UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0 - 26728
Tel-Save Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
23-2827736
(I.R.S. Employer Identification No.)
6805 Route 202, New Hope, PA 18938
(Address of principal executive offices - Zip code)
Registrant's telephone number, including area code: 215 - 862 - 1500
Former name, former address and former fiscal year, if changes since last
report.
Indicate by check whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12,13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court
Yes No
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date.
Common Stock, $.01 par value, 65,268,823 shares outstanding as of August 13,
1997.
<PAGE>
TEL-SAVE HOLDINGS, INC.
FORM 10-Q
JUNE 30, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997 and December
31, 1996 3
Consolidated Statements of Operations for the three and six
months ended June 30, 1997 and 1996 4
Consolidated Statement of Stockholders' Equity for the six
months ended June 30, 1997 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION
Items 1 - 6 22
Signatures 23
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1997 1996
- -------------------------------------------------------------------- -------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
CURRENT:
Cash and cash equivalents $ 43,146 $ 8,023
Marketable securities - 149,237
Accounts receivable, trade net of allowance for uncollect
ible accounts of $1,804 and $987, respectively 39,788 19,971
Advances to partitions and note receivables 27,639 13,410
Due from broker - 867
Prepaid AOL marketing costs-current 60,086 -
Prepaid expenses and other current assets 9,849 10,377
- -------------------------------------------------------------------- -------------- --------------
TOTAL CURRENT ASSETS 180,508 201,885
Property and equipment, net of accumulated depreciation of
$1,648 and $499, respectively 45,194 30,097
Intangibles, net of accumulated amortization of $1,467 and
$3,787, respectively 23,479 21,102
Prepaid AOL marketing costs 35,212 -
Other assets 5,880 3,924
- -------------------------------------------------------------------- -------------- --------------
TOTAL ASSETS $290,273 $257,008
==================================================================== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable and accrued expenses:
Trade and other $ 29,005 $17,812
Partitions 5,081 4,398
Sales and excise taxes payable 1,808 1,592
Other 1,220 1,619
Securities sold short, at cost to purchase - 867
- -------------------------------------------------------------------- -------------- --------------
TOTAL CURRENT LIABILITIES 37,114 26,288
- -------------------------------------------------------------------- -------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares autho
rized; no shares outstanding - -
Common stock - $.01 stated value, 100,000,000 authorized;
64,668,823 and 62,237,998 issued and outstanding,
respectively 647 622
Additional paid-in capital 233,465 210,616
Retained earnings 23,607 24,042
Treasury stock (4,560) (4,560)
- -------------------------------------------------------------------- -------------- --------------
TOTAL STOCKHOLDERS' EQUITY 253,159 230,720
- -------------------------------------------------------------------- -------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $290,273 $257,008
==================================================================== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- -----------------------
1997 1996 1997 1996
- ---------------------------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
SALES $ 75,032 $ 57,015 $ 146,192 $ 108,080
COST OF SALES 84,296 49,628 146,081 93,861
- ---------------------------------- ----------- ---------- ----------- ----------
GROSS PROFIT (LOSS) (9,264) 7,387 111 14,219
SELLING, GENERAL AND ADMINIS
TRATIVE 4,660 2,505 7,953 4,792
- ---------------------------------- ----------- ---------- ----------- ----------
OPERATING INCOME (LOSS) (13,924) 4,882 (7,842) 9,427
OTHER INCOME, NET 4,309 1,634 7,128 2,507
- ---------------------------------- ----------- ---------- ----------- ----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (9,615) 6,516 (714) 11,934
PROVISION (BENEFIT) FOR INCOME
TAXES (3,750) 2,458 (279) 4,499
- ---------------------------------- ----------- ---------- ----------- ----------
NET INCOME (LOSS) $ (5,865) $ 4,058 $ (435) $ 7,435
================================== =========== ========== =========== ==========
NET INCOME (LOSS) PER SHARE -
PRIMARY $ (.09) $ .07 $ (.01) $ .15
================================== =========== ========== =========== ==========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING - PRIMARY 66,881 58,766 66,367 50,050
================================== =========== ========== =========== ==========
NET INCOME (LOSS) PER SHARE -
FULLY DILUTED $ (.09) $ .07 $ (.01) $ .14
================================== =========== ========== =========== ==========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING - FULLY
DILUTED 66,898 59,864 66,479 53,034
================================== =========== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
-------------------------- Paid-in Retained -----------------------
Shares Amount Capital Earnings Shares Amount Total
- ------------------------------- ------------ ------------ ---------------- ------------ --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 62,238 $622 $210,616 $24,042 (428) $(4,560) $230,720
NET LOSS - - - (435) - - (435)
ISSUANCE OF WARRANTS TO
AOL - - 9,100 - - - 9,100
ISSUANCE OF COMMON STOCK 141 1 2,217 - - - 2,218
EXERCISE OF COMMON STOCK
WARRANTS 1,065 11 5,065 - - - 5,076
EXERCISE OF COMMON STOCK
OPTIONS 1,225 13 5,485 - - - 5,498
PURCHASE OF COMMON STOCK
WARRANTS - - (4,400) - - - (4,400)
INCOME TAX BENEFIT RELATED
TO EXERCISE OF COMMON
STOCK OPTIONS AND WAR
RANTS - - 5,382 - - - 5,382
- ------------------------------- ------------ ------------ ---------------- ------------ --------- ------------ ----------
BALANCE, JUNE 30, 1997 64,669 $647 $233,465 $23,607 (428) $(4,560) $253,159
=============================== ============ ============ ================ ============ ======= =============== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
1997 1996
- ------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (435) $ 7,435
Adjustment to reconcile net income to net cash (used in)
provided by operating activities:
Unrealized loss on securities sold short and marketable
securities - 216
Provision for bad debts 1025 11
Depreciation and amortization 2,994 1,135
Non-cash charge for customer acquisition costs 11,550 -
AOL marketing costs 14,366 -
Deferred credits - (240)
Income tax benefit related to warrants 5,382 -
(Increase) decrease in:
Accounts receivable - trade (20,635) (719)
Advances to partitions and note receivables (14,228) (3,086)
Prepaid expenses and other current assets (8,697) (1,430)
Prepaid AOL marketing costs (100,564) -
Other assets (1,956) (1,149)
Increase (decrease) in:
Accounts and partition payables and accrued expenses 11,483 9,058
Income taxes payable - 673
- ------------------------------------------------------------------- --------- -----------
Net cash (used in) provided by operating activities (99,715) 11,904
- ------------------------------------------------------------------- --------- -----------
Cash flows from investing activities:
Acquisition of intangibles (4,328) (796)
Capital expenditures (16,246) (17,911)
Securities sold short (867) 895
Due from broker 867 (1,111)
Loans to stockholder - (3,034)
Repayment of stockholder loans - 5,109
Sale (purchase) of marketable securities 149,238 (164,464)
- ------------------------------------------------------------------- --------- -----------
Net cash provided by (used in) investing activities 128,664 (181,312)
- ------------------------------------------------------------------- --------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock - 139,069
Proceeds from exercise of options and warrants 10,574 4,471
Purchase of common stock warrants (4,400) -
Payment of note payable to stockholder - (5,921)
- ------------------------------------------------------------------- --------- -----------
Net cash provided by financing activities 6,174 137,619
- ------------------------------------------------------------------- --------- -----------
Net increase (decrease) in cash and cash equivalents 35,123 (31,789)
Cash and cash equivalents, at beginning of period 8,023 41,211
- ------------------------------------------------------------------- --------- -----------
Cash and cash equivalents, at end of period $ 43,146 $ 9,422
=================================================================== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation The consolidated financial statements include
the accounts of Tel-Save Holdings, Inc. and
its wholly owned subsidiaries, and have been
prepared as if the entities had operated as a
single consolidated group since their
respective dates of incorporation. All
intercompany balances and transactions have
been eliminated. The consolidated financial
statements and related notes thereto as of
June 30, 1997 and for the three and six
months ended June 30, 1997 and 1996 are
presented as unaudited but in the opinion of
management include all adjustments necessary
to present fairly the information set forth
therein. These adjustments consist solely of
normal recurring accruals. The consolidated
balance sheet information for December 31,
1996 was derived from the audited financial
statements included in the Company's Form
10-K. These interim financial statements
should be read in conjunction with that
report. The interim results are not
necessarily indicative of the results for any
future periods.
2. Stock Split On January 3, 1997, the Company's Board of
Directors approved a two-for-one split of the
common stock in the form of a 100% stock
dividend. The additional shares resulting
from the stock split were distributed on
January 31, 1997, to all stockholders of
record at the close of business on January
17, 1997. The consolidated balance sheet as
of December 31, 1996 reflects the recording
of the stock split as if it had occurred on
December 31, 1996. Further, all references in
the consolidated financial statements to
average number of shares out standing and
related prices, per share amounts, warrant
and stock option data have been restated for
all periods to reflect the stock split.
-7-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. AOL Agreement In conjunction with the previously reported
Telecommunications Marketing Agreement (the
"AOL Agreement") with America Online, Inc.
("AOL"), the Company paid AOL a total of $100
million and issued two warrants to purchase
shares of the Company's stock, one warrant
(the "First Warrant") to purchase, at an
exercise price of $15.50 per share, up to
5,000,000 shares, which vests as to 2,500,000
shares on the earlier of the time the
Company's service under the AOL Agreement is
first made generally available to the public
(the "Com mercial Launch Date") and February
22, 1998, and as to 2,500,000 shares on
February 22, 1998 if the AOL Agreement has
not terminated, and one warrant (the "Second
Warrant") to purchase, at an exercise price
of $14.00 per share, up to 7,000,000 shares,
which will vest, commencing December 31,
1997, based on the number of subscribers to
the Company's service and would vest fully if
there are at least 3.5 million such
subscribers at any one time. The initial term
of the AOL Agreement runs to June 30, 2000,
and the AOL Agreement provides for annual
extensions by AOL of its term thereafter.
After discussions with the Staff of the
Securities and Exchange Commission (the
"SEC"), the Company has determined to change
the originally described accounting treatment
for the AOL Agreement and to account for the
$100 million cash payment, the value of the
First Warrant, as described below, and $0.6
million of agreement related costs as
follows: (i) $35.9 million will be charged to
expense ratably over the period from the
signing of the AOL Agreement to December 31,
1997, as payment for certain exclusivity
rights for that period; (ii) $13.2 million
will be treated as production of advertising
costs and will be charged to expense on the
Commercial Launch Date, currently anticipated
to be in September 1997; and (iii) the $60.6
million, the balance of the cash payment, the
value of the First Warrant and AOL Agreement
related costs, represents the combined value
of advertising and exclusivities which extend
over the term of the AOL Agreement and will
be recognized ratably after the Commercial
Launch Date as advertising services are
received. Accordingly, during the three and
six months ended June 30, 1997, the Company
recognized $10.8 million and $14.4 million,
respectively, related to the exclusivity, as
discussed in (i) above. The effect of these
charges for the three and six months ended
June 30, 1997 was a decrease in net income of
$6.6 milion and $8.8 million, respectively
and a decrease in net income per share
(primary and fully diluted) of $.10 and $.13,
respectively.
While the First Warrant has been valued by an
independent investment bank at $9.1 million
at its date of grant, the Company is
continuing to discuss with the SEC the
valuation of this First Warrant, and such
amount could change prior to the Commercial
Launch Date, which would affect the amount
charged to expense over the balance of the
initial term of the AOL Agreement. The Second
Warrant will be valued and charged to expense
as and when subscribers to the Com pany's
services under the AOL Agreement sign-up and
the shares under the Second Warrant vest.
-8-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The AOL Agreement also provides for marketing
payments to AOL based on the "pre-tax profit"
(as defined in the AOL Agreement) in each
calendar quarter from the telecommunications
services provided by the Company. AOL's share
of the pre-tax profit will vary from 50% to
70%, depending upon the level of revenues
from such services. The Company will withhold
a portion of AOL's share of the pre-tax
profit as a recovery of the initial $100
million cash payment. The Company is
permitted to withhold up to $4.3 million in
each of the 10 quarters ending after December
31, 1997 and to withhold 33% of AOL's share
of the pre-tax profits for every quarter
ending after June 30, 2002 until the entire
$100 million cash payment has been recovered.
AOL's share of pre-tax profits in excess of
the $4.3 million and 33% will be distributed
as earned.
The AOL Agreement also provides for the grant
to AOL of additional warrants to purchase up
to an aggregate of 2 million shares if AOL
extends its obligations under the AOL
Agreement beyond June 30, 2000. Any such
additional warrants that may be granted to
AOL will be valued at that time and will be
charged as an expense in the income
statement.
4. Customer Acquisition The Company has changed its direct marketing
Costs efforts to producing new end users for
the Company's long distance services through
the use and management of independent
telemarketing agents that solicit customers
primarily on behalf of Company partitions.
The Company determined in the second quarter
to deemphasize the use of direct marketing to
solicit customers for the Company as the
carrier and to focus the majority of its
existing direct marketing resources on
customer service and support for the
marketing operations of its carrier
partitions, on a fee basis. The Company
recognized fees of $2.7 million, included in
other income, from the services net of
related costs of $8.7 million during the
second quarter of 1997.
The Company recorded a one-time charge of
$11.5 million in the quarter ended June 30,
1997, primarily as a result of the Company
changing its accounting for customer
acquisition costs to expense them in the
period incurred versus the Company's prior
treatment of capitalizing customer
acquisition costs and amortizing them over a
six month period. The effect of this charge
for the three and six months ended June 30,
1997 was a decrease in income before
provision of income taxes of $11.5 million, a
decrease in net income of $7.0 million and a
decrease in net income per share (primary and
fully diluted) of $.11.
5. Recent Accounting In February 1997, the Financial Accounting
Pronouncement Standards Board issued Statement No. 128,
"Earnings Per Share," which is effective for
fiscal years ended after December 15, 1997.
The Company will adopt Statement No. 128 for
the year ended December 31, 1997. The
adoption of this standard is not expected to
have a material impact on the Company's
consolidated financial statements.
In June 1997, the Financial Accounting
Standards Board issued Statement of Financial
Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS 130), which
establishes standards for reporting and
display of comprehensive income, its
components and accumulated balances.
Comprehensive income is defined to include
all changes in equity except those resulting
from investments by owners and distributions
to owners. Among other disclosures, SFAS 130
requires that all items that are required to
be recognized under current accounting
standards as components of comprehensive
income be reported in a financial statement
that is displayed with the same prominence as
other financial statements.
SFAS 130 is effective for financial
statements for periods beginning after
December 15, 1997 and requires comparative
information for earlier years to be restated.
Because of the recent issuance of this
standard, management has been unable to fully
evaluate the impact, if any, the standard may
have on future financial statement
disclosures. Results of operations and
financial position, however, will be
unaffected by implementation of this
standard.
In June 1997, the Financial Accounting
Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise
and Related Information, (SFAS 131) which
supersedes SFAS No 14, Financial Reporting
for Segments of a Business Enterprise. SFAS
131 establishes standards for the way that
public companies report information about
operating segments in annual financial
statements and requires reporting of selected
information about operating segments in
interim financial statements issued to the
public. It also establishes standards for
disclosures regarding products and services,
geographic areas and major customers. SFAS
131 defines operating segments as components
of a company about which separate financial
information is available that is evaluated
regularly by the chief operating decision
maker in deciding how to allocate resources
and in assessing performance.
SFAS 131 is effective for financial
statements for periods beginning after
December 15, 1997 and requires comparative
information for earlier years to be restated.
Because of the recent issuance of this
standard, management has been unable to fully
evaluate the impact, if any, it may have on
future financial statement disclosures.
Results of operations and financial position,
however, will be unaffected by implementation
of this standard.
-9-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. Subsequent Event As of July 16, 1997, the Company, a wholly
owned subsidiary of the Company ("Merger
Sub") and Shared Technologies Fairchild, Inc.
("STF") entered into an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to
which STF would, by merger with and into
Merger Sub (the "Merger"), become a wholly
owned subsidiary of the Company and the
shares of STF common stock would be exchanged
for shares of the Company's common stock.
Pursuant to the terms of the Merger
Agreement, each share of STF stock will be
converted into the number of shares of the
Company common stock calculated by dividing
$11.25 by the average closing price of the
Company common stock over a 15-trading-day
period prior to the closing date of the
Merger, provided that the exchange ratio
shall not be greater than 1.125 shares of the
Company's common stock for a share of STF
common stock and that, if such average
closing price is greater than $20 per share,
the exchange ratio will be calculated by
dividing the sum of (a) $11.25 plus the
product of .3 times the amount by which such
average closing price exceeds $20 by (b) such
average closing price. STF's outstanding
convertible preferred stock will be exchanged
for preferred stock of the Company with
substantially identical terms or for shares
of the Company's common stock.
The consummation of the Merger is subject to
the approval of the stockholders of both the
Company and STF (including, in the case of
the Company, approval of an amendment to the
Company's certificate of incorporation to
increase the number of the Company's
authorized shares of common stock), as well
as other conditions, including antitrust
clearance, applicable federal and state
regulatory approvals and consents, the
Merger's qualifying as a pooling of interests
transaction for accounting purposes and other
customary closing conditions.
-10-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Company was founded in 1989 as a switchless reseller of AT&T long
distance services to small and medium-sized businesses, currently has
over 500,000 end users. In 1997, the Company commenced the deployment
of its own nationwide telecommunications network, One Better Net
("OBN"), consisting of five Company-owned, AT&T (now Lucent)
manufactured 5ESS-2000 switches connected by AT&T transmission
facilities. OBN currently provides service to approximately 150,000 of
the Company's end users, and a vast majority of the Company's new
outbound end users are now being provisioned to OBN.
The Company has continued to develop its direct marketing efforts to
producing new end users for the Company's long distance services. The
Company has determined to change its business practice and deemphasize
the use of direct marketing to solicit direct customers for the
Company as the carrier and to focus the majority of its direct
marketing resources on customer service and support for the marketing
operation of its carrier partitions. The Company has deemphasized its
efforts in direct marketing to businesses in order to (i) focus on
marketing to residential and business customers under the AOL
Agreement, (ii) utilize its direct marketing group to support the
marketing efforts of its partitions to business end users; (iii)
decrease the Company's risk of association with customer complaints
or federal or state enforcement actions with respect to direct
marketing and order verification practices and (iv) be in a position
to sell or provide these services to local exchange carriers as they
enter the long distance market in other geographical regions. The
Company expects to continue to use its facility and employees in
Florida for telemarketing of its services, but expects gradually to
shift such resources to providing customer service and support for
existing customers as well as those customers anticipated to be added
under the AOL Agreement and other marketing programs.
The Company continues to expand the capacity of OBN, which currently
could accommodate 400,000 new residential customers without additional
transmission facilities. Separately, the Company has entered into an
agreement with AT&T to purchase its Carrier Solutions Platform ("CSP")
service for an initial period of six (6) months subject to the
parties' right to terminate the agreement. The Company is negotiating
a longer term agreement with AT & T for such service. The CSP service
provides OBN with significant additional capacity. The CSP service
would enable the Company to accommodate large numbers of additional
customers on OBN by handling their peak load or overflow traffic.
-11-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
financial data as a percentage of sales:
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
--------------------------------------------------------------
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ------------------------------
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES 100.0% 100.0% 100.0% 100.0%
COST OF SALES 112,3 87.0 99.9 86.8
------- ------- ------- --------
GROSS PROFIT (LOSS) (12.3) 13.0 0.1 13.2
SELLING, GENERAL AND ADMINISTRATIVE 6.3 4.4 5.5 4.5
------- ------- ------- --------
OPERATING INCOME (LOSS) (18.6) 8.6 (5.4) 8.7
OTHER INCOME, NET 5.8 2.8 4.9 2.3
------- ------- ------- --------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (12.8) 11.4 (0.5) 11.0
PROVISION (BENEFIT) FOR INCOME
TAXES (5.0) 4.3 (0.2) 4.1
------- ------- ------- --------
NET INCOME (LOSS) (7.8)% 7.1% (0.3)% 6.9%
=========================================================================================================
</TABLE>
-12-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
THREE MONTHS ENDED JUNE 30, 1997 TO THE THREE MONTHS ENDED JUNE 30, 1996
Sales. Sales increased by 31.6% to $75.0 million in the second quarter
of 1997 from $57.0 million in the second quarter of 1996. The increase
in sales related primarily to the marketing of the Company's OBN
services and the addition of new partitions.
Although the Company expects sales to increase through the AOL
Agreement, the addition of new partitions, the growth of end user
business through existing partitions, the pending merger with STF and
possible future acquisitions, in view of the intense competition in
this industry, there can be no assurance that the Company will
continue to increase sales on a quarter-to-quarter or year-to-year
basis.
Cost of Sales. The Company's cost of sales increased by 69.9% to $84.3
million in the second quarter of 1997 from $49.6 million in the second
quarter of 1996. Included in the 1997 cost of sales are charges
aggregating $22.3 million consisting of $11.5 million primarily as a
result of the Company's change in its accounting for customer
acquisition costs (See Note 4) and $10.8 million related to the AOL
Agreement (See Note 3). The effect of these charges was to reduce net
income and net income per share (primary and fully diluted) by $13.6
million and $.21, respectively. Absent these charges, the Company's
cost of sales increased by 25% to $62.0 million in the second quarter
of 1997 from $49.6 million in the second quarter of 1996.
Prior to 1997, network usage costs consisted solely of "bundled"
charges from AT&T. Beginning in 1997, the Company also incurred
"unbundled" charges, including local access fees, associated with the
operation of OBN. Both "bundled" and "unbundled" charges are directly
related to calls made by the Company's end users.
-13-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
The Company and AOL are working together to prepare to begin online
marketing and billing of long distance service. Development and
testing is continuing for the systems that will be needed to support
the offering, but there can be no assurance that such development and
testing will be completed successfully or in a timely manner. The
Company currently estimates that between 2% and 6% of AOL's customers
will need to sign up for the Company's long distance service in order
for the Company to break even on its investment in the AOL Agreement.
As a switchless reseller of AT&T long distance services and in order
to provide its OBN services, the Company subscribes to contract
tariffs. The ability of the Company to negotiate competitive terms of
these contract tariffs has been an important reason for the Company's
success. In October 1996, the Company subscribed to a new AT&T
contract tariff, which was further revised in December 1996 and in May
1997 and permits the Company to continue to resell AT&T long distance
services, including AT&T-SDN service, through mid-1998. The new AT&T
contract tariff also includes other AT&T services (such as
international long distance, inbound and outbound services) that will
be used in the Company's nationwide telecommunications network, OBN.
The rates that the Company pays under the new AT&T contract tariff are
more favorable to the Company than under previous tariffs. During its
term, the new AT&T contract tariff will enable the Company to minimize
possible attrition that might result from moving existing end users
from the AT&T network to OBN. The new AT&T contract tariff also
permits a more gradual introduction of OBN, which has reduced the
expense of providing the capacity required in a more rapid phase-in of
OBN and lessened the impact of any technical difficulties during the
phase-in of OBN. The new AT&T contract tariff commits the Company to
purchase $285 million of service from AT&T over the next 4 years,
including at least $1 million per month of international service. The
Company can terminate the new contract tariff without liability to
AT&T at the end of 18 months if the Company has generated at least
$105 million in usage charges, including at least $15 million in
international usage charges and the Company currently expects to reach
these thresholds ($105 million and $15 million) in the fourth quarter
of 1997.
OBN and the operation of the Company's own switches and network have
to date and will in the future require the Company to incur systems
and equipment maintenance, lease, and network personnel expenses
significantly above the levels historically experienced by the Company
as a switchless reseller of AT&T services. However, these per call
costs, in combination with "unbundled" charges paid to LECs and AT&T,
were in the quarter ended June 30, 1997 and are expected in the future
to be less than the per call cost currently incurred by the Company as
a switchless reseller paying "bundled" charges to AT&T. The Company is
already expanding the capacity of OBN, which currently could
accommodate 400,000 new residential customers. Separately, the Company
has entered into an agreement with AT&T to purchase its Carrier
Solutions Platform ("CSP") service for an initial period of six (6)
months subject to either party's right to terminate the agreement. The
Company is negotiating a longer term agreement with AT&T for such
service. The CSP service provides OBN with significant additional
capacity. The CSP services would enable the Company to accommodate
large numbers of additional customers on OBN by handling their peak
load or overflow traffic. CSP has been installed, and testing is
expected to be completed by mid-October. This expansion of capacity
will cost the Company approximately $120,000 per month. By utilizing
CSP, the Company expects that it can operate its network close to
capacity, thereby lowering transport costs. Further, CSP gives the
Company the ability to seamlessly migrate traffic to OBN and reduce
the task of forecasting demand.
-14-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
Gross Margin. Gross margin decreased to (12.3%) in the second quarter
of 1997 from 13.0% during the second quarter of 1996. The decrease in
gross margin was primarily due to the charges discussed above. Absent
these charges, gross margin increased to 17.4% in the second quarter
of 1997 from 13.0% during the second quarter of 1996, due to lower
network usage costs on the Company's current contract tariff with AT&T
and network costs for OBN services which were lower on a per call
basis when compared to those paid to AT&T, offset by an increase in
direct marketing costs.
Although the basic rates of the three largest long distance carriers -
AT&T, MCI and Sprint - have consistently increased over the past three
years, AT&T and other carriers have announced new price plans and
significantly simplified rate structures aimed at residential
customers, the Company's primary target audience under the AOL
Agreement, which may have the impact of lowering overall long distance
prices. There can be no assurance that AT&T or other carriers will not
make similar offerings available to the small and medium sized
businesses that the Company currently serves. Although OBN is expected
to make the Company more price competitive, further reductions in long
distance prices charged by competitors still may have a material
adverse impact on the Company's gross margin in future periods. For
example, the FCC has recently ordered LECs to lower the access charges
they charge IXCs like the Company, which would lower the cost to the
Company of providing service over OBN. However, it also lowers costs
for AT&T and other IXCs, and they have publicly stated that they would
lower their prices to consumers accordingly.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 86.0% to $4.7 million in the
second quarter of 1997 from $2.5 million in the second quarter of
1996. The increase in selling, general and adminis trative expenses
was due primarily to the costs associated with hiring additional
personnel to support the Company's continuing growth, the development
costs associated with AOL and increased fees for professional
services.
The Company expects selling, general and administrative expenses to
increase as it implements, operates and maintains OBN and as it rolls
out the AOL service offering. If the STF Merger is consummated, the
Company also anticipates an increase in such expenses for the
integration of the operations of STF. These efforts will require
additional personnel, equipment and support. The additional selling,
general and administrative expenses may be offset by the increased
sales and profit gained as a result of the implementation of the
components of the Company's strategic plan, but increased costs may
have an adverse impact on results of operations and there can be no
assurances of such increased sales and profits.
Other Income. Other income was $4.3 million in the second quarter of
1997 versus $1.6 million for the second quarter of 1996. Other income
consists primarily of fees for customer service and for support for
the marketing operations of the Company's carrier partitions and
interest income earned on the Company's cash balances resulting
primarily from the unapplied proceeds of the Company's public offering
in April 1996 and excess cash from operations.
As a result of the $100 million cash payment to AOL, interest income
for future periods is expected to be significantly less than amounts
realized during the second, third and fourth quarter of 1996.
-15-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
Provision for income taxes. The Company's effective tax rate increased
to 39.0% for the three months ended June 30, 1997 from the effective
tax rate of 37.7% for the three months ended June 30, 1996 due to an
anticipated higher effective state tax rate in 1997.
-16-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
SIX MONTHS ENDED JUNE 30, 1997 TO THE SIX MONTHS ENDED JUNE 30, 1996
Sales. Sales increased by 35.3% to $146.2 million in the first six
months of 1997 from $108.1 million in the first six months of 1996.
The increase in sales related primarily to the marketing of the
Company's OBN services and the addition of new partitions.
Cost of Sales. The Company's costs of sales increased by 55.6% to
$146.1 million in the first six months of 1997 from $93.9 million in
the first six months of 1996. Included in the 1997 cost of sales are
charges aggregating $25.9 million consisting of $11.5 million
primarily as a result of the Company's change in its accounting for
customer acquisition costs (See Note 4) and $14.4 million related to
the AOL Agreement (See Note 3). The effect of these charges was to
reduce net income and net income per share (primary and fully diluted)
by $15.8 million and $.24, respectively. Absent these charges, the
Company's cost of sales increased by 28.0% to $120.2 million for the
first six months of 1997 from $93.9 million for the first six months
of 1996.
Gross Margin. Gross margin decreased to 0.1% in the first six months
of 1997 from 13.2% during the first six months of 1996. The decrease
in gross margin was primarily due to the charges discussed above.
Absent these charges, gross margin increased to 17.8% in the first six
months of 1997 from 13.2% in the first six months of 1996, due to
lower network usage costs on the Company's current contract tariff
with AT&T and network costs for OBN services which were lower on a per
call basis when compared to those paid to AT&T, offset by an increase
in direct marketing costs.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 66.0% to $8.0 million in the
first six months of 1997 from $4.8 million in the first six months of
1996. The increase in selling, general and administrative expenses was
due primarily to the costs associated with hiring additional personnel
to support the Company's continuing growth, the development costs
associated with AOL, and increased fees for professional services.
Other Income. Other income was $7.1 million in the first six months of
1997 versus $2.5 million for the first six months of 1996. Other
income consists primarily of fees for customer service and support for
the marketing operations of the Company's carrier partitions and
interest income earned on the Company's cash balances resulting
primarily from the unapplied proceeds of the Company's public offering
in April 1996 and excess cash from operations.
Provision for income taxes. The Company's effective tax rate increased
to 39.0% for the six months ended June 30, 1997 from the effective tax
rate of 37.7% for the six months ended June 30, 1996 due to an
anticipated higher effective state tax rate in 1997.
-17-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
In addition to historical information, certain of the statements
contained herein may be considered forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Such statements are
identified by the use of forward-looking words or phrases, including,
but not limited to,"estimates," "expects," "expected," "anticipates,"
and "anticipated." These forward-looking statements are based on the
Company's current expectations. Although the Company believes that the
expectations reflected in such forward-looking statements are
reasonable, there can be no assurance that such expectations will
prove to have been correct. Forward-looking statements involve risks
and uncertainties and the Company's actual results could differ
materially from the Company's expectations. Important factors that
could cause such actual results to differ materially include, among
others, adverse developments in the Company's relationship with AT&T,
increased price competition for long distance services, delays in the
direct marketing of residential long distance services under the AOL
Agreement, attrition in the number of end users, and changes in
government policy or regulation, and statements regarding the STF
Merger are based on the consummation of the STF Merger, which is
subject to a number of conditions, as described elsewhere herein. The
Company undertakes no obligation to update its forward-looking
statements.
-18-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
The Company consummated its initial public offering of 10,350,000
shares of Common Stock in September and October of 1995. The Company
received net proceeds from such offering of $42.8 million, of which
$4.5 million was used to pay the minority stockholder. The Company
consummated a public offering of 17,068,000 shares of Common Stock in
April and May, 1996. The Company received net proceeds from such
offering of approximately $139.1 million. During 1996, certain options
and warrants to purchase shares of the Company's Common Stock were
exercised and the Company received net proceeds of approximately $4.9
million and $7.4 million, respectively. Also during 1996, the Company
repurchased approximately 428,000 shares, which are held as treasury
shares, for $4.6 million. During the six months ended June 30, 1997,
certain options and warrants to purchase shares of the Company's
Common Stock were exercised and the Company received net proceeds of
approximately $5.5 million and $5.1 million, respectively. In
addition, the Company purchased certain Common Stock Warrants for $4.4
million. The tax benefit realized from the options and warrants was
approximately $21.3 million in 1996 and $5.4 million for the six
months ended June 30, 1997 and is reflected as an adjustment to
additional paid-in capital and taxes payable. At June 30, 1997, the
Company had cash, cash equivalents and marketable securities of
approximately $43.1 million.
The Company's working capital, excluding prepaid AOL marketing costs,
was $83.3 million and $175.6 million at June 30, 1997 and December 31,
1996, respectively. The significant decrease in working capital is
primarily a result of the $100 million cash payment made to AOL in
February, 1997.
The Company invested $16.2 million in capital equipment during the six
months ended June 30, 1997, of which $9.2 million was used for the
acquisition of capital equipment and installation costs relating to
the deployment of OBN. To date, through June 30, 1997, the Company has
invested $34.1 million for the acquisition of capital equipment and
installation costs relating to the deployment of OBN.
If the STF Merger is consummated, the Company will issue a significant
number of shares of its common stock (see Note 5 to the Consolidated
Financial Statements contained herein) (approximately 15.4 million
shares assuming conversion or exercise of all outstanding options,
warrants and convertible preferred stock and an average closing price
for the Company's common stock over the 15 trading days prior to the
closing of $18). In addition, as of June 30, 1997 STF had
approximately $255.4 million of debt and outstanding redeemable
preferred stock which is redeemable for $28.0 million. The Company
plans to purchase a significant amount of telecommunications equipment
in order to accomplish the objective of the STF Merger, which is to
take advantage of opportunities provided to offer telecommunications
services using OBN to a broader market of buildings and customers than
those currently served by STF.
-19-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
In June 1997, the Company negotiated a one year unsecured, committed
line of credit with First Union Bank ("First Union Credit Facility")
under which borrowings of up to $65.0 million are available. The
Company is required to pay an availability fee of $81,250 per annum,
or 0.125% of the total available borrowings. Interest on borrowing is
payable monthly at First Union Bank's prime rate less 0.5% or LIBOR
plus 0.875%, at the Company's option. Principal is payable upon demand
by First Union Bank. Under the terms of the First Union Credit
Facility, the Company must maintain certain financial covenants and
adhere to certain restrictions. At June 30, 1997, the Company had no
borrowings outstanding under the First Union Credit Facility.
The Company has used a portion of the proceeds from its 1996 stock
offering for: (i) advances to new and existing partitions to support
their marketing efforts, (ii) procurement of additional hardware and
software for OBN, (iii) direct marketing efforts, including the ABA
transaction, and a direct marketing center in Clearwater, Florida,
(iv) the purchase of a new headquarters building in New Hope,
Pennsylvania and (v) cash payment of $100 million made in February
1997 to AOL in conjunction with the AOL Agreement. The Company intends
to use the remaining proceeds: (i) to further fund new and existing
partitions, and (ii) to take advantage of growth opportunities,
including but not limited to, possible acquisitions. At June 30, 1997,
excess cash was invested primarily in U.S. Treasury Money Market
Funds. Generally, excess cash is invested primarily in marketable
securities, short term government securities and cash equivalents
consisting of money market accounts with major international brokerage
firms. The Company had to spend less of the proceeds of the 1996 stock
offering to start up OBN than originally planned because of the
current AT&T contract tariff, which allows the Company to avoid some
of the costs associated with moving existing end users to OBN and
permits the Company to phase in OBN more cost effectively by not
leasing transmission facilities before traffic levels are sufficient
to fill them.
The Company generally does not have a significant concentration of
credit risk with respect to accounts receivable due to the large
number of partitions and end users comprising the Company's customer
base and their dispersion across different geographic regions. At June
30, 1997, one carrier partition owed the Company approximately $15
million. The Company maintains reserves for potential credit losses
and, to date, such losses have been within the Company's expectations.
Additional financial arrangements will be necessary in connection with
the STF debt and redeemable preferred stock and may be necessary in
connection with telecommunications equipment purchase. The Company
believes that its current cash position, the credit facility and the
cash flow expected to be generated from operations, will be sufficient
to fund its other capital expenditures, working capital and other cash
requirements for at least the next twelve months.
-20-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
In June, 1997 in connection with the exercise of outstanding
Warrants the Company issued 315,000 shares of its common stock to
the holder of such Warrant upon the payment of $1,470,000 in
accordance with the terms thereof. The Company believes that the
issuance of such shares was exempt from registration under the
Securities Act of 1933 ("1933 Act") pursuant to Section 4(2)
thereunder.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) Not applicable;
(b) Not applicable;
(c) Not applicable.
Item 5. Other Information
None
-21-
<PAGE>
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 2 Agreement and Plan of Merger, dated as of
July 16, 1997, among Tel-Save Holdings,
Inc., TSH Co. Inc. and Shared Technologies
Fairchild, Inc. (incorporated by reference
to Exhibit 2 to the Company's Current
Report on Form 8-K dated July 22, 1997).
Exhibit 10.1 Revolving Credit Agreement dated as of
July 11, 1997 between the Company and
First Union National Bank
Exhibit 10.2 Agreement, dated as of July 16, 1997, by
and between Tel-Save Holdings, Inc. and
Shared Technologies Fairchild, Inc.
(incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form
8-K dated July 22, 1997).
Exhibit 10.3 Voting Agreement entered into as of July
16, 1997, by and between Daniel Borislow
and Shared Technologies Fairchild, Inc.
(incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form
8-K dated July 22, 1997).
Exhibit 10.4 Voting Agreement entered into as of July
16, 1997, by and between RHI Holdings,
Inc. and Tel-Save Holdings, Inc.
(incorporated by reference to Exhibit 10.3
to the Company's Current Report on Form
8-K dated July 22, 1997).
Exhibit 10.5 Voting Agreement entered into as of July
16, 1997, by and between Anthony D.
Autorino and Tel-Save Holdings, Inc.
(incorporated by reference to Exhibit 10.4
to the Company's Current Report on Form
8-K dated July 22, 1997).
Exhibit 10.6 Voting Agreement entered into as of July
16, 1997, by and between J.J. Cramer & Co.
and Tel-Save Holdings, Inc. (incorporated
by reference to Exhibit 10.5 to the
Company's Current Report on Form 8-K dated
July 22, 1997).
Exhibit 11 Computation of Net Income (Loss) Per Share
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
(1) Current Report on Form 8-K dated July 23, 1997.
-22-
<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 thereunto duly authorized.
Date: September 2, 1997 TEL-SAVE HOLDINGS, INC.
-----------------------
(Registrant)
By: /s/ Daniel Borislow
---------------------------------------
Daniel Borislow
Chairman of the Board,
Chief Executive Officer and Director
By: /s/ Joseph A. Schenk
---------------------------------------
Joseph A. Schenk
Chief Financial Officer, Treasurer and
Director
By: /s/ Kevin R. Kelly
---------------------------------------
Kevin R. Kelly
Controller
-23-
CREDIT AGREEMENT
among
TEL-SAVE HOLDINGS, INC.,
TEL-SAVE, INC. and
EMERGENCY TRANSPORT CORP.,
as Borrowers,
THE LENDERS NAMED HEREIN,
and
FIRST UNION NATIONAL BANK,
as Agent
$65,000,000, 364-Day Senior Credit Facility
Arranged by
FIRST UNION CAPITAL MARKETS CORP.
Dated as of July 11, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
RECITALS...................................................................-1-
ARTICLE I
DEFINITIONS
1.1. Defined Terms............................................................................-1-
1.2. Accounting Terms........................................................................-12-
1.3. Other Terms; Construction; Time.........................................................-13-
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. Commitments.............................................................................-13-
2.2. Borrowings..............................................................................-13-
2.3. Disbursements; Funding Reliance; Domicile of Loans......................................-14-
2.4. Notes...................................................................................-15-
2.5. Termination and Reduction of Commitments................................................-15-
2.6. Mandatory Payments and Prepayments......................................................-15-
2.7. Voluntary Prepayments...................................................................-16-
2.8. Interest................................................................................-16-
2.9. Fees....................................................................................-17-
2.10. Interest Periods........................................................................-18-
2.11. Conversions and Continuations...........................................................-18-
2.12. Method of Payments; Computations........................................................-19-
2.13. Recovery of Payments....................................................................-20-
2.14. Use of Proceeds.........................................................................-20-
2.15. Pro Rata Treatment......................................................................-20-
2.16. Increased Costs; Change in Circumstances; Illegality; etc...............................-21-
2.17. Taxes...................................................................................-23-
2.18. Compensation............................................................................-25-
ARTICLE III
CLOSING; CONDITIONS OF BORROWING
3.1. Closing.................................................................................-25-
3.2. Conditions of Closing. .................................................................-25-
3.3. Conditions of All Borrowings............................................................-27-
-i-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Organization and Power........................................................-28-
4.2. Authorization; Enforceability...........................................................-28-
4.3. No Violation............................................................................-28-
4.4. Governmental and Third-Party Authorization; Permits.....................................-29-
4.5. Litigation..............................................................................-29-
4.6. Taxes...................................................................................-29-
4.7. Subsidiaries............................................................................-29-
4.8. Full Disclosure.........................................................................-29-
4.9. Margin Regulations......................................................................-30-
4.10. No Material Adverse Change..............................................................-30-
4.11. Financial Matters.......................................................................-30-
4.12. Ownership of Properties.................................................................-30-
4.13. ERISA...................................................................................-31-
4.14. Environmental Matters...................................................................-31-
4.15. Compliance With Laws....................................................................-32-
4.16. Regulated Industries....................................................................-32-
4.17. Insurance...............................................................................-32-
4.18. Material Contracts......................................................................-32-
4.19. Labor Relations.........................................................................-32-
4.20. Single Business Enterprise..............................................................-32-
ARTICLE V
AFFIRMATIVE COVENANTS
5.1. Financial Statements....................................................................-33-
5.2. Other Business and Financial Information................................................-33-
5.3. Corporate Existence; Franchises; Maintenance of Properties..............................-35-
5.4. Compliance with Laws....................................................................-35-
5.5. Payment of Obligations..................................................................-35-
5.6. Insurance...............................................................................-35-
5.7. Maintenance of Books and Records; Inspection............................................-36-
5.8. Permitted Acquisitions..................................................................-36-
5.9. Creation or Acquisition of Subsidiaries.................................................-36-
5.10. Further Assurances......................................................................-37-
ARTICLE VI
FINANCIAL COVENANTS
6.1. Leverage Ratio..........................................................................-37-
6.2. Current Ratio...........................................................................-37-
-ii-
<PAGE>
ARTICLE VII
NEGATIVE COVENANTS
7.1. Merger; Consolidation...................................................................-37-
7.2. Indebtedness............................................................................-38-
7.3. Liens...................................................................................-38-
7.4. Disposition of Assets...................................................................-39-
7.5. Investments.............................................................................-40-
7.6. Restricted Payments.....................................................................-41-
7.7. Transactions with Affiliates............................................................-41-
7.8. Lines of Business.......................................................................-41-
7.9. Certain Amendments......................................................................-42-
7.10. Limitation on Certain Restrictions......................................................-42-
7.11. Fiscal Year.............................................................................-42-
7.12. Accounting Changes......................................................................-42-
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default.......................................................................-42-
8.2. Remedies: Termination of Commitments, Acceleration, etc.................................-44-
8.3. Remedies: Set-Off.......................................................................-45-
ARTICLE IX
THE AGENT
9.1. Appointment.............................................................................-45-
9.2. Nature of Duties........................................................................-45-
9.3. Exculpatory Provisions..................................................................-46-
9.4. Reliance by Agent.......................................................................-46-
9.5. Non-Reliance on Agent and Other Lenders.................................................-46-
9.6. Notice of Default.......................................................................-47-
9.7. Indemnification.........................................................................-47-
9.8. The Agent in its Individual Capacity....................................................-47-
9.9. Successor Agent.........................................................................-48-
ARTICLE X
MISCELLANEOUS
10.1. Fees and Expenses.......................................................................-48-
10.2. Indemnification. ......................................................................-49-
10.3. Governing Law; Consent to Jurisdiction..................................................-49-
10.4. Arbitration; Preservation and Limitation of Remedies....................................-50-
10.5. Notices.................................................................................-50-
-iii-
<PAGE>
10.6. Amendments, Waivers, etc................................................................-51-
10.7. Assignments, Participations.............................................................-52-
10.8. No Waiver...............................................................................-54-
10.9. Successors and Assigns..................................................................-54-
10.10. Survival................................................................................-54-
10.11. Severability............................................................................-54-
10.12. Construction............................................................................-54-
10.13. Confidentiality.........................................................................-55-
10.14. Counterparts; Effectiveness.............................................................-55-
10.15. The Borrowers as Co-Obligors............................................................-55-
10.16. Entire Agreement........................................................................-56-
-iv-
<PAGE>
EXHIBITS
Exhibit A Form of Note
Exhibit B-1 Form of Notice of Borrowing
Exhibit B-2 Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Subsidiary Guaranty
Exhibit F Form of Opinion of Arnold & Porter/Aloysius Lawn, Esq.
Exhibit G Form of Financial Condition Certificate
SCHEDULES
Schedule 4.7 Subsidiaries
Schedule 4.18 Material Contracts
Schedule 7.2 Existing Indebtedness
Schedule 7.3 Existing Liens
Schedule 7.5 Existing Investments
-v-
</TABLE>
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 11th day of July, 1997 (this
"Agreement"), is made among TEL-SAVE HOLDINGS, INC., a Delaware corporation with
its principal offices in New Hope, Pennsylvania ("Holdings"), TEL-SAVE, INC., a
Pennsylvania corporation with its principal offices in New Hope, Pennsylvania
("Tel-Save"), EMERGENCY TRANSPORT CORP., a Delaware corporation with its
principal offices in New Hope, Pennsylvania ("ETC" and collectively with
Holdings and Tel-Save, the "Borrowers"), the banks and financial institutions
listed on the signature pages hereto or that become parties hereto after the
date hereof (collectively, the "Lenders"), and FIRST UNION NATIONAL BANK ("First
Union"), as agent for the Lenders (in such capacity, the "Agent").
RECITALS
A. The Borrowers have requested that the Lenders make available to the
Borrowers a 364-day revolving credit facility in the aggregate principal amount
of up to $65,000,000. The Borrowers will use the proceeds of this facility for
working capital and general corporate purposes and for Permitted Acquisitions
(as hereinafter defined), all as more fully described herein.
B. The Lenders are willing to make available to the Borrowers the
credit facility described herein subject to and on the terms and conditions set
forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions, covenants
and agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. For purposes of this Agreement, in addition to the
terms defined elsewhere herein, the following terms shall have the meanings set
forth below (such meanings to be equally applicable to the singular and plural
forms thereof):
"Account Designation Letter" shall mean a letter from the Borrowers to
the Agent, duly completed and signed by an Authorized Officer of each of the
Borrowers and in form and substance satisfactory to the Agent, listing any one
or more accounts to which the Borrowers may from time to time request the Agent
to forward the proceeds of any Loans made hereunder.
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"Acquisition" shall mean any transaction or series of related
transactions, consummated on or after the date hereof, by which any Borrower
directly, or indirectly through one or more Borrower Subsidiaries, (i) acquires
any going business, or all or substantially all of the assets, of any Person,
whether through purchase of assets, merger or otherwise, (ii) acquires
securities or other ownership interests of any Person having at least a majority
of combined voting power of the then outstanding securities or other ownership
interests of such Person or (iii) acquires less than substantially all of the
assets of any Person for a purchase price of $1,000,000 or more.
"Adjusted Base Rate" shall mean, at any time with respect to any Base
Rate Loan, a rate per annum equal to the Base Rate as in effect at such time
minus the Applicable Margin Percentage for Base Rate Loans as in effect at such
time.
"Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR
Loan, a rate per annum equal to the LIBOR Rate as in effect at such time plus
the Applicable Margin Percentage for LIBOR Loans as in effect at such time.
"Affiliate" shall mean, as to any Person, each other Person that
directly, or indirectly through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person or is a director or
officer of such Person; provided that the term "Affiliate" shall not include any
"investment company" registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended. For purposes of this
definition, with respect to any Person "control" shall mean (i) the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise, or (ii) the beneficial ownership of
securities or other ownership interests of such Person having 10% or more of the
combined voting power of the then outstanding securities or other ownership
interests of such Person ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election of directors or
other governing body of such Person.
"Agent" shall mean First Union, in its capacity as Agent appointed
under Article IX, and its successors and permitted assigns in such capacity.
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
"Applicable Margin Percentage" shall mean, at any time from and after
the Closing Date, the applicable percentage (a) of 0.500%, to be subtracted from
the Base Rate pursuant to Section 2.8 for purposes of determining the Adjusted
Base Rate and, (b) of 0.875%, to be added to the LIBOR Rate pursuant to Section
2.8 for purposes of determining the Adjusted LIBOR Rate.
"Assignee" shall have the meaning given to such term in Section
10.7(a).
"Assignment and Acceptance" shall mean an Assignment and Acceptance
entered into between a Lender and an Assignee and accepted by the Agent and the
Borrowers, in substantially the form of Exhibit D.
"Authorized Officer" shall mean, with respect to any Borrower, any
officer of such Borrower duly authorized by resolution of the board of directors
of such Borrower to take such action on its behalf, and whose signature and
incumbency shall have been certified to the Agent by the secretary or an
assistant secretary of such Borrower.
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"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., as amended
from time to time, and any successor statute.
"Base Rate" shall mean the higher of (i) the per annum interest rate
publicly announced from time to time by First Union in Charlotte, North
Carolina, to be its prime rate (which may not necessarily be its best lending
rate), as adjusted to conform to changes as of the opening of business on the
date of any such change in such prime rate, and (ii) 0.5% per annum plus the
Federal Funds Rate, as adjusted to conform to changes as of the opening of
business on the date of any such change in the Federal Funds Rate.
"Base Rate Loan" shall mean, at any time, any Loan that bears interest
at such time at the Adjusted Base Rate.
"Borrower Affiliate" shall mean any Borrower or any subsidiary of a
Borrower.
"Borrowing" shall mean the incurrence by the Borrowers (including as a
result of conversions and continuations of outstanding Loans pursuant to Section
2.11) on a single date of a group of Loans of a single Type and, in the case of
LIBOR Loans, as to which a single Interest Period is in effect.
"Borrowing Date" shall mean, with respect to any Borrowing, the date
upon which such Borrowing is made.
"Business Day" shall mean (i) any day other than a Saturday or Sunday,
a legal holiday or a day on which commercial banks in Charlotte, North Carolina
are required by law to be closed and (ii) in respect of any determination
relevant to a LIBOR Loan, any such day that is also a day on which tradings are
conducted in the London interbank Eurodollar market.
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants, rights or
options to purchase any of the foregoing.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within 90 days from the date of acquisition, (ii) commercial paper
issued by any Person organized under the laws of the United States of America,
maturing within 90 days from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent thereof by
Standard & Poor's Ratings Services or at least P-1 or the equivalent thereof by
Moody's Investors Service, Inc., (iii) time deposits and certificates of deposit
maturing within 90 days from the date of issuance and issued by a bank or trust
company organized under the laws of the United States of America or any state
thereof that has combined capital and surplus of at least $500,000,000 and that
has (or is a subsidiary of a bank holding company that has) a long-term
unsecured debt rating of at least A or the equivalent thereof by Standard &
Poor's Ratings Services or at least A2 or the equivalent thereof by Moody's
Investors Service, Inc., (iv) repurchase obligations with a term not exceeding
seven (7) days with respect to underlying securities of the types described in
clause (i) above entered into with any bank or trust company meeting the
qualifications specified in clause (iii) above, and (v) money market funds at
least 95% of the assets of which are continuously invested in securities of the
type described in clause (i) above.
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"Closing" shall have the meaning given to such term in Section 3.1.
"Closing Date" shall mean the date referred to in Section 3.1.
"Commitment" shall mean, with respect to any Lender at any time, the
amount set forth opposite such Lender's name on its signature page hereto under
the caption "Commitment" or, if such Lender has entered into one or more
Assignment and Acceptances, the amount set forth for such Lender at such time in
the Register maintained by the Agent pursuant to Section 10.7(b) as such
Lender's "Commitment," as such amount may be reduced at or prior to such time
pursuant to the terms hereof.
"Compliance Certificate" shall mean a fully completed and duly executed
certificate in the form of Exhibit C, together with a Covenant Compliance
Worksheet.
"Consolidated Current Assets" shall mean, as of any date of
determination, all assets of the Borrowers and their Subsidiaries that would, in
accordance with GAAP, be classified on a consolidated balance sheet of the
Borrowers and their Subsidiaries as current assets as of such date.
"Consolidated Current Liabilities" shall mean, as of any date of
determination, all liabilities (without duplication) of the Borrowers and their
Subsidiaries that would, in accordance with GAAP, be classified on a
consolidated balance sheet of the Borrowers and their Subsidiaries as current
liabilities as of such date; provided, however, that Consolidated Current
Liabilities shall not include current maturities of any long-term Indebtedness.
"Consolidated Interest Expense" shall mean, for any period, the sum
(without duplication) of (i) total interest expense of the Borrowers and their
Subsidiaries for such period in respect of Funded Debt of the Borrowers and
their Subsidiaries (including, without limitation, all such interest expense
accrued or capitalized during such period, whether or not actually paid during
such period), determined on a consolidated basis in accordance with GAAP, (ii)
all net amounts payable under or in respect of Hedge Agreements, to the extent
paid or accrued by the Borrowers and their Subsidiaries during such period, and
(iii) all commitment fees and other ongoing fees in respect of Funded Debt
including the commitment fee provided for under Section 2.9) paid, accrued or
capitalized by the Borrowers and their Subsidiaries during such period.
"Consolidated Net Income" shall mean, for any period, net income (or
loss) for the Borrowers and their Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Contingent Obligation" shall mean, with respect to any Person, any
direct or indirect liability of such Person with respect to any Indebtedness,
liability or other obligation (the "primary obligation") of another Person (the
"primary obligor"), whether or not contingent, (a) to purchase, repurchase or
otherwise acquire such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or provide funds (i) for the payment
or discharge of any such primary obligation or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor in respect thereof to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss or failure or inability to perform in
respect thereof; provided, however, that, with respect to the Borrowers and
their Subsidiaries, the
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term Contingent Obligation shall not include endorsements for collection or
deposit in the ordinary course of business.
"Covenant Compliance Worksheet" shall mean a fully completed worksheet
in the form of Attachment A to Exhibit C.
"Credit Documents" shall mean this Agreement, the Notes, the Subsidiary
Guaranty, and all other agreements, instruments, documents and certificates now
or hereafter executed and delivered to the Agent or any Lender by or on behalf
of any Borrower Affiliate with respect to this Agreement and the transactions
contemplated hereby, in each case as amended, modified, supplemented or restated
from time to time.
"Current Ratio" shall mean, at any date of determination, the ratio of
(i) Consolidated Current Assets at such date of determination to (ii)
Consolidated Current Liabilities at such date of determination.
"Default" shall mean any event or condition that, with the passage of
time or giving of notice, or both, would constitute an Event of Default.
"Dollars" or "$" shall mean dollars of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or
business, whether or not incorporated) that would be deemed to be under "common
control" with, or a member of the same "controlled group" as, any Borrower
Affiliate, within the meaning of Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan or
Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan
or a Multiemployer Plan, (ii) a complete or partial withdrawal by any Borrower
or any ERISA Affiliate from a Multiemployer Plan that results in liability under
Section 4201 or 4204 of ERISA, or the receipt by any Borrower or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA, (iii) the distribution
by any Borrower or any ERISA Affiliate under Section 4041 or 4041A of ERISA of a
notice of intent to terminate any Plan or the taking of any action to terminate
any Plan, (iv) the commencement of proceedings by the PBGC under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by any Borrower or any ERISA Affiliate of a notice from any
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of
any Multiemployer Plan against any Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which is not dismissed within thirty (30) days, (vi) the
imposition upon any Borrower or any ERISA Affiliate of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section
4007 of ERISA, or the imposition or threatened imposition of any Lien upon any
assets of any Borrower or any ERISA Affiliate as a result of any alleged failure
to comply with the Internal Revenue Code or ERISA in respect of any Plan, (vii)
the engaging in or otherwise becoming liable for a nonexempt Prohibited
Transaction by any Borrower or any ERISA Affiliate, (viii) a violation of the
applicable requirements of Section 404 or
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405 of ERISA or the exclusive benefit rule under Section 401(a) of the Internal
Revenue Code by any fiduciary of any Plan for which any Borrower or any of its
ERISA Affiliates may be directly or indirectly liable or (ix) the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Internal
Revenue Code or Section 307 of ERISA, would result in the loss of tax-exempt
status of the trust of which such Plan is a part if any Borrower or any ERISA
Affiliate fails to timely provide security to such Plan in accordance with the
provisions of such sections.
"Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States or any state thereof and having total assets in
excess of $1,000,000,000, (ii) a commercial bank organized under the laws of any
other country that is a member of the Organization for Economic Cooperation and
Development or any successor thereto (the "OECD") or a political subdivision of
any such country and having total assets in excess of $1,000,000,000, provided
that such bank or other financial institution is acting through a branch or
agency located in the United States, in the country under the laws of which it
is organized or in another country that is also a member of the OECD, (iii) the
central bank of any country that is a member of the OECD, (iv) a finance
company, insurance company or other financial institution or fund that is
engaged in making, purchasing or otherwise investing in loans in the ordinary
course of its business and having total assets in excess of $500,000,000, (v)
any Affiliate of an existing Lender or (vi) any other Person approved by the
Required Lenders, which approval shall not be unreasonably withheld.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
accusations, allegations, notices of noncompliance or violation, investigations
(other than internal reports prepared by any Person in the ordinary course of
its business and not in response to any third party action or request of any
kind) or proceedings relating in any way to any actual or alleged violation of
or liability under any Environmental Law or relating to any permit issued, or
any approval given, under any such Environmental Law (collectively, "Claims"),
including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.
"Environmental Laws" shall mean any and all federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
rules of common law and orders of courts or Governmental Authorities, relating
to the protection of human health or occupational safety or the environment, now
or hereafter in effect and in each case as amended from time to time, including,
without limitation, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of Hazardous
Substances.
"Event of Default" shall have the meaning given to such term in
Section 8.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Federal Funds Rate" shall mean, for any period, a fluctuating per
annum interest rate (rounded upwards, if necessary, to the nearest 1/100 of one
percentage point) equal for each day during such period to the weighted average
of the rates on overnight federal funds transactions with
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members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such rate
is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
federal funds brokers of recognized standing selected by the Agent.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
"Financial Condition Certificate" shall mean a fully completed and duly
executed certificate, substantially in the form of Exhibit G.
"Financial Officer" shall mean, with respect to any Borrower, the chief
financial officer, vice president - finance, principal accounting officer,
controller or treasurer of such Borrower.
"Funded Debt" shall mean, with respect to any Person, all obligations
and Indebtedness for borrowed money of such Person, including but not limited to
capitalized leases, subordinated debt, convertible debentures, letters of
credit, obligations with respect to the deferred purchase price of goods or
services, and Contingent Obligations and guarantees in respect of any of the
foregoing.
"GAAP" shall mean generally accepted accounting principles, as set
forth in the statements, opinions and pronouncements of the Accounting
Principles Board, the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board, consistently applied and maintained, as in
effect from time to time (subject to the provisions of Section 1.2).
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any central bank thereof, any
municipal, local, city or county government, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Hazardous Substances" shall mean any substances or materials (i) that
are or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) the presence of
which require investigation or response under any Environmental Law, (iv) that
constitute a nuisance, trespass or health or safety hazard to Persons or
neighboring properties, (v) that consist of underground or aboveground storage
tanks, whether empty, filled or partially filled with any substance, or (vi)
that contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedge Agreement" shall mean any interest or foreign currency rate
swap, cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness and obligations of such Person for borrowed
money or in respect of loans or advances of any kind, (ii) all obligations of
such Person evidenced by notes, bonds, debentures or similar instruments, (iii)
all reimbursement obligations of such Person with respect to surety bonds,
letters of
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credit and bankers' acceptances (in each case, whether or not drawn or matured
and in the stated amount thereof), (iv) all obligations of such Person to pay
the deferred purchase price of property or services, (v) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person, (vi) all obligations of such
Person as lessee under leases that are or are required to be, in accordance with
GAAP, recorded as capital leases, to the extent such obligations are required to
be so recorded, (vii) the net termination obligations of such Person under any
Hedge Agreements, calculated as of any date as if such agreement or arrangement
were terminated as of such date, (viii) all Contingent Obligations of such
Person and (ix) all indebtedness referred to in clauses (i) through (viii) above
secured by any Lien on any property or asset owned or held by such Person
regardless of whether the indebtedness secured thereby shall have been assumed
by such Person or is nonrecourse to the credit of such Person.
"Interest Period" shall have the meaning given to such term in Section
2.10.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"LIBOR Loan" shall mean, at any time, any Loan that bears interest at
such time at the Adjusted LIBOR Rate.
"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising
part of the same Borrowing for any Interest Period, an interest rate per annum
obtained by dividing (i) (y) the applicable rate of interest for such Interest
Period appearing on Telerate Page 3750 (or any successor page) or (z) if no such
rate is available, the rate of interest determined by the Agent to be the rate
or the arithmetic mean of rates (rounded upward, if necessary, to the nearest
1/16 of one percentage point) at which Dollar deposits in immediately available
funds are offered by First Union to first-tier banks in the London interbank
Eurodollar market, in each case under (y) and (z) above at approximately 11:00
a.m., London time, two (2) Business Days prior to the first day of such Interest
Period for a period substantially equal to such Interest Period and in an amount
substantially equal to the amount of First Union's LIBOR Loan comprising part of
such Borrowing, by (ii) the amount equal to 1.00 minus the Reserve Requirement
(expressed as a decimal) for such Interest Period.
"Lender" shall mean each financial institution signatory hereto and
each other financial institution that becomes a "Lender" hereunder pursuant to
Section 10.7, and their respective successors and assigns.
"Lending Office" shall mean, with respect to any Lender, the office of
such Lender designated as its "Lending Office" on its signature page hereto or
in an Assignment and Acceptance, or such other office as may be otherwise
designated in writing from time to time by such Lender to the Borrower and the
Agent. A Lender may designate separate Lending Offices as provided in the
foregoing sentence for the purposes of making or maintaining different Types of
Loans, and, with respect to LIBOR Loans, such office may be a domestic or
foreign branch or Affiliate of such Lender.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
security interest, lien (statutory or otherwise), preference, priority, charge
or other encumbrance of any nature, whether voluntary or involuntary, including,
without limitation, the interest of any vendor or lessor under any conditional
sale agreement, title retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.
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"Loans" shall have the meaning given to such term in Section 2.1.
"Margin Stock" shall have the meaning given to such term in Regulation
U.
"Material Adverse Change" shall mean a material adverse change in (i)
the condition (financial or otherwise), operations, prospects, business,
properties or assets of the Borrowers and their Subsidiaries, taken as a whole
or (ii) the ability of any Borrower Affiliate to perform its obligations under
this Agreement or any of the other Credit Documents to which it is a party.
"Material Adverse Effect" shall mean a material adverse effect upon (i)
the condition (financial or otherwise), operations, prospects, business,
properties or assets of the Borrowers and their Subsidiaries, taken as a whole,
(ii) the ability of any Borrower Affiliate to perform its obligations under this
Agreement or any of the other Credit Documents to which it is a party or (iii)
the legality, validity or enforceability of this Agreement or any of the other
Credit Documents or the rights and remedies of the Agent and the Lenders
hereunder and thereunder.
"Material Contract" shall have the meaning given to such term in
Section 4.18.
"Maturity Date" shall mean July 9, 1998.
"Merrill Lynch Indebtedness" shall mean the Credit Facility, dated as
of February 26, 1997, between Holdings and Merrill Lynch International Bank
Limited.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which any Borrower or any ERISA
Affiliate makes, is making or is obligated to make contributions or has made or
been obligated to make contributions.
"Net Cash Proceeds" shall mean in the case of any asset disposition
permitted pursuant to Section 7.4, the aggregate amount of all cash payments
received by any Borrower Affiliate in connection with such asset disposition
less (x) reasonable fees and expenses incurred by any Borrower Affiliate in
connection therewith, (y) Indebtedness to the extent the amount thereof is
secured by a Lien on the property that is the subject of such asset disposition
and the transferee of (or holder of the Lien on) such property requires that
such Indebtedness be repaid as a condition to such asset disposition, and (z)
any income or transfer taxes paid or reasonably estimated by the Borrowers to be
payable by any Borrower Affiliate as a result of such asset disposition.
"Notes" shall mean the promissory notes of the Borrowers in
substantially the form of Exhibit A, together with any amendments, modifications
and supplements thereto, substitutions therefor and restatements thereof.
"Notice of Borrowing" shall have the meaning given to such term in
Section 2.2(b).
"Notice of Conversion/Continuation" shall have the meaning given to
such term in Section 2.11(b).
"Obligations" shall mean all principal of and interest (including, to
the greatest extent permitted by law, post-petition interest) on the Loans, and
all fees, expenses, indemnities and other obligations owing, due or payable at
any time by the Borrowers to the Agent, any Lender, or any other Person entitled
thereto, under this Agreement or any of the other Credit Documents.
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"Operating Cash Flow" shall mean, with respect to the Borrowers and
their Subsidiaries on a consolidated basis for any period, the aggregate of (a)
Consolidated Net Income for such period; plus (b) the sum of (i) Consolidated
Interest Expense, (ii) taxes paid by any Borrower Affiliate, (iii) depreciation
and amortization; (iv) the amount of any extraordinary losses recognized by any
Borrower Affiliate; and (v) (to the extent taken into account in the calculation
of Consolidated Net Income for such period) other non-cash expenses or charges
reducing income, all for such period, minus (c) the sum of, (i) the amount of
any interest and dividend income recognized by any Borrower Affiliate and (ii)
the amount of any extraordinary gains recognized by any Borrower Affiliate. For
purposes of this Agreement, calculations of Operating Cash Flow for a period
shall be adjusted with respect to entities or assets that are acquired or
disposed of during such period as permitted under pursuant to the terms of this
Agreement as if such transaction had occurred as of the first day of such period
(based upon a certificate in form and substance reasonably acceptable to the
Agent and signed by an Authorized Officer of each Borrower setting forth in
reasonable detail the Operating Cash Flow during such period of the entity or
assets acquired or disposed of and stating that the assumptions of the
Borrowers, in respect thereof, are reasonable).
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Participant" shall have the meaning given to such term in Section
10.7(d).
"Partition" shall mean an independent long distance and marketing
company or other direct marketing agent of any Borrower that resells and markets
the telecommunications products of any Borrower.
"Permitted Acquisition" shall mean (a) any Acquisition with respect to
which all of the following conditions are satisfied: (i) each business acquired
shall be within the permitted lines of business described in Section 7.8, (ii)
in the case of an Acquisition involving the acquisition of control of Capital
Stock of any Person, immediately after giving effect to such Acquisition such
Person (or the surviving Person, if the Acquisition is effected through a merger
or consolidation) shall be a Borrower or a Wholly Owned Subsidiary of a
Borrower, and (iii) all of the conditions and requirements of Sections 5.8 and
5.9 applicable to such Acquisition are satisfied; or (b) any other Acquisition
to which the Required Lenders (or the Agent on their behalf) shall have given
their prior written consent (which consent may be in their sole discretion and
may be given subject to such additional terms and conditions as the Required
Lenders shall establish) and with respect to which all of the conditions and
requirements set forth in this definition and in Section 5.8, and in or pursuant
to any such consent, have been satisfied or waived in writing by the Required
Lenders (or the Agent on their behalf). Without limiting the foregoing, an
Acquisition in any transaction or series of related transactions of less than
substantially all of the assets of any Person for a purchase price of less than
$1,000,000 shall be deemed to be a Permitted Acquisition.
"Permitted Liens" shall have the meaning given to such term in Section
7.3.
"Person" shall mean any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Plan" shall mean any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA that is subject to the provisions of Title IV
of ERISA (other than a Multiemployer Plan) and to which any Borrower or any
ERISA Affiliate may have any liability.
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"PNC Indebtedness" shall mean the $50,000,000 line of credit from PNC
Bank, N.A. to Holdings, dated March 27, 1996, as modified by the Modification
Agreement between Holdings and PNC Bank, N.A. dated February 24, 1997.
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a Department of Labor prohibited transaction individual or class
exemption or (ii) Section 4975(c) of the Internal Revenue Code that is not
exempt by reason of Section 4975(c)(2) or 4975(d) of the Internal Revenue Code.
"Register" shall have the meaning given to such term in Section
10.7(b).
"Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.
"Reportable Event" shall mean (i) any "reportable event" within the
meaning of Section 4043(c) of ERISA for which the 30-day notice under Section
4043(a) of ERISA has not been waived by the PBGC (including any failure to meet
the minimum funding standard of, or timely make any required installment under,
Section 412 of the Internal Revenue Code or Section 302 of ERISA, regardless of
the issuance of any waivers in accordance with Section 412(d) of the Internal
Revenue Code), (ii) any such "reportable event" subject to advance notice to the
PBGC under Section 4043(b)(3) of ERISA, (iii) any application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Internal Revenue Code, and (iv) a cessation of operations described in Section
4062(e) of ERISA.
"Required Lenders" shall mean the Lenders holding outstanding Loans and
Commitments (or, after the termination of the Commitments and outstanding Loans)
representing more than sixty-six and two-thirds percent (66-2/3%) of the
aggregate at such time of all outstanding Loans and Commitments (or, after the
termination of the Commitments, the aggregate at such time of all outstanding
Loans).
"Requirement of Law" shall mean, with respect to any Person, the
charter, articles or certificate of organization or incorporation and bylaws or
other organizational or governing documents of such Person, and any statute,
law, treaty, rule, regulation, order, decree, writ, injunction or determination
of any arbitrator or court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject or otherwise pertaining to any or
all of the transactions contemplated by this Agreement and the other Credit
Documents.
"Reserve Requirement" shall mean, with respect to any Interest Period,
the reserve percentage (expressed as a decimal) in effect from time to time
during such Interest Period, as provided by the Federal Reserve Board, applied
for determining the maximum reserve requirements (including, without limitation,
basic, supplemental, marginal and emergency reserves) applicable to First Union
under Regulation D with respect to "Eurocurrency liabilities" within the meaning
of Regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding Capital
Stock having ordinary voting power to elect a majority of the board of
directors, board of managers or other governing body of such Person, is at the
time, directly or indirectly, owned or controlled by such Person and one or more
of its other Subsidiaries or a combination thereof (irrespective of whether, at
the time, securities of any other
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class or classes of any such corporation or other Person shall or might have
voting power by reason of the happening of any contingency). When used without
reference to a parent entity, the term "Subsidiary" shall be deemed to refer to
a Subsidiary of one of the Borrowers.
"Subsidiary Guarantor" shall mean any Subsidiary that is a guarantor
under the Subsidiary Guaranty.
"Subsidiary Guaranty" shall mean a guaranty agreement made by the
Subsidiary Guarantors in favor of the Agent and the Lenders, in substantially
the form of Exhibit E, as amended, modified or supplemented from time to time.
"Termination Date" shall mean the Maturity Date or such earlier date of
termination of the Commitments pursuant to Section 2.5 or Section 8.2.
"Total Funded Debt" shall mean, at any date of determination, the
aggregate (without duplication) of all Funded Debt of the Borrowers and their
Subsidiaries as of such date, determined on a consolidated basis in accordance
with GAAP. For purposes of determining Funded Debt at any date, each Contingent
Obligation of any Borrower Affiliate required to be included in such
determination shall be valued at the maximum aggregate principal amount (whether
or not drawn or outstanding) of the Indebtedness that is the corresponding
"primary obligation" (as such term is defined in the definition of Contingent
Obligation) as of such date.
"Total Leverage Ratio" shall mean, at any date of determination, the
ratio of (a) Total Funded Debt on such date to (b) Operating Cash Flow for the
two most recently completed fiscal quarters of the Borrowers multiplied by two.
"Type" shall have the meaning given to such term in Section 2.2(a).
"Unfunded Pension Liability" shall mean, with respect to any Plan or
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.
"Unutilized Commitment" shall mean, with respect to any Lender at any
time, such Lender's Commitment at such time less the aggregate principal amount
of all Loans made by such Lender that are outstanding at such time.
"Wholly Owned" shall mean, with respect to any Subsidiary of any
Person, that 100% of the outstanding Capital Stock of such Subsidiary is owned,
directly or indirectly, by such Person.
1.2. Accounting Terms. Except as specifically provided otherwise in
this Agreement, all accounting terms used herein that are not specifically
defined shall have the meanings customarily given them in accordance with GAAP.
Notwithstanding anything to the contrary in this Agreement, for purposes of
calculation of the financial covenants set forth in Article VI, all accounting
determinations and computations hereunder shall be made in accordance with GAAP
as in effect as of the date of this Agreement applied on a basis consistent with
the application used in preparing the most recent financial statements of the
Borrowers referred to in Section 4.11(a). In the event that any changes in GAAP
after such date are required to be applied to the Borrowers and would affect the
computation of the financial covenants contained in Article VI, such changes
shall be followed
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only from and after the date this Agreement shall have been amended to take into
account any such changes.
1.3. Other Terms; Construction; Time. Unless otherwise specified or
unless the context otherwise requires, all references herein to sections,
annexes, schedules and exhibits are references to sections, annexes, schedules
and exhibits in and to this Agreement, and all terms defined in this Agreement
shall have the defined meanings when used in any other Credit Document or any
certificate or other document made or delivered pursuant hereto. All references
to time in any Credit Document shall refer to Charlotte, North Carolina time.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. Commitments. Each Lender severally agrees, subject to and on the
terms and conditions of this Agreement, to make loans (each, a "Loan," and
collectively, the "Loans") to the Borrowers, from time to time on any Business
Day during the period from and including the Closing Date to but not including
the Termination Date, in an aggregate principal amount at any time outstanding
not greater than the excess, if any, of its Commitment at such time over the
amount of any Loans made by such Lender then outstanding; provided that no
Borrowing of Loans shall be made if, immediately after giving effect thereto,
the sum of the aggregate principal amount of Loans outstanding at such time
would exceed the aggregate Commitments at such time. Subject to and on the terms
and conditions of this Agreement, the Borrowers may borrow, repay and reborrow
Loans.
2.2. Borrowings. (a) The Loans shall, at the option of the Borrowers
and subject to the terms and conditions of this Agreement, be either Base Rate
Loans or LIBOR Loans (each, a "Type" of Loan); provided that all Loans
comprising the same Borrowing shall, unless otherwise specifically provided
herein, be of the same Type.
(b) In order to make a Borrowing (other than Borrowings involving
continuations or conversions of outstanding Loans, which shall be made pursuant
to Section 2.11), an Authorized Officer of each of the Borrowers will give the
Agent written notice not later than 11:00 a.m., three (3) Business Days prior to
each Borrowing to be comprised of LIBOR Loans and on the Borrowing Date (as
hereinafter defined) for each Borrowing to be comprised of Base Rate Loans;
provided, however, that requests for the Borrowing of any Loans to be made on
the Closing Date may, at the discretion of the Agent, be given later than the
times specified hereinabove. Each such notice (each, a "Notice of Borrowing")
shall be irrevocable, shall be given in the form of Exhibit B-1 and shall
specify (1) the aggregate principal amount and initial Type of the Loans to be
made pursuant to such Borrowing, (2) in the case of a Borrowing of LIBOR Loans,
the initial Interest Period to be applicable thereto, and (3) the requested
Borrowing Date, which shall be a Business Day. Upon its receipt of a Notice of
Borrowing, the Agent will promptly notify each Lender of the proposed Borrowing.
Notwithstanding anything to the contrary contained herein:
(i) the aggregate principal amount of each Borrowing
comprised of Base Rate Loans shall not be less than $1,000,000 or, if
greater, an integral multiple of $500,000 in excess thereof (or, if
less, in the amount of the aggregate Unutilized Commitments), and the
aggregate principal amount of each Borrowing comprised of LIBOR Loans
shall not be less than $5,000,000 or, if greater, an integral multiple
of $1,000,000 in excess thereof;
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(ii) if the Borrowers shall have failed to designate the Type
of Loans comprising a Borrowing, the Borrowers shall be deemed to have
requested a Borrowing comprised of Base Rate Loans; and
(iii) if the Borrowers shall have failed to select the
duration of the Interest Period to be applicable to any Borrowing of
LIBOR Loans, then the Borrowers shall be deemed to have selected an
Interest Period with a duration of one month.
(c) Not later than 1:00 p.m., on the requested Borrowing Date, each
Lender will make available to the Agent at its office referred to in Section
10.5 (or at such other location as the Agent may designate) an amount, in
Dollars and in immediately available funds, equal to the amount of the Loan to
be made by such Lender. To the extent the Lenders have made such amounts
available to the Agent as provided hereinabove, the Agent will make the
aggregate of such amounts available to the Borrower in accordance with Section
2.3(a) and in like funds as received by the Agent.
2.3. Disbursements; Funding Reliance; Domicile of Loans. (a) The
Borrowers hereby authorize the Agent to disburse the proceeds of each Borrowing
in accordance with the terms of any written instructions from an Authorized
Officer of each Borrower; provided that the Agent shall not be obligated under
any circumstances to forward amounts to any account not listed in an Account
Designation Letter. The Borrowers may at any time deliver to the Agent an
Account Designation Letter listing any additional accounts or deleting any
accounts listed in a previous Account Designation Letter.
(b) Unless the Agent has received, prior to 1:00 p.m. on the relevant
Borrowing Date, written notice from a Lender that such Lender will not make
available to the Agent such Lender's ratable portion of the relevant Borrowing,
the Agent may assume that such Lender has made such portion available to the
Agent in immediately available funds on such Borrowing Date in accordance with
the applicable provisions of Section 2.2, and the Agent may, in reliance upon
such assumption, but shall not be obligated to, make a corresponding amount
available to the Borrowers on such Borrowing Date. If and to the extent that
such Lender shall not have made such portion available to the Agent, and the
Agent shall have made such corresponding amount available to the Borrowers, such
Lender, on the one hand, and the Borrowers, on the other, severally agree to pay
to the Agent forthwith on demand such corresponding amount, together with
interest thereon for each day from the date such amount is made available to the
Borrowers until the date such amount is repaid to the Agent, (i) in the case of
such Lender, at the Federal Funds Rate, and (ii) in the case of the Borrowers,
at the rate of interest applicable at such time to the Type of Loans comprising
such Borrowing, as determined under the provisions of Section 2.8. If such
Lender shall repay to the Agent such corresponding amount, such amount shall
constitute such Lender's Loan as part of such Borrowing for purposes of this
Agreement. The failure of any Lender to make any Loan required to be made by it
as part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Loan as part of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Loan to be
made by such other Lender as part of any Borrowing.
(c) Each Lender may, at its option, make and maintain any Loan at, to
or for the account of any of its Lending Offices; provided that any exercise of
such option shall not affect the obligation of the Borrowers to repay such Loans
to or for the account of such Lender in accordance with the terms of this
Agreement.
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2.4. Notes. (a) The Loans made by each Lender shall be evidenced by a
Note appropriately completed in substantially the form of Exhibit A.
(b) Each Note issued to a Lender shall (i) be executed by the
Borrowers, (ii) be payable to the order of such Lender, (iii) be dated as of the
Closing Date, (iv) be in a stated principal amount equal to such Lender's
Commitment, (v) bear interest in accordance with the provisions of Section 2.8,
as the same may be applicable from time to time to the Loans made by such
Lender, and (vi) be entitled to all of the benefits of this Agreement and the
other Credit Documents and subject to the provisions hereof and thereof.
(c) Each Lender will record on its internal records the amount and Type
of each Loan made by it and each payment received by it in respect thereof and
will, in the event of any transfer of any of its Notes, either endorse on the
reverse side thereof or on a schedule attached thereto (or any continuation
thereof) the outstanding principal amount and Type of the Loans evidenced
thereby as of the date of transfer or provide such information on a schedule to
the Assignment and Acceptance relating to such transfer; provided, however, that
the failure of any Lender to make any such recordation or provide any such
information, or any error therein, shall not affect the Borrowers' obligations
under this Agreement or the Notes.
2.5. Termination and Reduction of Commitments. (a) The Commitments
shall be automatically and permanently terminated on the Maturity Date (or on
July 11, 1997, but only if the Closing Date shall not have occurred on or prior
to such date), unless sooner terminated pursuant to any other provision of this
Section 2.5 or Section 8.2.
(b) At any time and from time to time after the date hereof, upon not
less than five (5) Business Days' prior written notice to the Agent, executed by
an Authorized Officer of each Borrower, the Borrowers may terminate in whole or
reduce in part the aggregate Unutilized Commitments; provided that any such
partial reduction shall be in an aggregate amount of not less than $5,000,000
or, if greater, an integral multiple of $1,000,000 in excess thereof. The amount
of any termination or reduction made under this subsection (c) may not
thereafter be reinstated.
(c) Each reduction of the Commitments pursuant to this Section 2.5
shall be applied ratably among the Lenders according to their respective
Commitments.
2.6. Mandatory Payments and Prepayments. (a) Except to the extent due
or paid sooner pursuant to the provisions of this Agreement, the aggregate
outstanding principal of the Loans shall be due and payable in full on the
Maturity Date.
(b) In the event that, at any time, the aggregate principal amount of
Loans outstanding at such time shall exceed the aggregate Commitments at such
time (after giving effect to any concurrent termination or reduction thereof),
the Borrowers will immediately prepay the outstanding principal amount of the
Loans in the amount of such excess.
(c) Each payment or prepayment of a LIBOR Loan made pursuant to the
provisions of this Section 2.6 on a day other than the last day of the Interest
Period applicable thereto shall be made together with all amounts required under
Section 2.18 to be paid as a consequence thereof.
(d) In the event that the Net Cash Proceeds of any sale or disposition
of assets permitted pursuant to Section 7.4 are not reinvested in similar assets
within 180 days of such sale or
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disposition, the Borrowers will immediately prepay the outstanding principal
amount of the Loans in the amount of such non-reinvested Net Cash Proceeds.
2.7. Voluntary Prepayments. (a) At any time and from time to time, the
Borrowers shall have the right to prepay the Loans, in whole or in part, without
premium or penalty (except as provided in clause (iii) below), upon written
notice executed by an Authorized Officer of each Borrower given to the Agent not
later than 11:00 a.m., three (3) Business Days prior to each intended prepayment
of LIBOR Loans and one (1) Business Day prior to each intended prepayment of
Base Rate Loans; provided that (i) each partial prepayment shall be in an
aggregate principal amount of not less than $1,000,000 or, if greater, an
integral multiple of $500,000 in excess thereof, (ii) no partial prepayment of
LIBOR Loans made pursuant to any single Borrowing shall reduce the aggregate
outstanding principal amount of the remaining LIBOR Loans under such Borrowing
to less than $5,000,000 or to any greater amount not an integral multiple of
$1,000,000 in excess thereof, and (iii) unless made together with all amounts
required under Section 2.18 to be paid as a consequence of such prepayment, a
prepayment of a LIBOR Loan may be made only on the last day of the Interest
Period applicable thereto. Each such notice shall specify the proposed date of
such prepayment and the aggregate principal amount and Type of the Loans to be
prepaid (and, in the case of LIBOR Loans, the Interest Period of the Borrowing
pursuant to which made), and shall be irrevocable and shall bind the Borrowers
to make such prepayment on the terms specified therein. Loans prepaid pursuant
to this subsection (a) may be reborrowed, subject to the terms and conditions of
this Agreement.
(b) Each prepayment of the Loans made pursuant to subsection (a) above
shall be applied ratably among the Lenders holding the Loans being prepaid, in
proportion to the principal amount held by each.
2.8. Interest. (a) The Borrowers will pay interest in respect of the
unpaid principal amount of each Loan, from the date of Borrowing thereof until
such principal amount shall be paid in full, (i) at the Adjusted Base Rate, as
in effect from time to time during such periods as such Loan is a Base Rate
Loan, and (ii) at the Adjusted LIBOR Rate, as in effect from time to time during
such periods as such Loan is a LIBOR Loan.
(b) Upon the occurrence and during the continuance of an Event of
Default as the result of failure by the Borrowers to pay any principal of or
interest on any Loan, any fees or other amount hereunder when due (whether at
maturity, pursuant to acceleration or otherwise), and (at the election of the
Required Lenders) upon the occurrence and during the continuance of any Event of
Default as the result of failure by any Borrower to observe, perform or comply
with any condition, covenant or agreement contained in Article VI or Article
VII, all outstanding principal amounts of the Loans and, to the greatest extent
permitted by law, all interest accrued on the Loans and all other accrued and
outstanding fees and other amounts hereunder, shall bear interest at a rate per
annum equal to the interest rate applicable from time to time thereafter to such
Loans (whether the Adjusted Base Rate or the Adjusted LIBOR Rate) plus 2% (or,
in the case of fees and other amounts, at the Adjusted Base Rate plus 2%), and,
in each case, such default interest shall be payable on demand. To the greatest
extent permitted by law, interest shall continue to accrue after the filing by
or against any Borrower of any petition seeking any relief in bankruptcy or
under any law pertaining to insolvency or debtor relief.
(c) Accrued (and theretofore unpaid) interest shall be payable as
follows:
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(i) in respect of each Base Rate Loan (including any Base
Rate Loan or portion thereof paid or prepaid pursuant to the provisions
of Section 2.6, except as provided hereinbelow), in arrears on the last
Business Day of each calendar quarter, beginning with the first such
day to occur after the Closing Date; provided, that in the event the
Loans are repaid or prepaid in full and the Commitments have been
terminated, then accrued interest in respect of all Base Rate Loans
shall be payable together with such repayment or prepayment on the date
thereof;
(ii) in respect of each LIBOR Loan (including any LIBOR Loan
or portion thereof paid or prepaid pursuant to the provisions of
Section 2.6, except as provided hereinbelow), in arrears (y) on the
last Business Day of the Interest Period applicable thereto (subject to
the provisions of clause (iv) in Section 2.10) and (z) in addition, in
the case of a LIBOR Loan with an Interest Period having a duration of
six months, on the date three months after the first day of such
Interest Period; provided, that in the event all LIBOR Loans made
pursuant to a single Borrowing are repaid or prepaid in full, then
accrued interest in respect of such LIBOR Loans shall be payable
together with such repayment or prepayment on the date thereof; and
(iii) in respect of any Loan, at maturity (whether pursuant to
acceleration or otherwise) and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Credit Document
shall be deemed to establish or require the payment of interest to any Lender at
a rate in excess of the maximum rate permitted by applicable law. If the amount
of interest payable for the account of any Lender on any interest payment date
would exceed the maximum amount permitted by applicable law to be charged by
such Lender, the amount of interest payable for its account on such interest
payment date shall be automatically reduced to such maximum permissible amount.
In the event of any such reduction affecting any Lender, if from time to time
thereafter the amount of interest payable for the account of such Lender on any
interest payment date would be less than the maximum amount permitted by
applicable law to be charged by such Lender, then the amount of interest payable
for its account on such subsequent interest payment date shall be automatically
increased to such maximum permissible amount; provided that at no time shall the
aggregate amount by which interest paid for the account of any Lender has been
increased pursuant to this sentence exceed the aggregate amount by which
interest paid for its account has theretofore been reduced pursuant to the
previous sentence.
(e) The Agent shall promptly notify the Borrowers and the Lenders upon
determining the interest rate for each Borrowing of LIBOR Loans after its
receipt of the relevant Notice of Borrowing or Notice of
Conversion/Continuation, and upon each change in the Base Rate; provided,
however, that the failure of the Agent to provide the Borrowers or the Lenders
with any such notice shall neither affect any obligations of the Borrowers or
the Lenders hereunder nor result in any liability on the part of the Agent to
any Borrower or any Lender. Each such determination (including each
determination of the Reserve Requirement) shall, absent manifest error, be
conclusive and binding on all parties hereto.
2.9. Fees. The Borrowers jointly and severally agree to pay to the
Agent, for the account of each Lender, a commitment fee for each calendar
quarter (or portion thereof) for the period from the date of this Agreement to
the Termination Date, at a per annum rate of 0.125%, on such Lender's ratable
share (based on the proportion that its Commitment bears to the aggregate
Commitments) of the average daily aggregate Unutilized Commitments, payable in
arrears (i) on the last Business Day
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of each calendar quarter, beginning with the first such day to occur after the
Closing Date, and (ii) on the Termination Date.
2.10. Interest Periods. Concurrently with the giving of a Notice of
Borrowing or Notice of Conversion/Continuation in respect of any Borrowing
comprised of Base Rate Loans to be converted into, or LIBOR Loans to be
continued as, LIBOR Loans, the Borrowers shall have the right to elect, pursuant
to such notice, the interest period (each, an "Interest Period") to be
applicable to such LIBOR Loans, which Interest Period shall, at the option of
the Borrowers, be a one-, three- or six-month period; provided, however, that:
(i) all LIBOR Loans comprising a single Borrowing shall at
all times have the same Interest Period;
(ii) the initial Interest Period for any LIBOR Loan shall
commence on the date of the Borrowing of such LIBOR Loan (including the
date of any continuation of, or conversion into, such LIBOR Loan), and
each successive Interest Period applicable to such LIBOR Loan shall
commence on the day on which the next preceding Interest Period
applicable thereto expires;
(iii) LIBOR Loans may not be outstanding under more than three
(3) separate Interest Periods at any one time (for which purpose
Interest Periods shall be deemed to be separate even if they are
coterminous);
(iv) if any Interest Period otherwise would expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day unless such next succeeding Business Day
falls in another calendar month, in which case such Interest Period
shall expire on the next preceding Business Day;
(v) the Borrowers may not select any Interest Period that
begins prior to the Closing Date or that expires after the Maturity
Date;
(vi) if any Interest Period begins on a day for which there
is no numerically corresponding day in the calendar month during which
such Interest Period would otherwise expire, such Interest Period shall
expire on the last Business Day of such calendar month; and
(vii) if, upon the expiration of any Interest Period
applicable to a Borrowing of LIBOR Loans, the Borrowers shall have
failed to elect a new Interest Period to be applicable to such LIBOR
Loans, then the Borrowers shall be deemed to have elected to convert
such LIBOR Loans into Base Rate Loans as of the expiration of the then
current Interest Period applicable thereto.
2.11. Conversions and Continuations. (a) The Borrowers shall have the
right, on any Business Day occurring on or after the Closing Date, to elect (i)
to convert all or a portion of the outstanding principal amount of any Base Rate
Loans into LIBOR Loans, or to convert any LIBOR Loans the Interest Periods for
which end on the same day into Base Rate Loans, or (ii) to continue all or a
portion of the outstanding principal amount of any LIBOR Loans the Interest
Periods for which end on the same day for an additional Interest Period;
provided that (w) any such conversion of LIBOR Loans into Base Rate Loans shall
involve an aggregate principal amount of not less than $1,000,000 or, if
greater, an integral multiple of $500,000 in excess thereof; any such conversion
of Base Rate Loans into, or continuation of, LIBOR Loans shall involve an
aggregate principal amount
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of not less than $5,000,000 or, if greater, an integral multiple of $1,000,000
in excess thereof; and no partial conversion of LIBOR Loans made pursuant to a
single Borrowing shall reduce the outstanding principal amount of such LIBOR
Loans to less than $5,000,000 or to any greater amount not an integral multiple
of $1,000,000 in excess thereof, (x) except as otherwise provided in Section
2.16(d), LIBOR Loans may be converted into Base Rate Loans only on the last day
of the Interest Period applicable thereto (and, in any event, if a LIBOR Loan is
converted into a Base Rate Loan on any day other than the last day of the
Interest Period applicable thereto, the Borrowers will pay, upon such
conversion, all amounts required under Section 2.18 to be paid as a consequence
thereof), and (y) no conversion of Base Rate Loans into LIBOR Loans or
continuation of LIBOR Loans shall be permitted during the continuance of a
Default or Event of Default.
(b) The Borrowers shall make each such election by giving the Agent
written notice, executed by an Authorized Officer of each Borrower, not later
than 11:00 a.m., three (3) Business Days prior to the intended effective date of
any conversion of Base Rate Loans into, or continuation of, LIBOR Loans and one
(1) Business Day prior to the intended effective date of any conversion of LIBOR
Loans into Base Rate Loans. Each such notice (each, a "Notice of
Conversion/Continuation") shall be irrevocable, shall be given in the form of
Exhibit B-2 and shall specify (x) the date of such conversion or continuation
(which shall be a Business Day), (y) in the case of a conversion into, or a
continuation of, LIBOR Loans, the Interest Period to be applicable thereto, and
(z) the aggregate amount and Type of the Loans being converted or continued.
Upon the receipt of a Notice of Conversion/Continuation, the Agent will promptly
notify each Lender of the proposed conversion or continuation. In the event that
the Borrowers shall fail to deliver a Notice of Conversion/Continuation as
provided herein with respect to any outstanding LIBOR Loans, such LIBOR Loans
shall automatically be converted to Base Rate Loans upon the expiration of the
then current Interest Period applicable thereto (unless repaid pursuant to the
terms hereof).
2.12. Method of Payments; Computations. (a) All payments by the
Borrowers hereunder shall be made without setoff, counterclaim or other defense,
in Dollars and in immediately available funds to the Agent, for the account of
the Lenders entitled to such payment (except as otherwise expressly provided
herein as to payments required to be made directly to the Lenders) at its office
referred to in Section 10.5, prior to 12:00 noon on the date payment is due. Any
payment made as required hereinabove, but after 12:00 noon, shall be deemed to
have been made on the next succeeding Business Day. If any payment falls due on
a day that is not a Business Day, then such due date shall be extended to the
next succeeding Business Day (except that in the case of LIBOR Loans to which
the provisions of clause (iv) in Section 2.10 are applicable, such due date
shall be the next preceding Business Day), and such extension of time shall then
be included in the computation of payment of interest, fees or other applicable
amounts.
(b) The Agent will distribute to the Lenders like amounts relating to
payments made to the Agent for the account of the Lenders as follows: (i) if the
payment is received by 12:00 noon, in immediately available funds, the Agent
will make available to each relevant Lender on the same date, by wire transfer
of immediately available funds, such Lender's ratable share of such payment
(based on the percentage that the amount of the relevant payment owing to such
Lender bears to the total amount of such payment owing to all of the relevant
Lenders), and (ii) if such payment is received after 12:00 noon, or in other
than immediately available funds, the Agent will make available to each such
Lender its ratable share of such payment by wire transfer of immediately
available funds on the next succeeding Business Day (or in the case of
uncollected funds, as soon as practicable after collected). If the Agent shall
not have made a required distribution to the appropriate Lenders as required
hereinabove after receiving a payment for the account of such Lenders, the Agent
will pay to each such Lender, on demand, its ratable share of such payment with
interest thereon at the Federal
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Funds Rate for each day from the date such amount was required to be disbursed
by the Agent until the date repaid to such Lender.
(c) Unless the Agent shall have received written notice, executed by an
Authorized Officer of each Borrower, prior to the date on which any payment is
due to any Lender hereunder that such payment will not be made in full, the
Agent may assume that the Borrowers have made such payment in full to the Agent
on such date, and the Agent may, in reliance on such assumption, but shall not
be obligated to, cause to be distributed to such Lender on such due date an
amount equal to the amount then due to such Lender. If and to the extent the
Borrowers shall not have so made such payment in full to the Agent, and without
limiting the obligation of the Borrowers to make such payment in accordance with
the terms hereof, such Lender shall repay to the Agent forthwith on demand such
amount so distributed to such Lender, together with interest thereon for each
day from the date such amount is so distributed to such Lender until the date
repaid to the Agent, at the Federal Funds Rate.
(d) Each Lender for whose account any payment is to be made hereunder
may, but shall not be obligated to, debit the amount of any such payment not
made as and when required hereunder to any ordinary deposit account of the
Borrowers with such Lender (with prompt notice to the Agent and the Borrowers);
provided, however, that the failure to give such notice shall not affect the
validity of such debit by such Lender.
(e) All computations of interest and fees hereunder (including
computations of the Reserve Requirement) shall be made on the basis of a year
consisting of (i) in the case of Base Rate Loans, 365 or 366 days, as the case
may be, and (ii) in all other instances, 360 days, and the actual number of days
(including the first day, but excluding the last day) elapsed.
2.13. Recovery of Payments. (a) The Borrowers agree that to the extent
any Borrower makes a payment or payments to or for the account of the Agent or
any Lender, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy,
insolvency or similar state or federal law, common law or equitable cause, then,
to the extent of such payment or repayment, the Obligation intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been received.
(b) If any amounts distributed by the Agent to any Lender are
subsequently returned or repaid by the Agent to the Borrowers or their
representatives or successors in interest, whether by court order or by
settlement approved by the Lender in question, such Lender will, promptly upon
receipt of notice thereof from the Agent, pay the Agent such amount. If any such
amounts are recovered by the Agent from the Borrowers or their representatives
or successors in interest, the Agent will redistribute such amounts to the
Lenders on the same basis as such amounts were originally distributed.
2.14. Use of Proceeds. The proceeds of the Loans shall be used for
working capital and general corporate purposes, for Permitted Acquisitions and
in accordance with the terms and provisions of this Agreement.
2.15. Pro Rata Treatment. (a) All fundings, continuations and
conversions of Loans shall be made by the Lenders pro rata on the basis of their
respective Commitments (in the case of the initial funding of Loans pursuant to
Section 2.2) or on the basis of their respective outstanding Loans (in the case
of continuations and conversions of Loans pursuant to Section 2.11, and
additionally in
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all cases in the event the Commitments have expired or have been terminated), as
the case may be from time to time. All payments on account of principal of or
interest on any Loans, fees or any other Obligations owing to or for the account
of any one or more Lenders shall be apportioned ratably among such Lenders in
proportion to the amounts of such principal, interest, fees or other Obligations
owed to them respectively.
(b) Each Lender agrees that if it shall receive any amount hereunder
(whether by voluntary payment, exercise of the right of setoff or banker's lien,
counterclaim or cross action, or otherwise, other than pursuant to Section 10.7)
applicable to the payment of any of the Obligations that exceeds its ratable
share (according to the proportion of (i) the amount of such Obligations due and
payable to such Lender at such time to (ii) the aggregate amount of such
Obligations due and payable to all Lenders at such time) of payments on account
of such Obligations then or therewith obtained by all the Lenders to which such
payments are required to have been made, such Lender shall forthwith purchase
from the other Lenders such participations in such Obligations as shall be
necessary to cause such purchasing Lender to share the excess payment or other
recovery ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each such other Lender shall be rescinded and each
such other Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery, together with an amount equal to such other Lender's
ratable share (according to the proportion of (i) the amount of such other
Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. Each Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to the provisions of this subsection may, to the fullest extent
permitted by law, exercise any and all rights of payment (including, without
limitation, setoff, banker's lien or counterclaim) with respect to such
participation as fully as if such participant were a direct creditor of such
Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or similar law, any Lender receives a secured claim in
lieu of a setoff to which this subsection applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this subsection
to share in the benefits of any recovery on such secured claim.
2.16. Increased Costs; Change in Circumstances; Illegality; etc. (a)
If, at any time after the date hereof and from time to time, the introduction of
or any change in any applicable law, rule or regulation or in the interpretation
or administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender with any
guideline or request from any such Governmental Authority (whether or not having
the force of law), shall (i) subject such Lender to any tax or other charge, or
change the basis of taxation of payments to such Lender, in respect of any of
its LIBOR Loans or any other amounts payable hereunder or its obligation to
make, fund or maintain any LIBOR Loans (other than any change in the rate or
basis of tax on the overall net income of such Lender or its applicable Lending
Office), (ii) impose, modify or deem applicable any reserve, special deposit or
similar requirement (other than as a result of any change in the Reserve
Requirement) against assets of, deposits with or for the account of, or credit
extended by, such Lender or its applicable Lending Office, or (iii) impose on
such Lender or its applicable Lending Office any other condition, and the result
of any of the foregoing shall be to increase the cost to such Lender of making
or maintaining any LIBOR Loans or to reduce the amount of any sum received or
receivable by such Lender hereunder, the Borrowers will, promptly upon written
demand therefor by such Lender, pay to such Lender such additional amounts as
shall compensate such Lender for such increase in costs or reduction in return.
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(b) If, at any time after the date hereof and from time to time, any
Lender shall have reasonably determined that the introduction of or any change
in any applicable law, rule or regulation regarding capital adequacy or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof, or compliance by such Lender
with any guideline or request from any such Governmental Authority (whether or
not having the force of law), has or would have the effect, as a consequence of
such Lender's Commitment or Loans, of reducing the rate of return on the capital
of such Lender or any Person controlling such Lender to a level below that which
such Lender or controlling Person could have achieved but for such introduction,
change or compliance (taking into account such Lender's or controlling Person's
policies with respect to capital adequacy), the Borrowers will, promptly upon
written demand therefor by such Lender therefor, pay to such Lender such
additional amounts as will compensate such Lender or controlling Person for such
reduction in return.
(c) If, on or prior to the first day of any Interest Period, (y) the
Agent shall have determined that adequate and reasonable means do not exist for
ascertaining the applicable LIBOR Rate for such Interest Period or (z) the Agent
shall have received written notice from the Required Lenders of their
determination that the rate of interest referred to in the definition of "LIBOR
Rate" upon the basis of which the Adjusted LIBOR Rate for LIBOR Loans for such
Interest Period is to be determined will not adequately and fairly reflect the
cost to such Lenders of making or maintaining LIBOR Loans during such Interest
Period, the Agent will forthwith so notify the Borrowers and the Lenders. Upon
such notice, (i) all then outstanding LIBOR Loans shall automatically, on the
expiration date of the respective Interest Periods applicable thereto (unless
then repaid in full), be converted into Base Rate Loans, (ii) the obligation of
the Lenders to make, to convert Base Rate Loans into, or to continue, LIBOR
Loans shall be suspended (including pursuant to the Borrowing to which such
Interest Period applies), and (iii) any Notice of Borrowing or Notice of
Conversion/Continuation given at any time thereafter with respect to LIBOR Loans
shall be deemed to be a request for Base Rate Loans, in each case until the
Agent or the Required Lenders, as the case may be, shall have determined that
the circumstances giving rise to such suspension no longer exist (and the
Required Lenders, if making such determination, shall have so notified the
Agent), and the Agent shall have so notified the Borrowers and the Lenders.
(d) Notwithstanding any other provision in this Agreement, if, at any
time after the date hereof and from time to time, any Lender shall have
determined in good faith that the introduction of or any change in any
applicable law, rule or regulation or in the interpretation or administration
thereof by any Governmental Authority charged with the interpretation or
administration thereof, or compliance with any guideline or request from any
such Governmental Authority (whether or not having the force of law), has or
would have the effect of making it unlawful for such Lender to make or to
continue to make or maintain LIBOR Loans, such Lender will forthwith so notify
the Agent and the Borrowers; provided that prior to giving any such notice to
the Agent pursuant to this Section 2.16(d), such Lender shall designate a
different applicable Lending Office if such designation will avoid the need for
giving such notice and will not, in the reasonable judgment of such Lender, be
otherwise disadvantageous to such Lender. Upon such notice, (i) each of such
Lender's then outstanding LIBOR Loans shall automatically, on the expiration
date of the respective Interest Period applicable thereto (or, to the extent any
such LIBOR Loan may not lawfully be maintained as a LIBOR Loan until such
expiration date, upon such notice), be converted into a Base Rate Loan, (ii) the
obligation of such Lender to make, to convert Base Rate Loans into, or to
continue, LIBOR Loans shall be suspended (including pursuant to any Borrowing
for which the Agent has received a Notice of Borrowing but for which the
Borrowing Date has not arrived), and (iii) any Notice of Borrowing or Notice of
Conversion/Continuation given at any time thereafter with respect to LIBOR Loans
shall, as to such Lender, be deemed to be a request for a Base Rate Loan, in
each case until
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such Lender shall have determined that the circumstances giving rise to such
suspension no longer exist and shall have so notified the Agent, and the Agent
shall have so notified the Borrowers.
(e) Each Lender will promptly notify the Borrowers and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section 2.16 and will
designate a different applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
(f) Determinations by the Agent or any Lender for purposes of this
Section 2.16 of any increased costs, reduction in return, market contingencies,
illegality or any other matter shall, absent manifest error, be conclusive,
provided that such determinations are made in good faith. No failure by the
Agent or any Lender at any time to demand payment of any amounts payable under
this Section 2.16 shall constitute a waiver of its right to demand payment of
any additional amounts arising at any subsequent time. Nothing in this Section
2.16 shall require or be construed to require the Borrowers to pay any interest,
fees, costs or other amounts in excess of that permitted by applicable law.
2.17. Taxes. (a) Any and all payments by the Borrowers hereunder or
under any Note shall be made, in accordance with the terms hereof and thereof,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, other than net income and franchise taxes imposed on the Agent
or any Lender by the United States or by the jurisdiction under the laws of
which the Agent or such Lender, as the case may be, is organized or in which its
principal office or (in the case of a Lender) its applicable Lending Office is
located, or any political subdivision or taxing authority thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrowers shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to the Agent or any Lender, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.17), the Agent or such Lender, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrowers will make such deductions, (iii) the Borrowers will pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrowers will deliver to the Agent
or such Lender, as the case may be, evidence of such payment.
(b) The Borrowers will jointly and severally indemnify the Agent and
each Lender for the full amount of Taxes (including, without limitation, any
Taxes imposed by any jurisdiction on amounts payable under this Section 2.17)
paid by the Agent or such Lender, as the case may be, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Agent or such
Lender, as the case may be, makes written demand therefor.
(c) Each of the Agent and the Lenders agrees that if it subsequently
recovers, or receives a permanent net tax benefit with respect to, any amount of
Taxes (i) previously paid by it and as to which it has been indemnified by or on
behalf of the Borrowers or (ii) previously deducted by the Borrowers (including,
without limitation, any Taxes deducted from any additional sums payable under
clause (i) of subsection (a) above), the Agent or such Lender, as the case may
be, shall reimburse the Borrowers to the extent of the amount of any such
recovery or permanent net tax
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benefit (but only to the extent of indemnity payments made, or additional
amounts paid, by or on behalf of the Borrowers under this Section 2.17 with
respect to the Taxes giving rise to such recovery or tax benefit); provided,
however, that the Borrowers, upon the request of the Agent or such Lender, agree
to repay to the Agent or such Lender, as the case may be, the amount paid over
to the Borrowers (together with any penalties, interest or other charges), in
the event the Agent or such Lender is required to repay such amount to the
relevant taxing authority or other Governmental Authority. The determination by
the Agent or any Lender of the amount of any such recovery or permanent net tax
benefit shall, in the absence of manifest error, be conclusive and binding;
provided that such determination is made in good faith.
(d) If any Lender is incorporated or organized under the laws of a
jurisdiction other than the United States of America or any state thereof (a
"Non-U.S. Lender") and claims exemption from United States withholding tax
pursuant to the Internal Revenue Code, such Non-U.S. Lender will deliver to each
of the Agent and the Borrowers, on or prior to the Closing Date (or, in the case
of a Non-U.S. Lender that becomes a party to this Agreement as a result of an
assignment after the Closing Date, on the effective date of such assignment),
(i) in the case of a Non-U.S. Lender that is a "bank" for purposes of Section
881(c)(3)(A) of the Internal Revenue Code, a properly completed Internal Revenue
Service Form 4224 or 1001, as applicable (or successor forms), certifying that
such Non-U.S. Lender is entitled to an exemption from or a reduction of
withholding or deduction for or on account of United States federal income taxes
in connection with payments under this Agreement or any of the Notes, together
with a properly completed Internal Revenue Service Form W-8 or W-9, as
applicable (or successor forms), and (ii) in the case of a Non-U.S. Lender that
is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal Revenue
Code, a certificate in form and substance reasonably satisfactory to the Agent
and the Borrower and to the effect that (x) such Non-U.S. Lender is not a "bank"
for purposes of Section 881(c)(3)(A) of the Internal Revenue Code, is not
subject to regulatory or other legal requirements as a bank in any jurisdiction,
and has not been treated as a bank for purposes of any tax, securities law or
other filing or submission made to any governmental authority, any application
made to a rating agency or qualification for any exemption from any tax,
securities law or other legal requirements, (y) is not a 10-percent shareholder
for purposes of Section 881(c)(3)(B) of the Internal Revenue Code and (z) is not
a controlled foreign corporation receiving interest from a related person for
purposes of Section 881(c)(3)(C) of the Internal Revenue Code, together with a
properly completed Internal Revenue Service Form W-8 or W-9, as applicable (or
successor forms). Each such Non-U.S. Lender further agrees to deliver to the
Agent and the Borrowers an additional copy of each such relevant form on or
before the date that such form expires or becomes obsolete or after the
occurrence of any event (including a change in its applicable Lending Office)
requiring a change in the most recent forms so delivered by it, in each case
certifying that such Non-U.S. Lender is entitled to an exemption from or a
reduction of withholding or deduction for or on account of United States federal
income taxes in connection with payments under this Agreement or any of the
Notes, unless an event (including, without limitation, any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required, which event renders all such forms inapplicable or the
exemption to which such forms relate unavailable and such Non-U.S. Lender
notifies the Agent and the Borrowers that it is not entitled to receive payments
without deduction or withholding of United States federal income taxes. Each
such Non-U.S. Lender will promptly notify the Agent and the Borrowers of any
changes in circumstances that would modify or render invalid any claimed
exemption or reduction.
(e) If any Lender is entitled to a reduction in (and not a complete
exemption from) the applicable withholding tax, the Borrowers and the Agent may
withhold from any interest payment to such Lender an amount equivalent to the
applicable withholding tax after taking into account such reduction. If any of
the forms or other documentation required under subsection (d) above are not
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delivered to the Agent as therein required, then the Borrowers and the Agent may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.
2.18. Compensation. The Borrowers will compensate each Lender upon
demand for all losses, expenses and liabilities (including, without limitation,
any loss, expense or liability incurred by reason of the liquidation or
reemployment of deposits or other funds required by such Lender to fund or
maintain LIBOR Loans) that such Lender may incur or sustain (i) if for any
reason (other than a default by such Lender) a Borrowing or continuation of, or
conversion into, a LIBOR Loan does not occur on a date specified therefor in a
Notice of Borrowing or Notice of Conversion/Continuation, (ii) if any repayment,
prepayment or conversion of any LIBOR Loan occurs on a date other than the last
day of an Interest Period applicable thereto (including as a consequence of
acceleration of the maturity of the Loans pursuant to Section 8.2), (iii) if any
prepayment of any LIBOR Loan is not made on any date specified in a notice of
prepayment given by the Borrowers or (iv) as a consequence of any other failure
by the Borrowers to make any payments with respect to any LIBOR Loan when due
hereunder. Calculation of all amounts payable to a Lender under this Section
2.18 shall be made as though such Lender had actually funded its relevant LIBOR
Loan through the purchase of a Eurodollar deposit bearing interest at the LIBOR
Rate in an amount equal to the amount of such LIBOR Loan, having a maturity
comparable to the relevant Interest Period; provided, however, that each Lender
may fund its LIBOR Loans in any manner it sees fit and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this Section
2.18. Determinations by any Lender for purposes of this Section 2.18 of any such
losses, expenses or liabilities shall, absent manifest error, be conclusive,
provided that such determinations are made in good faith.
ARTICLE III
CLOSING; CONDITIONS OF BORROWING
3.1. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Robinson, Bradshaw
& Hinson, P.A., 101 North Tryon Street, Suite 1900, Charlotte, North Carolina
28246 at 10:00 a.m. on July 11, 1997, or at such other time as the parties
hereto shall mutually agree (the "Closing Date").
3.2. Conditions of Closing. The Closing is subject to the satisfaction
of the following conditions precedent:
(a) The Agent shall have received the following, each dated as of the
Closing Date (unless otherwise specified) and, except for the Notes, in
sufficient copies for each Lender:
(i) A Note for each Lender that is a party hereto as of the
Closing Date, in the amount of such Lender's Commitment, each duly
completed in accordance with the relevant provisions of Section 2.4 and
executed by each Borrower;
(ii) the Subsidiary Guaranty, duly completed and executed by
each Subsidiary; and
(iii) the favorable opinions of Arnold & Porter, special
counsel to the Borrowers, and Aloysius Lawn, Esq., General Counsel and
Secretary of each Borrower, in substantially
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the form of Exhibit F, addressed to the Agent and the Lenders and
addressing such other matters as the Agent or any Lender may reasonably
request.
(b) The Agent shall have received a certificate, signed by the
president, the chief executive officer or the chief financial officer of each of
the Borrowers, in form and substance satisfactory to the Agent, certifying that
(i) all representations and warranties of the Borrowers contained in this
Agreement and the other Credit Documents that are not qualified as to
materiality are true and correct in all material respects, and all
representations and warranties of the Borrowers contained in this Agreement and
the other Credit Documents that are qualified as to materiality are true and
correct, in each case as of the Closing Date, both immediately before and after
giving effect to the consummation of the transactions contemplated hereby, (ii)
no Default or Event of Default has occurred and is continuing, both immediately
before and after giving effect to the consummation of the transactions
contemplated hereby, (iii) both immediately before and after giving effect to
the consummation of the transactions contemplated hereby, no Material Adverse
Change has occurred since December 31, 1996, and there exists no event,
condition or state of facts that could reasonably be expected to result in a
Material Adverse Change, and (iv) all conditions to the Closing hereunder set
forth in this Section 3.2 have been satisfied or waived as required hereunder.
(c) The Agent shall have received a certificate of the secretary or an
assistant secretary of each Borrower Affiliate, in form and substance
satisfactory to the Agent, certifying (i) that attached thereto is a true and
complete copy of the articles or certificate of incorporation and all amendments
thereto of such Borrower Affiliate, certified as of a recent date by the
Secretary of State (or comparable Governmental Authority) of its jurisdiction of
organization, and that the same has not been amended since the date of such
certification, (ii) that attached thereto is a true and complete copy of the
bylaws of such Borrower Affiliate as then in effect and as in effect at all
times from the date on which the resolutions referred to in clause (iii) below
were adopted to and including the date of such certificate, and (iii) that
attached thereto is a true and complete copy of resolutions adopted by the board
of directors of such Borrower Affiliate authorizing the execution, delivery and
performance of this Agreement and the other Credit Documents to which it is a
party, and as to the incumbency and genuineness of the signature of each officer
of such Borrower Affiliate executing this Agreement or any of such other Credit
Documents, and attaching all such copies of the documents described above.
(d) The Agent shall have received a certificate as of a recent date of
the good standing of each Borrower Affiliate under the laws of its jurisdiction
of organization, from the Secretary of State (or comparable Governmental
Authority) of such jurisdiction.
(e) All legal matters, documentation, and corporate or other
proceedings incident to the transactions contemplated hereby shall be
satisfactory in form and substance to the Agent; all approvals, permits and
consents of any Governmental Authorities or other Persons required in connection
with the execution and delivery of this Agreement and the other Credit Documents
and the consummation of the transactions contemplated hereby and thereby shall
have been obtained, without the imposition of conditions that are not acceptable
to the Agent, and all related filings, if any, shall have been made, and all
such approvals, permits, consents and filings shall be in full force and effect
and the Agent shall have received such copies thereof as it shall have
requested; all applicable waiting periods shall have expired without any adverse
action being taken by any Governmental Authority having jurisdiction; and no
action, proceeding, investigation, regulation or legislation shall have been
instituted, threatened or proposed before, and no order, injunction or decree
shall have been entered by, any court, Governmental Authority or other Person
(i) against or affecting any Borrower Affiliate
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or any of their respective properties or (ii) with respect to this Agreement or
any of the other Credit Documents.
(f) Since December 31, 1996, both immediately before and after giving
effect to the consummation of the transactions contemplated by this Agreement,
there shall not have occurred any Material Adverse Change or any event,
condition or state of facts that could reasonably be expected to result in a
Material Adverse Change.
(g) The Borrowers shall have paid all fees and expenses of the Agent
and the Lenders required hereunder or under any other Credit Document to be paid
on or prior to the Closing Date (including fees and expenses of counsel) in
connection with this Agreement and the transactions contemplated hereby.
(h) The Agent shall have received a Financial Condition Certificate,
in form and substance satisfactory to the Agent.
(i) The Agent shall have received written confirmation from the
applicable lenders under the PNC Indebtedness and the Merrill Lynch Indebtedness
to the effect that (i) all principal, interest and other amounts outstanding
with respect to the PNC Indebtedness and the Merrill Lynch Indebtedness, as the
case may be, have been repaid and satisfied in full, (ii) all commitments to
extend credit under the agreements and instruments relating thereto have been
terminated, (iii) any Liens securing any PNC Indebtedness or any Merrill Lynch
Indebtedness, as the case may be, have been released and any related filings
have been terminated of record (or arrangements satisfactory to the Agent made
therefor), and (iv) any letters of credit outstanding with respect to the PNC
Indebtedness or the Merrill Lynch Indebtedness, as the case may be, have been
terminated or cancelled.
(j) The Agent shall have received an Account Designation Letter,
together with written instructions from an Authorized Officer of each Borrower,
including wire transfer information, directing the payment of the proceeds of
Loans to be made hereunder.
(k) The Agent and each Lender shall have received such other
documents, certificates, opinions and instruments in connection with the
transactions contemplated hereby as it shall have reasonably requested.
(l) The Agent shall have completed its due diligence review of the
Borrowers and shall have been satisfied with the results thereof.
3.3. Conditions of All Borrowings. The obligation of each Lender to
make any Loans hereunder is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or date of issuance:
(a) The Agent shall have received a Notice of Borrowing in accordance
with Section 2.2(b);
(b) Each of the representations and warranties contained in Article IV
and in the other Credit Documents that is not qualified as to materiality shall
be true and correct in all material respects, and each of the representations
and warranties of the Borrowers contained in Article IV and the other Credit
Documents that is qualified as to materiality shall be true and correct, in each
case on and as of such Borrowing Date with the same effect as if made on and as
of such date, both
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immediately before and after giving effect to the Loans to be made on such date
(except to the extent any such representation or warranty is expressly stated to
have been made as of a specific date, in which case such representation or
warranty shall be true and correct in all material respects as of such date);
and
(c) No Default or Event of Default shall have occurred and be
continuing on such date, both immediately before and after giving effect to the
Loans to be made on such date.
Each giving of a Notice of Borrowing, and the consummation of each
Borrowing, shall be deemed to constitute a representation by the Borrower that
the statements contained in subsections (b) and (c) above are true, both as of
the date of such notice and as of the relevant Borrowing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and to
induce the Lenders to extend the credit contemplated hereby, the Borrowers
jointly and severally represent and warrant to the Agent and the Lenders as
follows:
4.1. Corporate Organization and Power. Each Borrower Affiliate (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, (ii) has the full corporate power and
authority to execute and deliver and perform its obligations under the Credit
Documents to which it is or will be a party, to own and hold its property and to
engage in its business as presently conducted, and (iii) is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the nature of its business or the ownership of its properties requires it
to be so qualified, except to the extent that the failure to be so qualified
would not have a Material Adverse Effect.
4.2. Authorization; Enforceability. Each Borrower Affiliate has taken,
or on the Closing Date will have taken, all necessary corporate action to
execute, deliver and perform each of the Credit Documents to which it is or will
be a party, and has, or on the Closing Date (or any later date of execution and
delivery) will have, validly executed and delivered each of the Credit Documents
to which it is or will be a party. This Agreement constitutes, and each of the
other Credit Documents upon execution and delivery will constitute, the legal,
valid and binding obligation of each Borrower Affiliate that is a party hereto
or thereto, enforceable against each such Borrower Affiliate in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting creditors' rights generally, by general equitable principles or by
principles of good faith and fair dealing.
4.3. No Violation. The execution, delivery and performance by each
Borrower Affiliate of this Agreement and each of the other Credit Documents to
which it is a party, and compliance by each such Borrower Affiliate, with the
terms hereof and thereof, do not (i) violate any provision of its articles or
certificate of incorporation or bylaws or contravene any other Requirement of
Law applicable to it, (ii) conflict with, result in a breach of or constitute
(with notice, lapse of time or both) a default under any indenture, agreement or
other instrument to which it is a party, by which it or any of its properties is
bound or to which it is subject, or (iii) result in or require the creation or
imposition of any Lien upon any of its properties or assets. No Borrower
Affiliate is a party to any agreement or instrument or otherwise subject to any
restriction or encumbrance that restricts or limits
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its ability to make dividend payments or other distributions in respect of its
Capital Stock, to repay Indebtedness owed to any Borrower or any other Borrower
Affiliate, to make loans or advances to any Borrower Affiliate, or to transfer
any of its assets or properties to any Borrower Affiliate, in each case other
than such restrictions or encumbrances existing under or by reason of the Credit
Documents or applicable Requirements of Law.
4.4. Governmental and Third-Party Authorization; Permits. (a) No
consent, approval, authorization or other action by, notice to, or registration
or filing with, any Governmental Authority or other Person is required as a
condition to or otherwise in connection with the due execution, delivery and
performance by each Borrower Affiliate of this Agreement or any of the other
Credit Documents to which it is or will be a party or the legality, validity or
enforceability hereof or thereof.
(b) Each Borrower Affiliate has, and is in good standing with respect
to, all governmental approvals, licenses, permits and authorizations necessary
to conduct its business as presently conducted and to own or lease and operate
its properties, except to the extent that the failure to have any such
governmental approval, license, permit or authorization would not have a
Material Adverse Effect.
4.5. Litigation. There are no actions, investigations, suits or
proceedings pending or, to the knowledge of any Borrower, threatened, at law, in
equity or in arbitration, before any court, other Governmental Authority or
other Person, (i) against or affecting any Borrower Affiliate or any of their
respective properties or (ii) with respect to this Agreement or any of the other
Credit Documents, other than any actions, investigations, suits or proceeding
that would not have a Material Adverse Effect.
4.6. Taxes. Each Borrower Affiliate has timely filed all federal, state
and local tax returns and reports required to be filed by it and has paid all
taxes, assessments, fees and other charges levied upon it or upon its properties
that are shown thereon as due and payable, other than those that are being
contested in good faith and by proper proceedings and for which adequate
reserves have been established in accordance with GAAP. Such returns accurately
reflect in all material respects all liability for taxes of each Borrower
Affiliate for the periods covered thereby. There is no ongoing audit or
examination or, to the knowledge of any Borrower, other investigation by any
Governmental Authority of the tax liability of any Borrower Affiliate and there
is no unresolved claim by any Governmental Authority concerning the tax
liability of any Borrower Affiliate for any period for which tax returns have
been or were required to have been filed, other than claims for which adequate
reserves have been established in accordance with GAAP. No Borrower Affiliate
has waived or extended or has been requested to waive or extend the statute of
limitations relating to the payment of any taxes.
4.7. Subsidiaries. Schedule 4.7 sets forth a list, as of the Closing
Date, of all of the Subsidiaries of any of the Borrowers and, as to each such
Subsidiary, the percentage ownership (direct and indirect) of each Borrower in
each class of its capital stock and each direct owner thereof. Except for the
shares of capital stock expressly indicated on Schedule 4.7, there are no shares
of capital stock, warrants, rights, options or other equity securities, or other
Capital Stock of any Subsidiary outstanding or reserved for any purpose. All
outstanding shares of capital stock of each Borrower Affiliate are duly and
validly issued, fully paid and nonassessable.
4.8. Full Disclosure. All factual information heretofore or
contemporaneously furnished to the Agent or any Lender in writing by or on
behalf of any Borrower Affiliate for purposes of or in connection with this
Agreement and the transactions contemplated hereby is, and all other such
factual
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information hereafter furnished to the Agent or any Lender in writing by or on
behalf of any Borrower Affiliate will be, true and accurate in all material
respects on the date as of which such information is dated or certified (or, if
such information has been amended or supplemented, on the date as of which any
such amendment or supplement is dated or certified) and not made incomplete by
omitting to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which such information was
provided, not misleading.
4.9. Margin Regulations. No proceeds of the Loans will be used,
directly or indirectly, to purchase or carry any Margin Stock, to extend credit
for such purpose or for any other purpose that would violate or be inconsistent
with Regulations G, T, U or X or any provision of the Exchange Act.
4.10. No Material Adverse Change. There has been no Material Adverse
Change since December 31, 1996, and there exists no event, condition or state of
facts that could reasonably be expected to result in a Material Adverse Change.
4.11. Financial Matters. (a) The Borrowers have heretofore furnished to
the Agent copies of (i) the audited consolidated balance sheets of Holdings and
its Subsidiaries as of December 31, 1996, 1995, and 1994, and the related
statements of income and cash flows for the fiscal years ended December 31,
1996, 1995 and 1994, together with the opinion of BDO Seidman, LLP thereon, and
(ii) the unaudited consolidated balance sheet of Holdings and its Subsidiaries
as of March 31, 1997, and the related statements of income and cash flows for
the three-month period then ended. Such financial statements have been prepared
in accordance with GAAP (subject, with respect to the unaudited financial
statements, to the absence of notes required by GAAP and to normal year-end
adjustments) and present fairly in all material respects the financial condition
of Holdings and its Subsidiaries on a consolidated basis as of the respective
dates thereof and the consolidated results of operations of Holdings and its
Subsidiaries for the respective periods then ended, except as may have been
indicated in a separate letter dated the date hereof from the Borrowers to the
Agent. Except as fully reflected in the most recent financial statements
referred to above and the notes thereto, there are no material liabilities or
obligations with respect to any Borrower Affiliate of any nature whatsoever
(whether absolute, contingent or otherwise and whether or not due).
(b) Each Borrower Affiliate, after giving effect to the consummation of
the transactions contemplated hereby, (i) has capital sufficient to carry on its
businesses as conducted and as proposed to be conducted, (ii) has assets with a
fair saleable value, determined on a going concern basis, (y) not less than the
amount required to pay the probable liability on its existing debts as they
become absolute and matured and (z) greater than the total amount of its
liabilities (including identified contingent liabilities, valued at the amount
that can reasonably be expected to become absolute and matured), and (iii) does
not intend to, and does not believe that it will, incur debts or liabilities
beyond its ability to pay such debts and liabilities as they mature.
4.12. Ownership of Properties. Each Borrower Affiliate (i) has good and
marketable title to all real property owned by it, (ii) holds interests as
lessee under valid leases in full force and effect with respect to all material
leased real and personal property used in connection with its business, (iii)
possesses or has rights to use licenses, patents, copyrights, trademarks,
service marks, trade names and other assets sufficient to enable it to continue
to conduct its business substantially as heretofore conducted and without any
material conflict with the rights of others, and (iv) has good title to all of
its other properties and assets reflected in the most recent financial
statements referred to in Section 4.11(a) (except as sold or otherwise disposed
of since the date thereof in the ordinary
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course of business), in each case under (i), (ii), (iii) and (iv) above free and
clear of all Liens other than Permitted Liens.
4.13. ERISA. Each Plan is and has been administered in compliance in
all material respects with all applicable Requirements of Law, including,
without limitation, the applicable provisions of ERISA and the Internal Revenue
Code. No ERISA Event has occurred and is continuing or, to the knowledge of any
Borrower, is reasonably expected to occur with respect to any Plan, in either
case that would be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect. No Plan has any Unfunded Pension Liability, and
neither any Borrower nor any ERISA Affiliate of any Borrower has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA, in either
instance where the same would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect. Neither any Borrower nor any ERISA
Affiliate of any Borrower is required to contribute to or has, or has at any
time had, any liability to a Multiemployer Plan.
4.14. Environmental Matters. (a) No Hazardous Substances are or have
been generated, used, located, released, treated, disposed of or stored by any
Borrower Affiliate or, to the knowledge of any Borrower, by any other Person
(including any predecessor in interest) or otherwise, in, on or under any
portion of any real property, leased or owned, of any Borrower Affiliate, except
in material compliance with all applicable Environmental Laws, and no portion of
any such real property or, to the knowledge of any Borrower, any other real
property at any time leased, owned or operated by any Borrower Affiliate, has
been contaminated by any Hazardous Substance; and no portion of any real
property, leased or owned, of any Borrower Affiliate has been or is presently
the subject of an environmental audit, assessment or remedial action.
(b) No portion of any real property, leased or owned, of any Borrower
Affiliate has been used by any Borrower Affiliate or, to the knowledge of any
Borrower, by any other Person, as or for a mine, a landfill, a dump or other
disposal facility, a gasoline service station, or (other than for petroleum
substances stored in the ordinary course of business) a petroleum products
storage facility; no portion of such real property or any other real property at
any time leased, owned or operated by any Borrower Affiliate has, pursuant to
any Environmental Law, been placed on the "National Priorities List" or "CERCLIS
List" (or any similar federal, state or local list) of sites subject to possible
environmental problems; and there are not and have never been any underground
storage tanks situated on any real property, leased or owned, of any Borrower
Affiliate.
(c) All activities and operations of any Borrower Affiliate are in
compliance with the requirements of all applicable Environmental Laws, except to
the extent the failure so to comply, individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect. Each Borrower Affiliate
has obtained all licenses and permits under Environmental Laws necessary to its
respective operations; all such licenses and permits are being maintained in
good standing; and each Borrower Affiliate is in compliance with all terms and
conditions of such licenses and permits, except for such licenses and permits
the failure to obtain, maintain or comply with which would not be reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect. No
Borrower Affiliate is involved in any suit, action or proceeding, or has
received any notice, complaint or other request for information from any
Governmental Authority or other Person, with respect to any actual or alleged
Environmental Claims that, if adversely determined, would be reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect; and, to the
knowledge of any Borrower, there are no threatened actions, suits, proceedings
or investigations with respect to any such Environmental Claims, nor any basis
therefor.
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4.15. Compliance With Laws. Each Borrower Affiliate has timely filed
all material reports, documents and other materials required to be filed by it
under all applicable Requirements of Law with any Governmental Authority, has
retained all material records and documents required to be retained by it under
all applicable Requirements of Law, and is otherwise in compliance with all
applicable Requirements of Law in respect of the conduct of its business and the
ownership and operation of its properties, except for such Requirements of Law
the failure to comply with which, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect.
4.16. Regulated Industries. No Borrower Affiliate is (i) an "investment
company," a company "controlled" by an "investment company," or an "investment
advisor," within the meaning of the Investment Company Act of 1940, as amended,
or (ii) a "holding company," a "subsidiary company" of a "holding company," or
an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.17. Insurance. The assets, properties and business of each Borrower
Affiliate are insured against such hazards and liabilities, under such coverages
and in such amounts, as are customarily maintained by prudent companies
similarly situated and under policies issued by insurers of recognized
responsibility.
4.18. Material Contracts. Schedule 4.18 lists, as of the Closing Date,
each "material contract" (within the meaning of Item 601(b)(10) of Regulation
S-K under the Exchange Act) to which any Borrower Affiliate is a party, by which
any of them or their respective properties is bound or to which any of them is
subject (collectively, "Material Contracts"), and also indicates the parties,
subject matter and term thereof. As of the Closing Date, (i) each Material
Contract is in full force and effect and is enforceable by the Borrower
Affiliate that is a party thereto in accordance with its terms, and (ii) no
Borrower Affiliate (nor, to the knowledge of any Borrower, any other party
thereto) is in breach of or default under any Material Contract in any material
respect or has given notice of termination or cancellation of any Material
Contract.
4.19. Labor Relations. No Borrower Affiliate is engaged in any unfair
labor practice within the meaning of the National Labor Relations Act of 1947,
as amended. There is (i) no unfair labor practice complaint before the National
Labor Relations Board, or grievance or arbitration proceeding arising out of or
under any collective bargaining agreement, pending or, to the knowledge of the
Borrower, threatened, against any Borrower Affiliate, (ii) no strike, lock-out,
slowdown, stoppage, walkout or other labor dispute pending or, to the knowledge
of any Borrower, threatened, against any Borrower Affiliate, and (iii) to the
knowledge of any Borrower, no petition for certification or union election or
union organizing activities taking place with respect to any Borrower Affiliate.
4.20. Single Business Enterprise. The Borrowers have historically
operated as, and intend to continue operating as, a single business enterprise.
Although separate entities, the Borrowers operate under a common business plan.
Each of the Borrowers will accordingly benefit from the financing arrangement
established by this Agreement.
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ARTICLE V
AFFIRMATIVE COVENANTS
The Borrowers covenant and agree that, until the termination of the
Commitments and the payment in full of all principal and interest with respect
to the Loans together with all other amounts then due and owing hereunder:
5.1. Financial Statements. The Borrowers will deliver to each Lender:
(a) As soon as practicable after the end of each of the first three
fiscal quarters of each fiscal year, beginning with the fiscal quarter ending
June 30, 1997, and in any event not later than five (5) days following the
filing thereof with the Securities and Exchange Commission, unaudited
consolidated balance sheets of Holdings and its Subsidiaries as of the end of
such fiscal quarter and unaudited consolidated statements of income and cash
flows for Holdings and its Subsidiaries for the fiscal quarter then ended and
for that portion of the fiscal year then ended, in each case setting forth
comparative consolidated figures as of the end of and for the corresponding
period in the preceding fiscal year, all in reasonable detail and prepared in
accordance with GAAP (subject to the absence of notes required by GAAP and
subject to normal year-end adjustments) applied on a basis consistent with that
of the preceding quarter or containing disclosure of the effect on the financial
condition or results of operations of any change in the application of
accounting principles and practices during such quarter; and
(b) As soon as practicable after the end of each fiscal year, beginning
with the fiscal year ending December 31, 1997, and in any event not later than
five (5) days following the filing thereof with the Securities and Exchange
Commission, an audited consolidated balance sheet of Holdings and its
Subsidiaries as of the end of such fiscal year and audited consolidated
statements of income and cash flows for Holdings and its Subsidiaries for the
fiscal year then ended, including the notes thereto, in each case setting forth
comparative figures as of the end of and for the preceding fiscal year, all in
reasonable detail and certified by the independent certified public accounting
firm regularly retained by the Borrowers or another independent certified public
accounting firm of recognized national standing reasonably acceptable to the
Required Lenders, together with a report thereon by such accountants that is not
qualified as to going concern or scope of audit and to the effect that such
financial statements present fairly in all material respects the consolidated
financial condition and results of operations of Holdings and its Subsidiaries
as of the dates and for the periods indicated in accordance with GAAP applied on
a basis consistent with that of the preceding year or containing disclosure of
the effect on the financial condition or results of operations of any change in
the application of accounting principles and practices during such year.
5.2. Other Business and Financial Information. The Borrowers will
deliver to each Lender:
(a) Concurrently with each delivery of the financial statements
described in Section 5.1, a Compliance Certificate with respect to the period
covered by the financial statements then being delivered, executed by a
Financial Officer of each Borrower, together with a Covenant Compliance
Worksheet reflecting the computation of the financial covenants set forth in
Sections 6.1 and 6.2 as of the last day of the period covered by such financial
statements.
(b) Promptly upon the sending, filing or receipt thereof, copies of (i)
all financial statements, reports, notices and proxy statements that any
Borrower Affiliate shall send or make
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available generally to its shareholders, (ii) all regular, periodic and special
reports, registration statements and prospectuses (other than on Form S-8) that
any Borrower Affiliate shall render to or file with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. or any national
securities exchange, and (iii) all press releases and other statements made
available generally by any Borrower Affiliate to the public concerning material
developments in the business of any Borrower Affiliate;
(c) Promptly upon (and in any event within five (5) Business Days
after) any Responsible Officer of any Borrower obtaining knowledge thereof,
written notice of any of the following:
(i) the occurrence of any Default or Event of Default,
together with a written statement of an Authorized Officer of such
Borrower specifying the nature of such Default or Event of Default, the
period of existence thereof and the action that such Borrower has taken
and proposes to take with respect thereto;
(ii) the institution or threatened institution of any action,
suit, investigation or proceeding against or affecting any Borrower
Affiliate, including any such investigation or proceeding by any
Governmental Authority (other than routine periodic inquiries,
investigations or reviews), that would, if adversely determined, be
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect, and any material development in any litigation or other
proceeding previously reported pursuant to Section 4.5 or this Section
5.2(c)(ii);
(iii) the receipt by any Borrower Affiliate from any
Governmental Authority of (y) any notice asserting any failure by any
Borrower Affiliate to be in compliance with applicable Requirements of
Law or that threatens the taking of any action against such Borrower
Affiliate or sets forth circumstances that, if taken or adversely
determined, would be reasonably likely to have a Material Adverse
Effect, or (z) any notice of any actual or threatened suspension,
limitation or revocation of, failure to renew, or imposition of any
restraining order, escrow or impoundment of funds in connection with,
any license, permit, accreditation or authorization of any Borrower
Affiliate, where such action would be reasonably likely to have a
Material Adverse Effect;
(iv) the occurrence of any ERISA Event, together with (x) a
written statement of an Authorized Officer of each of the Borrowers
specifying the details of such ERISA Event and the action that the
Borrowers have taken and propose to take with respect thereto, (y) a
copy of any notice with respect to such ERISA Event that may be
required to be filed with the PBGC and (z) a copy of any notice
delivered by the PBGC to any Borrower or any ERISA Affiliate with
respect to such ERISA Event;
(v) the occurrence of any material default under, or any
proposed or threatened termination or cancellation of, any Material
Contract or other material contract or agreement to which any Borrower
Affiliate is a party, the termination or cancellation of which would be
reasonably likely to have a Material Adverse Effect;
(vi) the occurrence of any of the following: (x) the
assertion of any Environmental Claim against or affecting any Borrower
Affiliate or any of their respective real property, leased or owned;
(y) the receipt by any Borrower Affiliate of notice of any alleged
violation of or noncompliance with any Environmental Laws; or (z) the
taking of any remedial action
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by any Borrower Affiliate or any other Person in response to the actual
or alleged generation, storage, release, disposal or discharge of any
Hazardous Substances on, to, upon or from any real property leased or
owned by any Borrower Affiliate; but in each case under clauses (x),
(y) and (z) above, only to the extent the same would be reasonably
likely to have a Material Adverse Effect; and
(vii) any other matter or event that has, or would be
reasonably likely to have, a Material Adverse Effect, together with a
written statement of an Authorized Officer of each Borrower setting
forth the nature and period of existence thereof and the action that
the Borrower has taken and proposes to take with respect thereto.
(d) As soon as is available and in any event within fifteen (15) days
after the end of each calendar month, a subscriber count for each Borrower
Affiliate.
(e) As promptly as reasonably possible, such other information about
the business, condition (financial or otherwise), operations or properties of
any Borrower Affiliate (including any Plan and any information required to be
filed under ERISA) as the Agent or any Lender may from time to time reasonably
request.
5.3. Corporate Existence; Franchises; Maintenance of Properties. Each
of the Borrowers will, and will cause each of its Subsidiaries to, (i) maintain
and preserve in full force and effect its corporate existence, except as
expressly permitted otherwise by Section 7.1, (ii) obtain, maintain and preserve
in full force and effect all other rights, franchises, licenses, permits,
certifications, approvals and authorizations required by Governmental
Authorities and necessary to the ownership, occupation or use of its properties
or the conduct of its business, except to the extent the failure to do so would
not be reasonably likely to have a Material Adverse Effect, and (iii) keep all
material properties in good working order and condition (normal wear and tear
excepted) and from time to time make all necessary repairs to and renewals and
replacements of such properties, except to the extent that any of such
properties are obsolete or are being replaced.
5.4. Compliance with Laws. Each of the Borrowers will, and will cause
each of its Subsidiaries to, comply in all respects with all Requirements of Law
applicable in respect of the conduct of its business and the ownership and
operation of its properties, except to the extent the failure so to comply could
not be reasonably be expected to have a Material Adverse Effect.
5.5. Payment of Obligations. Each of the Borrowers will, and will cause
each of its Subsidiaries to, (i) pay all liabilities and obligations as and when
due (subject to any applicable subordination provisions), except to the extent
failure to do so could not reasonably be expected to have a Material Adverse
Effect, and (ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
any Borrower Affiliate; provided, however, that no Borrower Affiliate shall be
required to pay any such tax, assessment, charge, levy or claim that is being
contested in good faith and by proper proceedings and as to which such Borrower
Affiliate is maintaining adequate reserves with respect thereto in accordance
with GAAP.
5.6. Insurance. Each of the Borrowers will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurance
companies insurance with respect to its assets, properties and business, against
such hazards and liabilities, of such types and in such
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amounts, as is customarily maintained by companies in the same or similar
businesses similarly situated.
5.7. Maintenance of Books and Records; Inspection. Each of the
Borrowers will, and will cause each of its Subsidiaries to, (i) maintain
adequate books, accounts and records, in which full, true and correct entries
shall be made of all financial transactions in relation to its business and
properties, and prepare all financial statements required under this Agreement,
in each case in accordance with GAAP and in compliance with the requirements of
any Governmental Authority having jurisdiction over it, and (ii) permit
employees or agents of the Agent or any Lender to inspect its properties and
examine or audit its books, records, working papers and accounts and make copies
and memoranda of them, and to discuss its affairs, finances and accounts with
its officers and employees and, upon notice to the Borrowers, the independent
public accountants of the Borrowers and their Subsidiaries (and by this
provision the Borrower authorizes such accountants to discuss the finances and
affairs of the Borrowers and their Subsidiaries), all at such times and from
time to time, upon reasonable notice and during business hours, as may be
reasonably requested.
5.8. Permitted Acquisitions. (a) Subject to the provisions of
subsection (b) below and the requirements contained in the definition of
Permitted Acquisition, and subject to the other terms and conditions of this
Agreement, the Borrowers may from time to time on or after the Closing Date
effect Permitted Acquisitions, provided that, with respect to each Permitted
Acquisition, no Default or Event of Default shall have occurred and be
continuing at the time of the consummation of such Permitted Acquisition or
would exist immediately after giving effect thereto;
(b) Not less than two (2) Business Days prior to the consummation of
any Permitted Acquisition, the Borrowers shall have delivered to the Agent and
each Lender a certificate, in form and substance reasonably satisfactory to the
Agent, executed by a Financial Officer of each Borrower to the effect that, to
the best of such individual's knowledge, (w) the consummation of such Permitted
Acquisition will not result in a violation of any provision of this Section 5.8,
and after giving effect to such Permitted Acquisition and any Borrowings made in
connection therewith, the Borrowers will be in compliance with the financial
covenants contained in Sections 6.1 and 6.2, such compliance determined with
regard to calculations made on a pro forma basis in accordance with GAAP as if
each Person or business that is the subject of a Permitted Acquisition had been
consolidated with the Borrowers for those periods applicable to such covenants
(such calculations to be attached to the certificate); (x) the Borrowers believe
in good faith that they will continue to comply with such financial covenants
for a period of one year following the date of the consummation of such
Permitted Acquisition and (y) after giving effect to such Permitted Acquisition
and any Borrowings in connection therewith, the Borrowers believe in good faith
that they will have sufficient availability under the Commitments to meet their
ongoing working capital requirements.
(c) The consummation of each Permitted Acquisition shall be deemed to
be a representation and warranty by the Borrowers that (except as shall have
been approved in writing by the Required Lenders) all conditions thereto set
forth in this Section 5.8 have been satisfied, that the same is permitted in
accordance with the terms of this Agreement, and that the matters certified to
by Financial Officer of each Borrower in the certificate referred to in
subsection (b) above are, to the best of such individual's knowledge, true and
correct in all material respects as of the date such certificate is given, which
representation and warranty shall be deemed to be a representation and warranty
as of the date thereof for all purposes hereunder, including, without
limitation, for purposes of Sections 3.3 and 8.1.
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5.9. Creation or Acquisition of Subsidiaries. Subject to the provisions
of Section 7.5, each Borrower may from time to time create or acquire new Wholly
Owned Subsidiaries in connection with Permitted Acquisitions or otherwise, and
the Wholly Owned Subsidiaries of each Borrower may create or acquire new Wholly
Owned Subsidiaries; provided, that concurrently with (and in any event within
ten (10) Business Days thereafter) the creation or direct or indirect
acquisition by a Borrower thereof, each such new Subsidiary will execute and
deliver to the Agent a joinder to the Subsidiary Guaranty, pursuant to which
such new Subsidiary shall become a party thereto and shall guarantee the payment
in full of the Obligations of the Borrower under this Agreement and the other
Credit Documents.
5.10. Further Assurances. Each of the Borrowers will, and will cause
each of its Subsidiaries to, make, execute, endorse, acknowledge and deliver any
amendments, modifications or supplements hereto and restatements hereof and any
other agreements, instruments or documents, and take any and all such other
actions, as may from time to time be reasonably requested by the Agent or the
Required Lenders to effect, confirm or further assure or protect and preserve
the interests, rights and remedies of the Agent and the Lenders under this
Agreement and the other Credit Documents.
ARTICLE VI
FINANCIAL COVENANTS
The Borrowers, jointly and severally, covenant and agree that, until
the termination of the Commitments and the payment in full of all principal and
interest with respect to the Loans together with all other amounts then due and
owing hereunder:
6.1. Leverage Ratio. The Borrowers will not permit the Total Leverage
Ratio at any time of determination to be greater than 2.00:1.00.
6.2. Current Ratio. The Borrower will not permit the Current Ratio at
any time of determination to be less than 1.50:1.00.
ARTICLE VII
NEGATIVE COVENANTS
Each of the Borrowers jointly and severally covenants and agrees that,
until the termination of the Commitments and the payment in full of all
principal and interest with respect to the Loans together with all other amounts
then due and owing hereunder:
7.1. Merger; Consolidation. No Borrower will, and each Borrower will
cause its Subsidiaries not to, liquidate, wind up or dissolve, or enter into any
consolidation, merger or other combination, or agree to do any of the foregoing;
provided, however, that:
(i) any Borrower may merge or consolidate with another
Person so long as (x) such Borrower is the surviving entity, (y) unless
such other Person is a Wholly Owned Subsidiary immediately prior to
giving effect thereto, such merger or consolidation shall constitute a
Permitted Acquisition and the applicable conditions and requirements of
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Sections 5.8 and 5.9 shall be satisfied, and (z) immediately after
giving effect thereto, no Default or Event of Default would exist; and
(ii) any Subsidiary may merge or consolidate with another
Person so long as (x) the surviving entity is a Borrower Affiliate, (y)
unless such other Person is a Wholly Owned Subsidiary immediately prior
to giving effect thereto, such merger or consolidation shall constitute
a Permitted Acquisition and the applicable conditions and requirements
of Sections 5.8 and 5.9 shall be satisfied, and (z) immediately after
giving effect thereto, no Default or Event of Default would exist.
7.2. Indebtedness. No Borrower will, and each Borrower will cause its
Subsidiaries not to, create, incur, assume or suffer to exist any Indebtedness
other than:
(i) Indebtedness incurred under this Agreement, the Notes
and the Subsidiary Guaranty;
(ii) Indebtedness existing on the Closing Date and described
in Section 7.2 and renewals, extensions, modifications and replacements
thereof which do not increase the principal amount thereof;
(iii) accrued expenses (including salaries, accrued vacation
and other compensation), current trade or other accounts payable and
other current liabilities arising in the ordinary course of business
and not incurred through the borrowing of money, provided that the same
shall be paid when due except to the extent being contested in good
faith and by appropriate proceedings;
(iv) loans and advances by any Borrower Affiliate to any
other Borrower Affiliate; provided that any such loan or advance is
subordinated in right and time of payment to the Obligations and is
evidenced by a promissory note, in form and substance satisfactory to
the Agent;
(v) purchase money Indebtedness of the Borrowers and their
Subsidiaries incurred solely to finance the payment of all or part of
the purchase price of any equipment, real property or other fixed
assets acquired in the ordinary course of business, including
Indebtedness in respect of capital lease obligations, and any renewals,
refinancings or replacements thereof (subject to the limitations on the
principal amount thereof set forth in this clause (vii)), which
Indebtedness shall not exceed $5,000,000 in aggregate principal amount
outstanding at any time; and
(vi) other unsecured Indebtedness not exceeding $5,000,000 in
aggregate principal amount outstanding at any time.
7.3. Liens. No Borrower will, and each Borrower will cause its
Subsidiaries not to, directly or indirectly, make, create, incur, assume or
suffer to exist, any Lien upon or with respect to any part of its property or
assets, whether now owned or hereafter acquired, or file or permit the filing
of, or permit to remain in effect, any financing statement or other similar
notice of any Lien with respect to any such property, asset, income or profits
under the Uniform Commercial Code of any state or under any similar recording or
notice statute, or agree to do any of the foregoing, other than the following
(collectively, "Permitted Liens"):
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(i) Liens in existence on the Closing Date and set forth on
Schedule 7.3 securing Indebtedness permitted by clause (ii) of Section
7.2; provided that no such Lien is amended after the date of this
Agreement to cover any additional property or to secure additional
Indebtedness;
(ii) Liens imposed by law, such as Liens of carriers,
warehousemen, mechanics, materialmen and landlords, and other similar
Liens incurred in the ordinary course of business for sums not
constituting borrowed money that are not overdue for a period of more
than thirty (30) days or that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required);
(iii) Liens (other than any Lien imposed by ERISA, the
creation or incurrence of which would result in an Event of Default
under Section 8.1(i)) incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure the
performance of letters of credit, bids, tenders, statutory obligations,
surety and appeal bonds, leases, government contracts and other similar
obligations (other than obligations for borrowed money) entered into in
the ordinary course of business;
(iv) Liens for taxes, assessments or other governmental
charges or statutory obligations that are not delinquent or remain
payable without any penalty or that are being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required);
(v) Liens securing the purchase money Indebtedness permitted
under clause (v) of Section 7.2; provided that any such Lien (a) shall
attach to such property concurrently with or within ten (10) days after
the acquisition thereof by such Borrower Affiliate, (b) shall not
exceed the lesser of (y) the fair market value of such property or (z)
the cost thereof to such Borrower Affiliate and (c) shall not encumber
any other property of any Borrower Affiliate;
(vi) any attachment or judgment Lien not constituting an
Event of Default under Section 8.1(h) that is being contested in good
faith by appropriate proceedings and for which adequate reserves have
been established in accordance with GAAP (if so required);
(vii) Liens arising from the filing, for notice purposes only,
of financing statements in respect of true leases;
(viii) with respect to any real property occupied by the
Borrowers or any of their Subsidiaries, all easements, rights of way,
licenses and similar encumbrances on title that do not materially
impair the use of such property for its intended purposes; and
(ix) other Liens securing obligations of the Borrowers and
their Subsidiaries not exceeding $5,000,000 in aggregate amount
outstanding at any time.
7.4. Disposition of Assets. No Borrower will, and each Borrower will
cause its Subsidiaries not to, sell, assign, lease, convey, transfer or
otherwise dispose of (whether in one or a series of transactions) all or any
portion of its assets, business or properties (including, without limitation,
any Capital Stock of any Subsidiary), or enter into any arrangement with any
Person providing for the lease by any Borrower Affiliate as lessee of any asset
that has been sold or
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transferred by such Borrower Affiliate to such Person, or agree to do any of the
foregoing, except for:
(i) sales of inventory in the ordinary course of business;
(ii) the sale or exchange of used or obsolete equipment to
the extent (y) the proceeds of such sale are applied towards, or such
equipment is exchanged for, replacement equipment or (z) such equipment
is no longer necessary for the operations of the applicable Borrower
Affiliate in the ordinary course of business;
(iii) the sale, lease or other disposition of assets by a
Borrower Affiliate to another Borrower Affiliate if, immediately after
giving effect thereto, no Default or Event of Default would exist; and
(iv) the sale or disposition of assets outside the ordinary
course of business for fair value and for cash, provided that (x) the
Net Cash Proceeds from such sales or dispositions are reinvested in
similar assets within 180 days of such sale or disposition or, if not
so reinvested, such Net Cash Proceeds are delivered to the Agent within
such 180 day period for application in prepayment of the Loans, (y) in
no event shall any Borrower Affiliate sell or otherwise dispose of any
of the Capital Stock of any Subsidiary of a Borrower, and (z)
immediately after giving effect thereto, no Default or Event of Default
would exist.
7.5. Investments. No Borrower will, and each Borrower will cause its
Subsidiaries not to, directly or indirectly, purchase, own, invest in or
otherwise acquire any Capital Stock, evidence of indebtedness or other
obligation or security or any interest whatsoever in any other Person, or make
or permit to exist any loans, advances or extensions of credit to, or any
investment in cash or by delivery of property in, any other Person, or purchase
or otherwise acquire (whether in one or a series of related transactions) any
portion of the assets, business or properties of another Person (including
pursuant to an Acquisition), or create or acquire any Subsidiary, or become a
partner or joint venturer in any partnership or joint venture (collectively,
"Investments"), or make a commitment or otherwise agree to do any of the
foregoing, other than:
(i) Cash Equivalents;
(ii) Investments consisting of purchases and acquisitions of
inventory, supplies, materials and equipment or licenses or leases of
intellectual property and other assets, in each case in the ordinary
course of business,
(iii) Investments consisting of loans and advances to
employees for reasonable travel, relocation and business expenses in
the ordinary course of business, loans and advances to employees
secured by shares of capital stock of Holdings or options to purchase
capital stock of Holdings and not exceeding $500,000 in aggregate
amount outstanding at any time, extensions of trade credit in the
ordinary course of business, and prepaid expenses incurred in the
ordinary course of business;
(iv) without duplication, Investments consisting of
intercompany Indebtedness permitted under clause (iv) of Section 7.2;
(v) Investments existing on the Closing Date and described in
Schedule 7.5;
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(vi) Investments consisting of loans and advances in the
ordinary course of business to Partitions secured by the assets of such
Partitions;
(vii) Investments consisting of the making of capital
contributions or the purchase of Capital Stock by any Borrower
Affiliate in any other Wholly Owned Subsidiary that is (or immediately
after giving effect to such Investment will be) a Borrower or a
Subsidiary Guarantor, provided that such Borrower complies with the
provisions of Section 5.10;
(viii) Investments (A) not exceeding $5,000,000 in an aggregate
amount outstanding at any time in equity or debt securities and (B) not
exceeding $20,000,000 in an aggregate amount outstanding at any time in
non-equity securities rated BBB+ or better by Standard & Poor's Rating
Services or Baa1 or better by Moody's Investors Service, Inc. and
equity securities in any Person with a debt rating of BBB+ or better by
Standard & Poor's Rating Service or Baa1 or better by Moody's Investor
Service, Inc.;
(ix) Investments consisting of the purchase of a minority
interest in the Capital Stock of another Person purchased with
consideration consisting solely of Capital Stock of Holdings; and
(x) Permitted Acquisitions.
7.6. Restricted Payments. (a) No Borrower will, and each Borrower will
cause its Subsidiaries not to, directly or indirectly, declare or make any
dividend payment, or make any other distribution of cash, property or assets, in
respect of any of its Capital Stock or any warrants, rights or options to
acquire its Capital Stock, or purchase, redeem, retire or otherwise acquire for
value any shares of its Capital Stock or any warrants, rights or options to
acquire its Capital Stock, or set aside funds for any of the foregoing, except
that:
(i) any Borrower may declare and make dividend payments or
other distributions payable solely in its common stock; and
(ii) each Wholly Owned Subsidiary of any Borrower may declare
and make dividend payments or other distributions to such Borrower or
another Wholly Owned Subsidiary of such Borrower, to the extent not
prohibited under applicable Requirements of Law.
(b) Each of the Borrowers will not, and will not permit or cause any of
its Subsidiaries to, make (or give any notice in respect of) any voluntary or
optional payment or prepayment of principal on any Indebtedness subordinate to
the Obligations, or directly or indirectly make any redemption (including
pursuant to any change of control provision), retirement, defeasance or other
acquisition for value of any Indebtedness subordinate to the Obligations, or
make any deposit or otherwise set aside funds for any of the foregoing purposes.
7.7. Transactions with Affiliates. No Borrower will, and each Borrower
will cause its Subsidiaries not to, enter into any transaction (including,
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service) with any officer, director, stockholder or other
Affiliate of such Borrower or any Subsidiary, except in the ordinary course of
its business and upon fair and reasonable terms that are no less favorable to it
than would obtain in a comparable arm's length transaction with a Person other
than an Affiliate of such Borrower or such Subsidiary.
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7.8. Lines of Business. No Borrower will, and each Borrower will cause
its subsidiaries not to, engage in any business other than the businesses
engaged in by it on the date hereof and businesses and activities reasonably
related thereto.
7.9. Certain Amendments. No Borrower will, and each Borrower will cause
its Subsidiaries not to amend, modify or change any provision of its articles or
certificate of incorporation or bylaws, or the terms of any class or series of
its Capital Stock, other than in a manner that could not reasonably be expected
to materially adversely affect the Lenders.
7.10. Limitation on Certain Restrictions. No Borrower will, and each
Borrower will cause its Subsidiaries not to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any restriction or
encumbrance on (i) the ability of such Borrower and its Subsidiaries to perform
and comply with their respective obligations under the Credit Documents or (ii)
the ability of any Subsidiary to make any dividend payments or other
distributions in respect of its Capital Stock, to repay Indebtedness owed to any
Borrower or any other Subsidiary, to make loans or advances to any Borrower or
any other Subsidiary, or to transfer any of its assets or properties to any
Borrower or any other Subsidiary, in each case other than such restrictions or
encumbrances existing under or by reason of the Credit Documents or applicable
Requirements of Law.
7.11. Fiscal Year. No Borrower will, and each Borrower will cause its
Subsidiaries not to, change the ending date of its fiscal year to a date other
than December 31.
7.12. Accounting Changes. No Borrower will, and each Borrower will
cause its Subsidiaries not to, make or permit any material change in its
accounting policies or reporting practices, except as may be required by GAAP,
except as may have been indicated in a separate letter dated the date hereof
from the Borrowers to the Agent.
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) Any Borrower shall fail to pay any principal of or interest on any
Loan, any fee or any other Obligation when due;
(b) Any Borrower shall fail to observe, perform or comply with any
condition, covenant or agreement contained in any of Sections 2.14, 5.1, 5.2,
5.3(i), 5.8, or 5.9 or in Article VI or Article VII;
(c) Any Borrower Affiliate shall fail to observe, perform or comply
with any condition, covenant or agreement contained in this Agreement or any of
the Credit Documents other than those enumerated in subsections (a) and (b)
above, and such failure (i) is deemed by the terms of the relevant Credit
Document to constitute an Event of Default or (ii) shall continue unremedied for
any grace period specifically applicable thereto or, if no such grace period is
applicable, for a period of thirty (30) days after the earlier of (y) the date
on which an officer of any Borrower acquires knowledge thereof and (z) the date
on which written notice thereof is delivered by the Agent or any Lender to any
Borrower;
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(d) Any representation or warranty made or deemed made by or on behalf
of any Borrower Affiliate in this Agreement, any of the other Credit Documents
or in any certificate, instrument, report or other document furnished in
connection herewith or therewith or in connection with the transactions
contemplated hereby or thereby shall prove to have been false or misleading in
any material respect as of the time made, deemed made or furnished;
(e) Any Borrower Affiliate shall (i) fail to pay when due (whether by
scheduled maturity, acceleration or otherwise and after giving effect to any
applicable grace period) any principal of or interest on any Indebtedness (other
than the Indebtedness incurred pursuant to this Agreement) having an aggregate
principal amount of at least $5,000,000 or (ii) fail to observe, perform or
comply with any condition, covenant or agreement contained in any agreement or
instrument evidencing or relating to any such Indebtedness, or any other event
shall occur or condition exist in respect thereof, and the effect of such
failure, event or condition is to cause, or permit the holder or holders of such
Indebtedness (or a trustee or agent on its or their behalf) to cause (with the
giving of notice, lapse of time, or both), such Indebtedness to become due, or
to be prepaid, redeemed, purchased or defeased, prior to its stated maturity;
(f) Any Borrower Affiliate shall (i) file a voluntary petition or
commence a voluntary case seeking liquidation, winding-up, reorganization,
dissolution, arrangement, readjustment of debts or any other relief under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, (ii) consent to the institution of, or fail to
controvert in a timely and appropriate manner, any petition or case of the type
described in subsection (g) below, (iii) apply for or consent to the appointment
of or taking possession by a custodian, trustee, receiver or similar official
for or of itself or all or a substantial part of its properties or assets, (iv)
fail generally, or admit in writing its inability, to pay its debts generally as
they become due, (v) make a general assignment for the benefit of creditors or
(vi) take any corporate action to authorize or approve any of the foregoing;
(g) Any involuntary petition or case shall be filed or commenced
against any Borrower Affiliate seeking liquidation, winding-up, reorganization,
dissolution, arrangement, readjustment of debts, the appointment of a custodian,
trustee, receiver or similar official for it or all or a substantial part of its
properties or any other relief under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, and
such petition or case shall continue undismissed and unstayed for a period of
sixty (60) days; or an order, judgment or decree approving or ordering any of
the foregoing shall be entered in any such proceeding;
(h) Any one or more money judgments, writs or warrants of attachment,
executions or similar processes involving an aggregate amount (exclusive of
amounts fully bonded or covered by insurance as to which the surety or insurer,
as the case may be, has acknowledged its liability in writing) in excess of
$1,000,000 shall be entered or filed against any Borrower Affiliate or any of
their respective properties and the same shall not be dismissed, stayed or
discharged for a period of thirty (30) days or in any event later than five days
prior to the date of any proposed sale thereunder;
(i) Any ERISA Event shall occur or exist with respect to any Plan or
Multiemployer Plan and, as a result thereof, together with all other ERISA
Events then existing, the Borrowers and their ERISA Affiliates would be
reasonably likely to incur liability to any one or more Plans or Multiemployer
Plans or to the PBGC (or to any combination thereof) in excess of $1,000,000;
(j) Any one or more licenses, permits, accreditations or authorizations
of any Borrower Affiliate shall be suspended, limited or terminated or shall not
be renewed, or any other action shall
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be taken, by any Governmental Authority in response to any alleged failure by
any Borrower Affiliate to be in compliance with applicable Requirements of Law
(including, without limitation, applicable laws and regulations relating to
telecommunications), and such action, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect;
(k) Any one or more Environmental Claims shall have been asserted
against any Borrower Affiliate (or a reasonable basis shall exist therefor);
such Borrower Affiliate would be reasonably likely to incur liability as a
result thereof; and such liability would be reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect;
(l) Any agreement or contract to which any Borrower Affiliate is a
party shall be terminated or shall, for any other reason, fail to be in full
force and effect and enforceable in accordance with its terms, and such event or
condition, together with all other such events or conditions, if any, would be
reasonably likely to have a Material Adverse Effect;
(m) AT&T shall have terminated its services under any contract tariff
with any Borrower and such Borrower shall not have replaced such services with
other long distance providers within 30 days thereafter.
(n) Dan Borislow shall have ceased to be the chief executive officer of
the Borrower or to continue to perform his current duties as chief executive
officer, and the Borrower shall have failed to hire or appoint a replacement
reasonably satisfactory to the Required Lenders within 120 days thereafter; or
(o) Any of the following shall occur: (i) any Person or group of
Persons acting in concert as a partnership or other group, other than Dan
Borislow, shall, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, have become, after the
date hereof, the "beneficial owner" (within the meaning of such term under Rule
13d-3 under the Exchange Act) of securities of any Borrower representing 20% or
more of the combined voting power of the then outstanding securities of such
Borrower ordinarily (and apart from rights accruing under special circumstances)
having the right to vote in the election of directors; or (ii) the Board of
Directors of any Borrower shall cease to consist of a majority of the
individuals who constituted the Board of Directors as of the date hereof or who
shall have become a member thereof subsequent to the date hereof after having
been nominated, or otherwise approved in writing, by at least a majority of
individuals who constituted the Board of Directors of such Borrower as of the
date hereof (or their replacements approved as herein required).
8.2. Remedies: Termination of Commitments, Acceleration, etc. Upon and
at any time after the occurrence and during the continuance of any Event of
Default, the Agent shall at the direction, or may with the consent, of the
Required Lenders, take any or all of the following actions at the same or
different times:
(a) Declare the Commitments to be terminated, whereupon the same shall
terminate (provided that, upon the occurrence of an Event of Default pursuant to
Section 8.1(f) or Section 8.1(g), the Commitments shall automatically be
terminated);
(b) Declare all or any part of the outstanding principal amount of the
Loans to be immediately due and payable, whereupon the principal amount so
declared to be immediately due and payable, together with all interest accrued
thereon and all other amounts payable under this Agreement, the Notes and the
other Credit Documents, shall become immediately due and payable
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without presentment, demand, protest, notice of intent to accelerate or other
notice or legal process of any kind, all of which are hereby knowingly and
expressly waived by the Borrower (provided that, upon the occurrence of an Event
of Default pursuant to Section 8.1(f) or Section 8.1(g), all of the outstanding
principal amount of the Loans and all other amounts described in this subsection
(b) shall automatically become immediately due and payable without presentment,
demand, protest, notice of intent to accelerate or other notice or legal process
of any kind, all of which are hereby knowingly and expressly waived by the
Borrowers); and
(c) Exercise all rights and remedies available to it under this
Agreement, the other Credit Documents and applicable law.
8.3. Remedies: Set-Off. In addition to all other rights and remedies
available under the Credit Documents or applicable law or otherwise, upon and at
any time after the occurrence and during the continuance of any Event of
Default, each Lender may, and each is hereby authorized by the Borrowers, at any
such time and from time to time, to the fullest extent permitted by applicable
law, without presentment, demand, protest or other notice of any kind, all of
which are hereby knowingly and expressly waived by the Borrowers, to set off and
to apply any and all deposits (general or special, time or demand, provisional
or final) and any other property at any time held (including at any branches or
agencies, wherever located), and any other indebtedness at any time owing, by
such Lender to or for the credit or the account of any Borrower against any or
all of the Obligations to such Lender now or hereafter existing, whether or not
such Obligations may be contingent or unmatured, each Borrower hereby granting
to each Lender a continuing security interest in and Lien upon all such deposits
and other property as security for such Obligations. Each Lender agrees promptly
to notify the Borrowers and the Agent after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application.
ARTICLE IX
THE AGENT
9.1. Appointment. Each Lender hereby irrevocably appoints and
authorizes First Union to act as Agent hereunder and under the other Credit
Documents and to take such actions as agent on its behalf hereunder and under
the other Credit Documents, and to exercise such powers and to perform such
duties, as are specifically delegated to the Agent by the terms hereof or
thereof, together with such other powers and duties as are reasonably incidental
thereto.
9.2. Nature of Duties. The Agent shall have no duties or
responsibilities other than those expressly set forth in this Agreement and the
other Credit Documents. The Agent shall not have, by reason of this Agreement or
any other Credit Document, a fiduciary relationship in respect of any Lender;
and nothing in this Agreement or any other Credit Document, express or implied,
is intended to or shall be so construed as to impose upon the Agent any
obligations or liabilities in respect of this Agreement or any other Credit
Document except as expressly set forth herein or therein. The Agent may execute
any of its duties under this Agreement or any other Credit Document by or
through agents or attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact that it selects with
reasonable care. The Agent shall be entitled to consult with legal counsel,
independent public accountants and other experts selected by it with respect to
all matters pertaining to this Agreement and the other Credit Documents and its
duties hereunder and thereunder and shall not be liable for any action taken or
omitted to be taken in good faith by it in
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accordance with the advice of such counsel, accountants or experts. The Lenders
hereby acknowledge that the Agent shall not be under any duty to take any
discretionary action permitted to be taken by it pursuant to the provisions of
this Agreement or any other Credit Document unless it shall be requested in
writing to do so by the Required Lenders (or, where a higher percentage of the
Lenders is expressly required hereunder, such Lenders).
9.3. Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action taken or omitted to be taken by it or such Person under or
in connection with the Credit Documents, except for its or such Person's own
gross negligence or willful misconduct, (ii) responsible in any manner to any
Lender for any recitals, statements, information, representations or warranties
herein or in any other Credit Document or in any document, instrument,
certificate, report or other writing delivered in connection herewith or
therewith, for the execution, effectiveness, genuineness, validity,
enforceability or sufficiency of this Agreement or any other Credit Document, or
for the financial condition of any Borrower Affiliate or any other Person, or
(iii) required to ascertain or make any inquiry concerning the performance or
observance of any of the terms, provisions or conditions of this Agreement or
any other Credit Document or the existence or possible existence of any Default
or Event of Default, or to inspect the properties, books or records of the
Borrowers or any of their Subsidiaries.
9.4. Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any notice, statement, consent or other
communication (including, without limitation, any thereof by telephone,
telecopy, telex, telegram or cable) believed by it in good faith to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons. The Agent may deem and treat each Lender as the owner of its interest
hereunder for all purposes hereof unless and until a written notice of the
assignment, negotiation or transfer thereof shall have been given to the Agent
in accordance with the provisions of this Agreement. The Agent shall be entitled
to refrain from taking or omitting to take any action in connection with this
Agreement or any other Credit Document (i) if such action or omission would, in
the reasonable opinion of the Agent, violate any applicable law or any provision
of this Agreement or any other Credit Document or (ii) unless and until it shall
have received such advice or concurrence of the Required Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder, such Lenders)
as it deems appropriate or it shall first have been indemnified to its
satisfaction by the Lenders against any and all liability and expense (other
than liability and expense arising from its own gross negligence or willful
misconduct) that may be incurred by it by reason of taking, continuing to take
or omitting to take any such action. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the Agent as a result of the
Agent's acting or refraining from acting hereunder or under any other Credit
Document in accordance with the instructions of the Required Lenders (or, where
a higher percentage of the Lenders is expressly required hereunder, such
Lenders), and such instructions and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders (including all subsequent
Lenders).
9.5. Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representation
or warranty to it and that no act by the Agent or any such Person hereinafter
taken, including any review of the affairs of the Borrowers and their
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Lender. Each Lender represents to the Agent that (i) it has,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
properties, financial
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and other condition and creditworthiness of the Borrower and its Subsidiaries
and made its own decision to enter into this Agreement and extend credit to the
Borrower hereunder, and (ii) it will, independently and without reliance upon
the Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action hereunder and under the
other Credit Documents and to make such investigation as it deems necessary to
inform itself as to the business, prospects, operations, properties, financial
and other condition and creditworthiness of the Borrowers and their
Subsidiaries. Except as expressly provided in this Agreement and the other
Credit Documents, the Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information concerning the business, prospects, operations, properties,
financial or other condition or creditworthiness of any Borrower Affiliate or
any other Person that may at any time come into the possession of the Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
9.6. Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default unless the Agent
shall have received written notice from a Borrower or a Lender referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent will give notice thereof to the Lenders as soon as reasonably
practicable; provided, however, that if any such notice has also been furnished
to the Lenders, the Agent shall have no obligation to notify the Lenders with
respect thereto. The Agent shall (subject to Sections 9.4 and 10.6) take such
action with respect to such Default or Event of Default as shall reasonably be
directed by the Required Lenders; provided that, unless and until the Agent
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Lenders.
9.7. Indemnification. To the extent the Agent is not reimbursed by or
on behalf of the Borrowers, and without limiting the joint and several
obligations of the Borrowers to do so, the Lenders agree (i) to indemnify the
Agent and its officers, directors, employees, agents, attorneys-in-fact and
Affiliates, ratably in proportion to their respective percentages as used in
determining the Required Lenders as of the date of determination, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including, without limitation,
attorneys' fees and expenses) or disbursements of any kind or nature whatsoever
that may at any time (including, without limitation, at any time following the
repayment in full of the Loans and the termination of the Commitments) be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement or any other Credit Document or any documents
contemplated by or referred to herein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Agent under or in connection with
any of the foregoing, and (ii) to reimburse the Agent upon demand, ratably in
proportion to their respective percentages as used in determining the Required
Lenders as of the date of determination, for any expenses incurred by the Agent
in connection with the preparation, negotiation, execution, delivery,
administration, amendment, modification, waiver or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement or any of the other Credit
Documents (including, without limitation, reasonable attorneys' fees and
expenses and compensation of agents and employees paid for services rendered on
behalf of the Lenders); provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
resulting from the gross negligence or willful misconduct of the party to be
indemnified.
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9.8. The Agent in its Individual Capacity. With respect to its
Commitment, the Loans made by it and the Note or Notes issued to it, the Agent
in its individual capacity and not as Agent shall have the same rights and
powers under the Credit Documents as any other Lender and may exercise the same
as though it were not performing the agency duties specified herein; and the
terms "Lenders," "Required Lenders," "holders of Notes" and any similar terms
shall, unless the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent and its Affiliates may accept deposits from, lend
money to, make investments in, and generally engage in any kind of banking,
trust, financial advisory or other business with the Borrower, any of its
Subsidiaries or any of their respective Affiliates as if the Agent were not
performing the agency duties specified herein, and may accept fees and other
consideration from any of them for services in connection with this Agreement
and otherwise without having to account for the same to the Lenders.
9.9. Successor Agent. The Agent may resign at any time by giving ten
(10) days' prior written notice to the Borrowers and the Lenders. Upon any such
notice of resignation, the Required Lenders will, with the prior written consent
of the Borrowers (which consent shall not be unreasonably withheld), appoint
from among the Lenders a successor to the Agent (provided that the Borrowers'
consent shall not be required in the event a Default or Event of Default shall
have occurred and be continuing). In connection with such appointment, the
Lenders will consider the recommendation of the Borrowers. If no successor to
the Agent shall have been so appointed by the Required Lenders and shall have
accepted such appointment within such ten-day period, then the retiring Agent
may, on behalf of the Lenders and after consulting with the Lenders and the
Borrowers, appoint a successor Agent from among the Lenders. Upon the acceptance
of any appointment as Agent by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder and under the other Credit Documents.
After any retiring Agent's resignation as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent. If no successor to the Agent has accepted appointment as
Agent by the thirtieth (30th) day following a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective, and the Lenders shall thereafter perform all of the duties of
the Agent hereunder and under the other Credit Documents until such time, if
any, as the Required Lenders appoint a successor Agent as provided for
hereinabove.
ARTICLE X
MISCELLANEOUS
10.1. Fees and Expenses. Each of the Borrowers, jointly and severally,
agrees (i) whether or not the transactions contemplated by this Agreement shall
be consummated, to pay upon demand all reasonable out-of-pocket costs and
expenses of the Agent (including, without limitation, the reasonable fees and
expenses of counsel to the Agent) in connection with (y) the Agent's due
diligence investigation in connection with, and the preparation, negotiation,
execution, delivery and syndication of, this Agreement and the other Credit
Documents, and any amendment, modification or waiver hereof or thereof or
consent with respect hereto or thereto, and (z) the administration, monitoring
and review of the Loans (including, without limitation, reasonable out-of-pocket
expenses for travel, meals, long-distance telephone calls, wire transfers,
facsimile transmissions and copying and with respect to the engagement of
appraisers, consultants, auditors or similar Persons by the Agent at any time,
whether before or after the Closing, to render opinions concerning the
Borrower's financial condition, (ii) to pay upon demand all reasonable
out-of-pocket
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costs and expenses of the Agent and each Lender (including, without limitation,
reasonable attorneys' fees and expenses) in connection with (y) any refinancing
or restructuring of the credit arrangement provided under this Agreement,
whether in the nature of a "work-out," in any insolvency or bankruptcy
proceeding or otherwise and whether or not consummated, and (z) the enforcement,
attempted enforcement or preservation of any rights or remedies under this
Agreement or any of the other Credit Documents, whether in any action, suit or
proceeding (including any bankruptcy or insolvency proceeding) or otherwise, and
(iii) to pay and hold the Agent and each Lender harmless from and against all
liability for any intangibles, documentary, stamp or other similar taxes, fees
and excises, if any, including any interest and penalties, and any finder's or
brokerage fees, commissions and expenses (other than any fees, commissions or
expenses of finders or brokers engaged by the Agent or any Lender), that may be
payable in connection with the transactions contemplated by this Agreement and
the other Credit Documents.
10.2. Indemnification. Each of the Borrowers jointly and severally
agrees, whether or not the transactions contemplated by this Agreement shall be
consummated, to indemnify and hold the Agent and each Lender and each of their
respective directors, officers, employees, agents and Affiliates (each, an
"Indemnified Person") harmless from and against any and all claims, losses,
damages, obligations, liabilities, penalties, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) of any kind or
nature whatsoever, whether direct, indirect or consequential (collectively,
"Indemnified Costs"), that may at any time be imposed on, incurred by or
asserted against any such Indemnified Person as a result of, arising from or in
any way relating to the preparation, execution, performance or enforcement of
this Agreement or any of the other Credit Documents, any of the transactions
contemplated herein or therein or any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of any Loans
(including, without limitation, in connection with the actual or alleged
generation, presence, discharge or release of any Hazardous Substances on, into
or from, or the transportation of Hazardous Substances to or from, any real
property at any time owned or leased by any Borrower Affiliate, any other
Environmental Claims or any violation of or liability under any Environmental
Law), or any action, suit or proceeding (including any inquiry or investigation)
by any Person, whether threatened or initiated, related to any of the foregoing,
and in any case whether or not such Indemnified Person is a party to any such
action, proceeding or suit or a subject of any such inquiry or investigation;
provided, however, that no Indemnified Person shall have the right to be
indemnified hereunder for any Indemnified Costs to the extent resulting from the
gross negligence or willful misconduct of such Indemnified Person. All of the
foregoing Indemnified Costs of any Indemnified Person shall be paid or
reimbursed by the Borrowers, as and when incurred and upon demand.
10.3. Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE
OTHER CREDIT DOCUMENTS HAVE BEEN EXECUTED, DELIVERED AND ACCEPTED IN, AND SHALL
BE DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF). EACH
BORROWER HEREBY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE COURT
WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN
THE WESTERN DISTRICT OF THE STATE OF NORTH CAROLINA FOR ANY PROCEEDING
INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS, OR ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS.
EACH BORROWER IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF
APPEAL) BY ANY JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES
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ANY OBJECTION THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE
OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. EACH BORROWER
CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL
DIRECTED TO IT AT ITS ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE
(3) BUSINESS DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE
PREPAID AND PROPERLY ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT
TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT
OF THE AGENT OR ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST ANY
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
10.4. Arbitration; Preservation and Limitation of Remedies. (a) Upon
demand of any party hereto, whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or relating to this Agreement or any other Credit Document ("Disputes")
between or among the Borrowers, their Subsidiaries, the Agent and the Lenders,
or any of them, shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
documents executed in the future, or claims arising out of or connected with the
transactions contemplated by this Agreement and the other Credit Documents.
Arbitration shall be conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA"), as in effect from time to time, and Title 9 of the U.S.
Code, as amended. All arbitration hearings shall be conducted in the city in
which the principal office of the Agent is located. The expedited procedures set
forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims
of less than $1,000,000. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any court having
jurisdiction. The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted.
(b) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Any party hereto shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights of self-help, including peaceful
occupation of real property and collection of rents, set-off, and peaceful
possession of personal property; (ii) obtaining provisional or ancillary
remedies, including injunctive relief, sequestration, garnishment, attachment,
appointment of a receiver and filing an involuntary bankruptcy proceeding; and
(iii) when applicable, a judgment by confession of judgment. Preservation of
these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute. The parties hereto agree
that no party shall have a remedy of punitive or exemplary damages against any
other party in any Dispute, and each party hereby waives any right or claim to
punitive or exemplary damages that it has now or that may arise in the future in
connection with any Dispute, whether such Dispute is resolved by arbitration or
judicially.
10.5. Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex, facsimile
transmission or cable communication) and mailed,
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telegraphed, telexed, telecopied, cabled or delivered to the party to be
notified at the following addresses:
(a) if to the Borrowers, to Tel-Save Holdings, Inc., 6805 Route
202, New Hope, Pennsylvania 18938, Attention: Aloysius T. Lawn, Esq.,
Telecopy No. (215) 862- 1085, with a copy to Arnold & Porter, 399 Park
Avenue, New York, New York 10022-4690, Attention: Michael W. Oshima,
Telecopy No. (212) 715-1399;
(b) if to the Agent, to First Union National Bank, One First
Union Center, DC-5, 301 South College Street, Charlotte, North
Carolina 28288-0608, Attention: Hilda Weathers, Telecopy No. (704)
374-4092, with a copy to Robinson, Bradshaw & Hinson, P.A., 101 N.
Tryon Street, Suite 1900, Charlotte, North Carolina 28246, Attention:
Benjamin W. Baldwin, Esq., Telecopy No. (704) 378-4000; and
(c) if to any Lender, to it at the address set forth on its
signature page hereto (or if to any Lender not a party hereto as of
the date hereof, at the address set forth in its Assignment and
Acceptance);
or in each case, to such other address as any party may designate for itself by
like notice to all other parties hereto. All such notices and communications
shall be deemed to have been given (i) if mailed as provided above by any method
other than overnight delivery service, on the third Business Day after deposit
in the mails, (ii) if mailed by overnight delivery service, telegraphed,
telexed, telecopied or cabled, when delivered for overnight delivery, delivered
to the telegraph company, confirmed by telex answerback, transmitted by
telecopier or delivered to the cable company, respectively, or (iii) if
delivered by hand, upon delivery; provided that notices and communications to
the Agent shall not be effective until received by the Agent.
10.6. Amendments, Waivers, etc. No amendment, modification, waiver or
discharge or termination of, or consent to any departure by the Borrowers from,
any provision of this Agreement or any other Credit Document, shall be effective
unless in a writing signed by the Required Lenders (or by the Agent at the
direction or with the consent of the Required Lenders), and then the same shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such amendment, modification, waiver,
discharge, termination or consent shall:
(a) unless agreed to by each Lender directly affected thereby, (i)
reduce or forgive the principal amount of any Loan, reduce the rate of or
forgive any interest thereon, or reduce or forgive any fees or other Obligations
(other than fees payable to the Agent for its own account), or (ii) extend the
Maturity Date or any other date fixed for the payment of any principal of or
interest on any Loan (other than additional interest payable under Section
2.8(b) at the election of the Required Lenders, as provided therein), any fees
(other than fees payable to the Agent for its own account) or any other
Obligations;
(b) unless agreed to by all of the Lenders, (i) increase or extend any
Commitment of any Lender (it being understood that a waiver of any Event of
Default, if agreed to by the requisite Lenders hereunder, shall not constitute
such an increase), (ii) change the percentage of the aggregate Commitments or of
the aggregate unpaid principal amount of the Loans, or the number or percentage
of Lenders, that shall be required for the Lenders or any of them to take or
approve, or direct the Agent to take, any action hereunder (including as set
forth in the definition of "Required Lenders"), (iii) except as may be otherwise
specifically provided in this Agreement or in any other Credit
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Document, release any Subsidiary Guarantor from its obligations under the
Subsidiary Guaranty, or (iv) change any provision of Section 2.15 or this
Section 10.6; and
(c) unless agreed to by the Agent in addition to the Lenders required
as provided hereinabove to take such action, affect the respective rights or
obligations of the Agent hereunder or under any of the other Credit Documents.
10.7. Assignments, Participations. (a) Each Lender may assign to one or
more other Eligible Assignees (each, an "Assignee") all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment, the outstanding Loans made by it and the Note or
Notes held by it); provided, however, that (i) any such assignment (other than
an assignment to a Lender or an Affiliate of a Lender) shall not be made without
the prior written consent of the Agent and the Borrowers (to be evidenced by its
counterexecution of the relevant Assignment and Acceptance), which consent shall
not be unreasonably withheld (provided that the Borrowers' consent shall not be
required in the event a Default or Event of Default shall have occurred and be
continuing), (ii) each such assignment shall be of a uniform, and not varying,
percentage of all of the assigning Lender's rights and obligations under this
Agreement, (iii) except in the case of an assignment to a Lender or an Affiliate
of a Lender, no such assignment shall be in an aggregate principal amount
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) less than $5,000,000, determined by combining the amount of the
assigning Lender's outstanding Loans and Unutilized Commitment being assigned
pursuant to such assignment (or, if less, the entire Commitment of the assigning
Lender), and (iv) the parties to each such assignment will execute and deliver
to the Agent, for its acceptance and recording in the Register, an Assignment
and Acceptance, together with any Note or Notes subject to such assignment, and
will pay a nonrefundable processing fee of $3,000 to the Agent for its own
account. Upon such execution, delivery, acceptance and recording of the
Assignment and Acceptance, from and after the effective date specified therein,
which effective date shall be at least five Business Days after the execution
thereof (unless the Agent shall otherwise agree), (A) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of the assigning Lender hereunder with respect
thereto and (B) the assigning Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (other than rights under the provisions of
this Agreement and the other Credit Documents relating to indemnification or
payment of fees, costs and expenses, to the extent such rights relate to the
time prior to the effective date of such Assignment and Acceptance) and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of such
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto). The terms and provisions of each Assignment
and Acceptance shall, upon the effectiveness thereof, be incorporated into and
made a part of this Agreement, and the covenants, agreements and obligations of
each Lender set forth therein shall be deemed made to and for the benefit of the
Agent and the other parties hereto as if set forth at length herein.
(b) The Agent will maintain at its address for notices referred to
herein a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amount of the Loans owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all
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purposes of this Agreement. The Register shall be available for inspection by
the Borrowers and each Lender at any reasonable time and from time to time upon
reasonable prior notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an Assignee and, if required,
counterexecuted by the Borrowers, together with the Note or Notes subject to
such assignment and the processing fee referred to in subsection (a) above, the
Agent will (i) accept such Assignment and Acceptance, (ii) on the effective date
thereof, record the information contained therein in the Register and (iii) give
notice thereof to the Borrower and the Lenders. Within five (5) Business Days
after its receipt of such notice, the Borrowers, at their own expense, will
execute and deliver to the Agent, in exchange for the surrendered Note or Notes,
a new Note or Notes to the order of the Assignee (and, if the assigning Lender
has retained any portion of its rights and obligations hereunder, to the order
of the assigning Lender), prepared in accordance with the provisions of Section
2.4 as necessary to reflect, after giving effect to the assignment, the
Commitments of the Assignee and (to the extent of any retained interests) the
assigning Lender, dated the date of the replaced Note or Notes and otherwise in
substantially the form of Exhibit A. The Agent will return cancelled Notes to
the Borrowers.
(d) Each Lender may, without the consent of the Borrowers, the Agent or
any other Lender, sell to one or more other Persons (each, a "Participant")
participations in any portion comprising less than all of its rights and
obligations under this Agreement (including, without limitation, a portion of
its Commitment, the outstanding Loans made by it and the Note or Notes held by
it); provided, however, that (i) such Lender's obligations under this Agreement
shall remain unchanged and such Lender shall remain solely responsible for the
performance of such obligations, (ii) no Lender shall sell any participation
that, when taken together with all other participations, if any, sold by such
Lender, covers all of such Lender's rights and obligations under this Agreement,
(iii) the Borrowers, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and no Lender shall permit any Participant to
have any voting rights or any right to control the vote of such Lender with
respect to any amendment, modification, waiver, consent or other action
hereunder or under any other Credit Document (except as to actions that would
(x) reduce or forgive the principal amount of any Loan, reduce the rate of or
forgive any interest thereon, or reduce or forgive any fees or other
Obligations, (y) extend the Maturity Date or any other date fixed for the
payment of any principal of or interest on any Loan, any fees or any other
Obligations, or (z) increase or extend any Commitment of any Lender), and (iv)
no Participant shall have any rights under this Agreement or any of the other
Credit Documents, each Participant's rights against the granting Lender in
respect of any participation to be those set forth in the participation
agreement, and all amounts payable by the Borrowers hereunder shall be
determined as if such Lender had not granted such participation. Notwithstanding
the foregoing, each Participant shall have the rights of a Lender for purposes
of Sections 2.16(a), 2.16(b), 2.17, 2.18 and 8.3, and shall be entitled to the
benefits thereto, to the extent that the Lender granting such participation
would be entitled to such benefits if the participation had not been made;
provided that no Participant shall be entitled to receive any greater amount
pursuant to any of such Sections than the Lender granting such participation
would have been entitled to receive in respect of the amount of the
participation made by such Lender to such Participant had such participation not
been made.
(e) Nothing in this Agreement shall be construed to prohibit any Lender
from pledging or assigning all or any portion of its rights and interest
hereunder or under any Note to any Federal Reserve Bank as security for
borrowings therefrom; provided, however, that no such pledge or assignment shall
release a Lender from any of its obligations hereunder.
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(f) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section,
disclose to the Assignee or Participant or proposed Assignee or Participant any
information relating to the Borrowers and their Subsidiaries furnished to it by
or on behalf of any other party hereto, provided that such Assignee or
Participant or proposed Assignee or Participant agrees in writing to keep such
information confidential to the same extent required of the Lenders under
Section 10.13.
10.8. No Waiver. The rights and remedies of the Agent and the Lenders
expressly set forth in this Agreement and the other Credit Documents are
cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the
part of the Agent or any Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or be construed to be a
waiver of any Default or Event of Default. No course of dealing between any of
the Borrowers and the Agent or the Lenders or their agents or employees shall be
effective to amend, modify or discharge any provision of this Agreement or any
other Credit Document or to constitute a waiver of any Default or Event of
Default. No notice to or demand upon the Borrowers in any case shall entitle the
Borrowers to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of the Agent or any Lender to
exercise any right or remedy or take any other or further action in any
circumstances without notice or demand.
10.9. Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, and all references herein to any party shall be
deemed to include its successors and assigns; provided, however, that (i) the
Borrowers shall not sell, assign or transfer any of their rights, interests,
duties or obligations under this Agreement without the prior written consent of
all of the Lenders and (ii) any Assignees and Participants shall have such
rights and obligations with respect to this Agreement and the other Credit
Documents as are provided for under and pursuant to the provisions of Section
10.7.
10.10. Survival. All representations, warranties and agreements made by
or on behalf of the Borrowers or any of their Subsidiaries in this Agreement and
in the other Credit Documents shall survive the execution and delivery hereof or
thereof and the making and repayment of the Loans. In addition, notwithstanding
anything herein or under applicable law to the contrary, the provisions of this
Agreement and the other Credit Documents relating to indemnification or payment
of fees, costs and expenses, including, without limitation, the provisions of
Sections 2.16(a), 2.16(b), 2.17, 2.18, 9.7, 10.1 and 10.2, shall survive the
payment in full of all Loans, the termination of the Commitments, and any
termination of this Agreement or any of the other Credit Documents.
10.11. Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
10.12. Construction. The headings of the various articles, sections and
subsections of this Agreement have been inserted for convenience only and shall
not in any way affect the meaning or construction of any of the provisions
hereof. Except as otherwise expressly provided herein and in the other Credit
Documents, in the event of any inconsistency or conflict between any provision
of
-54-
<PAGE>
this Agreement and any provision of any of the other Credit Documents, the
provision of this Agreement shall control.
10.13. Confidentiality. Each Lender agrees to keep confidential,
pursuant to its customary procedures for handling confidential information of a
similar nature and in accordance with safe and sound banking practices, all
nonpublic information provided to it by or on behalf of the Borrowers or any of
their Subsidiaries in connection with this Agreement or any other Credit
Document; provided, however, that any Lender may disclose such information (i)
to its directors, employees and agents and to its auditors, counsel and other
professional advisors in connection with the performance of such Lender's
obligations hereunder, (ii) at the demand or request of any bank regulatory
authority, court or other Governmental Authority having or asserting
jurisdiction over such Lender, as may be required pursuant to subpoena or other
legal process, or otherwise in order to comply with any applicable Requirement
of Law, (iii) in connection with any proceeding to enforce its rights hereunder
or under any other Credit Document or any other litigation or proceeding related
hereto or to which it is a party, (iv) to the Agent or any other Lender, (v) to
the extent the same has become publicly available other than as a result of a
breach of this Agreement and (vi) pursuant to and in accordance with the
provisions of Section 10.7(f). Each Borrower agrees and consents to Agent's
disclosure of information on the specific terms of this transaction to Gold
Sheets and other similar bank trade publications. Such information will consist
of deal terms and other information customarily found in such publications.
10.14. Counterparts; Effectiveness. This Agreement may be executed in
any number of counterparts and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto and receipt by the Agent and the Borrowers of written
or telephonic notification of such execution and authorization of delivery
thereof.
10.15. The Borrowers as Co-Obligors.
(a) The Borrowers are accepting the joint and several liability
provided for hereunder in consideration of the financial accommodations provided
and to be provided by the Lenders under this Agreement for the mutual benefit,
directly and indirectly, of the Borrowers and in consideration of each of the
undertakings of each Borrower herein to accept joint and several liability for
their mutual benefit, for the Obligations of each of the other of them.
(b) The Borrowers, jointly and severally as hereinafter described,
hereby irrevocably and unconditionally accept, not merely as surety but also as
co-debtors, joint and several liability with respect to the payment and
performance of all of the Obligations under all of the Credit Documents, it
being the intention of the parties hereto that all the Obligations shall be the
joint and several obligations of all the Borrowers without preference or
distinction among them, except for those obligations expressly set forth as only
applying to a single Borrower.
(c) If and to the extent that any Borrower shall fail to make any
payment with respect to any of the Obligations owed by it as and when due or to
perform any of such Obligations in accordance with the terms thereof, then in
each such event each of the other Borrowers will, forthwith upon demand by the
Lenders, make such payment with respect to, or perform, such obligation pursuant
to the terms thereof.
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<PAGE>
(d) Each Borrower hereby acknowledges and consents to all provisions of
each Credit Document. In connection with its obligations under this Section
10.15, each Borrower hereby waives notice of acceptance of the joint and several
liability contained in this Section 10.15, notice of any and all Loans made or
of any financial accommodations extended to any Borrower by the Lenders under
any Credit Document, notice of the occurrence of any Default or any Event of
Default or of any demand upon any Borrower for any payment under this Agreement
or any other Credit Documents whether in respect of any Loans or any other
obligation owing hereunder or thereunder, notice of any action at any time taken
or omitted by the Lenders under or in respect of any Credit Document or any of
the Obligations and, generally, all demands, notices, protests and other
formalities of every kind in connection with the joint and several liability
contained in this Section 10.15, the other provisions of this Agreement or any
provisions of the other Credit Documents. In connection with its obligations
under this Section 10.15, each Borrower hereby assents to, and waives notice of,
any extension or postponement of the time for the payment of any of the
Obligations, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by the Lenders at any time or times in respect
of any Default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of any Credit Document, any and all other
indulgences whatsoever by the Lenders in respect of any of the Obligations, and
the addition, substitution or release, in whole or in part, of any Person or
Persons primarily or secondarily liable in respect of any of the Obligations.
Each of the Borrowers also waives: (I) any right to require the Lenders to (A)
proceed against any other person, including any other Borrower, or (B) pursue
any other remedy; and (II) any defense arising by reason of (A) any disability
or other defense of any Borrower, or any other Person, (B) the cessation from
any cause whatsoever, other than payment or performance in full, of any of the
obligations of the Borrowers, or any other Person, or (C) any act or omission by
the Lenders which directly or indirectly results in or aids the discharge of any
Borrower or any Obligation hereunder by operation of law or otherwise. The
obligations of each Borrower under this Section 10.15 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Borrower
or the Lenders. The joint and several liability of each Borrower in this Section
10.15 shall continue in full force and effect notwithstanding any absorption,
merger, amalgamation or any other change whatsoever in the name, charter,
membership, constitution or place of formation of any Borrower, or any Lender.
Each of the Borrowers agrees that each of the waivers set forth above are made
with such Borrower's full knowledge of their significance and consequences, and
such Borrower agrees that, under the circumstances, the waivers are reasonable
and not contrary to public policy or law. If any of said waivers are determined
to be contrary to any applicable law or public policy, such waivers shall be
effective only to the extent permitted by law.
10.16. Entire Agreement. THIS AGREEMENT AND THE OTHER DOCUMENTS AND
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF, (B) SUPERSEDE ANY AND ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF, INCLUDING, WITHOUT LIMITATION, THE COMMITMENT
LETTER FROM FIRST UNION TO THE BORROWERS DATED MAY 22, 1997, AND (C) MAY NOT BE
AMENDED, SUPPLEMENTED, CONTRADICTED OR OTHERWISE MODIFIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
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<PAGE>
10.17. Post-Closing Matters. At the request of the Agent, each Borrower
will, and will cause each of their Subsidiaries to, use their reasonable efforts
to assist the Agent in the syndication of this Revolving Credit Facility and the
resultant addition of Lenders after the Closing Date.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
TEL-SAVE HOLDINGS, INC.,
as a Borrower
By:
------------------------------------
Title:
---------------------------------
TEL-SAVE, INC.,
as a Borrower
By:
------------------------------------
Title:
---------------------------------
EMERGENCY TRANSPORT CORP.,
as a Borrower
By:
------------------------------------
Title:
---------------------------------
(signatures continued)
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<PAGE>
FIRST UNION NATIONAL BANK, as Agent and as
a Lender
By:
-----------------------------------------
Commitment:
$65,000,000 Title:
-------------------------------------
Instructions for wire transfers to
the Agent:
First Union National Bank
ABA Routing No. 053000219
Charlotte, North Carolina
General Ledger No. 465906, RC No. 0000191
Attention: Hilda Weathers
Re: Tel-Save
Address for notices as a Lender:
First Union National Bank
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Jeffrey T. Hardesty
Telephone: (704) 383-1989
Telecopy: (704) 374-4092
Lending Office:
First Union National Bank
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Jeffrey T. Hardesty
Telephone: (704) 383-1989
Telecopy: (704) 374-4092
-59-
EXHIBIT 11
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ (5,865) $ 4,058 $(435) $ 7,435
=========== ============ =========== ==========
PRIMARY
Weighted average common and
common equivalent shares
outstanding - Primary:
Weighted average shares 63,898 53,374 63,171 46,186
Weighted average equivalent shares 2,983 5,392 3,196 3,864
----------- ------------ ----------- ----------
Weighted average common and common
equivalent shares - Primary 66,881 58,766 66,367 50,050
----------- ------------ ----------- ----------
Net income (loss) per share - Primary $ (.09) $ .07 (.01) .14
=========== ============ =========== ==========
FULLY DILUTED
Weighted average common and
common equivalent shares
outstanding - Fully Diluted:
Weighted average shares 63,898 53,374 63,171 46,186
Weighted average equivalent shares 3,000 6,490 3,308 6,848
----------- ------------ ----------- ----------
Weighted average common and common
equivalent shares - Fully Diluted 66,898 59,864 66,479 53,034
----------- ------------ ----------- ----------
Net income (loss) per share - Fully Diluted $ (.09) $ .07 $ (.01) $ .14
=========== ============ =========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND THE UNAUDITED
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1997 OF
TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> $43,146,000
<SECURITIES> 0
<RECEIVABLES> 41,592,000
<ALLOWANCES> 1,804,000
<INVENTORY> 0
<CURRENT-ASSETS> 180,508,000
<PP&E> 46,842,000
<DEPRECIATION> 1,648,000
<TOTAL-ASSETS> 290,273,000
<CURRENT-LIABILITIES> 37,114,000
<BONDS> 0
647,000
0
<COMMON> 0
<OTHER-SE> 252,512,000
<TOTAL-LIABILITY-AND-EQUITY> 253,159,000
<SALES> 0
<TOTAL-REVENUES> 146,192,000
<CGS> 0
<TOTAL-COSTS> 146,081,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (714,000)
<INCOME-TAX> (279,000)
<INCOME-CONTINUING> (435,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (435,000)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
