Its: Secretary
/s/ Royce Yudkoff
-----------------------------------
ROYCE YUDKOFF
