LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Agreement"), is dated as of
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September , 2000 (the "Closing Date"), by and between the following
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parties:
LENDER/SECURED PARTY: NTFC CAPITAL CORPORATION, a Delaware corporation
with offices at 501 Corporate Centre Drive,
Franklin, Tennessee 37067 (the "Lender"); and
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BORROWER/DEBTOR: POINTE COMMUNICATIONS CORPORATION, a Nevada
corporation with its principal place of business
at 1325 Northmeadow Parkway, Suite 110, Roswell,
Georgia 30076 (the "Borrower").
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This Agreement includes the general terms and conditions contained herein
and all the exhibits and schedules attached hereto, all of which are
incorporated herein. In the event of a conflict between the general terms and
conditions and any schedule, the additional terms and conditions stated in the
schedule shall control.
By executing this Agreement, the Lender agrees to make loans to the
Borrower, and the Borrower agrees to borrow from the Lender and to provide
collateral to secure such loans, all on the terms and conditions set forth
herein.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives:
LENDER: BORROWER:
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NTFC CAPITAL CORPORATION POINTE COMMUNICATIONS CORPORATION
BY: BY:
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TITLE: TITLE:
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DATE: DATE:
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TABLE OF CONTENTS
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ARTICLE 1: DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Principles; Subsidiaries. . . . . . . . . . . . . . . . . . . . . .10
1.03 UCC Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
1.04 General Construction; Captions. . . . . . . . . . . . . . . . . . . . . . . . 11
1.05 References to Documents and Laws. . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 2: LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.01 Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.02. Note and Payment Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.03. Procedures for Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.04. Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.05 Computation of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.06 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.07 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.08 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.09 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.10 Lender's Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.11 Increased Costs and Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE 3: COLLATERAL AND SECURITY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . .17
3.01. Grant of Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.02 Priority of Security Interests. . . . . . . . . . . . . . . . . . . . . . . . 18
3.03 Further Documentation; Pledge of Instruments. . . . . . . . . . . . . . . . . 18
3.04 Further Identification of Collateral. . . . . . . . . . . . . . . . . . . . . 18
3.05 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.06 Standard of Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.07 Advances to Protect Collateral. . . . . . . . . . . . . . . . . . . . . . . . 19
3.08 License to Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.09 Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10 Collateral Assignment of Nortel Purchase Agreement. . . . . . . . . . . . . . 19
3.11 Release of Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 4: REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . 20
4.01. Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . . 20
4.02. Authority and Authorization. . . . . . . . . . . . . . . . . . . . . . . . . .20
4.03. Execution and Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . 20
4.04 Governmental Authorizations. . . . . . . . . . . . . . . . . . . . . . . . . .20
4.05 Regulatory Authorizations. . . . . . . . . . . . . . . . . . . . . . . . . . .20
4.06 Material Agreement; Absence of Conflicts. . . . . . . . . . . . . . . . . . . 21
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4.07 No Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.08 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.09 Financial Accounting Practices. . . . . . . . . . . . . . . . . . . . . . . . 21
4.10 Accurate and Complete Disclosure. . . . . . . . . . . . . . . . . . . . . . . 21
4.11 No Event of Default; Compliance with Material Agreements. . . . . . . . . . . 22
4.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.13 Rights to Property; Intellectual Property. . . . . . . . . . . . . . . . . . .22
4.14 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
4.15 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
4.16 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.17 No Regulatory Event. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
4.18. Trade Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
4.19. No Brokerage Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
4.20. Margin Stock; Regulation U. . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.21. Investment Company; Public Utility Holding Company. . . . . . . . . . . . . . 23
4.22. Personal Holding Company; Subchapter S. . . . . . . . . . . . . . . . . . . . 23
4.23. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
4.24. Environmental Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.25. Security Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.26. Place of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.27. Location of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.28. Clear Title To Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.29. Assumed Names. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.30. Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . 24
4.31. Nortel Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .24
ARTICLE 5: CONDITIONS OF CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.01. Borrower's, Telscape's and the other Guarantors' Certificate. . . . . . . . . 24
5.02. Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
5.03. Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE 6: CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
6.01. Conditions for Initial Advance. . . . . . . . . . . . . . . . . . . . . . . . 26
6.02. Conditions for All Advances. . . . . . . . . . . . . . . . . . . . . . . . . .26
6.03. Affirmation of Representations and Warranties. . . . . . . . . . . . . . . . .27
6.04. Deadline for Funding Conditions. . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE 7: AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
7.02. Other Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
7.03 Notice of Pension Related Events. . . . . . . . . . . . . . . . . . . . . . . 30
7.04 Inspection Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
7.05. Preservation of Corporate Existence and Qualification. . . . . . . . . . . . .30
7.06. Continuation of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.07. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
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7.08. Payment of Taxes, Charges, Claims and Current Liabilities. . . . . . . . . . .31
7.09. Financial Accounting Practices. . . . . . . . . . . . . . . . . . . . . . . . 32
7.10. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.11. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
7.12 Government Authorizations; Regulatory Authorizations, Etc.. . . . . . . . . . 32
7.13. Contracts and Franchises. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.14. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.15. Financial Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.16. Construction and Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.17 Upgrade of Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.18 Further Assurances - Guarantors. . . . . . . . . . . . . . . . . . . . . . . .33
ARTICLE 8: NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.01. Restrictions on Indebtedness, Liens and Sale of Collateral. . . . . . . . . . 34
8.02 Limitation on Contingent Obligations. . . . . . . . . . . . . . . . . . . . . 34
8.03. Prohibition of Mergers, Acquisitions, Name, Office or Business Changes, Etc. .34
8.04 Termination of Nortel Purchase Agreement. . . . . . . . . . . . . . . . . . . 35
8.05. Removal of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
8.06. Assumed Names. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.07. Limitation on Investments, Advances and Loans. . . . . . . . . . . . . . . . .36
8.08. Limitation on Equity Payments. . . . . . . . . . . . . . . . . . . . . . . . .36
8.09. Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.10. Limitation on Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.11. Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . 37
8.12. Infrastructure Build Out. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.13. Restrictions on Dividends and Related Transactions. . . . . . . . . . . . . . 37
ARTICLE 9: EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . 38
9.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.02 Consequences of an Event of Default. . . . . . . . . . . . . . . . . . . . . .40
9.03 Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.04. Rights of Secured Party; Possession or Sale of Collateral. . . . . . . . . . .41
9.05. Notices, Etc. Waived. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.06. Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
9.07 Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
9.08 Discontinuance of Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .42
9.09. Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
9.10. Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 10: GENERAL CONDITIONS/MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 43
10.01 Modifications and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . .43
10.02. Advances Not Implied Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 43
10.03. Deviation from Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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10.04 Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.05 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
10.06. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
10.07 FCC and PUC Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.08. Lender Sole Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
10.09. Lender's Review of Information. . . . . . . . . . . . . . . . . . . . . . . . 45
10.10. No Joint Venture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.11. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.12. Rights Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
10.13. Duration; Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.14. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
10.15. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.16. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.17. Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
10.18. Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
10.19. Disclosures and Confidentiality. . . . . . . . . . . . . . . . . . . . . . . .47
10.20. Jurisdiction and Venue. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.21. Jury Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
10.22. Limitation on Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . .49
10.23. Borrower Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.24. Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
10.25. Agreement to Govern. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
10.26. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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SCHEDULES TO LOAN AND SECURITY AGREEMENT
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Schedule 1.01 Borrower Information and Defined Terms
Schedule 1.02 Business Plan
Schedule 2.01 Maximum Loan Amount
Schedule 2.02 Payment Terms and Governing Law
Schedule 2.09 Fees
Schedule 4.04 Required Consents
Schedule 4.05 Regulatory Authorizations
Schedule 4.06 Permitted Conflicts and Restrictions
Schedule 4.07 Restrictions on Loans
Schedule 4.08 Financial Statements
Schedule 4.12 Pending Litigation
Schedule 4.25 UCC Filing Offices
Schedule 4.26 Principal Offices and Location of Collateral
Schedule 4.29 Assumed Names
Schedule 4.30 Transactions with Affiliates
Schedule 4.31 Nortel Purchase Agreement
Schedule 6.02 Post-Closing Items
Schedule 7.07 Insurance
Schedule 7.15 Financial Covenants
Schedule 8.01 Permitted Specific Encumbrances
EXHIBITS TO LOAN AND SECURITY AGREEMENT
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Exhibit A Form of Note
Exhibit B Form of Borrowing Certificate
Exhibit C Form of Opinion of Counsel for Borrower
Exhibit D Form of Opinion of Regulatory Counsel for Borrower
Exhibit E Form of Landlord's Consent
Exhibit F Form of Certificate of Financial Condition
Exhibit G Form of Telscape Guaranty Agreement
Exhibit H Form of Significant Subsidiary Guaranty Agreement
Exhibit I Form of Collateral Assignment of Purchase Agreement
<PAGE>
LOAN AND SECURITY AGREEMENT
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THIS LOAN AND SECURITY AGREEMENT ("Agreement") is dated as of the Closing
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Date set forth on Schedule 1.01 hereto, by and between the entity or entities
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described on Schedule 1.01 hereto (collectively, "Borrower") and NTFC CAPITAL
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CORPORATION, a Delaware corporation ("Lender"), with offices at 501 Corporate
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Centre Drive, Franklin, Tennessee 37067.
B A C K G R O U N D:
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A. Borrower has entered into a certain purchase agreement with Nortel
Networks, Inc., as described on Schedule 4.31 hereto, providing for Borrower's
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purchase of certain telecommunications equipment and the license of associated
software, all as described therein, and has requested Lender to extend credit to
Borrower to finance such purchase and license and to make credit available for
the purchase of additional telecommunications equipment, in each case as
described herein.
B. Lender is willing to extend such credit to Borrower upon the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE 1: DEFINITIONS
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1.01. Certain Definitions. Certain terms are defined on Schedule 1.01
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hereto or elsewhere in this Agreement or the Schedules hereto . In addition to
other words and terms defined in the preamble hereof or elsewhere in this
Agreement, or on the Schedules hereto, the following words and terms shall have
the following meanings unless the context otherwise clearly requires:
"Additional Approved Cities": Chicago (Illinois), Dallas (Texas), New York
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City (New York), San Francisco (California) and San Juan (Puerto Rico).
"Advance(s)": any advance or loan of funds (including Capitalized Interest)
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made by Lender to Borrower pursuant to this Agreement.
"Affiliate": as applied to any Person, any other Person directly or
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indirectly controlling, controlled by, or under common control with such Person.
For purposes of this definition and the definition of "Control" and of
"Subsidiary," a Person shall be deemed to control another Person if such first
Person possesses, directly or indirectly, the power to direct, or to cause the
direction of, the management and policies of such other Person, whether through
ownership of voting securities, by contract or otherwise. The "Affiliates" of a
Person shall also include any Person that owns of record or beneficially at
least 10% of such Person's outstanding capital stock having the right to vote on
the election of the Person's directors.
"Approved Build-Out Plan": the original business plan titled
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"Pointecom-Telscape 5 Year -- Combined v4.xls" provided to the Lender in May,
2000, with such changes as may be required thereto to reflect, in connection
with infrastructure build-out in all the Additional Approved Cities, a need for
obtaining aggregate additional financing (exclusively for application to such
infrastructure build-out) after the Closing Date in the form of (i) equity
contributions in an aggregate amount of at least $9,000,000 and (ii) additional
financing (in the form of equity contributions or Indebtedness expressly
permitted under this Agreement) in an aggregate amount, including without
duplication of any equity financing required pursuant to clause (i) above, of at
least $21,000,000, in each case as such business plan may from time to time be
modified or superseded subject to the Lender's written consent.
<PAGE>
"Basic Agreements": a collective reference to this Agreement, the Note, the
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Security Documents, and the Guaranty Agreements.
"Borrowing Certificate": a certificate substantially in the form of Exhibit
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B hereto.
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"Borrowing Date": any Business Day on which an Advance is made to Borrower
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hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which
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commercial banks in Nashville, Tennessee, are authorized or required by law to
close.
"Business Plan": the business plan of Telscape attached as Schedule 1.02 to
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this Agreement.
"Calendar Quarter": each three-month period starting on each January 1,
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April 1, July 1, and October 1.
"Capital Stock": any and all shares, interests, participations, social
--------------
parts or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation) and any and all warrants or options to purchase any of the
foregoing.
"Capitalized Interest": the accrued but unpaid interest on any Advance that
--------------------
accrues during the Capitalized Interest Period, if any Capitalized Interest
Period is defined on Schedule 2.02 hereto, and is added to and deemed to be
--------------
principal due under any Note, in accordance with Section 2.02(b) hereof.
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"Capitalized Interest Period": as defined on Schedule 2.02 hereto.
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"Carrier": any inter-exchange carrier or other provider of
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telecommunications long distance service or any local exchange company or other
provider of local telecommunications service.
"Cash Equivalents": (a) securities issued or directly and fully guaranteed
----------------
or insured by the United States Government, or any agency or instrumentality
thereof, having maturities of not more than one year from the date of
acquisition; (b) marketable general obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality or agency thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition thereof having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (c) certificates of deposit, time deposits, eurodollar
time deposits, overnight bank deposits or bankers' acceptances having maturities
of not more than one year from the date of acquisition thereof of the Lender, or
of any U.S. domestic commercial bank the long-term debt of which is rated at the
time of acquisition thereof at least A or the equivalent thereof by Standard &
Poor's Ratings Group or A or the equivalent thereof by Moody's Investors
Service, Inc., and having capital and surplus in excess of $500,000,000; (d)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (a), (b) and (c) above entered into
with any bank meeting the qualifications specified in clause (c) above; (e)
commercial paper rated at the time of acquisition thereof at least A-2 or the
equivalent thereof by Standard & Poor's Ratings Group or P-2 or the equivalent
thereof by Moody's Investors Service, Inc., or carrying an equivalent rating by
a nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of investments, and in either case maturing within 270
days after the date of acquisition thereof; (f) interests in any investment
company which invests solely in instruments of the type specified in clauses (a)
through (e) above; and (g) other investment installments approved in writing by
the Lender and offered by any financial institution which has a combined capital
and surplus of not less than $500,000,000.
2
<PAGE>
"Certificate of Financial Condition": a certificate in the form of Exhibit
----------------------------------- -------
F hereto, executed by Borrower and Telscape.
-
"Change in Control": (a) with respect to Borrower and any Subsidiary other
-----------------
than Interlink Communications, Inc. ("Interlink"), the acquisition by any Person
or Persons other than Telscape or its Subsidiaries in the aggregate of more than
five (5%) percent of the Capital Stock of Borrower or such Subsidiary or of the
Capital Stock of Borrower or such Subsidiary having the ordinary voting power to
elect the Board of Directors or the governing body of Borrower or such
Subsidiary, (b) with respect to Interlink, the acquisition by another Person of
Capital Stock owned beneficially or of record by Telscape, and, (c) with respect
to Telscape, the acquisition by another Person or Persons in the aggregate of
either (i) twenty-five (25%) percent of such Capital Stock or (ii) such lesser
amount of such Capital Stock which would result in a change of Control or upon
the occurrence of specified events would result in a change in Control and, in
any case, the entering into of contractual or other arrangements which would
have the effect of a change of Control in Borrower or any Subsidiary, except as
permitted pursuant to Section 8.03.
"Closing Date": as defined on Schedule 1.01 hereto.
------------- --------------
"Code": the Internal Revenue Code of 1986, as amended from time to time.
----
"Collateral": as defined in Section 3.01 hereof.
---------- -------------
"Commitment": as defined in Section 2.01 hereof.
---------- -------------
"Communications Law": any and all of (i) the Communications Act of 1934, as
------------------
amended and any similar or successor federal statute, and the rules and
regulations of the FCC thereunder; and (ii) any state law governing the
provision of telecommunications services, and the rules and regulations of the
PUC, all as the same may be in effect from time to time.
"Concession": the concession to install, operate and exploit a public
----------
telecommunications network in the Federal District and the States of Guanajuato,
Jalisco, Mexico, Nuevo Leon, Puebla, Tamaulipas and Veracruz, granted to
Telereunion by the Government of Mexico through Secretaria de Comunicaciones y
Transportes (Secretary of Communications and Transportation), a Mexican federal
government agency (the "SCT"), as evidenced by the Concession Title (Titulo de
Concesion), dated June 3, 1998 issued by the SCT.
"Consent": a consent to a collateral assignment of the Nortel Purchase
-------
Agreement, a consent to a collateral assignment of any Vendor Purchase
Agreement, a Landlord Consent, and an agreement from each incumbent provider of
collocation space under any collocation and interconnection agreements with
Borrower or any Subsidiary where Collateral will be located, including without
limitation, from incumbent local exchange carriers where Collateral may be
located under collocation or other arrangements.
3
<PAGE>
"Contingent Obligation": as to any Person, any obligation of such Person
----------------------
guaranteeing, directly or indirectly, any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor; (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor; (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (d) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof.
"Contractual Obligation": as to any Person, any provision of any security
-----------------------
issued by such Person or of any agreement, instrument, or other material
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Control": the possession, directly or indirectly, of power to direct (or
-------
cause the direction of) management or policies of another Person (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise). "Controlled by" and "under common Control with" have
meanings correlative thereto.
"Conversion Date": as defined on Schedule 2.02 hereto.
---------------- --------------
"Default": any of the conditions or occurrences specified in Section 9.01,
------- ------------
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition has been satisfied.
"Default Rate": a rate of interest equal to the lesser of (i) three
-------------
percentage points over the Interest Rate or (ii) the maximum permissible rate
under applicable law in effect at any time.
"Domestic Subsidiary": any direct or indirect Subsidiary of Telscape which
--------------------
is incorporated under the laws of the United States, one of the states of the
United States, or under any territory or protectorate of the United States.
"EBITDA": for any fiscal period, Telscape's actual operating earnings from
------
ongoing operations on a consolidated basis, before interest, taxes, depreciation
and amortization for the fiscal period.
"Environmental Law": any current or future federal, state and local law
------------------
(including common law), statute, regulation, ordinance, rulings, codes, judicial
order, administrative order or terms of licenses or permits applicable to
environmental conditions (including, without limitation, conditions relating to
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, all such laws governing the employment,
generation, use, storage, disposal or transportation of toxic or hazardous
substances or wastes (including, without limitation, asbestos and petroleum
products), the Comprehensive Environmental Response, Compensation and Liability
Act, the Resource Conservation and Recovery Act, the Superfund Amendment and
Reauthorization Act of 1986, the Toxic Substances Control Act, the Clean Air
Act, the Water Pollution Control Act, the Hazardous Waste Management Act, the
Mineral Lands and Leasing Act, the Surface Mining Control and Reclamation Act,
U.S. Department of Transportation Regulations, and all similar state and local
laws and regulations, all as now or hereafter amended.
4
<PAGE>
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
-----
from time to time, and any successor statute.
"Equipment": the equipment defined in Section 3.01 hereof.
--------- -------------
"Equity Payment": any distribution of earnings or capital to any
---------------
stockholder of Telscape, Borrower or any Subsidiary, any management fee or other
fee paid to any stockholder of Telscape, Borrower or any Subsidiary not
reasonably related to services actually performed, or any redemption of equity
ownership interests in Telscape, Borrower or any Subsidiary, either directly or
indirectly, whether in cash or property or in obligations of Telscape, Borrower
or any Subsidiary.
"Event of Default": any of the events specified in Section 9.01 hereof,
------------------ ------------
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, under Section 9.01 or otherwise, has been
-------------
satisfied.
"FCC": the Federal Communications Commission of the United States of
---
America, and any successor, in whole or in part, to its jurisdiction.
"Financing Termination Date": as defined on Schedule 2.02 hereto.
---------------------------- --------------
"First Borrowing Date": the date of the first borrowing by Borrower
----------------------
hereunder.
"GAAP": subject to Section 1.02 hereof, 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
in which Telscape's independent certified public accountants concur), applied
both to classification of items and amounts.
"General Intangibles": as defined in Section 3.01 hereof.
-------------------- -------------
"Governmental Actions": actions by any Governmental Authority.
---------------------
"Governmental Authority": the federal government, any state or political
-----------------------
subdivision thereof, any city or municipal entity, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantor": Telscape and certain of Borrower's and Telscape's Significant
---------
Subsidiaries guaranteeing the Obligations of Borrower hereunder pursuant to the
provisions of Section 3.09 of this Agreement and any other Person guaranteeing
------------
the Obligations, in whole or in part, of Borrower hereunder.
"Guaranty" or "Guaranties": one or more of the Guaranty Agreements required
-------------------------
of Telscape, and certain of Borrower's and Telscape's Significant Subsidiaries
pursuant to the provisions of Section 3.09 of this Agreement.
-------------
"Indebtedness": as to any Person, at a particular time, (a) indebtedness
------------
for borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which such Person otherwise assures a
creditor against loss; (b) obligations under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases in respect of
which obligations such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which obligations such Person assures a
creditor against loss; (c) obligations of such Person to purchase or repurchase
accounts receivable, chattel paper or other payment rights sold or assigned by
such Person; and (d) indebtedness or obligations of such Person under or with
respect to letters of credit, notes, bonds or other debt instruments.
5
<PAGE>
"Initial Payment Date": as defined on Schedule 2.02 hereto.
---------------------- --------------
"Interest Only Period": as defined on Schedule 2.02 hereto.
---------------------- --------------
"Interest Payment Date": as defined on Schedule 2.02 hereto.
----------------------- --------------
"Interest Rate": as defined on Schedule 2.02 hereto.
-------------- --------------
"Landlord Consent": a consent substantially in the form of Exhibit E hereto
---------------- ---------
or in other form acceptable to Lender, to be executed by the owner/landlord,
sublessor and/or licensor (including carriers) of any real property where any of
the Collateral is to be located.
"Law": any law (including common law), constitution, statute, regulation,
---
rule, ordinance, order, injunction, writ, decree or award of any governmental
body or court of competent jurisdiction or of any arbitrator (including but not
limited to ERISA, the Code, the UCC, any applicable tax law, product safety law,
occupational safety or health law, Communications Law, Environmental Law and/or
securities laws).
"Lender's Expenses": as defined in Section 2.10 hereof.
------------------ -------------
"Lien": any mortgage, pledge, hypothecation, lien (statutory or other),
----
judgment lien, security interest, security agreement, charge or other
encumbrance, or other security arrangement of any nature whatsoever, including,
without limitation, any installment contract, conditional sale or other title
retention arrangement, any sale of accounts receivable or chattel paper, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and the filing of any financing statement under the UCC or comparable
law of any jurisdiction.
"Loans": the loans and loan facilities described in Section 2.01 hereof
----- ------------
and all Advances pursuant hereto.
"Loan Documents": a collective reference to this Agreement, the Note, the
---------------
Security Documents, the Guaranty Agreements, and all other documents,
instruments, agreements and certificates evidencing or securing any advance
hereunder or any obligation for the payment or performance thereof and/or
executed and delivered in connection with any of the foregoing.
"Lucent Credit Agreement": Credit Agreement dated as of September 29, 2000
-----------------------
among Telereunion S.A. de C.V., Telereunion International, S.A. de C.V.,
Telscape International, Inc., the other borrowers to be listed therein, any
additional borrowers from time to time, General Electric Capital Corporation, as
Administrative Agent, and the lenders from time to time party thereto, in the
form executed as of the Closing Date.
6
<PAGE>
"Material Adverse Effect": or "Material Adverse Change": a material adverse
----------------------- -----------------------
effect on, or material adverse change in (i) the business, operations or
financial condition of the Borrower or Telscape; (ii) the ability of the
Borrower or Telscape to perform its obligations under this Loan Agreement, the
Note, or the other Loan Documents; or (iii) the Lender's ability to enforce the
rights and remedies granted under this Agreement or the other Loan Documents, in
all cases whether attributable to a single circumstance or event or an
aggregation of circumstances or events.
"Maturity Date": the date defined on Schedule 2.02 hereto, on which all
-------------- -------------
principal, interest, premium, expenses, fees, penalties and other amounts due
under the Note shall be finally due and payable.
"Network": the telecommunications network to be built and operated by
-------
Telscape and its Subsidiaries in order to provide telecommunications services
pursuant to the Concession.
"New Equity": The amount of proceeds in excess of $37,000,000 (less the
-----------
liquidation amount of outstanding Class F Convertible Senior Preferred Stock of
Telscape) raised from the sale by Telscape subsequent to the date hereof of
Capital Stock of Telscape or debt subordinated to the Obligations in form and
substance satisfactory to Lender.
"Note": collectively, one or more promissory notes issued by Borrower to
----
Lender pursuant to this Agreement, and all extensions, renewals, modifications,
replacements, amendments, restatements and refinancings thereof.
"Nortel": Nortel Networks, Inc., a Delaware corporation.
------
"Nortel Equipment": the equipment and licensed or sub-licensed software
-----------------
manufactured or supplied by Nortel to Borrower with respect to which Advances
hereunder are used directly or indirectly to finance the acquisition cost
thereof at any time pursuant to the Nortel Purchase Agreement or any purchase
order issued by Borrower to Nortel or otherwise, including installation and
construction services provided by Nortel pursuant thereto.
"Nortel Purchase Agreement": the Nortel Purchase Agreement identified on
---------------------------
Schedule 4.31 hereto, together with any amendments or supplements thereto, and
--------------
any other purchase agreement between Nortel and Borrower and all purchase orders
and invoices issued pursuant thereto, all subject to the approval of Lender.
"Obligations": all indebtedness, liabilities and obligations of Borrower to
-----------
Lender of any class or nature, whether arising under or in connection with this
Agreement and/or the other Loan Documents or otherwise, whether now existing or
hereafter incurred, direct or indirect, absolute or contingent, secured or
unsecured, matured or unmatured, joint or several, whether for principal,
interest, fees, expenses, lease obligations, indemnities or otherwise,
including, without limitation, future advances of any sort, all future advances
made by Lender for taxes, levies, insurance and/or repairs to or maintenance of
the Collateral, the unpaid principal amount of, and accrued interest on, the
Note, and any expenses of collection or protection of Lender's rights, including
reasonable attorneys' fees.
"Organizational Documents": with respect to a corporation, the articles of
-------------------------
incorporation and by-laws of such corporation; with respect to a partnership,
the certificate of partnership (or limited partnership, as applicable) and
partnership agreement, together with the analogous documents for any corporate
or partnership general partner; with respect to a limited liability company, the
articles of organization and operating agreement of such limited liability
company; and in any case, any other document governing the formation and conduct
of business by such entity.
7
<PAGE>
"Payment Date": as defined on Schedule 2.02 hereto.
------------- --------------
"Payment Schedule": as defined on Schedule 2.02 hereto.
----------------- --------------
"PBGC": the Pension Benefit Guaranty Corporation established under Title IV
----
of ERISA or any other governmental agency, department or instrumentality
succeeding to its functions.
"Permits": all consents, licenses, notices, approvals, authorizations,
-------
filings, orders, registrations, and permits required by any Governmental
Authority for the construction and operation of the Equipment (excluding
Regulatory Authorizations), issued or obtained as and when required in
accordance with all Requirements of Law.
"Permitted Encumbrances": the Liens permitted under Section 8.01 hereof.
----------------------- ------------
"Permitted Preferred Cash Dividends": cash dividends with respect to
-------------------------------------
classes D, E or F of Telscape International, Inc. Convertible Senior Preferred
Stock, payable solely out of proceeds of New Equity, at any time after the first
anniversary of the Closing Date (as defined in the Lucent Credit Agreement), so
long as (i) Borrower shall fully comply with the prepayment obligations found in
Section 2.04(b) hereof, and (ii) at the time thereof and after giving effect
----------------
thereto, no Default or Event of Default has occurred and is continuing, and with
respect to each of the financial covenants set forth in Article VII, (A)
Telscape is in full compliance therewith as of the most recent date on which
such financial covenant was (or is being) measured, without requiring any waiver
thereof or amendment thereto to enable such compliance, and (B) no Default or
Event of Default could reasonably be expected to exist as of the next date on
which each financial covenant is to be measured.
"Person": an individual, corporation, limited liability company,
------
partnership, business or other trust, unincorporated association, joint venture,
joint-stock company, Governmental Authority or any other entity.
"Plan": any employee pension benefit plan to which Section 4021 of ERISA
----
applies and (i) which is maintained for employees of Telscape, the Borrower, or
any Significant Subsidiary or (ii) to which Telscape, the Borrower, or any
Significant Subsidiary made, or was required to make, contributions at any time
within the preceding five years.
"Proceeds": as defined in Section 3.01 hereof.
-------- -------------
"PUC": the public utilities commission for the state or any other
---
jurisdiction in which Borrower operates its telecommunications business or any
portion of the Equipment is located, or any successor agency, and any successor,
in whole or in part, to its functions or jurisdictions, and any other Persons
specified as such on Schedule 1.01 hereto.
--------------
"Purchase Agreement": individually and collectively, the Nortel Purchase
-------------------
Agreement and any Vendor Purchase Agreement.
"Regulatory Authorizations": all approvals, authorizations, licenses,
--------------------------
filings, notices, registrations, consents, permits, exemptions, registrations,
qualifications, designations, declarations, or other actions or undertakings now
or hereafter made by, to or in respect of any telecommunications governmental or
other regulatory authority, including, without limitation, any certificates of
public convenience and all grants, approvals, licenses, filings and
registrations from or to the FCC or PUC or under any Communications Law
necessary in order to enable Borrower to own, construct, maintain and operate
the Equipment, and any authorizations specified on Schedule 1.01 hereto.
--------------
8
<PAGE>
"Regulatory Event": any of the following events: (i) Lender becomes subject
----------------
to regulation as a "carrier," a "telephone company," a "common carrier," a
"public utility" or otherwise under any applicable law or governmental
regulation, federal, state or local, solely as a result of the transactions
contemplated by this Agreement and the other Loan Documents; (ii) Borrower,
Telscape or any Significant Subsidiary becomes subject to regulation by any
Governmental Authority in any way that is materially different from the
regulation existing at the Closing Date and that could materially adversely
affect the Borrower's, Telscape's or any Significant Subsidiary's ability to
perform its material obligations under the Loan Documents or Lender's rights
thereunder; or (iii) the FCC or PUC issues an order revoking, denying or
refusing to renew, or recommending the revocation, denial or non-renewal of, any
Regulatory Authorization.
"Reportable Event": (i) a reportable event described in Section 4043 of
-----------------
ERISA and regulations thereunder; (ii) a withdrawal by a substantial employer
from a Plan to which more than one employer contributes, as referred to in
Section 4063(b) of ERISA; or (iii) a cessation of operations at a facility
causing more than 20% of Plan participants to be separated from employment, as
referred to in Section 4062(f) of ERISA.
"Required Consents": the Governmental Authority approvals or consents of
------------------
other Persons required with respect to the execution, delivery and performance
of this Agreement and the other Loan Documents by the Borrower, Telscape, and
the Significant Subsidiaries, as described in Section 4.04 hereto.
-------------
"Requirement of Law": as to any Person, the Organizational Documents of
--------------------
such Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its properties or transactions or to
which such Person or any of its property or transactions is subject, including
without limitation, all applicable common law and equitable principles, all
provisions of all applicable state and federal constitutions, statutes, rules,
regulations and orders of governmental bodies, all Permits or Regulatory
Authorizations issued to Borrower, all Communications Laws, and all
Environmental Laws.
"Responsible Officer": with respect to a corporation, its President or any
--------------------
Vice President or Treasurer; with respect to a partnership, its general partner
(or the President, any Vice President or Treasurer of any corporate general
partner, as applicable); with respect to a limited liability company, a member
or manager (or the President, any Vice President or Treasurer of any corporate
member or manager), or the President or any Vice President of any other Person.
"Restricted Payment": means (a) any dividend or other distribution
-------------------
(whether in cash, securities or other property other than dividends of preferred
stock of Telscape paid to holders of such preferred stock) with respect to any
shares of any class of Capital Stock of Telscape or its Subsidiaries, or (b) any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any any shares of any class of
Capital Stock of Telscape or any Subsidiary or any option, warrant or other
right to acquire any such shares of Capital Stock of Telscape or any Subsidiary.
"Security Documents": this Agreement, the Consents, all financing
-------------------
statements, and any other documents granting, evidencing, or perfecting any
security interest or Lien with respect to or securing any of the Obligations.
9
<PAGE>
"Significant Subsidiaries": with regard to Telscape or Borrower, as
-------------------------
applicable (i) a direct or indirect Subsidiary having assets or revenues (as
applicable) of at least 5% of Telscape's consolidated assets or revenues
(whichever applies first) as of the Closing Date, as of the end of each of
Telscape's fiscal years thereafter, or as of the end of Telscape's fiscal
quarter immediately preceding any Borrowing Date, (ii) any Guarantor which is a
direct or indirect Subsidiary of Telscape or Borrower, and (iii) Borrower.
"Site(s)": any of the sites where Equipment is or is to be located.
-------
"Software" and "Software Licenses": any software now or hereafter owned by,
--------------------------------
or licensed to, Borrower or with respect to which Borrower has or may have
license or use rights.
"Subsidiary": as to any Person, any corporation or other entity that is an
----------
Affiliate of such Person and of which shares of stock or equity interests having
ordinary voting power with respect to the election of one or more directors or
other managers of such corporation are at the time directly or indirectly owned
or controlled by such Person (regardless of any contingency which does or may
suspend or dilute the voting rights of such class of stock). References to
"Subsidiary" shall refer to a Subsidiary of Telscape, unless otherwise provided.
"System": Telscape's complete telecommunications network or system
------
constructed and/or operated by Telscape (either directly or indirectly by a
Subsidiary or Affiliate of Telscape), of which the Equipment forms a part.
"Telecommunications": voice, video, data and internet services.
------------------
"Telscape": Telscape International, Inc., a Texas corporation, and its
--------
successors.
"UCC": the Uniform Commercial Code as the same may from time to time be in
---
effect in the State of New York, or the Uniform Commercial Code of another
jurisdiction, to the extent it may be required to apply to any item or items of
Collateral.
"Vendor": any manufacturer or supplier of Vendor Equipment or licensor or
------
supplier of Software, in each case other than Nortel.
"Vendor Equipment": any equipment, upgrades, switches and licensed or
-----------------
sub-licensed Software manufactured, or supplied to Borrower, by a Vendor.
"Vendor Purchase Agreement": any purchase agreement, together with any
---------------------------
amendments or supplements thereto, between a Vendor and Borrower or an assignor
of Borrower and all purchase orders and invoices issued pursuant thereto for the
sale of Vendor Equipment, all subject to the approval of Lender, not to be
unreasonably withheld or delayed.
1.02. Accounting Principles; Subsidiaries. Except as otherwise
-------------------------------------
provided in this Agreement, all computations and determinations as to accounting
or financial matters and all financial statements to be delivered pursuant to
this Agreement shall be made and prepared in accordance with GAAP (including
principles of consolidation where appropriate), consistently applied, and all
accounting or financial terms shall have the meanings ascribed to such terms by
GAAP unless otherwise provided herein. All accounting and financial terms
herein shall be deemed to include references to consolidated and consolidating
principles, and covenants, representations and agreements with respect to
Telscape and its properties and activities shall be deemed to refer to Telscape
and its consolidated Subsidiaries collectively unless otherwise expressly
provided.
10
<PAGE>
1.03. UCC Terms. Except as otherwise provided or amplified (but not
----------
limited) herein, terms used in this Agreement that are defined in the UCC shall
have the same meanings herein.
1.04. General Construction; Captions. All definitions and other terms
--------------------------------
used in this Agreement shall be equally applicable to the singular and plural
forms thereof, and all references to any gender shall include all other genders.
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified. The
captions and table of contents in this Agreement and the other Loan Documents
are for convenience only, and in no way limit or amplify the provisions hereof.
1.05. References to Documents and Laws. All defined terms and
------------------------------------
references in this Agreement or the other Loan Documents with respect to any
agreements, notes, instruments, certificates or other documents shall be deemed
to refer to such documents and to any amendments, modifications, renewals,
extensions, replacements, restatements, substitutions and supplements of and to
such documents. All references to statutes and related regulations shall include
any amendments thereof and any successor statutes and regulations.
ARTICLE 2: LOANS
----------------
2.01. Commitment. Subject to the terms and conditions herein provided,
----------
and so long as no Default has occurred and is continuing hereunder, Lender
agrees to lend to Borrower from time to time before the Financing Termination
Date, an aggregate principal amount, plus Capitalized Interest, if any, in the
maximum amount set forth on Schedule 2.01 hereto as the maximum principal amount
-------------
(the "Commitment"). If Borrower or Nortel should terminate the Nortel Purchase
----------
Agreement at any time prior to the Financing Termination Date, then the
Commitment shall automatically terminate, subject to Lender's right to make
further Advances hereunder, including, but not limited to, Advances under
Section 2.03. All amounts advanced hereunder shall be used solely for the
--------------
purchase of Nortel Equipment to be installed in the United States and related
services from Nortel, and amounts not exceeding the amount (if any) specified on
Schedule 2.01 may be used for legal fees, charges, expenses and closing costs
--------------
and other expenses incurred by Borrower or incurred by Lender and payable by
Borrower under Section 2.10; provided, however, that, notwithstanding the
foregoing, the Borrower may use up to 33% of the Commitment to finance the
origination fee set forth on Schedule 2.09 and, subject to approval of Lender,
to finance or refinance any Vendor Equipment installed or to be installed in the
United States and related services.
2.02. Note and Payment Terms.
-------------------------
(a) Promissory Note. The Loans shall be evidenced by the Note
----------------
substantially in the form of Exhibit A hereto, with appropriate insertions. The
---------
Note shall be executed by Borrower, payable to the order of Lender, and shall
evidence the obligation of Borrower to repay all principal amounts advanced
under or pursuant to this Agreement, together with interest and all other
amounts due thereunder. The Note shall be dated the Closing Date, have a stated
maturity that is the Maturity Date, and bear interest at the Interest Rate from
the First Borrowing Date until the Note or any amount thereunder is paid in full
(whether on the Maturity Date, by acceleration or otherwise). All schedules
attached to the Note shall be deemed a part thereof. Any such schedule may be
amended by Lender from time to time to reflect changes in the amounts includable
thereon, but the failure to attach or amend any schedule shall not diminish the
obligation of Borrower to repay all amounts due hereunder or on the Note.
11
<PAGE>
(b) Capitalized Interest Period. During the Capitalized Interest
-----------------------------
Period, interest shall accrue on all principal amounts outstanding under the
Note at the Interest Rate, and up to an aggregate of the maximum amount of
Capitalized Interest set forth on Schedule 2.02 hereto of such interest shall be
-------------
capitalized, in arrears, and added to the principal amount of the Note by
Lender, on behalf of Borrower, on the first day of each calendar month, thereby
increasing the principal amount of the Note. The Lender may also evidence such
increase by noting the date and amount of each such addition on a schedule to
the Note. Interest accruing during the Capitalized Interest Period in excess of
the maximum aggregate amount of Capitalized Interest set forth on Schedule 2.02
-------------
hereto shall be paid by Borrower quarterly in arrears, on the last Business Day
of the Calendar Quarter in which such limit is exceeded.
(c) Interest Payments. Following the Capitalized Interest Period,
------------------
interest shall continue to accrue on the principal amount outstanding on the
Note (including Capitalized Interest) at the Interest Rate and shall be payable,
in arrears, on each Interest Payment Date. Interest only shall be payable during
the Interest Only Period, and thereafter all accrued interest shall be payable
with the principal payments described below.
(d) Principal Payments. On the Conversion Date, the Note shall
-------------------
automatically convert to a term note, and all principal amounts due with respect
to the Note (including Capitalized Interest) shall be payable in installments in
accordance with the Payment Schedule set forth on Schedule 2.02 hereto,
--------------
commencing on the Initial Payment Date and on each Payment Date thereafter until
the Maturity Date. The amount of each such principal installment payment shall
be calculated, at the outset, by taking the applicable percentage (as described
on Schedule 2.02 hereto) of the amount of all principal amounts outstanding on
--------------
the Conversion Date (including Capitalized Interest); provided, however, that
the principal payment amounts shall be recalculated by Lender if any Advances
are made hereunder after the Conversion Date, based on the aggregate amount of
all Advances (including Capitalized Interest) made at any time. Borrower and
Lender understand that this payment schedule is intended to amortize fully the
principal amount of the Note and any other principal and interest amounts
outstanding will be added to the final payment on the Maturity Date. In any
event, the entire outstanding principal amount of the Note and all accrued but
unpaid interest and all other outstanding amounts due thereunder shall be paid
on the Maturity Date.
(e) Late Payments and Default Rate. Notwithstanding the foregoing,
------------------------------
if Borrower shall fail to pay within 10 days after the due date any principal
amount or interest or other amount payable under this Agreement or under the
Note, Borrower shall pay to Lender, to defray the administrative costs of
handling such late payments, an amount equal to interest on the amount unpaid,
to the extent permitted under applicable law, at the Default Rate (instead of
the Interest Rate), from the due date until such overdue principal amount,
interest or other unpaid amount is paid in full (both before and after judgment)
whether or not any notice of default in the payment thereof has been delivered
under Section 9.01 hereof. In addition, but without duplication, upon the
occurrence and during the continuance of an Event of Default, all outstanding
amounts hereunder shall bear interest at the Default Rate (instead of the
Interest Rate) until such amounts are paid in full, such Event of Default is
cured by Borrower, or such Event of Default is waived in writing by Lender.
12
<PAGE>
(f) Excess Interest. Notwithstanding any provision of the Note,
----------------
this Agreement or any other Loan Document to the contrary, it is the intent of
Lender and Borrower that Lender or any subsequent holder of the Note shall never
be entitled to receive, collect, reserve or apply, as interest, any amount in
excess of the maximum rate of interest permitted to be charged by applicable
Law, as amended or enacted from time to time. In the event Lender, or any
subsequent holder of the Note, ever receives, collects, reserves or applies, as
interest, any such excess, such amount which would be excessive interest shall
be deemed a partial prepayment of principal and treated as such, or, if the
principal indebtedness and all other amounts due are paid in full, any remaining
excess funds shall immediately be applied to any other outstanding indebtedness
of Borrower due to Lender, and if none is outstanding, shall be paid to
Borrower. In determining whether or not the interest paid or payable, under any
specific contingency, exceeds the highest lawful rate, Borrower and Lender
shall, to the maximum extent permitted under applicable law, (a) exclude
voluntary prepayments and the effects thereof as it may relate to any fees
charged by Lender, and (b) amortize, prorate, allocate, and spread, in equal
parts, the total amount of interest throughout the entire term of the
indebtedness; provided that if the indebtedness is paid and performed in full
prior to the end of the full contemplated term hereof, and if the interest
received for the actual period of existence hereof exceeds the maximum lawful
rate, Lender or any subsequent holder of any Note shall refund to Borrower the
amount of such excess or credit the amount of such excess against the principal
portion of the indebtedness, as of the date it was received, and, in such event,
Lender shall not be subject to any penalties provided by any laws for
contracting for, charging, reserving or receiving interest in excess of the
maximum lawful rate.
2.03. Procedures for Borrowing.
--------------------------
(a) Timing of Advances. Advances shall not be made more than once per
------------------
calendar month, and all Advances in any calendar month shall be made on the same
Borrowing Date. Each Advance (other than the last Advance) shall be in an
aggregate principal amount of not less than $250,000. No amounts may be borrowed
hereunder on or after the Financing Termination Date. Lender is hereby
authorized to retain from each Advance all amounts of Lender's Expenses accrued
and unpaid by Borrower, for which invoices have been sent to Borrower prior to
such Advance. In any event, all outstanding legal fees, charges and expenses not
paid by Borrower prior to any Borrowing Date shall be paid before any Advance is
made or concurrently with such Advance.
(b) Borrowing Certificates. To request an Advance hereunder, Borrower
----------------------
shall send to Lender, at least five Business Days prior to the requested
Borrowing Date, a completed Borrowing Certificate, along with invoices and such
other supporting documentation as Lender may reasonably request. Lender is
hereby authorized to add to any Borrowing Certificate all amounts payable by
Borrower to Lender in respect of legal fees, charges and expenses arising or
incurred by Lender, to the extent such fees, charges and expenses have then been
incurred or charged and may be paid from proceeds of the Loans.
(c) Transmission of Advances. Advances shall be made by wire transfer
------------------------
to the account(s) specified in the applicable Borrowing Certificate, except that
(i) proceeds of the Loans may be transmitted, at Lender's option, directly to
any Nortel or Vendor account for payment of any unpaid Nortel or Vendor
invoices, and (ii) Advances shall be made to Borrower only to the extent that
Borrower provides Lender with satisfactory evidence that the amount of such
Advance will be paid to Nortel or the Vendor. No further authorization shall be
necessary for any such direct disbursements, and each such Advance shall satisfy
pro tanto the obligations of Lender under this Agreement.
(d) Borrowing Dates. Advances shall be made by Lender on the Borrowing
---------------
Date specified in the applicable Borrowing Certificate if all conditions for
such Advance have been satisfied, or on such later Business Date as all
conditions for such Advance shall have been satisfied, as determined by Lender.
13
<PAGE>
(e) Advances After Default. At its option, after the occurrence and
-----------------------
continuance of a Default, Lender may but shall not be obligated to make advances
of portions of the Loans to any Person (including without limitation Nortel and
any Vendor, supplier, subcontractor and materialman) to whom Lender in good
faith determines payment is due with respect to the Equipment, and any proceeds
so disbursed by Lender shall be deemed disbursed as of the date on which the
Person to whom payment is made receives the same. No further authorization from
Borrower shall be necessary to warrant such direct advances, and the execution
of this Agreement by Borrower shall, and hereby does, constitute an irrevocable
authorization and power of attorney so to advance proceeds hereunder. All such
Advances shall satisfy pro tanto the obligations of Lender hereunder and shall
be secured by the Security Documents as fully as if made directly to Borrower.
2.04. Prepayments.
-----------
(a) Voluntary Prepayments. The Borrower may, at its option, at
----------------------
any time and from time to time, prepay the Loans in whole or in part, upon at
least five Business Days prior written notice to Lender specifying the date and
amount of prepayment, in a minimum amount of $50,000, plus the premium described
below, and all accrued but unpaid interest thereon. Such notice shall be
irrevocable and the principal amount specified in such notice shall be due and
payable on the date specified together with accrued interest on the amount
prepaid. Any such prepayment shall be subject to a prepayment premium equal to a
percentage of the amount prepaid as follows: 3% if the prepayment is made on or
before the first anniversary of the Closing Date; 2% if the prepayment is made
after the first anniversary but on or before the second anniversary of the
Closing Date; 1% if the prepayment is made after the second anniversary but on
or before the third anniversary of the Closing Date, and without a premium if
the prepayment is made after the third anniversary of the Closing Date. Amounts
prepaid may not be borrowed again and shall be applied as provided in Section
2.04(c). Excess interest payments under Section 2.02(g), prepayments made from
insurance proceeds pursuant to Section 6.03, or prepayments made with any
condemnation proceeds shall not be subject to a prepayment premium. The
prepayment premium shall not be required for amounts paid pursuant to an
acceleration of the obligations after the occurrence of an Event of Default.
(b) Mandatory Prepayment. If and on each occasion that Telscape or
--------------------
any Subsidiary shall make any Permitted Preferred Cash Dividends, the record
date for which shall occur during the period from and after the first
anniversary of the Closing Date and before the second anniversary of the Closing
Date, then, on or before the record date for such Permitted Preferred Cash
Dividends, the Borrower shall make a prepayment on the Loans, out of the
proceeds of the New Equity raised in connection with such Permitted Preferred
Cash Dividends, in an amount equal to the amount of such Permitted Preferred
Cash Dividends.
(c) Application of Prepayments. Any prepayments shall be applied
----------------------------
first to interest, then to premium, then to expenses, and then to the
installments of principal in reverse chronological order.
2.05. Computation of Interest. Interest shall be calculated daily on
-------------------------
the basis of a 360-day year for the actual days elapsed in the period during
which it accrues.
2.06. Payments. All payments and prepayments to be made in respect of
--------
principal, interest, prepayment premiums, or other amounts due from Borrower
hereunder or under the Note shall be payable on or before 1:00 p.m., Nashville
time, on the day when due, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, and an action therefor shall
immediately accrue. Such payments shall be made to Lender at Lender's office at
501 Corporate Centre Drive, Franklin, Tennessee 37067, or such other location
specified in writing by Lender, in immediately available funds, without setoff,
recoupment, counterclaims or any other deduction of any nature.
14
<PAGE>
2.07. Indemnity. Borrower hereby indemnifies Lender against any losses,
---------
claims, penalties, expenses, actions, suits, obligations, liabilities and Liens
(and all costs and expenses, including reasonable attorneys' fees incurred in
connection therewith), that Lender has sustained or incurred or may sustain or
incur in connection with any of the Collateral, or the enforcement, performance
or administration of the Loan Documents, or as a consequence of any default by
Borrower in the performance or observance of any covenant or condition contained
in this Agreement or the Loan Documents, including without limitation, the
breach of any representation or warranty, any failure of Borrower to pay when
due (by acceleration or otherwise) any principal, interest, fee or any other
amount due hereunder or under the Note, and any failure of Borrower to comply
with all applicable Requirements of Law (collectively, "Claims"), except to the
extent of any Claims proximately caused by Lender's gross negligence or willful
misconduct. Borrower's obligations under this Section 2.07 shall be part of the
Obligations and shall be secured by the Collateral. Borrower agrees that upon
written notice by Lender of the assertion of any Claims, Borrower shall, at
Lender's option, either assume full responsibility for, or reimburse Lender for
the reasonable costs and expenses of, the defense thereof. Neither Lender nor
Borrower shall have any liability for consequential or incidental damages of any
nature. The provisions of this Section 2.07 shall survive the termination of
this Agreement and payment of the Obligations; however, upon the payment of the
other Obligations, Lender shall release its Lien on the Collateral.
2.08. Use of Proceeds. The proceeds of the Advances hereunder shall be
----------------
used by Borrower only for the purposes and in the amounts described in Section
2.01 hereof, and no amounts repaid may be reborrowed.
2.09. Fees. Borrower shall pay Lender the fees described on Schedule
---- --------
2.09 hereto in connection with this Agreement.
2.10. Lender's Expenses. Borrower agrees (a) to pay or reimburse Lender
-----------------
for all its reasonable costs, fees, charges and expenses incurred or arising in
connection with the negotiation, review, preparation and execution of this
Agreement, the Loan Documents, any commitment or proposal letter, or any
amendment, supplement, waiver, modification to, or restructuring of this
Agreement, the Obligations or the other Loan Documents, including, without
limitation, reasonable legal fees and disbursements, expenses, document charges,
and other charges and expenses of Lender; (b) to pay or reimburse Lender for all
its reasonable costs, fees, charges and expenses incurred in connection with the
administration of the Loans or the enforcement, protection or preservation of
any rights under or in connection with this Agreement or any other Loan
Documents, including, without limitation, reasonable legal fees and
disbursements, audit fees and charges, and all out-of-pocket expenses; (c) to
pay, indemnify, and hold Lender harmless from, any and all recording and filing
fees and taxes and any and all liabilities with respect to, or resulting from
any delay in paying, any stamp, excise and other taxes (excluding income and
franchise taxes and taxes of similar nature), if any, which may be payable or
determined to be payable in connection with the execution and delivery or
recordation or filing of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement and the other Loan Documents.
All of the amounts described in this section are referred to collectively as the
"Lender's Expenses," shall be payable upon Lender's demand, and shall accrue
interest at the Interest Rate in effect when such demand is made from 20 days
after the date of demand until paid in full. All Lender's Expenses, and interest
thereon, shall be part of the Obligations and shall be secured by the
Collateral. The agreements in this Section 2.10 shall survive repayment of all
other Obligations not constituting Lender's Expenses. All Lender's Expenses
that are outstanding on any Borrowing Date shall be paid before or with such
Advance. If Borrower has not paid to Lender the amount of all Lender's Expenses
billed to Borrower at least five Business Days before such Borrowing Date,
Lender shall be authorized to retain from any Advance on such Borrowing Date the
amount of such Lender's Expenses that remain unpaid. Borrower's obligation to
pay Lender's Expenses shall not be limited by any limitation on the amount of
the Commitment that may be designated as available for such purposes, and any
amounts so designated shall be used to pay Lender's Expenses accrued at the time
of any Advance before any of Borrower's legal fees or similar expenses.
15
<PAGE>
2.11. Increased Costs and Taxes. (a) If, due to either (i) the
----------------------------
introduction of or any change (other than any change by way of imposition or
increase of reserve requirements, in the case of Variable Rate Advances) in or
in the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to Lender of agreeing to make or making, funding or maintaining Variable
Rate Advances, then the Borrower shall from time to time, upon demand by the
Lender, pay to the Lender additional amounts sufficient to compensate such
Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower by the Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(b) If the Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital (or the rate of return on capital) required or
expected to be maintained by the Lender or any corporation controlling the
Lender and that the amount of commitment, or offer or agreement, to lend
hereunder and other commitments, or offers or agreements, of this type, then,
upon notice by the Lender, the Borrower shall immediately pay to the Lender,
from time to time as specified by the Lender, additional amounts sufficient to
compensate the Lender, or such corporation in the light of such circumstances,
to the extent that the Lender reasonably determines such increase in capital (or
reduction in rate of return) to be allocable to the existence of Lender's
commitment, or offer or agreement, to lend hereunder. Such notice as to such
amounts submitted and delivered to the Borrower by the Lender shall set forth in
summary fashion the basis of such allocation and shall be conclusive and binding
for all purposes, absent manifest error.
(c) Any and all payments by Borrower hereunder or under a Note
executed by Borrower shall be made, in accordance with Section 2.11, free and
------------
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto (all such taxes, levies, imposts, deductions, charges, withholdings and
liabilities in respect of payments hereunder or under the Note being hereinafter
referred to as "Taxes"). If Borrower shall be required by law to deduct any
-----
Taxes from or in respect of any sum payable hereunder or under any Note executed
by Borrower to Lender, (i) the sum payable by Borrower shall be increased as may
be necessary so that, after Borrower and Lender have made all required
deductions (including deductions applicable to additional sums payable under
this Section 2.11), Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Borrower shall make all such
deductions, and (iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
(d) In addition, Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Note or from the execution,
delivery or registration of, performance under, or otherwise with respect to,
this Agreement or the Note (hereinafter referred to as "Other Taxes").
-----------
16
<PAGE>
(e) Borrower shall indemnify Lender for and hold it harmless against
the full amount of Taxes and Other Taxes, and for the full amount of taxes of
any kind imposed by any jurisdiction on amounts payable under this section
imposed on or paid by Lender and any liability (including penalties, additions
to tax, interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date Lender makes written
demand therefor.
(f) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to Lender, at its address referred to above, the original
or a certified copy of a receipt evidencing such payment.
(g) In the event that Lender determines in its reasonable discretion,
that it has actually and finally realized a refund of or credit for taxes
withheld or paid pursuant to this section, which credit or refund is
identifiable by Lender as being a result of taxes withheld in connection with
sums payable hereunder or under any other Loan Document, Lender shall promptly
notify Borrower and shall remit to Borrower, the amount of such refund or credit
allocable to payments made hereunder or under the other Loan Documents;
provided, however, that in the event of any subsequent disallowance of any such
-------
refund or credit on account of which Lender has made a payment pursuant to this
paragraph, the amount so disallowed shall be deemed to be a Tax for which Lender
shall be entitled to indemnification under of this section, but only to the
extent of any payment by such Lender pursuant to this paragraph.
ARTICLE 3: COLLATERAL AND SECURITY AGREEMENT
--------------------------------------------
3.01. Grant of Security Interest. The Borrower (as debtor) hereby
-----------------------------
assigns to Lender as collateral, and grants to Lender (as secured party) a
continuing security interest in and to, all of Borrower's right, title and
interest in and to the following kinds and types of property, whether now owned
or hereafter acquired or arising, wherever located, together with all
substitutions therefor and all accessions, replacements and renewals thereof,
and in all proceeds and products thereof (collectively, the "Collateral"):
(a) All Nortel Equipment financed or refinanced with proceeds of
an Advance and all Vendor Equipment financed or refinanced with proceeds of an
Advance, and in each case any and all additions, substitutions, and replacements
to or of any of the foregoing, together with all attachments thereto (other than
attachments (i) not financed or refinanced with proceeds of an Advance or which
are not required to be attached thereto by the terms of this Agreement, and (ii)
which are not an integral part of the Collateral, and are severable from the
Collateral without damaging the functionality or value of the remaining
Collateral), and all components, parts, improvements, upgrades, and accessions
installed thereon or affixed thereto, including installation services provided
by Nortel or any other Vendor in connection therewith (collectively,
"Equipment") and the Borrower's rights under each Nortel Purchase Agreement and
each Vendor Purchase Agreement relating to such Equipment;
(b) All general intangibles and intangible property (including all
contracts and contract rights) constituting part of, or provided by or through
Nortel or any Vendor in connection with, the Equipment, including without
limitation insurance proceeds and amounts due under insurance policies,
licenses, license rights, rights in intellectual property, Software, Software
Licenses, computer programming (including source codes, object codes, and all
other embodiments of computer programming or information), refunds, warranties
and indemnification rights, and all amounts owed at any time to Borrower by
Lender or Nortel or by a Vendor in connection with a Vendor Purchase Agreement
relating to Equipment (collectively, "General Intangibles");
17
<PAGE>
(c) All proceeds and products of any of the foregoing, including
without limitation (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Borrower from time to time with respect to any
of the Collateral; (ii) any and all payments (in any form whatsoever) made or
due and payable to Borrower from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority); and (iii) any and all cash proceeds and
non-cash proceeds in the form of equipment, inventory, contracts, accounts,
general intangibles, chattel paper, documents, instruments, securities, or other
proceeds, but excluding any revenues or accounts receivable paid to or due the
Borrower as a result of the operation of the Collateral in the Borrower's normal
course of business (collectively, "Proceeds").
3.02. Priority of Security Interests. The security interests granted by
------------------------------
Borrower to Lender are and shall be continuing and indefeasible first-priority
security interests in the Collateral, subject to no Liens except for Permitted
Encumbrances to the extent provided in Section 8.01.
-------------
3.03. Further Documentation; Pledge of Instruments. At any time and
------------------------------------------------
from time to time, upon the written request of Lender, and at the sole expense
of Borrower, Borrower shall promptly execute, deliver and record any documents,
instruments, agreements and amendments, and take all such further action, as
Lender may reasonably deem desirable in obtaining the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing statements or amendments under the UCC.
Borrower also hereby authorizes Lender to file any such financing statement or
amendment thereto, without the signature of Borrower, or with a copy or telecopy
of Borrower's signature, to the extent permitted by applicable law, or to
execute any financing statement or amendment thereof on behalf of Borrower as
Borrower's attorney-in-fact. If any amount payable under or in connection with
any of the Collateral shall be or become evidenced by any promissory note or
other instrument or any certificated securities, such note, instrument or
certificate shall be immediately pledged and delivered to Lender hereunder, duly
endorsed in a manner satisfactory to Lender. Lender acknowledges and recognizes
that Borrower's assignment of or grant of a security interest in its Regulatory
Authorizations may be subject to restrictions imposed by the FCC or PUC on
Borrower's ability to assign its interest in or transfer control of any
Regulatory Authorizations. Likewise, Lender acknowledges and recognizes that
Borrower's assignment of or grant of a security interest in any state or local
franchises or licenses may be subject to similar government restrictions.
Borrower acknowledges, however, that the value of the Regulatory Authorizations
is a critical part of Lender's collateral package, and agrees to use its best
efforts to effect the transfer of such Regulatory Authorizations to Lender or
its designee upon the occurrence of an Event of Default.
3.04. Further Identification of Collateral. Borrower shall furnish to
--------------------------------------
Lender from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Lender may reasonably request, all in reasonable detail.
3.05. Remedies. Lender shall have all the rights and remedies of a
--------
secured party under the UCC, and shall be entitled to exercise any and all
remedies available under Article 9 hereof or otherwise available at law or in
equity upon the occurrence of an Event of Default.
18
<PAGE>
3.06. Standard of Care. Lender shall be deemed to have exercised
------------------
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as Borrower requests in
writing, but Lender's failure to comply with any such request shall not of
itself be deemed a failure to exercise reasonable care, and no failure of Lender
to preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by Borrower, shall be deemed a failure to exercise reasonable
care in the custody or preservation of such Collateral.
3.07. Advances to Protect Collateral. All insurance expense and all
---------------------------------
expenses of protecting, storing, warehousing, insuring, handling, maintaining
and shipping the Collateral (including, without limitation, all rent payable by
Borrower to any landlord of any premises where any of the Collateral may be
located) and any and all taxes shall be borne and paid by Borrower. Lender may
(but shall not be obligated to) make advances to preserve, protect or obtain any
of the Collateral, including advances to cure defaults under any lease
agreements for Sites or advances to pay taxes, insurance and the like, and all
such advances shall become part of the Obligations owing to Lender hereunder and
shall be payable to Lender on demand, with interest thereon from the date of
such advance until paid at the Default Rate in effect on the date of such
advance.
3.08. License to Use. Lender is hereby granted a license or other right
--------------
to use after and during the continuance of an Event of Default, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade names,
trademarks and advertising matter, or any tangible or intangible property or
rights of a similar nature as it pertains to the Collateral, in advertising for
sale and selling any Collateral, and Borrower's rights under all licenses and
franchise agreements with respect to the Collateral shall inure to Lender's
benefit.
3.09. Guarantees. Payment of the Borrower's Obligations shall also be
----------
unconditionally guaranteed by Telscape, pursuant to the form of Guaranty
Agreement attached as Exhibit G to this Agreement, and by each existing and each
---------
future Significant Subsidiary which is a Domestic Subsidiary. In the event that
the Guarantors (excluding Telscape) have assets or revenues (as applicable) in
the aggregate on a non-consolidated basis of less than 90% of Telscape's
domestic consolidated assets or revenues (whichever applies first) as of the
Closing Date, as of the end of each of Telscape's fiscal years thereafter, or as
of the end of Telscape's fiscal quarter immediately preceding any Borrowing
Date, then Borrower shall cause additional direct or indirect Domestic
Subsidiaries of Telscape designated by the Borrower and acceptable to the Lender
to execute and deliver Guaranty Agreements in the form attached as Exhibit H to
---------
this Agreement so that the domestic assets and revenues (as applicable) in the
aggregate on a non-consolidated basis of all of the Guarantors (excluding
Telscape) that are also Domestic Subsidiaries (including each newly-designated
Significant Subsidiary) exceeds 90% of Telscape's domestic consolidated assets
and 90% of Telscape's domestic consolidated revenues, as applicable.
3.10. Collateral Assignment of Nortel Purchase Agreement. On the
-------------------------------------------------------
Closing Date, the Borrower shall assign to the Lender, as additional collateral
security, all of the Borrower's right, title and interest in and to the Nortel
Purchase Agreement pursuant to the form of Collateral Assignment of Purchase
Agreement attached as Exhibit I to this Agreement and shall obtain the consent
of Nortel to that assignment. Borrower shall make future collateral assignments
to the Lender of any additional purchase agreements subsequently entered into
with Nortel and shall use its reasonable efforts to deliver consents to the
Lender from Nortel for those subsequent assignments within 10 business days
after the effective date of each subsequent purchase agreement using
substantially the same forms as attached as exhibits to this Agreement.
19
<PAGE>
3.11. Release of Security Interest. Upon the payment of all amounts
-------------------------------
due under the Notes and all of Lender's Expenses, Lender shall release its
security interest in the Collateral and any indemnity obligations of Borrower to
Lender which survive the payment thereafter shall become unsecured
notwithstanding any other provision in this Loan Agreement.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES
-----------------------------------------
Borrower hereby represents and warrants to Lender as follows:
4.01. Organization and Qualification. Each of Telscape, the Borrower,
-------------------------------
and each Subsidiary is duly organized, validly existing and in good standing as
a corporation under the laws of its state of organization. Telscape, the
Borrower, and each Subsidiary is duly qualified to do business and in good
standing in each jurisdiction in which the failure to receive or retain such
qualification would have a Material Adverse Effect.
4.02. Authority and Authorization. Each of Telscape, the Borrower, and
---------------------------
each Significant Subsidiary has all requisite corporate right, power, authority
and legal right to execute and deliver and perform its obligations under the
Loan Documents to which it is a party, to make and secure (as the case may be)
the borrowings provided for herein, and to execute and deliver and to perform
its obligations under the Loan Documents to which it is a party. Each of
Telscape's, the Borrower's and each Significant Subsidiary's execution, delivery
and performance of the Loan Documents to which it is a party Basic Agreements
have been duly and validly authorized by all necessary corporate proceedings on
the part of Telscape, the Borrower, and each Significant Subsidiary.
4.03. Execution and Binding Effect. This Agreement, the Note, and all
------------------------------
other Basic Agreements have been or will be duly and validly executed and
delivered by Telscape, the Borrower, and each Significant Subsidiary, as
applicable, and constitute or, when executed and delivered, will constitute the
legal, valid and binding obligations of Telscape, the Borrower, and each
Significant Subsidiary, as applicable, enforceable in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other laws affecting
creditors' rights generally.
4.04. Governmental Authorizations. Except for the consents identified
----------------------------
on Schedule 4.04 hereto (the "Required Consents"), no authorization, consent,
-------------- -----------------
approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any Governmental
Authority (other than the filing of financing statements and continuation
statements) is or will be necessary in connection with the execution and
delivery of this Agreement, the Note, or any other Loan Documents by Telscape,
the Borrower, or any Significant Subsidiary; the consummation of the
transactions herein or therein contemplated; the performance of or compliance by
Telscape, the Borrower, and each Significant Subsidiary with the terms and
conditions hereof or thereof; or the legality, validity and enforceability
hereof or thereof.
4.05. Regulatory Authorizations. Telscape, the Borrower, and the
--------------------------
Significant Subsidiaries collectively hold all authorizations, permits and
licenses required by the FCC, the PUC, or any Communications Law for the
construction and operation of the System, and all such Regulatory Authorizations
are in full force and effect, are subject to no further administrative (except
as set forth in Schedule 4.05) or judicial review, and are therefore final. The
-------------
Lender will not by reason of the execution, delivery and performance (other than
the enforcement of remedies) of any of the Loan Documents be subject to the
regulation or control of either the FCC or the PUC. The Regulatory
Authorizations are described on Schedule 4.05.
--------------
20
<PAGE>
4.06. Material Agreement; Absence of Conflicts. Except as set forth on
-----------------------------------------
Schedule 4.06 hereof, the execution and delivery of this Agreement, the Note,
--------------
and the other Loan Documents; the consummation of the transactions herein or
therein contemplated; and the performance of or compliance with the terms and
conditions hereof or thereof by Telscape, the Borrower, and each Significant
Subsidiary will not (a) materially violate any applicable Law; (b) conflict with
or result in a breach of or a default under the Organizational Documents of
Telscape, the Borrower, or any Subsidiary, or conflict with or result in a
material breach of or default under any agreement or instrument to which
Telscape, the Borrower, or any Subsidiary is a party or by which Telscape, the
Borrower, or any Subsidiary or its properties are bound; or (c) result in the
creation or imposition of any Lien upon any property (now owned or hereafter
acquired) of Telscape, the Borrower, or any Subsidiary, except as otherwise
contemplated by this Agreement.
4.07. No Restrictions. None of Telscape, the Borrower, or any
----------------
Significant Subsidiary is not a party or subject to any contract, agreement or
restriction in its Organizational Documents that materially and adversely
affects its business or the use or ownership of any of its properties or
operation of its business. Except as set forth on Schedule 4.07 hereof, none of
-------------
Telscape, the Borrower, or any Subsidiary is not a party or subject to any
contract or agreement which restricts its right or ability to incur
Indebtedness. None of Telscape, the Borrower, or any Subsidiary has not agreed
or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of the Collateral, whether now owned or hereafter
acquired, to be subject to a Lien that is not a Permitted Encumbrance.
4.08. Financial Statements. The Borrower has furnished to Lender the
---------------------
most recent annual or quarterly financial statements of Telscape, certified by a
Responsible Officer of Telscape, including balance sheets and related statements
of income and retained earnings and statements of cash flows, as described on
Schedule 4.08 hereof. Such financial statements (including the notes thereto)
--------------
present fairly the financial condition of Telscape on a consolidated basis as of
the end of such fiscal period and the results of its operations and the changes
in its financial position for the fiscal period then ended, all in conformity
with GAAP applied on a basis consistent with that of the preceding fiscal
period. Any projections and pro forma financial statements delivered by Borrower
to Lender were prepared in good faith, based on reasonable assumptions,
including (without limitation) the cost of capital, but Borrower makes no
representation as to the accuracy of any such projections.
4.09. Financial Accounting Practices. Each of Telscape, the Borrower,
-------------------------------
and each Subsidiary has made and kept books, records and accounts which, in
reasonable detail, accurately and fairly reflect its respective transactions and
dispositions of its assets, and each of Telscape, the Borrower, and each
Subsidiary shall maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (a) transactions are executed in accordance
with management's general or specific authorization; (b) transactions are
recorded as necessary (i) to permit preparation of financial statements in
conformity with GAAP and (ii) to maintain accountability for assets; (c) access
to assets is permitted only in accordance with management's general or specific
authorization; and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
4.10. Accurate and Complete Disclosure. No representation or warranty
----------------------------------
made by Borrower under this Agreement and no statement made by Telscape, the
Borrower, or any Subsidiary in any financial statement, certificate, report,
exhibit or document furnished by Telscape, the Borrower, or a Subsidiary to
Lender pursuant to or in connection with this Agreement (including, without
limitation, any filings with the Securities Exchange Commission, the FCC, or the
PUC) is or was false or misleading as of the date made in any material respect
(including the omission of any material information necessary to make such
representation, warranty or statement not misleading); it being understood,
however, that Telscape, the Borrower, and the Subsidiaries make no
representations as to any projections furnished to Lender. There are no facts
that evidence or create a Material Adverse Effect, or, so far as Borrower can
now foresee, will evidence or create a Material Adverse Effect, which has not
been set forth in the financial statements referred to in Section 4.08 hereof or
------------
otherwise disclosed in writing to Lender prior to the First Borrowing Date.
21
<PAGE>
4.11. No Event of Default; Compliance with Material Agreements. No
------------------------------------------------------------
event has occurred and is continuing and no condition exists which constitutes a
Default or an Event of Default after giving effect to the Advance to be made on
the First Borrowing Date. As of the date hereof, none of Telscape, the Borrower,
or any Subsidiary is in violation of any term of its material agreements or
instruments to which it is a party or by which it or its properties is bound.
4.12. Litigation. Except as set forth in Schedule 4.12, there is no
---------- -------------
action, suit or proceeding pending or, to the knowledge of Telscape, the
Borrower, or a Subsidiary threatened by or before any Governmental Authority
against or affecting Telscape, the Borrower, any Subsidiary, or any of their
properties, rights or licenses which if adversely decided would have a Material
Adverse Effect.
4.13. Rights to Property; Intellectual Property. The Borrower has good
-----------------------------------------
and marketable title to the Collateral, subject only to Permitted Encumbrances.
Each of Telscape, the Borrower and their respective Subsidiaries has good and
marketable title to all personal and real property purported to be owned by them
as reflected in the most recent balance sheet referred to in Section 4.08 hereof
------------
(except as sold or otherwise disposed of in the ordinary course of business).
Each of Telscape, the Borrower and their respective Subsidiaries owns or
possesses the right to use all patents, trademarks, service marks, trade names,
copyrights, know-how, franchises, software and software licenses necessary for
the operation of their business, free from burdensome restrictions other than
such defects in title or limitations in rights to use that individually or in
the conjunction with each other do not or will not cause a Material Adverse
Effect.
4.14. Financial Condition. Telscape's financial condition is
--------------------
accurately described in the Certificate of Financial Condition executed by
Telscape and the Borrower pursuant to this Agreement.
4.15. Taxes. Telscape's, the Borrower's, and each Significant
-----
Subsidiary's federal tax identification number is set forth on Schedule 1.01
-------------
hereto. Except as disclosed on Schedule 4.15 hereto, all tax returns required
-------------
to be filed by Telscape, the Borrower, or any Subsidiary have been properly
prepared, executed and filed, and all taxes, assessments, fees and other
governmental charges upon Telscape, the Borrower, and each Subsidiary or upon
any of its properties, incomes, sales or franchises which are shown to be due
and payable thereon have been paid, other than taxes or assessments the validity
or amount of which Telscape, the Borrower, or the Subsidiary is determining or
contesting in good faith or for which Telscape, the Borrower, or the Subsidiary
has filed appropriate extensions. The reserves and provisions for taxes on the
books of Telscape, the Borrower, and each Subsidiary are adequate for all open
years and for its current fiscal period.
4.16. No Material Adverse Change. Since the date of the financial
-----------------------------
statements referenced in Section 4.08, there has been no Material Adverse Change
------------
except as disclosed on Schedule 4.16.
4.17. No Regulatory Event. No Regulatory Event has occurred and is
---------------------
continuing.
4.18. Trade Relations. There exists no actual or, to Telscape's, the
----------------
Borrower's or any Subsidiary's knowledge, threatened termination, cancellation
or limitation of, or any modification or change in, the business relationship
between Telscape, the Borrower, or any Subsidiary and any Carrier, any labor
organizations, any customer, or any group thereof whose agreements with
Telscape, the Borrower, or any Subsidiary or use of the System individually or
in the aggregate are material to the business of Telscape, the Borrower, or any
Subsidiary, or with any material Supplier, and there exists no present condition
or state of facts or circumstances which would have a Material Adverse Effect or
prevent Telscape, the Borrower, or any Subsidiary from conducting its business
after the consummation of the transactions contemplated by this Agreement.
22
<PAGE>
4.19. No Brokerage Fees. No brokerage or other fee, commission or
-------------------
compensation is to be paid by Telscape, the Borrower, or any Subsidiary to any
Person in connection with the Loans to be made hereunder other than to the
Lender. The Borrower hereby indemnifies Lender against any claims brought
against Lender for brokerage fees or commissions of any Person based on an
agreement with Telscape, the Borrower, or any Subsidiary and agrees to pay all
expenses incurred by Lender in connection with the defense of any action or
proceeding brought to collect any such brokerage fees or commissions.
4.20. Margin Stock; Regulation U. The 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 margin stock. The making of
the Advances and the use of the proceeds thereof will not violate Regulations G,
U or X of the Board of Governors of the Federal Reserve System.
4.21. Investment Company; Public Utility Holding Company. The Borrower
--------------------------------------------------
is not an "investment company" or a "company controlled by an investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or a "holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.22. Personal Holding Company; Subchapter S. The Borrower is not a
-----------------------------------------
"personal holding company" as defined in Section 542 of the Code. The Borrower
is not a "Subchapter S" corporation within the meaning of the Code.
4.23. ERISA. (i) With respect to any Plan, to Borrower's knowledge,
-----
there is no Reportable Event currently under consideration by the PBGC which may
reasonably result in any material liability to the PBGC with respect to any
Plan, (ii) no Plan has been terminated, (iii) no trustee has been appointed by
any United States District Court to administer any Plan, (iv) the PBGC has not
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any such Plan, (v) neither Telscape, the Borrower, nor any
Significant Subsidiary has withdrawn, completely or partially, from any Plan,
and (vi) neither Telscape, the Borrower, nor any Significant Subsidiary has
incurred secondary liability for withdrawal liability payments under any Plan.
4.24. Environmental Warranties. Telscape, the Borrower, and each
-------------------------
Subsidiary is in compliance with all Environmental Laws applicable to Telscape,
the Borrower, or any Subsidiary, or its business or to the real or personal
property owned, leased or operated by Telscape, the Borrower, or any Subsidiary.
None of Telscape, the Borrower, or any Subsidiary has received notice of, nor is
aware of, any violations or alleged violations, or any liability or asserted
liability, under any such Environmental Laws, with respect to Telscape, the
Borrower, any Subsidiary, or their business or properties.
23
<PAGE>
4.25. Security Interests. The provisions of Article 3 hereof are
------------------- ----------
effective to create in favor of Lender a legal, valid and enforceable Lien on or
security interest in all of the Collateral, and, when the recordings and filings
described on Schedule 4.25 hereto have been properly made in the public offices
-------------
listed on said Schedule 4.25, this Agreement will create a perfected
--------------
first-priority security interest in all right, title, estate and interest of
Borrower in the Collateral, and subject to no other Liens, except for Permitted
Encumbrances. All action necessary or desirable to protect and perfect such
security interest in each item of the Collateral will have been duly taken prior
to the First Borrowing Date. The recordings and filings shown on said Schedule
--------
4.25 are all the actions necessary or advisable in order to establish, protect
---
and perfect the interest of Lender in the Collateral.
4.26. Place of Business. The chief executive office of Borrower is
-------------------
identified on Schedule 4.26 hereto. The Borrower's principal place of business
-------------
in the state(s) where the Equipment is located is identified on Schedule 4.26
-------------
hereto. The Borrower's records concerning the Collateral are kept at one or all
of these addresses.
4.27. Location of Collateral. The Collateral is and will be kept at the
----------------------
locations identified on Schedule 4.26 hereto or such other locations as may be
-------------
permitted under Section 8.04.
-------------
4.28. Clear Title To Collateral. The Borrower is the sole owner of
----------------------------
each item of the Collateral, having good and marketable title thereto, free and
clear of any and all Liens, claims or rights of others, except for the security
interest granted herein to Lender and the other Permitted Encumbrances.
4.29. Assumed Names. Except as set forth on Schedule 4.29 hereto, the
-------------- -------------
Borrower does not conduct business under any assumed names or trade names and
has not conducted business under any other names or any assumed names or trade
names at any time prior to the date hereof.
4.30. Transactions with Affiliates. No Affiliate and no officer or
------------------------------
director of Telscape, the Borrower, or any Subsidiary or any individual related
by blood, marriage, adoption or otherwise to any such officer or director, or
any Person in which any such officer, director or individual related thereto
owns any beneficial interest, is a party to any agreement, contract, commitment
or transaction with Telscape, the Borrower, or any Subsidiary or has any
material interest in any material property used by Telscape, the Borrower, or
any Subsidiary, except as set forth on Schedule 4.30 hereto.
--------------
4.31. Nortel Purchase Agreement. The Nortel Purchase Agreement for
---------------------------
Nortel Equipment already acquired has been duly executed and delivered by the
Borrower and Nortel; is in full force and effect; and a true, correct and
complete copy thereof (including all annexes, attachments and amendments
thereto) has been delivered to Lender, and there are no other side letters,
waivers or other agreements affecting the terms thereof.
ARTICLE 5: CONDITIONS OF CLOSING
--------------------------------
On or before the Closing Date, the following conditions shall have been
satisfied:
5.01. Borrower's, Telscape's and the Other Guarantors' Certificate. A
--------------------------------------------------------------
certificate of Telscape, the Borrower, and each Significant Subsidiary signed by
a duly authorized Responsible Officer, certifying as to (i) true copies of
Organizational Documents of Telscape, the Borrower, and each other Guarantor in
effect on such date; (ii) true copies of all corporate action taken by Telscape,
the Borrower, and each other Guarantor relative to this Agreement, the Note, and
the other Loan Documents; (iii) the names, true signatures and incumbency of the
Responsible Officers of Telscape, the Borrower, and each other Guarantor
authorized to execute and deliver this Agreement, the Note, and the other Loan
Documents; as applicable (iv) a Certificate of Good Standing (or equivalent
certificate) for Telscape, the Borrower, and each other Guarantor duly issued by
the Secretary of State of each state in which Telscape, the Borrower, and each
other Guarantor is organized and with respect to the Borrower in each state in
which Collateral is located.
24
<PAGE>
5.02. Opinions of Counsel. Lender shall have received the following
---------------------
opinions, all dated as of the Closing Date and in form and substance
satisfactory to Lender:
(a) A written opinion of counsel to Telscape, the Borrower, and
each other Guarantor, substantially in the form of Exhibit C hereto;
----------
(b) A written opinion of regulatory counsel for Borrower and the
Guarantors, substantially in the form of Exhibit D hereto; and
----------
5.03. Closing Documents. Lender shall have received the following
------------------
documents, all in form and substance satisfactory to Lender:
(a) Agreement. This Agreement, duly executed by Borrower;
---------
(b) Note. The Note, duly executed by Borrower;
----
(c) Financing Statements. All UCC-1 financing statements necessary
--------------------
to perfect the Liens granted hereby, each duly executed by Borrower, and duly
recorded in all the offices identified on Schedule 4.25 hereto;
--------------
(d) Collateral Assignment of Purchase Agreement. The Collateral
---------------------------------------------
Assignment of Purchase Agreement, duly executed by the Borrower, and the consent
to Collateral Assignment of Purchase Agreement, duly executed by Nortel;
(e) Insurance. Policies and certificates of insurance required by
---------
Section 7.07, accompanied by evidence of the payment of the premiums therefor;
-------------
(f) Financial Statements. The financial statements described in
---------------------
Section 4.08 hereof;
-------------
(g) [INTENTIONALLY OMITTED].
------------------------
(h) Certificate of Financial Condition. A Certificate of Financial
----------------------------------
Condition, duly executed by a Responsible Officer of Telscape and the Borrower.
(i) Pre-Closing Lien Searches. Lien searches from all
---------------------------
jurisdictions reasonably determined by Lender to be appropriate, effective as of
a date reasonably close to the Closing Date, reflecting no other Liens (other
than Permitted Encumbrances) on any of the Collateral.
(j) Guaranty Agreements. A Guaranty Agreement, duly executed by
--------------------
Telscape and each Significant Subsidiary which is a Domestic Subsidiary.
25
<PAGE>
ARTICLE 6: CONDITIONS OF LENDING
--------------------------------
6.01. Conditions for Initial Advance. On or before the First Borrowing
-------------------------------
Date, the following conditions shall have been met to Lender's satisfaction:
(a) Post-Closing Lien Searches. Lender shall have received
----------------------------
satisfactory results of Lien searches in all jurisdictions reasonably determined
by Lender to be appropriate, reflecting the filing of financing statements in
favor of Lender pursuant hereto and no other Liens other than Permitted
Encumbrances.
(b) Required Consents. Lender shall have received satisfactory
------------------
evidence of Borrower's obtaining the Required Consents.
6.02. Conditions for All Advances. The obligation of Lender to make any
---------------------------
Advance hereunder is subject to Borrower's performance of its obligations
hereunder on or before the date of such Advance and to the satisfaction of the
following further conditions on or before the Borrowing Date for any Advance,
including the first Advance:
(a) Filings, Registrations and Recordings. Any financing
----------------------------------------
statements or other recordings required hereunder shall have been properly
filed, registered or recorded in each office in each jurisdiction required in
order to create in favor of Lender a perfected first-priority Lien on the
Collateral, subject to no other Lien (other than Permitted Encumbrances); Lender
shall have received acknowledgment copies of all such filings, registrations and
recordings stamped by the appropriate filing officer; and Lender shall have
received results of searches of such filing offices and satisfactory evidence
that any other Liens (other than Permitted Encumbrances) on the Collateral have
been duly released and that all necessary filing fees, recording fees, taxes and
other expenses related to such filings, registrations and recordings have been
paid in full.
(b) Borrowing Certificate. Lender shall have received a duly
----------------------
executed Borrowing Certificate in the form of Exhibit B, including a detailed
---------
itemization of all costs of goods and services to be paid with the proceeds of
the Advance and accompanied by supporting documentation satisfactory to Lender.
(c) Reporting Requirements. Borrower shall have provided Lender
-----------------------
with all relevant reports and information required under Article 7 hereof.
---------
(d) No Regulatory Event. No Regulatory Event (in either Borrower's
-------------------
or Lender's reasonable determination) shall have occurred and be continuing or
would exist upon the consummation of transactions to occur on such Borrowing
Date.
(e) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing or would exist upon the consummation of
transactions to occur on such Borrowing Date.
(f) No Material Adverse Change. No Material Adverse Change shall
----------------------------
have occurred or would occur after giving effect to such Advance since the date
of the last financial statements delivered to Lender pursuant to Section 4.08 or
------------
7.01 hereof.
----
(g) Representations and Warranties. The representations and
--------------------------------
warranties contained in Article 4 hereof shall be true in all material respects
---------
on and as of the date of each such Advance hereunder.
26
<PAGE>
(h) Lender's Expenses. All closing costs and other Lender's
------------------
Expenses shall have been paid in full (or shall be paid first from such Advance
as provided in Section 2.03 hereof).
-------------
(i) Opinions. Lender shall have received from Borrower such
--------
opinions of counsel for Borrower as may be reasonably acceptable to Lender in
form and substance with respect to the perfection of the Liens created by the
Security Documents in each jurisdiction where Collateral is located or to be
located.
(j) Details, Proceedings and Documents. All legal details and
-------------------------------------
proceedings in connection with the transactions contemplated by this Agreement
shall be reasonably satisfactory to Lender, and Lender shall have received all
such counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance
reasonably satisfactory to Lender, as Lender may from time to time request.
(k) Consents. Lender shall have received Consents duly executed by
--------
all parties and in form satisfactory to Lender.
(l) Fees. Lender shall have received the fee(s) described in
----
Section 2.09 hereof.
-------------
(m) Purchase Agreements. Lender shall have received a copy of each
-------------------
executed Nortel Purchase Agreement and/or Vendor Purchase Agreement with respect
to which proceeds of an Advance shall be used to acquire Nortel Equipment or
other Equipment, and Lender shall have reviewed and approved the Equipment to be
acquired with proceeds of an Advance, together with the collateral assignment
and consent specified in Section 3.10 of this Agreement.
-------------
(n) Post-Closing Items. The post-closing items described on
-------------------
Schedule 6.02 hereto, if any, shall have been completed in the time permitted,
--------------
and Borrower shall have provided Lender with satisfactory evidence thereof.
6.03. Affirmation of Representations and Warranties. Any Borrowing
-------------------------------------------------
Certificate or other request for any Advance hereunder shall constitute a
representation and warranty that (a) the representations and warranties
contained in Article 4 hereof are true and correct in all material respects on
---------
and as of the date of such request with the same effect as though made on and as
of the date of such request and (b) on the date of such request, no Default or
Event of Default has occurred and is continuing, exists, or will occur or exist
after giving effect to such Advance (for this purpose such Advance being deemed
to have been made on the date of such request). Failure of Lender to receive
notice from Borrower to the contrary before such Advance is made shall
constitute a further representation and warranty by Borrower that (x) the
representations and warranties of Borrower contained in the first sentence of
this Section 6.03 are true and correct on and as of the date of such Advance
-------------
with the same effect as though made on and as of the date of such Advance and
(y) on the date of the Advance, no Default or Event of Default has occurred and
is continuing, exists or will occur or exist after giving effect to such
Advance.
6.04. Deadline for Funding Conditions. Lender shall have no obligation
--------------------------------
to make any Advances hereunder if all of the conditions set forth in Article 5
---------
and in Sections 6.01 and 6.02 hereof have not been fully satisfied, and the
-------------------------
first Advance made hereunder, within the period of 12 calendar months following
the Closing Date.
27
<PAGE>
ARTICLE 7: AFFIRMATIVE COVENANTS
--------------------------------
Borrower hereby agrees that, as long as the commitment hereunder remains in
effect, the Note remains outstanding or unpaid, or any other amount is owing to
Lender hereunder or under any of the Loan Documents, Borrower shall keep and
perform fully each and all of the following covenants:
7.01. Reporting and Information Requirements.
-----------------------------------------
(a) Annual Audit Reports. As soon as practicable, and in any event
--------------------
within 105 days after the close of each fiscal year of Telscape, Borrower shall
furnish or cause to be furnished to Lender audited consolidated statements of
income, cash flow, and retained earnings for Telscape for the preceding fiscal
year and Telscape's consolidated balance sheet as of the close of the fiscal
year, and notes to each, all in reasonable detail and setting forth in
comparative form the corresponding figures for the preceding fiscal year, with
such statements and balance sheet to be certified without qualification by
independent certified public accountants of recognized regional or national
standing selected by Telscape and reasonably satisfactory to Lender.
(b) Quarterly Reports. Within 50 days after the end of each fiscal
-----------------
quarter, the Borrower shall furnish to Lender (i) unaudited consolidated
statements of income, cash flow, and retained earnings for Telscape for the
preceding fiscal quarter and for the period from the beginning of Telscape's
then current fiscal year to the end of the fiscal quarter, and an unaudited
consolidated balance sheet of Telscape as of the end of the fiscal quarter, all
in reasonable detail and certified by a Responsible Officer of Telscape as
presenting fairly the financial position of Telscape as of the end of the fiscal
quarter and the results of its operations and the changes in its financial
position for fiscal quarter, in conformity with GAAP (except for accompanying
notes thereto), subject to year-end audit adjustments, and (ii) upon Lender's
request, an aging of accounts payable and accounts receivable.
(c) Consolidating Financial Statements. As soon as practicable,
------------------------------------
and in any event within 105 days after the close of each fiscal year of
Telscape, Borrower shall furnish or cause to be furnished to Lender unaudited
statements of income for the preceding fiscal year and unaudited balance sheets
as of the close of the fiscal year for each Significant Subsidiary, together
with a consolidating statement of income and balance relating to Telscape.
(d) Compliance Certificates. Within 50 days after the end of each
------------------------
Calendar Quarter, Borrower shall deliver to Lender a certificate dated as of the
end of such Calendar Quarter, signed on behalf of Borrower and Telscape by a
Responsible Officer of Borrower and Telscape (i) stating that as of the date
thereof no Event of Default has occurred and is continuing or exists or, if an
Event of Default has occurred and is continuing or exists, specifying in detail
the nature and period of existence thereof and any action with respect thereto
taken or contemplated to be taken by Borrower; (ii) stating that the signer has
personally reviewed this Agreement and the Guaranty Agreements and that such
certificate is based on an examination made by or under the supervision of the
signer sufficient to assure that such certificate is accurate; and (iii)
calculating and certifying Telscape's compliance with the financial covenants
set forth in Section 7.15 hereof.
-------------
(e) Accountants' Certificate. Each set of audited statements and
-------------------------
balance sheets delivered pursuant to Section 7.01(a) hereof shall be accompanied
---------------
by a certificate or report dated the date of such statement and balance sheet by
the accountants who certified such statements and balance sheet, stating in
substance that they have reviewed this Agreement and that, in making the
examination necessary for their certification of the statements and balance
sheets, they did not become aware of any Default or, if they did become so
aware, the certificate or report shall state the nature and period of existence
thereof.
28
<PAGE>
(f) Projections. If requested by Lender, Borrower shall deliver to
-----------
Lender within 30 days prior to the beginning of each fiscal year projections of
the anticipated income, expenses, cash flow, assets and liabilities for Telscape
for each month of that year, prepared in good faith and in a manner and format
consistent with other financial statements provided by Borrower and Telscape to
Lender. The Borrower shall cause the projections to present fairly the
anticipated financial condition of Telscape and shall be certified by a
Responsible Officer of Telscape. Upon Lender's request, or following any
material change in Telscape's financial condition or business, such reports
shall be provided to Lender quarterly, within 30 days prior to the beginning of
each Calendar Quarter.
(g) Other Reports and Information. Promptly upon their becoming
-------------------------------
available to Telscape or the Borrower, the Borrower shall deliver to Lender
copies of (i) all regular or special reports or effective registration
statements which Telscape or the Borrower shall file with Governmental
Authorities, the FCC or the PUC (or any successor thereto) or any securities
exchange; (ii) financial statements, material reports, and other information
distributed by Telscape or the Borrower to its creditors or the financial
community in general; and (iii) all press releases issued by or concerning
Telscape, the Borrower, or the System.
(h) Further Information. The Borrower will promptly furnish to
--------------------
Lender such other information (including any report by independent auditors) in
such form as Lender may reasonably request.
7.02. Other Notices. Promptly upon a Responsible Officer of Borrower
--------------
becoming aware of any of the following, Borrower shall give Lender notice
thereof, together with a written statement of a Responsible Officer of Borrower
setting forth the details thereof and any action with respect thereto taken or
contemplated to be taken by Borrower:
(a) a Default or Event of Default;
(b) any Material Adverse Change;
(c) a default or breach by Telscape, the Borrower, or any
Subsidiary under any other contractual obligation to which it is a party or by
which it or its properties is bound, if the consequences of such breach or
default are material to the business, operations or financial condition of
Telscape, the Borrower, or a Significant Subsidiary;
(d) any event that Borrower reasonably determines would constitute
a Regulatory Event;
(e) the commencement, existence or threat of any proceeding by or
before any Governmental Authority against Telscape, the Borrower, or any
Subsidiary which, if adversely decided, would have a Material Adverse Effect;
(f) Borrower's receipt of any notice of violation of, or liability
under, any Environmental Laws affecting Telscape, the Borrower, any Significant
Subsidiary, or any of its properties; or
(g) any Change in Control or any material change in the management
of Telscape, the Borrower, or any Significant Subsidiary.
29
<PAGE>
7.03. Notice of Pension-Related Events. The Borrower shall promptly
-----------------------------------
furnish Lender with written notice upon the receipt by Borrower or the
administrator of any Plan of any notice, correspondence or other communication
from the PBGC, the IRS, the Secretary of Treasury, the Department of Labor, or
any other Person, as the case may be, relating to (i) any Reportable Event, (ii)
any funding deficiency with respect to any Plan, (iii) any liability, either
primary or secondary, with respect to complete or partial withdrawal from any
Plan, (iv) proceedings to terminate any Plan, or (v) the appointment of a
trustee for any Plan. Such notice shall be accompanied by any pertinent
documents, including, but not limited to, the relevant notice, correspondence or
other communication and a statement of a Responsible Officer of Borrower
describing the event or the action taken and the reasons therefor.
7.04. Inspection Rights. The Borrower shall upon reasonable prior
------------------
written notice (but no less than 72 hours) permit Lender's employees to visit
and inspect the Collateral; to examine the books and records of Telscape, the
Borrower, and each Subsidiary and take copies and extracts therefrom; and to
discuss their respective affairs with their officers, employees and independent
engineers at such times and as often as Lender may reasonably request. The
Borrower hereby authorizes such officers, employees and independent engineers to
discuss with Lender the affairs of the Borrower.
7.05. Preservation of Corporate Existence and Qualification. The
----------------------------------------------------------
Borrower shall maintain its and each of its Subsidiary's existence, good
standing, and rights in full force and effect in its jurisdiction of
organization. The Borrower shall and shall have each of its Subsidiaries
qualify to do business and remain qualified and in good standing and obtain all
necessary authorizations to do business in each jurisdiction in which failure to
receive or retain such would have a Material Adverse Effect.
7.06. Continuation of Business. The Borrower shall continue to operate
------------------------
and maintain the System and shall acquire and maintain in full force and effect
all rights, privileges, franchises and licenses necessary for the operation and
maintenance of the System, including (without limitation) any license or
authorization required by the FCC or any PUC.
7.07. Insurance.
---------
(a) The Borrower shall provide and maintain or cause to be
maintained at all times insurance in such forms and covering such risks and
hazards relating to the Collateral and in such amounts and with an insurance
corporation with a Best rating of "A" or above, licensed to do business in the
states where the System and Borrower are located, as may be satisfactory to
Lender, as shown on Schedule 7.07 hereto, and otherwise as may be required by
-------------
the Security Documents.
(b) Borrower shall cause (i) all liability insurance policies
relating to the Collateral to name Lender as an additional insured; (ii) all
physical damage insurance policies to contain a lender's or mortgagee's loss
payable provision acceptable to Lender with respect to the Collateral; (iii) all
insurance policies relating to the Collateral to provide that no assignment,
cancellation, modification, reduction in amount, or adverse change in coverage
thereof shall be effective until at least 30 days after receipt by Lender of
written notice thereof; (iv) all insurance policies to insure the interests of
Lender with respect to the Collateral regardless of any breach of or violation
by Borrower of any warranties, declarations or conditions contained therein; and
(v) all insurance policies relating to the Collateral to provide that Lender
shall have no obligation or liability for premiums, commissions, assessments or
calls in connection with such insurance. Lender shall be under no obligation to
verify the adequacy or existence of any insurance coverage. Borrower shall
furnish Lender copies of, or acceptable certificates with respect to, all such
policies prior to the Closing Date and shall provide to Lender, at least 30 days
prior to each policy expiration date, evidence of the insurance being maintained
by Borrower in compliance with this Section 7.07(b). Certificates for insurance
---------------
required under subsection (i) above shall be in ACORD Form 27 (attached hereto
at Schedule 7.07), and all certificates shall be satisfactory in form and
--------------
substance to Lender.
30
<PAGE>
(c) If the Collateral is partially or totally damaged or
destroyed, Borrower shall give prompt notice to Lender, and all insurance
proceeds relating to the Collateral, less the costs of collection thereof, shall
be paid to or retained by Lender. Settlements, adjustments or compromises of any
claims for loss, damage or destruction to the Collateral shall be made by
Borrower and Lender as long as no Event of Default has occurred and is
continuing, and otherwise shall be made solely by Lender. Borrower hereby
authorizes and directs any affected insurance company to pay such proceeds
directly to Lender and to rely on Lender's statement as to whether an Event of
Default has occurred. Borrower shall pay all costs of collection of insurance
proceeds payable on account of such damage or destruction. If no Default or
Event of Default has occurred and is continuing on the date the Collateral is
partially or totally damaged or destroyed, Lender shall make available to
Borrower the proceeds of any physical damage insurance actually paid to Lender
in respect of such damage or destruction of the Collateral (after deducting
therefrom any sums retained by Lender in reimbursement for costs of collection)
to pay the cost of restoration, and Borrower shall proceed promptly with the
work of restoration of the Collateral and shall pursue the work of restoration
diligently to completion. If any Default or Event of Default has occurred and is
continuing either on the date of such damage or destruction or on the date such
insurance proceeds are paid, or if any Default or Event of Default shall occur
prior to completion of such work of restoration, then Lender, at its option, may
apply such insurance proceeds in payment of any of the Obligations, in such
order as Lender may elect in its sole discretion. Any insurance proceeds
remaining after completion of work or restoration shall, at Lender's election,
be applied in accordance with Section 2.04(c) hereof (but without prepayment
---------------
premium) or paid over to Borrower. Upon completion of any restoration, Borrower
shall deliver to Lender a certificate stating that the restoration has been duly
completed and accounting for the use of any insurance proceeds in such
restoration.
7.08. Payment of Taxes, Charges, Claims and Current Liabilities.
----------------------------------------------------------------
Borrower shall and shall cause each of its Subsidiaries to pay or discharge:
(a) on or prior to the date on which penalties thereto accrue, all
taxes, assessments and other government charges or levies imposed upon it or any
of its properties or income (including such as may arise under Section 4062,
Section 4063 or Section 4064 of ERISA, or any similar provision of law), except
for filed extensions;
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, and other like persons which
could result in creation of a Lien on the Collateral; and
(c) on or prior to the date when due, all other lawful claims
which, if unpaid, might result in the creation of a Lien on the Collateral
(other than Permitted Encumbrances) or which, if unpaid, might give rise to a
claim entitled to priority over general creditors of Borrower or any of its
Significant Subsidiaries in a case under Title 11 (Bankruptcy) of the United
States Code, as amended, or in any insolvency proceeding or dissolution or
winding-up involving Borrower or its Significant Subsidiary.
31
<PAGE>
Notwithstanding the foregoing, the Borrower and each Subsidiary shall be
entitled (a) to contest or appeal the requirements of any Law or Governmental
Authority or the payment of any tax, assessment, charge, levy or claim, or any
judgment entered against the Borrower or any Subsidiary and (b) to be delinquent
in the filing of the tax returns and payment of taxes as disclosed in Schedule
4.15 (collectively, in this Section 7.08, all such matters described in clauses
------------
(a) and (b) of this sentence are referred to as the "requirements"), as long as
------------
(i) such requirements are being contested (or for the matters disclosed in
Schedule 4.15, pursued) in good faith by appropriate proceedings diligently
conducted; (ii) the Borrower and/or the Subsidiary has given Lender written
notice of such requirements and the intent to contest them, with supporting
reasons for such contest, before the addition of any interest or penalties
(except for the matters disclosed on Schedule 4.15) that may accrue on such
requirements; (iii) the Borrower and/or the Subsidiary maintains adequate cash
reserves and makes other appropriate provisions as may be required by GAAP to
provide for any liability arising from such requirements; (iv) the contesting
of, or failure to comply with, such requirements does not in any way jeopardize
the Borrower's and each of its Subsidiaries' ability or authority to operate all
or any part of the Collateral or the continuing priority of Lender's security
interests in the Collateral; (vi) the contesting of, or failure to comply with,
such requirements does not have a Material Adverse Effect; and (vii) any
foreclosure, attachment, execution, sale or similar proceeding against the
Borrower, the Subsidiary, or any of their properties in connection with any such
requirements is duly stayed by posting of a bond or security deposit or by other
action sufficient under applicable law to stay such foreclosure, attachment,
execution, sale or other proceedings.
7.09. Financial Accounting Practices. The Borrower shall and shall
--------------------------------
cause its Subsidiaries to make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect its transactions and
dispositions of its assets and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are executed
in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with GAAP and (ii) to maintain accountability for
assets; (c) access to assets is permitted only in accordance with management's
general or specific authorization; and (d) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
7.10. Compliance with Laws. Borrower shall comply and shall have each
----------------------
of its Subsidiaries comply in all respects with all Laws applicable to the
Borrower and such Subsidiary provided that Borrower shall not be deemed to be in
violation of this Section 7.10 as a result of any failure to comply which would
------------
not result in any liability or exposure to Lender or any fines, penalties,
injunctive relief or other civil or criminal liabilities which, in the
aggregate, would materially affect the business, operations or financial
condition of the Borrower or the Subsidiary or the ability of the Borrower or
any Significant Subsidiary to perform its obligations under this Agreement, the
Note, or a Guaranty Agreement.
7.11. Use of Proceeds. The Borrower shall use the proceeds of Advances
---------------
hereunder only as set forth in Section 2.01 hereof.
-------------
7.12. Government Authorizations; Regulatory Authorizations, Etc. The
-----------------------------------------------------------
Borrower shall and shall have each of its Subsidiaries at all times obtain and
maintain in force all Regulatory Authorizations and all other authorizations,
permits, consents, approvals, licenses, exemptions and other actions by, and all
registrations, qualifications, designations, declarations and other filings
with, any Governmental Authority necessary in connection with execution and
delivery of this Agreement, the Note, the Guaranty Agreements, the consummation
of the transactions herein or therein contemplated, the performance of or
compliance with the terms and conditions hereof or thereof, or to ensure the
legality, validity and enforceability hereof or thereof.
32
<PAGE>
7.13. Contracts and Franchises. The Borrower shall and shall have each
------------------------
of its Subsidiaries comply with all agreements or instruments to which it is a
party or by which it or any of its properties (now owned or hereafter acquired)
may be subject or bound and shall maintain any and all franchises it may have or
hereafter acquire, provided that the Borrower shall not be deemed to be in
violation of this Section 7.13 as a result of any failure to comply with any
-------------
agreement if such failure would not have Material Adverse Effect.
7.14. Consents. The Borrower shall obtain such Landlord's Consents,
--------
and other third party consents as Lender shall reasonably request to protect its
Liens and its access to the Collateral.
7.15. Financial Covenants. The Borrower shall cause Telscape and the
--------------------
Subsidiaries to comply with the financial covenants set forth on Schedule 7.15
-------------
hereto.
7.16. Construction and Storage. The Collateral shall be installed and
--------------------------
equipped in full compliance with the Requirements of Law affecting the
Collateral, except to the extent a failure to so comply would not have a
Material Adverse Effect on the construction or operation of the Collateral. All
Equipment financed with the proceeds of the Loans shall be safeguarded and
stored until installed in appropriate storage facilities owned or leased by the
Borrower. In the event of any cessation of construction for more than 15
successive calendar days, the Borrower shall make adequate provision, reasonably
acceptable to Lender, for the protection of all materials stored on site against
deterioration, loss or damage.
7.17. Upgrade of Equipment. The Borrower shall update the Software
----------------------
used in the Equipment within two releases of the most current batch change
supplement release. The Borrower shall maintain the Equipment in good working
order in accordance with established maintenance procedures such that the
Equipment performs to published specifications and shall upgrade its
functionality to include batch change supplements releases generally available
to customers of Nortel or the applicable Vendor, as the case may be, and batch
change supplements upgrades included in the original purchase price of the
Purchase Agreement in the form in effect on the date of the Closing Date.
7.18. Further Assurances - Guarantors. (a) If and to the extent
----------------------------------
requested by the Lender from time to time, execute and deliver such documents
and take such other action, and cause each of its Subsidiaries to execute and
deliver such documents and take such other action, as may be necessary or
reasonably requested by the Lender, in order to assure and confirm that all
obligations under this Agreement, the Note or any of the other Loan Documents
are at all times guaranteed on terms satisfactory to Lender by Guaranties as
required by Section 3.09.
(b) Promptly upon the designation by the Borrower or one of its
Domestic Subsidiaries as a Subsidiary, within 10 days thereafter, the Borrower
will cause such Subsidiary to enter into a Guaranty and will deliver to the
Lender, upon the request of the Lender in its sole discretion, a signed copy of
a favorable opinion of counsel for the Subsidiary as to such Guaranty and
related documents inform and substance satisfactory to Lender.
ARTICLE 8: NEGATIVE COVENANTS
-----------------------------
Borrower hereby agrees that, as long as the Commitment hereunder remains in
effect, the Note remains outstanding and unpaid, or any other amount is owing to
Lender hereunder or under any of the Loan Documents, the Borrower shall not and
shall allow not any of its Subsidiaries directly or indirectly to do or permit
to exist any of the following without prior written consent of Lender:
33
<PAGE>
8.01. Restrictions on Indebtedness, Liens and Sale of Collateral. (a)
-----------------------------------------------------------
Create, incur, assume or suffer to exist at any one time any Indebtedness in
excess of $50,000 in the aggregate, except for (i) Indebtedness incurred by
Borrower or any of its Subsidiaries in the ordinary course of business so long
as immediately before, and after giving effect to, the incurrence of such
Indebtedness, (1) Telscape is in compliance with the financial covenants set
forth on Schedule 7.15 hereto, and (2) no Default or Event of Default hereunder
-------------
shall have occurred and be continuing at the time of, or as a result from, the
incurrence of such Indebtedness, (ii) trade payables incurred in the ordinary
course of business, (iii) any Indebtedness set forth on Schedule 8.01 hereto, so
-------------
long as the amount of such scheduled indebtedness does not exceed the amount
outstanding on the Closing Date, as set forth on Schedule 8.01, and (iv) any
-------------
Loans under the Lucent Credit Agreement; or (b) create or suffer to exist any
Lien on the Collateral, or any part thereof, whether superior or subordinate to
the Lien of the Security Documents, or assign, or any other assets or property
of Borrower or any Subsidiary, or convey, sell or otherwise dispose of or
encumber its interest in the Collateral, or any part thereof (including, without
limitation, execution of any lease), nor permit any such action to be taken,
except for the following permitted dispositions and encumbrances (the "Permitted
---------
Encumbrances"): (i) the Lien created hereby; (ii) Liens for taxes not yet due,
------------
or which are being contested in good faith and by appropriate proceedings in
accordance with Section 7.08 hereof; (iii) carriers', warehousemen's,
-------------
mechanics', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business which are overdue for a period not longer than 30
days or which are being contested in good faith and by appropriate proceedings
in accordance with Section 7.08 hereof; (iv) pledges or liens not on the
-------------
Collateral in connection with workers' compensation, unemployment insurance and
other social security legislation; (v) deposits to secure the performance of
bids, trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business; (vi) easements,
rights-of-way, restrictions and other similar encumbrances that are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct of
the business of the Borrower or the applicable Subsidiary; (vii) judgment liens
which may not be on any of the Collateral with respect to which execution has
been stayed within 10 days by appropriate judicial proceedings and the posting
of adequate security which may not be any of the Collateral; and (viii) specific
liens, if any, identified on Schedule 8.01 hereto. Any of the foregoing Liens
-------------
shall remain "Permitted Encumbrances" as long as they are being contested, if
applicable, by the Borrower or its Subsidiary in compliance with Section 7.08
------------
hereof.
8.02. Limitation on Contingent Obligations. Agree to, or assume,
---------------------------------------
guarantee, endorse or otherwise in any way be or become responsible or liable
for, directly or indirectly, any Contingent Obligation except for those created
or contemplated by the Loan Documents.
8.03. Prohibition of Mergers, Acquisitions, Name, Office or Business
-----------------------------------------------------------------
Changes, Etc.
-------------
(a) Enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets, except for the
following (a "Permitted Transaction") if immediately after giving effect thereto
no Default or Event of Default would exist and be continuing hereunder: (i) any
Subsidiary of Telscape may be merged or consolidated with or into Telscape
(provided that Telscape shall be the continuing or surviving corporation) or
with or into any one or more Subsidiaries of Telscape or with or into another
Person (provided that the Subsidiary of Telscape shall be the continuing or
surviving corporation, and shall remain a Subsidiary of Telscape), (ii) any
Subsidiary of the Borrower may sell, lease, transfer or otherwise dispose of any
or all of its assets (upon voluntary liquidation or otherwise) to the Borrower
or any other Subsidiary of the Borrower so long as the effect of such sale,
lease, transfer or other disposition will not dilute such assets without proper
consideration; and (iii) the Borrower or any Subsidiary of the Borrower may be
merged or consolidated with or into another Person provided that Borrower or
such Subsidiary shall be the continuing or surviving corporation and in either
case a Subsidiary of Telscape, provided, however, in each Permitted Transaction
-----------------
involving a Subsidiary which is a Guarantor the surviving (if not already a
Guarantor) or transferee entity (if not already a Guarantor) must execute as a
condition to the consummation of the Permitted Transaction such documents as
requested by Lender to evidence its assumptions of the Subsidiary's obligations
under its Guaranty and deliver such other certificates and opinions as Lender
may reasonably require.
34
<PAGE>
(b) Without the consent of the Lender, sell, assign, transfer or
otherwise dispose of any Capital Stock of any Subsidiary; or, without the
consent of the Lender, which shall not be unreasonably withheld, otherwise issue
and sell any Capital Stock or beneficial interest therein (including, without
limitation, preferred stock) of any Subsidiary where such issuance and sale
would result in any Persons (other than Telscape or any Significant Subsidiary)
holding in the aggregate in excess of five percent of such Subsidiary.
(c) Change its name or corporate structure without giving Lender
at least 30 days advance written notice of such change, and previously ensuring
that any steps that Lender may deem necessary to continue the perfection and
priority of Lender's security interests in the Collateral shall have been taken.
(d) Change its fiscal year end from December 31, except with the
prior written consent of Lender, which consent shall not be unreasonably
withheld.
(e) Amend, restate or otherwise modify, or violate any terms of,
its Organizational Documents in a manner adverse to Lender without the prior
written consent of Lender.
(f) Become or agree to become a general or limited partner in any
general or limited partnership, or a member in a limited liability company or a
joint venturer in any joint venture, except that the Borrower or Subsidiary may
become so involved in the aforementioned types of entities if such entity is, or
thereupon becomes, a Subsidiary of the Borrower.
(g) Without the consent of the Lender, amend, modify or supplement
a material term of (a) a Contractual Obligation in connection with the
construction, operation, ownership and maintenance of the Network or the
business derived from the Network, or (b) any other Contractual Obligation, the
amendment or modification of which could reasonably be expected to have a
Material Adverse Effect..
(h) Engage in any business other than the business of
Telecommunications and businesses which are related thereto.
8.04. Termination of Nortel Purchase Agreement. Fail to satisfy its
--------------------------------------------
purchase obligations under a Purchase Agreement prior to the completion of the
installation of the subject Equipment or terminate any Purchase Agreement prior
to the completion of the installation of the subject Equipment.
8.05. Removal of Collateral. Remove or permit the removal of any
-----------------------
material part of the Collateral from the locations identified on Schedule 4.25,
-------------
without giving Lender 30 days prior written notice of such move and ensuring
that any steps Lender may deem necessary to continue the perfection and priority
of Lender's security interest in the Collateral shall have been taken.
35
<PAGE>
8.06. Assumed Names. Transact or engage in business under any assumed
--------------
name, fictitious name, tradestyle or "d/b/a" except those identified on
Schedule 4.29, without giving Lender at least 30 days' prior written notice.
--------------
8.07 Limitation on Investments, Advances and Loans. Make any
--------------------------------------------------
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in any Person (an
"Investment"), except:
----------
(a) extensions of trade credit and endorsements of negotiable
instruments and other documents in the ordinary course of business;
(b) Investments in Cash Equivalents;
(c) Investments by Borrower or any Subsidiary in Telscape or any
Subsidiary of Telscape;
(d) loans to officers, directors and employees of the Borrower,
Telscape and their Subsidiaries where cash paid out to such officers, directors,
and employees shall not exceed in the aggregate $500,000 outstanding at any one
time;
(e) Investment in Telecommunications companies in an amount not to
exceed $10,000,000 per annum; and
(f) acquisitions of Telecommunications equipment.
8.08 Limitation on Equity Payments. Declare or make, or agree to pay or
-----------------------------
make, directly or indirectly, any Restricted Payment (or incur any obligation to
do so), except (a) each of the Subsidiary may declare and pay dividends with
respect to its Capital Stock payable solely in additional shares of its common
stock, (b) Subsidiaries may declare and pay dividends to their shareholders with
respect to their Capital Stock ratably to Telscape, each Subsidiary and other
Person then holding Capital Stock of such Subsidiary (based on the ownership
interest of each such shareholder at such time without regard to class), (c)
Subsidiaries may make payments to their shareholders on account of the
redemption of their Capital Stock ratably to Telscape, each Subsidiary and other
Person then holding Capital Stock of such Subsidiary (based on the ownership
interest of each such shareholder at such time without regard to class), (d)
Subsidiaries may declare and pay dividends to each other and to Telscape with
respect to their Capital Stock, or (e) Telscape may declare and pay Permitted
Preferred Cash Dividends; provided that any Restricted Payment otherwise
--------
permitted pursuant to this Section shall not be permitted unless the Borrower
shall have delivered or caused to be delivered the Lender, prior to such
Restricted Payment, a certificate signed by a Responsible Officer setting forth
the amount of such Restricted Payment and certifying that all conditions to such
Restricted Payment are satisfied.
8.09 Capital Expenditures. Directly or indirectly make or commit to
---------------------
make any expenditure in respect of the purchase or other acquisition (including
installment purchases or capital leases) of fixed or capital assets in excess of
an aggregate of $1 million during each 12-month period during the term of this
Agreement, other than (for so long as such expenditures do not violate Schedule
--------
7.15) (i) replacements and maintenance properly charged to current operations or
----
(ii) expenditures in accordance with the Business Plan.
36
<PAGE>
8.10 Limitation on Leases. Except as otherwise permitted under Sections
-------------------- --------
8.01 or 8.08, enter into any agreement, or be or become liable under any
---- ----
agreement, not in existence as of the date hereof and reflected on Telscape's
consolidated financial statements, for the lease, hire or use of any real or
personal property in excess of $500,000 in the aggregate, including, without
limitation, capital or operating leases, except that the Borrower or its
Subsidiaries may, in the ordinary course of business and on term standard in the
industry, enter into leases or agreements (i) for the use of real property for
the System or sales offices; (ii) for office space, office equipment, vehicles
or tools; and (iii) for the location and storage of the Collateral.
8.11 Transactions with Affiliates. Except as permitted by Section 8.07
----------------------------- ------------
or as described in Schedule 4.30 hereto, enter into any transactions, including,
-------------
without limitation, any loans or advances, any repayment of loans or advances,
or the purchase, sale or exchange of property or the rendering of any services,
with any Affiliate; or otherwise pay any fees or expenses to, or reimburse or
assume any obligation for the reimbursement of any expenses incurred by, any
Affiliate.
8.12 Infrastructure Build Out. Commit to build or construct
--------------------------
telecommunications infrastructure in any city other than Atlanta (Georgia), Los
Angeles (California), Houston (Texas), Miami (Florida), or San Diego
(California); provided however, that Borrower or any Subsidiary of Borrower may
commit to build out or construct telecommunications infrastructure in any of the
Additional Approved Cities, in each case (a) as contemplated in and consistent
with, the Approved Build-Out Plan and for each such Additional Approved City,
subject to delivery to the Lender, at least three (3) months prior to entering
into any such commitment or commencing any such build-out, of a fully funded
plan (including evidence showing that Borrower or such Subsidiary has obtained
all financing required or contemplated by the Approved Build-Out Plan) for such
city in connection with such Additional Approved City, all to the reasonable
satisfaction of the Lender, and (b) only for so long as and to the extent that,
at the time of any such commitment and after giving effect thereto, no Default
or Event of Default has occurred and is continuing, and, with respect to each of
the financial covenants set forth in Article VII (i) Telscape was in full
compliance therewith as of the most recent date such financial covenant was (or
is being) measured, without requiring any waiver thereof or amendment thereto to
enable such compliance, and (ii) no Default or Event of Default could reasonably
be expected to exist as of the next date on which such financial covenant is to
be measured
8.13 Restrictions on Dividends and Related Transactions. Create or
------------------------------------------------------
otherwise cause or permit to exist or become effective any encumbrance or
restriction on the ability of any Subsidiary of Telscape (i) to pay dividends or
make any other distributions on or in respect of its capital stock; (ii) to make
loans or advances, or to pay any Indebtedness or other obligation owed, to
Telscape, Borrower or any Subsidiary of Telscape; or (iii) to transfer any of
its property or assets to Telscape, Borrower or any Subsidiary of Telscape,
except for encumbrances or restrictions existing under or by reason of: (1)
this Agreement; (2) applicable law, (3) customary non-assignment provisions with
respect to any contract or any lease governing a leasehold interest of a
Subsidiary, or (4) under agreements listed on Schedule 8.13.
--------------
37
<PAGE>
8.14 Limitation on Sale of Collateral. Without the consent of the
------------------------------------
Lender, sell, assign (by operation of law or otherwise), lease, transfer or
otherwise dispose of, or grant any option with respect to, any of its assets,
except that Telscape and its Subsidiaries may (a) sell inventory or obsolete or
unnecessary equipment not constituting Collateral, in each case in the ordinary
course of business; and (b) make other sales or dispositions of assets (other
than Collateral or the Capital Stock of any Subsidiary) if all of the following
conditions are met: (i) the market value of assets sold or otherwise disposed
of in any single transaction or series of related transactions does not exceed
$250,000 and the aggregate market value of assets sold or otherwise disposed of
in any fiscal year does not exceed $1,500,000; (ii) the consideration received
is at least equal to the fair market value of such assets; (iii) the Net
Proceeds of such asset sale or other disposition are applied to the obligations
under the Lucent Credit Agreement or are used to acquire replacement property,
in each case as set forth in Section 2.8(b)(iii) of the Lucent Credit Agreement;
and (iv) no Default shall then exist or result from such sale or other
disposition.
ARTICLE 9: EVENTS OF DEFAULT AND REMEDIES
-----------------------------------------
9.01. Events of Default. An Event of Default shall mean the occurrence
------------------
or existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of Law):
(a) Payment Default. If Borrower fails to pay any sum, whether of
----------------
principal or interest on the Note or any prepayment premiums, or any other
amount due hereunder or under the Note within three business days after written
notice from Lender that such amount became due;
(b) False Statement. If any statement, representation or warranty
----------------
made by Telscape, the Borrower, or any Guarantor in any Loan Document or made in
any financial statement, certificate, report, exhibit or document furnished to
Lender pursuant to any Loan Document, proves to have been untrue, incomplete,
false or misleading in any material respect as of the time when made (including
any omission of material information necessary to make such representation,
warranty or statement not misleading), (i) such untruth, falsity, misleading
statement, or omission shall not have been corrected or remedied to the
satisfaction of Lender within 10 calendar days after the earlier of Telscape's,
the Borrower's, or the Guarantor's knowledge thereof or receipt of written
notice thereof from Lender and (ii) the Lender relied on such untruth, falsity,
misleading statement, or omission to its detriment;
(c) Covenant Defaults. If the Borrower defaults in the performance
-----------------
or observance of any covenant or agreement in this Agreement, and such default
continues for a period of 30 calendar days after the earlier of Borrower's
knowledge thereof or receipt of written notice from Lender thereof, except for
specific Defaults listed elsewhere in this Section 9.01, as to which no notice
------------
or cure period shall apply unless specified;
(d) Failure of Conditions. If the Borrower fails to meet any
-----------------------
condition of lending under Article 6 hereof and such condition is not waived by
---------
Lender;
(e) Undischarged Judgments. If one or more judgments for the
-----------------------
payment of money has been entered against Telscape, the Borrower, or any
Subsidiary in an amount in excess of $500,000, and such judgment or judgments
have remained undischarged and unstayed for a period of 30 calendar days, unless
the validity thereof is contested in compliance with Section 7.08 hereof;
------------
(f) Attachments, etc. If a writ or warrant of attachment,
-----------------
garnishment, execution, distraint or similar process has been issued against
Telscape, the Borrower, any Subsidiary, or any of their properties which has
remained undischarged and unstayed for a period of 30 consecutive days and is
not being contested in compliance with Section 7.08 hereof;
-------------
38
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(g) Default Under Third Party Agreements. If a default, or event
--------------------------------------
or condition which with notice or lapse of time or both would become a default,
occurs that gives the creditor the right to accelerate in respect of any other
obligation of Telscape, the Borrower or any Subsidiary for borrowed money
(including lease obligations) in the amount of $500,000 in the aggregate, or
under any two or more such other obligations of any amount;
(h) Dissolution; Discontinuance of Business, Etc. If Telscape, the
--------------------------------------------
Borrower, or any Guarantor discontinues its usual business, dissolves, has its
Organizational Document revoked, winds up or liquidates itself or its business;
(i) Involuntary Bankruptcy or Receivership Proceedings. If a
------------------------------------------------------
receiver, custodian, liquidator, or trustee of Telscape, the Borrower, any
Subsidiaries, or of any of their property is appointed by the order or decree of
any court or agency or supervisory authority having jurisdiction; or an order is
entered adjudicating Telscape, the Borrower, or any Subsidiary as bankrupt or
insolvent; or any of the property of Telscape, the Borrower or any Subsidiary is
sequestered by court order; or a petition is filed against Telscape, the
Borrower, or any Subsidiary under any state or federal bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
liquidation, or receivership law of any jurisdiction, whether now or hereafter
in effect;
(j) Voluntary Bankruptcy. If Telscape, the Borrower, or any
---------------------
Subsidiary takes affirmative steps to prepare to file, or files, a petition in
voluntary bankruptcy or to seek relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution, or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition against it under any such law;
(k) Assignments for Benefit of Creditors, Etc. If Telscape, the
-------------------------------------------
Borrower, or any Subsidiary makes an assignment for the benefit of creditors, or
admits in writing its inability to pay its debts generally as they become due,
or consents to the appointment of a receiver, trustee, or liquidator of itself
or of all or any part of its properties;
(l) Non-compliance with Governmental Requirements. If Telscape,
-----------------------------------------------
the Borrower, or any Significant Subsidiary fails to comply with any requirement
of any Governmental Authority within 10 calendar days after notice in writing of
such requirement shall have been given to Telscape, the Borrower, or the
Significant Subsidiary by such Governmental Authority, or such longer period of
time permitted Telscape, the Borrower, or the Significant Subsidiary by such
Governmental Authority;
(m) Regulatory Authorizations. If any Regulatory Authorization in
-------------------------
connection with this Agreement or any other Loan Document or any such Regulatory
Authorization now or hereafter necessary or advisable to make this Agreement or
the other Loan Documents legal, valid, enforceable and admissible in evidence or
to permit Telscape, the Borrower, or any Significant Subsidiary to conduct its
business is not obtained or has ceased to be in full force and effect or has
been modified or amended or has been held to be illegal or invalid or is revoked
or terminated, and is not being contested by Telscape, the Borrower, or the
Significant Subsidiary in compliance with Section 7.08 hereof and Lender has
------------
reasonably determined in good faith (which determination shall be conclusive)
that such event or occurrence may have a Material Adverse Effect or a material
adverse effect on Lender's rights under this Agreement or any other Loan
Documents;
39
<PAGE>
(n) Damage or Destruction. If the proceeds of any physical damage
----------------------
insurance actually paid in respect of the partial or total damage or destruction
of the Collateral are insufficient to cover the cost of the restoration thereof
or if Lender determines that such damage or destruction is so extensive that
repair or restoration cannot be expected within a time period short enough to
prevent a Material Adverse Effect;
(o) Consents. If Borrower fails to provide any Consent required
--------
hereunder and Lender determines in its sole and reasonable discretion that such
failure results in a material impairment of Lender's security for the Loans;
(p) Change in Control. If any Change in Control should occur
-------------------
without Lender's prior written consent, which may be withheld in Lender's sole
and absolute discretion;
(q) ERISA Defaults. If, with respect to any Plan, (i) there has
---------------
occurred a Reportable Event being considered by the PBGC which may reasonably
result in any material liability to the PBGC with respect to any Plan; (ii) a
Plan has been terminated; (iii) a trustee has been appointed by a United States
District Court to administer a Plan; (iv) a PBGC or any other person has
instituted proceedings to terminate a Plan or to appoint a trustee to administer
any such Plan; (v) either Telscape, the Borrower, any Significant Subsidiary, or
any Affiliate has withdrawn, completely or partially, from any Plan; (vi) either
Telscape, the Borrower, any Significant Subsidiary, or any Affiliate has
incurred secondary liability for withdrawal liability payments under any Plan;
or (vii) a Plan has failed to meet the minimum funding standards established
under the Code or ERISA;
(r) Defaults Under Other Loan Documents. If any default,
---------------------------------------
misrepresentation or breach should occur under any Security Document or other
Loan Document and is not cured or waived within the time permitted therein, or
any such Loan Documents should cease to be in full force and effect, or any
party thereto should assert any unenforceability of, or deny liability on, or
admit inability to perform under, any such Loan Document; or
(s) Repudiation of Guaranty. Any guaranty or any subordination
-------------------------
agreement required or delivered in connection with this Agreement is breached or
becomes ineffective, or any guarantor, or subordinating creditor, disavows its
obligations under the guaranty or subordination agreement, as the case may be.
(t) Sale of Guarantor. Any Guarantor (other than Telscape) ceases
------------------
to be a Subsidiary of Telscape.
9.02. Consequences of an Event of Default. If any Event of Default
----------------------------------------
shall occur and be continuing or shall exist, Lender shall be under no further
obligation to make Advances hereunder, any remaining commitment hereunder shall
immediately terminate, with no further notice, and Lender may, by notice to
Borrower, declare the unpaid principal amount of the Note, interest accrued
thereon and all other amounts owing by Borrower hereunder or under the Note to
be immediately due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue. Such consequences shall occur automatically
upon the occurrence of an Event of Default under Section 9.01 (h), (i), (j) or
-----------------------------
(k), without any notice or demand. Upon the occurrence of an Event of Default,
---
Lender may, in its sole discretion, exercise any and all remedies available to
it under this Article 9 or under any of the Loan Documents or under applicable
---------
law without further notice or period of grace or opportunity to cure.
40
<PAGE>
9.03. Exercise of Rights. Subject to any requirements for FCC or other
-------------------
governmental approval upon the occurrence of any Event of Default, the rights,
powers and privileges provided in this section and all other remedies available
to Lender under this Agreement or by statute or by rule of law may be exercised
by Lender at any time from time to time, whether or not the Obligations shall be
due and payable and whether or not Lender shall have instituted any foreclosure
or other action for the enforcement of this Agreement or the Note. No failure to
exercise nor any delay in exercising on the part of Lender, any right, remedy,
power or privilege hereunder or under any of the other Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or future
exercise thereof or the exercise of any other right, remedy, power or privilege.
9.04. Rights of Secured Party; Possession or Sale of Collateral.
----------------------------------------------------------------
Without limiting the generality of the foregoing, Lender shall have all the
rights and remedies of a secured party under the UCC, and Lender may, without
demand and without advertisement or notice, all of which Borrower waives, at any
time or times, sell and deliver any or all Collateral held by or for it at
public or private sale, for cash, upon credit or otherwise, at such prices and
upon such terms as Lender deems advisable, in its sole discretion, and/or
collect, or enforce the collection of, the Collateral. Lender may be the
purchaser at any such sale. Upon the occurrence of an Event of Default and upon
Lender's request, Borrower shall assemble, at its own expense, any or all
Equipment and other Collateral at a convenient place acceptable to Lender and
shall pay to Lender or reimburse Lender for, on demand, all costs of collection
of all amounts due, and enforcement of all rights hereunder, including
reasonable attorneys' fees and legal expenses, and expenses of any repairs to
any realty or other property to which any of such Collateral may be affixed.
Upon an Event of Default, Lender may, to the full extent permitted by applicable
law, without notice, advertisement, hearing or process of law of any kind, enter
upon any premises where any of the Collateral may be located and take possession
of and remove such Collateral.
9.05. Notices, Etc. Waived. Except as expressly provided in this
----------------------
Article 9, Borrower hereby expressly waives, to the full extent permitted by
----------
applicable law, presentment, demand, protest, any and all notices of any kind,
advertisements, hearing or process of law in connection with the exercise by
Lender of any of its rights and remedies upon the occurrence of an Event of
Default. If any notification of intended disposition of any of the Collateral is
required by law, such notification shall be deemed reasonably and properly given
if given in accordance with Section 10.06 hereto at least 10 days before such
-------------
disposition.
9.06. Additional Remedies. Lender's remedies upon the occurrence and
--------------------
during the continuance of an Event of Default shall include, in addition to, and
not in lieu of, such remedies as are available at law or in equity or provided
for in any of the Loan Documents, the following:
(a) Foreclosure; Receivership. Lender shall be entitled to file
--------------------------
one or more suits at law or in equity to collect the Obligations and/or to
foreclose on Lender's Liens on and security interests created by this Agreement
or the Security Documents. Lender may apply or require Borrower to apply for any
necessary transfers, assignments, orders, consents or licenses in connection
with the operation or abandonment of the Collateral or any part thereof, and
Lender shall also be entitled as a matter of right and without notice and
without requiring bond (notice and bond being hereby waived), without regard to
the solvency or insolvency of Borrower at the time of application and without
regard to the value of the Collateral at that time, to have a receiver appointed
by a court of competent jurisdiction in order to manage, protect and preserve
the Collateral and to continue the operation of the business of Borrower and to
collect all revenues and profits thereof and apply the same to the payment of
all expenses and other charges of such receivership until the sale or other
final disposition of the Collateral. Borrower hereby consents to the appointment
of such receiver.
41
<PAGE>
(b) Right to Cure. If Borrower fails in any material respect to
---------------
perform or comply with any of its agreements contained herein or in any of the
other Loan Documents, Lender may take whatever actions it may deem appropriate
to perform or comply or otherwise cause performance or compliance with such
agreement, all at the risk, cost and expense of Borrower.
(c) Setoff. If the unpaid principal amount of the Note, interest
------
accrued thereon, or any other amount owing by Borrower hereunder or under the
Note shall have become due and payable (by acceleration or otherwise), Lender
shall have the right, in addition to all other rights and remedies available to
it, without notice to Borrower, to setoff against and to appropriate and apply
to such due and payable amounts any debt owing to and any other funds held in
any manner for the account of Borrower by Lender. Such right shall exist whether
or not Lender shall have given notice or made any demand hereunder or under the
Note, whether or not such debt owing to or funds held for the account of
Borrower is or are matured or unmatured, and regardless of the existence or
adequacy of any collateral, guaranty or any other security, right or remedy
available to Lender. Borrower hereby consents to and confirms the foregoing
arrangements and confirms Lender's rights of setoff.
9.07. Application of Proceeds. Any proceeds of any of the Collateral
-------------------------
received by Lender through sale or disposition of the Collateral or otherwise
may be applied by Lender toward the payment of the Obligations, including
expenses in connection with the Collateral (including reasonable fees and legal
expenses) in such order of application as Lender may from time to time elect.
9.08. Discontinuance of Proceedings. If Lender should proceed to
-------------------------------
enforce any right or remedy under this Agreement or any other Loan Document and,
then, discontinue or abandon such proceeding for any reason, all rights, powers
and remedies of Lender hereunder shall continue as if no such proceeding had
been taken.
9.09. Power of Attorney. For the purpose of carrying out the provisions
-----------------
and exercising the rights, powers and privileges granted by the Loan Documents,
including, without limitation, this Article 9, Borrower hereby irrevocably
----------
constitutes and appoints Lender its true and lawful attorney-in-fact to execute,
acknowledge and deliver any instruments and do and perform any acts such as are
referred to in the Loan Documents, including, without limitation, this Article
-------
9, in the name and on behalf of Borrower, from time to time in Lender's
-
reasonable discretion after the occurrence and during the continuance of an
Event of Default, in accordance with the Loan Documents and any statute or rule
of law. This power of attorney is a power coupled with an interest and cannot be
revoked. Borrower hereby ratifies all that said attorney-in-fact shall lawfully
do or cause to be done by virtue and in accordance with the terms hereof.
Without limiting the generality of the foregoing, Lender may, after the
occurrence and during the continuance of an Event of Default, do the following
without notice to or assent by Borrower to accomplish the purposes of this
Agreement:
(a) upon failure of Telscape, the Borrower, or any of their
Subsidiaries to timely pay or discharge taxes or Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance called
for by the terms of this Agreement or any other Loan Document and pay all or any
part of the premiums therefor and the costs thereof;
42
<PAGE>
(b) (i) direct any party liable for any payment on any Collateral
to make payment of any and all monies due and to become due thereunder directly
to Lender or as Lender shall direct; (ii) in the name of Borrower, its own name,
or otherwise, take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under or
otherwise receive payment of and receipt for any and all monies, claims and
other amounts due and to become due at any time in respect of or arising out of
any Collateral; (iii) sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with the Collateral; (iv)
commence and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect all or any of the Collateral and
to enforce any other right in respect of any Collateral; (v) defend any suit,
action or proceeding brought against Telscape, the Borrower, or any of their
Subsidiaries with respect to any Collateral; (vi) settle, compromise or adjust
any suit, action or proceeding described above upon commercially reasonable
terms under the circumstances and, in connection therewith, give such discharges
or releases as Lender may reasonably deem appropriate; and (vii) generally sell,
use, operate, transfer, pledge, make any agreement with respect to, or otherwise
deal with any of the Collateral as fully and completely as though Lender were
the absolute owner thereof for all purposes, and, at Lender's option and
Borrower's expense, at any time or from time to time after the occurrence and
during the continuance of an Event of Default, all other acts and things that
Lender reasonably deems necessary to protect, preserve or realize upon the
Collateral and Lender's security interest therein, in order to effect the intent
of this Agreement and the other Loan Documents all as fully and effectively as
Borrower might do.
9.10. Regulatory Matters. Notwithstanding any provision to the
-------------------
contrary contained herein, Lender will not exercise any right or remedy under
this Agreement that requires prior FCC or PUC approval without first obtaining
such approval. If counsel to Lender reasonably determines that the consent of
the FCC or PUC is required in connection with any of the actions that may be
taken by Lender in the exercise of its rights hereunder or under any of the
other Loan Documents, then Borrower, at its sole cost and expense, agrees to use
its best efforts to secure such consent and to cooperate with Lender in any
action commenced by Lender to secure such consent. Upon the occurrence and
during the continuation of an Event of Default, Borrower shall promptly execute
and/or cause the execution of all applications, certificates, instruments and
other documents and papers that may be required in order to obtain any necessary
governmental consent, approval or authorization and, if Borrower fails or
refuses to execute such documents, the clerk of the court with jurisdiction may
execute such documents on behalf of Borrower.
ARTICLE 10: GENERAL CONDITIONS/MISCELLANEOUS
--------------------------------------------
The following conditions shall be applicable throughout the term of this
Agreement:
10.01. Modifications and Waivers. This Agreement, the other Loan
---------------------------
Documents, or any provision thereof may not be changed, waived or terminated
orally, but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver or termination is sought. No action or course
of dealing on the part of Lender or its officers, employees, consultants or
agents, nor any failure or delay by Lender with respect to exercising any right,
power or privilege of Lender under the Note, this Agreement, or any other Loan
Document, shall operate as a waiver thereof, except as otherwise provided in
this Agreement. Any waiver shall be effective only to the extent and for the
instance specifically identified in such writing and shall not be deemed to
imply any future waivers or other waivers. No amendment to any Loan Document
shall be effective without written agreement signed by the parties to such Loan
Document.
10.02. Advances Not Implied Waivers. No waiver of the requirements
-------------------------------
contained in any Loan Document shall be effective unless in writing duly signed
by Lender. No Advance hereunder shall constitute a waiver of any of the
conditions of Lender's obligation to make further Advances nor, in the event
Borrower is unable to satisfy any such condition, shall any waiver of such
condition have the effect of precluding Lender from thereafter declaring such
inability to be an Event of Default as herein provided. Any Advance made by
Lender and any sums expended by Lender pursuant to the Loan Documents shall be
deemed to have been made pursuant to this Agreement, notwithstanding the
existence of an uncured Default or Event of Default. No Advance at a time when
an Event of Default exists shall constitute a waiver of any right or remedy of
Lender existing by reason of such Event of Default, including, without
limitation, the right to accelerate the maturity of the Indebtedness evidenced
by the Note or to foreclose the Lien on the Collateral or to refuse to make
further advances hereunder.
43
<PAGE>
10.03. Deviation from Covenants. The procedure to be followed by
--------------------------
Borrower to obtain the consent of Lender to any deviation from the covenants
contained in this Agreement or any other Loan Document shall be as follows:
(a) Borrower shall send a written notice to Lender setting forth
(i) the covenant(s) relevant to the matter, (ii) the requested deviation from
the covenant(s) involved, and (iii) the reason for the requested deviation from
the covenant(s); and
(b) Lender, within a reasonable time, will send a written notice
to Borrower, permitting or refusing the request, but in no event will any
deviation from the covenants of this Agreement or any other Loan Document be
effective without the express prior written consent of Lender. Lender's failure
to provide such written notice shall be deemed a refusal of such request.
10.04. Holidays. Except as otherwise provided herein, whenever any
--------
payment or action to be made or taken hereunder or under the Note shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
10.05. Records. From time to time, Lender may send Borrower statements
-------
of the unpaid principal amount of the Note, the unpaid interest accrued thereon,
the Interest Rate or rates applicable to such unpaid principal amount, the
duration of such applicability, and the amount remaining available on any Loans,
and each statement shall be deemed correct and conclusively binding on Borrower
(absent manifest error) unless Borrower notifies Lender of an error in the
statement in writing within 30 days after the date any such statement is
provided to Borrower.
10.06. Notices. All notices, requests, demands, directions and other
-------
communications (collectively, "notices") required under the provisions of this
Agreement or any other Loan Document shall be in writing (including
communication by facsimile transmission) unless otherwise expressly permitted
hereunder and shall be sent by hand, by registered or certified mail return
receipt requested, by overnight courier service maintaining records of receipt,
or by facsimile transmission with confirmation in writing mailed first-class, in
all cases with charges prepaid, and any such properly given notice shall be
effective upon the earlier of receipt or (i) when delivered by hand, (ii) the
third Business Day after being mailed, (iii) the following Business Day if sent
by overnight courier service, or (iv) when sent by facsimile, answer back
received. All notices shall be addressed as follows:
If to Borrower: Pointe Communications Corporation
1325 Northmeadow Parkway, Suite 110
Roswell, Georgia 30076
Attention: Chief Financial Officer
Telecopy: (770) 319-2834
44
<PAGE>
If to Lender: NTFC Capital Corporation
501 Corporate Centre Drive
Franklin, Tennessee 37067
Attention: Manager, Credit
Telecopy: (615) 771-6626
With a copy to: NTFC Capital Corporation
501 Corporate Centre Drive
Franklin, Tennessee 37067
Attention: Legal Department
Telecopy: (615) 771-6187
and
TFS Portfolio Management
10 Riverview Drive
Danbury, Connecticut 06810
All notices shall be sent to the applicable party at the address stated
above or in accordance with the last unrevoked written direction from such party
to the other party hereto, given in accordance with the terms hereof.
10.07. FCC and PUC Approval. The exercise of any rights or remedies
-----------------------
hereunder or under any other Loan Document by Lender that may require FCC or PUC
approval shall be subject to obtaining such approval. Pending the receipt of any
PUC or FCC approval, Borrower shall not do anything to delay, hinder, interfere
with, or obstruct the exercise of Lender's rights or remedies hereunder or the
obtaining of such approvals.
10.08. Lender Sole Beneficiary. All conditions of the obligation of
-------------------------
Lender to make any Advances hereunder are imposed solely and exclusively for the
benefit of Lender and its assigns and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make any Advances in the absence
of strict compliance with any or all such conditions. No Person shall under any
circumstances be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by Lender at any time if, in its
sole discretion, it deems it advisable to do so. Inspections and approvals of
the System, and the workmanship and materials used therein, impose no
responsibility or liability of any nature whatsoever on Lender. No Person shall,
under any circumstances, be entitled to rely upon such inspections and approvals
by Lender for any reason. Lender's sole obligation hereunder is to make the
Advances if and to the extent required by this Agreement or the Notes.
10.09. Lender's Review of Information. Borrower acknowledges and agrees
------------------------------
that any review or analysis by Lender of financial information, operating
information, marketing data, or other information provided to Lender by or on
behalf of Borrower at any time is and shall be conducted solely for Lender's
benefit and internal use and that Lender is under no duty or obligation to make
the results of such review or analysis available to Borrower. Borrower is not
relying, and will not rely, on Lender for financial or business advice.
45
<PAGE>
10.10. No Joint Venture. Nothing in any of the Loan Documents or in
------------------
this Agreement shall be deemed to constitute any kind of partnership, joint
venture, or fiduciary relationship between Lender and Borrower.
10.11. Severability. The provisions of this Agreement are intended to
------------
be severable. If any provision of this Agreement or the other Loan Documents
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof or thereof in any jurisdiction.
10.12. Rights Cumulative. All rights, powers and remedies herein given
------------------
to Lender are cumulative and not alternative, and are in addition to all
statutes or rules of law.
10.13. Duration; Survival. All representations and warranties of
-------------------
Borrower contained herein or made in connection herewith shall survive the
making of and shall not be waived by the execution and delivery of this
Agreement and the other Loan Documents, any investigation by Lender, or the
making of any Advances hereunder. All covenants and agreements of Borrower
contained herein shall continue in full force and effect from and after the date
hereof so long as it may borrow hereunder and until payment in full of the
Notes, interest thereon, all fees and all other Obligations of Borrower. Without
limitation, it is understood that all obligations of Borrower to make payments
to or indemnify Lender shall survive the payment in full of the Notes and of all
other Obligations.
10.14. Governing Law. This Agreement, the Notes, and each of the other
--------------
Loan Documents shall be governed by, construed and enforced in accordance with
the internal laws of the state of New York, except to the extent, if any, set
forth on Schedule 2.02 hereto and except to the extent that the laws of
--------------
jurisdictions where the Collateral is located may be required to apply to the
Collateral.
10.15. Counterparts. This Agreement may be executed in any number of
------------
counterparts (by facsimile transmission or otherwise) and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute but one and
the same instrument.
10.16. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of Lender and Borrower and their respective successors and
assigns; provided, however, that Borrower may not assign or transfer any of its
-----------------
rights or obligations hereunder or under the other Loan Documents (in whole or
in part) without the prior written consent of Lender. Lender may assign,
transfer or pledge any of its respective rights or obligations hereunder or
under the other Loan Documents without notice to or the prior written consent of
Borrower. Upon receipt of written notice from Lender of such assignment,
Borrower shall promptly acknowledge receipt thereof in writing. If Borrower is
given written notice of any assignment, it shall perform its obligations with
respect to this Agreement for the ratable benefit of the applicable assignee(s),
and, if so directed, shall pay all amounts due or to become due hereunder
directly to the applicable assignee(s) or to any other party designated by such
assignee(s). Borrower shall not assert against any such assignee any set-off,
defense or counterclaim that Borrower may have against Lender or any person
other than such assignee. Borrower shall also execute and deliver to Lender such
documentation as any such assignee may reasonably require, including (without
limitation) amended promissory notes, acknowledgments of, or consents to the
assignment which may require Borrower to make certain representations or
affirmations as to some of the basic terms and covenants contained herein.
Lender shall not be relieved of its obligations hereunder as a result of any
such sale, assignment, transfer, grant or pledge, unless such assignee
specifically assumes all or part of Lender's future obligations hereunder in a
writing, a copy of which shall be delivered to Borrower; in which event, after
the date of such assignment, Borrower's obligations to any such assignee shall
be proportionately as set forth herein with respect to Lender. Borrower shall
not look to Lender to perform any of such assignee's obligations hereunder which
arise after the date thereof. Any assignee shall be entitled to rely on
Borrower's agreements as stated herein, as applicable, and shall be considered a
third party beneficiary thereof. Except to the extent otherwise required by the
context of this Agreement, the word "Lender," when used in this Agreement, shall
mean and include any holder of any Note originally issued to Lender hereunder.
Any such holder of any Note shall be bound by and have the benefits of this
Agreement the same as if such holder had been a signatory hereto.
46
<PAGE>
10.17. Participation. Lender shall have the right to enter into one or
-------------
more participation agreements, syndication agreements, or similar agreements
with one or more participating lenders or other parties approved by Lender on
such terms and conditions as Lender shall deem advisable. Borrower shall furnish
a sufficient number of copies of reports and certificates to Lender so that
Lender and each participating lender shall receive a copy of each such document.
10.18. Time of Essence. Time is of the essence of this Agreement, the
-----------------
Note and the other Loan Documents.
10.19. Disclosures and Confidentiality.
---------------------------------
(a) Borrower agrees that it will obtain Lender's written consent
before using or generating any press release, advertisement, publicity
materials, or other publication in which the name or logo of Lender or any of
its Affiliates is used or may be reasonably inferred. Borrower will not
distribute any such materials in the absence of such prior written approval.
(b) Borrower agrees that it will not, directly or indirectly,
disclose to any third party the terms of this Agreement, the other Loan
Documents, prior or future correspondence relating thereto, the transactions
contemplated hereby, or any other information regarding Lender or its Affiliates
learned by Borrower during the course of negotiation thereof. The term "third
party" shall exclude only Borrower, its employees, its senior lenders, its
Affiliates, and their respective attorney(s) and certified public accountant(s).
This Section 10.19(b) shall not restrict the disclosure of information if such
-----------------
disclosure is required by law, by order of any court, or by the order, rule or
regulation of any administrative agency, including (without limitation) any
requirements of the FCC, any PUC, or any state or federal securities commissions
(the "Commissions"); provided, however, that, except for disclosures required by
----------- -------- -------
the FCC, PUC or Commissions, Borrower shall provide Lender with advance notice
of any such required disclosure of information so that Lender may seek an
appropriate protective order and/or waive compliance with this section. Borrower
shall not oppose any action taken by Lender to obtain an appropriate protective
order or other reliable assurance that the information will be accorded
confidential treatment. The obligations set forth in this Section 10.19(b) shall
----------------
survive the termination of this Agreement.
(c) The disclosure of information by either Lender or Borrower
will not be restricted under this Agreement if such information (i) has been or
becomes published or is now, or in the future, in the public domain through (A)
no fault of the parties, (B) disclosure other than unauthorized disclosure by
the party to whom the information is disclosed, or (C) disclosure to third
parties by the disclosing party without similar restriction; (ii) is property
(other than proposal letters, commitment letters, or other correspondence
between Lender and Borrower) within the legitimate possession of the receiving
party prior to disclosure hereunder; (iii) subsequent to disclosure hereunder,
is lawfully received from a third party having rights therein without
restriction of the third party's or receiving party's rights to disseminate the
information and without notice of any restriction against its further
disclosure; (iv) is disclosed with the written approval of the other party; or
(v) is or becomes publicly available free of any obligation to keep it
confidential.
47
<PAGE>
(d) Borrower authorizes Lender to discuss with and furnish to any
Affiliate of Lender, to any government or self-regulatory agency with
jurisdiction over Lender, to any other Governmental Authority, or to any
assignee, successor, participant, successor, or prospective assignee, successor
or participant, all financial statements, audit reports, and other information
pertaining to Telscape, the Borrower, and/or their Subsidiaries whether such
information was provided by Borrower or prepared or obtained by Lender or third
parties. Neither Lender nor any of its employees, officers, directors or agents
makes any representation or warranty to any existing or prospective assignee,
successor or participant regarding any audit reports or other analyses that
Lender may distribute, whether such information was provided by Borrower or
prepared or obtained by Lender or third parties, nor shall Lender or any of its
employees, officers, directors or agents be liable to any Person receiving a
copy of such reports or analyses for any inaccuracy or omission contained in
such reports or analyses or relating thereto.
(e) Every reference in this Agreement to disclosures of Borrower
to Lender (except the financial statements), to the extent that such references
refer or are intended to refer to disclosures at or prior to the execution of
this Agreement, shall be deemed strictly to refer only to written disclosures
delivered to Lender concurrently with the execution of this Agreement and
referred to specifically in the Loan Documents. The parties intend that such
disclosures are to be limited to those presented in an orderly manner at the
time of executing this Agreement and are not to be deemed to include expressly
or impliedly any disclosures that previously may have been delivered from time
to time to Lender, except to the extent that such previous disclosures are again
presented to Lender in writing concurrently with the execution of this
Agreement.
10.20. Jurisdiction and Venue. (a) The Borrower hereby irrevocably
------------------------
and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgment in respect thereof to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate
courts from any thereof; and
(ii) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in any inconvenient
court and agrees not to plead or claim the same.
(b) The Borrower hereby irrevocably and unconditionally:
48
<PAGE>
(i) consents to the appointment of CT Corporation System, 1633
Broadway, New York, New York 10019, as its process agent (together with any
successor process agent, the "Process Agent") upon which service of process
-------------
in New York, New York, may be served in any legal action proceeding
instituted in such courts. To the extent permitted by applicable law, the
Borrower agrees that service of process may be made personally or by
mailing or delivering a copy of the summons and complaint or other legal
process in any legal action or proceeding to the Borrower in care of the
Process Agent and such agent is hereby authorized to receive and
acknowledge the same for and on behalf of the Borrower and to admit service
with respect thereto. Service upon the Process Agent shall be deemed in
every respect effective service of process upon the Borrower and shall be
legal and binding upon the Borrower for all purposes notwithstanding any
failure to mail copies of such legal process to the Borrower, or any
failure on the part of the Borrower to receive the same. The Borrower
further agrees that it will not revoke the appointment of the Process Agent
so long as any of the Note remains outstanding or until the appointment,
which appointment the Borrower similarly agrees not to revoke, of a
successor Process Agent acceptable to the Lender and such successor's
acceptance of such appointment. The Borrower agrees that it will at all
times continuously maintain the Process Agent to receive service of process
in the State of New York on behalf of itself, and, in the event that for
any reason such Process Agent shall cease to be the Process Agent, the
Borrower shall promptly appoint a successor Process Agent acceptable to the
Lender for service of process in the State of New York and shall promptly
deliver to the Lender a copy of such successor Process Agent's acceptance
or acknowledgement of that appointment. The Borrower will take any and all
reasonable action, including, the filing of any and all documents and
instruments that may be necessary to continue the appointment of the
Process Agent in full force and effect;
(ii) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(iii) waives, to the maximum extent not prohibited by law any rights
it may have to claim or recover in any legal action or proceeding referred
to in this subsection any special, exemplary, punitive or consequential
damages.
10.21. Jury Waiver. BORROWER AND LENDER HEREBY KNOWINGLY AND WILLINGLY
------------
WAIVE THEIR RIGHTS TO DEMAND A JURY TRIAL IN ANY ACTION OR PROCEEDING INVOLVING
THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, THE OBLIGATIONS, OR ANY RELATIONSHIP
BETWEEN LENDER AND BORROWER. BORROWER 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.
10.22. Limitation on Liability. LENDER, BORROWER AND GUARANTORS 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 AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE OBLIGATIONS.
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.
49
<PAGE>
10.23. Borrower Waivers. To the full extent permitted by law and except
----------------
as set forth herein, Borrower hereby waives (i) presentment, demand, protest,
notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper, and guaranties
at any time held by Lender on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard; (ii) notice prior
to taking possession or control of the Collateral or any bond or security which
might be required by any court prior to allowing Lender to exercise any of
Lender's remedies, including the issuance of an immediate writ of possession,
except as expressly required in any of the Loan Documents; (iii) any marshalling
of assets or any right to compel Lender to resort first to any Collateral or
other Persons before pursuing Borrower for payment of the Obligations and any
defenses based on suretyship or impairment of Collateral; (iv) the benefit of
all valuation, appraisement and exemption laws; (v) any right to require Lender
to terminate its security interest in the Collateral or in any other property of
Borrower until termination of this Agreement and the execution by Borrower and
by any person whose Loans to Borrower are used in whole or in part to satisfy
the Obligations, of an agreement indemnifying Lender from any loss or damage
Lender may incur as the result of dishonored or unsatisfied items of any account
debtor applied to the Obligations; and (vi) notice of acceptance hereof.
Borrower acknowledges that the foregoing waivers are a material inducement to
Lender's entering into this Agreement and that Lender is relying upon the
foregoing waivers in its future dealings with Borrower.
10.24. Schedules. The Schedules and Exhibits attached to this Agreement
---------
are an integral part hereof and are hereby made a part of this Agreement.
10.25. Agreement to Govern. In case of any conflict between the terms
---------------------
of this Agreement and any of the other Loan Documents, the terms of this
Agreement shall govern.
10.26. Entire Agreement. This Agreement, the other Loan Documents, and
-----------------
other documents, agreements and certificates executed by the parties
contemporaneously herewith or subsequent hereto constitute the entire agreement
of the parties and supersede all prior understandings and agreements, written or
oral, between the parties hereto relating to the subject matter hereof. Borrower
is not entering into this Agreement in reliance on statements or representations
made by any Person other than as set forth herein.
END OF GENERAL TERMS AND CONDITIONS. NEXT PAGE IS SCHEDULE 1.01 [SIGNATURES
-------------
APPEAR ON THE COVER PAGE.]
50
<PAGE>
SCHEDULE 1.01
TO LOAN AND SECURITY AGREEMENT
BORROWER INFORMATION AND DEFINED TERMS
--------------------------------------
CLOSING DATE: September 29, 2000
BORROWER: Pointe Communications Corporation, a Nevada corporation
TAX IDENTIFICATION
NUMBER: 84-1097751
CHIEF
EXECUTIVE OFFICES: 1325 Northmeadow Parkway, Suite 110
Roswell, Georgia 30076
REGULATORY
AUTHORIZATIONS: The term "Regulatory Authorizations" shall include: the
various telecommunications services permits, licenses and
authorizations issued to the borrower and Significant
Subsidiaries by regulatory authorities, set forth on
Schedule 4.05 to the Loan and Security Agreement.
NORTEL
NETWORKS, INC.: Master Purchase Agreement dated November 2, 1999, between
Pointe Communications Corporation and Nortel Networks, Inc.
TAX IDENTIFICATION NUMBERS OF:
(Guarantor)
Telscape International, Inc.-- 75-2433637
(Significant Subsidiary Guarantors)
Telscape U.S.A., Inc. 76-0499077
MSN Communications, Inc. 33-0707658
Interlink Communications, Inc. 77-0483223
TSCP International, Inc. 76-0577773
Pointecom, Incorporated: 58-2440272
Galatel, Inc. 58-2559588
Pointe Local Exchange Company: 58-2539217
Overlook Communications International Corporation 58-2028264
Rent-A-Line Telephone Company, LLC 58-2297158
Tops Corporation 76-0460301
<PAGE>
SCHEDULE 1.02 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
BUSINESS PLAN
-------------
<PAGE>
SCHEDULE 2.01 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
MAXIMUM LOAN AMOUNT
-------------------
Maximum Principal Amount (including Capitalized Interest): $16,000,000
Maximum Amount for Lender's Expenses: $ 50,000
<PAGE>
SCHEDULE 2.02 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAGE 2
PAYMENT TERMS AND GOVERNING LAW
-------------------------------
INITIAL
BORROWING DATE: The first Borrowing Date on which the Lender disburses funds
at the request of the Borrower, as evidenced by a borrowing
certificate executed by the Borrower under the terms of the
Loan.
FINANCING
TERMINATION DATE: September 30, 2001 (One year after Closing Date).
CAPITALIZED
INTEREST PERIOD: September 29, 2000, through September 30, 2001.
INTEREST
ONLY PERIOD: October 1, 2001, through September 30, 2002.
CONVERSION DATE: September 30, 2002.
PAYMENT SCHEDULE: After the Conversion Date, the Borrower shall pay all
outstanding principal amounts, together with all accrued but
unpaid interest, in arrears in 20 quarterly installments of
principal and interest. If the Borrower elects to convert
all or a portion of the Advances to a fixed interest rate on
the Conversion Date as set forth below, the Borrower shall
pay the outstanding principal amount of the Loans so
converted in equal quarterly payments of principal and
interest on the last Business Day of each Calendar Quarter
in an amount sufficient to fully amortize the Loans by the
Maturity Date. If the Borrower does not make the election to
convert all Advances to a fixed interest rate on or prior to
the Conversion Date as set forth below, the Borrower shall
pay the outstanding principal amount of the Loans not so
converted in quarterly payments on the last Business Day of
each Calendar Quarter as follows:
Quarter Ending Amount
--------------- ------
December 31, 2002 3.75%
March 31, 2003 3.75%
June 30, 2003 3.75%
September 30, 2003 3.75%
December 31, 2003 4.25%
March 31, 2004 4.25%
June 30, 2004 4.25%
September 30, 2004 4.25%
December 31, 2004 5.00%
March 31, 2005 5.00%
June 30, 2005 5.00%
<PAGE>
SCHEDULE 2.02 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAGE 3
Quarter Ending Amount
--------------- ------
September 30, 2005 5.00%
December 31, 2005 5.75%
March 31, 2006 5.75%
June 30, 2006 5.75%
September 30, 2006 5.75%
December 31, 2006 6.25%
March 31, 2007 6.25%
June 30, 2007 6.25%
September 30, 2007 6.25%
INITIAL
PAYMENT DATE: The last Business Day of the first Calendar Quarter after
the Conversion Date.
INTEREST
PAYMENT DATE: The last Business Day of the first Calendar Quarter after
the Capitalized Interest Period and the last Business Day of
each Calendar Quarter thereafter until the Maturity Date.
PAYMENT DATE: The Initial Payment Date and the last Business Day of each
Calendar Quarter thereafter until the Maturity Date.
<PAGE>
SCHEDULE 2.02 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAGE 4
MATURITY DATE: September 30, 2007 (Last Business Day of 20th Calendar
Quarter after the Conversion Date).
GOVERNING LAW: New York.
<PAGE>
SCHEDULE 2.09 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
FEES
----
The Borrower shall pay a non-refundable origination fee of $320,000 on the
Closing Date, provided that Borrower shall receive a credit for any portion of
the Origination Fee paid prior to the Closing Date. The Borrower may finance (or
refinance) with Advances hereunder up to $320,000 of the Origination Fee.
Upon invoicing, the Borrower shall pay all reasonable fees, charges and expenses
of the Lender (including, without limitation, the fees, charges and expenses of
the Lender's counsel) arising in connection with the structuring of the
transactions contemplated in this Loan Agreement and in connection with the
negotiation, drafting, preparation, execution and/or delivery of the documents
evidencing the terms and conditions of the credit facility and all related
documents regardless of a successful closing. The Borrower also shall pay all
closing costs, including legal fees and charges, as well as all stamp or other
recording costs, charges, filing fees, costs and expenses of the Lender in the
enforcement or protection of its rights. The Borrower may finance up to $50,000
of the foregoing fees, charges and expenses under the Loan, which the Borrower
first shall use to reimburse the Lender for its legal fees, charges and expenses
and, then, to reimburse the Borrower for its legal expenses.
<PAGE>
SCHEDULE 4.04
TO LOAN AND SECURITY AGREEMENT
REQUIRED CONSENTS
-----------------
Certain state filings requesting consent to incur indebtedness over a certain
threshold are required in connection with the undertaking of the Subsidiaries
named below to guarantee the obligations of the Borrower, as set forth below.
Regulatory counsel is currently preparing the filings and such filings are
expected to be made by the Closing Date, and if not made by the Closing Date,
will be made as soon as reasonably possible thereafter. Each entity requesting
the aforementioned consents must receive approval from the relevant state office
within 60 days of the Closing Date.
Georgia:
-------
Overlook Communications International Corporation
PointeCom, Incorporated
Telscape USA, Inc.
Pennsylvania:
------------
MSN Communications, Inc.
Telscape USA, Inc.
Overlook Communications International Corporation
New York:
---------
Overlook Communications International Corporation
Telscape USA, Inc.
PointeCom, Incorporated
<PAGE>
SCHEDULE 4.05 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAGE 2
REGULATORY AUTHORIZATIONS
-------------------------
FEDERAL (FCC)
POINTE COMMUNICATIONS CORPORATION
214 License ITC-95-160 5/1/95
Earth Station E960410 SES-LIC-19960624-00939 9/20/96
Earth Station E960094 SES-LIC-19951121-00140 4/26/96
TELSCAPE INTERNATIONAL, INC.
Signaling Point Code SPC-NEW-19990916-00073 9/22/99
TELSCAPE USA, INC.
214 License (Global F/B) ITC-214-19971222-0809 2/13/98
214 License (Global Resale) ITC-214-19960925-00465 11/8/96
MSN COMMUNICATIONS, INC.
214 License ITC-214-19960522-00207 7/19/96
OVERLOOK COMMUNICATIONS INTERNATIONAL CORPORATION
214 License ITC-95-334 7/10/95
WORLDLINK COMMUNICATIONS, INC.
214 License ITC-95-460 9/22/95
214 License ITC-214-1999-0505-00284 6/18/99
POINTECOM, INCORPORATED
214 License ITC-214-19990716-000468 8/18/99
INTERLINK COMMUNICATIONS, INC.
214 License ITC-214-19981014-00699 11/27/98
Earth Station E960024 SES-MOD-19991018-01758 12/29/99
Earth Station E921000 Various Various
Earth Station E890130 SES-LIC-19990920-01853 2/18/00
<PAGE>
SCHEDULE 4.05 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAGE 3
TSCP INTERNATIONAL, INC.
214 License ITC-98-588-AL 8/6/98
STATE
TELSCAPE USA, INC.
Arizona Application T-03268A-960520 10/3/96
Arkansas Docket No. 96-294-U 10/7/96
California Decision No. 97-04-040 4/9/97
Florida Cert. No. 4768 1/27/97
Georgia Cert. No. R-395 10/7/97
Idaho Tariff Accepted 10/12/96
Illinois Docket No. 96-0450 12/4/96
Iowa Registered 8/9/99
Kansas Docket No. 97-TUSC-147-COC 11/7/96
Kentucky Tariff Accepted 10/11/96
Louisiana TSP00038 11/1/96
Maine Docket No. 96-528 11/15/96
Massachusetts Registered
Michigan Registered 9/6/96
Minnesota Docket No. P-5399/NA-96-1057 12/6/96
Mississippi Docket No. 96-UA-0430 10/25/96
Missouri Case No. TA-97126 11/12/96
Montana Authorized
Nebraska Case No. C-1413 11/12/96
Nevada CPC 2616 11/15/96
New Mexico 96-345-TC / Utility Case No. 2954 4/20/99
New York Case No. 96-C-0823 12/11/96
North Carolina Docket No. P-589 11/14/96
North Dakota Certificate No. 365 10/10/96
Ohio Case No. 96-978-CT-RRJ 10/13/96
Oregon Order No. 96-267 10/9/96
Pennsylvania Docket No. A-310444 12/16/96
South Dakota Docket TC 96-162 10/17/96
Tennessee Case No. 96-01396 10/2/96
Texas Registration Letter Amended 7/14/97
Utah Letter of Registration submitted 8/4/99
Washington Case No. UT-961137 (IXC Resell) 10/9/96
Case No. UT-971780 (Comp. Class.) 3/24/98
Wisconsin Utility No. 7093-TI-100 12/23/96
Wyoming Docket No. 74209-TX-96-1 9/10/96
<PAGE>
SCHEDULE 4.05 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAGE 4
MSN COMMUNICATIONS, INC.
California Decision No. 97-03-010 App. No. 96-12-004 3/7/97
Illinois Docket No. 96-0601 3/12/97
Nevada CPC 2207, Docket No. 96-12009 3/20/97
New York Case No. 96-C-1172 4/7/97
Texas Registered (IXC) 7/20/96
SPCOA No. 60073
OVERLOOK COMMUNICATIONS INTERNATIONAL CORPORATION
Alabama Docket No. 25636 12/2/96
Arizona Docket No. U-3129-96-165 9/24/97
Connecticut Docket No. 96-0813 12/18/96
Florida Cert. No. 4088, Docket No. 95-0871-TI 12/29/95
Order No. PSC-95-1020-FOF-TI
Georgia Cert. No.R-286, Docket No. 5841-U 11/22/96
Idaho Tariff Accepted 8/10/95
Indiana Cause No. 40344 11/30/95
Kansas Docket No. 194,710 U, 96-OLCC-617-COC 8/12/96
Kentucky Case No. 95-366 10/4/95
Louisiana Registration Accepted 10/6/95
Massachusetts Registered 7/21/95
Minnesota Docket No. P-5258/NA-95-976 1/12/95
Missouri Case No. TA-96-101 11/28/95
Nevada Docket No. 96-5030 Cert. No. 2119 7/31/96
New Hamp. Docket DE-96-009, Order No. 22,269 8/6/96
New Jersey Registered 7/6/95
New York Case No. 95-C-0902 12/8/95
North Dakota Case PU-151996-197 Registration No. 325 6/11/96
Ohio Case No. 96-17-CT RRJ 2/9/96
Oklahoma Cause PUD 95-0000199, Order No. 408533 1/15/97
Pennsylvania Docket No. A-310359 4/11/96
Tennessee Registered 8/4/95
Texas Registered 7/13/95
Vermont CPG No. 238 6/26/97
Washington Docket No. UT-961222 11/13/96
Docket No. UT-991073 9/22/99
West Virginia Case No. 96-0981-T-CN 11/26/96
<PAGE>
SCHEDULE 4.05 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAGE 5
WORLDLINK COMMUNICATIONS, INC.
Connecticut Docket No. 96-09-01 4/30/97
Georgia Docket No. 5073-U Cert. No. R-194 6/8/95
Idaho Tariff Accepted 10/16/95
Indiana Cause No. 40660 1/8/97
Louisiana Tariff Accepted 4/11/96
Massachusetts Tariff Approved 9/4/96
Missouri Case No. TA-97-107 11/22/96
Nevada Docket No. 96-9010 Cert. No. 2164 11/15/96
North Dakota Registration No. 370, Case PU-1583-96-480 11/29/96
Texas Registered 8/31/95
West Virginia Case No 96-1158-T-CN 12/16/96
POINTE LOCAL EXCHANGE COMPANY (FORMERLY HTC COMMUNICATIONS, LLC)
California U-6185-C, Decision 99-06-083 (LEC license) 6/24/99
U-6185-C, Decision 99-06-083 (IXC license) 6/24/99
PointeCom, Incorporated
Florida Docket No. 990215-TX 6/2/99
Order No. PSC-99-1056-CO-TX (LEC license)
Docket No. 991008-TI 11/12/99
Order No. PSC-99-2050-PAA-TI (IXC license)
Georgia IXC application filed 8/24/99
New York Case No. 99-C-0902 11/19/99
Texas COA-50027, Docket No. 22049 (SPCOA) 4/12/00
Rent-A-Line Telephone Company, LLC
Georgia Amended Cert. No. L-035 5/20/99
Docket Nos. 7130-U and 6170-U
Galatel, Inc.
Georgia Pre-paid Reseller
<PAGE>
SCHEDULE 4.05 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAGE 6
REGULATORY AUTHORIZATIONS NOT IN GOOD STANDING
----------------------------------------------
TELSCAPE USA, INC.
CERTIFICATION STATUS REPORT
---------------------------
IN GOOD STANDING
STATE WITH PUBLIC SERVICE/PUBLIC UTILITY COMMISSION
--------- --------------------------------------------
KENTUCKY NO
--------- --------------------------------------------
LOUISIANA NO
--------- --------------------------------------------
MSN COMMUNICATIONS, INC.
CERTIFICATION STATUS REPORT
---------------------------
IN GOOD STANDING
STATE WITH PUBLIC SERVICE/PUBLIC UTILITY COMMISSION
--------- --------------------------------------------
FLORIDA NO
--------- --------------------------------------------
Certificates of the above entities are in effect but not in good standing;
efforts are being undertaken presently to bring these certificates to good
standing status.
<PAGE>
SCHEDULE 4.06
TO LOAN AND SECURITY AGREEMENT
PERMITTED CONFLICTS AND RESTRICTIONS
------------------------------------
NONE
<PAGE>
SCHEDULE 4.07 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
RESTRICTIONS ON LOANS
---------------------
NONE
<PAGE>
SCHEDULE 4.08 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
FINANCIAL STATEMENTS
--------------------
Quarterly Report of Telscape on Form 10-Q for the period ended June 30, 2000.
Annual Report of Telscape on Form 10-K for the period ended December 31, 1999.
Annual Report of Pointe Communications Corporation on Form 10-K for the period
ended December 31, 1999.
<PAGE>
SCHEDULE 4.11
TO LOAN AND SECURITY AGREEMENT
DEFAULTS UNDER MATERIAL AGREEMENTS
----------------------------------
NONE
<PAGE>
SCHEDULE 4.12 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PAGE 2
SCHEDULE 4.12
TO LOAN AND SECURITY AGREEMENT
PENDING LITIGATION
------------------
Telscape International, Inc., Telereunion, S.A. de C.V., Telereunion
-----------------------------------------------------------------------------
International, S.A. de C.V., vs. Mastec, et. al. and Acietel Mexicana, S.A. de
--------------------------------------------------------------------------------
C.V. in the United States District Court, Southern District of Texas, Houston
---
Division, Case No. H-99-1468, regarding breach of contract, fraud, tortious
interference with contract and negligent misrepresentations resulting in
construction delays and alternate financing incurring additional costs and
expenses, as well as reputation and credibility damages. This suit has been
filed in the above district court and is currently set to go to trial on
September 29, 2000. The defendants have filed a counterclaim seeking an
unspecified amount of damages against the Company which the Company will
vigorously contest and refute. All activity has been temporarily stayed in
this case, as the parties are negotiating and will likely conclude a settlement
agreement. Even though we have been advised that we have a strong case against
MasTec, there can be no assurance as to the successful conclusion to this
matter.
<PAGE>
SCHEDULE 4.15 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
<TABLE>
<CAPTION>
TAXES
-----
<S> <C> <C>
ITEM DESCRIPTION Amount
---- ----------------------------------------------------------------------------- -----------
1 Federal Excise Taxes: The Company has reached a settlement with the
IRS regarding unpaid Federal Excise Taxes. The liability is as follows:
Federal Excise Taxes (November 1998 through June 2000 - accrued on $1,587 ,000
books)
Interest at 10% (not accrued on books) $ 238,000
The Company has negotiated a 24 month payment plan, which will begin
in October 2000.
2 Section 280G payments:
None
3 Overlook Communications International Corporation has not filed federal
excise and various state sales and use, gross receipts, universal service
fund and franchise tax returns related to its conduct of the prepaid calling
card business during 1997 through August 2000. The Company has
received an assessment for Universal Service Fund Fees for
approximately $2.0 million, which it believes is incorrect and has retained
Telecom Compliance Services, Inc. ("TCS") to assist in determining the
correct obligation and negotiating a settlement with the USAC.
Additionally, the Company has engaged Arthur Andersen to assist the
Company in determining its liability for the various state and federal taxes
and facilitating the filing of any required returns. Arthur Andersen began
the voluntary disclosure process with the Company's three largest states
California, Illinois and Florida as well as the IRS for Federal Excise tax.
Thus far they have been successful in arguing no NEXUS related to the
prepaid calling card business in California and Illinois and the Company
has received notification of no liability past or prospective (assuming fact
patterns remain constant) for the prepaid card business in these states. A
voluntary disclosure was filed with the IRS in May 2000 but a response
has not been received to date. The Federal Excise tax has been repealed
and will phase out over a three year period. As of August 31, 2000, the
Company had accrued approximately $3.3 million in its Financial
Statements for these various obligations.
4 As a result of a Georgia State Use tax audit during 1998, Pointe
Communications Corporation was assessed approximately $85,000 in use
tax, which has been accrued in the Company's Financial Statement but
has not yet been paid.
<PAGE>
5 Pointe Communications Corporation has not filed the Texas Franchise
Tax Return for 1998 for its subsidiary TOPS. The return will be filed
pending resolution of a valuation of Telcommute Solutions G.P., Inc.,
which TOPS dividended to its parent Pointe Communications Corporation.
</TABLE>
<PAGE>
SCHEDULE 4.16 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
The financial projections and the financial condition of the Company have been
negatively affected by the following events since June 30, 2000:
(i) The Mexican network was expected to be complete and operational during
the second quarter of 2000. However, due to delays in construction and
interconnection with Telmex, the network became only partially operational
during the third quarter and is not expected to be complete until the
fourth quarter of 2000. This delay has had a significant impact on the
gross margins earned in the prepaid calling card and the wholesale
businesses.
(ii) The completion of the Competitive Local Exchange Carrier network and
marketing of such services was delayed by approximately one quarter due to
delay in the completion of the build out and delay in the implementation of
the Operating Support System necessary to provision customers.
(iii) The non-CLEC one plus business in the United States was closed as a
result of negative operating results.
(iv) The Coast Partners litigation was settled for $875,000.
Borrower acknowledges that nothing in the disclosures in this Schedule 4.16
shall be deemed to alter its obligations under the Agreement, or limit the
Lender's rights and remedies under the Agreement.
<PAGE>
SCHEDULE 4.25
TO LOAN AND SECURITY AGREEMENT
UCC FILING OFFICES
------------------
CALIFORNIA
Secretary of State
Uniform Commercial Code Division
P. O. Box 942835
Sacramento, California 94235-0001
FLORIDA
Bureau of Uniform Commercial Code
Department of State
P. O. Box 5588
Tallahassee, Florida 32314
GEORGIA
Clerk of the Superior Court of Cobb County
P. O. Box 3370
Marietta, Cobb County, Georgia 30061
TEXAS
Texas Secretary of State
UCC Filing/Recording Office
P.O. Box 13697
Austin, Texas 78711
NEVADA
Nevada Secretary of State
UCC Filing/Recording Office
200 North Carson Street
Carson City, Nevada 89701-4201
<PAGE>
SCHEDULE 4.26
TO LOAN AND SECURITY AGREEMENT
PRINCIPAL OFFICES AND LOCATION OF COLLATERAL
--------------------------------------------
BORROWER'S CHIEF EXECUTIVE OFFICE:
Pointe Communications Corporation c/o
Telscape International, Inc.
1325 Northmeadow Parkway, Suite 110
Roswell, Georgia 30076
LOCATIONS OF COLLATERAL:
3949 Ruffin Road, Suite E-2
San Diego, California 92123
11021 Valley Blvd.
El Monte, California 91731
444 Brickell Avenue, Suite 100
Miami, Florida 33131
1301 Fanning Street, Suite 1275
Houston, Texas 77002
<PAGE>
SCHEDULE 4.29
TO LOAN AND SECURITY AGREEMENT
ASSUMED NAMES
-------------
Pointecom
Telscape Communications
Telscape Communications International
<PAGE>
SECTION 4.30 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
TRANSACTIONS WITH AFFILIATES
----------------------------
On May 7, 1999, the Company issued $1,000,000 in senior notes to E.
Scott Crist, bearing interest at 8% until November 6, 1999. Thereafter, the
interest rate increased by 1% for each month after November 6, 1999. The
Company repaid $150,000 to Mr. Crist on August 27, 1999 and 200,000 on
August 2000. The outstanding balance of the Note due to Mr. Crist at September
29, 2000 is $650,000.
On August 16, 1999, E. Scott Crist issued a Promissory Note to the Company
in the amount of $95,000, bearing simple interest at an annual rate of 8%. The
outstanding balance of the Note due to the Company at December 31, 1999 was
$97,873, including principal and accrued interest.
On December 10, 1998, Manual Landa issued a Promissory Note to the
Company in the amount of $270,000, bearing simple interest at an annual rate of
9%. The outstanding balance of the Note due to the Company at December 31, 1999
was $220,336, including principal and accrued interest.
During 1997, the Company entered into a five year operating lease of earth
station equipment located in Panama, Costa Rica and Nicaragua. Steve Raville is
affiliated with one of the lessors. The lease obligations total approximately
$70,000 per annum.
<PAGE>
SCHEDULE 4.31 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
NORTEL PURCHASE AGREEMENT
-------------------------
Master Purchase Agreement dated as of November 2, 1999, between Pointe
Communications Corporation and Nortel Networks, Inc.
<PAGE>
SCHEDULE 6.02 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
POST-CLOSING ITEMS
------------------
1. Filing of UCC-1 Financing Statements in offices listed on Schedule 4.25
within 10 days of the Closing Date.
2. Filing of UCC-1 Financing Statements as fixture filings for the locations
of Collateral listed on Schedule 4.26 within 10 days of the Closing Date.
3. Delivery to Lender of Certificate of Insurance satisfying the requirements
of Section 7.01 within 15 days of Closing.
4. Delivery to Lender of all post-filing lien searches reflecting no liens as
to Collateral (other than a subordinate lien securing the Lucent Credit
Agreement) within 45 days of the Closing Date.
5. Delivery to Lender of all Consents within 60 days of the Closing Date.
6. Delivery to Lender of an opinion of Regulatory Counsel in form and
substance satisfactory to Lender within 15 days of the Closing Date.
7. Receipt of all Required Consents within 60 days of the Closing Date.
The failure of the Borrower to satisfy, or cause the satisfaction of, each
post-closing item listed above within the specified time period shall constitute
an Event of Default.
<PAGE>
SCHEDULE 7.07 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
INSURANCE
---------
[SEE ATTACHED CERTIFICATE(S)]
<PAGE>
SCHEDULE 8.01 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
PERMITTED SPECIFIC ENCUMBRANCES
-------------------------------
1. Liens securing Indebtedness under the Lucent Credit Agreement, provided
that any lien on the Collateral must be subordinate to the Lien on the
Collateral in favor of Lender.
2. Liens securing Indebtedness under the Loan and Security Agreement dated as
of January 11, 1999 between and among Telscape International, Inc., a Texas
corporation ("Telscape"), Domestic and/or Foreign Subsidiaries of Telscape
which are signatories to the Schedule of Borrowing Subsidiaries attached
thereto and such additional Domestic and/or Foreign Subsidiaries of
Telscape which may thereafter become a party thereto pursuant to Section
1(b) thereof, and NTFC Capital Corporation, provided that no lien may
encumber the Collateral.
3. Liens securing Indebtedness under the Loan and Security Agreement dated as
of December 7, 1998 between and among Telscape International, Inc., a Texas
corporation ("Telscape"), Domestic and/or Foreign Subsidiaries of Telscape
which are signatories to the Schedule of Borrowing Subsidiaries attached
thereto and such additional Domestic and/or Foreign Subsidiaries of
Telscape which may thereafter become a party thereto pursuant to Section
1(b) thereof, and Newbridge Financial Services, a unit of GE Capital
Corporation, provided that no lien may encumber the Collateral.
4. Liens securing Indebtedness permitted under Section 8.01(a), provided that
no lien may encumber the Collateral.
<PAGE>
SCHEDULE 8.13 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
RESTRICTIONS ON DIVIDENDS AND RELATED TRANSACTIONS
--------------------------------------------------
1. Lucent Credit Agreement.
2. Loan and Security Agreement dated as of January 11, 1999 between and among
Telscape International, Inc., a Texas corporation ("Telscape"), Domestic
and/or Foreign Subsidiaries of Telscape which are signatories to the
Schedule of Borrowing Subsidiaries attached thereto and such additional
Domestic and/or Foreign Subsidiaries of Telscape which may thereafter
become a party thereto pursuant to Section 1(b) thereof, and NTFC Capital
Corporation.
3. Loan and Security Agreement dated as of December 7, 1998 between and among
Telscape International, Inc., a Texas corporation ("Telscape"), Domestic
and/or Foreign Subsidiaries of Telscape which are signatories to the
Schedule of Borrowing Subsidiaries attached thereto and such additional
Domestic and/or Foreign Subsidiaries of Telscape which may thereafter
become a party thereto pursuant to Section 1(b) thereof, and Newbridge
Financial Services, a unit of GE Capital Corporation.
<PAGE>
EXHIBIT A
---------
LOAN AND SECURITY AGREEMENT
---------------------------
FORM OF NOTE
------------
<PAGE>
EXHIBIT B
---------
LOAN AND SECURITY AGREEMENT
---------------------------
FORM OF BORROWING CERTIFICATE
-----------------------------
<PAGE>
EXHIBIT C
---------
LOAN AND SECURITY AGREEMENT
---------------------------
FORM OF OPINION OF COUNSEL FOR BORROWER
---------------------------------------
<PAGE>
EXHIBIT D
---------
LOAN AND SECURITY AGREEMENT
---------------------------
FORM OF OPINION OF REGULATORY COUNSEL FOR BORROWER
--------------------------------------------------
<PAGE>
EXHIBIT E
---------
LOAN AND SECURITY AGREEMENT
---------------------------
FORM OF LANDLORD'S CONSENT
--------------------------
<PAGE>
EXHIBIT F
---------
LOAN AND SECURITY AGREEMENT
---------------------------
FORM OF CERTIFICATE OF FINANCIAL CONDITION
------------------------------------------
<PAGE>
EXHIBIT G
---------
LOAN AND SECURITY AGREEMENT
---------------------------
FORM OF TELSCAPE GUARANTY AGREEMENT
-----------------------------------
<PAGE>
EXHIBIT H
---------
LOAN AND SECURITY AGREEMENT
---------------------------
FORM OF SIGNIFICANT SUBSIDIARY GUARANTY AGREEMENT
-------------------------------------------------
<PAGE>
EXHIBIT I
---------
LOAN AND SECURITY AGREEMENT
---------------------------
FORM OF COLLATERAL ASSIGNMENT OF PURCHASE AGREEMENT
---------------------------------------------------
<PAGE>
