UNITED STATES
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
Date of Report (Date of earliest event reported): December 30, 1997
AMERICAN COMMUNICATIONS SERVICES, INC.
(Exact Name of registrant specified in its charter)
Delaware 0-25314 52-1947746
(State or other Jurisdiction of (Commission File Number) (I.R.S. employer
Incorporation) Identification No.)
131 National Business Parkway
Annapolis Junction, Maryland 20701
(Address of principal executive offices)
Registrant's telephone number: (301) 617-4200
<PAGE>
Item 5. Other Events
On December 30, 1997, American Communications Services, Inc.
(the "Company") entered into a Loan and Security Agreement with AT&T Commercial
Finance Corporation (the "New AT&T Credit Facility") pursuant to which AT&T
Commercial Finance Corporation has agreed to provide up to $35 million in
financing for (i) the purpose of refinancing (the "Refinancing") all loans owing
by each of American Communication Services of Louisville, Inc., American
Communication Services of Fort Worth, Inc., American Communication Services of
Columbia, Inc., American Communication Services of Greenville, Inc. and American
Communication Services of El Paso, Inc. (the foregoing, the "Indebted
Subsidiaries") to AT&T Credit Corporation made under a $31.2 million credit
facility and (ii) general corporate purposes.
The loans under the New AT&T Credit Facility are secured by
the capital stock of the material subsidiaries of the Company and the promissory
notes (the "Intercompany Notes") of the Indebted Subsidiaries evidencing debt
provided by the Company pursuant to the Refinancing. The aggregate outstanding
principal balance of the loans is payable in twenty-four (24) consecutive
quarterly installments beginning on December 31, 1998 and continuing on each of
the last calendar days (or the next succeeding business day if such date is not
a business day) of March, June, September and December in each calendar year
thereafter through and including September 30, 2004. The principal of borrowed
amounts may be prepaid in certain circumstances and must be prepaid, without
premium or penalty, in other circumstances. Interest is due quarterly. Interest
is variable based on the three-month Commercial Paper Rate or LIBOR Rate plus
4.5% per annum, at the Company's option, and is compounded quarterly. Upon
certain events of default, additional interest at a rate of 2% will become
payable. In addition, the New AT&T Credit Facility includes covenants, some of
which impose certain restrictions on the Company and its material subsidiaries
including restrictions on the declaration or payment of dividends, the conduct
of certain activities, certain investments, the creation of additional liens or
indebtedness, the disposition of assets, transactions with affiliates and
extraordinary corporate transactions.
In connection with the New AT&T Credit Facility, the Company
issued to AT&T Credit Corporation 207,964 shares of its common stock in exchange
for AT&T Credit Corporation conveying to the Company (i) 145 shares of common
stock of American Communication Services of Columbia, Inc., (ii) 14.5 shares of
common stock of American Communication Services of El Paso, Inc., (iii) 145
shares of common stock of American Communication Services of Fort Worth, Inc.,
(iv) 145 shares of common stock of American Communication Services of
Greenville, Inc., and (v) 156.3 shares of common stock of American Communication
Services of Louisville, Inc. The Company was required to pledge to AT&T
Commercial Finance Corporation (i) all of its shares (present and future) of
capital stock in its material subsidiaries, along with all options and warrants
therein, (ii) the Intercompany Notes and (iii) any proceeds of any of the
foregoing. Under certain circumstances, the pledge agreement governing such
pledge also restricts the Company's ability to receive and retain dividends in
respect of the pledged collateral.
A copy of the Loan and Security Agreement, dated as of
December 30, 1997, between the Company and AT&T Commercial Finance Corporation,
relating to the above-described transaction is attached as Exhibit 99 hereto.
Item 7. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
The following exhibits are filed herewith in accordance with
Item 601 of Regulation S-K:
Exhibit No. Description
99 Loan and Security Agreement dated as of
December 30, 1997 between American Communications
Services, Inc. and AT&T Commercial Finance
Corporation
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
AMERICAN COMMUNICATIONS SERVICES, INC.
(Registrant)
By: /s/ Riley M. Murphy
----------------------
Name: Riley M. Murphy
Title: Executive Vice President
Legal and Regulatory Affairs
and Secretary
Date: January 16, 1998
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
99 Loan and Security Agreement dated as of
December 30, 1997 between American Communications
Services, Inc. and AT&T Commercial Finance
Corporation
- ------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
Dated as of December 30, 1997
Between
AMERICAN COMMUNICATIONS SERVICES, INC.
and
AT&T COMMERCIAL FINANCE CORPORATION
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page No.
ARTICLE IDEFINITIONS...........................................................
SECTION 1.01. Definitions............................................1
SECTION 1.02. Accounting Terms.......................................19
SECTION 1.03. Others Defined in New York Uniform Commercial Code.....19
ARTICLE IILOANS...............................................................19
SECTION 2.01. Agreement to Lend.....................................19
SECTION 2.02. Purpose of Loan.......................................19
SECTION 2.03. The Note..............................................19
SECTION 2.04. Interest on Loans.....................................19
SECTION 2.05. Payments..............................................20
SECTION 2.06. Default Rate of Interest..............................20
SECTION 2.07. Optional Prepayment of Loans; Mandatory Prepayment of
Loans.................................................21
SECTION 2.08. Payment, etc..........................................21
SECTION 2.09. Maximum Lawful Interest Rate..........................21
ARTICLE IIIREPRESENTATIONS AND WARRANTIES.....................................22
SECTION 3.01. Organization; Powers..................................22
SECTION 3.02. Authorization by the Borrower.........................22
SECTION 3.03. Financial Statements..................................23
SECTION 3.04. No Material Adverse Change............................23
SECTION 3.05. Litigation............................................23
SECTION 3.06. Tax Returns...........................................23
SECTION 3.07. No Defaults...........................................23
SECTION 3.08. Properties............................................23
SECTION 3.09. Licenses, etc.........................................24
SECTION 3.10. Compliance With Laws..................................24
SECTION 3.11. ERISA.................................................24
SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act...................................................25
SECTION 3.13. Federal Reserve Regulations...........................25
SECTION 3.14. Collateral. ..........................................25
SECTION 3.15. Chief Place of Business...............................25
SECTION 3.16. Other Corporate Names.................................25
SECTION 3.17. Insurance.............................................25
SECTION 3.18. Capitalization and Subsidiaries.......................26
SECTION 3.19. Subsidiaries and Joint Ventures.......................26
SECTION 3.20. Indentures............................................26
SECTION 3.21. No Material Misstatements.............................26
SECTION 3.22. Excluded Subsidiaries.................................26
ARTICLE IVCONDITIONS FOR LOAN.................................................26
SECTION 4.01. Conditions Precedent to Loans........................27
ARTICLE VAFFIRMATIVE COVENANTS................................................28
SECTION 5.01. Corporate and Franchise Existence.....................28
SECTION 5.02. Compliance with Laws, Etc.............................28
SECTION 5.03. Maintenance of Properties.............................28
SECTION 5.04. Insurance.............................................29
SECTION 5.05. Obligations and Taxes.................................29
SECTION 5.06. Financial Statements, Reports, etc....................29
SECTION 5.07. Litigation and Other Notices..........................31
SECTION 5.08. ERISA.................................................31
SECTION 5.09. Access to Premises and Records........................31
SECTION 5.10. Environmental Notices.................................31
SECTION 5.11. Amendment of Organization Document; Change of Name....31
SECTION 5.12. Changes in Regulation.................................32
SECTION 5.13. Further Assurances....................................32
ARTICLE VINEGATIVE COVENANTS..................................................32
SECTION 6.01. Liens, etc............................................32
SECTION 6.02. Mergers, Consolidations and Certain Sales of Assets...33
SECTION 6.03. Indentures............................................35
SECTION 6.04. Restricted Payments...................................35
SECTION 6.05. Issuances and Sales of Capital Stock of Subsidiaries..35
SECTION 6.06. Margin Regulation.....................................36
SECTION 6.07. Permitted Activities..................................36
SECTION 6.08. Disposition of Licenses, etc..........................36
SECTION 6.09. Transactions with Affiliates..........................36
SECTION 6.10. ERISA.................................................37
SECTION 6.11. Indebtedness..........................................37
SECTION 6.12. Investments...........................................38
ARTICLE VIICOLLATERAL SECURITY................................................39
SECTION 7.01. Collateral Security...................................39
SECTION 7.02. Preservation of Collateral and Perfection of Security
Interests Therein.....................................39
ARTICLE VIIIEVENTS OF DEFAULT; REMEDIES.......................................39
SECTION 8.01. Events of Default.....................................39
SECTION 8.02. Termination of Commitment; Acceleration...............42
SECTION 8.03. Waiver of Demand......................................42
SECTION 8.04. Rights and Remedies Generally.........................42
SECTION 8.05 Sale or Other Disposition of Collateral by Lender.....42
SECTION 8.06. Lender Not Liable.....................................43
SECTION 8.07. Right of Set-off......................................43
ARTICLE IXMISCELLANEOUS.......................................................43
SECTION 9.01. Notices...............................................43
SECTION 9.02. No Waivers; Amendments................................44
SECTION 9.03. Governing Law and Jurisdiction........................44
SECTION 9.04. Expenses; Documentary Taxes...........................44
SECTION 9.05. Equitable Relief......................................45
SECTION 9.06. Indemnification; Limitation of Liability..............45
SECTION 9.07. Survival of Agreements, Representations and
Warranties,etc........................................46
SECTION 9.08. Successors and Assigns................................46
SECTION 9.09. Severability..........................................46
SECTION 9.10. Cover Page, Table of Contents and Section Headings....46
SECTION 9.11. Counterparts..........................................46
SECTION 9.12. Application of Payments...............................46
SECTION 9.13. Marshalling; Payments Set Aside.......................47
SECTION 9.14. SERVICE OF PROCESS....................................47
SECTION 9.15. WAIVER OF JURY TRIAL..................................47
SECTION 9.16. Confidentiality.......................................47
SECTION 9.17. Entire Agreement, etc.................................48
<PAGE>
EXHIBITS
EXHIBIT A -- Form of Note
EXHIBIT B -- Form of Pledge Agreement
EXHIBIT C -- Form of Notice of Borrowing
EXHIBIT D -- Financials
EXHIBIT E -- Form of Secretary's Certificate
EXHIBIT F -- Form of Opinion of Borrower's
Special Counsel
EXHIBIT G -- Form of Intercompany Note
<PAGE>
SCHEDULES
SCHEDULE 3.04 -- Material Adverse Change
SCHEDULE 3.05 -- Pending Litigation
SCHEDULE 3.10 -- Compliance with Laws
SCHEDULE 3.11 -- ERISA
SCHEDULE 3.15 -- Chief Place of Business
SCHEDULE 3.16 -- Other Corporate Names
SCHEDULE 3.17 -- Insurance
SCHEDULE 3.18 -- Capitalization
SCHEDULE 3.19 -- Subsidiaries and Joint Ventures
SCHEDULE 3.22 -- Excluded Subsidiaries
<PAGE>
LOAN AND SECURITY AGREEMENT ("Agreement") dated as of December
30, 1997 between AMERICAN COMMUNICATIONS SERVICES, INC., a Delaware corporation
(the "Borrower"), and AT&T COMMERCIAL FINANCE CORPORATION, a Delaware
corporation (the "Lender").
WHEREAS, the Borrower has requested Lender to extend credit
to the Borrower to enable the Borrower to borrow; and
WHEREAS, the Lender is willing to extend such credit to the
Borrower, subject to, and on the terms and conditions of this Agreement;
NOW THEREFORE, the Borrower and the Lender hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Agreement, the
following words and terms shall have the meanings specified below:
"Accounts" shall mean all present and future rights of the
Borrower to payment for goods sold or leased or for services rendered which are
not evidenced by instruments or chattel paper, and whether or not they have been
earned by performance.
"Affiliate" shall mean with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such first Person. For purposes of this definition, control of a Person
shall mean the power to vote more than twenty-five percent (25%) of the
outstanding stock or other ownership interests having ordinary voting power for
election of directors (or Persons performing similar functions) of such Person;
provided, however, that except for purposes of Section 6.09 neither the Borrower
nor any of its Subsidiaries shall be deemed to be Affiliates of each other, and
for purposes of Section 6.09 no Subsidiary shall be deemed to be an Affiliate of
another Subsidiary.
<PAGE>
"Asset Sale" shall mean, with respect to any Person, any
transfer, conveyance, sale, lease or other disposition (including, without
limitation, by way of consolidation or merger, and by means of any Sale and
Leaseback Transaction by such Person or any of its Subsidiaries to any Person
other than the Borrower or a Subsidiary of the Borrower, in one transaction, or
a series of related transactions (each hereinafter referred to as a
"Disposition"), of Property or assets (including with respect to the Borrower,
the Capital Stock of any Subsidiary) of such Person or any of its Subsidiaries,
the Fair Market Value of which exceeds $2,000,000, other than (i) a disposition
of Property that is no longer useful in the conduct of the Telecommunications
Business of the Person making such disposition, (ii) a disposition that
constitutes a Restricted Payment permitted to be made under Section 6.04 hereof
and (iii) a disposition by the Borrower or any Subsidiary in connection with a
transaction permitted pursuant to Section 6.02 hereof. For purposes of this
definition, any series of related transactions that, if effected as a single
transaction would constitute an Asset Sale, shall be deemed to be a single Asset
Sale effected when the last transaction which is a part thereof is effected.
"Authorization" shall mean any license, permit, authorization,
approval or certificate of public convenience and necessity issued to the
Borrower or a Subsidiary by a Governmental Authority.
"Benefit Plan" shall mean a defined benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which the
Borrower or any ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Board of Directors" shall mean either the board of directors
of the Borrower or any duly authorized committee of that board.
"Board Resolution" shall mean a copy of a resolution certified
by the Secretary or an Assistant Secretary of the Borrower to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Lender.
"Business Day" shall mean any day not a Saturday, Sunday or
legal holiday in New Jersey, on which banks are open for business in New Jersey.
"Capital Lease Obligation" of any Person, shall mean the
obligation to pay rent or other payment amounts under a lease of (or other Debt
arrangements conveying the right to use) real or personal property of such
Person which is required to be classified and accounted for as a capital lease
or a liability on the face of a balance sheet of such Person prepared in
accordance with GAAP.
"Capital Stock" of any Person shall mean any and all shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person (including, without limitation, common stock,
preferred stock and partnership interests) and any rights (other than Debt
convertible into an equity interest), warrants or options to subscribe for or
acquire an equity interest in such Person.
"Cash Proceeds" shall mean, with respect to any Asset Sale or
issuance or sale of Capital Stock by any Person, the aggregate consideration
received in respect of such sale or issuance by such Person in the form of cash
and Eligible Cash Equivalents.
"Change of Control" shall mean, (i) after giving effect to any
disposition of Voting Stock of the Borrower, a Controlling Interest in fifty
percent (50%) or more of the Voting Stock of the Borrower is obtained by a
Person or Control Group except for (1) any Person or Control Group which has (A)
an equity capitalization of at least $1,000,000,000, (B) is engaged (without
giving effect to the acquisition of any Voting Stock of the Borrower) in the
Telecommunications Business, and (C) the total Debt of such Person after giving
effect to the acquisition of any Voting Stock of the Borrower does not exceed
forty percent (40%) of the Market Capitalization of such Person, or (2) any
transaction permitted pursuant to the provisions of Section 6.02(a)(iii), or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with any
new directors whose election or appointment by such board or whose nomination
for election by the shareholders of the Company was approved by a vote of the
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 then in office.
"Code" shall have the meaning ascribed to such term in
Section 1.03.
"Collateral" shall mean all property and interests in property
now owned or hereafter acquired by the Borrower in or upon which a security
interest, lien or mortgage is granted to Lender by the Borrower, whether
pursuant to Section 7.01 of this Agreement or the other Loan Documents;
provided, however, that Collateral shall not include the Capital Stock or equity
interests in any New Subsidiary or Excluded Subsidiary unless the Subsidiary
Investment Conditions have been fulfilled with respect thereto.
"Commercial Paper Rate" shall mean for each Interest Period,
the average offering rate by commercial paper dealers for three month commercial
paper of major corporations as quoted in the Eastern Edition of The Wall Street
Journal (or its successor publication) two (2) Business Days prior to such
Interest Period, plus four and one-half percent (4.50%) per annum.
"Commitment" shall mean Lender's agreement to lend as set
forth in Section 2.01.
"Commitment Amount" shall mean $35,000,000.
"Common Stock" shall mean, with respect to any Person, Capital
Stock of such Person that does not rank prior, as to the payment of dividends or
as to the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Consolidated Interest Expense" shall mean, with respect to
any Person for any period, without duplication (A) the sum of (i) the aggregate
amount of cash and non-cash interest expense (including capitalized interest) of
such Person and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP in respect of Debt (including, without limitation,
(v) any amortization of debt discount, (w) net costs associated with Interest
Hedging Obligations (including any amortization of discounts), (x) the interest
portion of any deferred payment obligation, (y) all accrued interest and (z) all
commissions, discounts and other fees and charges owed with respect to letters
of credit, bankers' acceptances or similar facilities paid or accrued, or
scheduled to be paid or accrued, during such period; (ii) dividends or
distributions with respect to Preferred Stock or Disqualified Stock of such
Person (and of its Subsidiaries if to be paid to a Person other than such Person
or its Subsidiaries) declared and payable in cash; (iii) the portion of any
rental obligation of such Person or its Subsidiaries in respect of any Capital
Lease Obligation allocable to interest expense in accordance with GAAP; and (iv)
to the extent such Person or any of its Subsidiaries Guarantees Debt of any
other Person, the aggregate amount of interest paid, accrued or scheduled to be
paid or accrued, by such other Person during such period attributable to any
such Debt, less (B) to the extent included in (A) above, amortization or
write-off of deferred financing costs of such Person and its Subsidiaries during
such period and any charge related to any premium or penalty paid in connection
with redeeming or retiring any Debt of such Person and its Subsidiaries prior to
its Stated Maturity; in the case of both (A) and (B) above, after elimination of
intercompany accounts among such Person and its Subsidiaries and as determined
in accordance with GAAP.
"Consolidated Net Income" of any Person shall mean for any
period, the aggregate net income (or net loss) of such Person and its
Subsidiaries for such period on a consolidated basis determined in accordance
with GAAP; provided that there shall be excluded therefrom, without duplication
(i) all items classified as extraordinary, (ii) any net income of any Person
other than such Person and its Subsidiaries, except to the extent of the amount
of dividends or other distributions actually paid to such Person or its
Subsidiaries by such other Person during such period in respect of such income,
(iii) the net income of any Person acquired by such Person or any of its
Subsidiaries in a pooling-of-interests transaction for any period prior to the
date of the related acquisition, (iv) any gain or loss, net of taxes, realized
on the termination of any employee pension benefit plan, (v) net gains (but not
net losses) in respect of Asset Sales by such Person or its Subsidiaries, (vi)
the net income (but not net loss) of any Subsidiary of such Person to the extent
that the payment of dividends or other distributions to such Person is
restricted by the terms of its charter or any agreement, instrument, contract,
judgment, order, decree, statute, rule, governmental regulation or otherwise,
except for any dividends or distributions actually paid by such Subsidiary to
such Person, (vii) with regard to a non-wholly owned Subsidiary, any aggregate
net income (or loss) in excess of such Person's or such Subsidiary's pro rata
share of such non-wholly owned Subsidiary's net income (or loss) and (viii) the
cumulative effect of changes in accounting principles.
"Consolidated Tangible Assets" of any Person shall mean, as of
any date, the sum for such Person and its Subsidiaries (after eliminating
intercompany items) of the net book value of all Property and assets of such
Person and its Subsidiaries reflected on a balance sheet of such Person or such
Subsidiary, as the case may be, prepared in accordance with GAAP, less the net
book value of all items that would be classified as intangibles under GAAP,
including, without limitation, (i) licenses, patents, patent applications,
copyrights, trademarks, trade names, goodwill, noncompete agreements,
organizational expenses, and (ii) unamortized deferred financing costs, debt
discount and expenses, including any appropriate deductions for any minority
interest in such assets of such Subsidiaries.
"Contaminant" shall mean any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special waste, petroleum or
petroleum-derived substance or waste, or any constituent of any such substance
or waste.
"Control Group" shall mean two or more Persons acting as a
partnership, limited partnership, limited liability company, syndicate or other
group for the purpose of acquiring, holding or disposing of Voting Stock of the
Borrower or any Subsidiary.
"Controlling Interest" shall mean the power to vote more than
50% of the outstanding stock or other ownership interests having ordinary voting
power for election of directors (or Persons performing similar functions) of a
Person.
"Debt" shall mean (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations Incurred in connection
with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith, (vii) every obligation under
Interest Rate and Currency Protection Agreements of such Person and (viii) every
obligation of the type referred to in clauses (i) through (vii) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has Guaranteed; provided, however that Debt shall not include any
obligation under any Disqualified Stock. The "amount" or "principal amount" of
Debt at any time of determination as used herein represented by (a) any Debt
issued at a price that is less than the principal amount at maturity thereof,
shall be the amount of the liability in respect thereof determined in accordance
with GAAP, or (b) any Receivables Sale shall be the amount of the unrecovered
capital or principal investment of the purchaser (other than the Borrower or a
Wholly-Owned Subsidiary of the Borrower) thereof, excluding amounts
representative of yield or interest earned on such investment.
"Debt to EBITDA Ratio" shall mean, as at any date of
determination, the ratio of (i) the aggregate amount of Debt of the Borrower and
its Subsidiaries on a consolidated basis as at the date of determination to (ii)
the aggregate amount of EBITDA of the Borrower and its Subsidiaries for the four
preceding fiscal quarters for which financial information is available
immediately prior to the date of determination; provided that any Debt incurred
or retired by the Borrower or any of its Subsidiaries during the fiscal quarter
in which the date of determination occurs shall be calculated as if such Debt
was so incurred or retired on the first day of the fiscal quarter in which the
date of determination occurs; and provided, further, that (x) if the transaction
giving rise to the need to calculate the Debt to EBITDA Ratio would have the
effect of increasing or decreasing Debt or EBITDA in the future, Debt or EBITDA
shall be calculated on a pro forma basis as if such transaction had occurred on
the first day of such four fiscal quarter period preceding the date of
determination, and (y) if during such four fiscal quarter period, the Borrower
or any of its Subsidiaries shall have engaged in any Asset Sale EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive), or
increased by any amount equal to the EBITDA (if negative), directly attributable
to the assets which are the subject of such Asset Sale and any related
retirement of Debt as if such Asset Sale and related retirement of Debt had
occurred on the first day of such period and (z) if during such four fiscal
quarter period the Borrower or any of its Subsidiaries shall have acquired any
material assets outside the ordinary course of business, EBITDA shall be
calculated on a pro forma basis as if such asset acquisition and related
financing had occurred on the first day of such period.
"Default" shall mean any event, act or condition, the
occurrence of which is, or after notice or the passage of time or both would be,
an Event of Default.
"Defeasance Conditions" shall mean that the Borrower or the
Subsidiary which assumes any Debt in connection with a merger or consolidation
permitted pursuant to Section 6.02(a) has cash or Eligible Cash Equivalents
solely the property of such Borrower or Subsidiary in an amount sufficient to
defease such Debt, which cash or Eligible Cash Equivalents shall at all times be
segregated from the other Property of such Borrower or Subsidiary, and shall be
applied by such Borrower or Subsidiary solely to defease such Debt.
"Disposition" shall have the meaning ascribed to such term in
the definition of "Asset Sale".
"Disqualified Stock" shall mean any Capital Stock which, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, or otherwise,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder thereof, or is
exchangeable for Debt at any time, in whole or in part, on or prior to the
Maturity Date.
"EBITDA" shall mean, with respect to any Person for any
period, the sum for such Person for such period of Consolidated Net Income plus,
to the extent reflected in the income statement of such Person for such period
from which Consolidated Net Income is determined, without duplication, (i)
Consolidated Interest Expense, (ii) income tax expense, (iii) depreciation
expense, (iv) amortization expense, (v) any non-cash charge related to the
issuance to employees of such Person of options to purchase Capital Stock of
such Person and (vi) any charge related to any premium or penalty paid in
connection with redeeming or retiring any Debt prior to its Stated Maturity and
minus, to the extent reflected in such income statement, any non-cash credits
that had the effect of increasing Consolidated Net Income of such Person for
such period, each item to be determined in accordance with GAAP.
"Eligible Cash Equivalents" shall mean (i) securities 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; (ii) time
deposits and certificates of deposit of any commercial bank organized in the
United States having capital and surplus in excess of $500,000,000, with a
maturity date not more than one year from the date of acquisition; (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (ii) above; (iv) direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing, or
subject to tender at the option of the holder thereof within 90 calendar days
after the date of acquisition thereof and, at the time of acquisition, having a
rating of A or better from Standard & Poor's or A-2 or better from Moody's; (v)
commercial paper issued by the parent corporation of any commercial bank
organized in the United States having capital and surplus in excess of
$500,000,000 and commercial paper issued by others having one of the two highest
ratings obtainable from either Standard & Poor's or Moody's and in each case
maturing within ninety days after date of acquisition; (vi) overnight bank
deposits and bankers' acceptances at any commercial bank organized in the United
States having capital and surplus in excess of $500,000,000; (vii) deposits
available for withdrawal on demand with a commercial bank organized in the
United States having capital and surplus in excess of $500,000,000; and (viii)
investments in money market funds substantially all of whose assets comprise
securities of the types described in clauses (i) through (vi).
"Eligible Institution" shall mean a commercial banking
institution that has combined capital and surplus of not less than $500 million
or its equivalent in foreign currency, whose debt is rated "A" (or higher)
according to Standard & Poor's or Moody's Investors Service, Inc. at the time as
of which any investment or rollover therein is made.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended.
"ERISA Affiliate" shall mean any (i) corporation which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the IRC) as the Borrower, (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of section 414(c) of the IRC) with the Borrower and (iii) member of the same
affiliated service group (within the meaning of section 414(m) of the IRC) as
the Borrower, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Event of Default" shall have the meaning given to such term
in Section 8.01 hereof.
"Exchange Rate Obligation" shall mean, with respect to any
Person, any currency swap agreements, forward exchange rate agreements, foreign
currency futures or options, exchange rate collar agreements, exchange rate
insurance or other agreements or arrangements, or combination thereof, designed
to provide protection against fluctuations in currency exchange rates.
"Excluded Subsidiary" shall mean a Person listed on
Schedule 3.22 hereto.
"Fair Market Value" shall mean, with respect to any Property
or asset, the sale value that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy, as determined in good
faith by the Board of Directors with respect to any asset valued at $500,000 or
more, or by a Responsible Officer with respect to any asset valued at less than
$500,000.
"FCC" shall mean the Federal Communications Commission or any
successor commission or agency having jurisdiction over any Subsidiary or any
System.
"Financials" shall have the meaning specified in Section 3.03.
"Funding Date" shall mean December 30, 1997.
"GAAP" shall have the meaning ascribed to such term in
Section 1.02.
"Government Securities" shall mean direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged and which have a remaining weighted average life to maturity of not less
than one year from the date of Investment therein.
"Governmental Authority" shall mean any nation or government,
federal, state, local or other political subdivision thereof or any entity
exercising executive, legislative, judicial or administrative functions of or
pertaining to government.
"Guarantee" shall mean any direct or indirect obligation,
contingent or otherwise, of a Person guaranteeing, or having the economic effect
of guaranteeing, any Debt of any other Person in any manner (and "Guarantees",
"Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative to
the foregoing).
"Headquarters Expenses" shall mean management or similar fees
payable by any Subsidiary to the Borrower.
"Incur" shall mean with respect to any Debt or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), extend, assume, Guarantee or otherwise become liable in respect of
such Debt or other obligation including by acquisition of Subsidiaries or the
recording, as required pursuant to GAAP or otherwise, of any such Debt or other
obligation on the balance sheet of such Person (and "Incurrence", "Incurred",
"Incurrable" and "Incurring" shall have meanings correlative to the foregoing);
provided that a change in GAAP that results in an obligation of such Person that
exists at such time becoming Debt shall not be deemed an Incurrence of such
Debt. Debt otherwise incurred by a Person before it becomes a Subsidiary of the
Borrower (whether by merger, consolidation, acquisition or otherwise) shall be
deemed to have been incurred at the time at which such Person becomes a
Subsidiary of the Borrower.
"Indebted Subsidiaries" shall mean collectively, American
Communication Services of Louisville, Inc., a Delaware corporation, American
Communication Services of Fort Worth, Inc., a Delaware corporation, American
Communication Services of Columbia, Inc., a Delaware corporation, American
Communication Services of Greenville, Inc., a Delaware corporation, and American
Communications Services of El Paso, Inc., a Delaware corporation.
"Indentures" shall mean collectively, (i) that certain
Indenture dated as of November 14, 1995 between the Borrower and Chemical Bank,
as trustee, and relating to Borrower's $190,000,000 13% Senior Discount Notes
due 2005, as amended and restated as of November 12, 1997, (ii) that certain
Indenture dated as of March 26, 1996 between the Borrower and Chemical Bank, as
trustee, and relating to Borrower's $120,000,000, 12 3/4% Senior Discount Notes
due 2006, as amended and restated as of November 12, 1997 and (iii) that certain
Indenture dated as of July 23, 1997 between the Borrower and Chemical Bank, as
trustee, and relating to Borrower's $220,000,000 13 3/4% Senior Notes due 2007.
"Intercompany Notes" shall mean the promissory notes of the
Indebted Subsidiaries that are payable to the Borrower and evidence the Debt of
the Indebted Subsidiaries to the Borrower resulting from the advance of funds by
the Borrower to the Indebted Subsidiaries to pay off existing Debt of the
Indebted Subsidiaries to AT&T Credit Corporation, substantially in the form of
Exhibit G attached hereto.
"Interest Hedging Obligation" shall mean, with respect to any
Person, an obligation of such Person pursuant to any interest rate swap
agreement, interest rate cap, collar or floor agreement or other similar
agreement or arrangement designed to protect against or manage such Person's or
any of its Subsidiaries' exposure to fluctuations in interest rates.
"Interest Period" shall mean the period commencing on the
Funding Date and ending on the last day of the calendar quarter in which the
Funding Date occurs, and thereafter, each period commencing on the first day of
each subsequent calendar quarter and ending on the last day of such subsequent
calendar quarter; provided, however, that the duration of any Interest Period
which commences before the Maturity Date and would otherwise end after the
Maturity Date shall end on the Maturity Date.
"Investment" in any Person shall mean any direct, or
contingent (i) advance or loan to, Guarantee of any Indebtedness of, extension
of credit or capital contribution to such Person; (ii) the acquisition of any
shares of Capital Stock, bonds, notes, debentures or other securities of such
Person; or (iii) the acquisition, by purchase or otherwise, of all or
substantially all of the business, assets or stock or other evidence of
beneficial ownership of such Person; provided that Investments shall exclude
commercially reasonable extensions of trade credit. The amount of any Investment
shall be the original cost of such Investment, plus the cost of all additions
thereto and minus the amount of any portion of such Investment repaid to such
Person in cash as a repayment of principal or a return of capital, as the case
may be, but without any other adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment. In
determining the amount of any Investment involving a transfer of any Property or
asset other than cash, such Property or asset shall be valued at its Fair Market
Value at the time of such transfer.
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated thereunder, and any
successor statutes or rules and regulations.
"IRS" shall mean the Internal Revenue Service or any successor
agency.
"Joint Venture" shall mean a corporation, partnership, limited
liability company or other entity engaged in one or more Telecommunications
Businesses in which the Borrower owns, directly or indirectly, a 25% or greater
interest, with the balance of the ownership interests being held by one or more
Strategic Investors.
"Lender" shall have the meaning ascribed to such term in the
recitals to this Agreement.
"LIBOR Rate" shall mean, for any Interest Period, an interest
rate per annum equal to the average of interbank offered rates for U.S. dollar
deposits in the London market for three months as quoted in the Eastern Edition
of The Wall Street Journal on the date ("LIBOR Rate Determination Date") two
Business Days prior to the first day of each Interest Period, or if such rate is
not published in the Eastern Edition of The Wall Street Journal, the arithmetic
mean (rounded upward to the nearest one-hundredth of one percent per annum), of
the rates per annum at which deposits in U.S. dollars of not less than
$1,000,000 are offered by the principal office of each of the Reference Banks in
London, England to prime banks in the London interbank market at approximately
11:00 A.M. (London time) on the LIBOR Rate Determination Date for any period
equal to three months, as quoted by at least two of the four Reference Banks
following a solicitation of quotes from all four Reference Banks, or, if fewer
than two such quotes are received, an interest rate per annum equal to the
arithmetic mean (rounded upward to the nearest one-hundredth of one percent per
annum), of the rates per annum at which loans in U.S. dollars of not less than
$1,000,000 are offered at approximately 11:00 a.m., New York time on the LIBOR
Rate Determination Date, by three major banks selected by Lender in New York,
New York to leading European banks, for a period equal to three months, as
quoted by such major New York banks; plus in each case four and one-half percent
(4.50%) per annum. The LIBOR Rate for each Interest Period shall be determined
by the Lender on the basis of the foregoing information or quotations on the
LIBOR Rate Determination Date with respect to such Interest Period, subject,
however, to the provisions of Section 2.04(c).
"Lien" shall mean, with respect to any Property or other asset
(including Capital Stock), any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, lien (statutory or other),
charge, easement, encumbrance, preference, priority or other security or similar
agreement or preferential arrangement of any kind or nature whatsoever on or
with respect to such Property or other asset (including, without limitation, any
conditional sale or title retention agreement having substantially the same
economic effect as any of the foregoing).
"Loans" shall mean the loans made to the Borrower on the
Funding Date pursuant to Section 2.01.
"Loan Documents" shall mean this Agreement (including all
schedules and exhibits referred to herein), the Note, the Pledge Agreement, the
Intercompany Notes, and all security agreements, guarantees, mortgages, deeds of
trust, subordination agreements, pledges, powers of attorney, consents,
assignments, financing statements, amendments and waivers heretofore, now or
hereafter executed by or on behalf of the Borrower or any Subsidiary in
connection with the transactions contemplated hereby, and delivered to Lender.
"Market Capitalization" shall mean, for any Person, at the
time of determination, (i)for purposes of determining whether a Change of
Control has occurred or Section 6.02(a)(iii)(C) has been complied with, where
the Common Stock of the Person which is acquiring the Borrower or is the
survivor of a merger or consolidation with the Borrower is traded on a
securities exchange, automated quotations system or market, the product of (A)
the aggregate amount of outstanding shares of Common Stock of such Person (which
shall not include any Common Stock issuable upon the exercise of options or
warrants on, or securities convertible or exchangeable into, shares of Common
Stock of such Person) and (B) the average Closing Price of such Common Stock
over the preceding twenty consecutive Trading Days, plus (C) indebtedness of the
Borrower as determined in accordance with GAAP immediately prior to such Change
of Control or merger or consolidation; (ii) for purposes of determining whether
a Change of Control has occurred or Section 6.02(a)(iii)(C) has been complied
with, where the Common Stock of the Person which is acquiring the Borrower or
merging or consolidating with the Borrower, is not traded on a securities
exchange, automated quotations system or market, the sum of (A) the book value
of the Common Stock of such Person immediately prior to such Change of Control
or merger or consolidation, (B) the consideration paid for the Borrower, and (C)
indebtedness of the Borrower as determined in accordance with GAAP immediately
prior to such Change of Control or merger or consolidation; and (iii) for
purposes of determining whether Section 6.02(a)(ii)(C) has been complied with,
(A) the book value of the Subsidiary which is a party to the merger immediately
prior to the merger, plus (B) the consideration paid to the shareholders of the
other Person which is a party to the merger, with any Common Stock included in
such consideration to be valued in accordance with the criteria set forth in
clause (i)(A) and (B) above or clause (ii)(A) above, as applicable, plus (C)
indebtedness of the other Person which is a party to the merger as determined in
accordance with GAAP immediately prior to the merger.
"Material Adverse Effect" shall mean a material adverse effect
upon the condition (financial or otherwise), operations, properties or prospects
of the Borrower and the Subsidiaries taken as a whole, or upon the ability of
the Borrower to perform under the Loan Documents.
"Maturity Date" shall mean September 30, 2004.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is, or within the immediately
preceding six (6) years was, contributed to by the Borrower or an ERISA
Affiliate.
"Net Cash Proceeds" shall mean, with respect to the sale of
any Property or assets by any Person or any of its Subsidiaries, Cash Proceeds
received net of (i) all reasonable out-of-pocket expenses of such Person or such
Subsidiary incurred in connection with such a sale, including, without
limitation, all legal, title and recording tax expenses, commissions and other
fees and expenses incurred (but excluding any finder's fee or broker's fee
payable to any Affiliate of such Person or any of its Subsidiaries) and all
federal, state, foreign and local taxes arising in connection with such sale
that are paid or required to be accrued as a liability under GAAP by such Person
or its Subsidiaries; (ii) all payments made or required to be made by such
Person or its Subsidiaries on any Debt which is secured by such Properties or
assets in accordance with the terms of any Lien upon or with respect to such
Properties or assets or which must, by the terms of such Lien, or in order to
obtain a necessary consent to such transaction or by applicable law, be repaid
in connection with such sale, and (iii) all contractually required distributions
and other payments made to minority interest holders (but excluding
distributions and payments to Affiliates of such Person) in Subsidiaries of such
Person as a result of such transaction; provided that, in the event that any
consideration for a transaction (which would otherwise constitute Net Cash
Proceeds) is required to be held in escrow pending determination of whether a
purchase price adjustment will be made, such consideration (or any portion
thereof) shall become Net Cash Proceeds only at such time as it is released to
such Person or its Subsidiaries from escrow; provided, further, that any
non-cash-consideration received in connection with any transaction, which is
subsequently converted to cash, shall be deemed to be Net Cash Proceeds at such
time of conversion, and shall thereafter be applied in accordance with Section
6.02.
"New Subsidiary" shall mean any Subsidiary of the Borrower
created after the Funding Date for any purpose other than engaging in a
Telecommunications Business or operating a System previously engaged in or
operated by any other Subsidiaries, exclusive of any such Subsidiary created
after the Funding Date for which all of the Subsidiary Investment Conditions
have been complied with.
"Note" shall mean the promissory note of the Borrower,
substantially in the form of Exhibit A attached hereto.
"Obligations" shall mean all of the payment and performance
obligations of the Borrower, heretofore now or hereafter existing under this
Agreement or the other Loan Documents, whether for principal, interest, fees,
expenses, indemnification or otherwise.
"Payment Date" shall mean, following the Funding Date, the
last calendar day of March, June, September and December in each calendar year,
but if any such date is not a Business Day the next succeeding Business Day.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.
"Permitted Investments" shall mean
(i) Eligible Cash Equivalents;
(ii) Investments in Property used in the ordinary course
of business;
(iii) Investments in any Person as a result of which such
Person becomes a Subsidiary of the Borrower provided that such
Investment does not result in an Event of Default and the Subsidiary
Investment Condition with respect to such Person have been complied
with within thirty days of making such Investment;
(iv) Investments in prepaid expenses, negotiable instruments
held for collection and lease, utility, workers' compensation,
performance and other similar deposits;
(v) Interest Hedging Obligations with respect to any floating
rate Debt that is permitted under Section 6.11 to be outstanding;
(vi) Exchange Rate Obligations, provided that such Exchange
Rate Obligations were entered into in connection with transactions in
the ordinary course of business or the Incurrence of Debt that is
permitted under Section 6.11 hereof to be outstanding;
(vii) bonds, notes, debentures, or other debt securities
received as a result of Assets Sales permitted under Section 6.02;
(viii) Investments by the Borrower or a Subsidiary in or in
respect of a Person to the extent the consideration for such Investment
consists of shares of Qualified Stock of the Borrower; and
(ix) Investments listed on Schedule 1.02 hereto.
"Permitted Liens" shall have the meaning set forth in
Section 6.01.
"Person" shall mean any individual, corporation, partnership,
joint venture, trust, unincorporated organization or other legal entity, or
government or any agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan as defined in
Section 3(3) of ERISA (other than a Multiemployer Plan) in respect of which the
Borrower or any ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean that certain Agreement in the
form of Exhibit B hereto, providing for the pledge by the Borrower to Lender of
all of the capital stock of all direct and indirect Subsidiaries of the
Borrower.
"Preferred Stock" shall mean as applied to the Capital Stock
of any Person, Capital Stock of any class or classes (however designated) which
is preferred, as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution or winding
up of such Person, over shares of Capital Stock of any other class of such
Person.
"Prepayment Conditions" shall mean (i) the Borrower seeks
additional financing through the provision of senior secured loans to the
Borrower, (ii) the Borrower provides Lender or a lending syndicate arranged by
Lender the opportunity to provide or participate in such financing, it being
understood that the Borrower shall have no obligation to accept any offer to
provide such financing from Lender or to keep such opportunity open for a period
of more than thirty (30) days after the Borrower has provided Lender with the
material terms and conditions related to such financing, (iii) in order to
obtain such senior secured financing from another source, it is necessary either
for (A) the Borrower to prepay the Loans in full or (B) Lender to share the
Collateral with the providers of such senior secured financing on a pro rata
basis, and Lender shall have refused to do so within thirty (30) days after
receipt of written request therefor from the Borrower, (iv) the Borrower obtains
the senior secured financing it sought from Lender from another financing source
on substantially the same terms and conditions or more favorable terms and
conditions to the Borrower than those offered to Lender, and (v) the Debt to
EBITDA Ratio is less than (i) 5.5 to 1.0 for Debt incurred on or before November
1, 1998 or (ii) 5.0 to 1.0 for Debt incurred after November 1, 1998.
"Prepayment Premium" shall mean, (i) if all of the Prepayment
Conditions have been satisfied other than the one in clause (v) of the
definition thereof and the holders of the Debt under the Indentures have not
waived any covenant prohibiting additional financing, the percentage of the
outstanding principal balance of the Loans set forth below during the period
indicated:
Period Percentage
March 31, 1998 through and 3%
including March 30, 1999
March 31, 1999 through and 1%
including March 30, 2001
any time thereafter 0%;
(ii) at any other time except when either (A) all of the Prepayment Conditions
have been satisfied or (B) all of the Prepayment Conditions have been satisfied
other than the one in clause (v) of the definition thereof and the holders of
the Debt under all the Indentures have waived all covenants prohibiting
additional financing, the percentage of the outstanding principal balance of the
Loans being prepaid set forth below during the period indicated:
Period Percentage
Funding Date through and 3%
including March 30, 1998
March 31, 1998 through and 1.5%
including March 30, 1999
March 31, 1999 through and 0.5%
including March 30, 2001
any time thereafter 0%
"Property" shall mean, with respect to any Person, any
interest of such Person in any kind of property or asset, whether real, personal
or mixed tangible or intangible, excluding Capital Stock in any other Person.
"PUC" shall mean the public utilities commission, public
service commission or other state Governmental Authority with responsibility for
telecommunications regulation and having jurisdiction over the Borrower or any
Subsidiary or such Subsidiary's System.
"Purchase Money Debt" shall mean Debt of the Borrower or any
Subsidiary of the Borrower (including, without limitation, Debt represented by
Capital Lease Obligations, Vendor Finance Indebtedness, mortgage financings and
purchase money obligations) incurred for the purpose of financing all or any
part of the cost of construction, acquisition or improvement by such Person or
any Subsidiary of the Borrower of assets to be owned and operated by such
Person, and including any related notes, Guarantees, collateral documents,
instruments and agreements executed in connection therewith, as the same may be
amended, supplemented, modified or restated from time to time.
"Qualified Stock" of any Person shall mean any class of
Capital Stock other than Disqualified Stock.
"Receivables" shall mean receivables, chattel paper,
instruments, documents or intangibles evidencing or relating to the right to
payment of money.
"Receivables Sale" of any Person shall mean any sale of
Receivables of such Person (pursuant to a purchase facility or otherwise), other
than in connection with a disposition of the business operations of such Person
relating thereto or a disposition of defaulted Receivables for purpose of
collection and not as a financing arrangement.
"Reference Banks" shall mean Chase Manhattan Bank, Citibank,
N.A., Bank of America and The First National Bank of Chicago.
"Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or into or out of any property,
including the movement of Contaminants through or in the air, soil, surface
water, groundwater or property.
"Remedial Action" shall mean actions required by any
Governmental Authority to (1) clean up, remove, treat or in any other way
address Contaminants in the indoor or outdoor environment; (2) prevent the
Release or threat of Release or prevent or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (3) perform
pre-remedial studies and investigations and post-remedial monitoring and care.
"Reportable Event" shall mean any reportable event as defined
in Section 4043 of ERISA, other than the events described in Section 4043(c)(3)
or (7) of ERISA or with respect to which the reporting requirements have been
waived .
"Responsible Officer" shall mean with respect to any Person,
its Chairman of the Board, President, any Vice President or Chief Financial
Officer.
"Restricted Payment" shall mean (i) a dividend or other
distribution declared or paid on the Capital Stock of the Borrower or to the
Borrower's stockholders (in their capacity as such), or declared or paid to any
Person other than the Borrower or a Subsidiary of the Borrower on the Capital
Stock of any Subsidiary of the Borrower, in each case, other than dividends,
distributions or payments made solely in Qualified Stock of the Borrower or such
Subsidiary, (ii) a payment made by the Borrower or any of its Subsidiaries
(other than to the Borrower or any Subsidiary of the Borrower) to purchase,
redeem, acquire or retire any Capital Stock of the Borrower or of a Subsidiary
of the Borrower, (iii) a payment made by the Borrower or any of its Subsidiaries
(other than a payment made solely in Qualified Stock of the Borrower) to redeem,
repurchase, defease (including an in-substance or legal defeasance) or otherwise
acquire or retire for value (including pursuant to mandatory repurchase
covenants), prior to any scheduled maturity, scheduled sinking fund or mandatory
redemption payment, Debt of the Borrower or such Subsidiary which was scheduled
to mature on or after the maturity of the Obligations, or (iv) an Investment in
any Person, including a Subsidiary, other than (a) a Permitted Investment, (b)
an Investment by the Borrower in a Subsidiary of the Borrower or (c) an
Investment by a Subsidiary of the Borrower in the Borrower or a Subsidiary of
the Borrower.
"Sale and Leaseback Transaction" shall mean, with respect to
any Person, any direct or indirect arrangement pursuant to which Property is
sold or transferred by such Person or a Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such Person
or one of its Subsidiaries.
"Segregated Assets" shall mean the proceeds, directly or
indirectly, of any Asset Sale relating to the Property or Capital Stock of any
Subsidiary of the Borrower or any revenues generated by any Subsidiary of the
Borrower.
"Share Exchange" shall mean the exchange by AT&T Credit
Corporation of shares of common stock of the Indebted Subsidiaries, which shares
are beneficially owned by AT&T Credit Corporation, for shares of common stock of
the Borrower pursuant to the terms of that certain Exchange Agreement of even
date herewith between AT&T Credit Corporation and the Borrower.
"Stated Maturity" shall mean, with respect to any security,
the date specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred), and, when
used with respect to any installment of interest on such security, the fixed
date on which such installment of interest is due and payable.
"Strategic Investor" shall mean a corporation, partnership or
other entity engaged in one or more Telecommunications Businesses that has, or
80% or more of the Voting Stock of which is owned by a Person that has, an
equity market capitalization, at the time of its initial Investment in the
Borrower or in a Joint Venture with the Borrower, in excess of $1.0 billion.
"Strategic Subsidiary" shall mean any of the following
Persons: any Indebted Subsidiary, American Communication Services of Maryland,
Inc., a Maryland corporation, American Communication Services of Las Vegas,
Inc., a Maryland corporation, or American Communication Services of Pima County,
Inc., a Delaware corporation.
"Subsidiary" of any Person shall mean (i) a corporation more
than 50% of the combined voting power of the outstanding Voting Stock of which
is owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person; (ii) any general partnership, joint venture or similar entity, more
than fifty percent (50%) of the outstanding partnership or similar interests of
which are owned, directly or indirectly, by such Person, or by one or more other
Subsidiaries of such Person, or by such Person and one or more other
Subsidiaries of such Person; and (iii) any limited partnership of which such
Person or any Subsidiary of such Person is a general partner; provided, however,
that neither a New Subsidiary nor an Excluded Subsidiary shall be deemed to be a
Subsidiary of the Borrower unless an Investment is made in such New Subsidiary
or Excluded Subsidiary out of Segregated Assets.
"Subsidiary Investment Conditions" shall mean with respect to
any New Subsidiary or Excluded Subsidiary (a "Prospective Subsidiary") which any
Subsidiary intends to make an Investment in or the Borrower intends to make an
Investment in out of Segregated Assets, (A) Lender shall have received each of
the following: (i) a Pledge Agreement executed by the Borrower and relating to
all the Capital Stock of such Prospective Subsidiary, together with stock
certificates and undated stock powers duly executed in blank for all the shares
of Capital Stock of such Prospective Subsidiary, (ii) the articles or
certificate of incorporation of such Prospective Subsidiary, certified to as of
a recent date to be true, correct and complete by the Secretary of State of the
state of incorporation of such Prospective Subsidiary, (iii) certificates of a
recent date from appropriate public officials as to the qualification and good
standing of such Prospective Subsidiary in the state in which it is incorporated
and the state in which it maintains its principal place of business, (iv) a
certificate of the secretary of the Borrower certifying as of the date of the
proposed Investment (a) the name and true signature of the officer of the
Borrower authorized to execute the above referenced Pledge Agreement, (b) the
resolutions of the Board of Directors of the Borrower approving the transactions
contemplated by the above referenced Pledge Agreement, and (c) the Borrower's
and such Prospective Subsidiary's bylaws, as of the date of the Proposed
Investment, (v) an opinion of counsel to the Borrower in form and substance
satisfactory to the Lender as to the transactions contemplated by the above
referenced Pledge Agreement, and (vi) a certificate of the Chief Financial
Officer of the Borrower dated as the date of the proposed Investment certifying
that no Default or Event of Default would result from such Prospective
Subsidiary becoming a Subsidiary of the Borrower and that as of such date the
representations and warranties of the Borrower set forth in Article III or in
any other Loan Document shall be true and correct in all material respects on
and as of the date of the proposed Investment with the same effect as though
such representations and warranties had been made on and as of such date; and
(B) such Prospective Subsidiary shall engage in a Telecommunications Business.
"System" shall mean with respect to any Subsidiary, the
competitive local exchange communications systems maintained by such Subsidiary
as expanded and developed from time to time, and all replacements, enhancements
or additions thereto.
"Telecommunications Assets" shall mean, with respect to any
Person, assets (including, without limitation, rights of way, trademarks and
licenses to use copyrighted material) that are utilized by such Person, directly
or indirectly, in a Telecommunications Business. Telecommunications Assets shall
include stock, joint venture or partnership interests in another Person,
provided that substantially all of the assets of such other Person consist of
Telecommunications Assets, and provided, further, that if such stock, joint
venture or partnership interests are held by the Borrower or a Subsidiary, such
other Person either is, or immediately following the relevant transaction shall
become, a Subsidiary of the Borrower and all of the Subsidiary Investment
Conditions are complied with respect to such Person. The determination of what
constitutes Telecommunication Assets shall be made by the Board of Directors and
evidenced by a Board Resolution delivered to the Lender.
"Telecommunications Business" shall mean the business of (i)
transmitting, or providing services relating to the transmission of, voice,
video or data through owned or leased transmission facilities, (ii) creating,
developing or marketing communications related network equipment, software and
other devices for use in an activity set forth in clause (i) above or (iii)
evaluating, participating or pursuing any other activity or opportunity that is
related to those identified in clause (i) or (ii) above.
"Termination Event" shall mean (i) a Reportable Event with
respect to any Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which the Borrower or such
ERISA Affiliate was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (iii) the imposition of an obligation on the Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written notice
of intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; (v) any event or condition which might reasonably
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan; or (vi) the partial or
complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer
Plan.
"Trading Day" shall mean, with respect to a security traded on
a securities exchange, automated quotation system or market, a day on which such
exchange, system or market is open for a full day of trading.
"Vendor Financing Indebtedness" of any Person shall mean an
obligation owed by such Person to a vendor of any Telecommunications Assets
solely in respect of the purchase price of such assets.
"Voting Stock" shall mean, with respect to any Person,
securities of any class or classes of Capital Stock in such Person entitling the
holders thereof (whether at all times or at the times that such class of Capital
Stock has voting power by reason of the happening of any contingency) to vote in
the election of members of the board of directors or comparable body of such
Person.
"Wholly-Owned Subsidiary" of any Person shall mean a
Subsidiary of such Person, all of the outstanding Voting Stock or other
ownership interests (other than directors' qualifying shares) of which shall at
the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of
such Person or by such Person and one or more Wholly-Owned Subsidiaries of such
Person.
SECTION 1.02. Accounting Terms. Except as otherwise herein
specifically provided, each accounting term used herein shall have the meaning
given to it under generally accepted accounting principles applied on a
consistent basis ("GAAP").
SECTION 1.03. Others Defined in New York Uniform Commercial
Code. All other terms contained in this Agreement (and which are not otherwise
specifically defined herein) shall have the meanings provided by the Uniform
Commercial Code of the State of New York (the "Code") to the extent the same are
used or defined therein.
ARTICLE II
LOANS
SECTION 2.01. Agreement to Lend. Subject to the terms and
conditions herein and relying upon the representations and warranties of the
Borrower herein (unless the Commitment of Lender shall have been terminated in
accordance with the terms hereof), Lender agrees to make Loans to Borrower in
the amount of the Commitment Amount on the Funding Date.
SECTION 2.02. Purpose of Loan. The Loans made to the Borrower
shall be used by the Borrower (i) to make Loans to Indebted Subsidiaries to
enable the Indebted Subsidiaries to repay all outstanding obligations owing by
them to AT&T Credit Corporation, and (ii) for general corporate purposes.
SECTION 2.03. The Note. All the Loans shall be evidenced by
the Note. The Loans shall bear interest from the Funding Date on the outstanding
principal balance thereof as set forth in Section 2.04. Lender shall, and is
authorized and directed by the Borrower to register on Schedule A to the Note
the date, amount, and maturity of the Loans, and to register the date and amount
of each payment on the Loans, and such Schedule A shall be conclusive evidence
of the amounts owing to Lender with respect to the Loans in the absence of
manifest error; provided, however, that the failure of Lender to register any
such information on such schedule shall not in any manner affect the obligation
of the Borrower to repay the Loans in accordance with the terms of the Note.
SECTION 2.04. Interest on Loans. (a) Subject to the provisions
of Section 2.06, each Loan shall bear interest from and after the Funding Date
at a rate per annum for each Interest Period equal to the Commercial Paper Rate
or the LIBOR Rate, as selected by the Borrower in a written notice delivered to
the Lender at least two Business Days prior to the commencement of the Interest
Period in question. If the Borrower fails to deliver such written notice within
the prescribed time period, then the Loans shall bear interest at the Commercial
Paper Rate during the Interest Period in question. Interest shall be computed on
the basis of a 360 day year comprised of twelve 30 day months, compounded
quarterly.
(b) The Lender shall give prompt notice to the Borrower of the
applicable LIBOR Rate determined by the Lender for each Interest Period for
which the Borrower has requested the Loans to bear interest at the LIBOR Rate,
including the applicable rate, if any, appearing in Eastern Edition of The Wall
Street Journal or furnished by each Reference Bank or New York City bank, as the
case may be.
(c) If, with respect to any Interest Period, the Lender is
unable to determine the LIBOR Rate on the basis of the Eastern Edition of The
Wall Street Journal or quotations of the Reference Banks or New York City banks
to be selected by the Lender:
(i) the Lender shall forthwith notify the Borrower that
the LIBOR Rate cannot be determined for such Interest
Period; and
(ii) the interest rate on the Loans for such Interest
Period will be the Commercial Paper Rate.
SECTION 2.05. Payments. (a) Interest on the Loans shall be
payable quarterly in arrears on each Payment Date.
(b) The aggregate outstanding principal balance of the Loans
shall be payable in twenty-four consecutive quarterly installments beginning on
December 31, 1998 and continuing on each Payment Date thereafter through and
including September 30, 2004. The amount of each principal payment shall be as
follows:
Payment Number Amount
1 to 4 $437,500
5 to 8 $875,000
9 to 12 $1,312,500
13 to 16 $1,750,000
17 to 24 $2,187,500
SECTION 2.06. Default Rate of Interest. If all or a portion of
(a) the principal amount of the Loans, (b) any interest payable thereon, or (c)
any other Obligations shall not be paid when due, such overdue amount shall bear
interest at a rate that is two percent (2%) per annum above the rate of interest
otherwise payable on the Loans from the date of non-payment until such amount is
paid in full.
SECTION 2.07. Optional Prepayment of Loans; Mandatory
Prepayment of Loans. (a) Provided that no Event of Default has occurred and is
continuing and clause (b) below is not applicable, the Borrower shall have the
right upon the provision of thirty days prior written notice to Lender, which
notice shall be irrevocable, on any Payment Date occurring on or after March 30,
1998, to prepay at least $5,000,000 of the outstanding principal balance of the
Loans, together with accrued interest thereon and the aggregate Prepayment
Premiums, if any, with respect to the Loans being prepaid; provided, however, no
partial prepayments which would result in reducing the aggregate outstanding
principal balance of the Loans to less than $10,000,000, shall be permitted.
Partial prepayments shall be applied to the principal installments of the Loans
in the inverse order of maturity.
(b) Provided that no Event of Default has occurred and is
continuing and either all of the Prepayment Conditions have been satisfied or
all of the Prepayment Conditions other than the condition specified in clause
(v) of the definition thereof have been satisfied, the Borrower shall have the
right upon the provision of thirty days prior written notice to Lender, which
notice shall be irrevocable, on any Payment Date to prepay the outstanding
principal balance of all, but not less than all, of the Loans, together with
accrued interest thereon, without premium or penalty if all of the Prepayment
Conditions have been satisfied, and otherwise, with the aggregate Prepayment
Premiums, if any.
(c) Upon the occurrence of a Change of Control, at the sole
option of Lender, the Borrower shall prepay, without premium or penalty, the
outstanding principal balance of all the Loans, and all other Obligations within
thirty days after receipt of notice from Lender requesting such payment,
together with accrued interest.
SECTION 2.08. Payment, etc. All payments by the Borrower
hereunder and under the Note shall be made to Lender by wire transfer or other
electronic payment method to such bank accounts as Lender may designate, for the
account of Lender in U.S. dollars in immediately available funds by 2:00 p.m.,
New Jersey time, on the date on which such payment shall be due. Interest in
respect of the Loans hereunder shall accrue from the Funding Date up to and
including the day prior to the date on which the Loans are paid in full.
SECTION 2.09. Maximum Lawful Interest Rate. Notwithstanding
any provision contained herein, the total liability of the Borrower for payment
of interest pursuant hereto and the Note, including any other charges or other
amounts, to the extent such charges and other amounts are deemed to be interest,
shall not exceed the maximum amount of such interest permitted by applicable law
to be charged, collected, or received from the Borrower. If any payments by the
Borrower include interest in excess of such a maximum amount, Lender shall apply
such excess to the reduction of the unpaid principal amount due pursuant hereto,
without premium or penalty, or if none is due, such excess shall be refunded to
the Borrower, as applicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to Lender that:
SECTION 3.01. Organization; Powers. (a) The Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and (ii) is qualified to do business (A) in the State
of Maryland and (B) in every other jurisdiction where such qualification is
necessary, except where the failure to qualify would not have a Material Adverse
Effect;
(b) the Borrower has the power and authority to own its
properties, to carry on its Telecommunications Business as now conducted or as
presently contemplated; and
(c) the Borrower has the power and authority to execute and
deliver and perform this Agreement and the other Loan Documents to which it is a
party, and to borrow hereunder.
SECTION 3.02. Authorization by the Borrower. The execution,
delivery and performance of this Agreement and the other Loan Documents to be
delivered on or subsequent to the date hereof, and the Loans hereunder:
(a) have been duly authorized by the Borrower's Board of
Directors and, if necessary, the Borrower's stockholders;
(b) (1) do not violate, with respect to the Borrower, (i) any
provision of law applicable to the Borrower, (ii) the Borrower's Certificate of
Incorporation or by-laws, or (iii) any applicable order of any court or other
Governmental Authority with respect to the Borrower, or (2) do not conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any indenture, agreement for borrowed money, bond, note or
other similar instrument or any other material agreement to which the Borrower
is a party or by which the Borrower or any of the Borrower's property is bound;
(c) do not result in the creation or imposition of any Lien of
any nature whatsoever upon any property or assets of the Borrower other than the
Lien granted pursuant to ARTICLE VII hereof;
(d) constitute legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms, subject, as to enforcement, to applicable bankruptcy, reorganization,
insolvency and similar laws affecting creditors' rights generally and to
moratorium laws from time to time in effect; and
(e) do not, as of the date of execution hereof, require any
governmental consent, filing, registration or approval to be obtained or made by
the Borrower.
SECTION 3.03. Financial Statements. The Borrower has furnished
to Lender the audited consolidated financial statements of the Borrower and its
Subsidiaries dated as of December 31, 1996, and the unaudited consolidated
financial statements of the Borrower and its Subsidiaries for the fiscal quarter
ended September 30, 1997, which statements are attached hereto as Exhibit D (the
"Financials"). The Financials have been prepared in accordance with GAAP applied
on a basis consistent with that of preceding periods and are complete and
correct in all material respects. As of the date of the Financials (a) the
Financials fairly represent, in accordance with GAAP, the Borrower's and its
Subsidiaries' financial position and results of operations; and (b) there are no
omissions from the Financials or any other facts or circumstances not reflected
in the Financials which are or may be material according to GAAP.
SECTION 3.04. No Material Adverse Change. Except as disclosed
on Schedule 3.04 hereto, there has been no material adverse change in the
condition (financial or otherwise), operations, properties or prospects of the
Borrower since September 30, 1997.
SECTION 3.05. Litigation. Except as set forth on Schedule
3.05, there are no actions, suits or proceedings at law or in equity or by or
before any governmental instrumentality or other agency now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
property or rights of the Borrower as to which there is a reasonable possibility
of an adverse determination and which, if adversely determined, would
individually or in the aggregate materially impair the right of the Borrower to
carry on business substantially as now being conducted or as presently
contemplated or would result in any Material Adverse Effect.
SECTION 3.06. Tax Returns. The Borrower has filed or caused to
be filed all Federal, state and local tax returns which, to the knowledge of the
Borrower, are required to be filed and has paid or caused to be paid all taxes
as shown on such returns or on any assessment received by it to the extent that
such taxes have become due, except such taxes the amount, applicability or
validity of which are being contested in good faith by appropriate proceedings
and with respect to which the Borrower shall have set aside on its books
adequate reserves with respect to such taxes as are required by GAAP.
SECTION 3.07. No Defaults. The Borrower is not in default (i)
with respect to any judgment, writ, injunction, decree, rule or regulation of
any governmental instrumentality or other agency which could be reasonably
expected to have a Material Adverse Effect, or (ii) in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any material agreement or instrument to which the Borrower is a
party or by which any of its assets are bound.
SECTION 3.08. Properties. The Borrower has good record and
marketable title to or a valid leasehold interest in, all its real property and
good title to all its other property other than its leased property, in which it
has a valid leasehold interest, and all Collateral is free and clear of all
Liens of any nature whatsoever, except Permitted Liens.
SECTION 3.09. Licenses, etc. The Borrower has obtained all
Authorizations and approvals required by any Governmental Authority in
connection with the operation of the Borrower's business except where the
failure to be so licensed or approved could not be expected to result in a
Material Adverse Effect.
SECTION 3.10. Compliance With Laws. Except as disclosed on
Schedule 3.10, the operations of the Borrower comply in all material respects
with all applicable federal, state or local laws and regulations, including
environmental, health and safety statutes and regulations. None of the
operations of the Borrower is subject to any judicial or administrative
proceeding alleging the violation of any federal, state or local environmental,
health or safety statute or regulation. To the knowledge of the Borrower, none
of the operations of the Borrower is the subject of federal or state
investigation evaluating whether any Remedial Action is needed to respond to a
Release of any Contaminant into the indoor or outdoor environment. Except as
disclosed on Schedule 3.10, the Borrower has not filed any notice under any
federal or state law indicating past or present treatment, storage or disposal
of a hazardous waste or reporting a Release of any Contaminant into the indoor
or outdoor environment. The Borrower has no contingent liability of which the
Borrower has knowledge or reasonably should have knowledge in connection with
any Release of any Contaminant into the indoor or outdoor environment.
SECTION 3.11. ERISA. Neither the Borrower nor any ERISA
Affiliate maintains or contributes to any Benefit Plan or Multiemployer Plan
other than a Benefit Plan or Multiemployer Plan listed on Schedule 3.11 hereto.
Each Plan which is intended to be qualified under Section 401(a) of the IRC has
been determined by the IRS to be so qualified, and each trust related to any
such Plan has been determined to be exempt from federal income tax under Section
501(a) of the IRC. Except as disclosed on Schedule 3.11, neither the Borrower
nor any ERISA Affiliate maintains or contributes to any employee welfare benefit
plan within the meaning of Section 3(1) of ERISA which provides benefits to
employees after termination of employment other than as required by Section 601
of ERISA. Neither the Borrower nor any ERISA Affiliate has breached in any
material respect any of the responsibilities, obligations or duties imposed on
it by ERISA or the regulations promulgated thereunder with respect to any Plan.
No Benefit Plan has incurred any accumulated funding deficiency (as defined in
Sections 302(a)(2) of ERISA and 412(a) of the IRC), whether or not waived.
Neither the Borrower nor any ERISA Affiliate nor any fiduciary of any Plan has
engaged in a material nonexempt "prohibited transaction" described in Section
406 of ERISA or Section 4975 of the IRC or has taken or failed to take any
action which would constitute or result in a Termination Event. Except as
disclosed on Schedule 3.11, neither the Borrower nor any ERISA Affiliate has
incurred any liability under Title IV of ERISA. Schedule B to the most recent
annual report filed with the IRS with respect to each Plan is complete and
accurate in all material respects. Since the date of the filing of the most
recent annual report containing a Schedule B with the IRS, there has been no
material adverse change in the funding status or financial condition of the Plan
relating to such Schedule B. Neither the Borrower nor any ERISA Affiliate has
failed to make a material required contribution or payment to a Multiemployer
Plan. Neither the Borrower nor any ERISA Affiliate has failed to make a required
installment or any other required payment under Section 412 of the IRC on or
before the due date for such installment or other payment under circumstances
that have resulted or are reasonably likely to result in the imposition of a
Lien on the assets of the Borrower or any of its Subsidiaries pursuant to
Section 412(n) of the IRC. Neither the Borrower nor any ERISA Affiliate is
required to provide security to a Plan under Section 401(a)(29) of the IRC due
to a Benefit Plan amendment that results in an increase in current liability for
the plan year.
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act. The Borrower is not an "investment company" as that term is defined
in, and is not otherwise subject to regulation under, the Investment Company Act
of 1940. The Borrower is not a "holding company" as that term is defined in, and
is not otherwise subject to regulation under, the Public Utility Holding Company
Act of 1935.
SECTION 3.13. Federal Reserve Regulations. The Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System of the United States), and no part of the proceeds of the Loans
hereunder will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin stock
or for any purpose that violates, or is inconsistent with, the provisions of
Regulation G, T, U or X of said Board of Governors.
SECTION 3.14. Collateral. The security interest granted by
Article VII hereof and possession by the Lender of the Collateral consisting of
Intercompany Notes, create a valid and perfected first priority Lien in and to
such Collateral, enforceable against other Persons in all jurisdictions securing
the payment of the Obligations of the Borrower, subject only to Permitted Liens,
except as the enforcement thereof may be affected by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting
creditors' rights generally. .
SECTION 3.15. Chief Place of Business. As of the execution
hereof, the principal place of business and chief executive office of the
Borrower is located at 131 National Business Parkway, Suite 100, Annapolis
Junction, Maryland 20701. If any change in such location occurs, the Borrower
shall notify Lender thereof not later than ten days after the occurrence
thereof. As of the date of execution hereof, the corporate books and records of
the Borrower are located at its chief executive office and all chattel paper and
all records of account of the Borrower are located at the principal place of
business of the Borrower, and if any change in any such location occurs, the
Borrower shall notify Lender thereof not later than ten days after the
occurrence thereof.
SECTION 3.16. Other Corporate Names. Except as disclosed on
Schedule 3.16, the Borrower has not used, and will not use any corporate or
fictitious name other than the corporate name shown in the Borrower's
Certificate of Incorporation.
SECTION 3.17. Insurance. Schedule 3.17 contains a
description of all insurance which the Borrower and its Subsidiaries maintains
with respect to their business and operations. All of such insurance is
in full force and effect.
SECTION 3.18. Capitalization and Subsidiaries. The capital
stock of the Borrower and of each Subsidiary of the Borrower (other than any
Excluded Subsidiary) has the classes, par values, authorized shares and
outstanding shares set forth on Schedule 3.18. All of the outstanding shares of
capital stock of the Borrower and of each Subsidiary are duly and validly
issued, fully paid and nonassessable, and none of such issued and outstanding
shares, equity securities or beneficial interests has been issued in violation
of, or is subject to, any pre-emptive or subscription rights. Except as set
forth on Schedule 3.18, there are no: (A) outstanding shares of capital stock or
other securities convertible into or exchangeable for equity securities of the
Borrower or any Subsidiary, or (B) outstanding rights of subscription, warrants,
calls, options, contracts or other agreements of any kind, issued, made or
granted to or with any Person under which the Borrower or any Subsidiary may be
obligated to issue, sell, purchase, retire or redeem or otherwise acquire or
dispose of any equity securities of the Borrower or any Subsidiary. The
ownership interests in the Borrower or any Subsidiary are as indicated on
Exhibit A to the Pledge Agreement.
SECTION 3.19. Subsidiaries and Joint Ventures. Set forth on
Schedule 3.19 is a list of each Subsidiary and Joint Venture of the Borrower,
the state in which each such Subsidiary or Joint Venture is organized and is in
good standing and the states in which it is in good standing as a foreign
corporation.
SECTION 3.20. Indentures. No "Event of Default" (as defined in
any Indenture) or event which with the giving of notice or passage of time, or
both, would constitute such an Event of Default, has occurred and is continuing.
SECTION 3.21. No Material Misstatements. No report, financial
statement, exhibit or schedule furnished by or on behalf of the Borrower to
Lender in connection with the negotiation of this Agreement, and the other Loan
Documents or included herein or therein, nor any other information required to
be furnished hereby or thereby, contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein not
materially misleading.
SECTION 3.22. Excluded Subsidiaries. Each of the Persons
listed on Schedule 3.22 hereto other than ACSI Technology Solutions, Inc. is
inactive and presently has no plans to engage in any Telecommunications
Business. ACSI Technology Solutions, Inc. has no material tangible assets and
intends to engage solely in the consulting business.
ARTICLE IV
CONDITIONS FOR LOAN
The obligation of Lender to make the Loans to the Borrower on
the Funding Date is subject to the accuracy in all respects, as of the Funding
Date, of the representations and warranties contained in Article III and the
other Loan Documents, to the performance by the Borrower of its obligations to
be performed hereunder on or before the Funding Date and to the satisfaction of
the following further conditions:
. CTION 4(a) All then applicable legal matters incident to
this Agreement and the other Loan Documents shall be satisfactory to counsel for
Lender.
(b) Lender shall have received a Notice of Borrowing from the
Borrower in the form of Exhibit C hereto.
(c) Lender shall have received the Financials.
(d) Lender shall have received a certificate substantially in
the form of Exhibit E hereto, dated the Funding Date, of the secretary of the
Borrower, certifying (i) the names and true signatures of the officers
authorized to sign each Loan Document to which the Borrower is a party, (ii) the
resolutions of the Board of Directors of the Borrower approving the transactions
contemplated by the Loan Documents to which the Borrower is a party, (iii) the
Borrower's by-laws, and (iv) the accuracy and completeness of each Indenture,
copies of which are attached thereto.
(e) Lender shall have received the favorable written opinions
of special, regulatory and in-house counsel for the Borrower dated the Funding
Date, addressed to Lender and reasonably satisfactory to (and containing only
such qualifications and limitations as are reasonably satisfactory to) counsel
for Lender, which opinions shall cover the matters described on Exhibit F
attached hereto.
(f) Lender shall have received (i) the Pledge Agreement
executed by the Borrower and Lender, and (ii) stock certificates and undated
stock powers duly executed in blank for the shares of capital stock of each
direct and indirect Subsidiary of the Borrower (other than the Excluded
Subsidiaries) held by the Borrower.
(g) Lender shall have received certificates of appropriate
public officials dated not more than 30 days prior to the Funding Date, as to
the legal existence or qualification, and good standing of the Borrower, from
Delaware and Maryland.
(h) Lender shall have received the Borrower's Certificate of
Incorporation, as amended, modified or supplemented to the Funding Date,
certified to be true, correct and complete by the Secretary of State of
Delaware.
(i) Lender shall have received satisfactory evidence that its
security interests in the Collateral have been properly perfected and constitute
first and prior security interests subject only to Permitted Liens.
(j) On the Funding Date and after giving effect to such Loan,
there shall have been no event resulting in a Material Adverse Effect on the
Borrower since September 30, 1997.
(k) The Share Exchange shall have been consummated.
(l) The representations and warranties of the Borrower set
forth in Article III or in any other Loan Document shall be true and correct in
all material respects on and as of the Funding Date with the same effect as
though such representations and warranties had been made on and as of the
Funding Date.
(m) On the Funding Date, and after giving effect to such Loan,
the Borrower shall be in compliance with all the terms and provisions set forth
herein or in any other Loan Document to which it is a party on its part to be
observed or performed, and neither any Event of Default nor any Default, shall
have occurred and be continuing.
(n) Lender shall be satisfied with the terms, conditions and
documentation relating to the loans to be made by the Borrower to the Indebted
Subsidiaries, and arrangements satisfactory to Lender shall have been made for
repayment on the Funding Date of all obligations of the Indebted Subsidiaries to
the Borrower.
(o) Each of the Intercompany Notes shall have been duly
executed and delivered and pledged to the Lender.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with Lender that so long as
the Agreement shall remain in effect or any Obligations hereunder or under any
of the other Loan Documents are unpaid:
SECTION 5.01. Corporate and Franchise Existence. The Borrower
shall, and shall cause each of its Subsidiaries to, (i) preserve and maintain
its corporate existence, and its rights, franchises and privileges in its
jurisdiction of its organization, and in all other jurisdictions in which such
qualification is necessary in view of its Telecommunications Business and
operations and property (provided that nothing in this Section 5.01 shall be
deemed to limit the right of the Borrower or any Subsidiary to enter into a
merger not prohibited by Section 6.02) and (ii) preserve, protect and keep in
full force and effect its Authorizations that are necessary for its
Telecommunications Business, and do all other things necessary for its
Telecommunications Business.
SECTION 5.02. Compliance with Laws, Etc. The Borrower shall
and shall cause each of its Subsidiaries to, comply with all laws and
regulations applicable to it and all material contractual obligations applicable
to it, the failure to comply with which could reasonably be expected to result
in a Material Adverse Effect.
SECTION 5.03. Maintenance of Properties. The Borrower shall
and shall cause each of its Subsidiaries to, at all times maintain in good
repair, working order and condition, excepting ordinary wear and tear, all of
its properties material to its operations and make all appropriate repairs,
replacements and renewals thereof, in each case consistent with prudent industry
practices and sound business judgment and with respect to the maintenance of
machinery and equipment, in compliance with applicable government regulations,
manufacturers' warranty requests and any licensing requirements.
SECTION 5.04. Insurance. The Borrower shall and shall cause
each of its Subsidiaries to, atits own expense, with financially sound and
reputable insurance companies:
(a) keep its insurable properties, adequately insured on an
all-risk basis for the full replacement value thereof at all times;
(b) maintain in full force and effect commercial general
liability insurance against claims for personal injury or death or property
damage occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by it, in such amounts as are customary in the
telecommunications industry for companies engaged in the same or a similar
business to that of the Borrower and its Subsidiaries; and
(c) maintain such other insurance to such extent and against
such risks, including against business interruptions, fire and other risks
insured against by extended coverage, as are usually insured against by
companies engaged in the same or a similar business to that of the Borrower and
its Subsidiaries.
SECTION 5.05. Obligations and Taxes. The Borrower shall and
shall cause each of its Subsidiaries to, pay, discharge or otherwise satisfy at
or before maturity all of its Debt and pay, discharge or otherwise satisfy
before they become delinquent (i) all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or in respect of
its property, and all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, might become a Lien upon such properties or any part
thereof; provided, however, that neither the Borrower nor any Subsidiary shall
be required to pay, discharge or otherwise satisfy or to cause to be paid and
discharged or otherwise satisfied any such Debt, tax, assessment, charge, levy
or claim so long as the validity or amount thereof shall be contested in good
faith by appropriate proceedings diligently pursued, and the Borrower or such
Subsidiary, as applicable, shall set aside on its books such reserves as are
required by GAAP with respect to any such Debt, tax, assessment, charge, levy or
claim so contested.
SECTION 5.06. Financial Statements, Reports, etc.
The Borrower shall furnish to Lender:
(a) within ninety (90) days after the end of each fiscal year
of the Borrower, annual consolidated and consolidating financial statements for
the Borrower, Subsidiaries and the New Subsidiaries, including the balance
sheets and statements of operations, stockholders' equity and cash flows, for
such fiscal year, which consolidated financial statements of the Borrower shall
have been audited by independent certified public accountants reasonably
satisfactory to Lender, and shall be prepared in accordance with GAAP, and
accompanied by such independent certified public accountant's unqualified
opinion;
(b) within forty-five (45) days after the end of each of the
first three fiscal quarters of each fiscal year, unaudited consolidated
financial statements for the Borrower, Subsidiaries and the New Subsidiaries as
of the end of each such quarter and for the then elapsed portion of the fiscal
year;
(c) concurrently with (a) and (b) above, a certificate of the
Borrower's independent certified public accountant or the Borrower's chief
financial officer, as applicable, to the effect that the financial statements
referred to in clause (a) or (b) above, present fairly the financial position
and results of operations of the Borrower, Subsidiaries and the New
Subsidiaries, and as having been prepared in accordance with GAAP, in each case
subject to normal year-end audit adjustments;
(d) promptly upon their becoming available, copies of any
material nonperiodic notices to the Borrower or any Subsidiary and other
material nonperiodic communications to the Borrower or any Subsidiary from the
FCC, any PUC or from any other federal, state or local Governmental Authority
which relate to any event or condition which could reasonably be expected to
result in a Material Adverse Effect;
(e) promptly upon any officer or management employee of the
Borrower obtaining knowledge of any condition or event which constitutes an
Event of Default or a Default, a certificate signed by an authorized officer of
the Borrower specifying in reasonable detail the nature and period of existence
thereof and what corrective action the Borrower has taken or proposes to take
with respect thereto;
(f) within ninety (90) days after the end of each fiscal year
of the Borrower, a certificate signed by an authorized officer of the Borrower,
stating that there does not exist any condition or event which either
constitutes an Event of Default or a Default;
(g) upon written request, evidence of insurance complying with
Section 5.04;
(h) within sixty (60) days after the beginning of each fiscal
year of the Borrower, an operating budget for the Borrower and its Subsidiaries
on a consolidated basis for such fiscal year;
(i) within five (5) days after receipt or transmittal thereof,
any notices received by the Borrower pursuant to any Indenture and any notices
transmitted by the Borrower pursuant to the Indenture;
(j) promptly after the creation thereof, information regarding
the identify of each New Subsidiary and each Joint Venture formed after the
Funding Date; and
(k) promptly from time to time such other information
regarding the operations, business affairs and condition (financial or
otherwise) of the Borrower, its Subsidiaries, the New Subsidiaries, the Excluded
Subsidiaries or the Telecommunications Businesses as Lender may reasonably
request in writing.
SECTION 5.07. Litigation and Other Notices. The Borrower shall
give Lender prompt written notice of the following: (a) all Events of Default or
Defaults; (b) any levy, attachment, execution or other process against any of
the material property or assets, real or personal, of the Borrower or any of its
Subsidiaries; (c) the filing or commencement of any action, suit or proceeding
against the Borrower or any of its Subsidiaries by or before any court or any
Governmental Authority which, if adversely determined against such Person, the
Borrower reasonably believes would materially impair the right of such Person to
carry on its Telecommunications Business substantially as now conducted or
contemplated or could reasonably be expected to result in a Material Adverse
Effect; and (d) any matter which has resulted in, or which the Borrower
reasonably believes will result in, a Material Adverse Effect.
SECTION 5.08. ERISA. The Borrower shall and shall cause each
of its Subsidiaries to, comply in all material respects with the applicable
provisions of ERISA and furnish to Lender, (i) as soon as possible, and in any
event within thirty (30) days after the Borrower or any officer thereof knows or
has reason to know that any Termination Event has occurred, a statement of an
officer of the Borrower setting forth details as to such Termination Event and
the corrective action that the Borrower proposes to take with respect thereto,
together with a copy of the notice of any such Termination Event given to the
PBGC, and (ii) promptly after receipt thereof, a copy of any notice the Borrower
or any Subsidiary may receive from the PBGC relating to the intention of the
PBGC to terminate any Plan or to appoint a trustee to administer any such Plan.
SECTION 5.09. Access to Premises and Records. The Borrower
shall, and shall cause each of its Subsidiaries to, permit representatives of
Lender to have access to its books and records and to the Collateral and its
premises at reasonable times and upon reasonable notice and to make such
excerpts from such records as such representatives may reasonably deem necessary
and to inspect the Collateral.
SECTION 5.10. Environmental Notices. If the Borrower or any
Subsidiary shall (a) receive notice that any violation of any federal, state or
local environmental law or regulation may have been committed or is about to be
committed by it, (b) receive notice that any administrative or judicial
complaint or order has been filed or threatened against it alleging violations
of any federal, state or local environmental law or regulation or requiring it
to take any action in connection with any Release of any Contaminant into the
indoor or outdoor environment, or (c) receive any notice from any Governmental
Authority or private party alleging that it may be liable or responsible for
costs associated with a response to or cleanup of a Release of any Contaminant
into the indoor or outdoor environment or any damages caused thereby, the
Borrower shall provide Lender with a copy of such notice within five (5)
Business Days of the receipt thereof by the Borrower or any Subsidiary. Within
five (5) Business Days of the Borrower having learned of the enactment or
promulgation of any federal, state or local environmental law or regulation
which may reasonably be expected to result in any Material Adverse Effect, the
Borrower shall provide Lender with notice thereof.
SECTION 5.11. Amendment of Organization Document; Change of
Name. The Borrower shall notify Lender of (i) any amendment to its Certificate
of Incorporation within ten days of the occurrence of any such event, and
provide Lender with copies of any amendments certified by the secretary of the
Borrower and of all other relevant documentation, and (ii) the use by the
Borrower of any corporate or fictitious name other than as indicated in its
Certificate of Incorporation, within ten days after the first use thereof. The
Borrower shall promptly deliver to Lender such financing statements executed by
the Borrower which Lender may request as a result of any such amendment or use
of new name which might require the filing of such financing statements.
SECTION 5.12. Changes in Regulation. The Borrower shall keep
Lender informed on a timely basis as to (and shall respond on a timely basis to
all requests by Lender for information with respect to) all actual changes in
regulation of the Borrower or the Telecommunications Businesses of which it is
aware, and which could reasonably be expected to result in a Material Adverse
Effect by any Federal, state or local authority, whether such changes are
effected because of the expansion of the properties, operations or
Telecommunications Business of the Borrower or any of its Subsidiaries or by
effect of statutes, regulations, official interpretations thereof, judicial
decisions, orders or by consensual action between the Borrower or any Subsidiary
and any regulatory authority. In the event that Lender determines in its
reasonable good faith discretion that any of such actual changes have or are
reasonably likely to have a material adverse effect on Lender or any Affiliate
of Lender under the Loan Documents (including, without limitation, the security
interests provided to Lender under the Loan Documents), the Borrower and Lender
shall cooperate in good faith to restructure, each at its own cost and expense
(unless an Event of Default has occurred and is continuing, in which event such
restructuring shall be at the sole cost and expense of the Borrower) the terms
and provisions set forth in the Loan Documents and the structure of the
financing provided under the Loan Documents so as to minimize or avoid the
adverse effects to Lender or any Affiliate of Lender of such actual changes.
SECTION 5.13. Further Assurances. The Borrower agrees to do
such further acts and things and to execute and deliver to Lender such
additional assignments, agreements, powers and instruments, at the Borrower's
expense, as Lender may reasonably require or deem advisable to carry into effect
the purposes of this Agreement and the other Loan Documents or to better assure
and confirm unto Lender its rights, powers and remedies hereunder and
thereunder.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees with Lender that so long as
this Agreement shall remain in effect or the Obligations hereunder or under any
of the Loan Documents shall be unpaid, without the prior written consent of
Lender:
SECTION 6.01. Liens, etc. The Borrower shall not and shall not
permit any of its Subsidiaries to, incur, or suffer to exist, directly or
indirectly, any Lien upon or with respect to any of its properties or the
Collateral, now owned or hereafter acquired, or upon any proceeds, products,
issues, income or profits therefrom except for the following "Permitted Liens":
(i) Liens granted pursuant to the Loan Documents;
(ii) Liens for taxes or assessments or other governmental
charges or levies not then due and payable (or which, if due and
payable, are being contested in good faith and for which adequate
reserves are being maintained to the extent required by GAAP) on
Property of the Borrower or any Subsidiary;
(iii) any statutory warehousemen's, materialmen's or other
similar Liens for sums not then due and payable (or which, if due and
payable, are being contested in good faith and with respect to which
adequate reserves are being maintained, to the extent required by GAAP
or five days have not yet elapsed since the due date thereof);
(iv) Liens incurred or deposits made in the ordinary course of
business to secure surety bonds provided that such Lien shall extend
only to cash collateral for such surety bonds;
(v) Liens securing Purchase Money Debt permitted by Section
6.11, but only to the extent such Liens attach solely to the assets
financed by such Purchase Money Debt;
(vi) easements, rights-of-way, licenses and other similar
restrictions on the use of Properties or minor imperfections of title
that, in the aggregate, are not material in amount and do not in any
case materially detract from the Properties subject thereto or
interfere with the ordinary conduct of the business of the Borrower or
its Subsidiaries;
(vii) any Lien to secure obligations under workmen's
compensation laws or similar legislation, other than any Lien imposed
by ERISA;
(viii) any Lien on any asset of the Capital Stock of any New
Subsidiary or Excluded Subsidiary not required to comply with the
Subsidiary Investment Conditions; and
(ix) Liens on Property of any Subsidiary which Liens secure
Debt permitted pursuant to Section 6.11(vii).
SECTION 6.02. Mergers, Consolidations and Certain Sales of
Assets. (a) The Borrower shall not and shall not permit any of its Subsidiaries
to consolidate with or merge into any other Person, except that (i) any
Subsidiary of the Borrower may be merged or consolidated with or into any one or
more Subsidiaries of the Borrower if after giving effect to any of such
transactions no Default or Event of Default shall exist or occur, (ii) any
Subsidiary of the Borrower may be merged with or into any other Person if (A)
such Subsidiary is the surviving Person as a result of such merger, (B) before
and after giving effect to such merger no Event of Default or Default would
exist or occur, (C) total Debt of such Subsidiary after giving effect to such
merger shall not exceed forty percent (40%) of the Market Capitalization of such
Subsidiary, (D) after giving effect to such merger, all of the Subsidiary
Investment Conditions shall be fulfilled for such Subsidiary, and (E) the
aggregate Debt assumed by all Subsidiaries in connection with all mergers with
or into such other Persons shall not exceed $10,000,000, exclusive of any Debt
for which the Defeasance Conditions shall have been satisfied, and (iii) the
Borrower may be merged with or consolidated into any other Person if (A) the
surviving Person as a result of such merger or consolidation is the Borrower or
a Person incorporated under the laws of one of the states of the United States
of America or the laws of the District of Columbia, (B) before and after giving
effect to such merger or consolidation, no Event of Default or Default would
exist or occur, (C) the total Market Capitalization of the surviving Person of
such merger or consolidation shall be at least $1,000,000,000, (D) the total
Debt of the surviving Person of such merger or consolidation after giving effect
to such merger or consolidation shall not exceed forty percent (40%) of the
Market Capitalization of such surviving Person, and (E) if the surviving Person
of such merger or consolidation is not the Borrower, such Person shall have
affirmed in writing to the Lender that it has assumed all of the obligations of
Borrower under the Loan Documents.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries, directly or indirectly, to, consummate any Asset Sale, unless:
(i) no Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof;
(ii) the Borrower or such Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at
least equal to the Fair Market Value of the Property or assets
sold or otherwise disposed of;
(iii) at least 75 percent of the consideration
received in respect of such Asset Sale by the Borrower or such
Subsidiary, as the case may be, for such Property or assets
consists of Cash Proceeds and/or Telecommunications Assets;
(iv) the Borrower or such Subsidiary, as the case may
be, uses the Net Cash Proceeds from such Asset Sale in the
manner set forth in Section 6.02(c) hereof;
(v) such Asset Sale does not involve a Disposition of
any Property of any Subsidiary to the Borrower, which Property
is material to the operation of any Telecommunications
Business of such Subsidiary; and
(vi) if such Asset Sale includes the sale of the
Capital Stock of any Subsidiary, such Asset Sale shall be expressly subject to
Lender's Lien on such Capital Stock.
(c) Within 270 calendar days after the closing of any Asset
Sale, the Borrower or such Subsidiary, as the case may be, may, at its option:
(i) reinvest (or enter a binding agreement to
reinvest, provided that such reinvestment is completed with
180 calendar days of the date of such agreement) an amount
equal to the Net Cash Proceeds, or any portion thereof, from
such Asset Sale in Telecommunications Assets; and/or
(ii) apply an amount equal to such Net Cash Proceeds,
or remaining Net Cash Proceeds, to the permanent reduction of
the Loans.
(d) The Borrower shall not permit any Subsidiary to make any
Disposition not constituting an Asset Sale to the Borrower of any Property of
such Subsidiary which Property is material to the operation of any
Telecommunications Business of such Subsidiary, and the Borrower shall not make
any Disposition of the Capital Stock of any Subsidiary not constituting an Asset
Sale unless such Disposition is expressly subject to Lender's Lien on the
Capital Stock of such Subsidiary.
SECTION 6.03. Indentures. The Borrower shall not make any
amendments to the Indenture that would result in accelerating the scheduled
amortization or maturity of any Debt thereunder.
SECTION 6.04. Restricted Payments. The Borrower shall not and
shall not permit any Subsidiary to, directly or indirectly make any Restricted
Payments of the following types: (1) declare or pay any dividend, or make any
distribution, in respect of its Capital Stock or to the holders thereof in their
capacity as such, excluding any dividends or distributions payable solely in
shares of its Capital Stock or in options, warrants or other rights to acquire
its Capital Stock, or (2) repurchase, redeem, or otherwise retire or acquire for
value (other than from a Subsidiary of the Borrower) (a) any Capital Stock of
the Borrower or (b) any options, warrants or rights to repurchase or acquire
shares of Capital Stock of the Borrower or any securities convertible or
exchangeable into shares of Capital Stock of the Borrower; provided, however,
(i) each of the Indebted Subsidiaries may make payments on its Intercompany Note
in accordance with its terms, (ii) each of the Subsidiaries may make payments to
the Borrower in respect of such Subsidiary's allocated share of reasonable
Headquarters Expenses, the Borrower may make any payment described in clause (1)
or (2) above out of any funds other than Segregated Assets, (iii) the Borrower
may repurchase any shares of its Capital Stock from Persons who were formerly
directors, officers or employees of the Borrower or any of its Subsidiaries or
pursuant to any management stock plans, and (iv) the Borrower may retire or
repurchase any Capital Stock of the Borrower in exchange for, or out of the
proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Borrower) of, Capital Stock (other than Disqualified Stock) of the Borrower.
SECTION 6.05. Issuances and Sales of Capital Stock of
Subsidiaries. The Borrower shall not permit any Subsidiary to, issue, transfer,
convey, sell or otherwise dispose of any shares of Capital Stock of or
securities convertible or exchangeable into, or options, warrants, rights or any
other interest with respect to, its Capital Stock to any Person other than the
Borrower or a Wholly-Owned Subsidiary of the Borrower or Strategic Investors,
provided that in each case Lender continues to have a first priority perfected
security interest in all such Capital Stock, and Borrower beneficially owns at
least a majority of the Voting Stock of each Subsidiary.
SECTION 6.06. Margin Regulation. The Borrower shall not and
shall not permit any Subsidiary to, use or permit any other Person to use any
portion of the proceeds of any credit extended under this Agreement in any
manner which might cause the extension of credit made by Lender or the
application of such proceeds to violate the Securities Act of 1933 or Securities
Exchange Act of 1934 (each as amended from time to time, and any successor
statute) or to violate Regulation G, Regulation U, or Regulation X, or any other
regulation of the Federal Reserve Board, in each case as in effect on the date
or dates of such extension of credit and such use of proceeds.
SECTION 6.07. Permitted Activities. The Borrower shall not,
and shall not permit any Subsidiary to, engage in any business or activity other
than the operation of its Telecommunications Business.
SECTION 6.08. Disposition of Licenses, etc. The Borrower shall
not sell, assign, transfer or otherwise dispose of in any way any governmental
authorizations, licenses, permits or approvals (including, without limitation,
any Authorizations) necessary or appropriate for the operation of its
Telecommunications Business, provided that any Subsidiary may make such a sale,
assignment, transfer or other disposition solely to the extent such action would
not result in a Material Adverse Effect.
SECTION 6.09. Transactions with Affiliates. (a) The Borrower
shall not and shall not permit any Subsidiary to, directly or indirectly, enter
into any transaction, including, without limitation, leases or other agreements
for the purchase or use of any goods or services, with any Affiliate, except (i)
in the ordinary course of and pursuant to reasonable requirements of such
Person's business and upon fair and reasonable terms no less favorable to such
Person than such would obtain in a comparable arm's length transaction with an
unaffiliated Person, but in no event shall the Borrower or any Subsidiary obtain
a Lien on the assets of the Borrower or any Subsidiary, (ii) the Borrower may
make loans to the Indebted Subsidiaries on the Funding Date in an amount
sufficient to permit the Indebted Subsidiaries to repay all their obligations to
AT&T Credit Corporation, and the Indebted Subsidiaries may repay such loans,
(iii) the Borrower or any Subsidiary may enter into any employment agreement in
the ordinary course of business and consistent with industry practice for
services rendered by a Person in such Person's capacity as an officer or
employee of the Borrower or such Subsidiary, (iv) the Borrower or any Subsidiary
may enter into any agreement or arrangement with respect to the compensation of
a director of the Borrower or any Subsidiary of the Borrower for services
rendered by a Person in such Person's capacity as a director approved by the
Board of Directors and consistent with industry practice, (v) the Borrower or
any Subsidiary may make any payment permitted to be made under Section 6.04, and
(vi) the Borrower or any Subsidiary may make loans and advances to employees and
officers of the Borrower or a Subsidiary of the Borrower in the ordinary course
of business and consistent with the past practice of the Borrower or such
Subsidiary provided that the aggregate principal amount of all such loans and
advances shall not exceed $3,000,000 at any one time outstanding, and provided,
further, that in the event the aggregate principal amount of all such loans or
advances exceeds $1,000,000 at any one time outstanding, the Borrower shall,
within 180 calendar days of the date such amount first exceeds $1,000,000,
reduce such amount to an amount less than $1,000,000.
(b) The Borrower shall not permit any Subsidiary to make an
Investment in any New Subsidiary or Excluded Subsidiary; provided, however, that
such Investment may be made if on or prior to the date thereof, the Borrower and
such Subsidiary comply with all of the Subsidiary Investment Conditions.
(c) The Borrower shall not make an Investment in any New
Subsidiary or Excluded Subsidiary out of Segregated Assets; provided, however,
that such Investment may be made if on or prior to the date thereof, the
Borrower and such Subsidiary comply with all of the Subsidiary Investment
Conditions.
SECTION 6.10. ERISA. The Borrower shall not:
(A) engage, or permit any ERISA Affiliate to engage in any
prohibited transaction described in Section 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the United States Department of Labor that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect;
(B) permit to exist any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the IRC) with respect to any
Benefit Plan, whether or not waived;
(C) terminate, or permit any ERISA Affiliate to terminate, any
Benefit Plan if such termination would have a Material Adverse Effect under
Title IV of ERISA;
(D) fail to make any material contribution or payment to any
Multiemployer Plan that the Borrower or any ERISA Affiliate is required to make
under any agreement relating to such Multiemployer Plan, or any law pertaining
thereto;
(E) amend, or permit any ERISA Affiliate to amend, a Plan
resulting in an increase in current liability for the plan year such that the
Borrower is required to provide security to such Plan under Section 401(a)(29)
of the IRC; or
(F) fail, or permit any ERISA Affiliate to fail, to pay any
required installment under Section 412 of the IRC on or before the due date for
such installment or other payment under circumstances reasonably likely to
result in the imposition of a Lien on the assets of the Borrower or its
Subsidiaries pursuant to Section 412(n) of the IRC.
SECTION 6.11. Indebtedness. The Borrower shall not, and shall
not permit any Subsidiary of the Borrower to, Incur or suffer to exist any Debt
except:
(i) the Obligations;
(ii) (A) with respect to any Subsidiary, Purchase Money Debt
which is incurred for administration and management purposes and not
for the construction, acquisition or improvement of Telecommunications
Assets, which Purchase Money Debt shall not exceed $2,000,000 in the
aggregate for all Subsidiaries, and (B) with respect to the Borrower,
Purchase Money Debt;
(iii) Debt owed by the Borrower to any Subsidiary of the
Borrower or any other Person or Debt owed by a Subsidiary of the
Borrower to the Borrower or another Subsidiary of the Borrower,
provided, however, that any Debt owed by the Borrower to any Subsidiary
of the Borrower shall be subordinate to the payment and performance of
the Obligations and any instrument and the books and records evidencing
such Debt shall expressly refer to such subordination, and the Borrower
shall not, and the Borrower shall not permit any of its Subsidiaries
to, accept any payments on any Debt described in this clause (iii) at
any time after Lender has notified the Borrower of the occurrence of an
Event of Default until such time as such Event of Default has been
cured to the satisfaction of the Lender or has been waived in writing
by the Lender;
(iv) Debt Incurred to renew, extend, refinance or refund
(each, a "refinancing") Purchase Money Debt described in clause (i) of
this paragraph in an aggregate principal amount not to exceed the
aggregate principal amount of and accrued interest on the Debt so
refinanced plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Debt so
refinanced or the amount of any premium reasonably determined by the
Borrower as necessary to accomplish such refinancing by means of a
tender offer or privately negotiated repurchase, plus the expenses of
the Borrower incurred in connection with such refinancings; provided
that, the amortization of any such Debt shall not be faster than the
amortization of the Debt being refinanced;
(v) unsecured Debt incurred by the Borrower pursuant to any
Indenture, any supplemental indenture thereunder, any indenture entered
into after the date hereof, or any other agreement, instrument or
document, and any other agreement, instrument or document evidencing a
renewal, extension, refinancing or refunding of any of the foregoing
(each such supplemental indenture, indenture, agreement, instrument or
document, other than the Indentures, a "New Debt Agreement"), provided,
however, that any New Debt Agreement shall not grant any Liens for the
benefit of the holders of the Debt incurred thereunder;
(vi) Debt Incurred by the Borrower that consists of Interest
Hedging Obligations with respect to the Debt referred to in clause (i)
above; and
(vii) Debt which becomes the obligation of the Borrower or any
Subsidiary as a result of any merger or consolidation permitted under
Section 6.02(a).
SECTION 6.12. Investments. The Borrower shall not, and shall
not permit any Subsidiary to make any Investments except (i) the Borrower may
make any Investment in any Subsidiary that does not constitute Debt of such
Subsidiary (other than the Intercompany Notes and any other Debt of such
Subsidiary that is permitted to be owing to the Borrower pursuant to Section
6.11(iii)), (ii) any Subsidiary may make an Investment in the Borrower or
another Subsidiary that does not constitute Debt of the Borrower or such other
Subsidiary, (iii) the Borrower may make Investments in Joint Ventures, New
Subsidiaries and Excluded Subsidiaries with funds that do not constitute
Segregated Assets, (iv) the Borrower or any Subsidiary may make Permitted
Investments, and (v) the Borrower or any Subsidiary may make Investments
described in Section 6.09(a)(vi), and (vii) the Borrower or any Subsidiary may
grant trade credit to customers of such Person in the ordinary course of
business.
ARTICLE VII
COLLATERAL SECURITY
SECTION 7.01. Collateral Security. The Borrower hereby grants
to Lender to secure payment and performance of all the Obligations, a right of
setoff against and a continuing security interest in and to the following
property and interests in property, whether now owned or hereafter acquired and
wheresoever located: the Intercompany Notes, and all substitutions for and
proceeds of any of the foregoing.
SECTION 7.02. Preservation of Collateral and Perfection of
Security Interests Therein. The Borrower shall execute and deliver to Lender,
concurrently with the execution of this Agreement, and at any time or times
hereafter at the request of Lender, all financing statements or other documents
(and pay the cost of filing or recording the same in all public offices deemed
necessary by Lender), as Lender may request, in a form satisfactory to Lender,
to perfect and keep perfected the security interest in the Collateral granted by
the Borrower to Lender or to otherwise protect and preserve the Collateral and
Lender's security interest therein or to enforce Lender's security interests in
the Collateral. Should the Borrower fail to do so, Lender is authorized to sign
any such financing statements as the Borrower's agent. The Borrower further
agrees that a carbon, photographic or other reproduction of this Agreement or of
an executed financing statement is sufficient as a financing statement.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
SECTION 8.01. Events of Default. The following events shall
each constitute an "Event of Default":
(a) the Borrower shall fail to pay the principal of or
interest on the Loan or any other amounts payable by it hereunder or under any
of the other Loan Documents when due, whether as scheduled, at a date fixed for
prepayment, by acceleration or otherwise, and such failure with respect to the
payment of principal or interest shall continue for five (5) Business Days and
with respect to any other amounts payable hereunder, shall continue for ten (10)
Business Days; or
(b) the Borrower shall fail to observe or perform (i) any
other covenant, condition or agreement to be observed or performed by the
Borrower in any of the Loan Documents, or (ii) any covenant, condition or
agreement to be observed or performed by the Borrower in any material agreement
of the Borrower, the failure to comply with which would result in a Material
Adverse Effect, and in either case, the Borrower fails to cure such breach
within thirty days after written notice thereof; or
(c) any representation or warranty made by the Borrower in
connection with this Agreement or any other Loan Document, or the Loans or any
statement or representation made in any report, certificate, financial statement
or other instrument (other than the operating budgets provided pursuant to
Section 5.06(h) as to which this paragraph (c) shall be inapplicable) furnished
by or on behalf of the Borrower pursuant to this Agreement or any other Loan
Document, shall prove to have been false or misleading in any material respect
when made or delivered or when deemed made in accordance with the terms hereof
or thereof; or
(d) any Debt of the Borrower or any of its Subsidiaries for
borrowed money in excess of $2,000,000 shall become due and payable (whether by
acceleration, demand or otherwise) or required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof,
and in each case, shall not have been paid prior to the expiration of any grace
period specified in the agreement or instrument relating to such Debt; or
(e) the Borrower or any Subsidiary shall (i) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator or
similar official for the Borrower or for a substantial part of its property,
(ii) make a general assignment for the benefit of its creditors, (iii) admit in
writing its inability or fail generally to pay its debts as they become due,
(iv) voluntarily or involuntarily dissolve, liquidate or wind up its affairs, or
(v) take any action for the purpose of effecting any of the foregoing; or
(f) a proceeding under any bankruptcy, reorganization,
arrangement of debts, insolvency or receivership law is filed by or against the
Borrower or any Subsidiary or the Borrower or any Subsidiary takes any action to
authorize any of the foregoing matters, and in the case of any such proceeding
instituted against the Borrower or any Subsidiary (but not instituted by such
Person), either such proceeding shall remain undismissed, undischarged or
unstayed for a period of 60 days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee or other similar official for the Borrower or
any Subsidiary or any substantial part of its property) shall be granted or
shall occur; or
(g) the Borrower or any Strategic Subsidiary becomes
"insolvent" (as defined in Section 1.01 of the Federal Bankruptcy Code); or
(h) a Termination Event occurs which Lender reasonably
believes would have a Material Adverse Effect; or
(i) the plan administrator of any Plan applies under Section
412(d) of the IRC for a waiver of the minimum funding standards of Section
412(a) of the IRC and Lender in good faith believes that the business hardship
underlying such application could reasonably be expected to result in a Material
Adverse Effect; or
(j) any of the Authorizations or any other license,
authorization or other governmental consent or approval necessary for the
continuing operation of any System or any other material authorization or
approval of or material filing with the FCC, the PUC or any other Governmental
Authority necessary for the continuing conduct by any Subsidiary of its
Telecommunications Business and operations, shall not be obtained as and when
required to permit the Borrower or any Subsidiary to conduct its
Telecommunications Business substantially as then being conducted and to perform
its material obligations under the Loan Documents, or shall cease to be in full
force and effect, which in respect of any of the Authorizations shall occur when
an order revoking or terminating any said Authorizations shall be issued, or the
FCC, the PUC or any other governmental authority having jurisdiction over any
such Authorizations shall, prior to the termination thereof decide not to renew
any such Authorizations, and any such event or events described in this Section
8.01(j) shall result in a Material Adverse Effect; or
(k) the FCC or the PUC, by final order, determines that the
existence or performance of this Agreement or any other Loan Document will
result in a revocation, suspension or material adverse modification of any of
the Authorizations necessary for the continuing conduct of any Subsidiary's
Telecommunications Business, and any such determination shall result in a
Material Adverse Effect; or
(l) for any reason any Loan Document shall not be in full
force and effect or shall not be enforceable, or any Lien granted pursuant
thereto shall fail (except to the extent resulting from a negligent or willful
failure of the Lender to take such action as is necessary to continue such Lien)
to be perfected or to have its intended priority, or any party thereto other
than Lender shall contest the validity of any Lien granted under, or shall
disaffirm its obligations under any Loan Document; or
(m) a judgment or judgments for the payment of money in excess
of $500,000 in the aggregate at any one time shall have been rendered against
one or more of the Borrower and its Subsidiaries, collectively, and the same
shall not have been vacated, discharged or stayed pending appeal within
forty-five (45) days after the entry thereof or no insurer shall have admitted
its full liability in writing with respect to such judgment or judgments; or
(n) for any reason, the Borrower or any Strategic Subsidiary
ceases to operate its Telecommunications Business (other than as permitted
pursuant to Section 6.02); or
(o) the Borrower or any Strategic Subsidiary is enjoined,
restrained or in any way prevented by the order of any court or administrative
or regulatory agency from conducting its Telecommunications Business or any
other material part of its business affairs, and only if such Person is
contesting such order in good faith by appropriate proceedings, such order shall
remain undismissed or unstayed for a period of forty-five (45) days; or
(p) any liabilities, costs, expenses, damages, fines or
penalties are assessed against the Borrower or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect, arising out of
or related to (i) any failure to take Remedial Action in response to a Release
or threatened Release at any location of any Contaminant into the indoor or
outdoor environment or (ii) any material violation of any environmental, health
or safety requirement of law.
SECTION 8.02. Termination of Commitment; Acceleration. Upon
the occurrence and at any time during the continuance of any Event of Default,
Lender may:
(a) by notice to the Borrower, terminate Lender's Commitment
to the Borrower to make Loans hereunder; or
(b) declare the Obligations to be immediately due and payable,
whereupon the Obligations shall be immediately due and payable upon notice to
the Borrower, provided, however, that if an Event of Default described in
Section 8.01(f) shall exist or occur, all of the Obligations shall
automatically, without declaration or notice of any kind, be immediately due and
payable.
SECTION 8.03. Waiver of Demand. Demand, presentment, protest
and notice of nonpayment are hereby waived by the Borrower. The Borrower also
waives the benefit of all valuation, appraisal and exemption laws.
SECTION 8.04. Rights and Remedies Generally. If an Event of
Default occurs and is continuing, Lender shall have, in addition to any other
rights and remedies contained in this Agreement or in any of the other Loan
Documents, all of the rights and remedies of a secured party under the Uniform
Commercial Code as in effect in all jurisdictions where the Collateral is
located or other applicable laws, all of which rights and remedies shall be
cumulative, and none exclusive, to the extent permitted by law. In addition to
all such rights and remedies, the sale, lease or other disposition of the
Collateral, or any part thereof, by Lender after the occurrence of an Event of
Default may be for cash, credit or any combination thereof, and Lender may
purchase all or any part of the Collateral at public or, if permitted by law,
private sale, and in lieu of actual payment of such purchase price, may set off
the amount of such purchase price against the Obligations then owing. Any sales
of the Collateral may be adjourned from time to time with or without notice.
Lender may, in its sole discretion, cause the Collateral to remain on the
Borrower's premises, at the Borrower's expense, pending sale or other
disposition of the Collateral. Lender shall have the right to conduct such sales
on the Borrower's premises, at the Borrower's expense, or elsewhere, on such
occasion or occasions as Lender may see fit.
SECTION 8.05 Sale or Other Disposition of Collateral by
Lender. Any notice required to be given by Lender of a sale, lease or other
disposition or other intended action by Lender with respect to any of the
Collateral which is given in accordance with the provisions of Section 9.01, at
least ten (10) Business Days prior to such proposed action shall constitute fair
and reasonable notice to the Borrower of any such action. The net proceeds
realized by Lender upon any such sale or other disposition, after deduction for
the expense of retaking, holding, preparing for sale, selling or the like and
the reasonable attorneys' fees and legal expenses incurred by Lender in
connection therewith, shall be applied as provided herein toward satisfaction of
the Obligations. Lender shall account to the Borrower (and promptly pay to the
Borrower) for any surplus realized upon such sale or other disposition, and the
Borrower shall remain liable for the the full amount of any deficiency. The
commencement of any action, legal or equitable, or the rendering of any judgment
or decree for any deficiency shall not affect Lender's security interest in the
Collateral. The Borrower agrees that Lender has no obligation to preserve rights
to the Collateral against any other parties.
SECTION 8.06. Lender Not Liable. Lender shall not be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral or of any instrument received in payment therefor
or for any damages resulting therefrom (except to the extent the same shall be
finally adjudicated or otherwise conclusively determined to have been caused
solely by gross negligence or willful misconduct of Lender). Lender shall not,
under any circumstances or in any event whatsoever, have any liability for any
error or omission of any kind made in the settlement, collection or payment of
any of the Collateral (except to the extent the same shall be finally
adjudicated or otherwise conclusively determined to have been caused solely by
gross negligence or willful misconduct of Lender). The costs of collection and
enforcement, including but not limited to reasonable counsel fees and
out-of-pocket expenses, shall be borne solely by the Borrower whether the same
are incurred by Lender or the Borrower.
SECTION 8.07. Right of Set-off. In addition to any rights and
remedies of Lender provided by law, Lender shall have the right, without prior
notice to the Borrower or any Subsidiary (except as may be required by
applicable law), upon the occurrence and during the continuance of an Event of
Default, to set-off and apply against the amount of any Obligation that is then
due and payable, and to hold for set-off and application against Obligations
that will subsequently become due and payable (and to set-off and apply against
the amount of such Obligation as it becomes due and payable, whether in
accordance with its terms or by acceleration, demand or otherwise), any amount
owing from Lender or any Affiliate of Lender to the Borrower. Lender agrees
promptly to notify the Borrower after any such set-off and application made by
Lender or any Affiliate of Lender; provided that the failure to give such notice
shall not affect the validity of such set-off and application. The Borrower
hereby agrees that the foregoing provisions are intended to be construed so as
to satisfy the requirements of Section 553 of the Federal Bankruptcy Code or
amendments thereto (including any requirement of mutuality of obligations
therein).
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications
provided for herein shall be in writing and shall be delivered by a courier
service of recognized standing (specifying next Business Day delivery) or by
hand delivery, or by registered or certified mail, postage prepaid, return
receipt requested or by telecommunications device capable of creating a written
record, addressed, if to the Borrower, at: 131 National Business Parkway, Suite
100, Annapolis Junction, Maryland 20701, Attention: Chief Executive Officer
(telecopy no. 301/617-4279, confirmation no. 301/617-4200), and if to Lender,
c/o AT&T Capital Corporation/Capital Markets Division, 44 Whippany Road,
Morristown, NJ 07962-1983, Attention: Vice President Credit (telecopy no. (973)
397-4368, confirmation no. (973) 397-3482, with a copy to AT&T Capital
Corporation/ Capital Markets Division at 44 Whippany Road, Morristown, NJ
07962-1983, Attention: Chief Counsel (telecopy no. (973) 397-3165, confirmation
no. (973) 397-4189). All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement shall be deemed to
have been given (a) five days after mailing in the United States mails when sent
by registered or certified mail, postage prepaid, return receipt requested, or
(b) upon receipt, if by courier service, by hand delivery or any above described
telecommunications device, in each case addressed to such party as provided in
this Section or in accordance with the latest unrevoked direction from such
party.
SECTION 9.02. No Waivers; Amendments. (a) No failure or delay
of Lender to exercise any right hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, preclude any other or further exercise thereof or the exercise of
any other right. No waiver of any provision of this Agreement or any other Loan
Document nor consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be in writing and signed by Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any other Loan Documents may be
amended or modified except pursuant to an agreement or agreements in writing
executed by the Borrower and Lender.
SECTION 9.03. Governing Law and Jurisdiction. THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAWS PRINCIPLES. THE BORROWER AND LENDER CONSENT TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN THE STATE OF NEW
JERSEY AND WAIVE ANY OBJECTION RELATING TO IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY PROCEEDING BY SUCH COURT.
SECTION 9.04. Expenses; Documentary Taxes. The Borrower will
pay all reasonable out-of-pocket expenses incurred by Lender in connection with
the negotiation, preparation and execution of the Loan Documents (whether or not
the transactions contemplated hereby shall be consummated), the administration
of the Loan Documents, the creation, perfection, priority or protection of the
Liens in the Collateral, and the enforcement of the rights of Lender in
connection with this Agreement, any other Loan Documents or the Collateral,
including all reasonable attorneys' fees and related expenses and costs. The
Borrower agrees that it shall indemnify Lender from and hold it harmless against
any documentary taxes or similar assessments or charges made by any Governmental
Authority by reason of the execution and delivery of this Agreement or any other
Loan Document.
SECTION 9.05. Equitable Relief. The Borrower recognizes that,
in the event that it fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, or any other Loan Document, any
remedy at law may prove to be inadequate relief to Lender; therefore, the
Borrower agrees that Lender, if Lender so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
SECTION 9.06. Indemnification; Limitation of Liability. (a)
The Borrower agrees to protect, indemnify and hold harmless Lender and each of
its officers, Affiliates, directors, employees, attorneys, accountants,
representatives and agents (collectively called the "Indemnitees") from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for and consultants of such Indemnitees in connection
with any investigative, administrative or judicial proceeding, whether or not
such Indemnitees shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against such Indemnitees (whether direct, indirect, or
consequential and whether based on any federal or state laws or other statutory
regulations, including, without limitation, securities, environmental and
commercial laws and regulations, under common law or at equitable cause or on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any of the other Loan Documents, or any act, event or transaction
related or attendant thereto, the agreements of Lender contained herein, the
making of Loans, the management of such Loans or the Collateral (including any
liability under federal, state or local environmental laws or regulations) or
the use or intended use of the proceeds of such Loans hereunder (collectively,
the "Indemnified Matters"); provided that the Borrower shall not have any
obligation to any Indemnitee hereunder with respect to Indemnified Matters
caused by or resulting from the willful misconduct or gross negligence of such
Indemnitee or with respect to taxes imposed on the Lender on (i) any of its
overall net income and (ii) franchise taxes imposed on the Lender by the
jurisdiction under the laws of which the Lender is organized or any political
subdivision thereof. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, the Borrower shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all Indemnified Matters incurred by the
Indemnitees.
(b) To the extent permitted by applicable law, no claim may be
made by the Borrower or any other Person against Lender or any of its
Affiliates, directors, officers, employees, agents, attorneys, accountants,
representatives or consultants for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by any of the Loan Documents or any act, omission or event occurring in
connection therewith; and the Borrower hereby waives, releases and agrees not to
sue upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor. Neither Lender nor any of its
Affiliates, directors, officers, employees, agents, attorneys or consultants
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with any of the Loan Documents, except for its or their own
gross negligence or willful misconduct.
SECTION 9.07. Survival of Agreements, Representations and
Warranties, etc. All warranties, representations and covenants made by the
Borrower in any Loan Document survive the execution and delivery of this
Agreement and the other Loan Documents and the making of the Obligations until
repayment in full of all Obligations.
SECTION 9.08. Successors and Assigns. (a) The Borrower may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of Lender. This Agreement shall be binding upon and inure to the
benefit of the Borrower and Lender and their respective successors and permitted
assigns. Without limiting the generality of the foregoing, the Lender shall have
the right to assign any of its rights hereunder or delegate any of its
obligations hereunder, in whole or in part and/or all of its rights and interest
under the Loan Documents as security therefor to any affiliate, or to any bank,
financial institution or financing company which in the ordinary course of
business accepts assignments of loans or assumes obligations to make loans from
third parties, and in furtherance thereof to provide to any such prospective or
actual assignee financial or other information relating to the Borrower and the
transactions contemplated hereby.
(b) Without limiting the generality of the foregoing, the
Lender shall have the right in its sole discretion to sell one or more
participations in the Note and the Loan Documents without notice to or consent
of the Borrower to any affiliate, or to any bank, financial institution or
financing company which in the ordinary course of its business accepts
assignments of loans or assumes obligations to make loans from third parties,
and in connection therewith, to provide such participants with financial and
other information and copies of documents relating to the Borrower and the
transactions contemplated hereby.
SECTION 9.09. Severability. In case any one or more of the
provisions contained in this Agreement or any other Loan Document shall be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
SECTION 9.10. Cover Page, Table of Contents and Section
Headings. The cover page, Table of Contents and section headings used herein are
for convenience of reference only, are not part of this Agreement and are not to
affect the construction of or be taken into consideration in interpreting this
Agreement.
SECTION 9.11. Counterparts. This Agreement may be signed in
counterparts with the same effect as if the signatures thereof and hereto were
upon the same instrument.
SECTION 9.12. Application of Payments. Notwithstanding any
contrary provision contained in this Agreement or in any of the other Loan
Documents, upon the occurrence and during the continuance of any Event of
Default, the Borrower irrevocably waives the right to direct the application of
any and all payments at any time or times thereafter received by Lender from the
Borrower or with respect to any of the Collateral, and the Borrower does hereby
irrevocably agree that Lender shall have the continuing exclusive right to apply
and reapply any and all payments received at any time or times thereafter,
whether with respect to the Collateral or otherwise, against the Obligations in
such manner as Lender may reasonably deem advisable, notwithstanding any entry
by Lender upon any of its books and records.
SECTION 9.13. Marshalling; Payments Set Aside. Lender shall be
under no obligation to Marshall any assets in favor of the Borrower or any other
party or against or in payment of any or all of the Obligations. To the extent
that the Borrower makes a payment or payments to Lender or Lender enforces its
security interests or exercises its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
SECTION 9.14. SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL
SERVICE OF ANY PROCESS UPON IT AND, CONSENTS THAT ALL SERVICE OF PROCESS SHALL
BE MADE BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE BORROWER
AT THE ADDRESS INDICATED IN SECTION 9.01 AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED FIVE (5) DAYS AFTER SAME SHALL HAVE BEEN POSTED AS AFORESAID.
SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND LENDER
EACH WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LENDER AND THE
BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO. THE
BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT EITHER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 9.16. Confidentiality. The parties hereto recognize
and acknowledge that, in connection with the transactions contemplated by this
Agreement and the other Loan Documents, Lender necessarily will need to acquire,
consider and analyze certain information about the Borrower and which the
Borrower regards as valuable and confidential and identified in writing as such
by Borrower (the "Confidential Information"). The Lender agrees that it shall
use the Confidential Information solely for purposes of the transactions
contemplated by this Agreement and the other Loan Documents and that the
Confidential Information will be kept confidential by Lender and that Lender
will not disclose any of the Confidential Information to any Person; provided,
however, that such confidentiality obligation shall not apply to (i) any
information disclosed to Persons employed by or expected to become engaged in
evaluating, approving, structuring, auditing or administering the Loans or
Obligations hereunder who agree to comply with this Section 9.16, including,
without limitation, the Lender's representatives, attorneys, advisors,
accountants, and rating agencies, (ii) any information which is or becomes
available to the Lender from a source other than the Borrower, or its
Affiliates, (iii) any information which is or becomes available to the public
other than as a result of disclosure by Lender or its above-described
representatives or agents, (iv) any information required or requested by any
governmental agency or representative thereof or pursuant to legal process, or
(v) any information in connection with the exercise of any remedy under the Loan
Documents; and provided, further, that nothing herein shall prevent Lender from
disclosing such information to any bona fide assignee, transferee or participant
or prospective assignee, transferee or participant of any of their respective
representatives that have agreed to comply with this Section 9.16 in connection
with the contemplated assignment or transfer of any Loans hereunder or
participation therein.
SECTION 9.17. Entire Agreement, etc. This Agreement (including
all schedules and exhibits referred to herein), the Note and all other Loan
Documents constitute the entire contract between the parties hereto with respect
to the subject matter hereof and thereof and shall supersede and take the place
of any other instrument purporting to be an agreement of the parties hereto
relating to such subject matter.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers as of the day
and year first above written.
AMERICAN COMMUNICATIONS SERVICES, INC.
By: /s/Riley M. Murphy
--------------------------
Name:Riley M. Murphy Title:Executive Vice President
/Secretary
AT&T COMMERCIAL FINANCE CORPORATION
By: /s/ William Roos
Name:William Roos ---------------------------
Title:Vice President
