SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FEBRUARY 18, 1999
_______________________________________
Date of Report (Date of earliest event reported)
USN COMMUNICATIONS, INC.
______________________________________________________
(Exact name of Registrant as specified in its charter)
DELAWARE 333-16265 36-3947804
______________ _____________________ __________________
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
10 SOUTH RIVERSIDE PLAZA, SUITE 2000, CHICAGO, ILLINOIS 60606
____________________________________________________________
(Address of principal executive offices, including zip code)
(312) 906-3600
____________________________________________________
(Registrant's telephone number, including area code)
N/A
_____________________________________________________________
(Former name or former address, if changed since last report)
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
On February 18, 1999, registrant USN Communications, Inc. (the
"Company") and twelve of its subsidiaries (collectively, the "Debtors")
filed for protection under Chapter 11 in the United States District Court
for the District of Delaware (the "Court"). The cases have been
consolidated for the purpose of joint administration and have been assigned
to the Honorable Peter J. Walsh. The consolidated caption is: In re USN
Communications, Inc., et al., Case No. 99-383 (PJW). At a first day
hearing conducted on February 19, 1999 and continued on February 22, 1999,
the Court entered nineteen orders granting authority to the Debtors to,
among other things: honor prepetition payroll obligations; honor
prepetition refunds or credits owed to existing customers; maintain
existing bank accounts, cash management systems and business forms; retain
professionals (including counsel, financial advisors and investment
bankers) to represent the Company in connection with the Company's two
proposed asset sales described herein, the debtor-in-possession financing
described herein and the Debtors' Chapter 11 cases; and pay expense
reimbursements of up to $1,000,000 and, in the event of a closing of an
alternative transaction in lieu of the proposed sale, a termination fee of
$750,000 under the terms of the Asset Purchase Agreement, dated as of
February 19, 1999, among the Debtors and CoreComm Limited (the "CoreComm
Agreement"), described further below.
The Court also approved, on an interim basis, a debtor-in-possession
financing facility in the approximate amount of $23 million and authorized
the Debtors to use up to $18 million of such facility, pending final
approval thereof, to continue operations, pay employees, purchase goods
and services going forward and repurchase the Company's $15 million
aggregate principal amount prepetition senior secured notes. A final
hearing is scheduled for March 19 in which the Court will consider the
Debtors' request for the use of the full debtor-in-possession financing
committed by the debtor-in-possession participants. The motion filed with
respect to the CoreComm Agreement seeks to grant the Debtors authority to
sell substantially all of their assets, excluding the Company's
Connecticut wireless subsidiaries, to CoreComm Limited ("CoreComm") for up
to $85 million in cash plus warrants to purchase common stock of CoreComm.
The agreement provides for approximately $25 million in cash, plus the
warrants, to be paid at closing in addition to up to approximately $60
million payable to the Company depending on future operating results. The
Court set a hearing date of April 2, 1999 with respect to the CoreComm
Agreement and any competing bids.
The Court also approved procedures for obtaining additional bids for
the assets subject to the CoreComm Agreement as well as auction procedures
for the sale of the Company's Connecticut wireless subsidiaries. Under the
bidding and auction procedures approved by the Court, qualified bidders
must complete their due diligence and submit qualified bids with respect to
the Debtors' assets proposed to be sold to CoreComm, the Connecticut
wireless subsidiaries or the combined assets on or prior to March 23, 1999.
Objections to the proposed asset sales are also due on that date. To the
extent that qualified bids are received, an auction will be held for the
qualified bidders on March 30, 1999 in New York City. In accordance with
the order approving the bidding and auction procedures, detailed bidding
and auction procedures were published and mailed to creditors and
interested parties beginning on February 25.
Copies of the orders and other documents filed in the case may be
obtained for a nominal cost directly from (i) IKON Office Solutions at 901
North Market Street, Suite 718, Wilmington, Delaware 19801 (telephone (302)
777-4500, facsimile (302) 777-5155); and (ii) Lason Systems, Inc., Delaware
Legal Copy Division, at One Rodney Square, Suite 505, Wilmington, Delaware
19801 (telephone (302) 426-5100; fax (302) 426-1503).
The organizational meeting for the Debtors' creditors was set by the
United States Trustee for March 5, 1999 in Wilmington, Delaware.
On February 19, 1999, the Company issued the press release attached
hereto as Exhibit 99 announcing the CoreComm Agreement and the commencement
of the Debtors' Chapter 11 cases.
ITEM 5. OTHER EVENTS
The CoreComm Agreement (as defined above) provides for the sale of
substantially all of the assets of the Company and, except for the
Company's Connecticut wireless subsidiaries ("USN Wireless"), of the
Company's subsidiaries to CoreComm for up to $85 million in cash plus
warrants to purchase a total of 350,000 shares of common stock of
CoreComm. The agreement provides for approximately $25 million, based upon
revenues of the Company's Ohio operations prior to closing, and the
warrants to be paid to the Company at closing. In addition, the Company
may receive an additional payment of up to approximately $60 million, plus
an additional cash payment to be determined depending on revenues of the
Company's operations, other than in Ohio, during the six month period
ending on March 31, 2000.
Under the terms of the CoreComm Agreement, the Company is obligated,
among other things, to use all commercially reasonable efforts to conduct
its business in the ordinary course, to meet its post-bankruptcy filing
obligations as they become due and to fulfill its commitments to
customers. The Company is permitted under the CoreComm Agreement to sell
USN Wireless. The consummation of the transactions contemplated by the
CoreComm Agreement is subject to a number of customary and other
conditions including receipt of necessary state and federal regulatory
approvals, maintenance of certain revenue criteria and the receipt of
required audited consolidated financial statements of the Company. The
CoreComm Agreement is terminable, among other events, by CoreComm if Court
approval of the agreement is not obtained by April 23, 1999 and by either
party if the closing shall not have occurred by May 31, 1999 (subject to
an automatic one month extension if the closing shall not have occurred
because of the failure to obtain the necessary regulatory approvals).
Reimbursement by the Company of actual expenses of up to $1 million
incurred by CoreComm in connection with the transactions contemplated by
the CoreComm Agreement is required in certain events. A termination fee of
$750,000 is payable to CoreComm in certain circumstances upon the
consummation of an Alternative Transaction (as defined in the CoreComm
Agreement).
The Company, CoreComm and Merrill Lynch Global Allocation Fund, Inc.
(together with CoreComm, the "Note Purchasers") entered into a Note
Purchase Agreement and related agreements, dated as of February 23, 1999
(the "Note Purchase Agreement"), providing for the sale to the Note
Purchasers of up to approximately $23 million aggregate principal amount of
the Company's 14% senior secured notes due June 30, 1999. As part of the
orders described above the Court authorized the Debtors to use up to $18
million immediately to continue operations, pay employees, purchase goods
and services going forward and repurchase the Company's $15 million
aggregate principal amount prepetition senior secured notes. A final
hearing is scheduled for March 19, 1999 in which the Court will consider
the Debtors' request for the use of the full amount of the debtor-in-
possession financing available under the Note Purchase Agreement.
The descriptions set forth above of the CoreComm Agreement and the
Note Purchase Agreement do not summarize all of the material provisions of
such documents. Copies of such documents are filed herewith as exhibits as
noted below. The terms of such documents are hereby incorporated herein by
reference. Investors are urged to obtain and fully review copies of such
documents.
This Report contains statements which constitute "forward-looking
statements" within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. "Forward-looking statements" in this Report
include the intent, belief or current expectations of the Company and
members of its management team with respect to the timing of, completion of
and scope of the sale to CoreComm Limited, the proposed auction of the
USN's Connecticut wireless subsidiaries, financing, and the Company's
future liquidity, as well as the assumptions upon which such statements are
based. While the Company believes that its expectations are based upon
reasonable assumptions within the bounds of its knowledge of its business
and operations, investors are cautioned that any such forward-looking
statements are not guarantees of future performance, involve risks and
uncertainties, and that actual results may differ materially from those
contemplated by such forward-looking statements. Important facts currently
known to management that could cause actual results to differ materially
from those contemplated by the forward-looking statements in this Report
include, but are not limited to, further adverse developments with respect
to the Company's liquidity position or operations of the Company's various
businesses, adverse development in the Company's efforts to complete the
financing and/or sales agreement or to consummate an auction of the USN's
Connecticut wireless subsidiaries; adverse developments in the timing or
results of the Company's Chapter 11 operating plan (including the time line
to complete to proposed sale transactions); and the ability of the Company
to realize the anticipated general and administrative expense savings and
overhead reductions presently contemplated. Additional factors that would
cause actual results to differ materially from those contemplated within
this Report can also be found in the Company's Reports on Form 8-K during
1998 and 1999, Form 10-Q for the quarter ended September 30, 1998, and Form
10-K for the year ended December 31, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are included with this Report:
Exhibit 10.1 Asset Purchase Agreement, dated as of
February 19, 1999, by and among the Company,
certain of its subsidiaries and CoreComm
Limited.
Exhibit 10.2 Note Purchase Agreement, dated as of February
23, 1999, by and between USN Communications,
Inc. and the Purchasers listed on Annex I
thereto (the "Purchasers").
Exhibit 10.3 Security Agreement, dated as of February 23,
1999, by and among the Purchasers, the
Company and certain of its subsidiaries.
Exhibit 10.4 Subsidiary Guaranty Agreement, dated as of
February 23, 1999, by and among the Company,
its subsidiaries and the Purchasers.
Exhibit 10.5 Paying Agency Agreement, dated as of February
23, 1999, by and between the Company, the
Purchasers and PricewaterHouseCoopers LLP, as
Paying Agent.
Exhibit 10.6 Collateral Agency Agreement, dated as of
February 23, 1999, by and among
PricewaterHouseCoopers LLP, as Collateral
Agent, and the Purchasers.
Exhibit 99.1 Press Release dated February 19, 1999.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
USN COMMUNICATIONS, INC.
By: /s/ Thomas A. Monson
---------------------------------------
Thomas A. Monson
Senior Vice President, General Counsel
and Secretary
Exhibit 10.1
Execution Copy
ASSET PURCHASE AGREEMENT
by and between
CORECOMM LIMITED
as Purchaser
and
USN COMMUNICATIONS, INC.,
U.S. NETWORK CORPORATION,
USN COMMUNICATIONS WEST, INC.,
USN COMMUNICATIONS MIDWEST, INC.,
USN COMMUNICATIONS NORTHEAST, INC.,
USN COMMUNICATIONS ATLANTIC, INC.,
USN SOLUTIONS, INC.,
USN COMMUNICATIONS SOUTHWEST, INC.,
USN COMMUNICATIONS MAINE, INC.,
USN COMMUNICATIONS VIRGINIA, INC.,
QUEST UNITED, INC.,
USN COMMUNICATIONS LONG DISTANCE, INC.,
FONENET/OHIO, INC.
as Sellers
Dated as of February 19, 1999
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of February 19, 1999 (the
"Agreement"), by and between CORECOMM LIMITED, a Bermuda corporation
("CoreComm" which together with any wholly owned subsidiary of CoreComm
(each an "Acquisition Subsidiary") to be designated by CoreComm pursuant to
Section 2.4 are collectively referred to herein as "Purchaser"), USN
COMMUNICATIONS, INC., a Delaware corporation (the "Company" or "USN"), and
the subsidiaries of the Company set forth on the signature page hereto
(collectively, with the Company, "Sellers"). Capitalized terms used herein
and not otherwise defined shall have the meanings set forth in Article XII.
WHEREAS, the Company, directly and through its subsidiaries, is
engaged in the business of providing telecommunications products and
services, including local and long distance telephone retail services and
other telecommunications services (the "Business," which, for purposes of
this Agreement, shall not include the business of USN Wireless, Inc., a
Connecticut corporation ("USN Wireless") or the subsidiaries of USN
Wireless);
WHEREAS, the Sellers intend to file voluntary petitions (the
"Petitions") for relief commencing a case (the "Chapter 11 Case") under
Chapter 11 of Title 11 of the United States Code, 11 U.S.C. sections 101 et
seq. (the "Bankruptcy Code") in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"); and
WHEREAS, Purchaser desires to purchase and obtain the assignment
from Sellers, and Sellers desire to sell, convey, assign, and transfer to
Purchaser, substantially all of the assets and properties of Sellers
relating to the Business, together with certain obligations and liabilities
relating thereto, all in the manner and subject to the terms and conditions
set forth herein and in accordance with sections 105, 363, and 365 of the
Bankruptcy Code (the "Contemplated Transactions").
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets. On the terms and
subject to the conditions set forth in this Agreement, at the Closing the
Sellers shall sell, assign, transfer, convey, and deliver to the Purchaser,
and the Purchaser shall purchase and accept from the Sellers, the Sellers'
rights, title, and interests in and to the Business, including, without
limitation, in and to all the assets, properties, rights, contractual
rights of Sellers, and claims of Sellers related to the Business (except as
otherwise set forth in Section 1.2 hereof), wherever located, whether
tangible or intangible, as the same shall exist at the Closing (such
rights, title, and interests in and to all such assets, properties, rights,
contracts, and claims being collectively referred to herein as the
"Assets"), free and clear of all mortgages, pledges, liens, charges,
equities, encumbrances, defects in title, security interests,
hypothecations, assessments, easements, encroachments, consents, claims,
options, reservations, restrictions, condemnation proceedings, burdens or
conflicts of all kinds (collectively, "Encumbrances"), other than
easements, encroachments and similar reservations, restrictions and burdens
which would not individually or in the aggregate have a material adverse
effect on the use or enjoyment of the Assets ("Permitted Encumbrances.").
The Assets shall include, without limitation, all the Sellers' rights,
title, and interests in and to the assets, properties, rights, contracts,
and claims described in clauses (a) through (q) below (but shall
specifically exclude those assets, properties, rights, contracts, and
claims set forth in Section 1.2):
(a) all furnishings, furniture, fixtures, office supplies,
vehicles, equipment, computers, and other tangible personal property;
(b) all accounts receivable and related deposits, security,
or collateral therefor, including recoverable customer deposits
(collectively, the "Trade Receivables"), but specifically excluding Past
Due Accounts (as defined in Section 1.2(e));
(c) [intentionally deleted]
(d) the Intellectual Property (as defined herein), the
rights to sue for, and remedies against, past, present, and future
infringements thereof, and the rights of priority and protection of
interests therein under applicable laws;
(e) all copies of marketing brochures and materials and
other printed or written materials in any form or medium relating to the
Sellers' ownership or operation of the Business that Sellers are not
required by law to retain and duplicates of any such materials that the
Sellers are required by law to retain;
(f) all rights under all warranties, representations, and
guarantees made by suppliers, manufacturers, and contractors in connection
with the operation of the Business;
(g) all Seller Permits held by the Sellers (or, to the
extent any such Seller Permits are not freely transferable by the
permittee, all right, title and interest of Sellers in such Seller Permits
to the full extent such right, title and interest may be transferred);
(h) all contracts listed in Section 1.1(h) of the Seller
Disclosure Letter (the "Assumed Contracts"), and specifically excluding the
Excluded Contracts (as defined herein);
(i) all Communications Licenses (as defined herein) and all
licenses issued by state regulatory agencies or commissions to provide
specifically defined telecommunication services ("Certificates") (or, to
the extent any such Communication License or Certificate is not freely
transferable by the permittee, all right, title and interest of Sellers in
such Communication License or Certificate to the full extent such right,
title and interest may be transferred);
(j) all carrier or other codes used or useful in the
operation of the Business including, but not limited to, all exchange
carrier, ACNA, RISD, OCN, NECA and carrier identification codes;
(k) all books and records of the Business, including,
without limitation, data processing records, employment and personnel
records, customer lists, files, and records, advertising and marketing data
and records, credit records, records relating to suppliers and other data;
(l) all credits, prepaid expenses, deferred charges,
advance payments, security deposits and prepaid items (and, in each case,
security interests from third parties relating thereto);
(m) all goodwill relating to the Assets and the Business;
(n) all computer software programs and databases used by
the Sellers, whether owned, licensed (subject to applicable restrictions),
leased, or internally developed;
(o) all written leases and subleases, including all
amendments and modifications pursuant to which the Sellers lease any real
property, all of which leases and subleases and amendments and
modifications thereto are described in Section 1.1(o) of the Seller
Disclosure Letter (the "Assumed Leases"), but specifically excluding the
Excluded Leases (as defined herein);
(p) all telephone numbers used by Sellers in the conduct of
the Business; and
(q) those items described in Section 1.1(q) of the Seller
Disclosure Letter.
EXCEPT FOR SPECIFIC REPRESENTATIONS AND WARRANTIES CONTAINED IN
THIS AGREEMENT, THE ASSETS ARE BEING SOLD ON AN "AS IS," "WHERE IS" BASIS
AND SELLERS MAKE NO WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY,
FITNESS OR OTHERWISE WITH RESPECT TO THE ASSETS WHICH EXTEND BEYOND THE
AFORESAID SPECIFIC REPRESENTATIONS AND WARRANTIES.
Section 1.2 Excluded Assets. The following assets,
properties, and rights (the "Excluded Assets") are not included in the
Assets and shall be retained by Sellers:
(a) the capital stock of any direct or indirect subsidiary
of Sellers set forth in Section 1.2(a) of the Seller Disclosure Letter (the
"Excluded Subsidiaries");
(b) any contract set forth in Section 1.2(b) of the Seller
Disclosure Letter (the "Excluded Contracts");
(c) any contracts with respect to which Purchaser does not
assume all liabilities that arise on or after the Closing Date in
accordance with the 365 Order;
(d) any real property leases or subleases set forth in
Section 1.2(d) of the Seller Disclosure Letter (the "Excluded Leases");
(e) subject to Section 6.11 and based upon the most
current available information as of the time of measurement, all accounts
receivable that are both (i) over 90 days past due prior to the Closing
Date and (ii) from Persons who ceased being customers no later than 90 days
prior to the Closing Date ("Past Due Accounts");
(f) all cash and cash equivalents of Sellers; and
(g) any other asset, property, right, contract or claim set
forth in Section 1.2(g) of the Seller Disclosure Letter.
Section 1.3 Assumed Liabilities. On the terms and subject to
the conditions set forth in this Agreement, at the Closing, Purchaser shall
assume from the Sellers and thereafter pay, perform, or discharge in
accordance with their terms, only the following liabilities and obligations
of the Sellers (the "Assumed Liabilities"):
(a) all liabilities and obligations with respect to,
arising out of, or related to, the ownership, possession or use of the
Assets, but in each case only to the extent arising on or after the Closing
Date;
(b) all obligations of the Sellers under the Assumed
Contracts and Assumed Leases which by the terms thereof are to be observed,
paid, discharged or performed, as the case may be, in each case at any time
on or after the Closing Date (including obligations for goods in transit
which have been ordered but not received by the Sellers prior to the
Closing), but excluding obligations and liabilities arising out of any
breach or default by the Sellers under any such Assumed Contract or Assumed
Leases prior to the Closing Date (except as set forth in Section 1.4(d)
below);
(c) the liquidated amounts payable as set forth in Section
1.3(c) of the Seller Disclosure Letter, subject to Section 1.5(b)(ii); and
(d) those items described in Section 1.3(d) of the Seller
Disclosure Letter.
Section 1.4 Excluded Liabilities. Notwithstanding anything to
the contrary contained herein, Purchaser shall not assume, or in any way be
liable or responsible for, any liabilities, commitments or obligations of
the Sellers of any kind or nature whatsoever, known or unknown, accrued,
fixed, contingent or otherwise, liquidated or unliquidated, choate or
inchoate, due or to become due, except for the Assumed Liabilities.
Without limiting the generality of the foregoing, Purchaser shall not
assume, and the Sellers shall remain responsible for the following:
(a) any liabilities or obligations (whether absolute, contingent or
otherwise) with respect to, arising out of, or related to, the Assets on or
prior to the Closing Date, including, without limitation, any liability or
obligation of the Sellers or any of their employees, directors, officers,
affiliates or agents arising out of, relating to, or caused by (whether
directly or indirectly), the Sellers' ownership, possession, interest in,
use or control of the Assets; (b) any liability or obligation of the
Sellers for any Taxes (as defined herein) of any kind accrued for,
applicable to or arising from any period prior to the Closing Date; (c) any
liability or obligation in respect of employment plans (including, without
limitation, any pension, welfare, or other Seller Plan, as defined in
Section 3.13(a)), consulting, severance, change in control or similar
agreements, including those listed in Section 1.4 of the Seller Disclosure
Letter (unless and to the extent Purchaser in its discretion agrees in
writing to assume any such obligations after modifying or amending any such
agreements as it may in its sole judgment elect); (d) any cure amounts that
become payable in respect of the assumption and assignment to Purchaser of
Assumed Contracts, Assumed Leases or other executory contracts and
unexpired leases assigned to Purchaser under the 365 Order ("Cure
Amounts"); provided, however, that Purchaser shall be responsible for
payment, and shall promptly pay, the first $500,000 of any Cure Amounts;
provided, further, that to the extent that any Cure Amounts are paid by any
person or entity (including any Seller) which is not Purchaser or any of
its affiliates prior to the Closing ("Pre-Closing Cure Amounts"), the Net
Closing Cash Consideration payable at Closing shall be increased by the
total amount of any such Pre-Closing Cure Amounts paid up to $500,000; and
(e) except as set forth in Section 1.3(c), any obligations or liabilities
of any of the Sellers to BT Alex Brown Inc.
Section 1.5 Consideration. The Consideration for the Assets
shall consist of (a) the Total Ohio Consideration (as defined below); (b)
$25,000,000 minus (i) the product of (x) the Total Ohio Consideration and
(y) 55%, (ii) the liquidated amount payable referred to in clause (i) of
Section 1.3(c) of the Seller Disclosure Letter, and (iii) any amounts
(including principal, unpaid interest and unreimbursed fees and expenses)
owing to Purchaser under the DIP Credit Agreement (such net amount payable
in cash in immediately available funds, the "Net Closing Cash
Consideration"); (c) a warrant to purchase 250,000 shares of common stock
of the Purchaser ("Shares"), at an exercise price equal to $30.00 per
Share, at any time, and from time to time, prior to the third anniversary
of the Closing Date (the "$30 Warrant"); (d) a warrant to purchase 100,000
Shares, at an exercise price equal to $50.00 per Share, at any time, and
from time to time, prior to the fifth anniversary of the Closing Date (the
"$50 Warrant," and together with the $30 Warrant, the "Warrants") (it being
understood that the Net Closing Cash Consideration, the $30 Warrant and the
$50 Warrant will be delivered at Closing); and (e) pursuant to Section 2.3
hereof, the Contingent Payment (as defined in Section 2.3 herein), less the
amount payable referred to in clause (ii) of Section 1.3(c) of the Seller
Disclosure Letter. For purposes hereof, the "Initial Cash Consideration"
shall mean the sum of (a) the Total Ohio Consideration and (b) $25,000,000
minus (i) the product of (x) the Total Ohio Consideration and (y) 55%.
Section 1.6 Ohio Revenues. (a) Three Business Days prior to
the date on which the Closing is scheduled to occur, the Company shall
deliver a certificate (the "Estimated Ohio Revenues Certificate") to the
Purchaser, signed by the president or chief accounting officer of the
Company, setting forth in good faith and in reasonable detail the Recent
Monthly Revenues from Services (as both are defined in Section 2.3) of the
Sellers generated in Ohio (the "Ohio Revenues") as of the Closing Date.
(b) The Purchaser shall pay to the Company five times the actual
Ohio Revenues (the "Total Ohio Consideration"), of which 87.5% of the
amount set forth in the Estimated Ohio Revenues Certificate shall be
payable at Closing and the balance, if any, shall be payable upon
conclusion of the adjustment procedures set forth in Section 1.5(c).
(c) Adjustment Procedures. (i) For a ten (10) day period after
the Closing Date, Purchaser shall have the right to deliver to the Company
a written notice (the "Ohio Purchaser Objection") specifying in reasonable
detail the basis for its objection to the Estimated Ohio Revenues
Certificate.
(ii) If the parties are unable to resolve the
disagreement specified in the Ohio Purchaser Objection within thirty (30)
days after receipt by the Company thereof, the disagreement shall be
submitted to Arthur Andersen & Co. or another nationally recognized firm of
independent public accountants as to which the Purchaser and the Company
mutually agree (the "Ohio Accountant"). Any adjustment resulting from the
resolution of any matters specified in the Ohio Purchaser Objection by the
parties within such 30 day period shall be paid promptly to the party
entitled to receive it.
(iii) The Ohio Accountant shall follow such
procedures as it deems appropriate for obtaining the necessary information
in considering the respective positions of the Purchaser and the Company.
The Ohio Accountant shall have the right to review all accounting records
relevant to the determination of the Ohio Revenues. The Ohio Accountant
shall render its determinations on the disagreement submitted to it within
forty five (45) days of submission of the disagreement by the Purchaser and
the Company. The Ohio Accountant's determination shall be final,
conclusive and binding upon the Purchaser and the Company (the "Final Ohio
Determination"). In the event that the Ohio Accountant makes a Final Ohio
Determination in favor of the Company, the Purchaser shall promptly make an
adjustment payment to the Company to the extent that the amount paid at
Closing was less than five (5) times the Ohio Revenues set forth in the
Final Ohio Determination. In the event that the Ohio Accountant makes a
Final Ohio Determination in favor of the Purchaser, but the amount paid at
Closing was less than five (5) times the Ohio Revenues set forth in the
Final Ohio Determination, the Purchaser shall pay the difference to the
Company; and if the amount paid at Closing was greater than five (5) times
the Ohio Revenues set forth in the Final Ohio Determination, then Purchaser
shall either (i) collect the difference from the Company, and the Company
shall pay such difference, or (ii) reduce the amount of the Contingent
Payment by the amount of the difference.
(iv) Fees and expenses for the Ohio Accountant shall be
paid by the Company if the Final Ohio Determination is less than 105% of
the amount certified in the Estimated Ohio Revenues Certificate; and if the
Final Ohio Determination is 105% or more of the amount certified in the
Estimated Ohio Revenues Certificate, the fees and expenses shall be paid by
the Purchaser.
ARTICLE II
THE CLOSING
Section 2.1 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019-6064 at 10:00 a.m. on the second
Business Day after the conditions set forth in Article VII shall have been
satisfied or waived or at such other time, date and place as shall be fixed
by agreement among the parties (the date of the Closing being herein
referred to as the "Closing Date").
Section 2.2 Consideration. Subject to the terms and
conditions hereof, at the Closing, Purchaser shall:
(a) pay to the Company, by wire transfer of
immediately available funds to an account or accounts specified in writing
not less than three Business Days prior to the Closing by the Company, the
Net Closing Cash Consideration and the amount payable at Closing pursuant
to Section 1.6(b);
(b) deliver, directly to the Company, the Warrants,
pursuant to a Warrant Agreement containing terms and conditions customary
for a warrant issued by a public company and reasonably satisfactory to
Purchaser and Company; and
(c) assume the Assumed Liabilities pursuant to a duly
executed Assignment and Assumption Agreement, in customary form mutually
agreeable to the parties.
Section 2.3 Contingent Payment.
(a) Total Revenues. On or prior to July 1, 2000, the Purchaser
shall deliver a certificate (the "Revenue Certificate") to the Company,
signed by the president or chief accounting officer of the Purchaser and
setting forth in reasonable detail the Total Revenues (as defined herein).
If the amount of Total Revenues exceeds the Initial Cash Consideration,
then the cash consideration payable under this Agreement shall be increased
by an amount equal to the excess of (i) the Total Revenues over (ii) the
Initial Cash Consideration (the "Contingent Payment"); provided, however,
that in no event shall the sum of the Contingent Payment and the Initial
Cash Consideration exceed $85 million (exclusive of any payments made or to
be made in respect of Cure Payments). The Contingent Payment, minus the
liquidated amount payable as set forth in clause (ii) of Section 1.3(c) of
the Seller Disclosure Letter, shall be paid to the Company in cash
simultaneously with the delivery of the Revenue Certificate.
(b) For purposes of this Section 2.3, the following terms shall
be defined as follows:
Acquisition State shall mean each Included State in which any
member of the Purchaser Group makes a Qualifying Acquisition prior to the
termination of the Measurement Period other than the state of Ohio.
Calendar/Billing Month shall mean the most recent available
calendar month for which Revenue data is available, or if such data is not
kept on a calendar basis in the ordinary course by such company, then the
most recent 30 day period for which Revenue data is available.
Included States shall mean each of Illinois, Indiana, Michigan,
Ohio, Wisconsin, Massachusetts, New Hampshire, New York, Rhode Island,
Maryland, New Jersey, Pennsylvania, and Virginia.
Measurement Period shall mean the period beginning October 1,
1999 and ending March 31, 2000.
Purchaser Group shall mean the Purchaser and its Subsidiaries (it
being understood that the businesses of the Sellers are included as part of
Purchaser Group after Closing).
Qualifying Acquisition shall mean a consummated acquisition of an
unaffiliated company which has Revenues derived from Services during the
period beginning on the later of (i) the closing of such acquisition and
(ii) the beginning of the Measurement Period ending on the conclusion of
the Measurement Period in an Included State; provided, however, that if the
closing of such acquisition is subsequent to the conclusion of the
Measurement Period, such acquisition shall not be a Qualifying Acquisition.
Qualifying Revenues shall be the sum of (as calculated on a
state-by-state basis):
(i) Revenues from Services of the Purchaser Group in such Acquisition
State during the period beginning on the commencement of the
Measurement Period and concluding on the closing of the
Qualifying Acquisition in such state; provided, however, that if
the closing of such Qualifying Acquisition is prior to the
commencement of the Measurement Period, this amount shall be
equal to zero; and
(ii) the product of:
(x) a fraction, (a) the numerator of which is Recent Monthly
Revenues from Services of the Purchaser Group in such state
and (b) the denominator of which is (1) Recent Monthly
Revenues from Services of the Purchaser Group in such state
plus (2) Recent Monthly Revenues from Services of the
company acquired in the Qualifying Acquisition in such
state; and
(y) the sum of (c) Revenues from Services of the Purchaser Group
during the period beginning on the later of: (1) the
commencement of the Measurement Period and (2) the closing
of the Qualifying Acquisition in such state, and concluding
on the conclusion of the Measurement Period and (d) Revenue
from Services of the company acquired in the Qualifying
Acquisition in such state during the period beginning on the
later of: (1) the commencement of the Measurement Period and
(2) the closing of the Qualifying Acquisition in such state,
and concluding on the conclusion of the Measurement Period.
Recent Monthly Revenues shall mean Revenues from the most recent
available Calendar/Billing Month immediately preceding the closing of the
related acquisition.
Revenues shall mean revenues as determined in accordance with
GAAP, it being understood by the parties that such Revenues shall not
include billings for customers identified as canceled or illegitimate;
Revenues "in" a given state shall be deemed to be Revenues associated with
lines located in such state.
Services shall mean resold and facilities-based local exchange
services, including IntraLATA toll and wireline long distance services sold
to business and residential end users.
Total Revenues shall be the sum of (i) Revenues derived from
Services of the Purchaser Group during the Measurement Period from USN
States and (ii) Qualifying Revenues derived from Services during the
Measurement Period from Acquisition States. Nothing herein shall be
construed to "double count" or give more than one (1) times credit for any
Revenues during the Measurement Period.
USN States shall mean all Included States other than Acquisition
States and the state of Ohio.
If the Purchaser makes more than one Qualifying Acquisition in a
given state (each, an "Additional Qualifying Acquisition"), then the
Qualifying Revenues for such state shall be calculated in a manner
consistent with the manner described above for the period following the
closing of such Additional Qualifying Acquisition, with the Revenues from
Services of such Additional Qualifying Acquisition included in both the
denominator (b) under (x) above as well as the sum in (y) above.
In no event, however, shall the Qualifying Revenues from an
Acquisition State exceed nine times the greater of (i) Sellers' Recent
Monthly Revenues from Services in such state as of the Closing Date and
(ii) Purchaser Group's Recent Monthly Revenues from Services in such state
as of the closing of the related Qualifying Acquisition.
(c) Review Process. (i) If the Company disagrees with the
Total Revenues determination set forth in the Revenue Certificate, the
Company shall deliver to the Purchaser, within thirty (30) days after
delivery by the Purchaser of the Revenue Certificate, a written notice (the
"Objection Notice") specifying in reasonable detail the basis for its
disagreement and its determination of the Total Revenues. If the Company
fails to deliver an Objection Notice within such thirty (30) day period,
the amount set forth in the Revenue Certificate shall be final, conclusive
and binding on the Company and the Purchaser.
(ii) The Company shall have the right to review, during
business hours, on reasonable advance notice and without unduly interfering
with the Purchaser's operations, all books, accounting records and other
materials of the Purchaser that are relevant to determining the Total
Revenues.
(iii) If the parties are unable to resolve the
disagreement specified in the Objection Notice within thirty (30) days
after receipt by the Purchaser thereof, the disagreement shall be submitted
to Arthur Andersen & Co. or another nationally recognized firm of
independent public accountants as to which the Purchaser and the Company
mutually agree (the "Accountant"). Any adjustment resulting from the
resolution of any matters specified in the Objection Notice by the parties
within such 30 day period shall be paid promptly to the party entitled to
receive it.
(iv) The Accountant shall follow such procedures as it deems
appropriate for obtaining the necessary information in considering the
respective positions of the Purchaser and the Company. The Accountant
shall have the right to review all accounting records relevant to the
determination of the Total Revenues. The Accountant shall render its
determinations on the disagreement submitted to it within forty-five (45)
days of submission of the disagreement by the Purchaser and the Company.
The Accountant's determination shall be final, conclusive and binding upon
the Purchaser and the Company (the "Final Determination"). In the event
that the Accountant makes a Final Determination in favor of one party, the
other party shall promptly, and in any event within two Business Days of
the date of the Final Determination, make a corresponding adjustment
payment to the party to whose favor the Final Determination was made.
(v) Fees and expenses for the Accountant shall be paid by
the Company if the Final Determination is less than 105% of the amount
certified in the Revenue Certificate; and if the Final Determination is
105% or more of the amount certified in the Revenue Certificate, the fees
and expenses shall be paid by the Purchaser.
(d) Acknowledgment. Sellers acknowledge and agree that they
have not received any assurances as to the anticipated Total Revenues and
that Purchaser has not made any representation or warranty, express or
implied, as to the anticipated Total Revenues or Contingent Payment. While
no representation or warranty is made or assurances provided with respect
to the achievement of any portion of the Contingent Payment, (i) Purchaser
agrees to operate the Business in good faith and pursuant to commercially
reasonable business practices, including commercially reasonable customer
care, collection, retention and disconnection practices, and (ii) it is the
intention of the Purchaser as of the date of this Agreement (and Purchaser
shall maintain such intention until the earlier to occur of (x) the Closing
Date and (y) 75 days after the date hereof) to operate or cause the
operation of the Business in good faith and in a manner which reasonably
balances the interest of the Purchaser in operating the Business prudently
and the interest of the Sellers in maximizing the amount of the Contingent
Payment ("Good Faith Operation of the Business"). A determination by the
board of directors or a subcommittee thereof of Purchaser that the
Purchaser and/or its Subsidiaries, as the case may be, have engaged
throughout the Measurement Period in a Good Faith Operation of the Business
shall serve as a presumption that such occurred.
Section 2.4 Acquisition Subsidiaries. On or before the
Closing, CoreComm may designate one or more Acquisition Subsidiaries in
writing to receive all or part of the Assets.
Section 2.5 Allocation. Purchaser and Sellers agree to
cooperate to allocate as soon as practicable after the date hereof, but in
any event prior to the Closing, the Consideration among the Assets, for all
accounting and tax purposes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as otherwise disclosed to the Purchaser in a schedule
attached hereto and made a part hereof (which schedule contains appropriate
references to identify the representations and warranties herein to which
the information in such schedule relates) (the "Seller Disclosure Letter"),
Sellers jointly and severally represent and warrant to Purchaser as
follows:
Section 3.1 Organization. Each of the Sellers is a
corporation validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and authority
to own, use, and operate its properties and to carry on its business as it
is now being conducted or presently proposed to be conducted except where
the failure to be so validly existing and in good standing would not
reasonably be expected to, individually or in the aggregate, result in a
Seller Material Adverse Effect. Each of the Sellers is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified would not individually or in
the aggregate have a Seller Material Adverse Effect.
Section 3.2 Authority Relative to this Agreement. Each of the
Sellers has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder. The execution, delivery, and
performance of this Agreement by each of the Sellers and the consummation
by each of the Sellers of the transactions contemplated hereby have been
duly authorized by all requisite corporate actions. Subject to the entry
and effectiveness of the 363 Order and the 365 Order, this Agreement has
been duly and validly executed and delivered by each of the Sellers and
(assuming this Agreement constitutes a valid and binding obligation of the
Purchaser) constitutes a valid and binding agreement of each of the
Sellers, enforceable against each of the Sellers in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium, and other laws affecting creditors' rights generally from time
to time in effect and to general equitable principles.
Section 3.3 Consents and Approvals. No consent, approval, or
authorization of, or declaration, filing, or registration with, any United
States federal or state government or regulatory authority is required to
be made or obtained by any of the Sellers in connection with the execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated hereby, except (a) for consents, approvals, or
authorizations of, or declarations or filings with, the Bankruptcy Court,
(b) for the filing of a notification and report form under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and
the expiration or earlier termination of the applicable waiting period
thereunder, (c) for Regulatory Approvals (as defined in Section 7.3(d)(i)
herein), (d) for consents, approvals, authorizations, declarations, or
rulings identified in Section 3.3 of the Seller Disclosure Letter, and
(e) for consents, approvals, authorizations, declarations, filings, or
registrations, which, if not obtained, would not, individually or in the
aggregate, have a Seller Material Adverse Effect. The items referred to in
clauses (a) through (d) of this Section 3.3 are hereinafter referred to as
the "Government Requirements."
Section 3.4 No Violations. Assuming that the consents,
approvals, authorizations, declarations, and filings referred to in
Section 3.3 have been made or obtained and shall remain in full force and
effect and the conditions set forth in Article VII shall have been
satisfied or waived, neither the execution, delivery, or performance of
this Agreement by any Seller, nor the consummation by any Seller of the
transactions contemplated hereby, nor compliance by any Seller with any of
the provisions hereof will (a) conflict with or result in any breach of any
provisions of the articles of incorporation or bylaws of any Seller,
(b) result in a violation, or breach of, or constitute (with or without due
notice or lapse of time) a default (or give rise to any right of
termination, cancellation, vesting, payment, exercise, acceleration,
suspension, or revocation) under any of the terms, conditions, or
provisions of any note, bond, mortgage, deed of trust, security interest,
indenture, license, contract, agreement, plan, or other instrument or
obligation to which any Seller is a party or by which any Seller's
properties or assets may be bound or affected, (c) violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to any Seller
or to any Seller's properties or assets, (d) result in the creation or
imposition of any Encumbrance on any asset of any Seller, or (e) cause the
suspension or revocation of any permit, license, governmental
authorization, consent, or approval necessary for any Seller to conduct its
business as currently conducted, except in the case of clauses (b), (c),
(d), and (e) for violations, breaches, defaults, terminations,
cancellations, accelerations, creations, impositions, suspensions, or
revocations that (i) would not individually or in the aggregate have a
Seller Material Adverse Effect, (ii) are excused by or unenforceable as a
result of the Sellers' filing of the Petitions, or (iii) are set forth in
Section 3.4 of the Seller Disclosure Letter.
Section 3.5 SEC Reports and Financial Statements. Except as
set forth in Section 3.5 of the Seller Disclosure Letter, USN has filed
with the SEC, and has heretofore made available to Purchaser true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since January 1, 1997 under the
Securities Exchange Act of 1934 (the "Exchange Act") or the Securities Act
of 1933, (the "Securities Act") (as such documents have been amended since
the time of their filing, collectively, the "USN SEC Documents"). Except
as may be provided in subsequently filed USN SEC Documents that are filed
prior to the date hereof, as of their respective dates or, if amended, as
of the date of the last such amendment, the USN SEC Documents, including,
without limitation, any financial statements or schedules included therein,
(a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading and (b) complied in all material respects
with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the
SEC thereunder. No subsidiary of USN is required to file any forms,
reports or other documents with the SEC. The audited financial statements
of USN (the "USN Audited Financial Statements") included in USN's Annual
Report on Form 10K for the fiscal year ended December 31, 1997 (the "USN
1997 10-K") have been prepared from, and are in accordance with, the books
and records of USN and its subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the
consolidated financial position and the consolidated results of operations
and cash flows of USN and its subsidiaries at the dates and for the periods
covered thereby. Section 3.5 of the Seller Disclosure Letter contains
complete unaudited copies of the statements of income, the related balance
sheets, and the notes thereto, of USN and its subsidiaries for the twelve
month period ended December 31, 1998 (the "USN Unaudited Financial
Statements"). Except for the absence of certain or all notes thereto and
except for normal year-end adjustments, the USN Unaudited Financial
Statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto, if any) and fairly present the consolidated financial
position and the consolidated results of operations and cash flows of USN
and its subsidiaries at the dates and for the periods covered thereby.
Section 3.6 Absence of Certain Changes. Except as set forth
in Section 3.6 of the Seller Disclosure Letter or as contained in the USN
SEC Documents, since December 31, 1998, there has been no event or
condition that has had (or is reasonably likely to result in) a Seller
Material Adverse Effect and, except as set forth in Section 3.6 of the
Seller Disclosure Letter, since December 31, 1998 the Sellers have not
taken any action that, if taken after the date hereof, would violate
Section 5.1 hereof.
Section 3.7 Litigation. Except for the Chapter 11 Case and
except as set forth in Section 3.7 of the Seller Disclosure Letter, there
is no suit, action, proceeding, or investigation (whether at law or equity,
before or by any federal, state, or foreign commission, court, tribunal,
board, agency, or instrumentality, or before any arbitrator) pending or, to
any Seller's knowledge, threatened against or affecting any Seller, the
outcome of which, in the reasonable judgment of such Seller, is likely
individually or in the aggregate to have a Seller Material Adverse Effect,
nor is there any judgment, decree, injunction, rule, or order of any court,
governmental department, commission, agency, instrumentality, or arbitrator
outstanding against any Seller, or that, insofar as can reasonably be
foreseen, in the future may reasonably likely have, a Seller Material
Adverse Effect.
Section 3.8 No Default. Except as set forth in Section 3.8 of
the Seller Disclosure Letter and except as a result of the Chapter 11 Case,
no Seller is in violation or breach of, or default under (and no event has
occurred that with notice or the lapse of time would constitute a violation
or breach of, or a default under) any term, condition, or provision of
(a) its articles of incorporation or bylaws, (b) any note, bond, mortgage,
deed of trust, security interest, indenture, license, agreement, plan,
contract, lease, commitment, or other instrument or obligation to which
such Seller is a party or by which such Seller's properties or assets may
be bound or affected, (c) any order, writ, injunction, decree, statute,
rule, or regulation applicable to such Seller or to such Seller's
properties or assets, or (d) any permit, license, governmental
authorization, consent, or approval necessary for such Seller to conduct
its business as currently conducted, except in the case of clauses (b),
(c), and (d) above for breaches, defaults, or violations that are excused
by or unenforceable as a result of such Seller's filing of the Petitions
and except as would not reasonably be expected to, individually or in the
aggregate, result in a Seller Material Adverse Effect.
Section 3.9 No Violation of Law. Except as disclosed in
Section 3.9 of the Seller Disclosure Letter, no Seller is in violation of,
or has been given notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance, or judgment (including,
without limitation, any applicable environmental law, ordinance, or
regulation) of any governmental or regulatory body or authority except for
such violations, notices or changes that would not reasonably be expected
to, individually or in the aggregate, result in a Seller Material Adverse
Effect. Except as disclosed in Section 3.9 of the Seller Disclosure Letter
or except as would not reasonably be expected to, individually or in the
aggregate, result in a Seller Material Adverse Effect, no investigation or
review by any governmental or regulatory body or authority is pending or,
to the best knowledge of each Seller, threatened, nor has any governmental
or regulatory body or authority indicated to any Seller an intention to
conduct the same.
Section 3.10 FCC Matters.
(a) The Sellers have obtained the necessary registration,
certification or other regulatory authorization from the appropriate
governmental authority in each such jurisdiction including, without
limitation, state public service and public utilities commissions ("State
PUCs") (the "State Licenses") and hold all licenses, permits, certificates,
franchises, registrations and other authorizations issued by the FCC (the
"FCC Licenses") that are required for the conduct of their businesses as
presently conducted, and for the holding of their assets, except where
failure to hold such State Licenses or FCC Licenses would not reasonably be
expected to, individually or in the aggregate, result in a Seller Material
Adverse Effect. All of the FCC Licenses and the State Licenses
(collectively the "Communications Licenses") are set forth in
Schedule 3.10(a) hereto.
(b) Other than Communications Licenses which are
immaterial, each of the Communications Licenses was duly issued, and is
valid and in full force and effect and each of the Communications Licenses
has not been modified, canceled, revoked, or conditioned in any adverse
manner other than in a manner which is immaterial.
(c) Each holder of a Communications License is set forth on
Section 3.10(c) of the Seller Disclosure Letter and has operated in all
material respects in compliance with all terms thereof. Each holder of a
Communications License is in all material respects in compliance with, and
its businesses have operated in compliance with, the Communications Act or
any applicable state regulations, and has filed all registrations and
reports and paid all required fees, including any renewal applications,
required by the Communications Act or any applicable state regulations.
Except as would not reasonably be expected to, individually or in the
aggregate, result in a Seller Material Adverse Effect, (i) there is no
pending or, to the knowledge of the Sellers after due inquiry, threatened
action by or before the FCC or any State PUC to revoke, cancel, suspend,
modify or refuse to renew any of the Communications Licenses, and
(ii) except as set forth in Section 3.10(c) of the Seller Disclosure
Letter, there is not now issued, outstanding or, to the knowledge of the
Sellers after due inquiry, threatened any notice by the FCC or any State
PUC of violation or complaint against any Seller with respect to the
operation of their respective businesses.
(d) Except as set forth in Section 3.10 of the Seller
Disclosure Letter or as would not reasonably be expected to, individually
or in the aggregate, result in a Seller Material Adverse Effect, no event
has occurred which permits the revocation or termination of any of the
Communications Licenses or the imposition of any restriction thereon.
Section 3.11 Taxes. Except as set forth in Section 3.11 of the
Seller Disclosure Letter:
(a) each Seller has (i) duly filed (or there has been filed
on its behalf) with the appropriate governmental authorities all Tax
Returns required to be filed by it on or prior to the date hereof and the
failure to file of which could have a Seller Material Adverse Effect and
(ii) duly paid (or made provision for payment) in full in accordance with
GAAP (or there has been paid or provision has been made on its behalf for
the payment of) all Taxes, the failure to pay of which could have a Seller
Material Adverse Effect, for all periods ending through the date hereof;
(b) no federal, state, local, or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of any Seller wherein an adverse
determination or ruling in any one such proceeding or in all such
proceedings in the aggregate would be reasonably likely to have a Seller
Material Adverse Effect;
(c) the federal income Tax Returns of all Sellers have been
examined by the Internal Revenue Service (or the applicable statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for all periods through and including December 31, 1994, and no
deficiencies were asserted as a result of such examinations that have not
been resolved and fully paid;
(d) no Seller has granted any requests, agreements,
consents, or waivers to amend the statutory period of limitations
applicable to the assessment of any Taxes with respect to any Tax Returns
of such Seller;
(e) no Seller is a party to any tax sharing, tax indemnity,
or other agreement or arrangement relating to Taxes;
(f) there are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the Assets;
(g) none of the Assets is property which is required to be
treated as being owned by any other person pursuant to the so-called "safe
harbor lease" provisions of former section 168(f)(8) of the Code;
(h) none of the Assets directly or indirectly secures any
debt the interest on which is tax exempt under section 103(a) of the Code;
and
(i) none of the Assets is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
Section 3.12 Environmental Matters. Except as set forth in
Section 3.12 of the Seller Disclosure Letter and except as would not
reasonably be expected to, individually or in the aggregate, result in a
Seller Material Adverse Effect, (a) each Seller is in compliance with all
federal, state, and local laws governing the protection of the environment
("Environmental Laws"), (b) no Seller has received any written notice not
subsequently resolved with respect to the business of, or any property
owned or leased by any Seller from any governmental entity or third party
alleging that any Seller is not in compliance with any Environmental Law,
and (c) there has been no release of a Hazardous Substance, as that term is
defined in the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. section 9601 et seq., in excess of a reportable
quantity on any real property leased by any Seller that is used in the
Business.
Section 3.13 Employee Benefits; Labor Matters.
(a) Section 3.13(a) of the Seller Disclosure Letter
contains a true and complete list of each plan, program, arrangement,
agreement or commitment which is an employment, consulting or deferred
compensation agreement, or an executive compensation, incentive bonus or
other bonus, employee pension, profit-sharing, savings, retirement, stock
option, stock purchase, severance pay, life, health, disability or accident
insurance plan, or vacation, or other employee benefit plan, program,
arrangement, agreement or commitment, including, without limitation, any
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), in each case,
that is sponsored, maintained or contributed to or required to be
contributed to by any Seller or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with any Seller would be
deemed a "single employer" within the meaning of Section 4001(b) of ERISA,
or to which any Seller or an ERISA Affiliate is party, for the benefit of
any "Offer Employee" (as defined in Section 6.5(b)) (individually, a
"Seller Plan," and collectively, the "Seller Plans"). No Seller Plan is
subject to Title IV or Section 302 of ERISA.
(b) No liability under Title IV or Section 302 of ERISA has
been incurred by any Seller or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a risk to any
Seller or any ERISA Affiliate of incurring any such liability, other than
liability for premiums due the Pension Benefit Guaranty Corporation (which
premiums have been paid when due). Insofar as the representation made in
this Section 3.13(b) applies to Sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which the Seller
or any ERISA Affiliate made, or was required to make, contributions during
the six (6)-year period ending on the last day of the most recent plan year
ended prior to the Closing Date.
(c) Except as set forth in Section 3.13(c) of the Seller
Disclosure Letter, with respect to each Seller Plan (A) all payments due
from any Seller or any Seller Affiliate to date have been made when due and
all amounts properly accrued to date or as of the date of Closing as
liabilities of any Seller which have not been paid have been properly
recorded on the books of any Seller; (B) the Sellers and each Seller
Affiliate have complied with, and each such Seller Plan conforms in form
and operation to, all applicable laws and regulations, including, but not
limited to, ERISA and the Code, in all material respects; (C) each such
Seller Plan which is an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) and intended to qualify under Section 401 of the
Code has received a favorable determination letter from the Internal
Revenue Service with respect to such qualification, its related trust has
been determined to be exempt from taxation under Section 501(a) of the
Code, and since the date of such letter through the date of this Agreement,
nothing has occurred that has or is likely to adversely affect such
qualification or exemption; and (D) there are no actions, suits or claims
pending (other than routine claims for benefits) or threatened with respect
to such Seller Plan or against the assets of such Seller Plan.
(d) Except as set forth in Section 3.13(d) of the Seller
Disclosure Letter, the consummation of the transactions contemplated by
this Agreement will not (A) accelerate the time of the payment or vesting
of, or increase the amount of, compensation due to any Offer Employee,
(B) reasonably be expected to result in any payment of any "excess
parachute payment" to any Offer Employee under Section 280G of the Code,
(C) result in any liability to any Offer Employee, including, but not
limited to, as a result of the Worker Adjustment Retraining and
Notification Act or (D) entitle any Offer Employee to severance pay,
unemployment compensation or similar payment.
(e) Neither the Company nor any subsidiary has an announced
plan or legally binding commitment to create any additional Seller Plans or
to amend or modify any existing Seller Plan.
(f) Except as set forth in Section 3.13(f) of the Seller
Disclosure Letter, no Seller has any material liability, whether absolute
or contingent, direct or indirect, including any obligations under any
Seller Plan, with respect to any misclassification of a person as an
independent contractor rather than as an employee.
(g) No Seller has an obligation to provide or any direct or
indirect liability, whether contingent or otherwise, with respect to the
provision of health or death benefits to or in respect of former employees,
except as may be required pursuant to COBRA and the costs of which are
fully paid by such former employees.
(h) With respect to each Seller Plan, the Sellers have
delivered to Purchaser a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the
extent applicable: (A) any related trust agreement or other funding
instrument; (B) the most recent IRS determination letter, if applicable;
(C) the most recent summary plan description, (w) the most recent Form 5500
and attached schedules, (x) the most recent audited financial statement,
and (y) the most recent actuarial valuation report.
(i) No Seller or Seller Affiliate is a party to any
collective bargaining agreements and there are no labor unions or other
organizations representing, purporting to represent, or attempting to
represent, any employee of any Seller.
(j) Except as set forth in Section 3.13(j) of the Seller
Disclosure Letter, no Seller or Seller Affiliate has violated any provision
of federal or state law or any governmental rule or regulation, or any
order, decree, judgment arbitration award of any court, arbitrator or any
government agency regarding the terms and conditions of employment of
employees, former employees or prospective employees or other labor related
matters, including, without limitation, laws, rules, regulations, orders,
rulings, decrees, judgments and awards relating to discrimination, fair
labor standards and occupational health and safety, wrongful discharge or
violation of the personal rights of employees, former employees or
prospective employees.
Section 3.14 Title to and Use of Property.
(a) (i) At the Closing Purchaser will acquire good and
marketable title to all of the Assets, in each case free and clear of
any and all Encumbrances (including, without limitation, any and all
claims that may arise by reason of the execution, delivery or
performance by Sellers of this Agreement), other than Permitted
Encumbrances and with respect to Assumed Contracts and Assumed Leases,
subject to Purchaser's obligation to make the $500,000 of payments
provided for in Section 1.4(d) or Section 1.5, as applicable;
(ii) no Seller owns any real property;
(iii) all real estate constituting any part of the
Assets that is used or held by any Seller pursuant to any lease or
other contractual arrangement as of the date hereof is designated in
Section 3.14(a) of the Seller Disclosure Letter;
(iv) other than Permitted Encumbrances and with respect
to Assumed Contracts and Assumed Leases, subject to Purchaser's
obligation to make the $500,000 of payments provided for in Section
1.4(d) or Section 1.5, as applicable, immediately prior to the
Closing, each Seller will have leasehold interests in, or has other
valid contractual rights to use, all of the Assets of the type
described in Section 3.14(a)(iii) above;
(v) other than Permitted Encumbrances and with respect
to Assumed Contracts and Assumed Leases, subject to Purchaser's
obligation to make the $500,000 of payments provided for in Section
1.4(d) or Section 1.5, as applicable, immediately prior to the
Closing, each Seller will be in peaceful and undisturbed possession of
the space or estate under the leases or other agreements under which
it is a tenant or entitled to use the properties of a type described
in Section 3.14(a)(iv) above being sold;
(vi) as to all Assets of the type described in
Section 3.14(a)(i) or (iii) above, either (A) each Seller is in no
respect in default or delinquent in performing its obligations under
such Assumed Contract, lease or other agreement, or (B) other than
Permitted Encumbrances and with respect to Assumed Contracts and
Assumed Leases, subject to Purchaser's obligation to make the $500,000
of payments provided for in Section 1.4(d) or Section 1.5, as
applicable, any such default or delinquency will be fully cured, or
otherwise may not be asserted against Purchaser or the Assets, as a
result of the entry by the Bankruptcy Court of the 363 Order and the
365 Order, such that the Sellers' rights in and under all such leases
or other agreements shall vest in Purchaser upon the Closing without
reversion or diminution; and
(vii) each Seller has good and valid rights of ingress
and egress to and from all the real property leased by it and
constituting part of the Assets being sold from and to the public
street systems for all usual street, road, and utility purposes.
(b) The Assets include, without limitation, all real
property and related rights and interests and all personal property of the
Sellers, both tangible and intangible, necessary to conduct the Business as
it is currently conducted by the Sellers, to provide all services that are
the subject of Governmental Permits to the extent currently provided by the
Sellers, except for any Assets which, individually or in the aggregate if
not owned by any Seller, would not result in a Seller Material Adverse
Effect.
Section 3.15 Non-Competition Agreements. Except as set forth
in Section 3.15 of the Seller Disclosure Letter, no Seller, nor any
officer, director, or key employee of any Seller, is a party to any
agreement that purports to restrict or prohibit it, directly or indirectly,
from engaging in any business involving telecommunications or any other
material business currently engaged in by a Seller, or to the knowledge of
any Seller, by Purchaser or any corporations affiliated with Purchaser.
Except as set forth in Section 3.15 of the Seller Disclosure Letter, no
officer, director, or key employee of any Seller is a party to any
agreement, which by virtue of such person's relationship with such Seller,
restricts such Seller from, directly or indirectly, engaging in any of the
business described above.
Section 3.16 Brokers. Except as contemplated by Section 1.5 of
the Seller Disclosure Letter, no person is entitled to any brokerage,
financial advisory, finder's or similar fee or commission payable by any
Seller in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of such Seller.
Section 3.17 Contracts. Section 3.17 of the Seller Disclosure
Letter contains a complete and accurate list of all contracts of the
Sellers ("Contracts") involving payments or other consideration in excess
of (i) $100,000 in any twelve-month period or (ii) $200,000 over the life
of the Contract. True and complete copies of each such written Contract
(or written summaries of the terms of any such oral Contract or any oral
modification of a written Contract) have been heretofore made available to
the Purchaser; and, in the case of each Contract listed in Section 1.1(h)
of the Seller Disclosure Letter, true and complete copies of each such
Contract have been made available to Purchaser prior to the execution of
this Agreement. Except as set forth in Section 3.17 of the Seller
Disclosure Letter, as of the date of this Agreement, no Seller has received
notice, nor does it otherwise have knowledge, that any party to any such
Contract intends to cancel, terminate, or refuse to renew such Contract or
to exercise or decline to exercise any option or right thereunder, except
as would not reasonably be expected to, individually or in the aggregate,
result in a Seller Material Adverse Effect and except to the extent any
such notice would be ineffective and unenforceable as a result of the
Chapter 11 Case. The Contracts that the Sellers have in place with their
customers are valid and binding upon such customers in accordance with
their terms, except to the extent that the failure of such Contracts to be
valid and binding would not have a Seller Material Adverse Effect.
Section 3.18 Intellectual Property.
(a) "Intellectual Property" shall mean all of the following
as they exist in all jurisdictions throughout the world, in each case, to
the extent owned by, licensed to, or otherwise used by any Seller:
(i) patents, patent applications, and other patent
rights (including any divisions, continuations, continuations-in-part,
substitutions, or reissues thereof, whether or not patents are issued
on any such applications and whether or not any such applications are
modified, withdrawn, or resubmitted);
(ii) trademarks, service marks, trade dress, trade
names, brand names, Internet domain names, designs, logos, or
corporate names, whether registered or unregistered, and all
registrations and applications for registration thereof;
(iii) copyright registrations and applications for
registration thereof and non-registered copyrights;
(iv) trade secrets, designs, research, processes,
procedures, techniques, methods, know-how, data, mask works,
inventions, and other proprietary rights (whether or not patentable
or subject to copyright, mask work, or trade secret protection)
(collectively, "Technology"); and
(v) computer software programs, including, without
limitation, all source code, object code, and material documentation
related thereto (the "Software").
(b) Intellectual Property Disclosure. Section 3.18(b) of
the Seller Disclosure Letter sets forth all United States and foreign
patents and patent applications, trademark and service mark registrations
and applications, Internet domain name registrations and applications, and
copyright registrations and applications owned or licensed by any Seller,
specifying as to each item, as applicable: the nature of the item,
including the title; the owner of the item; the jurisdictions in which the
item is issued or registered or in which an application for issuance or
registration has been filed; and the issuance, registration, or application
numbers and dates.
(c) Ownership. Except as would not reasonably be expected
to, individually or in the aggregate, result in a Seller Material Adverse
Effect, each Seller will own as of the Closing date and transfer to the
Purchaser, free and clear of any and all Encumbrances, and as of the
Closing Date will have the unrestricted right to use, sell, or license, all
Intellectual Property used in the conduct of the business of any Seller.
(d) Claims. Except as would not reasonably be expected to,
individually or in the aggregate, result in a Seller Material Adverse
Effect, no Seller has been, during the three (3) years preceding the date
hereof, a party to any claim or action, nor, to the knowledge of any
Seller, is any claim or action threatened, that challenges the validity,
enforceability, ownership, or right to use, sell, or license any
Intellectual Property. Except as would not reasonably be expected to,
individually or in the aggregate, result in a Seller Material Adverse
Effect, to the knowledge of any Seller, no third party is infringing upon
any Intellectual Property.
(e) Administration and Enforcement. Except as would not
reasonably be expected to, individually or in the aggregate, result in a
Seller Material Adverse Effect, each Seller has taken all necessary and
desirable action to maintain and protect each item of Intellectual Property
owned by any such Seller.
(f) Software. All material Software used in the Business
is described in Section 3.18(f) of the Seller Disclosure Letter. Such
Software is held by a Seller legitimately, is fully and freely transferable
to the Purchaser without any third party consent, and to the knowledge of
any Seller is free from any significant software defect, performs in
conformance with its documentation, and does not contain any bugs or
viruses or any code or mechanism that may be reasonably likely to
materially interfere with the operation of such Software.
(g) Year 2000 Compliance. Except as set forth in
Section 3.18(g) of the Seller Disclosure Letter, all Software, hardware,
databases, and embedded control systems used by any Seller (collectively,
the "Systems") are Year 2000 Compliant, except as would not reasonably be
expected to, individually or in the aggregate, result in a Seller Material
Adverse Effect. As used herein, the term "Year 2000 Compliant" means that
the Systems (i) accurately process date and time data (including, without
limitation, calculating, comparing, and sequencing) from, into, and between
the twentieth and twenty-first centuries, the years 1999 and 2000, and leap
year calculations and (ii) operate accurately with other software and
hardware that use standard date format (4 digits) for representation of the
year. Except as set forth in Section 3.18(g) of the Seller Disclosure
Letter, Purchaser shall not be required to incur any material expenses
arising from or relating to the failure of any of the Systems or Products
to be Year 2000 Compliant.
Section 3.19 Customers. Section 3.19 of the Seller Disclosure
Letter sets forth (a) the names of the 450 highest revenue generating
customers of the Business for the January 10, 1999 billing run that
together accounted for approximately 20% of the net revenues of the
Business during the relevant billing period (the "Top Customers") and
(b) the amount for which each such customer was invoiced during such
period. As of the date of this Agreement, to Sellers' knowledge, except as
set forth in Section 3.19 of the Seller Disclosure Letter and except as
would not reasonably be expected to, individually or in the aggregate,
result in a Seller Material Adverse Effect, neither the Company nor any of
its subsidiaries has received any notice (written or oral) that any Top
Customer of the Business (i) has ceased, or will cease, to purchase
telecommunication services of the Business, (ii) has reduced or will reduce
the purchase of telecommunication services of the Business or (iii) has
sought, or is seeking, to reduce the price it will pay for
telecommunication services of the Business, including, in each case, after
the consummation of the Contemplated Transactions.
Section 3.20 Board Approval and Recommendation. The Board of
Directors of the Company has determined that an immediate sale and
assignment of the Assets pursuant to this Agreement under Sections 363 and
365 of the Bankruptcy Code is in the best interests of the Company.
Section 3.21 Investment Intent; Restricted Securities. The
Company is acquiring the Warrants solely for its own account and not with
the view to, or for resale in connection with, any distribution thereof,
other than as may be permitted under applicable law without registration
under the Securities Act. The Company understands that the Warrants and
the common stock of the Purchaser issuable upon exercise of the Warrants
have not been and are not being registered under the Securities Act by
reason of specified exemptions therefrom which depend upon, among other
things, the bona fide nature of its investment intent as expressed herein
and as explicitly acknowledged hereby, and that the Warrants and the common
stock of the Purchaser issuable upon exercise of the Warrants are
"Restricted Securities" under the federal securities laws inasmuch as they
are being acquired from the Purchaser in a transaction not involving a
public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act only
in certain limited sets of circumstances. The Company agrees that the
Warrants may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the
Securities Act except as may be permitted under applicable law. The
Company may distribute or transfer the Warrants only upon delivery to the
Purchaser of (i) an opinion of legal counsel, in form and substance, and
from counsel, reasonably satisfactory to the Purchaser, that the
distribution or transfer may be effected without registration under the
Securities Act, or (ii) a Bankruptcy Court order, reasonably satisfactory
to the Purchaser, that such distribution or transfer of the Warrants and
the stock issuable upon exercise thereof is exempt from the Securities Act;
provided, however, that if the Company is unable to distribute or transfer
the Warrants pursuant to clause (i) or (ii) above, after using reasonable
commercial efforts to do so, then the Purchaser shall, at the request of
the beneficial holders of a majority interest of the Warrants given not
earlier than four months after the Closing Date, register the Warrants
under the Securities Act pursuant to a customary registration rights
agreement. The Warrants will bear appropriate legends restricting
transfer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Except as otherwise disclosed to the Company in a schedule
annexed hereto (which schedule contains appropriate references to identify
the representations and warranties herein to which the information in such
schedule relates) (the
"Purchaser Disclosure Letter"), the Purchaser represents and warrants to
the Company as follows:
Section 4.1 Organization. The Purchaser is a corporation
validly existing and in good standing under the laws of its jurisdiction of
incorporation.
Section 4.2 Authority Relative to this Agreement. The
Purchaser has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution,
delivery, and performance of this Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby have
been duly authorized by all requisite corporate actions. This Agreement
has been duly and validly executed and delivered by the Purchaser and
(assuming this Agreement constitutes a valid and binding obligation of the
Sellers) constitutes a valid and binding agreement of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium, and other
laws affecting creditors' rights generally from time to time in effect and
to general equitable principles.
Section 4.3 No Violations. Neither the execution, delivery,
or performance of this Agreement by the Purchaser, nor the consummation by
the Purchaser of the transactions contemplated hereby, nor compliance by
the Purchaser with any of the provisions hereof, will (a) except for the
approval of the Bankruptcy Court, require Purchaser to obtain any consent,
approval or action of, or make any filing with or give notice to, any
Governmental Body or any other person, (b) conflict with or result in any
breach of any provisions of the certificate of incorporation or bylaws of
the Purchaser, (c) result in a violation or breach of, or constitute (with
or without due notice or lapse of time) a default (or give rise to any
right of termination, cancellation, acceleration, vesting, payment,
exercise, suspension, or revocation) under any of the terms, conditions, or
provisions of any note, bond, mortgage, deed of trust, security interest,
indenture, license, concrete agreement, plan, or other instrument or
obligation to which the Purchaser is a party or by which the Purchaser or
the Purchaser's properties or assets may be bound or affected, (d) violate
any order, writ, injunction. decree, statute, rule, or regulation
applicable to the Purchaser or the Purchaser's properties or assets, or
(e) result in the creation or imposition of any Encumbrance on any asset of
the Purchaser, except in the case of clauses (c), (d), and (e), for
violations, breaches, defaults, terminations, cancellations, accelerations,
creations, impositions, suspensions, or revocations that would individually
or in the aggregate have a material adverse effect on the assets, condition
(financial or otherwise) or operations of Purchaser (a "Purchaser Material
Adverse Effect") except as set forth in Section 4.3 of the Purchaser
Disclosure Letter.
Section 4.4 Consents and Approvals. No consent, approval, or
authorization of, or declaration, filing, or registration with, any United
States federal or state government or regulatory authority is required to
be made or obtained by Purchaser in connection with the execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated hereby, except for Government Requirements.
Section 4.5 Brokers. Except as set forth in Section 4.5 of
the Purchaser Disclosure Letter, no person is entitled to any brokerage,
financial advisory, finder's or similar fee or commission payable by
Purchaser in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Purchaser.
Section 4.6 Financing. The Purchaser represents that as of
the date hereof it has, and on the Closing Date it will have, sufficient
funds to deliver the Consideration to the Company.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business by the Sellers Pending the
Closing. Subject, after the date on which the Sellers file the Petitions,
to any obligations as a debtor or debtor-in-possession under the Bankruptcy
Code, or order of the Bankruptcy Court, the Sellers shall use all
commercially reasonable efforts to conduct their businesses in the ordinary
course consistent with past practice and taking into account the filing of
the Petitions, including, without limitation meeting their post-Petition
obligations as they become due, fulfilling their commitments to customers
and not reducing their current pricing to customers. The Sellers shall
also use all commercially reasonable efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers and key employees, subject
to the terms of this Agreement. Except as provided in the Seller
Disclosure Letter or except as otherwise contemplated under this Agreement,
from the date hereof until the Closing Date, without the prior written
consent of the Purchaser:
(a) Sellers shall not adopt or propose any change in their
certificates of incorporation or bylaws, except a change that would not
have any adverse affect on the Contemplated Transactions;
(b) Sellers shall not declare, set aside, or pay any
dividend or other distribution with respect to any shares of their capital
stock, or split, combine, or reclassify any of their capital stock, or
repurchase, redeem, or otherwise acquire any shares of their capital stock;
(c) Sellers shall not merge or consolidate with any other
person or (except in the ordinary course of business) acquire a material
amount of assets of any other person;
(d) Sellers shall not lease, license, or otherwise
surrender, relinquish, encumber, or dispose of any Assets other than the
disposition of obsolete or damaged Assets in the ordinary course of their
business;
(e) Sellers shall not change any method of accounting or
accounting practice used by them, except for any change required by GAAP;
(f) Sellers shall not establish or increase the
benefits under, or promise to establish, modify or increase the benefits
under, any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including without limitation, the
granting of stock options, stock appreciation rights, performance awards,
or restricted stock awards), stock purchase or other employee benefit plan
or employment, consulting or severance agreement, or otherwise increase the
compensation payable to any directors, officers or employees of the
Sellers, except in the ordinary course of business and consistent with past
practice, or establish, adopt or enter into any collective bargaining
agreement;
(g) Sellers shall not make or agree to make any capital
expenditures or capital additions that exceed $25,000 per calendar month;
(h) Sellers shall not in any material respect change their
methods of collecting Trade Receivables, and shall not make or agree to
make any settlement concerning a Trade Receivable in excess of $5,000
without consulting with Purchaser;
(i) Sellers shall not agree or commit to do any of the
foregoing; and
(j) except to the extent necessary to comply with the
requirements of applicable laws and regulations, Sellers shall not
(i) take, or agree or commit to take, any action that would make any
representation or warranty of the Sellers hereunder inaccurate in any
respect at, or as of any time prior to, the Closing Date, (ii) omit, or
agree or commit to omit, to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect on the
Closing Date, or (iii) take, or agree or commit to take, any action that
would result in, or is reasonably likely to result in, any of the
conditions set forth in Article VII not being satisfied.
Section 5.2 Access and Information. Sellers shall afford to
Purchaser and to Purchaser's financial advisors, legal counsel,
accountants, consultants, financing sources, and other authorized
representatives access during normal business hours and without material
disruption to the Business of the Sellers throughout the period prior to
the Closing Date to all their books, records, properties, plants, and
personnel which relate to the Business of the Sellers and, during such
period, shall furnish as promptly as practicable to Purchaser (a) a copy of
each report, schedule, and other document filed or received by them
pursuant to the requirements of federal or state securities laws and
(b) all other information as Purchaser reasonably may request in
furtherance of the Contemplated Transactions, provided that Purchaser shall
not disclose any competitively sensitive information (unless Purchaser is
legally compelled to do so in which case Purchaser shall provide to the
Company with prompt written notice of the legal requirement to disclose so
that the Company may seek a protective order or other appropriate remedy)
and no investigation pursuant to this Section 5.2 shall affect any
representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the transactions
contemplated by this Agreement. The Purchaser and the Company shall
continue to abide by the terms of Section (e)(ii) of the letter agreement,
dated as of January 13, 1999 (the "1999 Letter Agreement"), between the
Company, Purchaser and BT Alex Brown Inc.
Section 5.3 Cure of Defaults. Subject to the prior approval
of the Bankruptcy Court and subject to Section 1.4(d) herein, the Sellers
shall, on or prior to the Closing, cure any and all defaults and breaches
under and satisfy (or, with respect to any Assumed Liability or obligation
that cannot be rendered non-contingent and liquidated prior to the Closing
Date, make effective provision reasonably satisfactory to Purchaser and the
Bankruptcy Court for satisfaction from funds of Seller of) any Assumed
Liability or obligation arising from or relating to pre-Closing periods
under the Assumed Contracts and Assumed Leases so that such Assumed
Contracts and Assumed Leases may be assumed by the Sellers and assigned to
the Purchaser in accordance with the provisions of Section 365 of the
Bankruptcy Code and this Agreement (including, without limitation,
Section 1.3 hereof); provided that the Sellers shall not be required to
cure any default or breach under any Assumed Contract or satisfy any
obligation arising from any Assumed Contract unless and until the aggregate
amount of all such obligations exceeds $500,000. Each Seller agrees that
it will promptly take such actions as are reasonably necessary to obtain
the 365 Order, assuming and assigning to Purchaser the Assumed Contracts
and Assumed Leases.
Section 5.4 Cooperation. The Purchaser shall have the right
to have its designated representatives, as provided to the Company in
writing from time to time (the "Designated Purchaser Representatives"),
present within normal business hours and without material disruption to the
Business of the Sellers for consultation at the Sellers' principal offices
from the date hereof until the Closing. Such Designated Purchaser
Representatives shall have the right to review and become familiar with the
conduct of the Business and shall be available to be consulted and shall
have authority on behalf of the Purchaser in regard to consultation in
regard to Material Decisions (as defined below in this Section 5.4).
Purchaser shall take all reasonable actions necessary to ensure that its
Designated Purchaser Representatives will be readily available during
normal business hours. Without notice to and consultation with the
Designated Purchaser Representatives, no Seller shall take any action
involving any Material Decision. "Material Decision" shall mean, for
purposes of this Agreement, any of the following to the extent the same may
affect the Assets, the Assumed Liabilities or the Business following the
Closing: (i) any entering into, termination or material amendment of, or
waiver of any Seller's rights in respect of, any Assumed Contract; (ii) any
purchase order for products or supplies involving in excess of $10,000 in
any instance to be delivered, or the payment for which shall become due,
after the Closing; (iii) the acceptance of any material customer Assumed
Contract that deviates in any material respect from the terms and
conditions of current pricing policies; (iv) any action to respond to any
material customer or regulatory complaint outside of the normal course of
business; (v) any general communication with customers related to the
Business or to the Contemplated Transactions; or (vi) a material change in
pricing, promotional, marketing or any other decision that would affect in
any material respect any Seller's customary profit margins.
Section 5.5 Acquisition Proposal Procedures. The Sellers
shall, promptly (and in any event within three (3) Business Days following
the date of this Agreement), seek the entry of an order (the "Overbid
Procedures Order") in the form of Exhibit A hereto providing for procedures
substantially similar to those set forth in Appendix A hereto.
Section 5.6 Filings; Other Action. Subject to the terms and
conditions herein provided, as promptly as practicable, Sellers and
Purchaser shall (a) promptly make all filings and submissions under the HSR
Act, (b) use all commercially reasonable efforts to cooperate with each
other in (i) determining which filings are required to be made prior to the
Closing Date with, and which material consents, approvals, permits, or
authorizations are required to be obtained prior to the Closing Date from,
governmental or regulatory authorities of the United States and the several
states or the District of Columbia, and foreign jurisdictions in connection
with the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and (ii) timely making all such
filings and timely seeking all such consents, approvals, permits, or
authorizations, and (c) using all commercially reasonable efforts to take,
or cause to be taken, all other action and do, or cause to be done, all
other things reasonably necessary or appropriate to consummate the
transactions contemplated by this Agreement, as soon as practicable. In
connection with the foregoing, the Company will promptly provide the
Purchaser, and Purchaser will promptly provide the Company, with copies of
all correspondence, filings, or communications (or memoranda setting forth
the substance thereof) between such party or any of its representatives, on
the one hand, and any governmental agency or authority or members of their
respective staffs, on the other hand, with respect to this Agreement and
the transactions contemplated hereby. The parties acknowledge that certain
actions may be necessary with respect to the foregoing in making
notifications and obtaining clearances consents, approvals, waivers, or
similar third party actions that are material to the consummation of the
transactions contemplated hereby, and each party agrees to take all
commercially reasonable actions as are necessary, to complete such
notifications and obtain such clearances, approvals, waivers, or third
party actions, except where such consequence, event, or occurrence would
have a Purchaser Material Adverse Effect or a Seller Material Adverse
Effect, as the case may be.
Section 5.7 Communications Licenses and Authorizations. The
Sellers shall obtain and maintain in full force and effect all approvals,
consents, permits, licenses and other authorizations, and any renewals
thereof, from the FCC and any appropriate State PUC, and make all filings
and reports and pay all fees, reasonably necessary or required for the
continued operation of the Business, as and when such approvals, consents,
permits, licenses, filings or reports or other authorizations are necessary
or required.
Section 5.8 FCC Applications.
(a) As promptly as practicable and in any event within five
Business Days after the execution and delivery of this Agreement, the
Sellers shall prepare and deliver to Purchaser Seller's completed portion
of all appropriate applications for FCC approval, and such other documents
as may be required, with respect to the assignment of licenses of Sellers
to Purchaser (collectively, the "FCC Applications"). As promptly as
practicable and in any event within five Business Days after the execution
and delivery of this Agreement, the Purchaser shall prepare and deliver to
the Sellers, the Purchaser's portion of all appropriate FCC Applications.
As soon as practical after the execution and delivery of this Agreement,
the parties shall file, or cause to be filed, the FCC Applications. If the
Closing shall not have occurred for any reason within any applicable
initial consummation period relating to the FCC's grant of the FCC
Applications, and neither Sellers nor Purchaser shall have terminated this
Agreement pursuant to Section 8.1, Purchaser and Sellers shall jointly
request one or more extensions of the consummation period of such grant.
No party hereto shall knowingly take, or fail to take, any action if the
intent or reasonably anticipated consequence of such action or failure to
act is, or would be, to cause the FCC not to grant approval of the FCC
Applications or materially delay either such approval or the consummation
of the assignment of licences and the Customer Base of the Sellers.
(b) Purchaser and Sellers shall cooperate to determine a
plan to expeditiously obtain applicable governmental approvals, clearances,
consents and authorizations necessary to effectuate the Contemplated
Transactions. Subject to the determination of such plan, as promptly as
practicable and in any event within five Business Days after the execution
and delivery of this Agreement, the Sellers shall prepare and deliver to
Purchaser Sellers' portions of all required applications for approval by
State PUCs, and such other documents as may be required, with respect to
the assignment of licenses and Customer Base of the Sellers (collectively,
the "State PUC Applications"). As promptly as practicable and in any event
within five Business Days after the execution and delivery of this
Agreement, the Purchaser shall prepare and deliver to Sellers Purchaser's
portion of all appropriate State PUC Applications. Subject to the first
sentence of this Section 5.8(b), as soon as practicable after the execution
and delivery of this Agreement, the parties shall file, or cause to be
filed, the State PUC Applications. If the Closing shall not have occurred
for any reason within any applicable consummation period relating to any
State PUC's grant of any State PUC Application, and neither Purchaser nor
the Sellers shall have terminated this Agreement pursuant to Section 8.1,
Purchaser and Sellers shall jointly request one or more extensions of the
consummation period of such grant. No party hereto shall knowingly take,
or fail to take, any action if the intent or reasonably anticipated
consequence of such action or failure to act is, or would be, to cause any
State PUC not to grant approval of any State PUC Application or materially
delay either such approval or the consummation of the assignment of
licenses and Customer Base of Sellers.
(c) The Company and Purchaser shall each pay one-half of
any FCC fees that may be payable in connection with the filing or granting
of approval of the FCC Applications. Except as set forth in the
immediately preceding sentence, each of Purchaser and the Sellers shall
bear its own expenses in connection with the preparation and prosecution of
the FCC Applications and the State PUC Applications. Purchaser and Sellers
shall each use their reasonable best efforts to prosecute the FCC
Applications and the State PUC Applications in good faith and with due
diligence before the FCC and the State PUCs and in connection therewith
shall take such action or actions as may be necessary or reasonably
required in connection with the FCC Applications and the State PUC
Applications, including furnishing to the FCC and the State PUCs any
documents, materials or other information requested by the FCC and the
State PUCs in order to obtain such approvals as expeditiously as
practicable.
Section 5.9 Public Announcements. Purchaser, on the one hand,
and Sellers, on the other hand, agree that they will not issue any press
release or respond to any press inquiry with respect to this Agreement or
the transactions contemplated hereby without the prior approval of the
other parties (which approval will not be unreasonably withheld), except as
may be required by applicable law or any requirement of any stock exchange
on which the stock of either party is listed.
Section 5.10 Bankruptcy Actions. (a) As promptly as
practicable after the Petition Date (and in any event within three
(3) Business Days following the date of this Agreement), Sellers shall file
with the Bankruptcy Court a motion, supporting papers, notices and a
proposed Overbid Procedures Order, all in form and substance reasonably
satisfactory to Purchaser, seeking the Bankruptcy Court's approval of the
terms of Sections 5.1, 5.5 and 8.6 of this Agreement, and observance and
performance of such terms by Sellers and Purchaser during the pendency of
the Chapter 11 Case, and Sellers shall use their best efforts to obtain the
entry of the Overbid Procedures Order.
(b) As promptly as practicable after the Petition Date (and
in any event within three (3) Business Days following the date of this
Agreement), Sellers will file with the Bankruptcy Court a motion,
supporting papers, notices and a form of 363 Order and 365 Order, all in
form and substance reasonably satisfactory to Purchaser, seeking the
Bankruptcy Court's approval of this Agreement, Sellers' performance under
this Agreement, assumption and assignment of the Assumed Contracts and
Assumed Leases and Sellers' retention of the Excluded Assets, and
identification of the cash payments required under Section 5.3 of this
Agreement, and, subject to the provisions of the Overbid Procedures Order,
Sellers shall use their best efforts to obtain entry of the 363 Order and
the 365 Order.
(c) Sellers will provide Purchaser with copies of all
motions, applications, and supporting papers prepared by Sellers (including
forms of orders and notices to interested parties) relating to Purchaser or
the transactions contemplated by this Agreement prior to the filing thereof
in the Chapter 11 Cases and shall not, other than due to emergency time
constraints, file any such document unless it is in form and substance
reasonably satisfactory to Purchaser.
(d) Sellers shall give appropriate notice, and provide
appropriate opportunity for hearing, to all parties entitled thereto, of
all motions, orders, hearings, or other proceedings relating to this
Agreement or the transactions contemplated hereby.
Section 5.11 Tax Returns and Filings; Payment of Taxes. Each
Seller shall prepare all of its Tax Returns for periods ending on or prior
to the Closing Date. Sellers shall be responsible for paying all of their
Taxes for periods ending on or prior to the Closing Date.
Section 5.12 Sellers' Use of USN Name. Each Seller covenants
that at the Closing, or as soon thereafter as is practicable (but in no
event later than the tenth day after the Closing Date), it will not use any
name, mark, logo, trade name or trademark incorporating "USN" or "USN
Communications, Inc." in any business activity except as is necessary for
the administration of the Bankruptcy Cases.
Section 5.13 Tax Matters. All personal property transfer,
documentary, sales, use, registration, value-added and other similar Taxes
(including interest, penalties and additions to Tax) incurred in connection
with the Contemplated Transactions ("Transfer Taxes") shall be borne by
Sellers, and Sellers, jointly and severally, shall indemnify Purchaser for
any such Taxes incurred by Purchaser as a result of Sellers' failure to
timely pay such Taxes.
Section 5.14 1998 Unaudited Financial Statements. Purchaser
shall instruct its accountants to take all necessary action so as to effect
Section 7.3(g) as soon as practicable.
Section 5.15 Additional Matters. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
commercially reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper, or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using all
commercially reasonable efforts to obtain all necessary waivers, consents,
and approvals in connection with the Governmental Requirements and to
effect all necessary registrations and filings.
ARTICLE VI
ADDITIONAL POST-CLOSING COVENANTS
Section 6.1 Further Assurances. In addition to the provisions
of this Agreement, from time to time after the Closing Date, the Sellers
and the Purchaser will use all commercially reasonable efforts to execute
and deliver such other instruments of conveyance, transfer or assumption,
as the case may be, and take such other action as may be reasonably
requested to implement more effectively the conveyance and transfer of the
Assets to the Purchaser and the assumption of the Assumed Liabilities by
the Purchaser.
Section 6.2 Books and Records; Personnel. For a period of
seven (7) years after the Closing Date (or such longer period as may be
required by any governmental or regulatory body or authority or ongoing
Legal Proceeding):
(a) Purchaser shall not dispose of or destroy any of the
business records and files of the Business other than in connection with a
sale or other disposition of the Business or any portion thereof. If the
Purchaser wishes to dispose of or destroy such records and files after that
time, it shall first give sixty (60) days' prior written notice to the
Company, and the Company shall have the right, at its option and expense,
upon prior written notice to the Purchaser within such sixty-day period, to
take possession of the records and files within ninety (90) days after the
date of the notice from the Company.
(b) Purchaser shall allow the Company and any of its
directors, officers, employees, counsel, representatives, accountants, and
auditors (collectively, the "Seller Representatives") access to all
business records and files of the Sellers or the Business that are
transferred to it in connection herewith, which are reasonably required by
such party in anticipation of, or preparation for, any existing or future
Legal Proceeding involving a Seller or Tax Return preparation, during
regular business hours and upon reasonable notice at Purchaser's principal
place of business or at any location where such records are stored, and the
Seller Representatives shall have the right to make copies of any such
records and files; provided, however, that any such access or copying shall
be had or done in such a manner so as not to interfere with the normal
conduct of Purchaser's business or operations.
Section 6.3 Third Party Rights. No provision of this
Agreement shall create any third party beneficiary rights in any employee
or former employee of the Sellers or any other persons or entities
(including any beneficiary or dependent thereof), in respect of continued
employment (or resumed employment) for any specified period of any nature
or kind whatsoever, and no provision of this Agreement shall create such
third party beneficiary rights in any such persons or entities in respect
of any benefits that may be provided, directly or indirectly, under any
Seller Plan.
Section 6.4 Employee Withholding. Sellers agree that,
pursuant to the "Alternative Procedure" provided in Section 5 of Revenue
Procedure 84-77, 1984-2 C.B. 753, with respect to filing and furnishing IRS
Forms W-2, W-3, and 941, (a) Sellers shall report on a "predecessor-
successor" basis, as set forth therein, (b) Sellers shall be relieved from
furnishing Forms W-2 to any of the employees of Sellers who become
employees of Purchaser, and (c) Purchaser shall assume the obligations of
Sellers to furnish such Forms W-2 to such employees for the year in which
the Closing occurs.
Section 6.5 Employment of Sellers' Employees. (a) Each
Seller shall use its reasonable best efforts to retain all of its
employees, and to maintain in good standing through the Closing all
relationships and agreements with employees, independent contractors or
consultants, in each case from the date hereof through the Closing Date and
to cooperate with Purchaser in hiring its employees offered employment
pursuant to Section 6.5(b); provided, that the foregoing shall not require
that any Seller offer any compensation or other incentives in addition to
the compensation and benefits being provided or required to be provided as
of the date of this Agreement.
(b) Purchaser shall offer employment to each employee
listed on Section 6.5(b) of the Purchaser Disclosure Letter (each such
employee, an "Offer Employee") on such other terms and conditions as
Purchaser shall determine (subject to the provisions of this Article 6)
effective as of the Closing Date. The time at which the employment by the
Purchaser of each such employee who is not an Inactive Employee as of the
Closing and who accepts such offer of employment shall become effective
(the "Effective Time of Employment") shall be the Closing. The Effective
Time of Employment of any such employee who is an Inactive Employee as of
the Closing shall be such time (if any) within one hundred eighty (180)
days following the Closing Date when such Inactive Employee returns to
active status and reports to work with Purchaser and Purchaser shall have
no obligation to employ any such Inactive Employee who fails to return to
active status or to report to work with Purchaser within such one hundred
eighty (180) day period. Each employee who becomes employed by Purchaser
pursuant to one of the two preceding sentences shall be considered a
"Transitioned Employee" from and after his or her Effective Time of
Employment.
(c) From the date hereof through the Closing, Sellers shall
permit Purchaser to communicate with Sellers' employees and consultants, at
reasonable times and upon reasonable notice, concerning Purchaser's plans,
operations, business, customer relations and general personnel matters and
to interview Sellers' employees and consultants and review the personnel
records and such other information concerning Sellers' employees and
consultants as Purchaser may reasonably request (subject to obtaining any
legally required written permission of any affected employee or consultant
and to other applicable law), provided that such contacts shall be
conducted in a manner that is reasonably acceptable to Sellers.
(d) Sellers shall be solely responsible for any and all
liabilities relating to or arising in connection with any actual,
constructive or deemed termination of employment (including without
limitation, severance or separation pay or benefits or other similar
compensation or benefits under any applicable law, regulation or Seller
Plan) (i) to or with respect to any employee other than a Transitioned
Employee, whether as a result of the consummation of the transactions
contemplated hereby or otherwise, and whether before, on or after the
Closing Date, or (ii) to any Transitioned Employee, whether as a result of
(A) the consummation of the transaction contemplated hereby, (B) any event
occurring before the Closing or (C) any action or failure to act of
Sellers. Except as provided in this Section 6.5(d) and Section 6.6(c),
Purchaser shall be solely responsible for any and all Liabilities relating
to or arising in connection with any actual, constructive or deemed
termination of employment of any Transitioned Employee with Purchaser after
such Transitioned Employee's Effective Time of Employment. Notwithstanding
any other provision hereof, Purchaser shall be solely responsible for any
and all liabilities relating to or arising in connection with any actual,
constructive or deemed termination of employment by the Purchaser of any
Offer Employee who becomes an employee of Purchaser or any affiliate of
Purchaser within one year following the Closing Date.
Section 6.6 Employee Benefits Generally for Transitioned
Employees. (a) Purchaser shall provide employee benefit plans and
arrangements to Transitioned Employees that are substantially comparable in
the aggregate to the benefits provided to similarly situated employees of
Purchaser.
(b) As soon as practicable after the date of this
Agreement, but in any event before the Closing, Sellers shall prepare,
subject to Purchaser's approval (which shall not be unreasonably withheld),
a schedule setting forth, for each Offer Employee, such employee's length
of service with Sellers before the Closing ("Prior Service"). Following
the Closing, except as specifically provided in the next sentence,
Purchaser shall recognize each Transitioned Employee's Prior Service,
solely for purposes of determining vesting and eligibility to participate
in, but not for purposes of the schedule of benefits or benefit accrual
under, any employee benefit plan sponsored by Purchaser in which such
Transitioned Employee participates after the Closing Date. Notwithstanding
the foregoing: (i) Purchaser shall recognize Prior Service of each
Transitioned Employee for purposes of determining the amount of such
Transitioned Employee's vacation and level of benefits for any severance
plan or arrangement; and (ii) Purchaser shall not be obligated as a result
of this Agreement to recognize any Prior Service for purposes of
eligibility for or vesting in retiree welfare benefits.
(c) Without limiting the generality of any other provision
of this Article 6, Sellers shall remain solely responsible for any and all
liabilities relating to or arising in connection with the Seller Plans,
whether arising before, on or after the Closing Date.
Section 6.7 Certain Benefits. (a) From and after the Closing
Date, Sellers shall remain solely responsible for any and all liabilities
relating to or arising in connection with (i) the requirements of
Section 4980B of the Code to provide continuation of health care coverage
under any Seller Plan in respect of (A) employees who are not Transitioned
Employees, and their beneficiaries and dependents, and (B) Transitioned
Employees and their beneficiaries and dependents arising as a result of
qualifying events that occur on or before the Transitioned Employee's
Effective Time of Employment, and (ii) claims for Welfare Benefits incurred
by Transitioned Employees and their beneficiaries and dependents before the
Transitioned Employee's Effective Time of Employment. The foregoing
notwithstanding, Purchaser shall be responsible for any and all liabilities
relating to or arising in connection with (i) the requirements of
Section 4980B of the Code to provide continuation of health care coverage
in respect of Transitioned Employees and their beneficiaries and dependents
arising as a result of qualifying events after the Employee's Effective
Time of Employment, and (ii) claims for Welfare Benefits incurred by
Transitioned Employees and their beneficiaries and dependents after the
Transitioned Employee's Effective Time of Employment.
(b) For purposes of this Agreement, the following claims
and liabilities shall be deemed to be incurred as follows: (i) life,
accidental death and dismemberment and business travel accident insurance
benefits, upon the death, disability or accident giving rise to such
benefits; (ii) salary continuation or other short-term disability benefits,
or long-term disability, upon the event or commencement of the condition
resulting in the disability giving rise to such benefit; (iii) hospital-
provided health, dental, prescription drug or other benefits, which become
payable with respect to any hospital confinement, upon commencement of such
confinement; and (iv) health, dental and/or prescription drug benefits,
upon provision of such services, materials or supplies.
Section 6.8 Workers' Compensation. (a) From and after the
Closing Date: (i) Sellers shall remain solely responsible for any and all
liabilities relating to or arising in connection with any and all claims
for workers' compensation benefits (A) incurred by or in respect of any
employee who is not a Transitioned Employee on, prior to or after the
Closing Date, and (B) incurred by or in respect of Transitioned Employees
on or before the Closing Date and (ii) Purchaser shall be solely
responsible for any and all liabilities to or in respect of any
Transitioned Employee relating to or arising in connection with any and all
claims for worker's compensation benefits incurred after the Closing Date.
(b) For purposes of this Section 6.8, a claim for workers'
compensation benefits shall be deemed to be incurred when the first event
giving rise to the claim occurs.
Section 6.9 Employment Taxes. (a) Sellers and Purchaser
shall (i) treat Purchaser as a "successor employer" and each Seller as a
"Predecessor," within the meaning of Sections 3121(a)(1) and 3306(b)(1) of
the Code, with respect to Transitioned Employees who are employed by
Purchaser for purposes of Taxes imposed under the United States Federal
Unemployment Tax Act ("FUTA") or the United States Federal Insurance
Contributions Act ("FICA"), and (ii) cooperate with each other to avoid, to
the extent possible, the filing of more than one IRS Form W-2 with respect
to each such Transitioned Employee for the calendar year within which the
Closing Date occurs.
(b) At the reasonable request of Purchaser with respect to
any particular applicable Tax Law relating to employment, unemployment
insurance, social security, disability, workers' compensation, payroll,
health care or other similar Tax other than Taxes imposed under FICA and
FUTA, Sellers shall and Purchaser shall (i) treat Purchaser as a successor
employer and each Seller as a predecessor employer, within the meaning of
the relevant provisions of such Tax Law, with respect to Transitioned
Employees who are employed by Purchaser, and (ii) cooperate with each other
to avoid, to the extent possible, the filing of more than one individual
information reporting form pursuant to each such Tax Law with respect to
each such Transitioned Employee for the calendar year within which the
Closing Date occurs.
Section 6.10 Stock Options and Stock Plans. Sellers and
Purchaser agree that Purchaser shall not assume the obligations of the
Sellers with regard to options to purchase shares of capital stock of any
Seller issued or granted pursuant to either the 1994 Stock Option Plan or
the Omnibus Securities Plan (the "Company Plan Options").
Section 6.11 Collection of Past Due Accounts. Purchaser shall
have the exclusive authority to collect Past Due Accounts for a period of
120 days following the Closing Date (the "Collection Period") and shall
exercise reasonable, good faith efforts to collect such Past Due Accounts,
consistent with its customary practices. Purchaser shall promptly deliver
any funds collected pursuant to this Section 6.11 to the Company.
Subsequent to the Collection Period Sellers shall have the authority to
collect Past Due Accounts from each Person who (i) was no longer a customer
at the conclusion of the Collection Period and (ii) did not make any
payment toward his Past Due Account during the Collection Period.
Section 6.12 Continued Cooperation. If the Closing occurs at a
time when all Regulatory Approvals have not been obtained, the parties
shall (i) continue to abide by their obligations hereunder to obtain all
Regulatory Approvals and (ii) cooperate in continuing to operate the
Business, to the extent commercially practicable, in the ordinary course in
those states with respect to which Regulatory Approvals have not been
obtained, with the Purchaser receiving the economic benefits of such
operation.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions Precedent to Obligations of Sellers and
Purchaser. The respective obligations of each party to effect the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing Date of the following conditions:
(a) any waiting period applicable to the consummation of
the transactions contemplated by this Agreement under the HSR Act shall
have expired or been terminated, and no action shall have been instituted
by the Department of Justice or the Federal Trade Commission challenging or
seeking to enjoin the consummation of the transactions contemplated by this
Agreement, which action shall not have been withdrawn or terminated without
requiring Purchaser to dispose of or divest any of its assets or businesses
(including, without limitation, any material Asset or Business), or
discontinue or refrain from conducting any of its operations;
(b) no statute, rule, regulation, executive order, decree,
ruling, or preliminary or permanent injunction shall have been enacted,
entered, promulgated, or enforced by any federal or state court or
governmental authority that prohibits, restrains, enjoins, or restricts the
consummation of the transactions contemplated by this Agreement that has
not been withdrawn or terminated; and
(c) no claim, action, suit, arbitration, inquiry,
proceeding or investigation (each, an "Action") shall have been commenced
by or before any United States federal, state, or local or any foreign
government, governmental, regulatory, or administrative authority, agency,
or commission or any court, tribunal or judicial or arbitral body against
the Purchaser or any Seller, seeking to restrain or materially and
adversely alter the transactions contemplated by this Agreement that, in
the reasonable good faith determination of any party, is likely to render
it impossible or unlawful to consummate such transactions; provided,
however, that the provisions of this Section 7.1(c) shall not apply to any
party that has directly or indirectly solicited or encouraged any such
Action;
Section 7.2 Conditions Precedent to Obligation of Sellers.
The obligation of Sellers to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing
Date of the following additional conditions:
(a) the Purchaser shall have performed in all material
respects its obligations under this Agreement required to be performed by
it at or prior to the Closing Date; the representations and warranties of
the Purchaser contained in this Agreement that are qualified with respect
to materiality shall be true and correct in all respects, and such
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as if made at and as of such date; and
the Sellers shall have received a certificate of the chairman of the board,
the president, an executive vice president, a senior vice president, or the
chief financial officer of the Purchaser as to the satisfaction of this
condition; and
(b) the 363 Order and 365 Order shall have been entered by
the Bankruptcy Court in substantially the form contemplated by this
Agreement (unless Sellers shall have agreed to modify such form) and shall
not have been reversed, stayed, modified or amended in any manner adverse
to the Sellers.
Section 7.3 Conditions Precedent to Obligation of the
Purchaser. The obligation of the Purchaser to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction at or
prior to the Closing Date of the following additional conditions
(compliance with which or the occurrence of which may be waived in whole or
in part in a writing executed by Purchaser, unless such a waiver is
prohibited by law):
(a) each Seller shall have performed in all material
respects its obligations under this Agreement required to be performed by
it at or prior to the Closing Date; the representations and warranties of
the Sellers contained in this Agreement that are qualified with respect to
materiality (i.e., with respect to the occurrence or likely occurrence of a
Seller Material Adverse Effect or materiality) shall be true and correct in
all respects, such representations and warranties that are not so qualified
shall be true and correct in all material respects and all breaches of such
non-qualified representations and warranties, when combined with all
matters and conditions that, but for the qualification by reference to a
Seller Material Adverse Effect or materiality, would have constituted
breaches of the representations and warranties that are qualified by such
reference, shall not collectively constitute or give rise to a Seller
Material Adverse Effect, in each case as of the date of this Agreement and,
except with respect to representations and warranties which speak as to an
earlier date, at and as of the Closing Date as if made at and as of such
date; and the Purchaser shall have received a certificate of the chairman
of the board, the president, a vice president or the chief financial
officer of the Company as to the satisfaction of this condition;
(b) the 363 Order and 365 Order shall have been entered by
the Bankruptcy Court in substantially the form contemplated by this
Agreement and shall not have been reversed, stayed, modified or amended in
any manner adverse to the Purchaser, and shall not be subject to any
pending appeal or motion for rehearing or reconsideration, and shall remain
valid and binding and in full force and effect;
(c) Purchaser or any of the Purchaser's Subsidiaries shall
have received or otherwise hold all United States, Illinois, Michigan,
Ohio, New York and Massachusetts government approvals, clearances, consents
and authorizations necessary to permit Purchaser (or, if applicable,
Purchaser shall have received adequate assurances reasonably satisfactory
to it that all such approvals, clearances, consents and authorizations will
be given) to operate the Business in the United States, Illinois, Michigan,
Ohio, New York and Massachusetts, and no such Seller Permits shall be
revoked, or, to the extent applicable, shall fail to be transferred to
Purchaser without additional expense and subject to no additional
restrictions or burdens on the permittee other than those which in the
aggregate are immaterial; and
(d) (i) Subject to clause (iii) below, all consents,
waivers, approvals, certificates and other authorizations required to be
obtained from the FCC (the "FCC Approvals") or from any other governmental
authority asserting jurisdiction over the Company or one of its
subsidiaries (the "State Approvals") (collectively, the "Regulatory
Approvals"), including, without limitation, any State PUC, that are
required in order to consummate the transactions contemplated hereby shall
have been obtained by a Final Order (as hereinafter defined). Other than
those which in the aggregate are immaterial, all filings and notices
required to be made by the Sellers prior to the consummation of the
transaction contemplated hereby shall have been made. For purposes of this
Agreement, "Final Order" shall mean an action by the FCC or other
regulatory authority (including State PUCs) (x) that is not reversed,
stayed, enjoined, set aside, annulled or suspended within the deadline, if
any, provided by applicable statute or regulation, (y) with respect to
which no request for stay, motion or petition for reconsideration,
application or request for review, or notice of appeal or other judicial
petition for review that is filed within such period is pending and (z) as
to which the deadlines, if any, for filing any such request, motion,
petition, application, appeal or notice, and for the entry by the FCC or
other regulatory authority of orders staying, reconsidering or reviewing on
its own motion have expired.
(ii) Subject to clause (iii) below, Purchaser shall
have obtained all rights necessary to offer telecommunication services to
Sellers' Customer Base on a resale basis from each incumbent local exchange
carrier ("ILEC") so that it may conduct the Business as conducted as of the
date hereof either (x) through a local exchange resale tariff generally
available to all carriers, or (y) through an executed interconnection or
resale agreement (each, a "Service Agreement"), approved by all government
authorities asserting jurisdiction over any local exchange market.
(iii) Notwithstanding clauses (i) and (ii), in the
event that all Regulatory Approvals and Service Agreements have not been
obtained by the tenth (10th) Business Day before the date set forth in
8.2(b), but those Regulatory Approvals from the FCC and the State PUCs
governing the states of Massachusetts, New York, Ohio, Michigan and
Illinois (the "Critical States") and those Service Agreements have been
obtained which apply to the Critical States, then such failure to obtain
100% of the required Regulatory Approvals and Service Agreements shall not
be deemed a failure of this condition;
(e) Purchaser shall have received the legal opinion of
outside counsel to the Company, dated the Closing Date, addressed to
Purchaser, substantially in the form attached as Exhibit B hereto.
(f) All of the Assumed Contracts and Assumed Leases shall
(x) be in full force and effect, (y) be assignable to and assumable by
Purchaser without the consent of any other party thereto, or consent to
assignment to and assumption by Purchaser shall have been obtained with
respect thereto, and (z) have had breaches and defaults thereunder cured,
if necessary, in accordance with Section 5.3 hereof.
(g) Purchaser shall have received the audited financial
statements of USN (and the consolidating financial statements for the
Business and USN Wireless) for the fiscal year ended December 31, 1998
(the "1998 Audited Financial Statements") with no qualification that would
prevent the inclusion of such 1998 Audited Financial Statement in any SEC
filing of the Purchaser; provided, however, that the Purchaser shall pay
any fees payable in connection with the preparation of the 1998 Audited
Financial Statements.
(h) As of the Billing Date (as defined below), the revenue
derived from Services (determined in accordance with GAAP) of the Sellers
for the one-month period preceding the Billing Date shall have been at
least 60% of the revenue derived from Services (determined in accordance
with GAAP) of the Sellers for the month of January, 1999. For purposes
hereof, "Billing Date" shall mean (i) if the Closing Date shall occur
prior to the tenth calendar day of any month, then the tenth calendar day
of the month preceding the month that includes the Closing Date, or (ii)
if the Closing Date shall occur on or subsequent to the tenth calendar day
of any month, then the tenth calendar day of the month that includes the
Closing Date.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination by Mutual Consent. This Agreement may
be terminated at any time prior to the Closing Date by mutual written
agreement of Purchaser and the Sellers.
Section 8.2 Termination by Either Purchaser or the Seller.
This Agreement may be terminated at any time prior to the Closing Date by
either Purchaser or the Sellers if (a) a United States federal or state
court of competent jurisdiction or United States federal or state
governmental regulatory, or administrative agency or commission shall have
issued an order, decree, or ruling or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement and either (i) thirty (30) days
shall have elapsed from the issuance of such order, decree, or ruling or
other action and such order, decree, or ruling or other action has not been
removed or (ii) such order, decree, ruling, or other action shall have
become final and non-appealable, provided that the party seeking to
terminate this Agreement pursuant to this clause shall have used all
reasonable efforts to remove such injunction, order, or decree, (b) the
Closing Date shall not have occurred on or May 31, 1999 provided, however,
that neither party may terminate this Agreement pursuant to this
Section 8.2(b) on or before June 30, 1999 if the conditions to Purchaser's
obligations to consummate the transactions contemplated hereunder have not
been satisfied on account of the failure to receive the Regulatory
Approvals; provided, however, that the right to terminate this Agreement
pursuant to this Section 8.2(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the
cause of the failure of the Closing Date to have occurred on or prior to
such date, (c) the Board of Directors of the Company has withdrawn,
modified, or changed in a manner adverse to the Purchaser its approval or
recommendation of this Agreement in order to approve and permit the Sellers
to execute a definitive agreement relating to an Overbid or any other sale
or disposition of a material portion of the Business or the Assets or of an
equity interest in a Seller, or (d) the Bankruptcy Court shall have
approved the Sellers' execution of a definitive agreement relating to an
Overbid or any other sale or disposition of a material portion of the
Business or the Assets or of an equity interest in a Seller.
Section 8.3 Termination by Sellers. This Agreement may be
terminated at any time prior to the Closing Date by action of the Board of
Directors of the Company if there has been a material breach of any of the
representations, warranties, covenants or agreements set forth in this
Agreement on the part of the Purchaser, which breach is not curable or, if
curable, is not cured within thirty (30) days after written notice of such
breach is given by the Company to the Purchaser;
Section 8.4 Termination by the Purchaser. This Agreement may
be terminated at any time prior to the Closing Date by the Purchaser if
(a) there has been a breach by any Seller of any representation or warranty
contained in this Agreement that is qualified as to materiality or a
material breach of any representation and warranty that is not so
qualified, which breach is not curable, or if curable, is not cured within
thirty (30) days after notice of such breach is given by Purchaser to
Company; (b) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of any Seller, which
breach is not curable or, if curable, is not cured within thirty (30) days
after written notice of such breach is given by the Purchaser to Company;
(c) the Overbid Procedures Order shall not have been entered by the
Bankruptcy Court in substantially the form contemplated by this Agreement
within fifteen (15) days of the Petition Date; provided, however, that any
rights of Purchaser to terminate this Agreement pursuant to this
Section 8.4(c) shall no longer be available upon the entry, on Purchaser's
consent, of the Overbid Procedure Order; (d) the conditions to the
Purchaser's obligations to close under Section 7.3(b) shall not have been
satisfied or waived on or prior to April 23, 1999; or (e) the Bankruptcy
Court shall not have granted initial approval of the transactions
contemplated by the DIP Credit Agreement by February 24, 1999, or any of
the parties (other than Purchaser) to the DIP Credit Agreement shall have
failed to make its initial purchase of Notes thereunder within five days of
the date set forth in the DIP Credit Agreement.
Section 8.5 Effect of Termination and Abandonment. In the
event of termination of this Agreement pursuant to this Article VIII,
written notice thereof shall as promptly as practicable be given to the
other party to this Agreement and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action
by any of the parties hereto. If this Agreement is terminated as provided
herein (a) there shall be no liability or obligation on the part of the
Sellers, the Purchaser, or their respective officers, directors and
affiliates, and all obligations of the parties shall terminate, except for
(i) the obligations of the parties pursuant to Sections 5.9, 8.5, 8.6,
11.5, 11.6. and 11.10, (ii) that a party that is in material breach of its
representations, warranties, covenants, or agreements set forth in this
Agreement shall be liable for damages occasioned by such breach, including
without limitation any expenses, including the reasonable fees and expenses
of attorneys, accountants and other agents, incurred by the other party in
connection with this Agreement and the transactions contemplated hereby,
and (b) all filings, applications and other submissions made pursuant to
the transactions contemplated by this Agreement shall, to the extent
practicable, be withdrawn from the agency or person to which made.
Section 8.6 Expense Reimbursement; Termination Fee.
(a) Expense Reimbursement. In the event this Agreement is
terminated pursuant to Section 8.2(c) or (d), or 8.4(a) or (b), Sellers
shall reimburse Purchaser for its actual reasonable out of pocket expenses,
not to exceed $1,000,000, incurred in connection with this Agreement and
the transactions contemplated herein, including without limitation
attorneys', accountants' and other agents' fees and expenses incurred by
Purchaser for services in preparing and negotiating this Agreement,
performance of due diligence, participating in the Chapter 11 Case or
otherwise (the "Expense Reimbursement"). This obligation (x) shall survive
any termination of this Agreement, and shall constitute an administrative
expense of the Sellers under sections 503(b) and 507(a)(1) of the
Bankruptcy Code and (y) shall be secured by a second priority lien (junior
only to the liens under the DIP Credit Agreement) on the Assets of the
proceeds thereof. Purchaser shall have an administrative expense claim
(which shall be a super priority administrative expense claim senior to all
other administrative expense claims other than administrative expense
claims arising under the DIP Credit Agreement) in an amount equal to the
Expense Reimbursement. Payment of the Expense Reimbursement will be made
by Sellers within ten (10) days of submission by Purchaser of an itemized
statement reflecting such actual reasonable expenses unless earlier payment
is required pursuant to Section 8.6(b).
(b) Termination Fee.
(i) Sellers agree and acknowledge that Purchaser's
preparation, negotiation and execution of the Agreement have resulted
from substantial investment of management time and have required
significant commitment of financial and other resources by Purchaser,
and that the preparation, negotiation and execution have provided
value to the Sellers. Consequently, if a Termination Fee Event (as
defined in subsection (ii) below) occurs, Sellers shall pay $750,000
by wire transfer of immediately available funds to Purchaser as a
Termination Fee and shall also pay the Expense Reimbursement, in
accordance with clause (iii) below; provided that Sellers shall not be
obligated to pay the Termination Fee if (x) prior to the occurrence of
the Termination Fee Event, the Agreement has validly been terminated
pursuant solely to (1) Section 8.1 or 8.3 or (2) by the Purchaser
pursuant to Section 8.2(a) or (b) if at the time of such termination
there is no proposal for an Alternative Transaction pending or (y) an
Alternative Transaction is not consummated.
(ii) A "Termination Fee Event" is the occurrence of any
of the following:
(A) The termination of this Agreement pursuant to
Section 8.2(c) or (d) hereof;
(B) The execution by any Seller, or any trustee
in bankruptcy for any Seller, of an agreement providing for the
sale or disposition of all or any material portion of the
Business or of an equity interest in a Seller, or any business
combination of a Seller, involving any party other than Purchaser
or an affiliate thereof, within eighteen months of termination of
this transaction (an "Alternative Transaction"); or
(C) The confirmation of any plan of
reorganization in the Bankruptcy Court, or the approval of any
agreement or transaction by the Bankruptcy Court, that provides
for any Alternative Transaction within eighteen months of
termination of this transaction.
(iii) Sellers shall pay the Termination Fee and
Expense Reimbursement simultaneously with the closing of any
Alternative Transaction (unless with respect to the Expense
Reimbursement, earlier payment is required pursuant to Section 8.6
(a)). Sellers' obligation to pay the Termination Fee shall survive
termination of this Agreement and shall (x) constitute an
administrative expense (which shall be a superpriority administrative
expense claim senior to all other administrative expense claims other
than administrative expense claims arising under the DIP Credit
Agreement) of the Sellers under sections 503(b) and 507(a)(1) of the
Bankruptcy Code and (y) be secured by a perfected second priority lien
(junior only to the liens under the DIP Credit Agreement) on the
Assets and the proceeds thereof.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Obligation of the Seller to Indemnify. Subject to
the limitations on indemnification contained in this Article IX, from and
after the Closing Date Sellers agree to indemnify, defend and hold harmless
the Purchaser (and its respective shareholders, directors, officers, agents
and employees) (each, an "Indemnitee") from and against all losses,
liabilities, damages, costs or expenses (including, without limitation,
reasonable attorneys' fees and disbursements) (collectively "Losses") based
upon, arising out of or otherwise in respect of (i) any breach of a
representation or warranty contained in Article III, each of which
representation and warranty shall be considered without regard to any
materiality or Seller Material Adverse Effect qualification therein or
(ii) any Excluded Liabilities or Excluded Assets. Notwithstanding the
foregoing, the Sellers shall not be liable under clause (i) of this
Section 9.1 for any Losses arising in any discrete claim for indemnity
(i.e., a claim with respect to a particular item or set of closely related
items) if the amount of such Loss is less than $25,000.
Section 9.2 Notice and Opportunity to Defend.
(a) Promptly after receipt by any person or entity entitled
to indemnification under this Agreement (an "Indemnified Party") of notice
of any demand, claim or circumstances which, or with the lapse of time,
would give rise to a claim or the commencement (or threatened commencement)
of any action, proceeding or investigation (an "Asserted Liability") that
will result in a Loss, the Indemnified Party shall give written notice
thereof (the "Claims Notice") to the Company; provided, however, that the
failure to promptly provide the Claims Notice shall not relieve Sellers of
their obligations hereunder except to the extent they were prejudiced
thereby. The Claims Notice shall describe the Asserted Liability in
reasonable detail.
(b) Subject to the limitations set forth in this
Section 9.2, the Sellers may elect to compromise or defend, at their own
expense and by their own counsel, any Asserted Liability. If the Sellers
elect to compromise or defend such Asserted Liability, they shall within
30 days (or sooner, if the nature of the Asserted Liability so requires)
provide the Indemnified Party with the notice of such defense (the "Defense
Notice") and the Indemnified Party shall cooperate in the compromise of, or
defense against, such Asserted Liability; provided, however, that the
Indemnified Party shall have the right to approve the counsel of the
Sellers (the "Defense Counsel"), which approval shall not be unreasonably
withheld or delayed. If the Sellers choose to defend any claim, action or
proceeding, the Indemnified Party shall make available to the Sellers any
books, records or other documents within its control that are necessary or
appropriate for such defense.
(c) Without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed, the
Sellers will not enter into any settlement of any claim brought by a third
party or cease to defend against such claim.
(d) If an offer is made to settle a claim brought by a
third party and pursuant to or as a result of such offer no injunctive or
other equitable relief and no other obligations of any kind would be
imposed against the Indemnified Party, and the Sellers desire to accept and
agree to such offer, the Company will give written notice to the
Indemnified Party to that effect. If the Indemnified Party fails to
consent to such offer within 15 calendar days after its receipt of such
notice, the Indemnified Party may continue to contest or defend such claim
and, in such event, the maximum liability of the Sellers as to such claim
will not exceed the amount of such settlement offer.
(e) If the Company shall fail to give the Defense Notice,
Sellers shall be deemed to have elected not to conduct the defense of the
Asserted Liability, and in such event the Indemnified Party shall have the
right to conduct such defense in good faith and to compromise and settle
the claim. In each instance when this Article IX shall allow an
Indemnified Party the right to conduct its defense and to compromise and
settle a claim, it shall do so only with the prior consent of the Company,
such consent not to be unreasonably withheld or delayed, and the Sellers
will be liable for all reasonable costs, expenses, settlement amounts or
other Losses paid or incurred in connection therewith. In any event, the
Indemnified Party may participate, at its own expense, in the defense of
any Asserted Liability.
Section 9.3 Limitations Regarding Indemnification Obligations.
(a) Subject to Section 9.4 hereof, the Sellers shall
indemnify the Indemnitees for all Losses up to $6,000,000; provided, that,
the maximum aggregate liability of the Sellers shall not exceed $6,000,000.
(b) Notwithstanding the provisions of Section 9.1 hereof,
the Sellers shall not be required to make any indemnification payment for
Losses arising under Section 9.1 unless and until the aggregate amount of
all Losses arising under Section 9.1 exceeds $500,000 (the "Basket
Amount"), at which point the Sellers shall indemnify the Indemnitees for
all Losses (including those that are less than the Basket Amount) up to
$6,000,000.
(c) No claim for indemnification for a Loss arising under
Section 9.1 may be brought after expiration of the applicable period set
forth in Section 11.1. If written notice of a claim has been given prior
to the expiration of the applicable survival period set forth in
Section 11.1, then the relevant representations and warranties shall
survive solely as to such claim until the claim has been finally resolved.
Section 9.4 Indemnity Payments. In the event Sellers, or any
of them, agree to or are determined to have any obligation to indemnify any
Indemnitee pursuant to this Article IX, the amount of the Contingent
Payment shall automatically be decreased by the amount of the Loss relating
to such obligation, and as a result of such decrease, Sellers, or any such
Seller, as the case may be, shall be deemed to have satisfied such
obligation in full and shall have no further liability with respect
thereto, provided that if as a result of such decrease the amount of the
Contingent Payment would otherwise be zero or less than zero, then (i) the
amount of the Contingent Payment shall be reduced to zero and (ii) Sellers
or any such Seller, as the case may be, shall be deemed to have satisfied
such obligation in full and shall have no further liability with respect
thereto.
ARTICLE X
DELIVERIES AT CLOSING
Section 10.1 Sellers' Deliveries at Closing. In addition to
the other things required to be done hereby, at the Closing, the Company
shall deliver, or cause to be delivered, to Purchaser the following:
(a) a certificate dated the Closing Date and validly
executed on behalf of each Seller to the effect that the conditions set
forth in Section 7.3(a) have been satisfied;
(b) a legal opinion of outside counsel to the Company,
dated the Closing Date, addressed to Purchaser, in the form attached as
Exhibit B hereto;
(c) all documents, certificates and agreements necessary to
transfer to Purchaser good and marketable title to the Assets, free and
clear of any and all Encumbrances thereon, including:
(i) a duly executed Assignment and Assumption
Agreement, in customary form mutually agreeable to the parties;
(ii) assignments of all Assumed Contracts, Intellectual
Property and any other agreements and instruments constituting Assets,
dated the Closing Date, assigning to Purchaser all of Sellers' right,
title and interest therein and thereto, with any required consent
endorsed thereon; and
(iii) an assignment of lease, dated as of the
Closing Date, with respect to each Assumed Lease, in form reasonably
acceptable to Purchaser, together with any necessary transfer
declarations or other filings (and in recordable form if required by
Purchaser); and
(d) certified copies of all orders of the Bankruptcy Court
pertaining to the Contemplated Transactions, including the 363 Order and
the 365 Order, and evidence of the entry of all such orders on the docket
of the Chapter 11 case and of the absence of any pending appeal or motion
for rehearing or reconsideration.
Section 10.2 Purchaser's Deliveries at Closing. In addition to
the other things required to be done hereby, at the Closing, Purchaser
shall deliver, or cause to be delivered, to the Company the following:
(a) a certificate dated the Closing Date and validly
executed on behalf of Purchaser to the effect that the conditions set forth
in Section 7.2(a) have been satisfied;
(b) a copy of the resolutions of the Board of Directors of
Purchaser, or similar enabling document, authorizing the execution,
delivery and performance hereof by Purchaser, and a certificate of its
secretary or assistant secretary, dated as of the Closing Date, that such
resolutions were duly adopted and are in full force and effect;
(c) duly executed Warrants; and
(d) a duly executed Assignment and Assumption Agreement, in
customary form mutually agreeable to the parties.
Section 10.3 Required Documents. All documents to be delivered
by Sellers or to be entered into by Sellers and Purchaser necessary to
carry out the transactions contemplated by this Agreement or contemplated
by the terms of this Agreement shall be satisfactory in form and substance
to Purchaser and counsel to Purchaser and all documents to be delivered by
Purchaser necessary to carry out the transactions contemplated by this
Agreement or to be entered into by Sellers and Purchaser necessary to carry
out the transactions contemplated by this Agreement shall be satisfactory
in form and substance to the Company and counsel to the Company.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Survival of Representations, Warranties, and
Agreements. The representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive until
March 31, 2000.
Section 11.2 Notices. All notices, claims, demands, and other
communications hereunder shall be in writing and shall be deemed given upon
(i) confirmation of receipt of a facsimile transmission, (b) confirmed
delivery by a standard overnight carrier or when delivered by hand, or
(c) the expiration of five (5) Business Days after the day when mailed by
registered or certified mail (postage prepaid, return receipt requested),
addressed to the respective parties at the following addresses (or such
other address for a party as shall he specified by like notice):
(a) If to Purchaser, to:
CoreComm Limited
110 East 59th Street
New York, NY 10022
Telecopy: (212) 906-8489
Attention: Jeffrey G. Wyman, Esq.
with copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Telecopy: (212) 757-3990
Attention: Kenneth M. Schneider, Esq.
(b) If to Seller, to:
USN Communications, Inc.
10 South Riverside Plaza
Suite 2000
Chicago, IL 60606
Telephone: (312) 906-3620
Telecopy: (312) 474-0814
Attention: Mr. J. Thomas Elliott
and to:
USN Communications, Inc.
10 South Riverside Plaza
Suite 2000
Chicago, IL 60606
Telephone: (312) 906-3592
Telecopy: (312) 474-0814
Attention: Thomas A. Monson, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Suite 2100
Chicago, IL 60606
Telephone: (312) 407-0700
Telecopy: (312) 407-0411
Attention: Gary P. Cullen, Esq.
Section 11.3 Descriptive Headings. The headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 11.4 Entire Agreement; Assignment. This Agreement
(including the Exhibits, the Seller Disclosure Letter, and the other
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings
(other than those contained in the 1999 Letter Agreement, which are hereby
incorporated by reference herein) both written and oral, between the
parties, with respect to the subject matter hereof, including, without
limitation, any transaction between the parties hereto and (b) shall not be
assigned by operation of law or otherwise; provided, however, that (i) the
Purchaser may assign its rights and obligations hereunder to any
Subsidiary, but Purchaser shall not be relieved of its obligations
hereunder as a result of such assignment; and (ii) Sellers may assign a
security interest in its rights under this Agreement to any creditor or
creditors of Sellers.
Section 11.5 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware without
regard to the rules of conflict of laws of the State of Delaware or any
other jurisdiction.
Section 11.6 Expenses. Except as otherwise provided herein,
whether or not the actions contemplated by this Agreement are consummated,
all costs and expenses incurred in connection will this Agreement and the
transactions contemplated thereby shall be paid by the party incurring such
expenses.
Section 11.7 Amendment. This Agreement may not be amended
except by an instrument in writing signed on behalf of the parties hereto.
Section 11.8 Waiver. At any time prior to the Closing Date,
the parties hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto, and (c) waive compliance with any
of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
Section 11.9 Counterparts; Effectiveness. This Agreement may
be executed in two or more counterparts, each of which shall be deemed to
be an original but all of which shall constitute one and the same
agreement. This Agreement shall become effective when each party hereto
shall have received counterparts thereof signed by all the other parties
hereto.
Section 11.10 Severability; Validity; Parties in Interest. If
any provision of this Agreement or the application thereof to any person or
circumstance is held invalid or unenforceable, the remainder of this
Agreement, and the application of such provision to other persons or
circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable. Nothing in this
Agreement, express or implied, is intended to confer upon any person not a
party to this Agreement any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 11.11 Enforcement of Agreement. The parties hereto
agree that irreparable damage would occur in the event that any provision
of this Agreement was not performed in accordance with its specific terms
or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to all other remedies available at law or in equity.
ARTICLE XII
DEFINITIONS
Section 12.1 Defined Terms. As used herein, the terms below
shall have the following meanings.
"Accountant" has the meaning set forth in Section 2.3(c).
"Acquisition Subsidiary" has the meaning set forth in the
Preamble.
"Action" has the meaning set forth in Section 7.1(c).
"Agreement" has the meaning set forth in the Preamble.
"Alternative Transaction" has the meaning set forth in
Section 8.6(b)(ii)(B).
"Asserted Liability" has the meaning set forth in Section 9.2(a).
"Assets" has the meaning set forth in Section 1.1.
"Assignment and Assumption Agreement" means a Bill of Sale,
Assignment and Assumption Agreement in such form as may be agreed to by
Purchaser and the Company.
"Assumed Contracts" means (a) those contracts, bids, proposals,
purchase orders, agreements, indentures, notes, bonds, loans, instruments,
leases, mortgages, or other arrangements or agreements listed in
Section 1.1(h) of the Seller Disclosure Letter and (b) any other contract,
agreement, understanding, or arrangement (whether written or oral) entered
into by the Seller in the ordinary course of business after the date
hereof, but specifically excluding the Excluded Contracts.
"Assumed Leases" has the meaning set forth in Section 1.1(o).
"Assumed Liabilities" has the meaning set forth in Section 1.3.
"Bankruptcy Code" has the meaning set forth in the Recitals.
"Bankruptcy Court" has the meaning set forth in the Recitals.
"Basket Amount" has the meaning set forth in Section 9.3(b).
"Billing Date" has the meaning set forth in Section 7.3(i).
"Business" has the meaning set forth in the Recitals.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which banking institutions in New York, New York are
authorized or required by law or executive order to close.
"Certificates" has the meaning set forth in Section 1.1(i).
"Chapter 11 Case" has the meaning set forth in the Recitals.
"Claims Notice" has the meaning set forth in Section 9.2(a).
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications Licenses" has the meaning set forth in
Section 3.10(a).
"Company" has the meaning set forth in the Preamble.
"Company Board Determination" has the meaning set forth in
Section 3.20.
"Company Plan Options" has the meaning set forth in Section 6.10.
"Consideration" has the meaning set forth in Section 1.5.
"Contemplated Transactions" has the meaning set forth in the
Recitals.
"Contingent Payment" has the meaning set forth in Section 2.3(a).
"Contract" has the meaning set forth in Section 3.17.
"CoreComm" has the meaning set forth in the Preamble.
"Cure Amounts" has the meaning set forth in Section 1.4.
"Customer Base" means those Persons to which the Sellers provide
telecommunications service.
"Defense Counsel" has the meaning set forth in Section 9.2(b).
"Defense Notice" has the meaning set forth in Section 9.2(b).
"Designated Purchaser Representatives" shall have the meaning set
forth in Section 5.4.
"DIP Credit Agreement" means the credit agreement and related
documentation set forth as Exhibit C.
"Effective Time of Employment" has the meaning set forth in
Section 6.5(b).
"Employees" means, collectively, any employee or former employee
employed or formerly employed by any Seller in the operation of the
Business or the beneficiaries or dependents of any such employee or former
employee.
"Encumbrances" has the meaning set forth in Section 1.1.
"Environmental Laws" has the meaning set forth in Section 3.12.
"ERISA" has the meaning set forth in Section 3.13(a).
"ERISA Affiliate" has the meaning set forth in Section 3.13(a).
"Estimated Ohio Revenues Certificate" has the meaning set forth
in Section 1.6.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" has the meaning set forth in Section 1.2.
"Excluded Contracts" has the meaning set forth in Section 1.2.
"Excluded Leases" has the meaning set forth in Section 1.2.
"Excluded Liabilities" has the meaning set forth in Section 1.4.
"Excluded Subsidiaries" has the meaning set forth in Section 1.2.
"Expense Reimbursement" has the meaning set forth in Section 8.6.
"FCC Applications" has the meaning set forth in Section 5.8(a).
"FCC Approvals" has the meaning set forth in Section 7.3(e).
"FCC Licenses" has the meaning set forth in Section 3.10(a).
"FICA" has the meaning set forth in Section 6.9.
"$50 Warrant" has the meaning set forth in Section 1.5.
"Final Determination" has the meaning set forth in Section
2.3(c).
"Final Ohio Determination" has the meaning set forth in
Section 1.6(c)(iii).
"Final Order" has the meaning set forth in Section 7.3(e).
"FUTA" has the meaning set forth in Section 6.9.
"GAAP" has the meaning set forth in Section 3.5.
"Good Faith Operation of the Business" has the meaning set forth
in Section 2.3(d).
"Governmental Requirements" has the meaning set forth in
Section 3.3.
"HSR Act" has the meaning set forth in Section 3.3.
"Inactive Employee" means an employee who is not actively at work
due to approved leave of absence, short-term disability leave or military
leave.
"Indemnified Party" has the meaning set forth in Section 9.2(a).
"Indemnitee" has the meaning set forth in Section 9.1.
"Initial Cash Consideration" has the meaning set forth in
Section 1.5.
"Intellectual Property" means all United States (a) patents and
patent applications (including reissues, divisions, continuations-in-part
and extensions thereof), invention disclosures, inventions, and
improvements thereto, (b) trademarks, trade names, service marks, trade
dress and logos and registrations and applications for registration
thereof, (c) copyrights and registrations thereof and (d) licenses of any
of the foregoing.
"Legal Proceeding" means any judicial, administrative, regulatory
or arbitral proceeding, investigation or inquiry or administrative charge
or complaint pending at law or in equity before any governmental or
regulatory body or authority.
"Losses" has the meaning set forth in Section 9.1.
"Material Decision" has the meaning set forth in Section 5.4.
"Net Closing Cash Consideration" has the meaning set forth in
Section 1.5.
"1998 Audited Financial Statements" has the meaning set forth in
Section 7.3(h).
"1998 Letter Agreement" has the meaning set forth in Section
1.3(c).
"1999 Letter Agreement" has the meaning set forth in Section 5.2.
"Objection Notice" has the meaning set forth in Section 2.3(c).
"Offer Employee" has the meaning set forth in Section 6.5(b).
"Ohio Accountant" has the meaning set forth in Section 1.6(c).
"Ohio Purchaser Objection" has the meaning set forth in
Section 1.6(c).
"Ohio Revenue" has the meaning set forth in Section 1.6.
"Other State Consideration" has the meaning set forth in Section
1.5.
"Overbid Procedures Order" has the meaning set forth in
Section 5.5.
"Overbids" has the meaning set forth in Section 5.5(c).
"Permitted Encumbrances" has the meaning set forth in Section
1.1.
"Person" means any natural person, firm, partnership,
association, corporation, Seller, trust, business trust or other entity.
"Petition Date" means the date on which the Petitions are filed
with the Bankruptcy Court.
"Petitions" has the meaning set forth in the Recitals.
"Pre-Closing Cure Amounts" has the meaning set forth in
Section 1.4.
"Prior Service" has the meaning set forth in Section 6.6(b).
"Purchaser" has the meaning set forth in the Preamble.
"Purchaser Disclosure Letter" has the meaning set forth in
Article IV.
"Purchaser Material Adverse Effect" has the meaning set forth in
Section 4.3.
"Purchaser Objection" has the meaning set forth in Section 1.6.
"Regulatory Approvals" has the meaning set forth in
Section 7.3(e).
"Revenue Certificate" has the meaning set forth in Section
2.3(a).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Affiliate" has the meaning set forth in Section 3.13(a).
"Seller Disclosure Letter" has the meaning set forth in
Article III.
"Seller Material Adverse Effect" means any events, conditions, or
matters in respect of any Seller, the Assets, the Business, and the Assumed
Liabilities (collectively, the "Acquired Businesses"), other than the
filing of the Petitions, that in the aggregate taking into account all
events, conditions or matters that impact the Acquired Businesses (whether
or not in connection with the same or any similar representation, warranty
or matter) result in or would reasonably be expected to result in (i) a
material adverse effect on the properties, results of operations or
condition (financial or otherwise) of the Business taken as a whole or
(ii) a material adverse effect on the ability of the Sellers, taken as a
whole, to perform their obligations hereunder.
"Seller Permits" means all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations,
consents, and approvals necessary to conduct the Sellers' businesses as
presently conducted, except for those the absence of which, alone or in the
aggregate, do not have a Seller Material Adverse Effect.
"Seller Plan" has the meaning set forth in Section 3.13(a).
"Seller Plans" has the meaning set forth in Section 3.13(a).
"Seller Representatives" has the meaning set forth in
Section 6.2(b).
"Sellers" has the meaning set forth in the Preamble.
"Shares" has the meaning set forth in Section 1.5.
"Software" has the meaning set forth in Section 3.18(a)(v).
"State Approvals" has the meaning set forth in Section 7.3(e).
"State Licenses" has the meaning set forth in Section 3.10(a).
"State PUCs" has the meaning set forth in Section 3.10(a).
"State PUC Applications" has the meaning set forth in
Section 5.8(b).
"Subsidiary" shall mean any subsidiary of the Purchaser.
"Systems" has the meaning set forth in Section 3.18(g).
"Tax" means all federal, state, local, and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties
applicable thereto.
"Tax Returns" means all federal, state, local, and foreign tax
returns, declarations, statements, reports, schedules, forms, and
information returns and any amended Tax Returns relating to Taxes.
"Technology" has the meaning set forth in Section 3.18(a)(iv).
"Termination Fee" has the meaning set forth in Section 8.6.
"Termination Fee Event" has the meaning set forth in
Section 8.6(b)(ii).
"$30 Warrant" has the meaning set forth in Section 1.5.
"363 Hearing" has the meaning set forth in Section 5.5(c)(iii).
"363 Order" means an order of the Bankruptcy Court, in form and
substance reasonably satisfactory to the Purchaser and the Seller,
approving the sale of the Business, including all Assets and the assignment
of all Assumed Contracts and Assumed Leases except Excluded Contracts and
other Excluded Assets, by Seller to Purchaser under this Agreement pursuant
to sections 105 and 363 of the Bankruptcy Code, in each case free and clear
of any Encumbrances except as specifically set forth in this Agreement as
an Assumed Liability, and finding that Purchaser is a good faith purchaser
including for purposes of Section 363(m) of the Bankruptcy Code, in
substantially the form of Exhibit E.
"365 Order" means an order or orders of the Bankruptcy Court
(which may be included in the 363 Order), in form and substance reasonably
satisfactory to the Purchaser and the Seller, approving the assumption and
assignment of all Assumed Contracts and Assumed Leases by the Seller
pursuant to section 365 of the Bankruptcy Code. The 365 Order shall
provide that all defaults of Seller under the Assumed Contracts arising or
accruing prior to the date of the 365 Order (without giving effect to any
acceleration clauses or any default provisions in such contracts of a kind
specified in section 365(b)(2) of the Bankruptcy Code) have been cured or
will be promptly cured by Seller such that Purchaser shall have no
liability or obligation with respect to any default or obligation arising
or accruing prior to the date of the 365 Order, except as may otherwise be
specifically agreed as set forth in this Agreement; and that the Assumed
Contracts and Assumed Leases (other than Excluded Contracts) will be
transferred to, and remain in full force and effect for the benefit of the
Purchaser, notwithstanding any provision in such Assumed Contracts except
Excluded Contracts and other Excluded Assets or in applicable law
(including those described in sections 365(b)(2) and (f) of the Bankruptcy
Code) that prohibits, restricts, or limits in any way such assignment or
transfer.
"Top Customers" has the meaning set forth in Section 3.19.
"Total Ohio Consideration" has the meaning set forth in Section
1.6.
"Trade Receivables" has the meaning set forth in Section 1.1(b).
"Transfer Taxes" has the meaning set forth in Section 5.13.
"Transitioned Employee" has the meaning set forth in
Section 6.5(b).
"USN" has the meaning set forth in the Preamble.
"USN Audited Financial Statements" has the meaning set forth in
Section 3.5.
"USN 1997 10-K" has the meaning set forth in Section 3.5.
"USN SEC Documents" has the meaning set forth in Section 3.5.
"USN Unaudited Financial Statements" has the meaning set forth in
Section 3.5.
"USN Wireless" has the meaning set forth in the Recitals.
"Warrants" has the meaning set forth in Section 1.5.
"Year 2000 Compliant" has the meaning set forth in
Section 3.18(g).
IN WITNESS WHEREOF, the Sellers and the Purchaser have caused
this Agreement to be executed on their behalf by their officers thereunto
duly authorized, as of the date first above written.
CORECOMM LIMITED
By: /s/ George S. Blumenthal
________________________________
Name: George S. Blumenthal
Title:
USN COMMUNICATIONS, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Senior Vice President,
General Counsel and
Secretary
USN NETWORK CORPORATION.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
USN COMMUNICATIONS WEST, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
USN COMMUNICATIONS MIDWEST, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
USN COMMUNICATIONS NORTHEAST, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
USN COMMUNICATIONS ATLANTIC, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
USN SOLUTIONS, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
USN COMMUNICATIONS SOUTHWEST, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
USN COMMUNICATIONS MAINE, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
USN COMMUNICATIONS VIRGINIA, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
QUEST UNITED, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
USN COMMUNICATIONS LONG
DISTANCE, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
FONENET/OHIO, INC.
By: /s/ Thomas A. Monson
_______________________________
Name: Thomas A. Monson
Title: Vice President
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . 3
Section 1.1 Purchase and Sale of Assets . . . . . . . . . . . . . 3
Section 1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . 5
Section 1.3 Assumed Liabilities . . . . . . . . . . . . . . . . . 5
Section 1.4 Excluded Liabilities . . . . . . . . . . . . . . . . 6
Section 1.5 Consideration . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.1 Closing . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.2 Consideration . . . . . . . . . . . . . . . . . . . . 9
Section 2.4 Acquisition Subsidiaries . . . . . . . . . . . . . 13
Section 2.5 Allocation . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . 13
Section 3.1 Organization . . . . . . . . . . . . . . . . . . . 13
Section 3.2 Authority Relative to this Agreement . . . . . . . 14
Section 3.3 Consents and Approvals . . . . . . . . . . . . . . 14
Section 3.4 No Violations . . . . . . . . . . . . . . . . . . . 14
Section 3.5 SEC Reports and Financial Statements . . . . . . . 15
Section 3.6 Absence of Certain Changes . . . . . . . . . . . . 16
Section 3.7 Litigation . . . . . . . . . . . . . . . . . . . . 16
Section 3.8 No Default . . . . . . . . . . . . . . . . . . . . 16
Section 3.9 No Violation of Law . . . . . . . . . . . . . . . . 17
Section 3.10 FCC Matters . . . . . . . . . . . . . . . . . . . . 17
Section 3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.12 Environmental Matters . . . . . . . . . . . . . . . 19
Section 3.13 Employee Benefits; Labor Matters . . . . . . . . . 19
Section 3.14 Title to and Use of Property . . . . . . . . . . . 21
Section 3.15 Non-Competition Agreements . . . . . . . . . . . . 23
Section 3.16 Brokers . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.17 Assumed Contracts . . . . . . . . . . . . . . . . . 23
Section 3.18 Intellectual Property . . . . . . . . . . . . . . . 23
Section 3.19 Customers . . . . . . . . . . . . . . . . . . . . . 25
Section 3.20 Board Approval and Recommendation . . . . . . . . . 26
Section 3.21 Investment Intent; Restricted Securities . . . . . 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . 27
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . 27
Section 4.2 Authority Relative to this Agreement . . . . . . . 27
Section 4.3 No Violations . . . . . . . . . . . . . . . . . . . 27
Section 4.4 Consents and Approvals . . . . . . . . . . . . . . 28
Section 4.5 Brokers . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.6 Financing . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.1 Conduct of Business by the Sellers Pending
the Closing. . . . . . . . . . . . . . . . . . . . 28
Section 5.2 Access and Information . . . . . . . . . . . . . . 30
Section 5.3 Cure of Defaults . . . . . . . . . . . . . . . . . 30
Section 5.4 Cooperation . . . . . . . . . . . . . . . . . . . . 30
Section 5.5 Acquisition Proposal Procedures . . . . . . . . . . 31
Section 5.6 Filings; Other Action . . . . . . . . . . . . . . . 31
Section 5.7 Communications Licenses and Authorizations . . . . 32
Section 5.8 FCC Applications . . . . . . . . . . . . . . . . . 32
Section 5.9 Public Announcements . . . . . . . . . . . . . . . 33
Section 5.10 Bankruptcy Actions . . . . . . . . . . . . . . . . 33
Section 5.11 Tax Returns and Filings; Payment of Taxes . . . . . 34
Section 5.12 Sellers' Use of USN Name . . . . . . . . . . . . . 34
Section 5.13 Tax Matters . . . . . . . . . . . . . . . . . . . . 34
Section 5.15 Additional Matters . . . . . . . . . . . . . . . . 35
ARTICLE VI ADDITIONAL POST-CLOSING COVENANTS . . . . . . . . . . . . . 35
Section 6.1 Further Assurances . . . . . . . . . . . . . . . . 35
Section 6.2 Books and Records; Personnel . . . . . . . . . . . 35
Section 6.3 Third Party Rights . . . . . . . . . . . . . . . . 36
Section 6.4 Employee Withholding . . . . . . . . . . . . . . . 36
Section 6.5 Employment of Sellers' Employees . . . . . . . . . 36
Section 6.6 Employee Benefits Generally for Transitioned
Employees . . . . . . . . . . . . . . . . . . . . 37
Section 6.7 Certain Benefits . . . . . . . . . . . . . . . . . 38
Section 6.8 Workers' Compensation . . . . . . . . . . . . . . . 39
Section 6.9 Employment Taxes . . . . . . . . . . . . . . . . . 39
Section 6.10 Stock Options and Stock Plans . . . . . . . . . . . 39
Section 6.11 Collection of Past Due Accounts . . . . . . . . . . 40
ARTICLE VII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . 40
Section 7.1 Conditions Precedent to Obligations of Sellers
and Purchaser . . . . . . . . . . . . . . . . . . 40
Section 7.2 Conditions Precedent to Obligation of Seller . . . 41
Section 7.3 Conditions Precedent to Obligation of the Purchaser 41
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . 44
Section 8.1 Termination by Mutual Consent . . . . . . . . . . . 44
Section 8.2 Termination by Either Purchaser or the Seller . . . 44
Section 8.3 Termination by Sellers . . . . . . . . . . . . . . 44
Section 8.4 Termination by the Purchaser . . . . . . . . . . . 45
Section 8.5 Effect of Termination and Abandonment . . . . . . . 45
Section 8.6 Expense Reimbursement; Termination Fee . . . . . . 46
ARTICLE IX INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.1 Obligation of the Seller to Indemnify . . . . . . . 47
Section 9.2 Notice and Opportunity to Defend . . . . . . . . . 48
Section 9.3 Limitations Regarding Indemnification Obligations . 49
Section 9.4 Indemnity Payments . . . . . . . . . . . . . . . . 49
ARTICLE X DELIVERIES AT CLOSING . . . . . . . . . . . . . . . . . . . 50
Section 10.1 Sellers' Deliveries at Closing . . . . . . . . . . 50
Section 10.2 Purchaser's Deliveries at Closing . . . . . . . . . 50
Section 10.3 Required Documents . . . . . . . . . . . . . . . . 51
ARTICLE XI GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . 51
Section 11.1 Survival of Representations, Warranties,
and Agreements . . . . . . . . . . . . . . . . . 51
Section 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.3 Descriptive Headings . . . . . . . . . . . . . . . 52
Section 11.4 Entire Agreement; Assignment . . . . . . . . . . . 52
Section 11.5 Governing Law . . . . . . . . . . . . . . . . . . . 53
Section 11.6 Expenses . . . . . . . . . . . . . . . . . . . . . 53
Section 11.7 Amendment . . . . . . . . . . . . . . . . . . . . . 53
Section 11.8 Waiver . . . . . . . . . . . . . . . . . . . . . . 53
Section 11.9 Counterparts; Effectiveness . . . . . . . . . . . . 53
Section 11.10 Severability; Validity; Parties in Interest . . . . 53
Section 11.11 Enforcement of Agreement . . . . . . . . . . . . . 54
ARTICLE XII DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.1 Defined Terms . . . . . . . . . . . . . . . . . . . 54
EXHIBIT 10.2
[EXECUTION COPY]
USN COMMUNICATIONS, INC.
$22,830,070
14% CLASS A SENIOR SECURED NOTES DUE JUNE 30, 1999
14% CLASS B SENIOR SECURED NOTES DUE JUNE 30, 1999
14% SENIOR SECURED DELAYED CLOSING NOTES DUE JUNE 30, 1999
-------------------------------
NOTE PURCHASE AGREEMENT
-------------------------------
Dated as of February 23, 1999
TABLE OF CONTENTS
PAGE
1. AUTHORIZATION OF NOTES..............................................1
2. SALE AND PURCHASE OF NOTES..........................................2
3. CLOSINGS............................................................2
4. CONDITIONS TO CLOSINGS..............................................3
A. FIRST CLOSING..............................................3
4.1 Representations and Warranties.............................3
4.2 No Default.................................................3
4.3 Documents Required.........................................3
4.4 Opinion of Counsel.........................................5
4.5 Payment of Special Counsel Fees............................5
4.6 CoreComm Asset Purchase Agreement..........................5
4.7 Interim DIP Order..........................................5
4.8 Funding Order..............................................5
B. SECOND CLOSING.............................................5
4.1 Representations And Warranties.............................5
4.2 No Default.................................................6
4.3 Documents Required.........................................6
4.4 Final Dip Order............................................6
4.5 Funding....................................................6
C. DELAYED CLOSINGS...........................................6
4.1 Documents Required.........................................6
4.2 Assumption of Cured Contracts..............................6
4.3 Final Dip Order............................................6
4.4 Corecomm Asset Purchase Agreement .........................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................6
5.1 Organization; Power and Authority..........................7
5.2 Authorization, Enforceability, Etc.........................7
5.3 Organization and Ownership of Shares of
Subsidiaries; Affiliates.................................7
5.4 Security Interests, Priority, Etc..........................8
5.5 Private Offering by the Company............................8
5.6 Use of Proceeds; Margin Regulations........................9
5.7 Accounts...................................................9
6. REPRESENTATIONS OF THE PURCHASER....................................9
6.1 Purchase for Investment....................................9
6.2 Accredited Investor.......................................10
6.3 Source of Funds...........................................10
7. PAYMENTS AND PREPAYMENTS...........................................10
7.1 Required Payments.........................................11
7.2 Optional Prepayments......................................11
7.3 Allocation of Partial Prepayments.........................12
7.4 Maturity; Surrender, Etc..................................12
7.5 No Discharge; Survival of Claims..........................12
8. AFFIRMATIVE COVENANTS..............................................12
8.1 Financial and Business Information........................12
8.2 Compliance with Law.......................................13
8.3 Maintenance of Properties.................................13
8.4 Preservation of Corporate Existence, Etc..................14
8.5 Use of Proceeds...........................................14
8.6 Capital Stock.............................................14
8.7 Full Cooperation..........................................14
8.8 Obligations with respect to Stock and Assets
of Subsidiaries.........................................14
8.9 Performance of Material Contracts.........................15
8.10 Accounts..................................................15
9. NEGATIVE COVENANTS.................................................15
9.1 Limitations on Transactions with Affiliates...............15
9.2 Limitations on Liens......................................16
9.3 Limitations on Indebtedness...............................16
9.4 Limitations on Lease Obligations..........................17
9.5 Limitations on Mergers, Consolidations, Sales
of Assets, Etc..........................................17
9.6 Limitations on Dividends and Other Payment
Restrictions Affecting Subsidiaries.....................17
9.7 Limitations on Prepayments of Indebtedness, Etc...........17
9.8 Limitations on Negative Pledges...........................18
9.9 Limitations on Changes in Fiscal Year.....................18
9.10 Limitations on Speculative Real Estate Investments........19
9.11 Limitation on Investments.................................19
9.12 Limitation on Asset Purchases.............................19
9.13 Limitation on Capital Stock...............................19
9.14 Limitation on Termination of Licenses.....................19
9.15 Limitation on Line of Business............................19
9.16 Limitation on Termination of Employer Plans...............19
9.17 Limitation on Investment Company Act......................20
9.18 Limitations on Amendments.................................20
9.19 Limitation on Press Releases..............................20
9.20 Limitation on Creation of Subsidiaries....................20
9.21 Limitation on Sale and Leaseback Transactions.............20
9.22 Chapter 11 Claims.........................................20
9.23 Conflicting Agreements, Orders or Actions.................21
10. [INTENTIONALLY OMITTED.]...........................................21
11. EVENTS OF DEFAULT..................................................21
11.1 Events of Default.........................................21
11.2 Acceleration..............................................23
11.3 Other Remedies............................................24
11.4 Rescission................................................24
11.5 Restoration of Rights and Remedies........................24
11.6 No Waivers or Election of Remedies, Expenses, Etc.........24
12. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES......................25
12.1 Registration of Notes.....................................25
12.2 Transfer and Exchange of Notes............................25
12.3 Replacement of Notes......................................25
13. PAYMENTS ON NOTES..................................................26
14. EXPENSES, ETC......................................................26
14.1 Transaction Expenses......................................26
14.2 Indemnity.................................................27
14.3 Survival..................................................28
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.......28
16. AMENDMENT AND WAIVER...............................................29
16.1 Requirements..............................................29
16.2 Solicitation of Holders of Notes..........................29
16.3 Binding Effect, Etc.......................................30
16.4 Notes Held by Company, Etc................................30
17. NOTICES............................................................30
18. REPRODUCTION OF DOCUMENTS..........................................31
19. CONFIDENTIAL INFORMATION...........................................31
20. SUBSTITUTION OF PURCHASER..........................................32
21. MISCELLANEOUS......................................................32
21.1 Successors and Assigns....................................32
21.2 Payments Due on Non-Business Days.........................32
21.3 Satisfaction Requirement..................................33
21.4 Severability..............................................33
21.5 Construction..............................................33
21.6 Computation of Time Periods...............................33
21.7 Counterparts..............................................33
21.8 Governing Law; Submission to Jurisdiction, Etc............33
21.9 Bankruptcy Waivers........................................34
21.10 Permitted Dispositions, etc...............................35
SCHEDULES
Schedule I - Defined Terms
Schedule 4.6 - Consents and Approvals
Schedule 4.8 - Changes in Corporate Structure
Schedule 5.3 - Subsidiaries of the Company
Schedule 5.7 - Accounts
Schedule 9.1 - Transactions with Affiliates
Schedule 9.2(ii) - Existing Liens
Schedule 9.3 - Existing Indebtedness
Schedule 9.4 - Obligations as Lessee
Schedule 9.11 - Existing Investments
Schedule 9.14 - Termination of Licenses
EXHIBITS
Exhibit A-1 - Form of Class A Note
Exhibit A-2 - Form of Class B Note
Exhibit A-3 - Form of Delayed Closing Note
Exhibit B - Form of Security Agreement
Exhibit C - Interim DIP Order
Exhibit D - Subsidiary Guaranty
Exhibit E - Collateral Agency Agreement
Exhibit F - Paying Agency Agreement
Exhibit G - February 18, 1999 Cash Flow Presentations
ANNEXES
Annex I - Information as to Purchasers
USN COMMUNICATIONS, INC.
10 SOUTH RIVERSIDE PLAZA, SUITE 2000
CHICAGO, ILLINOIS 60606
14% Class A Senior Secured Notes due June 30, 1999
14% Class B Senior Secured Notes due June 30, 1999
14% Senior Secured Delayed Closing Notes due June 30, 1999
As of February 23, 1999
MERRILL LYNCH GLOBAL ALLOCATION FUND, INC.
CORECOMM LIMITED
Ladies and Gentlemen:
USN Communications, Inc., a Delaware corporation, (the
"COMPANY"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $6,000,000
aggregate principal amount of its 14% Class A Senior Secured Notes due June
30, 1999 (together with the Class A Notes delivered pursuant to Section 2
of this Agreement and any Notes issued in substitution or exchange therefor
pursuant to Section 12 of this Agreement, the "CLASS A NOTES"), $16,330,070
aggregate principal amount of its 14% Class B Senior Secured Notes due
June30, 1999 (together with the Class B Notes delivered pursuant to Section
2 of this Agreement and any Class B Notes issued in substitution or
exchange therefor pursuant to Section 12 of this Agreement, the "CLASS B
Notes"), and $500,000 aggregate principal amount of its 14% Senior Secured
Delayed Closing Notes due June 30, 1999 (together with the Delayed Closing
Notes delivered pursuant to Section 2 of this Agreement and any Delayed
Closing Notes issued in substitution or exchange therefor pursuant to
Section 12 of this Agreement, the "DELAYED CLOSING NOTES"; the Class A
Notes, the Class B Notes and the Delayed Closing Notes being, collectively,
the "NOTES"). Each of the Class A Notes shall be in substantially the form
of Exhibit A-1 attached hereto, each of the Class B Notes shall be in
substantially the form of Exhibit A-2 attached hereto and each of the
Delayed Closing Notes shall be in substantially in the form of Exhibit A-3
attached hereto, with such amendments, supplements and other modifications
thereto, if any, as shall be approved from time to time by you and the
Company. Capitalized terms used in this Agreement shall have the meanings
specified in Schedule I attached hereto; and references to a "Schedule," an
"Exhibit" or an "Annex" are, unless otherwise specified herein, to a
Schedule, an Exhibit or an Annex attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
The Company will issue and sell to you and, subject to the
terms and conditions of this Agreement, you will purchase from the Company,
at the First Closing, the Second Closing and each Delayed Closing, in each
case as provided for in Section 3, Notes in the aggregate principal amount
set forth below your name on Annex I hereto.
3. CLOSINGS.
3.1 The sale and purchase of the Notes (THE "FIRST CLOSING
NOTES") to be purchased by you shall occur at the offices of McDermott,
Will & Emery, 50 Rockefeller Plaza, New York, New York 10020, at or about
11:30 A.M. (New York time), at a closing (the "FIRST CLOSING") on or prior
to February 24, 1999 or such other date as may be agreed upon between the
Company and you (the "FIRST CLOSING DATE"). At the First Closing, the
Company will deliver to you the First Closing Notes to be purchased by you
in the form of a single Note (or such greater number of Notes in
denominations of at least $500,000 or integral multiples of $100,000 in
excess thereof as you may request) dated the First Closing Date and
registered in your name (or in the name of your nominee), against delivery
by you to the Company or its order in the amount of the aggregate purchase
price therefor by wire transfer of immediately available funds as provided
in the Paying Agency Agreement; provided, however, that with respect to the
purchase of the Class B Notes the same shall be purchased by the Purchaser
thereof by converting the aggregate amount of principal, interest and fees
that are outstanding on the First Closing Date under the Existing Note
Purchase Agreement into principal outstanding under the Class B Notes. If
at the First Closing the Company shall fail to tender the First Closing
Notes to you as provided above in this Section 3.1 or any of the conditions
specified in Section 4.A shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without hereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
3.2 The sale and purchase of the Notes (the "SECOND CLOSING
NOTES") to be purchased by you shall occur at the offices of McDermott,
Will & Emery, 50 Rockefeller Plaza, New York, New York 10020, at or about
11:30 A.M. (New York time), at a closing (the "SECOND CLOSING") after the
First Closing Date and on or prior to March 15, 1999 or such other date as
may be agreed upon between the Company and you (the "SECOND CLOSING DATE").
At the Second Closing, the Company will deliver to you the Second Closing
Notes to be purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $500,000 or integral multiples
of $100,000 in excess thereof as you may request) dated the Second Closing
Date and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order in the amount of the aggregate
purchase price therefor by wire transfer of immediately available funds as
provided in the Paying Agency Agreement. If at the Second Closing the
Company shall fail to tender the Second Closing Notes to you as provided
above in this Section 3.2 or any of the conditions specified in Section 4B
as it relates to the Second Closing shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement as it relates to the Second Closing Notes,
without hereby waiving any rights you may have by reason of such failure or
such nonfulfillment.
3.3 The sale and purchase of the Delayed Closing Notes to be
purchased by you from time to time (each a "DELAYED CLOSING") from and
after the Second Closing Date and on or prior to May 31, 1999 (each a
"DELAYED CLOSING DATE") shall be subject to the delivery by the Company to
you of the Delayed Closing Notes to be purchased by you in the form of a
single Note dated the relevant Delayed Closing Date and registered in your
name (or in the name of your nominee), against delivery by you to the
Company or its order in the amount of the aggregate purchase price thereof
by wire transfer of immediately available funds as provided in the Paying
Agency Agreement.
4. CONDITIONS TO CLOSINGS.
A. FIRST CLOSING.
Your obligation to purchase and pay for the First Closing Notes
to be sold to you at the First Closing is subject to the fulfillment to
your satisfaction, prior to or at the First Closing Date, of the following
conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in
this Agreement and in each of the other Note Documents shall be complete
and correct in all material respects when made and at the time of the First
Closing, before and after giving effect to the issue and sale of the First
Closing Notes and to the application of the proceeds therefrom as
contemplated by Section 5.6.
4.2 NO DEFAULT.
No Default or Event of Default shall have occurred and be
continuing.
4.3 DOCUMENTS REQUIRED.
At or prior to the First Closing, you shall have received the
following documents, each dated as of the First Closing Date (except as
otherwise specified below) and in the form of the respective Exhibit
attached hereto, if any, or otherwise in form and substance satisfactory to
you:
(a) Security Agreement. A security agreement, in substantially
the form of Exhibit B attached hereto (as amended, supplemented or
otherwise modified hereafter from time to time in accordance with the
terms hereof and thereof, the "SECURITY AGREEMENT"), duly executed by
the Company and each of its Subsidiaries (other than Connecticut
Telephone) together with:
(i) certificates representing the Pledged Shares referred
to therein accompanied by undated stock powers executed in
blank, and
(ii) Uniform Commercial Code financing statements, duly
executed by the Company and each of its Subsidiaries under the
Uniform Commercial Code of the State of Illinois, and each
other jurisdiction required to cover the Collateral described
in the Security Agreement (it being agreed that the Company and
each of its Subsidiaries will file such financing statements as
soon as practicable after the date hereof).
(b) Note. A First Closing Note or First Closing Notes, in
substantially the form of Exhibit A-1 and/or A-2 attached hereto,
duly executed by the Company.
(c) Subsidiary Guaranty. A subsidiary guaranty, in
substantially the form of Exhibit D attached hereto (as amended,
supplemented or otherwise modified hereafter from time to time in
accordance with the terms hereof and thereof, the "SUBSIDIARY
GUARANTY") duly executed by each Subsidiary of the Company.
(d) Secretary's Certificate. A certificate from the secretary
or an assistant secretary (or a Person performing similar functions)
of the Company and each of its Subsidiaries certifying:
(i) copies of the resolutions of the board of directors (or
Persons performing similar functions) of the Company and each
of its Subsidiaries approving each of the other Note Documents
to which it is or is to be a party, and of all documents
evidencing other necessary corporate or other necessary action
and governmental approvals, if any, with respect thereto,
(ii) the names and true signatures of the officers of the
Company and each of its Subsidiaries authorized to sign each of
the Note Documents to which it is or is to be a party and the
other agreements, instruments and other documents to be
delivered hereunder and thereunder, and
(iii) true and correct copies of its by-laws and
certificate of incorporation.
(e) Officer's Certificate. An Officer's Certificate certifying
that the conditions specified in Sections 4.1 and 4.2 have been
fulfilled.
(f) Collateral Agency Agreement. A collateral agency agreement,
in substantially the form of Exhibit E attached hereto (as amended,
supplemented or otherwise modified hereafter from time to time in
accordance with the terms hereof and thereof, the "COLLATERAL AGENCY
AGREEMENT"), duly executed by the Collateral Agent and each original
Purchaser.
(g) Paying Agency Agreement. A paying agency agreement, in
substantially the form of Exhibit F attached hereto (as amended,
supplemented or otherwise modified hereafter from time to time in
accordance with the terms hereof and thereof, the "PAYING AGENCY
AGREEMENT"), duly executed by the Company, the Collateral Agent and
each original Purchaser.
4.4 OPINION OF COUNSEL.
You shall have received a favorable opinion, dated the First
Closing Date, from Skadden, Arps, Slate, Meagher & Flom (New York), counsel
for the Company, substantially in the form provided in connection with the
Existing Note Purchase Agreement.
4.5 PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 14.1, there shall be
paid from the proceeds of the First Closing Notes (a) the reasonable fees,
charges and disbursements of McDermott, Will & Emery in connection with the
Transaction, and (b) the reasonable fees, charges and disbursements of
Paul, Weiss, Rifkind, Wharton & Garrison in connection with the Transaction
in an amount not to exceed $12,000.
4.6 CORECOMM ASSET PURCHASE AGREEMENT.
You shall have received true and correct copies of the CoreComm
Asset Purchase Agreement that has been duly executed and delivered by the
parties thereto, and such agreement shall be in form and substance
satisfactory to you. None of the parties to the CoreComm Asset Purchase
Agreement has, or may be reasonably expected to, disclaim or not perform
any of its obligations thereunder, nor has any other Person contested in
any manner the terms of the CoreComm Asset Purchase Agreement or the
transactions contemplated thereby.
4.7 INTERIM DIP ORDER.
On the First Closing Date the Interim DIP Order (a) shall have
been entered upon an application of the Company satisfactory in form and
substance to you, (b) shall be in full force and effect and (c) shall not
have been vacated, stayed, reviewed, rescinded, modified or amended in any
respect.
4.8 FUNDING.
Each Purchaser of First Closing Notes shall have
contemporaneously purchased and duly funded the same.
B. SECOND CLOSING.
Your obligation to purchase and pay for the Second Closing
Notes to be sold to you at the Second Closing is subject to the fulfillment
to your satisfaction, on or prior to the Second Closing Date, of the
following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in
this Agreement and in each of the other Note Documents shall be complete
and correct in all material respects when made and at the time of the
Second Closing, before and after giving effect to the issue and sale of the
Second Closing Notes and to the application of the proceeds therefrom as
contemplated by Section 5.6.
4.2 NO DEFAULT.
No Default or Event of Default shall have occurred and be
continuing.
4.3 DOCUMENTS REQUIRED.
You shall have received a Second Closing Note or Second Closing
Notes, in substantially the form of Exhibit A-1 and/or A-2 attached hereto,
duly executed by the Company.
4.4 FINAL DIP ORDER.
On the Second Closing Date the Final DIP Order (a) shall have
been entered upon an application of the Company satisfactory in form and
substance to you, (b) shall be in full force and effect and (c) shall not
have been vacated, stayed, reversed, rescinded, modified or amended in any
respect.
4.5 FUNDING.
Each Purchaser of Second Closing Notes shall have
contemporaneously purchased its and duly funded the same.
C. DELAYED CLOSINGS.
Your obligation to purchase and pay for the Delayed Closing
Notes to be sold to you at each Delayed Closing is subject to the
fulfillment to your satisfaction, on to the relevant Delayed Closing Date,
of the following conditions:
4.1 DOCUMENTS REQUIRED.
You shall have received a Delayed Closing Note in substantially
the form of Exhibit A-3 attached hereto, duly executed by the Company.
4.2 ASSUMPTION OF CURED CONTRACTS.
The relevant Cured Contract has been assumed pursuant to an
order of the Bankruptcy Court (a) that shall be in full force and effect,
(b) that shall not have been vacated, stayed, reversed, rescinded, modified
or amended in any respect, and (c) for which the time to appeal or seek
rehearing has expired and for which no appeal or motion for rehearing has
been filed.
4.3 FINAL DIP ORDER.
The Final DIP Order (a) shall be in full force and effect and
(b) shall not have been vacated, stayed, reversed, rescinded, modified or
amended in any respect.
4.4 CORECOMM ASSET PURCHASE AGREEMENT.
The CoreComm Asset Purchase Agreement shall not have been
terminated in accordance with Article VIII thereof
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1 ORGANIZATION; POWER AND AUTHORITY.
The Company and each of its Subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, and are duly qualified as a
foreign corporation and are in good standing in each other jurisdiction in
which the ownership, lease or operation of their respective property and
assets or the conduct of their respective businesses requires such
qualification, other than in any such jurisdiction in which the failure to
be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Subject to the terms of the Interim DIP Order and, after the entry thereof,
the Final DIP Order, the Company and each of its Subsidiaries have all
corporate and other necessary power and authority, and the legal right, to
own or to hold under lease the properties they purport to own or hold under
lease and to transact the business they transact and propose to transact.
Subject to the terms of the Interim DIP Order and, after the entry thereof,
the Final DIP Order, the Company and each of its Subsidiaries has all
corporate and other necessary power and authority, and the legal right, to
execute and deliver each of the Note Documents to which it is or is to be a
party, and to perform its obligations thereunder and to consummate the
Transaction. All of the outstanding capital stock of the Company and each
of its Subsidiaries has been validly issued, is fully paid and
non-assessable.
5.2 AUTHORIZATION, ENFORCEABILITY, ETC.
This Agreement and each of the other Note Documents have been
duly authorized by all necessary corporate action (including, without
limitation, all necessary shareholder action) on the part of the Company.
This Agreement has been, and each of the other Note Documents, when
delivered hereunder, will have been duly executed and delivered by the
Company. This Agreement constitutes, and each of the other Note Documents,
when delivered hereunder will constitute, the legal, valid and binding
obligation of the Company, enforceable against such party in accordance
with its terms, except as such enforceability may be limited by (a) the
effect of applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally
and (b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.3 attached hereto sets forth (i) all of the
Subsidiaries of the Company, showing, as to each such Subsidiary, the
correct name thereof, the jurisdiction of its incorporation and the
percentage of shares of each class of its capital stock or similar
equity interests or membership interests outstanding, that are owned
by the Company and/or one or more of its Subsidiaries.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary referred to in Schedule 5.3
attached hereto as being owned by the Company and/or one or more of
its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company and/or one or more of its
Subsidiaries free and clear of all Liens, except for the Liens
created under the Collateral Documents and Liens disclosed on
Schedule 9.2(ii).
(c) Neither the Company nor any Subsidiary is a party to or
otherwise subject to any legal restriction or any agreement (other
than the Collateral Documents and customary limitations imposed by
corporate law statutes) restricting the ability of such Subsidiary to
pay dividends out of profits or make any other similar distributions
of profits to the Company or any of its Subsidiaries that owns shares
of capital stock of or similar equity interests in such Subsidiary.
5.4 SECURITY INTERESTS, PRIORITY, ETC.
(a) The Collateral Documents will create a valid and perfected
first priority lien on and security interest in the Collateral (of
the type subject to Articles 8 or 9 of the Uniform Commercial Code)
in your favor, securing the payment of all of the Secured
Obligations, and all of the shares of capital stock of each of the
Subsidiaries of the Company that are purported to comprise part of
the Collateral have been delivered to you, together with undated
stock powers executed in blank, and, upon the filing of the financing
statements, all filings and other actions necessary or desirable to
perfect and protect such lien and security interest will have been
duly made or taken and will be in full force and effect.
(b) Pursuant to Section 364(c)(1) of the Bankruptcy Code, the
Secured Obligations shall at all times constitute a Superpriority
Claim in the Chapter 11 case and in any future Chapter 7 case.
(c) Pursuant to Sections 364 (c)(2), (d)(1) and (d)(2) of the
Bankruptcy Code, the Secured Obligations shall at all times be
secured by a valid and perfected Lien (as provided in the Interim DIP
Order and, after the entry thereof, the Final DIP Order) and security
interest upon all the property, both real and personal, whether now
owned or hereafter acquired, of the Company and each of its
Subsidiaries.
5.5 PRIVATE OFFERING BY THE COMPANY.
(a) Neither the Company nor any Person acting on its behalf has
directly or indirectly offered the Notes or any similar securities
for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any
Person other than you. Neither the Company nor any Person acting on
its behalf has taken, or will take, any action that would subject the
issuance and sale of the Notes to the registration requirements of
Section 5 of the Securities Act.
(b) Neither the Company nor any Person acting on its behalf has
directly or indirectly offered or sold the Notes by any form of
general solicitation or general advertising (including, without
limitation, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or any
broadcast over television or radio or any seminar or meeting whose
attendees have been invited by any form of general solicitation or
general advertising).
5.6 USE OF PROCEEDS; MARGIN REGULATIONS.
(a) The proceeds from the sale of the First Closing Notes and
the Second Closing Notes shall be used, first, to pay the fees,
charges and disbursements of (i) McDermott, Will & Emery and (ii)
Paul, Weiss, Rifkind, Wharton & Garrison (in an amount not to exceed
$12,000), in each case in connection the Transaction (subject in each
case to subsequent review pursuant to the terms of the Interim DIP
Order), and second, for general corporate purposes of the Company (in
an aggregate amount not to exceed $2,000,000 on the First Closing and
$4,000,000 on the Second Closing) and to pay amounts owing pursuant
to the Existing Note Purchase Agreement. All amounts applied by the
Company for its general corporate purposes shall be consistent with
the February 1, 1999 through June 30, 1999 cash flow presentations,
dated February 18, 1999, in the form of Exhibit G attached hereto.
All the proceeds from the sale of each Delayed Closing Note shall be
used by the Company to cure executory contracts and unexpired leases
(each a "CURED CONTRACT") that have been assumed by the Company and
are to be assigned to CoreComm Limited under the CoreComm Asset
Purchase Agreement pursuant to Section 365 of the Bankruptcy Code.
(b) No part of the proceeds from the sale of the Notes will be
used, directly or indirectly, for the purpose of purchasing or
carrying any "margin stock" (within the meaning of Regulation U) or
for the purpose of purchasing, carrying or trading in any securities
under such circumstances as to involve the Company in a violation of
Regulation X or to involve any broker or dealer in a violation of
Regulation T or U. Upon your request, the Company will furnish you
with a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 referred to in Regulation U. No
indebtedness being reduced or retired out of the proceeds of the
Notes was or will be incurred for the purpose of purchasing or
carrying any "margin stock" (within the meaning of Regulation U) or
any "margin security" (within the meaning of Regulation T). Margin
stock does not constitute more than 25 % of the value of the
consolidated property and assets of the Company and its Subsidiaries.
None of the transactions contemplated by this Agreement (including,
without limitation, the direct and indirect use of proceeds of the
Notes) will violate or result in a violation of the Securities Act or
the Exchange Act or any of the rules and regulations promulgated
thereunder or Regulation T, Regulation U or Regulation X.
5.7 ACCOUNTS.
Neither the Company nor any of its Subsidiaries has any deposit
accounts or other checking or operating accounts other than the accounts
listed on the attached Schedule 5.7.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof; provided that the disposition of your or their
property shall at all times be within your or their control. You understand
that the Notes have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities Act
or if an exemption from registration is available, except under
circumstances where neither such registration or such an exemption is
required by applicable law, and that the Company is not required to
register the Notes.
6.2 ACCREDITED INVESTOR.
You are an "accredited investor" (as defined in Rule 501 of
Regulation D under the Securities Act) and by reason of your business and
financial experience, and the business and financial experience of those
Persons retained by you to advise you with respect to your investment in
the Notes, you, together with such advisors, have such knowledge,
sophistication and experience in business and financial matters as to be
capable of evaluating the merits and risks of the prospective investment,
are able to bear the economic risk of such investment and, at the present
time, are able to afford a complete loss of such investment. You are not
purchasing the Notes in reliance upon any investigation made by any other
Person.
6.3 SOURCE OF FUNDS.
You represent that at least one of the following statements is
an accurate representation as to each source of funds (a "FUNDS SOURCE") to
be used by you to pay the purchase price of the Notes to be purchased by
you hereunder:
(a) the Funds Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of
the total client assets managed by such QPAM, the conditions of Parts
l(c) and l(g) of the QPAM Exemption are satisfied, neither the QPAM
nor a person controlling or controlled by the QPAM (applying the
definition of "control" in Section V(e) of the QPAM Exemption) owns
more than a 5% interest in the Company and (i) the identity of such
QPAM and (ii) the names of all employee benefit plans the assets of
which are included in such investment fund have been disclosed to the
Company in writing pursuant to this Section 6.3(a); or
(b) the Funds Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
7. PAYMENTS AND PREPAYMENTS.
7.1 REQUIRED PAYMENTS.
(a) The aggregate outstanding principal amount of the Notes,
together with all interest accrued and unpaid thereon and the
Facility Fee, shall be due and payable by the Company on the Maturity
Date. Upon and during the continuance of an Event of Default, the
Company shall pay interest at the Default Rate. All such payments,
together with all other payments required to be made pursuant to the
Note Documents, shall be made by the Company and each of its
Subsidiaries without application to, or order or authorization by,
the Bankruptcy Court or any other Person.
(b) Within two Business Days after the date the Bankruptcy
Court approves a bid (the "OVERBID FACILITY") by a Qualified Bidder
(as defined in the Motion for Order Approving Global Bidding
Procedures, dated February 19, 1999, filed by the Company with the
Bankruptcy Court), other than CoreComm Limited or any of its
Affiliates, with respect to (i) all the assets the subject of the
CoreComm Asset Purchase Agreement or (ii) all the assets the subject
of the CoreComm Asset Purchase Agreement and all the assets or stock
of Connecticut Telephone, the Company shall repay amounts owing to
CoreComm Limited under the Note Documents unless the Company shall
have caused the purchase by a third Person of all the Notes and other
obligations of CoreComm Limited under the Note Documents as required
by the bidding procedures annexed to the CoreComm Asset Purchase
Agreement which was approved by the Bankruptcy Court on February 22,
1999.
(c) The Company shall, and shall cause each of its
Subsidiaries, on the date of receipt by any of them of any proceeds
from a Permitted Disposition to apply all of the same (in the form
received) to repay amounts owing under the Note Documents, such
proceeds, to be applied, subject to Section 21.12 hereof, first, to
the payment of any unpaid fees, costs and expenses, second, to the
payment of accrued interest on the Notes and, third, to the payment
of principal outstanding on the Notes.
7.2 OPTIONAL PREPAYMENTS.
(a) Subject to Section 21.12 hereof, the Company may, at its
option, upon notice as provided in Section 7.2(b), prepay at any time
all, or from time to time any part of, the Notes, in an aggregate
principal amount of not less than $250,000 or integral multiples of
$50,000 in excess thereof (or, if less, the remaining aggregate
principal amount of the Notes outstanding at such time), at 100% of
the aggregate principal amount of the Notes so prepaid.
(b) The Company will give each holder of Notes written notice
of each optional prepayment under this Section 7.2 not less than 1
day and not more than 10 days prior to the date fixed for such
prepayment. Each such notice shall specify the date fixed for such
prepayment, the aggregate principal amount of the Notes to be prepaid
on such date, the principal amount of each Note held by such holder
to be prepaid, and the interest to be paid on the prepayment date
with respect to such principal amount being prepaid and shall state
that such prepayment is to be made pursuant to this Section 7.2.
7.3 ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated (in integral multiples
of $1,000) among all of the Notes at the time outstanding pursuant to this
Agreement in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.
7.4 MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section
7, the principal amount of each Note to be prepaid shall mature and become
due and payable on the date fixed for such prepayment, together with
interest on such principal amount accrued to such date. From and after such
date, unless the Company shall fail to pay such principal amount when so
due and payable, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to
the Company and cancelled and shall not be reissued, and no Note shall be
issued in lieu of any prepaid or repurchased principal amount of any Note.
7.5 NO DISCHARGE; SURVIVAL OF CLAIMS.
Each of the Company and its Subsidiaries agrees that (a) its
Obligations under the Note Documents shall not be discharged by the entry
of an order confirming a Plan of Reorganization (and each of the Company
and its Subsidiaries pursuant to Section 1141 (d)(4) of the Bankruptcy Code
hereby waives any such discharge) and (b) the Superpriority Claim and Lien
granted to the Purchasers pursuant to the Bankruptcy Order shall not be
affected in any manner by the entry of an order confirming a Plan of
Reorganization.
7.6 OPTIONAL SET-OFF OF PAYMENTS.
On the Closing Date (as defined in the CoreComm Asset Purchase
Agreement) CoreComm Limited may, in its sole discretion, reduce its
purchase price obligations under the CoreComm Asset Purchase Agreement in
exchange for a dollar-for-dollar reduction in the amounts owing by the
Company to CoreComm Limited under this Agreement on account of principal,
interest and fees.
8. AFFIRMATIVE COVENANTS.
From the date of this Agreement and, thereafter, so long as any of
the Notes shall be outstanding, the Company will perform and comply with
each of the following covenants:
8.1 FINANCIAL AND BUSINESS INFORMATION.
The Company will furnish to each holder of Notes without cost to
you:
(a) Requested Information. With reasonable promptness, any
information relating to the financial condition, business,
operations, assets, liabilities or properties of the Company or any
of its Subsidiaries, including but not limited to information
regarding FCC activity or state regulatory activity or relating to
the ability of the Company or any of its Subsidiaries to perform its
obligations under any of the Note Documents to which it is a party as
from time to time may be reasonably requested by any such holder of
Notes which is an Institutional Investor, including, without
limitation, all monthly bank statements of the Company and its
Subsidiaries and any reports from financial advisors, investment
bankers or consultants to the Company or its Subsidiaries including,
without limitation, reports of Jay Alix & Associates.
(b) Chapter 11 Case Notices. Promptly upon transmission or
receipt thereof, copies of all pleadings, motions, applications and
all other documents filed or delivered in connection with the Chapter
11 case, including any of the foregoing which is filed with the
Bankruptcy Court, distributed by or on behalf of the Company or any
of its Subsidiaries in the Chapter 11 case or which is served upon
the Company or any of its Subsidiaries, provided that prior to the
filing any of the foregoing by or on behalf of the Company with
respect to the Collateral the Purchasers shall receive copies
thereof.
(c) Weekly Cash Flow Statements. Within two Business Days after
the end of each calendar week, a satisfactory cash flow statement for
the immediately preceding calendar week.
8.2 COMPLIANCE WITH LAW.
The Company will and will cause its Subsidiaries to comply with
all laws, ordinances, rules, regulations, including, without limitation,
the Communications Act, FCC Rules, any state regulatory requirements and
those relating to copyright and orders to which each of them and their
properties are subject and all applicable restrictions imposed on each of
them and their properties by any Governmental Authority (including, without
limitation, all Environmental Laws), and will obtain and maintain in effect
all licenses, certificates, permits, franchises, consents and other
authorizations of any Governmental Authority or public body or authority or
any subdivision thereof or any other third party including any radio,
television or other license, Permit, certificate or approval granted or
issued by the FCC or any other Governmental Authority (except for filings
to perfect security interest granted pursuant to this Agreement or any
other Note Document) necessary for the ownership or leasing and operation
of their respective properties or the conduct of their respective
businesses, in each case to the extent necessary to ensure that any
noncompliance with such laws, ordinances, rules, regulations or orders or
any failure to obtain or maintain in effect such licenses, certificates,
permits, franchises, consents and other authorizations, either individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
8.3 MAINTENANCE OF PROPERTIES.
The Company will and will cause its Subsidiaries maintain and
keep, or cause to be maintained and kept, their respective properties and
assets, owned or leased, used or useful in the conduct of its business,
that, either individually or in the aggregate, are Material in good repair,
working order and condition (other than ordinary wear and tear and as a
result of casualty and condemnation), so that the business carried on in
connection therewith may be properly conducted in all material respects at
all times.
8.4 PRESERVATION OF CORPORATE EXISTENCE, ETC.
Except as permitted by Section 9.5 hereof, the Company will and
will cause each of its Subsidiaries to at all times preserve and keep in
full force and effect (i) its corporate existence and its Material rights
(charter and statutory) and (ii) the corporate existence of each of its
Subsidiaries and all Material permits, licenses, approvals, rights,
privileges and franchises thereof.
8.5 USE OF PROCEEDS.
The Company will use the proceeds of the issue and sale of the
Notes solely for the purposes set forth in Section 5.6(a).
8.6 CAPITAL STOCK.
The Company will at all times be the direct, legal and beneficial
owner of 100% of the outstanding capital stock of each of its directly
owned Subsidiaries as set forth in Schedule 5.3, and the indirect legal and
beneficial owner of 100% of the outstanding capital stock of each of its
indirectly owned Subsidiaries free and clear of any lien, security
interest, option or other charge or encumbrance, except for Permitted Liens
described in clause (a) of the definition of Permitted Liens, Liens created
by this Agreement or the Collateral Documents and except as a result of
sales of stock in accordance with Section 9.5.
8.7 FULL COOPERATION.
The Company agrees that, at all times, it will cooperate fully
with you and provide all information reasonably requested by you in
connection with any refinancing of the Notes or the other Indebtedness of
the Company, including information, term sheets, drafts of agreements with
strategic partners, lenders, acquirers or equity investors.
8.8 OBLIGATIONS WITH RESPECT TO STOCK AND ASSETS OF SUBSIDIARIES.
Subject to the sale of stock or assets pursuant to the CoreComm
Asset Purchase Agreement or a Permitted Disposition, the Company will cause
all of the shares of capital stock of each direct Subsidiary of the
Company, now or hereafter owned by the Company to be pledged to you
pursuant to the terms and conditions of the Security Agreement or a
security agreement in substantially the form of Exhibit B attached hereto
and otherwise in form and substance reasonably acceptable to you. In
addition, the Company will cause each of its direct Subsidiaries, now or
hereafter owned by the Company, to become a party to the Subsidiary
Guaranty or a guaranty agreement in substantially the form of Exhibit D
attached hereto and otherwise in form and substance reasonably acceptable
to you. In furtherance of the foregoing provisions of this Section 8.8, the
Company agrees that at the time that any Person becomes a direct
Subsidiary, the Company shall so notify you and shall take such steps as
are necessary to cause 100% (or, if less, the full amount owned, directly
or indirectly, by the Company), of the shares of capital stock of such
Person to be delivered to you (together with undated stock powers executed
in blank.
8.9 PERFORMANCE OF MATERIAL CONTRACTS.
Except to the extent that the Company is authorized by the
Bankruptcy Court in the Chapter 11 case to reject an "executory contract"
under Section 365 of the Bankruptcy Code or during the pendency before the
Bankruptcy Court considering the rejection thereof, the Company will and
will cause each of its Subsidiaries to perform and observe all of the terms
and provisions of each Material Contract to be performed or observed by it,
maintain each such Material Contract in full force and effect, enforce each
such Material Contract in accordance with its terms, take all such action
to such end as may be from time to time requested by the Purchaser and,
upon request of the Purchaser, make to each other party to each such
Material Contract such demands and requests for information and reports or
for actions as the Company is entitled to make under such Material
Contract, and cause each of its Subsidiaries to do so except, in any case,
where the failure to do so, either individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect. Should the
Company fail to perform its obligations under a Material Contract pending
rejection thereof by the Bankruptcy Code, the Company shall immediately
notify the Purchaser of its election to do so. All requests by the Company
to reject an "executory contract" under Section 365 of the Bankruptcy Court
shall be made in good faith and in accordance with the provisions of the
Bankruptcy Code.
8.10 ACCOUNTS.
The Company shall instruct each bank listed on Schedule 5.7, not
later than 10 days after the First Closing, to transfer funds to the
Account at the end of each Business Day, in same day funds, in an amount
equal to the credit balance of the account at such bank; provided, that the
Company shall not be required to cause the transfer of the funds in the
accounts of Connecticut Telephone.
8.11 NOTICE TO LIENHOLDERS.
At the time and otherwise as required by Federal Rules of
Bankruptcy Procedure Rule 4001, the Company shall provide notice to the
relevant creditors of the Company and its Subsidiaries in regard to the
proceedings relating to the Final DIP Order.
8.12 PAYMENT OF FEES.
The Company will pay the Facility Fee on the Maturity Date.
9. NEGATIVE COVENANTS.
From the date of this Agreement and, thereafter, so long as any of
the Notes shall be outstanding, the Company will perform and comply with
each of the following covenants:
9.1 LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
Except as otherwise permitted in this Agreement, the Company will
not and will not permit any of its Subsidiaries to directly or indirectly
enter into or engage in any transaction or series of related transactions
(including, without limitation, the purchase, lease, sale or exchange of
property or assets of any kind or the rendering of any service) with any of
its Affiliates other than Connecticut Telephone that is not a wholly owned
Subsidiary of the Company, except in the ordinary course and pursuant to
the reasonable requirements of the Company's or such Subsidiary's business
and upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate thereof, provided that the
foregoing restrictions of this Section 9.1 shall not apply (a) to any tax
sharing agreements in existence on the date of closing and approved by the
Purchaser and (b) to any transactions described on Schedule 9.1 hereto.
9.2 LIMITATIONS ON LIENS.
The Company will not and will not permit any of its Subsidiaries
to (a) create, incur, assume or suffer to exist any Lien on or with respect
to any of its property or assets of any character (including, without
limitation, accounts), whether now owned or hereafter acquired, (b) sign or
file or suffer to exist under the Uniform Commercial Code or any similar
statute of any jurisdiction, an effective financing statement (or the
equivalent thereof) that names the Company or any of its Subsidiaries as
debtor, (c) sign or suffer to exist any security agreement authorizing any
secured party thereunder to file such financing statement (or the
equivalent thereof), or (d) assign any accounts or other right to receive
income; excluding, however, from the operation of the foregoing
restrictions the following:
(i) Permitted Liens;
(ii) Liens existing on the date of this Agreement and
described in Schedule 9.2(ii) attached hereto; and
(iii) Liens created by this Agreement or that otherwise
secure the payment of the Notes.
If the Company shall create, assume or suffer to exist any Lien upon any of
its property or assets, or the property or assets of any of its
Subsidiaries, whether now owned or hereafter acquired, other than any Liens
expressly permitted under clauses (i) through (iii) of this Section 9.2,
the Company will make or cause to be made effective provision whereby the
Notes and all of the other Obligations of the Company under the Note
Documents will be secured equally and ratably with any and all other
Obligations of the Company and its Subsidiaries secured thereby; provided
that the securing of the Notes and all of the other Obligations of the
Company under the Note Documents equally and ratably with such other
Obligations of the Company and its Subsidiaries will in no way be deemed to
remedy or waive any Default or Event of Default resulting from the
incurrence, assumption, existence or continuation of any such Lien.
9.3 LIMITATIONS ON INDEBTEDNESS.
The Company will not and will not permit any of its Subsidiaries
to create, incur, assume or suffer to exist any Indebtedness other than:
(a) Indebtedness arising under the Note Documents; and
(b) Indebtedness listed on Schedule 9.3.
9.4 LIMITATIONS ON LEASE OBLIGATIONS.
The Company will not and will not permit any of its Subsidiaries
at any time to create, incur, assume or suffer to exist, any obligations as
lessee for the rental or hire of real or personal property of any kind
under leases or agreements to lease, including, but not limited to,
Capitalized Leases, except as identified on Schedule 9.4.
9.5 LIMITATIONS ON MERGERS, CONSOLIDATIONS, SALES OF ASSETS, ETC.
Except for Permitted Dispositions in which the Company has
complied with Section 7.1(c), the Company will not and will not permit any
of its Subsidiaries to merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose (whether in one transaction or a
series of transactions) of its property and assets (whether now owned or
hereafter acquired) to, any Person.
9.6 LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
(a) The Company will not and will not permit any of its
Subsidiaries to declare or pay any dividends, purchase, redeem, retire
or otherwise acquire for value any of its capital stock or any
warrants, rights or options to acquire such capital stock, now or
hereafter outstanding, return any capital to its stockholders as such,
make any distribution of assets, capital stock, warrants, rights,
options, obligations or securities to its stockholders as such or issue
or sell any capital stock or any warrants, rights or options to acquire
such capital stock other than any dividend or distribution made by a
direct or indirect wholly owned Subsidiary of the Company to its parent
corporation.
(b) The Company will not and will not permit any of its
Subsidiaries to directly or indirectly create or otherwise cause,
incur, assume, suffer or otherwise permit to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of
any Subsidiary (i) to pay dividends or to make any other distribution
on any shares of capital stock of (or other ownership or profit
interest in) such Subsidiary owned by the Company or any of its
Subsidiaries, (ii) to pay or to subordinate any Indebtedness owed to
the Company or any of its Subsidiaries, (iii) to make loans or advances
to the Company or any of its Subsidiaries or (iv) to transfer any of
its property or assets to the Company or any of its Subsidiaries (other
than any property or assets subject to a Lien permitted hereby).
9.7 LIMITATIONS ON PREPAYMENTS OF INDEBTEDNESS, ETC.
If any Default or Event of Default has occurred and is continuing
or would occur, directly or indirectly, as a consequence thereof, the
Company will not and will not permit any of its Subsidiaries (a) after the
issuance thereof, to amend, modify or otherwise change in any manner (or
permit the amendment, modification or other change in any manner of) any of
the terms of any Indebtedness of the Company or any such Subsidiary if such
amendment, modification or change would shorten the final maturity or
average life to maturity of, or require any payment to be made sooner than
originally scheduled on, such Indebtedness, increase the interest rate
applicable thereto or change any subordination provision thereof, (b) make
(or give any notice with respect thereto) any voluntary or optional
payment, prepayment, redemption or acquisition for value of any
Indebtedness (other than the Note or Notes) of the Company or any such
Subsidiary (including, without limitation, by way of depositing money or
securities with the trustee therefor before the date required for the
purpose of paying when due) of any Indebtedness of the Company or any such
Subsidiary, or refund, refinance, replace or exchange any other
Indebtedness for any such Indebtedness or (c) amend, modify or otherwise
change its articles of incorporation or bylaws (or other similar
organizational documents) if such amendment, modification or change, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
9.8 LIMITATIONS ON NEGATIVE PLEDGES.
The Company will not permit any of its Subsidiaries to enter into,
assume or suffer or permit to exist any agreement prohibiting, conditioning
or otherwise restricting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired, or requiring
the grant of any assignment or security for such obligation if an
assignment or security is given for some other obligation, other than:
(a) the Note Documents;
(b) in connection with any Indebtedness described on Schedule 5.19
attached hereto to the extent such agreement is in effect on the date
hereof;
(c) any such agreement prohibiting other encumbrances on specific
property and assets of the Company or any of its Subsidiaries, which
encumbrance secures the payment of Indebtedness incurred solely to
acquire, construct or improve such property or assets or to finance the
purchase price therefor and which Indebtedness is otherwise permitted
to be incurred under the terms of this Agreement;
(d) any agreement setting forth customary restrictions on the
subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract of similar property or assets;
(e) any restriction or encumbrance with respect to any Subsidiary
of the Company imposed pursuant to an agreement that has been entered
into for the sale, transfer or other disposition of all or
substantially all of the property and assets of such Subsidiary so long
as such sale or disposition is otherwise expressly permitted under the
terms of this Agreement; and
(f) any agreement evidencing Indebtedness outstanding on the date
a Subsidiary of the Company first becomes a Subsidiary of the Company
or any of its Subsidiaries.
9.9 LIMITATIONS ON CHANGES IN FISCAL YEAR.
The Company will not and will not permit any of its Subsidiaries
to change its fiscal year.
9.10 LIMITATIONS ON SPECULATIVE REAL ESTATE INVESTMENTS.
Notwithstanding anything to the contrary set forth in this
Agreement, the Company will not and will not permit any of its Subsidiaries
to acquire, lease, assume or otherwise invest in any real property solely
for investment purposes.
9.11 LIMITATION ON INVESTMENTS.
The Company will not and will not permit any of its Subsidiaries
to make or hold any Investment in any Person other than (i) purchases of
assets permitted under Section 9.12, (ii) Investments in Cash Equivalents
and (iii) existing Investments set forth on Schedule 9.11.
9.12 LIMITATION ON ASSET PURCHASES.
The Company will not and will not permit any of its Subsidiaries
to purchase any assets other than in the ordinary course of business
consistent with past practice.
9.13 LIMITATION ON CAPITAL STOCK.
The Company will not and will not permit any of its Subsidiaries
to (a) purchase, redeem or otherwise acquire for value any shares of any
capital stock or any warrants, rights or options to acquire any such
shares, now or hereafter outstanding, or the voluntary prepayment,
redemption or repurchase in respect of any debt; or (b) issue any capital
stock or any warrants, rights or options to acquire any such capital stock
other than employee stock options issued pursuant to plans approved or to
be approved by the Company's shareholders and other than issuances of
capital stock upon the exercise of warrants and/or conversion of
convertible securities in each case existing as of the date hereof.
9.14 LIMITATION ON TERMINATION OF LICENSES.
Except as disclosed on Schedule 9.14, the Company will not and
will not permit any of its Subsidiaries to lose, fail to hold, or fail to
renew for a full license term, forfeit, revoke, rescind or materially
impair any FCC Licenses or any Certificates, except where such loss,
failure to renew, forfeiture, revocation, recission or impairment could not
be reasonably expected to have a Material Adverse Effect.
9.15 LIMITATION ON LINE OF BUSINESS.
The Company will not and will not permit any of its Subsidiaries
to engage in any line of business other than the business engaged in by the
Company and its Subsidiaries on the date hereof, in a manner that is
consistent with past practice.
9.16 LIMITATION ON TERMINATION OF EMPLOYER PLANS.
The Company will not and will not permit any of its Subsidiaries
to create or otherwise cause to exist or become effective any consensual
risk of termination of any single employer plan or multiemployer plan by
the Pension Benefit Guaranty Corporation if the occurrence of such event
could reasonably be expected to have a Material Adverse Effect.
9.17 LIMITATION ON INVESTMENT COMPANY ACT.
The Company will not and will not permit any of its Subsidiaries
to be or become an investment company subject to the registration
requirements of the Investment Company Act of 1940, as amended.
9.18 LIMITATIONS ON AMENDMENTS.
The Company will not permit and will not permit any of its
Subsidiaries to, at any time amend, modify or change in any manner, or
consent or acquiesce to any of the foregoing, the CoreComm Asset Purchase
Agreement, the Interim DIP Order or, after the entry thereof, the Final DIP
Order.
9.19 LIMITATION ON PRESS RELEASES.
The Company will not and will not permit any of its Subsidiaries
to issue a press release or other public disclosure containing any
reference to you or any of your Affiliates without your express written
consent except as otherwise may be required by applicable law.
9.20 LIMITATION ON CREATION OF SUBSIDIARIES.
The Company will not and will not permit any of its Subsidiaries
to create any Subsidiary not in existence on the date hereof.
9.21 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into, assume, guarantee or
otherwise become liable with respect to, any Sale and Leaseback
Transaction, unless (a) the Company or such Subsidiary, as the case may be,
receives consideration at the time of such Sale and Leaseback Transaction
at least equal to the Fair Market Value (as evidenced by a Board Resolution
delivered to you) of the Property or assets subject to such transaction;
and (b) the Attributable Indebtedness of the Company or such Subsidiary
with respect thereto is included as Indebtedness and would be permitted to
be incurred under Section 9.3 hereof and any Liens granted thereby would be
permitted under Section 9.2 hereof.
9.22 CHAPTER 11 CLAIMS
The Company will not and will not permit any of its Subsidiaries to incur,
create, assume, apply for, suffer to exist or permit any other
superpriority claim or other claim which is pari passu with or senior to
the claims of the holders of the Notes, against the Company, any of its
Subsidiaries or any of their properties or assets. The Liens and
superpriority claims granted to the Collateral Agent and the Purchasers
pursuant to this Agreement and the Interim DIP Order and the Final DIP
Order shall be subject and subordinate to a carve-out (the "CARVE-OUT") for
(a) following the occurrence and during the continuance of a Default or an
Event of Default, the payment of (I) allowed professional fees and
disbursements incurred by the professionals retained pursuant to Bankruptcy
327(a) or (e) under a general retainer (excepting ordinary course
professionals) or Bankruptcy Code Section 1103(a) by the Company and any
statutory committees appointed in the Chapter 11 cases and (II) the
expenses of any member of any such committee allowed under Bankruptcy Code
Section 503(b)(3)(F), in both cases in a cumulative aggregate amount not to
exceed $500,000 and (b) quarterly fees required to be paid pursuant to 28
U.S.C. ss. 1930(a)(6) and any fees payable to the Clerk of the Bankruptcy
Court. Notwithstanding anything to the contrary contained herein, the
Carve-Out shall not be available to pay professional fees and disbursements
incurred in connection with the initiation or prosecution of any claims,
causes of action, litigation or proceedings which asserts (x) claims or
causes of action against the Noteholders and/or (y) challenges or raises
any defenses to the Obligations or prepetition obligations or any
prepetition or postpetition lien of the Purchasers. As long as no Default
or Event of Default shall have occurred and be continuing, the Company
shall pay compensation and reimbursement of expenses as authorized by any
applicable order of the Bankruptcy Court, as the same may be payable, and
the amount so paid shall not reduce the Carve-Out.
9.23 CONFLICTING AGREEMENTS, ORDERS OR ACTIONS.
The Company will not and will not permit any of its Subsidiaries
to, enter into any stipulation or agreement, request or permit or suffer
itself to become subject to any order entered in the Chapter 11 case, or
take or permit any other Person to take any other action which does or
could conflict or materially interfere with any of the rights, privileges,
benefits or remedies of the Purchasers under any of Note Documents, or
materially diminish or impair the practical realization of any such right,
privilege, benefit or remedy, including, without limitation, permit an
order dismissing the Chapter 11 case (or any part thereof) unless the
Obligations under the Note Documents have been repaid in full in cash.
9.24 RESTRICTIONS ON USE OF CASH.
Neither the Company nor any of its Subsidiaries shall use any of
their funds for the same purpose for which the proceeds of the Delayed
Closing Notes are used.
10. [INTENTIONALLY OMITTED.]
11. EVENTS OF DEFAULT.
11.1 EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following
conditions or events shall occur and be continuing (each, an "EVENT OF
DEFAULT"):
(a) the Company defaults in the payment of any principal on
any Note when the same becomes due and payable, whether by
scheduled maturity or at a date fixed for prepayment or repurchase
or by declaration, demand or otherwise; or
(b) the Company defaults in the payment of any interest on
any Note, or the Company defaults in the payment of any other
amount owing under any of the Note Document (subject to a five day
cure period), when the same becomes due and payable, whether by
scheduled maturity or at a date fixed for prepayment or repurchase
or by declaration, demand or otherwise; or
(c) the Company defaults in the performance of or compliance
with any term, covenant or agreement contained in any of the Note
Documents on its part to be performed or complied with and such
default shall remain unremedied for 10 Business Days after the
earlier of the first date on which (i) a Responsible Officer
obtains becomes aware of such default and (ii) the Company
receives written notice of such default from any holder of a Note;
or
(d) any representation or warranty made or deemed made by or
on behalf of the Company or any of its Subsidiaries or by any
officer of the Company or any of its Subsidiaries under or in
connection with this Agreement or any other Note Document or in
any writing furnished in connection with the Transaction or any of
the other transactions contemplated hereby proves to have been
false or incorrect in any material respect on the date as of which
it was made or deemed to have been made, and the failure of such
representation and warranty to be true and correct shall have a
Material Adverse Effect; or
(e) there shall be any relief of the automatic stay pursuant
to 11 U.S.C. ss. 362 in the Chapter 11 case in which the Person
obtaining such relief makes any claim aggregating in excess of
$250,000; or
(f) any provision of any Note Document after delivery thereof
pursuant to Section 4 or 8.11 shall for any reason (other than
pursuant to the express terms thereof) cease to be valid and
binding on or enforceable against the Company or any of its
Subsidiaries intended to be a party to it or to give you any of
the rights, powers or privileges purported to be created
thereunder, or the Company shall so state in writing; or
(g) any Collateral Document after delivery thereof pursuant
to Section 4 or 8.11 shall for any reason (other than pursuant to
the terms thereof) cease to create a valid and perfected first
priority lien on and security interest in the Collateral purported
to be covered thereby; or
(h) except for the transactions contemplated by the CoreComm
Asset Purchase Agreement or as a result of one or more Permitted
Dispositions, there shall occur a Change of Control; or
(i) the Chapter 11 case shall be dismissed or converted to a
case under Chapter 7 of the Bankruptcy Code; or a trustee or an
examiner under Chapter 7 or Chapter 11 of the Bankruptcy Code (or
any Person having powers similar to a trustee or an examiner)
shall be appointed in the Chapter 11 case; or the Company or any
of its Subsidiaries shall make a motion for, or in support of, the
entry of any of the foregoing; or
(j) the Bankruptcy Court shall enter an order granting relief
from the automatic stay applicable under Section 362 of the
Bankruptcy Code (i) to the holder of any security interest to
permit foreclosure (or the granting of a deed in lieu of
foreclosure of the like) in any assets of the Company or any of
its Subsidiaries (other than the holders of the Notes with respect
to security interests created by Collateral Documents) or (ii) to
holders of any Indebtedness which have a value in excess of
$100,000 in the aggregate; or
(k) the Interim DIP Order (except for modifications
contemplated by the Final DIP Order) or, after the entry thereof,
the Final DIP Order, shall be reversed, rescinded, stayed,
vacated, amended or modified in any respect; or
(l) the Bankruptcy Court shall deny the entry of the Final
DIP Order or shall fail to enter the Final DIP Order on or before
March 15, 1999; or
(m) all the sales contemplated by the CoreComm Asset Purchase
Agreement shall not have been consummated pursuant to Section 363
of the Bankruptcy Code either (i) in accordance with terms
contained in the CoreComm Asset Purchase Agreement or (ii)
pursuant to another sale approved by the Purchasers in their sole
and absolute discretion, in each case by May 31, 1999; or
(n) the expenses of the Company and its Subsidiaries shall
have increased cumulatively by more than 5% since the date of the
First Closing or 10% during any calendar week, in each case as
measured against the cash flow presentations delivered pursuant to
the Section 5.6; or
(o) the CoreComm Asset Purchase Agreement shall terminate in
accordance with Article VIII thereof; or
(p) all the stock and assets of Connecticut Telephone shall
not have been sold, on terms and for a price satisfactory to you,
by May 31, 1999.
11.2 ACCELERATION.
If any Event of Default shall occur and be continuing, the
Required Holders may at any time, at its or their option, by notice or
notices to the Company, declare all of the Notes then outstanding to be
immediately due and payable. Upon any Notes becoming due and payable under
this Section 11.2, such Notes will forthwith mature and the entire unpaid
principal amount of such Notes, plus all accrued and unpaid interest
thereon and the Facility Fee shall all be immediately due and payable, in
each and every case without presentment, demand, protest or further notice
of any kind, all of which are hereby waived by the Company, provided that
the foregoing shall be subject to the terms of the Interim DIP Order and,
after the entry thereof, the Final DIP Order. The Company acknowledges, and
the parties hereto agree, that each holder of a Note has the right to
maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for).
11.3 OTHER REMEDIES.
If one or more Events of Default shall occur and be continuing,
and irrespective of whether any Notes have become or have been declared
immediately due and payable under Section 11.2(a), the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of
such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any other Note Document, or for an injunction against a
violation of any of the terms hereof or thereof, or in aid of the exercise
of any power granted hereby or thereby or by law or otherwise.
11.4 RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to Section 11.2(b), the holders by unanimous vote and written
notice to the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes,
all principal and other amounts on any Notes that are due and payable and
are unpaid other than by reason of such declaration, and all interest on
such overdue principal, and (to the extent permitted by applicable law) any
overdue interest in respect of the Notes, at the Default Rate, (b) all
Defaults and Events of Default, other than nonpayment of amounts that have
become due solely by reason of such declaration, have been remedied or have
been waived pursuant to Section 16, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto, to the Notes or
to any other Note Document. No rescission and annulment under this Section
11.4 will extend to or affect any subsequent Default or Event of Default or
impair any right consequent thereon. 11.5 RESTORATION OF RIGHTS AND
REMEDIES.
If any holder of any Note has instituted any proceeding to enforce
any right or remedy under this Agreement or any other Note Document and
such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to such holder, then, and in each such case, the
Company and the other holders of Notes shall, subject to any determination
in such proceeding, be restored severally and respectively to their former
positions hereunder and, thereafter, all rights and remedies of the holders
of Notes shall continue as though no such proceeding had been instituted.
11.6 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any other Note
Document upon any holder thereof shall be exclusive of any other right,
power or remedy referred to herein or therein or now or hereafter available
at law, in equity, by statute or otherwise. Without limiting the
obligations of each of the Company under Section 14, the Company will pay
to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 11, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
12. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
12.1 REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a
register for the registration and registration of transfers of Notes. The
name and address of each holder of one or more Notes, each transfer thereof
and the name and address of each transferee of one or more Notes shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes hereof,
and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor, promptly upon request therefor, a complete and
correct copy of the names and addresses of all registered holders of Notes.
12.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of
the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of
such Note or his attorney duly authorized in writing and accompanied by the
address for notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, at the Company's expense (except as
provided below), one or more new Notes (as requested by the holder thereof)
in exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be in
substantially the form of Exhibit A attached hereto. Each such new Note
shall be dated and bear interest from the date to which interest shall have
been paid on the surrendered Note or dated the date of the surrendered Note
if no interest shall have been paid thereon. The Company may require
payment of a sum sufficient to cover any stamp tax or governmental charge
imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $500,000; provided, that, if
necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than $500,000.
Any transferee, by its acceptance of a Note registered in its name (or the
name of its nominee), shall be deemed to have made the representations set
forth in Section 6.1.
12.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the ownership of and the loss, theft, destruction or mutilation of
any Note (which evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such ownership and
such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such
Note is, or is a nominee for, an original Purchaser or any other
Institutional Investor, such Person's own unsecured agreement of
indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company, at its own expense, shall execute and deliver, in lieu
thereof, a new Note, dated and blaring interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated
Note or dated the date of such lost, stolen, destroyed or mutilated Note if
no interest shall have been paid thereon.
13. PAYMENTS ON NOTES.
The Company will pay all sums becoming due on such Note for
principal and interest by the method and at the address specified for such
purpose below your name on the signature page attached hereto, or by such
other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation
thereon, except that upon written request of the Company made concurrently
with or reasonably promptly after payment or prepayment in full of any
Note, you shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at its principal executive office.
Prior to any sale, transfer or other disposition of any Note held by you or
your nominee, you will, at your election, either endorse thereon the amount
of principal paid thereon and the last date to which interest has been paid
thereon or surrender such Note to the Company in exchange for a new Note or
Notes pursuant to Section 12.2. The Company will afford the benefits of
this Section 13 to any Institutional Investor that is the direct or
indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in
this Section 13.
14. EXPENSES, ETC.
14.1 TRANSACTION EXPENSES.
Whether or not any aspect of the Transaction or any of the other
transactions contemplated hereby are consummated, the Company will pay all
costs and expenses of (i) Merrill Lynch Global Allocation Fund, Inc.
(including reasonable attorneys' fees of its special counsel, local or
other counsel, financial advisors and outside accountants) incurred by it
in connection with the preparation, execution, delivery and administration
of this Agreement, the Notes and the other Note Documents and (ii) each
Purchaser in connection with any amendments, waivers or consents under or
in respect of this Agreement, the Notes or any of the other Note Documents
(whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the Facility Fee, (b) the costs and
expenses incurred in enforcing or defending (or determining whether or how
to enforce or defend) any rights under this Agreement, the Notes or any of
the other Note Documents or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Agreement, the Notes or any of the other Note Documents, or by reason of
being a holder of any Note, and (c) the costs and expenses, including
financial advisors' fees, incurred in connection with any work-out,
renegotiating or restructuring of the Transaction or any of the other
transactions contemplated hereby, by the Notes and by the other Note
Documents. The Company further agrees to indemnify you and each of your
transferees from and hold you and each of them harmless from and against
any and all present and future transfer, stamp, documentary or other
similar taxes, assessments or charges made by any Governmental Authority by
reason of the execution, delivery or performance of this Agreement, any
Note or any other Note Document and all costs, expenses, taxes, assessments
and other charges incurred in connection with any filing or perfection of
any lien, pledge or security interest contemplated by any of the Collateral
Documents or any other document referred to therein. The Company will pay,
and will save you and each other holder of a Note harmless from, all claims
in respect of any fees, costs or expenses, if any, of brokers and finders
(other than those retained by you).
14.2 INDEMNITY.
The Company agrees to indemnify the Purchaser and its affiliates
and their respective directors, officers, employees, agents, attorneys,
investment advisors and controlling persons (the Purchaser and each such
person being an "INDEMNIFIED PARTY") from and against any and all losses,
claims, damages and liabilities, joint or several, to which such
Indemnified Party may become subject under any applicable federal or state
law, or otherwise, and related to or arising out of the Note Documents
(including with respect to any actions taken or not taken by the Collateral
Purchaser pursuant to Section 21.10 with respect to the Collateral) and
will reimburse any Indemnified Party for all expenses (including reasonable
counsel fees and expenses) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened
claim or any action or proceeding arising therefrom, whether or not such
Indemnified Party is a party and whether or not such claim, action or
proceeding is initiated or brought by or on behalf of the Company . The
Company will not be liable under the foregoing indemnification provision to
the extent that any loss, claim, damage, liability or expense is found in a
final judgment by a court to have resulted from the Purchaser's bad faith
or gross negligence. The Company also agrees that no Indemnified Party
shall have any liability (whether direct or indirect, in contract or tort
or otherwise) to the Company or its security holders or creditors related
to or arising out of the performance by the Purchaser of the services
contemplated by, this Agreement except to the extent that any loss, claim,
damage or liability is found in a final judgment by a court to have
resulted from the Purchaser's bad faith or gross negligence.
If the indemnification of an Indemnified Party provided for in
this Agreement is for any reason held unenforceable, the Company agrees to
contribute to the losses, claims, damages and liabilities for which such
indemnification is held unenforceable (a) in such proportion as is
appropriate to reflect the relative benefits to the Company, on the one
hand, and the Purchaser, on the other hand, of the Notes as contemplated by
this Agreement (whether or not the Notes is consummated) or (b) if (but
only if) the allocation provided for in clause (a) is for any reason held
unenforceable, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (a) but also the relative fault of
the Company, on the one hand, and the Purchaser, on the other hand, as well
as any other relevant equitable considerations. The Company agrees that for
the purposes of this paragraph the relative benefits to the Company and the
Purchaser of the Notes as contemplated shall be deemed to be in the same
proportion that the total amount of the Notes, as the case may be, bears to
the fees paid or to be paid to the Purchaser under this Agreement or in
connection with the Notes; provided, however, that, to the extent permitted
by applicable law, in no event shall the Indemnified Parties be required to
contribute an aggregate amount in excess of the aggregate fees actually
paid to the Purchaser under this Agreement or in connection with the Notes.
The Company agrees that, without the Purchaser's prior written
consent, it will not settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding in
respect of which indemnification could be sought under the indemnification
provision of this Agreement (whether or not the Purchaser or any other
Indemnified Party is an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising
out of such claim, action or proceeding.
In the event that an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against the
Company or any affiliate of the Company in which such Indemnified Party is
not named as a defendant, the Company agree to reimburse the Purchaser for
all reasonable expenses incurred by it in connection with such Indemnified
Party's appearing and preparing to appear as such a witness, including,
without limitation, the fees and disbursements of its legal counsel.
Anything in this Section 14.2 to the contrary notwithstanding, the
Company shall not make any payments under this Section 14.2 to CoreComm
Limited on account of any obligation owing by the Company to CoreComm
Limited under the CoreComm Asset Purchase Agreement or with respect to the
transactions contemplated thereunder.
14.3 SURVIVAL.
The obligations of the Company under this Section 14 shall survive
the payment or transfer of any Note, the enforcement, amendment or waiver
of any provision of this Agreement, the Notes or any other Note Document,
and the termination of this Agreement and, in respect of any Person who was
at any time a Purchaser or in whose name or for whose benefit such Person
held any Note, the date on which such person no longer holds, or no longer
holds in the name of or for the benefit of such other Person, any Note.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein and in the
other Note Documents shall survive the execution and delivery of this
Agreement and the Notes, the purchase or transfer by you of any Note or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other holder
of a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company or any Subsidiary pursuant to this
Agreement or any other Note Document shall be deemed representations and
warranties of each of the Company and its Subsidiaries under this
Agreement. Subject to the immediately preceding sentence, this Agreement,
the Notes and the other Note Documents embody the entire agreement and
understanding between you and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.
16. AMENDMENT AND WAIVER.
16.1 REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of
any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and
all the Purchasers (or when CoreComm Limited is not a holder of the Notes,
the Required Holders), except that when CoreComm Limited is not a holder of
the Notes (a) no amendment or waiver of any of the provisions of Section 1,
2, 3, 4, 5, 6 or 20 hereof, or any defined term (as it is used therein),
will be effective as to you unless consented to by you in writing, and (b)
no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby:
(i) subject to the provisions of Section 11 relating to
acceleration or rescission, change the amount or time of any
prepayment or repurchase or payment of principal of, or reduce the
rate or change the time of payment or method of computation of
interest on, the Notes;
(ii) change the percentage of the aggregate principal amount
of the Notes the holders of which are required to consent to any
such amendment or waiver;
(iii) subordinate the Notes (or any of them) to any other
obligations of the Company now or hereafter existing; (iv) reduce
or limit the Company's liability with respect to any Obligations
owing to you or any other holder of any Note;
(v) release a material portion of the Collateral in any
transaction or any series of related transactions;
(vi) permit the creation, incurrence, assumption or existence
of any Lien on a material portion of the Collateral in any
transaction or any series of related transactions to secure any
obligations other than obligations owing to you and the other
holders of Notes under the Note Documents; or
(vii) amend any of Sections 7, 11.1 (a), 11.1(b), any of 11.2
through 11.6, 17 or 19.
If any action is taken under the Note Documents at the request or
with the consent of less than all the Noteholders, each consenting or
requesting Noteholder shall, contemporaneously with the making of such
request or granting of such consent, notify the non-consenting or
non-requesting Noteholder of the same in reasonable detail.
16.2 SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company will provide each holder
of the Notes (irrespective of the amount of Notes then owned by it
at the time) with sufficient information, sufficiently far in
advance of the date a decision is required, to enable such holder
to make an informed and considered decision with respect to any
proposed amendment, waiver or consent in respect of any of the
provisions hereof or of the other Note Documents. The Company will
deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this
Section 16 to each holder of outstanding Notes promptly following
the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly
pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant
any security, to any holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes or any
waiver or amendment of any of the terms and provisions hereof or
of the other Note Documents, unless such remuneration is
concurrently paid, or security is concurrently granted, on the
same terms, ratably to each holder of Notes then outstanding even
if such holder did not consent to such waiver or amendment.
16.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section
16 applies equally to all holders of Notes and is binding upon them, upon
each future holder of any Note and upon the Company without regard to
whether such Note has been marked to indicate such amendment or waiver. No
such amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or
impair any right consequent thereon. No course of dealing between the
Company and the holder of any Note nor any delay in exercising any right,
power or privilege hereunder or under any other Note Document shall operate
as a waiver of any right of any holder of such Note; nor shall any single
or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege. The remedies provided under this Agreement and the other Note
Documents are cumulative and not exclusive of any rights and remedies
provided by applicable law.
16.4 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or any other Note Document, or have directed the
taking of any action provided herein or in any other Note Document to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be deemed
not to be outstanding.
17. NOTICES.
All notices and communications provided for hereunder shall be in
writing and delivered (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), (b) by registered or certified mail with return receipt
requested (postage prepaid) or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the
address specified for such communications on the signature page
attached hereto, or at such other address as you or it shall have
specified to the Company in writing;
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the
Company in writing; or
(iii) if to the Company at its address set forth on the
first page of this Agreement (Telecopier No. 312-474-0814) to the
attention of its most senior financial officer, or at such other
address as the Company shall have specified to the holder of each
Note in writing.
All notices and communications provided for under this Section 17 will be
deemed given and effective only when actually received.
18. REPRODUCTION OF DOCUMENTS.
This Agreement, each of the other Note Documents and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications of this Agreement or any other Note Document that may
hereafter be executed, (b) documents received by you at the First Closing
and the Second Closing (except the Notes themselves), and (c) financial
statements, certificates and other information previously or hereafter
furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable
law, any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by
you in the regular course of business) and any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence. This Section 18 shall not prohibit the Company or any other
holder of Notes from contesting any such reproduction to the same extent
that it could contest the original, or from introducing evidence to
demonstrate the inaccuracy of any such reproduction.
19. CONFIDENTIAL INFORMATION.
You hereby agree to maintain the confidentiality of all
Confidential Information in accordance with procedures adopted by you in
good faith to protect confidential information of third parties delivered
to you; provided that you may deliver or disclose Confidential Information
to (a) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (b) your
counsel or your financial and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with
the terms of this Section 19, (c) any other holder of any Note or to the
Agent or any Bank, (d) any Institutional Investor to which you sell or
offer to sell such Note or any part thereof or any participation therein
(if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 19),
(e) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 19),
(f) any federal or state regulatory authority having jurisdiction over you,
or (g) any other Person to which such delivery or disclosure may be
necessary or appropriate (i) to effect compliance with any law, rule,
regulation or order applicable to you, (ii) in response to any subpoena or
other legal process, (iii) in connection with any litigation to which you,
any other holder of any Note or the Agent are a party or (iv) if an Event
of Default shall have occurred and be continuing, to the extent you may
reasonably determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights and
remedies under your Notes, this Agreement and the other Note Documents.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 19
as though it were a party to this Agreement. Upon the reasonable request of
the Company in connection with the delivery to any holder of a Note of
information required to be delivered to such holder under this Agreement or
requested by such holder (other than a holder that is a party to this
Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 19.
20. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates
as the purchaser of the Notes that you have agreed to purchase hereunder,
by written notice to the Company, which notice shall be signed by both you
and such Affiliate, shall contain such Affiliate's agreement to be bound by
this Agreement and shall contain a confirmation by such Affiliate of the
accuracy with respect to it of the representations set forth in Section 6.
Upon receipt of such notice, wherever the word "you" is used in this
Agreement (other than in this Section 20), such word shall be deemed to
refer to such Affiliate in lieu of you. In the event that such Affiliate is
so substituted as a purchaser hereunder and such Affiliate thereafter
transfers to you all of the Notes then held by such Affiliate, upon receipt
by the Company of notice of such transfer, wherever the word "you" is used
in this Agreement (other than in this Section 20), such word shall no
longer be deemed to refer to such Affiliate, but shall refer to you, and
you shall have all the rights of an original holder of the Notes under this
Agreement.
21. MISCELLANEOUS.
21.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by
or on behalf of any of the parties hereto bind and inure to the benefit of
their respective successors and assigns (including, without limitation, any
subsequent holder of a Note) whether so expressed or not.
21.2 PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or interest on any Note that
is due on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days elapsed in
the computation of the items payable on such next succeeding Business Day.
21.3 SATISFACTION REQUIREMENT.
Except as otherwise provided herein, or in any other Note
Document, if any agreement, certificate or other writing, or any action
taken or to be taken, is by the terms of this Agreement or any other Note
Document required to be satisfactory to you or to the Required Holders, the
determination of such satisfaction shall be made by you or the Required
Holders, as the case may be, in the sole and exclusive judgment (exercised
in good faith) of the Person or Persons making such determination.
21.4 SEVERABILITY.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by
law) not invalidate or render unenforceable such provision in any other
jurisdiction.
21.5 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance
with any other covenant. Where any provision herein refers to action to be
taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
21.6 COMPUTATION OF TIME PERIODS.
In this Agreement, in the computation of periods of time from a
specific date to a later specified date, the word "from" means "from and
including", the word "through" means "through and including", and the words
"to" and "until" each mean "to but not excluding".
21.7 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute
one instrument. Each counterpart may consist of a number of copies hereof,
each signed by less than all, but together signed by all, of the parties
hereto.
21.8 GOVERNING LAW; SUBMISSION TO JURISDICTION, ETC.
(a) This Agreement shall be governed by, and construed and
enforced in accordance with, the law of the State of New York.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York state court or federal
court of the United States of America sitting in New York, New
York, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, the Notes
or the other Note Documents, or for recognition or enforcement of
any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such New
York state court or, to the extent permitted by applicable law, in
such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by applicable law. Nothing in this
Agreement shall affect any right that any party may otherwise have
to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
(c) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or
relating to this Agreement, the Notes or the other Note Documents
in any New York state or federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by
applicable law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) To the extent that the Company has or hereafter may
acquire any immunity from the jurisdiction of any court or from
any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, the Company
hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the Notes.
(e) THE PARTIES HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF
THE NOTE DOCUMENTS, THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
ACTIONS OF THE AGENT OR THE PURCHASER IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
21.9 BANKRUPTCY WAIVERS.
The Company and each of its Subsidiaries waives, to the fullest
extent permitted by applicable law, all claims, remedies, defenses or
courses of action arising under Sections 506, 510, 543, 544, 545, 547, 548,
549 and 553 as it relates to this Agreement and the other Note Documents.
21.10 PERMITTED DISPOSITIONS.
Provided that the Company applies all the proceeds from each
Permitted Disposition to repay the Obligations as provided in Section
7.1(b), the terms of Section 8.4, 8.6, 8.9, 8.11, 9.5, 9.14 or otherwise
contained as the Note Documents which prohibit the same shall be
inoperative and of no force and effect.
21.11 REPURCHASE PROVISIONS
Anything in any Note Document to the contrary notwithstanding,
Merrill Lynch Global Allocation Fund, Inc. or any of its Affiliates may at
any time in its sole and absolute direction (including during the
continuance of any Default or Event of Default) purchase all or any part of
the Notes held by CoreComm Limited and its Affiliates and their successors
and assigns, and CoreComm Limited, such Affiliates and their successors and
assigns shall sell such Notes if it is paid an amount equal to the
aggregate principal amount of the Notes, being so purchased and the related
accrued and unpaid interest thereon.
21.12 SUBORDINATION, ETC.
(a) The holders of Class A Notes and Delayed Closing Notes' Liens
on the Collateral shall be prior and superior to any Liens of holders of
Class B Notes therein, and the holders of Class B Notes expressly
acknowledge and agree that their Liens therein are subordinate to the Liens
of the holders of Class A Notes and Delayed Closing Notes. The priorities
established herein are applicable without regard to (i) the date a loan,
advance or extension of credit is made to the Company or any other
obligations are incurred by the Company, (ii) the time or order of
attachments, perfection, filing or recording of the Liens or the time or
order of filing of financing statements and other security documents or the
giving or failure to give notice of the acquisition of any such Lien, and
(iii) the rules of priority established under the Uniform Commercial Code
or other laws of a relevant state relating to the priority of Liens or the
provisions of the Bankruptcy Code or any state insolvency laws.
(b) The obligations of the Company to the holders of Class A Notes
and Delayed Closing Notes (including any interest accruing on such Notes)
shall first be paid in full before any payment or distribution by the
Company or from its assets, whether in cash, securities or other property,
shall be made to holders of Class B Notes on account of the Company's
obligations to holders of Class B Notes, except that with respect to the
proceeds of Permitted Dispositions, the holders of the Class A Notes shall
be paid first, the holders of the Class B Notes shall be paid second, and
the holders of the Delayed Closing Notes shall be paid third Any payment or
distribution by the Company or from its assets, whether in cash, securities
or other property, which would otherwise (but for these provisions) be
payable or deliverable in respect of the obligations of the Company to
holders of Class B Notes (or holders of Delayed Closing Notes, in the case
of proceeds of Permitted Dispositions), shall be paid or delivered directly
to holders of Class A Notes and Delayed Closing Notes (or the holders of
Class A Notes and, after the Class A Notes have been paid in full, Class B
Notes, in the case of proceeds of Permitted Dispositions) until the
obligations of the Company to holders of Class A Notes and Delayed Closing
Notes (or the holders of the Class A Notes and Class B Notes, in the case
of proceeds of Permitted Dispositions) (including any interest accruing on
such Notes) shall have been paid in full.
(c) Except for the foregoing subordination in clauses (a) and (b),
all the Notes shall be identical in all respects and entitled to all the
same right, title and interest pursuant to the Note Documents. The
provisions of this Section 21.12 shall define the relative rights of the
Noteholders and shall not affect the obligations of the Company, which
shall remain absolute and unconditional, to comply with all the terms of
the Note Documents.
(d) By executing this Agreement, CoreComm Limited consents to the
granting of a security interest in the CoreComm Asset Purchase Agreement in
favor of the Collateral Agent pursuant to the Security Agreement.
If you are in agreement with the foregoing, please sign the form
of agreement on the accompanying counterpart of this Agreement and return
it to the Company, whereupon the foregoing shall become a binding agreement
between you and the Company.
Very truly yours,
Company:
USN COMMUNICATIONS, INC.
By: /s/ Ronald W. Gavllet
___________________________
Name: Ronald W. Gavillet
Title:
The foregoing is hereby agreed to as of the date first above written.
MERRILL LYNCH GLOBAL
ALLOCATION FUND, INC.
By: /s/ Lisa Ann O'Donnell
__________________________
Name: Lisa Ann O'Donnell
Title: Authorized Signatory, V.P. MLAM
Address for Notices:
Address: 800 Scudders Mill Road
Plainsboro, NJ 08536
Telecopier: (609) 282-6916
Payment Instructions:
Citibank N.A., New York
ABA #021-000-089
Beneficiary Bank A/C#: 09250276
Brown Brothers Harriman & Co.
Beneficiary A/C#: 8116915
Ref: Global Allocation Fund
CORECOMM LIMITED
By: /s/ Richard J. Lubasch
______________________________
Name: Richard J. Lubasch
Title: Senior Vice President
Address for Notices:
Address: 110 East 59th Street
New York, NY 10022
Telecopier: (212) 906-8489
Payment Instructions:
SCHEDULE I
DEFINED TERMS
As used in this Agreement, the following terms shall have
the respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the term defined):
"ACCOUNT" means the Concentration Account of the Company
at Harris Trust & Savings Bank Account No. 432-329-1).
"AFFILIATE" means, with respect to any Person, any other
Person that, directly or indirectly, controls, is controlled by or
is under common control with such Person, or is a director or
officer of such Person. For purposes of this definition, the term
"control" (including the terms "controlling", "controlled by" and
"under common control with") of a Person means the possession,
direct or indirect, of the power to vote 5% or more of the Voting
Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the
ownership of Voting Stock, by contract or otherwise. For purposes
hereof, the Purchaser and its Affiliates shall not be considered
Affiliates of the Company.
"AGREEMENT" means this Note Purchase Agreement, as
amended, supplemented or otherwise modified from time to time.
"BANKRUPTCY CODE" shall mean The Bankruptcy Reform Act
of 1978, codified as 11 U.S.C. ss. 101 et seq., as heretofore and
hereafter amended from time to time, and any successor act or
statute.
"BANKRUPTCY COURT" shall mean the United States
Bankruptcy Court for Delaware or any other court having
jurisdiction over the Case.
"BENEFIT LIABILITIES" has the meaning specified in
Section 3 of ERISA.
"BUSINESS DAY" means any day other than a Saturday, a
Sunday or a day on which commercial banks in New York, New York,
are required or authorized by law to be closed.
"CAPITALIZED LEASE" means any lease with respect to which
the lessee is required concurrently to recognize the acquisition
of an asset and the incurrence of a liability in accordance with
GAAP.
"CARVE-OUT PAYMENTS" has the meaning provided in Section
9.23.
"CASH EQUIVALENTS" means, at any time, (a) any evidence
of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided, that
the full faith and credit of the United States of America is
pledged in support thereof); (b) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less
than $500,000,000; (c) certificates of deposit with a maturity of
180 days or less of any financial institution that is not
organized under the laws of the United States, any state thereof
or the District of Columbia that are rated at least A-1 by S&P or
at least P-1 by Moody's or at least an equivalent rating category
of another nationally recognized securities rating agency; (d)
repurchase agreements and reverse repurchase agreements relating
to marketable direct obligations issued or unconditionally
guaranteed by the government of the United States of America or
issued by any agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing
within 180 days from the date of acquisition; provided that the
terms of such agreements comply with the guidelines set forth in
the Federal Financial Agreements of Depository Institutions With
Securities Dealers and Others, as adopted by the Comptroller of
the Currency on October 31, 1985.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to
time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the
U.S. Environmental Protection
"CERTIFICATES" means any state or federal certificates of
operating authority of the Company or its Subsidiaries.
"CHANGE OF CONTROL" shall be deemed to occur if (a) the
sale, conveyance, transfer or lease (other than to the Company or
any wholly-owned Subsidiary of the Company), whether direct or
indirect, of all or substantially all of the assets of the Company
or of the Company and its Subsidiaries taken as a whole to any
"person" or "group" (within the meaning of Sections 13(d)(3) and
14(d)(2) of the Exchange Act or any successor provision to either
of the foregoing, including any group acting for the purpose of
acquiring, holding or disposing of securities within the meaning
of Rule 13d-5(b)(i) under the Exchange Act) shall have occurred;
or (b) any "person" or "group" (within the meaning of Sections
13(d)(3) and 14(d)(2) of the Exchange Act or any successor
provision to either of the foregoing, including any group acting
for the purpose of acquiring, holding or disposing of securities
within the meaning of Rule 13d-5(b)(i) under the Exchange Act),
other than any Permitted Holder or Permitted Holders, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of more than 35 percent of the total voting power of all
classes of the Voting Stock of the Company (including any
warrants, options or rights to acquire such Voting Stock),
calculated on a fully diluted basis, and such voting power
percentage is greater than or equal to the total voting power
percentage then beneficially owned by the Permitted Holders in the
aggregate; or (c) during any period of two consecutive years,
individuals who at the beginning of such period constituted the
board of directors of the Company (together with any new directors
whose election or appointment by such board or whose nomination
for election by the stockholders of the Company was approved by a
vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for
any reason to constitute a majority of the board of directors of
the Company then in office.
"CHAPTER 11 CASE" means , collectively, the Chapter 11
cases of the Company and its Subsidiaries under Chapter 11 of the
Bankruptcy Code, Case No. 99-383 through 395, including any
conversion of such case under Chapter 7 of the Bankruptcy Code.
"CLASS A NOTES" has the meaning specified in Section 1.
"CLASS B NOTES" has the meaning specified in Section 1.
"COLLATERAL" means all "Collateral" referred to in the
Collateral Documents and all other property and assets that are or
are intended under the terms of the Collateral Documents to be
subject to any Lien in favor of you.
"COLLATERAL AGENCY AGREEMENT" has the means specified in
Section A. 4.3(f).
"COLLATERAL AGENT" means PricewaterhouseCoopers LLP, and
its successors and assigns as Collateral Agent under the
Collateral Agency Agreement.
"COLLATERAL DOCUMENTS" means, collectively, the Security
Agreement, the Collateral Agency Agreement, the Paying Agency
Agreement each other security or pledge agreement entered into
pursuant to Section 8.11 and each other agreement that creates or
purports to create or perfect a Lien in favor of you.
"COLLATERAL PURCHASER" has the meanings specified in
Section 21.10.
"COMMUNICATIONS ACT" means the Communications Act of
1934, as amended, 47 U.S.C. sec. 151 et seq.
"COMPANY" has the meaning specified on page one of this
Agreement.
"CONFIDENTIAL INFORMATION" means information delivered to
you by or on behalf of the Company or any of its Subsidiaries in
connection with this Agreement or the Transaction or the other
transactions contemplated hereby that is proprietary in nature and
that was financial in nature or clearly marked, labeled or
otherwise adequately identified when received by you as being
confidential information of the Company or such Subsidiary, but
does not include any such information that (a) is or was generally
available to the public (other than as a result of a breath of
your confidentiality obligations hereunder), (b) becomes known or
available to you on a nonconfidential basis other than through
disclosure by the Company or any of its Subsidiaries or (c)
constitutes financial statements delivered to you under Section
5.4 or 8.1 that are otherwise publicly available.
"CONNECTICUT TELEPHONE" means USN Wireless, Inc. and its
Subsidiaries.
"CORECOMM ASSET PURCHASE AGREEMENT" means, the Asset
Purchase Agreement, dated as of February 19, 1999, among the
Company, certain of its Subsidiaries and CoreComm Limited.
"CURED CONTRACT" has the meaning specified in Section 5.14.
"CURRENT VALUE" has the meaning specified in Section 3 of
ERISA.
"DEFAULT" means any Event of Default or any event or
condition that would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.
"DEFAULT RATE" means that rate of interest that is the
greater of 3 % per annum above the rate of interest stated in
clause (a) of the first paragraph of the Notes.
"DELAYED CLOSING" has the meaning specified in Section
3.3.
"DELAYED CLOSING DATE" has the meaning specified in
Section 3.3.
"DELAYED CLOSING NOTES" has the meaning specified in
Section 1.
"EMPLOYEE BENEFIT PLAN" has the meaning specified in
Section 3 of ERISA.
"ENVIRONMENTAL ACTION" means any action, suit, demand,
demand letter, claim, notice of noncompliance or violation, notice
of liability or potential liability, investigation, proceeding,
consent order or consent agreement relating in any way to any
Environmental Law, any Environmental Permit or any Hazardous
Materials or arising from alleged injury or threat to health,
safety or the environment, including, without limitation, (a) by
any Governmental Authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any
Governmental Authority or other third party for damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief.
"ENVIRONMENTAL LAW" means any federal, state, local or
foreign statute, law, ordinance, rule, regulation, code, order,
writ, judgment, injunction, decree or judicial, ministerial or
agency interpretation, policy or guidance relating to pollution or
to protection of the environment, health, safety or natural
resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"ENVIRONMENTAL PERMIT" means any permit, approval,
license, identification number or other authorization required
under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations
promulgated and the rulings issued thereunder from time to time.
"ERISA AFFILIATE" means any Person that for purposes of
Title IV of ERISA is a member of the controlled group of the
Company or any of the Guarantors, or under common control with the
Company or any of the Guarantors, within the meaning of Section
414 of the Internal Revenue Code.
"EVENT OF DEFAULT" has the meaning specified in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time, and the regulations promulgated and
the rulings issued thereunder from time to time.
"EXISTING NOTE PURCHASE AGREEMENT" means the Note
Purchase Agreement, dated as of the November 18, 1998, between the
Company and Merrill Lynch Global Allocation Fund, Inc., as amended
pursuant to the First Amendment, dated January 15, 1999, and the
Second Amendment, dated February 8, 1999.
"FACILITY FEE" means (a) in the case of Merrill Lynch
Global Allocation Fund, Inc., $90,000 (or, if the Notes of Merrill
Lynch Global Allocation Fund, Inc. have not been paid in full by
June 1, 1999, $670,000) and (b) in the case of CoreComm Limited,
$90,000 (or, if the Notes of CoreComm Limited have not been paid
in full by June 1, 1999, $180,000), such Facility Fee to be
payable to relevant Purchaser on the Maturity Date.
"FCC LICENSES" means the aggregate authority granted by,
or documents issued by, the FCC to the Company or any of its
Subsidiaries permitting the Company or any of its Subsidiaries, to
render, provide or engage in telecommunications or
telecommunications service within the jurisdiction of the FCC,
including authority that is the subject of an application or
request filed with the FCC by the Company or any of its
Subsidiaries.
"FCC RULES" means Title 47 of the Code of Federal
Regulations, as amended at any time and from time to time, and FCC
decisions issued pursuant to the adoption of such regulations.
"FILING DATE" shall mean February 18, 1999, the date on
which the Reorganization was commenced.
"FINAL DIP ORDER" shall mean an order of the Bankruptcy
Court, in form and substance satisfactory to the Purchaser, that
is entered pursuant to Section 364(c) and (d) of the Bankruptcy
Code and contains the finding that the Purchaser has extended such
credit in good faith and is entitled to the full protection of
Section 364(e) of the Bankruptcy Code, certified by the Clerk of
the Bankruptcy Court as a true and correct copy, approving the
financing contemplated by the Note Documents which has not been
reversed, stayed, modified or amended and for which the time to
appeal or seek rehearing has expired, and for which no appeal or
motion for rehearing has been filed.
"FIRST CLOSING" has the meaning specified in Section 3.1.
"FIRST CLOSING DATE" has the meaning specified in Section
3.1.
"FIRST CLOSING NOTES" has the meaning specified in
Section 3.1.
"GAAP" means generally accepted accounting principles as
in effect in the United States of America and as are applied in
the financial statements of a Person on a consistent basis.
"GOVERNMENTAL AUTHORITY" means any nation or government,
any state, province or other political subdivision thereof, and
any governmental, executive, legislative, judicial, administrative
or regulatory agency, department, authority, instrumentality,
commission, board or similar body, whether federal, state,
provincial, territorial, local or foreign.
"HAZARDOUS MATERIALS" means (a) petroleum or petroleum
products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon
gas and (b) any other chemicals, materials or substances
designated, classified or regulated as hazardous or toxic or as a
pollutant or contaminant under any Environmental Law.
"HEDGE AGREEMENTS" means interest rate swap, cap or
collar agreements, interest rate future or option contracts,
commodity future or option contracts, currency swap agreements,
currency fixture or option contracts and other similar agreements.
"HOLDER" means, with respect to any Note, the Person in
whose name such Note is registered in the register maintained by
the Company pursuant to Section 11. 1.
"INDEBTEDNESS" means, with respect to any Person (without
duplication):
(a) all indebtedness of such Person for borrowed money;
(b) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, or upon which interest payments
are customarily made;
(c) all Obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property or assets acquired by such Person, even though the rights and
remedies of the seller or the lender under such agreement in the event of
default are limited to repossession or sale of such property or assets;
(d) all Obligations of such Person as lessee under Capitalized
Leases;
(e) all Obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities;
(f) all Obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any shares of capital
stock of (or other ownership or profit interest in) such Person or in any
other Person, or any warrants, rights or options to acquire such shares (or
such other ownership or profit interest), other than any such Obligations
for accrued and unpaid dividends thereon;
(g) all Obligations of such Person in respect of Hedge Agreements,
commodities agreements or take-or-pay or other similar arrangements;
(h) all Obligations of such Person under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar off-balance
sheet financing if the transaction giving rise to such Obligation is
considered indebtedness for borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP;
(i) all Obligations of such Person for production payments from
property operated by or on behalf of such Person and other similar
arrangements with respect to natural resources;
(j) all Indebtedness of other Persons referred to in clauses (a)
through (j) above or clause (l) below guaranteed directly or indirectly in
any manner by such Person, or in effect guaranteed directly or indirectly
by such Person through an agreement (i) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or purchase of
such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor)
property or assets, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to
assure the holder of such Indebtedness against loss, (iii) to supply funds
to or in any other manner to invest in the debtor (including any agreement
to pay for property, assets or services irrespective of whether such
property or assets are received or such services are rendered) or (iv)
otherwise to assure a creditor against loss; and
(k) all Indebtedness referred to in clauses (a) through (k) above
of another Person secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien
on property or assets (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or
become liable for the payment of such Indebtedness.
The Indebtedness of any Person shall include (i) all obligations of any
partnership or joint venture of the character described in clauses (a)
through (1) above in which such person is a general partner or a joint
venturer and (ii) all obligations of such Person of the character described
in clauses (a) through (1) above to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"INDEMNIFIED PARTY" has the meaning specified in Section
14.2.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser
of a Note, (b) any holder of a Note holding more than 25 % of the
aggregate principal amount of the Notes outstanding on any date of
determination and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any
investment company, any insurance company, any broker or dealer,
or any other similar financial institution or entity, regardless
of legal form.
"INSUFFICIENCY" means, with respect to any Plan, the
amount, if any, of its unfunded benefit liabilities (as defined in
Section 4001(a)(18) of ERISA).
"INTERIM DIP ORDER" shall mean an interim order of the
Bankruptcy Court entered pursuant to Section 364(c) of the
Bankruptcy Code approving on a temporary basis financing up to the
aggregate amount specified on Annex I for the First Closing,
substantially in the form of Exhibit C hereto.
"INTERNAL REVENUE CODE" means the Internal Revenue Code
of 1986, as amended from time to time, and the regulations
promulgated and the rulings issued thereunder from time to time.
"INVESTMENT" means, with respect to any Person, any loan
or advance to such Person, any purchase or other acquisition of
any shares of capital stock (or other ownership or profit
interest), warrants, rights, options, obligations or other
securities of such Person, any capital contribution to such Person
or any other investment in such Person, including, without
limitation, any arrangement pursuant to which the investor incurs
Indebtedness of the types referred to in clause (k) or (1) of the
definition of "Indebtedness" in respect of such Person.
"LEGAL REQUIREMENTS" means all applicable international,
foreign, federal, state, and local laws, judgments, decrees,
orders, statutes, ordinances, rules, regulations, or Permits
including the Communications Act and all orders issued and
regulations promulgated under the Communications Act.
"LIEN" means, with respect to any Person, any mortgage,
lien, pledge, charge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance priority, charge or
other preference of any kind (including, without limitation, any
agreement to give any of the foregoing), or any interest or title
of any vendor, lessor, lender or other secured party to or of such
Person under any conditional sale or other title retention
agreement or Capitalized Lease, upon or with respect to any
property or asset of such Person (including, in the case of shares
of capital stock, stockholder agreements, voting trust agreements
and other similar arrangements).
"MATERIAL" means material in relation to the business,
operations, condition (financial or otherwise), assets,
liabilities or properties of the Company and the Guarantors, taken
as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect
on (a) the business, operations, condition (financial or
otherwise), assets, liabilities or properties of the Company and
its Subsidiaries, taken as a whole, as measured from the Filing
Date, (b) the ability of the Company or its Subsidiaries to
perform its obligations under this Agreement or any other Note
Document to which it is or is to be a party or (c) other than
solely as a result of an action or inaction by you, the rights and
remedies afforded to you under this Agreement or any other Note
Document.
"MATERIAL CONTRACT" means, with respect to any Person,
each contract to which such Person is a party involving aggregate
consideration payable to or by such Person of $150,000 or more in
any year or otherwise material to the business, condition
(financial or otherwise), operations, performance, properties or
prospects of such Person.
"MATURITY DATE" means the earliest of (a) any maturity
date provided in the Interim DIP Order or, after the entry
thereof, the Final DIP Order, or (b) (i) June 30, 1999, (ii) the
date the Notes have become or are declared to be immediately due
and payable pursuant to Section 11, (iii) the sale or disposition
of stock or assets of the Company and its Subsidiaries (other than
of Connecticut Telephone), in accordance with Section 363 of the
Bankruptcy Code, either pursuant to (A) the terms of the CoreComm
Asset Purchase Agreement or (B) another sale (other than of
Connecticut Telephone) approved by the Purchasers in their sole
and absolute discretion, or (iv) the consummation of the
transactions contemplated by the Overbid Facility.
"MULTIEMPLOYER PLAN" means a multiemployer plan (as
defined in Section 4001(a)(3) of ERISA) to which the Company or
any ERISA Affiliate is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years
made or accrued an obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan (as
defined in Section 4001(a)(15) of ERISA) that (a) is maintained
for employees of the Company or any ERISA Affiliate and at least
one Person other than the Company and the ERISA Affiliates or (b)
was so maintained and in respect of which the Company or any ERISA
Affiliate could have liability under Section 4064 or 4069 of ERISA
in the event such plan has been or were to be terminated.
"NOTE DOCUMENTS" means, collectively, this Agreement, the
Notes, the Collateral Documents, each other agreement evidencing
any Obligation of the Company secured by the Collateral Documents
and the Subsidiary Guaranty, in each case as amended, supplemented
or otherwise modified hereafter from time to time in accordance
with the terms hereof and thereof.
"NOTES" has the meaning defined in Section 1.
"NPL" means the National Priorities List under CERCLA.
"OBLIGATION" means, with respect to any Person, any
payment, performance or other obligation of such Person of any
kind, including, without limitation, any liability of such Person
on any claim, whether or not the right of any creditor to payment
in respect of such claim is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured or unsecured, and whether or not such
claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 11.1(g).
"OFFICER'S CERTIFICATE" means a certificate of a Senior
Financial Officer or of any other officer of the Company whose
responsibilities extend to the subject matter of such certificate.
"OVERBID FACILITY" has the meaning set forth in Section
7.1(b).
"PAYING AGENCY AGREEMENT" has the meaning set forth in
Section 7.1(b).
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA or any successor thereto.
"PERMITS" of a Person shall mean all rights, franchises,
permits, authorities, licenses, certificates of approval or
authorizations, including licenses and other authorizations
issuable by a Governmental Authority, which pursuant to applicable
Legal Requirements are necessary to permit such Person lawfully to
conduct and operate its business as currently conducted and to own
and use its assets.
"PERMITTED DISPOSITION" means the sale or disposition of
stock or assets of Connecticut Telephone, in accordance with
Section 363 of the Bankruptcy Code, pursuant to terms approved by
the Purchasers in their sole and absolute discretion; provided
that the consent of the Purchasers shall not be required if (a)
the aggregate amount of cash consideration to be received on the
initial closing date of the Permitted Disposition is equal to or
greater that 110% of the aggregate amount of the monetary
Obligations under the Note Documents anticipated to be owing to
the Purchasers on such closing date (which amount shall be
specified by each Purchaser to the Company) and (b) the Permitted
Disposition is on fair and reasonable terms and would be entered
into by a prudent Person in the position of the Company with a
Person which is not one of its Affiliates as determined in good
faith by the Board of Directors of the Company.
"PERMITTED HOLDERS" means J. Thomas Elliott, Ronald W.
Gavillet, the Chase Manhattan Bank, CIBC Oppenheimer Corp., John
Hancock Insurance Company, Northwood Capital Partners, LLC,
Northwood Ventures, HarbourVest Partners IV-Direct Fund L.P.,
HarbourVest Partners V-Direct Fund L.P., BT Alex Brown,
Incorporated, Enterprises, the Purchaser and any of their
respective Subsidiaries (or a wholly-owned Subsidiary of the sole
stockholder of any of the foregoing Persons).
"PERMITTED LIENS" means such of the following as to which
no enforcement, collection, execution, levy or foreclosure
proceeding shall have been commenced:
(a) Liens for taxes, assessments and governmental charges
or levies to the extent not otherwise required to be paid under
Section 8.5(a);
(b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's, storage and repairmen's Liens
and other similar Liens arising in the ordinary course of business
and securing obligations (other than Indebtedness for borrowed
money) that (i) are not overdue for a period of more than 60 days
or (ii) are being contested in good faith and by proper
proceedings and as to which appropriate reserves are being
maintained in accordance with GAAP;
(c) pledges or deposits to secure obligations incurred in
the ordinary course of business under workers' compensation laws,
unemployment insurance or other similar legislation (other than in
respect of employee benefit plans subject to ERISA) or to secure
public or statutory obligations;
(d) Liens securing the performance of, or payment in
respect of, bids, tenders, government contracts (other than for
the repayment of borrowed money), surety and appeal bonds and
other obligations of a similar nature incurred in the ordinary
course of business;
(e) any interest or title of a lessor or sublessor and
any restriction or encumbrance to which the interest or title of
such lessor or sublessor may be subject that is incurred in the
ordinary course of business and, either individually or when
aggregated with all other Permitted Liens in effect on any date of
determination, could not be reasonably expected to have a Material
Adverse Effect;
(f) Liens in favor of customs and revenue authorities
arising as a matter of law or pursuant to a bond to secure payment
of customs duties in connection with the importation of goods;
(g) customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions;
(h) easements, rights of way, zoning restrictions and
other encumbrances on title to real property that do not, either
individually or in the aggregate, render title to the property
encumbered thereby unmarketable or materially and adversely affect
either the use of such property for its present purposes or the
conduct of the business of the Company or any of its Subsidiaries
in the ordinary course;
(i) Liens in favor of the Company on assets of its
Subsidiaries other than Connecticut Telephone; and
(j) second priority Liens on the assets of the Company in
favor of MCI WorldCom on terms and conditions satisfactory to the
Purchaser.
"PERSON" means an individual, partnership, corporation
(including a business trust), limited liability company, joint
stock company, trust, unincorporated association, joint venture or
other entity, or a government or any political subdivision or
agency thereof.
"PLAN" means a Single Employer Plan or a Multiple
Employer Plan.
"PLAN OF REORGANIZATION" means a plan of reorganization
in the Chapter 11 case (or part thereof).
"PLEDGED SHARES" has the meaning specified in the
Security Agreement.
"POSTPETITION" means from and after the date the Company
commences its Chapter 11 case.
"PRESENT VALUE" has the meaning specified in Section 3 of
ERISA.
"PROPERTY" or "PROPERTIES" means, unless otherwise
expressly stated in this Agreement, real or personal property of
any kind, tangible or intangible, choate or inchoate.
"PURCHASER" means the Persons listed as purchasers of
Notes on Annex I, together with their successors and assigns.
"QPAM EXEMPTION" means Prohibited Transaction Class
Exemption 84-14 issued by the United States Department of Labor.
"REGULATION T" shall mean Regulation T of the Board of
Governors of the Federal Reserve System as from time to time in
effect (and any successor to all or a portion thereof).
"REGULATION U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in
effect (and any successor to all or a portion thereof).
"REGULATION X" shall mean Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in
effect (and any successor to all or a portion thereof).
"REORGANIZATION" shall mean the reorganization case in
respect of Company commenced by filing the voluntary petition
under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court
on the Filing Date.
"REPORTABLE EVENT" means any of the events set forth in
Section 4043(c) of ERISA other than those events as to which the
post-event notice requirement is waived under subsections .13,
.14, .18, .19, or .20 of PBGC Reg. _2615.
"REQUIRED HOLDERS" means, at any time, (a) when CoreComm
Limited is a holder of one or more Notes, any holder of a Note,
and (b) when CoreComm Limited is not a holder of a Note or with
respect to any actions taken or not taken by the Purchasers with
respect to Sections 8.10 or 11.1(n), the holders of at least a
majority in interest of the aggregate principal amount of all of
the Notes outstanding at such time (excluding from any calculation
thereof any Notes then owned or held by the Company or any of its
Subsidiaries or other Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer
and any other officer of the Company or any of its Subsidiaries
responsible for overseeing the administration of or reviewing
compliance with all or any portion of this Agreement or any other
Note Document.
"SECOND CLOSING" has the meaning specified in Section
3.2.
"SECOND CLOSING DATE" has the meaning specified in
Section 3.2.
"SECOND CLOSING NOTES" has the meaning specified in
Section 3.2.
"SECURED OBLIGATIONS" has the meaning specified in
Section 2 of the Security Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time.
"SECURITY AGREEMENT" has the meaning specified in Section
A4.3 (a).
"SENIOR FINANCIAL OFFICER" means the chief financial
officer, the principal accounting officer, the treasurer or the
comptroller of the Company.
"SEPARATE ACCOUNT" has the meaning specified in Section 3
of ERISA.
"SINGLE EMPLOYER PLAN" means a single employer plan (as
defined in Section 4001(a)(15) of ERISA) that (a) is maintained
for employees of the Company or any ERISA Affiliate and no Person
other than the Company and the ERISA Affiliates or (b) was so
maintained and in respect of which the Company or any ERISA
Affiliate could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, joint venture, limited liability
company, trust or estate of which (or in which) more than 50% of:
(a) the issued and outstanding shares of capital stock
having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether at the time
shares of capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence
of any contingency);
(b) the interest in the capital or profits of such
partnership, joint venture or limited liability company; or
(c) the beneficial interest in such trust or estate,
is at the time, directly or indirectly, owned or controlled by
such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other
Subsidiaries.
"SUBSIDIARY GUARANTY" has the meaning specified in
Section A4.3(c).
"SUPERPRIORITY CLAIM" shall mean a claim against the
Company in the Chapter 11 case which is an administrative expense
claim having priority over all administrative expenses of the kind
specified in Section 503(b), 507(b) and 364(c) of the Bankruptcy
Code.
"TERMINATION EVENT" means:
(a) (i) the occurrence of a reportable event, within the
meaning of Section 4043(c) of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event
has been waived by the PBGC or (ii) the requirements of paragraph
(1) of Section 4043(b) of ERISA (without regard to paragraph (2)
of such Section) are met with a contributing sponsor, as defined
in Section 4001(a)(13) of ERISA, of a Plan, and an event described
in paragraph (9), (IO), (II), (I 2) or (1 3) of Section 4043(c) of
ERISA would reasonably be expected to occur with respect to such
Plan within the following 30 days;
(b) the application for a minimum funding waiver with
respect to a Plan;
(c) the provision by the administrator of any Plan of a
notice of intent to terminate such Plan pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a
plan amendment referred to in Section 4041(e) of ERISA);
(d) the cessation of operations at a facility of the
Company or any ERISA Affiliate in the circumstances described in
Section 4062(e) of ERISA;
(e) the withdrawal by the Company or any ERISA Affiliate
from a Multiple Employer Plan during a plan year for which it was
a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for the imposition of a lien under
Section 302(f) of ERISA shall have been met with respect to any
Plan;
(g) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of
ERISA; or
(h) the institution by the PBGC of proceedings to
terminate a Plan pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of
ERISA, that constitutes grounds for the termination of, or the
appointment of a trustee to administer, a Plan.
"TRANSACTION" means the entering into and performance by
the Company and its Subsidiaries of the Note Documents and the
transactions contemplated thereby, including the Interim DIP Order
and the Final DIP Order but excluding the CoreComm Asset Purchase
Agreement and the transactions contemplated thereby.
"VOTING STOCK" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the
holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even if the right so
to vote has been suspended by the happening of such a contingency.
"WITHDRAWAL LIABILITY" has the meaning specified in Part
I of Subtitle E of Title IV of ERISA.
"WORLDCOM" means MCI WorldCom.
"YOU" and "YOUR" refers to each Purchaser.
ANNEX I
INFORMATION AS TO PURCHASERS
----------------------------
Purchaser Name First Closing Second Closing Delayed Closing
- -------------- ------------- -------------- ---------------
Merrill Lynch Global
Allocation Fund, Inc. $1,000,000 $2,000,000 Zero
Class A Notes Class A Notes
$16,330,070
Class B Notes
CoreComm Limited $1,000,000 $2,000,000 $500,000
Class A Notes Class A Notes Delayed Closing
Notes
Exhibit 10.3
EXHIBIT B
SECURITY AGREEMENT
Dated as of February 23, 1999
From
USN COMMUNICATIONS, INC.
and its Subsidiaries,
as the Grantors
to
PRICEWATERHOUSECOOPERS LLP, as
the Secured Party.
TABLE OF CONTENTS
PAGE
----
SECTION 1. Grant of Security............................................1
SECTION 2. Security for Obligations.....................................3
SECTION 3. Grantors Remain Liable.......................................4
SECTION 4. Delivery of Security Collateral..............................4
SECTION 5. Representations and Warranties...............................4
SECTION 6. Further Assurances...........................................5
SECTION 7. As to Equipment and Inventory................................6
SECTION 8. Insurance....................................................7
SECTION 9. Place of Perfection, Records, Collection of
Receivables..................................................7
SECTION 10. Voting Rights; Dividends; Etc................................8
SECTION 11. Transfers and Other Liens; Additional Shares.................9
SECTION 12. The Secured Party Appointed Attorney-in-Fact................10
SECTION 13. The Secured Party May Perform...............................10
SECTION 14. The Secured Party's Duties..................................10
SECTION 15. Remedies....................................................10
SECTION 16 Indemnity and Expenses......................................11
SECTION 17. Security Interest Absolute..................................12
SECTION 18. Amendments; Waivers; Etc....................................12
SECTION 19. Addresses for Notices.......................................13
SECTION 20. Continuing Security Interest, Assignments under the
Note Purchase Agreement.....................................13
SECTION 21. Release and Termination.....................................13
SECTION 22. Execution in Counterparts...................................13
SECTION 23. Governing Law; Terms........................................14
SECTION 24. Subject to Collateral Agency Agreement......................14
Schedule I PLEDGED SHARES
Schedule II LOCATIONS OF EQUIPMENT AND INVENTORY
Schedule III TRADE NAMES
SECURITY AGREEMENT, dated as of February 23, 1999, made by USN
COMMUNICATIONS, INC., a Delaware corporation (the "BORROWER"), and each of
the other Persons listed on the signature pages hereof (together with the
Borrower, collectively the "GRANTORS" and individually a "GRANTOR"), in
favor of PRICEWATERHOUSE COOPERS LLP, as collateral agent (together with
its successors and assigns in such capacity, the "COLLATERAL AGENT") under
the Collateral Agency Agreement, dated as of the date hereof (as amended,
restated or otherwise modified from time to time, the "COLLATERAL AGENCY
AGREEMENT"), among the Borrower, the Collateral Agent and the Purchasers
under the Note Purchase Agreement referred to below.
(1) The Borrower has entered into the Note Purchase Agreement,
dated as of the date hereof (such Agreement, as amended, restated or
otherwise modified from time to time, is referred to herein as the "NOTE
PURCHASE AGREEMENT"; the terms defined therein and not otherwise defined
herein being used herein as therein defined), with the purchasers named on
Annex I thereto (collectively, the "PURCHASERS"), pursuant to which the
Borrower is issuing Senior Secured Notes due June 30, 1999 (as amended,
restated or otherwise modified from time to time, the "NOTES").
(2) Each Grantor is the owner of the shares set forth in Schedule
I hereto and issued by the corporation named therein.
(3) The Secured Party is entering into this Agreement on behalf
of, and for benefit for, the Purchasers in order to perfect their security
interest in the Collateral.
(4) It is a condition precedent to the purchase of the Notes by
the Purchasers under the Note Purchase Agreement that each Grantor shall
have granted the assignment and security interest and made the pledge and
assignment contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Secured Party to purchase the Notes, each Grantor hereby agrees with
the Secured Party as follows:
SECTION 1. Grant of Security. Each Grantor hereby assigns and pledges
to the Secured Party, and hereby grants to the Secured Party for its
benefit and the benefit of the Purchasers, a security interest in the
following (collectively, the "COLLATERAL"):
(a) all of such Grantor's right, title and interest, whether now
owned or hereafter acquired, in and to all equipment in all of its
forms, wherever located, now or hereafter existing, all fixtures and
all parts thereof and all accessions thereto (any and all such
equipment, fixtures, parts and accessions being the "EQUIPMENT");
(b) all of such Grantor's right, title and interest, whether now
owned or hereafter acquired, in and to all inventory in all of its
forms, wherever located, now or hereafter existing (including, but not
limited to, (i) all raw materials and work in process therefor,
finished goods thereof and materials used or consumed in the
manufacture or production thereof, (ii) goods in which such Grantor
has an interest in mass or a joint or other interest or right of any
kind (including, without limitation, goods in which such Grantor has
an interest or right as consignee) and (iii) goods that are returned
to or repossessed by such Grantor), and all accessions thereto and
products thereof and documents therefor (any and all such inventory,
accessions, products and documents being the "INVENTORY");
(c) all of such Grantor's right, title and interest, whether now
owned or hereafter acquired, in and to all accounts, accounts
receivable, reimbursements, notes, contract rights, lease rights,
chattel paper, instruments, deposit accounts, general intangibles
(including, without limitation, patents, trademarks, copyrights, trade
secrets, computer hardware and software, and other intellectual
property) and other obligations of any kind (including, without
limitation, all intercompany debt owed to such Grantor that is not
evidenced by a promissory note or similar instrument and all telephone
accounts and accounts receivable arising from telecommunication
services rendered to an end user prior to the sale, assignment, or
transfer of such account (collectively, the "END USER ACCOUNTS") to a
regional Bell operating company, a Bell operating company, local
exchange company, credit card company or provider of local telephone
services (each a "LEC") for billing and collection, and rights in and
to any of the telephone receivables, debts, and other amounts payable
to such Grantor by any LEC) and any and all other assets, now or
hereafter existing, whether or not arising out of or in connection
with the sale or lease of goods or the rendering of services and
whether or not earned by performance (including, without limitation,
the Corecomm Asset Purchase Agreement and any rights with respect to
workers' compensation or other deposits made by such Grantor and any
rights to receive tax refunds or other refunds, reimbursements and
payments from any federal, state or local government or any political
subdivision, agency or instrumentality thereof), and all rights now or
hereafter existing in and to all security agreements, leases and other
contracts (including without limitation, network contracts, customer
contracts for the furnishing by such Grantor of telecommunication
services and billing and collection contracts) securing or otherwise
relating to any such accounts, contract rights, chattel paper,
instruments, deposit accounts, general intangibles, obligations or
other assets (any and all such accounts, contract rights, chattel
paper, instruments, deposit accounts, general intangibles and
obligations, to the extent not referred to in clause (d), (e) or (f)
below, being the "RECEIVABLES", and any and all such leases, security
agreements and other contracts being the "RELATED CONTRACTS");
(d) all of the following (the "SECURITY COLLATERAL"):
(i) the shares of stock set forth opposite in Schedule I
hereto and issued by the corporations indicated therein
(collectively referred to herein as the "INITIAL PLEDGED SHARES",
and together with the shares referred to in clause (iii) below,
the "PLEDGED SHARES"), together with the certificates
representing such Initial Pledged Shares and all dividends, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all of such Initial Pledged Shares; and
(ii) all additional shares of stock of any issuer of any
Initial Pledged Shares or of any other Subsidiary of such Grantor
or of any other Person from time to time acquired by such Grantor
in any manner, and all additional shares of stock of each other
Subsidiary of such Grantor to the extent required pursuant to
Section 8.11 of the Note Purchase Agreement, together with the
certificates representing such additional shares and all
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares;
(e) all of the following (collectively, the "ACCOUNT COLLATERAL"):
(i) all deposit accounts of such Grantor, all funds held
therein and all certificates and instruments, if any, from time
to time representing or evidencing such deposit accounts;
(ii) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter
delivered to or otherwise possessed by the Secured Party for or
on behalf of such Grantor in substitution for or in addition to
any or all of the then existing Account Collateral; and
(iii) all interest, dividends, cash, drafts, rights to
receive payment in money or kind, instruments and other property
from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the then existing
Account Collateral;
(f) customer lists, all documents containing the names,
addresses, telephone numbers, and other information regarding such
Grantor's customers, subscribers, tapes, programs, printouts, disks, and
other material and documents relating to the recording, billing or
analyzing of any of the foregoing, and any other right to payment;
(g) all of such Grantor's other property and rights of every kind
and description and interests therein; and
(h) all proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds that constitute property of the
types described in clauses (a) - (g) of this Section 1) and, to the extent
not otherwise included, all (i) payments under insurance (whether or not a
Secured Party is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect
to any of the foregoing Collateral and (ii) cash.
Notwithstanding the foregoing, Collateral shall not include a
grant of any Related Contract or other contract or capital lease if such
grant (i) is prohibited by such contract's terms, (ii) requires
governmental approval, or (iii) would violate any applicable law.
SECTION 2. Security for Obligations. This Agreement secures the
payment of (a) all Obligations of each Grantor now or hereafter existing
under the Note Documents, whether direct or indirect, absolute or
contingent, including any extensions, modifications, substitutions,
amendments and renewals thereof, whether for principal, interest, premium,
penalties, fees, the Facility Fee, indemnifications, costs, expenses or
otherwise and (b) all amounts required to be paid by the Borrower to
CoreComm Limited pursuant to Section 8.6 of the CoreComm Asset Purchase
Agreement (all such Obligations being the "SECURED OBLIGATIONS"). Without
limiting the generality of the foregoing, this Agreement secures the
payment of all amounts that constitute part of the Secured Obligations and
would be owed by any Grantor to the Secured Party or a Purchaser under the
Note Documents.
SECTION 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts
and agreements included in the Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent
as if this Agreement had not been executed, (b) the exercise by the Secured
Party of any of the rights hereunder shall not release any Grantor from any
of its duties or obligations under the contracts and agreements included in
the Collateral and (c) neither the Secured Party nor any Purchaser shall
have any obligation or liability under the contracts and agreements
included in the Collateral by reason of this Agreement, nor shall the
Secured Party or any Purchaser be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
SECTION 4. Delivery of Security Collateral. Unless previously
delivered, all certificates or instruments representing or evidencing
Security Collateral or Account Collateral (and, to the extent requested by
the Secured Party, any other Collateral) shall be delivered to and held by
or on behalf of the Secured Party pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Secured Party. Subject to the Interim DIP Order, after
the occurrence of an Event of Default and for so long as it is continuing,
the Secured Party shall have the right, at any time in its discretion and
without notice to any Grantor, to transfer to or to register in the name of
the Secured Party or any of its nominees any or all of the Security
Collateral and Account Collateral, subject only to the revocable rights
specified in Section 10(a). In addition, the Secured Party shall have the
right at any time to exchange certificates or instruments representing or
evidencing Security Collateral or Account Collateral for certificates or
instruments of smaller or larger authorized denominations.
SECTION 5. Representations and Warranties. Each Grantor represents
and warrants as follows:
(a) All of the Equipment and Inventory are located at the
places specified in Schedule II hereto. The chief place of
business and chief executive office of such Grantor and the office
where such Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper that evidence Receivables,
are located at the address below such Grantor's name on the
signature pages hereto. No material amount of the Receivables is
evidenced by a promissory note or other instrument.
(b) Such Grantor is the legal and beneficial owner of the
Collateral of such Grantor free and clear of any Lien, except for
the security interest created by this Agreement and except as
permitted under the Note Purchase Agreement. No effective
financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Secured
Party relating to this Agreement or as permitted by the Note
Purchase Agreement. Such Grantor has the trade names listed on
Schedule III.
(c) The Pledged Shares have been duly authorized and
validly issued and are fully paid and non-assessable.
(d) The Initial Pledged Shares constitute the percentage
of the issued and outstanding shares of stock of the issuers
thereof indicated on Schedule I.
(e) This Agreement, the pledge of the Security Collateral
pursuant hereto, the pledge and assignment of the Account
Collateral pursuant hereto and the Interim DIP Order create a
valid and, subject to the filing of all necessary financing
statements and the delivery of the Security Collateral, perfected
first priority security interest in the Collateral of the type
subject to Articles 8 or 9 of the Uniform Commercial Code,
securing the payment of the Secured Obligations, and all filings
and other actions necessary or desirable to perfect and protect
such security interest have been duly taken except as permitted
under the Note Purchase Agreement.
(f) Other than the Interim DIP Order, no consent of any
other Person and no authorization, approval or other action by,
and no notice to or filing with, any governmental authority or
regulatory body or other third party is required either (i) for
the grant by any Grantor of the assignment and security interest
granted hereby, for the pledge by any Grantor of the Security
Collateral pursuant hereto or for the execution, delivery or
performance of this Agreement by any Grantor, (ii) for the
perfection or maintenance of the pledge, assignment and security
interest created hereby (including the first priority nature of
such pledge, assignment or security interest), except for the
Interim DIP Order and the filing of financing and continuation
statements under the Uniform Commercial Code, which financing
statements have been or will be duly filed or (iii) for the
exercise by the Secured Party of its voting or other rights
provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement, except as may be required
by the Interim DIP Order or in connection with the disposition of
any portion of the Security Collateral by laws affecting the
offering and sale of securities generally or as otherwise
permitted under the Note Purchase Agreement.
SECTION 6. Further Assurances.
(a) Each Grantor agrees that from time to time, at its
own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may
be necessary, or that the Secured Party may reasonably request, in
order to perfect and protect any pledge, assignment or security
interest granted or purported to be granted hereby or to enable
the Secured Party to exercise and enforce its respective rights
and remedies hereunder with respect to any Collateral. At the
reasonable request of the Secured Party, without limiting the
generality of the foregoing, each Grantor will: (i) mark
conspicuously each document included in the Inventory, each
chattel paper included in the Receivables, each Related Contract
and, at the request of the Secured Party, each of its records
pertaining to the Collateral with a legend, in form and substance
satisfactory to the Secured Party, indicating that such document,
chattel paper, Related Contract or Collateral is subject to the
security interest granted hereby; (ii) if any Collateral shall be
evidenced by a promissory note or other instrument or chattel
paper, deliver and pledge to the Secured Party hereunder such note
or instrument or chattel paper duly endorsed and accompanied by
duly executed instruments of transfer or assignment, all in form
and substance satisfactory to the Secured Party; and (iii) execute
and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Secured Party may request, in
order to perfect and preserve the pledge, assignment and security
interest granted or purported to be granted hereby.
(b) Each Grantor hereby authorizes the Secured Party to
file one or more financing or continuation statements, and
amendments thereto, relating to all or any part of the Collateral
without the signature of such Grantor where permitted by law. A
photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) Each Grantor will furnish to the Secured Party from
time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection
with the Collateral as the Secured Party may reasonably request,
all in reasonable detail.
(d) Each Grantor agrees to take any action which the
Secured Party may reasonably request in order to obtain and enjoy
the full rights and benefits granted to the Secured Party by this
Agreement and each other agreement, instrument and document
delivered to the Secured Party in connection herewith or in any
document evidencing or securing the Collateral, including
specifically, at such Grantor's sole cost and expense, the use of
its best efforts to assist in obtaining approval of the FCC or any
other agency or government for any action or transaction
contemplated by this Agreement which is then required by law, and
specifically, without limitation, upon request, to prepare, sign
and file with the FCC or any other agency or government the
assignor's or transferor's portion of any application or
applications for consent to the assignment of any license or
franchise or transfer of control necessary or appropriate under
the FCC's or any agency or government's rules and regulations for
approval of (a) any sale or sales of property constituting the
Collateral by the Secured Party on its behalf, or (b) any
assumption by the Secured Party on its behalf of voting rights or
management rights in property constituting the Collateral affected
in accordance with the terms of this Agreement.
SECTION 7. As to Equipment and Inventory. (a) Each Grantor shall
keep the Equipment and Inventory (other than Inventory sold in the ordinary
course of business) at the places therefor specified in Section 5(a) or,
upon prior written notice to the Secured Party, at such other places in a
jurisdiction where all action required by Section 6 shall have been taken
with respect to the Equipment and Inventory.
(b) To the extent required by the Note Purchase Agreement, each
Grantor shall cause the Equipment to be maintained and preserved in the
same condition, repair and working order as when new, ordinary wear and
tear excepted, and in accordance with any manufacturer's manual, and shall
forthwith, or in the case of any loss or damage to any of the Equipment as
quickly as practicable after the occurrence thereof, make or cause to be
made all repairs, replacements and other improvements in connection
therewith that are necessary or desirable to such end. Each Grantor shall
promptly furnish to the Secured Party a statement respecting any material
loss or damage to any of the Equipment.
(c) To the extent required by the Note Purchase Agreement and the
Bankruptcy Code, each Grantor shall pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies)
against, the Equipment and Inventory. In producing the Inventory, each
Grantor shall comply in all material respects with all requirements of the
Fair Labor Standards Act.
SECTION 8. Insurance. (a) Each Grantor shall, at its own expense,
maintain insurance with respect to the Equipment and Inventory in such
amounts, against such risks, in such form and with such insurers, as shall
be reasonably satisfactory to the Secured Party from time to time and is
customary in the industry. Each Grantor shall take all necessary action to
ensure that each policy for liability insurance shall provide for all
losses to be paid on behalf of the Secured Party and each Grantor as their
interests may appear, and each policy for property damage insurance shall
provide for all losses to be paid directly to the Secured Party. Each
Grantor shall take all necessary action to ensure that each such policy
shall in addition (i) name each Grantor and the Secured Party as insured
Party thereunder (without any representation or warranty by or obligation
upon the Secured Party) as their interests may appear, (ii) contain the
agreement by the insurer that any loss thereunder shall be payable to the
Secured Party notwithstanding any action, inaction or breach of
representation or warranty by any Grantor, (iii) provide that there shall
be no recourse against the Secured Party for payment of premiums or other
amounts with respect thereto and (iv) provide that at least 10 days' prior
written notice of cancellation or of lapse shall be given to the Secured
Party by the insurer. Each Grantor shall, if so requested by the Secured
Party, deliver to the Secured Party original or duplicate policies of such
insurance and, as often as the Secured Party may reasonably request, a
report of a reputable insurance broker with respect to such insurance.
Further, each Grantor shall, at the request of the Secured Party, duly
exercise and deliver instruments of assignment of such insurance policies
to comply with the requirements of Section 6 and cause the insurers to
acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by each
Grantor pursuant to this Section 8 may be paid directly to the Person who
shall have incurred liability covered by such insurance. In case of any
loss involving damage to Equipment or Inventory when subsection (c) of this
Section 8 is not applicable, each Grantor may make or cause to be made the
necessary repairs to or replacements of such Equipment or Inventory, and
any proceeds of insurance maintained by each Grantor pursuant to this
Section 8 shall be paid to such Grantor as reimbursement for the costs of
such repairs or replacements.
(c) Upon the occurrence and during the continuance of any Default
or the actual or constructive total loss (in excess of $100,000 per
occurrence) of any Equipment or Inventory, all insurance payments in
respect of such Equipment or Inventory shall be paid to and applied by the
Secured Party as specified in Section 15(b).
SECTION 9. Place of Perfection, Records, Collection of
Receivables. (a) Each Grantor shall keep its chief place of business and
chief executive office and the office where it keeps its records concerning
the Collateral and all originals of all chattel paper that evidence
Receivables, at the location therefor specified in Section 5(a) or, upon 30
days' prior written notice to the Secured Party, at such other locations in
a jurisdiction where all actions required by Section 6 shall have been
taken with respect to the Collateral. Each Grantor will hold and preserve
such records and chattel paper and will permit representatives of the
Secured Party at any time during normal business hours to inspect and make
abstracts from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b), each
Grantor shall have the sole right to continue to collect, at its own
expense, all amounts due or to become due to such Grantor under the
Receivables. In connection with such collections, each Grantor may take
such action as such Grantor or the Secured Party may deem necessary or
advisable to enforce collection of the Receivables; provided, however, that
the Secured Party shall have the right at any time following the occurrence
and during the continuance of an Event of Default, to notify the obligors
under any Receivables of the assignment of such Receivables to the Secured
Party and to direct such obligors to make payment of all amounts due or to
become due to such Grantor thereunder directly to the Secured Party and,
upon such notification and at the expense of such Grantor, to enforce
collection of any such Receivables, and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as
such Grantor might have done, and the Secured Party also agrees to provide
prompt notice (in advance, if reasonably practicable) of same to such
Grantor. After receipt by each Grantor of the notice from the Secured Party
referred to in the proviso to the preceding sentence, and until an Event of
Default no longer exists (i) subject to the Note Purchase Agreement and the
Interim DIP Order, all amounts and proceeds (including instruments)
received by such Grantor in respect of the Receivables shall be received in
trust for the benefit of the Secured Party hereunder and applied as
provided by Section 15(b) and (ii) such Grantor shall not adjust, settle or
compromise the amount or payment of any Receivable, release wholly or
partly any obligor thereof, or allow any credit or discount thereon.
SECTION 10. Voting Rights; Dividends; Etc. (a) So long as no
Event of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the
Security Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement or the other
Note Documents; provided, however, that such Grantor shall
not exercise or refrain from exercising any such right if,
in the Secured Party's judgment, such action would have a
material adverse effect on the value of the Security
Collateral or any part thereof; and provided further that
such Grantor shall give the Secured Party at least five
days' written notice of the manner in which it intends to
exercise, or the reasons for refraining from exercising, any
such right that could be reasonably expected to have a
Material Adverse Effect.
(ii) Each Grantor shall be entitled to receive and
retain any and all dividends and interest paid in respect of
the Security Collateral; provided, however, that any and all
(A) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of,
or in exchange for, any Security Collateral,
(B) dividends and other distributions paid or payable
in cash in respect of any Security Collateral in connection
with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or
paid-in-surplus and
(C) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in exchange
for, any Security Collateral shall be, and shall be
forthwith delivered to the Secured Party to hold as,
Security Collateral and shall, if received by any Grantor,
be received in trust for the benefit of the Secured Party,
be segregated from the other property or funds of such
Grantor and be forthwith delivered to the Secured Party as
Security Collateral in the same form as so received (with
any necessary endorsement).
(iii) The Secured Party shall execute and deliver (or
cause to be executed and delivered) to each Grantor all such
proxies and other instruments as each Grantor may reasonably
request for the purpose of enabling each Grantor to exercise
the voting and other rights that it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends
or interest payments that it is authorized to receive and
retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an
Event of Default, subject to the Note Purchase Agreement and the
Interim DIP Order:
(iv) All rights of each Grantor (x) to exercise or
refrain from exercising the voting and other consensual
rights that it would otherwise be entitled to exercise
pursuant to Section 10(a)(i) shall, upon notice to such
Grantor by the Secured Party, cease and (y) to receive the
dividends and interest payments that it would otherwise be
authorized to receive and retain pursuant to Section
10(a)(ii) shall, upon notice from the Secured Party,
automatically cease, and all such rights shall thereupon
become vested in the Secured Party, which shall thereupon
have the sole right to exercise or refrain from exercising
such voting and other consensual rights and to receive and
hold as Security Collateral such dividends and interest
payments.
(v) All dividends and interest payments that are
received by any Grantor contrary to the provisions of
paragraph (i) of this Section 10(b) shall be received in
trust for the benefit of the Secured Party, shall be
segregated from other funds of such Grantor and shall be
forthwith paid over to the Secured Party as Security
Collateral in the same form as so received (with any
necessary endorsement).
SECTION 11. Transfers and Other Liens; Additional Shares. (a) Each
Grantor shall not (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, except sales of Inventory in the ordinary course of business,
or (ii) create or suffer to exist any Lien upon or with respect to any of
the Collateral except for the pledge, assignment and security interest
created by this Agreement, except, in each case, as permitted under the
Note Purchase Agreement.
(b) Each Grantor shall (i) cause each issuer of the Pledged Shares
not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to such
Grantor, and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional shares of stock or
other securities.
SECTION 12. The Secured Party Appointed Attorney-in-Fact. Subject
to the Note Purchase Agreement and the Interim DIP Order, each Grantor
hereby irrevocably appoints each of the Secured Party such Grantor's
attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, from time to time in
the Secured Party's discretion, following an Event of Default and until
such Event of Default no longer exists, to take any action and to execute
any instrument that the Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to
the Secured Party pursuant to Section 8,
(b) to ask for, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the
Collateral,
(c) to receive, indorse and collect any drafts or other
instruments, documents and chattel paper, in connection with
clause (a) or (b) above, and
(d) to file any claims or take any action or institute
any proceedings that the Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise
to enforce compliance with the rights of the Secured Party with
respect to any of the Collateral.
SECTION 13. The Secured Party May Perform. If any Grantor fails to
perform any agreement contained herein, the Secured Party may itself
perform, or cause performance of, such agreement, and the expenses of the
Secured Party incurred in connection therewith shall be payable by such
Grantor under Section 16(b).
SECTION 14. The Secured Party's Duties. The powers conferred on
the Secured Party hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Secured
Party shall have no duty as to any Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Security Collateral, whether or not the
Secured Party has or is deemed to have knowledge of such matters, or as to
the taking of any necessary steps to preserve rights against any Party or
any other rights pertaining to any Collateral. The Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation of
any Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Secured Party accords its own
property.
SECTION 15. Remedies. If any Event of Default shall have occurred
and be continuing, subject to the Note Purchase Agreement and the Interim
DIP Order:
(a) The Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies
of a secured party upon default under the Uniform Commercial Code
in effect in the State of New York at such time (the "NEW YORK
UNIFORM COMMERCIAL CODE") (whether or not the New York Uniform
Commercial Code applies to the affected Collateral) and also may
(i) require each Grantor to, and each Grantor hereby agrees that
it will at its expense and upon request of the Secured Party
forthwith, assemble all or part of the Collateral as directed by
the Secured Party and make it available to the Secured Party at a
place to be designated by the Secured Party that is reasonably
convenient to all Party; (ii) without notice except as specified
below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Secured Party's
offices or elsewhere, for cash, on credit or for future delivery,
and upon such other terms as the Secured Party may deem
commercially reasonable; (iii) occupy any premises owned or leased
by any Grantor where the Collateral or any part thereof is
assembled or located for a reasonable period in order to
effectuate its rights and remedies hereunder or under law, without
obligation to each Grantor in respect of such occupation; and (iv)
exercise any and all rights and remedies of each Grantor under or
in connection the Receivables or otherwise in respect of the
Collateral, including, without limitation, any and all rights of
each Grantor to demand or otherwise require payments of any amount
under the Receivables. Each Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice
to such Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute
reasonable notification. The Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having
been given. The Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(b) All cash proceeds received by the Secured Party in
respect of any sale of, collection from, or other realization upon
all or any part of the Collateral may, in the discretion of the
Secured Party, be held by the Secured Party as collateral for,
and/or then or at any time thereafter applied (after payment of
any amounts payable to the Secured Party pursuant to Section 16)
in whole or in part by the Secured Party against, all or any part
of the Secured Obligations in such order as the Secured Party
shall elect. Any surplus of such cash or cash proceeds held by the
Secured Party and remaining after the indefeasible payment in full
in cash of all the Secured Obligations shall be paid over to the
relevant Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
(c) The Secured Party may exercise any and all rights and
remedies of each Grantor otherwise in respect of the Collateral.
(d) Upon notice to the relevant Grantor by the Secured
Party, all payments received by such Grantor in respect of the
Collateral shall be received in trust for the benefit of the
Secured Party, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Secured Party in
the same form as so received (with any necessary endorsement).
SECTION 16. Indemnity and Expenses. (a) Each Grantor agrees to
indemnify the Secured Party from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including,
without limitation, enforcement of this Agreement), except claims, losses
or liabilities resulting from the Secured Party's bad faith, gross
negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction.
(b) Each Grantor will upon demand pay to the Secured Party the
amount of any and all reasonable expenses, including the reasonable fees
and expenses of its counsel and of any experts and agents, that the Secured
Party may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale
of, collection from or other realization upon, any of the Collateral, (iii)
the exercise or enforcement of any of the rights of the Secured Party
hereunder or (iv) the failure by any Grantor to perform or observe any of
the provisions hereof.
SECTION 17. Security Interest Absolute. All rights of the Secured
Party and the pledge, assignment and security interest hereunder, and all
obligations of any Grantor hereunder, shall be absolute and unconditional,
irrespective of:
(a) any lack of validity or enforceability of any Note
Document or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured Obligations
or any other amendment or waiver of or any consent to any
departure from any Note Document;
(c) subject to the Note Purchase Agreement and the
Interim DIP Order, any taking, exchange, release or non-perfection
of any other collateral, or any taking, release or amendment or
waiver of or consent to departure from any guaranty, for all or
any of the Secured Obligations;
(d) any manner of application of collateral, or proceeds
thereof, to all or any of the Secured Obligations, or any manner
of sale or other disposition of any collateral for all or any of
the Secured Obligations or any other assets of any Grantor or any
of its Subsidiaries;
(e) any change, restructuring or termination of the
corporate structure or existence of any Grantor or any of its
Subsidiaries; or
(f) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, any Grantor
or a third party grantor of a security interest.
This Agreement shall continue to be effective or reinstated, as
the case may be, if at any time any payment of any of the Secured
Obligations is rescinded or must otherwise be returned by the Secured Party
or by any other Person, all as though such payment had not been made.
SECTION 18. Amendments; Waivers; Etc. No amendment or waiver of
any provision of this Agreement, and no consent to any departure by any
Grantor herefrom, shall in any event be effective unless the same shall be
in writing and signed by the Secured Party and, if required, approved by
the Bankruptcy Court, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
No failure on the part of the Secured Party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other
or further exercise thereof or the exercise of any other right.
SECTION 19. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including
telecopier, telegraphic, telex or cable communication) and, mailed,
telegraphed, telecopied, telexed, cabled or delivered if to any Grantor,
addressed to it at the address of the Borrower set forth below on the
signature pages hereof and as otherwise provided in the Interim DIP Order,
and if to the Secured Party, addressed to it at its address set forth below
on the signature pages herein, the CoreComm Asset Purchase Agreement, or,
as to any party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the
terms of this Section. All such notices and other communications shall,
when mailed, telecopied, telegraphed, telexed or cabled, be effective three
Business Days after deposited in the mails, or when telecopied, delivered
to the telegraph company, confirmed by telex answerback or delivered to the
cable company, respectively, addressed as aforesaid.
SECTION 20. Continuing Security Interest, Assignments under the
Note Purchase Agreement. This Agreement shall create a continuing security
interest in the Collateral and shall (a) remain in full force and effect
until the later of the indefeasible payment in full in cash of the
principal of the Notes, accrued interest thereon, and all other Secured
Obligations and the Maturity Date, (b) be binding upon each Grantor, its
successors and assigns and (c) inure, together with the rights and remedies
of the Secured Party hereunder, to the benefit of the Secured Party, the
Purchasers and their successors, transferees and assigns.
SECTION 21. Release and Termination. (a) Upon any sale, lease,
transfer or other disposition of any item of Collateral in accordance with
the terms of the Note Documents the security interest in such collateral
shall automatically be released. In addition, other than sales of Inventory
in the ordinary course of business, the Secured Party will, at each
Grantor's expense, execute and deliver to each Grantor such documents as
each Grantor shall reasonably request to evidence the release of such item
of Collateral from the assignment and security interest granted hereby;
provided, however, that (i) at the time of such release no Default shall
have occurred and be continuing, (ii) each Grantor shall have delivered to
the Secured Party, at least five Business Days prior to the date of the
proposed written release, a written request for release describing the item
of Collateral and the terms of the sale, lease, transfer or other
disposition in reasonable detail, including the price thereof and any
expenses in connection therewith, together with a form of release for
execution by the Secured Party and a certification by each relevant Grantor
to the effect that the transaction is in compliance with the Note Documents
and as to such other matters as the Secured Party may request, (iii) the
proceeds of any such sale, lease, transfer or other disposition required to
be applied in accordance with Sections 7.1 and 7.2 of the Note Purchase
Agreement shall be paid to the Purchasers as therein provided and (iv) the
Secured Party shall have approved such sale, lease, transfer or other
disposition in writing or the same shall otherwise be permitted by the Note
Purchase Agreement.
(b) Upon the later of the indefeasible payment in full in cash of
the principal of the Notes, accrued interest thereon, and all other Secured
Obligations and the Maturity Date, the pledge, assignment and security
interest granted hereby shall terminate and all rights to the Collateral
shall revert to the Grantors. Upon any such termination, the Secured Party
will, at the Grantors' expense, execute and deliver to each Grantor such
documents as each Grantor shall reasonably request to evidence such
termination.
SECTION 22. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of any executed counterpart
of a signature page to this Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 23. Governing Law; Terms. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York,
except to the extent that the validity or perfection of the security
interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the State
of New York, Unless otherwise defined herein or in the Note Purchase
Agreement, terms used in Article 9 of the New York Uniform Commercial Code
are used herein as therein defined.
SECTION 24. Subject to Collateral Agency Agreement. Any and all
rights granted to the Collateral Agent under this Agreement are to be held
and exercised by the Collateral Agent as collateral Agent solely for the
benefit of the Purchasers pursuant to the terms of the Collateral Trust
Agreement. Nothing in this Agreement or otherwise provided shall entitle
any Person, other than the Collateral Agent and the Purchasers, to any
right, title or interest in the Collateral or the benefits provided by this
Agreement.
USN COMMUNICATIONS, INC.
[FN]
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN Communications, Inc.
10 South Riverside Plaza - Suite 2000
Chicago, Illinois 60606
Phone: 312/906-3600
Fax: 312/559-8388
U.S. NETWORK CORPORATION
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
FONENET/OHIO, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS MIDWEST, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS NORTHEAST, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
QUEST UNITED, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS LONG DISTANCE, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN SOLUTIONS, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS ATLANTIC, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS VIRGINIA, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS SOUTHWEST, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS MAINE, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS WEST, INC.
By: /s/ Ronald W. Gavillet
___________________________________
Name: Ronald W. Gavillet
Title:
Accepted and Agreed:
PRICEWATERHOUSECOOPERS LLP
By: /s/ Martha E.M. Kopucz
_________________________________
Name: Martha E.M. Kopucz
Title: Principal
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
Attention: Martha E.M. Kopacz
Phone: 617-439-7363
Fax: 617-443-2849
<TABLE>
<CAPTION>
SCHEDULE I
PLEDGED SHARES
PERCENTAGE
OF
STOCK CERTIFICATE NUMBER OUTSTANDING
OWNER STOCK ISSUER CLASS OF STOCK PAR VALUE NO(S). OF SHARES SHARES
----- ------------ -------------- --------- ----------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
USN Communications, Inc.
</TABLE>
SCHEDULE II
LOCATIONS OF EQUIPMENT AND INVENTORY
LOCATIONS OF EQUIPMENT:
LOCATIONS OF INVENTORY:
SCHEDULE III
TRADE NAMES
EXHIBIT 10.4
EXHIBIT D
SUBSIDIARY GUARANTY
GUARANTY, dated as of February 23, 1999 (as amended, supplemented,
restated or otherwise modified from time to time, this "GUARANTY"), made by
each of the Persons (such capitalized term, and all other capitalized terms
used in these recitals without definition, to have the meanings assigned to
such terms in Article I) identified on the signature page hereof (herein
individually referred to as a "GUARANTOR" and collective as the
"GUARANTORS"), in favor of each of the Purchasers (as defined below).
W I T N E S S E T H:
WHEREAS, USN Communications, Inc., a Delaware corporation (the
"COMPANY"), has entered into the Note Purchase Agreement, dated as of the
date hereof (as it may be amended, restated or otherwise modified from time
to time, the "NOTE PURCHASE AGREEMENT"), with the purchasers listed on
Annex I thereto (collectively, together with their respective successors,
transferees and assigns, the "PURCHASERS");
WHEREAS, each Guarantor is a Subsidiary of the Company;
WHEREAS, as a condition precedent to the purchase of the Notes
under the Note Purchase Agreement, each Guarantor is required to execute
and deliver this Guaranty; and
WHEREAS, each Guarantor has duly authorized the execution,
delivery and performance of this Guaranty and will receive direct and
indirect benefits by reason of the sale of the Notes by the Company to the
Purchasers;
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and in order to induce the
Purchasers to purchase the Notes pursuant to the Note Purchase Agreement,
each Guarantor hereby agrees with the Purchasers as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms when used in this
Guaranty, including its preamble and recitals, shall have the following
meanings (such definitions to be equally applicable to the singular and
plural forms thereof):
"COMPANY" is defined in the first recital.
"GUARANTEED OBLIGATIONS" is defined in Section 2.1.
"GUARANTOR" and "GUARANTORS" is defined in the preamble.
"GUARANTY" is defined in the preamble.
"NOTE PURCHASE AGREEMENT" is defined in the first recital.
"PURCHASERS" is defined in the first recital.
SECTION 1.2. NOTE PURCHASE AGREEMENT DEFINITIONS. Unless otherwise
defined herein or the context otherwise requires, terms used in this
Guaranty, including its preamble and recitals, have the meanings provided
in the Note Purchase Agreement.
ARTICLE 2
GUARANTY
SECTION 2.1. GUARANTY. Each Guarantor hereby jointly and severally
unconditionally and irrevocably guarantees the full and prompt payment when
due, whether at stated maturity, by acceleration or otherwise (including,
without limitation, all amounts which would have become due but for the
operation of the automatic stay under Section 362(a) of the Federal
Bankruptcy Code, 11 U.S.C. 362(a)), of the following (collectively, the
"GUARANTEED OBLIGATIONS"),
(a) all Obligations of the Company to each Purchaser now
or hereafter existing under the Note Purchase Agreement and each
other Note Document (including this Guaranty), whether for
principal, interest, fees, expenses or otherwise; and
(b) any and all costs and expenses (including reasonable
fees and expenses of legal counsel) incurred by each Purchaser in
enforcing any of its rights under this Guaranty.
This Guaranty constitutes a guaranty of payment when due and not
merely of collection, and each Guarantor specifically agrees that it shall
not be necessary or required that any Purchaser exercise any right, assert
any claim or demand or enforce any remedy whatsoever against the Company,
any other Guarantor or any Collateral before or as a condition to the
obligations of such Guarantor hereunder.
SECTION 2.2. GUARANTY ABSOLUTE. This Guaranty is a continuing,
absolute, unconditional and irrevocable guarantee of payment and shall
remain in full force and effect until all the Guaranteed Obligations have
been indefeasibly paid in full in cash. Each Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms
of the agreement under which they arise, regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of
such terms or the rights of any Purchaser with respect thereto. The
liability of each Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:
(a) any lack of validity, legality or enforceability of
the Note Purchase Agreement, the Notes, any other Note Document or
any other agreement or instrument relating to any thereof;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Guaranteed
Obligations, or any compromise, renewal, extension, acceleration
or release with respect thereto, or any other amendment or waiver
of or any consent to departure from the Note Purchase Agreement,
the Notes or any other Note Document;
(c) any addition, exchange, release, impairment or
non-perfection of any collateral, or any release or amendment or
waiver of or consent to departure from any other guaranty, for all
or any of the Guaranteed Obligations;
(d) the failure of any Purchaser
(i) to assert any claim or demand or to enforce
any right or remedy against the Company, any Guarantor or
any other Person (including any other guarantor) under
the provisions of the Note Purchase Agreement, any Note,
any other Note Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any of the
Guaranteed Obligations;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the
terms of the Note Purchase Agreement, any Note or any other Note
Document;
(f) any defense, set-off or counterclaim which may at any
time be available to or be asserted by the Company or any
Guarantor against any Purchaser;
(g) any reduction, limitation, impairment or termination
of the Guaranteed Obligations for any reason, including any claim
of waiver, release, surrender, alteration or compromise, and shall
not be subject to (and each Guarantor hereby waives any right to
or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or
any other event or occurrence affecting, the Guaranteed
Obligations or otherwise; or
(h) any other circumstance which might otherwise
constitute a defense available to, or a legal or equitable
discharge of, the Company or any Guarantor.
SECTION 2.3. REINSTATEMENT, ETC. Each Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment (in whole or in part) of any of the
Guaranteed Obligations is rescinded or must otherwise be restored by any
Purchaser, upon the insolvency, bankruptcy or reorganization of the
Company, any other Guarantor or otherwise, all as though such payment had
not been made.
SECTION 2.4. WAIVER. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of
the Guaranteed Obligations and this Guaranty and any requirement that any
Purchaser protect, secure, perfect or insure any Lien or any property
subject thereto or exhaust any right or take any action against the
Company, any other Guarantor or any other Person (including any other
guarantor) or any collateral securing the Guaranteed Obligations.
SECTION 2.5. WAIVER OF SUBROGATION. Each Guarantor hereby
irrevocably waives any claim or other rights which it may now or hereafter
acquire against the Company or any other Guarantor that arise from the
existence, payment, performance or enforcement of such Guarantor's
obligations under this Guaranty or any other Note Document, including any
right of subrogation, reimbursement, exoneration or indemnification, any
right to participate in any claim or remedy of any Purchaser against the
Company or any other Guarantor or any collateral which any Purchaser now
has or hereafter acquires, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including the
right to take or receive from the Company or any other Guarantor, directly
or indirectly, in cash or other property or by set-off or in any manner,
payment or security on account of such claim or other rights, until such
time as the Guaranteed Obligations shall have been indefeasibly paid in
full in cash. If any amount shall be paid to any Guarantor in violation of
the preceding sentence, such amount shall be deemed to have been paid to
such Guarantor for the benefit of, and held in trust for, the Purchasers,
and shall forthwith be paid to the Purchasers to be credited and applied
against the Guaranteed Obligations, whether matured or unmatured. Each
Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by the Note Purchase Agreement
and that the waiver set forth in this Section is knowingly made in
contemplation of such benefits.
SECTION 2.6. SUCCESSORS, TRANSFEREES AND ASSIGNS; TRANSFERS OF
NOTES, ETC. This Guaranty shall:
(a) be binding upon each Guarantor and its successors,
transferees and assigns; and
(b) inure to the benefit of and be enforceable by the
Purchasers.
Without limiting the generality of clause (b), any Purchaser may assign or
otherwise transfer (in whole or in part) any Note held by it to any other
Person, and such other Person shall thereupon become vested with all rights
and benefits in respect thereof granted to such Purchaser under any Note
Document (including this Guaranty) or otherwise.
ARTICLE 3
REPRESENTATIONS AND COVENANTS
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. Each Guarantor
hereby represents and warrants to the Purchasers as follows:
(a) such Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has full corporate power and
authority to enter into this Guaranty and the other Note Documents
to which it is a party and to carry out the transactions
contemplated hereby and thereby;
(b) the execution and delivery by such Guarantor of this
Guaranty and the other Note Documents to which it is a party and
the consummation by such Guarantor of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action of such Guarantor. This Guaranty and
such other Note Documents to which such Guarantor is a party have
each been duly executed and delivered by such Guarantor and each
constitutes the legal, valid and binding obligation of such
Guarantor enforceable against such Guarantor in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect
affecting the rights of creditors generally and subject to the
effects of general principles of equity (regardless of whether
considered in a proceeding in law or equity); and
(c) the execution and delivery of this Guaranty and the
other Note Documents to which such Guarantor is a party and the
consummation by such Guarantor of the transactions contemplated
hereby do not (i) contravene or result in a default under such
Guarantor's articles of incorporation or bylaws (or comparable
organizational documents), (ii) contravene or result in a default
under any contractual restriction, law or governmental regulation
or court decree or order binding on such Guarantor, (iii) require
any filings, consents or authorizations which have not been duly
obtained or (iv) result in the creation or imposition of any Lien
on such Guarantor's properties (other than in favor of the
Purchasers).
SECTION 3.2. COVENANTS. Each Guarantor agrees to comply with all
the covenants contained in the Note Purchase Agreement and the other Note
Documents that are applicable to it.
ARTICLE 4
MISCELLANEOUS
SECTION 4.1. NOTE DOCUMENT. This Guaranty is a Note Document
executed pursuant to the Note Purchase Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and
applied in accordance with the terms and provisions thereof.
SECTION 4.2. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS;
ASSIGNMENT. In addition to, and not in limitation of, Section 2.6, this
Guaranty shall be binding upon each Guarantor and its successors,
transferees and assigns and shall inure to the benefit of and be
enforceable by the Purchasers and their respective successors, transferees
and assigns; provided, however, that no Guarantor may assign any of its
obligations hereunder without the prior written consent of each Purchaser.
SECTION 4.3. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by any Guarantor
therefrom shall in any event be effective unless the same shall be in
writing and signed by each Purchaser and, if required, approved by the
Bankruptcy Court and, in the case of any such amendment, each Guarantor,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 4.4. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile
transmission and, if to any Guarantor, mailed, given by facsimile
transmission or delivered to it care of the Company at the address provided
for in the Note Purchase Agreement and as otherwise provided in the Interim
DIP Order, and if to the Purchasers, mailed, given by facsimile
transmission or delivered to it, at the address provided for in the Note
Purchase Agreement, or as to any such party at such other address as shall
be designated by such party in a written notice to each other party
complying as to delivery with the terms of this Section. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given
three Business Days after posting; any notice sent by prepaid overnight
express mail shall be deemed delivered on the next following Business Day;
and any notice, if transmitted by facsimile transmission or delivery, shall
be deemed given upon electronic confirmation of transmission by the sender
thereof.
SECTION 4.5. NO WAIVER; REMEDIES. No failure on the part of any
Purchaser to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise
of any right hereunder preclude any other or further exercise thereof or
the exercise of any other right. Each Purchaser shall have all remedies
available at law or equity, including without limitation, the remedy of
specific performance for any breach of any provision hereof. The remedies
herein provided are cumulative and not exclusive of any remedies provided
by law or equity.
SECTION 4.6. RIGHT TO SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, each Purchaser is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to
setoff and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by such Purchaser to or for the credit or the account of any
Guarantor against any and all of the Guaranteed Obligations of such
Guarantor now or hereafter existing under this Guaranty, irrespective of
whether such Purchaser shall have made any demand under this Guaranty. Each
Purchaser agrees promptly to notify the Company after any such set-off and
application made by such Purchaser, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The
rights of each Purchaser under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which
the Purchasers may have.
SECTION 4.7. SEVERABILITY. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Guaranty or affecting the validity or enforceability of such provisions in
any other jurisdiction.
SECTION 4.8. COUNTERPARTS. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute but one and the same
agreement.
SECTION 4.9. GOVERNING LAW; ENTIRE AGREEMENT. THIS GUARANTY SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER NOTE DOCUMENT TO WHICH IT IS A PARTY) AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PURCHASERS ENTERING
INTO THE NOTE PURCHASE AGREEMENT AND EACH SUCH OTHER NOTE DOCUMENT.
SECTION 4.10. WAIVER OF JURY TRIAL. EACH GUARANTOR AND PURCHASER
HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS GUARANTY OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF THE PURCHASERS OR ANY GUARANTOR. THIS GUARANTY AND THE OTHER
NOTE DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO
WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 4.11. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS GUARANTY OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PURCHASER OR ANY GUARANTOR
SHALL BE BROUGHT AND MAINTAINED IN THE FEDERAL AND STATE COURTS OF THE
STATE OF NEW YORK LOCATED IN NEW YORK, NEW YORK. EACH GUARANTOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURTS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. EACH GUARANTOR FURTHER IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH GUARANTOR
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE
AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT ANY GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID
OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH
GUARANTOR HEREBY, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
GUARANTY.
SECTION 4.12. WAIVER OF CERTAIN CLAIMS. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NO GUARANTOR SHALL ASSERT, AND HEREBY WAIVES, ANY CLAIM
AGAINST EACH PURCHASER ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES)
ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS GUARANTY OR ANY
INSTRUMENT CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
USN COMMUNICATIONS, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN Communications, Inc.
10 South Riverside Plaza - Suite 2000
Chicago, Illinois 60606
Phone: 312/906-3600
Fax: 312/559-8388
U.S. NETWORK CORPORATION
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
FONENET/OHIO, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS MIDWEST, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS NORTHEAST, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
QUEST UNITED, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS LONG DISTANCE, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN SOLUTIONS, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS ATLANTIC, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS VIRGINIA, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS SOUTHWEST, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS MAINE, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN WIRELESS, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
CONNECTICUT TELEPHONE & COMMUNICATION
SYSTEMS, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
CONNECTICUT MOBILECOM, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN WIRELESS OF RHODE ISLAND, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN WIRELESS OF MASSACHUSETTS, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
USN COMMUNICATIONS WEST, INC.
By: /s/ Ronald W. Gavillet
__________________________________
Name: Ronald W. Gavillet
Title:
Acknowledged and Accepted:
MERRILL LYNCH GLOBAL ALLOCATION FUND, INC.
By: /s/ Lisa Ann O'Donnell
_______________________________
Name: Lisa Ann O'Donnell
Title: V.P. MLAM, Authorized
Signatory
CORCOMM LIMITED
By: /s/ Richard J. Lubasch
_______________________________
Name: Richard J. Lubasch
Title:
EXHIBIT F
PAYING AGENCY AGREEMENT
PAYING AGENCY AGREEMENT, dated as of February 23, 1999, made by
USN Communications, Inc., a Delaware corporation (the "Company"), each of
the Noteholders set forth on the signature pages hereof (together with
their permitted successors, transferees and assigns, the "Noteholders") and
PricewaterhouseCoopers LLP ("PWC"), as paying agent (together with its
permitted successors in such capacity, the "Paying Agent").
RECITALS:
WHEREAS, the Company has entered into the Note Purchase Agreement,
dated as of February 23, 1999 (such Agreement, as amended, restated or
otherwise modified from time to time, is referred to herein as the "Note
Purchase Agreement"; the terms defined therein and not otherwise defined
herein being used herein as therein defined), with the Noteholders,
pursuant to which the Company is issuing senior secured notes due June 30,
1999 (as amended, restated or otherwise modified from time to time, the
"Notes").
WHEREAS, in order to ensure that the cash proceeds of the Notes
are utilized strictly in accordance with the terms of Section 5.14 of the
Note Purchase Agreement, the Company and the Noteholders have requested
that the Paying Agent act as paying agent with respect to the disbursement
of such proceeds; and
WHEREAS, PWC is willing to act as the paying agent hereunder upon
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
1. The Company and the Noteholders hereby appoint PWC as the
Paying Agent in connection with the disbursement of the cash proceeds of
the Notes to the Company, upon the terms and subject to the conditions set
forth herein.
2. Prior to the First Closing, the Company shall designate at
Harris Trust and Savings Bank, Account No. 432-329-1, as its disbursement
account (the "Disbursement Account"). At the First Closing, the Second
Closing and each Delayed Closing, the Noteholders will transfer proceeds of
the Notes (except for the Class B Note, which shall be funded by converting
the principal, interest and fees outstanding on the First Closing Date
under the Existing Note Purchase Agreement into the principal amount of the
Class B Note) to the Disbursement Account (except for those Proceeds that
are applied to pay the fees and expenses of McDermott, Will & Emery and
PWC, which shall be paid directly to such Persons from the Proceeds) in
accordance with the terms and conditions of the Note Purchase Agreement.
The Noteholders shall be solely responsible for ensuring, and the Paying
Agent shall have no responsibility to verify, that all such amounts
transferred into the Disbursement Account are transferred in accordance
with the terms and conditions of the Note Purchase Agreement. In addition,
on each Business Day, amounts that are owing from the account debtors for
the Company and its Subsidiaries and that are on deposit in each blocked
account of the Company shall be transferred into the Disbursement Account
(all such amounts deposited into the Disbursement Account from time to time
being the "Proceeds"). All transfers out of the Disbursement Account shall
(a) require the approval and written authorization of both the Paying Agent
and the Company and (b) be made only to one of the following accounts of
the Company: (i) Harris Trust and Savings Bank Payroll Account (430-899-5);
(ii) Harris Trust and Savings Bank Disbursement Zero Balance Account
(430-898-7); (iii) The Chase Manhattan Bank Asset Management Account
(3121-003121); (iv) Harris Trust and Savings Bank Investment Management
Account (54345-71); or (v) Gabelli Fixed Income Account (72342-71).
3. The Company will, from time to time from and including the
First Closing Date to and including the Business Day immediately preceding
the Maturity Date (the "Disbursement Period"), submit to the Paying Agent
(with copies to each Noteholder) written disbursement requests (each a
"Disbursement Request") in the form of a "pre-check" register with respect
to the disbursement of the Proceeds, together with proposed wire transfer
instructions for transfers from the Disbursement Account. Each such
Disbursement Request shall specify in reasonable detail the amount, date
and payee of the requested disbursements, and those items referenced in
Section 5.6 of the Note Purchase Agreement and, more specifically, Exhibit
G thereto under which each requested disbursement is proposed to be made.
The Company shall provide in writing such further details with respect to
each Disbursement Request as the Paying Agent may reasonably request.
4. During the Disbursement Period, the Paying Agent is hereby
authorized and directed within two Business Days of receipt of a
Disbursement Request, in form and substance, in good faith determination by
the Paying Agent, consistent with the requirements of Section 5.6 of the
Note Purchase Agreement and, more specifically, Exhibit G thereto, to
approve and authorize for release the transfers proposed to be made by the
Company from the Disbursement Account; provided, however, that in no event
shall the Paying Agent approve and authorize for release pursuant to
Disbursement Requests (a) an aggregate amount in excess of the Proceeds,
(b) if any such release would result in the expenses of the Company and its
Subsidiaries increasing cumulatively by more 5% since the date of the First
Closing or 10% during any calendar week, in each case as measured against
the cash flow presentations delivered pursuant to Section 5.6 of the Note
Purchase Agreement or (c) subject to the three business day notice period
required by paragraph 15 of the Interim DIP Order, if any Default or Event
of Default under the Note Purchase Agreement has occurred and is
continuing. Promptly after making any payment, whether by check or by wire
transfer, in accordance with an approved Disbursement Request with funds
released from the Disbursement Account, the Company shall provide to the
Paying Agent a check register identifying each such payment.
5. The Paying Agent shall monitor the expenses and cash flow of
the Company and its Subsidiaries on terms requested by the Required
Holders, including, without limitation, with respect to compliance by the
Company of those matters which could constitute an Event of Default under
Section 11.1(n) of the Note Purchase Agreement.
6. The Paying Agent may resign at any time by giving 10 Business
Days' written notice thereof to each of the other parties hereto. Upon any
such resignation, the Noteholders and the Company shall appoint a
replacement paying agent. In the event the Noteholders and the Company have
not agreed to a replacement agent prior to the effectiveness of the Paying
Agent's resignation, the Noteholders shall name a replacement paying agent.
7. The Noteholders shall indemnify the Paying Agent and hold it
harmless from and against any loss, liability, costs, claims, damage,
expense, action or demand which the Paying Agent may incur or which may be
made against it as a result of or in connection with its appointment or the
exercise of its powers or the administration of its duties as the Paying
Agent, as well as the reasonable costs and expenses (including attorneys'
fees) which it may incur defending against any claim or liability except
such as may result from its own gross negligence or willful misconduct;
provided that the Paying Agent shall promptly notify the Noteholders in
writing of any such less, liability, cost, claim, damage, expense, action
or demand, in respect of which indemnity may be sought against the
Noteholders; provided further that prior to settling any such loss,
liability, cost, claim, damage expense, action or demand, in respect of
which indemnity may be sought against the Noteholders, the Paying Agent
shall promptly notify the Noteholders in writing of the terms and
conditions of any proposed settlement, and the Noteholders may at their
option assume the defense thereof, including the employment of counsel and
the payment of all expenses in connection therewith, and the Noteholders
shall thereafter have the right to negotiate and consent to the settlement
thereof. The Paying Agent shall have the right to employ separate counsel
and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Paying Agent unless the
employment such counsel has been specifically authorized by the
Noteholders. The Noteholders shall not be liable for any settlement
effected without their consent, but if settled with the consent of the
Noteholders or if there be a final judgment for the plaintiff in any action
with or without consent, the Noteholders agree to indemnify and hold
harmless the Paying Agent from and against any loss or liability by reason
of such settlement or judgment. The Paying Agent and its officers,
employees and agents shall incur no liability and shall be indemnified and
held harmless by the Company for any action, taken, omitted or suffered to
be taken in good faith, without gross negligence or willful misconduct, in
reliance upon (a) any written opinion of counsel, (b) any written or cabled
or telexed instruction from the Company or the Noteholders, or (c) any
written direction, consent, certificate, officers' certificate, affidavit,
statement, notice, request, order or approval, or other document conforming
to the requirements of the Note Purchase Agreement or this Agreement and
reasonably believed by the Paying Agent receiving the same to be genuine
and to be delivered, sent or signed by the proper party or parties. The
Paying Agent shall have no responsibility for any act, or omission to act,
of either the Company or any Noteholder.
8. Any notice, demand, request, consent, approval, declaration or
other communication to be given hereunder shall be in writing and either
shall be delivered in person with receipt acknowledged or by registered or
certified mail, return receipt requested, postage prepaid, or telecopied
and confirmed by telecopy answerback to the respective parties at their
addresses set forth on the signature pages to this Agreement or at such
other address as may be substituted by notice given as herein provided.
9. This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of New York applicable to
contracts made and performed in such State, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of
the United States of America.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer(s) on
the date first set forth above.
COMPANY: USN COMMUNICATIONS, INC.
By: /s/ Ronald W. Gavillet
______________________________
Name: Ronald W. Gavillet
Title:
USN Communications, Inc.
10 South Riverside Plaza - Suite 2000
Chicago, Illinois 60606
Phone: 312/906-3600
Fax: 312/559-8388
NOTEHOLDER: MERRILL LYNCH GLOBAL
ALLOCATION FUND, INC.
By: /s/ Lisa Ann O'Donnell
_______________________________
Name: Lisa Ann O'Donnell
Title: V.P. MLAM, Authorized
Signatory
Merrill Lynch Global Allocation Fund,
Inc.
800 Scudders Mill Road
Plainsboro, NJ 08536
Phone: 609/282-2000
Fax: 609/282-6916
NOTEHOLDER: CORECOMM LIMITED
By: /s/ Richard J. Lubasch
_______________________________
Name: Richard J. Lubasch
Title: Senior Vice President
CoreComm Limited
110 East 59th Street
New York, New York 10022
Phone: 212/906-8440
Fax: 212/906-8489
PAYING AGENT: PRICEWATERHOUSECOOPERS LLP
By: /s/ Martha E.M. Kopucz
_______________________________
Name: Martha E.M. Kopucz
Title: Principal
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
Attention: Martha E.M. Kopacz
Phone: 617-439-7363
Fax: 617-443-2849
TABLE OF CONTENTS
Page
RECITALS 1
Section 1. DEFINITIONS...................................................1
Section 1.1 Definitions................................................1
Section 1.2 Effectiveness of this Agreement............................4
Section 2. Representations And Warranties; Other Matters.................4
Section 2.1 Representations and Warranties of the Secured Parties......4
Section 2.2 Representations of Warranties of the Collateral Agent......4
Section 2.3 Cooperation; Accountings...................................5
Section 2.4. Termination of Note Agreement.............................5
Section 3. Appointment and Authorization of Collateral Agent..............5
Section 4. Agency Provisions..............................................5
Section 4.1 Delegation of Duties.....................................6
Section 4.2 Exculpatory Provisions...................................6
Section 4.3 Reliance by Collateral Agent.............................6
Section 4.4 Knowledge or Notice of Default or Event of Default.......7
Section 4.5 Non-Reliance on Collateral Agent and Other Secured
Parties................................................7
Section 4.6 Indemnification..........................................8
Section 4.7 Collateral Agent in Its Individual Capacity..............8
Section 4.8 Successor Collateral Agent...............................8
Section 5. Actions by the Collateral Agent...............................9
Section 5.1 Duties and Obligations...................................9
Section 5.2 Notification of Default..................................9
Section 5.3 Exercise of Remedies.....................................9
Section 5.4 Instructions from Secured Parties.......................10
Section 5.5 Emergency Actions.......................................10
Section 5.6 Changes to Security Documents...........................10
Section 5.7 Release of Collateral...................................11
Section 5.8 Other Actions...........................................11
Section 5.9 Cooperation.............................................11
Section 5.10 Distribution of Proceeds................................11
Section 5.11 Authorized Investments..................................12
Section 6. Miscellaneous................................................13
Section 6.1 Secured Parties; Other Collateral......................13
Section 6.2 Marshalling............................................13
Section 6.3 Consents, Amendments, Waivers..........................13
Section 6.4 Parties in Interest....................................13
Section 6.5 Counterparts...........................................13
Section 6.6 Termination............................................14
Section 6.7 Notices................................................14
Section 6.8 Establishing Outstanding Amount of Senior
Secured Obligations..................................15
Section 6.9 Governing Law..........................................15
EXHIBIT E
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COLLATERAL AGENCY AGREEMENT
Dated as of February 23, 1999
By and Among
PRICEWATERHOUSECOOPERS LLP,
as Collateral Agent,
AND
THE NOTEHOLDERS NAMED IN SCHEDULE I HERETO,
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COLLATERAL AGENCY AGREEMENT
THIS COLLATERAL AGENCY AGREEMENT, dated as of February 23, 1999
(this "Agreement"), is entered into by and among PricewaterhouseCoopers LLP
("PWC"), in its capacity as Collateral Agent (together with its successors
in such capacity the "Collateral Agent"), and each of the Noteholders set
forth on the signature pages hereof (together with their permitted
successors, transferees and assigns, the "Noteholders").
RECITALS:
A. Pursuant to the Note Purchase Agreement, dated as of February
23, 1999 (the "Note Agreement"), entered into by USN Communication, Inc.
(the "Company"), and each of the Noteholders, the Noteholders will purchase
certain senior secured notes from the Company (collectively, the "Senior
Secured Notes").
B. The obligations of the Company to (i) the Noteholders under the
Note Agreement and under the Senior Note Documents (as hereinafter defined)
including, without limitation, the obligations evidenced by the Senior
Secured Notes, and (ii) of CoreComm Limited under Section 8.6 of the
CoreComm Asset Purchase Agreement will be secured pursuant to the Security
Documents (as hereinafter defined) in accordance with the priorities set
forth herein and in the Note Agreement. The Noteholders desire to appoint
PWC as Collateral Agent to act on their behalf regarding the Collateral (as
hereinafter defined), all as more fully provided herein. The parties hereto
have entered into this Agreement to, among other things, further define the
rights, duties, authority and responsibilities of the Collateral Agent with
respect to the Collateral.
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS
Section 1.1 Definitions. Capitalized terms used herein without
being defined have the meanings provided for in the Note Agreement. In
addition, the following terms shall have the meanings assigned to them
below:
"Affiliate" shall mean, with respect to any Person, any other
Person that, directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with, such first
Person.
"Agreement" shall have the meaning amended thereto in the preamble
hereof.
"Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which commercial banks in New York, New York are required or
authorized to be closed.
"Cash Equivalent Investments" shall mean, (a) direct obligations
of the United States Government or any agencies thereof and obligations
guaranteed by the United States Government, in each case having remaining
terms to maturity of not more than thirty days; and (b) certificates of
deposit, time deposits and acceptances, including Eurodollar deposits,
having remaining terms to maturity of not more than sixty days issued by a
United States bank which has a combined capital and surplus of at least
$750,000,000 and whose long-term certificates of deposit are rated "A" or
better by Standard & Poor's Corporation or "A2" or better by Moody's
Investors Service, Inc.
"Closing Date" shall have the meaning assigned thereto in Section
2 of the Note Agreement.
"Collateral" shall mean all collateral under the Security Documents.
"Collateral Agent" shall have the meaning assigned thereto in the
preamble.
"Company" shall mean USN Communication, Inc., a Delaware
corporation, and its successors and permitted assigns.
"Corporation" shall mean a corporation, joint stock association or
business trust.
"Default" shall mean any event or condition, the occurrence of
which would, with the lapse of time or the giving of notice, or both,
constitute an Event of Default.
"Event of Default" shall mean any event or occurrence which would
constitute an "Event of Default" under the terms of the Note Agreement.
"Lien" upon the property or assets (or the income or profits
therefrom) of any Person shall mean (in each case, whether the same is
consensual or non-consensual or arises by contract, operation of law, legal
process or otherwise) any mortgage, lien, pledge, attachment, charge or
other security interest or encumbrance or other type of preferential
arrangement of any kind on or in respect of any property of such Person, or
upon the income or profits therefrom, including, without limitation, the
lien or retained security title of a conditional vendor and any covenant,
right of way or other encumbrance on title to real property.
"Note Agreement" shall have the meaning assigned in the Recitals
hereof, and shall include such agreement as amended or modified in
accordance with its terms.
"Noteholders" shall have the meaning assigned thereto in the
preamble, and shall include CoreComm Limited with respect to amounts owing
to it by the Company pursuant to Section 8.6 of the CoreComm Asset Purchase
Agreement.
"Notice of Default" shall mean a notice pursuant to ss.5.2 hereof
from the Collateral Agent or the Required Secured Parties to the Secured
Parties of the occurrence of a Default or an Event of Default.
"Person" shall mean an individual, corporation, partnership, trust
or unincorporated organization, and a government or agency or political
subdivision thereof.
"PWC" shall have the meaning assigned thereto in the preamble.
"Required Secured Parties" shall have the meaning assigned to
"Required Noteholders" in the Note Agreement.
"Secured Party" shall mean any Noteholder and any permitted
successor and assign to the interests in the Secured Obligations owing to
any such Noteholder, and "Secured Parties" shall mean all Secured Parties,
collectively.
"Security Agreement" shall have the same meaning assigned thereto
in the Note Agreement.
"Security Documents" shall mean the Security Agreement and any and
all other agreements, documents and instruments relating to, arising out
of, or in any way connected with any of the foregoing documents or granting
to the Collateral Agent Liens to secure the Senior Secured Obligations,
whether now or hereafter executed, each as may be amended from time to time
in accordance with the terms hereof and any and all ancillary documents and
instruments relating thereto such as stock powers and financing statements
and all extensions, renewals, amendments, substitutions and replacements to
and of any of the foregoing; provided, however, that Security Documents
shall not include the Note Agreement or the Senior Secured Notes
"Senior Note Documents" shall mean the Note Agreement, the Senior
Secured Notes, the Security Documents and all other security agreements,
documents, certificates and instruments relating to, arising out of, or in
any way connected therewith or any of the transactions contemplated
thereby.
"Senior Secured Notes" shall have the meaning assigned thereto in
the Recitals hereof.
"Senior Secured Obligations" shall mean collectively the
indebtedness, obligations and liabilities of the Company to the Noteholders
under the Senior Note Documents (including, but not limited to, all unpaid
principal of, premium, if any, and accrued and unpaid interest on the
Senior Secured Notes), whether now existing or hereafter arising, joint or
several, direct or indirect, absolute or contingent, due or to become due,
matured or unmatured, liquidated or unliquidated, arising by contract,
operation of law or otherwise, and all obligations of the Company to the
Secured Parties or the Collateral Agent arising out of any extension,
refinancing or refunding of any of the foregoing obligations.
The term "subsidiary" shall mean as to any particular parent
corporation or partnership, any corporation of which more than 50% (by
number of votes) of the voting stock shall be beneficially owned, directly
or indirectly, by such parent corporation or partnership. The term
"Subsidiary" shall mean a subsidiary of the Company.
Section 1.2 Effectiveness of this Agreement. The effectiveness of
this Agreement is conditioned upon the execution and delivery of (a) this
Agreement by the Collateral Agent and the Noteholders, (b) the execution,
delivery and effectiveness of the Note Agreement and the Security Documents
by the parties thereto and (c) the execution and delivery of the
Acknowledgment of this Agreement by the Company.
Section 2. Representations And Warranties; Other Matters.
Section 2.1 Representations and Warranties of the Secured Parties.
Each of the Secured Parties represents and warrants to the other parties
hereto that:
(1) The execution, delivery and performance by such Secured Party
of this Agreement has been authorized by all necessary proceedings
(corporate or otherwise) and does not and will not contravene any
provision of law, its charter or by-laws or any amendment thereof, or
of any indenture, agreement, instrument or undertaking binding upon
such Secured Party.
(2) The execution, delivery and performance by such Secured Party
of this Agreement will result in a valid and legally binding
obligation of such Secured Party enforceable in accordance with its
terms.
Section 2.2 Representations of Warranties of the Collateral Agent.
The Collateral Agent hereby represents and warrants to each of the
Secured Parties that:
(1) The Collateral Agent is a limited liability partnership duly
formed, valily existing, and in good standing under the laws of the
jurisdiction of its formation.
(2) The Collateral Agent has full power, authority and legal
right to execute, deliver, and perform this Agreement and has taken
all necessary action to authorize the execution, delivery, and
performance by it of this Agreement.
(3) The execution, delivery and performance by the Collateral
Agent of this Agreement will not contravene any law, rule or
regulation regulating the Collateral Agent or any judgment or order
applicable to or binding on the Collateral Agent and will not
contravene or result in any breach of, or constitute a default under,
the Collateral Agent's limited liability partnership agreement or the
provision of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or any of its properties is bound.
(4) The execution, delivery and performance by the Collateral
Agent of this Agreement will not require the authorization, consent,
or approval of, the giving of notice to, the filing or registration
with, or the taking of any other action in respect of, any
governmental authority or agency regulating the activities of the
Collateral Agent.
(5) This Agreement has been duly executed and delivered by the
Collateral Agent and constitutes the legal, valid, and binding
agreement of the Collateral Agent, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
Section 2.3 Cooperation; Accountings. Each of the Secured Parties
will, upon the reasonable request of another Secured Party, from time to
time execute and deliver or cause to be executed and delivered such further
instruments, and do and cause to be done such further acts as may be
necessary or proper to carry out more effectively the provisions of this
Agreement. The Secured Parties agree to provide to each other upon
reasonable request a statement of all payments received in respect of
Senior Secured Obligations.
Section 2.4 Termination of Note Agreement. Upon final payment in
full of all Senior Secured Obligations owing to any Secured Party, such
Secured Party shall cease to be a party to this Agreement; provided,
however, if all or any part of any payments to such Secured Party are
invalidated or set aside or required to be repaid to any Person in any
bankruptcy proceeding or otherwise, then this Agreement shall be renewed as
of such date and shall thereafter continue in full force and effect to the
extent of the Senior Secured Obligations so invalidated, set aside or
repaid.
Section 3. Appointment and Authorization of Collateral Agent.
(a) Each Secured Party hereby irrevocably designates and appoints
PWC as the Collateral Agent of such Secured Party under this Agreement and
the Security Documents, and each Secured Party hereby irrevocably
authorizes the Collateral Agent to execute and enter into each of the
Security Documents and all other instruments relating to said Security
Documents and (i) to take action on its behalf and exercise such powers and
use such discretion as are expressly permitted hereunder and under the
Security Documents and all instruments relating hereto and thereto and (ii)
to exercise such powers and perform such duties as are, in each case,
expressly delegated to the Collateral Agent by the terms hereof and thereof
together with such other powers and discretion as are reasonably incidental
hereto and thereto.
(b) Notwithstanding any provision to the contrary elsewhere in
this Agreement or the Security Documents, the Collateral Agent shall not
have any duties or responsibilities except those expressly set forth herein
or therein or any fiduciary relationship with any Secured Party, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any Security Document or
otherwise exist against the Collateral Agent.
Section 4. Agency Provisions.
Section 4.1 Delegation of Duties. The Collateral Agent may
exercise its powers and execute any of its duties under this Agreement and
the Security Documents by or through employees, agents or attorneys-in-fact
and shall be entitled to take and to rely on advice of counsel concerning
all matters pertaining to such powers and duties. The Collateral Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care. The Collateral Agent
may utilize the services of such Persons as the Collateral Agent in its
sole discretion may determine, and all reasonable fees and expenses of such
Persons shall be borne by the Company.
Section 4.2 Exculpatory Provisions. Neither the Collateral Agent
nor any of the Collateral Agent's officers, partners, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (a) liable for any action
taken or omitted to be taken by it or such Person under or in connection
with this Agreement or any Security Document or any Collateral (except for
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any of the Secured Parties for any recitals,
statements, representations or warranties made by the Company or any
officer thereof contained in, or made or deemed made in connection with,
any Senior Note Document or Security Document or in any certificate,
report, statement or other document referred to or provided for in, or
received by the Collateral Agent under or in connection with, this
Agreement or any Senior Note Document, or Security Document, or for the due
execution, legality, value, validity, effectiveness, genuineness,
enforceability or sufficiency of the Senior Note Documents, or the Security
Documents or any other document or instrument furnished pursuant thereto or
for any failure of the Company to perform its obligations thereunder. The
Collateral Agent shall be under no obligation to the Secured Parties to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, statements made in, or conditions of, the Senior
Note Documents or the Security Documents or to inspect the property
(including the books and records) of the Company.
Section 4.3 Reliance by Collateral Agent. The Collateral Agent
shall be entitled to rely, and shall be fully protected and shall incur no
liability in acting and relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or
conversation reasonably believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation,
counsel to the Company), independent accountants and other experts selected
by the Collateral Agent. Without limiting the generality of the foregoing,
the Collateral Agent may treat the payee of any Senior Secured Note as the
registered holder thereof until it receives notice or otherwise has actual
knowledge that such payee is no longer the registered holder of such Senior
Secured Note. Notwithstanding anything to the contrary contained herein or
in any Security Document, the Collateral Agent shall be fully justified in
failing or refusing to take action under this Agreement or the Security
Documents (including, without limitation, the exercise of any rights or
remedies under, or the entering into of any agreement amending, modifying,
supplementing, waiving any provision of, or the giving of consent pursuant
to, any of the Security Documents) unless it shall first receive
instructions of the Required Secured Parties as is contemplated by ss.5
hereof and it shall first be indemnified to its reasonable satisfaction by
the Secured Parties against any and all liability and expense which may be
incurred by it by reason of taking, continuing to take or refraining from
taking any such action. The Collateral Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and
the Security Documents in accordance with the provisions of ss.5.5 hereof
and in accordance with written instructions of the Required Secured Parties
pursuant to ss.5.3 hereof, and such instructions and any action taken or
failure to act pursuant thereto shall be binding upon all the Secured
Parties and all other holders from time to time of the Senior Secured
Notes.
Section 4.4 Knowledge or Notice of Default or Event of Default.
The Collateral Agent shall not be deemed to have actual, constructive,
direct or indirect knowledge or notice of the occurrence of any Default or
Event of Default unless and until the Collateral Agent has received written
notice from a Secured Party or the Company referring to the Note Agreement
describing such Default or Event of Default setting forth in reasonable
detail the facts and circumstances thereof and stating that the Collateral
Agent may rely on such notice without further inquiry. The Collateral Agent
shall have no obligation or duty prior to or after receiving any such
notice to inquire whether a Default or Event of Default has in fact
occurred and shall be entitled to rely, and shall be fully protected in so
relying, on any such notice furnished to it.
Section 4.5 Non-Reliance on Collateral Agent and Other Secured
Parties. Each Secured Party expressly acknowledges that, except as
expressly set forth in this Agreement, neither the Collateral Agent nor any
of the Collateral Agent's partners, officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties
to it and that no act by the Collateral Agent hereinafter taken, including
any review of the affairs of the Company, shall be deemed to constitute any
representation or warranty by the Collateral Agent to any Secured Party.
Each Secured Party represents that it has, independently and without
reliance upon the Collateral Agent or any other Secured Party, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and credit-worthiness of the Company and made
its own decision to enter into this Agreement and the Senior Note
Documents. Each Secured Party also represents that it will, independently
and without reliance upon the Collateral Agent or any other Secured Party,
and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under the Senior Note Documents,
the Security Documents and this Agreement, and to make such investigation
as it deems necessary to inform itself as to the business, operations,
property, financial and other condition and credit-worthiness of the
Company. Except for notices, reports and other documents expressly required
to be furnished to the Secured Parties by the Collateral Agent hereunder,
the Collateral Agent shall not have any duty or responsibility to provide
the Secured Parties with any credit or other information concerning the
business, operations, property, financial and other condition or
credit-worthiness of the Company which may come into the possession of the
Collateral Agent or any of its partners, officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
Section 4.6 Indemnification. The Secured Parties agree to jointly
and severally indemnify the Collateral Agent in its capacity as such (to
the extent not reimbursed by the Company and without limiting any
obligation of the Company to do so), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment
of the Senior Secured Obligations) be imposed on, incurred by or asserted
against the Collateral Agent in any way relating or arising out of any of
the Senior Note Documents or the Security Documents or actions or omissions
of the Collateral Agent specifically required or permitted by this
Agreement or by written instructions of the Required Secured Parties
pursuant to ss.5.3 hereof (including, without limitation, costs incurred in
accordance with the provisions of ss.4.1); provided that no Secured Party
shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Collateral Agent's
gross negligence or willful misconduct. The agreements in this ss.4.6 shall
survive the payment of the Senior Secured Obligations.
Section 4.7 Collateral Agent in Its Individual Capacity. The
Collateral Agent and its Affiliates may generally engage in any kind of
business with the Company as though such Person was not the Collateral
Agent hereunder and without any duty to account therefor to the Secured
Parties.
Section 4.8 Successor Collateral Agent. (a) The Collateral Agent
may resign at any time upon sixty days' notice to the Secured Parties and
the Company and may be removed at any time, with or without cause, by the
Required Secured Parties by written notice delivered to the Company, the
Collateral Agent and the Secured Parties. After any resignation or removal
hereunder of the Collateral Agent, the provisions of this ss.4 shall
continue to inure to its benefit as to any actions taken or omitted to be
taken by it in connection with its agency hereunder while it was the
Collateral Agent under this Agreement and it shall be entitled to be paid
promptly when due any amounts owing to it pursuant to ss.4.6.
(b) Upon receiving notice of any such resignation or removal, a
successor Collateral Agent shall be appointed by the Required Secured
Parties; provided, however, that such successor Collateral Agent shall be
(i) a Person having a combined capital and surplus of at least $50,000,000;
and (ii) authorized under bylaw to assume the functions of the Collateral
Agent. If the appointment of such successor shall not have become effective
(as hereafter provided) within such sixty day period after the Collateral
Agent's resignation or upon removal of the Collateral Agent, then the
Collateral Agent may petition a court of competent jurisdiction for the
appointment of a successor Collateral Agent. Such court shall, after such
notice as it may deem proper, appoint a successor Collateral Agent meeting
the qualifications specified in this ss.4.8(b). The Secured Parties hereby
consent to such petition and appointment so long as such criteria are met.
(c) The resignation or removal of a Collateral Agent shall become
effective upon the execution and delivery of such documents or instruments
as are necessary to transfer the rights and obligations of the Collateral
Agent under the Security Documents, including, without limitation, the
delivery and recordation of all amendments, instruments, financing
statements, continuation statements and other documents necessary to
maintain the perfection of the security interests held by the Collateral
Agent under the Security Documents. Copies of each such document or
instrument shall be delivered to all Secured Parties. The appointment of a
successor Collateral Agent pursuant to this ss.4.8 shall become effective
upon the acceptance of the appointment as Collateral Agent hereunder by a
successor Collateral Agent. Upon such effective appointment, the successor
Collateral Agent shall succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Collateral Agent and the
retiring Collateral Agent shall be discharged from its rights, powers,
privileges and duties under this Agreement and the other Security
Documents, but shall remain liable for its actions prior to and including
such date of discharge.
Section 5. Actions by the Collateral Agent.
Section 5.1 Duties and Obligations. The duties and obligations of
the Collateral Agent are only those set forth in this Agreement and in the
Security Documents.
Section 5.2 Notification of Default. If the Collateral Agent has
been notified in a writing conforming to the requirements of ss.4.4 by any
Secured Party that a Default or an Event of Default has occurred, the
Collateral Agent shall promptly furnish (and in any event no later than
three Business Days after receipt of such notice) to the Secured Parties a
copy of such written notice (a "Notice of Default"). The failure of any
Secured Party having knowledge of the occurrence of a Default or an Event
of Default of Default to notify the Collateral Agent or any Secured Party
of such occurrence, however, does not constitute a waiver of such Default
or Event of Default by the Secured Parties. The Notice of Default may
contain a recommendation of actions to be taken by the Secured Parties
and/or request instructions from the Secured Parties and shall specify the
date on which responses are due in order to be timely within ss.5.4 hereof.
Section 5.3 Exercise of Remedies. Except as otherwise provided in
ss.ss.5.5 and 5.7, the Collateral Agent shall take only such actions and
exercise only such remedies under the Security Documents as are approved in
written instructions delivered to the Collateral Agent and signed by the
Required Secured Parties. In the event that the Collateral Agent shall
determine in good faith that taking the actions specified in such
instructions is contrary to law, it may refrain (and shall be fully
protected in so refraining) from taking such action and shall immediately
give notice of such fact to each of the Secured Parties. In the event that
instructions received by the Collateral Agent are in its good faith
judgment ambiguous or conflict with other instructions received by the
Collateral Agent, the Collateral Agent (a) shall promptly notify the
Secured Parties of such ambiguity or conflict and request clarifying
instructions, and (b) may either (1) delay taking any such action or
exercising any such remedy pending the receipt of such clarifying
instructions (and shall be fully protected in so delaying) or (2) take such
actions as it is entitled under ss.5.5.
Section 5.4 Instructions from Secured Parties. If any Secured
Party does not respond in a timely manner to any notice (including, without
limitation, a Notice of Default) from the Collateral Agent or request for
instructions within the time period specified by the Collateral Agent in
such notice or request for instructions (which shall be a minimum of five
Business Days), the Senior Secured Obligations held by such Secured Party
which would otherwise be included in a determination of Required Secured
Parties shall not be included in the determination of Required Secured
Parties for purposes of such notice or request for instructions. Any action
taken or not taken without the vote of a Secured Party or Secured Parties
under this ss.5.4 shall nevertheless be binding on such Secured Party or
Secured Parties.
Section 5.5 Emergency Actions. If the Collateral Agent has asked
the Secured Parties for instruction and if the Required Secured Parties
have not yet responded to such request, the Collateral Agent shall be
authorized to take, but shall not be required to take and shall in no event
have any liability for the taking or the failure to take, such actions
(other than any action described or permitted under ss. 5.7 hereof) with
regard to a Default or Event of Default which the Collateral Agent, in good
faith, believes to be reasonably required to promote and protect the
interests of the Secured Parties and to maximize both the value of the
Collateral and the present value of the recovery by the Secured Parties on
the Senior Secured Obligations and shall give the Secured Parties
appropriate notice of such action; provided that once instructions with
respect to such request have been received by the Collateral Agent from the
Required Secured Parties, the actions of the Collateral Agent shall be
governed thereby and the Collateral Agent shall not take any further action
which would be contrary thereto.
Section 5.6 Changes to Security Documents. Any term of the
Security Documents may be amended, and the performance or observance by the
parties to a Security Document of any term of such Security Document may be
waived (either generally or in a particular instance and either
retroactively or prospectively) by the Collateral Agent only upon the
written consent of the Majority Secured Parties; provided that no amendment
to the Security Documents which directly or indirectly narrows the
description of the Collateral or the obligations being secured thereby,
changes the priority of payments to the Secured Parties or the Collateral
Agent under the Security Documents or amends the definitions of "Majority
Secured Parties" or "Required Secured Parties" may be made without the
written consent of all of the Secured Parties.
Section 5.7 Release of Collateral. Subject to ss.ss.5.3 and 5.5
hereof, the Collateral Agent may, when no Default or Event of Default is
continuing, release any Collateral under the Security Documents which is
permitted to be sold or disposed of by the Company pursuant to Section 9.5
of the Note Agreement and execute and deliver such releases as may be
necessary to terminate of record the Secured Parties' security interest in
such Collateral.
Section 5.8 Other Actions. The Collateral Agent shall have the
right to take such actions, or omit to take such actions, hereunder and
under the Security Documents not inconsistent with the written instructions
of the Required Secured Parties delivered pursuant to ss.5.3 hereof or the
terms of this Agreement, including actions the Collateral Agent deems
necessary or appropriate to perfect or continue the perfection of the Liens
on the Collateral for the benefit of the Secured Parties. Except as
otherwise provided by applicable law, the Collateral Agent shall have no
duty as to any Collateral, the collection or protection of the Collateral
or any income thereon (including any duty to ascertain or take action with
respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Collateral Agent has
or is deemed to have knowledge of such matters), nor as to the preservation
of rights against prior parties, nor as to the preservation of rights
pertaining to the Collateral beyond the safe custody of any Collateral in
the Collateral Agent's actual possession. Section 5.9 Cooperation. To the
extent that the exercise of the rights, powers and remedies of the
Collateral Agent in accordance with this Agreement requires that any action
be taken by any Secured Party, such Secured Party shall take such action
and cooperate with the Collateral Agent to ensure that the rights, powers
and remedies of all Secured Parties are exercised in full.
Section 5.10 Distribution of Proceeds. All amounts owing with
respect to the Senior Secured Obligations shall be secured by the
Collateral without distinction as to whether some Senior Secured
Obligations are then due and payable and other Senior Secured Obligations
are not then due and payable. Upon any realization upon the Collateral, the
Secured Parties agree that the proceeds thereof shall be applied, subject
to ss.ss. 5.12 and 9.13 hereof, (a) first, to the amounts owing to the
Collateral Agent by the Company or the Secured Parties solely in its
capacity as Collateral Agent hereunder pursuant to this Agreement or the
Security Documents; (b) second, ratably to the payment of all amounts of
interest outstanding which constitute the Senior Secured Obligations
according to the aggregate amounts of such interest then owing to each
Secured Party; (c) third, ratably to all amounts of principal outstanding
under the Senior Secured Obligations according to the aggregate amounts of
such principal then owing to each Secured Party; (d) fourth, ratably to all
other amounts then due to the Secured Parties under the Note Agreement
(including fees and expenses), (e) fifth, the balance, if any, shall be
returned to the Company or such other Persons as are entitled thereto. Upon
the request of the Collateral Agent prior to any distribution under this
ss.5.10, each Secured Party shall provide to the Collateral Agent
certificates, in form and substance reasonably satisfactory to the
Collateral Agent, setting forth the respective amounts referred to in
clauses (b) through (d) above which each such Secured Party believes it is
entitled to receive.
Section 5.11 Authorized Investments. Any and all funds held by the
Collateral Agent in its capacity as Collateral Agent, whether pursuant to
any provision of this Agreement or any of the Security Documents, shall to
the extent feasible within a reasonable time be invested by the Collateral
Agent in Cash Equivalent Investments. Prior to making such investment or to
the extent it is not feasible to invest such funds in Cash Equivalent
Investments, the Collateral Agent shall hold any such funds in an interest
bearing account. Any interest earned on such funds shall be disbursed to
the Secured Parties in accordance with ss.5.10. The Collateral Agent shall
have no duty to place funds held and invested pursuant to this ss.5.11 in
investments which provide a maximum return. The Collateral Agent shall not
be responsible for any loss of any funds invested in accordance with this
ss.5.11.
Section 5.12 Lien Priority. Notwithstanding anything contained in
ss.5.10, the holders of Class A Notes and Delayed Closing Notes' Liens on
the Collateral shall be prior and superior to any Liens of holders of Class
B Notes therein, and the holders of the Class B Notes' Liens on the
Collateral shall be prior and superior to any Liens of CoreComm which
secured payment of amounts required to be made under Section 8.6 of the
CoreComm Asset Purchase Agreement. The holders of the Notes and CoreComm
Limited expressly acknowledge and agree to the foregoing terms of
subordination. The priorities established herein are applicable without
regard to (i) the date a loan, advance or extension of credit is made to
the Company or any other obligations are incurred by the Company, (ii) the
time or order of attachments, perfection, filing or recording of the Liens
or the time or order of filing of financing statements and other security
documents or the giving or failure to give notice of the acquisition of any
such Lien, and (iii) the rules of priority established under the Uniform
Commercial Code or other laws of a relevant state relating to the priority
of Liens or the provisions of the Bankruptcy Code or any state insolvency
laws.
Section 5.13 Closing Subordination. Notwithstanding anything
contained in ss.5.10 but subject to the immediately following sentence (a)
the obligations of the Company to the holders of Class A Notes and Delayed
Closing Notes (including any interest accruing on such Notes) shall first
be paid in full before any payment or distribution by the Company or from
its assets, whether in cash, securities or other property, shall be made to
the holders of Class B Notes on account of the Company's obligations to the
holders of Class B Notes and (b) the obligations of the Company to the
holders of the Class B Notes (including any interest accruing on such
Notes) shall first be paid in full before any payment or distribution by
the Company or from its assets, whether in cash, securities or other
property, shall be made to CoreComm Limited on account of payments required
to be made under Section 8.6 of the CoreComm Asset Purchase Agreement.
Notwithstanding the previous sentence, with respect to the proceeds of
Permitted Dispositions (a) the holders of the Class A Notes shall be paid
first, (b) the holders of the Class B Notes shall be paid second, (c) the
holders of the Delayed Closing Notes shall be paid third and (d) payment to
CoreComm Limited pursuant to Section 8.6 of the CoreComm Asset Purchase
Agreement shall be paid fourth. Any payment or distribution by the Company
or from its assets, whether in cash, securities or other property, which
would otherwise (but for these provisions) be payable or deliverable in
respect of the obligations of the Company to the holders of Class B Notes
(or the holders of Delayed Closing Notes, in the case of proceeds of
Permitted Dispositions) or to CoreComm Limited in respect of Section 8.6 of
the CoreComm Asset Purchase Agreement, shall be paid in accordance with the
priorities set forth in the two immediately preceding sentences.
Section 6. Miscellaneous
Section 6.1 Secured Parties; Other Collateral. The Secured Parties
agree that all of the provisions of this Agreement shall apply to any and
all properties, assets and rights of the Company in which the Collateral
Agent at any time acquires a security interest or Lien pursuant to the
Security Documents or the Note Agreement.
Section 6.2 Marshalling. The Collateral Agent shall not be
required to marshal any present or future security for (including, without
limitation, the Collateral), or guaranties of, the Senior Secured
Obligations or any of them, or to resort to such security or guaranties in
any particular order; and all of each of such Person's rights in respect of
such securities and guaranties shall be cumulative and in addition to all
other rights, however existing or arising. To the extent that they lawfully
may, the Secured Parties hereby agree that they will not invoke any law
relating to the marshalling of collateral which might cause delay in or
impede the enforcement of the Secured Parties' rights under the Security
Documents or under any other instrument evidencing any of the Senior
Secured Obligations or under which any of the Senior Secured Obligations is
outstanding or by which any of the Senior Secured Obligations is secured or
guaranteed.
Section 6.3 Consents, Amendments, Waivers. All amendments, waivers
or consents of any provision of this Agreement shall be effective only if
the same shall be in writing and signed by the Required Secured Parties and
the Company.
Section 6.4 Parties in Interest. All terms of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, including, without
limitation, any future holder of the Senior Secured Notes; provided that no
Secured Party may assign or transfer its rights hereunder or under the
Security Documents without such assignees or transferees agreeing, by
executing an instrument in form and substance reasonably acceptable to the
Collateral Agent, to be bound by the terms of this Agreement as though
named herein.
Section 6.5 Counterparts. This Agreement and any amendment hereof
may be executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one instrument. In
proving this Agreement it shall not be necessary to produce or account for
more than one such counterpart signed by the party against whom enforcement
is sought.
Section 6.6 Termination. Upon the payment in full of the Senior
Secured Obligations in accordance with their terms, this Agreement shall
terminate.
Section 6.7 Notices. Except as otherwise expressly provided
herein, all notices, consents and waivers and other communications made or
required to be given pursuant to this Agreement shall be in writing and
shall be delivered by hand, mailed by United States registered or certified
first-class mail, postage prepaid, or sent by overnight courier or by
telecopy, telegraph or telex and confirmed by letter, addressed as follows:
If to the Collateral Agent at:
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
Attention: Martha E.M. Kopacz
Telephone: 617-439-7363
Facsimile: 617-443-2849
or at such other address for notice as the Collateral Agent shall last have
furnished in writing to the Person giving the notice; and
If to any Noteholder, at: Such address specified in the
Note Purchase Agreement
If to the Company, at: USN Communication, Inc.
10 South Riverside Plaza
Suite 2000
Chicago, Illinois 60606
Attention: Vice President- Finance
Telephone: 312-906-3600
Facsimile: 312-559-8338
or at such other address for notice as such Secured Party or the Company
shall last have furnished in writing to the Person giving such notice.
Any such notice, consent, waiver or demand shall be deemed to have been
duly given or made and to have become effective (a) if delivered by hand to
a responsible officer of the party to which it is directed, at time of the
receipt thereof by such officer, (b) if sent by registered or certified
first class mail, postage prepaid, on the earlier of (i) the time of
receipt thereof if a Business Day or, if not a Business Day, the next
succeeding business day, or (ii) five Business Days after the posting
thereof, and (c) if sent by telecopy, telex or cable, at the time of
receipt thereof if a Business Day or, if not a Business Day, the next
succeeding Business Day. Notices given by telecopy shall be promptly
confirmed in writing sent by courier.
Section 6.8 Establishing Outstanding Amount of Senior Secured
Obligations. In order to establish what constitutes the Required Secured
Parties, the Collateral Agent may request from time to time, and the
Secured Parties agree to provide, certificates setting forth the amount of
Senior Secured Obligations held or represented by each Secured Party, which
certificates the Collateral Agent shall be entitled to rely upon.
Section 6.9 Governing Law. This Agreement shall be deemed to be a
contract under seal and shall for all purposes be governed by and construed
in accordance with the laws of the State of New York (without regard to New
York principles of conflicts of law other than Section 5-1401 of the New
York General Obligations Law).
IN WITNESS WHEREOF, the parties hereto have caused these presents
to be duly executed as an instrument by their authorized representatives as
of the date first written above.
PRICEWATERHOUSECOOPERS LLP,
as Collateral Agent
By /s/ Martha E.M. Kopucz
_______________________________
Name: Martha E.M. Kopucz
Title: Principal
MERRILL LYNCH GLOBAL
ALLOCATION FUND, INC.
By /s/ Lisa Ann O'Donnell
_______________________________
Name: Lisa Ann O'Donnell
Title: V.P. MLAM, Authorized
Signatory
CORECOMM LIMITED
By /s/ Richard J. Lubasch
_______________________________
Name: Richard J. Lubasch
Title:
ACKNOWLEDGMENT
The undersigned hereby acknowledges and agrees to the terms of the
foregoing Agreement.
USN COMMUNICATIONS, INC.
By /s/ Ronald W. Gavillet
______________________________
Name: Ronald W. Gavillet
Title:
PRESS RELEASE
USN COMMUNICATIONS SIGNS DEFINITIVE SALE AGREEMENT
WITH CORECOMM LIMITED
CHICAGO, February 19, 1999 - USN Communications, Inc. (Nasdaq: USNC)
announced today that it signed a definitive agreement to sell substantially
all of its assets, excluding its wireless subsidiary, to CoreComm Limited
for up to $85 million in cash (depending on future operating results) plus
warrants in CoreComm. The agreement provides for approximately $25 million
to be paid at closing. Separately, USN Communications and 12 of its
subsidiaries filed voluntary petitions for reorganization under Chapter 11
in the United States Bankruptcy Court for the District of Delaware. The
cases exclude the USN wireless subsidiary, which operates in Connecticut.
The boards of directors of both USN and CoreComm have approved the
transaction and expect it to close in the second quarter of 1999, subject
to certain conditions, including approval by the bankruptcy court and other
regulatory approvals.
USN plans to seek the Court's approval to secure debtor-in-possession
financing promptly in order to continue to pay its employees' wages and
benefits as well as post-petition obligations owed to creditors who
continue to do business with the Company.
USN's chairman, president and chief executive officer J. Thomas Elliott
said, "The USN Board determined that this transaction provides the best
means for insuring uninterrupted service to customers and maximizes the
value of its corporate assets. The financing package that the Company is
seeking approval for is designed to meet the Company's operating needs
until the sale can be completed."
USN Communications delivers local and long distance services to thousands
of small to medium-sized businesses throughout fourteen states. USN was
founded in 1994 and is headquartered in Chicago, Illinois with sales
offices located in the Midwest and Northeast.
CoreComm Limited was formed in order to succeed to the businesses and
assets that were operated by OCOM Corporation in the state of Ohio and as
an appropriate vehicle to pursue new telecommunications opportunities. The
Company was formerly a subsidiary of what is now Cellular Communications of
Puerto Rico, Inc. CoreComm currently offers local and long distance
telephony services to business and residential customers, as well as
Internet services and wireless telephony services. CoreComm Limited is
traded on the Nasdaq under the symbol: COMMF.
Certain statements made in this press release are forward-looking in
nature. Actual events may differ materially from USN's current
expectations. There can be no assurance that the Court will grant the
relief sought by the Company or that the contemplated sale or financing
will be completed. Additional relevant information can be found in USN's
SEC filings. USN undertakes no obligation to update publicly any forward-
looking statements whether as a result of new information, future events or
otherwise.
