SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 333-8807
GST TELECOMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
CANADA NOT APPLICABLE
---------------------------- ----------------------------
(State or Other Jurisdiction (IRS Employer Identification
of Incorporation or Organization) Number)
4317 NE THURSTON WAY, VANCOUVER, WA 98662
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (360) 254-4700
N/A
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date: At January
24, 1997, there were outstanding 23,658,331 Common Shares, without par value, of
the Registrant.
<PAGE>
GST TELECOMMUNICATIONS, INC.
----------------------------
INDEX
PAGE(S)
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheet - December 31,
1996 (unaudited) and September 30, 1995...............................2
Consolidated Statements of Operations and
Deficit- Three Months Ended December 31, 1996
and 1995 (unaudited)..................................................3
Consolidated Statements of Cash Flows - Three
Months Ended December 31, 1996 and 1995 (unaudited)...................4
Notes to Consolidated Condensed Financial
Statements (unaudited)..............................................5-8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................9-12
PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings....................................................13
ITEM 6. Exhibits and Reports on Form 8-K..................................13-14
SIGNATURES....................................................................15
<PAGE>
Part 1. Financial Information
GST TELECOMMUNICATIONS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1996 (UNAUDITED) AND SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1996(1)
----------------- ---------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 13,363 $ 61,343
Restricted cash 11,112 16,000
Accounts receivable, net 13,413 9,472
Investments -- 5,176
Inventories 2,626 2,406
Prepaid expenses and other current assets 10,202 6,151
--------- ---------
Total current assets 50,716 100,548
--------- ---------
Property, plant and equipment, net 185,961 127,575
Other assets, net 75,069 73,578
--------- ---------
$ 311,746 $ 301,701
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 19,374 $ 12,443
Accrued liabilities 10,299 26,743
Current portion of capital lease obligations 723 722
Current portion of long term debt 3,415 4,832
Other current liabilities 563 726
--------- ---------
Total current liabilities 34,374 45,466
--------- ---------
Deferred compensation 158 158
Capital lease obligation, less current portion 1,733 1,453
Long term debt, less current portion 264,864 232,674
Minority interest in subsidiaries 229 182
--------- ---------
Shareholders' equity
Common shares 93,607 72,647
Commitment to issue shares 15,748 25,454
Deficit (98,967) (76,333)
--------- ---------
Total shareholders' equity 10,388 21,768
--------- ---------
$ 311,746 $ 301,701
========= =========
</TABLE>
(1) The information in this column was derived from the Company's audited
financial statements as of September 30, 1996.
-2-
<PAGE>
GST TELECOMMUNICATIONS, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
DECEMBER 31, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
-------------------------------------------
1996 1995
------------------- -----------------
<S> <C> <C>
Revenue:
Telecommunication services $ 18,437 $ 4,534
Telecommunication products 4,780 1,985
------------ ------------
23,217 6,519
------------ ------------
Operating costs and expenses:
Network expenses 15,728 4,225
Facilities administration and maintenance 3,325 1,341
Cost of product revenues 1,821 805
Selling, general and administrative 15,232 4,482
Research and development 410 283
Depreciation and amortization 4,689 1,320
------------ ------------
41,205 12,456
------------ ------------
Loss from operations (17,988) (5,937)
------------ ------------
Other expenses (income)
Interest income (839) (269)
Interest expense 5,434 1,727
Loss from joint venture -- 228
Other 104 (10)
------------ ------------
4,699 1,676
------------ ------------
Loss before income taxes
and minority interest (22,687) (7,613)
------------ ------------
Minority interest in loss of subsidiaries 53 175
------------ ------------
Net loss $ (22,634) $ (7,438)
============ ============
Net loss per common and common equivalent share $ (1.02) $ (0.41)
============ ============
Weighted average common and common equivalent
shares outstanding 22,237,008 18,038,314
============ ============
</TABLE>
-3-
<PAGE>
GST TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
DECEMBER 31, 1996 AND DECEMBER 31, 1995 (UNAUDITED)
(IN THOUSANDS)
Three Months
Ended December 31,
----------------------
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (22,634) $ (7,438)
Items not involving cash:
Minority interest in loss of subsidiaries (53) (175)
Loss on investments 23 228
Accretion of interest 6,743 1,016
Amortization and depreciation 5,078 1,411
Stock compensation 65 --
Issuance of stock for financing commitments -- 396
Changes in non-cash operating working capital:
Receivables (3,653) 346
Inventory (220) (214)
Prepaid expenses and other (34) (96)
Accounts payable and accrued liabilities (881) (861)
Deferred revenue 87 (83)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (15,479) (5,470)
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of marketable securities 5,176 218
Acquisition of subsidiaries, net of cash acquired (672) --
Acquisition of property and equipment (62,554) (8,091)
Purchase of other assets (9,171) (897)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (67,221) (8,770)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances on notes receivable -- (159)
Issuance of special warrants 9,690 --
Issuance of common shares 1,499 287
Deferred financing costs (253) (7,928)
Principal payments on capital leases (245) --
Principal payments on long term debt (2,683) --
Proceeds from long term debt 26,712 180,773
--------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 34,720 172,973
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS (47,980) 158,733
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 61,343 6,024
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,363 $ 164,757
========= =========
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<PAGE>
GST TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles. However, certain information or
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed, or
omitted, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the statements include all adjustments
necessary (which are of a normal and recurring nature) for the fair presentation
of the results of the interim periods presented. These financial statements
should be read in conjunction with the Company's audited consolidated financial
statements for the year ended September 30, 1996, as included in the Company's
Annual Report on Form 10-K.
2. NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE
Net loss per common and common equivalent share is computed using the
weighted average number of common and dilutive common equivalent shares assumed
to be outstanding during the period. Common equivalent shares consist of options
and warrants to purchase common shares.
3. INVENTORIES
Inventories, net of reserves, stated at the lower of cost or market
consist of:
December 31, 1996 September 30, 1996
----------------- ------------------
Raw Material $ 498 $ 378
Work in Progress 273 346
Finished Goods 1,855 1,682
----------------- ------------------
Total Inventories $2,626 $2,406
================= ==================
4. SHAREHOLDERS' EQUITY
Shares authorized and outstanding are as follows:
December 31, 1996 September 30, 1996
----------------- ------------------
Common Shares, no par 23,353,337 21,257,697
value
Unlimited number of
common shares authorized
5. SUPPLEMENTAL CASH FLOW INFORMATION
As a result of acquisition discussed in note 6, the Company recorded
$3,837 in assets and $379 in liabilities during the quarter ended December 31,
1996. The company purchased $524 in assets via capital leases during the three
months ended December 31, 1996. Accounts payable and accrued liabilities include
$12,396 in fixed asset purchases at December 31, 1996.
6. RECENT DEVELOPMENTS
During the first quarter, the Company acquired the 50% of Phoenix Fiber
Access, Inc. not owned by the Company for $2,094 in cash.
-5-
<PAGE>
7.
GST USA, INC. (1)
CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1996 (UNAUDITED) AND SEPTEMBER 30, 1996
(IN THOUSANDS)
(STATED IN U.S. DOLLARS)
December 31, September 30,
1996 1996
------------ -------------
Assets
Current assets $ 37,197 $ 77,506
Non-current asset 229,772 168,882
--------- ---------
Total Assets $ 266,969 $ 246,388
========= =========
Liabilities and stockholders' equity
Current liabilities $ 42,489 $ 34,286
Non-current liabilities 242,336 210,243
Minority interest 229 182
--------- ---------
Total liabilities 285,054 244,711
--------- ---------
Total shareholders' equity (18,085) 1,677
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 266,969 $ 246,388
========= =========
(1) GST USA, Inc. ("GUS") is a wholly-owned subsidiary of the Company. The
summarized financial information of GUS is for the three months ended December
31, 1996 and the comparable 1995 period. The total outstanding indebtedness of
GUS includes its senior discount notes with an accreted value of $ 183.8 million
as of December 31, 1996, which the Company fully and unconditionally has
guaranteed. Separate financial statements and other disclosures concerning GUS
are not presented because management has determined that such information is not
materially different than the information already provided.
-6-
<PAGE>
GST USA, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS)
(STATED IN U.S. DOLLARS)
Three Months
Ended December 31,
---------------------------
1996 1995
-------- --------
Revenue $ 15,161 $ 6,519
Operating costs and expenses $ 31,952 $ 12,089
-------- --------
Loss from operations $(16,801) $ (5,570)
Other expenses $ 2,964 $ 1,160
-------- --------
Net loss $(19,765) $ (6,730)
======== ========
-7-
<PAGE>
GST USA, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS)
(STATED IN U.S. DOLLARS)
Three Months
Ended December 31,
------------------------
1996 1995
--------- ---------
Cash used in operations $ (15,172) $ (5,658)
Cash used in investing (63,755) (6,841)
Cash provided by financing 40,503 153,652
--------- ---------
Increase in cash and cash equivalents (38,424) 141,153
Cash and cash equivalents, beginning of period 41,420 3,894
--------- ---------
Cash and cash equivalents, end of period $ 2,996 $ 145,047
========= =========
-8-
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following management's discussion and analysis of financial
condition and results of operations contains forward looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward looking statements as a
result of certain factors discussed herein.
OVERVIEW
GST Telecommunications, Inc. (the "Company") provides a broad range of
integrated telecommunications products and services, primarily to customers
located in the western continental United States and Hawaii. Since inception as
a facilities-based competitive access provider ("CAP"), the Company has
constructed and operated state- of-the-art, digital telecommunications networks
that provide an alternative to incumbent local exchange carriers. The Company
has expanded beyond the scope of traditional CAP operations into competitive
local exchange carrier ("CLEC") services and currently provides, through its
established sales channels, a range of enhanced telecommunications services that
include long distance, internet access and data services. In addition, the
Company provides switched access and recently began to provide local dial tone
services to complement its existing telecommunications service offerings. The
Company also provides advanced telecommunications switching platforms with
integrated applications software and network telemanagement capabilities through
its wholly owned subsidiary, NACT Telecommunications, Inc. ("NACT").
The Company's fiber optic networks currently serve 18 cities in
Arizona, California, Hawaii, New Mexico and Washington and its digital microwave
network serves four of the Hawaiian Islands. In addition, the Company has 20
networks under construction and two networks in development, thereby expanding
its regional footprint to include Idaho, Oregon, Texas and Utah.
The Telecommunications Act of 1996 and several state regulatory
initiatives have substantially changed the telecommunications regulatory
environment in the United States. As a result of these regulatory changes, the
Company is permitted in certain states to provide local dial tone in addition to
its existing telecommunications service offerings. Management believes that the
Company has an opportunity to leverage its network infrastructure and service
capabilities to expand the Company's addressable market and to improve its
opportunity to participate, on a regional basis, in both the local and long
distance telecommunications markets in the United States. In order to capitalize
on these opportunities, the Company has accelerated the development and
construction of additional networks within its region. In addition, to
facilitate the provision of local services, the Company has deployed nine high
capacity digital switches, one of which is operational and the balance of which
are expected to be operational in the first half of 1997. The Company intends to
deploy an additional five such switches in the first half of 1997, all of which
are expected to be operational by the third quarter of 1997.
RESULTS OF OPERATIONS
REVENUES. Total revenues for the three months ended December 31, 1996
increased $16.7 million to $23.2 million from $6.5 million for the three months
ended December 31, 1995. Telecommunications services revenues for the three
months ended December 31, 1996 increased $13.9 million to $18.4 million from
$4.5 million for the comparable period in the previous year. The increase in
telecommunications services revenues resulted from the inclusion of revenues
from strategic acquisitions, including Call America Business Communications
Corporation and affiliated companies and TotalNet Communications, Inc., as well
as increased CLEC service revenues generated by the Company's networks. To a
lesser extent, the increase in telecommunications services revenues resulted
from increased Internet, shared tenant and data services. Telecommunications
products revenues for the three months ended December 31, 1996 increased $2.8
million to $4.8 million from $2.0 million for the three months ended December
31, 1995. The increase in telecommunication products revenues resulted from
increased unit sales of NACT's STX switch.
-9-
<PAGE>
OPERATING EXPENSES. Total operating expenses for the three months ended
December 31, 1996 increased $28.7 million to $41.2 million from $12.5 million
for the three months ended December 31, 1995. Network expenses, which include
direct local and long distance circuit costs, increased $11.5 million to $15.7
million for the three months ended December 31, 1996 from $4.2 million for the
comparable period in the previous year. As a percentage of telecommunications
services revenues, network expenses decreased from 93.2% for the three months
ended December 31, 1995 to 85.3% for the three months ended December 31, 1996.
Facilities administration and maintenance expenses for the three months ended
December 31, 1996 increased $2.0 million to $3.3 million from $1.3 million for
the three months ended December 31, 1995. The increase relates to additional
personnel and facility costs associated with network expansion. As a percentage
of telecommunication services revenues, facilities administration and
maintenance expense decreased from 29.6% for the three months ended December 31,
1995 to 18.0% for the three months ended December 31, 1996. The decrease results
from the expansion of the Company's customer base over the past year.
Cost of product revenues at NACT for the three months ended December
31, 1996 increased $1 million to $1.8 million from $.8 million for the three
months ended December 31, 1995. As a percentage of telecommunications products
revenues, cost of product revenues decreased from 40.6% to 38.1% for the same
periods. The decrease results from increased unit sales and the resultant
economies of scale. Research and development costs at NACT increased from $283
for the three months ended December 31, 1995 to $410 for the three months ended
December 31, 1996. The increase is primarily due to the addition of personnel to
enhance the current switch product line and to facilitate the development of new
switching products.
Selling, general and administrative expenses for the three months ended
December 31, 1996 increased $10.7 million to $15.2 million from $4.5 million for
the three months ended December 31, 1995. The increase is primarily due to the
expansion of the Company's CLEC and enhanced services operations and the
acquisition of three long distance companies, an Internet service provider and a
provider of shared tenant services during the fiscal year ended September 30,
1996 ("Fiscal 1996"). The implementation of the Company's integrated services
strategy has resulted in additional marketing, management information and sales
staff dedicated to network expansion and increased service offerings.
Depreciation and amortization for the three months ended December 31,
1996 increased $3.4 million to $4.7 million from $1.3 million for the comparable
period in the previous year. The increase is attributable to newly-constructed
networks becoming operational and to the amortization of intangible assets
related to the Company's Fiscal 1996 acquisitions. The Company expects that
depreciation will continue to increase as it expands its networks and provides
switched services.
OTHER EXPENSES. Other expenses for the three months ended December 31,
1996 increased $3.0 million to $4.7 million from $1.7 million for the three
months ended December 31, 1995. The increase is principally the result of
additional interest expense associated with the December 1995 debt offering. The
increase was partially offset by the interest income resulting from the
investment of the proceeds of such offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred significant operating and net losses as a
result of the development and operation of its networks. The Company expects
that such losses will continue as the Company emphasizes the development,
construction and expansion of its networks and builds its customer base, and
that cash provided by operations will not be sufficient to fund the expansion of
its networks and services. The Company has financed, and expects to continue to
finance, its capital expenditures, acquisitions and working capital requirements
primarily through the sale of equity and debt securities.
Net cash provided by financing activities from borrowings and equity
issuances to fund capital expenditures, acquisitions and operating losses was
$34.7 million and $173.0 million for the three month periods ended December
-10-
<PAGE>
31, 1996 and 1995, respectively. The Company's net cash used in operating and
investment activities was $82.7 million and $14.2 million for the three month
periods ended December 31, 1996 and 1995, respectively.
Capital expenditures for the three months ended December 31, 1996 and
1995 were $58.0 million and $8.1 million, respectively. The Company estimates
capital expenditures of in excess of $350 million for the 1997 and 1998 fiscal
years. The actual amount and timing of such expenditures will be dependent upon
a number of factors, including the availability of equity and debt financing,
customer demand, the ability to conclude interconnection agreements and the
regulatory environment. These expenditures will be utilized for the expansion,
development and construction of the Company's networks, the acquisition and
deployment of switches and related equipment to facilitate the offering of
advanced telecommunications services and internal management systems. Continued
significant capital expenditures are expected to be made thereafter. In
addition, the Company expects to continue to incur increasing operating losses
while it expands its business and builds its customer base. Actual capital
expenditures and operating losses will depend on numerous factors beyond the
Company's control, including the nature of future expansion and acquisition
opportunities, economic conditions, competition, regulatory developments and the
availability of capital.
The Company completed a $180 million debt offering in December 1995,
consisting of $160 million in senior discount notes and $20 million in
convertible senior subordinated discount notes (collectively, the "1995 Notes").
The net proceeds from the issuance of the 1995 Notes, $171.3 million, are being
used to fund network development, capital expenditures and working capital
requirements. The indentures governing the 1995 Notes include restrictive
covenants which, among other items, limit or restrict additional indebtedness
incurred by the Company, investment in certain subsidiaries and the payment of
dividends.
In October 1994, the Company and Tomen entered into agreements (the
"Tomen Facility") pursuant to which Tomen agreed to make available up to a total
of $100 million of financing, on a project-by-project basis, for the
construction and development of network projects. Tomen has a right of first
refusal to finance each network project up to the limit of the facility. To
date, Tomen has provided, or agreed to provide, $34.5 million in debt financing
under the Tomen Facility for the Company's network projects in Southern
California, Tucson and Albuquerque.] Furthermore, Tomen has purchased 1,324,074
common shares of the Company, without par value (the "Common Shares"), and holds
warrants to purchase 296,155 additional Common Shares. In November 1996 Tomen
agreed in principle to provide the Company with $41 million of additional
financing under the Tomen Facility for the Hawaiian inter-island network and
terrestrial fiber optic facilities and in connection with such financing will
purchase additional Common Shares and warrants to purchase 75,000 additional
Common Shares.
In October 1996 the Company completed a private placement to non-U.S.
investors of two million special warrants (the "Special Warrants"). Each Special
Warrant is exercisable for one Common Share and one-half of an underlying
warrant. Each full underlying warrant entitles the holder to purchase one
additional Common Share for a purchase price of $13.00 for one year from the
date of issuance. The Special Warrants become exercisable by the holders for no
additional consideration upon the receipt of approval of the Canadian prospectus
(the "Canadian Prospectus") from the securities commission of each of the
Canadian provinces where the Special Warrants were sold, but in any event, no
later than September 22, 1997. In the event that the requisite regulatory
approvals for the Canadian Prospectus are not received by the Company by
February 19, 1997, then each Special Warrant will become exercisable for 1.1
Common Shares and one-half of one underlying warrant. The Company received $9.7
million in net proceeds in October 1996 and the remaining $11.1 million in net
proceeds in January 1997.
In September 1996, the Company entered into a loan agreement with
Siemens Stromberg-Carlson ("Siemens") that provides for loans by Siemens of up
to an aggregate of $226 million to finance the purchase of Siemens equipment and
certain equipment from other suppliers. $116 million of such loan proceeds is
presently available to the Company. The Company may seek to obtain the balance
of such proceeds on an as-needed basis, subject to the negotiation and execution
of mutually satisfactory documentation. In December 1996, the Company entered
into an agreement with Northern Telecom Finance Company ("NTFC"), which provides
for $50 million of equipment
-11-
<PAGE>
financing to finance the purchase of equipment and products from Northern
Telecom, Inc. As of December 31, 1996, the Company has borrowed $26 million
pursuant to the NTFC agreement.
The Company proposes to incur significant additional indebtedness to
purchase telecommunications equipment such as switches and fiber optic cable and
to finance related design, development, construction, installation and
integration costs. The Company may make public and private offerings of its debt
and equity securities and may negotiate additional credit facilities.
At December 31, 1996, the Company had cash, cash equivalents,
restricted cash and investments of $24.5 million, compared to $82.5 million at
September 30, 1996. Management believes that the cash on hand, the proceeds from
the Special Warrants offering, the expected proceeds of approximately $10
million from the public offering of NACT's common stock whereby the Company and
NACT will sell one million and two million shares respectively, of NACT's common
stock, borrowings expected to be available under the Tomen Facility, the NTFC
agreement and the Siemens agreement and currently contemplated offerings of the
Company's debt and equity securities will provide sufficient funds for the
Company to expand its business as presently planned and to fund its operating
expenses through December 31, 1997. Thereafter, the Company expects to acquire
additional financing. In the event that the Company's plans or assumptions
change or prove to be inaccurate, or its cash resources, together with
borrowings under the current financing arrangements prove to be insufficient to
fund the Company's growth and operations, or if the Company consummates
additional acquisitions, the Company may be required to seek additional sources
of capital sooner than currently anticipated. There can be no assurance that the
Tomen Facility, the currently contemplated offerings of debt and equity
securities or other financing will be available to the Company or, if available,
that it can be concluded on terms acceptable to the Company or within the
limitations contained in the Company's financing arrangements. Failure to obtain
such financing could result in the delay or abandonment of some or all of the
Company's development or expansion plans, and could have a material adverse
effect on the Company's business. Such failure could also limit the ability of
the Company to make principal and interest payments on its outstanding
indebtedness. The Company has no working capital or other credit facility under
which it may borrow for working capital and other general corporate purposes.
There can be no assurance that such a facility will be available to the Company
in the future or that if such a facility were available, that it would be
available on terms and conditions acceptable to the Company.
Although the Company's liquidity substantially improved as a result of
the 1995 Notes offering because the 1995 Notes do not require the payment of
cash interest prior to June 2001 and the 1995 Notes do not require payment of
principal until maturity in 2005, a portion of the indebtedness under the Tomen
Facility will, and a portion of the equipment financing may, mature prior to
2005. Accordingly, the Company may need to refinance a substantial amount of
indebtedness. In addition, the Company anticipates that cash flow from
operations may be insufficient to repay the 1995 Notes in full at maturity and
that such notes may need to be refinanced. There can be no assurance that the
Company will be able to improve its earnings before fixed charges or that the
Company will be able to meet its debt service obligations, including its
obligations under the Tomen Facility, the 1995 Notes or equipment financing.
Because the Company does not currently have a revolving credit facility, if a
shortfall occurs, alternative financing would be necessary in order for the
Company to meet its liquidity requirements and there can be no assurance that
such financing would be available. In such event, the Company could face
substantial liquidity problems. The ability of the Company to meets its
obligations and effect such refinancings will be dependent upon the future
performance of the Company, which will be subject to prevailing economic
conditions and to financial, business and other factors, including factors
beyond the control of the Company.
-12-
<PAGE>
Part II. Other Information
Item 1. LEGAL PROCEEDINGS
Reference is made to ITEM 3. LEGAL PROCEEDINGS of the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1996, and to the
descriptions therein of an action commenced by GST Tucson Lightwave, Inc. ("GST
Tucson") against the City of Tucson in the Superior Court of Arizona, County of
Pima (the "State Proceeding") and a second action commenced by GST Tucson
against the City of Tucson in the United States District Court for the District
of Arizona (the "Federal Proceeding"). In the State Proceeding, the Arizona
Court of Appeals affirmed the Superior Court's ruling denying GST Tucson the
relief sought in respect of its City of Tucson fiber optic communications
license. GST Tucson may appeal to the Arizona Supreme Court. In the Federal
Proceeding, the United States District Court dismissed GST Tucson's action. GST
Tucson filed a Notice of Appeal to the United States Court of Appeals for the
Ninth Circuit on January 16, 1997.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*10(a) 1996 Stock Option Plan of the Company, as amended to date.
*10(b) 1996 Senior Executive Officer Stock Option Plan of the Company.
*10(c) 1996 Senior Operating Officer Stock Option Plan of the Company.
*10(d) Loan and Security Agreement dated as of September 4, 1996 by and
between Siemens Stromberg-Carlson ("Siemens") and GST Switchco, Inc.
("GST Switchco").
*10(e) Unconditional Continuing Guaranty dated as of September 4, 1996 by and
between Siemens and GST USA, Inc.
*10(f) Unconditional Limited Guaranty Agreement dated as of December 19, 1996
made by GST USA, Inc., in favor of NTFC Capital Corporation.
*27 Financial Data Schedule.
- ----------------------
* Filed herewith.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated October 31, 1996
reporting under Item 2 thereof the acquisition by merger of TotalNet and under
Item 5 thereof the Special Warrant offering.
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<PAGE>
EXHIBIT INDEX
EXHIBIT
*10(a) 1996 Stock Option Plan of the Company, as amended to date.
*10(b) 1996 Senior Executive Officer Stock Option Plan of the Company.
*10(c) 1996 Senior Operating Officer Stock Option Plan of the Company.
*10(d) Loan and Security Agreement dated as of September 4, 1996 by and
between Siemens Stromberg-Carlson ("Siemens") and GST Switchco, Inc.
("GST Switchco").
*10(e) Unconditional Continuing Guaranty dated as of September 4, 1996 by and
between Siemens and GST USA, Inc.
*10(f) Unconditional Limited Guaranty Agreement dated as of December 19, 1996
made by GST USA, Inc., in favor of NTFC Capital Corporation.
*27 Financial Data Schedule.
- ----------------------
* Filed herewith.
-14-
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
GST TELECOMMUNICATIONS, INC.
(Registrant)
/s/Robert H. Hanson
---------------------------------
Robert H. Hanson,
(Senior Vice President and Chief
Financial Officer)
/s/Clifford V. Sander
---------------------------------
Clifford V. Sander
(Senior Vice President, Treasurer
and Chief Accounting Officer)
Date: February 14, 1997
-15-
As amended through
January 14, 1997
GST TELECOMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This 1996 Stock Option Plan (the "Plan") is intended as an
incentive, to retain in the employ of and as consultants and advisors to GST
TELECOMMUNICATIONS, INC., a Canadian corporation with its principal office at
4317 N.E. Thurston Way, Vancouver, Washington 98662 (the "Company") and any
Subsidiary of the Company, within the meaning of Section 425(f) of the United
States Internal Revenue Code of 1986, as amended (the "Code"), persons of
training, experience and ability, to attract new employees, directors, advisors
and consultants whose services are considered valuable, to encourage the sense
of proprietorship and to stimulate the active interest of such persons in the
development and financial success of the Company and its Subsidiaries.
It is further intended that certain options granted pursuant
to the Plan shall constitute incentive stock options within the meaning of
Section 422 of the Code (the "Incentive Options") while certain other options
granted pursuant to the Plan shall be nonqualified stock options (the
"Nonqualified Options"). Incentive Options and Nonqualified Options are
hereinafter referred to collectively as "Options."
The Company intends that the Plan meet the requirements of
Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section
16(b) of the Exchange Act. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
2. ADMINISTRATION OF THE PLAN.
The Board of Directors of the Company (the "Board") shall
appoint and maintain as administrator of the Plan a Committee (the "Committee")
consisting of two or more Non-Employee Directors (as such term is defined in
Rule 16b-3), which shall serve at the pleasure of the Board. The Committee,
subject to Sections 3 and 5 hereof, shall have full power and authority to
designate recipients of Options, to determine the terms and conditions of
respective
<PAGE>
Option agreements (which need not be identical) and to interpret the provisions
and supervise the administration of the Plan. The Committee shall have the
authority, without limitation, to designate which Options granted under the Plan
shall be Incentive Options and which shall be Nonqualified Options. To the
extent any Option does not qualify as an Incentive Option, it shall constitute a
separate Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall
interpret the Plan and all Options granted under the Plan, shall make such rules
as it deems necessary for the proper administration of the Plan, shall make all
other determinations necessary or advisable for the administration of the Plan
and shall correct any defects or supply any omission or reconcile any
inconsistency in the Plan or in any Options granted under the Plan in the manner
and to the extent that the Committee deems desirable to carry into effect the
Plan or any Options. The act or determination of a majority of the Committee
shall be the act or determination of the Committee and any decision reduced to
writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority at a meeting duly held. Subject
to the provisions of the Plan, any action taken or determination made by the
Committee pursuant to this and the other Sections of the Plan shall be
conclusive on all parties.
In the event that for any reason the Committee is unable to
act or if the Committee at the time of any grant, award or other acquisition
under the Plan of Options or Stock does not consist of two or more Non-Employee
Directors, then any such grant, award or other acquisition may be approved or
ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3.
3. DESIGNATION OF OPTIONEES.
The persons eligible for participation in the Plan as
recipients of Options (the "Optionees") shall include employees, officers and
directors of, and consultants and advisors to, the Company or any Subsidiary;
provided that Incentive Options may only be granted to employees of the Company
and the Subsidiaries. In selecting Optionees, and in determining the number of
shares to be covered by each Option granted to Optionees, the Committee may
consider the office or position held by the Optionee or the Optionee's
relationship to the Company, the Optionee's degree of responsibility for and
contribution to the growth and success of the Company or any Subsidiary, the
Optionee's length of service, age, promotions, potential and any other factors
that the Committee may consider relevant. An Optionee who has been granted an
Option hereunder may be granted an additional Option or Options, if the
Committee shall so determine.
-2-
<PAGE>
4. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in Section 7 hereof, a total
of 400,000 shares of the Company's Common Shares (the "Stock") shall be subject
to the Plan. The shares of Stock subject to the Plan shall consist of unissued
shares or previously issued shares held by any Subsidiary of the Company, and
such amount of shares of Stock shall be and is hereby reserved for such purpose.
Any of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option expire or be cancelled prior to its
exercise in full or should the number of shares of Stock to be delivered upon
the exercise in full of an Option be reduced for any reason, the shares of Stock
theretofore subject to such Option may be subject to future Options under the
Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Options granted under the Plan shall be subject to the
following conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The purchase price of each share of
Stock purchasable under an Incentive Option shall be determined by the Committee
at the time of grant, but shall not be less than 100% of the Fair Market Value
(as defined below) of such share of Stock on the date the Option is granted;
PROVIDED, HOWEVER, that with respect to an Optionee who, at the time such
Incentive Option is granted, owns (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of stock
of the Company or of any Subsidiary, the purchase price per share of Stock shall
be at least 110% of the Fair Market Value per share of Stock on the date of
grant. The purchase price of each share of Stock purchasable under a
Nonqualified Option shall not be less than 80% of the Fair Market Value of such
share of Stock on the date the Option is granted; PROVIDED, HOWEVER, that an
Optionee who is a Canadian taxpayer may require that any Nonqualified Option
granted to him provide for the purchase of shares of Stock upon exercise thereof
at a price equal to the Fair Market Value per share of Stock on the date of
grant. The exercise price for each Option shall be subject to adjustment as
provided in Section 7 below. Fair Market Value means the closing price of
publicly traded shares of Stock on the principal United States securities
exchange on which shares of Stock are listed (if the shares of Stock are so
listed), or on the NASDAQ Stock Market (if the shares of Stock are regularly
quoted on the NASDAQ Stock Market), or, if not so listed or regularly quoted,
the mean between the closing bid and asked prices of publicly traded shares of
Stock in the
-3-
<PAGE>
over-the-counter market, or, if such bid and asked prices shall not be
available, as reported by any nationally recognized quotation service selected
by the Company, or as determined by the Committee in a manner consistent with
the provisions of the Code. Anything in this Section 5(a) to the contrary
notwithstanding, in no event shall the purchase price of a share of Stock be
less than the minimum price permitted under rules and policies of the American
Stock Exchange and the Vancouver Stock Exchange.
(b) OPTION TERM. The term of each Option shall be
fixed by the Committee, but no Option shall be exercisable more than five years
after the date such Option is granted.
(c) EXERCISABILITY. Subject to Section 5(j) hereof,
Options shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at the time of grant.
(d) METHOD OF EXERCISE. Options to the extent then
exercisable may be exercised in whole or in part at any time during the option
period, by giving written notice to the Company specifying the number of shares
of Stock to be purchased, accompanied by payment in full of the purchase price,
in cash, by check or such other instrument as may be acceptable to the
Committee. As determined by the Committee, in its sole discretion, at or after
grant, payment in full or in part may also be made in the form of Stock owned by
the Optionee (based on the Fair Market Value of the Stock on the trading day
before the Option is exercised). An Optionee shall have the right to dividends
and other rights of a stockholder with respect to shares of Stock purchased upon
exercise of an Option after (i) the Optionee has given written notice of
exercise and has paid in full for such shares and (ii) becomes a stockholder of
record with respect thereto.
(e) NON-TRANSFERABILITY OF OPTIONS. Options are not
transferable and may be exercised solely by the Optionee during his lifetime or
after his death by the person or persons entitled thereto under his will or the
laws of descent and distribution. Any attempt to transfer, assign, pledge or
otherwise dispose of, or to subject to execution, attachment or similar process,
any Option contrary to the provisions hereof shall be void and ineffective and
shall give no right to the purported transferee.
(f) TERMINATION BY DEATH. Unless otherwise determined
by the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of death, the Option may
thereafter be exercised, to the extent then exercisable (or on such accelerated
basis as the Committee shall determine at or after grant), by the legal
representative of the estate or by the legatee of the Optionee under the will of
the Optionee, for a period of one year after the
-4-
<PAGE>
date of such death or until the expiration of the stated term of such Option as
provided under the Plan, whichever period is shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless
otherwise determined by the Committee at grant, if any Optionee's employment
with or service to the Company or any Subsidiary terminates by reason of total
and permanent disability, any Option held by such Optionee may thereafter be
exercised, to the extent it was exercisable at the time of termination due to
Disability (or on such accelerated basis as the Committee shall determine at or
after grant), but may not be exercised after 30 days after the date of such
termination of employment or service or the expiration of the stated term of
such Option, whichever period is shorter; provided, however, that, if the
Optionee dies within such 30 day period, any unexercised Option held by such
Optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of one year after the date of such
death or for the stated term of such Option, whichever period is shorter.
(h) TERMINATION BY REASON OF RETIREMENT. Unless
otherwise determined by the Committee at grant, if any Optionee's employment
with or service to the Company or any Subsidiary terminates by reason of Normal
or Early Retirement (as such terms are defined below), any Option held by such
Optionee may thereafter be exercised to the extent it was exercisable at the
time of such Retirement (or on such accelerated basis as the Committee shall
determine at or after grant), but may not be exercised after 30 days after the
date of such termination of employment or service or the expiration of the
stated term of such Option, whichever period is shorter; provided, however,
that, if the Optionee dies within such 30 day period, any unexercised Option
held by such Optionee shall thereafter be exercisable, to the extent to which it
was exercisable at the time of death, for a period of one year after the date of
such death or for the stated term of such Option, whichever period is shorter.
For purposes of this paragraph (h), Normal Retirement shall
mean retirement from active employment with the Company or any Subsidiary on or
after the normal retirement date specified in the applicable Company or
Subsidiary pension plan or if no such pension plan, age 65. Early Retirement
shall mean retirement from active employment with the Company or any Subsidiary
pursuant to the early retirement provisions of the applicable Company or
Subsidiary pension plan or if no such pension plan, age 55.
(i) OTHER TERMINATION. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates for any reason other than death, Disability
or Normal or Early Retirement, the Option shall thereupon terminate, except that
the portion of any
-5-
<PAGE>
Option that was exercisable on the date of such termination of employment may be
exercised for the lesser of 30 days after the date of termination or the balance
of such Option's term if the Optionee's employment or service with the Company
or any Subsidiary is terminated by the Company or such Subsidiary without cause
(the determination as to whether termination was for cause to be made by the
Committee). The transfer of an Optionee from the employ of the Company to a
Subsidiary, or vice versa, or from one Subsidiary to another, shall not be
deemed to constitute a termination of employment for purposes of the Plan.
(j) LIMIT ON VALUE OF INCENTIVE OPTION. The aggregate
Fair Market Value, determined as of the date the Incentive Option is granted, of
Stock for which Incentive Options are exercisable for the first time by any
Optionee during any calendar year under the Plan (and/or any other stock option
plans of the Company or any Subsidiary) shall not exceed $100,000.
(k) TRANSFER OF INCENTIVE OPTION SHARES. The stock
option agreement evidencing any Incentive Options granted under this Plan shall
provide that if the Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any share or
shares of Stock issued to him upon exercise of an Incentive Option granted under
the Plan within the two-year period commencing on the day after the date of the
grant of such Incentive Option or within a one-year period commencing on the day
after the date of transfer of the share or shares to him pursuant to the
exercise of such Incentive Option, he shall, within 10 days after such
disposition, notify the Company thereof and immediately deliver to the Company
any amount of United States federal income tax withholding required by law.
(l) LIMITATION ON OPTIONS HELD BY ONE PERSON. The
aggregate number of shares of Stock subject to options held by any one person
shall not exceed that number of shares as equals 5% of the outstanding shares of
the Company.
6. TERM OF PLAN.
No Option shall be granted pursuant to the Plan on or after
January 5, 2006, but Options theretofore granted may extend beyond that date.
7. CAPITAL CHANGE OF THE COMPANY.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number and option price of shares subject to outstanding Options
granted under the Plan, to the end that after such event each Optionee's
-6-
<PAGE>
proportionate interest shall be maintained as immediately before the occurrence
of such event.
8. PURCHASE FOR INVESTMENT.
Unless the Options and shares covered by the Plan have been
registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), or the Company has determined that such registration is
unnecessary, each person exercising an Option under the Plan may be required by
the Company to give a representation in writing that he is acquiring the shares
for his own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof.
9. TAXES.
The Company may make such provisions as it may deem
appropriate, consistent with applicable law, in connection with any Options
granted under the Plan with respect to the withholding of any United States or
Canadian taxes or any other tax matters.
10. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on January 5, 1996, provided
however that the Plan shall subsequently be approved by majority vote of the
Company's shareholders not later than January 4, 1997.
11. AMENDMENT AND TERMINATION.
The Board may amend, suspend, or terminate the Plan, except
that no amendment shall be made that would impair the rights of any Optionee
under any Option theretofore granted without his consent, and except that no
amendment shall be made which, without the approval of the shareholders of the
Company would:
(a) materially increase the number of shares that may
be issued under the Plan, except as is provided in Section 7;
(b) materially increase the benefits accruing to the
Optionees under the Plan;
(c) materially modify the requirements as to
eligibility for participation in the Plan;
(d) decrease the exercise price of an Incentive
Option to less than 100% of the Fair Market Value per share of Stock on the date
of grant thereof or the exercise price of a Nonqualified Option to less than 80%
of the Fair Market Value per share of Stock on the date of grant thereof; or
-7-
<PAGE>
(e) extend the term of any Option beyond that
provided for in Section 5(b).
The Committee may amend the terms of any Option theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any Optionee without his consent. The Committee may also substitute
new Options for previously granted Options, including options granted under
other plans applicable to the participant and previously granted Options having
higher option prices, upon such terms as the Committee may deem appropriate.
12. GOVERNMENT REGULATIONS.
The Plan, and the grant and exercise of Options hereunder, and
the obligation of the Company to sell and deliver shares under such Options,
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges
(including the American Stock Exchange and Vancouver Stock Exchange) as may be
required.
13. GENERAL PROVISIONS.
(a) CERTIFICATES. All certificates for shares of
Stock delivered under the Plan shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission, or
other securities commission having jurisdiction, any applicable Federal,
provincial or state securities law, any stock exchange upon which the Stock is
then listed and the Committee may cause a legend or legends to be placed on any
such certificates to make appropriate reference to such restrictions.
(b) EMPLOYMENT MATTERS. The adoption of the Plan
shall not confer upon any Optionee of the Company or any Subsidiary, any right
to continued employment or, in the case of an Optionee who is a director,
continued service as a director, with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or any
Subsidiary to terminate the employment of any of its employees, the service of
any of its directors or the retention of any of its consultants or advisors at
any time.
(c) LIMITATION OF LIABILITY. No member of the Board
or the Committee, or any officer or employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
-8-
<PAGE>
law, be fully indemnified and protected by the Company in respect of any such
action, determination or interpretation.
(d) REGISTRATION OF STOCK. Notwithstanding any other
provision in the Plan, no Option may be exercised unless and until the Stock to
be issued upon the exercise thereof has been registered under the Securities Act
and applicable state securities laws, or are, in the opinion of counsel to the
Company, exempt from such registration in the United States or exempt from the
prospectus and registration requirements under applicable provincial
legislation. The Company shall not be under any obligation to register under
applicable federal or state securities laws any Stock to be issued upon the
exercise of an Option granted hereunder, or to comply with an appropriate
exemption from registration under such laws or the laws of any province in order
to permit the exercise of an Option and the issuance and sale of the Stock
subject to such Option however, the Company may in its sole discretion register
such Stock at such time as the Company shall determine. If the Company chooses
to comply with such an exemption from registration, the Stock issued under the
Plan may, at the direction of the Committee, bear an appropriate restrictive
legend restricting the transfer or pledge of the Stock represented thereby, and
the Committee may also give appropriate stop transfer instructions to the
Company's transfer agents.
GST TELECOMMUNICATIONS, INC.
January 5, 1996
-9-
As amended through
January 14, 1997
GST TELECOMMUNICATIONS, INC.
SENIOR EXECUTIVE OFFICER STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This Senior Executive Officer Stock Option Plan (the "Plan") is
intended as an incentive, to retain in the employ of GST TELECOMMUNICATIONS,
INC., a federally chartered Canadian corporation with its principal office at
4317 N.E. Thurston Way, Vancouver, Washington 98662 (the "Company") and any
Subsidiary of the Company, within the meaning of Section 424(f) of the United
States Internal Revenue Code of 1986, as amended (the "Code"), as senior
executive officers, persons of training, experience and ability, to attract new
senior executive officers whose services are considered valuable, to encourage
the sense of proprietorship and to stimulate the active interest of such persons
in the development and financial success of the Company and its Subsidiaries.
It is further intended that certain options granted pursuant to the
Plan shall constitute incentive stock options within the meaning of Section 422
of the Code (the "Incentive Options"), while certain other options granted
pursuant to the Plan shall be nonqualified stock options (the "Nonqualified
Options"). Incentive Options and Nonqualified Options are hereinafter referred
to collectively as "Options."
The Company intends that the Plan meet the requirements of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section
16(b) of the Exchange Act. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
<PAGE>
2. ADMINISTRATION OF THE PLAN.
The Board of Directors of the Company (the "Board") shall appoint and
maintain as administrator of the Plan a Committee (the "Committee") consisting
of two or more Non-Employee Directors (as such term is defined in Rule 16b-3),
which shall serve at the pleasure of the Board. The Committee, subject to
Sections 3 and 5 hereof, shall have full power and authority to designate
recipients of Options, to determine the terms and conditions of respective
Option agreements (which need not be identical) and to interpret the provisions
and supervise the administration of the Plan. The Committee shall have the
authority, without limitation, to designate which Options granted under the Plan
shall be Incentive Options and which shall be Nonqualified Options. To the
extent any Option does not qualify as an Incentive Option, it shall constitute a
separate Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall interpret
the Plan and all Options granted under the Plan, shall make such rules as it
deems necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defects or supply any omission or reconcile any inconsistency
in the Plan or in any Options granted under the Plan in the manner and to the
extent that the Committee deems desirable to carry into effect the Plan or any
Options. The act or determination of a majority of the Committee shall be the
act or determination of the Committee and any decision reduced to writing and
signed by all of the members of the Committee shall be fully effective as if it
had been made by a majority at a meeting duly held. Subject to the provisions of
the Plan, any action taken or determination made by the Committee pursuant to
this and the other Sections of the Plan shall be conclusive on all parties.
In the event that for any reason the Committee is unable to act or if
the Committee at the time of any grant, award or other acquisition under the
Plan of Options or Stock does not consist of two or more Non-Employee Directors,
then any such grant, award or other acquisition may be approved or ratified in
any other manner contemplated by subparagraph (d) of Rule 16b-3.
3. DESIGNATION OF OPTIONEES.
The persons eligible for participation in the Plan as recipients of
Options (the "Optionees") shall comprise senior executive officers of the
Company or any Subsidiary; provided that Incentive Options may only be granted
to senior executive officers who are employees of the Company and the
Subsidiaries. In selecting Optionees, and in determining the number of shares to
be covered by each Option granted to Optionees, the Committee may consider the
office or position held by the Optionee or the Optionee's relationship to the
Company, the Optionee's degree of
-2-
<PAGE>
responsibility for and contribution to the growth and success of the Company or
any Subsidiary, the Optionee's length of service, age, promotions, potential and
any other factors that the Committee may consider relevant. An Optionee who has
been granted an Option hereunder may be granted an additional Option or Options,
if the Committee shall so determine.
4. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in Section 7 hereof, a total of
600,000 of the Company's Common Shares (the "Stock") shall be subject to the
Plan. The shares of Stock subject to the Plan shall consist of unissued shares
or previously issued shares held by any Subsidiary of the Company, and such
amount of shares of Stock shall be and is hereby reserved for such purpose. Any
of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option expire or be cancelled prior to its
exercise in full or should the number of shares of Stock to be delivered upon
the exercise in full of an Option be reduced for any reason, the shares of Stock
theretofore subject to such Option may be subject to future Options under the
Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The purchase price of each share of Stock purchasable
under an Incentive Option shall be determined by the Committee at the time of
grant, but shall not be less than 100% of the Fair Market Value (as defined
below) of such share of Stock on the date the Option is granted; PROVIDED,
HOWEVER, that with respect to an Optionee who, at the time such Incentive Option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
of any Subsidiary, the purchase price per share of Stock shall be at least 110%
of the Fair Market Value per share of Stock on the date of grant. The purchase
price of each share of Stock purchasable under a Nonqualified Option shall not
be less than 80% of the Fair Market Value of such share of Stock on the date the
Option is granted; PROVIDED, HOWEVER, that an Optionee who is a Canadian
taxpayer may require that any Nonqualified Option granted to him provide for the
purchase of shares of Stock upon exercise thereof at a price equal to the Fair
Market Value per share of Stock on the date of grant. The exercise price for
each Option shall be subject to adjustment as provided in Section 7
-3-
<PAGE>
below. Fair Market Value means the closing price of publicly traded shares of
Stock on the principal United States securities exchange on which shares of
Stock are listed (if the shares of Stock are so listed), or on the NASDAQ Stock
Market (if the shares of Stock are regularly quoted on the NASDAQ Stock Market),
or, if not so listed or regularly quoted, the mean between the closing bid and
asked prices of publicly traded shares of Stock in the over-the-counter market,
or, if such bid and asked prices shall not be available, as reported by any
nationally recognized quotation service selected by the Company, or as
determined by the Committee in a manner consistent with the provisions of the
Code. Anything in this Section 5(a) to the contrary notwithstanding, in no event
shall the purchase price of a share of Stock be less than the minimum price
permitted under rules and policies of the American Stock Exchange and the
Vancouver Stock Exchange.
(b) OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than six years after the date
such Option is granted.
(c) EXERCISABILITY. Subject to Section 5(j) hereof, Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee at the time of grant. No option may be
exercised to the extent that such exercise will cause the Company to issue, upon
exercise of options to purchase shares of Stock granted by the Company without
shareholder approval, that number of shares of Stock as equals or exceeds (i) 5%
of the number of outstanding shares of Stock in any 12-month period, or (ii) 10%
of the number of outstanding shares of Stock in any five-year period.
(d) METHOD OF EXERCISE. Options to the extent then exercisable may be
exercised in whole or in part at any time during the option period, by giving
written notice to the Company specifying the number of shares of Stock to be
purchased, accompanied by payment in full of the purchase price, in cash, by
check or such other instrument as may be acceptable to the Committee. As
determined by the Committee, in its sole discretion, at or after grant, payment
in full or in part may also be made in the form of Stock owned by the Optionee
(based on the Fair Market Value of the Stock on the trading day before the
Option is exercised). An Optionee shall have the right to dividends and other
rights of a stockholder with respect to shares of Stock purchased upon exercise
of an Option after (i) the Optionee has given written notice of exercise and has
paid in full for such shares and (ii) becomes a stockholder of record with
respect thereto.
(e) NON-TRANSFERABILITY OF OPTIONS. Options are not transferable and
may be exercised solely by the Optionee during his lifetime or after his death
by the person or persons entitled thereto under his will or the laws of descent
and distribution.
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Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject
to execution, attachment or similar process, any Option contrary to the
provisions hereof shall be void and ineffective and shall give no right to the
purported transferee.
(f) TERMINATION BY DEATH. Unless otherwise determined by the Committee
at grant, if any Optionee's employment with or service to the Company or any
Subsidiary terminates by reason of death, the Option may thereafter be
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal representative of the
estate or by the legatee of the Optionee under the will of the Optionee, for a
period of one year after the date of such death or until the expiration of the
stated term of such Option as provided under the Plan, whichever period is
shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of total and permanent
disability, any Option held by such Optionee may thereafter be exercised, to the
extent it was exercisable at the time of termination due to Disability (or on
such accelerated basis as the Committee shall determine at or after grant), but
may not be exercised after 30 days after the date of such termination of
employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such 30 day period, any unexercised Option held by such Optionee shall
thereafter be exercisable to the extent to which it was exercisable at the time
of death for a period of one year after the date of such death or for the stated
term of such Option, whichever period is shorter.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of Normal or Early Retirement (as
such terms are defined below), any Option held by such Optionee may thereafter
be exercised to the extent it was exercisable at the time of such Retirement (or
on such accelerated basis as the Committee shall determine at or after grant),
but may not be exercised after 30 days after the date of such termination of
employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such 30 day period, any unexercised Option held by such Optionee shall
thereafter be exercisable, to the extent to which it was exercisable at the time
of death, for a period of one year after the date of such death or for the
stated term of such Option, whichever period is shorter.
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For purposes of this paragraph (h), Normal Retirement shall mean
retirement from active employment with the Company or any Subsidiary on or after
the normal retirement date specified in the applicable Company or Subsidiary
pension plan or if no such pension plan, age 65. Early Retirement shall mean
retirement from active employment with the Company or any Subsidiary pursuant to
the early retirement provisions of the applicable Company or Subsidiary pension
plan or if no such pension plan, age 55.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee at
grant, if any Optionee's employment with or service to the Company or any
Subsidiary terminates for any reason other than death, Disability or Normal or
Early Retirement, the Option shall thereupon terminate, except that the portion
of any Option that was exercisable on the date of such termination of employment
may be exercised for the lesser of 30 days after the date of termination or the
balance of such Option's term if the Optionee's employment or service with the
Company or any Subsidiary is terminated by the Company or such Subsidiary
without cause (the determination as to whether termination was for cause to be
made by the Committee). The transfer of an Optionee from the employ of the
Company to a Subsidiary, or vice versa, or from one Subsidiary to another, shall
not be deemed to constitute a termination of employment for purposes of the
Plan.
(j) LIMIT ON VALUE OF INCENTIVE OPTIONS. The aggregate Fair Market
Value, determined as of the date the Incentive Option is granted, of Stock for
which Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000.
(k) TRANSFER OF INCENTIVE OPTION SHARES. The stock option agreement
evidencing any Incentive Options granted under this Plan shall provide that if
the Optionee makes a disposition, within the meaning of Section 424(c) of the
Code and regulations promulgated thereunder, of any share or shares of Stock
issued to him upon exercise of an Incentive Option granted under the Plan within
the two-year period commencing on the day after the date of the grant of such
Incentive Option or within a one-year period commencing on the day after the
date of transfer of the share or shares to him pursuant to the exercise of such
Incentive Option, he shall, within 10 days after such disposition, notify the
Company thereof and immediately deliver to the Company any amount of United
States federal income tax withholding required by law.
(l) LIMITATION ON OPTIONS HELD BY ONE PERSON. The aggregate number of
shares of Stock subject to options held by any one person shall not exceed that
number of shares as equals 5% of the outstanding shares of the Company.
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6. TERM OF PLAN.
No Option shall be granted pursuant to the Plan on or after May 21,
2006, but Options theretofore granted may extend beyond that date.
7. CAPITAL CHANGE OF THE COMPANY.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number and option price of shares subject to outstanding Options
granted under the Plan, to the end that after such event each Optionee's
proportionate interest shall be maintained as immediately before the occurrence
of such event.
8. PURCHASE FOR INVESTMENT.
Unless the Options and shares covered by the Plan have been registered
under the United States Securities Act of 1933, as amended (the "Securities
Act"), or the Company has determined that such registration is unnecessary, each
person exercising an Option under the Plan may be required by the Company to
give a representation in writing that he is acquiring the shares for his own
account for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof.
9. TAXES.
The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options granted under the
Plan with respect to the withholding of any United States or Canadian taxes or
any other tax matters.
10. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on May 22, 1996.
11. AMENDMENT AND TERMINATION.
The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made that would impair the rights of any Optionee under any
Option theretofore granted without his consent, and except that no amendment
shall be made which, without the approval of the shareholders of the Company
would:
(a) materially increase the number of shares that may be issued
under the Plan, except as is provided in Section 7;
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<PAGE>
(b) materially increase the benefits accruing to the Optionees
under the Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) decrease the exercise price of an Incentive Option to less
than 100% of the Fair Market Value per share of Stock on the date of
grant thereof or the exercise price of a Nonqualified Option to less
than 80% of the Fair Market Value per share of Stock on the date of
grant thereof; or
(e) extend the term of any Option beyond that provided for in
Section 5(b).
The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Optionee without his consent. The Committee may also substitute new Options
for previously granted Options, including options granted under other plans
applicable to the participant and previously granted Options having higher
option prices, upon such terms as the Committee may deem appropriate.
12. GOVERNMENT REGULATIONS.
The Plan, and the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges (including the
American Stock Exchange and Vancouver Stock Exchange) as may be required.
13. GENERAL PROVISIONS.
(a) CERTIFICATES. All certificates for shares of Stock delivered under
the Plan shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, or other securities
commission having jurisdiction, any applicable Federal, provincial or state
securities law, any stock exchange upon which the Stock is then listed and the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions.
(b) EMPLOYMENT MATTERS. The adoption of the Plan shall not confer upon
any Optionee of the Company or any Subsidiary, any right to continued employment
or, in the case of an Optionee who is a director, continued service as a
director, with the Company or a Subsidiary, as the case may be, nor shall it
interfere in any way with the right of the Company or any
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<PAGE>
Subsidiary to terminate the employment of any of its employees, the service of
any of its directors or the retention of any of its consultants or advisors at
any time.
(c) LIMITATION OF LIABILITY. No member of the Board or the Committee,
or any officer or employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
(d) REGISTRATION OF STOCK. Notwithstanding any other provision in the
Plan, no Option may be exercised unless and until the Stock to be issued upon
the exercise thereof has been registered under the Securities Act and applicable
state securities laws, or are, in the opinion of counsel to the Company, exempt
from such registration in the United States or exempt from the prospectus and
registration requirements under applicable provincial legislation. The Company
shall not be under any obligation to register under applicable federal or state
securities laws any Stock to be issued upon the exercise of an Option granted
hereunder, or to comply with an appropriate exemption from registration under
such laws or the laws of any province in order to permit the exercise of an
Option and the issuance and sale of the Stock subject to such Option however,
the Company may in its sole discretion register such Stock at such time as the
Company shall determine. If the Company chooses to comply with such an exemption
from registration, the Stock issued under the Plan may, at the direction of the
Committee, bear an appropriate restrictive legend restricting the transfer or
pledge of the Stock represented thereby, and the Committee may also give
appropriate stop transfer instructions to the Company's transfer agents.
GST TELECOMMUNICATIONS, INC.
May 22, 1996
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As amended Through
January 14, 1997
GST TELECOMMUNICATIONS, INC.
SENIOR OPERATING OFFICER STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This Senior Operating Officer Stock Option Plan (the "Plan") is
intended as an incentive, to retain in the employ of GST TELECOMMUNICATIONS,
INC., a federally chartered Canadian corporation with its principal office at
4317 N.E. Thurston Way, Vancouver, Washington 98662 (the "Company") and any
Subsidiary of the Company, within the meaning of Section 424(f) of the United
States Internal Revenue Code of 1986, as amended (the "Code"), as senior
operating officers, operating officers, senior executive officers, other
officers, employees and directors, persons of training, experience and ability,
to attract new senior operating officers, operating officers, senior executive
officers, other officers, employees and directors whose services are considered
valuable, to encourage the sense of proprietorship and to stimulate the active
interest of such persons in the development and financial success of the Company
and its Subsidiaries.
It is further intended that certain options granted pursuant to the
Plan shall constitute incentive stock options within the meaning of Section 422
of the Code (the "Incentive Options"), while certain other options granted
pursuant to the Plan shall be nonqualified stock options (the "Nonqualified
Options"). Incentive Options and Nonqualified Options are hereinafter referred
to collectively as "Options."
The Company intends that the Plan meet the requirements of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section
16(b) of the Exchange Act. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
<PAGE>
2. ADMINISTRATION OF THE PLAN.
The Board of Directors of the Company (the "Board") shall appoint and
maintain as administrator of the Plan a Committee (the "Committee") consisting
of two or more Non-Employee Directors (as such term is defined in Rule 16b-3),
which shall serve at the pleasure of the Board. The Committee, subject to
Sections 3 and 5 hereof, shall have full power and authority to designate
recipients of Options, to determine the terms and conditions of respective
Option agreements (which need not be identical) and to interpret the provisions
and supervise the administration of the Plan. The Committee shall have the
authority, without limitation, to designate which Options granted under the Plan
shall be Incentive Options and which shall be Nonqualified Options. To the
extent any Option does not qualify as an Incentive Option, it shall constitute a
separate Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall interpret
the Plan and all Options granted under the Plan, shall make such rules as it
deems necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defects or supply any omission or reconcile any inconsistency
in the Plan or in any Options granted under the Plan in the manner and to the
extent that the Committee deems desirable to carry into effect the Plan or any
Options. The act or determination of a majority of the Committee shall be the
act or determination of the Committee and any decision reduced to writing and
signed by all of the members of the Committee shall be fully effective as if it
had been made by a majority at a meeting duly held. Subject to the provisions of
the Plan, any action taken or determination made by the Committee pursuant to
this and the other Sections of the Plan shall be conclusive on all parties.
In the event that for any reason the Committee is unable to act or if
the Committee at the time of any grant, award or other acquisition under the
Plan of Options or Stock does not consist of two or more Non-Employee Directors,
then any such grant, award or other acquisition may be approved or ratified in
any other manner contemplated by subparagraph (d) of Rule 16b-3.
3. DESIGNATION OF OPTIONEES.
The persons eligible for participation in the Plan as recipients of
Options (the "Optionees") shall comprise senior operating officers, operating
officers, senior executive officers, other officers, employees and directors of
the Company or any Subsidiary; provided that Incentive Options may only be
granted to senior operating officers, operating officers, senior executive
officers, other officers, employees and directors who are employees of the
Company and the Subsidiaries. In selecting Optionees, and in determining the
number of shares to be covered by each Option
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<PAGE>
granted to Optionees, the Committee may consider the office or position held by
the Optionee or the Optionee's relationship to the Company, the Optionee's
degree of responsibility for and contribution to the growth and success of the
Company or any Subsidiary, the Optionee's length of service, age, promotions,
potential and any other factors that the Committee may consider relevant. An
Optionee who has been granted an Option hereunder may be granted an additional
Option or Options, if the Committee shall so determine.
4. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in Section 7 hereof, a total of
900,000 of the Company's Common Shares (the "Stock") shall be subject to the
Plan. The shares of Stock subject to the Plan shall consist of unissued shares
or previously issued shares held by any Subsidiary of the Company, and such
amount of shares of Stock shall be and is hereby reserved for such purpose. Any
of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option expire or be cancelled prior to its
exercise in full or should the number of shares of Stock to be delivered upon
the exercise in full of an Option be reduced for any reason, the shares of Stock
theretofore subject to such Option may be subject to future Options under the
Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The purchase price of each share of Stock purchasable
under an Incentive Option shall be determined by the Committee at the time of
grant, but shall not be less than 100% of the Fair Market Value (as defined
below) of such share of Stock on the date the Option is granted; PROVIDED,
HOWEVER, that with respect to an Optionee who, at the time such Incentive Option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
of any Subsidiary, the purchase price per share of Stock shall be at least 110%
of the Fair Market Value per share of Stock on the date of grant. The purchase
price of each share of Stock purchasable under a Nonqualified Option shall not
be less than 80% of the Fair Market Value of such share of Stock on the date the
Option is granted; PROVIDED, HOWEVER, that an Optionee who is a Canadian
taxpayer may require that any Nonqualified Option granted to him provide for the
purchase of shares of Stock upon
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<PAGE>
exercise thereof at a price equal to the Fair Market Value per share of Stock on
the date of grant. The exercise price for each Option shall be subject to
adjustment as provided in Section 7 below. Fair Market Value means the closing
price of publicly traded shares of Stock on the principal United States
securities exchange on which shares of Stock are listed (if the shares of Stock
are so listed), or on the NASDAQ Stock Market (if the shares of Stock are
regularly quoted on the NASDAQ Stock Market), or, if not so listed or regularly
quoted, the mean between the closing bid and asked prices of publicly traded
shares of Stock in the over-the-counter market, or, if such bid and asked prices
shall not be available, as reported by any nationally recognized quotation
service selected by the Company, or as determined by the Committee in a manner
consistent with the provisions of the Code. Anything in this Section 5(a) to the
contrary notwithstanding, in no event shall the purchase price of a share of
Stock be less than the minimum price permitted under rules and policies of the
American Stock Exchange and the Vancouver Stock Exchange.
(b) OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than six years after the date
such Option is granted.
(c) EXERCISABILITY. Subject to Section 5(j) hereof, Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee at the time of grant. No option may be
exercised to the extent that such exercise will cause the Company to issue, upon
exercise of options to purchase shares of Stock granted by the Company without
shareholder approval, that number of shares of Stock as equals or exceeds (i) 5%
of the number of outstanding shares of Stock in any 12-month period, or (ii) 10%
of the number of outstanding shares of Stock in any five-year period.
(d) METHOD OF EXERCISE. Options to the extent then exercisable may be
exercised in whole or in part at any time during the option period, by giving
written notice to the Company specifying the number of shares of Stock to be
purchased, accompanied by payment in full of the purchase price, in cash, by
check or such other instrument as may be acceptable to the Committee. As
determined by the Committee, in its sole discretion, at or after grant, payment
in full or in part may also be made in the form of Stock owned by the Optionee
(based on the Fair Market Value of the Stock on the trading day before the
Option is exercised). An Optionee shall have the right to dividends and other
rights of a stockholder with respect to shares of Stock purchased upon exercise
of an Option after (i) the Optionee has given written notice of exercise and has
paid in full for such shares and (ii) becomes a stockholder of record with
respect thereto.
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<PAGE>
(e) NON-TRANSFERABILITY OF OPTIONS. Options are not transferable and
may be exercised solely by the Optionee during his lifetime or after his death
by the person or persons entitled thereto under his will or the laws of descent
and distribution. Any attempt to transfer, assign, pledge or otherwise dispose
of, or to subject to execution, attachment or similar process, any Option
contrary to the provisions hereof shall be void and ineffective and shall give
no right to the purported transferee.
(f) TERMINATION BY DEATH. Unless otherwise determined by the Committee
at grant, if any Optionee's employment with or service to the Company or any
Subsidiary terminates by reason of death, the Option may thereafter be
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal representative of the
estate or by the legatee of the Optionee under the will of the Optionee, for a
period of one year after the date of such death or until the expiration of the
stated term of such Option as provided under the Plan, whichever period is
shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of total and permanent
disability, any Option held by such Optionee may thereafter be exercised, to the
extent it was exercisable at the time of termination due to Disability (or on
such accelerated basis as the Committee shall determine at or after grant), but
may not be exercised after 30 days after the date of such termination of
employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such 30 day period, any unexercised Option held by such Optionee shall
thereafter be exercisable to the extent to which it was exercisable at the time
of death for a period of one year after the date of such death or for the stated
term of such Option, whichever period is shorter.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of Normal or Early Retirement (as
such terms are defined below), any Option held by such Optionee may thereafter
be exercised to the extent it was exercisable at the time of such Retirement (or
on such accelerated basis as the Committee shall determine at or after grant),
but may not be exercised after 30 days after the date of such termination of
employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such 30 day period, any unexercised Option held by such Optionee shall
thereafter be exercisable, to the extent to which it was exercisable at the time
of death, for a period of one year after
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<PAGE>
the date of such death or for the stated term of such Option, whichever period
is shorter.
For purposes of this paragraph (h), Normal Retirement shall mean
retirement from active employment with the Company or any Subsidiary on or after
the normal retirement date specified in the applicable Company or Subsidiary
pension plan or if no such pension plan, age 65. Early Retirement shall mean
retirement from active employment with the Company or any Subsidiary pursuant to
the early retirement provisions of the applicable Company or Subsidiary pension
plan or if no such pension plan, age 55.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee at
grant, if any Optionee's employment with or service to the Company or any
Subsidiary terminates for any reason other than death, Disability or Normal or
Early Retirement, the Option shall thereupon terminate, except that the portion
of any Option that was exercisable on the date of such termination of employment
may be exercised for the lesser of 30 days after the date of termination or the
balance of such Option's term if the Optionee's employment or service with the
Company or any Subsidiary is terminated by the Company or such Subsidiary
without cause (the determination as to whether termination was for cause to be
made by the Committee). The transfer of an Optionee from the employ of the
Company to a Subsidiary, or vice versa, or from one Subsidiary to another, shall
not be deemed to constitute a termination of employment for purposes of the
Plan.
(j) LIMIT ON VALUE OF INCENTIVE OPTIONS. The aggregate Fair Market
Value, determined as of the date the Incentive Option is granted, of Stock for
which Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000.
(k) TRANSFER OF INCENTIVE OPTION SHARES. The stock option agreement
evidencing any Incentive Options granted under this Plan shall provide that if
the Optionee makes a disposition, within the meaning of Section 424(c) of the
Code and regulations promulgated thereunder, of any share or shares of Stock
issued to him upon exercise of an Incentive Option granted under the Plan within
the two-year period commencing on the day after the date of the grant of such
Incentive Option or within a one-year period commencing on the day after the
date of transfer of the share or shares to him pursuant to the exercise of such
Incentive Option, he shall, within 10 days after such disposition, notify the
Company thereof and immediately deliver to the Company any amount of United
States federal income tax withholding required by law.
(l) LIMITATION ON OPTIONS HELD BY ONE PERSON. The aggregate number of
shares of Stock subject to options held by any
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one person shall not exceed that number of shares as equals 5% of the
outstanding shares of the Company.
6. TERM OF PLAN.
No Option shall be granted pursuant to the Plan on or after May 21,
2006, but Options theretofore granted may extend beyond that date.
7. CAPITAL CHANGE OF THE COMPANY.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number and option price of shares subject to outstanding Options
granted under the Plan, to the end that after such event each Optionee's
proportionate interest shall be maintained as immediately before the occurrence
of such event.
8. PURCHASE FOR INVESTMENT.
Unless the Options and shares covered by the Plan have been registered
under the United States Securities Act of 1933, as amended (the "Securities
Act"), or the Company has determined that such registration is unnecessary, each
person exercising an Option under the Plan may be required by the Company to
give a representation in writing that he is acquiring the shares for his own
account for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof.
9. TAXES.
The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options granted under the
Plan with respect to the withholding of any United States or Canadian taxes or
any other tax matters.
10. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on May 22, 1996.
11. AMENDMENT AND TERMINATION.
The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made that would impair the rights of any Optionee under any
Option theretofore granted without his consent, and except that no amendment
shall be made which, without the approval of the shareholders of the Company
would:
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(a) materially increase the number of shares that may be issued
under the Plan, except as is provided in Section 7;
(b) materially increase the benefits accruing to the Optionees
under the Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) decrease the exercise price of an Incentive Option to less
than 100% of the Fair Market Value per share of Stock on the date of
grant thereof or the exercise price of a Nonqualified Option to less
than 80% of the Fair Market Value per share of Stock on the date of
grant thereof; or
(e) extend the term of any Option beyond that provided for in
Section 5(b).
The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Optionee without his consent. The Committee may also substitute new Options
for previously granted Options, including options granted under other plans
applicable to the participant and previously granted Options having higher
option prices, upon such terms as the Committee may deem appropriate.
12. GOVERNMENT REGULATIONS.
The Plan, and the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges (including the
American Stock Exchange and Vancouver Stock Exchange) as may be required.
13. GENERAL PROVISIONS.
(a) CERTIFICATES. All certificates for shares of Stock delivered under
the Plan shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, or other securities
commission having jurisdiction, any applicable Federal, provincial or state
securities law, any stock exchange upon which the Stock is then listed and the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions.
(b) EMPLOYMENT MATTERS. The adoption of the Plan shall not confer upon
any Optionee of the Company or any
-8-
<PAGE>
Subsidiary, any right to continued employment or, in the case of an Optionee who
is a director, continued service as a director, with the Company or a
Subsidiary, as the case may be, nor shall it interfere in any way with the right
of the Company or any Subsidiary to terminate the employment of any of its
employees, the service of any of its directors or the retention of any of its
consultants or advisors at any time.
(c) LIMITATION OF LIABILITY. No member of the Board or the Committee,
or any officer or employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
(d) REGISTRATION OF STOCK. Notwithstanding any other provision in the
Plan, no Option may be exercised unless and until the Stock to be issued upon
the exercise thereof has been registered under the Securities Act and applicable
state securities laws, or are, in the opinion of counsel to the Company, exempt
from such registration in the United States or exempt from the prospectus and
registration requirements under applicable provincial legislation. The Company
shall not be under any obligation to register under applicable federal or state
securities laws any Stock to be issued upon the exercise of an Option granted
hereunder, or to comply with an appropriate exemption from registration under
such laws or the laws of any province in order to permit the exercise of an
Option and the issuance and sale of the Stock subject to such Option however,
the Company may in its sole discretion register such Stock at such time as the
Company shall determine. If the Company chooses to comply with such an exemption
from registration, the Stock issued under the Plan may, at the direction of the
Committee, bear an appropriate restrictive legend restricting the transfer or
pledge of the Stock represented thereby, and the Committee may also give
appropriate stop transfer instructions to the Company's transfer agents.
GST TELECOMMUNICATIONS, INC.
May 22, 1996
-9-
LOAN AND SECURITY AGREEMENT
Dated as of September 4, 1996
By and Between
SIEMENS STROMBERG-CARLSON
LENDER
AND
GST SWITCHCO, INC.
BORROWER
<PAGE>
TABLE OF CONTENTS
PAGE
----
LOAN AND SECURITY AGREEMENT.................................................. 1
RECITALS .....................................................................1
ARTICLE I.....................................................................1
DEFINITIONS...............................................................1
1.1 DEFINITIONS....................................................1
ARTICLE II....................................................................9
LOANS.....................................................................9
2.1 AGREEMENT TO LEND..............................................9
2.2 THE NOTE......................................................12
2.3 TERM LOANS....................................................12
2.4 INTEREST ON LOANS.............................................13
2.5 TERM LOAN PAYMENTS............................................13
2.6 DEFAULT RATE OF INTEREST......................................14
2.7 OPTIONAL PREPAYMENT OF NOTE; MANDATORY PREPAYMENT OF NOTE.....14
2.8 PAYMENT, ETC..................................................14
2.9 MAXIMUM LAWFUL INTEREST RATE..................................15
2.10 INDEMNIFICATION FOR FAILURE TO BORROW.........................15
2.11 ADDITIONAL EQUIPMENT..........................................15
2.12 LEASES........................................................15
2.13 SECURITY AGREEMENT............................................15
2.14 EXTENSION.....................................................15
ARTICLE III..................................................................16
REPRESENTATIONS AND WARRANTIES...........................................16
3.1 ORGANIZATION; POWERS..........................................16
3.2 AUTHORIZATION BY BORROWER.....................................16
3.3 FINANCIAL STATEMENTS..........................................17
3.4 NO MATERIAL ADVERSE CHANGE....................................17
3.5 LITIGATION....................................................17
3.6 TAX RETURNS...................................................17
3.7 NO DEFAULTS...................................................17
3.8 PROPERTIES....................................................18
3.9 LICENSES, ETC.................................................18
3.10 COMPLIANCE WITH LAWS..........................................18
3.11 ERISA.........................................................19
3.12 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT....19
3.13 FEDERAL RESERVE REGULATIONS...................................19
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3.14 COLLATERAL....................................................19
3.15 CHIEF PLACE OF BUSINESS.......................................20
3.16 OTHER CORPORATE NAMES.........................................20
3.17 INSURANCE.....................................................20
3.18 CAPITALIZATION................................................20
3.19 ARTICLES OF INCORPORATION; BY-LAWS............................20
3.20 REAL PROPERTY LEASES AND EASEMENTS............................21
3.21 INTELLECTUAL PROPERTY.........................................21
3.22 FISCAL YEAR...................................................21
3.23 NO MATERIAL MISSTATEMENTS.....................................21
3.24 BUSINESS PLAN.................................................21
ARTICLE IV...................................................................21
CONDITIONS FOR LOANS.....................................................21
4.1 ON OR PRIOR TO THE EFFECTIVE DATE.............................22
4.2 ALL LOANS.....................................................23
ARTICLE V....................................................................25
AFFIRMATIVE COVENANTS....................................................25
5.1 CORPORATE EXISTENCE; LICENSES AND TRADE NAMES.................25
5.2 COMPLIANCE WITH LAWS. ETC.....................................25
5.3 MAINTENANCE OF PROPERTIES.....................................25
5.4 INSURANCE.....................................................26
5.5 TAXES.........................................................26
5.6 FINANCIAL STATEMENTS, REPORTS, ETC............................26
5.7 LITIGATION AND OTHER NOTICES..................................28
5.8 LANDLORD CONSENTS AND AGREEMENTS..............................28
5.9 ERISA.........................................................28
5.10 ACCESS TO PREMISES, RECORDS AND NETWORK.......................29
5.11 ENVIRONMENTAL NOTICES.........................................29
5.12 AMENDMENT OF ORGANIZATION DOCUMENT............................29
5.13 FURTHER ASSURANCES............................................29
5.14 ENVIRONMENTAL PERMITS, LICENSES, ETC..........................30
5.15 PAYMENT RESERVE...............................................30
ARTICLE VI...................................................................31
NEGATIVE COVENANTS.......................................................31
6.1 LIENS, ETC....................................................31
6.2 SALE OF ASSETS; CONSOLIDATION, MERGER, ETC....................31
6.3 GUARANTEES; THIRD-PARTY SALES AND LEASES......................32
6.4 INVESTMENTS...................................................32
6.5 PERMITTED ACTIVITIES..........................................33
6.6 TRANSACTIONS WITH AFFILIATES..................................33
6.7 INDEBTEDNESS..................................................33
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6.9 CORPORATE NAMES...............................................33
6.10 SALE OF COLLATERAL............................................34
6.11 SALARIES AND COMPENSATION.....................................34
ARTICLE VII..................................................................34
COLLATERAL SECURITY......................................................34
7.1 COLLATERAL SECURITY...........................................34
7.2 PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN.......................................................34
ARTICLE VIII.................................................................34
EVENTS OF DEFAULT; REMEDIES..............................................34
8.1 EVENTS OF DEFAULT.............................................34
8.2 TERMINATION OF COMMITMENT; ACCELERATION.......................37
8.3 WAIVER OF DEMAND..............................................37
8.4 RIGHTS AND REMEDIES GENERALLY.................................37
8.5 ENTRY UPON PREMISES AND ACCESS TO INFORMATION.................37
8.6 SALE OR OTHER DISPOSITION OF COLLATERAL BY LENDER.............38
8.7 LENDER NOT LIABLE.............................................38
ARTICLE IX...................................................................39
MISCELLANEOUS............................................................39
9.1 NOTICES.......................................................39
9.2 NO WAIVERS; AMENDMENTS........................................40
9.3 GOVERNING LAW AND JURISDICTION................................41
9.4 EXPENSES; DOCUMENTARY TAXES...................................41
9.5 EQUITABLE RELIEF..............................................41
9.6 INDEMNIFICATION; LIMITATION OF LIABILITY......................41
9.7 SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES, ETC...42
9.8 SUCCESSORS AND ASSIGNS........................................43
9.9 SEVERABILITY..................................................43
9.10 COVER PAGE; TABLE OF CONTENTS AND SECTION HEADINGS............43
9.11 COUNTERPARTS..................................................43
9.12 MARSHALLING; PAYMENTS SET ASIDE...............................43
9.13 SERVICE OF PROCESS............................................44
9.14 WAIVER OF JURY TRIAL..........................................44
9.15 ENTIRE AGREEMENT, ETC.........................................44
iii
<PAGE>
EXHIBITS
Exhibit A -- Form of Guaranty
Exhibit B -- Form of Note
Exhibit C -- Form of Notice of Borrowing
Exhibit D -- Borrower's Balance Sheet
Exhibit E -- [INTENTIONALLY DELETED]
Exhibit F -- Form of Opinion of Borrower's Counsel
Exhibit G -- [INTENTIONALLY DELETED]
Exhibit H -- Form of Lessee Security Agreement
Exhibit I -- Form of Landlord/Mortgagee's Waiver
Exhibit J -- Form of Lease
Exhibit K -- Form of Escrow Agreement
Exhibit L -- Form of Officer's Certificate and Support Affidavit
iv
<PAGE>
SCHEDULES
Schedule 1.1 -- Approved Third-Party Product
Schedule 1.1(a) -- IXC Toll Tandem Features
Schedule 3.2 -- Governmental Consents, Filings, Registrations and
Approvals
Schedule 3.5 -- Pending Litigation
Schedule 3.17 -- Insurance
Schedule 3.18 -- Capitalization
Schedule 3.19 -- Articles of Incorporation; Bylaws
Schedule 3.20 -- Real Property Leases and Easements
Schedule 3.21 -- Intellectual Property
v
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), dated as of
September 4, 1996 is entered into by and between SIEMENS STROMBERG-CARLSON, a
Delaware general partnership ("LENDER"), and GST SWITCHCO, INC. a Washington
corporation ("BORROWER").
RECITALS
WHEREAS, Borrower is a special purpose corporation recently formed to
own and lease equipment to be used in alternate access communications networks;
and
WHEREAS, Borrower has requested that Lender extend a line of credit to
Borrower for the purpose of enabling Borrower to purchase Equipment required by
Borrower in connection with its business; and
WHEREAS, Lender is willing to extend such line of credit to Borrower
subject to, and on the terms and conditions of, this Agreement and in reliance
on the Guaranty executed by Guarantor;
Accordingly, in consideration of the foregoing and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged by the parties, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following words and
terms shall have the meanings specified below:
"ADEQUATE CASH" means accounts in the names of Guarantor and/or
Affiliates of Guarantor consisting of cash or cash equivalents.
"AFFILIATE" means any Person directly or indirectly controlling,
controlled by or under common control with Borrower, and any officer, director
or shareholder of such Person or Borrower.
"APPLICABLE RATE" means with respect to the Note the interest rate then
in effect with respect to the Interim Loans or the Term Loan, as applicable,
evidenced thereby.
1
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"APPROVED THIRD-PARTY PRODUCT" means (i) all product identified in
SCHEDULE 1.1 hereto as "Approved Product" (as such Schedule may be amended from
time to time by Borrower and Lender) and (ii) any other product or future
product for the provision of communication services that may be mutually agreed
to between Borrower and Lender from time to time based on good faith discussions
between Borrower and Lender; PROVIDED, HOWEVER, that Lender shall not
unreasonably withhold its approval of the designation of any such products as
"Approved Third-Party Product." Notwithstanding the preceding sentence,
"Approved Third-Party Product" shall not include any product identified in
SCHEDULE 1.1 hereto as "Non-Approved Product." It is understood by the parties
that Lender will not finance third-party products which Lender also manufactures
and/or sells and that performs essentially the same application as a Third-Party
Product for which Borrower may request financing.
"BALANCE SHEET" has the meaning set forth in SECTION 3.3.
"BANKRUPTCY CODE" means the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended from time to time, or any successor statute.
"BORROWER AFFILIATE" shall mean any Affiliate to which Borrower has
leased a portion of the Equipment pursuant to a Lease.
"BUSINESS" means the business of acquiring, holding and leasing
alternate access communications equipment and all operations related thereto or
in support thereof.
"BUSINESS DAY" means any day not a Saturday, Sunday or legal holiday in
the State of New York, on which banks are open for business in New York, New
York.
"BUSINESS PLAN" means that certain Business Plan of Borrower dated July
22, 1996 which has been delivered to Lender.
"CABLE" means Siecor fiber optic cable and miscellaneous hardware.
"CABLE COMMITMENT AMOUNT" means Five Million Dollars ($5,000,000), for
the purchase of Siecor fiber optic cable.
"CODE" has the meaning set forth in SECTION 1.3.
"COLLATERAL" means all property and interests in property now owned or
hereafter acquired by Borrower in or upon which a security interest, lien or
mortgage is granted to Lender by Borrower pursuant to Section 7.1 of this
Agreement.
"COMMITMENT" means Lender's agreement to lend as set forth in SECTION
2.1 hereof.
"COMMITMENT TERMINATION DATE" means, for both Phase I and Phase II
Loans, the date that is seven (7) years from the Effective Date.
2
<PAGE>
"COMMUNICATIONS ACT" means the Communication Act of 1934, as amended,
and all rules, regulations and policies promulgated thereunder.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"CONVERSION DATE" means the first Business Day of each calendar quarter
during the term hereof.
"DEBT" means, with respect to any Person, (i) indebtedness of such
Person for borrowed money, (ii) obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations of such Person
which arise under conditional sale agreements relating to property purchased by
such Person (including, without limitation, obligations to pay the deferred
purchase price of property or services), excluding trade payables and accrued
expenses incurred in the ordinary course of business, (iv) obligations as lessee
under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases and (v) all Guarantees of such Person.
"EFFECTIVE DATE" means the date on which this Agreement has been duly
executed by and delivered to all parties hereto.
"EQUIPMENT" has the meaning set forth in SECTION 7.1 hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended.
"ERISA AFFILIATE" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of IRC ss. 414(b)) as
Borrower, (ii) partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of IRC ss. 414(c)) with
Borrower, and (iii) member of the same affiliated service group (within the
meaning of IRC ss. 414(m)) as Borrower, any corporation described in clause (i)
above or any partnership or trade or business described in clause (ii) above.
"ESCROW ACCOUNT" means the escrow account maintained in accordance with
the Escrow Agreement into which the Reserve Amount is deposited or withdrawn
from time to time.
"ESCROW AGENT" means the person serving as escrow agent in accordance
with the Escrow Agreement, as selected by Borrower and Lender, and such person's
successors.
"ESCROW AGREEMENT" means the escrow agreement in substantially the form
of EXHIBIT L hereto among Borrower, Lender and Escrow Agent.
3
<PAGE>
"EVENT OF DEFAULT" has the meaning given to such term in ARTICLE VIII
hereof.
"FCC" means the Federal Communications Commission or any successor
commission or agency.
"FCC LICENSE" means each and every license, permit or authorization, if
any, duly issued by the FCC required by the Borrower to conduct the Business.
"FINANCING FEE AMOUNT" has the meaning set forth in SECTION 2.1(F)
hereof.
"FISCAL YEAR" means the year ending September 30.
"GAAP" means generally accepted accounting principles in the United
States of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application to which Lender's
independent certified public accountants concur), applied both to classification
of items and determination of amounts.
"GUARANTEE" means any obligation, contingent or otherwise, of any
Person guaranteeing any indebtedness of any other Person (the "Primary Obligor")
in any manner, whether directly or indirectly, and including any obligation of
such Person, direct or indirect, (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such indebtedness; (ii) to purchase property, securities or services for the
purpose of assuring the owner of such indebtedness of the payment of such
indebtedness; or (iii) to maintain working capital, equity capital or other
financial statement condition of the Primary Obligor so as to enable the Primary
Obligor to pay such indebtedness.
"GUARANTOR" means GST USA, Inc. a Delaware corporation, together with
its successors and assigns.
"GUARANTY" means the Guaranty in the form attached hereto as EXHIBIT A.
"INTEREST PERIOD" means (i) with respect to each Interim Loan, the
period commencing on the date that such Interim Loan is advanced hereunder and
terminating on the date that such Interim Loan is converted into a Term Loan in
accordance with the terms hereof, and (ii) with respect to each Term Loan, each
six (6) month period commencing on the date that such Term Loan comes into
existence in accordance with the terms hereof until the date that the principal
of such Term Loan is repaid in full.
"INTERIM LOANS" means each of the Loans constituting Phase I Loans and
Phase II Loans made by Lender pursuant to Sections 2.1(a) and 2.1(b) of this
Agreement.
"INTERIM LOAN RATE" means with respect to each Interim Loan, for the
Interest Period with respect thereto, a rate equal to the three (3) months LIBOR
on a date two (2) Business
4
<PAGE>
Days prior to the commencement of such Interest Period PLUS four hundred and
fifty (450) basis points.
"INVESTMENT" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, any Guarantee or
similar arrangement, but excluding advances to customers in the ordinary course
of business that are, in conformance with GAAP, recorded as accounts receivable
on the balance sheet of Borrower) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of other) or any purchase of capital stock,
bonds, notes, debentures or other similar instruments issued by, such Person.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder, and any successor
statutes or rules and regulations.
"IRS" means the Internal Revenue Service or any successor agency.
"IXC TOLL TANDEM FEATURES" means the features directly associated with
the Switch for the purpose of providing long distance switched services and
identified in Schedule 1.1(a) hereto.
"LEASE" means any lease between Borrower, as lessor, and a Borrower
Affiliate, as lessee, pursuant to which Borrower has leased a portion of the
Equipment to such Borrower Affiliate, substantially in the form attached hereto
as EXHIBIT J.
"LENDER EQUIPMENT" means all Siemens Stromberg-Carlson equipment and
products (including software), including, but not limited to, fiber optic cable
("CABLE"), Siemens Optiset telephone sets ("OPTISETS"), Switches, Upgraded
Switches and upgrades or growth to such Switches or Upgraded Switches, as
applicable, purchased by Borrower from Lender and invoiced by Siemens
Stromberg-Carlson.
"LENDER EQUIPMENT LOAN" means each Interim Loan to the extent that the
proceeds of which are used exclusively to pay the invoice price for Lender
Equipment, which price shall include any related charges (including, but not
limited to, applicable installation and shipping charges).
"LIBOR" means London Interbank Offered Rate, as quoted in the Eastern
Edition of THE WALL STREET JOURNAL (or any successor publication).
"LIEN" means any mortgage, pledge, deed of trust, assignment for
security, lien, charge, encumbrance or other security interest of any kind, or
the interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement, but excluding easements, rights of way
or similar encumbrances on the real property
5
<PAGE>
which are in the ordinary course of business and which do not materially affect
the value, use and insurability of title of such real property.
"LOAN" means any Interim Loan or Term Loan, as applicable.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Note, the
Guaranty, each Security Agreement, each Lease, the Escrow Agreement and the
Officer's Certificate delivered pursuant to Section 4.1(n) hereof, including all
schedules, amendments, exhibits, attachments, modifications and supplements of
or to all such documents.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon the
condition (financial or otherwise), operations, or properties of Borrower or
Guarantor or upon the ability of Borrower or Guarantor to perform under the Loan
Documents.
"NETWORK" means any alternate access communications facility installed
or maintained by Borrower or a Borrower Affiliate, within any Network
Location(s), as expanded and developed from time to time, together with all
Switches, Upgraded Switches, upgrades and growth to Switches and Upgraded
Switches, and equipment, rights of access, easements, leasehold and fee
interests in real property, and all related patents, trademarks, licenses and
certificates, and all replacements, enhancements or additions thereto.
"NETWORK LOCATION(S)" means any city and any municipality, metropolitan
area, or unincorporated jurisdiction within the United States, Mexico and
Canada, in which Borrower or any Borrower Affiliate has deployed or intends to
deploy a Switch or Upgraded Switch, as applicable, financed pursuant to this
Agreement, including without limitation, any areas in which any Equipment is
located which supports such Switch or Upgraded Switch, as applicable.
"NON-LENDER EQUIPMENT" means all equipment, products and software
(including related software licenses), Approved Third-Party Product, peripheral
equipment, air conditioning equipment, fire suppression equipment, transmission
and cable equipment purchased by or provided to Borrower from vendors other than
Lender or Siecor for use in any Network.
"NOTE" has the meaning set forth in SECTION 2.2 hereof.
"OBLIGATIONS" means (i) all amounts due or to become due under the
Note; (ii) the performance of all obligations of Borrower now or hereafter
existing under this Agreement, the Note and all other Loan Documents whether for
principal, interest, fees, expenses, indemnification or otherwise; (iii) all
extensions, renewals, modifications, amendments and refinancings of any of the
foregoing; and (iv) all loans, advances, indebtedness, and other obligations
owed by Borrower to Lender of every description whether now existing or
hereafter arising (including those owed by Borrower to others and acquired by
Lender by purchase, assignment, or otherwise) and whether direct or indirect,
primary or as guarantor
6
<PAGE>
or surety, absolute or contingent, liquidated or unliquidated, matured or
unmatured, whether or not secured by additional collateral.
"OPTISET COMMITMENT AMOUNT" means One Million Dollars ($1,000,000) for
the purchase of Siemens Optisets.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"PERMITTED LIENS" has the meaning set forth in SECTION 6.1 hereof.
"PERSON" means any natural person, corporation, division of a
corporation, business trust, joint venture, association, company, partnership,
unincorporated organization or other legal entity, or a government or any agency
or political subdivision thereof.
9 "PHASE I CAP" has the meaning set forth in SECTION 2.1(A) hereof.
"PHASE II CAP" has the meaning set forth in SECTION 2.1(B) hereof.
"PHASE I COMMITMENT AMOUNT" means One Hundred Ten Million Dollars
($110,000,000).
"PHASE II COMMITMENT AMOUNT" means One Hundred Ten Million Dollars
($110,000,000).
"PHASE I LOAN" means any Interim Loan made pursuant to SECTION 2.1(A),
together with any Term Loan relating to such Interim Loan.
"PHASE II LOAN" means any Interim Loan made pursuant to SECTION 2.1(B),
together with any Term Loan relating to such Interim Loan.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement of
Contaminants through or in the, air, soil, surface water, groundwater or
property.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be amended or supplemented from time to
time.
"REMEDIAL ACTION" means actions required to (1) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor environment;
(2) prevent the Release or threat of Release or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor
7
<PAGE>
environment; or (3) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"RESERVE AMOUNT" means an amount calculated as of any Conversion Date
following the making of the initial Interim Loan hereunder equal to the total
amount of principal and interest that will become due and payable (assuming no
Event of Default has occurred) on the next two succeeding Conversion Dates in
respect of all Term Loans outstanding on the next day following such Conversion
Date. For purposes of calculating the Reserve Amount as of any Conversion Date,
it will be assumed that any and all amounts of principal and interest due and
payable on such Conversion Date have been paid in full.
"RESERVE NOTICE" means the written notice to be delivered by Lender in
accordance with SECTION 5.15 at least five (5) Business Days prior to any
Conversion Date following the making of the initial Interim Loan hereunder,
which notice shall set forth the Reserve Amount as of such Conversion Date and
the calculation thereof.
"SCHEDULED SHIP DATE," with respect to the applicable Switch or
Upgraded Switch, has the meaning set forth in SECTION 2.1(D) hereof.
"SECURITY AGREEMENT" means any Security Agreement between Lender and a
Borrower Affiliate in the form attached hereto as EXHIBIT H.
"SIECOR" means Siecor Corporation and its successors and assigns.
"SOLVENT" means with respect to any person on a particular date, that
on such date (i) the fair value of the property of such person is greater than
the total amount of liabilities, including, without limitation, contingent
liabilities, of such person, (ii) the present fair salable value of the assets
of such person is not less than the amount that will be required to pay the
probable liability of such person on its debts as they become absolute and
matured, (iii) such person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such person's ability to pay as such
debts and liabilities mature and (iv) such person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such persons's property would constitute an unreasonably small level of
capitalization. The amount of contingent liabilities at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"SWITCH" means a Siemens Stromberg-Carlson EWSD host switching system
and associated remotes (including related engineering services, installation
costs, ancillary OEM equipment, software licenses and peripheral equipment).
"TERM LOAN" has the meaning set forth in SECTION 2.3 hereof.
8
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"TERM LOAN RATE" means with respect to each Term Loan for each Interest
Period with respect thereto, a rate equal to the six (6) month LIBOR on the date
two (2) Business Days prior to the commencement of such Interest Period PLUS
three hundred and fifty (350) basis points.
"TOTAL COMMITMENT AMOUNT" means the sum of the Phase I Commitment
Amount, the Phase II Commitment Amount, the Cable Commitment Amount and the
Optiset Commitment Amount.
"UNDELIVERED LENDER EQUIPMENT" has the meaning set forth in SECTION
2.1(D) hereof.
"UPGRADED SWITCH" means a Switch manufactured with a combined EWSD
platform containing both local and long-distance exchange services, including
IXC Toll Tandem Features.
"VENDOR ADVANCE" means each Interim Loan to the extent that (i) the
proceeds thereof are used exclusively to reimburse Borrower for the invoice
price, which price shall include any related charges (including, but not limited
to, applicable installation and shipping charges) for Non-Lender Equipment to be
used at any Network Location.
1.2 ACCOUNTING TERMS. Except as otherwise herein specifically provided,
each accounting term used herein shall have the meaning given to it under GAAP.
1.3 OTHER TERMS DEFINED IN NEW YORK UNIFORM COMMERCIAL CODE. All other
terms contained in this Agreement (and which are not otherwise specifically
defined herein) shall have the meanings provided by the Uniform Commercial Code
of the State of New York (the "CODE") to the extent the same are used or defined
therein.
ARTICLE II
LOANS
2.1 AGREEMENT TO LEND.
(a) AGREEMENT TO LEND -- PHASE I. Provided no Event of Default as
defined in Article VIII hereof, or any occurrence that would constitute an Event
of Default with the giving of notice or the lapse of time, or both, has occurred
and is continuing, and subject to the terms and conditions herein, unless the
Commitment shall have been terminated in accordance with the terms hereof,
Lender agrees, upon Borrower's request, to make one or more loans (which shall
constitute Phase I Loans) to Borrower from time to time on or after the
Effective Date and until the Commitment Termination Date; PROVIDED, HOWEVER,
that Lender shall be obligated to make its initial Phase I Loan to Borrower only
if Borrower has provided to Lender a firm irrevocable purchase order(s) (which
purchase order(s) need
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not include the proposed delivery dates(s)), in form acceptable to Lender, for
eleven (11) Switches scheduled to be delivered within thirty-six (36) months of
the Effective Date within Network Locations with the purchase price of each
Switch and related Equipment being not less than One Million Five Hundred
Thousand Dollars ($1,500,000). Borrower covenants and agrees to deliver such
foregoing described purchase order(s) in conjunction with its execution and
delivery of this Agreement. The amount of any proposed Interim Loan made to
Borrower pursuant to this SECTION 2.1(A), may not exceed the sum of (i) the
Phase I Commitment Amount; (ii) the Cable Commitment Amount; and (iii) the
Optiset Commitment Amount (the "PHASE I CAP"), LESS the aggregate principal
balance of the Phase I Loans advanced hereunder to Borrower through the date of
such proposed Interim Loan. Notwithstanding the foregoing, the aggregate amount
of Phase I Loans available for financing the purchase of Cable shall not exceed
the Cable Commitment Amount; and the aggregate amount of the Phase I Loans
available for financing of Siemens Optisets shall not exceed the Optiset
Commitment Amount.
(b) AGREEMENT TO LEND -- PHASE II. Provided (i) no Event of Default
as defined in Article VIII hereof, or any occurrence that would constitute an
Event of Default with the giving of notice or the lapse of time, or both, has
occurred and is continuing and (ii) Lender has determined, in its sole
discretion, that it desires to make such loans, and subject to the terms and
conditions hereof, and unless the commitment shall have been terminated in
accordance with the terms hereof, Lender shall, upon Borrower's request (which
shall be made to Lender within twenty-four (24) months of the Effective Date or
six (6) months after general availability of the IXC Toll Tandem Features,
whichever occurs last), make one or more loans (which shall constitute Phase II
Loans) to Borrower from time to time on or after the Effective Date and until
the Commitment Termination Date, for the purpose of purchasing Switches or
Upgraded Switches to be deployed in any Network location, with the purchase
price of each Switch or Upgraded Switch and related Equipment being not less
than One Million Five Hundred Thousand Dollars ($1,500,000). The amount of a
proposed Interim Loan made to Borrower pursuant to this SECTION 2.1(B), may not
exceed the sum of (i) the Phase II Commitment Amount; (ii) the Cable Commitment
Amount (less the aggregate balance of the Cable Commitment Amount advanced
hereunder to Borrower in connection with the Phase I Loans); and (iii) the
Optiset Commitment Amount (less the aggregate balance of the Optiset Commitment
Amount advanced hereunder to Borrower in connection with the Phase I Loans) (the
"PHASE II CAP"), LESS the aggregate balance of the Phase II Loans advanced
hereunder to Borrower through the date of such proposed Interim Loan.
Notwithstanding the foregoing, the aggregate amount of the Phase II Loans
available for the financing of Cable shall not exceed the Cable Commitment
Amount (less the aggregate amount of the Cable Commitment Amount used to finance
Cable as part of the Phase I Loans); and the aggregate amount of the Phase II
Loans available for the financing of Siemens Optisets shall not exceed the
Optiset Commitment Amount (less the aggregate amount of the Optiset Commitment
Amount used to finance Optisets as part of the Phase I Loans).
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(c) USE OF LOAN PROCEEDS. Borrower covenants and agrees that the
proceeds of each Interim Loan shall be used solely to finance Borrower's
purchase of (i) Lender Equipment to be used solely in any Network and (ii)
Borrower's purchase of Non- Lender Equipment to be used solely in a Network.
(d) LIMITATION ON VENDOR ADVANCES; ADVANCE DATE FOR INTERIM
NON-LENDER EQUIPMENT LOAN. The proceeds of any Vendor Advance used exclusively
to reimburse Borrower for Non-Lender Equipment to be used at any Network
Location, when aggregated with all prior Vendor Advances used to pay for
Non-Lender Equipment for all Network Locations, as of the date such proceeds are
advanced, shall not exceed the aggregate amount of the Loans made to Borrower
hereunder for the acquisition of Lender Equipment for all Network Location(s).
An Interim Loan, to the extent that it constitutes a Vendor Advance, shall be
deemed advanced to Borrower hereunder, and interest shall commence to accrue
with respect to such Vendor Advance, on the date that Lender has (i) received
from Borrower and accepted in accordance with SECTION 4.2(J) hereof: (A) the
invoice for the Non-Lender Equipment financed thereby and (B) the proof of
payment of such invoice, and (ii) advanced such Vendor Advance proceeds to
Borrower in accordance with the instructions described in subsection (h) of this
Section; PROVIDED, HOWEVER, that no Vendor Advance shall be made to Borrower
more than six (6) months prior to the "SCHEDULED SHIP DATE" of the relevant
Switch or Upgraded Switch as set forth in the firm irrevocable purchase order
relating to said Switch or Upgraded Switch. If, for any reason, Borrower fails
or refuses to take delivery of any Switch or Upgraded Switch on or before its
Scheduled Ship Date ("UNDELIVERED LENDER EQUIPMENT") and Lender has made any
Vendor Advance(s) to Borrower for the acquisition of Non-Lender Equipment for
the Network to which the Undelivered Lender Equipment was to be delivered, the
Interim Loan relating to the Undelivered Lender Equipment shall be deemed
advanced to Borrower on the Scheduled Ship Date for such Undelivered Lender
Equipment. Lender shall transport and store such Undelivered Lender Equipment on
behalf of Borrower at Borrower's expense. All the terms and conditions of this
Agreement and all obligations and responsibilities of Borrower relating to the
delivered Lender Equipment (except those terms and conditions relating to
possession and maintenance by Borrower of Lender Equipment after delivery) shall
be applicable to such Undelivered Lender Equipment and the Loan relating
thereto.
(e) ADVANCE DATE FOR INTERIM LENDER EQUIPMENT LOAN. An Interim
Loan, to the extent that it is a Lender Equipment Loan, shall be deemed advanced
to Borrower hereunder, the Lender Equipment to be financed thereby shall be
deemed paid for, and interest shall commence to accrue with respect to such
Interim Loan, thirty (30) days after shipment of such Lender Equipment and the
date the invoice for such Lender Equipment is issued to Borrower or thirty (30)
days after the date of invoice for engineering, installation and services
relating to such Lender Equipment is issued to Borrower, whichever occurs last.
(f) FINANCING FEE. With respect to each Vendor Advance, Lender
shall fully earn, concurrent with the disbursement thereof, a financing fee
equal to one percent (1%) the amount of such Vendor Advance. The amount of each
financing fee earned by
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Lender (the "FINANCING FEE AMOUNT") shall be paid by Borrower to Lender within
thirty (30) days after the Advance Date of the related Interim Loan.
(g) PROCEDURE FOR PROPER REQUEST. Borrower shall give Lender at
least five (5) Business Days' prior written notice of each Interim Loan
requested to be made. In each case, such notice shall be in the form attached
hereto as EXHIBIT C ("NOTICE"), shall be irrevocable and shall specify the
aggregate amount of the proposed Interim Loan, the intended use of such Interim
Loan proceeds, and the specific bank account (including the identity of the bank
and the account number) to which Lender shall transfer the proceeds of the
Vendor Advance portion, if any, of the proposed Interim Loan. Such Notice, to be
effective, must be received by Lender not later than 12:00 noon, Eastern Time,
on the fifth (5th) Business Day prior to the borrowing date specified in such
Notice. In the event and to the extent that any such Notice relates to proceeds
of an Interim Loan to be used to purchase Non-Lender Equipment that does not
constitute Approved Third-Party Product identified in SCHEDULE 1.1 hereto,
Lender shall promptly determine and notify Borrower within five (5) Business
Days whether it is prepared to recognize such Non-Lender Equipment as Approved
Third-Party Product and finance the purchase of such Non-Lender Equipment
through a Vendor Advance. Lender and Borrower agree to use their best efforts in
good faith to resolve any disagreement as to whether any Non-Lender Equipment
constitutes Approved Third-Party Product. Lender shall make the proceeds of any
Vendor Advance available to Borrower at the bank account specified in the Notice
in U.S. dollars in immediately available funds.
(h) ADEQUATE CASH. Notwithstanding the provisions of this Section
2.1, Lender shall be obligated to advance any Interim Loan only if, at the time
such Interim Loan is to be advanced, Guarantor has Adequate Cash in the amount
of not less than Twenty-Five Million Dollars ($25,000,000). If the amount of
Adequate Cash is insufficient as provided in this subparagraph, and if the
Interim Loan was to be a Lender Equipment Loan, Borrower shall be relieved of
its obligation to purchase the related Lender Equipment and, if delivered, it
shall be returned to Lender at the direction of Lender at Borrower's sole cost
and expense.
2.2 THE NOTE. The Loans shall be evidenced by a promissory note in the
form of EXHIBIT B hereto (the "NOTE"). Lender is hereby authorized by Borrower
to endorse on the schedule attached to the Note an appropriate notation
evidencing the date and amount of each Interim Loan, and the date and the
principal amount of each Term Loan thereunder; PROVIDED, HOWEVER, that the
failure of Lender to provide such endorsement, and other information on the Note
or schedule shall not in any manner affect the obligation of Borrower to repay a
Loan in accordance with the terms of the Note.
2.3 TERM LOANS. Each Interim Loan shall be converted into a term loan
(a "TERM LOAN") on the next Conversion Date after the date of such Interim Loan.
Such Term Loan shall continue to be evidenced by the Note.
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2.4 INTEREST ON LOANS.
(a) INTERIM LOAN INTEREST RATE. Subject to the provisions of
SECTION 2.9 hereof, each Interim Loan shall bear interest during each Interest
Period therefor at the Interim Loan Rate for such Interest Period. The Interim
Loan Rate shall be computed on the basis of the actual number of days elapsed
over a year of 360 days. Interest accrued with respect to any Interim Loan shall
be due and payable by Borrower on the first Conversion Date following the date
of the making of the Lender Equipment Loan or Vendor Advance relating to such
Interim Loan.
(b) TERM LOAN INTEREST RATE. Subject to the provisions of SECTION
2.9 hereof, the outstanding principal amount of each Term Loan shall bear
interest from the date of its conversion from an Interim Loan to a Term Loan at
the Term Loan Rate. The Term Loan Rate shall be computed on the basis of the
actual number of days elapsed over a year of 360 days and Term Loan Rate shall
be adjusted semi-annually on the last business day prior to January 1 and July 1
of each year during the term of such Term Loan, which adjustment dates may be
changed by mutual written agreement of Lender and Borrower.
2.5 TERM LOAN PAYMENTS.
(a) TERM LOAN INTEREST PAYMENTS. Interest accrued with respect to
any Term Loan shall be due and payable by Borrower on the last Business Day of
each calendar quarter during the term thereof. Borrower shall make interest only
payments in respect of any Term Loan for the four (4) succeeding quarters
following the related Conversion Date. Thereafter, interest accrued with respect
to the Term Loans and the Term Loan principal amounts outstanding under the Note
shall be due and payable by Borrower on the last Business Day of each calendar
quarter during the term hereof as set forth in this SECTION 2.5(A) AND IN
SECTION 2.5(B) BELOW.
(b) TERM LOAN PRINCIPAL PAYMENTS. The outstanding principal amount
of each Term Loan under the Note shall be payable by Borrower in twenty-four
(24) consecutive quarterly installments commencing on the same date that the
fifth (5th) consecutive quarterly installment of interest with respect to such
Term Loan is payable on the Note, with the amount of principal due and payable
on each such quarterly installment date pursuant to this SECTION 2.5(B) to be
equal to the following percentage of the original principal amount of such Term
Loan (PROVIDED that the last such payment shall be in an amount sufficient to
repay in full the principal amount of such Term Loan):
Percentage of Original
Quarterly Installment Principal Amount
--------------------- ----------------
5 through 12 3.5%
13 through 20 4.0%
21 through 28 5.0%
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2.6 DEFAULT RATE OF INTEREST. If Borrower shall default in the payment
of the principal of or interest on the Note, Borrower shall, on demand, pay
interest on any amount overdue on the Note at a rate that is equal to the
Applicable Rate with respect to the Note plus two percent (2%), from the date
such payment is due to the date of actual payment. If Borrower shall default in
the payment of any amount payable by it hereunder (other than principal of and
interest on any of the Loans), Borrower shall, on demand, pay interest on any
such overdue amount at a rate that is equal to the average of the Applicable
Rates on all Loans then outstanding plus two percent (2%), from the date such
payment is due to the date of actual payment.
2.7 OPTIONAL PREPAYMENT OF NOTE; MANDATORY PREPAYMENT OF NOTE.
(a) Borrower shall have the right at any time to prepay any Note of
Borrower, in whole or in part, without premium or penalty, upon at least five
(5) Business Day's prior written notice to Lender, in integral multiples of one
hundred thousand dollars ($100,000). Any prepayment of less than the entire
aggregate outstanding balance of the Loans should be applied first to the
payment of all accrued interest on the amount so prepaid to and including the
date of prepayment, and second to the payment of the required payment of
principal due under the Note in the inverse order of the maturity of the
installments hereof.
(b) Each notice of prepayment pursuant to subsection (a) of this
section shall specify the principal amount to be prepaid and the prepayment date
on which such principal shall be prepaid, shall be irrevocable and shall commit
the Borrower giving such prepayment notice to prepay such principal amount. Upon
any prepayment pursuant to this section, Borrower shall not be entitled to
reborrow from Lender hereunder the principal amount prepaid.
(c) If (i) the aggregate outstanding principal balance of the Phase
I Loans exceeds the Phase I Cap or (ii) if the aggregate outstanding principal
balance of the Phase II Loans exceeds the Phase II Cap, then in each such case,
Borrower is obligated to immediately repay to Lender, upon notice from Lender,
(i) the amount by which the aggregate outstanding principal balance of the
related Loans exceeds the Phase I Principal Cap or Phase II Principal Cap, as
applicable, plus (ii) all accrued and unpaid interest on such excess principal
up to the date of repayment.
2.8 PAYMENT, ETC. All payments by Borrower hereunder and under the Note
shall be made to Lender by wire transfer or other electronic payment method to
such bank accounts as Lender may designate, for the account of Lender in U.S.
dollars in immediately available funds by 12:00 p.m., Eastern time, on the date
on which such payment shall be due. Interest in respect of any Loan hereunder
shall accrue from the first day following such Loan up to and including the date
on which such Loan is paid in full.
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2.9 MAXIMUM LAWFUL INTEREST RATE. Notwithstanding any provision to the
contrary contained herein, the total liability of Borrower for payment of
interest pursuant hereto and the Note, including any other charges or other
amounts, to the extent such charges and other amounts are deemed to be interest,
shall not exceed the maximum amount of such permitted by law to be charged,
collected, or received from Borrower. If any payments by Borrower include
interest in excess of such a maximum amount, Lender shall apply such excess to
the reduction of the unpaid principal amount due pursuant hereto, or if none is
due, such excess shall be refunded to Borrower.
2.10 INDEMNIFICATION FOR FAILURE TO BORROW. Borrower agrees to pay to
Lender, upon the Lender's request, such amount or amounts as shall compensate
the Lender for any loss, cost or expense incurred by the Lender (as reasonably
determined by the Lender) as a result of any failure by Borrower to borrow an
Interim Loan on the date for such borrowing specified in the relevant Notice
under SECTION 2.1(G) hereof, such compensation to include, without limitation,
an amount equal to any loss or expense incurred by Lender in respect of such
proposed Interim Loan during the period from the date of receipt by Borrower of
such Notice to the last day of such Interest Period, if the rate of interest
obtainable by the Lender upon the redeployment of an amount of funds equal to
the amount of such proposed Interim Loan is less than the rate of interest
applicable to such Interim Loan or such Term Loan, as applicable, for such
Interest Period; provided, however, that Borrower shall not be responsible for
any such loss if the failure to borrow is caused by any willful act or omission
of Lender, including, Lender's unreasonable failure to make any Interim Loan in
accordance with Section 2.1(g) or 2.1(h). The Lender's determination of the
amount of any such loss or expense, when set forth in a written notice to
Borrower, containing the Lender's calculation thereof in reasonable detail,
shall be conclusive, absent manifest error.
2.11 ADDITIONAL EQUIPMENT. Lender agrees to amend this Agreement from
time to time (to the extent necessary) to permit Lender's new products (as such
products become available), including, without limitation, Newbridge ATM/Frame
relay, to the type of Lender Equipment to be financed pursuant to this
Agreement.
2.12 LEASES. Borrower covenants and agrees that all Equipment purchased
by Borrower and financed pursuant to this Agreement, to the extent that the same
shall be operated and maintained by a Borrower Affiliate rather than by
Borrower, shall be operated and maintained by such Borrower Affiliate only
pursuant to the terms of a Lease between Borrower and such Borrower Affiliate,
which Lease shall be substantially in the form attached hereto as EXHIBIT J.
2.13 SECURITY AGREEMENT. Borrower covenants and agrees that it will
cause each Borrower Affiliate to enter into the Security Agreement in favor of
Lender, substantially in the form attached hereto as EXHIBIT H.
2.14 EXTENSION. Lender and Borrower agree that in the year immediately
preceding the Commitment Termination Date they will discuss the possibility of a
three (3)-year
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extension of the Commitment Termination Date, which extension shall occur only
if the parties mutually agree upon the terms and conditions thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that as of the Effective
Date:
3.1 ORGANIZATION; POWERS.
(a) It (i) is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, (ii) is duly
qualified to do business and is in good standing in each jurisdiction where the
failure to qualify could have a Material Adverse Effect;
(b) It has the power and authority to own its properties, to carry
on its business as now conducted or as presently contemplated and to own,
operate and maintain the Network; and
(c) It has the power and authority to execute and deliver and
perform this Agreement and the other Loan Documents to which it is a party and
to borrow hereunder.
3.2 AUTHORIZATION BY BORROWER. The execution, delivery and performance
of this Agreement and the other Loan Documents to which it is a party, if any,
to be delivered subsequent to the date hereof, and the Loans hereunder:
(a) have been duly authorized by Borrower's Board of Directors and,
if necessary, Borrower's shareholders;
(b) do not violate (i) any provision of law or any rules or
regulations applicable to Borrower or the Business, (ii) Borrower's Articles of
Incorporation or By-laws, (iii) any applicable order of any court or other
governmental authority, or (iv) any indenture, agreement for borrowed money,
bond, note or other similar instrument or any other agreement to which Borrower
is a party or by which Borrower or any of Borrower's property is bound, in each
case in a manner which could have a Material Adverse Effect;
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(c) do not conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any bond, indenture,
agreement for borrowed money, bond, note or similar instrument or material
agreement to which Borrower is a party or by which Borrower or any of Borrower's
property is bound in a manner which could have a Material Adverse Effect;
(d) do not result in the creation or imposition of any Lien of any
nature whatsoever upon any property or assets of Borrower other than the Lien
granted pursuant to ARTICLE VII hereof;
(e) constitute legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, subject,
as to enforcement, to applicable bankruptcy, reorganization, insolvency and
similar laws affecting creditors' rights generally and to moratorium laws from
time to time in effect; and
(f) do not, as of the execution hereof, require any governmental
consent, filing, registration or approval except as set forth on SCHEDULE 3.2,
the lack of which could have a Material Adverse Effect.
3.3 FINANCIAL STATEMENTS. Borrower has furnished to Lender a balance
sheet, dated as of August 31, 1996 (the "BALANCE SHEET"), attached hereto as
EXHIBIT D. As of the Effective Date, (a) the Balance Sheet fairly represents
Borrower's assets, liabilities and financial condition as of such date and
indicates the equity contributions made by Borrower's shareholders as of such
date according to GAAP; and (b) there are no misrepresentations or omissions
from the Balance Sheet or any other facts or circumstances not reflected in the
Balance Sheet which are material.
3.4 NO MATERIAL ADVERSE CHANGE. There has been no material adverse
change in the condition (financial or otherwise), operations or properties of
Borrower since the date of the Balance Sheet.
3.5 LITIGATION. Except as set forth on SCHEDULE 3.5, there are no
actions, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency now pending or, to the knowledge of
Borrower, threatened against or affecting Borrower or any property or rights of
Borrower as to which there is a reasonable possibility of an adverse
determination and which, if adversely determined, would individually or in the
aggregate materially impair the right of Borrower to carry on its business or
would result in any Material Adverse Effect.
3.6 TAX RETURNS. Borrower has filed or caused to be filed all Federal,
state and local tax returns, if any, which are required to be filed and has paid
or caused to be paid all taxes, if any, as shown on such returns or on any
assessment received by it to the extent that such taxes have become due.
3.7 NO DEFAULTS. Borrower is not in default (i) with respect to any
judgment, writ, injunction, decree, rule or regulation of any governmental
instrumentality or other agency which could have a Material Adverse Effect, or
(ii) in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any material agreement or instrument to
which Borrower is a party or by which its assets are bound in a manner which
could have a Material Adverse Effect.
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3.8 PROPERTIES. Borrower has good and marketable title to all
properties and assets owned by it and all Collateral is free and clear of all
Liens of any nature whatsoever, except Permitted Liens.
3.9 LICENSES, ETC. Borrower has obtained any and all licenses,
authorizations, certificates, permits and approvals of any Federal, state or
local governmental agency, authority or instrumentality having jurisdiction over
Borrower necessary and appropriate for Borrower to own, use and operate the
properties of Borrower. Borrower has all FCC Licenses necessary for Borrower to
operate the Business. Any such FCC Licenses are in full force and effect;
Borrower has fulfilled and performed all of its obligations as a holder of any
such FCC Licenses; and no event has occurred which permits or, after notice, a
lapse of time, or both, would permit revocation or termination of such FCC
Licenses or result in any other material impairment of the rights of Borrower
therein.
3.10 COMPLIANCE WITH LAWS.
(a) Borrower's operations comply in all material respects with all
applicable Federal, state or local laws and regulations, including, without
limitation applicable municipal laws with respect to communications, real estate
and easements and all ERISA, environmental, health and safety statutes and
regulations. None of the properties owned, leased, used or operated by Borrower
or the operations or business of Borrower is subject to any judicial or
administrative proceeding alleging the violation of any Federal, state or local
laws, or regulations or ordinances (including, without limitation, any
communications, utilities, environment, health or safety statute, regulation or
order) which, if resolved adversely to Borrower, could have a Material Adverse
Effect.
(b) To the knowledge of Borrower, none of the operations or
business of Borrower is the subject of any Federal or state investigation
evaluating whether any Remedial Action is needed to respond to a Release of any
Contaminant into the indoor or outdoor environment. Borrower has not filed any
notice under any Federal or state law indicating past or present treatment,
storage or disposal of a hazardous waste or reporting a Release of any
Contaminant into the indoor or outdoor environment. There is no contingent
liability of Borrower of which Borrower has knowledge or reasonably should have
knowledge in connection with any Release of any Contaminant into the indoor or
outdoor environment.
(c) Borrower has made or caused to be made all submissions with
respect to the Business (including, but not limited, to registration statements,
and equal employment opportunity reports), if any, required under the
Communications Act and relevant to the conduct and operation of the Business,
and Borrower and the Business are in compliance with the Communications Act in
all material respects. Without limiting the generality of the foregoing,
Borrower, to the extent required under rules and regulations of the FCC, has
filed appropriate notices with the FCC relating to the operation of the
Business. The execution, delivery and performance of the Loan Documents, do not
require the approval of any FCC,
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will not result in any violation of the Communications Act, and will not cause
any forfeiture or impairment of any FCC Licenses issued for the operation of the
Business.
3.11 ERISA. Borrower and its ERISA Affiliates, if any, has fulfilled
their obligations under the minimum funding standards of ERISA and the IRC, if
any, with respect to employee benefit plan subject to ERISA and are in
compliance in all material respects with the applicable provisions of ERISA and
the IRC, and have not incurred any liability to the PBGC or any such plan under
Title IV of ERISA and no "prohibited transaction" or "reportable event", as such
terms are defined in ERISA, has occurred with respect to any such plan.
3.12 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Borrower is not an "investment company", as that term is defined in, and is not
otherwise subject to regulation under, the Investment Company Act of 1940.
Borrower is not a "holding company", as that term is defined in, and is not
otherwise subject to regulation under, the Public Utility Holding Company Act of
1935.
3.13 FEDERAL RESERVE REGULATIONS. Borrower is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying any margin stock (within the meaning of
Regulation G of the Board of Governors of the Federal Reserve Network of the
United States), and no part of the proceeds of the Loans hereunder will be used
to purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or for any purpose that
violates, or is inconsistent with, the provisions of Regulation G, T, U or X of
said Board of Governors.
3.14 COLLATERAL. With respect to Collateral located in the United
States, the security interest granted by ARTICLE VII hereof and accompanying
financing statements, when (i) duly filed in the appropriate governmental
offices in accordance with the Uniform Commercial Code in effect in the
applicable jurisdictions and (ii) Borrower has acquired an ownership interest in
the Collateral, shall create a valid and perfected first priority Lien in and to
the Collateral, enforceable against (x) other Persons in all jurisdictions
securing the payment of the Obligations without penalty (subject to Permitted
Liens) and (y) Liens such as carrier's, warehousemen's and mechanic's liens,
which arise in the ordinary course of business with respect to obligations not
yet due or being contested in good faith by appropriate proceedings and for
which Borrower shall have set aside reserves on its books as required by GAAP.
Without limiting the foregoing, upon filing such financing statements, no
further action will be required to perfect fully the Lien of Lender in any such
Collateral. With respect to Collateral located in Mexico or Canada, the security
interest granted by ARTICLE VII hereof when, the appropriate action has been
taken in accordance with appropriate statutes and regulations in effect in the
applicable jurisdictions, and Borrower has acquired an ownership interest in the
Collateral, shall create a valid and perfected first priority Lien in and to the
Collateral, enforceable against (x) other Persons in said jurisdiction securing
the payment of the Obligations without penalty (subject to Permitted Liens) and
(y) Liens such as carrier's,
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warehouseman's and mechanic's liens, which arise in the ordinary course of
business with respect to obligations not yet due or being contested in good
faith by appropriate proceedings and for which Borrower shall set aside reserves
on its books as required by GAAP.
3.15 CHIEF PLACE OF BUSINESS. As of the execution hereof, the principal
place of business and chief executive office of Borrower is located at 4317
North East Thurston Way, Vancouver, Washington 98662. If any change in such
location occurs, Borrower at such time shall notify Lender thereof not later
than ten (10) days after the occurrence thereof. As of the execution hereof, the
books and records of Borrower and all chattel paper and all records of account
of Borrower are located at its principal place of business and chief executive
office. If any change in such location occurs, Borrower at such time shall
notify Lender thereof not later than ten (10) days after the occurrence thereof.
3.16 OTHER CORPORATE NAMES. Borrower has not used any corporate or
fictitious names other than Borrower's corporate name, as shown in Borrower's
Articles of Incorporation.
3.17 INSURANCE. SCHEDULE 3.17 contains a description of all insurance
which Borrower or any Affiliate of Borrower maintains with respect to the
Business. All of such insurance policies are in full force and effect.
3.18 CAPITALIZATION. SCHEDULE 3.18 sets forth the following information
with respect to Borrower, as of the Effective Date: each class of capital stock
of Borrower, and the related par value, authorized and issued shareholder of
shares of capital stock of Borrower, indicating the amount and type of such
capital stock held by such holder, and the date(s) of acquisition and purchase
price of such capital stock. All of the outstanding shares of capital stock of
Borrower as of the Effective Date are duly and validly issued, fully paid and
nonassessable, and none of such issued and outstanding shares, equity securities
or beneficial interests has been issued in violation of, or is subject to, any
pre-emptive or subscription rights. Except as set forth on SCHEDULE 3.18 hereto,
there are no: (A) outstanding shares of capital stock or other securities
convertible into or exchangeable for equity securities of Borrower as of the
Effective Date, or (B) outstanding rights of subscription, warrants, calls,
options, contracts or other agreements of any kind, issued, made or granted to
or with any Person under which Borrower as of the Effective Date may be
obligated to issue, sell, purchase, retire or redeem or otherwise acquire or
dispose of any equity securities of Borrower.
3.19 ARTICLES OF INCORPORATION; BY-LAWS. Attached as SCHEDULE 3.19
hereto is a true, complete and correct copy of the Articles of Incorporation and
By-laws of Borrower as of the Effective Date, as in effect on the Effective
Date, and the Board of Directors of Borrower has not passed any resolution or
made any determination to amend, modify or annul Borrower's Articles of
Incorporation and By-laws or any provision therein.
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3.20 REAL PROPERTY LEASES AND EASEMENTS. Set forth on SCHEDULE 3.20 is
a list of (i) all real property, if any, owned by Borrower as of the Effective
Date (the "OWNED REAL PROPERTY"), (ii) all real property leased by Borrower, if
any, as of the Effective Date (the "LEASED REAL PROPERTY)" and the material
terms and provisions thereof, (iii) an easements, licenses, rights of way and
similar rights, if any, with respect to real property granted to Borrower (the
"EASEMENTS") and the material terms and provisions thereof.
3.21 INTELLECTUAL PROPERTY. SCHEDULE 3.21 contains a complete and
accurate list of all trade names, trademarks, copyrights and other intellectual
property, if any, owned or licensed by Borrower as of the Effective Date and
Borrower's interests in such intellectual property, if any, are sufficient for
purposes of Borrower conducting and operating the Business. Borrower has no
knowledge of any conflict with the business property rights of others, the
resolution of which could have a Material Adverse Effect on Borrower. Borrower
possesses rights to use all copyrights, trademarks, service marks, service
names, trade names, and patents, if any, necessary to operate the Business. To
the best of Borrower's knowledge, Borrower is not infringing any copyright,
trademark, trademark rights, service marks, service names, trade names, patents,
patent rights, license, trade secrets, or franchises owned by any Person or
Persons, and there is no such claim or action pending, or to the knowledge of
Borrower threatened, with respect thereto.
3.22 FISCAL YEAR. As of the Effective Date, Borrower's fiscal year for
both tax and accounting purposes is from October 1 to September 30.
3.23 NO MATERIAL MISSTATEMENTS. No report, financial statement, exhibit
or schedule furnished by or on behalf of Borrower to Lender in connection with
the Loan Documents or included herein or therein, nor any other information
required to be furnished hereby or thereby, contains any material misstatement
of fact or omits to state any material fact necessary to make the statements
therein not materially misleading as of the date of delivery thereof to Lender
or as of the Effective Date.
3.24 BUSINESS PLAN. The Business Plan, in the reasonable opinion of
Borrower, fairly presents good faith projections based upon reasonable
assumptions at the time of its preparation; provided, however, that (i) there
can be no assurance that said projections will be realized or that actual events
will not result in variations from such projections and (ii) the Business Plan
does not address the effect of deployment of wireless communication services.
ARTICLE IV
CONDITIONS FOR LOANS
Lender's obligation to make Loans hereunder is subject to the
satisfaction of the following conditions:
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4.1 ON OR PRIOR TO THE EFFECTIVE DATE. On or prior to the Effective
Date:
(a) All then applicable legal matters incident to this Agreement
and the other Loan Documents shall be satisfactory to counsel for Lender.
(b) Lender shall have received the Business Plan.
(c) Lender shall have received certificates, dated the Effective
Date, of the Secretary or Assistant Secretary of each of Borrower and Guarantor
as of the Effective Date, certifying (i) the names and true signatures of the
officers authorized to sign each Loan Document to which Borrower or Guarantor is
a party and (ii) the resolutions of the Board of Directors of each of Borrower
and Guarantor approving the transactions contemplated by the Loan Documents.
(d) Lender shall have received the favorable written opinion of
counsel for Borrower and Guarantor, dated the Effective Date, addressed to
Lender and substantially in the form of EXHIBIT F attached hereto.
(e) Lender shall have received certificates of appropriate public
officials of the jurisdiction of the organization of each of Borrower and
Guarantor and of the jurisdictions in which each of Borrower and Guarantor are
required to be qualified, dated not more than thirty (30) days prior to the
Effective Date, as to the legal existence or qualification and good standing of
each of Borrower and Guarantor.
(f) Lender shall have received a copy of Borrower's Articles of
Incorporation, as amended, modified or supplemented to the Effective Date,
certified to be true, correct and complete by the Secretary of State of the
State of Borrower's and Guarantor's incorporation.
(g) Lender shall have received loss payable endorsements in a form
reasonably satisfactory to Lender with respect to Borrower insurance policies
relating to the Collateral pledged by Borrower.
(h) Lender shall have received the fully executed Guaranty.
(i) Lender shall have received the duly executed Note.
(j) Lender shall have received the Balance Sheet.
(k) Lender shall have received all of the financial statements of
Guarantor required to be delivered pursuant to the Guaranty on or before the
Effective Date.
(l) Each of Borrower and Guarantor shall have performed all of its
obligations to be performed hereunder on or before the Effective Date.
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(m) Borrower shall have paid closing fees to Lender including due
diligence fees, transportation costs, credit reports fees, filing fees and
Lender's legal fees (which legal fees shall not be in excess of $100,000)
incurred by Lender for the negotiation and preparation of the Loan Documents.
(n) Lender shall have received an Officer's Certificate in the form
of EXHIBIT L from each of Borrower and Guarantor.
(o) Lender shall have received the purchase order(s) for eleven
(11) switches referred to in Section 2.1(a).
By its execution of this Agreement, Lender acknowledges that all of
the conditions set forth in this Section 4.1 either have been satisfied or
waived by Lender.
4.2 ALL LOANS. In the case of each Interim Loan hereunder:
(a) The representations and warranties of Borrower and Guarantor
set forth in SECTIONS 3.1, 3.2, 3.4, 3.9, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16 AND
3.23 OF ARTICLE III shall be true and correct in all material respects on and as
of the date of such Loan.
(b) Each of Borrower and Guarantor shall have performed all of its
obligations to be performed hereunder or under any other Loan Document or on or
before the date of such Loan.
(c) On the date of, and after giving effect to, each such Loan,
Borrower, each Borrower Affiliate and Guarantor, and each of them, shall be in
compliance with all the terms and provisions set forth herein or in any other
Loan Document on its part to be observed or performed, and no Event of Default,
nor any event which upon notice or lapse of time or both would constitute such
an Event of Default, shall have occurred and be continuing.
(d) On the date of, and after giving effect to, each such Loan, no
event shall have occurred which has a Material Adverse Effect with respect to
Borrower or Guarantor.
(e) Such Loan, when combined with Loans previously made to
Borrower, shall not exceed the sum of the Total Commitment Amount.
(f) Such Loan, to the extent it finances the purchase of Cable,
when combined with Loans previously made to Borrower to finance the purchase of
Cable, shall not exceed the Cable Commitment Amount.
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(g) Such Loan, to the extent it finances the purchase of Siemens
Optisets, when combined with loans previously made to Borrower to finance the
purchase of Siemens Optisets, shall not exceed the Optiset Commitment Amount.
(h) All other legal matters incident to such Loan and the Loan
Documents shall be satisfactory to counsel for Lender.
(i) Lender shall have received a Notice from Borrower pursuant to
SECTION 2.1(G) requesting the Loan, signed by Borrower's President, Chief
Financial Officer, Chief Accounting Officer or Treasurer regarding the requested
Loan and the representations, warranties, absence of default, and use of
proceeds, all as set forth on EXHIBIT C hereto.
(j) As a condition precedent to the disbursement of such Loan
proceeds with respect to Non-Lender Equipment the acquisition of which is to be
financed with the Loan proceeds, Lender shall have received and approved the
invoices for such Non-Lender Equipment and the proofs of payment of such
invoices, which acceptance by Lender shall not be unreasonably withheld.
(k) With respect to Collateral located in the United States, Lender
shall have received satisfactory evidence that its security interests in the
Collateral pledged hereunder have been properly perfected and constitute first
and prior security interests subject only to Permitted Liens including, but not
limited to, (i) the filing and, or recording of UCC- 1 Financing Statements
signed by Borrower, as debtor, (ii) UCC-1 Financing Statements and signed by the
Borrower Affiliate, if any, that it will be leasing the subject Collateral, as
debtor, with the applicable Secretary of State and/or County Recorder.
(l) Lender shall have received such additional supporting
documents, certificates and assurances with respect to Borrower and Guarantor as
Lender shall reasonably determine are material to Borrower's compliance with the
conditions to Lender's extension of such Loan hereunder and to Borrower's
fulfillment of its obligations hereunder, which documents, certificates and
assurances shall be approved by Lender as to form and substance, which approval
shall not be unreasonably withheld.
(m) Lender shall have received a fully executed Escrow Agreement.
(n) Lender shall have received a fully executed Security Agreement
from the Borrower Affiliate to whom Borrower will be leasing the Equipment which
is being financed pursuant to such Loan.
(o) Lender shall have received a copy of the fully executed Lease
between Borrower and the Borrower Affiliate to whom Borrower will be leasing the
Equipment which is being financed pursuant to such Loan.
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(p) With respect to any Loan which finances Equipment to be
deployed in a Network Location in Mexico or Canada, (i) Borrower shall have paid
all reasonable costs and expenses, including, without limitation, attorneys'
fees and expenses, related to negotiation, structuring, transfer and creation
and perfection of the security interest with respect to such Loan (ii) Lender
shall have received satisfactory evidence that its security interest in the
Collateral pledged hereunder have been properly perfected and constitute first
and prior security interests subject only Permitted Liens; and (iii) Borrower
shall have provided evidence satisfactory to Lender in its sole discretion, that
the remedies and rights of enforcement that would be available to Lender with
respect to Collateral to be located in such countries are reasonably comparable
in substance, scope and timing to those that are available to Lender under
applicable laws of the United States with respect to Collateral to be located in
the United States.
ARTICLE V
AFFIRMATIVE COVENANTS
Borrower covenants and agrees with Lender that so long as the Agreement
shall remain in effect or any Obligations hereunder or under any of the other
Loan Documents are unpaid:
5.1 CORPORATE EXISTENCE; LICENSES AND TRADE NAMES. Borrower shall:
(a) preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its organization, and qualify
and remain qualified as a foreign corporation in all jurisdiction in which such
qualification is necessary in view of its business and operations and property;
and
(b) preserve, protect and keep in full force and effect its
material rights and its licenses and certificates, if any, and do all things
necessary to maintain and operate the Business.
5.2 COMPLIANCE WITH LAWS. ETC. Borrower shall comply with all laws and
regulations applicable to it and all material contractual obligations applicable
to it and shall obtain and maintain all material governmental consents, filings,
registrations and approvals. Borrower shall maintain, in full force and effect
the FCC Licenses, if any, required for the Business and shall comply with, or
cause to be complied with, all applicable rules and regulations of the FCC.
5.3 MAINTENANCE OF PROPERTIES. Borrower shall at all times maintain in
good repair, working order and condition, excepting ordinary wear and tear, all
of its properties material to its operations and make all appropriate repairs,
replacements and renewals thereof, in each case consistent with sound business
practices.
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5.4 INSURANCE. Borrower shall:
(a) maintain or cause to be maintained in full force and effect on
the Collateral property casualty insurance in an amount equal to the replacement
value of the Collateral.
(b) maintain or cause to be maintained in full force and effect
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by Borrower in such amounts as
customarily maintained by similar businesses of similar size;
(c) cause each such insurance policy (i) pertaining to the
Collateral, to name Lender as an "additional insured", if such policy is a
liability policy, (ii) to name Lender as a "loss payee" and include a standard
lender's loss payable endorsement in favor of Lender in a form reasonably
satisfactory to Lender if such policy is a property insurance policy, and (iii)
to provide that Lender shall be notified of any proposed cancellation of such
policy at least thirty (30) days in advance of such proposed cancellation; and
(d) promptly deliver to Lender copies of all loss payable
endorsements issued by Borrower's insurers with respect to the policies
described above.
5.5 TAXES. Borrower shall pay and discharge promptly all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, might become a Lien upon such properties or any part
thereof; PROVIDED, HOWEVER, that Borrower shall not be required to pay and
discharge or to cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings diligently pursued, and
Borrower shall set aside on its books such reserves as are required by GAAP with
respect to any such tax, assessment, charge, levy or claim so contested.
5.6 FINANCIAL STATEMENTS, REPORTS, ETC. Borrower shall furnish to
Lender:
(a) within five (5) days after any corresponding periodic filings
with the U.S. Securities and Exchange Commission by GST Telecommunications, Inc.
with respect to the end of each Fiscal Year, an annual unaudited balance sheet
and income statement for Borrower for such fiscal year, which balance sheet
shall fairly represent Borrower's assets, liabilities and financial condition as
of such date according to GAAP and shall indicate the equity contributions made
by Borrower's shareholders as of such date according to GAAP and shall contain
no misrepresentations or omissions of any other facts or circumstances which are
material;
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(b) within five (5) days after any corresponding periodic filing
with the U.S. Securities and Exchange Commission by GST Telecommunications, Inc.
with respect to each of the first three financial quarters of each Fiscal Year,
(i) an unaudited balance sheet and income statement for Borrower as of the end
of each such quarter and for the then elapsed portion of such Fiscal Year, which
balance sheet shall fairly represent Borrower's assets, liabilities and
financial condition as of such date according to GAAP and shall indicate the
equity contributions made by Borrower's shareholders as of such date according
to GAAP and shall contain no misrepresentations or omissions of any other facts
or circumstances which are material and (ii) a copy of the then current Business
Plan;
(c) concurrently with any financial statements provided pursuant to
SECTION 5.6(A) and SECTION 5.6(B) above, a certificate of Borrower executed on
its behalf by its chief financial officer, chief accounting officer or treasurer
to the effect that such financial statements present fairly the financial
position and results of operations of Borrower, in each case subject to normal
year-end audit adjustments;
(d) promptly upon their becoming available, copies of any periodic
or special documents, statements or other information, if any, filed by Borrower
with the FCC or with any other Federal, state or local governmental agency or
authority in connection with the construction and/or operation of the Business
or with respect to the transactions contemplated by any of the Loan Documents,
and copies of any material notices and other material communications from the
FCC or from any other Federal, state or local governmental agency or authority;
(e) immediately upon obtaining knowledge of any condition or event
which either constitutes an Event of Default or which, after notice or lapse of
time or both, would constitute an Event of Default, or which constitutes a
breach of any covenant herein, or which renders any representation or warranty
contained herein materially false or misleading, a certificate of Borrower,
signed by an authorized officer of Borrower, specifying in reasonable detail the
nature and period of existence thereof and what corrective action Borrower has
taken or proposes to take with respect thereto;
(f) within ninety (90) days after the end of each Fiscal Year, a
certificate of Borrower, executed for and on its behalf by an authorized officer
of Borrower, stating that there does not exist any condition or event which
either constitutes an Event of Default or which, after notice or lapse of time
or both, would constitute an Event of Default, or which constitutes a breach of
any covenant hereunder or which renders any representation or warranty herein
materially false or misleading;
(g) promptly from time to time such other information regarding the
operations, business affairs and condition (financial or otherwise) of Borrower
or the Business as Lender may reasonably request.
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5.7 LITIGATION AND OTHER NOTICES. Borrower shall give Lender prompt
written notice of the following: (a) all events of default or any event that
would become an event of default upon notice or lapse of time or both under any
of the terms or provisions of any note, or of any other evidence of indebtedness
or agreement or contract governing the borrowing of money, of Borrower which
would have a Material Adverse Effect; (b) any levy, attachment, execution or
other process against any of the property or assets, real or personal, of
Borrower which would have a Material Adverse Effect; (c) the filing or
commencement of any action, suit or proceeding by or before any court or any
Federal, state, municipal or other governmental department, commission,
instrumentality or agency which, if adversely determined against Borrower, would
materially impair Borrower's right to carry on the Business substantially as now
conducted or contemplated or result in a Material Adverse Effect; (d) any letter
or other correspondence, oral inquiry, communication or request of any kind from
the FCC relating to any FCC License held or required to be held by Borrower
which would or is reasonably likely or foreseeable to have a Material Adverse
Effect on such Network, the Business or Borrower's financial condition or
operations; and (e) any matter which has resulted in, or which Borrower
reasonably believes will result in, a Material Adverse Effect.
5.8 LANDLORD CONSENTS AND AGREEMENTS.
(a) Borrower shall use its best efforts (which efforts shall not
require Borrower to expend any funds) to obtain from each owner of real property
in respect of which a Borrower Affiliate has entered into a Lease prior to the
Effective Date at which Collateral is to be located a landlord/mortgage's waiver
in substantially the form of Exhibit I hereto and shall deliver such
landlord/mortgagee's waiver to Lender.
(b) Borrower shall obtain from each owner of real property in
respect of which a Borrower Affiliate has entered into a Lease (an "OWNER
LEASE") after the Effective Date at which Collateral is to be located a
landlord/mortgagee's waiver in substantially the form of Exhibit I hereto and
shall deliver such waiver to Lender. Each such Owner Lease shall contain a form
of such landlord/mortgagee's waiver as an exhibit or attachment thereto.
(c) In the event any Owner Lease referred to in Section 5.8(b)
above has been recorded with the appropriate officer of the county in which the
related real property is located, Borrower agrees to cause the related waiver
also to be recorded with the such officer of such county.
5.9 ERISA. Borrower shall comply and shall cause each Borrower
Affiliate to comply, in all material respects with the applicable provisions of
ERISA, including the minimum funding requirements of ERISA with respect to any
employee benefit plans subject to ERISA and shall not permit a Reportable Event,
as defined in ERISA, or a Prohibited Transaction, as defined in ERISA, to occur
with respect to any employee benefit plans subject to ERISA.
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5.10 ACCESS TO PREMISES, RECORDS AND NETWORK. Borrower shall permit
representatives of Lender to have access to Borrower's books and records and to
the Collateral and the premises of Borrower at reasonable times upon reasonable
notice and to make such excerpts from such records as such representatives deem
necessary and to inspect the Collateral. Borrower shall grant or shall cause
each Borrower Affiliate to grant, Lender access to the Networks for the purpose
of inspecting the Collateral and monitoring any construction, modification or
expansion thereof.
5.11 ENVIRONMENTAL NOTICES. If Borrower shall:
(a) receive notice that any material violation of any Federal,
state or local environmental law or regulation may have been committed or is
about to be committed by Borrower;
(b) receive notice that any material administrative or judicial
complaint or order has been filed or is about to be filed against Borrower
alleging any material violations of any Federal, state or local environmental
law or regulation or requiring Borrower to take any material action in
connection with any Release of any Contaminant into the indoor or outdoor
environment; or
(c) receive any notice from a federal, state, or local governmental
agency or private party alleging that Borrower may be liable or responsible for
costs associated with a material response to or material cleanup of a Release of
any Contaminant into the indoor or outdoor environment or any material damages
caused thereby;
Borrower shall provide, or shall cause to provide, Lender with a copy of such
notice within fifteen (15) days of receipt thereof. Within fifteen (15) days of
Borrower having learned of the enactment or promulgation of any federal, state
or local environmental law/or regulation which may result in any Material
Adverse Effect, Borrower shall provide Lender with notice thereof.
5.12 AMENDMENT OF ORGANIZATION DOCUMENT. Borrower shall notify Lender
of any amendment to its Articles of Incorporation within ten (10) days of the
occurrence of any such event, and provide Lender with copies of any amendments
certified by the secretary of Borrower and of all other relevant documentation.
Borrower will promptly deliver to Lender such financing statements executed by
Borrower which Lender may request to continue Lender's first priority security
interest in the Collateral as a result of any such event.
5.13 FURTHER ASSURANCES. Borrower agrees to execute and deliver to
Lender such additional assignments, agreements and instruments, at Borrower's
expense, as Lender may reasonably require or deem advisable to carry into effect
the purposes of this Agreement and the Loan Documents or to better assure and
confirm unto Lender its rights, powers and remedies hereunder and thereunder.
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5.14 ENVIRONMENTAL PERMITS, LICENSES, ETC. Borrower shall obtain all
permits, licenses, and other authorizations which are required under, and shall
be in material compliance with, all federal, state and local laws and
regulations relating to pollution, reclamation, or protection of the
environment, including laws relating to Releases or threatened Releases of
Contaminants or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of Contaminants.
5.15 PAYMENT RESERVE. Within fifteen (15) days following receipt by
Borrower from Lender of the Reserve Notice relating to any Conversion Date,
Borrower will deposit or cause to be deposited with Escrow Agent the amount, if
any, required so that the aggregate amount held in the Escrow Account equals the
Reserve Amount calculated by Lender in the exercise of its reasonable judgment
for such Conversion Date as set forth in such Reserve Notice. To the extent that
the amount on deposit in the Escrow Account on any Conversion Date exceeds the
Reserve Amount calculated for such Conversion Date, so long as no Event of
Default has occurred and is continuing, Borrower may require Escrow Agent to
remit the amount of such excess to Borrower. Upon the occurrence and during the
continuation of any Event of Default, Lender may require Escrow Agent to remit
any amounts held in the Escrow Account for application to the payment of any
Obligation of Borrower to Lender then due and payable under this Agreement.
5.16 MAINTENANCE OF COLLATERAL; RISK OF LOSS. Borrower shall and shall
cause each Borrower Affiliate to maintain the Collateral in good repair,
condition and working order (subject to ordinary wear and tear and
obsolescence), and shall furnish any and all parts, mechanisms, and devices
required to keep the Collateral in good repair, condition and working order
(subject to ordinary wear and tear or obsolescence), at the sole cost and
expense of Borrower and/or each Borrower Affiliate. Borrower and/or each
Borrower Affiliate shall bear the entire risk of loss for theft, destruction, or
other injury to the Collateral from any and every cause whatsoever. In the event
of damage or loss to such Collateral (or any part thereof), and irrespective of
payment from any insurance coverage maintained by Borrower, but applying full
credit therefor, Borrower shall at the option of Lender, (a) place such
Collateral in good repair, condition and working order; or (b) replace such
Collateral (or any part thereof) with like equipment in good repair, condition
and working order and grant to Lender a first priority security interest in such
replacement equipment. In the event Borrower is required to restore any of the
Collateral to good repair, condition and working order, Borrower shall have
thirty (30) days after notice from Lender to commence and diligently pursue said
repairs; provided, however, if, within ninety (90) days after Lender's notice,
such Collateral is not placed in good repair, condition and working order or
replaced with like equipment in good repair, condition and working order
(through no fault of Lender), Borrower shall promptly prepay to Lender the
principal amount of any Loan to the extent that the proceeds of such Loan were
used to acquire such Collateral. The terms of this Section 5.16 shall in no way
limit or restrict any rights that Borrower may have against Lender (by reason of
warranty or any other agreement between Lender and Borrower) arising in
connection with Borrower's purchase of Collateral from Lender. Nor shall the
terms of this Section 5.16 in any way modify or expand Lender's
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obligations to Borrower (by reason of warranty or any other agreement between
Lender and Borrower) arising in connection with Borrower's purchase of the
Collateral.
ARTICLE VI
NEGATIVE COVENANTS
Borrower covenants and agrees with Lender that so long as this
Agreement shall remain in effect or the Obligations hereunder or under any of
the Loan Documents shall be unpaid, without the prior written consent of Lender:
6.1 LIENS, ETC. Borrower shall not and shall not permit any Borrower
Affiliate to create, incur, assume or suffer to exist, directly or indirectly,
any Lien upon or with respect to the Collateral, now owned or hereafter acquired
except for the following "PERMITTED LIENS":
(1) Liens granted pursuant to the Loan Documents;
(2) Liens for taxes, assessments or governmental charges or levies
on property of Borrower if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being diligently contested in
good faith and by appropriate proceedings and for which Borrower shall have set
aside reserves on its books as required by GAAP;
(3) Liens such as carrier's, warehousemen's and mechanic's liens
and other similar liens, which arise in the ordinary course of business with
respect to obligations not yet due or being contested in good faith by
appropriate proceedings and for which Borrower shall have set aside reserves on
its books as required by GAAP;
(4) Liens arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other social
security benefits other than any Lien imposed by ERISA; and
(5) Liens consisting of extensions or renewals of the Liens
referred to in clause (4) of this section, provided that the indebtedness
secured thereby shall not be increased or refinanced pursuant to any such
extension or renewal and no such extension or renewal shall extend any such Lien
to additional Collateral.
6.2 SALE OF ASSETS; CONSOLIDATION, MERGER, ETC. Borrower shall not:
(1) consolidate with or merge into any other Person, or acquire all
or substantially all of the assets of any of the capital stock of any Person;
PROVIDED, HOWEVER, that Borrower may merge or consolidate with any affiliate of
Borrower if, but only if:
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(a) Borrower shall have delivered to Lender written notice
thereof not later than thirty (30) days prior to any such merger or
consolidation, together with a reasonably detailed description thereof;
(b) Borrower shall be the surviving entity and, if appropriate,
shall have duly filed appropriate Uniform Commercial Code Financing Statements
in the applicable Secretary of State and County Recorder's Offices in order to
enable Lender to perfect and preserve its Lien on the Collateral theretofore
owned by the merged or consolidated Borrower, and, concurrently with any such
merger or consolidation, delivered to Lender acknowledgment of copies thereof
evidencing such filing;
(c) After giving effect to any such merger or consolidation, no
Event of Default or any event which, with the giving of notice or passage of
time, would constitute an Event of Default shall have occurred and be continuing
or shall exist hereunder.
(2) sublease, transfer or otherwise dispose of all or substantially
all of its assets in any transaction or series of related transaction, except
for the Leases, the Security Agreements, and other sales and subleases in the
ordinary course of business, which shall include dispositions of assets that are
obsolete, surplus or replaced;
(3) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction; or
(4) become subject to any agreement or instrument which by its
terms would restrict Borrower's rights or ability to perform in any material
respect any of its obligations to Lender pursuant to the terms of the Loan
Documents.
6.3 GUARANTEES; THIRD-PARTY SALES AND LEASES. Except for endorsements
of negotiable instruments, Borrower shall not directly or indirectly (i) assume
any obligation or indebtedness of another Person (other than an Affiliate of
Borrower) (ii) make or assume any Guarantee, or (iii) finance any third-party
sales or leases, except for leases of Collateral in the ordinary course of
business.
6.4 INVESTMENTS. Borrower shall not, directly or indirectly, make any
Investments except:
(1) Investments in obligations issued by, or guaranteed by, the
United States of America or any agency or instrumentality thereof, provided that
such obligations mature within three hundred and sixty-five (365) days of the
date of acquisition thereof; or
(2) Investments in certificates of deposit, money market or other
cash management accounts, bankers acceptances and Eurodollar time deposits with
financial institutions having a long term deposit rating of at least A from
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively;
or
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(3) Investments in commercial paper rated Pl or Al by Moody's
Investor's Service, Inc. or Standard & Poor's Corporation, respectively.
6.5 PERMITTED ACTIVITIES. Borrower shall not engage in any business or
activity other than the operation of the Business.
6.6 TRANSACTIONS WITH AFFILIATES. Except for the Leases, the Security
Agreement and any other agreements contemplated by the Loan Documents, Borrower
shall not directly or indirectly, enter into any transaction, including, without
limitation, leases or other agreements for the purchase or use of any goods or
services, with any Affiliate, except in the ordinary course of and pursuant to
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to Borrower than it would obtain in a comparable arm's
length transaction with an unaffiliated Person.
6.7 INDEBTEDNESS. Borrower shall not create or suffer to exist, or
permit any of its subsidiaries to create or suffer to exist, any Debt except:
(1) the Obligations;
(2) Guarantees and third party financing permitted by SECTION 6.3;
(3) purchase money Debt secured by Liens permitted by clause (5) of
SECTION 6.1;
(4) obligations under capital or operating leases;
(5) Debt which is subordinated to payment of the Obligations on
terms approved by Lender, in its sole discretion, prior to the incurrence of, or
execution of any agreement with respect to incurrence of, such Debt; and
(6) Debt to any Affiliate of Borrower.
6.8 MARGIN REGULATION. Borrower shall not use or permit any other
Person to use any portion of the proceeds of any credit extended under this
Agreement in any manner which might cause the extension of credit made by Lender
or the application of such proceeds to violate the Securities Act of 1933 or
Securities Exchange Act of 1934 (each as amended from time to time, and any
successor statute) or to violate Regulation G, Regulation U, or Regulation X, or
any other regulation of the Federal Reserve Board, in each case as in effect on
the date or dates of such extension of credit and such use of proceeds.
6.9 CORPORATE NAMES. Borrower shall not use any corporate or fictitious
names other than the corporate name as shown in Borrower's Articles of
Incorporation.
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6.10 SALE OF COLLATERAL. Borrower shall not, and shall not permit any
Borrower Affiliate to, sell, transfer, lease (except for Leases to Borrower
Affiliates as permitted hereby), sublease or otherwise dispose of any of the
Collateral without the prior written consent of Lender, in its sole discretion.
6.11 SALARIES AND COMPENSATION. Borrower shall not pay, whether
directly or indirectly, any salary or other compensation, including fees,
bonuses, profit-sharing and distributions, to any of its officers, directors or
shareholders who are not involved in the management and/or operations of the
Business.
ARTICLE VII
COLLATERAL SECURITY
7.1 COLLATERAL SECURITY. To secure payment and performance of the
obligations, Borrower hereby grants to Lender (to the extent permitted by
applicable law) a continuing security interest in and to the following property,
whether now owned or hereafter acquired by Borrower and wheresoever located, to
the extent acquired by Borrower with the proceeds of any Loan: (i) Lender and
Non-Lender Equipment (collectively, "EQUIPMENT") and (ii) all software licenses
and computer programs, accessories, parts, attachments, and appurtenances
appertaining or attached to any of the Equipment (collectively, the
"COLLATERAL") together with all substitutions, trade-ins, renewals and
replacements of, and improvements and accessions to the Collateral, including
Collateral classified as Borrower's inventory.
7.2 PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN. Borrower shall execute and deliver to Lender at any time and from time
to time at the request of Lender, all financing statements or other similar
documents (and pay the cost of filing or recording the same in all public
offices deemed necessary by Lender), as Lender may reasonably request, in a form
satisfactory to Lender, to perfect and keep perfected the security interest in
the Collateral granted by Borrower to Lender or to otherwise protect and
preserve such Collateral and Lender's security interest therein or to enforce
Lender's security interests in such Collateral in a manner consistent with the
Loan Documents. Should Borrower fail to do so, Lender is authorized to sign any
such financing statements as Borrower's agent. Borrower further agrees that a
carbon, photographic or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT. The following events shall each constitute an
"EVENT OF DEFAULT":
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(a) Borrower shall fail to pay the principal of or interest on the
Note, when due, whether as scheduled, at a date fixed for prepayment, by
acceleration or otherwise and such failure shall continue for ten (10) days
after the due date thereof; or
(b) Borrower, a Borrower Affiliate or Guarantor shall fail to
observe or perform any other covenant, condition or agreement to be observed or
performed pursuant to the terms of the Loan Documents (other than a covenant in
SECTION 5.14) and such failure is not cured within thirty (30) days after
receipt by Borrower of written notice thereof; or
(c) Any representation or warranty made by Borrower, a Borrower
Affiliate or Guarantor in connection with this Agreement or any other Loan
Document shall prove to have been false or misleading in any material respect
when made or delivered or when deemed made in accordance with the terms hereof
or thereof; or
(d) Borrower or Guarantor as the case may be, shall fail to pay any
principal, premium or interest on any Debt, which Debt exceeds two hundred and
fifty thousand dollars ($250,000) (in the case of Borrower) or five million
dollars ($5,000,000) (in the case of Guarantor) when due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such indebtedness; or any other
default or event under any agreement or instrument relating to any such
indebtedness or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in any such agreement or instrument
if the effect of such default or event is to accelerate, the maturity of such
indebtedness; or any such indebtedness shall be declared to be due and payable
or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof as a result of any such event
of default; or
(e) Borrower or Guarantor shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator or similar official
for Borrower or Guarantor or for a substantial part of its property, (ii) make a
general assignment for the benefit of creditors, (iii) involuntarily dissolve,
liquidate or wind up its affairs, or (iv) take action for the purpose of
effecting any of the foregoing; or
(f) A voluntary proceeding under any bankruptcy, reorganization,
arrangement of debts, insolvency or receivership law is filed by Borrower, a
Borrower Affiliate or Guarantor or an involuntary proceeding is commenced
against Borrower, a Borrower Affiliate or Guarantor and such proceeding is not
dismissed within sixty (60) days after filing (or Borrower, a Borrower Affiliate
or Guarantor consents to such filing at any time), or Borrower, Borrower
Affiliate or Guarantor takes any action to authorize any of the foregoing
matters; or
(g) Borrower or Guarantor is not Solvent and such party shall not
cure such condition within thirty (30) days of receipt of notice from Lender to
such effect; or
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(h) Any FCC License or any other certificate or license necessary
for the operation by Borrower of the Business shall not be obtained or shall
cease to be in full force and effect, which in respect of a license of the FCC
shall occur when an order revoking or terminating such license shall be issued
which is no longer subject to further administrative and judicial review, or the
FCC or any other governmental authority having jurisdiction over any such
certificate or license shall, prior to the termination thereof, decide, which
decision shall not be subject to further administrative or judicial review, not
to renew such certificate or license; or
(i) For any reason any Loan Document shall not be in full force and
effect or shall not be enforceable in accordance with its terms, or any security
interest or lien granted pursuant thereto shall fail to be perfected, other than
as a result of an act or omission of Lender, or any party thereto other than
Lender shall contest the validity of any Lien granted under, or shall disaffirm
its obligations under, any Loan Document; or
(j) A judgment or judgments for the payment of money in excess of
Two Hundred Fifty Thousand Dollars ($250,000) individually or Five Hundred
Thousand Dollars ($500,000) in the aggregate at any one time shall have been
rendered against Borrower or a judgment or judgments for payment of money in
excess of Two Millon Dollars ($2,000,000) at any one time shall have been
rendered against the Guarantor and/or Borrower Affiliate, and the same shall
have remained unsatisfied undischarged, unvacated, unbonded or unstayed for a
period of forty-five (45) days during which no stay of execution shall have been
obtained; or
(k) For any reason, Borrower or Guarantor ceases to operate the
Business; or
(l) Either Borrower or Guarantor is enjoined, restrained or in any
way prevented by the order of any court or administrative or regulatory agency
from conducting any material portion of their respective business and such
injunction, restraining order or other order is not vacated or stayed within
thirty (30) days; or
(m) Borrower or Guarantor becomes subject to any liabilities,
costs, expenses, damages, fines or penalties which could reasonably be expected
to have a Material Adverse Effect arising out of or related to (i) any Remedial
Action in response to a Release or threatened Release at any location of any
Contaminant into the indoor or outdoor environment or (ii) any material
violation of any environmental, health or safety requirement of law; or
(n) Either Borrower or Guarantor fails to comply with any provision
of the Communications Act or any other FCC regulation or policy, and the effect
of such failure is likely to result in a sanction by the FCC which could have a
Material Adverse Effect on the operations and conditions of Borrower or
Guarantor, financial or otherwise; or
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(o) Ownership of any Borrower Affiliate shall have been transferred
so that it is no longer wholly owned by Borrower or an Affiliate.
8.2 TERMINATION OF COMMITMENT; ACCELERATION. Upon the occurrence and at
any time during the continuance of any Event of Default, Lender may:
(a) by notice to Borrower, terminate Lender's Commitment to
Borrower to make Loans hereunder; and
(b) declare the Obligations to be immediately due and payable,
whereupon the Obligations shall be immediately due and payable without notice of
any kind; PROVIDED, HOWEVER, that if an Event of Default described in SECTION
8.1(E) OR 8.1(F) shall exist or occur, all of the Obligations shall
automatically, without declaration or notice of any kind, be immediately due and
payable.
8.3 WAIVER OF DEMAND. Demand, presentment, protest and notice of
nonpayment are hereby waived by Borrower. Borrower also waives the benefit of
all valuation, appraisal and exemption laws to the extent permitted by
applicable law.
8.4 RIGHTS AND REMEDIES GENERALLY. If an Event of Default occurs,
Lender shall have, in addition to any other rights and remedies contained in
this Agreement or in any of the other Loan Documents, all of the rights and
remedies of a secured party under the Code and other applicable laws and all
other rights and remedies by law, all of which rights and remedies shall be
cumulative, and non-exclusive, to the extent permitted by law. In addition to
all such rights and remedies, the sale, lease or other disposition of the
Collateral, or any part thereof, by Lender after the occurrence of an Event of
Default may be for cash, credit or any combination thereof, and Lender may
purchase all or any part of the Collateral at public sale held in compliance
with the procedures set forth in the Code, or, if permitted by law, private sale
held in compliance with the procedures set forth in the Code, and in lieu of
actual payment of such purchase price, may set off the amount of such purchase
price against the Obligations then owing. Any sales of the Collateral may be
adjourned from time to time with or without notice. Lender may, in its sole
discretion, cause the Collateral to remain on Borrower's or a Borrower
Affiliate's premises, at Borrower's expense, pending sale or other disposition
of the Collateral. Lender shall have the right to conduct such sales on
Borrower's or a Borrower Affiliate's premises, at Borrower's expense, or
elsewhere, on such occasion or occasions as Lender may see fit. Lender's rights
under this Section shall be enforceable to the extent permitted by applicable
law.
8.5 ENTRY UPON PREMISES AND ACCESS TO INFORMATION. Following the
occurrence and during the continuance of an Event of Default, Lender shall have
the right to enter upon the premises of Borrower where the Collateral is located
(or is believed to be located) without any obligation to pay rent to Borrower or
a Borrower Affiliate, or any other place or places where the Collateral is
believed to be located and kept, and render the Collateral unusable or remove
the Collateral therefrom to the premises of Lender or any agent of
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Lender, for such time as Lender may desire, in order effectively to collect or
liquidate the Collateral, and/or Lender may require Borrower or a Borrower
Affiliate to assemble the Collateral and make it available to Lender at a place
or places to be designated by Lender. Lender shall have the right to obtain
access to Borrower's data processing equipment or a Borrower Affiliate, computer
hardware and software relating to the Collateral during normal business hours
and to use all of the foregoing and the information contained therein in any
manner Lender deems reasonably appropriate in connection with the exercise of
its rights and remedies. Lender's rights under this Section shall be enforceable
to the extent permitted by applicable law.
8.6 SALE OR OTHER DISPOSITION OF COLLATERAL BY LENDER. Any notice
required to be given by Lender of a sale, lease or other disposition by Lender
pursuant to ARTICLE VIII with respect to any of the Collateral which is
deposited in the United States mails, certified postage prepaid and duly
addressed to Borrower and Guarantor and, each of them, at the address specified
in SECTION 9.1 below, at least five (5) Business Days prior to such proposed
action shall constitute fair and reasonable notice to Borrower and Guarantor of
any such action. The net proceeds realized by Lender upon any such sale or other
disposition, after deduction for the expense of retaking, holding, preparing for
sale, selling or the like and the reasonable attorneys' fees and legal expenses
incurred by Lender in connection therewith, shall be applied as provided herein
toward satisfaction of the Obligations. Lender shall account to Borrower for any
surplus realized upon such sale or other disposition, and Borrower shall remain
liable for any deficiency. The commencement of any action, legal or equitable,
or the rendering of any judgment or decree for any deficiency shall not affect
Lender's security interest in the Collateral. Borrower agrees that Lender has no
obligation to preserve rights to the Collateral against any other Persons. In
connection with the exercise of any remedies pursuant to this section, Lender is
hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, and, to the extent not
prohibited by the terms of any applicable license or franchise agreements,
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's benefit until the Obligations are paid in full. Lender's rights under
this Section shall be enforceable to the extent permitted by applicable law.
8.7 LENDER NOT LIABLE. Lender shall not be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral or of any instrument received in payment therefor or for any damages
resulting therefrom (except to the extent such loss shall be finally adjudicated
or otherwise conclusively determined to have been caused by the gross negligence
or willful misconduct of Lender). Lender shall not, under any circumstances or
in any event whatsoever, have any liability for any error or omission of any
kind made in the settlement, collection or payment of any of the Collateral
(except to the extent such loss shall be finally adjudicated or otherwise
conclusively determined to have been caused by the gross negligence or willful
misconduct of Lender). The costs of collection and enforcement, including, but
not limited to, reasonable counsel fees and out-of-
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pocket expenses, shall be borne solely by Borrower, whether the same are
incurred by Lender or Borrower.
8.8 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default, Lender is hereby authorized at any time and from time to
tine, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness or other obligations at any time owing by Lender to
or for the credit or the account of Borrower against any and all of the
obligations of Borrower now or hereafter existing under this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. Notices and other communications provided for herein shall
be in writing and shall be delivered by a courier service of recognized standing
or mailed (or, if by telex, graphic scanning or other telegraphic or telecopy
communications equipment of the sending party, delivered by such equipment)
addressed
If to Borrower, to:
GST Switchco, Inc.
4317 North East Thurston Way
Vancouver, Washington 98662
Attention: Clifford V. Sander
Vice President and Treasurer
Facsimile: (360) 604-2878
with copy to:
Olshan, Grundman, Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022-1170
Attention: Stephen Irwin, Esq.
Daniel J. Gallagher, Esq.
Facsimile: (212) 755-1467
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and if to Lender to:
Siemens Stromberg-Carlson
900 Broken Sound Parkway
Boca Raton, Florida 33487
Attention: Mr. Wayne Pitman
Facsimile: (407) 955-8771
with copy to:
Siemens Corporation
1301 Avenue of the Americas
New York, New York 10019
Attention: Martin V. Schwartz, Esq.
Facsimile: (212) 767-0581
with additional copy to:
Cooper, White & Cooper
201 California Street
17th Floor
San Francisco, California 94111
Attention: Jeffrey J. Wong, Esq.
Facsimile: (415) 433-5530
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given (a) three (3) days after mailing when sent by registered or certified
mail, postage prepaid, return receipt requested, or (b) upon receipt, if by
courier service or any telegraphic communications equipment of the sender, in
each case addressed to such party as provided in this Section or in accordance
with the latest unrevoked direction from such party.
9.2 NO WAIVERS; AMENDMENTS.
(a) No failure or delay of Lender to exercise any right hereunder
or under any other Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, preclude any other or further
exercise thereof or the exercise of any other right. No waiver of any provision
of this Agreement or any other Loan Document nor consent to any departure by
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by Lender, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances.
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(b) Neither this Agreement nor any other Loan Documents may be
amended or modified except pursuant to an agreement or agreements in writing
executed by Borrower and Lender.
9.3 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES. BORROWER AND LENDER CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE
OR FEDERAL COURT LOCATED IN NEW YORK CITY IN THE STATE OF NEW YORK AND WAIVE ANY
OBJECTION RELATING TO IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF
ANY PROCEEDING BY SUCH COURT.
9.4 EXPENSES; DOCUMENTARY TAXES. Borrower shall be obligated to pay all
reasonable out-of-pocket expenses incurred by Lender in connection with (i) the
creation, perfection, priority or protection of the Liens in the Collateral,
including the reasonable attorneys' fees incurred both prior to and after the
Effective Date to perfect the Lien in the Collateral, and (ii) the enforcement
of Lender's rights in connection with this Agreement, any other Loan Documents
or the Collateral, including all reasonable attorneys' fees and related expenses
and costs; provided, however, that Borrower shall not be obligated to pay
expenses incurred by Lender on or prior to the Effective Date to the extent that
they exceed $100,000. Borrower agrees to indemnify Lender from and hold it
harmless against any documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of this Agreement
or any other Loan Document.
9.5 EQUITABLE RELIEF. Borrower recognizes that, in the event that
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or any other Loan Document, any remedy at law
may prove to be inadequate relief to Lender; therefore, Borrower agrees that
Lender, if Lender so requests, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.
9.6 INDEMNIFICATION; LIMITATION OF LIABILITY.
(a) Borrower agrees to protect, indemnify and hold harmless Lender
and each of its officers, directors, employees, attorneys, consultants and
agents (collectively the "INDEMNITIES") from and against any and all liabilities
(including tort, negligence and strict liabilities), obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for and consultants of such
Indemnities in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnities shall be designated a party
thereto), which may be imposed on, incurred by, or asserted against such
Indemnities (whether direct, indirect, or consequential and whether
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based on any federal or state laws or other statutory regulations, including,
without limitation, securities, environmental and commercial laws and
regulations, under common law or at equitable cause or on contract or otherwise)
in any manner relating to or arising out of this Agreement or any of the other
Loan Documents, or any act, event or transaction related or attendant thereto,
the agreements of Lender contained herein, the making of Loans, the management
of such Loans or the Collateral (including any liability under federal, state or
local environmental laws or regulations) or the use or intended use of the
proceeds of such Loans hereunder (collectively, the "INDEMNIFIED MATTERS");
provided that neither Borrower nor Guarantor shall have any obligation to any
Indemnitee hereunder with respect to Indemnified Matters caused by or resulting
from the willful misconduct or gross negligence of such Indemnitee. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall contribute the maximum portion which they are
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnities.
(b) To the extent permitted by applicable law, no claim may be made
by Borrower or any other Person against Lender or any of its affiliates,
directors, officers, employees, agents, attorneys or consultants for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by any of the Loan Documents or any act, omission
or event occurring in connection therewith; and Borrower hereby waives, releases
and agrees not to sue upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor, to the
extent permitted by applicable law. Neither Lender nor any of its affiliates,
directors, officers, employees, agents, attorneys or consultants shall be liable
for any action taken or omitted to be taken by it or them under or in connection
with any of the Loan Documents, except for its or their own gross negligence or
willful misconduct.
(c) If Borrower fails to pay promptly when due to any other Person
monies which it is required to pay by reason of any provision in this Agreement,
Lender may, but need not, pay the same and Borrower agrees to promptly reimburse
Lender for such payment; PROVIDED, HOWEVER, Lender may not pay any amounts
described in this sentence the validity of which Borrower is contesting, in
proceedings which are being diligently pursued, and for which Borrower has
created reserves therefor which are satisfactory to Lender. Any payments made by
Lender shall not constitute: (i) an agreement by Lender to make similar payments
in the future, or (ii) a waiver by Lender of any Event of Default.
9.7 SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES, ETC. All
warranties, representations, indemnities and covenants made by Borrower in any
Loan Document survive the execution and delivery of this Agreement and the other
Loan Documents and the making of the Obligations and shall survive until
repayment in full in immediately available funds of all Obligations (after which
period Lender shall only have a right of indemnification from Borrower for any
breach of any such warranties, representations and covenants during the
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period for which such warranties, representations and covenants are in effect);
PROVIDED, HOWEVER, that if the Lender for any reason is required to disgorge any
payment with respect to the Obligations after the date that all of the
Obligations are repaid in full in immediately available funds, then all
warranties, representations and covenants made by Borrower or Guarantor shall be
reinstated as though such full payment had not occurred and shall continue in
effect until repayment in full in immediately available funds of all Obligations
that are restored and/or created as a result of such payment disgorgement.
9.8 SUCCESSORS AND ASSIGNS. Borrower may not assign or transfer any of
its rights or obligations hereunder without Lender's prior written consent.
Lender may not assign or transfer any of its rights or obligations hereunder to
any Person (other than to Siemens Credit Corporation), without Borrower's prior
written consent, which consent shall not be unreasonably withheld or delayed.
Borrower agrees that it will not assert against any permitted assignee of
Lender, including Siemens Credit Corporation, any defense, counterclaim or
off-set that Borrower may have against Lender and that upon notice of any such
assignment or transfer, it will pay all Obligations due under this Agreement to
such assignee or transferee. Borrower acknowledges that any assignment or
transfer by Lender shall not materially change Borrower's duties or obligations
under this Agreement nor shall it materially increase the burdens or risks
imposed on Borrower.
9.9 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement or any other Loan Document shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby.
9.10 COVER PAGE; TABLE OF CONTENTS AND SECTION HEADINGS. The cover
page, Table of Contents and section headings used herein are for convenience of
reference only, are not part of this Agreement and are not to affect the
construction of or be taken into consideration in interpreting this Agreement.
9.11 COUNTERPARTS. This Agreement may be signed in counterparts with
the same effect as if the signatures thereof and hereto were upon the same
instrument.
9.12 MARSHALLING; PAYMENTS SET ASIDE. Lender shall be under no
obligation to marshall any assets in favor of Borrower or any other party or
against or in payment of any or all of the Obligations. Notwithstanding any
other provision hereof, to the extent that Borrower makes a payment or payments
to Lender or Lender enforces its security interests or exercises its rights of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, Federal or state law,
common law or equitable cause, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not
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been made or such enforcement or setoff had not occurred. Lender's rights under
this Section shall be enforceable to the extent permitted by applicable law.
9.13 SERVICE OF PROCESS. BORROWER WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT AND, CONSENTS THAT ALL SERVICE OF PROCESS SHALL BE MADE BY
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO BORROWER, AT THE ADDRESS
INDICATED IN SECTION 9.1 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) BUSINESS DAYS AFTER SAME SHALL HAVE BEEN (1) POSTED AS
AFORESAID OR (2) DELIVERED BY ANY OTHER PROCESS PERMITTED BY APPLICABLE LAW.
9.14 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE, BETWEEN LENDER AND BORROWER ARISING OUT OF, CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH
OR THE TRANSACTIONS RELATED THERETO. BORROWER AND LENDER EACH HEREBY AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT EITHER MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
9.15 ENTIRE AGREEMENT, ETC. This Agreement (including all schedules and
exhibits referred to herein), the Note and all other Loan Documents constitute
the entire contract between the parties hereto with respect to the subject
matter hereof and thereof and shall supersede and take the place of any other
instrument purporting to be an agreement of the parties hereto relating to such
subject matter.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers as of the day and year first
above written.
GST SWITCHCO, INC., Borrower
By:/s/ John Warta
-----------------------------------------
John Warta
President and Chief Executive Officer
SIEMENS STROMBERG-CARLSON, Lender
By: SIEMENS COMMUNICATIONS SYSTEMS INC.
Its General Partner
By: /s/ Frederick R. Fromm
-----------------------------------------
Frederick R. Fromm
President and Chief Executive Officer
45
UNCONDITIONAL CONTINUING GUARANTY
(LOAN AGREEMENT)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "GUARANTY") is made and
entered into as of September 4, 1996, by and between Siemens Stromberg-Carlson
("LENDER"), whose principal place of business is located at 900 Broken Sound
Parkway, Boca Raton, Florida 33487 and GST USA, Inc. ("GUARANTOR"), whose
address is 4317 Northeast Thurston Way, Vancouver, Washington 98662.
1. GUARANTY. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement dated as of the date
hereof (the "AGREEMENT"), with GST Switchco, Inc. ("BORROWER") and, subject to
Section 2 below, Guarantor unconditionally, absolutely and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of Borrower now or hereafter
existing to Lender under the Agreement and the Note (collectively,
"OBLIGATIONS"), including, but not limited to, the repayment to Lender of all
sums presently due and owing, and all sums that in the future become due and
owing, from Borrower to Lender arising under the Agreement. All capitalized
terms not otherwise defined herein shall have the same meaning as set forth in
the Agreement.
2. LIMITATION ON GUARANTOR'S LIABILITY. Guarantor's liability under
this Guaranty shall be limited to the sum of (a) the lesser of (i) fifty-five
percent (55%) of the principal and interest outstanding under Loans, other than
Loans used by Borrower to finance the acquisition Cable or (ii) Forty-Five
Million Dollars ($45,000,000), and (b) one hundred percent (100%) of the
outstanding principal and interest under Loans used to finance the acquisition
of Cable and all reasonable attorneys' fees and costs incurred by Lender in the
enforcement of the Agreement or this Guaranty.
3. OBLIGATIONS. The Obligations include any and all loans, advances,
indebtedness and other obligations owed by Borrower to Lender under the
Agreement of every description, whether now existing or hereafter arising,
whether direct or indirect, fixed or contingent or liquidated or unliquidated.
4. ATTORNEY'S FEES. If Lender incurs attorney's fees relating to the
enforcement of this Guaranty, Guarantor agrees to pay Lender such reasonable
attorney's fees plus all reasonable costs and expenses relating thereto.
Guarantor agrees to pay Lender's reasonable attorney's fees relating to any
action, suit, counterclaim, post-judgment motions, bankruptcy litigation,
appeal, arbitration or mediation relating to the enforcement of this Guaranty.
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5. WAIVERS.
5.1. SCOPE OF RISK DEFENSES. Lender may at any time and from time to
time, without notice or the consent of Guarantor, and without affecting or
impairing the liability of Guarantor hereunder, do any of the following: (i)
renew, modify, or extend (including extensions beyond the original term) any
Obligations of Borrower, of its customers, of any co-guarantors (whether
hereunder or under a separate instrument) or of any other party at any time
directly or contingently liable for the payment of any said Obligations; (ii)
accept partial payments of said Obligations; (iii) settle, discharge, release
(by operation of law or otherwise), compound, compromise, collect or liquidate
any of said Obligations and the security therefor in any manner; (iv) consent to
the transfer or sale of security, or (v) bid and purchase at any sale of any
security; or (vi) change the terms of the Obligations, including increases or
decreases in payments or any interest rate adjustments.
5.2. PRIMARY OBLIGATION DEFENSES. Guarantor waives any rights to
require Lender to (i) proceed against Borrower or any other guarantor or party;
(ii) proceed against or exhaust any security held from Borrower or any other
guarantor; or (iii) pursue any other remedy in Lender's power whatsoever.
Guarantor waives any defense based on or arising out of any defense of Borrower
in respect of the Obligations, whether such defense arises by operation of law,
bankruptcy of Borrower or otherwise, including without limitation, any defense
based on or arising out of any disability of Borrower or the unenforceability of
the Obligations from any cause. Guarantor waives any defense based on any
applicable statute of limitations or statute of frauds.
5.3. COMMERCIALLY REASONABLE SALE AND ANTI-DEFICIENCY LAWS. Lender
may, at Lender's election, foreclose on any security held by Lender by one or
more judicial or nonjudicial sales, whether or not every aspect of any such sale
is commercially reasonable, or exercise any other right or remedy Lender may
have against Borrower, or any security, without affecting or impairing in any
way the liability of Guarantor except to the extent the Obligations have been
paid. Guarantor waives any defense arising out of any such election by Lender,
even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of Lender against Borrower
or any security. In the absence of agreeing to the waivers contained in this
Section 5.3, Guarantor may have the right of subrogation or reimbursement
against Borrower. For example, if Lender elects to foreclose, by nonjudicial
sale, any deeds of trust securing any indebtedness of Borrower to Lender,
causing Guarantor to lose any such rights or create defenses to enforcement of
this Guaranty, Guarantor gives up any such potential defenses by agreeing to the
waivers contained in this Section 5.3. Guarantor also expressly waives any
defense or benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
5.4. DISCLOSURE DEFENSES. Guarantor expressly waives all set-offs
and counterclaims and waives all notices, protests and demands including,
without limitation,
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notice of default in the payment of rents or in the performance or in the
observance of any of the terms, provisions, covenants or conditions contained in
any agreement between Lender and Borrower.
5.5. IMPAIRMENT OF COLLATERAL DEFENSE. Guarantor expressly agrees
that the validity of this Guaranty and the obligations of Guarantor shall not be
terminated, affected or impaired by reason of the waiving, delaying, exercising
or non-exercising of any of Lender's rights against Borrower pursuant to the
Agreement or against Guarantor by reason of this Guaranty or as a result of the
substitution, release, repossession, sale, disposition or destruction of any
collateral or of the items leased or to be leased to Borrower. Guarantor shall
not be released or discharged, either in whole or in part, by Lender's failure
or delay (a) to perfect or continue the perfection of any security interest in
any property which secures the Obligations of Borrower to Lender or (b) to
protect the property covered by such security interest.
5.6. GUARANTOR'S RIGHT TO REVOKE. Guarantor expressly waives the
right to revoke or terminate this Guaranty, including any statutory right of
revocation under the laws of any state.
6. FINANCIAL CONDITION OF BORROWER. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
7. SUBROGATION. If an Event of Default has occurred and is continuing
under the Agreement, Guarantor shall not exercise any rights which it may
acquire by way of subrogation under this Guaranty, by any payment made hereunder
or otherwise, until all of the Obligations shall have been paid in full and the
obligation of Lender under the Agreement to make Loans shall have expired or
been terminated. If an Event of Default has occurred and is continuing, any
amount that is paid to Guarantor on account of such subrogation rights at any
time prior to the later of the payment in full of the Obligations or the
expiration or termination of the obligation of Lender under the Agreement to
make Loans, shall be held in trust for the benefit of Lender and paid forthwith
to Lender to either, in Lender's sole discretion, (x) be credited and applied
upon the Obligations, whether matured or unmatured, in accordance with the terms
of the Agreement or (y) be held by Lender as collateral security for any
Obligations thereafter existing. If (i) Guarantor makes payment to Lender of all
or any part of the Obligations, (ii) all the Obligations are paid in full and
(iii) the obligation of Lender under the Agreement to make Loans has expired or
terminated, Lender will, at Guarantor's request, execute and deliver to
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to Guarantor of an
interest in the Obligations resulting from such payment by Guarantor.
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8. RECOVERY OF PREFERENCES. If a claim of a preference payment or a
claim of fraudulent transfer is made upon Lender at any time for repayment or
recovery of any amount(s) or other value received by Lender, from any source, in
payment of or on account of any of the Obligations guaranteed hereunder and
Lessor repays or otherwise becomes liable for all or any part of such claim by
reason of (i) any judgment, decree or order of any court or administrative body
having competent jurisdiction or (ii) any settlement or compromise of any such
claim, Guarantor shall remain liable to Lender hereunder for the amount so
repaid or for which Lender is otherwise liable to the same extent as if such
amount(s) had never been received by Lender, notwithstanding any termination
hereof.
9. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender as of the Effective Date that:
9.1. It is a corporation duly organized, validly existing and in
good standing under the laws of the country, state or province of its
incorporation;
9.2. It is duly qualified to do business and is in good standing in
each jurisdiction where the failure to qualify would have a material adverse
effect on the business, condition (financial or otherwise) or operations of
Guarantor (a "MATERIAL ADVERSE EFFECT");
9.3. It has the requisite power and authority to own its properties,
to carry on its business as now conducted or as presently contemplated and to
own, operate and maintain such properties;
9.4. It has the power to execute, deliver and perform this Guaranty;
9.5. The execution, delivery and performance of this Guaranty:
9.5.1. has been duly authorized by Guarantor's Board of
Directors and, if necessary, Guarantor's shareholders;
9.5.2. do not violate (a) any provision of law or any rules or
regulations applicable to Guarantor or its business, (b) Guarantor's Articles of
Incorporation or Bylaws, (c) any applicable order of any court or any
governmental authority or (d) any indenture, agreement for borrowed money, bond,
note or other similar instrument or any other agreement to which Guarantor is a
party or by which Guarantor or any of Guarantor's property is bound, where such
violation would have a Material Adverse Effect;
9.5.3. do not conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
indenture, agreement for borrowed money, bond, note or similar instrument or
material agreement to which Guarantor is a party or by which Guarantor or any of
Guarantor's property is bound in a manner which would have a Material Adverse
Effect;
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9.5.4. do not result in the creation or imposition of any Lien
of any nature whatsoever upon any property or assets of Guarantor, which Lien
would have a Material Adverse Effect;
9.5.5. constitutes a legal, valid and binding obligation of
Guarantor enforceable against Guarantor in accordance with its respective terms,
subject, as to enforcement, to applicable or bankruptcy, reorganization,
insolvency and similar laws affecting creditors' rights generally and to
moratorium laws from time to time in effect; and
9.5.6. do not as of the execution hereof require any
governmental consent, filing, registration or approval where the failure to
receive such requirement would have a Material Adverse Effect;
9.6. Guarantor has furnished to Lender a Balance Sheet of Guarantor,
dated as of March 31, 1996 (the "BALANCE SHEET"), attached hereto as EXHIBIT A.
As of the Effective Date, (a) the Balance Sheet fairly represents such company's
assets, liabilities and financial condition as of such date according to GAAP;
(b) there are no material representations or omissions from the Balance Sheet or
any other facts or circumstances not reflected in the Balance Sheet which are or
may be material; and (c) there has been no material adverse change in the
condition (financial or otherwise), operations or properties of such company
since the date of the Balance Sheet.
9.7. There are no actions, suits at law or in equity or by or before
any governmental instrumentality or other agency now pending, or to the
knowledge of Guarantor, threatened against Guarantor or affecting any property
or rights of Guarantor as to which there is a reasonable possibility of an
adverse determination which, if adversely determined, would in individually or
in the aggregate materially impair the right of Guarantor to carry on its
business or would have any Material Adverse Effect;
9.8. Guarantor has filed or caused to be filed all federal, state
and local tax returns which are required to be filed as paid or caused to be
paid all taxes as shown on such returns or on any assessment received by it to
the extent that such taxes have become due, except such taxes, the amount,
applicability or validity of which are being contested in good faith by
appropriate proceedings with respect to which the Guarantor shall have set aside
on its books adequate reserves which respect to such taxes and required by GAAP,
where the failure to file such returns or pay such taxes would have a Material
Adverse Effect;
9.9. Guarantor is not in default, which default would have a
Material Adverse Effect: (a) with respect to any judgment, writ, injunction,
decree, rule or regulation of any governmental instrumentality or other agency,
or (b) in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any material agreement or instrument to
which Guarantor is a party or by which its assets are bound;
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9.10. Guarantor has obtained any and all licenses, authorizations,
certificates, and approvals of any federal, state or local governmental agency,
authority or instrumentality having jurisdiction over Guarantor required for
Guarantor to conduct its business as now conducted, where the lack thereof would
have a Material Adverse Effect;
9.11. Guarantor's operations comply in all material respects with
all applicable federal, state or local laws and regulations where the failure to
so comply would have a Material Adverse Effect. To the knowledge of Guarantor,
none of the properties owned, leased, used or operated by Guarantor or the
operation of business of Guarantor is subject to any judicial or administrative
proceeding alleging the violation of any federal, state or local laws, or
regulations or ordinances, including, without limitation, any communications,
utilities, environmental, health or safety statute, regulation or order, which
violation would have a Material Adverse Effect;
9.12. To the knowledge of Guarantor, none of the operations or
business of Guarantor is the subject of any federal or state investigation
evaluating whether any material Remedial Action is needed to respond to a
Release of any Contaminant into the indoor or outdoor environment. Guarantor has
not filed any notice under any federal or state law indicating past or present
treatment, storage or disposal of a hazardous waste or reporting a Release of
any Contaminate into the indoor or outdoor environment. There is no contingent
liability of Guarantor of which Guarantor has knowledge or reasonably should
have knowledge in connection with any Release of any Contaminant into the indoor
or outdoor environment which would have a Material Adverse Effect;
9.13. Guarantor and its ERISA Affiliates (i) have fulfilled their
obligations under any applicable the minimum funding standards of ERISA with
respect to each employment benefit plan subject to ERISA, are in compliance in
all material respects with the applicable provisions of ERISA and have not
incurred any liability to the PBGC or any such plan under Title IV of ERISA; and
(ii) no "prohibitive transaction" or "reportable event", as such terms are
defined in ERISA, has occurred with respect to any such plan, where the failure
to comply with the foregoing would have a Material Adverse Effect;
9.14. Guarantor is not an "investment company" as that term is
defined in, and is not otherwise subject to regulation under, the Investment
Company Act of 1940. Guarantor is not a "holding company" as that term is
defined in, and is not otherwise subject to regulation under, the "Public
Utility Holding Company Act of 1935;" and
9.15. Guarantor is not engaged principally, or as one of its
important activities in the business of extending credit for the purpose of
purchasing or carrying any margin stock (within the meaning of Regulation G of
the Board of Governors of the Federal Reserve Network of the Unites States) and
no part of the proceeds of the Loans will be used to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock or for the purpose that violates, or is
inconsistent with, the provisions of Regulation G, T, U or X of the Board of
Governors.
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10. AFFIRMATIVE COVENANTS. Guarantor covenants and agrees with Lender
that so long as the Agreement and this Guaranty shall remain in effect or any
Obligations to Lender hereunder or under any of the other Loan Documents are
unpaid:
10.1. Guarantor shall preserve and maintain its corporate
existence, rights, franchises and privileges in the jurisdiction of its
organization, and qualify and remain qualified as a foreign corporation in all
jurisdictions in which such qualification is necessary in view of its business
operations and property.
10.2. Guarantor shall comply in all material respects with all laws
and regulations applicable to it and shall obtain and maintain all governmental
consents, filings, registrations and approvals where the failure to do so would
have a Material Adverse Effect.
10.3. Guarantor shall at all times maintain in good repair, working
order and condition, excepting ordinary wear and tear and obsolescence, all of
its properties material to its operations and make all appropriate repairs,
replacements and renewals thereof, in each case consistent with sound business
practice where the failure to do so would have a Material Adverse Effect.
10.4. Guarantor shall: (a) maintain in full force and effect on
such of its properties, including real property and personal property, insurance
against such risks and in such amounts as is customarily maintained by similar
businesses of similar size and (b) maintain in full force and effect public
liability insurance against claims for personal injury or death or property
damage occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by Guarantor in such amounts as is customarily
maintained by similar business of similar size.
10.5. Guarantor shall pay and discharge promptly all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, might become a Lien upon such properties or any part
thereof; PROVIDED, HOWEVER, that Guarantor shall not be required to pay and
discharge or to cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as (i) the validity or amount thereof shall be
contested in good faith by appropriate proceedings diligently pursued and
Guarantor shall set aside on its books such reserves as are required by GAAP
with respect to any such tax, assessment, charge, levy or claim so contested and
(ii) Guarantor's failure to do so would not have a Material Adverse Effect.
10.6. Guarantor shall furnish to Lender:
10.6.1. within five (5) days after any periodic filings with
the U.S. Securities and Exchange Commission by GST Telecommunications, Inc.
("GST") with respect to the end of each Fiscal Year, copies of such filing;
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10.6.2. within five (5) days after any corresponding periodic
filings with the U.S. Securities and Exchange Commission by GST with respect to
the end of each Fiscal Year, an annual unaudited balance sheet and income
statement for Guarantor for such fiscal year, which balance sheet and income
statement shall fairly represent Guarantor's assets, liabilities and financial
condition as of such date according to GAAP and shall indicate the equity
contributions made by Guarantor's shareholders as of such date according to GAAP
and shall contain no misrepresentations or omissions of any other facts or
circumstances which are material;
10.6.3. within five (5) days after any corresponding periodic
filing with the Securities and Exchange Commission by GST with respect to each
of the first three financial quarters of each Fiscal Year, an unaudited balance
sheet and income statement for Guarantor as of the end of each such quarter and
for the then elapsed portion of such Fiscal Year, which balance sheet and income
statement shall fairly represent Guarantor's assets, liabilities and financial
condition as of such date according to GAAP and shall indicate the equity
contributions made by Guarantor's shareholders and shall contain no
misrepresentations or omissions of any other facts or circumstances as of such
date according to GAAP which are material;
10.6.4. Concurrently with the financial materials provided
pursuant to Section 10.6.2 and Section 10.6.3 above, (i) a certificate of
Guarantor to the effect that such materials present fairly the financial
position and results of operations of Guarantor, subject to normal year-end
audit adjustments and (ii) with respect to the financial materials provided
pursuant to Section 10.6.3, a certificate constituting a bridge between such
materials and the assets and liabilities of GST, in each case executed on its
behalf by its Chief Financial Officer, Chief Accounting Officer or Treasurer
("BRIDGE CERTIFICATE"). Guarantor represents and warrants that the Bridge
Certificate shall be accurate in all material respects.
10.6.5. Immediately upon obtaining knowledge of any condition
or event which either constitutes and Event of Default or which, after notice or
lapse of time or both, would constitute an Event of Default, or which
constitutes a breach of any covenant herein, or which renders any representation
or warranty contained herein materially false or misleading, a certificate of
Guarantor, signed by an authorized officer of Guarantor, specifying in
reasonable detail the nature and period of existence thereof and what corrective
action Guarantor has taken or proposes to take with respect thereto;
10.6.6. Concurrent with providing the financial statements
referred to in Section 10.6.1, a certificate of Guarantor, executed for and on
its behalf by an authorized officer of Guarantor, stating that there does not
exist any condition or event which either constitutes an Event of Default or
which, after notice or lapse of time or both, would constitute an Event of
Default or which constitutes a breach of any covenant hereunder or which renders
any representation or warranty herein materially false or misleading; and
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10.6.7. Promptly from time to time such other information
regarding the operations and condition (financial or otherwise) of Guarantor or
its business as Lender may reasonably request.
10.7. Guarantor shall give Lender prompt written notice of the
following: (a) all events of defaults or any event that would become an event of
default upon notice or lapse of time or both under any of the terms or
provisions of any note, or of any other evidence of indebtedness or agreement or
contract governing the borrowing of money, of Guarantor that would have a
Material Adverse Effect; (b) any levy, attachment, execution or other process
against any of the property or assets, real or personal of Guarantor that would
have a Material Adverse Effect; (c) the filing or commencement of any action,
suit or proceeding by or before any court or any federal, state, municipal or
other governmental department, commission, instrumentality or agency which, if
adversely determined against Guarantor, would materially impair either
Guarantor's right to carry on its business substantially as now conducted or
contemplated or result in a Material Adverse Effect; and (d) any other matter
which has resulted in or which Guarantor reasonably believes will result in, a
Material Adverse Effect.
10.8. If Guarantor shall receive notice: (a) that violation of any
federal, state or local environmental law regulation may have been committed or
is about to be committed by Guarantor that would have a Material Adverse Effect;
(b) that any administrative or judicial complaint or order has been filed or is
about to be filed against Guarantor alleging violations of any federal, state or
local environmental law or regulation or requiring Guarantor to take any action
in connection with any Release of any Contaminant into the outdoor or indoor
environment, which violation or Release would have a Material Adverse Effect;
(c) from a federal, state or local governmental agency or private party alleging
that Guarantor may be liable or responsible for costs associated with a response
to or clean-up of a Release or of any Contaminant into the indoor or outdoor
environment or any damages caused thereby which liability would have a Material
Adverse Effect; or (d) of the enactment or promulgation of any federal, state or
local environmental law or regulation; which may result in any Material Adverse
Effect, then Guarantor shall provide Lender with a copy of such notice within
fifteen (15) days of its receipt thereof.
11. NEGATIVE COVENANTS
11.1. Guarantor covenants and agrees with Lender that so long as
the Agreement and this Guaranty shall remain in effect or the Obligations under
the Agreement or under any of the Loan Documents shall be unpaid, without the
prior written consent of Lender, Guarantor shall not: (a) consolidate or merge
with any other person unless Guarantor or an affiliate is the surviving entity;
(b) sublease, transfer or otherwise dispose of all or substantially all of its
assets in any transaction or series of related transactions, except for sales
and subleases in the ordinary course of business, which shall include
disposition of assets that are obsolete, surplus or replaced; (c) liquidate,
dissolve or effect a recapitalization or reorganization in any form of
transaction; or (d) become subject to any agreement or
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instrument which by its terms would restrict Guarantor's rights or ability to
perform any of its obligations to Lender pursuant to the terms of this Guaranty.
11.2. Guarantor covenants and agrees with Lender that so long as
the Agreement and this Guaranty shall remain in effect or the Obligations under
the Agreement or under any of the Loan Documents shall be unpaid, without the
prior written consent of Lender, Guarantor shall not and shall not permit any
Affiliate of Guarantor to, create, incur, assume or suffer to exist any lien on
any of Guarantor's or such Affiliate's assets unless all amounts due under the
Loan Documents are directly secured equally and ratably with or prior to the
obligation secured by such lien; provided, however, that the foregoing
limitation shall not apply to the liens listed in (a) clause (i) through (vii)
of Section 4.09 of the Senior Notes Indenture, dated as of December 19, 1995,
among GST, the Guarantor and United States Trust Company of New York and (b)
clauses (i) through (vii) of Section 4.10 of the Convertible Notes Indenture,
dated as of December 19, 1995, among GST, Guarantor and United States Trust
Company of New York.
12. BINDING ON SUCCESSORS AND ASSIGNS. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement; and Guarantor hereby waives notice of any such assignment. All of
Lender's rights are cumulative and not alternative.
13. MISCELLANEOUS. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists. This Guaranty may
not be amended or modified except by a writing signed by Lender and Guarantor.
This Guaranty is a valid and subsisting legal instrument and no provision which
may be deemed unenforceable shall in any way invalidate any other provision or
provisions, all of which shall remain in full force and effect. No invalidity,
irregularity or unenforceability of all or any part of the Obligations nor any
other circumstance which might be a legal defense of a guarantor shall affect,
impair or be a defense to this Guaranty. Each of the persons who has signed this
or any other Guaranty has unconditionally delivered it to Lender, and the
failure to sign this or any other Guaranty by any other person shall not
discharge the liability of any signer.
14. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, AND GUARANTOR
AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE AND/OR FEDERAL COURTS IN THE
STATE OF NEW YORK. GUARANTOR HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY
MATTERS ARISING OUT OF THIS GUARANTY OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
LENDER AND GUARANTOR.
10
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered as of the date first above written.
GST USA, INC.
By: /s/ John Warta
------------------------------------
John Warta
President and
Chief Executive Officer
11
UNCONDITIONAL LIMITED GUARANTY AGREEMENT
THIS UNCONDITIONAL LIMITED GUARANTY AGREEMENT (the "GUARANTY"), dated
as of December 19, 1996, made by GST USA, Inc., a Washington corporation (the
"GUARANTOR"), in favor of NTFC CAPITAL CORPORATION, a Delaware corporation (the
"LENDER"), and any assignee of the Lender.
RECITALS:
A. Guarantor desires to induce the Lender to enter that certain
Equipment Loan and Security Agreement dated as of December , 1996 (the "LOAN
AGREEMENT"), by and between the Lender and GST Equipco, Inc., a Washington
corporation ("BORROWER"), which is a wholly owned subsidiary of the Guarantor
(and each is a direct or indirect subsidiary of GST Telecommunications, Inc., a
Canadian corporation). Pursuant to the Loan Agreement the Lender will, at the
request of Borrower, provide financing for Borrower to acquire from Northern
Telecom Inc. and lease to Affiliates certain equipment, additions, upgrades and
software (collectively, the "EQUIPMENT") pursuant to the terms of the Loan
Agreement. Such financings shall be referred to herein from time to time as the
"LOANS".
B. The Lender is willing to enter into the Loan Agreement, and advance
the Loans, subject to the terms and conditions set forth in the Loan Agreement
and related instruments, agreements and documents executed by and between
Borrower and the Lender (as amended, modified, supplemented or replaced from
time to time, the "LOAN DOCUMENTS"), but only so long as Guarantor
unconditionally guarantees the timely performance and payment by Borrower of
each and every obligation under the Loan Documents, subject to the limitations
stated herein.
C. Guarantor acknowledges that the Lender would not be willing to enter
into the Loan Documents without the guaranty by Guarantor under the terms of
this Guaranty.
D. Guarantor is wholly owned by GST Telecommunications, Inc., which
also owns (indirectly) one hundred percent (100%) of the outstanding capital
stock of Borrower, and Guarantor expects to increase its business, and the
business of its other direct and indirect Affiliates, through the use of the
Equipment to be leased by Affiliates from Borrower and will receive direct and
indirect benefit from the Lender's extension of credit to Borrower.
NOW, THEREFORE, in order to induce the Lender to enter into the Loan
Documents with Borrower and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Guarantor hereby agrees
as follows:
<PAGE>
TERMS:
ARTICLE 1
DEFINITIONS
SECTION 1.1 CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"BORROWER" has the meaning assigned to that term in Recital A
hereto, and its successors and assigns, and includes without
limitation: (i) the Borrower as debtor-in-possession or any trustee in
any bankruptcy proceeding; (ii) any trustee, receiver, custodian,
conservator, or other similar appointee over Borrower or over any of
Borrower's property pursuant to any court proceeding of any kind or
otherwise; and (iii) any successor person.
"EQUIPMENT" has the meaning assigned to that term in Recital A
hereto.
"GUARANTEED OBLIGATIONS" has the meaning assigned to that term
in SECTION 2.1 hereof.
"GUARANTOR" has the meaning assigned to that term in Recital A
hereto, and its successors and permitted assigns, and shall include
without limitation: (i) the Guarantor as debtor-in- possession or any
trustee in any bankruptcy proceeding; (ii) any trustee, receiver,
custodian, conservator, or other similar appointee over Guarantor or
over any of Guarantor's property pursuant to any court proceeding of
any kind or otherwise; and (iii) any successor person.
"GUARANTY" means this Guaranty, as the same may be amended,
supplemented, amended and restated or otherwise modified from time to
time.
"LOAN AGREEMENT" has the meaning assigned to that term in
Recital A hereto.
"LOANS" has the meaning assigned to that term in Recital A
hereto.
"LOAN DOCUMENTS" has the meaning assigned to that term in
Recital B hereto.
SECTION 1.2 LOAN DOCUMENTS DEFINITIONS. Unless otherwise defined herein
or the context otherwise.requires, terms used in this Guaranty, including its
preamble and recitals, have the meanings provided in the Loan Documents.
ARTICLE 2
GUARANTY
SECTION 2.1 GUARANTY. Guarantor hereby unconditionally and irrevocably
guarantees, subject to the limitations expressed herein, the full and prompt
payment when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, all amounts which would have become due but for
the operation of the automatic stay under Section 362(a) of the Federal
Bankruptcy Code, 11 U.S.C.
-2-
<PAGE>
362(a)), of any and all indebtedness and obligations of any kind and character
whatsoever of Borrower to the Lender and any and all extensions, renewals and
replacements of such indebtedness, arising under any of the Loan Documents
including, but not limited to, the Loan Agreement, the Note, or any other
document executed by Borrower in connection therewith, or of Guarantor
hereunder, whether such indebtedness is:
(i) characterized as the payment of principal, interest,
premium, fees, costs, expenses or otherwise;
(ii) presently existing or hereafter incurred or arising;
(iii) from time to time reduced and thereafter increased or
entirely extinguished and thereafter reincurred;
(iv) foreseen or unforeseen, direct or indirect, absolute or
contingent, primary or secondary, secured or unsecured,
matured or unmatured, of the same class or type or of
different classes or types;
(v) created by or arising under contract, tort, guaranty,
overdraft, recovery of avoided payments or otherwise;
(vi) contracted for by Borrower alone or jointly and
severally with another or others;
(vii) incurred by Borrower prior to, during, or after any
filing by Borrower or against Borrower of any petition or
request for liquidation, reorganization, arrangement,
adjudication as a bankrupt, relief as a debtor, or other
relief under bankruptcy, insolvency, or similar laws now or
hereafter in affect in the United States of America or any
state or territory thereof or any foreign jurisdiction, and
notwithstanding Borrower's legal status as a debtor or a
debtor-in-possession or Borrower's discharge in any such
proceeding; and/or
(viii) created or incurred with or without notice to Guarantor.
The foregoing obligations are referred to herein collectively as the "Guaranteed
Obligations." This Guaranty constitutes a guaranty of payment when due and not
merely of collection, and Guarantor specifically agrees that it shall not be
necessary or required that the Lender or any holder of any Loan exercise any
right, assert any claim or demand or enforce any remedy whatsoever against the
Borrower before or as a condition to the Guaranteed Obligations of any Guarantor
hereunder.
SECTION 2.2 ACCELERATION OF GUARANTY. Guarantor agrees that, in the
event of the dissolution or insolvency of the Guarantor, or the inability or
failure of the Guarantor to pay its debts as it become due, or an assignment by
the Guarantor for the benefit of creditors, or the commencement of any case or
proceeding in respect of the Guarantor under any bankruptcy, insolvency or
similar laws, and if such event shall occur at a time when any of the Guaranteed
Obligations of the Borrower may not then be due and payable, Guarantor will pay
to the Lender forthwith the full amount which would be payable hereunder by
Guarantor if all such Guaranteed Obligations were then due and payable.
-3-
<PAGE>
SECTION 2.3 GUARANTY ABSOLUTE. Except as limited in SECTION 2.8 below,
this Guaranty shall be construed as a continuing, absolute, unconditional and
irrevocable guarantee of payment and shall remain in full force and effect until
all Guaranteed Obligations of the Borrower have been paid in full, all
obligations of Guarantor hereunder have been paid in full and obligations of
Lender under all Loan Documents shall have terminated. Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
the Loan Agreement, and that all other Guaranteed Obligations shall be paid
strictly in accordance with the terms of the Loan Documents, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Lender with respect thereto.
The liability of Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:
(a) any lack of validity, legality or enforceability of the
Loan Agreement, the Note, any other Loan Document or any other
agreement or instrument relating to any thereof;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any
compromise, renewal, extension, acceleration or release with respect
thereto, or any other amendment or waiver of or any consent to
departure from the Loan Agreement or any other Loan Document;
(c) any addition, exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) the failure of the Lender or any holder of a Loan
Document:
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower or any other person or
entity (including any other guarantor) under the provisions of
the Loan Agreement or any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor of, or collateral securing, any Guaranteed
Obligations of the Borrower;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Loan Agreement or any other Loan Document;
(f) any defense, set-off or counter-claim which may at any
time be available to or be asserted by the Borrower against the Lender;
(g) any reduction, limitation, impairment or termination of
the Guaranteed Obligations of the Borrower for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality,
non-genuineness, irregularity, compromise, unenforceability of, or any
other event or occurrence affecting, the Guaranteed Obligations of the
Borrower or otherwise; or
(h) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the
Borrower or Guarantor.
-4-
<PAGE>
SECTION 2.4 REINSTATEMENT, ETC. Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Guaranteed Obligations is
rescinded or must otherwise be restored by any the Lender or any holder of any
Loan Document, upon the insolvency, bankruptcy or reorganization of the Borrower
or otherwise, all as though such payment had not been made.
SECTION 2.5 WAIVER. Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Lender protect,
secure, perfect or insure any security interest or lien or any property subject
thereto or exhaust any right or take any action against the Borrower or any
other person or entity (including any other guarantor) or any collateral.
SECTION 2.6 WAIVER OF SUBROGATION. Guarantor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire against the
Borrower that arise from the existence, payment, performance or enforcement of
Guarantor's obligations under this Guaranty or any other Loan Document,
including any right of subrogation, reimbursement, exoneration, or
indemnification, any right to participate in any claim or remedy of the Lender
against the Borrower or any collateral which the Lender now has or hereafter
acquires, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including the right to take or receive from the
Borrower, directly or indirectly, in cash or other property or by set-off or in
any manner, payment or security on account of such claim or other rights. If any
amount shall be paid to Guarantor in violation of the preceding sentence and the
Guaranteed Obligations shall not have been paid in cash in full and the Loan
Documents have not been terminated, such amount shall be deemed to have been
paid to Guarantor for the benefit of, and held in trust for, the Lender, and
shall forthwith be paid to the Lender to be credited and applied upon the
Guaranteed Obligations, whether matured or unmatured. Guarantor acknowledges
that it will receive direct and indirect benefits from the financing
arrangements contemplated by the Loan Agreement and the other Loan Documents and
that the waiver set forth in this Section is knowingly made in contemplation of
such benefits.
SECTION 2.7 SUCCESSORS, TRANSFEREES AND ASSIGNS; TRANSFERS, OF LOANS,
ETC. This Guaranty shall:
(a) be binding upon Guarantor, and its permitted successors,
transferees and assigns;
and
(b) inure to the benefit of and be enforceable by the Lender
and its permitted successors, transferees and assigns.
Without limiting the generality of clause (b), to the extent the Lender assigns
or otherwise transfers (in whole or in part) any Loan or Loan Documents held by
it to any other person or entity, such other person or entity shall thereupon
become vested with the corresponding rights and benefits granted to the Lender
under this Guaranty.
SECTION 2.8 LIMITATION OF GUARANTY. The financial obligations of
Guarantor hereunder shall be limited in aggregate amount to the lesser of (i)
forty-five percent (45%) of Borrower's aggregate Obligations outstanding under
the Loan Agreement from time to time or (ii) Twenty-Five Million Dollars
($25,000,000.00).
-5-
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents
and warrants to the Lender as follows:
(a) Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation and has full corporate power and authority to enter into
this Guaranty and to carry out the transactions contemplated hereby and
thereby.
(b) The execution and delivery by Guarantor of this Guaranty
and the consummation by Guarantor of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of
Guarantor. This Guaranty has been duly executed and delivered by
Guarantor and constitutes the legal, valid and binding obligation of
Guarantor enforceable against Guarantor in accordance with its terms,
subject, as to enforcement only, to bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect
affecting the enforceability of the rights of creditors generally.
(c) The execution and delivery of this Guaranty and the
consummation by Guarantor of the transactions contemplated hereby have
not resulted, and will not (with or without the lapse of time or the
giving of notice or both) result, (i) in any breach of any of the terms
or provisions of, or constitute a default under, the charter or bylaws
of Guarantor, any agreement, license or other instrument, any law, rule
or regulation or any judgment, decree or order of any court to which
Guarantor is a party or by which its property may be bound, or (ii) in
the creation or imposition of any claim, lien charge or encumbrance of
any-nature whatsoever upon, or give to others any claim, interest or
right, with respect to any of the properties, assets, contracts or
licenses of Guarantor.
ARTICLE 4
MISCELLANEOUS
SECTION 4.1 LOAN DOCUMENT. This Guaranty is a Loan Document executed
pursuant to the Loan Agreement.
SECTION 4.2 BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT.
In addition to, and not in limitation of SECTION 2.7, this Guaranty shall be
binding upon Guarantor and its successors, permitted transferees and permitted
assigns and shall inure to the benefit of and be enforceable by the Lender and
its successors, transferees and assigns (to the full extent provided pursuant to
SECTION 2.7); PROVIDED, HOWEVER, that Guarantor may not transfer or assign any
of its obligations hereunder without the prior written consent of the Lender,
and no such assignment, if permitted, will operate to relieve Guarantor of its
obligations hereunder.
SECTION 4.3 AMENDMENTS, ETC. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by Guarantor therefrom shall in any
event be effective unless the same shall
-6-
<PAGE>
be in writing and signed by the Lender and Guarantor, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 4.4 ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing or by facsimile transmission and, if
to Guarantor, mailed, given by facsimile transmission or delivered to it,
addressed to it at 4317 North East Thurston Way, Vancouver, Washington 98662,
Attention: Chief Financial Officer (facsimile number (360) 604-2878), with a
copy to Olshan Grundman Frome & Rosenzweig LLP, 505 Park Avenue, New York, New
York 10022-1170, Attention: Stephen Irwin, Esq. and Daniel Gallagher, Esq.
(facsimile number (212) 755-1467, and if to the Lender, mailed, given by
facsimile transmission or delivered to it, addressed to it at 220 Athens Way,
Nashville, Tennessee 37228, Attention: Legal Department (facsimile number (615)
734-5283), with a copy to the Lender Corporation, 220 Athens Way, Nashville,
Tennessee 37228, Attention: Manager, Credit, (facsimile number (715) 734-5110),
or as to each party at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this Section. Any notice, if mailed and properly addressed with postage
prepaid, shall be deemed given when received; any notice, if transmitted by
facsimile transmission or delivery, shall be deemed given when received.
SECTION 4.5 NO WAIVER; REMEDIES. No failure on the part of the Lender
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law or equity.
SECTION 4.6 CONTINUING GUARANTY. This Guaranty is a continuing guaranty
and shall (a) remain in full force and effect until final payment in full of the
Guaranteed Obligations and all other amounts payable under this Guaranty,
subject to reinstatement in accordance with SECTION 2.4 hereof, (b) be binding
upon Guarantor, its successors and permitted assigns, and (c) inure to the
benefit of and be enforceable by the Lender for its benefit and the benefit of
the Lender and its permitted successors, transferees and assigns.
SECTION 4.7 SEVERABILITY. Any provision of this Guaranty 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 of this Guaranty or affecting the validity
or enforceability of such provisions in any other jurisdiction.
SECTION 4.8 CONSENT TO JURISDICTION AND VENUE; WAIVERS.
(a) GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION
OF THE FEDERAL COURTS SITTING IN THE MIDDLE DISTRICT OF TENNESSEE, AND
IF NO FEDERAL JURISDICTION EXISTS, TO THE JURISDICTION AND VENUE OF THE
STATE COURTS OF TENNESSEE FOR ANY SUIT BROUGHT OR ACTION COMMENCED IN
CONNECTION WITH THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
OBLIGATIONS, AND AGREES NOT TO CONTEST VENUE OR JURISDICTION IN ANY
SUCH COURTS. IN ANY SUCH LITIGATION, GUARANTOR WAIVES PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, AND AGREES THAT THE SERVICE
THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECT TO GUARANTOR
AT ITS ADDRESS SET FORTH IN SECTION 4.4 HEREOF. IN THE ALTERNATIVE, IN
ITS SOLE DISCRETION, LENDER
-7-
<PAGE>
MAY EFFECT SERVICE UPON GUARANTOR IN ANY OTHER FORM OR MANNER PERMITTED
BY LAW. THE CHOICE OF FORUM SET FORTH HEREIN SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY
APPROPRIATE JURISDICTION.
(b) GUARANTOR AND LENDER HEREBY KNOWINGLY AND WILLINGLY WAIVE
THEIR RESPECTIVE RIGHTS TO DEMAND A JURY TRIAL IN ANY ACTION OR
PROCEEDING INVOLVING THIS GUARANTY, ANY OTHER LOAN DOCUMENT, THE
GUARANTEED OBLIGATIONS, OR ANY RELATIONSHIP BETWEEN THE LENDER AND
GUARANTOR. GUARANTOR WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE
FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(c) THE LENDER SHALL HAVE NO LIABILITY UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS FOR SPECIAL,
EXEMPLARY, PUNITIVE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF
ANY SORT IN ANY SUIT BROUGHT OR ACTION COMMENCED IN CONNECTION WITH
THIS GUARANTY, THE OTHER LOAN DOCUMENTS, OR THE GUARANTIED OBLIGATIONS,
AND, EXCEPT TO THE EXTENT PROHIBITED BY LAW, EACH PARTY WAIVES ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH ACTION ANY SPECIAL,
EXEMPLARY, PUNITIVE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF
ANY SORT OTHER THAN ACTUAL DAMAGES.
(d) TO THE EXTENT THAT GUARANTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR TO ITS PROPERTY, GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY.
(e) BY EXECUTING THIS GUARANTY, GUARANTOR HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY BROUGHT
IN ANY OF THE AFORESAID COURTS, AND HEREBY FURTHER IRREVOCABLY AND
UNCONDITIONALLY WAIVES AND AGREES
-8-
<PAGE>
NOT TO PLEAD ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 4.9 GOVERNING LAW. This Guaranty shall be governed by and
construed in accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written, and the Lender has accepted it by its duly authorized
officer.
GST USA, INC.
By: /s/ Clifford V. Sander
--------------------------
Name: Clifford V. Sander
Title: Senior Vice President
Accepted:
NTFC CAPITAL CORPORATION
By: /s/ illegible
--------------------------
Name:
Title:
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Company's Form 10-Q for the quarter ended December 31, 1996 and
is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 24,474,693
<SECURITIES> 0
<RECEIVABLES> 15,089,806
<ALLOWANCES> (1,676,746)
<INVENTORY> 2,625,775
<CURRENT-ASSETS> 50,715,991
<PP&E> 195,782,426
<DEPRECIATION> (9,821,374)
<TOTAL-ASSETS> 311,746,470
<CURRENT-LIABILITIES> 34,374,345
<BONDS> 206,723,311
<COMMON> 93,607,231
0
0
<OTHER-SE> 15,748,002
<TOTAL-LIABILITY-AND-EQUITY> 311,746,470
<SALES> 23,217,156
<TOTAL-REVENUES> 23,217,156
<CGS> 17,548,585
<TOTAL-COSTS> 41,204,574
<OTHER-EXPENSES> (733,930)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,433,558
<INCOME-PRETAX> (22,687,046)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22,687,046)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,634,081)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
