SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 25, 1997
Tel-Save Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-26728 23-2827736
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(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
6805 Route 202, New Hope, PA 18938
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(Address of principal executive offices) (Zip code)
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Registrant's telephone number, including area code: (215) 862-1500
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(Former name or former address, if changed since last report)
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Item 5. Other Events
As of August 25, 1997, Tel-Save Holdings, Inc. ("Tel-Save") entered into a
short term credit facility (the "Credit Agreement") with Salomon Brothers
Holding Company Inc, pursuant to which Tel-Save could borrow up to $150 million
to finance the purchase by Tel-Save of the outstanding 12-1/4% Senior
Subordinated Discount Notes due 2006 (the "Shared Tech Notes") of a subsidiary
of Shared Technologies Fairchild Inc. ("Shared Tech") and for general corporate
purposes. The facility has a term of 364 days and is secured by a pledge of
substantially all of the assets of Tel-Save and its subsidiaries and by a pledge
of the Tel-Save common stock of Mr. Daniel Borislow, the Chairman and CEO of
Tel-Save. So long as the new facility is outstanding, Tel-Save will not be able
to borrow under its existing $65 million bank credit facility.
Tel-Save had previously reported its merger agreement (the "Merger
Agreement") with Shared Tech, under which Tel-Save would acquire Shared Tech in
a stock-for-stock merger (the "STF Merger") after satisfaction of certain
conditions, including approval by the Tel-Save and Shared Tech stockholders at
meetings to be held.
As of August 27, 1997, Tel-Save had purchased, in separate, privately
negotiated transactions, approximately $150 million principal amount of the
approximately $164 million principal amount of the Shared Tech Notes outstanding
and had borrowed $130 million under the Credit Agreement.
Filed herewith as Exhibits are the Credit Agreement and related documents
and the foregoing description of the Credit Agreement and related documents is
qualified in its entirety by reference thereto.
Also filed herewith as Exhibit 99.1 are certain Unaudited Pro Forma
Combined Condensed Financial Statements of Tel-Save, which give effect to the
STF Merger of Tel-Save and Shared Tech using the pooling of interests method of
accounting, the acquisition of certain STF long-term debt and the issuance by
Tel-Save (in a private placement not registered under the Securities Act of
1933) of certain long-term debt to finance such acquisition of STF long-term
debt and to finance certain STF credit facility obligations upon consummation of
the STF Merger. The availability of the pooling of interests method of
accounting is one of the conditions to the obligations of the parties to
consummate the STF Merger. Should the pooling of interests accounting method not
be
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<PAGE>
available for Tel-Save to account for the STF Merger, there can be no assurance
that the STF Merger would be consummated. As disclosed therein, the Unaudited
Pro Forma Combined Condensed Financial Statements filed herewith reflect a
number of assumptions, including, among other things, that the STF Merger, which
is subject to a number of conditions, is consummated. THE UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS ARE PRESENTED FOR INFORMATION AND
ILLUSTRATIVE PURPOSES ONLY AND REFLECT A NUMBER OF SIGNIFICANT ASSUMPTIONS AS TO
FUTURE EVENTS, INCLUDING THE CONSUMMATION OF THE STF MERGER AND THE ISSUANCE OF
CERTAIN DEBT SECURITIES BY TEL-SAVE, WHICH MAY NOT OCCUR OR OCCUR ON THE TERMS
OR AT THE TIMES ASSUMED. THEY SHOULD NOT BE CONSIDERED INDICATIVE OF THE
OPERATING RESULTS OR FINANCIAL POSITION THAT WOULD HAVE OCCURRED HAD THE STF
MERGER, THE OTHER ACQUISITIONS SHOWN THEREIN AND THE ACQUISITION AND REFINANCING
OF THE SHARED TECH NOTES BEEN CONSUMMATED AT THE DATES INDICATED NOR INDICATIVE
OF FUTURE OPERATING RESULTS OR FINANCIAL POSITION OF THE MERGED COMPANIES SHOULD
THE STF MERGER BE CONSUMMATED.
At the 1997 Tel-Save stockholders meeting, anticipated to be held in the
fourth quarter, the grant to an executive officer of an option to purchase
800,000 shares of Tel-Save common stock will be submitted for stockholder
approval. If this option is so approved, it will result in compensation expense
equal to the difference between the exercise price ($11.125) of the option and
the market value of Tel-Save common stock on the date of such approval.
Also filed herewith as Exhibit 99.2 and incorporated herein by reference is
a review of certain risk factors concerning Tel-Save that is an update of
certain previously filed disclosure and of sections of certain other Tel-Save
filings captioned "Risk Factors."
In connection with the proposed STF Merger, Shared Tech reported that, on
July 31, 1997, it was served with a purported stockholder class action complaint
in an action commenced in the Delaware Chancery Court in New Castle County (the
"Complaint"). Shared Tech and its directors are named as defendants. Among other
things, the Complaint seeks injunctive relief with respect to the STF Merger.
Item 7. Financial Statements and Exhibits
(c) Exhibits:
10.1 Credit Agreement, dated as of August 25, 1997, among Tel-Save Holdings,
Inc. ("TS"), the Lenders and Salomon Brothers Holding Company, Inc.
("SBHC"), as administrative agent, collateral agent and syndication
agent
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<PAGE>
10.2 Guarantee Agreement, dated as of August 25, 1997, among the named
Guarantors and SBHC, as collateral agent
10.3 Indemnity, Subrogation and Contribution Agreement, dated as of August
25, 1997, among TS, the listed Guarantors and SBHC, as collateral agent
10.4 Pledge Agreement, dated as of August 25, 1997, between TS and SBHC, as
collateral agent
10.5 Pledge Agreement, dated as of August 25, 1997, between Daniel Borislow
and SBHC, as collateral agent.
10.6 Security Agreement, dated as of August 25, 1997, among TS, TS's
Subsidiaries and SBHC, as collateral agent
99.1 Unaudited Pro Forma Combined Condensed Financial Statements
99.2 Risk Factors
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<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.
TEL-SAVE HOLDINGS, INC.
Date: September 2, 1997 By: /s/ Aloysius T. Lawn, IV
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Aloysius T. Lawn, IV
General Counsel and
Secretary
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<PAGE>
EXHIBIT INDEX
10.1 Credit Agreement, dated as of August 25, 1997, among Tel-Save Holdings,
Inc. ("TS"), the Lenders and Salomon Brothers Holding Company, Inc.
("SBHC"), as administrative agent, collateral agent and syndication
agent
10.2 Guarantee Agreement, dated as of August 25, 1997, among the named
Guarantors and SBHC, as collateral agent
10.3 Indemnity, Subrogation and Contribution Agreement, dated as of August
25, 1997, among TS, the listed Guarantors and SBHC, as collateral agent
10.4 Pledge Agreement, dated as of August 25, 1997, between TS and SBHC, as
collateral agent
10.5 Pledge Agreement, dated as of August 25, 1997, between Daniel Borislow
and SBHC, as collateral agent.
10.6 Security Agreement, dated as of August 25, 1997, among TS, TS's
Subsidiaries and SBHC, as collateral agent
99.1 Unaudited Pro Forma Combined Condensed Financial Statements
99.2 Risk Factors
Execution copy
CREDIT AGREEMENT dated as of August 25, 1997, among TEL-SAVE
HOLDINGS, INC., a Delaware corporation (the "Borrower"), the Lenders (as defined
in Article I), and SALOMON BROTHERS HOLDING COMPANY INC, a Delaware corporation,
as administrative agent (in such capacity, the "Administrative Agent"), as
collateral agent (in such capacity, the "Collateral Agent") and syndication
agent for the Lenders.
The Borrower has requested the Lenders to extend credit in the
form of (a) Term Loans (such term and each other capitalized term used but not
defined herein having the meaning given it in Article I) on the Closing Date, in
an aggregate principal amount not in excess of $130,000,000, and (b) Revolving
Loans at any time and from time to time prior to the Revolving Credit Maturity
Date, in an aggregate principal amount at any time outstanding not in excess of
$20,000,000 less the amount of any outstanding letters of credit issued pursuant
to the following sentence. The Borrower may request, and an Issuing Bank may
issue, letters of credit, in an aggregate face amount at any time outstanding
not in excess of $10,000,000, to support payment obligations incurred in the
ordinary course of business by the Borrower and its Subsidiaries. Subject to the
limitations contained herein, the proceeds of the Term Loans are to be used
solely for general corporate purposes, to purchase debt obligations of Shared
Technologies Fairchild Communications Corp. and to prepay bank debt, and the
proceeds of the Revolving Loans are to be used solely for general corporate
purposes.
The Lenders are willing to extend such credit to the Borrower
and any Issuing Bank will be willing to issue letters of credit for the account
of the Borrower on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"ABR Term Borrowing" shall mean a Borrowing comprised of ABR
Term Loans.
"ABR Term Loan" shall mean any Term Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
<PAGE>
"Adjusted LIBO Rate" shall mean, with respect to any
Eurodollar Borrowing for any Interest Period, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of
(a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.
"Administrative Agent Fees" shall have the meaning assigned to
such term in Section 2.05(b).
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified
person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate
amount of the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate
or both for any reason, including the inability or failure of the Administrative
Agent to obtain sufficient quotations in accordance with the terms of the
definition thereof, the Alternate Base Rate shall be determined without regard
to clause (b) or (c), or both, of the preceding sentence, as appropriate, until
the circumstances giving rise to such inability no longer exist. Any change in
the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or
the Federal Funds Effective Rate shall be effective on the effective date of
such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate, respectively. The term "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by Citibank, N.A. as its prime rate
in effect at its principal office in New York City; each change in the Prime
Rate shall be effective on the date such change is publicly announced as being
effective. The term "Base CD Rate" shall mean the sum of (a) the product of (i)
the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate. The term "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding 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 the day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Annualized EBITDA" shall mean at any date of determination
thereof, the product of (a) EBITDA for the period of two consecutive fiscal
quarters ended on such date of
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determination or, if such date of determination is not the end of a fiscal
quarter, on the last day of the most recent ended fiscal quarter times (b) two.
"Applicable Percentage" shall mean, for any day, with respect
to any Eurodollar Loan or ABR Loan, or with respect to the Commitment Fees, as
the case may be, the applicable percentage set forth below under the caption
"Eurodollar Spread", "ABR Spread" or "Fee Percentage", as the case may be, based
upon the Leverage Ratio as of the relevant date of determination (provided that
for any date prior to December 31, 1997 the Leverage Ratio will be deemed to be
Category 1):
<TABLE>
<CAPTION>
Eurodollar ABR Fee
Spread Spread Percentage
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<S> <C> <C> <C>
Category 1
----------
Leverage Ratio greater than or equal 1.875% 0% 0.50%
to 3:1
Category 2
----------
Leverage Ratio greater than or equal 1.50% 0% 0.50%
to 2:1 but less than 3:1
Category 3
----------
Leverage Ratio less than 2:1 1.25% 0% 0.50%
</TABLE>
Each change in the Applicable Percentage resulting from a
change in the Leverage Ratio shall be effective with respect to all Loans,
Commitments and Letters of Credit outstanding on and after the date of delivery
to the Administrative Agent of the financial statements and certificates
required by Section 5.04(a) or (b) indicating such change until the date
immediately preceding the next date of delivery of such financial statements and
certificates indicating another such change. Notwithstanding the foregoing, (a)
at any time during which the Borrower has failed to deliver the financial
statements and certificates required by Section 5.04(a) or (b), or (b) at any
time after the occurrence and during the continuance of an Event of Default, the
Leverage Ratio shall be deemed to be in Category 1 for purposes of determining
the Applicable Percentage.
"Assessment Rate" shall mean for any date the annual rate
(rounded upwards, if necessary, to the next 1/100 of 1%) most recently estimated
by the Administrative Agent as the then current net annual assessment rate that
will be employed in determining amounts payable by any Lender that is a
financial institution with deposits insured by the Federal Deposit Insurance
<PAGE>
Corporation (or any successor thereto) to the Federal Deposit Insurance
Corporation or such successor for insurance by such Corporation (or such
successor) of time deposits made in dollars at such Lender's domestic offices.
"Asset Sale" shall mean any transaction or series of
transactions pursuant to which the Borrower and/or any of its Subsidiaries
sells, assigns or otherwise disposes of any substantial amount of property
(whether such property is now owned or hereafter acquired).
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee, and accepted by the
Administrative Agent, in the form of Exhibit B or such other form as shall be
approved by the Administrative Agent.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States of America.
"Borrowing" shall mean a group of Loans of a single Type made
by the Lenders on a single date and as to which a single Interest Period is in
effect.
"Borrowing Request" shall mean a request by the Borrower in
accordance with the terms of Section 2.03 and substantially in the form of
Exhibit C.
"Business Day" shall mean any day other than a Saturday,
Sunday or day on which banks in New York City are authorized or required by law
to close; provided, however, that when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" shall mean for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Borrower or any of its
Subsidiaries to acquire or construct fixed or other capital assets (including
renewals, improvements and replacements, but excluding repairs) during such
period computed in accordance with GAAP).
"Cash Interest Expense" shall mean for any period, Interest
Expense paid or payable in cash during such period minus interest income of the
Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) for such period.
"Capital Lease Obligations" of any person shall mean the
obligations of such person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
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"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.
A "Change in Control" shall be deemed to have occurred if (a)
any person or group (within the meaning of Rule 13d-5 of the Securities Exchange
Act of 1934 as in effect on the date hereof) shall own directly or indirectly,
beneficially or of record, shares representing more than 49% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
the Borrower or any corporation directly or indirectly Controlling the Borrower;
(b) a majority of the seats (other than vacant seats) on the board of directors
of the Borrower or any person directly or indirectly Controlling the Borrower
shall at any time be occupied by persons who were neither (i) nominated by the
board of directors of the Borrower, nor (ii) appointed by directors so
nominated; (c) any change in control (or similar event, however denominated)
with respect to the Borrower, any person directly or indirectly controlling the
Borrower or any Subsidiary shall occur under and as defined in any indenture or
agreement in respect of Indebtedness to which the Borrower, any person directly
or indirectly controlling the Borrower or any Subsidiary is a party; or (d) any
person or group shall otherwise directly or indirectly Control the Borrower.
"Closing Date" shall mean the date of the first Credit Event.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean all the "Collateral" as defined in any
Security Document and shall also include the Mortgaged Properties.
"Commitment" shall mean, with respect to any Lender, such
Lender's Revolving Credit Commitment and Term Loan Commitment.
"Commitment Fee" shall have the meaning assigned to such term
in Section 2.05(a).
"Confidential Information Memorandum" shall mean the
Confidential Information Memorandum of the Borrower dated August 1997.
"Control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Credit Event" shall have the meaning assigned to such term in
Section 4.01.
<PAGE>
"Default" shall mean any event or condition which upon notice,
lapse of time or both would constitute an Event of Default.
"dollars" or "$" shall mean lawful money of the United States
of America.
"Domestic Subsidiaries" shall mean all Subsidiaries
incorporated or organized under the laws of the United States of America, any
State thereof or the District of Columbia.
"EBITDA" shall mean for any period, Net Income for such
period, plus, to the extent deducted in determining such Net Income, (i)
Interest Expense, (ii) depreciation, (iii) amortization, (iv) all Federal,
state, local and foreign income taxes (v) all other non-cash expenses and (vi)
the amount of any extraordinary losses recognized by the Borrower or any
Subsidiary, minus, to the extent added in determining such Net Income, (a) any
non-cash gains (b) the amount of any interest and dividend income recognized by
the Borrower or any Subsidiary and (c) the amount of any extraordinary gains
recognized by the Borrower or any Subsidiary, all as determined on a
consolidated basis in accordance with GAAP.
"environment" shall mean ambient air, surface water and
groundwater (including potable water, navigable water and wetlands), the land
surface or subsurface strata, the workplace or as otherwise defined in any
Environmental Law.
"Environmental Claim" shall mean any written accusation,
allegation, notice of violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any Governmental Authority
or any person for damages, injunctive or equitable relief, personal injury
(including sickness, disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages, nuisance, pollution, any
adverse effect on the environment caused by any Hazardous Material, or for
fines, penalties or restrictions, resulting from or based upon (a) the
existence, or the continuation of the existence, of a Release (including sudden
or non-sudden, accidental or non-accidental Releases), (b) exposure to any
Hazardous Material, (c) the presence, use, handling, transportation, storage,
treatment or disposal of any Hazardous Material or (d) the violation or alleged
violation of any Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present
and future treaties, laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, Release or threatened Release of any Hazardous Material or to health
and safety matters, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. Section 6901 et seq., the Federal Water Pollution Control Act, as amended
by the Clean Water Act of 1977, 33 U.S.C. Section 1251 et seq., the Clean Air
Act of 1970, as amended 42 U.S.C. Section 7401 et seq., the Toxic Substances
Control Act of 1976, 15 U.S.C. Section 2601 et seq., the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C.
<PAGE>
Section 651 et seq., the Emergency Planning and Community Right-to- Know Act of
1986, 42 U.S.C. Section 11001 et seq., the Safe Drinking Water Act of 1974, as
amended, 42 U.S.C. Section 300(f) et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 5101 et seq., and any similar or
implementing state or local law, and all amendments or regulations promulgated
under any of the foregoing.
"Environmental Permit" shall mean any permit, approval,
authorization, certificate, license, variance, filing or permission required by
or from any Governmental Authority pursuant to any Environmental Law.
"Equity Issuance" shall mean any issuance or sale by the
Borrower or any of its Subsidiaries after the Closing Date of any Capital Stock.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code, or solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as
defined in Section 4043 of ERISA or the regulations issued thereunder, with
respect to a Plan; (b) the adoption of any amendment to a Plan that would
require the provision of security pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA; (c) the existence with respect to any Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section
412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of
the minimum funding standard with respect to any Plan; (e) the incurrence of any
liability under Title IV of ERISA with respect to the termination of any Plan or
the withdrawal or partial withdrawal of the Borrower or any of its ERISA
Affiliates from any Plan or Multiemployer Plan; (f) the receipt by the Borrower
or any ERISA Affiliate from the PBGC or a plan administrator of any notice
relating to the intention to terminate any Plan or Plans or to appoint a trustee
to administer any Plan; (g) the receipt by the Borrower or any ERISA Affiliate
of any notice concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA; (h) the occurrence
of a "prohibited transaction" with respect to which the Borrower or any of its
Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of
the Code) or with respect to which the Borrower or any such Subsidiary could
otherwise be liable; and (i) any other event or condition with respect to a Plan
or Multiemployer Plan that could reasonably be expected to result in liability
of the Borrower.
"Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or
Eurodollar Term Loan.
<PAGE>
"Eurodollar Revolving Loan" shall mean any Revolving Loan
bearing interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Term Borrowing" shall mean a Borrowing comprised
of Eurodollar Term Loans.
"Eurodollar Term Loan" shall mean any Term Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Event of Default" shall have the meaning assigned to such
term in Article VII.
"Fee Letter" shall mean the Commitment Fee Letter, dated as of
August 25, 1997, between the Borrower and the Administrative Agent.
"Fees" shall mean the Commitment Fees, the fees described in
Section 2.05(c), the Administrative Agent's Fees, the L/C Participation Fees and
the Issuing Bank Fees.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, Treasurer or Controller of such
corporation.
"Foreign Subsidiary" shall mean any Subsidiary that is not a
Domestic Subsidiary.
"GAAP" shall mean United States generally accepted accounting
principles applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local
or foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantee" of or by any person shall mean any obligation,
contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase or lease property, securities
or services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) to maintain working capital, equity capital
or any other financial statement condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness; provided, however,
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business.
<PAGE>
"Guarantee Agreement" shall mean the Guarantee Agreement,
substantially in the form of Exhibit D, made by the Guarantors in favor of the
Collateral Agent for the benefit of the Secured Parties.
"Guarantors" shall mean each person listed on Schedule 1.01(b)
and each other person that becomes party to a Guarantee Agreement as a
Guarantor, and the permitted successors and assigns of each such person.
"Hazardous Materials" shall mean all explosive or radioactive
substances or wastes, hazardous or toxic substances or wastes, pollutants,
solid, liquid or gaseous wastes, including petroleum or petroleum distillates,
asbestos or asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Indebtedness" of any person shall mean, without duplication,
(a) all obligations of such person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such person evidenced
by bonds, debentures, notes or similar instruments, (c) all obligations of such
person upon which interest charges are customarily paid, (d) all obligations of
such person under conditional sale or other title retention agreements relating
to property or assets purchased by such person, (e) all obligations of such
person issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
person, whether or not the obligations secured thereby have been assumed, (g)
all Guarantees by such person of Indebtedness of others, (h) all Capital Lease
Obligations of such person, (i) all obligations of such person in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements and (j) all obligations of
such person as an account party in respect of letters of credit and bankers'
acceptances. The Indebtedness of any person shall include the Indebtedness of
any partnership in which such person is a general partner.
"Indemnity, Subrogation and Contribution Agreement" shall mean
the Indemnity, Subrogation and Contribution Agreement, substantially in the form
of Exhibit E, among the Borrower, the Guarantors and the Collateral Agent.
"Interest Coverage Ratio" shall mean at any date of
determination thereof, the ratio of (a) (i) Annualized EBITDA on such date of
determination minus (ii) Capital Expenditures for the fiscal quarter then ending
or most recently ended times four to (b) Cash Interest Expense for the fiscal
quarter ending on such date of determination (or if such date of determination
is not the end of a fiscal quarter, on the last day of the most recently ended
fiscal quarter) times four.
"Interest Expense" shall mean for any period, the sum, for the
Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP),
<PAGE>
of the following: (a) all interest in respect of Indebtedness (including,
without limitation, the interest component of any payments in respect of Capital
Lease Obligations, but excluding any capitalized financing fees paid during such
period that are to be charged to future periods) accrued or capitalized during
such period (whether or not actually paid or received during such period).
"Interest Rate Protection Agreement" shall mean with respect
to any person, an interest rate swap, cap or collar agreement or similar
arrangement between such person and one or more financial institutions providing
for the transfer or mitigation of interest rate risks (and not for speculative
purposes) either generally or under specific contingencies.
"Interest Payment Date" shall mean, with respect to any Loan,
the last day of the Interest Period applicable to the Borrowing of which such
Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months' duration, each day that would have been an
Interest Payment Date had successive Interest Periods of three months' duration
been applicable to such Borrowing, and, in addition, the date of any prepayment
of such Borrowing or conversion of such Borrowing to a Borrowing of a different
Type.
"Interest Period" shall mean (a) as to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day (or, if there is no numerically corresponding day,
on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter,
as the Borrower may elect and (b) as to any ABR Borrowing, the period commencing
on the date of such Borrowing and ending on the earliest of (i) the next
succeeding March 31, June 30, September 30 or December 31, (ii) the Revolving
Credit Maturity Date or the Term Loan Maturity Date, as applicable, and (iii)
the date such Borrowing is converted to a Borrowing of a different Type in
accordance with Section 2.10 or repaid or prepaid in accordance with Section
2.11 or 2.12; provided, however, that if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Issuing Bank" shall mean, as the context may require, any
Lender that may become an Issuing Bank pursuant to Section 2.22(i) or 2.22(k),
with respect to Letters of Credit issued by such Lender.
"Issuing Bank Fees" shall have the meaning assigned to such
term in Section 2.05(d).
"L/C Commitment" shall mean the commitment of the Issuing Bank
to issue Letters of Credit pursuant to Section 2.22.
"L/C Disbursement" shall mean a payment or disbursement made
by the Issuing Bank pursuant to a Letter of Credit.
<PAGE>
"L/C Exposure" shall mean at any time the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such time, plus
(b) the aggregate principal amount of all L/C Disbursements that have not yet
been reimbursed at such time. The L/C Exposure of any Revolving Credit Lender at
any time shall mean its Pro Rata Percentage of the aggregate L/C Exposure at
such time.
"L/C Participation Fee" shall have the meaning assigned to
such term in Section 2.05(d).
"Lenders" shall mean (a) the financial institutions listed on
Schedule 2.01 (other than any such financial institution that has ceased to be a
party hereto pursuant to an Assignment and Acceptance) and (b) any financial
institution that has become a party hereto pursuant to an Assignment and
Acceptance.
"Letter of Credit" shall mean any letter of credit issued
pursuant to Section 2.22.
"Leverage Ratio" shall mean at any date of determination
thereof, the ratio of (a) Indebtedness of the Borrower and its Subsidiaries at
such date of determination (determined on a consolidated basis without
duplication in accordance with GAAP) to (b) Annualized EBITDA at such date of
determination.
"LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing, the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at
which dollar deposits approximately equal in principal amount to the
Administrative Agent's portion of such Eurodollar Borrowing and for a maturity
comparable to such Interest Period are offered to the principal London office of
the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest
in or on such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" shall mean this Agreement, the Letters of
Credit, the Guarantee Agreement, the Security Documents and the Indemnity,
Subrogation and Contribution Agreement.
"Loan Parties" shall mean the Borrower and the Guarantors.
"Loans" shall mean the Revolving Loans and the Term Loans.
"Margin Stock" shall have the meaning assigned to such term in
Regulations, G and U.
<PAGE>
"Material Adverse Effect" shall mean (a) a materially adverse
effect on the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and the Subsidiaries, taken as a whole, (b) material
impairment of the ability of the Borrower or any other Loan Party to perform any
of its obligations under any Loan Document to which it is or will be a party or
(c) material impairment of the rights of or benefits available to the Lenders
under any Loan Document.
"Merger" shall mean the proposed merger of Shared Technologies
Fairchild, Inc. ("Shared Tech") with and into TSHCo, Inc., a subsidiary of
Tel-Save Holdings, Inc. ("Holdings"), pursuant to the Agreement and Plan of
Merger, dated as of July 16, 1997, among Holdings, TSHCo, Inc. and Shared Tech.
"Mortgaged Properties" shall mean the owned real properties of
the specified on Schedule 1.01(c).
"Mortgages" shall mean the mortgages, deeds of trust,
leasehold mortgages, assignments of leases and rents, modifications and other
security documents delivered pursuant to clause (i) of Section 4.02(j) or
pursuant to Section 5.11, each substantially in the form of Exhibit F.
"Multiemployer Plan" shall mean a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean:
(a) in the case of any Asset Sale, the aggregate
amount of all cash payments received by the Borrower and its
Subsidiaries directly or indirectly in connection with such
Asset Sale, provided that (i) Net Cash Proceeds shall be net
of (x) the amount of any legal, title and recording tax
expenses, commissions and other fees and expenses paid by the
Borrower and its Subsidiaries in connection with such Asset
Sale and (y) any Federal, state, local or foreign income or
other taxes estimated to be payable by the Borrower and its
Subsidiaries as a result of such Asset Sale (but only to the
extent that such estimated taxes are in fact paid to the
relevant Governmental Authority within three months) of the
date of such Asset Sale and (ii) Net Cash Proceeds shall be
net of any repayments by the Borrower or any of its
Subsidiaries of Indebtedness to the extent that (x) such
Indebtedness is secured by a Lien on the property that is
subject to such Asset Sale and (y) the transferee of (or
holder of a Lien on) such property requires that such
Indebtedness be repaid as a condition to the purchase of such
property; and
(b) in the case of any Equity Issuance or any
issuance or other disposition of Indebtedness, the aggregate
amount of all cash received by the Borrower and its
Subsidiaries in respect of such transaction net of reasonable
expenses incurred by the Borrower and its Subsidiaries in
connection therewith.
<PAGE>
"Net Income" shall mean for any period, the net income of the
Borrower and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, but excluding from the determination of Net
Income (without duplication) (a) any extraordinary or non-recurring gains or
losses or gains or losses form disposition of assets, (b) restructuring charges,
(c) effects of discontinued operations and (d) interest income.
"Obligations" shall mean all obligations defined as
"Obligations" in the Guarantee Agreement and the Security Documents.
"Partition" shall mean an independent long distance and
marketing company or other direct marketing agent of the Borrower or a
Subsidiary that resells and markets the telecommunications products of the
Borrower or such Subsidiary.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.
"Perfection Certificate" shall mean the Perfection Certificate
substantially in the form of Annex 2 to the Security Agreement.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the
principal of and interest on which are unconditionally
guaranteed by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full
faith and credit of the United States of America), in each
case maturing within one year from the date of acquisition
thereof;
(b) investments in commercial paper maturing within
270 days from the date of acquisition thereof and having, at
such date of acquisition, the highest credit rating obtainable
from Standard & Poor's Ratings Group or from Moody's Investors
Service, Inc.;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within one year from
the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or
any State thereof that has a combined capital and surplus and
undivided profits of not less than $250,000,000; and
(d) other investment instruments approved in writing
by the Required Lenders and offered by financial institutions
which have a combined capital and surplus and undivided
profits of not less than $250,000,000.
"Person" or "person" shall mean any natural person,
corporation, business trust, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
<PAGE>
"Plan" shall mean any employee pension benefit plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 307 of ERISA, and in respect of which the
Borrower or any ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
"Pledge Agreements" shall mean the Pledge Agreements,
substantially in the forms of Exhibit G-1 and G-2, between the Borrower and
Daniel Borislow, respectively, and the Collateral Agent for the benefit of the
Secured Parties.
"Prime Rate" shall have the meaning assigned in the definition
of "Alternate Base Rate".
"Pro Rata Percentage" of any Revolving Credit Lender at any
time shall mean the percentage of the Total Revolving Credit Commitment
represented by such Lender's Revolving Credit Commitment.
"Register" shall have the meaning given such term in Section
9.04(d).
"Regulation G" shall mean Regulation G of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation T" shall mean Regulation T of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation U" shall mean Regulation U of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation X" shall mean Regulation X of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, depositing, dispersing, emanating or migrating of any Hazardous
Material in, into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such
term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions
required by any Governmental Authority or voluntarily undertaken to: (i)
cleanup, remove, treat, abate or in any other way address any Hazardous Material
in the environment; (ii) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not migrate or endanger
or threaten to endanger public health, welfare or the environment; or (iii)
perform studies and investigations in connection with, or as a precondition to,
(i) or (ii) above.
"Repayment Date" shall have the meaning given such term in
Section 2.11.
"Required Lenders" shall mean, at any time, Lenders having
Loans, L/C Exposure and unused Revolving Credit and Term Loan Commitments
representing at least 51% of the sum
<PAGE>
of all Loans outstanding, L/C Exposure and unused Revolving Credit and Term Loan
Commitments at such time.
"Responsible Officer" of any corporation shall mean any
executive officer or Financial Officer of such corporation and any other officer
or similar official thereof responsible for the administration of the
obligations of such corporation in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised
of Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make Revolving Loans hereunder as set
forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which
such Lender assumed its Revolving Credit Commitment, as applicable, as the same
may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any
Lender at any time, the aggregate principal amount at such time of all
outstanding Revolving Loans of such Lender, plus the aggregate amount at such
time of such Lender's L/C Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving
Credit Commitment.
"Revolving Credit Maturity Date" shall mean August 24, 1998.
"Revolving Loans" shall mean the revolving loans made by the
Lenders to the Borrower pursuant to clause (b) of Section 2.01. Each Revolving
Loan shall be a Eurodollar Revolving Loan or an ABR Revolving Loan.
"Secured Parties" shall have the meaning assigned to such term
in the Security Agreement.
"Security Agreement" shall mean the Security Agreement,
substantially in the form of Exhibit H, between the Subsidiaries party thereto
and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" shall mean the Mortgages, the Security
Agreement, the Pledge Agreements and each of the security agreements, mortgages
and other instruments and documents executed and delivered pursuant to any of
the foregoing or pursuant to Section 5.11.
"Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board and any other banking authority, domestic
or foreign, to which the Administrative Agent or any Lender (including any
<PAGE>
branch, Affiliate, or other fronting office making or holding a Loan) is subject
(a) with respect to the Base CD Rate, for new negotiable nonpersonal time
deposits in dollars of over $100,000 with maturities approximately equal to
three months, and (b) with respect to the Adjusted LIBO Rate, for Eurocurrency
Liabilities (as defined in Regulation D of the Board). Such reserve percentages
shall include those imposed pursuant to such Regulation D. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or
offsets that may be available from time to time to any Lender under such
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"subsidiary" shall mean, with respect to any person (herein
referred to as the "parent"), any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or more than 50% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held, or (b) that is, at the
time any determination is made, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent.
"Subsidiary" shall mean any subsidiary of the Borrower.
"Term Borrowing" shall mean a Borrowing comprised of Term
Loans.
"Term Loan Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make Term Loans hereunder as set forth
on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such
Lender assumed its Term Loan Commitment, as applicable, as the same may be (a)
reduced from time to time pursuant to Section 2.09 and (b) reduced or increased
from time to time pursuant to assignments by or to such Lender pursuant to
Section 9.04.
"Term Loan Maturity Date" shall mean August 24, 1998.
"Term Loans" shall mean the term loans made by the Lenders to
the Borrower pursuant to Section 2.01. Each Term Loan shall be a Eurodollar Term
Loan or an ABR Term Loan.
"Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 a.m., New
York City time, on such day (or, if such day shall not be a Business Day, on the
next preceding Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized standing selected
by it.
<PAGE>
"Total Revolving Credit Commitment" shall mean, at any time,
the aggregate amount of the Revolving Credit Commitments, as in effect at such
time.
"Transactions" shall have the meaning assigned to such term in
Section 3.02.
"Type" shall refer to (i), when used in respect of any Loan or
Borrowing at any time prior to the Initial Rate Termination Date shall refer to
the Rate by reference to which interest such Loan or on the Loans comprising
such Borrowing would, if such Loan remained outstanding without modification, be
determined on or subsequent to the Initial Rate Termination Date and (ii) when
used in respect of any Loan or Borrowing at any time on or subsequent to the
Initial Rate Termination Date, shall refer to the Rate by reference to which
interest on such Loan or on the Loans comprising such Borrowing is determined.
For purposes hereof, the term "Rate" shall include the Adjusted LIBO Rate and
the Alternate Base Rate.
"wholly owned subsidiary" of any person shall mean a
subsidiary of such person of which securities (except for directors' qualifying
shares) or other ownership interests representing 100% of the equity or 100% of
the ordinary voting power or 100% of the general partnership interests are, at
the time any determination is being made, owned, controlled or held by such
person or one or more wholly owned subsidiaries of such person or by such person
and one or more wholly owned subsidiaries of such person.
"Withdrawal Liability" shall mean liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that if the Borrower notifies the
Administrative Agent that the Borrower wishes to amend any covenant in Article
VI or any related definition to eliminate the effect of any change in GAAP
occurring after the date of this Agreement on the operation of such covenant (or
if the Administrative Agent notifies the Borrower that the Required Lenders wish
to amend Article VI or any related definition for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.
<PAGE>
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions
and relying upon the representations and warranties herein set forth, each
Lender agrees, severally and not jointly, (a) to make a Term Loan to the
Borrower on the Closing Date in a principal amount not to exceed its Term Loan
Commitment, and (b) to make Revolving Loans to the Borrower, at any time and
from time to time on or after the date hereof, and until the earlier of the
Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitment of such Lender in accordance with the terms hereof, in an aggregate
principal amount at any time outstanding that will not result in (i) such
Lender's Revolving Credit Exposure exceeding (ii) such Lender's Revolving Credit
Commitment. Within the limits set forth in clause (b) of the preceding sentence
and subject to the terms, conditions and limitations set forth herein, the
Borrower may borrow, pay or prepay and reborrow Revolving Loans. Amounts paid or
prepaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their applicable Revolving Credit Commitments; provided, however, that the
failure of any Lender to make any Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder (it being understood, however, that
no Lender shall be responsible for the failure of any other Lender to make any
Loan required to be made by such other Lender). Except for Loans deemed made
pursuant to Section 2.02(f), the Loans comprising any Borrowing shall be in an
aggregate principal amount that is (i) an integral multiple of $1,000,000 and
not less than $130,000,000 (in the case of the Term Loans) or $1,000,000 (in the
case of Revolving Loans) or (ii) equal to the remaining available balance of the
applicable Commitments.
(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement. Borrowings of more than one Type may be outstanding at the same
time; provided, however, that the Borrower shall not be entitled to request any
Borrowing that, if made, would result in more than four Eurodollar Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
(c) Except with respect to Loans made pursuant to Section
2.02(f), each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds to such
account in New York City as the Administrative Agent may designate not later
than 11:00 a.m., New York City time, and the Administrative Agent shall by 4:00
p.m., New York City time, credit the amounts so received to an account in the
name of the Borrower, maintained with the Administrative Agent or an institution
designated by the
<PAGE>
Administrative Agent and designated by the Borrower in the applicable Borrowing
Request or, if a Borrowing shall not occur on such date because any condition
precedent herein specified shall not have been met, return the amounts so
received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent at (i) in the case of the Borrower, the
interest rate applicable from time to time the time to the Loans comprising such
Borrowing and (ii) in the case of such Lender, a rate determined by the
Administrative Agent to represent its cost of overnight or short-term funds
(which determination shall be conclusive absent manifest error). If such Lender
shall repay to the Administrative Agent such corresponding amount, such amount
shall constitute such Lender's Loan as part of such Borrowing for purposes of
this Agreement.
(e) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Revolving Credit Maturity
Date.
(f) If any Issuing Bank shall not have received from the
Borrower the payment required to be made by Section 2.22(e) within the time
specified in such Section, such Issuing Bank will promptly notify the
Administrative Agent of the L/C Disbursement and the Administrative Agent will
promptly notify each Revolving Credit Lender of such L/C Disbursement and its
Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by wire
transfer of immediately available funds to the Administrative Agent not later
than 2:00 p.m., New York City time, on such date (or, if such Revolving Credit
Lender shall have received such notice later than 12:00 (noon), New York City
time, on any day, not later than 10:00 a.m., New York City time, on the
immediately following Business Day), an amount equal to such Lender's Pro Rata
Percentage of such L/C Disbursement (it being understood that such amount shall
be deemed to constitute an ABR Revolving Loan of such Lender and such payment
shall be deemed to have reduced the L/C Exposure), and the Administrative Agent
will promptly pay to the Issuing Bank amounts so received by it from the
Revolving Credit Lenders. The Administrative Agent will promptly pay to the
Issuing Bank any amounts received by it from the Borrower pursuant to Section
2.22(e) prior to the time that any Revolving Credit Lender makes any payment
pursuant to this paragraph (f); any such amounts received by the Administrative
Agent thereafter will be promptly remitted by the Administrative Agent to the
Revolving Credit Lenders that shall have made such payments and to the Issuing
Bank, as their interests may appear. If any Revolving Credit Lender shall not
have made its Pro Rata Percentage of such L/C
<PAGE>
Disbursement available to the Administrative Agent as provided above, such
Lender and the Borrower severally agree to pay interest on such amount, for each
day from and including the date such amount is required to be paid in accordance
with this paragraph to but excluding the date such amount is paid, to the
Administrative Agent for the account of the Issuing Bank at (i) in the case of
the Borrower, a rate per annum equal to the interest rate applicable to
Revolving Loans pursuant to Section 2.06(a), and (ii) in the case of such
Lender, for the first such day, the Federal Funds Effective Rate, and for each
day thereafter, the Alternate Base Rate.
SECTION 2.03. Borrowing Procedure. In order to request a
Borrowing (other than a deemed Borrowing pursuant to Section 2.02(f), as to
which this Section 2.03 shall not apply), the Borrower shall hand deliver or
telecopy to the Administrative Agent a duly completed Borrowing Request (a) in
the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before a proposed Borrowing, and (b) in the case of an
ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day
before a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall
be signed by or on behalf of the Borrower and shall specify the following
information: (i) whether the Borrowing then being requested is to be a Term
Borrowing or a Revolving Credit Borrowing, and whether such Borrowing is to be a
Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which
shall be a Business Day), (iii) the number and location of the account to which
funds are to be disbursed (which shall be an account that complies with the
requirements of Section 2.02(c)); (iv) the amount of such Borrowing; and (v) if
such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect
thereto; provided, however, that, notwithstanding any contrary specification in
any Borrowing Request, each requested Borrowing shall comply with the
requirements set forth in Section 2.02. If no election as to the Type of
Borrowing is specified in any such notice, then the requested Borrowing shall be
an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing
is specified in any such notice, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration. The Administrative Agent
shall promptly advise the applicable Lenders of any notice given pursuant to
this Section 2.03 (and the contents thereof), and of each Lender's portion of
the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of each Lender the principal amount of each Term Loan of such Lender
as provided in Section 2.11 and the then unpaid principal amount of each
Revolving Loan on the Revolving Credit Maturity Date.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender from time to time,
including the amounts of principal and interest payable and paid such Lender
from time to time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which
it will record (i) the amount of each Loan made hereunder, the Type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the
<PAGE>
Administrative Agent hereunder from the Borrower or any Guarantor and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) above shall be prima facie evidence of the existence and
amounts of the obligations therein recorded; provided, however, that the failure
of any Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligations of the Borrower to repay
the Loans in accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in
the event any Lender shall request and receive a promissory note payable to such
Lender and its registered assigns, the interests represented by such note shall
at all times (including after any assignment of all or part of such interests
pursuant to Section 9.04) be represented by one or more promissory notes payable
to the payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each
Lender, through the Administrative Agent, on the last day of March, June,
September and December in each year and on each date on which any Commitment of
such Lender shall expire or be terminated as provided herein, a commitment fee
(a "Commitment Fee") equal to 50 basis points per annum on the average daily
unused amount of the Commitments of such Lender during the preceding quarter (or
other period commencing with the date hereof and ending with the Revolving
Credit Maturity Date or the date on which the Commitments of such Lender shall
expire or be terminated). All Commitment Fees shall be computed on the basis of
the actual number of days elapsed in a year of 360 days. The Commitment Fee due
to each Lender shall commence to accrue on the date hereof and shall cease to
accrue on the date on which the Commitment of such Lender shall expire or be
terminated as provided herein.
(b) The Borrower agrees to pay to the Administrative Agent,
for its own account, the administrative fees set forth in the Fee Letter at the
times and in the amounts specified therein (the "Administrative Agent Fees").
(c) The Borrower agrees to pay to the Administrative Agent,
for payment to the other Lenders (to the extent applicable), on the Closing
Date, the other fees specified in the Fee Letter, and the Administrative Agent
shall pay to each Lender on the Closing Date that portion of such fees that
shall be owing to such Lender.
(d) The Borrower agrees to pay (i) to each Revolving Credit
Lender, through the Administrative Agent, on the last day of March, June,
September and December of each year and on the date on which the Revolving
Credit Commitment of such Lender shall be terminated as provided herein, a fee
(an "L/C Participation Fee") calculated on such Lender's Pro Rata Percentage of
the average daily aggregate L/C Exposure (excluding the portion thereof
attributable to unreimbursed L/C Disbursements) during the preceding quarter (or
shorter period commencing with the date hereof or ending with the Revolving
Credit Maturity Date or the date on which all Letters of Credit have been
canceled or have expired and the Revolving Credit Commitments of all Lenders
shall have been terminated) at a rate equal to the Applicable Percentage from
time to time used to determine the interest rate on Revolving Credit Borrowings
<PAGE>
comprised of Eurodollar Loans pursuant to Section 2.06, and (ii) to any Issuing
Bank with respect to each Letter of Credit the standard fronting, issuance and
drawing fees specified from time to time by the Issuing Bank (the "Issuing Bank
Fees"). All L/C Participation Fees and Issuing Bank Fees shall be computed on
the basis of the actual number of days elapsed in a year of 360 days.
All Fees shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, if and as
appropriate, among the Lenders, except that the Issuing Bank Fees shall be paid
directly to the Issuing Bank. Once paid, none of the Fees shall be refundable
under any circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions
of Section 2.07, the Loans comprising each ABR Borrowing shall bear interest at
a rate per annum equal to the Alternate Base Rate plus the Applicable Percentage
in effect from time to time. Such interest shall be computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be, when determined by reference to the Prime Rate and over a year of 360 days
at all other times.
(b) Subject to the provisions of Section 2.07, the Loans
comprising each Eurodollar Borrowing shall bear interest at a rate per annum
equal to the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Percentage in effect from time to time. Such
interest shall be computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be, when determined by reference
to the Prime Rate and over a year of 360 days when determined by reference to
the Adjusted LIBO Rate.
Interest on each Loan shall be payable on the Interest
Payment Dates applicable to such Loan except as otherwise provided in this
Agreement. The applicable Prime Rate, Alternate Base Rate or Adjusted LIBO Rate
for each Interest Period or day within an Interest Period, as the case may be,
shall be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.07. Default Interest. If the Borrower shall default
in the payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, or under any other Loan
Document, the Borrower shall on demand from time to time pay interest, to the
extent permitted by law, on such defaulted amount to but excluding the date of
actual payment (after as well as before judgment) (a) in the case of overdue
principal, at the rate otherwise applicable to such Loan pursuant to Section
2.06 plus 2% per annum and (b) in all other cases, at a rate per annum (computed
on the basis of the actual number of days elapsed over a year of 365 or 366
days, as the case may be, when determined by reference to the Prime Rate and
over a year of 360 days at all other times) equal to the sum of the Alternate
Base Rate plus 2%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurodollar Borrowing the Administrative Agent shall
have determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the
<PAGE>
London interbank market, or that the rates at which such dollar deposits are
being offered will not adequately and fairly reflect the cost to any Lender of
making or maintaining its Eurodollar Loan during such Interest Period, or that
reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the
Administrative Agent shall, as soon as practicable thereafter, give written or
telecopy notice of such determination to the Borrower and the Lenders. In the
event of any such determination, until the Administrative Agent shall have
advised the Borrower and the Lenders that the circumstances giving rise to such
notice no longer exist, any request by the Borrower for a Eurodollar Borrowing
pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an ABR
Borrowing. Each determination by the Administrative Agent hereunder shall be
conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a)
The Term Loan Commitments shall automatically terminate at 5:00 p.m., New York
City time, on the Closing Date. The Revolving Credit Commitments and the L/C
Commitment shall automatically terminate on the Revolving Credit Maturity Date.
Notwithstanding the foregoing, all the Commitments shall automatically terminate
at 5:00 p.m., New York City time, on August 25, 1997, if the initial Credit
Event shall not have occurred by such time.
(b) Upon at least three Business Days' prior irrevocable
written or telecopy notice to the Administrative Agent, the Borrower may at any
time in whole permanently terminate, or from time to time in part permanently
reduce, the Term Loan Commitments or the Revolving Credit Commitments; provided,
however, that (i) each partial reduction of the Term Loan Commitments or the
Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and
in a minimum amount of $0 and (ii) the Total Revolving Credit Commitment shall
not be reduced to an amount that is less than the Aggregate Revolving Credit
Exposure at the time.
(c) Each reduction in the Term Loan Commitments or the
Revolving Credit Commitments hereunder shall be made ratably among the Lenders
in accordance with their respective applicable Commitments. The Borrower shall
pay to the Administrative Agent for the account of the applicable Lenders, on
the date of each termination or reduction, the Commitment Fees on the amount of
the Commitments so terminated or reduced accrued to but excluding the date of
such termination or reduction.
SECTION 2.10. Conversion and Continuation of Borrowings. The
Borrower shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 12:00 (noon), New York City time, one
Business Day prior to conversion, to convert any Eurodollar Borrowing into an
ABR Borrowing, (b) not later than 10:00 a.m., New York City time, three Business
Days prior to conversion or continuation, to convert any ABR Borrowing into a
Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar
Borrowing for an additional Interest Period, and (c) not later than 10:00 a.m.,
New York City time, three Business Days prior to conversion, to convert the
Interest Period with respect to any Eurodollar Borrowing to another permissible
Interest Period, subject in each case to the following:
<PAGE>
each conversion or continuation shall be made pro
rata among the Lenders in accordance with the respective
principal amounts of the Loans comprising the converted or
continued Borrowing;
if less than all the outstanding principal amount of
any Borrowing shall be converted or continued, then each
resulting Borrowing shall satisfy the limitations specified in
Sections 2.02(a) and 2.02(b) regarding the principal amount
and maximum number of Borrowings of the relevant Type;
each conversion shall be effected by each Lender and
the Administrative Agent by recording for the account of such
Lender the new Loan of such Lender resulting from such
conversion and reducing the Loan (or portion thereof) of such
Lender being converted by an equivalent principal amount;
accrued interest on any Eurodollar Loan (or portion thereof)
being converted shall be paid by the Borrower at the time of
conversion;
if any Eurodollar Borrowing is converted at a time
other than the end of the Interest Period applicable thereto,
the Borrower shall pay, upon demand, any amounts due to the
Lenders pursuant to Section 2.16;
any portion of a Borrowing maturing or required
to be repaid in less than one month may not be converted
into or continued as a Eurodollar Borrowing;
any portion of a Eurodollar Borrowing that cannot be
converted into or continued as a Eurodollar Borrowing by
reason of the immediately preceding clause shall be
automatically converted at the end of the Interest Period in
effect for such Borrowing into an ABR Borrowing;
no Interest Period may be selected for any Eurodollar
Term Borrowing that would end later than a Repayment Date
occurring on or after the first day of such Interest Period
if, after giving effect to such selection, the aggregate
outstanding amount of (A) the Eurodollar Term Borrowings with
Interest Periods ending on or prior to such Repayment Date and
(B) the ABR Term Borrowings would not be at least equal to the
principal amount of Term Borrowings to be paid on such
Repayment Date; and
upon notice to the Borrower from the Administrative
Agent given at the request of the Required Lenders, after the
occurrence and during the continuance of a Default or Event of
Default, no outstanding Loan may be converted into, or
continued as, a Eurodollar Loan.
Each notice pursuant to this Section 2.10 shall be irrevocable
and shall refer to this Agreement and specify (i) the identity and amount of the
Borrowing that the Borrower requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a Eurodollar Borrowing or
an ABR Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such
<PAGE>
Borrowing is to be converted to or continued as a Eurodollar Borrowing, the
Interest Period with respect thereto. If no Interest Period is specified in any
such notice with respect to any conversion to or continuation as a Eurodollar
Borrowing, the Borrower shall be deemed to have selected an Interest Period of
one month's duration. The Administrative Agent shall advise the Lenders of any
notice given pursuant to this Section 2.10 and of each Lender's portion of any
converted or continued Borrowing. If the Borrower shall not have given notice in
accordance with this Section 2.10 to continue any Borrowing into a subsequent
Interest Period (and shall not otherwise have given notice in accordance with
this Section 2.10 to convert such Borrowing), such Borrowing shall, at the end
of the Interest Period applicable thereto (unless repaid pursuant to the terms
hereof), automatically be continued into a new Interest Period as an ABR
Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) The Term
Borrowings shall be payable as to principal in one installment payable on the
Term Loan Maturity Date (such date also being called the "Repayment Date"), such
payment to be in an amount equal to the aggregate principal amount of Term
Borrowings made on the Closing Date.
(b) Each prepayment of principal of the Term Borrowings
pursuant to Section 2.12 shall be applied to reduce scheduled payments of
principal due under this Section 2.11 after the date of such prepayment. To the
extent not previously paid, all Term Borrowings shall be due and payable on the
Term Loan Maturity Date. Each payment of Term Borrowings pursuant to this
Section 2.11 shall be accompanied by accrued interest on the principal amount
paid to but excluding the date of payment.
SECTION 2.12. Prepayment. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing, in whole but
not in part, upon at least three Business Days' prior written or telecopy notice
(or telephone notice promptly confirmed by written or telecopy notice) to the
Administrative Agent before 11:00 a.m., New York City time.
(b) [Reserved].
(c) Each notice of prepayment shall specify the prepayment
date and the principal amount of each Borrowing (or portion thereof) to be
prepaid, shall be irrevocable and shall commit the Borrower to prepay such
Borrowing by the amount stated therein on the date stated therein. All
prepayments under this Section 2.12 shall be subject to Section 2.16 but
otherwise without premium or penalty. All prepayments under this Section 2.12
shall be accompanied by accrued interest on the principal amount being prepaid
to but excluding the date of payment.
SECTION 2.13. Mandatory Prepayments. (a) In the event of any
termination of all the Revolving Credit Commitments, the Borrower shall repay or
prepay all its outstanding Revolving Credit Borrowings on the date of such
termination. In the event of any partial reduction of the Revolving Credit
Commitments, then (i) at or prior to the effective date of such reduction, the
Administrative Agent shall notify the Borrower and the Revolving Credit Lenders
of the Aggregate Revolving Credit Exposure after giving effect thereto and (ii)
if the Aggregate Revolving Credit Exposure would exceed the Total Revolving
Credit Commitment after giving effect to such reduction or termination, then the
Borrower shall, on the date of such reduction or
<PAGE>
termination, repay or prepay Revolving Credit Borrowings in an amount sufficient
to eliminate such excess.
(b) Not later than the third Business Day following the
completion of any Asset Sale, the Borrower shall apply 100% of the Net Cash
Proceeds received with respect thereto to prepay outstanding Term Loans in
accordance with Section 2.13(g).
(c) In the event and on each occasion that an Equity Issuance
occurs, the Borrower shall, substantially simultaneously with (and in any event
not later than the third Business Day next following) the occurrence of such
Equity Issuance, apply 100% of the Net Cash Proceeds therefrom to prepay
outstanding Term Loans in accordance with Section 2.13(g).
(d) [Reserved].
(e) In the event that any Loan Party or any subsidiary of a
Loan Party shall receive Net Cash Proceeds from the issuance or other
disposition of Indebtedness for money borrowed of any Loan Party or any
subsidiary of a Loan Party [(other than [(i)] any cash proceeds from the
issuance of [describe permitted transaction][, the Net Cash Proceeds of which
are used to prepay the Term Loans in accordance with this Section 2.13][, or
(ii) Indebtedness for money borrowed permitted pursuant to Section 6.01])], the
Borrower shall, substantially simultaneously with (and in any event not later
than the third Business Day next following) the receipt of such Net Cash
Proceeds by such Loan Party or such subsidiary, apply an amount equal to 100% of
such Net Cash Proceeds to prepay outstanding Term Loans in accordance with
Section 2.13(g).
(f) In the event that there shall occur any Casualty or
Condemnation (each as defined in Section 5.12) and, pursuant to Section 5.12,
the Casualty Proceeds or Condemnation Proceeds (each as defined in Section
5.12), as the case may be, are required to be used to prepay the Term Loans,
then the Borrower shall apply an amount equal to 100% of such Casualty Proceeds
or Condemnation Proceeds, as the case may be, to prepay outstanding Term Loans
in accordance with Section 2.13(g).
(g) Mandatory prepayments of outstanding Term Loans under this
Agreement shall be applied pro rata against the principal due in respect of the
Term Loans under Section 2.11.
(h) The Borrower shall deliver to the Administrative Agent, at
the time of each prepayment required under this Section 2.13, (i) a certificate
signed by a Financial Officer of the Borrower setting forth in reasonable detail
the calculation of the amount of such prepayment and (ii) to the extent
practicable, at least three days prior written notice of such prepayment. Each
notice of prepayment shall specify the prepayment date, the Type of each Loan
being prepaid and the principal amount of each Loan (or portion thereof) to be
prepaid. All prepayments of Borrowings under this Section 2.13 shall be subject
to Section 2.16, but shall otherwise be without premium or penalty.
(i) Amounts to be applied pursuant to this Section 2.13 to the
prepayment of Term Loans and Revolving Loans shall be applied, as applicable,
first to reduce outstanding ABR
<PAGE>
Term Loans and ABR Revolving Loans. Any amounts remaining after each such
application shall, at the option of the Borrower, be applied to prepay
Eurodollar Term Loans or Eurodollar Revolving Loans, as the case may be,
immediately and/or shall be deposited in the Prepayment Account (as defined
below). The Administrative Agent shall apply any cash deposited in the
Prepayment Account (i) allocable to Term Loans to prepay Eurodollar Term Loans
and (ii) allocable to Revolving Loans to prepay Eurodollar Revolving Loans, in
each case on the last day of their respective Interest Periods (or, at the
direction of the Borrower, on any earlier date) until all outstanding Term Loans
or Revolving Loans, as the case may be, have been prepaid or until all the
allocable cash on deposit with respect to such Loans has been exhausted. For
purposes of this Agreement, the term "Prepayment Account" shall mean an account
established by the Borrower with the Administrative Agent or an institution
designated by it and over which the Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal for
application in accordance with this paragraph (i). The Administrative Agent
will, at the request of the Borrower, invest amounts on deposit in the
Prepayment Account in Permitted Investments that mature prior to the last day of
the applicable Interest Periods of the Eurodollar Term Borrowings or Eurodollar
Revolving Borrowings to be prepaid, as the case may be; provided, however, that
(i) the Administrative Agent shall not be required to make any investment that,
in its sole judgment, would require or cause the Administrative Agent to be in,
or would result in any, violation of any law, statute, rule or regulation and
(ii) the Administrative Agent shall have no obligation to invest amounts on
deposit in the Prepayment Account if a Default or Event of Default shall have
occurred and be continuing. The Borrower shall indemnify the Administrative
Agent for any losses relating to the investments so that the amount available to
prepay Eurodollar Borrowings on the last day of the applicable Interest Period
is not less than the amount that would have been available had no investments
been made pursuant thereto. Other than any interest earned on such investments,
the Prepayment Account shall not bear interest. Interest or profits, if any, on
such investments shall be deposited in the Prepayment Account and reinvested and
disbursed as specified above. If the maturity of the Loans has been accelerated
pursuant to Article VII, the Administrative Agent may, in its sole discretion,
apply all amounts on deposit in the Prepayment Account to satisfy any of the
Obligations. The Borrower hereby grants to the Administrative Agent, for its
benefit and the benefit of the Issuing Bank and the Lenders, a security interest
in the Prepayment Account to secure the Obligations.
SECTION 2.14. Reserve Requirements; Change in Circumstances.
(a) Notwithstanding any other provision of this Agreement, if after the date of
this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of payments to any Lender or
the Issuing Bank of the principal of or interest on any Eurodollar Loan made by
such Lender or any Fees or other amounts payable hereunder (other than changes
in respect of taxes imposed on the overall net income of such Lender or the
Issuing Bank by the jurisdiction in which such Lender or the Issuing Bank has
its principal office or by any political subdivision or taxing authority
therein), or shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of or credit extended by any Lender or the Issuing Bank (except any such
reserve requirement which is reflected in the Adjusted LIBO Rate) or shall
impose on such Lender or the Issuing Bank or the London
<PAGE>
interbank market any other condition affecting this Agreement or Eurodollar
Loans made by such Lender or any Letter of Credit or participation therein, and
the result of any of the foregoing shall be to increase the cost to such Lender
or the Issuing Bank of making or maintaining any Eurodollar Loan or increase the
cost to any Lender of issuing or maintaining any Letter of Credit or purchasing
or maintaining a participation therein or to reduce the amount of any sum
received or receivable by such Lender or the Issuing Bank hereunder (whether of
principal, interest or otherwise) by an amount deemed by such Lender or the
Issuing Bank to be material, then the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, upon demand such additional amount or amounts
as will compensate such Lender or the Issuing Bank, as the case may be, for such
additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined
that the adoption after the date hereof of any law, rule, regulation, agreement
or guideline regarding capital adequacy, or any change after the date hereof in
any such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender's or the
Issuing Bank's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Governmental Authority
has or would have the effect of reducing the rate of return on such Lender's or
the Issuing Bank's capital or on the capital of such Lender's or the Issuing
Bank's holding company, if any, as a consequence of this Agreement or the Loans
made or participations in Letters of Credit purchased by such Lender pursuant
hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such applicability,
adoption, change or compliance (taking into consideration such Lender's or the
Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's
holding company with respect to capital adequacy) by an amount deemed by such
Lender or the Issuing Bank to be material, then from time to time the Borrower
shall pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank
or such Lender's or the Issuing Bank's holding company for any such reduction
suffered.
(c) A certificate of a Lender or the Issuing Bank setting
forth the amount or amounts necessary to compensate such Lender or the Issuing
Bank or its holding company, as applicable, as specified in paragraph (a) or (b)
above shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay such Lender or the Issuing Bank the amount shown
as due on any such certificate delivered by it within 10 days after its receipt
of the same.
(d) Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation for any increased costs or reduction in amounts
received or receivable or reduction in return on capital shall not constitute a
waiver of such Lender's or the Issuing Bank's right to demand such compensation.
The protection of this Section shall be available to each Lender and the Issuing
Bank regardless of any possible contention of the invalidity or inapplicability
of the
<PAGE>
law, rule, regulation, agreement, guideline or other change or condition that
shall have occurred or been imposed.
SECTION 2.15. Change in Legality. (a) Notwithstanding any
other provision of this Agreement, if, after the date hereof, any change in any
law or regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans
will not thereafter (for the duration of such unlawfulness) be
made by such Lender hereunder (or be continued for additional
Interest Periods and ABR Loans will not thereafter (for such
duration) be converted into Eurodollar Loans), whereupon any
request for a Eurodollar Borrowing (or to convert an ABR
Borrowing to a Eurodollar Borrowing or to continue a
Eurodollar Borrowing for an additional Interest Period) shall,
as to such Lender only, be deemed a request for an ABR Loan
(or a request to continue an ABR Loan as such for an
additional Interest Period or to convert a Eurodollar Loan
into an ABR Loan, as the case may be), unless such declaration
shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding
Eurodollar Loans made by it be converted to ABR Loans, in
which event all such Eurodollar Loans shall be automatically
converted to ABR Loans as of the effective date of such notice
as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or
(ii) above, all payments and prepayments of principal that would otherwise have
been applied to repay the Eurodollar Loans that would have been made by such
Lender or the converted Eurodollar Loans of such Lender shall instead be applied
to repay the ABR Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.15, a notice to the
Borrower by any Lender shall be effective as to each Eurodollar Loan made by
such Lender, if lawful, on the last day of the Interest Period currently
applicable to such Eurodollar Loan; in all other cases such notice shall be
effective on the date of receipt by the Borrower.
SECTION 2.16. Indemnity. The Borrower shall indemnify each
Lender against any loss or expense that such Lender may sustain or incur as a
consequence of (a) any event, other than a default by such Lender in the
performance of its obligations hereunder, which results in (i) such Lender
receiving or being deemed to receive any amount on account of the principal of
any Eurodollar Loan prior to the end of the Interest Period in effect therefor,
(ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of
the Interest Period with respect to any Eurodollar Loan, in each case other than
on the last day of the Interest Period in effect therefor, or (iii) any
Eurodollar Loan to be made by such Lender (including any Eurodollar Loan to be
made pursuant to a conversion or continuation under Section 2.10) not being made
<PAGE>
after notice of such Loan shall have been given by the Borrower hereunder (any
of the events referred to in this clause (a) being called a "Breakage Event") or
(b) any default in the making of any payment or prepayment required to be made
hereunder. In the case of any Breakage Event, such loss shall include an amount
equal to the excess, as reasonably determined by such Lender, of (i) its cost of
obtaining funds for the Eurodollar Loan that is the subject of such Breakage
Event for the period from the date of such Breakage Event to the last day of the
Interest Period in effect (or that would have been in effect) for such Loan over
(ii) the amount of interest likely to be realized by such Lender in redeploying
the funds released or not utilized by reason of such Breakage Event for such
period. A certificate of any Lender setting forth any amount or amounts which
such Lender is entitled to receive pursuant to this Section 2.16 shall be
delivered to the Borrower and shall be conclusive absent manifest error.
SECTION 2.17. Pro Rata Treatment. Except as required under
Section 2.15, each Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the Loans, each payment of the Commitment
Fees, each reduction of the Term Loan Commitments or the Revolving Credit
Commitments and each conversion of any Borrowing to or continuation of any
Borrowing as a Borrowing of any Type shall be allocated pro rata among the
Lenders in accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Loans). Each Lender agrees
that in computing such Lender's portion of any Borrowing to be made hereunder,
the Administrative Agent may, in its discretion, round each Lender's percentage
of such Borrowing to the next higher or lower whole dollar amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against the Borrower or any other Loan Party, or pursuant to a
secured claim under Section 506 of Title 11 of the United States Code or other
security or interest arising from, or in lieu of, such secured claim, received
by such Lender under any applicable bankruptcy, insolvency or other similar law
or otherwise, or by any other means, obtain payment (voluntary or involuntary)
in respect of any Loan or Loans or L/C Disbursement as a result of which the
unpaid principal portion of its Term Loans and Revolving Loans and
participations in L/C Disbursements shall be proportionately less than the
unpaid principal portion of the Term Loans and Revolving Loans and
participations in L/C Disbursements of any other Lender, it shall be deemed
simultaneously to have purchased from such other Lender at face value, and shall
promptly pay to such other Lender the purchase price for, a participation in the
Term Loans and Revolving Loans and L/C Exposure, as the case may be of such
other Lender, so that the aggregate unpaid principal amount of the Term Loans
and Revolving Loans and L/C Exposure and participations in Term Loans and
Revolving Loans and L/C Exposure held by each Lender shall be in the same
proportion to the aggregate unpaid principal amount of all Term Loans and
Revolving Loans and L/C Exposure then outstanding as the principal amount of its
Term Loans and Revolving Loans and L/C Exposure prior to such exercise of
banker's lien, setoff or counterclaim or other event was to the principal amount
of all Term Loans and Revolving Loans and L/C Exposure outstanding prior to such
exercise of banker's lien, setoff or counterclaim or other event; provided,
however, that if any such purchase or purchases or adjustments shall be made
pursuant to this Section 2.18 and the payment giving
<PAGE>
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. The Borrower expressly
consents to the foregoing arrangements and agrees that any Lender holding a
participation in a Term Loan or Revolving Loan or L/C Disbursement deemed to
have been so purchased may exercise any and all rights of banker's lien, setoff
or counterclaim with respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a Loan directly to
the Borrower in the amount of such participation.
SECTION 2.19. Payments. (a) The Borrower shall make each
payment (including principal of or interest on any Borrowing or any L/C
Disbursement or any Fees or other amounts) hereunder and under any other Loan
Document not later than 12:00 (noon), New York City time, on the date when due
in immediately available dollars, without setoff, defense or counterclaim. Each
such payment (other than Issuing Bank Fees, which shall be paid directly to the
Issuing Bank) shall be made to the Administrative Agent at its offices at Seven
World Trade Center, New York, New York.
(b) Whenever any payment (including principal of or interest
on any Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.20. Taxes. (a) Any and all payments by or on behalf
of the Borrower or any Loan Party hereunder and under any other Loan Document
shall be made, in accordance with Section 2.19, free and clear of and without
deduction for any and all current or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding (i)
income taxes imposed on the net income of the Administrative Agent, any Lender
or the Issuing Bank (or any transferee or assignee thereof, including a
participation holder (any such entity a "Transferee")) and (ii) franchise taxes
imposed on the net income of the Administrative Agent, any Lender or the Issuing
Bank (or Transferee), in each case by the jurisdiction under the laws of which
the Administrative Agent, such Lender or the Issuing Bank (or Transferee) is
organized or any political subdivision thereof (all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities, collectively
or individually, being called "Taxes"). If the Borrower or any Loan Party shall
be required to deduct any Taxes from or in respect of any sum payable hereunder
or under any other Loan Document to the Administrative Agent, any Lender or the
Issuing Bank (or any Transferee), (i) the sum payable shall be increased by the
amount (an "additional amount") necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.20) the Administrative Agent, such Lender or the Issuing Bank (or
Transferee), as the case may be, shall receive an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower or such
Loan Party shall make such deductions and (iii) the Borrower or such Loan Party
shall pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
<PAGE>
(b) In addition, the Borrower agrees to pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies (including, without limitation, mortgage recording taxes and
similar fees) that arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document ("Other Taxes").
(c) The Borrower will indemnify the Administrative Agent, each
Lender and the Issuing Bank (or Transferee) for the full amount of Taxes and
Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank
(or Transferee), as the case may be, and any liability (including penalties,
interest and expenses (including reasonable attorney's fees and expenses))
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability prepared by the
Administrative Agent, a Lender or the Issuing Bank (or Transferee), or the
Administrative Agent on its behalf, absent manifest error, shall be final,
conclusive and binding for all purposes. Such indemnification shall be made
within 30 days after the date the Administrative Agent, any Lender or the
Issuing Bank (or Transferee), as the case may be, makes written demand therefor.
(d) As soon as practicable after the date of any payment of
Taxes or Other Taxes by the Borrower or any other Loan Party to the relevant
Governmental Authority, the Borrower or such other Loan Party will deliver to
the Administrative Agent, at its address referred to in Section 9.01, the
original or a certified copy of a receipt issued by such Governmental Authority
evidencing payment thereof.
(e) Each Lender (or Transferee) that is organized under the
laws of a jurisdiction other than the United States, any State thereof or the
District of Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a
Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S.
Federal withholding tax on payments by the Borrower under this Agreement and the
other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on
or before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this Section 2.20(e), a Non-U.S. Lender
shall not be
<PAGE>
required to deliver any form pursuant to this Section 2.20(e) that such Non-U.S.
Lender is not legally able to deliver.
(f) The Borrower shall not be required to indemnify any
Non-U.S. Lender or to pay any additional amounts to any Non-U.S. Lender, in
respect of United States Federal withholding tax pursuant to paragraph (a) or
(c) above to the extent that (i) the obligation to withhold amounts with respect
to United States Federal withholding tax existed on the date such Non-U.S.
Lender became a party to this Agreement (or, in the case of a Transferee that is
a participation holder, on the date such participation holder became a
Transferee hereunder) or, with respect to payments to a New Lending Office, the
date such Non-U.S. Lender designated such New Lending Office with respect to a
Loan; provided, however, that this paragraph (f) shall not apply (x) to any
Transferee or New Lending Office that becomes a Transferee or New Lending Office
as a result of an assignment, participation, transfer or designation made at the
request of the Borrower and (y) to the extent the indemnity payment or
additional amounts any Transferee, or any Lender (or Transferee), acting through
a New Lending Office, would be entitled to receive (without regard to this
paragraph (f)) do not exceed the indemnity payment or additional amounts that
the person making the assignment, participation or transfer to such Transferee,
or Lender (or Transferee) making the designation of such New Lending Office,
would have been entitled to receive in the absence of such assignment,
participation, transfer or designation or (ii) the obligation to pay such
additional amounts would not have arisen but for a failure by such Non-U.S.
Lender to comply with the provisions of paragraph (f) above.
(g) Nothing contained in this Section 2.20 shall require any
Lender or the Issuing Bank (or any Transferee) or the Administrative Agent to
make available any of its tax returns (or any other information that it deems to
be confidential or proprietary).
SECTION 2.21. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate. (a) In the event (i) any Lender or the Issuing
Bank delivers a certificate requesting compensation pursuant to Section 2.14,
(ii) any Lender or the Issuing Bank delivers a notice described in Section 2.15
or (iii) the Borrower is required to pay any additional amount to any Lender or
the Issuing Bank or any Governmental Authority on account of any Lender or the
Issuing Bank pursuant to Section 2.20, the Borrower may, at its sole expense and
effort (including with respect to the processing and recordation fee referred to
in Section 9.04(b)), upon notice to such Lender or the Issuing Bank and the
Administrative Agent, require such Lender or the Issuing Bank to transfer and
assign, without recourse (in accordance with and subject to the restrictions
contained in Section 9.04), all of its interests, rights and obligations under
this Agreement to an assignee that shall assume such assigned obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (x) such assignment shall not conflict with any law, rule or regulation or
order of any court or other Governmental Authority having jurisdiction, (y) the
Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Revolving Credit Commitment is being assigned, of the Issuing
Bank), which consent shall not unreasonably be withheld, and (z) the Borrower or
such assignee shall have paid to the affected Lender or the Issuing Bank in
immediately available funds an amount equal to the sum of the principal of and
interest accrued to the date of such payment on the outstanding Loans or L/C
Disbursements of such Lender or the Issuing Bank,
<PAGE>
respectively, plus all Fees and other amounts accrued for the account of such
Lender or the Issuing Bank hereunder (including any amounts under Section 2.14
and Section 2.16); provided further that, if prior to any such transfer and
assignment the circumstances or event that resulted in such Lender's or the
Issuing Bank's claim for compensation under Section 2.14 or notice under Section
2.15 or the amounts paid pursuant to Section 2.20, as the case may be, cease to
cause such Lender or the Issuing Bank to suffer increased costs or reductions in
amounts received or receivable or reduction in return on capital, or cease to
have the consequences specified in Section 2.15, or cease to result in amounts
being payable under Section 2.20, as the case may be (including as a result of
any action taken by such Lender or the Issuing Bank pursuant to paragraph (b)
below), or if such Lender or the Issuing Bank shall waive its right to claim
further compensation under Section 2.14 in respect of such circumstances or
event or shall withdraw its notice under Section 2.15 or shall waive its right
to further payments under Section 2.20 in respect of such circumstances or
event, as the case may be, then such Lender or the Issuing Bank shall not
thereafter be required to make any such transfer and assignment hereunder.
(b) If (i) any Lender or the Issuing Bank shall request
compensation under Section 2.14, (ii) any Lender or the Issuing Bank delivers a
notice described in Section 2.15 or (iii) the Borrower is required to pay any
additional amount to any Lender or the Issuing Bank or any Governmental
Authority on account of any Lender or the Issuing Bank, pursuant to Section
2.20, then such Lender or the Issuing Bank shall use reasonable efforts (which
shall not require such Lender or the Issuing Bank to incur an unreimbursed loss
or unreimbursed cost or expense or otherwise take any action inconsistent with
its internal policies or legal or regulatory restrictions or suffer any
disadvantage or burden deemed by it to be significant) (x) to file any
certificate or document reasonably requested in writing by the Borrower or (y)
to assign its rights and delegate and transfer its obligations hereunder to
another of its offices, branches or affiliates, if such filing or assignment
would reduce its claims for compensation under Section 2.14 or enable it to
withdraw its notice pursuant to Section 2.15 or would reduce amounts payable
pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender or the
Issuing Bank in connection with any such filing or assignment, delegation and
transfer.
SECTION 2.22. Letters of Credit. (a) General. The Borrower may
request the issuance of a Letter of Credit for its own account, in a form
reasonably acceptable to the Administrative Agent and the Issuing Bank, at any
time and from time to time while the Revolving Credit Commitments remain in
effect. This Section shall not be construed to impose an obligation upon the
Issuing Bank to issue any Letter of Credit that is inconsistent with the terms
and conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to amend,
renew or extend an existing Letter of Credit), the Borrower shall hand deliver
or telecopy to the Issuing Bank and the Administrative Agent (reasonably in
advance of the requested date of issuance, amendment, renewal or extension) a
notice requesting the issuance of a Letter of Credit, or identifying the Letter
of Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such Letter of Credit is to expire
(which shall comply with
<PAGE>
paragraph (c) below), the amount of such Letter of Credit, the name and address
of the beneficiary thereof and such other information as shall be necessary to
prepare such Letter of Credit. Following receipt of such notice and prior to the
issuance of the requested Letter of Credit or the applicable amendment, renewal
or extension, the Administrative Agent shall notify the Borrower and the Issuing
Bank of the amount of the Aggregate Revolving Credit Exposure after giving
effect to (i) the issuance, amendment, renewal or extension of such Letter of
Credit, (ii) the issuance or expiration of any other Letter of Credit that is to
be issued or will expire prior to the requested date of issuance of such Letter
of Credit and (iii) the borrowing or repayment of any Revolving Credit Loans
that (based upon notices delivered to the Administrative Agent by the Borrower)
are to be borrowed or repaid prior to the requested date of issuance of such
Letter of Credit. A Letter of Credit shall be issued, amended, renewed or
extended only if, and upon issuance, amendment, renewal or extension of each
Letter of Credit the Borrower shall be deemed to represent and warrant that,
after giving effect to such issuance, amendment, renewal or extension (A) the
L/C Exposure shall not exceed $10,000,000 and (B) the Aggregate Revolving Credit
Exposure shall not exceed the Total Revolving Credit Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at the
close of business on the date that is five Business Days prior to the Revolving
Credit Maturity Date, unless such Letter of Credit expires by its terms on an
earlier date.
(d) Participations. By the issuance of a Letter of Credit and
without any further action on the part of the Issuing Bank or the Lenders, the
Issuing Bank hereby grants to each Revolving Credit Lender, and each such Lender
hereby acquires from the applicable Issuing Bank, a participation in such Letter
of Credit equal to such Lender's Pro Rata Percentage of the aggregate amount
available to be drawn under such Letter of Credit, effective upon the issuance
of such Letter of Credit. In consideration and in furtherance of the foregoing,
each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay
to the Administrative Agent, for the account of the Issuing Bank, such Lender's
Pro Rata Percentage of each L/C Disbursement made by the Issuing Bank and not
reimbursed by the Borrower (or, if applicable, another party pursuant to its
obligations under any other Loan Document) forthwith on the date due as provided
in Section 2.02(f). Each Revolving Credit Lender acknowledges and agrees that
its obligation to acquire participations pursuant to this paragraph in respect
of Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including the occurrence and continuance of a
Default or an Event of Default, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, the Borrower shall pay to the
Administrative Agent an amount equal to such L/C Disbursement not later than two
hours after the Borrower shall have received notice from the Issuing Bank that
payment of such draft will be made, or, if the Borrower shall have received such
notice later than 10:00 a.m., New York City time, on any Business Day, not later
than 10:00 a.m., New York City time, on the immediately following Business Day.
(f) Obligations Absolute. The Borrower's obligations to
reimburse L/C Disbursements as provided in paragraph (e) above shall be
absolute, unconditional and
<PAGE>
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under any and all circumstances whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any
Letter of Credit or any Loan Document, or any term or
provision therein;
(ii) any amendment or waiver of or any consent to
departure from all or any of the provisions of any Letter of
Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or
other right that the Borrower, any other party guaranteeing,
or otherwise obligated with, the Borrower, any Subsidiary or
other Affiliate thereof or any other person may at any time
have against the beneficiary under any Letter of Credit, the
Issuing Bank, the Administrative Agent or any Lender or any
other person, whether in connection with this Agreement, any
other Loan Document or any other related or unrelated
agreement or transaction;
(iv) any draft or other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that
does not comply with the terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any
kind of the Issuing Bank, the Lenders, the Administrative
Agent or any other person or any other event or circumstance
whatsoever, whether or not similar to any of the foregoing,
that might, but for the provisions of this Section, constitute
a legal or equitable discharge of the Borrower's obligations
hereunder.
Without limiting the generality of the foregoing, it is
expressly understood and agreed that the absolute and unconditional obligation
of the Borrower hereunder to reimburse L/C Disbursements will not be excused by
the gross negligence or willful misconduct of the Issuing Bank. However, the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the Issuing Bank's gross negligence or willful misconduct in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof; it is understood that the Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary and, in
making any payment under any Letter of Credit (i) the Issuing Bank's exclusive
reliance on the documents presented to it under such Letter of Credit as to any
and all matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document
<PAGE>
presented pursuant to such Letter of Credit proves to be insufficient in any
respect, if such document on its face appears to be in order, and whether or not
any other statement or any other document presented pursuant to such Letter of
Credit proves to be forged or invalid or any statement therein proves to be
inaccurate or untrue in any respect whatsoever and (ii) any noncompliance in any
immaterial respect of the documents presented under such Letter of Credit with
the terms thereof shall, in each case, be deemed not to constitute willful
misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall as promptly
as possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether the
Issuing Bank has made or will make an L/C Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse the Issuing Bank and the Revolving
Credit Lenders with respect to any such L/C Disbursement. The Administrative
Agent shall promptly give each Revolving Credit Lender notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, then, unless the Borrower shall
reimburse such L/C Disbursement in full on such date, the unpaid amount thereof
shall bear interest for the account of the Issuing Bank, for each day from and
including the date of such L/C Disbursement, to but excluding the earlier of the
date of payment by the Borrower or the date on which interest shall commence to
accrue thereon as provided in Section 2.02(f), at the rate per annum that would
apply to such amount if such amount were an ABR Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing
Bank may resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed at any
time by the Borrower by notice to the Issuing Bank, the Administrative Agent and
the Lenders. Subject to the next succeeding paragraph, upon the acceptance of
any appointment as the Issuing Bank hereunder by a Lender that shall agree to
serve as successor Issuing Bank, such successor shall succeed to and become
vested with all the interests, rights and obligations of the retiring Issuing
Bank and the retiring Issuing Bank shall be discharged from its obligations to
issue additional Letters of Credit hereunder. At the time such removal or
resignation shall become effective, the Borrower shall pay all accrued and
unpaid fees pursuant to Section 2.05(d)(ii). The acceptance of any appointment
as the Issuing Bank hereunder by a successor Lender shall be evidenced by an
agreement entered into by such successor, in a form satisfactory to the Borrower
and the Administrative Agent, and, from and after the effective date of such
agreement, (i) such successor Lender shall have all the rights and obligations
of the previous Issuing Bank under this Agreement and the other Loan Documents
and (ii) references herein and in the other Loan Documents to the term "Issuing
Bank" shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require. After the resignation or removal of the Issuing Bank hereunder, the
retiring Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement and the other
Loan
<PAGE>
Documents with respect to Letters of Credit issued by it prior to such
resignation or removal, but shall not be required to issue additional Letters of
Credit.
(j) Cash Collateralization. If any Event of Default shall
occur and be continuing, the Borrower shall, on the Business Day it receives
notice from the Administrative Agent or the Required Lenders (or, if the
maturity of the Loans has been accelerated, Revolving Credit Lenders holding
participations in outstanding Letters of Credit representing greater than 50% of
the aggregate undrawn amount of all outstanding Letters of Credit) thereof and
of the amount to be deposited, deposit in an account with the Collateral Agent,
for the benefit of the Revolving Credit Lenders, an amount in cash equal to the
L/C Exposure as of such date. Such deposit shall be held by the Collateral Agent
as collateral for the payment and performance of the Obligations. The Collateral
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account. Other than any interest earned on the
investment of such deposits in Permitted Investments, which investments shall be
made at the option and sole discretion of the Collateral Agent, such deposits
shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall (i) automatically be
applied by the Administrative Agent to reimburse the Issuing Bank for L/C
Disbursements for which it has not been reimbursed, (ii) be held for the
satisfaction of the reimbursement obligations of the Borrower for the L/C
Exposure at such time and (iii) if the maturity of the Loans has been
accelerated (but subject to the consent of Revolving Credit Lenders holding
participations in outstanding Letters of Credit representing greater than 50% of
the aggregate undrawn amount of all outstanding Letters of Credit), be applied
to satisfy the Obligations. If the Borrower is required to provide an amount of
cash collateral hereunder as a result of the occurrence of an Event of Default,
such amount (to the extent not applied as aforesaid) shall be returned to the
Borrower within three Business Days after all Events of Default have been cured
or waived.
(k) Additional Issuing Banks. The Borrower may, at any time
and from time to time with the consent of the Administrative Agent (which
consent shall not be unreasonably withheld) and such Lender, designate one or
more additional Lenders to act as an issuing bank under the terms of the
Agreement. Any Lender designated as an issuing bank pursuant to this paragraph
(k) shall be deemed to be an "Issuing Bank" (in addition to being a Lender) in
respect of Letters of Credit issued or to be issued by such Lender, and, with
respect to such Letters of Credit, such term shall thereafter apply to the other
Issuing Bank and such Lender.
ARTICLE III
Representations and Warranties
The Borrower represents and warrants to the Administrative
Agent, the Collateral Agent, the Issuing Bank and each of the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower and
each of the Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be
<PAGE>
conducted, (c) is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where the failure so
to qualify could not reasonably be expected to result in a Material Adverse
Effect, and (d) has the corporate power and authority to execute, deliver and
perform its obligations under each of the Loan Documents and each other
agreement or instrument contemplated hereby to which it is or will be a party
and, in the case of the Borrower, to borrow hereunder.
SECTION 3.02. Authorization. The execution, delivery and
performance by each Loan Party of each of the Loan Documents and the borrowings
hereunder (collectively, the "Transactions") (a) have been duly authorized by
all requisite corporate and, if required, stockholder action and (b) will not
(i) violate (A) any provision of law, statute, rule or regulation, or any order
of any Governmental Authority, other than with respect to the failure to make
any required filings with any Governmental Authority, which failure could not
reasonably be expected to result in a Material Adverse Effect, (B) any provision
of the certificate or articles of incorporation or other constitutive documents
or by-laws of the Borrower or any Subsidiary, or (C) any provision of any
indenture, agreement or other instrument to which the Borrower, any Subsidiary
or any other Loan Party is a party or by which any of them or any of their
property is or may be bound, (ii) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a default under, or
give rise to any right to accelerate or to require the prepayment, repurchase or
redemption of any obligation under any such indenture, agreement or other
instrument or (iii) result in the creation or imposition of any Lien upon or
with respect to any property or assets now owned or hereafter acquired by the
Borrower, any Subsidiary or any other Loan Party (other than any Lien created
hereunder or under the Security Documents).
SECTION 3.03. Enforceability. This Agreement has been duly
executed and delivered by the Borrower and constitutes, and each other Loan
Document when executed and delivered by the each Loan Party thereto will
constitute, a legal, valid and binding obligation of such Loan Party enforceable
against such Loan Party in accordance with its terms.
SECTION 3.04. Governmental Approvals. No action, consent or
approval of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(a) the filing of Uniform Commercial Code financing statements, (b) recordation
of the Mortgages and (c) such as have been made or obtained and are in full
force and effect.
SECTION 3.05. Financial Statements. (a) The Borrower has
heretofore furnished to the Lenders its consolidated and consolidating balance
sheets and statements of income and changes in financial condition (i) as of and
for the fiscal year ended December 31, 1996, audited by and accompanied by the
opinion of BDO Seidman, LLP, independent public accountants, and (ii) as of and
for the fiscal quarters and the portion of the fiscal year ended March 30, 1997
and June 30, 1997, certified by its chief financial officer. Such financial
statements present fairly the financial condition and results of operations and
cash flows of the Borrower and its consolidated Subsidiaries as of such dates
and for such periods. Such balance sheets and the notes thereto disclose all
material liabilities, direct or contingent, of the Borrower and its consolidated
<PAGE>
Subsidiaries as of the dates thereof. Such financial statements were prepared in
accordance with GAAP applied on a consistent basis.
(b) The Borrower has heretofore delivered to the
Administrative its unaudited pro forma consolidated balance sheet as of the
close of business on August 25, 1997 and will deliver to the Administrative
Agent no later than the close of business on August 29, 1997 its unaudited pro
forma consolidated balance sheet as of such date and time, in each case
reflecting (in addition to any other appropriate adjustments) the Borrower's
purchase and/or repayment of certain debt securities of Shared Tech in
connection with the Merger prepared giving effect to the Merger as if it had
occurred on such date.
SECTION 3.06. No Material Adverse Change. There has been no
material adverse change in the business, assets, operations, prospects,
condition, financial or otherwise, or material agreements of the Borrower and
the Subsidiaries, taken as a whole, since December 31, 1996.
SECTION 3.07. Title to Properties; Possession Under Leases.
(a) Each of the Borrower and the Subsidiaries has good and marketable title to,
or valid leasehold interests in, all its material properties and assets
(including all Mortgaged Property), except for minor defects in title that do
not interfere with its ability to conduct its business as currently conducted or
to utilize such properties and assets for their intended purposes. All such
material properties and assets are free and clear of Liens, other than Liens
expressly permitted by Section 6.02.
(b) Each of the Borrower and the Subsidiaries has complied
with all obligations under all material leases to which it is a party and all
such leases are in full force and effect. Each of the Borrower and the
Subsidiaries enjoys peaceful and undisturbed possession under all such material
leases.
(c) Except as set forth on Schedule 3.07(c), the Borrower has
not received any notice of, nor has any knowledge of, any pending or
contemplated condemnation proceeding affecting the Mortgaged Properties or any
sale or disposition thereof in lieu of condemnation.
(d) Neither the Borrower nor any of the Subsidiaries is
obligated under any right of first refusal, option or other contractual right to
sell, assign or otherwise dispose of any Mortgaged Property or any interest
therein.
No patents, trademarks, service marks or other intellectual
property is, individually or in the aggregate, material to the business,
operations or prospects of the Borrower or any of the Subsidiaries.
SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the
Closing Date a list of all Subsidiaries and the percentage ownership interest of
the Borrower therein. The shares of capital stock or other ownership interests
so indicated on Schedule 3.08 are fully paid and non-assessable and are owned by
the Borrower, directly or indirectly, free and clear of all Liens. Tel-Save
Holdings of Virginia, Inc. (i) does not as of the date of this Agreement conduct
any business or own any assets used in the conduct of the business of the
Borrower or any other
<PAGE>
Subsidiary and (ii) will not at any date after the date of this Agreement
conduct any business or own any such assets unless the Administrative Agent has
previously been furnished with an opinion of counsel satisfactory in form and
substance to the Administrative Agent as to the participation by Tel-Save
Holdings of Virginia, Inc. in the Transactions.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as
set forth on Schedule 3.09, there are not any actions, suits or proceedings at
law or in equity or by or before any Governmental Authority now pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
any Subsidiary or any business, property or rights of any such person (i) that
involve any Loan Document or the Transactions or (ii) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.
(b) None of the Borrower or any of the Subsidiaries or any of
their respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits) or any
restrictions of record or agreements affecting the Mortgaged Property, or is in
default with respect to any judgment, writ, injunction, decree or order of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
(c) Certificates of occupancy and permits are in effect for
each Mortgaged Property as currently constructed, and true and complete copies
of such certificates of occupancy have been delivered to the Collateral Agent as
mortgagee with respect to each Mortgaged Property.
SECTION 3.10. Agreements. (a) [Reserved].
(b) Neither the Borrower nor any of the Subsidiaries is in
default in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, where such default could reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) Neither the
Borrower nor any of the Subsidiaries is engaged principally, in the business or
has as one of its important activities, of extending credit for the purpose of
buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of
Credit will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, for any purpose that entails a violation of, or that
is inconsistent with, the provisions of the Regulations of the Board, including
Regulation G, T, U or X.
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act. Neither the Borrower nor any Subsidiary is (a) an "investment
company" as defined in, or subject
<PAGE>
to regulation under, the Investment Company Act of 1940 or (b) a "holding
company" as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. Subject to the limitations set
forth herein (including, without limitation, the provisions of Section 3.11
herein), the Borrower will use the proceeds of the Loans and will request the
issuance of Letters of Credit only for the purposes specified in the preamble to
this Agreement; provided, however, that no part of the proceeds of the Term Loan
will be used to purchase any securities other than the 12.25% Senior Subordinate
Discount Notes Due 2006 of Shared Technologies Fairfield Communications Corp.
SECTION 3.14. Tax Returns. Each of the Borrower and the
Subsidiaries has filed or caused to be filed all Federal, state, local and
foreign tax returns or materials required to have been filed by it and has paid
or caused to be paid all taxes due and payable by it and all assessments
received by it, except taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, shall have set aside on its books adequate reserves.
SECTION 3.15. No Material Misstatements. None of (a) the
Confidential Information Memorandum or (b) any other information, report,
financial statement, exhibit or schedule furnished by or on behalf of the
Borrower to the Administrative Agent or any Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement of fact or
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading; provided that to the extent any such
information, report, financial statement, exhibit or schedule was based upon or
constitutes a forecast or projection, the Borrower represents only that it acted
in good faith and utilized reasonable assumptions and due care in the
preparation of such information, report, financial statement, exhibit or
schedule.
SECTION 3.16. Employee Benefit Plans. Each of the Borrower and
its ERISA Affiliates is in compliance in all material respects with any
applicable provisions of ERISA and the Code and the regulations and published
interpretations thereunder. Neither the Borrower nor any of the Subsidiaries has
or is required to have any Plan.
SECTION 3.17. Environmental Matters. Except as set forth in
Schedule 3.17:
(a) The properties owned or operated by the Borrower and the
Subsidiaries (the "Properties") do not contain any Hazardous Materials in
amounts or concentrations which (i) constitute, or constituted a violation of,
(ii) require Remedial Action under, or (iii) could give rise to liability under,
Environmental Laws, which violations, Remedial Actions and liabilities, in the
aggregate, could result in a Material Adverse Effect;
(b) The Properties and all operations of the Borrower and the
Subsidiaries are in compliance, and in the last five years have been in
compliance, with all Environmental Laws and all necessary Environmental Permits
have been obtained and are in effect, except to the extent
<PAGE>
that such non-compliance or failure to obtain any necessary permits, in the
aggregate, could not result in a Material Adverse Effect;
(c) There have been no Releases or threatened Releases at,
from, under or proximate to the Properties or otherwise in connection with the
operations of the Borrower or the Subsidiaries, which Releases or threatened
Releases, in the aggregate, could result in a Material Adverse Effect;
(d) Neither the Borrower nor any of the Subsidiaries has
received any notice of an Environmental Claim in connection with the Properties
or the operations of the Borrower or the Subsidiaries or with regard to any
person whose liabilities for environmental matters the Borrower or the
Subsidiaries has retained or assumed, in whole or in part, contractually, by
operation of law or otherwise, which, in the aggregate, could result in a
Material Adverse Effect, nor do the Borrower or the Subsidiaries have reason to
believe that any such notice will be received or is being threatened; and
(e) Hazardous Materials have not been transported from the
Properties, nor have Hazardous Materials been generated, treated, stored or
disposed of at, on or under any of the Properties in a manner that could give
rise to liability under any Environmental Law, nor have the Borrower or the
Subsidiaries retained or assumed any liability, contractually, by operation of
law or otherwise, with respect to the generation, treatment, storage or disposal
of Hazardous Materials, which transportation, generation, treatment, storage or
disposal, or retained or assumed liabilities, in the aggregate, could result in
a Material Adverse Effect.
SECTION 3.18. Insurance. Schedule 3.18, which is to be
furnished to the Administrative Agent not later than five Business Days after
the Closing Date, will set forth a true, complete and correct description of all
insurance maintained by the Borrower or by the Borrower for its Subsidiaries as
of the date furnished. As of the date hereof and the Closing Date, all insurance
maintained by the Borrower is in full force and effect and all premiums have
been duly paid. The Borrower and its Subsidiaries have insurance in such amounts
and covering such risks and liabilities as are in accordance with normal
industry practice.
SECTION 3.19. Security Documents. (a) Each of the Pledge
Agreements is effective to create in favor of the Collateral Agent, for the
ratable benefit of the Secured Parties, a legal, valid and enforceable security
interest in the Collateral (as defined in the Pledge Agreements) and, when the
Collateral is delivered to the Collateral Agent, the Pledge Agreements shall
constitute a fully perfected first priority Lien on, and security interest in,
all right, title and interest of the pledgor thereunder in such Collateral, in
each case prior and superior in right to any other person.
(b) The Security Agreement is effective to create in favor of
the Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreement) and, when financing statements in appropriate form are filed
in the offices specified on Schedule 6 to the Perfection Certificate, the
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantor thereunder in such
Collateral (other than the Intellectual Property, as
<PAGE>
defined in the Security Agreement), in each case prior and superior in right to
any other person, other than with respect to Liens expressly permitted by
Section 6.02.
(c) [Reserved].
(d) The Mortgages are effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable Lien on all of the applicable Loan Party's right, title and
interest in and to the Mortgaged Property thereunder and the proceeds thereof,
and when the Mortgages are filed in the offices specified on Schedule 3.19(d),
the Mortgages shall constitute a fully perfected Lien on, and security interest
in, all right, title and interest of such Loan Party in such Mortgaged Property
and the proceeds thereof, in each case prior and superior in right to any other
person, other than with respect to the rights of persons pursuant to Liens
expressly permitted by Section 6.02.
SECTION 3.20. Location of Real Property and Leased Premises.
Schedule 3.20 lists completely and correctly as of the Closing Date all real
property owned by the Borrower and the Subsidiaries and the addresses thereof.
The Borrower and the Subsidiaries own in fee all the real property set forth on
Schedule 3.20.
SECTION 3.21. Labor Matters. As of the date hereof and the
Closing Date, there are no strikes, lockouts or slowdowns against the Borrower
or any Subsidiary pending or, to the knowledge of the Borrower, threatened. The
hours worked by and payments made to employees of the Borrower and the
Subsidiaries have not been in violation of the Fair Labor Standards Act or any
other applicable Federal, state, local or foreign law dealing with such matters.
All payments due from the Borrower or any Subsidiary, or for which any claim may
be made against the Borrower or any Subsidiary, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of the Borrower or such Subsidiary. The consummation of
the Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which the Borrower or any Subsidiary is bound.
SECTION 3.22. Solvency. (a) Immediately after the consummation
of the Transactions to occur on the Closing Date and immediately following the
making of each Loan made on the Closing Date and after giving effect to the
application of the proceeds of such Loans, (i) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (ii) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (iii) each Loan Party will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (iv) each Loan Party will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Closing Date.
<PAGE>
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of the
Issuing Bank to issue Letters of Credit hereunder are subject to the
satisfaction of the following conditions:
SECTION 4.01. All Credit Events. On the date of each
Borrowing, including on the date of each issuance of a Letter of Credit (each
such event being called a "Credit Event"):
(a) The Administrative Agent shall have received a notice of
such Borrowing as required by Section 2.03 (or such notice shall have been
deemed given in accordance with Section 2.03) or, in the case of the issuance of
a Letter of Credit, the Issuing Bank and the Administrative Agent shall have
received a notice requesting the issuance of such Letter of Credit as required
by Section 2.22(b).
(b) Except in the case of a Borrowing that does not increase
the aggregate principal amount of Loans outstanding of any Lender, the
representations and warranties set forth in Article III hereof shall be true and
correct in all material respects on and as of the date of such Credit Event with
the same effect as though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date.
(c) The Borrower and each other Loan Party shall be in
compliance with all the terms and provisions set forth herein and in each other
Loan Document on its part to be observed or performed, and at the time of and
immediately after such Credit Event, no Event of Default or Default shall have
occurred and be continuing.
Each Credit Event shall be deemed to constitute a
representation and warranty by the Borrower on the date of such Credit Event as
to the matters specified in paragraphs (b) (except as aforesaid) and (c) of this
Section 4.01.
SECTION 4.02. First Credit Event. On the Closing Date:
(a) The Administrative Agent shall have received, on
behalf of itself, the Lenders and the Issuing Bank, a
favorable written opinion of Arnold & Porter, counsel for the
Borrower, substantially to the effect set forth in Exhibit I-1
(A) dated the Closing Date, (B) addressed to the Issuing Bank,
the Administrative Agent and the Lenders, and (C) covering
such other matters relating to the Loan Documents and the
Transactions as the Administrative Agent shall reasonably
request, and the Borrower hereby requests such counsel to
deliver such opinion.
(b) All legal matters incident to this Agreement, the
Borrowings and extensions of credit hereunder and the other
Loan Documents shall be satisfactory to the Lenders, to the
Issuing Bank and to Cleary, Gottlieb, Steen & Hamilton,
counsel for the Administrative Agent.
<PAGE>
(c) The Administrative Agent shall have received (i)
a copy of the certificate or articles of incorporation,
including all amendments thereto, of each institutional Loan
Party, certified as of a recent date by the Secretary of State
of the state of its organization, and a certificate as to the
good standing of each Loan Party as of a recent date, from
such Secretary of State; (ii) a certificate of the Secretary
or Assistant Secretary of each Loan Party dated the Closing
Date and certifying (A) that attached thereto is a true and
complete copy of the by-laws of such Loan Party as in effect
on the Closing Date and at all times since a date prior to the
date of the resolutions described in clause (B) below, (B)
that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of such
Loan Party authorizing the execution, delivery and performance
of the Loan Documents to which such person is a party and, in
the case of the Borrower, the borrowings hereunder, and that
such resolutions have not been modified, rescinded or amended
and are in full force and effect, (C) that the certificate or
articles of incorporation of such Loan Party have not been
amended since the date of the last amendment thereto shown on
the certificate of good standing furnished pursuant to clause
(i) above, and (D) as to the incumbency and specimen signature
of each officer executing any Loan Document or any other
document delivered in connection herewith on behalf of such
Loan Party; (iii) a certificate of another officer as to the
incumbency and specimen signature of the Secretary or
Assistant Secretary executing the certificate pursuant to (ii)
above; and (iv) such other documents as the Lenders, the
Issuing Bank or Cleary, Gottlieb, Steen & Hamilton, counsel
for the Administrative Agent, may reasonably request.
(d) The Administrative Agent shall have received a
certificate, dated the Closing Date and signed by a Financial
Officer of the Borrower, confirming compliance with the
conditions precedent set forth in paragraphs (b) and (c) of
Section 4.01.
(e) The Administrative Agent shall have received all
Fees and other amounts due and payable on or prior to the
Closing Date, including, to the extent invoiced, reimbursement
or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder or under any
other Loan Document.
(f) The Pledge Agreement shall have been duly
executed by the parties thereto and delivered to the
Collateral Agent and shall be in full force and effect, and
all the outstanding capital stock of the Subsidiaries shall
have been duly and validly pledged thereunder to the
Collateral Agent for the ratable benefit of the Secured
Parties and certificates representing such shares, accompanied
by instruments of transfer and stock powers endorsed in blank,
shall be in the actual possession of the Collateral Agent.
<PAGE>
(g) The Security Agreement shall have been duly
executed by the Loan Parties party thereto and shall have been
delivered to the Collateral Agent and shall be in full force
and effect on such date and each document (including each
Uniform Commercial Code financing statement) required by law
or reasonably requested by the Administrative Agent to be
filed, registered or recorded in order to create in favor of
the Collateral Agent for the benefit of the Secured Parties a
valid, legal and perfected first-priority security interest in
and lien on the Collateral (subject to any Lien expressly
permitted by Section 6.02) described in such agreement shall
have been delivered to the Collateral Agent.
(h) [Intentionally omitted].
(i) The Collateral Agent shall have received a
Perfection Certificate with respect to the Loan Parties dated
the Closing Date and duly executed by a Responsible Officer of
the Borrower.
(j)(i) Each of the Security Documents, in form and
substance satisfactory to the Lenders, relating to each of the
Mortgaged Properties shall have been duly executed by the
parties thereto and delivered to the Collateral Agent and
shall be in full force and effect, (ii) each of such Mortgaged
Properties shall not be subject to any Lien other than those
permitted under Section 6.02, and (iii) each of such Security
Documents shall have been transmitted for filing and recording
in the recording office as specified on Schedule 3.19(d).
(k) The Guarantee Agreement shall have been duly
executed by the parties thereto, shall have been delivered to
the Collateral Agent and shall be in full force and effect.
(l) The Indemnity, Subrogation and Contribution
Agreement shall have been duly executed by the parties
thereto, shall have been delivered to the Collateral Agent and
shall be in full force and effect.
(m) [Reserved].
(n) The Lenders shall be satisfied as to the amount
and nature of any environmental and employee health and safety
exposures to which the Borrower and the Subsidiaries may be
subject and the plans of the Borrower with respect thereto.
ARTICLE V
Affirmative Covenants
The Borrower covenants and agrees with each Lender that so
long as this Agreement shall remain in effect and until the Commitments have
been terminated and the principal of and interest on each Loan, all Fees and all
other expenses or amounts payable under
<PAGE>
any Loan Document shall have been paid in full and all Letters of Credit have
been canceled or have expired and all amounts drawn thereunder have been
reimbursed in full, unless the Required Lenders shall otherwise consent in
writing, the Borrower will, and will cause each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as otherwise expressly permitted under
Section 6.05.
(b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names material to the conduct of its business; maintain and operate such
business in substantially the manner in which it is presently conducted and
operated; comply in all material respects with all applicable laws, rules,
regulations (including any zoning, building, Environmental Law, ordinance, code
or approval or any building permits or any restrictions of record or agreements
affecting the Mortgaged Properties) and decrees and orders of any Governmental
Authority, whether now in effect or hereafter enacted; and at all times maintain
and preserve all property material to the conduct of such business and keep such
property in good repair, working order and condition and from time to time make,
or cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times.
SECTION 5.02. Insurance. (a) Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers;
maintain such other insurance, to such extent and against such risks, including
fire and other risks insured against by extended coverage, as is customary with
companies in the same or similar businesses operating in the same or similar
locations, including public liability insurance against claims for personal
injury or death or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by it; and maintain
such other insurance as may be required by law.
(b) [Reserved].
(c) If at any time the area in which the Mortgaged Property
(as defined in the Mortgages) is located is designated (i) a "flood hazard area"
in any Flood Insurance Rate Map published by the Federal Emergency Management
Agency (or any successor agency), obtain flood insurance in such total amount as
the Administrative Agent, the Collateral Agent or the Required Lenders may from
time to time require, and otherwise comply with the National Flood Insurance
Program as set forth in the Flood Disaster Protection Act of 1973, as it may be
amended from time to time, or (ii) a "Zone 1" area, obtain earthquake insurance
in such total amount as the Administrative Agent, the Collateral Agent or the
Required Lenders may from time to time require.
(d) With respect to any Mortgaged Property, carry and maintain
comprehensive general liability insurance including the "broad form CGL
endorsement" and coverage on an
<PAGE>
occurrence basis against claims made for personal injury (including bodily
injury, death and property damage) and umbrella liability insurance against any
and all claims, in no event for a combined single limit of less than $3,000,000.
(e) [Reserved].
(f) In connection with the covenants set forth in this Section
5.02, it is understood and agreed that:
(i) none of the Administrative Agent, the Lenders,
the Issuing Bank, or their respective agents or employees
shall be liable for any loss or damage insured by the
insurance policies required to be maintained under this
Section 5.02, it being understood that (A) the Borrower and
the other Loan Parties shall look solely to their insurance
companies or any other parties other than the aforesaid
parties for the recovery of such loss or damage and (B) such
insurance companies shall have no rights of subrogation
against the Administrative Agent, the Collateral Agent, the
Lenders, the Issuing Bank or their agents or employees. If,
however, the insurance policies do not provide waiver of
subrogation rights against such parties, as required above,
then the Borrower hereby agrees, to the extent permitted by
law, to waive its right of recovery, if any, against the
Administrative Agent, the Collateral Agent, the Lenders, the
Issuing Bank and their agents and employees; and
(ii) the designation of any form, type or amount of
insurance coverage by the Administrative Agent, the Collateral
Agent or the Required Lenders under this Section 5.02 shall in
no event be deemed a representation, warranty or advice by the
Administrative Agent, the Collateral Agent or the Lenders that
such insurance is adequate for the purposes of the business of
the Borrower and the Subsidiaries or the protection of their
properties and the Administrative Agent, the Collateral Agent
and the Required Lenders shall have the right from time to
time to require the Borrower and the other Loan Parties to
keep other insurance in such form and amount as the
Administrative Agent, the Collateral Agent or the Required
Lenders may reasonably request, provided that such insurance
shall be obtainable on commercially reasonable terms.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and
other obligations promptly and in accordance with their terms and pay and
discharge promptly when due all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or in respect of its
property, before the same shall become delinquent or in default, as well as all
lawful claims for labor, materials and supplies or otherwise that, if unpaid,
might give rise to a Lien upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required with respect to
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
the Borrower shall have set aside on its books adequate reserves with respect
thereto in accordance with GAAP and such contest operates to suspend collection
of
<PAGE>
the contested obligation, tax, assessment or charge and enforcement of a Lien
and, in the case of a Mortgaged Property, there is no risk of forfeiture of such
property.
SECTION 5.04. Financial Statements, Reports, etc. In the case
of the Borrower, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year,
its consolidated and consolidating balance sheets and related
statements of operations, stockholders' equity and cash flows
showing the financial condition of the Borrower and its
consolidated Subsidiaries as of the close of such fiscal year
and the results of its operations and the operations of such
Subsidiaries during such year, all audited by BDO Seidman or
other independent public accountants of recognized national
standing acceptable to the Required Lenders and accompanied by
an opinion of such accountants (which shall not be qualified
in any material respect) to the effect that such consolidated
financial statements fairly present the financial condition
and results of operations of the Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;
(b) within 45 days after the end of each of the first
three fiscal quarters of each fiscal year, its consolidated
and consolidating balance sheets and related statements of
operations, stockholders' equity and cash flows showing the
financial condition of the Borrower and its consolidated
Subsidiaries as of the close of such fiscal quarter and the
results of its operations and the operations of such
Subsidiaries during such fiscal quarter and the then elapsed
portion of the fiscal year, all certified by one of its
Financial Officers as fairly presenting the financial
condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal
year-end audit adjustments;
(c) concurrently with any delivery of financial
statements under sub-paragraph (a) or (b) above, a certificate
of the accounting firm or Financial Officer opining on or
certifying such statements (which certificate, when furnished
by an accounting firm, may be limited to accounting matters
and disclaim responsibility for legal interpretations) (i)
certifying that no Event of Default or Default has occurred
or, if such an Event of Default or Default has occurred,
specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto and
(ii) setting forth computations in reasonable detail
satisfactory to the Administrative Agent demonstrating
compliance with the covenants contained in Sections 6.09, 6.10
and 6.11;
(d) promptly after the same become publicly
available, copies of all periodic and other reports, proxy
statements and other materials filed by the Borrower or any
Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the
functions of said
<PAGE>
Commission, or with any national securities exchange, or
distributed to its shareholders, as the case may be; and
(e) promptly, from time to time, such other
information regarding the operations, business affairs and
financial condition of the Borrower or any Subsidiary, or
compliance with the terms of any Loan Document, as the
Administrative Agent or any Lender may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the
Administrative Agent, the Issuing Bank and each Lender prompt written notice of
the following:
(a) any Event of Default or Default, specifying the
nature and extent thereof and the corrective action (if any)
taken or proposed to be taken with respect thereto;
(b) the filing or commencement of, or any threat or
notice of intention of any person to file or commence, any
action, suit or proceeding, whether at law or in equity or by
or before any Governmental Authority, against the Borrower or
any Affiliate thereof that could reasonably be expected to
result in a Material Adverse Effect; and (c) any development
that has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect.
SECTION 5.06. Employee Benefits. Comply in all material
respects with any applicable provisions of ERISA and the Code.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all requirements of law are made of
all dealings and transactions in relation to its business and activities. Each
Loan Party will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender to visit
and inspect the financial records and the properties of the Borrower or any
Subsidiary at reasonable times and as often as reasonably requested and to make
extracts from and copies of such financial records, and permit any
representatives designated by the Administrative Agent or any Lender to discuss
the affairs, finances and condition of the Borrower or any Subsidiary with the
officers thereof and independent accountants therefor.
SECTION 5.08. Use of Proceeds. Subject to the limitations set
forth herein (including, without limitation, the provision of Section 3.11
herein), use the proceeds of the Loans and request the issuance of Letters of
Credit only for the purposes set forth in the preamble to this Agreement;
provided, however, that no part of the proceeds of the Term Loan will be used to
purchase any securities other than the 12.25% Senior Subordinate Discount Notes
Due 2006 of Shared Technologies Fairfield Communications Corp.
SECTION 5.09. Compliance with Environmental Laws. Comply, and
cause all lessees and other persons occupying its Properties to comply, in all
material respects with all Environmental Laws and Environmental Permits
applicable to its operations and Properties;
<PAGE>
obtain and renew all material Environmental Permits necessary for its operations
and Properties; and conduct any Remedial Action in accordance with Environmental
Laws; provided, however, that neither the Borrower nor any of the Subsidiaries
shall be required to undertake any Remedial Action to the extent that its
obligation to do so is being contested in good faith and by proper proceedings
and appropriate reserves are being maintained with respect to such
circumstances.
SECTION 5.10. Preparation of Environmental Reports. If a
Default caused by reason of a breach of Section 3.17 or 5.09 shall have occurred
and be continuing, at the request of the Required Lenders through the
Administrative Agent, provide to the Lenders within 45 days after such request,
at the expense of the Borrower, an environmental site assessment report for the
Properties which are the subject of such default prepared by an environmental
consulting firm acceptable to the Administrative Agent and indicating the
presence or absence of Hazardous Materials and the estimated cost of any
compliance or Remedial Action in connection with such Properties.
SECTION 5.11. Further Assurances. Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or that the Required Lenders, the Administrative Agent or the Collateral
Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority of the security interests created or
intended to be created by the Security Documents. The Borrower will cause any
subsequently acquired or organized Domestic Subsidiary to execute a Subsidiary
Guarantee Agreement, Indemnity Subrogation and Contribution Agreement and each
applicable Security Document in favor of the Collateral Agent. In addition, from
time to time, the Borrower will, at its cost and expense, promptly secure the
Obligations by pledging or creating, or causing to be pledged or created,
perfected security interests with respect to such of its assets and properties
as the Administrative Agent or the Required Lenders shall designate (it being
understood that it is the intent of the parties that the Obligations shall be
secured by, among other things, substantially all the assets of the Borrower
(including real and other properties acquired subsequent to the Closing Date)).
Such security interests and Liens will be created under the Security Documents
and other security agreements, mortgages, deeds of trust and other instruments
and documents in form and substance satisfactory to the Collateral Agent, and
the Borrower shall deliver or cause to be delivered to the Lenders all such
instruments and documents (including legal opinions, title insurance policies
and lien searches) as the Collateral Agent shall reasonably request to evidence
compliance with this Section. The Borrower agrees to provide such evidence as
the Collateral Agent shall reasonably request as to the perfection and priority
status of each such security interest and Lien.
SECTION 5.12. Mortgaged Property Casualty and Condemnation.
(a) Notwithstanding any other provision of this Agreement or the Security
Documents, the Collateral Agent is authorized, at its option (for the benefit of
the Secured Parties), to collect and receive, to the extent payable to the
Borrower or any other Loan Party, all insurance proceeds, damages, claims and
rights of action under any insurance policies with respect to any casualty or
other insured damage ("Casualty") to any portion of any Mortgaged Property
(collectively, "Insurance
<PAGE>
Proceeds"), unless the amount of the related Insurance Proceeds is less than
$1,000,000 and an Event of Default shall not have occurred and be continuing.
The Borrower agrees to notify the Collateral Agent and the Administrative Agent,
in writing, promptly after the Borrower obtains notice or knowledge of any
Casualty to a Mortgaged Property, which notice shall set forth a description of
such Casualty and the Borrower's good faith estimate of the amount of related
damages. The Borrower agrees, subject to the foregoing limitations, to endorse
and transfer or cause to be endorsed or transferred any Insurance Proceeds
received by it or any other Loan Party to the Collateral Agent.
(b) The Borrower will notify the Collateral Agent and the
Administrative Agent immediately upon obtaining knowledge of the institution of
any action or proceeding for the taking of any Mortgaged Property, or any part
thereof or interest therein, for public or quasi-public use under the power of
eminent domain, by reason of any public improvement or condemnation proceeding,
or in any other manner (a "Condemnation"). No settlement or compromise of any
claim in connection with any such action or proceeding shall be made without the
consent of the Collateral Agent, which consent shall not be unreasonably
withheld. The Collateral Agent is authorized, at its option (for the benefit of
the Secured Parties), to collect and receive all proceeds of any such
Condemnation (in each case, the "Condemnation Proceeds"). The Borrower agrees to
execute or cause to be executed such further assignments of any Condemnation
Proceeds as the Collateral Agent may reasonably require.
(c) In the event of any Condemnation of the Mortgaged
Property, or any part thereof and subject to the provisions of paragraph (e)
below, the Collateral Agent shall apply the Condemnation Proceeds first, in the
case of a partial Condemnation, to the repair or restoration of any integrated
structure subject to such Condemnation or, in the case of a total or
"substantially all" Condemnation, to the location of a replacement property,
acquisition of such replacement property and construction of the replacement
structures, and second, shall apply the remainder of such Condemnation Proceeds
(less the reasonable costs, if any, incurred by the Collateral Agent in the
recovery of such Condemnation Proceeds) to prepay obligations outstanding under
this Agreement, with any remaining Condemnation Proceeds being returned to the
Borrower.
(d) In the event of any Casualty of less than 50% of the
useable square footage of the improvements of any Mortgaged Property, the
Borrower shall, subject to the conditions contained in paragraph (e), restore
the Mortgaged Property to substantially its same condition immediately prior to
such Casualty. In the event of any Casualty of at least 50% of the useable
square footage of the improvements of any Mortgaged Property and so long as no
Default or Event of Default has occurred and is continuing, the Borrower shall
have the option to either:
(i) restore the Mortgaged Property to a condition
substantially similar to its condition immediately prior to
such Casualty and to invest the balance, if any, of any
Insurance Proceeds in equipment or other assets used in the
Borrower's principal lines of business within 90 days after
the receipt thereof, provided that the Borrower, pending such
reinvestment, promptly deposits such excess
<PAGE>
Insurance Proceeds in a cash collateral account established
with the Collateral Agent for the benefit of the Secured
Parties, or
(ii) direct the Collateral Agent to apply the related
Insurance Proceeds to prepay obligations outstanding under
this Agreement, with any remaining Insurance Proceeds being
returned to the Borrower.
It is understood that any excess Insurance Proceeds that are not reinvested in
the Borrower's principal lines of business as contemplated above will be applied
to prepay the Obligations.
If required to do so, the Borrower shall make the election
contemplated by the immediately preceding paragraph by notifying the Collateral
Agent and the Administrative Agent promptly after the later to occur of (A) five
days after the Borrower and its insurance carrier reach a final determination of
the amount of any Insurance Proceeds and (B) 30 days after the occurrence of the
Casualty. If the Borrower shall be required or shall elect to restore the
Mortgaged Property, the insufficiency of any Insurance Proceeds or Condemnation
Proceeds to defray the entire expense of such restoration shall in no way
relieve the Borrower of such obligation so to restore. In the event the Borrower
shall be required to restore or shall notify the Collateral Agent and the
Administrative Agent of its election to restore, the Borrower shall diligently
and continuously prosecute the restoration of the Mortgaged Property to
completion. In the event of a Casualty where the Borrower is required to make
the election set forth above and the Borrower shall fail to notify the
Collateral Agent and the Administrative Agent of its election within the period
set forth above or shall elect not to restore the Mortgaged Property, the
Collateral Agent shall (after being reimbursed for all reasonable costs of
recovery of such Insurance Proceeds) apply such Insurance Proceeds to prepay
obligations outstanding under this Agreement. In addition, upon such prepayment,
the Borrower shall be obligated to place the remaining portion, if any, of the
Mortgaged Property in a safe condition that is otherwise in compliance with the
requirements of applicable Governmental Authorities and the provisions of this
Agreement and the applicable Mortgage.
(e) Except as otherwise specifically provided in this Section
5.12, all Insurance Proceeds and all Condemnation Proceeds recovered by the
Collateral Agent (A) are to be applied to the restoration of the applicable
Mortgaged Property (less the reasonable cost, if any, to the Collateral Agent of
such recovery and of paying out such proceeds, including reasonable attorneys'
fees, other charges and disbursements and costs allocable to inspecting the Work
(as defined below)) and (B) shall be applied by the Collateral Agent to the
payment of the cost of restoring or replacing the Mortgaged Property so damaged,
destroyed or taken or of the portion or portions of the Mortgaged Property not
so taken (the "Work") and (C) shall be paid out from time to time to the
Borrower as and to the extent the Work (or the location and acquisition of any
replacement of any Mortgaged Property) progresses for the payment thereof, but
subject to each of the following conditions:
(i) the Borrower must promptly commence the
restoration process or the location, acquisition and
replacement process (in the case of a total or "substantially
all" Condemnation) in connection with the Mortgaged Property;
<PAGE>
(ii) the Work shall be in the charge of an architect
or engineer and before the Borrower commences any Work, other
than temporary work to protect property or prevent
interference with business, the Collateral Agent shall have
received the plans and specifications and the general contract
for the Work from the Borrower. The plans and specifications
shall provide for such Work that, upon completion thereof, the
improvements shall (A) be in compliance with all requirements
of applicable Governmental Authorities such that all
representations and warranties of the Borrower relating to the
compliance of such Mortgaged Property with applicable laws,
rules or regulations in this Agreement or the Security
Documents will be correct in all respects and (B) be at least
equal in value and general utility to the improvements that
were on such Mortgaged Property (or that were on the Mortgaged
Property that has been replaced, if applicable) prior to the
Casualty or Taking, and in the case of a Taking, subject to
the effect of such Taking;
(iii) except as provided in (iv) below, each request
for payment shall be made on seven days' prior notice to the
Collateral Agent and shall be accompanied by a certificate to
be made by such architect or engineer, stating (A) that all
the Work completed has been done in substantial compliance
with the plans and specifications, (B) that the sum requested
is justly required to reimburse the Borrower for payments by
the Borrower to, or is justly due to, the contractor,
subcontractors, materialmen, laborers, engineers, architects
or other persons rendering services or materials for the Work
(giving a brief description of such services and materials)
and that, when added to all sums previously paid out by the
Collateral Agent, does not exceed the value of the Work done
to the date of such certificate;
(iv) each request for payment in connection with the
acquisition of a replacement Mortgaged Property (in the case
of a total or "substantially all" Condemnation) shall be made
on 30 days' prior notice to the Collateral Agent and, in
connection therewith, (A) each such request shall be
accompanied by a copy of the sales contract or other document
governing the acquisition of the replacement property by the
Borrower and a certificate of the Borrower stating that the
sum requested represents the sales price under such contract
or document and the related reasonable transaction fees and
expenses (including brokerage fees) and setting forth in
sufficient detail the various components of such requested sum
and (B) the Borrower shall (I) in addition to any other items
required to be delivered under this Section 5.12), provide the
Administrative Agent and the Collateral Agent with such
opinions, documents, certificates, title insurance policies,
surveys and other insurance policies as they may reasonably
request and (II) take such other actions as the Administrative
Agent and the Collateral Agent may reasonably deem necessary
or appropriate (including actions with respect to the delivery
to the Collateral Agent of a first priority Mortgage with
respect to such real property for the ratable benefit of the
Secured Parties);
<PAGE>
(v) each request shall be accompanied by waivers of
lien satisfactory to the Collateral Agent covering that part
of the Work for which payment or reimbursement is being
requested and, if required by the Collateral Agent, by a
search prepared by a title company or licensed abstractor or
by other evidence satisfactory to the Collateral Agent, that
there has not been filed with respect to such Mortgaged
Property any mechanics' or other lien or instrument for the
retention of title in respect of any part of the Work not
discharged of record or bonded to the reasonable satisfaction
of the Collateral Agent;
(vi) there shall be no Default or Event of Default
that has occurred and is continuing;
(vii) the request for any payment after the Work has
been completed shall be accompanied by a copy of any
certificate or certificates required by law to render
occupancy of the improvements being rebuilt, repaired or
restored legal; and
(viii) after commencing the Work, the Borrower shall
continue to perform the Work diligently and in good faith to
completion in accordance with the approved plans and
specifications.
Upon completion of the Work and payment in full therefor, the Collateral Agent
will disburse to the Borrower the amount of any Insurance Proceeds or
Condemnation Proceeds then or thereafter in the hands of the Collateral Agent on
account of the Casualty or Taking that necessitated such Work to be applied (x)
to prepay obligations outstanding under this Agreement, with any excess being
returned to the Borrower, or (y) to be reinvested in the Borrower's principal
lines of business within 180 days after the receipt thereof, provided that the
Borrower, pending such reinvestment, promptly deposits such amounts in a cash
collateral account established with the Collateral Agent for the benefit of the
Secured Parties.
(f) Notwithstanding any other provisions of this Section 5.12,
if the Borrower shall have elected to replace a Mortgaged Property in connection
with a total or "substantially all" Condemnation as contemplated in paragraph
(c) above, all Condemnation Proceeds held by the Collateral Agent in connection
therewith shall be applied to prepay obligations outstanding under this
Agreement if (i) the Borrower notifies the Collateral Agent and the
Administrative Agent that it does not intend to replace the related Mortgaged
Property, (ii) a Responsible Officer of the Borrower shall not have notified the
Administrative Agent and the Collateral Agent in writing that the Borrower has
acquired or has entered into a binding contract to acquire land upon which it
will construct the replacement property within six months after the related
Condemnation or (iii) the Borrower shall have not notified the Administrative
Agent and the Collateral Agent in writing that it has begun construction of the
replacement structures within one year after the related Condemnation.
(g) Nothing in this Section 5.12 shall prevent the Collateral
Agent from applying at any time all or any part of the Insurance Proceeds or
Condemnation Proceeds to (i) the curing
<PAGE>
of any Event of Default under this Agreement or (ii) the payment of any of the
Obligations after the occurrence and during the continuance of an Event of
Default.
ARTICLE VI
Negative Covenants
The Borrower covenants and agrees with each Lender that, so
long as this Agreement shall remain in effect and until the Commitments have
been terminated and the principal of and interest on each Loan, all Fees and all
other expenses or amounts payable under any Loan Document have been paid in full
and all Letters of Credit have been cancelled or have expired and all amounts
drawn thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, and will not cause or
permit any of the Subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to
exist any Indebtedness, except:
(a) Indebtedness for borrowed money existing on the
date hereof and set forth in Schedule 6.01 or reflected on the
most recent balance sheet of the Borrower referred to in
Section 3.05, but not any extensions, renewals or replacements
of such Indebtedness;
(b) Indebtedness created hereunder and under the
other Loan Documents; and
(c) loans and advances by the Borrower or any
Subsidiary to any other Subsidiary or the Borrower; 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
Administrative Agent.
SECTION 6.02. Liens. Create, incur, assume or permit to exist
any Lien on any property or assets (including stock or other securities of any
person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and
its Subsidiaries existing on the date hereof and set forth in
Schedule 6.02; provided that such Liens shall secure only
those obligations which they secure on the date hereof;
(b) any Lien created under the Loan Documents;
(c) 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
<PAGE>
good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP (if so
required);
(d) Liens (other than any Lien imposed by ERISA, the
creation or incurrence of which would result in an Event of
Default hereunder) 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;
(e) 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);
(f) Liens securing any purchase money Indebtedness
permitted under Section 6.01; provided that any such Lien (a)
shall attach to such property concurrently with or within ten
(10) days after the acquisition thereof by the Borrower or the
applicable Subsidiary, (b) shall not exceed the lesser of (y)
the fair market value of such property or (z) the cost thereof
to the Borrower or the applicable Subsidiary and (c) shall not
encumber any other property of the Borrower or any other
Subsidiary;
(g) any attachment or judgment Lien not constituting
an Event of Default hereunder 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);
(h) Liens arising from the filing, for notice
purposes only, of financing statements in respect of true
leases;
(i) with respect to any real property occupied by the
Borrower or any Subsidiary, 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
(j) other Liens securing obligations of the Borrower
or any Subsidiary not exceeding $5,000,000 in aggregate amount
outstanding at any time.
SECTION 6.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter
<PAGE>
rent or lease such property or other property which it intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold
or acquire any capital stock, evidences of indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) investments by the Borrower existing on the
date hereof in the capital stock of the Subsidiaries;
(b) Permitted Investments;
(c) 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
the Borrower or options to purchase capital stock of the
Borrower 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;
(d) without duplication, investments consist-
ing of intercompany Indebtedness permitted under clause (c)
of Section 6.01;
(e) investments consisting of loans and ad-
vances in the ordinary course of business to Partitions
secured by the assets of such Partitions;
(f) 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 the Borrower (provided that all Capital Stock used
for such purchases after the Closing Date shall not in the
aggregate exceed the sum of (i) 30% of the outstanding Capital
Stock of the Borrower at any time and (ii) the Capital Stock
to be issued in connection with the Merger); and
(g) purchases of 12.25% Senior Subordinated
Discount Notes Due 2006 of Shared Technologies Fairchild
Communications Corp.; and
(h) issuances of Capital Stock in connection with the
Merger.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions. Merge into or consolidate with any other person, or permit any
other person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) all or
any substantial part of its assets (whether now owned or hereafter acquired) or
any capital stock of any Subsidiary, or purchase, lease or otherwise acquire (in
one transaction or a series of transactions) all or any substantial part of the
assets of any other person, except that (a) the Borrower and any Subsidiary may
purchase and sell inventory in the ordinary course of
<PAGE>
business and (b) if at the time thereof and immediately after giving effect
thereto no Event of Default or Default shall have occurred and be continuing (i)
any wholly owned subsidiary of the Borrower may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation and (ii) any
wholly owned subsidiary of the Borrower may merge into or consolidate with any
other wholly owned subsidiary of the Borrower in a transaction in which the
surviving entity is a wholly owned subsidiary of the Borrower and no person
other than the Borrower or a wholly owned subsidiary of the Borrower receives
any consideration.
SECTION 6.06. Dividends and Distributions; Restrictions on
Ability of Subsidiaries to Pay Dividends. (a) Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of capital
or otherwise), whether in cash, property, securities or a combination thereof,
with respect to any shares of its capital stock or directly or indirectly
redeem, purchase, retire or otherwise acquire for value (or permit any
Subsidiary to purchase or acquire) any shares of any class of its capital stock
or set aside any amount for any such purpose; provided, however, that any
Subsidiary may declare and pay dividends or make other distributions to the
Borrower.
(b) Permit its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Subsidiary to (i) pay any dividends or
make any other distributions on its capital stock or any other interest or (ii)
make or repay any loans or advances to the Borrower or the parent of such
Subsidiary.
SECTION 6.07. Transactions with Affiliates. Sell or transfer
any property or assets to, or purchase or acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except that the Borrower or any Subsidiary may engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to the Borrower or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties.
SECTION 6.08. Business of Borrower and Subsidiaries. Engage at
any time in any business or business activity other than the business currently
conducted by it and business activities reasonably incidental thereto.
SECTION 6.09. Leverage Ratio. Permit the Leverage Ratio to
exceed 4:1 at any time after the Closing Date.
SECTION 6.10. Interest Coverage Ratio. Permit the Interest
Coverage Ratio to be less than 2:1 at any time after the Closing Date.
ARTICLE VII
Events of Default
In case of the happening of any of the following events
("Events of Default"):
<PAGE>
(a) any representation or warranty made or deemed
made in or in connection with any Loan Document or the
borrowings or issuances of Letters of Credit hereunder, or any
representation, warranty, statement or information contained
in any report, certificate, financial statement or other
instrument furnished in connection with or pursuant to any
Loan Document, shall prove to have been false or misleading in
any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any
principal of any Loan or the reimbursement with respect to any
L/C Disbursement when and as the same shall become due and
payable, whether at the due date thereof or at a date fixed
for prepayment thereof or by acceleration thereof or
otherwise;
(c) default shall be made in the payment of any
interest on any Loan or any Fee or L/C Disbursement or any
other amount (other than an amount referred to in (b) above)
due under any Loan Document, when and as the same shall become
due and payable, and such default shall continue unremedied
for a period of three Business Days;
(d) default shall be made in the due observance or
performance by the Borrower or any Subsidiary of any covenant,
condition or agreement contained in Section 5.01(a), 5.05 or
5.07 or in Article VI;
(e) default shall be made in the due observance or
performance by the Borrower or any Subsidiary of any covenant,
condition or agreement contained in any Loan Document (other
than those specified in (b), (c) or (d) above) and such
default shall continue unremedied for a period of 15 days
after notice thereof from the Administrative Agent or any
Lender to the Borrower;
(f) the Borrower or any Subsidiary shall (i) fail to
pay any principal or interest, regardless of amount, due in
respect of any Indebtedness in a principal amount in excess of
$5,000,000, when and as the same shall become due and payable,
or (ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreement or
instrument evidencing or governing any such Indebtedness if
the effect of any failure referred to in this clause (ii) is
to cause, or to permit the holder or holders of such
Indebtedness or a trustee on its or their behalf (with or
without the giving of notice, the lapse of time or both) to
cause, such Indebtedness to become due prior to its stated
maturity;
(g) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Borrower or
any Subsidiary, or of a substantial part of the property or
assets of the Borrower or a Subsidiary, under Title 11 of the
United States Code, as now constituted or hereafter amended,
or any other Federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or
similar official for
<PAGE>
the Borrower or any Subsidiary or for a substantial part of
the property or assets of the Borrower or a Subsidiary or
(iii) the winding-up or liquidation of the Borrower or any
Subsidiary; and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h) the Borrower or any Subsidiary shall (i)
voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or
similar law, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or
the filing of any petition described in (g) above, (iii) apply
for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for
the Borrower or any Subsidiary or for a substantial part of
the property or assets of the Borrower or any Subsidiary, (iv)
file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to
pay its debts as they become due or (vii) take any action for
the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in
an aggregate amount in excess of $1,000,000 shall be rendered
against the Borrower, any Subsidiary or any combination
thereof and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the
Borrower or any Subsidiary to enforce any such judgment;
(j) an ERISA Event shall have occurred that, in the
opinion of the Required Lenders, when taken together with all
other such ERISA Events, could reasonably be expected to
result in liability of the Borrower and its ERISA Affiliates
in an aggregate amount exceeding $1,000,000;
(k) any security interest purported to be created by
any Security Document shall cease to be, or shall be asserted
by the Borrower or any other Loan Party not to be, a valid,
perfected, first priority (except as otherwise expressly
provided in this Agreement or such Security Document) security
interest in the securities, assets or properties covered
thereby, except to the extent that any such loss of perfection
or priority results from the failure of the Collateral Agent
to maintain possession of certificates representing securities
pledged under the Pledge Agreement and except to the extent
that such loss is covered by a lender's title insurance policy
and the related insurer promptly after such loss shall have
acknowledged in writing that such loss is covered by such
title insurance policy;
<PAGE>
(l) there shall have occurred a Change in Control;
(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; or
(n) Dan Borislow shall have ceased to be the chief
executive officer of the Borrower or 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.
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate forthwith
the Commitments and (ii) declare the Loans then outstanding to be forthwith due
and payable in whole or in part, whereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder
and under any other Loan Document, shall become forthwith due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding; and in any event
with respect to the Borrower described in paragraph (g) or (h) above, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrower accrued hereunder and under any other
Loan Document, shall automatically become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding.
ARTICLE VIII
The Administrative Agent and the Collateral Agent
In order to expedite the transactions contemplated by this
Agreement, Salomon Brothers Holding Company Inc is hereby appointed to act as
Administrative Agent and Collateral Agent on behalf of the Lenders and the
Issuing Bank (for purposes of this Article VIII, the Administrative Agent and
the Collateral Agent are referred to collectively as the "Agents"). Each of the
Lenders and each assignee of any such Lender, hereby irrevocably authorizes the
Agents to take such actions on behalf of such Lender or assignee or the Issuing
Bank and to exercise such powers as are specifically delegated to the Agents by
the terms and provisions hereof and of the other Loan Documents, together with
such actions and powers as are reasonably incidental thereto. The Administrative
Agent is hereby expressly authorized by the Lenders and the Issuing Bank,
without hereby limiting any implied authority, (a) to receive on behalf of the
Lenders and the Issuing Bank all payments of principal of and interest on the
Loans, all payments in respect of L/C Disbursements and all other amounts due to
the Lenders
<PAGE>
hereunder, and promptly to distribute to each Lender or the Issuing Bank its
proper share of each payment so received; (b) to give notice on behalf of each
of the Lenders to the Borrower of any Event of Default specified in this
Agreement of which the Administrative Agent has actual knowledge acquired in
connection with its agency hereunder; and (c) to distribute to each Lender
copies of all notices, financial statements and other materials delivered by the
Borrower or any other Loan Party pursuant to this Agreement or the other Loan
Documents as received by the Administrative Agent. Without limiting the
generality of the foregoing, the Agents are hereby expressly authorized to
execute any and all documents (including releases) with respect to the
Collateral and the rights of the Secured Parties with respect thereto, as
contemplated by and in accordance with the provisions of this Agreement and the
Security Documents.
Neither the Agents nor any of their respective directors,
officers, employees or agents shall be liable as such for any action taken or
omitted by any of them except for its or his own gross negligence or willful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith, or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower or any other Loan Party of any of the terms,
conditions, covenants or agreements contained in any Loan Document. The Agents
shall not be responsible to the Lenders for the due execution, genuineness,
validity, enforceability or effectiveness of this Agreement or any other Loan
Documents, instruments or agreements. The Agents shall in all cases be fully
protected in acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the
absence of knowledge to the contrary, be entitled to rely on any instrument or
document believed by it in good faith to be genuine and correct and to have been
signed or sent by the proper person or persons. Neither the Agents nor any of
their respective directors, officers, employees or agents shall have any
responsibility to the Borrower or any other Loan Party on account of the failure
of or delay in performance or breach by any Lender or the Issuing Bank of any of
its obligations hereunder or to any Lender or the Issuing Bank on account of the
failure of or delay in performance or breach by any other Lender or the Issuing
Bank or the Borrower or any other Loan Party of any of their respective
obligations hereunder or under any other Loan Document or in connection herewith
or therewith. Each of the Agents may execute any and all duties hereunder by or
through agents or employees and shall be entitled to rely upon the advice of
legal counsel selected by it with respect to all matters arising hereunder and
shall not be liable for any action taken or suffered in good faith by it in
accordance with the advice of such counsel.
The Lenders hereby acknowledge that neither Agent shall be
under any duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement unless it shall be requested in
writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Agent
as provided below, either Agent may resign at any time by notifying the Lenders
and the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor. If no successor shall have been so appointed by
the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation, then the
<PAGE>
retiring Agent may, on behalf of the Lenders, appoint a successor Agent which
shall be a bank with an office in New York, New York, having a combined capital
and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the
acceptance of any appointment as Agent hereunder by a successor bank, such
successor shall 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. After the Agent's
resignation hereunder, the provisions of this Article and Section 9.05 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in
its individual capacity and not as Agent shall have the same rights and powers
as any other Lender and may exercise the same as though it were not an Agent,
and the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in
the amount of its pro rata share (based on its Commitments hereunder) of any
expenses incurred for the benefit of the Lenders by the Agents, including
counsel fees and compensation of agents and employees paid for services rendered
on behalf of the Lenders, that shall not have been reimbursed by the Borrower
and (b) to indemnify and hold harmless each Agent and any of its directors,
officers, employees or agents, on demand, in the amount of such pro rata share,
from and against any and all liabilities, taxes, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by or asserted
against it in its capacity as Agent or any of them in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted by it or any of them under this Agreement or any other Loan Document, to
the extent the same shall not have been reimbursed by the Borrower or any other
Loan Party, provided that no Lender shall be liable to an Agent or any such
other indemnified person for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Agent or any of its directors, officers, employees or agents.
Each Revolving Credit Lender agrees to reimburse each the Issuing Bank and its
directors, employees and agents, in each case, to the same extent and subject to
the same limitations as provided above for the Agents.
Each Lender acknowledges that it has, independently and
without reliance upon the Agents or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agents or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
<PAGE>
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopy, as follows:
(a) if to the Borrower, to it at 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. (215) 715-1399;
(b) if to the Administrative Agent, to Salomon Brothers
Holding Company Inc, Seven World Trade Center, New York, New
York 10048, Attention of Townsend Weekes (Telecopy No. (212)
783-2823) ; and
(c) if to a Lender, to it at its address (or telecopy
number) set forth on Schedule 2.01 or in the Assignment and
Acceptance pursuant to which such Lender shall have become a
party hereto.
All notices and other communications given to any party hereto
in accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy or on the date five Business Days after dispatch by
certified or registered mail if mailed, in each case delivered, sent or mailed
(properly addressed) to such party as provided in this Section 9.01 or in
accordance with the latest unrevoked direction from such party given in
accordance with this Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Borrower herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated. The provisions of Sections 2.14, 2.16, 2.20 and 9.05
shall remain operative and in full force and effect regardless of the expiration
of the term of this Agreement, the consummation of the transactions contemplated
hereby, the repayment of any of the Loans, the expiration of the Commitments,
the expiration of any Letter of Credit, the invalidity or unenforceability of
any term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Administrative Agent, the Collateral
Agent, any Lender or the Issuing Bank.
<PAGE>
SECTION 9.03. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the permitted successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of the Borrower, the
Administrative Agent, the Issuing Bank or the Lenders that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns.
(b) Each Lender may assign to one or more assignees all or a
portion of its interests, rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans at the time owing to it);
provided, however, that (i) except in the case of an assignment to a Lender or
an Affiliate of such Lender, (x) the Administrative Agent (and, in the case of
any assignment of a Revolving Credit Commitment, the Issuing Bank) must give
their prior written consent to such assignment (which consent shall not be
unreasonably withheld) and (y) the amount of the Commitment of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 (or, if less, the entire
remaining amount of such Lender's Commitment), (ii) the parties to each such
assignment shall execute and deliver to the Administrative Agent an Assignment
and Acceptance, together with a processing and recordation fee of $3,500 and
(iii) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire. Upon acceptance and
recording pursuant to paragraph (e) of this Section 9.04, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement and (B) the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its account and
not yet paid).
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Loan Commitment and Revolving Credit Commitment, and the outstanding
balances of its Term Loans and Revolving Loans, in each case without giving
effect to assignments thereof which have not become effective, are as set forth
in such Assignment and Acceptance, (ii) except as set forth in (i) above, such
assigning Lender makes no representation
<PAGE>
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto, or the financial condition of the Borrower
or any Subsidiary or the performance or observance by the Borrower or any
Subsidiary of any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; (iv) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements referred to in Section 3.05(a) or delivered pursuant to
Section 5.04 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Collateral Agent, such assigning
Lender 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 decisions in
taking or not taking action under this Agreement; (vi) such assignee appoints
and authorizes the Administrative Agent and the Collateral Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent and the Collateral Agent,
respectively, by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices in The City of New
York a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the Commitment
of, and principal amount of the Loans owing to, each Lender pursuant to the
terms hereof from time to time (the "Register"). The entries in the Register
shall be conclusive and the Borrower, the Administrative Agent, the Issuing
Bank, the Collateral Agent and the Lenders may treat each person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower, the Issuing Bank,
the Collateral Agent and any Lender, at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, an Administrative
Questionnaire completed in respect of the assignee (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in paragraph (b) above and, if required, the written consent of the Issuing Bank
and the Administrative Agent to such assignment, the Administrative Agent shall
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Lenders and
the Issuing Bank. No assignment shall be effective unless it has been recorded
in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the
Issuing Bank or the Administrative Agent sell participations to one or more
banks or other entities in all or a
<PAGE>
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided, however, that
(i) such Lender's obligations under this Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participating banks or other entities
shall be entitled to the benefit of the cost protection provisions contained in
Sections 2.14, 2.16 and 2.20 to the same extent as if they were Lenders and (iv)
the Borrower, the Administrative Agent, the Issuing Bank and the Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and such Lender shall
retain the sole right to enforce the obligations of the Borrower relating to the
Loans or L/C Disbursements and to approve any amendment, modification or waiver
of any provision of this Agreement (other than amendments, modifications or
waivers decreasing any fees payable hereunder or the amount of principal of or
the rate at which interest is payable on the Loans, extending any scheduled
principal payment date or date fixed for the payment of interest on the Loans or
increasing or extending the Commitments).
(g) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 9.04, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.16.
(h) Any Lender may at any time assign all or any portion of
its rights under this Agreement to a Federal Reserve Bank to secure extensions
of credit by such Federal Reserve Bank to such Lender; provided that no such
assignment shall release a Lender from any of its obligations hereunder or
substitute any such Bank for such Lender as a party hereto. In order to
facilitate such an assignment to a Federal Reserve Bank, the Borrower shall, at
the request of the assigning Lender, duly execute and deliver to the assigning
Lender a promissory note or notes evidencing the Loans made to the Borrower by
the assigning Lender hereunder.
(i) The Borrower shall not assign or delegate any of its
rights or duties hereunder without the prior written consent of the
Administrative Agent, the Issuing Bank and each Lender, and any attempted
assignment without such consent shall be null and void.
(j) In the event that Standard & Poor's Ratings Group, Moody's
Investors Service, Inc., and Thompson's BankWatch (or InsuranceWatch Ratings
Service, in the case of Lenders that are insurance companies (or Best's
Insurance Reports, if such insurance company is not rated by Insurance Watch
Ratings Service)) shall, after the date that any Lender becomes a Revolving
Credit Lender, downgrade the long-term certificate deposit ratings of such
Lender, and the resulting ratings shall be below BBB-, Baa3 and C (or BB, in the
case of a Lender that is an insurance company (or B, in the case of an insurance
company not rated by InsuranceWatch Ratings Service)), then the Issuing Bank
shall have the right, but not the obligation, at its own
<PAGE>
expense, upon notice to such Lender and the Administrative Agent, to replace (or
to request the Borrower to use its reasonable efforts to replace) such Lender
with an assignee (in accordance with and subject to the restrictions contained
in paragraph (b) above), and such Lender hereby agrees to transfer and assign
without recourse (in accordance with and subject to the restrictions contained
in paragraph (b) above) all its interests, rights and obligations in respect of
its Revolving Credit Commitment to such assignee; provided, however, that (i) no
such assignment shall conflict with any law, rule and regulation or order of any
Governmental Authority and (ii) the Issuing Bank or such assignee, as the case
may be, shall pay to such Lender in immediately available funds on the date of
such assignment the principal of and interest accrued to the date of payment on
the Loans made by such Lender hereunder and all other amounts accrued for such
Lender's account or owed to it hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to
pay all out-of-pocket expenses incurred by the Administrative Agent, the
Collateral Agent and the Issuing Bank in connection with the syndication of the
credit facilities provided for herein and the preparation and administration of
this Agreement and the other Loan Documents or in connection with any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby or thereby contemplated shall be
consummated) or incurred by the Administrative Agent, the Collateral Agent or
any Lender in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents or in connection
with the Loans made or Letters of Credit issued hereunder, including the fees,
charges and disbursements of Cleary, Gottlieb, Steen & Hamilton, counsel for the
Administrative Agent and the Collateral Agent, and, in connection with any such
enforcement or protection, the fees, charges and disbursements of any other
counsel for the Administrative Agent, the Collateral Agent or any Lender.
(b) The Borrower agrees to indemnify the Administrative Agent,
the Collateral Agent, each Lender and the Issuing Bank, each Affiliate of any of
the foregoing persons and each of their respective directors, officers,
employees and agents (each such person being called an "Indemnitee") against,
and to hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, charges and
disbursements, incurred by or asserted against any Indemnitee arising out of, in
any way connected with, or as a result of (i) the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their respective obligations
thereunder or the consummation of the Transactions and the other transactions
contemplated thereby, (ii) the use of the proceeds of the Loans or issuance of
Letters of Credit, (iii) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any Indemnitee is a party
thereto, or (iv) any actual or alleged presence or Release of Hazardous
Materials on any property owned or operated by the Borrower or any of the
Subsidiaries, or any Environmental Claim related in any way to the Borrower or
the Subsidiaries; provided that such indemnity shall not, as to any Indemnitee,
be available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee.
<PAGE>
(c) The provisions of this Section 9.05 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of Credit, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Administrative Agent, the Collateral Agent, any
Lender or the Issuing Bank. All amounts due under this Section 9.05 shall be
payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall
have occurred and be continuing, each Lender is hereby authorized at any time
and from time to time, except to the extent prohibited by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Lender
to or for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement and
other Loan Documents held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section 9.06 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER
LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of
the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank
in exercising any power or right hereunder or under any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower or any other Loan Party therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.
<PAGE>
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders; provided,
however, that no such agreement shall (i) decrease the principal amount of, or
extend the maturity of or any scheduled principal payment date or date for the
payment of any interest on any Loan or any date for reimbursement of an L/C
Disbursement, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or L/C Disbursement, without the prior
written consent of each Lender affected thereby, (ii) change or extend the
Commitment or decrease or extend the date for payment of the Commitment Fees of
any Lender without the prior written consent of such Lender or (iii) amend or
modify the provisions of Section 2.17 or 9.04(i), the provisions of this
Section, the definition of the term "Required Lenders" or release any Guarantor
or all or any substantial part of the Collateral, without the prior written
consent of each Lender; provided further that no such agreement shall amend,
modify or otherwise affect the rights or duties of the Administrative Agent, the
Collateral Agent or the Issuing Bank hereunder or under any other Loan Document
without the prior written consent of the Administrative Agent, the Collateral
Agent or the Issuing Bank.
SECTION 9.09. Interest Rate Limitation. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan or participation in any L/C Disbursement, together with all fees,
charges and other amounts which are treated as interest on such Loan or
participation in such L/C Disbursement under applicable law (collectively the
"Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may
be contracted for, charged, taken, received or reserved by the Lender holding
such Loan or participation in accordance with applicable law, the rate of
interest payable in respect of such Loan or participation hereunder, together
with all Charges payable in respect thereof, shall be limited to the Maximum
Rate and, to the extent lawful, the interest and Charges that would have been
payable in respect of such Loan or participation but were not payable as a
result of the operation of this Section 9.09 shall be cumulated and the interest
and Charges payable to such Lender in respect of other Loans or participations
or periods shall be increased (but not above the Maximum Rate therefor) until
such cumulated amount, together with interest thereon at the Federal Funds
Effective Rate to the date of repayment, shall have been received by such
Lender.
SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter
and the other Loan Documents constitute the entire contract between the parties
relative to the subject matter hereof. Any other previous agreement among the
parties with respect to the subject matter hereof is superseded by this
Agreement and the other Loan Documents. Nothing in this Agreement or in the
other Loan Documents, expressed or implied, is intended to confer upon any party
other than the parties hereto and thereto any rights, remedies, obligations or
liabilities under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO
<PAGE>
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of
the provisions contained in this Agreement or in any other Loan Document should
be held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby (it being understood that
the invalidity of a particular provision in a particular jurisdiction shall not
in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and shall become effective as provided in Section
9.03. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 9.14. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a)
The Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against the Borrower or its properties in the courts of
any jurisdiction.
<PAGE>
(b) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents in any New York State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.16. Confidentiality. The Administrative Agent, the
Collateral Agent, the Issuing Bank and each of the Lenders agrees to keep
confidential (and to use its best efforts to cause its respective agents and
representatives to keep confidential) the Information (as defined below) and all
copies thereof, extracts therefrom and analyses or other materials based
thereon, except that the Administrative Agent, the Collateral Agent, the Issuing
Bank or any Lender shall be permitted to disclose Information (a) to such of its
respective officers, directors, employees, agents, affiliates and
representatives as need to know such Information, (b) to the extent requested by
any regulatory authority, (c) to the extent otherwise required by applicable
laws and regulations or by any subpoena or similar legal process, (d) in
connection with any suit, action or proceeding relating to the enforcement of
its rights hereunder or under the other Loan Documents or (e) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section 9.16 or (ii) becomes available to the Administrative Agent, the
Issuing Bank, any Lender or the Collateral Agent on a nonconfidential basis from
a source other than the Borrower. For the purposes of this Section,
"Information" shall mean all financial statements, certificates, reports,
agreements and information (including all analyses, compilations and studies
prepared by the Administrative Agent, the Collateral Agent, the Issuing Bank or
any Lender based on any of the foregoing) that are received from the Borrower
and related to the Borrower, any shareholder of the Borrower or any employee,
customer or supplier of the Borrower, other than any of the foregoing that were
available to the Administrative Agent, the Collateral Agent, the Issuing Bank or
any Lender on a nonconfidential basis prior to its disclosure thereto by the
Borrower, and which are in the case of Information provided after the date
hereof, clearly identified at the time of delivery as confidential. The
provisions of this Section 9.16 shall remain operative and in full force and
effect regardless of the expiration and term of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
TEL-SAVE HOLDINGS, INC.
By
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
SALOMON BROTHERS HOLDING COMPANY INC,
as a Lender and as Administrative Agent and
Collateral Agent
By
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
<PAGE>
EXHIBIT A
[Form of]
TEL-SAVE HOLDINGS, INC.
ADMINISTRATIVE QUESTIONNAIRE
Please accurately complete the following information and return via
Telecopy to the attention of
[ ] at Salomon Brothers Holding Company Inc as soon
as possible, at Telecopy No. (212) 783- .
LENDER LEGAL NAME TO APPEAR IN DOCUMENTATION:
GENERAL INFORMATION - DOMESTIC LENDING OFFICE:
Institution Name:
Street Address:
City, State, Zip Code:
GENERAL INFORMATION - EURODOLLAR LENDING OFFICE:
Institution Name:
Street Address:
City, State, Zip Code:
POST-CLOSING, ONGOING CREDIT CONTACTS/NOTIFICATION METHODS:
CREDIT CONTACTS:
Primary Contact:
Street Address:
A-1
<PAGE>
City, State, Zip Code:
Phone Number:
Telecopy Number:
Backup Contact:
Street Address:
City, State, Zip Code:
Phone Number:
Telecopy Number:
TAX WITHHOLDING:
Nonresident Alien Y* N
* Form 4224 Enclosed
Tax ID Number _________________________
POST-CLOSING, ONGOING ADMINISTRATIVE CONTACTS/NOTIFICATION METHODS:
ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, FEES, ETC.
Contact:
Street Address:
City, State, Zip Code:
Phone Number:
Telecopy Number:
A-2
<PAGE>
PAYMENT INSTRUCTIONS:
Name of Bank to which funds are to be transferred:
Routing Transit/ABA number of Bank to which funds are to be
transferred:
Name of Account, if applicable:
Account Number:
Additional information:
MAILINGS:
Please specify the person to whom the Borrower should send financial
and compliance information received subsequent to the closing (if
different from primary credit contact):
Name:
Street Address:
City, State, Zip Code:
It is very important that all the above information be accurately
completed and that this questionnaire be returned to the person
specified in the introductory paragraph of this questionnaire as soon
as possible. If there is someone other than yourself who should receive
this questionnaire, please notify us of that person's name and telecopy
number and we will telecopy a copy of the questionnaire. If you have
any questions about this form, please call Townsend Weekes at (212)
783-2823.
<PAGE>
EXHIBIT B
[Form of]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of August
25, 1997 (the "Credit Agreement"), among Tel-Save Holdings, Inc., a
Delaware corporation (the "Borrower"), the lenders listed on Schedule
2.01 thereto (the "Lenders") and Salomon Brothers Holding Company Inc,
as administrative agent for the Lenders (in such capacity, the
"Administrative Agent") and collateral agent. Terms defined in the
Credit Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to
the Assignee, and the Assignee hereby purchases and assumes, without
recourse, from the Assignor, effective as of the Effective Date set
forth below (but not prior to the registration of the information
contained herein in the Register pursuant to Section 9.04(e) of the
Credit Agreement), the interests set forth below (the "Assigned
Interest") in the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents, including, without limitation,
the amounts and percentages set forth below of (i) the Commitments of
the Assignor on the Effective Date, (ii) the Loans owing to the
Assignor which are outstanding on the Effective Date and (iii)
participations in Letters of Credit which are outstanding on the
Effective Date. Each of the Assignor and the Assignee hereby makes and
agrees to be bound by all the representations, warranties and
agreements set forth in Section 9.04(c) of the Credit Agreement, a copy
of which has been received by each such party. From and after the
Effective Date, (i) the Assignee shall be a party to and be bound by
the provisions of the Credit Agreement and, to the extent of the
interests assigned by this Assignment and Acceptance, have the rights
and obligations of a Lender thereunder and under the Loan Documents and
(ii) the Assignor shall, to the extent of the interests assigned by
this Assignment and Acceptance, relinquish its rights and be released
from its obligations under the Credit Agreement.
2. This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is organized
under the laws of a jurisdiction outside the United States, the forms
specified in Section 2.20(e) of the Credit Agreement, duly completed
and executed by such Assignee, (ii) if the Assignee is not already a
Lender under the Credit Agreement, an Administrative Questionnaire in
the form of Exhibit A to the Credit Agreement and (iii) a processing
and recordation fee of $3,500.
3. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
Date of Assignment:
B-1
<PAGE>
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment (may not be fewer than 5 Business Days
after the Date of Assignment):
<TABLE>
<CAPTION>
Percentage Assigned of Applicable
Facility/Commitment (set forth, to at
Principal Amount least 8 decimals, as a percentage of
Assigned the Facility and the aggregate
---------------- Commitments of all Lenders thereunder)
--------------------------------------
<S> <C> <C>
Facility/Commitment
Revolving Credit
$ %
Term Loans $ %
The terms set forth above are
hereby agreed to: Accepted*
_________________, as Assignor SALOMON BROTHERS HOLDING COMPANY, INC,
as Administrative Agent
by:___________________________ by:_________________________
Name: Name:
</TABLE>
- ----------
* To be completed to the extent consent are required under Section 9.04)b) of
the Credit Agreement.
B-2
<PAGE>
Title: Title:
_________________, as Assignee [Issuing Bank]
by:_________________________
Name:
Title:
<PAGE>
EXHIBIT C
Salomon Brothers Holding Company Inc, as Administrative Agent for
the Lenders referred to below,
Seven World Trade Center
New York, NY 10048
Attention of Townsend Weekes
August 25, 1997
Ladies and Gentlemen:
The undersigned, Tel-Save Holdings, Inc. (the "Company"),
refers to the Credit Agreement dated as of August 25, 1997 (the "Credit
Agreement"), among the Company, the lenders from time to time party
thereto (the "Lenders") and Salomon Brothers Holding Company Inc, as
administrative agent for the Lenders (in such capacity, the "Agent")
and collateral agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the
Credit Agreement. The Company hereby gives you notice pursuant to
Section 2.03 of the Credit Agreement that it requests a Borrowing under
the Credit Agreement, and in that connection sets forth below the terms
on which such Borrowing is requested to be made:
(A) Date of Borrowing
(B) Principal Amount of
Borrowing
(C) Interest rate basis
(D) Interest Period and the last
day thereof
(E) Funds are requested to be disbursed as follows:
C-1
<PAGE>
Upon acceptance of any or all of the Loans offered by the
Lenders in response to this request, the Company shall be deemed to
have represented and warranted that the conditions to lending specified
in Sections 4.01(b) and (c) of the Credit Agreement have been
satisfied.
TEL-SAVE HOLDINGS, INC.
By:
---------------------------------------
Name: Joseph A. Schenk
Title: Chief Financial Officer
C-2
<PAGE>
EXHIBIT D
GUARANTEE AGREEMENT dated as of August 25, 1997, among each
person listed on the signature page hereto (each such person
individually, a "Guarantor" and collectively, the "Guarantors") with
respect to the obligations of TEL-SAVE HOLDINGS, INC., a Delaware
corporation (the "Borrower"), to SALOMON BROTHERS HOLDING COMPANY INC,
a Delaware corporation, as collateral agent (the "Collateral Agent")
for the Secured Parties (as defined in the Credit Agreement referred to
below).
Reference is made to the Credit Agreement dated as of August
25, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrower, the lenders from
time to time party thereto (the "Lenders") and Salomon Brothers Holding
Company Inc, as administrative agent for the Lenders and the Collateral
Agent. Capitalized terms used herein and not defined herein shall have
the meanings assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and
pursuant to the Credit Agreement, an Issuing Bank may agree to issue
Letters of Credit for the account of the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the Credit
Agreement. The obligations of the Lenders to make Loans and of any
Issuing Bank to issue Letters of Credit are conditioned on, among other
things, the execution and delivery by the Guarantors of a Guarantee
Agreement in the form hereof. As consideration therefor and in order to
induce the Lenders to make Loans and any Issuing Bank to issue Letters
of Credit, the Guarantors are willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally
guarantees, jointly with the other Guarantors and severally, as a
primary obligor and not merely as a surety, (a) the due and punctual
payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and
as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (ii) each payment required to be made
by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement
of disbursements, interest thereon and obligations to provide cash
collateral and (iii) all other monetary obligations, including fees,
costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in
such proceeding), of the Loan Parties to the Secured Parties under the
Credit Agreement and the other Loan Documents and (b) the due and
punctual performance of all covenants,
D-1
<PAGE>
agreements, obligations and liabilities of the Loan Parties under or
pursuant to the Credit Agreement and the other Loan Documents and (c)
unless otherwise agreed upon in writing by the applicable Lender party
thereto, all obligations of the Borrower, monetary or otherwise, under
each Interest Rate Protection Agreement entered into with a
counterparty that was a Lender at the time such Interest Rate
Protection Agreement was entered into (all the monetary and other
obligations referred to in the preceding clauses (a) and (b) being
collectively called the "Obligations"). Each Guarantor further agrees
that the Obligations may be extended or renewed, in whole or in part,
without notice to or further assent from it, and that it will remain
bound upon its guarantee notwithstanding any extension or renewal of
any Obligation.
Anything contained in this Agreement to the contrary
notwithstanding, the obligations of each Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the greatest amount that
would not render such Guarantor's obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of
Title 11 of the United States Code or any provisions of applicable
state law (collectively, the "Fraudulent Transfer Laws"), in each case
after giving effect to all other liabilities of such Guarantor,
contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of intercompany indebtedness to the Borrower
or Affiliates of the Borrower to the extent that such indebtedness
would be discharged in an amount equal to the amount paid by such
Guarantor hereunder and (b) under any Guarantee of senior unsecured
indebtedness or Indebtedness subordinated in right of payment to the
Obligations which Guarantee contains a limitation as to maximum amount
similar to that set forth in this paragraph, pursuant to which the
liability of such Guarantor hereunder is included in the liabilities
taken into account in determining such maximum amount) and after giving
effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, contribution, reimbursement, indemnity or similar rights
of such Guarantor pursuant to (i) applicable law or (ii) any agreement
providing for an equitable allocation among such Guarantor and other
Affiliates of the Borrower of obligations arising under Guarantees by
such parties (including the Indemnity, Subrogation and Contribution
Agreement).
Notwithstanding anything else herein, the obligations of
Daniel Borislow hereunder will be limited-recourse obligations payable
only from the Collateral pledged under the Pledged Agreement of even
date herewith between Daniel Borislow and the Collateral Agent.
SECTION 2. Obligations Not Waived. To the fullest extent
permitted by applicable law, each Guarantor waives presentment to,
demand of payment from and protest to the Borrower of any of the
Obligations, and also waives notice of acceptance of its guarantee and
notice of protest for nonpayment. To the fullest extent permitted by
applicable law, the obligations of each Guarantor hereunder shall not
be affected by (a) the failure of the Collateral Agent or any other
Secured Party to assert any claim or demand or to enforce or exercise
any right or remedy against the Borrower or any other Guarantor under
the provisions of the Credit Agreement, any other Loan Document or
otherwise, (b) any
D-2
<PAGE>
rescission, waiver, amendment or modification of, or any release from
any of the terms or provisions of this Agreement, any other Loan
Document, any Guarantee or any other agreement, including with respect
to any other Guarantor under this Agreement or (c) the failure to
perfect any security interest in, or the release of, any of the
security held by or on behalf of the Collateral Agent or any other
Secured Party.
SECTION 3. Security. Each of the Guarantors authorizes the
Collateral Agent and each of the other Secured Parties, to (a) take and
hold security for the payment of this Guarantee and the Obligations and
exchange, enforce, waive and release any such security, (b) apply such
security and direct the order or manner of sale thereof as they in
their sole discretion may determine and (c) release or substitute any
one or more endorsees, other guarantors of other obligors.
SECTION 4. Guarantee of Payment. Each Guarantor further agrees
that its guarantee constitutes a guarantee of payment when due and not
of collection, and waives any right to require that any resort be had
by the Collateral Agent or any other Secured Party to any of the
security held for payment of the Obligations or to any balance of any
deposit account or credit on the books of the Collateral Agent or any
other Secured Party in favor of the Borrower or any other person.
SECTION 5. No Discharge or Diminishment of Guarantee. The
obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason (other
than the indefeasible payment in full in cash of the Obligations),
including any claim of waiver, release, surrender, alteration or
compromise of any of the Obligations, and shall not be subject to any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor hereunder shall not be
discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or
demand or to enforce any remedy under the Credit Agreement, any other
Loan Document or any other agreement, by any waiver or modification of
any provision of any thereof, by any default, failure or delay, willful
or otherwise, in the performance of the Obligations, or by any other
act or omission that may or might in any manner or to any extent vary
the risk of any Guarantor or that would otherwise operate as a
discharge of each Guarantor as a matter of law or equity (other than
the indefeasible payment in full in cash of all the Obligations).
SECTION 6. Defenses of Borrower Waived. To the fullest extent
permitted by applicable law, each of the Guarantors waives any defense
based on or arising out of any defense of the Borrower or the
unenforceability of the Obligations or any part thereof from any cause,
or the cessation from any cause of the liability of the Borrower, other
than the final and indefeasible payment in full in cash of the
Obligations. The Collateral Agent and the other Secured Parties may, at
their election, foreclose on any security held by one or more of them
by one or more judicial or nonjudicial sales, accept an assignment of
any such security in lieu of foreclosure, compromise or adjust any part
of the Obligations, make any
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<PAGE>
other accommodation with the Borrower or any other guarantor or
exercise any other right or remedy available to them against the
Borrower or any other guarantor, without affecting or impairing in any
way the liability of any Guarantor hereunder except to the extent the
Obligations have been fully, finally and indefeasibly paid in cash.
Pursuant to applicable law, each of the Guarantors waives any defense
arising out of any such election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other Guarantor or guarantor, as the case
may be, or any security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of
the foregoing and not in limitation of any other right that the
Collateral Agent or any other Secured Party has at law or in equity
against any Guarantor by virtue hereof, upon the failure of the
Borrower or any other Loan Party to pay any Obligation when and as the
same shall become due, whether at maturity, by acceleration, after
notice of prepayment or otherwise, each Guarantor hereby promises to
and will forthwith pay, or cause to be paid, to the Collateral Agent or
such other Secured Party as designated thereby in cash the amount of
such unpaid Obligations. Upon payment by any Guarantor of any sums to
the Collateral Agent or any Secured Party as provided above, all rights
of such Guarantor against the Borrower arising as a result thereof by
way of right of subrogation, contribution, reimbursement, indemnity or
otherwise shall in all respects be subordinate and junior in right of
payment to the prior indefeasible payment in full in cash of all the
Obligations. In addition, any indebtedness of the Borrower now or
hereafter held by any Guarantor is hereby subordinated in right of
payment to the prior payment in full of the Obligations. If any amount
shall erroneously be paid to any Guarantor on account of (i) such
subrogation, contribution, reimbursement, indemnity or similar right or
(ii) any such indebtedness of the Borrower, such amount shall be held
in trust for the benefit of the Secured Parties and shall forthwith be
paid to the Collateral Agent to be credited against the payment of the
Obligations, whether matured or unmatured, in accordance with the terms
of the Loan Documents.
SECTION 8. Information. Each of the Guarantors assumes all
responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing
upon the risk of nonpayment of the Obligations and the nature, scope
and extent of the risks that such Guarantor assumes and incurs
hereunder, and agrees that none of the Collateral Agent or the other
Secured Parties will have any duty to advise any of the Guarantors of
information known to it or any of them regarding such circumstances or
risks.
SECTION 9. Representations, Warranties and Covenants. Each of
the Guarantors represents and warrants as to itself that all
representations and warranties relating to it contained in the Credit
Agreement are true and correct. Each of the Guarantors that is a
Subsidiary agrees to comply with all covenants in the Credit Agreement
that are applicable to it as fully as if it were a party to the Credit
Agreement, and any Guarantor becoming a Guarantor after the date hereof
that is not a Subsidiary agrees to comply with the restrictions in
Sections 6.01 and 6.02 of the Credit Agreement as if it were a
Subsidiary.
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SECTION 10. Termination. The Guarantees made hereunder (a)
shall terminate when all the Obligations have been indefeasibly paid in
full and the Lenders have no further commitment to lend under the
Credit Agreement, the L/C Exposure has been reduced to zero and any
Issuing Bank has no further obligation to issue Letters of Credit under
the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part
thereof, of any Obligation is rescinded or must otherwise be restored
by any Secured Party or any Guarantor upon the bankruptcy or
reorganization of the Borrower, any Guarantor or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments.
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of
such party; and all covenants, promises and agreements by or on behalf
of the Guarantors that are contained in this Agreement shall bind and
inure to the benefit of each party hereto and their respective
successors and assigns. This Agreement shall become effective as to any
Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a
counterpart hereof shall have been executed on behalf of the Collateral
Agent, and thereafter shall be binding upon such Guarantor and the
Collateral Agent and their respective successors and assigns, and shall
inure to the benefit of such Guarantor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns,
except that no Guarantor shall have the right to assign its rights or
obligations hereunder or any interest herein (and any such attempted
assignment shall be void). If all of the capital stock of a Guarantor
is sold, transferred or otherwise disposed of pursuant to a transaction
permitted by Section 6.05 of the Credit Agreement, such Guarantor shall
be released from its obligations under this Agreement without further
action. This Agreement shall be construed as a separate agreement with
respect to each Guarantor and may be amended, modified, supplemented,
waived or released with respect to any Guarantor without the approval
of any other Guarantor and without affecting the obligations of any
other Guarantor hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Collateral Agent hereunder and of the other
Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any
departure by any Guarantor therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on any
Guarantor in any case shall entitle such Guarantor to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement
entered into between the Guarantors with respect to which such waiver,
amendment or modification relates and the Collateral Agent,
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<PAGE>
with the prior written consent of the Required Lenders (except as
otherwise provided in the Credit Agreement).
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 14. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 9.01 of the Credit
Agreement. All communications and notices hereunder to each Guarantor
shall be given to it in care of the Borrower.
SECTION 15. Survival of Agreement; Severability. (a) All
covenants, agreements, representations and warranties made by the
Guarantors herein and in the certificates or other instruments prepared
or delivered in connection with or pursuant to this Agreement or any
other Loan Document shall be considered to have been relied upon by the
Collateral Agent and the other Secured Parties and shall survive the
making by the Lenders of the Loans and the issuance of any Letters of
Credit by any Issuing Bank regardless of any investigation made by the
Secured Parties or on their behalf, and shall continue in full force
and effect as long as the principal of or any accrued interest on any
Loan or any other fee or amount payable under this Agreement or any
other Loan Document is outstanding and unpaid or the L/C Exposure does
not equal zero and as long as the Commitments and the L/C Commitment
have not been terminated.
(b) In the event any one or more of the provisions contained
in this Agreement or in any other Loan Document should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity
of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 16. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute a single contract, and shall
become effective as provided in Section 11. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this
Agreement.
SECTION 17. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement.
SECTION 18. Jurisdiction; Consent to Service of Process. (a)
Each Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New
York State court or Federal court of the United States
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of America sitting in New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring
any action or proceeding relating to this Agreement or the other Loan
Documents against any Guarantor or its properties in the courts of any
jurisdiction.
(b) Each Guarantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this
Agreement or the other Loan Documents in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum
to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 14.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE,
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 19.
SECTION 20. Additional Guarantors. Pursuant to Section 5.11 of
the Credit Agreement, each Subsidiary of the Borrower that was not in
existence on the date of the Credit Agreement is required to enter into
this Agreement as a Guarantor upon becoming a Subsidiary. Upon
execution and delivery after the date hereof by the Collateral Agent
and such a Subsidiary of an instrument in the form of Annex 1, such
Subsidiary shall become a Guarantor hereunder with the same force and
effect as if originally named as a Guarantor
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<PAGE>
herein. The execution and delivery of any instrument adding an
additional Guarantor as a party to this Agreement shall not require the
consent of any other Guarantor hereunder. The rights and obligations of
each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this
Agreement.
SECTION 21. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Secured Party is hereby authorized at
any time and from time to time, to the fullest extent permitted by law,
to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other Indebtedness
at any time owing by such Secured Party to or for the credit or the
account of any Guarantor against any or all the obligations of such
Guarantor now or hereafter existing under this Agreement and the other
Loan Documents held by such Secured Party, irrespective of whether or
not such Secured Party shall have made any demand under this Agreement
or any other Loan Document and although such obligations may be
unmatured. The rights of each Secured Party under this Section 21 are
in addition to other rights and remedies (including other rights of
setoff) which such Secured Party may have.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
DANIEL BORISLOW
-------------------------------------------
TEL-SAVE, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
EMERGENCY TRANSPORT CORP.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
TEL-SAVE HOLDINGS OF VIRGINIA, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SALOMON BROTHERS HOLDING
COMPANY INC., as Collateral Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
<PAGE>
Annex 1 to the
Guarantee Agreement
SUPPLEMENT NO. dated as of , to the Guarantee Agreement
dated as of August 25, 1997, among each of the persons
listed on the signature page thereto (each such person
individually, a "Guarantor" and collectively, the
"Guarantors") with respect to the obligations of TEL-SAVE
HOLDINGS, INC., a Delaware corporation (the "Borrower"), to
SALOMON BROTHERS HOLDING COMPANY INC, a Delaware
corporation, as collateral agent (the "Collateral Agent")
for the Secured Parties (as defined in the Credit Agreement
referred to below).
A. Reference is made to the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders") and Salomon Brothers
Holding Company Inc, as administrative agent for the Lenders and the
Collateral Agent. Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Credit Agreement.
B. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Guarantee
Agreement and the Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in
order to induce the Lenders to make Loans and any Issuing Bank to issue
Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement,
each Subsidiary of the Borrower that was not in existence or not a
Subsidiary on the date of the Credit Agreement is required to enter
into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary.
Section 20 of the Guarantee Agreement provides that additional
Subsidiaries of the Borrower may become Guarantors under the Guarantee
Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary of the Borrower (the "New
Guarantor") is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Guarantor under the
Guarantee Agreement in order to induce the Lenders to make additional
Loans and the Issuing Bank to issue additional Letters of Credit and as
consideration for Loans previously made and any Letters of Credit
previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree
as follows:
SECTION 1. In accordance with Section 20 of the Guarantee
Agreement, the New Guarantor by its signature below becomes a Guarantor
under the Guarantee Agreement with the same force and effect as if
originally named therein as a Guarantor and the New Guarantor hereby
(a) agrees to all the terms and provisions of the Guarantee
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<PAGE>
Agreement applicable to it as a Guarantor thereunder and (b) represents
and warrants that the representations and warranties made by it as a
Guarantor thereunder are true and correct on and as of the date hereof.
Each reference to a "Guarantor" in the Guarantee Agreement shall be
deemed to include the New Guarantor. The Guarantee Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has
been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall
become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the
signatures of the New Guarantor and the Collateral Agent. Delivery of
an executed signature page to this Supplement by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of
this Supplement.
SECTION 4. Except as expressly supplemented hereby, the
Guarantee Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and in the Guarantee Agreement shall not in
any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision hereof in a particular
jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties hereto shall endeavor
in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be
in writing and given as provided in Section 14 of the Guarantee
Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its
signature below, with a copy to the Borrower.
SECTION 8. The New Guarantor agrees to reimburse the
Collateral Agent for its out-of-pocket expenses in connection with this
Supplement, including the fees, disbursements and other charges of
counsel for the Collateral Agent.
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<PAGE>
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent
have duly executed this Supplement to the Guarantee Agreement as of the
day and year first above written.
[Name of New Guarantor]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address:
-----------------------------------
SALOMON BROTHERS HOLDING COMPANY INC, as
Collateral Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
D-10
<PAGE>
EXHIBIT E
INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of
August 25, 1997, among TEL-SAVE HOLDINGS, INC., a Delaware corporation
(the "Borrower"), each person listed on the signature page hereto (the
"Guarantors") and SALOMON BROTHERS HOLDING COMPANY INC, a Delaware
corporation ("SBHC"), as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders"), any Lender identified
pursuant thereto as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent") and Collateral Agent, and (b) the Guarantee
Agreement dated as of August 25, 1997, among the Guarantors and the
Collateral Agent (the "Guarantee Agreement"). Capitalized terms used
herein and not defined herein shall have the meanings assigned to such
terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and an
Issuing Bank may agree to issue Letters of Credit for the account of
the Borrower, pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. The Guarantors have
guaranteed such Loans and the other Obligations (as defined in the
Guarantee Agreement) of the Borrower under the Credit Agreement
pursuant to the Guarantee Agreement; certain Guarantors have granted
Liens on and security interests in certain of their assets to secure
such guarantees. The obligations of the Lenders to make Loans and of
any Issuing Bank to issue Letters of Credit are conditioned on, among
other things, the execution and delivery by the Borrower and the
Guarantors of an agreement in the form hereof.
Accordingly, the Borrower, each Guarantor and the Collateral
Agent agree as follows:
SECTION 1. Indemnity and Subrogation. In addition to all such
rights of indemnity and subrogation as the Guarantors may have under
applicable law (but subject to Section 3), the Borrower agrees that (a)
in the event a payment shall be made by any Guarantor under the
Guarantee Agreement, the Borrower shall indemnify such Guarantor for
the full amount of such payment and such Guarantor shall be subrogated
to the rights of the person to whom such payment shall have been made
to the extent of such payment and (b) in the event any assets of any
Guarantor shall be sold pursuant to any Security Document to satisfy a
claim of any Secured Party, the Borrower shall indemnify such Guarantor
in an amount equal to the greater of the book value or the fair market
value of the assets so sold.
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<PAGE>
SECTION 2. Contribution and Subrogation. Each Guarantor (a
"Contributing Guarantor") agrees (subject to Section 3) that, in the
event a payment shall be made by any other Guarantor under the
Guarantee Agreement or assets of any other Guarantor shall be sold
pursuant to any Security Document to satisfy a claim of any Secured
Party and such other Guarantor (the "Claiming Guarantor") shall not
have been fully indemnified by the Borrower as provided in Section 1,
the Contributing Guarantor shall indemnify the Claiming Guarantor in an
amount equal to the amount of such payment or the greater of the book
value or the fair market value of such assets, as the case may be, in
each case multiplied by a fraction of which the numerator shall be the
net worth of the Contributing Guarantor on the date hereof and the
denominator shall be the aggregate net worth of all the Guarantors on
the date hereof (or, in the case of any Guarantor becoming a party
hereto pursuant to Section 12, the date of the Supplement hereto
executed and delivered by such Guarantor). Any Contributing Guarantor
making any payment to a Claiming Guarantor pursuant to this Section 2
shall be subrogated to the rights of such Claiming Guarantor under
Section 1 to the extent of such payment. Notwithstanding anything else
herein, the obligations of Daniel Borislow hereunder will be limited
the Collateral pledged under the Pledged Agreement of even date
herewith between Daniel Borislow and the Collateral Agent.
SECTION 3. Subordination. Notwithstanding any provision of
this Agreement to the contrary, all rights of the Guarantors under
Sections 1 and 2 and all other rights of indemnity, contribution or
subrogation under applicable law or otherwise shall be fully
subordinated to the indefeasible payment in full in cash of the
Obligations. No failure on the part of the Borrower or any Guarantor to
make the payments required by Sections 1 and 2 (or any other payments
required under applicable law or otherwise) shall in any respect limit
the obligations and liabilities of any Guarantor with respect to its
obligations hereunder, and each Guarantor shall remain liable for the
full amount of the obligations of such Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in
full force and effect so long as any Obligation is outstanding and has
not been indefeasibly paid in full in cash, and so long as any L/C
Exposure has not been reduced to zero or any of the Commitments under
the Credit Agreement have not been terminated, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment,
or any part thereof, of any Obligation is rescinded or must otherwise
be restored by any Secured Party or any Guarantor upon the bankruptcy
or reorganization of the Borrower, any Guarantor or otherwise.
SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of
the Collateral Agent or any Guarantor to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy by the Collateral Agent or any Guarantor
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<PAGE>
preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. All remedies hereunder are cumulative and
are not exclusive of any other remedies provided by law. None of the
Collateral Agent and the Guarantors shall be deemed to have waived any
rights hereunder unless such waiver shall be in writing and signed by
such parties.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement
entered into between the Borrower, the Guarantors and the Collateral
Agent, with the prior written consent of the Required Lenders (except
as otherwise provided in the Credit Agreement).
SECTION 7. Notices. All communications and notices hereunder
shall be in writing and given as provided in the Guarantee Agreement
and addressed as specified therein.
SECTION 8. Binding Agreement; Assignments. Whenever in this
Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of the
parties that are contained in this Agreement shall bind and inure to
the benefit of their respective successors and assigns. Neither the
Borrower nor any Guarantor may assign or transfer any of its rights or
obligations hereunder (and any such attempted assignment or transfer
shall be void) without the prior written consent of the Required
Lenders. Notwithstanding the foregoing, at the time any Guarantor is
released from its obligations under the Guarantee Agreement in
accordance with such Guarantee Agreement and the Credit Agreement, such
Guarantor will cease to have any rights or obligations under this
Agreement.
SECTION 9. Survival of Agreement; Severability. (a) All
covenants and agreements made by the Borrower and each Guarantor herein
and in the certificates or other instruments prepared or delivered in
connection with this Agreement or the other Loan Documents shall be
considered to have been relied upon by the Collateral Agent, the other
Secured Parties and each Guarantor and shall survive the making by the
Lenders of the Loans and the issuance of any Letters of Credit by any
Issuing Bank, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loans or any other fee
or amount payable under the Credit Agreement or this Agreement or under
any of the other Loan Documents is outstanding and unpaid or the L/C
Exposure does not equal zero and as long as the Commitments have not
been terminated.
(b) In case any one or more of the provisions contained in
this Agreement should be held invalid, illegal or unenforceable in any
respect, no party hereto shall be required to comply with such
provision for so long as such provision is held to be invalid, illegal
or unenforceable, but the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected
or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable
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<PAGE>
provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 10. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This
Agreement shall be effective with respect to any Guarantor when a
counterpart bearing the signature of such Guarantor shall have been
delivered to the Collateral Agent. Delivery of an executed signature
page to this Agreement by facsimile transmission shall be as effective
as delivery of a manually signed counterpart of this Agreement.
SECTION 11. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement.
SECTION 12. Additional Guarantors. Pursuant to Section 5.11 of
the Credit Agreement, each Subsidiary of the Borrower that was not in
existence on the date of the Credit Agreement is required to enter into
the Guarantee Agreement as a Guarantor upon becoming a Subsidiary. Upon
execution and delivery, after the date hereof, by the Collateral Agent
and such a Subsidiary of an instrument in the form of Annex 1 hereto,
such Subsidiary shall become a Guarantor hereunder with the same force
and effect as if originally named as a Guarantor hereunder. The
execution and delivery of any instrument adding an additional Guarantor
as a party to this Agreement shall not require the consent of any
Guarantor hereunder. The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the
addition of any new Guarantor as a party to this Agreement.
E-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the
date first appearing above.
TEL-SAVE HOLDINGS, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
DANIEL BORISLOW
--------------------------------------
TEL-SAVE, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
EMERGENCY TRANSPORT CORP.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
TEL-SAVE HOLDINGS OF
VIRGINIA, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
TSHCo, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SALOMON BROTHERS HOLDING COMPANY INC,
as Collateral Agent,
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-5
<PAGE>
Annex 1 to
the Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. dated as of , to the Indemnity, Subrogation
and Contribution Agreement dated as of August 25, 1997 (as the
same may be amended, supplemented or otherwise modified from time
to time, the "Indemnity, Subrogation and Contribution
Agreement"), among TEL-SAVE HOLDINGS, INC., a Delaware
corporation (the "Borrower") each person listed on the signature
page thereto (the "Guarantors"), and SALOMON BROTHERS HOLDING
COMPANY INC, a Delaware corporation ("SBHC"), as collateral agent
(the "Collateral Agent") for the Secured Parties (as defined in
the Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders"), the Lender identified
therein as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent") and Collateral Agent, and (b) the Guarantee
Agreement dated as of August 25, 1997, among the Guarantors and the
Collateral Agent (the "Guarantee Agreement").
B. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Indemnity,
Subrogation and Contribution Agreement and the Credit Agreement.
C. The Borrower and the Guarantors have entered into the
Indemnity, Subrogation and Contribution Agreement in order to induce
the Lenders to make Loans and any Issuing Bank to issue Letters of
Credit. Pursuant to Section 5.11 of the Credit Agreement, each
Subsidiary of the Borrower that was not in existence on the date of the
Credit Agreement is required to enter into the Guarantee Agreement as a
Guarantor upon becoming a Subsidiary. Section 12 of the Indemnity,
Subrogation and Contribution Agreement provides that additional
Subsidiaries of the Borrower may become Guarantors under the Indemnity,
Subrogation and Contribution Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary
of the Borrower (the "New Guarantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a
Guarantor under the Indemnity, Subrogation and Contribution Agreement
in order to induce the Lenders to make additional Loans and any Issuing
Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree
as follows:
E-7
<PAGE>
SECTION 1. In accordance with Section 12 of the Indemnity,
Subrogation and Contribution Agreement, the New Guarantor by its
signature below becomes a Guarantor under the Indemnity, Subrogation
and Contribution Agreement with the same force and effect as if
originally named therein as a Guarantor and the New Guarantor hereby
agrees to all the terms and provisions of the Indemnity, Subrogation
and Contribution Agreement applicable to it as a Guarantor thereunder.
Each reference to a "Guarantor" in the Indemnity, Subrogation and
Contribution Agreement shall be deemed to include the New Guarantor.
The Indemnity, Subrogation and Contribution Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has
been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts
(and by different parties hereto on different counterparts), each of
which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall
become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the
signatures of the New Guarantor and the Collateral Agent. Delivery of
an executed signature page to this Supplement by facsimile transmission
shall be as effective as delivery of a manually signed counterpart of
this Supplement.
SECTION 4. Except as expressly supplemented hereby, the
Indemnity, Subrogation and Contribution Agreement shall remain in full
force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in
any respect, neither party hereto shall be required to comply with such
provision for so long as such provision is held to be invalid, illegal
or unenforceable, but the validity, legality and enforceability of the
remaining provisions contained herein and in the Indemnity, Subrogation
and Contribution Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be
in writing and given as provided in Section 7 of the Indemnity,
Subrogation and Contribution Agreement. All communications and notices
hereunder to the New Guarantor shall be given to it at the address set
forth under its signature.
E-8
<PAGE>
SECTION 8. The New Guarantor agrees to reimburse the
Collateral Agent for its reasonable out-of-pocket expenses in
connection with this Supplement, including the reasonable fees, other
charges and disbursements of counsel for the Collateral Agent.
E-9
<PAGE>
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent
have duly executed this Supplement to the Indemnity, Subrogation and
Contribution Agreement as of the day and year first above written.
[Name of Guarantor]
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address
-------------------------------
SALOMON BROTHERS HOLDING COMPANY INC,
as Collateral Agent
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-10
<PAGE>
EXHIBIT G-1
PLEDGE AGREEMENT dated as of August 25, 1997, among TEL-SAVE
HOLDINGS, INC., a Delaware corporation (the "Pledgor") and SALOMON
BROTHERS HOLDING COMPANY INC, a Delaware corporation ("SBHC"), as
collateral agent (in such capacity, the "Collateral Agent") for the
Secured Parties (as defined in the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders"), the Lender identified
therein as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders and Collateral Agent.
The Lenders have agreed to make Loans to the Borrower and
pursuant to the Credit Agreement, an Issuing Bank may agree to issue
Letters of Credit for the account of the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of Tel-Save, Inc., Emergency Transport Corp., Tel-Save
Holdings of Virginia, Inc. and Daniel Borislow has agreed to guarantee,
among other things, all the obligations of the Borrower under the
Credit Agreement. The obligations of the Lenders to make Loans and of
any Issuing Bank to issue Letters of Credit are conditioned upon, among
other things, the execution and delivery by the Pledgor of a Pledge
Agreement in the form hereof to secure (a) the due and punctual payment
by the Borrower of (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the
Loans, when and as due, whether at maturity, by acceleration, upon one
or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Borrower under the Credit Agreement in
respect of any Letter of Credit, when and as due, including payments in
respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Borrower to
the Secured Parties under the Credit Agreement and the other Loan
Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or
pursuant to the Credit Agreement and the other Loan Documents (all the
monetary and other obligations referred to in the preceding clauses (a)
through (c) being referred to collectively as the "Obligations").
Capitalized terms used herein and not defined herein shall have
meanings assigned to such terms in the Credit Agreement.
Accordingly, the Pledgor and the Collateral Agent, on behalf
of itself and each Secured Party (and each of their respective
successors or assigns), hereby agree as follows:
<PAGE>
SECTION 1. Pledge. As security for the payment and
performance, as the case may be, in full of the Obligations, the
Pledgor hereby transfers, grants, bargains, sells, conveys,
hypothecates, pledges, sets over and delivers unto the Collateral
Agent, its successors and assigns, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of the Pledgor's right,
title and interest in, to and under (a) the shares of capital stock
owned by it and listed on Schedule I hereto and any shares of capital
stock of any Subsidiary obtained in the future by the Pledgor and the
certificates representing all such shares (the "Pledged Stock");
provided that the Pledged Stock shall not include to the extent that
applicable law requires that a Subsidiary of the Pledgor issue
directors' qualifying shares, such qualifying shares; (b)(i) the debt
securities listed opposite the name of the Pledgor on Schedule I
hereto, (ii) any debt securities in the future issued to the Pledgor
and (iii) the promissory notes and any other instruments evidencing
such debt securities (the "Pledged Debt Securities"); (c) all other
property that may be delivered to and held by the Collateral Agent
pursuant to the terms hereof; (d) subject to Section 5, all payments of
principal or interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities
referred to in clauses (a) and (b) above; (e) subject to Section 5, all
rights and privileges of the Pledgor with respect to the securities and
other property referred to in clauses (a), (b), (c) and (d) above; and
(f) all proceeds of any of the foregoing (the items referred to in
clauses (a) through (f) above being collectively referred to as the
"Collateral"). Upon delivery to the Collateral Agent, (a) any stock
certificates, notes or other securities now or hereafter included in
the Collateral (the "Pledged Securities") shall be accompanied by stock
powers duly executed in blank or other instruments of transfer
satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request and (b) all
other property comprising part of the Collateral shall be accompanied
by proper instruments of assignment duly executed by the Pledgor and
such other instruments or documents as the Collateral Agent may
reasonably request. Each delivery of Pledged Securities shall be
accompanied by a schedule describing the securities theretofore and
then being pledged hereunder, which schedule shall be attached hereto
as Schedule I and made a part hereof. Each schedule so delivered shall
supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or
incidental thereto, unto the Collateral Agent, its successors and
assigns, for the ratable benefit of the Secured Parties, forever;
subject, however, to the terms, covenants and conditions hereinafter
set forth.
SECTION 2. Delivery of the Collateral. (a) The Pledgor agrees
promptly to deliver or cause to be delivered to the Collateral Agent
any and all Pledged Securities, and any and all certificates or other
instruments or documents representing the Collateral.
<PAGE>
(b) The Pledgor will cause any Indebtedness for borrowed money
owed to the Pledgor by any person and pledged hereunder to be evidenced
by a duly executed promissory note that is pledged and delivered to the
Collateral Agent pursuant to the terms thereof.
SECTION 3. Representations, Warranties and Covenants. The
Pledgor hereby represents, warrants and covenants, as to itself and the
Collateral pledged by it hereunder, to and with the Collateral Agent
that:
(a) the Pledged Stock represents that percentage as
set forth on Schedule I of the issued and outstanding shares
of each class of the capital stock of the issuer with respect
thereto;
(b) except for the security interest granted
hereunder, the Pledgor (i) is and will at all times continue
to be the direct owner, beneficially and of record, of the
Pledged Securities indicated on Schedule I, (ii) holds the
same free and clear of all Liens, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or
permit to exist any security interest in or other Lien on, the
Collateral, other than pursuant hereto, and (iv) subject to
Section 5, will cause any and all Collateral, whether for
value paid by the Pledgor or otherwise, to be forthwith
deposited with the Collateral Agent and pledged or assigned
hereunder;
(c) the Pledgor (i) has the power and authority to
pledge the Collateral in the manner hereby done or
contemplated and (ii) will defend its title or interest
thereto or therein against any and all Liens (other than the
Lien created by this Agreement), however arising, of all
persons whomsoever;
(d) no consent of any other person (including
stockholders or creditors of the Pledgor) and no consent or
approval of any Governmental Authority or any securities
exchange was or is necessary to the validity of the pledge
effected hereby;
(e) by virtue of the execution and delivery by the
Pledgor of this Agreement, when the Pledged Securities,
certificates or other documents representing or evidencing the
Collateral are delivered to the Collateral Agent in accordance
with this Agreement, the Collateral Agent will obtain a valid
and perfected first lien upon and security interest in such
Pledged Securities as security for the payment and performance
of the Obligations;
(f) the pledge effected hereby is effective to vest
in the Collateral Agent, on behalf of the Secured Parties, the
rights of the Collateral Agent in the Collateral as set forth
herein;
(g) all of the Pledged Stock has been duly authorized
and validly issued and is fully paid and nonassessable;
<PAGE>
(h) all information set forth herein relating to the
Pledged Stock is accurate and complete in all material
respects as of the date hereof; and
(i) the pledge of the Pledged Stock pursuant to this
Agreement does not violate Regulation G, T, U or X of the
Federal Reserve Board or any successor thereto as of the date
hereof.
SECTION 4. Registration in Nominee Name; Denominations. The
Collateral Agent, on behalf of the Secured Parties, shall have the
right (in its sole and absolute discretion) to hold the Pledged
Securities in its own name as pledgee, the name of its nominee (as
pledgee or as sub-agent) or the name of the Pledgor, endorsed or
assigned in blank or in favor of the Collateral Agent. The Pledgor will
promptly give to the Collateral Agent copies of any notices or other
communications received by it with respect to Pledged Securities
registered in the name of the Pledgor. The Collateral Agent shall at
all times have the right to exchange the certificates representing
Pledged Securities for certificates of smaller or larger denominations
for any purpose consistent with this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a)
Unless and until an Event of Default shall have occurred and be
continuing:
(i) The Pledgor shall be entitled to exercise any and
all voting and/or other consensual rights and powers inuring
to an owner of Pledged Securities or any part thereof for any
purpose consistent with the terms of this Agreement, the
Credit Agreement and the other Loan Documents; provided,
however, that the Pledgor will not be entitled to exercise any
such right if the result thereof could materially and
adversely affect the rights inuring to a holder of the Pledged
Securities or the rights and remedies of any of the Secured
Parties under this Agreement or the Credit Agreement or any
other Loan Document or the ability of the Secured Parties to
exercise the same.
(ii) The Collateral Agent shall execute and deliver
to the Pledgor, or cause to be executed and delivered to the
Pledgor, all such proxies, powers of attorney and other
instruments as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to exercise the voting and/or
consensual rights and powers it is entitled to exercise
pursuant to subparagraph (i) above and to receive the cash
dividends it is entitled to receive pursuant to subparagraph
(iii) below.
(iii) The Pledgor shall be entitled to receive and
retain any and all cash dividends, interest and principal paid
on the Pledged Securities to the extent and only to the extent
that such cash dividends, interest and principal are permitted
by, and otherwise paid in accordance with, the terms and
conditions of the Credit Agreement, the other Loan Documents
and applicable laws. All noncash dividends, interest and
principal, and all dividends, interest and principal paid or
<PAGE>
payable in cash or otherwise in connection with a partial or
total liquidation or dissolution, return of capital, capital
surplus or paid-in surplus, and all other distributions (other
than distributions referred to in the preceding sentence) made
on or in respect of the Pledged Securities, whether paid or
payable in cash or otherwise, whether resulting from a
subdivision, combination or reclassification of the
outstanding capital stock of the issuer of any Pledged
Securities or received in exchange for Pledged Securities or
any part thereof, or in redemption thereof, or as a result of
any merger, consolidation, acquisition or other exchange of
assets to which such issuer may be a party or otherwise, shall
be and become part of the Collateral, and, if received by the
Pledgor, shall not be commingled by the Pledgor with any of
its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the
Collateral Agent and shall be forthwith delivered to the
Collateral Agent in the same form as so received (with any
necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to dividends, interest or
principal that the Pledgor is authorized to receive pursuant to
paragraph (a)(iii) above shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the
sole and exclusive right and authority to receive and retain such
dividends, interest or principal. All dividends, interest or principal
received by any Pledgor contrary to the provisions of this Section 5
shall be held in trust for the benefit of the Collateral Agent, shall
be segregated from other property or funds of the Pledgor and shall be
forthwith delivered to the Collateral Agent upon demand in the same
form as so received (with any necessary endorsement). Any and all money
and other property paid over to or received by the Collateral Agent
pursuant to the provisions of this paragraph (b) shall be retained by
the Collateral Agent in an account to be established by the Collateral
Agent upon receipt of such money or other property and shall be applied
in accordance with the provisions of Section 7. After all Events of
Default have been cured or waived, the Collateral Agent shall, within
five Business Days after all such Events of Default have been cured or
waived, repay to the Pledgor all cash dividends, interest or principal
(without interest), that the Pledgor would otherwise be permitted to
retain pursuant to the terms of paragraph (a)(iii) above and which
remain in such account.
(c) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to exercise the voting and
consensual rights and powers it is entitled to exercise pursuant to
paragraph (a)(i) of this Section 5, and the obligations of the
Collateral Agent under paragraph (a)(ii) of this Section 5, shall
cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and
authority to exercise such voting and consensual rights and powers,
provided that, unless otherwise directed by the Required Lenders, the
Collateral Agent shall have the right from time to time following and
during the continuance of an Event of Default to permit the Pledgor to
exercise such rights. After all Events of Default have been cured or
waived, the Pledgor will have the right to exercise the voting and
<PAGE>
consensual rights and powers that it would otherwise be entitled to
exercise pursuant to the terms of paragraph (a)(i) above.
SECTION 6. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, subject to applicable
regulatory and legal requirements, the Collateral Agent may sell the
Collateral, or any part thereof, at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or
for future delivery as the Collateral Agent shall deem appropriate. The
Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers
to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to
the distribution or sale thereof, and upon consummation of any such
sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold.
Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Pledgor,
and, to the extent permitted by applicable law, the Pledgor hereby
waives all rights of redemption, stay, valuation and appraisal the
Pledgor now has or may at any time in the future have under any rule of
law or statute now existing or hereafter enacted.
The Collateral Agent shall give a Pledgor 10 days' prior
written notice (which the Pledgor agrees is reasonable notice within
the meaning of Section 9-504(3) of the Uniform Commercial Code as in
effect in the State of New York or its equivalent in other
jurisdictions) of the Collateral Agent's intention to make any sale of
the Pledgor's Collateral. Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale
at a broker's board or on a securities exchange, shall state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such
board or exchange. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice of such sale. At any
such sale, the Collateral, or portion thereof, to be sold may be sold
in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The
Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral
is made on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the sale price is paid in full
by the purchaser or purchasers thereof, but the Collateral Agent shall
not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At
any public (or, to the extent permitted by applicable law, private)
sale made pursuant to this Section 6, any Secured Party may bid for or
purchase, free from any right of redemption, stay or appraisal on the
part of the Pledgor (all said rights being
<PAGE>
also hereby waived and released), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any
claim then due and payable to it from the Pledgor as a credit against
the purchase price, and it may, upon compliance with the terms of sale,
hold, retain and dispose of such property without further
accountability to the Pledgor therefor. For purposes hereof, (a) a
written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof, (b) the Collateral Agent shall be
free to carry out such sale pursuant to such agreement and (c) the
Pledgor shall not be entitled to the return of the Collateral or any
portion thereof subject thereto, notwithstanding the fact that after
the Collateral Agent shall have entered into such an agreement all
Events of Default shall have been remedied and the Obligations paid in
full. As an alternative to exercising the power of sale herein
conferred upon it, the Collateral Agent may proceed by a suit or suits
at law or in equity to foreclose upon the Collateral and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a
proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Section 6 shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-504(3) of
the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of
any sale of Collateral pursuant to Section 6, as well as any Collateral
consisting of cash, shall be applied by the Collateral Agent as
follows:
FIRST, to the payment of all costs and expenses
incurred by the Collateral Agent in connection with such sale
or otherwise in connection with this Agreement, any other Loan
Document or any of the Obligations, including all court costs
and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Collateral
Agent hereunder or under any other Loan Document on behalf of
the Pledgor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder
or under any other Loan Document;
SECOND, to the payment in full of the Obligations
(the amounts so applied to be distributed among the Secured
Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgor, its successors or assigns, or
as a court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the
time of application of any such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the
Collateral Agent (including pursuant to a power of sale granted by
statute or under a judicial proceeding), the receipt of the purchase
money by the Collateral Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall
<PAGE>
not be obligated to see to the application of any part of the purchase
money paid over to the Collateral Agent or such officer or be
answerable in any way for the misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) The Pledgor
agrees to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, other charges
and disbursements of its counsel and of any experts or agents, that the
Collateral Agent may incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder or (iv) the failure by the Pledgor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations
under the other Loan Documents, the Pledgor agrees to indemnify the
Collateral Agent and the Indemnitees (as defined in Section 9.05 of the
Credit Agreement) against, and hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, other charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in any
way connected with, or as a result of (i) the execution or delivery of
this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations thereunder or the
consummation of the Transactions and the other transactions
contemplated thereby or (ii) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c) Any amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security
Documents. The provisions of this Section 8 shall remain operative and
in full force and effect regardless of the termination of this
Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any
other Loan Document or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party. All amounts due under this
Section 8 shall be payable on written demand therefor and shall bear
interest at the rate specified in Section 2.06 of the Credit Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. The
Pledgor hereby appoints the Collateral Agent the attorney-in-fact of
the Pledgor for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, the
Collateral Agent shall have the right, upon
<PAGE>
the occurrence and during the continuance of an Event of Default, with
full power of substitution either in the Collateral Agent's name or in
the name of the Pledgor, to ask for, demand, sue for, collect, receive
and give acquittance for any and all moneys due or to become due under
and by virtue of any Collateral, to endorse checks, drafts, orders and
other instruments for the payment of money payable to the Pledgor
representing any interest or dividend or other distribution payable in
respect of the Collateral or any part thereof or on account thereof and
to give full discharge for the same, to settle, compromise, prosecute
or defend any action, claim or proceeding with respect thereto, and to
sell, assign, endorse, pledge, transfer and to make any agreement
respecting, or otherwise deal with, the same; provided, however, that
nothing herein contained shall be construed as requiring or obligating
the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral
Agent, or to present or file any claim or notice, or to take any action
with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby. The
Collateral Agent and the other Secured Parties shall be accountable
only for amounts actually received as a result of the exercise of the
powers granted to them herein, and neither they nor their officers,
directors, employees or agents shall be responsible to the Pledgor for
any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Collateral Agent hereunder and of the other
Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provisions of this Agreement or consent to any
departure by the Pledgor therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on the Pledgor
in any case shall entitle the Pledgor to any other or further notice or
demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement
entered into between the Collateral Agent and the Pledgor, subject to
any consent required in accordance with Section 9.08 of the Credit
Agreement.
SECTION 11. Securities Act, etc. In view of the position of
the Pledgor in relation to the Pledged Securities, or because of other
current or future circumstances, a question may arise under the
Securities Act of 1933, as now or hereafter in effect, or any similar
statute hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being called
the "Federal Securities Laws") with respect to any disposition of the
Pledged Securities permitted hereunder. The
<PAGE>
Pledgor understands that compliance with the Federal Securities Laws
might very strictly limit the course of conduct of the Collateral Agent
if the Collateral Agent were to attempt to dispose of all or any part
of the Pledged Securities, and might also limit the extent to which or
the manner in which any subsequent transferee of any Pledged Securities
could dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under
applicable Blue Sky or other state securities laws or similar laws
analogous in purpose or effect. The Pledgor recognizes that in light of
such restrictions and limitations the Collateral Agent may, with
respect to any sale of the Pledged Securities, limit the purchasers to
those who will agree, among other things, to acquire such Pledged
Securities for their own account, for investment, and not with a view
to the distribution or resale thereof. The Pledgor acknowledges and
agrees that in light of such restrictions and limitations, the
Collateral Agent, in its sole and absolute discretion, (a) may proceed
to make such a sale whether or not a registration statement for the
purpose of registering such Pledged Securities or part thereof shall
have been filed under the Federal Securities Laws and (b) may approach
and negotiate with a single potential purchaser to effect such sale.
The Pledgor acknowledges and agrees that any such sale might result in
prices and other terms less favorable to the seller than if such sale
were a public sale without such restrictions. In the event of any such
sale, the Collateral Agent shall incur no responsibility or liability
for selling all or any part of the Pledged Securities at a price that
the Collateral Agent, in its sole and absolute discretion, may in good
faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized
if the sale were deferred until after registration as aforesaid or if
more than a single purchaser were approached. The provisions of this
Section 11 will apply notwithstanding the existence of a public or
private market upon which the quotations or sales prices may exceed
substantially the price at which the Collateral Agent sells.
SECTION 12. Registration, etc. The Pledgor agrees that, upon
the occurrence and during the continuance of an Event of Default
hereunder, if for any reason the Collateral Agent desires to sell any
of the Pledged Securities of the Borrower at a public sale, it will, at
any time and from time to time, upon the written request of the
Collateral Agent, use its best efforts to take or to cause the issuer
of such Pledged Securities to take such action and prepare, distribute
and/or file such documents, as are required or advisable in the
reasonable opinion of counsel for the Collateral Agent to permit the
public sale of such Pledged Securities. The Pledgor further agrees to
indemnify, defend and hold harmless the Collateral Agent, each other
Secured Party, any underwriter and their respective officers,
directors, affiliates and controlling persons from and against all
loss, liability, expenses, costs of counsel (including, without
limitation, reasonable fees and expenses to the Collateral Agent of
legal counsel), and claims (including the costs of investigation) that
they may incur insofar as such loss, liability, expense or claim arises
out of or is based upon any alleged untrue statement of a material fact
contained in any prospectus (or any amendment or supplement thereto) or
in any notification or offering circular, or arises out of or is based
upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements in any thereof not
<PAGE>
misleading, except insofar as the same may have been caused by any
untrue statement or omission based upon information furnished in
writing to the Pledgor or the issuer of such Pledged Securities by the
Collateral Agent or any other Secured Party expressly for use therein.
The Pledgor further agrees, upon such written request referred to
above, to use its best efforts to qualify, file or register, or cause
the issuer of such Pledged Securities to qualify, file or register, any
of the Pledged Securities under the Blue Sky or other securities laws
of such states as may be requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications,
filings or registrations. The Pledgor will bear all costs and expenses
of carrying out its obligations under this Section 12. The Pledgor
acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section 12 and that such failure
would not be adequately compensable in damages, and therefore agrees
that its agreements contained in this Section 12 may be specifically
enforced.
SECTION 13. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the grant of a security interest in the
Collateral and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement
or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or
any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the
foregoing, (c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or
departure from any guaranty, for all or any of the Obligations or (d)
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the
Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
SECTION 14. Termination or Release. (a) This Agreement and the
security interests granted hereby shall terminate when all the
Obligations have been indefeasibly paid in full and the Lenders have no
further commitment to lend under the Credit Agreement, the L/C Exposure
has been reduced to zero and the Issuing Bank has no further obligation
to issue Letters of Credit under the Credit Agreement.
(b) Upon any sale or other transfer by the Pledgor of any
Collateral that is permitted under the Credit Agreement, or, upon the
effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.08(b)
of the Credit Agreement, the security interest in such Collateral shall
be automatically released.
(c) In connection with any termination or release pursuant to
paragraph (a) or (b), the Collateral Agent shall execute and deliver to
the Pledgor, at the Pledgor's expense, all documents that the Pledgor
shall reasonably request to evidence such termination or
<PAGE>
release. Any execution and delivery of documents pursuant to this
Section 14 shall be without recourse to or warranty by the Collateral
Agent.
SECTION 15. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 9.01 of the Credit
Agreement.
SECTION 16. Further Assurances. The Pledgor agrees to do such
further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral
Agent may at any time reasonably request in connection with the
administration and enforcement of this Agreement or with respect to the
Collateral or any part thereof or in order better to assure and confirm
unto the Collateral Agent its rights and remedies hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments.
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of
such party; and all covenants, promises and agreements by or on behalf
of the Pledgor that are contained in this Agreement shall bind and
inure to the benefit of its successors and assigns. This Agreement
shall become effective when a counterpart hereof executed on behalf of
the Pledgor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral
Agent, and thereafter shall be binding upon the Pledgor and the
Collateral Agent and their respective successors and assigns, and shall
inure to the benefit of the Pledgor, the Collateral Agent and the other
Secured Parties, and their respective successors and assigns, except
that the Pledgor shall not have the right to assign its rights
hereunder or any interest herein or in the Collateral (and any such
attempted assignment shall be void), except as expressly contemplated
by this Agreement or the other Loan Documents.
SECTION 18. Survival of Agreement; Severability. (a) All
covenants, agreements, representations and warranties made by the
Pledgor herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other
Loan Document shall be considered to have been relied upon by the
Collateral Agent and the other Secured Parties and shall survive the
making by the Lenders of the Loans and the issuance of the Letters of
Credit by the Issuing Bank, regardless of any investigation made by the
Secured Parties or on their behalf, and shall continue in full force
and effect as long as the principal of or any accrued interest on any
Loan or any other fee or amount payable under this Agreement or any
other Loan Document is outstanding and unpaid or the L/C Exposure does
not equal zero and as long as the Commitments and the L/C Commitments
have not been terminated.
(b) In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of
itself affect the validity of such
<PAGE>
provision in any other jurisdiction). The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 20. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original,
but all of which, when taken together, shall constitute a single
contract, and shall become effective as provided in Section 17.
Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission shall be as effective as delivery
of a manually executed counterpart of this Agreement.
<PAGE>
SECTION 21. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement. Section headings used herein are for
convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting this Agreement.
SECTION 22. Jurisdiction; Consent to Service of Process. (a)
The Pledgor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that, to the extent permitted by applicable law, all claims in
respect of any such action or proceeding may be heard and determined in
such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that
the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Pledgor or its properties in the courts of
any jurisdiction.
(b) The Pledgor hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this
Agreement or the other Loan Documents in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum
to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 15.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 23. Waiver Of Jury Trial. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO
<PAGE>
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
SECTION 24. Any Subsidiary may become a Subsidiary Pledgor by
execution and delivery of an agreement substantially in the form of
Annex 1 hereto.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
TEL-SAVE HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
SALOMON BROTHERS HOLDING
COMPANY INC, as Collateral Agent
By:
---------------------------------
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
Schedule I to the
Pledge Agreement
CAPITAL STOCK
Number of Registered Number and Percentage
Issuer Certificate Owner Class of Shares of Shares
----- ----------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Tel-Save, Inc. Tel-Save Holdings, Inc. 1,950 Common Stock 100%
Emergency Transport Corp. Tel-Save Holdings, Inc. 100 Common Stock 100%
2
Tel-Save Holdings of Tel-Save Holdings, Inc. 100 Common Stock 100%
Virginia, Inc. 1
TSHCo, Inc. 1 Tel-Save Holdings, Inc. 10 Common Stock 100%
</TABLE>
<TABLE>
<CAPTION>
DEBT SECURITIES
Principal
Issuer Issue Amount Date of Note Maturity Date
------ ----- --------- ------------ -------------
<S> <C> <C> <C> <C>
Shared Technologies 12.25% Senior $160,700,000 March 1, 1996 March 1, 2006
Fairchild Subordinated
Communications Discount Notes
Corp.
</TABLE>
<PAGE>
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. dated as of , to the PLEDGE AGREEMENT dated as
of August 25, 1997, among TEL-SAVE HOLDINGS, INC., a Delaware
corporation (the "Pledgor") and SALOMON BROTHERS HOLDINGS INC, a
Delaware corporation ("SBHC"), as collateral agent (in such capacity,
the "Collateral Agent") for the Secured Parties (as defined in the
Credit Agreement referred to below)
A. Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Pledgor, parent, the
lenders from time to time party thereto (the "Lenders"), the Lender
identified therein as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders and Collateral Agent.
B. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit
Agreement.
C. The Pledgors have entered into the Pledge Agreement in
order to induce the Lenders to make Loans and any Issuing Bank to issue
Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement,
each Subsidiary of the Borrower that was not in existence or not a
Subsidiary on the date of the Credit Agreement is required to enter
into the Pledge Agreement as a Subsidiary Pledgor upon becoming a
Subsidiary if such Subsidiary owns or possesses property of a type that
would be considered Collateral under the Pledge Agreement. Section 24
of the Pledge Agreement provides that such Subsidiaries may become
Subsidiary Pledgor under the Pledge Agreement by execution and delivery
of an instrument in the form of this Supplement. The undersigned
Subsidiary (the "New Pledgor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a
Subsidiary Pledgor under the Pledge Agreement in order to induce the
Lenders to make additional Loans and the Issuing Bank to issue
additional Letters of Credit and as consideration for Loans previously
made and any Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as
follows:
SECTION 1. In accordance with Section 24 of the Pledge
Agreement, the New Pledgor by its signature below becomes a Pledgor
under the Pledge Agreement with the same force and effect as if
originally named therein as a Pledgor and the New Pledgor hereby agrees
(a) to all the terms and provisions of the Pledge Agreement applicable
to it as a Pledgor thereunder and (b) represents and warrants that the
representations and warranties made by it as a Pledgor thereunder are
true and correct on and as of the date hereof. In furtherance of the
foregoing, the New Pledgor, as security for the payment and
<PAGE>
performance in full of the Obligations (as defined in the Pledge
Agreement), does hereby create and grant to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the
New Pledgor's right, title and interest in and to the Collateral (as
defined in the Pledge Agreement) of the New Pledgor. Each reference to
a "Subsidiary Pledgor" or a "Pledgor" in the Pledge Agreement shall be
deemed to include the New Pledgor. The Pledge Agreement is hereby
incorporated herein by reference.
<PAGE>
SECTION 2. The New Pledgor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has
been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall
become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the
signatures of the New Pledgor and the Collateral Agent. Delivery of an
executed signature page to this Supplement by facsimile transmission
shall be as effective as delivery of a manually signed counterpart of
this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that
set forth on Schedule I attached hereto is a true and correct schedule
of all its Pledged Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in
any respect, neither party hereto shall be required to comply with such
provision for so long as such provision is held to be invalid, illegal
or unenforceable, but the validity, legality and enforceability of the
remaining provisions contained herein and in the Pledge Agreement shall
not in any way be affected or impaired. The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be
in writing and given as provided in Section 15 of the Pledge Agreement.
All communications and notices hereunder to the New Pledgor shall be
given to it [at the address set forth under its signature hereto][in
care of the Borrower].
SECTION 9. The New Pledgor agrees to reimburse the Collateral
Agent for its reasonable out-of-pocket expenses in connection with this
Supplement, including the reasonable fees, other charges and
disbursements of counsel for the Collateral Agent.
<PAGE>
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent
have duly executed this Supplement to the Pledge Agreement as of the
day and year first above written.
[NAME OF NEW PLEDGOR]
By:
-------------------------------------
Name:
Title:
Address:
SALOMON BROTHERS HOLDING
COMPANY INC, as Collateral Agent
By:
-------------------------------------
Name:
Title:
Address:
<PAGE>
Schedule I to
Supplement No.
to the Pledge Agreement
Pledged Securities of the New Pledgor
-------------------------------------
CAPITAL STOCK
Number of Registered Number and Class Percentage
Issuer Certificate Owner of Shares of Shares
- ------ ----------- ---------- ---------------- ----------
DEBT SECURITIES
Principal
Issuer Issue Amount Date of Note Maturity Date
- ------ --------- ------ ------------ -------------
<PAGE>
Schedule I to
Supplement No.
to the Pledge Agreement
Pledged Securities of the New Pledgor
-------------------------------------
CAPITAL STOCK
Number of Registered Number and Class Percentage
Issuer Certificate Owner of Shares of Shares
- ------ ----------- ---------- ---------------- ----------
DEBT SECURITIES
Principal
Issuer Issue Amount Date of Note Maturity Date
- ------ --------- ------ ------------ -------------
<PAGE>
EXHIBIT G-2
PLEDGE AGREEMENT dated as of August 25, 1997, between DANIEL
BORISLOW (the "Pledgor") and SALOMON BROTHERS HOLDING COMPANY INC, a
Delaware corporation ("SBHC"), as collateral agent (in such capacity,
the "Collateral Agent") for the Secured Parties (as defined in the
Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders"), the Lender identified
therein as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders and Collateral Agent.
The Lenders have agreed to make Loans to the Borrower and
pursuant to the Credit Agreement, an Issuing Bank may agree to issue
Letters of Credit for the account of the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of Tel-Save, Inc., Emergency Transport Corp., Tel-Save
Holdings of Virginia, Inc. and the Pledgor has agreed to guarantee,
among other things, all the obligations of the Borrower under the
Credit Agreement. The obligations of the Lenders to make Loans and of
any Issuing Bank to issue Letters of Credit are conditioned upon, among
other things, the execution and delivery by the Pledgor of a Pledge
Agreement in the form hereof to secure (a) the due and punctual payment
by the Borrower of (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the
Loans, when and as due, whether at maturity, by acceleration, upon one
or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Borrower under the Credit Agreement in
respect of any Letter of Credit, when and as due, including payments in
respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Borrower to
the Secured Parties under the Credit Agreement and the other Loan
Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or
pursuant to the Credit Agreement and the other Loan Documents (all the
monetary and other obligations referred to in the preceding clauses (a)
through (c) being referred to collectively as the "Obligations").
Capitalized terms used herein and not defined herein shall have
meanings assigned to such terms in the Credit Agreement.
G-2-1
<PAGE>
Accordingly, the Pledgor and the Collateral Agent, on behalf
of itself and each Secured Party (and each of their respective
successors or assigns), hereby agree as follows:
SECTION 1. Pledge. As security for the payment and
performance, as the case may be, in full of the Obligations, the
Pledgor hereby transfers, grants, bargains, sells, conveys,
hypothecates, pledges, sets over and delivers unto the Collateral
Agent, its successors and assigns, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of the Pledgor's right,
title and interest in, to and under the shares of capital stock owned
by him and listed on Schedule I hereto and any shares of capital stock
of the Borrower obtained in the future by the Pledgor and the
certificates representing all such shares (the "Pledged Stock") (b) any
debt securities in the future issued to the Pledgor by the Borrower and
(ii) the promissory notes and any other instruments evidencing such
debt securities (the "Pledged Debt Securities"); (c) all other property
that may be delivered to and held by the Collateral Agent pursuant to
the terms hereof; (d) subject to Section 5, all payments of principal
or interest, dividends, cash, instruments and other property from time
to time received, receivable or otherwise distributed, in respect of,
in exchange for or upon the conversion of the securities referred to in
clauses (a) and (b) above; (e) subject to Section 5, all rights and
privileges of the Pledgor with respect to the securities and other
property referred to in clauses (a), (b), (c) and (d) above; and (f)
all proceeds of any of the foregoing (the items referred to in clauses
(a) through (f) above being collectively referred to as the
"Collateral"). Upon delivery to the Collateral Agent, (a) any stock
certificates, notes or other securities now or hereafter included in
the Collateral (the "Pledged Securities") shall be accompanied by stock
powers duly executed in blank or other instruments of transfer
satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request and (b) all
other property comprising part of the Collateral shall be accompanied
by proper instruments of assignment duly executed by the Pledgor and
such other instruments or documents as the Collateral Agent may
reasonably request. Each delivery of Pledged Securities shall be
accompanied by a schedule describing the securities theretofore and
then being pledged hereunder, which schedule shall be attached hereto
as Schedule I and made a part hereof. Each schedule so delivered shall
supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or
incidental thereto, unto the Collateral Agent, its successors and
assigns, for the ratable benefit of the Secured Parties, forever;
subject, however, to the terms, covenants and conditions hereinafter
set forth.
SECTION 2. Delivery of the Collateral. (a) The Pledgor agrees
promptly to deliver or cause to be delivered to the Collateral Agent
any and all Pledged Securities, and any and all certificates or other
instruments or documents representing the Collateral.
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(b) The Pledgor will cause any Indebtedness for borrowed money
owed to the Pledgor by any person and pledged hereunder to be evidenced
by a duly executed promissory note that is pledged and delivered to the
Collateral Agent pursuant to the terms thereof.
SECTION 3. Representations, Warranties and Covenants. The
Pledgor hereby represents, warrants and covenants, as to himself and
the Collateral pledged by him hereunder, to and with the Collateral
Agent that:
(a) the Pledged Stock represents that percentage as
set forth on Schedule I of the issued and outstanding shares
of each class of the capital stock of the issuer with respect
thereto;
(b) except for the security interest granted
hereunder, the Pledgor (i) is and will at all times continue
to be the direct owner, beneficially and of record, of the
Pledged Securities indicated on Schedule I, (ii) holds the
same free and clear of all Liens, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or
permit to exist any security interest in or other Lien on, the
Collateral, other than pursuant hereto, and (iv) subject to
Section 5, will cause any and all Collateral, whether for
value paid by the Pledgor or otherwise, to be forthwith
deposited with the Collateral Agent and pledged or assigned
hereunder;
(c) the Pledgor (i) has the capacity to pledge the
Collateral in the manner hereby done or contemplated and (ii)
will defend his title or interest thereto or therein against
any and all Liens (other than the Lien created by this
Agreement), however arising, of all persons whomsoever;
(d) no consent of any other person (including
creditors of the Pledgor) and no consent or approval of any
Governmental Authority or any securities exchange was or is
necessary to the validity of the pledge effected hereby;
(e) by virtue of the execution and delivery by the
Pledgor of this Agreement, when the Pledged Securities,
certificates or other documents representing or evidencing the
Collateral are delivered to the Collateral Agent in accordance
with this Agreement, the Collateral Agent will obtain a valid
and perfected first lien upon and security interest in such
Pledged Securities as security for the payment and performance
of the Obligations;
(f) the pledge effected hereby is effective to vest
in the Collateral Agent, on behalf of the Secured Parties, the
rights of the Collateral Agent in the Collateral as set forth
herein;
(g) all of the Pledged Stock has been duly authorized
and validly issued and is fully paid and nonassessable; and
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(h) all information set forth herein relating to the
Pledged Stock is accurate and complete in all material
respects as of the date hereof; and
(i) unless Pledgor shall have given Pledgee not less
than 30 days' prior notice thereof, Pledgor will not change
(i) his name or (ii) the location of his residence or place of
business.
SECTION 4. Registration in Nominee Name; Denominations. The
Collateral Agent, on behalf of the Secured Parties, shall have the
right (in its sole and absolute discretion) to hold the Pledged
Securities in its own name as pledgee, the name of its nominee (as
pledgee or as sub-agent) or the name of the Pledgor, endorsed or
assigned in blank or in favor of the Collateral Agent. The Pledgor will
promptly give to the Collateral Agent copies of any notices or other
communications received by it with respect to Pledged Securities
registered in the name of the Pledgor. The Collateral Agent shall at
all times have the right to exchange the certificates representing
Pledged Securities for certificates of smaller or larger denominations
for any purpose consistent with this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a)
Unless and until an Event of Default shall have occurred and be
continuing:
(i) The Pledgor shall be entitled to exercise any and
all voting and/or other consensual rights and powers inuring
to an owner of Pledged Securities or any part thereof for any
purpose consistent with the terms of this Agreement, the
Credit Agreement and the other Loan Documents; provided,
however, that the Pledgor will not be entitled to exercise any
such right if the result thereof could materially and
adversely affect the rights inuring to a holder of the Pledged
Securities or the rights and remedies of any of the Secured
Parties under this Agreement or the Credit Agreement or any
other Loan Document or the ability of the Secured Parties to
exercise the same.
(ii) The Collateral Agent shall execute and deliver
to the Pledgor, or cause to be executed and delivered to the
Pledgor, all such proxies, powers of attorney and other
instruments as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to exercise the voting and/or
consensual rights and powers it is entitled to exercise
pursuant to subparagraph (i) above and to receive the cash
dividends it is entitled to receive pursuant to subparagraph
(iii) below.
(iii) The Pledgor shall be entitled to receive and
retain any and all cash dividends, interest and principal paid
on the Pledged Securities to the extent and only to the extent
that such cash dividends, interest and principal are permitted
by, and otherwise paid in accordance with, the terms and
conditions of the Credit Agreement, the other Loan Documents
and applicable laws. All noncash dividends, interest and
principal, and all dividends, interest and principal paid or
payable in cash or otherwise in connection with a partial or
total liquidation or
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dissolution, return of capital, capital surplus or paid-in
surplus, and all other distributions (other than distributions
referred to in the preceding sentence) made on or in respect
of the Pledged Securities, whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination
or reclassification of the outstanding capital stock of the
issuer of any Pledged Securities or received in exchange for
Pledged Securities or any part thereof, or in redemption
thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer
may be a party or otherwise, shall be and become part of the
Collateral, and, if received by the Pledgor, shall not be
commingled by the Pledgor with any of its other funds or
property but shall be held separate and apart therefrom, shall
be held in trust for the benefit of the Collateral Agent and
shall be forthwith delivered to the Collateral Agent in the
same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to dividends, interest or
principal that the Pledgor is authorized to receive pursuant to
paragraph (a)(iii) above shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the
sole and exclusive right and authority to receive and retain such
dividends, interest or principal. All dividends, interest or principal
received by any Pledgor contrary to the provisions of this Section 5
shall be held in trust for the benefit of the Collateral Agent, shall
be segregated from other property or funds of the Pledgor and shall be
forthwith delivered to the Collateral Agent upon demand in the same
form as so received (with any necessary endorsement). Any and all money
and other property paid over to or received by the Collateral Agent
pursuant to the provisions of this paragraph (b) shall be retained by
the Collateral Agent in an account to be established by the Collateral
Agent upon receipt of such money or other property and shall be applied
in accordance with the provisions of Section 7. After all Events of
Default have been cured or waived, the Collateral Agent shall, within
five Business Days after all such Events of Default have been cured or
waived, repay to the Pledgor all cash dividends, interest or principal
(without interest), that the Pledgor would otherwise be permitted to
retain pursuant to the terms of paragraph (a)(iii) above and which
remain in such account.
(c) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to exercise the voting and
consensual rights and powers it is entitled to exercise pursuant to
paragraph (a)(i) of this Section 5, and the obligations of the
Collateral Agent under paragraph (a)(ii) of this Section 5, shall
cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and
authority to exercise such voting and consensual rights and powers,
provided that, unless otherwise directed by the Required Lenders, the
Collateral Agent shall have the right from time to time following and
during the continuance of an Event of Default to permit the Pledgor to
exercise such rights. After all Events of Default have been cured or
waived, the Pledgor will have the right to exercise the voting and
consensual rights and powers that it would otherwise be entitled to
exercise pursuant to the terms of paragraph (a)(i) above.
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<PAGE>
SECTION 6. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, subject to applicable
regulatory and legal requirements, the Collateral Agent may sell the
Collateral, or any part thereof, at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or
for future delivery as the Collateral Agent shall deem appropriate. The
Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers
to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to
the distribution or sale thereof, and upon consummation of any such
sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold.
Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Pledgor,
and, to the extent permitted by applicable law, the Pledgor hereby
waives all rights of redemption, stay, valuation and appraisal the
Pledgor now has or may at any time in the future have under any rule of
law or statute now existing or hereafter enacted.
The Collateral Agent shall give a Pledgor 10 days' prior
written notice (which the Pledgor agrees is reasonable notice within
the meaning of Section 9-504(3) of the Uniform Commercial Code as in
effect in the State of New York or its equivalent in other
jurisdictions) of the Collateral Agent's intention to make any sale of
the Pledgor's Collateral. Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale
at a broker's board or on a securities exchange, shall state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such
board or exchange. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice of such sale. At any
such sale, the Collateral, or portion thereof, to be sold may be sold
in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The
Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral
is made on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the sale price is paid in full
by the purchaser or purchasers thereof, but the Collateral Agent shall
not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At
any public (or, to the extent permitted by applicable law, private)
sale made pursuant to this Section 6, any Secured Party may bid for or
purchase, free from any right of redemption, stay or appraisal on the
part of the Pledgor (all said rights being also hereby waived and
released), the Collateral or any part thereof offered for sale and may
make payment on account thereof by using any claim then due and payable
to it
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<PAGE>
from the Pledgor as a credit against the purchase price, and it may,
upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to the Pledgor therefor.
For purposes hereof, (a) a written agreement to purchase the Collateral
or any portion thereof shall be treated as a sale thereof, (b) the
Collateral Agent shall be free to carry out such sale pursuant to such
agreement and (c) the Pledgor shall not be entitled to the return of
the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Collateral Agent shall have entered into such
an agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of
sale herein conferred upon it, the Collateral Agent may proceed by a
suit or suits at law or in equity to foreclose upon the Collateral and
to sell the Collateral or any portion thereof pursuant to a judgment or
decree of a court or courts having competent jurisdiction or pursuant
to a proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Section 6 shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-504(3) of
the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of
any sale of Collateral pursuant to Section 6, as well as any Collateral
consisting of cash, shall be applied by the Collateral Agent as
follows:
FIRST, to the payment of all costs and expenses
incurred by the Collateral Agent in connection with such sale
or otherwise in connection with this Agreement, any other Loan
Document or any of the Obligations, including all court costs
and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Collateral
Agent hereunder or under any other Loan Document on behalf of
the Pledgor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder
or under any other Loan Document;
SECOND, to the payment in full of the Obligations
(the amounts so applied to be distributed among the Secured
Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgor, his successors or assigns, or
as a court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the
time of application of any such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the
Collateral Agent (including pursuant to a power of sale granted by
statute or under a judicial proceeding), the receipt of the purchase
money by the Collateral Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money
paid over to
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<PAGE>
the Collateral Agent or such officer or be answerable in any way for
the misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) The Pledgor
agrees to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, other charges
and disbursements of its counsel and of any experts or agents, that the
Collateral Agent may incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder or (iv) the failure by the Pledgor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations
under the other Loan Documents, the Pledgor agrees to indemnify the
Collateral Agent and the Indemnitees (as defined in Section 9.05 of the
Credit Agreement) against, and hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, other charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in any
way connected with, or as a result of (i) the execution or delivery of
this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations thereunder or the
consummation of the Transactions and the other transactions
contemplated thereby or (ii) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c) Any amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security
Documents. The provisions of this Section 8 shall remain operative and
in full force and effect regardless of the termination of this
Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any
other Loan Document or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party. All amounts due under this
Section 8 shall be payable on written demand therefor and shall bear
interest at the rate specified in Section 2.06 of the Credit Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. The
Pledgor hereby appoints the Collateral Agent the attorney-in-fact of
the Pledgor for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, the
Collateral Agent shall have the right, upon the occurrence and during
the continuance of an Event of Default, with full power of
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substitution either in the Collateral Agent's name or in the name of
the Pledgor, to ask for, demand, sue for, collect, receive and give
acquittance for any and all moneys due or to become due under and by
virtue of any Collateral, to endorse checks, drafts, orders and other
instruments for the payment of money payable to the Pledgor
representing any interest or dividend or other distribution payable in
respect of the Collateral or any part thereof or on account thereof and
to give full discharge for the same, to settle, compromise, prosecute
or defend any action, claim or proceeding with respect thereto, and to
sell, assign, endorse, pledge, transfer and to make any agreement
respecting, or otherwise deal with, the same; provided, however, that
nothing herein contained shall be construed as requiring or obligating
the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral
Agent, or to present or file any claim or notice, or to take any action
with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby. The
Collateral Agent and the other Secured Parties shall be accountable
only for amounts actually received as a result of the exercise of the
powers granted to them herein, and neither they nor their officers,
directors, employees or agents shall be responsible to the Pledgor for
any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Collateral Agent hereunder and of the other
Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provisions of this Agreement or consent to any
departure by the Pledgor therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on the Pledgor
in any case shall entitle the Pledgor to any other or further notice or
demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement
entered into between the Collateral Agent and the Pledgor, subject to
any consent required in accordance with Section 9.08 of the Credit
Agreement.
SECTION 11. Securities Act, etc. In view of the position of
the Pledgor in relation to the Pledged Securities, or because of other
current or future circumstances, a question may arise under the
Securities Act of 1933, as now or hereafter in effect, or any similar
statute hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being called
the "Federal Securities Laws") with respect to any disposition of the
Pledged Securities permitted hereunder. The Pledgor understands that
compliance with the Federal Securities Laws might very strictly
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limit the course of conduct of the Collateral Agent if the Collateral
Agent were to attempt to dispose of all or any part of the Pledged
Securities, and might also limit the extent to which or the manner in
which any subsequent transferee of any Pledged Securities could dispose
of the same. Similarly, there may be other legal restrictions or
limitations affecting the Collateral Agent in any attempt to dispose of
all or part of the Pledged Securities under applicable Blue Sky or
other state securities laws or similar laws analogous in purpose or
effect. The Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the
Pledged Securities, limit the purchasers to those who will agree, among
other things, to acquire such Pledged Securities for their own account,
for investment, and not with a view to the distribution or resale
thereof. The Pledgor acknowledges and agrees that in light of such
restrictions and limitations, the Collateral Agent, in its sole and
absolute discretion, (a) may proceed to make such a sale whether or not
a registration statement for the purpose of registering such Pledged
Securities or part thereof shall have been filed under the Federal
Securities Laws and (b) may approach and negotiate with a single
potential purchaser to effect such sale. The Pledgor acknowledges and
agrees that any such sale might result in prices and other terms less
favorable to the seller than if such sale were a public sale without
such restrictions. In the event of any such sale, the Collateral Agent
shall incur no responsibility or liability for selling all or any part
of the Pledged Securities at a price that the Collateral Agent, in its
sole and absolute discretion, may in good faith deem reasonable under
the circumstances, notwithstanding the possibility that a substantially
higher price might have been realized if the sale were deferred until
after registration as aforesaid or if more than a single purchaser were
approached. The provisions of this Section 11 will apply
notwithstanding the existence of a public or private market upon which
the quotations or sales prices may exceed substantially the price at
which the Collateral Agent sells.
SECTION 12. Registration, etc. The Pledgor agrees that, upon
the occurrence and during the continuance of an Event of Default
hereunder, if for any reason the Collateral Agent desires to sell any
of the Pledged Securities of the Borrower at a public sale, it will, at
any time and from time to time, upon the written request of the
Collateral Agent, use its best efforts to take or to cause the issuer
of such Pledged Securities to take such action and prepare, distribute
and/or file such documents, as are required or advisable in the
reasonable opinion of counsel for the Collateral Agent to permit the
public sale of such Pledged Securities. The Pledgor further agrees to
indemnify, defend and hold harmless the Collateral Agent, each other
Secured Party, any underwriter and their respective officers,
directors, affiliates and controlling persons from and against all
loss, liability, expenses, costs of counsel (including, without
limitation, reasonable fees and expenses to the Collateral Agent of
legal counsel), and claims (including the costs of investigation) that
they may incur insofar as such loss, liability, expense or claim arises
out of or is based upon any alleged untrue statement of a material fact
contained in any prospectus (or any amendment or supplement thereto) or
in any notification or offering circular, or arises out of or is based
upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements in any thereof not
misleading, except insofar as the same may have been caused by any
untrue statement or
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omission based upon information furnished in writing to the Pledgor or
the issuer of such Pledged Securities by the Collateral Agent or any
other Secured Party expressly for use therein. The Pledgor further
agrees, upon such written request referred to above, to use its best
efforts to cause the issuer of such Pledged Securities to qualify, file
or register, any of the Pledged Securities under the Blue Sky or other
securities laws of such states as may be requested by the Collateral
Agent and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. The Pledgor will bear all
costs and expenses of carrying out its obligations under this Section
12. The Pledgor acknowledges that there is no adequate remedy at law
for failure by the Pledgor to comply with the provisions of this
Section 12 and that such failure would not be adequately compensable in
damages, and therefore agrees that his agreements contained in his
Section 12 may be specifically enforced.
SECTION 13. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the grant of a security interest in the
Collateral and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement
or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or
any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the
foregoing, (c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or
departure from any guaranty, for all or any of the Obligations or (d)
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the
Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
SECTION 14. Termination or Release. (a) This Agreement and the
security interests granted hereby shall terminate when all the
Obligations have been indefeasibly paid in full and the Lenders have no
further commitment to lend under the Credit Agreement, the L/C Exposure
has been reduced to zero and the Issuing Bank has no further obligation
to issue Letters of Credit under the Credit Agreement.
(b) Upon any sale or other transfer by the Pledgor of any
Collateral that is permitted under the Credit Agreement, or, upon the
effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.08(b)
of the Credit Agreement, the security interest in such Collateral shall
be automatically released.
(c) In connection with any termination or release pursuant to
paragraph (a) or (b), the Collateral Agent shall execute and deliver to
the Pledgor, at the Pledgor's expense, all documents that the Pledgor
shall reasonably request to evidence such termination or release. Any
execution and delivery of documents pursuant to this Section 14 shall
be without recourse to or warranty by the Collateral Agent.
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SECTION 15. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 9.01 of the Credit
Agreement.
SECTION 16. Further Assurances. The Pledgor agrees to do such
further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral
Agent may at any time reasonably request in connection with the
administration and enforcement of this Agreement or with respect to the
Collateral or any part thereof or in order better to assure and confirm
unto the Collateral Agent its rights and remedies hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments.
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of
such party; and all covenants, promises and agreements by or on behalf
of the Pledgor that are contained in this Agreement shall bind and
inure to the benefit of its successors and assigns. This Agreement
shall become effective when a counterpart hereof executed on behalf of
the Pledgor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral
Agent, and thereafter shall be binding upon the Pledgor and the
Collateral Agent and their respective successors and assigns, and shall
inure to the benefit of the Pledgor, the Collateral Agent and the other
Secured Parties, and their respective successors and assigns, except
that the Pledgor shall not have the right to assign its rights
hereunder or any interest herein or in the Collateral (and any such
attempted assignment shall be void), except as expressly contemplated
by this Agreement or the other Loan Documents.
SECTION 18. Survival of Agreement; Severability. (a) All
covenants, agreements, representations and warranties made by the
Pledgor herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other
Loan Document shall be considered to have been relied upon by the
Collateral Agent and the other Secured Parties and shall survive the
making by the Lenders of the Loans and the issuance of the Letters of
Credit by the Issuing Bank, regardless of any investigation made by the
Secured Parties or on their behalf, and shall continue in full force
and effect as long as the principal of or any accrued interest on any
Loan or any other fee or amount payable under this Agreement or any
other Loan Document is outstanding and unpaid or the L/C Exposure does
not equal zero and as long as the Commitments and the L/C Commitments
have not been terminated.
(b) In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid
provisions the
G-2-12
<PAGE>
economic effect of which comes as close as possible to that of the
invalid, illegal or unenforceable provisions.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 20. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original,
but all of which, when taken together, shall constitute a single
contract, and shall become effective as provided in Section 17.
Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission shall be as effective as delivery
of a manually executed counterpart of this Agreement.
G-2-13
<PAGE>
SECTION 21. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement. Section headings used herein are for
convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting this Agreement.
SECTION 22. Jurisdiction; Consent to Service of Process. (a)
The Pledgor hereby irrevocably and unconditionally submits, for himself
and his property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that, to the extent permitted by applicable law, all claims in
respect of any such action or proceeding may be heard and determined in
such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that
the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Pledgor or its properties in the courts of
any jurisdiction.
(b) The Pledgor hereby irrevocably and unconditionally waives,
to the fullest extent he may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this
Agreement or the other Loan Documents in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum
to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 15.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
OR HE MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT OR HE
HAVE BEEN INDUCED TO ENTER INTO THIS
G-2-14
<PAGE>
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION.
* * *
G-2-15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
DANIEL BORISLOW
------------------------------------------
SALOMON BROTHERS HOLDING
COMPANY INC, as Collateral Agent
By: _______________________________________
Name:
Title:
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<PAGE>
Schedule I to the
Exhibit G-2
CAPITAL STOCK
Number of Registered Number and Percentage
Issuer Certificate Owner Class of Shares of Shares
- ------ ----------- ---------- ---------------- ----------
G-2-17
<PAGE>
EXHIBIT H
SECURITY AGREEMENT dated as of August 25, 1997, among Tel-Save
Holdings, Inc. (the "Borrower"), each subsidiary of the Borrower listed
on the signature page hereto (the Borrower and each such subsidiary
individually a "Grantor" and collectively, the "Grantors") and SALOMON
BROTHERS HOLDING COMPANY INC, a Delaware corporation ("SBHC"), as
collateral agent (in such capacity, the "Collateral Agent") for the
Secured Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders") and SBHC, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent") and Collateral Agent and (b) the Guarantee
Agreement dated as of August 25, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Guarantee Agreement"), among
the Guarantors party thereto and the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower, and an
Issuing Bank may agree to issue Letters of Credit for the account of
the Borrower, pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. Each of the Grantors
other than the Borrower has agreed to guarantee, among other things,
all the obligations of the Borrower under the Credit Agreement. The
obligations of the Lenders to make Loans and of any Issuing Bank to
issue Letters of Credit are conditioned upon, among other things, the
execution and delivery by the Grantors of an agreement in the form
hereof to secure (a) the due and punctual payment by the Borrower of
(i) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed
or allowable in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower
under the Credit Agreement in respect of any Letter of Credit, when and
as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash
collateral and (iii) all other monetary obligations, including fees,
costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in
such proceeding), of the Borrower to the Secured Parties under the
Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities
of the Borrower under or pursuant to the Credit Agreement and the other
Loan Documents and (c) the due and punctual payment and performance of
all the covenants, agreements, obligations and liabilities of each Loan
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Party under or pursuant to this Agreement and the other Loan Documents
(all the monetary and other obligations described in the preceding
clauses (a) through (c) being collectively called the "Obligations").
Accordingly, the Grantor and the Collateral Agent, on behalf
of itself and each Secured Party (and each of their respective
successors or assigns), hereby agree as follows:
<PAGE>
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the
context otherwise requires, all capitalized terms used but not defined
herein shall have the meanings set forth in the Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used
herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may
become obligated to the Grantor under, with respect to or on account of
an Account.
"Accounts" shall mean any and all right, title and interest of
the Grantor to payment for goods and services sold or leased, including
any such right evidenced by chattel paper, whether due or to become
due, whether or not it has been earned by performance, and whether now
or hereafter acquired or arising in the future, including accounts
receivable from Affiliates of the Grantor.
"Accounts Receivable" shall mean all "accounts" as such term
is used in Section 9-106 of the UCC and, to the extent not included
within such definition, all accounts receivable, book debts and other
forms of obligations, whether arising out of goods sold or services
rendered by Grantor or from any other transaction, including, without
limitation, any such obligation which might be characterized as an
account or contract right under the UCC, and all of Grantor's rights
in, to and under all purchase orders or receipts for goods or services,
all of Grantor's rights to any goods represented by any of the
foregoing, all moneys due or to become due to Grantor under all
contracts for the sale of goods or the performance of services or both
by Grantor (whether or not yet earned by performance on the part of
Grantor or in any other transaction), now in existence or hereafter
occurring, and expressly including, without limitation, rights to
receive the proceeds of, from or in connection with purchase orders or
contracts for the provision of telephone and other communication
services, including, without limitation, all agreements with and sums
due from customers and other persons, and all books and records
recording, evidencing or relating to such rights or any part thereof,
and all collateral security and guarantees of any kind given by any
person with respect to any of the foregoing.
"Collateral" shall mean all (a) Accounts, (b) Contracts and
Leases, (c) Equipment and Licenses, (d) Furniture and Fixtures, (e)
General Intangibles, (f) Inventory, (g) cash and cash accounts, (h)
Miscellaneous Items and (i) Proceeds.
"Contracts and Leases" shall mean all contracts, undertakings,
leases or other agreements in or under which Grantor may now or
hereafter have any right, title or interest including, without
limitation, (a) construction contracts, subscriber contracts,
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customer service agreements, management agreements, rights of way,
easements, tower agreements, cell site agreements, pole attachment
agreements, transmission capacity agreements, public utility contracts
and other agreements to which the Grantor is a party, whether now
existing or hereafter arising; (b) lease agreements for real or
personal property to which the Grantor is a party, whether now existing
or hereafter arising; and (c) other contracts and contractual rights,
remedies or provisions now existing or hereafter arising in favor of
the Grantor, including, with respect to an Account, any agreement
relating to the terms of performance thereof.
"Copyright License" shall mean any written agreement, now or
hereafter in effect, granting any right to any third party under any
Copyright now or hereafter owned by the Grantor or which the Grantor
otherwise has the right to license, or granting any right to the
Grantor under any Copyright now or hereafter owned by any third party,
and all rights of the Grantor under any such agreement.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all copyright rights in any work
subject to the copyright laws of the United States or any other
country, whether as author, assignee, transferee or otherwise, and (b)
all registrations and applications for registration of any such
copyright in the United States or any other country, including
registrations, recordings, supplemental registrations and pending
applications for registration in the United States Copyright Office.
"Credit Agreement" shall have the meaning assigned to such
term in the preliminary statement of this Agreement.
"Equipment and Licenses " shall mean all "equipment" as such
term is defined in Section 9-109(2) of the UCC and, to the extent not
included within such definition, all machinery, equipment, furnishings,
vehicles, fixtures, and supplies (installed and uninstalled), and any
and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed or to be installed thereon
or affixed or to be affixed thereto, including, without limitation, all
equipment located at telephone switching office facilities; any
distribution systems and all components thereof, including but not
limited to hardware, cables, fiber optic cables, switches, computer
equipment, amplifiers, and associated devices; and any other equipment
used in connection with the Grantor's business; and all franchises,
licenses, permits and operating rights authorizing or relating to the
Grantor's rights to operate and maintain telecommunications or other
related business.
"Furniture and Fixtures" shall mean all of the Debtor's right,
title and interest in and to all furniture and fixtures in which the
Debtor has an ownership, leasehold or similar legal interest.
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"General Intangibles" shall mean all "general intangibles" as
such term is defined in Section 9-106 of the UCC and, to the extent not
included within such definition, all personal property, all goodwill,
permits, customer lists, patents, copyrights, proprietary or
confidential information, inventions (whether patented or patentable or
not), technical information, procedures, trademarks, trademark
applications, trade names, trade secrets, designs, knowledge, know-how,
software, data, databases, skill, expertise, experience, processes,
models, drawings, materials and records, industrial or intellectual
property or rights therein, whether under license or otherwise, all
right, title and interest in any of the foregoing, including, without
limitation, all rights to receive payment or property upon or in
connection with any transfer of any license, claims for tax refunds,
tax refund amounts and rights of indemnification, in each case, whether
now owned or hereafter acquired by the Grantor.
"Intellectual Property" shall mean all intellectual and
similar property of the Grantor of every kind and nature now owned or
hereafter acquired by the Grantor, including inventions, designs,
Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential
or proprietary technical and business information, know-how, show-how
or other data or information, software and databases and all
embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and
accessions to, and books and records describing or used in connection
with, any of the foregoing.
"Inventory" shall mean all "inventory" as such term is defined
in Section 9-109(4) of the UCC and to the extent not included within
such definition, all inventory, supplies, merchandise, goods and other
personal property of whatsoever nature and kind, and wherever situated,
including, without limitation any inventory held for lease or sale or
which are furnished or are to be furnished under a contract of service,
or which constitute raw materials, components, work in process,
finished goods, goods in transit, materials used or consumed or to be
used or consumed in Grantor's business, packing and shipping materials,
and all accretions and accessions thereto, trust receipts and similar
documents covering the same products.
"Miscellaneous Items" shall mean all goods, chattel paper,
documents, instruments, supplies, choses in action, claims, money,
deposits, certificates of deposit, stock or share certificates
(including, without limitation, the stock of any subsidiaries of the
Grantor now existing or hereafter created or acquired) and licenses and
other rights in intellectual property not otherwise included as
"collateral" hereunder and including, without limitation, all other
investment property of Grantor to the extent not otherwise included
above, including all securities, security entitlements, securities
accounts and commodity contracts.
"Obligations" shall have the meaning assigned to such term in
the preliminary statement of this Agreement.
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<PAGE>
"Patent License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to make, use
or sell any invention on which a Patent, now or hereafter owned by the
Grantor or which the Grantor otherwise has the right to license, is in
existence, or granting to the Grantor any right to make, use or sell
any invention on which a Patent, now or hereafter owned by any third
party, is in existence, and all rights of the Grantor under any such
agreement.
"Patents" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof,
and all applications for letters patent of the United States or any
other country, including registrations, recordings and pending
applications in the United States Patent and Trademark Office or any
similar offices in any other country, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions
thereof, and the inventions disclosed or claimed therein, including the
right to make, use and/or sell the inventions disclosed or claimed
therein.
"Perfection Certificate" shall mean a certificate
substantially in the form of Annex 2 hereto, completed and supplemented
with the schedules and attachments contemplated thereby, and duly
executed by a Financial Officer and the chief legal officer of the
Borrower.
"Proceeds" shall mean to the extent not otherwise included as
"Collateral" hereunder, all "proceeds", as such term is defined in
Section 9-306(1) of the UCC, of each item of Collateral, and, to the
extent not included within such definition, any and all proceeds of any
loss of, damage to or destruction of the above, whether insured or not
insured, and all other proceeds of any sale, lease or other disposition
of any property or interest therein referred to herein, together with
all proceeds of any policies of insurance covering any item of
Collateral, any and all proceeds of any award with respect to the
requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the property or assets of the Grantor, any and all
proceeds of any insurance, indemnity, warranty or guarantee payable to
Grantor from time to time with respect to any property or assets of the
Grantor, any rebates or refunds, whether for taxes or otherwise, and
any and all other amounts from time to time paid or payable (in
whatever form) under, in connection with or with respect to any
property or assets of the Grantor, and all proceeds of any such
proceeds.
"Secured Parties" shall mean (a) the Lenders, (b) the
Administrative Agent, (c) the Collateral Agent, (d) the Issuing Bank,
(e) the beneficiaries of each indemnification obligation undertaken by
any Grantor under any Loan Document and (f) the successors and assigns
of each of the foregoing.
"Security Interest" shall have the meaning assigned to such
term in Section 2.01.
"Trademark License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to use any
Trademark now or hereafter owned
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<PAGE>
by the Grantor or which the Grantor otherwise has the right to license,
or granting to the Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of the Grantor under
any such agreement.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all trademarks, service marks,
trade names, corporate names, company names, business names, fictitious
business names, trade styles, trade dress, logos, other source or
business identifiers, designs and general intangibles of like nature,
now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all registration and recording applications
filed in connection therewith, including registrations and registration
applications in the United States Patent and Trademark Office, any
State of the United States or any similar offices in any other country
or any political subdivision thereof, and all extensions or renewals
thereof, (b) all goodwill associated therewith or symbolized thereby
and (c) all other assets, rights and interests that uniquely reflect or
embody such goodwill.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of New York; provided, however,
in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of any Secured Party's
interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, or by
the laws of a jurisdiction other than a state of the United States, the
term "UCC" shall mean the Uniform Commercial Code as in effect in such
other jurisdiction or such other laws, as the case may be, for purposes
of the provisions hereof relating to such attachment, perfection or
priority.
SECTION 1.03. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement.
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment
or performance, as the case may be, in full of the Obligations, the
Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages,
pledges, hypothecates and transfers to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties,
and hereby grants to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, a security interest in,
all of the Grantor's right, title and interest in, to and under the
Collateral (the "Security Interest"). Without limiting the foregoing,
the Collateral Agent is hereby authorized to file one or more financing
statements (including fixture filings), continuation statements, or
other documents for the purpose of perfecting, confirming, continuing,
enforcing or protecting the Security Interest granted by the Grantor,
without the signature of the Grantor, and naming the Grantor as the
debtor and
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the Collateral Agent as secured party. Notwithstanding anything else
herein, the Grantor's grant of the Security Interest with respect to
Grantor's rights under any contract or agreement to which Grantor is a
party on the date hereof shall be effective hereunder only to the
extent such grant is permitted or not prohibited by the terms of such
contract or agreement.
SECTION 2.02. No Assumption of Liability. The Security
Interest is granted as security only and shall not subject the
Collateral Agent or any other Secured Party to, or in any way alter or
modify, any obligation or liability of the Grantor with respect to or
arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantor represents and warrants to the Collateral Agent
and the Secured Parties that:
SECTION 3.01. Title and Authority. The Grantor has good and
valid rights in and title to the Collateral with respect to which it
has purported to grant a Security Interest hereunder and has full power
and authority to grant to the Collateral Agent the Security Interest in
such Collateral pursuant hereto and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the
consent or approval of any other person other than any consent or
approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been
duly prepared, completed and executed and the information set forth
therein is correct and complete. Fully executed Uniform Commercial Code
financing statements (including fixture filings, as applicable) or
other appropriate filings, recordings or registrations containing a
description of the Collateral have been delivered to the Collateral
Agent for filing in each governmental, municipal or other office
specified in Schedule 6 to the Perfection Certificate, which are all
the filings, recordings and registrations that are necessary to publish
notice of and protect the validity of and to establish a legal, valid
and perfected security interest in favor of the Collateral Agent (for
the ratable benefit of the Secured Parties) in respect of all
Collateral in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording,
registration or reregistration is necessary in any such jurisdiction,
except as provided under applicable law with respect to the filing of
continuation statements.
(b) [Reserved].
SECTION 3.03. Validity of Security Interest. The Security
Interest constitutes (a) a legal and valid security interest in all the
Collateral securing the payment and
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performance of the Obligations and (b) subject to the filings described
in Section 3.02 above, a perfected security interest in all Collateral
in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United
States (or any political subdivision thereof) and its territories and
possessions pursuant to the Uniform Commercial Code or other applicable
law in such jurisdictions. The Security Interest is and shall be prior
to any other Lien on any of the Collateral, other than Liens expressly
permitted to be prior to the Security Interest pursuant to Section 6.02
of the Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned
by the Grantor free and clear of any Lien, except for Liens expressly
permitted pursuant to Section 6.02 of the Credit Agreement. None of the
Grantors has filed or consented to the filing of (a) any financing
statement or analogous document under the Uniform Commercial Code or
any other applicable laws covering any Collateral or (b) any assignment
in which the Grantor assigns any Collateral or any security agreement
or similar instrument covering any Collateral with any foreign
governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar
instrument is still in effect, except, in each case, for Liens
expressly permitted pursuant to Section 6.02 of the Credit Agreement.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records;
Place of Business. (a) The Grantor agrees promptly to notify the
Collateral Agent in writing of any change (i) in its corporate name or
in any trade name used to identify it in the conduct of its business or
in the ownership of its properties, (ii) in the location of its chief
executive office, its principal place of business, any office in which
it maintains books or records relating to Collateral owned by it or any
office or facility at which Collateral owned by it is located
(including the establishment of any such new office or facility), (iii)
in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number. The Grantor agrees not to effect or permit any
change referred to in the preceding sentence unless all filings have
been made under the Uniform Commercial Code or otherwise that are
required in order for the Collateral Agent to continue at all times
following such change to have a valid, legal and perfected first
priority security interest in all the Collateral. The Grantor agrees
promptly to notify the Collateral Agent if any material portion of the
Collateral owned or held by such Grantor is damaged or destroyed.
(b) The Grantor agrees to maintain, at its own cost and
expense, such complete and accurate records with respect to the
Collateral owned by it as is consistent with its current practices and
in accordance with such prudent and standard practices used in
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industries that are the same as or similar to those in which the
Grantor is engaged, but in any event to include complete accounting
records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the
Collateral Agent may reasonably request, promptly to prepare and
deliver to the Collateral Agent a duly certified schedule or schedules
in form and detail satisfactory to the Collateral Agent showing the
identity, amount and location of any and all Collateral.
SECTION 4.02. Periodic Certification. Each year, at the time
of delivery of annual financial statements with respect to the
preceding fiscal year pursuant to Section 5.04 of the Credit Agreement,
the Borrower shall deliver to the Collateral Agent a certificate
executed by a Financial Officer and the chief legal officer of the
Borrower (a) setting forth the information required pursuant to Section
2 of the Perfection Certificate or confirming that there has been no
change in such information since the date of such certificate or the
date of the most recent certificate delivered pursuant to Section 4.02
and (b) certifying that all Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations, including all
refilings, rerecordings and reregistrations, containing a description
of the Collateral have been filed of record in each governmental,
municipal or other appropriate office in each jurisdiction identified
pursuant to clause (a) above to the extent necessary to protect and
perfect the Security Interest for a period of not less than 18 months
after the date of such certificate (except as noted therein with
respect to any continuation statements to be filed within such period).
SECTION 4.03. Protection of Security. The Grantor shall, at
its own cost and expense, take any and all actions necessary to defend
title to the Collateral against all persons and to defend the Security
Interest of the Collateral Agent in the Collateral and the priority
thereof against any Lien not expressly permitted pursuant to Section
6.02 of the Credit Agreement.
SECTION 4.04. Further Assurances. The Grantor agrees, at its
own expense, to execute, acknowledge, deliver and cause to be duly
filed all such further instruments and documents and take all such
actions as the Collateral Agent may from time to time request to better
assure, preserve, protect and perfect the Security Interest and the
rights and remedies created hereby, including the payment of any fees
and taxes required in connection with the execution and delivery of
this Agreement, the granting of the Security Interest and the filing of
any financing statements (including fixture filings) or other documents
in connection herewith or therewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by
any promissory note or other instrument, such note or instrument shall
be immediately pledged and delivered to the Collateral Agent, duly
endorsed in a manner satisfactory to the Collateral Agent.
SECTION 4.05. Inspection and Verification. The Collateral
Agent and such persons as the Collateral Agent may reasonably designate
shall have the right, at the Grantor's own cost and expense, to inspect
the Collateral, all records related thereto (and
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to make extracts and copies from such records) and the premises upon
which any of the Collateral is located, to discuss the Grantor's
affairs with the officers of the Grantor and its independent
accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other
matter relating to, the Collateral, including, in the case of Accounts
or Collateral in the possession of any third person, by contacting
Account Debtors or the third person possessing such Collateral for the
purpose of making such a verification. The Collateral Agent shall have
the absolute right to share any information it gains from such
inspection or verification with any Secured Party (it being understood
that any such information shall be deemed to be "Information" subject
to the provisions of Section 9.16).
SECTION 4.06. Taxes; Encumbrances. At its option, the
Collateral Agent may discharge past due taxes, assessments, charges,
fees, Liens, security interests or other encumbrances at any time
levied or placed on the Collateral and not permitted pursuant to
Section 6.02 of the Credit Agreement, and may pay for the maintenance
and preservation of the Collateral to the extent the Grantor fails to
do so as required by the Credit Agreement or this Agreement, and the
Grantor agrees to reimburse the Collateral Agent on demand for any
payment made or any expense incurred by the Collateral Agent pursuant
to the foregoing authorization; provided, however, that nothing in this
Section 4.06 shall be interpreted as excusing the Grantor from the
performance of, or imposing any obligation on the Collateral Agent or
any Secured Party to cure or perform, any covenants or other promises
of the Grantor with respect to taxes, assessments, charges, fees,
liens, security interests or other encumbrances and maintenance as set
forth herein or in the other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time
the Grantor shall take a security interest in any property of an
Account Debtor or any other person to secure payment and performance of
an Account, the Grantor shall promptly assign such security interest to
the Collateral Agent. Such assignment need not be filed of public
record unless necessary to continue the perfected status of the
security interest against creditors of and transferees from the Account
Debtor or other person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantor. The
Grantor shall remain liable to observe and perform all the conditions
and obligations to be observed and performed by it under each contract,
agreement or instrument relating to the Collateral, all in accordance
with the terms and conditions thereof, and the Grantor agrees to
indemnify and hold harmless the Collateral Agent and the Secured
Parties from and against any and all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. The Grantor
shall not make or permit to be made an assignment, pledge or
hypothecation of the Collateral nor shall it grant any other Lien in
respect of the Collateral, except as expressly permitted by Section
6.02 of the Credit Agreement. The Grantor shall not make or permit to
be made any transfer of the Collateral and the Grantor shall remain at
all times in possession of the
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Collateral owned by it, except that (a) Inventory may be sold in the
ordinary course of business and (b) unless and until the Collateral
Agent shall notify the Grantor that an Event of Default shall have
occurred and be continuing and that during the continuance thereof the
Grantor shall not sell, convey, lease, assign, transfer or otherwise
dispose of any Collateral (which notice may be given by telephone if
promptly confirmed in writing), the Grantor may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of
this Agreement, the Credit Agreement or any other Loan Document.
Without limiting the generality of the foregoing, the Grantor agrees
that it shall not permit any Inventory to be in the possession or
control of any warehouseman, bailee, agent or processor at any time
unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to
hold the Inventory subject to the Security Interest and the
instructions of the Collateral Agent and to waive and release any Lien
held by it with respect to such Inventory, whether arising by operation
of law or otherwise.
SECTION 4.10. Limitation on Modification of Accounts. The
Grantor will not, without the Collateral Agent's prior written consent,
grant any extension of the time of payment of any of the Accounts
Receivable, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any person liable for
the payment thereof or allow any credit or discount whatsoever thereon,
other than extensions, credits, discounts, compromises or settlements
granted or made in the ordinary course of business and consistent with
its current practices and in accordance with such prudent and standard
practices used in industries that are the same as or similar to those
in which the Grantor is engaged.
SECTION 4.11. Insurance. The Grantor, at its own expense,
shall maintain or cause to be maintained insurance covering physical
loss or damage to the Inventory and Equipment in accordance with
Section 5.02 of the Credit Agreement. The Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as the
Grantor's true and lawful agent (and attorney-in-fact) for the purpose,
during the continuance of an Event of Default, of making, settling and
adjusting claims in respect of Collateral under policies of insurance,
endorsing the name of the Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance
and for making all determinations and decisions with respect thereto.
In the event that the Grantor at any time or times shall fail to obtain
or maintain any of the policies of insurance required hereby or to pay
any premium in whole or part relating thereto, the Collateral Agent
may, without waiving or releasing any obligation or liability of the
Grantor hereunder or any Event of Default, in its sole discretion,
obtain and maintain such policies of insurance and pay such premium and
take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.11, including reasonable attorneys'
fees, court costs, expenses and other charges relating thereto, shall
be payable, upon demand, by the Grantor to the Collateral Agent and
shall be additional Obligations secured hereby.
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SECTION 4.12. Legend. The Grantor shall legend, in form and
manner satisfactory to the Collateral Agent, its Accounts Receivable
and its books, records and documents evidencing or pertaining thereto
with an appropriate reference to the fact that such Accounts Receivable
have been assigned to the Collateral Agent for the benefit of the
Secured Parties and that the Collateral Agent has a security interest
therein.
SECTION 4.13. Covenants Regarding Patent, Trademark and
Copyright Collateral. (a) The Grantor agrees that it will not, nor will
it permit any of its licensees to, do any act, or omit to do any act,
whereby any Patent which is material to the conduct of the Grantor's
business may become invalidated or dedicated to the public, and agrees
that it shall continue to mark any products covered by a Patent with
the relevant patent number as necessary and sufficient to establish and
preserve its maximum rights under applicable patent laws.
(b) The Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of the
Grantor's business, (i) maintain such Trademark in full force free from
any claim of abandonment or invalidity for non-use, (ii) maintain the
quality of products and services offered under such Trademark, (iii)
display such Trademark with notice of Federal or foreign registration
to the extent necessary and sufficient to establish and preserve its
maximum rights under applicable law and (iv) not knowingly use or
knowingly permit the use of such Trademark in violation of any third
party rights.
(c) The Grantor (either itself or through licensees) will, for
each work covered by a material Copyright, continue to publish,
reproduce, display, adopt and distribute the work with appropriate
copyright notice as necessary and sufficient to establish and preserve
its maximum rights under applicable copyright laws.
(d) The Grantor shall notify the Collateral Agent immediately
if it knows or has reason to know that any Patent, Trademark or
Copyright material to the conduct of its business may become abandoned,
lost or dedicated to the public, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court or
similar office of any country) regarding the Grantor's ownership of any
Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.
(e) In no event shall the Grantor, either itself or through
any agent, employee, licensee or designee, file an application for any
Patent, Trademark or Copyright (or for the registration of any
Trademark or Copyright) that is material to the conduct of the
Grantor's business with the United States Patent and Trademark Office,
United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any
political subdivision thereof, unless it promptly informs the
Collateral Agent, and, upon request of the Collateral Agent, executes
and delivers any and all agreements, instruments, documents and papers
as the Collateral Agent may
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request to evidence the Collateral Agent's security interest in such
Patent, Trademark or Copyright, and the Grantor hereby appoints the
Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being
hereby ratified and confirmed; such power, being coupled with an
interest, is irrevocable.
(f) The Grantor will take all necessary steps that are
consistent with the practice in any proceeding before the United States
Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or
in any other country or any political subdivision thereof, to maintain
and pursue each material application relating to the Patents,
Trademarks and/or Copyrights (and to obtain the relevant grant or
registration) and to maintain each issued Patent and each registration
of the Trademarks and Copyrights that is material to the conduct of the
Grantor's business, including timely filings of applications for
renewal, affidavits of use, affidavits of incontestability and payment
of maintenance fees, and, if consistent with good business judgment, to
initiate opposition, interference and cancellation proceedings against
third parties.
(g) In the event that the Grantor has reason to believe that
any Collateral consisting of a Patent, Trademark or Copyright material
to the conduct of the Grantor's business has been or is about to be
infringed, misappropriated or diluted by a third party, the Grantor
promptly shall notify the Collateral Agent and shall, if consistent
with good business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for
such infringement, misappropriation or dilution, and take such other
actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default,
the Grantor shall use its best efforts to obtain all requisite consents
or approvals by the licensor of each Copyright License, Patent License
or Trademark License to effect the assignment of all of the Grantor's
right, title and interest thereunder to the Collateral Agent or its
designee.
ARTICLE V
Power of Attorney
The Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by
the Collateral Agent) as the Grantor's true and lawful agent and
attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for the Grantor and in the
Grantor's name or otherwise, for the use and benefit of the Collateral
Agent and the Secured Parties, upon the occurrence and during the
continuance of an Event of Default (a) to receive, endorse, assign
and/or deliver any and all notes, acceptances, checks, drafts, money
orders or other evidences of payment relating to the Collateral or any
part thereof; (b) to demand, collect, receive payment of, give receipt
for and give discharges and releases of all or any of the Collateral;
(c) to sign the name of the Grantor on any invoice or bill of lading
relating to
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any of the Collateral; (d) to send verifications of Accounts Receivable
to any Account Debtor; (e) to commence and prosecute any and all suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the
Collateral or to enforce any rights in respect of any Collateral; (f)
to settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Collateral; (g) to notify, or
to require the Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent; and (h) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Collateral, and to do all other acts and things
necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Collateral
Agent or any Secured Party to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by the
Collateral Agent or any Secured Party, or to present or file any claim
or notice, or to take any action with respect to the Collateral or any
part thereof or the moneys due or to become due in respect thereof or
any property covered thereby, and no action taken or omitted to be
taken by the Collateral Agent or any Secured Party with respect to the
Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of the Grantor or to any claim or
action against the Collateral Agent or any Secured Party. It is
understood and agreed that the appointment of the Collateral Agent as
the agent and attorney-in-fact of the Grantor for the purposes set
forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve the Grantor of any
of its obligations hereunder or under any other Loan Document with
respect to the Collateral or any part thereof or impose any obligation
on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof,
or in any way limit the exercise by the Collateral Agent or any Secured
Party of any other or further right which it may have on the date of
this Agreement or hereafter, whether hereunder, under any other Loan
Document, by law or otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, the Grantor agrees to
deliver each item of Collateral to the Collateral Agent on demand, and
it is agreed that the Collateral Agent shall have the right to take any
of or all the following actions at the same or different times: (a)
with respect to any Collateral consisting of Intellectual Property, on
demand, to cause the Security Interest to become an assignment,
transfer and conveyance of any of or all such Collateral by the Grantor
to the Collateral Agent, or to license or sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any such Collateral throughout the world on such terms and
conditions and in such manner as the Collateral Agent shall determine
(other than in violation of any then-existing
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licensing arrangements to the extent that waivers cannot be obtained),
and (b) with or without legal process and with or without prior notice
or demand for performance, to take possession of the Collateral and
without liability for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or
removing the Collateral and, generally, to exercise any and all rights
afforded to a secured party under the Uniform Commercial Code or other
applicable law. Without limiting the generality of the foregoing, the
Grantor agrees that the Collateral Agent shall have the right, subject
to the mandatory requirements of applicable law, to sell or otherwise
dispose of all or any part of the Collateral, at public or private sale
or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem
appropriate. The Collateral Agent shall be authorized at any such sale
(if it deems it advisable to do so) to restrict the prospective bidders
or purchasers to persons who will represent and agree that they are
purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation
of any such sale the Collateral Agent shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of
the Grantor, and the Grantor hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which the Grantor now
has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantor 10 days' written
notice (which the Grantor agrees is reasonable notice within the
meaning of Section 9-504(3) of the Uniform Commercial Code as in effect
in the State of New York or its equivalent in other jurisdictions) of
the Collateral Agent's intention to make any sale of Collateral. Such
notice, in the case of a public sale, shall state the time and place
for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any
such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may
fix and state in the notice (if any) of such sale. At any such sale,
the Collateral, or portion thereof, to be sold may be sold in one lot
as an entirety or in separate parcels, as the Collateral Agent may (in
its sole and absolute discretion) determine. The Collateral Agent shall
not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of
such Collateral shall have been given. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further
notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail
to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may be sold again upon
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like notice. At any public (or, to the extent permitted by law,
private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right
of redemption, stay, valuation or appraisal on the part of the Grantor
(all said rights being also hereby waived and released to the extent
permitted by law), the Collateral or any part thereof offered for sale
and may make payment on account thereof by using any claim then due and
payable to such Secured Party from the Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the
terms of sale, hold, retain and dispose of such property without
further accountability to the Grantor therefor. For purposes hereof, a
written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free
to carry out such sale pursuant to such agreement and the Grantor shall
not be entitled to the return of the Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it,
the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent
shall apply the proceeds of any collection or sale of the Collateral,
as well as any Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses
incurred by the Administrative Agent or the Collateral Agent
(in its capacity as such hereunder or under any other Loan
Document) in connection with such collection or sale or
otherwise in connection with this Agreement or any of the
Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, the repayment of all
advances made by the Collateral Agent hereunder or under any
other Loan Document on behalf of the Grantor and any other
costs or expenses incurred in connection with the exercise of
any right or remedy hereunder or under any other Loan
Document;
SECOND, to the payment in full of the Obligations
(the amounts so applied to be distributed among the Secured
Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantor, its successors or assigns, or
as a court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with
this Agreement. Upon any sale of the Collateral by the Collateral Agent
(including pursuant to a power of sale granted by
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statute or under a judicial proceeding), the receipt of the Collateral
Agent or of the officer making the sale shall be a sufficient discharge
to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property.
For the purpose of enabling the Collateral Agent to exercise rights and
remedies under this Article at such time as the Collateral Agent shall
be lawfully entitled to exercise such rights and remedies, the Grantor
hereby grants to the Collateral Agent an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation
to the Grantor) to use, license or sub-license any of the Collateral
consisting of Intellectual Property now owned or hereafter acquired by
the Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof. The use of
such license by the Collateral Agent shall be exercised, at the option
of the Collateral Agent, upon the occurrence and during the
continuation of an Event of Default; provided that any license,
sub-license or other transaction entered into by the Collateral Agent
in accordance herewith shall be binding upon the Grantor
notwithstanding any subsequent cure of an Event of Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices
hereunder shall (except as otherwise expressly permitted herein) be in
writing and given as provided in Section 9.01 of the Credit Agreement.
All communications and notices hereunder to any Grantor shall be given
to it at its address or telecopy number set forth on Schedule I.
SECTION 7.02. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the Security Interest and all obligations
of the Grantor hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the
Credit Agreement, any other Loan Document, any agreement with respect
to any of the Obligations or any other agreement or instrument relating
to any of the foregoing, (b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or
any other amendment or waiver of or any consent to any departure from
the Credit Agreement, any other Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on
other collateral, or any release or amendment or waiver of or consent
under or departure from any guarantee, securing or guaranteeing all or
any of the Obligations, or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the
Grantor in respect of the Obligations or this Agreement.
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SECTION 7.03. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Grantor herein
and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement shall be considered to
have been relied upon by the Secured Parties and shall survive the
making by the Lenders of the Loans, and the execution and delivery to
the Lenders of any notes evidencing such Loans, regardless of any
investigation made by the Lenders or on their behalf, and shall
continue in full force and effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This
Agreement shall become effective when a counterpart hereof executed on
behalf of the Grantor shall have been delivered to the Collateral Agent
and a counterpart hereof shall have been executed on behalf of the
Collateral Agent, and thereafter shall be binding upon the Grantor and
the Collateral Agent and their respective successors and assigns, and
shall inure to the benefit of the Grantor, the Collateral Agent and the
other Secured Parties and their respective successors and assigns,
except that the Grantor shall not have the right to assign or transfer
its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except
as expressly contemplated by this Agreement or the Credit Agreement.
SECTION 7.05. Successors and Assigns. Whenever in this
Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of the
Grantor or the Collateral Agent that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and
assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses;
Indemnification. (a) The Grantor agrees to pay upon demand to the
Collateral Agent the amount of any and all reasonable expenses,
including the reasonable fees, disbursements and other charges of its
counsel and of any experts or agents, which the Collateral Agent may
incur in connection with (i) the administration of this Agreement, (ii)
the custody or preservation of, or the sale of, collection from or
other realization upon any of the Collateral, (iii) the exercise,
enforcement or protection of any of the rights of the Collateral Agent
hereunder or (iv) the failure of the Grantor to perform or observe any
of the provisions hereof.
(b) Without limitation of its indemnification obligations
under the other Loan Documents, the Grantor agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of
them harmless from, any and all losses, claims, damages, liabilities
and related expenses, including reasonable fees, disbursements and
other charges of counsel, incurred by or asserted against any of them
arising out of, in any way connected with, or as a result of, the
execution, delivery or performance of this Agreement or any claim,
litigation, investigation or proceeding relating hereto or to the
Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related
expenses are determined by a court of competent
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jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby. The provisions of this Section
7.06 shall remain operative and in full force and effect regardless of
the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of
any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Collateral Agent or any
Lender. All amounts due under this Section 7.06 shall be payable on
written demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of
the Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Collateral Agent hereunder and of the
Collateral Agent, the Issuing Bank, the Administrative Agent and the
Lenders under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or any other Loan Document
or consent to any departure by the Grantor therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on
the Grantor in any case shall entitle the Grantor or any other Grantor
to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Collateral Agent and the
Grantor, subject to any consent required in accordance with Section
9.08 of the Credit Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
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<PAGE>
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not
in any way be affected or impaired thereby (it being understood that
the invalidity of a particular provision in a particular jurisdiction
shall not in and of itself affect the validity of such provision in any
other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.11. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original
but all of which when taken together shall constitute but one contract
(subject to Section 7.04), and shall become effective as provided in
Section 7.04. Delivery of an executed signature page to this Agreement
by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings used
herein are for the purpose of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a)
The Grantor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may
be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Collateral Agent, the
Administrative Agent, the Issuing Bank or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement or the
other Loan Documents against the Grantor or its properties in the
courts of any jurisdiction.
(b) The Grantor hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter
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<PAGE>
have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 7.01.
Nothing in this Agreement will affected the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 7.14. Termination. This Agreement and the Security
Interest shall terminate when all the Obligations have been
indefeasibly paid in full, the Lenders have no further commitment to
lend, the L/C Exposure has been reduced to zero and the Issuing Bank
has no further commitment to issue Letters of Credit under the Credit
Agreement, at which time the Collateral Agent shall execute and deliver
to the Grantor, at the Grantor's expense, all Uniform Commercial Code
termination statements and similar documents which the Grantor shall
reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this
Section 7.14 shall be without recourse to or warranty by the Collateral
Agent. A Grantor shall automatically be released from its obligations
hereunder and the Security Interest in the Collateral of such Grantor
shall be automatically released in the event that all the capital stock
of such Grantor shall be sold, transferred or otherwise disposed of to
a person that is not an Affiliate of the Borrower in accordance with
the terms of the Credit Agreement; provided that the Required Lenders
shall have consented to such sale, transfer or other disposition (to
the extent required by the Credit Agreement) and the terms of such
consent did not provide otherwise.
SECTION 7.15. Additional Grantors. Upon execution and delivery
by the Collateral Agent and a Subsidiary of an instrument in the form
of Annex 3 hereto, such Subsidiary shall become a Grantor hereunder
with the same force and effect as if originally named as a Grantor
herein. The execution and delivery of any such instrument shall not
require the consent of the Grantor hereunder. The rights and
obligations of the Grantor hereunder shall remain in full force and
effect notwithstanding the addition of any new Grantor as a party to
this Agreement.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
TEL-SAVE HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
TEL-SAVE, INC.
By:
-------------------------------------
Name:
Title:
EMERGENCY TRANSPORT CORP.
By:
-------------------------------------
Name:
Title:
TEL-SAVE HOLDINGS OF VIRGINIA, INC.
By:
-------------------------------------
Name:
Title:
SALOMON BROTHERS HOLDING
COMPANY INC, as Collateral Agent
By:
-------------------------------------
Name:
Title:
H-23
<PAGE>
Annex 2 to the
Security Agreement
[Form of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders") and Salomon Brothers
Holding Company Inc, as administrative agent for the Lenders (in such
capacity, the "Administrative Agent") and Collateral Agent and (b) the
Guarantee Agreement dated as of August 25, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee
Agreement"), among the Guarantors party thereto and the Collateral
Agent.
The undersigned, a Financial Officer and a Legal Officer,
respectively, of the Borrower, hereby certify to the Collateral Agent
and each other Secured Party as follows:
1. Names. (a) The exact corporate name of the Grantor, as such
name appears in its certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name the Grantor
has had in the past five years, together with the date of the relevant
change:
(c) Except as set forth in Schedule 1 hereto, the Grantor has
not changed its identity or corporate structure in any way within the
past five years. Changes in identity or corporate structure would
include mergers, consolidations and acquisitions, as well as any change
in the form, nature or jurisdiction of corporate organization. If any
such change has occurred, include in Schedule 1 the information
required by Sections 1 and 2 of this certificate as to each acquiree or
constituent party to a merger or consolidation.
(d) The following is a list of all other names (including
trade names or similar appellations) used by the Grantor or any of its
divisions or other business units in connection with the conduct of its
business or the ownership of its properties at any time during the past
five years:
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<PAGE>
(e) Set forth below is the Federal Taxpayer Identification
Number of the Grantor:
2. Current Locations. (a) The chief executive office of the
Grantor is located at the address set forth below:
Mailing Address County State
--------------- ------ -----
(b) Set forth below are all locations where the Grantor
maintains any books or records relating to any Accounts Receivable
(with each location at which chattel paper, if any, is kept being
indicated by an "*"):
Mailing Address County State
--------------- ------ -----
(c) Set forth below are all the places of business of the
Grantor not identified in paragraph (a) or (b) above:
Mailing Address County State
--------------- ------ -----
(d) Set forth below are all the locations where the Grantor
maintains any Collateral not identified above:
Mailing Address County State
--------------- ------ -----
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<PAGE>
(e) Set forth below are the names and addresses of all persons
other than the Grantor that have possession of any of the Collateral of
the Grantor:
Mailing Address County State
--------------- ------ -----
3. Unusual Transactions. All Accounts Receivable have been
originated by the Grantor and all Inventory has been acquired by the
Grantor in the ordinary course of business.
4. File Search Reports. Attached hereto as Schedule 4(A) are
true copies of file search reports from the Uniform Commercial Code
filing offices where filings described in Section 3.19 of the Credit
Agreement are to be made. Attached hereto as Schedule 4(B) is a true
copy of each financing statement or other filing identified in such
file search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1
in substantially the form of Schedule 5 hereto have been prepared for
filing in the Uniform Commercial Code filing office in each
jurisdiction where the Grantor has Collateral as identified in Section
2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a
schedule setting forth, with respect to the filings described in
Section 5 above, each filing and the filing office in which such filing
is to be made.
7. Filing Fees. All filing fees and taxes payable in
connection with the filings described in Section 5 above have been
paid.
8. Stock Ownership. Attached hereto as Schedule 8 is a true
and correct list of all the duly authorized, issued and outstanding
stock of each Subsidiary and the record and beneficial owners of such
stock. Also set forth on Schedule 8 is each equity Investment of the
Borrower and each Subsidiary that represents 50% or less of the equity
of the entity in which such investment was made.
9. Notes. Attached hereto as Schedule 9 is a true and correct
list of all notes held by the Borrower and each Subsidiary and all
intercompany notes between the Borrower and each Subsidiary of the
Borrower and between each Subsidiary of the Borrower and each other
such Subsidiary.
10. Advances. Attached hereto as Schedule 10 is (a) a true and
correct list of all advances made by the Borrower to any Subsidiary of
the Borrower or made by any Subsidiary of the Borrower to the Borrower
or any other Subsidiary of the Borrower, which advances will be on and
after the date hereof evidenced by one or more intercompany notes
pledged to the Collateral Agent under the Pledge Agreement, and (b)
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<PAGE>
a true and correct list of all unpaid intercompany transfers of goods
sold and delivered by or to the Borrower or any Subsidiary of the
Borrower.
11. Mortgage Filings. Attached hereto as Schedule 11 is a
schedule setting forth, with respect to each Mortgaged Property, (i)
the exact corporate name of the corporation that owns such property as
such name appears in its certificate of incorporation, (ii) if
different from the name identified pursuant to clause (i), the exact
name of the current record owner of such property reflected in the
records of the filing office for such property identified pursuant to
the following clause and (iii) the filing office in which a Mortgage
with respect to such property must be filed or recorded in order for
the Collateral Agent to obtain a perfected security interest therein.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
certificate on this 25th day of August, 1997.
TEL-SAVE HOLDINGS, INC.
By:
------------------------------------
Name: Joseph A. Schenk
Title: Chief Financial Officer
By:
------------------------------------
Name: Aloysius T. Lawn, IV
Title: General Counsel and Secretary
H-34
EXHIBIT D
GUARANTEE AGREEMENT dated as of August 25, 1997, among each
person listed on the signature page hereto (each such person
individually, a "Guarantor" and collectively, the "Guarantors") with
respect to the obligations of TEL-SAVE HOLDINGS, INC., a Delaware
corporation (the "Borrower"), to SALOMON BROTHERS HOLDING COMPANY INC,
a Delaware corporation, as collateral agent (the "Collateral Agent")
for the Secured Parties (as defined in the Credit Agreement referred to
below).
Reference is made to the Credit Agreement dated as of August
25, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrower, the lenders from
time to time party thereto (the "Lenders") and Salomon Brothers Holding
Company Inc, as administrative agent for the Lenders and the Collateral
Agent. Capitalized terms used herein and not defined herein shall have
the meanings assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and
pursuant to the Credit Agreement, an Issuing Bank may agree to issue
Letters of Credit for the account of the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the Credit
Agreement. The obligations of the Lenders to make Loans and of any
Issuing Bank to issue Letters of Credit are conditioned on, among other
things, the execution and delivery by the Guarantors of a Guarantee
Agreement in the form hereof. As consideration therefor and in order to
induce the Lenders to make Loans and any Issuing Bank to issue Letters
of Credit, the Guarantors are willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally
guarantees, jointly with the other Guarantors and severally, as a
primary obligor and not merely as a surety, (a) the due and punctual
payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and
as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (ii) each payment required to be made
by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement
of disbursements, interest thereon and obligations to provide cash
collateral and (iii) all other monetary obligations, including fees,
costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in
such proceeding), of the Loan Parties to the Secured Parties under the
Credit Agreement and the other Loan Documents and (b) the due and
punctual performance of all covenants,
D-1
<PAGE>
agreements, obligations and liabilities of the Loan Parties under or
pursuant to the Credit Agreement and the other Loan Documents and (c)
unless otherwise agreed upon in writing by the applicable Lender party
thereto, all obligations of the Borrower, monetary or otherwise, under
each Interest Rate Protection Agreement entered into with a
counterparty that was a Lender at the time such Interest Rate
Protection Agreement was entered into (all the monetary and other
obligations referred to in the preceding clauses (a) and (b) being
collectively called the "Obligations"). Each Guarantor further agrees
that the Obligations may be extended or renewed, in whole or in part,
without notice to or further assent from it, and that it will remain
bound upon its guarantee notwithstanding any extension or renewal of
any Obligation.
Anything contained in this Agreement to the contrary
notwithstanding, the obligations of each Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the greatest amount that
would not render such Guarantor's obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of
Title 11 of the United States Code or any provisions of applicable
state law (collectively, the "Fraudulent Transfer Laws"), in each case
after giving effect to all other liabilities of such Guarantor,
contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of intercompany indebtedness to the Borrower
or Affiliates of the Borrower to the extent that such indebtedness
would be discharged in an amount equal to the amount paid by such
Guarantor hereunder and (b) under any Guarantee of senior unsecured
indebtedness or Indebtedness subordinated in right of payment to the
Obligations which Guarantee contains a limitation as to maximum amount
similar to that set forth in this paragraph, pursuant to which the
liability of such Guarantor hereunder is included in the liabilities
taken into account in determining such maximum amount) and after giving
effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, contribution, reimbursement, indemnity or similar rights
of such Guarantor pursuant to (i) applicable law or (ii) any agreement
providing for an equitable allocation among such Guarantor and other
Affiliates of the Borrower of obligations arising under Guarantees by
such parties (including the Indemnity, Subrogation and Contribution
Agreement).
Notwithstanding anything else herein, the obligations of
Daniel Borislow hereunder will be limited-recourse obligations payable
only from the Collateral pledged under the Pledged Agreement of even
date herewith between Daniel Borislow and the Collateral Agent.
SECTION 2. Obligations Not Waived. To the fullest extent
permitted by applicable law, each Guarantor waives presentment to,
demand of payment from and protest to the Borrower of any of the
Obligations, and also waives notice of acceptance of its guarantee and
notice of protest for nonpayment. To the fullest extent permitted by
applicable law, the obligations of each Guarantor hereunder shall not
be affected by (a) the failure of the Collateral Agent or any other
Secured Party to assert any claim or demand or to enforce or exercise
any right or remedy against the Borrower or any other Guarantor under
the provisions of the Credit Agreement, any other Loan Document or
otherwise, (b) any
D-2
<PAGE>
rescission, waiver, amendment or modification of, or any release from
any of the terms or provisions of this Agreement, any other Loan
Document, any Guarantee or any other agreement, including with respect
to any other Guarantor under this Agreement or (c) the failure to
perfect any security interest in, or the release of, any of the
security held by or on behalf of the Collateral Agent or any other
Secured Party.
SECTION 3. Security. Each of the Guarantors authorizes the
Collateral Agent and each of the other Secured Parties, to (a) take and
hold security for the payment of this Guarantee and the Obligations and
exchange, enforce, waive and release any such security, (b) apply such
security and direct the order or manner of sale thereof as they in
their sole discretion may determine and (c) release or substitute any
one or more endorsees, other guarantors of other obligors.
SECTION 4. Guarantee of Payment. Each Guarantor further agrees
that its guarantee constitutes a guarantee of payment when due and not
of collection, and waives any right to require that any resort be had
by the Collateral Agent or any other Secured Party to any of the
security held for payment of the Obligations or to any balance of any
deposit account or credit on the books of the Collateral Agent or any
other Secured Party in favor of the Borrower or any other person.
SECTION 5. No Discharge or Diminishment of Guarantee. The
obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason (other
than the indefeasible payment in full in cash of the Obligations),
including any claim of waiver, release, surrender, alteration or
compromise of any of the Obligations, and shall not be subject to any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor hereunder shall not be
discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or
demand or to enforce any remedy under the Credit Agreement, any other
Loan Document or any other agreement, by any waiver or modification of
any provision of any thereof, by any default, failure or delay, willful
or otherwise, in the performance of the Obligations, or by any other
act or omission that may or might in any manner or to any extent vary
the risk of any Guarantor or that would otherwise operate as a
discharge of each Guarantor as a matter of law or equity (other than
the indefeasible payment in full in cash of all the Obligations).
SECTION 6. Defenses of Borrower Waived. To the fullest extent
permitted by applicable law, each of the Guarantors waives any defense
based on or arising out of any defense of the Borrower or the
unenforceability of the Obligations or any part thereof from any cause,
or the cessation from any cause of the liability of the Borrower, other
than the final and indefeasible payment in full in cash of the
Obligations. The Collateral Agent and the other Secured Parties may, at
their election, foreclose on any security held by one or more of them
by one or more judicial or nonjudicial sales, accept an assignment of
any such security in lieu of foreclosure, compromise or adjust any part
of the Obligations, make any
D-3
<PAGE>
other accommodation with the Borrower or any other guarantor or
exercise any other right or remedy available to them against the
Borrower or any other guarantor, without affecting or impairing in any
way the liability of any Guarantor hereunder except to the extent the
Obligations have been fully, finally and indefeasibly paid in cash.
Pursuant to applicable law, each of the Guarantors waives any defense
arising out of any such election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other Guarantor or guarantor, as the case
may be, or any security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of
the foregoing and not in limitation of any other right that the
Collateral Agent or any other Secured Party has at law or in equity
against any Guarantor by virtue hereof, upon the failure of the
Borrower or any other Loan Party to pay any Obligation when and as the
same shall become due, whether at maturity, by acceleration, after
notice of prepayment or otherwise, each Guarantor hereby promises to
and will forthwith pay, or cause to be paid, to the Collateral Agent or
such other Secured Party as designated thereby in cash the amount of
such unpaid Obligations. Upon payment by any Guarantor of any sums to
the Collateral Agent or any Secured Party as provided above, all rights
of such Guarantor against the Borrower arising as a result thereof by
way of right of subrogation, contribution, reimbursement, indemnity or
otherwise shall in all respects be subordinate and junior in right of
payment to the prior indefeasible payment in full in cash of all the
Obligations. In addition, any indebtedness of the Borrower now or
hereafter held by any Guarantor is hereby subordinated in right of
payment to the prior payment in full of the Obligations. If any amount
shall erroneously be paid to any Guarantor on account of (i) such
subrogation, contribution, reimbursement, indemnity or similar right or
(ii) any such indebtedness of the Borrower, such amount shall be held
in trust for the benefit of the Secured Parties and shall forthwith be
paid to the Collateral Agent to be credited against the payment of the
Obligations, whether matured or unmatured, in accordance with the terms
of the Loan Documents.
SECTION 8. Information. Each of the Guarantors assumes all
responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing
upon the risk of nonpayment of the Obligations and the nature, scope
and extent of the risks that such Guarantor assumes and incurs
hereunder, and agrees that none of the Collateral Agent or the other
Secured Parties will have any duty to advise any of the Guarantors of
information known to it or any of them regarding such circumstances or
risks.
SECTION 9. Representations, Warranties and Covenants. Each of
the Guarantors represents and warrants as to itself that all
representations and warranties relating to it contained in the Credit
Agreement are true and correct. Each of the Guarantors that is a
Subsidiary agrees to comply with all covenants in the Credit Agreement
that are applicable to it as fully as if it were a party to the Credit
Agreement, and any Guarantor becoming a Guarantor after the date hereof
that is not a Subsidiary agrees to comply with the restrictions in
Sections 6.01 and 6.02 of the Credit Agreement as if it were a
Subsidiary.
D-4
<PAGE>
SECTION 10. Termination. The Guarantees made hereunder (a)
shall terminate when all the Obligations have been indefeasibly paid in
full and the Lenders have no further commitment to lend under the
Credit Agreement, the L/C Exposure has been reduced to zero and any
Issuing Bank has no further obligation to issue Letters of Credit under
the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part
thereof, of any Obligation is rescinded or must otherwise be restored
by any Secured Party or any Guarantor upon the bankruptcy or
reorganization of the Borrower, any Guarantor or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments.
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of
such party; and all covenants, promises and agreements by or on behalf
of the Guarantors that are contained in this Agreement shall bind and
inure to the benefit of each party hereto and their respective
successors and assigns. This Agreement shall become effective as to any
Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a
counterpart hereof shall have been executed on behalf of the Collateral
Agent, and thereafter shall be binding upon such Guarantor and the
Collateral Agent and their respective successors and assigns, and shall
inure to the benefit of such Guarantor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns,
except that no Guarantor shall have the right to assign its rights or
obligations hereunder or any interest herein (and any such attempted
assignment shall be void). If all of the capital stock of a Guarantor
is sold, transferred or otherwise disposed of pursuant to a transaction
permitted by Section 6.05 of the Credit Agreement, such Guarantor shall
be released from its obligations under this Agreement without further
action. This Agreement shall be construed as a separate agreement with
respect to each Guarantor and may be amended, modified, supplemented,
waived or released with respect to any Guarantor without the approval
of any other Guarantor and without affecting the obligations of any
other Guarantor hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Collateral Agent hereunder and of the other
Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any
departure by any Guarantor therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on any
Guarantor in any case shall entitle such Guarantor to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement
entered into between the Guarantors with respect to which such waiver,
amendment or modification relates and the Collateral Agent,
D-5
<PAGE>
with the prior written consent of the Required Lenders (except as
otherwise provided in the Credit Agreement).
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 14. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 9.01 of the Credit
Agreement. All communications and notices hereunder to each Guarantor
shall be given to it in care of the Borrower.
SECTION 15. Survival of Agreement; Severability. (a) All
covenants, agreements, representations and warranties made by the
Guarantors herein and in the certificates or other instruments prepared
or delivered in connection with or pursuant to this Agreement or any
other Loan Document shall be considered to have been relied upon by the
Collateral Agent and the other Secured Parties and shall survive the
making by the Lenders of the Loans and the issuance of any Letters of
Credit by any Issuing Bank regardless of any investigation made by the
Secured Parties or on their behalf, and shall continue in full force
and effect as long as the principal of or any accrued interest on any
Loan or any other fee or amount payable under this Agreement or any
other Loan Document is outstanding and unpaid or the L/C Exposure does
not equal zero and as long as the Commitments and the L/C Commitment
have not been terminated.
(b) In the event any one or more of the provisions contained
in this Agreement or in any other Loan Document should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity
of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 16. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute a single contract, and shall
become effective as provided in Section 11. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this
Agreement.
SECTION 17. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement.
SECTION 18. Jurisdiction; Consent to Service of Process. (a)
Each Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New
York State court or Federal court of the United States
D-6
<PAGE>
of America sitting in New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring
any action or proceeding relating to this Agreement or the other Loan
Documents against any Guarantor or its properties in the courts of any
jurisdiction.
(b) Each Guarantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this
Agreement or the other Loan Documents in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum
to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 14.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE,
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 19.
SECTION 20. Additional Guarantors. Pursuant to Section 5.11 of
the Credit Agreement, each Subsidiary of the Borrower that was not in
existence on the date of the Credit Agreement is required to enter into
this Agreement as a Guarantor upon becoming a Subsidiary. Upon
execution and delivery after the date hereof by the Collateral Agent
and such a Subsidiary of an instrument in the form of Annex 1, such
Subsidiary shall become a Guarantor hereunder with the same force and
effect as if originally named as a Guarantor
D-7
<PAGE>
herein. The execution and delivery of any instrument adding an
additional Guarantor as a party to this Agreement shall not require the
consent of any other Guarantor hereunder. The rights and obligations of
each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this
Agreement.
SECTION 21. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Secured Party is hereby authorized at
any time and from time to time, to the fullest extent permitted by law,
to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other Indebtedness
at any time owing by such Secured Party to or for the credit or the
account of any Guarantor against any or all the obligations of such
Guarantor now or hereafter existing under this Agreement and the other
Loan Documents held by such Secured Party, irrespective of whether or
not such Secured Party shall have made any demand under this Agreement
or any other Loan Document and although such obligations may be
unmatured. The rights of each Secured Party under this Section 21 are
in addition to other rights and remedies (including other rights of
setoff) which such Secured Party may have.
D-8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
DANIEL BORISLOW
-------------------------------------------
TEL-SAVE, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
EMERGENCY TRANSPORT CORP.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
TEL-SAVE HOLDINGS OF VIRGINIA, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SALOMON BROTHERS HOLDING
COMPANY INC., as Collateral Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
<PAGE>
Annex 1 to the
Guarantee Agreement
SUPPLEMENT NO. dated as of , to the Guarantee Agreement
dated as of August 25, 1997, among each of the persons
listed on the signature page thereto (each such person
individually, a "Guarantor" and collectively, the
"Guarantors") with respect to the obligations of TEL-SAVE
HOLDINGS, INC., a Delaware corporation (the "Borrower"), to
SALOMON BROTHERS HOLDING COMPANY INC, a Delaware
corporation, as collateral agent (the "Collateral Agent")
for the Secured Parties (as defined in the Credit Agreement
referred to below).
A. Reference is made to the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders") and Salomon Brothers
Holding Company Inc, as administrative agent for the Lenders and the
Collateral Agent. Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Credit Agreement.
B. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Guarantee
Agreement and the Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in
order to induce the Lenders to make Loans and any Issuing Bank to issue
Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement,
each Subsidiary of the Borrower that was not in existence or not a
Subsidiary on the date of the Credit Agreement is required to enter
into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary.
Section 20 of the Guarantee Agreement provides that additional
Subsidiaries of the Borrower may become Guarantors under the Guarantee
Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary of the Borrower (the "New
Guarantor") is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Guarantor under the
Guarantee Agreement in order to induce the Lenders to make additional
Loans and the Issuing Bank to issue additional Letters of Credit and as
consideration for Loans previously made and any Letters of Credit
previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree
as follows:
SECTION 1. In accordance with Section 20 of the Guarantee
Agreement, the New Guarantor by its signature below becomes a Guarantor
under the Guarantee Agreement with the same force and effect as if
originally named therein as a Guarantor and the New Guarantor hereby
(a) agrees to all the terms and provisions of the Guarantee
D-8
<PAGE>
Agreement applicable to it as a Guarantor thereunder and (b) represents
and warrants that the representations and warranties made by it as a
Guarantor thereunder are true and correct on and as of the date hereof.
Each reference to a "Guarantor" in the Guarantee Agreement shall be
deemed to include the New Guarantor. The Guarantee Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has
been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall
become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the
signatures of the New Guarantor and the Collateral Agent. Delivery of
an executed signature page to this Supplement by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of
this Supplement.
SECTION 4. Except as expressly supplemented hereby, the
Guarantee Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and in the Guarantee Agreement shall not in
any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision hereof in a particular
jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties hereto shall endeavor
in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be
in writing and given as provided in Section 14 of the Guarantee
Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its
signature below, with a copy to the Borrower.
SECTION 8. The New Guarantor agrees to reimburse the
Collateral Agent for its out-of-pocket expenses in connection with this
Supplement, including the fees, disbursements and other charges of
counsel for the Collateral Agent.
D-9
<PAGE>
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent
have duly executed this Supplement to the Guarantee Agreement as of the
day and year first above written.
[Name of New Guarantor]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address:
-----------------------------------
SALOMON BROTHERS HOLDING COMPANY INC, as
Collateral Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
D-10
EXHIBIT E
INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of
August 25, 1997, among TEL-SAVE HOLDINGS, INC., a Delaware corporation
(the "Borrower"), each person listed on the signature page hereto (the
"Guarantors") and SALOMON BROTHERS HOLDING COMPANY INC, a Delaware
corporation ("SBHC"), as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders"), any Lender identified
pursuant thereto as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent") and Collateral Agent, and (b) the Guarantee
Agreement dated as of August 25, 1997, among the Guarantors and the
Collateral Agent (the "Guarantee Agreement"). Capitalized terms used
herein and not defined herein shall have the meanings assigned to such
terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and an
Issuing Bank may agree to issue Letters of Credit for the account of
the Borrower, pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. The Guarantors have
guaranteed such Loans and the other Obligations (as defined in the
Guarantee Agreement) of the Borrower under the Credit Agreement
pursuant to the Guarantee Agreement; certain Guarantors have granted
Liens on and security interests in certain of their assets to secure
such guarantees. The obligations of the Lenders to make Loans and of
any Issuing Bank to issue Letters of Credit are conditioned on, among
other things, the execution and delivery by the Borrower and the
Guarantors of an agreement in the form hereof.
Accordingly, the Borrower, each Guarantor and the Collateral
Agent agree as follows:
SECTION 1. Indemnity and Subrogation. In addition to all such
rights of indemnity and subrogation as the Guarantors may have under
applicable law (but subject to Section 3), the Borrower agrees that (a)
in the event a payment shall be made by any Guarantor under the
Guarantee Agreement, the Borrower shall indemnify such Guarantor for
the full amount of such payment and such Guarantor shall be subrogated
to the rights of the person to whom such payment shall have been made
to the extent of such payment and (b) in the event any assets of any
Guarantor shall be sold pursuant to any Security Document to satisfy a
claim of any Secured Party, the Borrower shall indemnify such Guarantor
in an amount equal to the greater of the book value or the fair market
value of the assets so sold.
E-1
<PAGE>
SECTION 2. Contribution and Subrogation. Each Guarantor (a
"Contributing Guarantor") agrees (subject to Section 3) that, in the
event a payment shall be made by any other Guarantor under the
Guarantee Agreement or assets of any other Guarantor shall be sold
pursuant to any Security Document to satisfy a claim of any Secured
Party and such other Guarantor (the "Claiming Guarantor") shall not
have been fully indemnified by the Borrower as provided in Section 1,
the Contributing Guarantor shall indemnify the Claiming Guarantor in an
amount equal to the amount of such payment or the greater of the book
value or the fair market value of such assets, as the case may be, in
each case multiplied by a fraction of which the numerator shall be the
net worth of the Contributing Guarantor on the date hereof and the
denominator shall be the aggregate net worth of all the Guarantors on
the date hereof (or, in the case of any Guarantor becoming a party
hereto pursuant to Section 12, the date of the Supplement hereto
executed and delivered by such Guarantor). Any Contributing Guarantor
making any payment to a Claiming Guarantor pursuant to this Section 2
shall be subrogated to the rights of such Claiming Guarantor under
Section 1 to the extent of such payment. Notwithstanding anything else
herein, the obligations of Daniel Borislow hereunder will be limited
the Collateral pledged under the Pledged Agreement of even date
herewith between Daniel Borislow and the Collateral Agent.
SECTION 3. Subordination. Notwithstanding any provision of
this Agreement to the contrary, all rights of the Guarantors under
Sections 1 and 2 and all other rights of indemnity, contribution or
subrogation under applicable law or otherwise shall be fully
subordinated to the indefeasible payment in full in cash of the
Obligations. No failure on the part of the Borrower or any Guarantor to
make the payments required by Sections 1 and 2 (or any other payments
required under applicable law or otherwise) shall in any respect limit
the obligations and liabilities of any Guarantor with respect to its
obligations hereunder, and each Guarantor shall remain liable for the
full amount of the obligations of such Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in
full force and effect so long as any Obligation is outstanding and has
not been indefeasibly paid in full in cash, and so long as any L/C
Exposure has not been reduced to zero or any of the Commitments under
the Credit Agreement have not been terminated, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment,
or any part thereof, of any Obligation is rescinded or must otherwise
be restored by any Secured Party or any Guarantor upon the bankruptcy
or reorganization of the Borrower, any Guarantor or otherwise.
SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of
the Collateral Agent or any Guarantor to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy by the Collateral Agent or any Guarantor
E-2
<PAGE>
preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. All remedies hereunder are cumulative and
are not exclusive of any other remedies provided by law. None of the
Collateral Agent and the Guarantors shall be deemed to have waived any
rights hereunder unless such waiver shall be in writing and signed by
such parties.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement
entered into between the Borrower, the Guarantors and the Collateral
Agent, with the prior written consent of the Required Lenders (except
as otherwise provided in the Credit Agreement).
SECTION 7. Notices. All communications and notices hereunder
shall be in writing and given as provided in the Guarantee Agreement
and addressed as specified therein.
SECTION 8. Binding Agreement; Assignments. Whenever in this
Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of the
parties that are contained in this Agreement shall bind and inure to
the benefit of their respective successors and assigns. Neither the
Borrower nor any Guarantor may assign or transfer any of its rights or
obligations hereunder (and any such attempted assignment or transfer
shall be void) without the prior written consent of the Required
Lenders. Notwithstanding the foregoing, at the time any Guarantor is
released from its obligations under the Guarantee Agreement in
accordance with such Guarantee Agreement and the Credit Agreement, such
Guarantor will cease to have any rights or obligations under this
Agreement.
SECTION 9. Survival of Agreement; Severability. (a) All
covenants and agreements made by the Borrower and each Guarantor herein
and in the certificates or other instruments prepared or delivered in
connection with this Agreement or the other Loan Documents shall be
considered to have been relied upon by the Collateral Agent, the other
Secured Parties and each Guarantor and shall survive the making by the
Lenders of the Loans and the issuance of any Letters of Credit by any
Issuing Bank, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loans or any other fee
or amount payable under the Credit Agreement or this Agreement or under
any of the other Loan Documents is outstanding and unpaid or the L/C
Exposure does not equal zero and as long as the Commitments have not
been terminated.
(b) In case any one or more of the provisions contained in
this Agreement should be held invalid, illegal or unenforceable in any
respect, no party hereto shall be required to comply with such
provision for so long as such provision is held to be invalid, illegal
or unenforceable, but the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected
or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable
E-3
<PAGE>
provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 10. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This
Agreement shall be effective with respect to any Guarantor when a
counterpart bearing the signature of such Guarantor shall have been
delivered to the Collateral Agent. Delivery of an executed signature
page to this Agreement by facsimile transmission shall be as effective
as delivery of a manually signed counterpart of this Agreement.
SECTION 11. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement.
SECTION 12. Additional Guarantors. Pursuant to Section 5.11 of
the Credit Agreement, each Subsidiary of the Borrower that was not in
existence on the date of the Credit Agreement is required to enter into
the Guarantee Agreement as a Guarantor upon becoming a Subsidiary. Upon
execution and delivery, after the date hereof, by the Collateral Agent
and such a Subsidiary of an instrument in the form of Annex 1 hereto,
such Subsidiary shall become a Guarantor hereunder with the same force
and effect as if originally named as a Guarantor hereunder. The
execution and delivery of any instrument adding an additional Guarantor
as a party to this Agreement shall not require the consent of any
Guarantor hereunder. The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the
addition of any new Guarantor as a party to this Agreement.
E-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the
date first appearing above.
TEL-SAVE HOLDINGS, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
DANIEL BORISLOW
--------------------------------------
TEL-SAVE, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
EMERGENCY TRANSPORT CORP.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
TEL-SAVE HOLDINGS OF
VIRGINIA, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
TSHCo, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SALOMON BROTHERS HOLDING COMPANY INC,
as Collateral Agent,
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-5
<PAGE>
Annex 1 to
the Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. dated as of , to the Indemnity, Subrogation
and Contribution Agreement dated as of August 25, 1997 (as the
same may be amended, supplemented or otherwise modified from time
to time, the "Indemnity, Subrogation and Contribution
Agreement"), among TEL-SAVE HOLDINGS, INC., a Delaware
corporation (the "Borrower") each person listed on the signature
page thereto (the "Guarantors"), and SALOMON BROTHERS HOLDING
COMPANY INC, a Delaware corporation ("SBHC"), as collateral agent
(the "Collateral Agent") for the Secured Parties (as defined in
the Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders"), the Lender identified
therein as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent") and Collateral Agent, and (b) the Guarantee
Agreement dated as of August 25, 1997, among the Guarantors and the
Collateral Agent (the "Guarantee Agreement").
B. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Indemnity,
Subrogation and Contribution Agreement and the Credit Agreement.
C. The Borrower and the Guarantors have entered into the
Indemnity, Subrogation and Contribution Agreement in order to induce
the Lenders to make Loans and any Issuing Bank to issue Letters of
Credit. Pursuant to Section 5.11 of the Credit Agreement, each
Subsidiary of the Borrower that was not in existence on the date of the
Credit Agreement is required to enter into the Guarantee Agreement as a
Guarantor upon becoming a Subsidiary. Section 12 of the Indemnity,
Subrogation and Contribution Agreement provides that additional
Subsidiaries of the Borrower may become Guarantors under the Indemnity,
Subrogation and Contribution Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary
of the Borrower (the "New Guarantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a
Guarantor under the Indemnity, Subrogation and Contribution Agreement
in order to induce the Lenders to make additional Loans and any Issuing
Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree
as follows:
E-7
<PAGE>
SECTION 1. In accordance with Section 12 of the Indemnity,
Subrogation and Contribution Agreement, the New Guarantor by its
signature below becomes a Guarantor under the Indemnity, Subrogation
and Contribution Agreement with the same force and effect as if
originally named therein as a Guarantor and the New Guarantor hereby
agrees to all the terms and provisions of the Indemnity, Subrogation
and Contribution Agreement applicable to it as a Guarantor thereunder.
Each reference to a "Guarantor" in the Indemnity, Subrogation and
Contribution Agreement shall be deemed to include the New Guarantor.
The Indemnity, Subrogation and Contribution Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has
been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts
(and by different parties hereto on different counterparts), each of
which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall
become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the
signatures of the New Guarantor and the Collateral Agent. Delivery of
an executed signature page to this Supplement by facsimile transmission
shall be as effective as delivery of a manually signed counterpart of
this Supplement.
SECTION 4. Except as expressly supplemented hereby, the
Indemnity, Subrogation and Contribution Agreement shall remain in full
force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in
any respect, neither party hereto shall be required to comply with such
provision for so long as such provision is held to be invalid, illegal
or unenforceable, but the validity, legality and enforceability of the
remaining provisions contained herein and in the Indemnity, Subrogation
and Contribution Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be
in writing and given as provided in Section 7 of the Indemnity,
Subrogation and Contribution Agreement. All communications and notices
hereunder to the New Guarantor shall be given to it at the address set
forth under its signature.
E-8
<PAGE>
SECTION 8. The New Guarantor agrees to reimburse the
Collateral Agent for its reasonable out-of-pocket expenses in
connection with this Supplement, including the reasonable fees, other
charges and disbursements of counsel for the Collateral Agent.
E-9
<PAGE>
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent
have duly executed this Supplement to the Indemnity, Subrogation and
Contribution Agreement as of the day and year first above written.
[Name of Guarantor]
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address
-------------------------------
SALOMON BROTHERS HOLDING COMPANY INC,
as Collateral Agent
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-10
EXHIBIT G-1
PLEDGE AGREEMENT dated as of August 25, 1997, among TEL-SAVE
HOLDINGS, INC., a Delaware corporation (the "Pledgor") and SALOMON
BROTHERS HOLDING COMPANY INC, a Delaware corporation ("SBHC"), as
collateral agent (in such capacity, the "Collateral Agent") for the
Secured Parties (as defined in the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders"), the Lender identified
therein as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders and Collateral Agent.
The Lenders have agreed to make Loans to the Borrower and
pursuant to the Credit Agreement, an Issuing Bank may agree to issue
Letters of Credit for the account of the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of Tel-Save, Inc., Emergency Transport Corp., Tel-Save
Holdings of Virginia, Inc. and Daniel Borislow has agreed to guarantee,
among other things, all the obligations of the Borrower under the
Credit Agreement. The obligations of the Lenders to make Loans and of
any Issuing Bank to issue Letters of Credit are conditioned upon, among
other things, the execution and delivery by the Pledgor of a Pledge
Agreement in the form hereof to secure (a) the due and punctual payment
by the Borrower of (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the
Loans, when and as due, whether at maturity, by acceleration, upon one
or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Borrower under the Credit Agreement in
respect of any Letter of Credit, when and as due, including payments in
respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Borrower to
the Secured Parties under the Credit Agreement and the other Loan
Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or
pursuant to the Credit Agreement and the other Loan Documents (all the
monetary and other obligations referred to in the preceding clauses (a)
through (c) being referred to collectively as the "Obligations").
Capitalized terms used herein and not defined herein shall have
meanings assigned to such terms in the Credit Agreement.
Accordingly, the Pledgor and the Collateral Agent, on behalf
of itself and each Secured Party (and each of their respective
successors or assigns), hereby agree as follows:
<PAGE>
SECTION 1. Pledge. As security for the payment and
performance, as the case may be, in full of the Obligations, the
Pledgor hereby transfers, grants, bargains, sells, conveys,
hypothecates, pledges, sets over and delivers unto the Collateral
Agent, its successors and assigns, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of the Pledgor's right,
title and interest in, to and under (a) the shares of capital stock
owned by it and listed on Schedule I hereto and any shares of capital
stock of any Subsidiary obtained in the future by the Pledgor and the
certificates representing all such shares (the "Pledged Stock");
provided that the Pledged Stock shall not include to the extent that
applicable law requires that a Subsidiary of the Pledgor issue
directors' qualifying shares, such qualifying shares; (b)(i) the debt
securities listed opposite the name of the Pledgor on Schedule I
hereto, (ii) any debt securities in the future issued to the Pledgor
and (iii) the promissory notes and any other instruments evidencing
such debt securities (the "Pledged Debt Securities"); (c) all other
property that may be delivered to and held by the Collateral Agent
pursuant to the terms hereof; (d) subject to Section 5, all payments of
principal or interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities
referred to in clauses (a) and (b) above; (e) subject to Section 5, all
rights and privileges of the Pledgor with respect to the securities and
other property referred to in clauses (a), (b), (c) and (d) above; and
(f) all proceeds of any of the foregoing (the items referred to in
clauses (a) through (f) above being collectively referred to as the
"Collateral"). Upon delivery to the Collateral Agent, (a) any stock
certificates, notes or other securities now or hereafter included in
the Collateral (the "Pledged Securities") shall be accompanied by stock
powers duly executed in blank or other instruments of transfer
satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request and (b) all
other property comprising part of the Collateral shall be accompanied
by proper instruments of assignment duly executed by the Pledgor and
such other instruments or documents as the Collateral Agent may
reasonably request. Each delivery of Pledged Securities shall be
accompanied by a schedule describing the securities theretofore and
then being pledged hereunder, which schedule shall be attached hereto
as Schedule I and made a part hereof. Each schedule so delivered shall
supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or
incidental thereto, unto the Collateral Agent, its successors and
assigns, for the ratable benefit of the Secured Parties, forever;
subject, however, to the terms, covenants and conditions hereinafter
set forth.
SECTION 2. Delivery of the Collateral. (a) The Pledgor agrees
promptly to deliver or cause to be delivered to the Collateral Agent
any and all Pledged Securities, and any and all certificates or other
instruments or documents representing the Collateral.
<PAGE>
(b) The Pledgor will cause any Indebtedness for borrowed money
owed to the Pledgor by any person and pledged hereunder to be evidenced
by a duly executed promissory note that is pledged and delivered to the
Collateral Agent pursuant to the terms thereof.
SECTION 3. Representations, Warranties and Covenants. The
Pledgor hereby represents, warrants and covenants, as to itself and the
Collateral pledged by it hereunder, to and with the Collateral Agent
that:
(a) the Pledged Stock represents that percentage as
set forth on Schedule I of the issued and outstanding shares
of each class of the capital stock of the issuer with respect
thereto;
(b) except for the security interest granted
hereunder, the Pledgor (i) is and will at all times continue
to be the direct owner, beneficially and of record, of the
Pledged Securities indicated on Schedule I, (ii) holds the
same free and clear of all Liens, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or
permit to exist any security interest in or other Lien on, the
Collateral, other than pursuant hereto, and (iv) subject to
Section 5, will cause any and all Collateral, whether for
value paid by the Pledgor or otherwise, to be forthwith
deposited with the Collateral Agent and pledged or assigned
hereunder;
(c) the Pledgor (i) has the power and authority to
pledge the Collateral in the manner hereby done or
contemplated and (ii) will defend its title or interest
thereto or therein against any and all Liens (other than the
Lien created by this Agreement), however arising, of all
persons whomsoever;
(d) no consent of any other person (including
stockholders or creditors of the Pledgor) and no consent or
approval of any Governmental Authority or any securities
exchange was or is necessary to the validity of the pledge
effected hereby;
(e) by virtue of the execution and delivery by the
Pledgor of this Agreement, when the Pledged Securities,
certificates or other documents representing or evidencing the
Collateral are delivered to the Collateral Agent in accordance
with this Agreement, the Collateral Agent will obtain a valid
and perfected first lien upon and security interest in such
Pledged Securities as security for the payment and performance
of the Obligations;
(f) the pledge effected hereby is effective to vest
in the Collateral Agent, on behalf of the Secured Parties, the
rights of the Collateral Agent in the Collateral as set forth
herein;
(g) all of the Pledged Stock has been duly authorized
and validly issued and is fully paid and nonassessable;
<PAGE>
(h) all information set forth herein relating to the
Pledged Stock is accurate and complete in all material
respects as of the date hereof; and
(i) the pledge of the Pledged Stock pursuant to this
Agreement does not violate Regulation G, T, U or X of the
Federal Reserve Board or any successor thereto as of the date
hereof.
SECTION 4. Registration in Nominee Name; Denominations. The
Collateral Agent, on behalf of the Secured Parties, shall have the
right (in its sole and absolute discretion) to hold the Pledged
Securities in its own name as pledgee, the name of its nominee (as
pledgee or as sub-agent) or the name of the Pledgor, endorsed or
assigned in blank or in favor of the Collateral Agent. The Pledgor will
promptly give to the Collateral Agent copies of any notices or other
communications received by it with respect to Pledged Securities
registered in the name of the Pledgor. The Collateral Agent shall at
all times have the right to exchange the certificates representing
Pledged Securities for certificates of smaller or larger denominations
for any purpose consistent with this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a)
Unless and until an Event of Default shall have occurred and be
continuing:
(i) The Pledgor shall be entitled to exercise any and
all voting and/or other consensual rights and powers inuring
to an owner of Pledged Securities or any part thereof for any
purpose consistent with the terms of this Agreement, the
Credit Agreement and the other Loan Documents; provided,
however, that the Pledgor will not be entitled to exercise any
such right if the result thereof could materially and
adversely affect the rights inuring to a holder of the Pledged
Securities or the rights and remedies of any of the Secured
Parties under this Agreement or the Credit Agreement or any
other Loan Document or the ability of the Secured Parties to
exercise the same.
(ii) The Collateral Agent shall execute and deliver
to the Pledgor, or cause to be executed and delivered to the
Pledgor, all such proxies, powers of attorney and other
instruments as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to exercise the voting and/or
consensual rights and powers it is entitled to exercise
pursuant to subparagraph (i) above and to receive the cash
dividends it is entitled to receive pursuant to subparagraph
(iii) below.
(iii) The Pledgor shall be entitled to receive and
retain any and all cash dividends, interest and principal paid
on the Pledged Securities to the extent and only to the extent
that such cash dividends, interest and principal are permitted
by, and otherwise paid in accordance with, the terms and
conditions of the Credit Agreement, the other Loan Documents
and applicable laws. All noncash dividends, interest and
principal, and all dividends, interest and principal paid or
<PAGE>
payable in cash or otherwise in connection with a partial or
total liquidation or dissolution, return of capital, capital
surplus or paid-in surplus, and all other distributions (other
than distributions referred to in the preceding sentence) made
on or in respect of the Pledged Securities, whether paid or
payable in cash or otherwise, whether resulting from a
subdivision, combination or reclassification of the
outstanding capital stock of the issuer of any Pledged
Securities or received in exchange for Pledged Securities or
any part thereof, or in redemption thereof, or as a result of
any merger, consolidation, acquisition or other exchange of
assets to which such issuer may be a party or otherwise, shall
be and become part of the Collateral, and, if received by the
Pledgor, shall not be commingled by the Pledgor with any of
its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the
Collateral Agent and shall be forthwith delivered to the
Collateral Agent in the same form as so received (with any
necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to dividends, interest or
principal that the Pledgor is authorized to receive pursuant to
paragraph (a)(iii) above shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the
sole and exclusive right and authority to receive and retain such
dividends, interest or principal. All dividends, interest or principal
received by any Pledgor contrary to the provisions of this Section 5
shall be held in trust for the benefit of the Collateral Agent, shall
be segregated from other property or funds of the Pledgor and shall be
forthwith delivered to the Collateral Agent upon demand in the same
form as so received (with any necessary endorsement). Any and all money
and other property paid over to or received by the Collateral Agent
pursuant to the provisions of this paragraph (b) shall be retained by
the Collateral Agent in an account to be established by the Collateral
Agent upon receipt of such money or other property and shall be applied
in accordance with the provisions of Section 7. After all Events of
Default have been cured or waived, the Collateral Agent shall, within
five Business Days after all such Events of Default have been cured or
waived, repay to the Pledgor all cash dividends, interest or principal
(without interest), that the Pledgor would otherwise be permitted to
retain pursuant to the terms of paragraph (a)(iii) above and which
remain in such account.
(c) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to exercise the voting and
consensual rights and powers it is entitled to exercise pursuant to
paragraph (a)(i) of this Section 5, and the obligations of the
Collateral Agent under paragraph (a)(ii) of this Section 5, shall
cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and
authority to exercise such voting and consensual rights and powers,
provided that, unless otherwise directed by the Required Lenders, the
Collateral Agent shall have the right from time to time following and
during the continuance of an Event of Default to permit the Pledgor to
exercise such rights. After all Events of Default have been cured or
waived, the Pledgor will have the right to exercise the voting and
<PAGE>
consensual rights and powers that it would otherwise be entitled to
exercise pursuant to the terms of paragraph (a)(i) above.
SECTION 6. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, subject to applicable
regulatory and legal requirements, the Collateral Agent may sell the
Collateral, or any part thereof, at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or
for future delivery as the Collateral Agent shall deem appropriate. The
Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers
to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to
the distribution or sale thereof, and upon consummation of any such
sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold.
Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Pledgor,
and, to the extent permitted by applicable law, the Pledgor hereby
waives all rights of redemption, stay, valuation and appraisal the
Pledgor now has or may at any time in the future have under any rule of
law or statute now existing or hereafter enacted.
The Collateral Agent shall give a Pledgor 10 days' prior
written notice (which the Pledgor agrees is reasonable notice within
the meaning of Section 9-504(3) of the Uniform Commercial Code as in
effect in the State of New York or its equivalent in other
jurisdictions) of the Collateral Agent's intention to make any sale of
the Pledgor's Collateral. Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale
at a broker's board or on a securities exchange, shall state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such
board or exchange. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice of such sale. At any
such sale, the Collateral, or portion thereof, to be sold may be sold
in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The
Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral
is made on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the sale price is paid in full
by the purchaser or purchasers thereof, but the Collateral Agent shall
not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At
any public (or, to the extent permitted by applicable law, private)
sale made pursuant to this Section 6, any Secured Party may bid for or
purchase, free from any right of redemption, stay or appraisal on the
part of the Pledgor (all said rights being
<PAGE>
also hereby waived and released), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any
claim then due and payable to it from the Pledgor as a credit against
the purchase price, and it may, upon compliance with the terms of sale,
hold, retain and dispose of such property without further
accountability to the Pledgor therefor. For purposes hereof, (a) a
written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof, (b) the Collateral Agent shall be
free to carry out such sale pursuant to such agreement and (c) the
Pledgor shall not be entitled to the return of the Collateral or any
portion thereof subject thereto, notwithstanding the fact that after
the Collateral Agent shall have entered into such an agreement all
Events of Default shall have been remedied and the Obligations paid in
full. As an alternative to exercising the power of sale herein
conferred upon it, the Collateral Agent may proceed by a suit or suits
at law or in equity to foreclose upon the Collateral and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a
proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Section 6 shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-504(3) of
the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of
any sale of Collateral pursuant to Section 6, as well as any Collateral
consisting of cash, shall be applied by the Collateral Agent as
follows:
FIRST, to the payment of all costs and expenses
incurred by the Collateral Agent in connection with such sale
or otherwise in connection with this Agreement, any other Loan
Document or any of the Obligations, including all court costs
and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Collateral
Agent hereunder or under any other Loan Document on behalf of
the Pledgor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder
or under any other Loan Document;
SECOND, to the payment in full of the Obligations
(the amounts so applied to be distributed among the Secured
Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgor, its successors or assigns, or
as a court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the
time of application of any such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the
Collateral Agent (including pursuant to a power of sale granted by
statute or under a judicial proceeding), the receipt of the purchase
money by the Collateral Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall
<PAGE>
not be obligated to see to the application of any part of the purchase
money paid over to the Collateral Agent or such officer or be
answerable in any way for the misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) The Pledgor
agrees to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, other charges
and disbursements of its counsel and of any experts or agents, that the
Collateral Agent may incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder or (iv) the failure by the Pledgor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations
under the other Loan Documents, the Pledgor agrees to indemnify the
Collateral Agent and the Indemnitees (as defined in Section 9.05 of the
Credit Agreement) against, and hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, other charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in any
way connected with, or as a result of (i) the execution or delivery of
this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations thereunder or the
consummation of the Transactions and the other transactions
contemplated thereby or (ii) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c) Any amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security
Documents. The provisions of this Section 8 shall remain operative and
in full force and effect regardless of the termination of this
Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any
other Loan Document or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party. All amounts due under this
Section 8 shall be payable on written demand therefor and shall bear
interest at the rate specified in Section 2.06 of the Credit Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. The
Pledgor hereby appoints the Collateral Agent the attorney-in-fact of
the Pledgor for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, the
Collateral Agent shall have the right, upon
<PAGE>
the occurrence and during the continuance of an Event of Default, with
full power of substitution either in the Collateral Agent's name or in
the name of the Pledgor, to ask for, demand, sue for, collect, receive
and give acquittance for any and all moneys due or to become due under
and by virtue of any Collateral, to endorse checks, drafts, orders and
other instruments for the payment of money payable to the Pledgor
representing any interest or dividend or other distribution payable in
respect of the Collateral or any part thereof or on account thereof and
to give full discharge for the same, to settle, compromise, prosecute
or defend any action, claim or proceeding with respect thereto, and to
sell, assign, endorse, pledge, transfer and to make any agreement
respecting, or otherwise deal with, the same; provided, however, that
nothing herein contained shall be construed as requiring or obligating
the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral
Agent, or to present or file any claim or notice, or to take any action
with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby. The
Collateral Agent and the other Secured Parties shall be accountable
only for amounts actually received as a result of the exercise of the
powers granted to them herein, and neither they nor their officers,
directors, employees or agents shall be responsible to the Pledgor for
any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Collateral Agent hereunder and of the other
Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provisions of this Agreement or consent to any
departure by the Pledgor therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on the Pledgor
in any case shall entitle the Pledgor to any other or further notice or
demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement
entered into between the Collateral Agent and the Pledgor, subject to
any consent required in accordance with Section 9.08 of the Credit
Agreement.
SECTION 11. Securities Act, etc. In view of the position of
the Pledgor in relation to the Pledged Securities, or because of other
current or future circumstances, a question may arise under the
Securities Act of 1933, as now or hereafter in effect, or any similar
statute hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being called
the "Federal Securities Laws") with respect to any disposition of the
Pledged Securities permitted hereunder. The
<PAGE>
Pledgor understands that compliance with the Federal Securities Laws
might very strictly limit the course of conduct of the Collateral Agent
if the Collateral Agent were to attempt to dispose of all or any part
of the Pledged Securities, and might also limit the extent to which or
the manner in which any subsequent transferee of any Pledged Securities
could dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under
applicable Blue Sky or other state securities laws or similar laws
analogous in purpose or effect. The Pledgor recognizes that in light of
such restrictions and limitations the Collateral Agent may, with
respect to any sale of the Pledged Securities, limit the purchasers to
those who will agree, among other things, to acquire such Pledged
Securities for their own account, for investment, and not with a view
to the distribution or resale thereof. The Pledgor acknowledges and
agrees that in light of such restrictions and limitations, the
Collateral Agent, in its sole and absolute discretion, (a) may proceed
to make such a sale whether or not a registration statement for the
purpose of registering such Pledged Securities or part thereof shall
have been filed under the Federal Securities Laws and (b) may approach
and negotiate with a single potential purchaser to effect such sale.
The Pledgor acknowledges and agrees that any such sale might result in
prices and other terms less favorable to the seller than if such sale
were a public sale without such restrictions. In the event of any such
sale, the Collateral Agent shall incur no responsibility or liability
for selling all or any part of the Pledged Securities at a price that
the Collateral Agent, in its sole and absolute discretion, may in good
faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized
if the sale were deferred until after registration as aforesaid or if
more than a single purchaser were approached. The provisions of this
Section 11 will apply notwithstanding the existence of a public or
private market upon which the quotations or sales prices may exceed
substantially the price at which the Collateral Agent sells.
SECTION 12. Registration, etc. The Pledgor agrees that, upon
the occurrence and during the continuance of an Event of Default
hereunder, if for any reason the Collateral Agent desires to sell any
of the Pledged Securities of the Borrower at a public sale, it will, at
any time and from time to time, upon the written request of the
Collateral Agent, use its best efforts to take or to cause the issuer
of such Pledged Securities to take such action and prepare, distribute
and/or file such documents, as are required or advisable in the
reasonable opinion of counsel for the Collateral Agent to permit the
public sale of such Pledged Securities. The Pledgor further agrees to
indemnify, defend and hold harmless the Collateral Agent, each other
Secured Party, any underwriter and their respective officers,
directors, affiliates and controlling persons from and against all
loss, liability, expenses, costs of counsel (including, without
limitation, reasonable fees and expenses to the Collateral Agent of
legal counsel), and claims (including the costs of investigation) that
they may incur insofar as such loss, liability, expense or claim arises
out of or is based upon any alleged untrue statement of a material fact
contained in any prospectus (or any amendment or supplement thereto) or
in any notification or offering circular, or arises out of or is based
upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements in any thereof not
<PAGE>
misleading, except insofar as the same may have been caused by any
untrue statement or omission based upon information furnished in
writing to the Pledgor or the issuer of such Pledged Securities by the
Collateral Agent or any other Secured Party expressly for use therein.
The Pledgor further agrees, upon such written request referred to
above, to use its best efforts to qualify, file or register, or cause
the issuer of such Pledged Securities to qualify, file or register, any
of the Pledged Securities under the Blue Sky or other securities laws
of such states as may be requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications,
filings or registrations. The Pledgor will bear all costs and expenses
of carrying out its obligations under this Section 12. The Pledgor
acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section 12 and that such failure
would not be adequately compensable in damages, and therefore agrees
that its agreements contained in this Section 12 may be specifically
enforced.
SECTION 13. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the grant of a security interest in the
Collateral and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement
or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or
any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the
foregoing, (c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or
departure from any guaranty, for all or any of the Obligations or (d)
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the
Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
SECTION 14. Termination or Release. (a) This Agreement and the
security interests granted hereby shall terminate when all the
Obligations have been indefeasibly paid in full and the Lenders have no
further commitment to lend under the Credit Agreement, the L/C Exposure
has been reduced to zero and the Issuing Bank has no further obligation
to issue Letters of Credit under the Credit Agreement.
(b) Upon any sale or other transfer by the Pledgor of any
Collateral that is permitted under the Credit Agreement, or, upon the
effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.08(b)
of the Credit Agreement, the security interest in such Collateral shall
be automatically released.
(c) In connection with any termination or release pursuant to
paragraph (a) or (b), the Collateral Agent shall execute and deliver to
the Pledgor, at the Pledgor's expense, all documents that the Pledgor
shall reasonably request to evidence such termination or
<PAGE>
release. Any execution and delivery of documents pursuant to this
Section 14 shall be without recourse to or warranty by the Collateral
Agent.
SECTION 15. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 9.01 of the Credit
Agreement.
SECTION 16. Further Assurances. The Pledgor agrees to do such
further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral
Agent may at any time reasonably request in connection with the
administration and enforcement of this Agreement or with respect to the
Collateral or any part thereof or in order better to assure and confirm
unto the Collateral Agent its rights and remedies hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments.
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of
such party; and all covenants, promises and agreements by or on behalf
of the Pledgor that are contained in this Agreement shall bind and
inure to the benefit of its successors and assigns. This Agreement
shall become effective when a counterpart hereof executed on behalf of
the Pledgor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral
Agent, and thereafter shall be binding upon the Pledgor and the
Collateral Agent and their respective successors and assigns, and shall
inure to the benefit of the Pledgor, the Collateral Agent and the other
Secured Parties, and their respective successors and assigns, except
that the Pledgor shall not have the right to assign its rights
hereunder or any interest herein or in the Collateral (and any such
attempted assignment shall be void), except as expressly contemplated
by this Agreement or the other Loan Documents.
SECTION 18. Survival of Agreement; Severability. (a) All
covenants, agreements, representations and warranties made by the
Pledgor herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other
Loan Document shall be considered to have been relied upon by the
Collateral Agent and the other Secured Parties and shall survive the
making by the Lenders of the Loans and the issuance of the Letters of
Credit by the Issuing Bank, regardless of any investigation made by the
Secured Parties or on their behalf, and shall continue in full force
and effect as long as the principal of or any accrued interest on any
Loan or any other fee or amount payable under this Agreement or any
other Loan Document is outstanding and unpaid or the L/C Exposure does
not equal zero and as long as the Commitments and the L/C Commitments
have not been terminated.
(b) In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of
itself affect the validity of such
<PAGE>
provision in any other jurisdiction). The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 20. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original,
but all of which, when taken together, shall constitute a single
contract, and shall become effective as provided in Section 17.
Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission shall be as effective as delivery
of a manually executed counterpart of this Agreement.
<PAGE>
SECTION 21. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement. Section headings used herein are for
convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting this Agreement.
SECTION 22. Jurisdiction; Consent to Service of Process. (a)
The Pledgor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that, to the extent permitted by applicable law, all claims in
respect of any such action or proceeding may be heard and determined in
such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that
the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Pledgor or its properties in the courts of
any jurisdiction.
(b) The Pledgor hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this
Agreement or the other Loan Documents in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum
to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 15.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 23. Waiver Of Jury Trial. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO
<PAGE>
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
SECTION 24. Any Subsidiary may become a Subsidiary Pledgor by
execution and delivery of an agreement substantially in the form of
Annex 1 hereto.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
TEL-SAVE HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
SALOMON BROTHERS HOLDING
COMPANY INC, as Collateral Agent
By:
---------------------------------
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
Schedule I to the
Pledge Agreement
CAPITAL STOCK
Number of Registered Number and Percentage
Issuer Certificate Owner Class of Shares of Shares
----- ----------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Tel-Save, Inc. Tel-Save Holdings, Inc. 1,950 Common Stock 100%
Emergency Transport Corp. Tel-Save Holdings, Inc. 100 Common Stock 100%
2
Tel-Save Holdings of Tel-Save Holdings, Inc. 100 Common Stock 100%
Virginia, Inc. 1
TSHCo, Inc. 1 Tel-Save Holdings, Inc. 10 Common Stock 100%
</TABLE>
<TABLE>
<CAPTION>
DEBT SECURITIES
Principal
Issuer Issue Amount Date of Note Maturity Date
------ ----- --------- ------------ -------------
<S> <C> <C> <C> <C>
Shared Technologies 12.25% Senior $160,700,000 March 1, 1996 March 1, 2006
Fairchild Subordinated
Communications Discount Notes
Corp.
</TABLE>
<PAGE>
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. dated as of , to the
PLEDGE AGREEMENT dated as of August 25,
1997, among TEL-SAVE HOLDINGS, INC., a
Delaware corporation (the "Pledgor") and
SALOMON BROTHERS HOLDINGS INC, a Delaware
corporation ("SBHC"), as collateral agent
(in such capacity, the "Collateral Agent")
for the Secured Parties (as defined in the
Credit Agreement referred to below)
A. Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Pledgor, parent, the
lenders from time to time party thereto (the "Lenders"), the Lender
identified therein as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders and Collateral Agent.
B. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit
Agreement.
C. The Pledgors have entered into the Pledge Agreement in
order to induce the Lenders to make Loans and any Issuing Bank to issue
Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement,
each Subsidiary of the Borrower that was not in existence or not a
Subsidiary on the date of the Credit Agreement is required to enter
into the Pledge Agreement as a Subsidiary Pledgor upon becoming a
Subsidiary if such Subsidiary owns or possesses property of a type that
would be considered Collateral under the Pledge Agreement. Section 24
of the Pledge Agreement provides that such Subsidiaries may become
Subsidiary Pledgor under the Pledge Agreement by execution and delivery
of an instrument in the form of this Supplement. The undersigned
Subsidiary (the "New Pledgor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a
Subsidiary Pledgor under the Pledge Agreement in order to induce the
Lenders to make additional Loans and the Issuing Bank to issue
additional Letters of Credit and as consideration for Loans previously
made and any Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as
follows:
SECTION 1. In accordance with Section 24 of the Pledge
Agreement, the New Pledgor by its signature below becomes a Pledgor
under the Pledge Agreement with the same force and effect as if
originally named therein as a Pledgor and the New Pledgor hereby agrees
(a) to all the terms and provisions of the Pledge Agreement applicable
to it as a Pledgor thereunder and (b) represents and warrants that the
representations and warranties made by it as a Pledgor thereunder are
true and correct on and as of the date hereof. In furtherance of the
foregoing, the New Pledgor, as security for the payment and
<PAGE>
performance in full of the Obligations (as defined in the Pledge
Agreement), does hereby create and grant to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the
New Pledgor's right, title and interest in and to the Collateral (as
defined in the Pledge Agreement) of the New Pledgor. Each reference to
a "Subsidiary Pledgor" or a "Pledgor" in the Pledge Agreement shall be
deemed to include the New Pledgor. The Pledge Agreement is hereby
incorporated herein by reference.
<PAGE>
SECTION 2. The New Pledgor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has
been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall
become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the
signatures of the New Pledgor and the Collateral Agent. Delivery of an
executed signature page to this Supplement by facsimile transmission
shall be as effective as delivery of a manually signed counterpart of
this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that
set forth on Schedule I attached hereto is a true and correct schedule
of all its Pledged Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in
any respect, neither party hereto shall be required to comply with such
provision for so long as such provision is held to be invalid, illegal
or unenforceable, but the validity, legality and enforceability of the
remaining provisions contained herein and in the Pledge Agreement shall
not in any way be affected or impaired. The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be
in writing and given as provided in Section 15 of the Pledge Agreement.
All communications and notices hereunder to the New Pledgor shall be
given to it [at the address set forth under its signature hereto][in
care of the Borrower].
SECTION 9. The New Pledgor agrees to reimburse the Collateral
Agent for its reasonable out-of-pocket expenses in connection with this
Supplement, including the reasonable fees, other charges and
disbursements of counsel for the Collateral Agent.
<PAGE>
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent
have duly executed this Supplement to the Pledge Agreement as of the
day and year first above written.
[NAME OF NEW PLEDGOR]
By:
-------------------------------------
Name:
Title:
Address:
SALOMON BROTHERS HOLDING
COMPANY INC, as Collateral Agent
By:
-------------------------------------
Name:
Title:
Address:
<PAGE>
Schedule I to
Supplement No.
to the Pledge Agreement
Pledged Securities of the New Pledgor
-------------------------------------
CAPITAL STOCK
Number of Registered Number and Class Percentage
Issuer Certificate Owner of Shares of Shares
- ------ ----------- ---------- ---------------- ----------
DEBT SECURITIES
Principal
Issuer Issue Amount Date of Note Maturity Date
- ------ --------- ------ ------------ -------------
<PAGE>
Schedule I to
Supplement No.
to the Pledge Agreement
Pledged Securities of the New Pledgor
-------------------------------------
CAPITAL STOCK
Number of Registered Number and Class Percentage
Issuer Certificate Owner of Shares of Shares
- ------ ----------- ---------- ---------------- ----------
DEBT SECURITIES
Principal
Issuer Issue Amount Date of Note Maturity Date
- ------ --------- ------ ------------ -------------
EXHIBIT G-2
PLEDGE AGREEMENT dated as of August 25, 1997, between DANIEL
BORISLOW (the "Pledgor") and SALOMON BROTHERS HOLDING COMPANY INC, a
Delaware corporation ("SBHC"), as collateral agent (in such capacity,
the "Collateral Agent") for the Secured Parties (as defined in the
Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders"), the Lender identified
therein as an issuing bank (the "Issuing Bank") and SBHC, as
administrative agent for the Lenders and Collateral Agent.
The Lenders have agreed to make Loans to the Borrower and
pursuant to the Credit Agreement, an Issuing Bank may agree to issue
Letters of Credit for the account of the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of Tel-Save, Inc., Emergency Transport Corp., Tel-Save
Holdings of Virginia, Inc. and the Pledgor has agreed to guarantee,
among other things, all the obligations of the Borrower under the
Credit Agreement. The obligations of the Lenders to make Loans and of
any Issuing Bank to issue Letters of Credit are conditioned upon, among
other things, the execution and delivery by the Pledgor of a Pledge
Agreement in the form hereof to secure (a) the due and punctual payment
by the Borrower of (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the
Loans, when and as due, whether at maturity, by acceleration, upon one
or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Borrower under the Credit Agreement in
respect of any Letter of Credit, when and as due, including payments in
respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Borrower to
the Secured Parties under the Credit Agreement and the other Loan
Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or
pursuant to the Credit Agreement and the other Loan Documents (all the
monetary and other obligations referred to in the preceding clauses (a)
through (c) being referred to collectively as the "Obligations").
Capitalized terms used herein and not defined herein shall have
meanings assigned to such terms in the Credit Agreement.
G-2-1
<PAGE>
Accordingly, the Pledgor and the Collateral Agent, on behalf
of itself and each Secured Party (and each of their respective
successors or assigns), hereby agree as follows:
SECTION 1. Pledge. As security for the payment and
performance, as the case may be, in full of the Obligations, the
Pledgor hereby transfers, grants, bargains, sells, conveys,
hypothecates, pledges, sets over and delivers unto the Collateral
Agent, its successors and assigns, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of the Pledgor's right,
title and interest in, to and under the shares of capital stock owned
by him and listed on Schedule I hereto and any shares of capital stock
of the Borrower obtained in the future by the Pledgor and the
certificates representing all such shares (the "Pledged Stock") (b) any
debt securities in the future issued to the Pledgor by the Borrower and
(ii) the promissory notes and any other instruments evidencing such
debt securities (the "Pledged Debt Securities"); (c) all other property
that may be delivered to and held by the Collateral Agent pursuant to
the terms hereof; (d) subject to Section 5, all payments of principal
or interest, dividends, cash, instruments and other property from time
to time received, receivable or otherwise distributed, in respect of,
in exchange for or upon the conversion of the securities referred to in
clauses (a) and (b) above; (e) subject to Section 5, all rights and
privileges of the Pledgor with respect to the securities and other
property referred to in clauses (a), (b), (c) and (d) above; and (f)
all proceeds of any of the foregoing (the items referred to in clauses
(a) through (f) above being collectively referred to as the
"Collateral"). Upon delivery to the Collateral Agent, (a) any stock
certificates, notes or other securities now or hereafter included in
the Collateral (the "Pledged Securities") shall be accompanied by stock
powers duly executed in blank or other instruments of transfer
satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request and (b) all
other property comprising part of the Collateral shall be accompanied
by proper instruments of assignment duly executed by the Pledgor and
such other instruments or documents as the Collateral Agent may
reasonably request. Each delivery of Pledged Securities shall be
accompanied by a schedule describing the securities theretofore and
then being pledged hereunder, which schedule shall be attached hereto
as Schedule I and made a part hereof. Each schedule so delivered shall
supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or
incidental thereto, unto the Collateral Agent, its successors and
assigns, for the ratable benefit of the Secured Parties, forever;
subject, however, to the terms, covenants and conditions hereinafter
set forth.
SECTION 2. Delivery of the Collateral. (a) The Pledgor agrees
promptly to deliver or cause to be delivered to the Collateral Agent
any and all Pledged Securities, and any and all certificates or other
instruments or documents representing the Collateral.
G-2-2
<PAGE>
(b) The Pledgor will cause any Indebtedness for borrowed money
owed to the Pledgor by any person and pledged hereunder to be evidenced
by a duly executed promissory note that is pledged and delivered to the
Collateral Agent pursuant to the terms thereof.
SECTION 3. Representations, Warranties and Covenants. The
Pledgor hereby represents, warrants and covenants, as to himself and
the Collateral pledged by him hereunder, to and with the Collateral
Agent that:
(a) the Pledged Stock represents that percentage as
set forth on Schedule I of the issued and outstanding shares
of each class of the capital stock of the issuer with respect
thereto;
(b) except for the security interest granted
hereunder, the Pledgor (i) is and will at all times continue
to be the direct owner, beneficially and of record, of the
Pledged Securities indicated on Schedule I, (ii) holds the
same free and clear of all Liens, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or
permit to exist any security interest in or other Lien on, the
Collateral, other than pursuant hereto, and (iv) subject to
Section 5, will cause any and all Collateral, whether for
value paid by the Pledgor or otherwise, to be forthwith
deposited with the Collateral Agent and pledged or assigned
hereunder;
(c) the Pledgor (i) has the capacity to pledge the
Collateral in the manner hereby done or contemplated and (ii)
will defend his title or interest thereto or therein against
any and all Liens (other than the Lien created by this
Agreement), however arising, of all persons whomsoever;
(d) no consent of any other person (including
creditors of the Pledgor) and no consent or approval of any
Governmental Authority or any securities exchange was or is
necessary to the validity of the pledge effected hereby;
(e) by virtue of the execution and delivery by the
Pledgor of this Agreement, when the Pledged Securities,
certificates or other documents representing or evidencing the
Collateral are delivered to the Collateral Agent in accordance
with this Agreement, the Collateral Agent will obtain a valid
and perfected first lien upon and security interest in such
Pledged Securities as security for the payment and performance
of the Obligations;
(f) the pledge effected hereby is effective to vest
in the Collateral Agent, on behalf of the Secured Parties, the
rights of the Collateral Agent in the Collateral as set forth
herein;
(g) all of the Pledged Stock has been duly authorized
and validly issued and is fully paid and nonassessable; and
G-2-3
<PAGE>
(h) all information set forth herein relating to the
Pledged Stock is accurate and complete in all material
respects as of the date hereof; and
(i) unless Pledgor shall have given Pledgee not less
than 30 days' prior notice thereof, Pledgor will not change
(i) his name or (ii) the location of his residence or place of
business.
SECTION 4. Registration in Nominee Name; Denominations. The
Collateral Agent, on behalf of the Secured Parties, shall have the
right (in its sole and absolute discretion) to hold the Pledged
Securities in its own name as pledgee, the name of its nominee (as
pledgee or as sub-agent) or the name of the Pledgor, endorsed or
assigned in blank or in favor of the Collateral Agent. The Pledgor will
promptly give to the Collateral Agent copies of any notices or other
communications received by it with respect to Pledged Securities
registered in the name of the Pledgor. The Collateral Agent shall at
all times have the right to exchange the certificates representing
Pledged Securities for certificates of smaller or larger denominations
for any purpose consistent with this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a)
Unless and until an Event of Default shall have occurred and be
continuing:
(i) The Pledgor shall be entitled to exercise any and
all voting and/or other consensual rights and powers inuring
to an owner of Pledged Securities or any part thereof for any
purpose consistent with the terms of this Agreement, the
Credit Agreement and the other Loan Documents; provided,
however, that the Pledgor will not be entitled to exercise any
such right if the result thereof could materially and
adversely affect the rights inuring to a holder of the Pledged
Securities or the rights and remedies of any of the Secured
Parties under this Agreement or the Credit Agreement or any
other Loan Document or the ability of the Secured Parties to
exercise the same.
(ii) The Collateral Agent shall execute and deliver
to the Pledgor, or cause to be executed and delivered to the
Pledgor, all such proxies, powers of attorney and other
instruments as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to exercise the voting and/or
consensual rights and powers it is entitled to exercise
pursuant to subparagraph (i) above and to receive the cash
dividends it is entitled to receive pursuant to subparagraph
(iii) below.
(iii) The Pledgor shall be entitled to receive and
retain any and all cash dividends, interest and principal paid
on the Pledged Securities to the extent and only to the extent
that such cash dividends, interest and principal are permitted
by, and otherwise paid in accordance with, the terms and
conditions of the Credit Agreement, the other Loan Documents
and applicable laws. All noncash dividends, interest and
principal, and all dividends, interest and principal paid or
payable in cash or otherwise in connection with a partial or
total liquidation or
G-2-4
<PAGE>
dissolution, return of capital, capital surplus or paid-in
surplus, and all other distributions (other than distributions
referred to in the preceding sentence) made on or in respect
of the Pledged Securities, whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination
or reclassification of the outstanding capital stock of the
issuer of any Pledged Securities or received in exchange for
Pledged Securities or any part thereof, or in redemption
thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer
may be a party or otherwise, shall be and become part of the
Collateral, and, if received by the Pledgor, shall not be
commingled by the Pledgor with any of its other funds or
property but shall be held separate and apart therefrom, shall
be held in trust for the benefit of the Collateral Agent and
shall be forthwith delivered to the Collateral Agent in the
same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to dividends, interest or
principal that the Pledgor is authorized to receive pursuant to
paragraph (a)(iii) above shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the
sole and exclusive right and authority to receive and retain such
dividends, interest or principal. All dividends, interest or principal
received by any Pledgor contrary to the provisions of this Section 5
shall be held in trust for the benefit of the Collateral Agent, shall
be segregated from other property or funds of the Pledgor and shall be
forthwith delivered to the Collateral Agent upon demand in the same
form as so received (with any necessary endorsement). Any and all money
and other property paid over to or received by the Collateral Agent
pursuant to the provisions of this paragraph (b) shall be retained by
the Collateral Agent in an account to be established by the Collateral
Agent upon receipt of such money or other property and shall be applied
in accordance with the provisions of Section 7. After all Events of
Default have been cured or waived, the Collateral Agent shall, within
five Business Days after all such Events of Default have been cured or
waived, repay to the Pledgor all cash dividends, interest or principal
(without interest), that the Pledgor would otherwise be permitted to
retain pursuant to the terms of paragraph (a)(iii) above and which
remain in such account.
(c) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to exercise the voting and
consensual rights and powers it is entitled to exercise pursuant to
paragraph (a)(i) of this Section 5, and the obligations of the
Collateral Agent under paragraph (a)(ii) of this Section 5, shall
cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and
authority to exercise such voting and consensual rights and powers,
provided that, unless otherwise directed by the Required Lenders, the
Collateral Agent shall have the right from time to time following and
during the continuance of an Event of Default to permit the Pledgor to
exercise such rights. After all Events of Default have been cured or
waived, the Pledgor will have the right to exercise the voting and
consensual rights and powers that it would otherwise be entitled to
exercise pursuant to the terms of paragraph (a)(i) above.
G-2-5
<PAGE>
SECTION 6. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, subject to applicable
regulatory and legal requirements, the Collateral Agent may sell the
Collateral, or any part thereof, at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or
for future delivery as the Collateral Agent shall deem appropriate. The
Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers
to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to
the distribution or sale thereof, and upon consummation of any such
sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold.
Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Pledgor,
and, to the extent permitted by applicable law, the Pledgor hereby
waives all rights of redemption, stay, valuation and appraisal the
Pledgor now has or may at any time in the future have under any rule of
law or statute now existing or hereafter enacted.
The Collateral Agent shall give a Pledgor 10 days' prior
written notice (which the Pledgor agrees is reasonable notice within
the meaning of Section 9-504(3) of the Uniform Commercial Code as in
effect in the State of New York or its equivalent in other
jurisdictions) of the Collateral Agent's intention to make any sale of
the Pledgor's Collateral. Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale
at a broker's board or on a securities exchange, shall state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such
board or exchange. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice of such sale. At any
such sale, the Collateral, or portion thereof, to be sold may be sold
in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The
Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral
is made on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the sale price is paid in full
by the purchaser or purchasers thereof, but the Collateral Agent shall
not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At
any public (or, to the extent permitted by applicable law, private)
sale made pursuant to this Section 6, any Secured Party may bid for or
purchase, free from any right of redemption, stay or appraisal on the
part of the Pledgor (all said rights being also hereby waived and
released), the Collateral or any part thereof offered for sale and may
make payment on account thereof by using any claim then due and payable
to it
G-2-6
<PAGE>
from the Pledgor as a credit against the purchase price, and it may,
upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to the Pledgor therefor.
For purposes hereof, (a) a written agreement to purchase the Collateral
or any portion thereof shall be treated as a sale thereof, (b) the
Collateral Agent shall be free to carry out such sale pursuant to such
agreement and (c) the Pledgor shall not be entitled to the return of
the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Collateral Agent shall have entered into such
an agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of
sale herein conferred upon it, the Collateral Agent may proceed by a
suit or suits at law or in equity to foreclose upon the Collateral and
to sell the Collateral or any portion thereof pursuant to a judgment or
decree of a court or courts having competent jurisdiction or pursuant
to a proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Section 6 shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-504(3) of
the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of
any sale of Collateral pursuant to Section 6, as well as any Collateral
consisting of cash, shall be applied by the Collateral Agent as
follows:
FIRST, to the payment of all costs and expenses
incurred by the Collateral Agent in connection with such sale
or otherwise in connection with this Agreement, any other Loan
Document or any of the Obligations, including all court costs
and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Collateral
Agent hereunder or under any other Loan Document on behalf of
the Pledgor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder
or under any other Loan Document;
SECOND, to the payment in full of the Obligations
(the amounts so applied to be distributed among the Secured
Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgor, his successors or assigns, or
as a court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the
time of application of any such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the
Collateral Agent (including pursuant to a power of sale granted by
statute or under a judicial proceeding), the receipt of the purchase
money by the Collateral Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money
paid over to
G-2-7
<PAGE>
the Collateral Agent or such officer or be answerable in any way for
the misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) The Pledgor
agrees to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, other charges
and disbursements of its counsel and of any experts or agents, that the
Collateral Agent may incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder or (iv) the failure by the Pledgor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations
under the other Loan Documents, the Pledgor agrees to indemnify the
Collateral Agent and the Indemnitees (as defined in Section 9.05 of the
Credit Agreement) against, and hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, other charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in any
way connected with, or as a result of (i) the execution or delivery of
this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations thereunder or the
consummation of the Transactions and the other transactions
contemplated thereby or (ii) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c) Any amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security
Documents. The provisions of this Section 8 shall remain operative and
in full force and effect regardless of the termination of this
Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any
other Loan Document or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party. All amounts due under this
Section 8 shall be payable on written demand therefor and shall bear
interest at the rate specified in Section 2.06 of the Credit Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. The
Pledgor hereby appoints the Collateral Agent the attorney-in-fact of
the Pledgor for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, the
Collateral Agent shall have the right, upon the occurrence and during
the continuance of an Event of Default, with full power of
G-2-8
<PAGE>
substitution either in the Collateral Agent's name or in the name of
the Pledgor, to ask for, demand, sue for, collect, receive and give
acquittance for any and all moneys due or to become due under and by
virtue of any Collateral, to endorse checks, drafts, orders and other
instruments for the payment of money payable to the Pledgor
representing any interest or dividend or other distribution payable in
respect of the Collateral or any part thereof or on account thereof and
to give full discharge for the same, to settle, compromise, prosecute
or defend any action, claim or proceeding with respect thereto, and to
sell, assign, endorse, pledge, transfer and to make any agreement
respecting, or otherwise deal with, the same; provided, however, that
nothing herein contained shall be construed as requiring or obligating
the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral
Agent, or to present or file any claim or notice, or to take any action
with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby. The
Collateral Agent and the other Secured Parties shall be accountable
only for amounts actually received as a result of the exercise of the
powers granted to them herein, and neither they nor their officers,
directors, employees or agents shall be responsible to the Pledgor for
any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Collateral Agent hereunder and of the other
Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provisions of this Agreement or consent to any
departure by the Pledgor therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on the Pledgor
in any case shall entitle the Pledgor to any other or further notice or
demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement
entered into between the Collateral Agent and the Pledgor, subject to
any consent required in accordance with Section 9.08 of the Credit
Agreement.
SECTION 11. Securities Act, etc. In view of the position of
the Pledgor in relation to the Pledged Securities, or because of other
current or future circumstances, a question may arise under the
Securities Act of 1933, as now or hereafter in effect, or any similar
statute hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being called
the "Federal Securities Laws") with respect to any disposition of the
Pledged Securities permitted hereunder. The Pledgor understands that
compliance with the Federal Securities Laws might very strictly
G-2-9
<PAGE>
limit the course of conduct of the Collateral Agent if the Collateral
Agent were to attempt to dispose of all or any part of the Pledged
Securities, and might also limit the extent to which or the manner in
which any subsequent transferee of any Pledged Securities could dispose
of the same. Similarly, there may be other legal restrictions or
limitations affecting the Collateral Agent in any attempt to dispose of
all or part of the Pledged Securities under applicable Blue Sky or
other state securities laws or similar laws analogous in purpose or
effect. The Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the
Pledged Securities, limit the purchasers to those who will agree, among
other things, to acquire such Pledged Securities for their own account,
for investment, and not with a view to the distribution or resale
thereof. The Pledgor acknowledges and agrees that in light of such
restrictions and limitations, the Collateral Agent, in its sole and
absolute discretion, (a) may proceed to make such a sale whether or not
a registration statement for the purpose of registering such Pledged
Securities or part thereof shall have been filed under the Federal
Securities Laws and (b) may approach and negotiate with a single
potential purchaser to effect such sale. The Pledgor acknowledges and
agrees that any such sale might result in prices and other terms less
favorable to the seller than if such sale were a public sale without
such restrictions. In the event of any such sale, the Collateral Agent
shall incur no responsibility or liability for selling all or any part
of the Pledged Securities at a price that the Collateral Agent, in its
sole and absolute discretion, may in good faith deem reasonable under
the circumstances, notwithstanding the possibility that a substantially
higher price might have been realized if the sale were deferred until
after registration as aforesaid or if more than a single purchaser were
approached. The provisions of this Section 11 will apply
notwithstanding the existence of a public or private market upon which
the quotations or sales prices may exceed substantially the price at
which the Collateral Agent sells.
SECTION 12. Registration, etc. The Pledgor agrees that, upon
the occurrence and during the continuance of an Event of Default
hereunder, if for any reason the Collateral Agent desires to sell any
of the Pledged Securities of the Borrower at a public sale, it will, at
any time and from time to time, upon the written request of the
Collateral Agent, use its best efforts to take or to cause the issuer
of such Pledged Securities to take such action and prepare, distribute
and/or file such documents, as are required or advisable in the
reasonable opinion of counsel for the Collateral Agent to permit the
public sale of such Pledged Securities. The Pledgor further agrees to
indemnify, defend and hold harmless the Collateral Agent, each other
Secured Party, any underwriter and their respective officers,
directors, affiliates and controlling persons from and against all
loss, liability, expenses, costs of counsel (including, without
limitation, reasonable fees and expenses to the Collateral Agent of
legal counsel), and claims (including the costs of investigation) that
they may incur insofar as such loss, liability, expense or claim arises
out of or is based upon any alleged untrue statement of a material fact
contained in any prospectus (or any amendment or supplement thereto) or
in any notification or offering circular, or arises out of or is based
upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements in any thereof not
misleading, except insofar as the same may have been caused by any
untrue statement or
G-2-10
<PAGE>
omission based upon information furnished in writing to the Pledgor or
the issuer of such Pledged Securities by the Collateral Agent or any
other Secured Party expressly for use therein. The Pledgor further
agrees, upon such written request referred to above, to use its best
efforts to cause the issuer of such Pledged Securities to qualify, file
or register, any of the Pledged Securities under the Blue Sky or other
securities laws of such states as may be requested by the Collateral
Agent and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. The Pledgor will bear all
costs and expenses of carrying out its obligations under this Section
12. The Pledgor acknowledges that there is no adequate remedy at law
for failure by the Pledgor to comply with the provisions of this
Section 12 and that such failure would not be adequately compensable in
damages, and therefore agrees that his agreements contained in his
Section 12 may be specifically enforced.
SECTION 13. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the grant of a security interest in the
Collateral and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement
or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or
any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the
foregoing, (c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or
departure from any guaranty, for all or any of the Obligations or (d)
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the
Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
SECTION 14. Termination or Release. (a) This Agreement and the
security interests granted hereby shall terminate when all the
Obligations have been indefeasibly paid in full and the Lenders have no
further commitment to lend under the Credit Agreement, the L/C Exposure
has been reduced to zero and the Issuing Bank has no further obligation
to issue Letters of Credit under the Credit Agreement.
(b) Upon any sale or other transfer by the Pledgor of any
Collateral that is permitted under the Credit Agreement, or, upon the
effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.08(b)
of the Credit Agreement, the security interest in such Collateral shall
be automatically released.
(c) In connection with any termination or release pursuant to
paragraph (a) or (b), the Collateral Agent shall execute and deliver to
the Pledgor, at the Pledgor's expense, all documents that the Pledgor
shall reasonably request to evidence such termination or release. Any
execution and delivery of documents pursuant to this Section 14 shall
be without recourse to or warranty by the Collateral Agent.
G-2-11
<PAGE>
SECTION 15. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 9.01 of the Credit
Agreement.
SECTION 16. Further Assurances. The Pledgor agrees to do such
further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral
Agent may at any time reasonably request in connection with the
administration and enforcement of this Agreement or with respect to the
Collateral or any part thereof or in order better to assure and confirm
unto the Collateral Agent its rights and remedies hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments.
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of
such party; and all covenants, promises and agreements by or on behalf
of the Pledgor that are contained in this Agreement shall bind and
inure to the benefit of its successors and assigns. This Agreement
shall become effective when a counterpart hereof executed on behalf of
the Pledgor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral
Agent, and thereafter shall be binding upon the Pledgor and the
Collateral Agent and their respective successors and assigns, and shall
inure to the benefit of the Pledgor, the Collateral Agent and the other
Secured Parties, and their respective successors and assigns, except
that the Pledgor shall not have the right to assign its rights
hereunder or any interest herein or in the Collateral (and any such
attempted assignment shall be void), except as expressly contemplated
by this Agreement or the other Loan Documents.
SECTION 18. Survival of Agreement; Severability. (a) All
covenants, agreements, representations and warranties made by the
Pledgor herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other
Loan Document shall be considered to have been relied upon by the
Collateral Agent and the other Secured Parties and shall survive the
making by the Lenders of the Loans and the issuance of the Letters of
Credit by the Issuing Bank, regardless of any investigation made by the
Secured Parties or on their behalf, and shall continue in full force
and effect as long as the principal of or any accrued interest on any
Loan or any other fee or amount payable under this Agreement or any
other Loan Document is outstanding and unpaid or the L/C Exposure does
not equal zero and as long as the Commitments and the L/C Commitments
have not been terminated.
(b) In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid
provisions the
G-2-12
<PAGE>
economic effect of which comes as close as possible to that of the
invalid, illegal or unenforceable provisions.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 20. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original,
but all of which, when taken together, shall constitute a single
contract, and shall become effective as provided in Section 17.
Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission shall be as effective as delivery
of a manually executed counterpart of this Agreement.
G-2-13
<PAGE>
SECTION 21. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement. Section headings used herein are for
convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting this Agreement.
SECTION 22. Jurisdiction; Consent to Service of Process. (a)
The Pledgor hereby irrevocably and unconditionally submits, for himself
and his property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that, to the extent permitted by applicable law, all claims in
respect of any such action or proceeding may be heard and determined in
such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that
the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Pledgor or its properties in the courts of
any jurisdiction.
(b) The Pledgor hereby irrevocably and unconditionally waives,
to the fullest extent he may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this
Agreement or the other Loan Documents in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum
to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 15.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
OR HE MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT OR HE
HAVE BEEN INDUCED TO ENTER INTO THIS
G-2-14
<PAGE>
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION.
* * *
G-2-15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
DANIEL BORISLOW
------------------------------------------
SALOMON BROTHERS HOLDING
COMPANY INC, as Collateral Agent
By: _______________________________________
Name:
Title:
G-2-16
<PAGE>
Schedule I to the
Exhibit G-2
CAPITAL STOCK
Number of Registered Number and Percentage
Issuer Certificate Owner Class of Shares of Shares
- ------ ----------- ---------- ---------------- ----------
G-2-17
EXHIBIT H
SECURITY AGREEMENT dated as of August 25, 1997, among Tel-Save
Holdings, Inc. (the "Borrower"), each subsidiary of the Borrower listed
on the signature page hereto (the Borrower and each such subsidiary
individually a "Grantor" and collectively, the "Grantors") and SALOMON
BROTHERS HOLDING COMPANY INC, a Delaware corporation ("SBHC"), as
collateral agent (in such capacity, the "Collateral Agent") for the
Secured Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders") and SBHC, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent") and Collateral Agent and (b) the Guarantee
Agreement dated as of August 25, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Guarantee Agreement"), among
the Guarantors party thereto and the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower, and an
Issuing Bank may agree to issue Letters of Credit for the account of
the Borrower, pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. Each of the Grantors
other than the Borrower has agreed to guarantee, among other things,
all the obligations of the Borrower under the Credit Agreement. The
obligations of the Lenders to make Loans and of any Issuing Bank to
issue Letters of Credit are conditioned upon, among other things, the
execution and delivery by the Grantors of an agreement in the form
hereof to secure (a) the due and punctual payment by the Borrower of
(i) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed
or allowable in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower
under the Credit Agreement in respect of any Letter of Credit, when and
as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash
collateral and (iii) all other monetary obligations, including fees,
costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in
such proceeding), of the Borrower to the Secured Parties under the
Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities
of the Borrower under or pursuant to the Credit Agreement and the other
Loan Documents and (c) the due and punctual payment and performance of
all the covenants, agreements, obligations and liabilities of each Loan
H-1
<PAGE>
Party under or pursuant to this Agreement and the other Loan Documents
(all the monetary and other obligations described in the preceding
clauses (a) through (c) being collectively called the "Obligations").
Accordingly, the Grantor and the Collateral Agent, on behalf
of itself and each Secured Party (and each of their respective
successors or assigns), hereby agree as follows:
<PAGE>
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the
context otherwise requires, all capitalized terms used but not defined
herein shall have the meanings set forth in the Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used
herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may
become obligated to the Grantor under, with respect to or on account of
an Account.
"Accounts" shall mean any and all right, title and interest of
the Grantor to payment for goods and services sold or leased, including
any such right evidenced by chattel paper, whether due or to become
due, whether or not it has been earned by performance, and whether now
or hereafter acquired or arising in the future, including accounts
receivable from Affiliates of the Grantor.
"Accounts Receivable" shall mean all "accounts" as such term
is used in Section 9-106 of the UCC and, to the extent not included
within such definition, all accounts receivable, book debts and other
forms of obligations, whether arising out of goods sold or services
rendered by Grantor or from any other transaction, including, without
limitation, any such obligation which might be characterized as an
account or contract right under the UCC, and all of Grantor's rights
in, to and under all purchase orders or receipts for goods or services,
all of Grantor's rights to any goods represented by any of the
foregoing, all moneys due or to become due to Grantor under all
contracts for the sale of goods or the performance of services or both
by Grantor (whether or not yet earned by performance on the part of
Grantor or in any other transaction), now in existence or hereafter
occurring, and expressly including, without limitation, rights to
receive the proceeds of, from or in connection with purchase orders or
contracts for the provision of telephone and other communication
services, including, without limitation, all agreements with and sums
due from customers and other persons, and all books and records
recording, evidencing or relating to such rights or any part thereof,
and all collateral security and guarantees of any kind given by any
person with respect to any of the foregoing.
"Collateral" shall mean all (a) Accounts, (b) Contracts and
Leases, (c) Equipment and Licenses, (d) Furniture and Fixtures, (e)
General Intangibles, (f) Inventory, (g) cash and cash accounts, (h)
Miscellaneous Items and (i) Proceeds.
"Contracts and Leases" shall mean all contracts, undertakings,
leases or other agreements in or under which Grantor may now or
hereafter have any right, title or interest including, without
limitation, (a) construction contracts, subscriber contracts,
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customer service agreements, management agreements, rights of way,
easements, tower agreements, cell site agreements, pole attachment
agreements, transmission capacity agreements, public utility contracts
and other agreements to which the Grantor is a party, whether now
existing or hereafter arising; (b) lease agreements for real or
personal property to which the Grantor is a party, whether now existing
or hereafter arising; and (c) other contracts and contractual rights,
remedies or provisions now existing or hereafter arising in favor of
the Grantor, including, with respect to an Account, any agreement
relating to the terms of performance thereof.
"Copyright License" shall mean any written agreement, now or
hereafter in effect, granting any right to any third party under any
Copyright now or hereafter owned by the Grantor or which the Grantor
otherwise has the right to license, or granting any right to the
Grantor under any Copyright now or hereafter owned by any third party,
and all rights of the Grantor under any such agreement.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all copyright rights in any work
subject to the copyright laws of the United States or any other
country, whether as author, assignee, transferee or otherwise, and (b)
all registrations and applications for registration of any such
copyright in the United States or any other country, including
registrations, recordings, supplemental registrations and pending
applications for registration in the United States Copyright Office.
"Credit Agreement" shall have the meaning assigned to such
term in the preliminary statement of this Agreement.
"Equipment and Licenses " shall mean all "equipment" as such
term is defined in Section 9-109(2) of the UCC and, to the extent not
included within such definition, all machinery, equipment, furnishings,
vehicles, fixtures, and supplies (installed and uninstalled), and any
and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed or to be installed thereon
or affixed or to be affixed thereto, including, without limitation, all
equipment located at telephone switching office facilities; any
distribution systems and all components thereof, including but not
limited to hardware, cables, fiber optic cables, switches, computer
equipment, amplifiers, and associated devices; and any other equipment
used in connection with the Grantor's business; and all franchises,
licenses, permits and operating rights authorizing or relating to the
Grantor's rights to operate and maintain telecommunications or other
related business.
"Furniture and Fixtures" shall mean all of the Debtor's right,
title and interest in and to all furniture and fixtures in which the
Debtor has an ownership, leasehold or similar legal interest.
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"General Intangibles" shall mean all "general intangibles" as
such term is defined in Section 9-106 of the UCC and, to the extent not
included within such definition, all personal property, all goodwill,
permits, customer lists, patents, copyrights, proprietary or
confidential information, inventions (whether patented or patentable or
not), technical information, procedures, trademarks, trademark
applications, trade names, trade secrets, designs, knowledge, know-how,
software, data, databases, skill, expertise, experience, processes,
models, drawings, materials and records, industrial or intellectual
property or rights therein, whether under license or otherwise, all
right, title and interest in any of the foregoing, including, without
limitation, all rights to receive payment or property upon or in
connection with any transfer of any license, claims for tax refunds,
tax refund amounts and rights of indemnification, in each case, whether
now owned or hereafter acquired by the Grantor.
"Intellectual Property" shall mean all intellectual and
similar property of the Grantor of every kind and nature now owned or
hereafter acquired by the Grantor, including inventions, designs,
Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential
or proprietary technical and business information, know-how, show-how
or other data or information, software and databases and all
embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and
accessions to, and books and records describing or used in connection
with, any of the foregoing.
"Inventory" shall mean all "inventory" as such term is defined
in Section 9-109(4) of the UCC and to the extent not included within
such definition, all inventory, supplies, merchandise, goods and other
personal property of whatsoever nature and kind, and wherever situated,
including, without limitation any inventory held for lease or sale or
which are furnished or are to be furnished under a contract of service,
or which constitute raw materials, components, work in process,
finished goods, goods in transit, materials used or consumed or to be
used or consumed in Grantor's business, packing and shipping materials,
and all accretions and accessions thereto, trust receipts and similar
documents covering the same products.
"Miscellaneous Items" shall mean all goods, chattel paper,
documents, instruments, supplies, choses in action, claims, money,
deposits, certificates of deposit, stock or share certificates
(including, without limitation, the stock of any subsidiaries of the
Grantor now existing or hereafter created or acquired) and licenses and
other rights in intellectual property not otherwise included as
"collateral" hereunder and including, without limitation, all other
investment property of Grantor to the extent not otherwise included
above, including all securities, security entitlements, securities
accounts and commodity contracts.
"Obligations" shall have the meaning assigned to such term in
the preliminary statement of this Agreement.
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"Patent License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to make, use
or sell any invention on which a Patent, now or hereafter owned by the
Grantor or which the Grantor otherwise has the right to license, is in
existence, or granting to the Grantor any right to make, use or sell
any invention on which a Patent, now or hereafter owned by any third
party, is in existence, and all rights of the Grantor under any such
agreement.
"Patents" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof,
and all applications for letters patent of the United States or any
other country, including registrations, recordings and pending
applications in the United States Patent and Trademark Office or any
similar offices in any other country, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions
thereof, and the inventions disclosed or claimed therein, including the
right to make, use and/or sell the inventions disclosed or claimed
therein.
"Perfection Certificate" shall mean a certificate
substantially in the form of Annex 2 hereto, completed and supplemented
with the schedules and attachments contemplated thereby, and duly
executed by a Financial Officer and the chief legal officer of the
Borrower.
"Proceeds" shall mean to the extent not otherwise included as
"Collateral" hereunder, all "proceeds", as such term is defined in
Section 9-306(1) of the UCC, of each item of Collateral, and, to the
extent not included within such definition, any and all proceeds of any
loss of, damage to or destruction of the above, whether insured or not
insured, and all other proceeds of any sale, lease or other disposition
of any property or interest therein referred to herein, together with
all proceeds of any policies of insurance covering any item of
Collateral, any and all proceeds of any award with respect to the
requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the property or assets of the Grantor, any and all
proceeds of any insurance, indemnity, warranty or guarantee payable to
Grantor from time to time with respect to any property or assets of the
Grantor, any rebates or refunds, whether for taxes or otherwise, and
any and all other amounts from time to time paid or payable (in
whatever form) under, in connection with or with respect to any
property or assets of the Grantor, and all proceeds of any such
proceeds.
"Secured Parties" shall mean (a) the Lenders, (b) the
Administrative Agent, (c) the Collateral Agent, (d) the Issuing Bank,
(e) the beneficiaries of each indemnification obligation undertaken by
any Grantor under any Loan Document and (f) the successors and assigns
of each of the foregoing.
"Security Interest" shall have the meaning assigned to such
term in Section 2.01.
"Trademark License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to use any
Trademark now or hereafter owned
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by the Grantor or which the Grantor otherwise has the right to license,
or granting to the Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of the Grantor under
any such agreement.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all trademarks, service marks,
trade names, corporate names, company names, business names, fictitious
business names, trade styles, trade dress, logos, other source or
business identifiers, designs and general intangibles of like nature,
now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all registration and recording applications
filed in connection therewith, including registrations and registration
applications in the United States Patent and Trademark Office, any
State of the United States or any similar offices in any other country
or any political subdivision thereof, and all extensions or renewals
thereof, (b) all goodwill associated therewith or symbolized thereby
and (c) all other assets, rights and interests that uniquely reflect or
embody such goodwill.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of New York; provided, however,
in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of any Secured Party's
interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, or by
the laws of a jurisdiction other than a state of the United States, the
term "UCC" shall mean the Uniform Commercial Code as in effect in such
other jurisdiction or such other laws, as the case may be, for purposes
of the provisions hereof relating to such attachment, perfection or
priority.
SECTION 1.03. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement.
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment
or performance, as the case may be, in full of the Obligations, the
Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages,
pledges, hypothecates and transfers to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties,
and hereby grants to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, a security interest in,
all of the Grantor's right, title and interest in, to and under the
Collateral (the "Security Interest"). Without limiting the foregoing,
the Collateral Agent is hereby authorized to file one or more financing
statements (including fixture filings), continuation statements, or
other documents for the purpose of perfecting, confirming, continuing,
enforcing or protecting the Security Interest granted by the Grantor,
without the signature of the Grantor, and naming the Grantor as the
debtor and
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the Collateral Agent as secured party. Notwithstanding anything else
herein, the Grantor's grant of the Security Interest with respect to
Grantor's rights under any contract or agreement to which Grantor is a
party on the date hereof shall be effective hereunder only to the
extent such grant is permitted or not prohibited by the terms of such
contract or agreement.
SECTION 2.02. No Assumption of Liability. The Security
Interest is granted as security only and shall not subject the
Collateral Agent or any other Secured Party to, or in any way alter or
modify, any obligation or liability of the Grantor with respect to or
arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantor represents and warrants to the Collateral Agent
and the Secured Parties that:
SECTION 3.01. Title and Authority. The Grantor has good and
valid rights in and title to the Collateral with respect to which it
has purported to grant a Security Interest hereunder and has full power
and authority to grant to the Collateral Agent the Security Interest in
such Collateral pursuant hereto and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the
consent or approval of any other person other than any consent or
approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been
duly prepared, completed and executed and the information set forth
therein is correct and complete. Fully executed Uniform Commercial Code
financing statements (including fixture filings, as applicable) or
other appropriate filings, recordings or registrations containing a
description of the Collateral have been delivered to the Collateral
Agent for filing in each governmental, municipal or other office
specified in Schedule 6 to the Perfection Certificate, which are all
the filings, recordings and registrations that are necessary to publish
notice of and protect the validity of and to establish a legal, valid
and perfected security interest in favor of the Collateral Agent (for
the ratable benefit of the Secured Parties) in respect of all
Collateral in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording,
registration or reregistration is necessary in any such jurisdiction,
except as provided under applicable law with respect to the filing of
continuation statements.
(b) [Reserved].
SECTION 3.03. Validity of Security Interest. The Security
Interest constitutes (a) a legal and valid security interest in all the
Collateral securing the payment and
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performance of the Obligations and (b) subject to the filings described
in Section 3.02 above, a perfected security interest in all Collateral
in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United
States (or any political subdivision thereof) and its territories and
possessions pursuant to the Uniform Commercial Code or other applicable
law in such jurisdictions. The Security Interest is and shall be prior
to any other Lien on any of the Collateral, other than Liens expressly
permitted to be prior to the Security Interest pursuant to Section 6.02
of the Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned
by the Grantor free and clear of any Lien, except for Liens expressly
permitted pursuant to Section 6.02 of the Credit Agreement. None of the
Grantors has filed or consented to the filing of (a) any financing
statement or analogous document under the Uniform Commercial Code or
any other applicable laws covering any Collateral or (b) any assignment
in which the Grantor assigns any Collateral or any security agreement
or similar instrument covering any Collateral with any foreign
governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar
instrument is still in effect, except, in each case, for Liens
expressly permitted pursuant to Section 6.02 of the Credit Agreement.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records;
Place of Business. (a) The Grantor agrees promptly to notify the
Collateral Agent in writing of any change (i) in its corporate name or
in any trade name used to identify it in the conduct of its business or
in the ownership of its properties, (ii) in the location of its chief
executive office, its principal place of business, any office in which
it maintains books or records relating to Collateral owned by it or any
office or facility at which Collateral owned by it is located
(including the establishment of any such new office or facility), (iii)
in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number. The Grantor agrees not to effect or permit any
change referred to in the preceding sentence unless all filings have
been made under the Uniform Commercial Code or otherwise that are
required in order for the Collateral Agent to continue at all times
following such change to have a valid, legal and perfected first
priority security interest in all the Collateral. The Grantor agrees
promptly to notify the Collateral Agent if any material portion of the
Collateral owned or held by such Grantor is damaged or destroyed.
(b) The Grantor agrees to maintain, at its own cost and
expense, such complete and accurate records with respect to the
Collateral owned by it as is consistent with its current practices and
in accordance with such prudent and standard practices used in
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industries that are the same as or similar to those in which the
Grantor is engaged, but in any event to include complete accounting
records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the
Collateral Agent may reasonably request, promptly to prepare and
deliver to the Collateral Agent a duly certified schedule or schedules
in form and detail satisfactory to the Collateral Agent showing the
identity, amount and location of any and all Collateral.
SECTION 4.02. Periodic Certification. Each year, at the time
of delivery of annual financial statements with respect to the
preceding fiscal year pursuant to Section 5.04 of the Credit Agreement,
the Borrower shall deliver to the Collateral Agent a certificate
executed by a Financial Officer and the chief legal officer of the
Borrower (a) setting forth the information required pursuant to Section
2 of the Perfection Certificate or confirming that there has been no
change in such information since the date of such certificate or the
date of the most recent certificate delivered pursuant to Section 4.02
and (b) certifying that all Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations, including all
refilings, rerecordings and reregistrations, containing a description
of the Collateral have been filed of record in each governmental,
municipal or other appropriate office in each jurisdiction identified
pursuant to clause (a) above to the extent necessary to protect and
perfect the Security Interest for a period of not less than 18 months
after the date of such certificate (except as noted therein with
respect to any continuation statements to be filed within such period).
SECTION 4.03. Protection of Security. The Grantor shall, at
its own cost and expense, take any and all actions necessary to defend
title to the Collateral against all persons and to defend the Security
Interest of the Collateral Agent in the Collateral and the priority
thereof against any Lien not expressly permitted pursuant to Section
6.02 of the Credit Agreement.
SECTION 4.04. Further Assurances. The Grantor agrees, at its
own expense, to execute, acknowledge, deliver and cause to be duly
filed all such further instruments and documents and take all such
actions as the Collateral Agent may from time to time request to better
assure, preserve, protect and perfect the Security Interest and the
rights and remedies created hereby, including the payment of any fees
and taxes required in connection with the execution and delivery of
this Agreement, the granting of the Security Interest and the filing of
any financing statements (including fixture filings) or other documents
in connection herewith or therewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by
any promissory note or other instrument, such note or instrument shall
be immediately pledged and delivered to the Collateral Agent, duly
endorsed in a manner satisfactory to the Collateral Agent.
SECTION 4.05. Inspection and Verification. The Collateral
Agent and such persons as the Collateral Agent may reasonably designate
shall have the right, at the Grantor's own cost and expense, to inspect
the Collateral, all records related thereto (and
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to make extracts and copies from such records) and the premises upon
which any of the Collateral is located, to discuss the Grantor's
affairs with the officers of the Grantor and its independent
accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other
matter relating to, the Collateral, including, in the case of Accounts
or Collateral in the possession of any third person, by contacting
Account Debtors or the third person possessing such Collateral for the
purpose of making such a verification. The Collateral Agent shall have
the absolute right to share any information it gains from such
inspection or verification with any Secured Party (it being understood
that any such information shall be deemed to be "Information" subject
to the provisions of Section 9.16).
SECTION 4.06. Taxes; Encumbrances. At its option, the
Collateral Agent may discharge past due taxes, assessments, charges,
fees, Liens, security interests or other encumbrances at any time
levied or placed on the Collateral and not permitted pursuant to
Section 6.02 of the Credit Agreement, and may pay for the maintenance
and preservation of the Collateral to the extent the Grantor fails to
do so as required by the Credit Agreement or this Agreement, and the
Grantor agrees to reimburse the Collateral Agent on demand for any
payment made or any expense incurred by the Collateral Agent pursuant
to the foregoing authorization; provided, however, that nothing in this
Section 4.06 shall be interpreted as excusing the Grantor from the
performance of, or imposing any obligation on the Collateral Agent or
any Secured Party to cure or perform, any covenants or other promises
of the Grantor with respect to taxes, assessments, charges, fees,
liens, security interests or other encumbrances and maintenance as set
forth herein or in the other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time
the Grantor shall take a security interest in any property of an
Account Debtor or any other person to secure payment and performance of
an Account, the Grantor shall promptly assign such security interest to
the Collateral Agent. Such assignment need not be filed of public
record unless necessary to continue the perfected status of the
security interest against creditors of and transferees from the Account
Debtor or other person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantor. The
Grantor shall remain liable to observe and perform all the conditions
and obligations to be observed and performed by it under each contract,
agreement or instrument relating to the Collateral, all in accordance
with the terms and conditions thereof, and the Grantor agrees to
indemnify and hold harmless the Collateral Agent and the Secured
Parties from and against any and all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. The Grantor
shall not make or permit to be made an assignment, pledge or
hypothecation of the Collateral nor shall it grant any other Lien in
respect of the Collateral, except as expressly permitted by Section
6.02 of the Credit Agreement. The Grantor shall not make or permit to
be made any transfer of the Collateral and the Grantor shall remain at
all times in possession of the
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Collateral owned by it, except that (a) Inventory may be sold in the
ordinary course of business and (b) unless and until the Collateral
Agent shall notify the Grantor that an Event of Default shall have
occurred and be continuing and that during the continuance thereof the
Grantor shall not sell, convey, lease, assign, transfer or otherwise
dispose of any Collateral (which notice may be given by telephone if
promptly confirmed in writing), the Grantor may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of
this Agreement, the Credit Agreement or any other Loan Document.
Without limiting the generality of the foregoing, the Grantor agrees
that it shall not permit any Inventory to be in the possession or
control of any warehouseman, bailee, agent or processor at any time
unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to
hold the Inventory subject to the Security Interest and the
instructions of the Collateral Agent and to waive and release any Lien
held by it with respect to such Inventory, whether arising by operation
of law or otherwise.
SECTION 4.10. Limitation on Modification of Accounts. The
Grantor will not, without the Collateral Agent's prior written consent,
grant any extension of the time of payment of any of the Accounts
Receivable, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any person liable for
the payment thereof or allow any credit or discount whatsoever thereon,
other than extensions, credits, discounts, compromises or settlements
granted or made in the ordinary course of business and consistent with
its current practices and in accordance with such prudent and standard
practices used in industries that are the same as or similar to those
in which the Grantor is engaged.
SECTION 4.11. Insurance. The Grantor, at its own expense,
shall maintain or cause to be maintained insurance covering physical
loss or damage to the Inventory and Equipment in accordance with
Section 5.02 of the Credit Agreement. The Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as the
Grantor's true and lawful agent (and attorney-in-fact) for the purpose,
during the continuance of an Event of Default, of making, settling and
adjusting claims in respect of Collateral under policies of insurance,
endorsing the name of the Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance
and for making all determinations and decisions with respect thereto.
In the event that the Grantor at any time or times shall fail to obtain
or maintain any of the policies of insurance required hereby or to pay
any premium in whole or part relating thereto, the Collateral Agent
may, without waiving or releasing any obligation or liability of the
Grantor hereunder or any Event of Default, in its sole discretion,
obtain and maintain such policies of insurance and pay such premium and
take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.11, including reasonable attorneys'
fees, court costs, expenses and other charges relating thereto, shall
be payable, upon demand, by the Grantor to the Collateral Agent and
shall be additional Obligations secured hereby.
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SECTION 4.12. Legend. The Grantor shall legend, in form and
manner satisfactory to the Collateral Agent, its Accounts Receivable
and its books, records and documents evidencing or pertaining thereto
with an appropriate reference to the fact that such Accounts Receivable
have been assigned to the Collateral Agent for the benefit of the
Secured Parties and that the Collateral Agent has a security interest
therein.
SECTION 4.13. Covenants Regarding Patent, Trademark and
Copyright Collateral. (a) The Grantor agrees that it will not, nor will
it permit any of its licensees to, do any act, or omit to do any act,
whereby any Patent which is material to the conduct of the Grantor's
business may become invalidated or dedicated to the public, and agrees
that it shall continue to mark any products covered by a Patent with
the relevant patent number as necessary and sufficient to establish and
preserve its maximum rights under applicable patent laws.
(b) The Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of the
Grantor's business, (i) maintain such Trademark in full force free from
any claim of abandonment or invalidity for non-use, (ii) maintain the
quality of products and services offered under such Trademark, (iii)
display such Trademark with notice of Federal or foreign registration
to the extent necessary and sufficient to establish and preserve its
maximum rights under applicable law and (iv) not knowingly use or
knowingly permit the use of such Trademark in violation of any third
party rights.
(c) The Grantor (either itself or through licensees) will, for
each work covered by a material Copyright, continue to publish,
reproduce, display, adopt and distribute the work with appropriate
copyright notice as necessary and sufficient to establish and preserve
its maximum rights under applicable copyright laws.
(d) The Grantor shall notify the Collateral Agent immediately
if it knows or has reason to know that any Patent, Trademark or
Copyright material to the conduct of its business may become abandoned,
lost or dedicated to the public, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court or
similar office of any country) regarding the Grantor's ownership of any
Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.
(e) In no event shall the Grantor, either itself or through
any agent, employee, licensee or designee, file an application for any
Patent, Trademark or Copyright (or for the registration of any
Trademark or Copyright) that is material to the conduct of the
Grantor's business with the United States Patent and Trademark Office,
United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any
political subdivision thereof, unless it promptly informs the
Collateral Agent, and, upon request of the Collateral Agent, executes
and delivers any and all agreements, instruments, documents and papers
as the Collateral Agent may
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request to evidence the Collateral Agent's security interest in such
Patent, Trademark or Copyright, and the Grantor hereby appoints the
Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being
hereby ratified and confirmed; such power, being coupled with an
interest, is irrevocable.
(f) The Grantor will take all necessary steps that are
consistent with the practice in any proceeding before the United States
Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or
in any other country or any political subdivision thereof, to maintain
and pursue each material application relating to the Patents,
Trademarks and/or Copyrights (and to obtain the relevant grant or
registration) and to maintain each issued Patent and each registration
of the Trademarks and Copyrights that is material to the conduct of the
Grantor's business, including timely filings of applications for
renewal, affidavits of use, affidavits of incontestability and payment
of maintenance fees, and, if consistent with good business judgment, to
initiate opposition, interference and cancellation proceedings against
third parties.
(g) In the event that the Grantor has reason to believe that
any Collateral consisting of a Patent, Trademark or Copyright material
to the conduct of the Grantor's business has been or is about to be
infringed, misappropriated or diluted by a third party, the Grantor
promptly shall notify the Collateral Agent and shall, if consistent
with good business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for
such infringement, misappropriation or dilution, and take such other
actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default,
the Grantor shall use its best efforts to obtain all requisite consents
or approvals by the licensor of each Copyright License, Patent License
or Trademark License to effect the assignment of all of the Grantor's
right, title and interest thereunder to the Collateral Agent or its
designee.
ARTICLE V
Power of Attorney
The Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by
the Collateral Agent) as the Grantor's true and lawful agent and
attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for the Grantor and in the
Grantor's name or otherwise, for the use and benefit of the Collateral
Agent and the Secured Parties, upon the occurrence and during the
continuance of an Event of Default (a) to receive, endorse, assign
and/or deliver any and all notes, acceptances, checks, drafts, money
orders or other evidences of payment relating to the Collateral or any
part thereof; (b) to demand, collect, receive payment of, give receipt
for and give discharges and releases of all or any of the Collateral;
(c) to sign the name of the Grantor on any invoice or bill of lading
relating to
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<PAGE>
any of the Collateral; (d) to send verifications of Accounts Receivable
to any Account Debtor; (e) to commence and prosecute any and all suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the
Collateral or to enforce any rights in respect of any Collateral; (f)
to settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Collateral; (g) to notify, or
to require the Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent; and (h) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Collateral, and to do all other acts and things
necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Collateral
Agent or any Secured Party to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by the
Collateral Agent or any Secured Party, or to present or file any claim
or notice, or to take any action with respect to the Collateral or any
part thereof or the moneys due or to become due in respect thereof or
any property covered thereby, and no action taken or omitted to be
taken by the Collateral Agent or any Secured Party with respect to the
Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of the Grantor or to any claim or
action against the Collateral Agent or any Secured Party. It is
understood and agreed that the appointment of the Collateral Agent as
the agent and attorney-in-fact of the Grantor for the purposes set
forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve the Grantor of any
of its obligations hereunder or under any other Loan Document with
respect to the Collateral or any part thereof or impose any obligation
on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof,
or in any way limit the exercise by the Collateral Agent or any Secured
Party of any other or further right which it may have on the date of
this Agreement or hereafter, whether hereunder, under any other Loan
Document, by law or otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, the Grantor agrees to
deliver each item of Collateral to the Collateral Agent on demand, and
it is agreed that the Collateral Agent shall have the right to take any
of or all the following actions at the same or different times: (a)
with respect to any Collateral consisting of Intellectual Property, on
demand, to cause the Security Interest to become an assignment,
transfer and conveyance of any of or all such Collateral by the Grantor
to the Collateral Agent, or to license or sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any such Collateral throughout the world on such terms and
conditions and in such manner as the Collateral Agent shall determine
(other than in violation of any then-existing
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<PAGE>
licensing arrangements to the extent that waivers cannot be obtained),
and (b) with or without legal process and with or without prior notice
or demand for performance, to take possession of the Collateral and
without liability for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or
removing the Collateral and, generally, to exercise any and all rights
afforded to a secured party under the Uniform Commercial Code or other
applicable law. Without limiting the generality of the foregoing, the
Grantor agrees that the Collateral Agent shall have the right, subject
to the mandatory requirements of applicable law, to sell or otherwise
dispose of all or any part of the Collateral, at public or private sale
or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem
appropriate. The Collateral Agent shall be authorized at any such sale
(if it deems it advisable to do so) to restrict the prospective bidders
or purchasers to persons who will represent and agree that they are
purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation
of any such sale the Collateral Agent shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of
the Grantor, and the Grantor hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which the Grantor now
has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantor 10 days' written
notice (which the Grantor agrees is reasonable notice within the
meaning of Section 9-504(3) of the Uniform Commercial Code as in effect
in the State of New York or its equivalent in other jurisdictions) of
the Collateral Agent's intention to make any sale of Collateral. Such
notice, in the case of a public sale, shall state the time and place
for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any
such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may
fix and state in the notice (if any) of such sale. At any such sale,
the Collateral, or portion thereof, to be sold may be sold in one lot
as an entirety or in separate parcels, as the Collateral Agent may (in
its sole and absolute discretion) determine. The Collateral Agent shall
not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of
such Collateral shall have been given. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further
notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail
to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may be sold again upon
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<PAGE>
like notice. At any public (or, to the extent permitted by law,
private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right
of redemption, stay, valuation or appraisal on the part of the Grantor
(all said rights being also hereby waived and released to the extent
permitted by law), the Collateral or any part thereof offered for sale
and may make payment on account thereof by using any claim then due and
payable to such Secured Party from the Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the
terms of sale, hold, retain and dispose of such property without
further accountability to the Grantor therefor. For purposes hereof, a
written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free
to carry out such sale pursuant to such agreement and the Grantor shall
not be entitled to the return of the Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it,
the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent
shall apply the proceeds of any collection or sale of the Collateral,
as well as any Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses
incurred by the Administrative Agent or the Collateral Agent
(in its capacity as such hereunder or under any other Loan
Document) in connection with such collection or sale or
otherwise in connection with this Agreement or any of the
Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, the repayment of all
advances made by the Collateral Agent hereunder or under any
other Loan Document on behalf of the Grantor and any other
costs or expenses incurred in connection with the exercise of
any right or remedy hereunder or under any other Loan
Document;
SECOND, to the payment in full of the Obligations
(the amounts so applied to be distributed among the Secured
Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantor, its successors or assigns, or
as a court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with
this Agreement. Upon any sale of the Collateral by the Collateral Agent
(including pursuant to a power of sale granted by
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<PAGE>
statute or under a judicial proceeding), the receipt of the Collateral
Agent or of the officer making the sale shall be a sufficient discharge
to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property.
For the purpose of enabling the Collateral Agent to exercise rights and
remedies under this Article at such time as the Collateral Agent shall
be lawfully entitled to exercise such rights and remedies, the Grantor
hereby grants to the Collateral Agent an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation
to the Grantor) to use, license or sub-license any of the Collateral
consisting of Intellectual Property now owned or hereafter acquired by
the Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof. The use of
such license by the Collateral Agent shall be exercised, at the option
of the Collateral Agent, upon the occurrence and during the
continuation of an Event of Default; provided that any license,
sub-license or other transaction entered into by the Collateral Agent
in accordance herewith shall be binding upon the Grantor
notwithstanding any subsequent cure of an Event of Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices
hereunder shall (except as otherwise expressly permitted herein) be in
writing and given as provided in Section 9.01 of the Credit Agreement.
All communications and notices hereunder to any Grantor shall be given
to it at its address or telecopy number set forth on Schedule I.
SECTION 7.02. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the Security Interest and all obligations
of the Grantor hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the
Credit Agreement, any other Loan Document, any agreement with respect
to any of the Obligations or any other agreement or instrument relating
to any of the foregoing, (b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or
any other amendment or waiver of or any consent to any departure from
the Credit Agreement, any other Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on
other collateral, or any release or amendment or waiver of or consent
under or departure from any guarantee, securing or guaranteeing all or
any of the Obligations, or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the
Grantor in respect of the Obligations or this Agreement.
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<PAGE>
SECTION 7.03. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Grantor herein
and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement shall be considered to
have been relied upon by the Secured Parties and shall survive the
making by the Lenders of the Loans, and the execution and delivery to
the Lenders of any notes evidencing such Loans, regardless of any
investigation made by the Lenders or on their behalf, and shall
continue in full force and effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This
Agreement shall become effective when a counterpart hereof executed on
behalf of the Grantor shall have been delivered to the Collateral Agent
and a counterpart hereof shall have been executed on behalf of the
Collateral Agent, and thereafter shall be binding upon the Grantor and
the Collateral Agent and their respective successors and assigns, and
shall inure to the benefit of the Grantor, the Collateral Agent and the
other Secured Parties and their respective successors and assigns,
except that the Grantor shall not have the right to assign or transfer
its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except
as expressly contemplated by this Agreement or the Credit Agreement.
SECTION 7.05. Successors and Assigns. Whenever in this
Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of the
Grantor or the Collateral Agent that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and
assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses;
Indemnification. (a) The Grantor agrees to pay upon demand to the
Collateral Agent the amount of any and all reasonable expenses,
including the reasonable fees, disbursements and other charges of its
counsel and of any experts or agents, which the Collateral Agent may
incur in connection with (i) the administration of this Agreement, (ii)
the custody or preservation of, or the sale of, collection from or
other realization upon any of the Collateral, (iii) the exercise,
enforcement or protection of any of the rights of the Collateral Agent
hereunder or (iv) the failure of the Grantor to perform or observe any
of the provisions hereof.
(b) Without limitation of its indemnification obligations
under the other Loan Documents, the Grantor agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of
them harmless from, any and all losses, claims, damages, liabilities
and related expenses, including reasonable fees, disbursements and
other charges of counsel, incurred by or asserted against any of them
arising out of, in any way connected with, or as a result of, the
execution, delivery or performance of this Agreement or any claim,
litigation, investigation or proceeding relating hereto or to the
Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related
expenses are determined by a court of competent
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<PAGE>
jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby. The provisions of this Section
7.06 shall remain operative and in full force and effect regardless of
the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of
any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Collateral Agent or any
Lender. All amounts due under this Section 7.06 shall be payable on
written demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of
the Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Collateral Agent hereunder and of the
Collateral Agent, the Issuing Bank, the Administrative Agent and the
Lenders under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or any other Loan Document
or consent to any departure by the Grantor therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on
the Grantor in any case shall entitle the Grantor or any other Grantor
to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Collateral Agent and the
Grantor, subject to any consent required in accordance with Section
9.08 of the Credit Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
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<PAGE>
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not
in any way be affected or impaired thereby (it being understood that
the invalidity of a particular provision in a particular jurisdiction
shall not in and of itself affect the validity of such provision in any
other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.11. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original
but all of which when taken together shall constitute but one contract
(subject to Section 7.04), and shall become effective as provided in
Section 7.04. Delivery of an executed signature page to this Agreement
by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings used
herein are for the purpose of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a)
The Grantor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may
be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Collateral Agent, the
Administrative Agent, the Issuing Bank or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement or the
other Loan Documents against the Grantor or its properties in the
courts of any jurisdiction.
(b) The Grantor hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter
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<PAGE>
have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 7.01.
Nothing in this Agreement will affected the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 7.14. Termination. This Agreement and the Security
Interest shall terminate when all the Obligations have been
indefeasibly paid in full, the Lenders have no further commitment to
lend, the L/C Exposure has been reduced to zero and the Issuing Bank
has no further commitment to issue Letters of Credit under the Credit
Agreement, at which time the Collateral Agent shall execute and deliver
to the Grantor, at the Grantor's expense, all Uniform Commercial Code
termination statements and similar documents which the Grantor shall
reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this
Section 7.14 shall be without recourse to or warranty by the Collateral
Agent. A Grantor shall automatically be released from its obligations
hereunder and the Security Interest in the Collateral of such Grantor
shall be automatically released in the event that all the capital stock
of such Grantor shall be sold, transferred or otherwise disposed of to
a person that is not an Affiliate of the Borrower in accordance with
the terms of the Credit Agreement; provided that the Required Lenders
shall have consented to such sale, transfer or other disposition (to
the extent required by the Credit Agreement) and the terms of such
consent did not provide otherwise.
SECTION 7.15. Additional Grantors. Upon execution and delivery
by the Collateral Agent and a Subsidiary of an instrument in the form
of Annex 3 hereto, such Subsidiary shall become a Grantor hereunder
with the same force and effect as if originally named as a Grantor
herein. The execution and delivery of any such instrument shall not
require the consent of the Grantor hereunder. The rights and
obligations of the Grantor hereunder shall remain in full force and
effect notwithstanding the addition of any new Grantor as a party to
this Agreement.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
TEL-SAVE HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
TEL-SAVE, INC.
By:
-------------------------------------
Name:
Title:
EMERGENCY TRANSPORT CORP.
By:
-------------------------------------
Name:
Title:
TEL-SAVE HOLDINGS OF VIRGINIA, INC.
By:
-------------------------------------
Name:
Title:
SALOMON BROTHERS HOLDING
COMPANY INC, as Collateral Agent
By:
-------------------------------------
Name:
Title:
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<PAGE>
Annex 2 to the
Security Agreement
[Form of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders") and Salomon Brothers
Holding Company Inc, as administrative agent for the Lenders (in such
capacity, the "Administrative Agent") and Collateral Agent and (b) the
Guarantee Agreement dated as of August 25, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee
Agreement"), among the Guarantors party thereto and the Collateral
Agent.
The undersigned, a Financial Officer and a Legal Officer,
respectively, of the Borrower, hereby certify to the Collateral Agent
and each other Secured Party as follows:
1. Names. (a) The exact corporate name of the Grantor, as such
name appears in its certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name the Grantor
has had in the past five years, together with the date of the relevant
change:
(c) Except as set forth in Schedule 1 hereto, the Grantor has
not changed its identity or corporate structure in any way within the
past five years. Changes in identity or corporate structure would
include mergers, consolidations and acquisitions, as well as any change
in the form, nature or jurisdiction of corporate organization. If any
such change has occurred, include in Schedule 1 the information
required by Sections 1 and 2 of this certificate as to each acquiree or
constituent party to a merger or consolidation.
(d) The following is a list of all other names (including
trade names or similar appellations) used by the Grantor or any of its
divisions or other business units in connection with the conduct of its
business or the ownership of its properties at any time during the past
five years:
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<PAGE>
(e) Set forth below is the Federal Taxpayer Identification
Number of the Grantor:
2. Current Locations. (a) The chief executive office of the
Grantor is located at the address set forth below:
Mailing Address County State
--------------- ------ -----
(b) Set forth below are all locations where the Grantor
maintains any books or records relating to any Accounts Receivable
(with each location at which chattel paper, if any, is kept being
indicated by an "*"):
Mailing Address County State
--------------- ------ -----
(c) Set forth below are all the places of business of the
Grantor not identified in paragraph (a) or (b) above:
Mailing Address County State
--------------- ------ -----
(d) Set forth below are all the locations where the Grantor
maintains any Collateral not identified above:
Mailing Address County State
--------------- ------ -----
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<PAGE>
(e) Set forth below are the names and addresses of all persons
other than the Grantor that have possession of any of the Collateral of
the Grantor:
Mailing Address County State
--------------- ------ -----
3. Unusual Transactions. All Accounts Receivable have been
originated by the Grantor and all Inventory has been acquired by the
Grantor in the ordinary course of business.
4. File Search Reports. Attached hereto as Schedule 4(A) are
true copies of file search reports from the Uniform Commercial Code
filing offices where filings described in Section 3.19 of the Credit
Agreement are to be made. Attached hereto as Schedule 4(B) is a true
copy of each financing statement or other filing identified in such
file search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1
in substantially the form of Schedule 5 hereto have been prepared for
filing in the Uniform Commercial Code filing office in each
jurisdiction where the Grantor has Collateral as identified in Section
2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a
schedule setting forth, with respect to the filings described in
Section 5 above, each filing and the filing office in which such filing
is to be made.
7. Filing Fees. All filing fees and taxes payable in
connection with the filings described in Section 5 above have been
paid.
8. Stock Ownership. Attached hereto as Schedule 8 is a true
and correct list of all the duly authorized, issued and outstanding
stock of each Subsidiary and the record and beneficial owners of such
stock. Also set forth on Schedule 8 is each equity Investment of the
Borrower and each Subsidiary that represents 50% or less of the equity
of the entity in which such investment was made.
9. Notes. Attached hereto as Schedule 9 is a true and correct
list of all notes held by the Borrower and each Subsidiary and all
intercompany notes between the Borrower and each Subsidiary of the
Borrower and between each Subsidiary of the Borrower and each other
such Subsidiary.
10. Advances. Attached hereto as Schedule 10 is (a) a true and
correct list of all advances made by the Borrower to any Subsidiary of
the Borrower or made by any Subsidiary of the Borrower to the Borrower
or any other Subsidiary of the Borrower, which advances will be on and
after the date hereof evidenced by one or more intercompany notes
pledged to the Collateral Agent under the Pledge Agreement, and (b)
H-32
<PAGE>
a true and correct list of all unpaid intercompany transfers of goods
sold and delivered by or to the Borrower or any Subsidiary of the
Borrower.
11. Mortgage Filings. Attached hereto as Schedule 11 is a
schedule setting forth, with respect to each Mortgaged Property, (i)
the exact corporate name of the corporation that owns such property as
such name appears in its certificate of incorporation, (ii) if
different from the name identified pursuant to clause (i), the exact
name of the current record owner of such property reflected in the
records of the filing office for such property identified pursuant to
the following clause and (iii) the filing office in which a Mortgage
with respect to such property must be filed or recorded in order for
the Collateral Agent to obtain a perfected security interest therein.
H-33
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
certificate on this 25th day of August, 1997.
TEL-SAVE HOLDINGS, INC.
By:
------------------------------------
Name: Joseph A. Schenk
Title: Chief Financial Officer
By:
------------------------------------
Name: Aloysius T. Lawn, IV
Title: General Counsel and Secretary
H-34
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Tel-Save Holdings, Inc. ("Tel-Save") entered into an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of July 16, 1997, among Tel-Save, a
subsidiary of Tel-Save and Shared Technologies Fairchild Inc. ("STF"), pursuant
to which, among other matters, STF would merge (the "Merger") with and into the
Tel-Save subsidiary and thereby become a wholly owned subsidiary of Tel-Save and
the STF Common Stock would be exchanged for shares of Tel-Save Common Stock. The
following Unaudited Pro Forma Combined Condensed Financial Statements give
effect to the Merger using the "pooling of interests" method of accounting,
after giving effect to the pro forma adjustments described in the accompanying
notes.
The Unaudited Pro Forma Combined Condensed Balance Sheet gives effect to the
Merger as if it had occurred on June 30, 1997, combining the balance sheets of
Tel-Save with that of STF. The Unaudited Pro Forma Combined Condensed Statements
of Operations give effect to the Merger as if it occurred at the beginning of
the earliest period presented, combining the results of Tel-Save and STF for
each year in the three-year period ended December 31, 1996 and the six months
ended June 30, 1997.
As a result of the Merger, the merged companies will incur certain acquisition
and transition related costs in connection with consummating the transaction and
integrating the operations of Tel-Save and STF. The acquisition and transition
related costs consist principally of professional and registration fees,
employment contract termination costs and other costs associated with the
integration of the two businesses resulting from the Merger. While the exact
timing, nature and amount of these acquisition and transition related costs are
subject to change, Tel-Save anticipates that a one-time pretax charge of
approximately $16.0 million for incremental acquisition-related costs will be
recorded in the quarter in which the Merger is consummated. The estimate is
comprised of the following amounts:
Total
(in thousands)
--------------
Professional fees $ 7,000
Employment contract termination costs 7,000
Registration and other regulatory costs 1,000
Other 1,000
-----------
$ 16,000
===========
The incremental acquisition-related costs have been reflected as an increase in
accounts payable and accrued expenses - trade and other in the Unaudited Pro
Forma Combined Condensed Balance Sheet as of June 30, 1997. These costs have not
been reflected in the Unaudited Pro Forma Combined Condensed Statement of
Operations for any period presented.
These Unaudited Pro Forma Combined Condensed Financial Statements have been
prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of Tel-Save and STF, which
were previously filed with the Securities and Exchange Commission.
<PAGE>
In addition, the Unaudited Pro Forma Combined Condensed Financial Statements
give effect to the following transactions for the periods indicated:
o The acquisition of American Business Alliance ("ABA") by Tel-Save after
giving effect to the pro forma adjustments described in the Unaudited Pro
Forma Combined Condensed Financial Statements for Tel-Save and ABA and the
acquisition of Fairchild Industries, Inc. ("FII") by STF after giving
effect to the pro forma adjustments described in the Unaudited Pro Forma
Combined Financial Statements for STF and FII. The acquisitions of ABA and
FII were consummated on December 13, 1996 and March 13, 1996, respectively,
and were accounted for as purchases. Accordingly, Tel-Save's historical
financial statements reflect the results of operations of ABA solely for
the periods on or after December 14, 1996 and STF's historical financial
statements reflect the results of operations of FII on or after March 14,
1996. The Unaudited Pro Forma Combined Condensed Statement of Operations
for the year ended December 31, 1996 reflects these acquisitions as if they
had occurred at the beginning of that year.
o The redemption of STF Series J Redeemable Special Preferred Stock (the
"Series J Preferred Stock") for $21.5 million as stipulated in the Merger
Agreement pursuant to the certificate-designated liquidation preference of
$21.5 million. The Unaudited Pro Forma Combined Condensed Balance Sheet
gives effect to the redemption as if it had occurred on June 30, 1997 . The
Unaudited Pro Forma Combined Condensed Statements of Operations give effect
to the decrease in interest income and elimination of dividends associated
with such redemption as if it had occurred on the date such stock was
issued, March 13, 1996.
o The conversion of STF Series I 6% Cumulative Convertible Preferred Stock
(the "Series I Preferred Stock") into Tel-Save Common Stock based on the
current liquidation value of $26.302 million, the certificate-designated
conversion price of $6.375 and the Exchange Ratio (as defined in the Merger
Agreement).
o The acquisition of the outstanding STF Senior Subordinated Notes (the "STF
Notes") by Tel-Save subsequent to the signing of the Merger Agreement. In
connection with the acquisition of FII, Shared Technologies issued $163.637
million in STF Notes. The STF Notes bear an annual interest rate of 12.25%
with the principal fully due on March 1, 2006. Interest does not begin
accruing until March 1, 1999 and the discount on the STF Notes is being
amortized using the effective interest method over the three year period
ending March 1, 1999. To date, Tel-Save has acquired approximately 90% of
the outstanding STF Notes at a premium of 1% over the face value and it is
assumed, for purposes of these Unaudited Pro Forma Combined Condensed
Financial Statements, that Tel-Save will acquire those that remain
outstanding prior to the consummation of the Merger.
The Unaudited Pro Forma Combined Condensed Balance Sheet reflects (i) the
elimination of such STF Notes and the write-off of the associated unamortized
deferred financing costs and discount for STF and the elimination of the related
investment, (ii) the charge related to the excess of acquisition cost over the
carrying amount of the STF Notes ("premium") and (iii) the net proceeds from the
issuance by Tel-Save, in a private placement not registered under the Securities
Act of 1933, of approximately $250 million (which does not assume the exercise
of any underwriters' overallotment option) in convertible subordinated notes
("TS Notes") at an assumed interest rate of 4.5% (which securities would not be
able to be offered or resold absent registration under the Securities Act of
1933 or an applicable exception from such registration), to finance the
acquisition of the STF Notes and the repayment of approximately $78 million in
outstanding STF credit facility term loans ("Credit Facility Term Loans") (prior
to the issuance of the TS Notes, the acquisition of the STF Notes was financed
by short term margin and bridge loans). The non-recurring write-off of the
unamortized deferred financing costs of $6.812 million and the premium of
$30.998 million, net of the related $12.855 million tax benefit, that will be
charged to expense upon consummation of the Merger have not been reflected in
the Unaudited Pro Forma Combined Condensed Statement of Operations. The
Unaudited Pro Forma Combined Condensed Statement of Operations reflects (i) the
differential between the interest on the Credit Facility Term Loans and the
amortization of the STF Note discount and the interest on the TS Notes that
<PAGE>
will ultimately be used to finance the acquisition of the STF Notes and the
repayment of the Credit Facility Term Loans and (ii) the differential
between the amortization of STF's deferred financing costs and the deferred
debt issue costs for the TS Notes.
A separate Unaudited Pro Forma Combined Condensed Financial Statement of
Operations for Tel-Save and STF for the year ended December 31, 1996 is also
presented to reflect solely the Merger since it would constitute the historical
financial statement of operations after restatement for the pooling of
interests.
The Unaudited Pro Forma Combined Condensed Financial Statements are presented
for illustrative purposes only and are not necessarily indicative of the
operating results or financial position that would have occurred had the Merger,
the acquisitions of ABA and FII, the acquisition of the STF Notes and the
repayment of a portion of STF's Credit Facility Term Loans been consummated at
the dates indicated, nor is it necessarily indicative of future operating
results or the financial position of the merged companies.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Tel-Save STF Adjustments Combined
-------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and investments $ 43,146 $ 1,783 $ - $ 44,929
Accounts receivable, net 39,788 33,356 - 73,144
Advances to partitions and note receivables 27,639 - - 27,639
Inventories - 4,063 - 4,063
Prepaid AOL marketing costs-current 60,086 - - 60,086
Prepaid expenses and other current assets 9,849 2,660 - 12,509
-------------- ---------------- ------------------ ------------------
Total current assets 180,508 41,862 - 222,370
Property and equipment, net 45,194 68,830 - 114,024
Investments in affiliates - 651 - 651
Intangibles, net 23,479 258,779 - 282,258
Prepaid AOL marketing costs 35,212 - - 35,212
Other assets 5,880 326 - 6,206
-------------- ---------------- ------------------ ------------------
Total Assets $ 290,273 $ 370,448 $ - $ 660,721
============== ================ ================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses:
Trade and other $ 29,005 $ 33,498 $ (843)(2d) $ 61,660
Partitions 5,081 - - 5,081
Sales and excise taxes payable 1,808 - - 1,808
Other 1,220 - - 1,220
Current portion of long-term debt and capital
lease obligations - 15,374 - 15,374
-------------- ---------------- ------------------ ------------------
Total current liabilities 37,114 48,872 (843) 85,143
Long-term debt and capital lease obligations, less
current portion - 239,988 - 239,988
Redeemable put warrant - 816 - 816
Convertible preferred stock - 25,000 (25,000) (2d) -
Special preferred stock - 14,757 - 14,757
-------------- ---------------- ------------------ ------------------
Total liabilities 37,114 329,433 (25,843) 340,704
-------------- ---------------- ------------------ ------------------
STOCKHOLDERS' EQUITY:
Preferred stock - 8 (4) (2b)(2c) 4
Common stock 647 63 36 (2a) 776
26 (2d)
4 (2b)
Additional paid-in capital 233,465 76,379 (36) (2a) 335,625
25,817 (2d)
Retained earnings (deficit) 23,607 (35,435) - (11,828)
Treasury stock (4,560) - - (4,560)
-------------- ---------------- ------------------ ------------------
Total stockholders' equity 253,159 41,015 25,843 320,017
-------------- ---------------- ------------------ ------------------
Total liabilities and stockholders' equity $ 290,273 $ 370,448 $ - $ 660,721
============== ================ ================== ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Combined
------------------ -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and investments $ (21,500) (2e) $ 23,429
165,273 (2g)
(165,273) (2g)
Accounts receivable, net - 73,144
Advances to partitions and note receivables - 27,639
Inventories - 4,063
Prepaid AOL marketing costs-current - 60,086
Prepaid expenses and other current assets 2,380 (2f) 27,744
12,855 (2g)
------------------ -------------------
Total current assets (6,265) 216,105
Property and equipment, net - 114,024
Investments in affiliates - 651
Intangibles, net (6,812) (2g) 282,446
7,000 (2g)
Prepaid AOL marketing costs - 35,212
Other assets - 6,206
------------------ -------------------
Total Assets $ (6,077) $ 654,644
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses:
Trade and other $ 16,000 (2f) $ 77,660
Partitions - 5,081
Sales and excise taxes payable - 1,808
Other - 1,220
Current portion of long-term debt and capital
lease obligations - 15,374
------------------ -------------------
Total current liabilities 16,000 101,143
Long-term debt and capital lease obligations, less
current portion (134,275) (2g) 277,986
165,273 (2g)
(165,273) (2g)
(77,727) (2g)
250,000 (2g)
Redeemable put warrant - 816
Convertible preferred stock - -
Special preferred stock (14,757) (2e) -
------------------ -------------------
Total liabilities 39,241 379,945
------------------ -------------------
STOCKHOLDERS' EQUITY:
Preferred stock - 4
Common stock - 776
Additional paid-in capital - 335,625
Retained earnings (deficit) (6,743) (2e) (57,146)
(13,620) (2f)
(24,955) (2g)
Treasury stock - (4,560)
------------------ -------------------
Total stockholders' equity (45,318) 274,699
------------------ -------------------
Total liabilities and stockholders' equity $ (6,077) $ 654,644
================== ===================
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Historical Pro Forma
Tel-Save STF Combined
----------------- ----------------- ------------------
<S> <C> <C> <C>
Sales $ 146,192 $ 95,618 $ 241,810
Cost of sales 146,081 46,630 192,711
----------------- ----------------- ------------------
Gross profit 111 48,988 49,099
Selling, general and administrative 7,953 34,334 42,287
Operating income (loss) ----------------- ----------------- ------------------
(7,842) 14,654 6,812
Other income (expenses):
Equity in loss of affiliate - (186) (186)
Net interest expense - (14,480) (14,480)
Investment and other income, net 7,128 - 7,128
----------------- ----------------- ------------------
Income (loss) before provision (benefit) for income taxes (714) (12) (726)
Provision (benefit) for income taxes (279) 208 (71)
----------------- ----------------- ------------------
Net income (loss) $ (435) $ (220) $ (655)
================= ================= ==================
Preferred stock dividends - 2,299 2,299
----------------- ----------------- ------------------
Net income (loss) applicable to common stock $ (435) $ (2,519) $ (2,954)
================= ================= ==================
Net income (loss) per share - primary (1), (3) $ (0.01) $ (0.16) $ (0.04)
================= ================= ==================
Weighted average common and common equivalent
shares outstanding - primary (1), (3) 66,367 15,788 76,285
================= ================= ==================
Net income (loss) per share - fully diluted (1), (3) $ (0.01) $ (0.16) $ (0.04)
================= ================= ==================
Weighted average common and common equivalent shares
outstanding - fully diluted (1), (3) 66,479 15,788 76,397
================= ================= ==================
</TABLE>
<TABLE>
<CAPTION>
Acquisition of
Merger STF Notes and
Related Issuance of TS
Pro Forma Notes Pro Forma Pro Forma
Adjustments Adjustments Combined
------------------ -------------------- -----------------
<S> <C> <C>
Sales $ - - $ 241,810
Cost of sales - - -
------------------ -------------------- -----------------
Gross profit - - 49,099
Selling, general and administrative - - 42,287
------------------ -------------------- -----------------
Operating income (loss) - - 6,812
Other income (expenses):
Equity in loss of affiliate - - (186)
Net interest expense (538) (2i) 5,310 (2h) (9,708)
Investment and other income, net - - 7,128
------------------ -------------------- -----------------
Income (loss) before provision (benefit) for income taxes (538) 5,310 4,046
Provision (benefit) for income taxes (183) (2k) 1,805 (2k) 1,551
------------------ -------------------- -----------------
Net income (loss) $ (355) $ 3,504 $ 2,495
================== ==================== =================
Preferred stock dividends (2,299) (2j) - -
------------------ -------------------- -----------------
Net income (loss) applicable to common stock $ 1,944 $ $ 2,495
================== ==================== =================
Net income (loss) per share - primary (1), (3) $ 0.03
=================
Weighted average common and common equivalent
shares outstanding - primary (1), (3) 76,285
=================
Net income (loss) per share - fully diluted (1), (3) $ 0.03
=================
Weighted average common and common equivalent shares
outstanding - fully diluted (1), (3) 76,397
=================
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Merger
Related
Pro Forma Pro Forma Pro Forma
Tel-Save & ABA STF & FII Adjustments
--------------- ----------------- -------------------------
<S> <C> <C> <C>
Sales $ 233,067 $ 184,524 $ -
Cost of sales 207,779 94,287 -
--------------- ----------------- -------------------------
Gross profit 25,288 90,237 -
Selling, general and administrative 13,294 66,868 -
--------------- ----------------- -------------------------
Operating income 11,994 23,369 -
Other income (expenses):
Equity in loss of affiliate - (3,927) -
Interest expense - (28,108) (851) (2i)
Investment and other income, net 10,121 - -
--------------- ----------------- -------------------------
Income (loss) before provision for income taxes and
extraordinary item 22,115 (8,666) (851)
Provision for income taxes 8,337 773 (289) (2k)
--------------- ----------------- -------------------------
Income (loss) before extraordinary item 13,778 (9,439) (562)
Preferred stock dividends - 3,241 (3,241) (2j)
--------------- ----------------- -------------------------
Income (loss) before extraordinary
item applicable to common stockholders $ 13,778 $ (12,680) $ 2,679
=============== ================= =========================
Income (loss) before extraordinary item per share-primary (1),(3) $ 0.24 $ (0.85)
=============== =================
Weighted average common and common equivalent
shares outstanding - primary (1),(3) 57,002 14,967
=============== =================
Income (loss) before extraordinary item per share-fully
diluted (1),(3) $ 0.24 $ (0.85)
=============== =================
Weighted average common and common equivalent
shares outstanding - fully diluted (1),(3) 58,027 14,967
=============== =================
</TABLE>
<TABLE>
<CAPTION>
Acquisition of
STF Notes and Issuance Pro Forma
of TS Notes Pro Forma Tel-Save &
Adjustments STF
---------------------------- ------------------
<S> <C> <C>
Sales $ - $ 417,591
Cost of sales - 302,066
---------------------------- ------------------
Gross profit - 115,525
Selling, general and administrative - 80,162
---------------------------- ------------------
Operating income - 35,363
Other income (expenses):
Equity in loss of affiliate - (3,927)
Interest expense 7,726 (2h) (21,233)
Investment and other income, net - 10,121
---------------------------- ------------------
Income (loss) before provision for income taxes and
extraordinary item 7,726 20,324
Provision for income taxes 2,627 (2k) 11,447
---------------------------- ------------------
Income (loss) before extraordinary item 5,099 8,876
Preferred stock dividends - -
---------------------------- ------------------
Income (loss) before extraordinary
item applicable to common stockholders $ 5,099 $ 8,876
============================ ==================
Income (loss) before extraordinary item per share-primary (1),(3) $ 0.13
==================
Weighted average common and common equivalent
shares outstanding - primary (1),(3) 66,404
==================
Income (loss) before extraordinary item per share-fully
diluted (1),(3) $ 0.13
==================
Weighted average common and common equivalent
shares outstanding - fully diluted (1),(3) 67,429
==================
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(1) EXCHANGE RATIO
Under the Merger Agreement, each outstanding share of STF Common
Stock will be converted into 0.6282 shares of Tel-Save Common
Stock, based on the Exchange Ratio (as defined in the Merger
Agreement). This Exchange Ratio was used in computing share and
per share amounts in the accompanying unaudited pro forma
combined condensed financial statements.
(2) PRO FORMA ADJUSTMENTS
BALANCE SHEET ADJUSTMENTS:
<TABLE>
<CAPTION>
<S> <C>
(a) To reflect the issuance of shares based on the 0.6282 Exchange Ratio,
calculated as follows:
15,715 shares of Common stock x Exchange Ratio
9,872
9,872 shares @ $0.01 par value $ 99
Adjustment to reflect conversion of acquired STF Common Stock less
issuance of Tel-Save Common Stock $ 36
</TABLE>
(b) To reflect the conversion of shares of the STF Series C Preferred
Stock on a two-for-one basis into STF Common Stock (which was
converted on July 25, 1997, August 1, 1997 and August 7, 1997).
(c) To reflect the conversion of STF Series D Preferred Stock on a
one-for-one basis into Tel-Save Series A Preferred Stock.
(d) To reflect the conversion of STF Series I Preferred Stock into
Tel-Save Common Stock, calculated using the Exchange Ratio:
<TABLE>
<CAPTION>
<S> <C> <C>
Liquidation preference ($25,000+ 4% accretion of $1,302)/
$6.375 4,126
4,126 shares x Exchange Ratio 2,592
2,592 shares @ $0.01 par value $ 26
Additional paid-in capital ($25,843 less $26 par value) $ 25,817
</TABLE>
(e) To reflect the redemption at liquidation preference value of STF
Series J Preferred Stock for $21.5 million.
(f) To reflect certain acquisition-related costs and expenses, net of
$2,380 in income taxes, as described in the introduction to the
"Unaudited Pro Forma Combined Condensed Financial Statements."
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(g) To reflect Tel-Save's acquisition of the STF Notes, the repayment of a
portion of STF's Credit Facility Term Loans by Tel-Save from the
issuance of the TS Notes, the write-off of deferred debt issue costs
and premium over the carrying value and the tax benefit related to
such write-offs.
<TABLE>
<CAPTION>
<S> <C>
Issuance of TS Notes $ 250,000
Debt issue costs (7,000)
--------------
Net proceeds $ 243,000
==============
Application of net proceeds
Repayment of debt used to acquire STF Notes $ 165,273
Repayment of portion of STF Credit Facility Term Loans 77,727
--------------
Total $ 243,000
==============
Tel-Save cost of acquisition of STF Notes $ 165,273
Carrying value of STF Notes on STF's books 134,275
--------------
Premium paid over carrying value 30,998
Write-off of deferred financing costs 6,812
--------------
Total non-recurring charges 37,810
Less: Tax benefit related to non-recurring charges 12,855
--------------
Net change $ 24,955
==============
</TABLE>
OPERATING RESULTS ADJUSTMENTS:
(h) To reflect the differential between (i) the interest expense and the
amortization of the STF Notes discount and deferred STF financing
costs recorded as interest expense in connection with the STF Notes
and Credit Facility Term Loans and (ii) the interest expense and the
amortization of deferred debt issue costs on the TS Notes.
<TABLE>
<CAPTION>
Six months
Year Ended ended
12/31/96 6/30/97
--------------- ------------------
<S> <C> <C>
Interest, amortization of discount and deferred financing costs
recorded by STF on STF Notes and Credit Facility Term Loans $ 17,740 $ 11,635
Interest and amortization of debt issue costs on TS Notes 10,014 6,325
--------------- ------------------
$ 7,726 $ 5,310
=============== ==================
</TABLE>
(i) To reflect reduction in interest income at 5% on the cash used for the
redemption of the STF Series J Preferred Stock.
(j) To reflect the elimination of STF Series J Preferred Stock dividends.
(k) To reflect the tax effect on the decrease in net interest expense.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(3) The Unaudited Pro Forma Combined Condensed Financial Statements contemplate
that the Closing Date Market Price (as defined in the Merger Agreement)
will be equal to $17.9083 per share. To the extent the Closing Date Market
Price varies from $17.9083 per share, the weighted average common and
common equivalent shares outstanding, and thus net income and income before
extraordinary item per share, will vary as well. The following table
represents net income and income before extraordinary item per share
applicable to common stockholders if the Closing Date Market Price was
$10.00, $17.9083 and $20.00 per share.
<TABLE>
<CAPTION>
Closing Date Market Price
--------------------------------------------------
<S> <C> <C> <C>
$ 10.0000 $ 17.9083 $ 20.0000
-------------- --------------- ---------------
(in thousands, except per share amounts)
Exchange Ratio 1.1250 0.6282 0.5625
============== =============== ===============
Six months ended June 30, 1997:
Net income applicable to common stock $ 2,495 $ 2,495 $ 2,495
============== =============== ===============
Net income per share - primary $ 0.03 $ 0.03 $ 0.03
============== =============== ===============
Weighted average common and common
equivalent shares outstanding - primary 84,129 76,285 75,248
============== =============== ===============
Net income per share - fully diluted $ 0.03 $ 0.03 $ 0.03
============== =============== ===============
Weighted average common and common
equivalent shares outstanding - fully diluted 84,241 76,397 75,360
============== =============== ===============
Year ended December 31, 1996:
Income before extraordinary item applicable
to common stock $ 8,876 $ 8,876 $ 8,876
============== =============== ===============
Income before extraordinary item
per share - primary $ 0.12 $ 0.13 $ 0.14
============== =============== ===============
Weighted average common and common
equivalent shares outstanding - primary 73,840 66,404 65,421
============== =============== ===============
Income before extraordinary item
per share - fully diluted $ 0.12 $ 0.13 $ 0.13
============== =============== ===============
Weighted average common and common
equivalent shares outstanding - fully diluted 74,865 67,429 66,446
============== =============== ===============
</TABLE>
<PAGE>
TEL-SAVE & ABA
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Period of
January 1, 1996- Pro Forma
Historical December 13, 1996 Adjustments Pro Forma
Tel-Save ABA ABA Tel-Save & ABA
---------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Sales $ 232,424 $ 7,172 $ (6,529)(1) $ 233,067
Cost of sales 200,597 15,845 (5,301)(2) 207,779
(3,362)(3)
------------------------------------------------------------------------------
Gross profit (loss) 31,827 (8,673) 2,134 25,288
Selling, general and administrative 10,039 2,796 459 (4) 13,294
------------------------------------------------------------------------------
Operating income (loss) 21,788 (11,469) 1,675 11,994
Investment and other income, net 10,585 9 (473)(5) 10,121
------------------------------------------------------------------------------
Income (loss) before provision for income taxes and 32,373 (11,460) 1,202 22,115
Provision for income taxes 12,205 - (3,868)(6) 8,337
------------------------------------------------------------------------------
Net income $ 20,168 $(11,460) $ 5,070 $ 13,778
==============================================================================
Net income extraordinary per share-primary $ 0.35 $ 0.24
============== ===============
Weighted average common and common equivalent
shares outstanding - primary 57,002 57,002
============== ===============
Net income per share-fully diluted $ 0.35 $ 0.24
============== ===============
Weighted average common and common equivalent
shares outstanding - fully diluted 58,027 58,027
============== ===============
</TABLE>
(1) To reflect the elimination of intercompany revenues.
(2) To reflect the elimination of intercompany cost of sales.
(3) To reflect the capitalization of deferred customer
acquisition costs. Prior to acquisition, ABA's policy was to
expense all marketing costs as incurred. Tel-Save's policy
was to capitalize direct marketing costs and amortize them
over a period of six months. Effective April 1, 1997, the
Company changed its policy to expense all direct marketing
costs as incurred.
(4) To reflect the amortization of goodwill over 40 years.
Effective April 1, 1997, the Company changed the life of the
goodwill associated with the acquisition of ABA to 15 years.
(5) To reflect interest at 5% on the cash portion of the
acquisition price.
(6) To reflect the tax benefit relating to the utilization of
ABA's current operating loss and the pro forma adjustments.
<PAGE>
STF & FII
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Period of
January 1, 1996- Pro Forma
Historical March 13, 1996 Adjustments Pro Forma
STF FII FII STF & FII
---------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Sales $ 157,241 $ 27,283 $ - $ 184,524
Cost of sales 82,572 11,917 (202)(1) 94,287
----------------------------------------------------------------------------
Gross profit 74,669 15,366 202 90,237
Selling, general and administrative 55,329 10,737 1,414 (2) 66,868
(612)(1)
-----------------------------------------------------------------------------
Operating income 19,340 4,629 (600) 23,369
Other income (expenses):
Equity in loss of affiliate (3,927) - - (3,927)
Interest expense (22,888) (4,373) (622)(5) (28,108)
(247)(3)
22 (4)
Investment and other income, net - - - -
-----------------------------------------------------------------------------
Income (loss) before provision for income taxes and
extraordinary item (7,475) 256 (1,447) (8,666)
Provision for income taxes 783 - (10)(6) 773
-----------------------------------------------------------------------------
Income (loss) before extraordinary item (8,258) 256 (1,437) (9,439)
Preferred stock dividends 2,366 963 (88)(7) 3,241
-----------------------------------------------------------------------------
Loss before extraordinary
item applicable to common stockholders $(10,624) $ (707) $ (1,349) $ (12,680)
=============================================================================
Loss before extraordinary item per share-primary $ (0.77) $ (0.85)
================ ===================
Weighted average common and common equivalent
shares outstanding - primary 13,787 1,180 14,967
================ ============== ===================
Loss before extraordinary item per
share-fully diluted $ (0.77) $ (0.85)
================ ===================
Weighted average common and common equivalent
shares outstanding - fully diluted 13,787 1,180 14,967
================ ============== ===================
</TABLE>
(1) To reflect the estimated effect of certain cost savings and increases
associated with the consolidation of the operations of STF and FII:
Net S, G & A savings $ 612
Network savings 202
------------
$ 814
============
(2) To reflect the amortization ($1,581) of the goodwill resulting from the
purchase of FII offset by the elimination of goodwill previously
recorded on FII"s books ($167).
(3) To reflect the amortization of capitalized financing fees of $9,646
associated with the assumption of $240,000 in new debt. Additional
interest expense was recorded based on an amortization period of 10
years for $5,120 of the fees and 7 years for the remaining $4,526. The
allocation of fees was based on the actual costs incurred for the
respective amounts of zero coupon bonds and bank debt issued.
(4) To reflect the reclassification of the amortization of certain deferred
costs resulting from the retiring of STF's existing credit facility.
(5) A pro forma adjustment has been made to reflect the reduction in
interest expense relating to the net change in outstanding debt as
described in (3) above as if it had occurred on January 1, 1996.
$115 million in zero coupon bonds 12 1/4% interest $ 2,935
$125 million in bank debt 8.6% interest 2,240
Retirement of 12 1/4% notes (3,190)
Retirement of FII indebtedness (1,275)
Retirement of STF indebtedness (88)
-------------
$ 622
=============
A 1/2% change in the estimated interest rates for the $125 million in
bank debt would result in a change in the interest expense of $156 on
an annual basis.
(6) To reduce state income taxes to an estimated minimum required amount.
(7) To reflect the issuance of new preferred stock and the retirement of FII
preferred stock.
Preferred stock dividends added:
STF cumulative preferred stock dividends $ (625)
STF special preferred stock dividends (250)
Preferred stock dividends eliminated:
FII preferred stock dividends 963
------------
$ 88
============
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Historical Pro Forma
Tel-Save STF Combined
---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Sales $ 232,424 $ 157,241 $ 389,665
Cost of sales 200,597 82,572 283,169
---------------- ------------------ ------------------
Gross profit 31,827 74,669 106,496
Selling, general and administrative 10,039 55,329 65,368
---------------- ------------------ ------------------
Operating income 21,788 19,340 41,128
Other income (expenses):
Equity in loss of affiliate - (3,927) (3,927)
Interest expense - (22,888) (22,888)
Investment and other income, net 10,585 - 10,585
---------------- ------------------ ------------------
Income (loss) before provision for income taxes and
extraordinary item 32,373 (7,475) 24,898
Provision for income taxes 12,205 783 12,988
---------------- ------------------ ------------------
Income (loss) before extraordinary item 20,168 (8,258) 11,910
Preferred stock dividends - 2,366 2,366
---------------- ------------------ ------------------
Income (loss) before extraordinary
item applicable to common stockholders $ 20,168 $ (10,624) $ 9,544
================ ================== ==================
Income (loss) before extraordinary item per share-primary (1),(2) $ 0.35 $ (0.77) $ 0.15
================ ================== ==================
Weighted average common and common equivalent
shares outstanding - primary (1),(2) 57,002 13,787 65,663
================ ================== ==================
Income (loss) before extraordinary item per share-fully
diluted (1),(2) $ 0.35 $ (0.77) $ 0.14
================ ================== ==================
Weighted average common and common equivalent
shares outstanding - fully diluted (1),(2) 58,027 13,787 66,688
================ ================== ==================
</TABLE>
(1) Exchange Ratio
Under the Merger Agreement, each outstanding share of STF Common Stock
will be converted into 0.6282 shares of Tel-Save Common Stock, based on
the Exchange Ratio (as defined in the Merger Agreement). This Exchange
Ratio was used in computing share and per shares amounts in the
accompanying unaudited pro forma combined condensed financial
statements.
(2) The Unaudited Pro Forma Combined Condensed Financial Statements
contemplate that the Closing Date Market Price (as defined in the Merger
Agreement) will be equal to $17.9083 per share. To the extent the
Closing Date Market Price varies from $17.9083 per share, the weighted
average common and common equivalent shares outstanding, and thus income
before extraordinary item per share, will vary as well. The following
table represents income before extraordinary item per share applicable
to common stockholders if the Closing Date Market Price was $10.00,
$17.9083 and $20.00 per share.
<PAGE>
<TABLE>
<CAPTION>
Closing Date Market Price
------------------------------------------------------------
$10.0000 $ 17.9083 $ 20.0000
------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Exchange Ratio 1.1250 0.6282 0.5625
============================================================
Income before extraordinary item applicable
to common stock $ 9,544 $ 9,544 $ 9,544
================ ================== ==================
Income before extraordinary item
per share - primary $ 0.13 $ 0.15 $ 0.15
================ ================== ==================
Weighted average common and common
equivalent shares outstanding - primary 72,512 65,663 64,757
================ ================== ==================
Income before extraordinary item
per share - fully diluted $ 0.13 $ 0.14 $ 0.15
================ ================== ==================
Weighted average common and common
equivalent shares outstanding - fully diluted 73,537 66,688 65,782
================ ================== ==================
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Historical Pro Forma
Tel-Save STF Combined
---------------- ---------------- ----------------
<S> <C> <C> <C>
Sales $ 180,102 $ 47,086 $ 227,188
Cost of sales 156,121 28,872 184,993
---------------- ---------------- ----------------
Gross profit 23,981 18,214 42,195
Selling, general and administrative 6,280 16,188 22,468
---------------- ---------------- ----------------
Operating income 17,701 2,026 19,727
Other income (expenses):
Equity in loss of affiliate - (1,752) (1,752)
Gain on sale of subsidiary stock - 1,375 1,375
Interest expense - (677) (677)
Investment and other income, net 331 - 331
---------------- ---------------- ----------------
Income before provision for income taxes 18,032 972 19,004
Provision for income taxes 7,213 45 7,258
---------------- ---------------- ----------------
Net income $ 10,819 $ 927 $ 11,746
================ ================ ================
Preferred stock dividends - 398 398
---------------- ---------------- ----------------
Net income applicable to common stockholders $ 10,819 $ 529 $ 11,348
================ ================ ================
Net income per share - primary (1),(2) $ 0.32 $ 0.06 $ 0.29
================ ================ ================
Weighted average common and common equivalent
shares outstanding - primary (1),(2) 33,605 8,482 38,933
================ ================ ================
Net income per share - fully diluted (1),(2) $ 0.32 $ 0.06 $ 0.29
================ ================ ================
Weighted average common and common equivalent
shares outstanding - fully diluted (1),(2) 33,605 8,482 38,933
================ ================ ================
</TABLE>
(1) Exchange Ratio
Under the Merger Agreement, each outstanding share of STF Common Stock will
be converted into 0.6282 shares of Tel-Save Common Stock, based on the
Exchange Ratio (as defined in the Merger Agreement). This Exchange Ratio
was used in computing share and per share amounts in the accompanying
unaudited pro forma combined condensed financial statements.
(2) The Unaudited Pro Forma Combined Condensed Financial Statements contemplate
that the Closing Date Market Price (as defined in the Merger Agreement)
will be equal to $17.9083 per share. To the extent the Closing Date Market
Price varies from $17.9083 per share, the weighted average common and
common equivalent shares outstanding, and thus income before extraordinary
item per share, will vary as well. The following table represents income
before extraordinary item per share applicable to common stockholders if
the Closing Date Market Price was $10.00, $17.9083 and $20.00 per share.
<TABLE>
<CAPTION>
Closing Date Market Price
--------------------------------------------------------
$ 10.0000 $ 17.9083 $ 20.0000
--------------------------------------------------------
(in thousands, except per share amounts)
Exchange Ratio 1.1250 0.6282 0.5625
========================================================
<S> <C> <C> <C>
Income before extraordinary item applicable
to common stock $ 11,348 $ 11,348 $ 11,348
================ ================ ================
Income before extraordinary item
per share - primary $ 0.26 $ 0.29 $ 0.30
================ ================ ================
Weighted average common and common
equivalent shares outstanding - primary 43,147 38,933 38,376
================ ================ ================
Income before extraordinary item
per share - fully diluted $ 0.26 $ 0.29 $ 0.30
================ ================ ================
Weighted average common and common
equivalent shares outstanding - fully diluted 43,147 38,933 38,376
================ ================ ================
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Historical Pro Forma
Tel-Save STF Combined
---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Sales $ 82,835 $ 45,367 $ 128,202
Cost of sales 70,104 26,172 96,276
---------------- ---------------- ----------------
Gross profit 12,731 19,195 31,926
Selling, general and administrative 3,442 16,909 20,351
---------------- ---------------- ----------------
Operating income 9,289 2,286 11,575
Other income (expenses):
Minority interest in net income of subsidiaries - (128) (128)
Interest expense - (359) (359)
Investment and other income, net 66 - 66
---------------- ---------------- ----------------
Income before provision for income taxes and extraordinary
item 9,355 1,799 11,154
Provision (benefit) for income taxes 3,742 (487) 3,255
---------------- ---------------- ----------------
Net income $ 5,613 $ 2,286 $ 7,899
================ ================ ================
Preferred stock dividends - 478 478
---------------- ---------------- ----------------
Net income applicable to common stockholders $ 5,613 $ 1,808 $ 7,421
================ ================ ================
Net income per share - primary (1),(2) $ 0.18 $ 0.27 $ 0.21
================ ================ ================
Weighted average common and common equivalent
shares outstanding - primary (1),(2) 30,663 6,792 34,930
================= ================ ================
Net income per share - fully diluted (1),(2) $ 0.18 $ 0.27 $ 0.21
================ ================ ================
Weighted average common and common equivalent
shares outstanding - fully diluted (1),(2) 30,663 6,792 34,930
================= ================ ================
</TABLE>
(1) Exchange Ratio
Under the Merger Agreement, each outstanding share of STF Common Stock will
be converted into 0.6282 shares of Tel-Save Common Stock, based on the
Exchange Ratio (as defined in the Merger Agreement). This Exchange Ratio
was used in computing share and per share amounts in the accompanying
unaudited pro forma combined condensed financial statements.
(2) The Unaudited Pro Forma Combined Condensed Financial Statements contemplate
that the Closing Date Market Price (as defined in the Merger Agreement)
will be equal to $17.9083 per share. To the extent the Closing Date Market
Price varies from $17.9083 per share, the weighted average common and
common equivalent shares outstanding, and thus income before extraordinary
item per share, will vary as well. The following table represents income
before extraordinary item per share applicable to common stockholders if
the Closing Date Market Price was $10.00, $17.9083 and $20.00 per share.
<TABLE>
<CAPTION>
Closing Date Market Price
-------------------------------------------------------
$10.0000 $ 17.9083 $ 20.0000
-------------------------------------------------------
(in thousands, except per share amounts)
Exchange Ratio 1.1250 0.6282 0.5625
=======================================================
<S> <C> <C> <C>
Income before extraordinary item applicable
to common stock $ 7,421 $ 7,421 $ 7,421
================ ================ ================
Income before extraordinary item
per share - primary $ 0.19 $ 0.21 0.22
================ ================ ================
Weighted average common and common
equivalent shares outstanding - primary 38,304 34,930 34,484
================ ================ ================
Income before extraordinary item
per share - fully diluted $ 0.19 $ 0.21 $ 0.22
================ ================ ================
Weighted average common and common
equivalent shares outstanding - fully diluted 38,304 34,930 34,484
================ ================ ================
</TABLE>
RISK FACTORS
PROPOSED SHARED TECHNOLOGIES FAIRCHILD MERGER
Tel-Save Holding, Inc. (the "Company") entered into the Agreement and Plan
of Merger (the "Shared Technologies Merger Agreement"), dated as of July 16,
1997, among the Company, a subsidiary of the Company and Shared Technologies
Fairchild Inc. ("Shared Technologies"), pursuant to which, among other things,
Shared Technologies would be merged ("Shared Technologies Merger") with and into
a subsidiary of the Company and thereby become a wholly owned subsidiary of the
Company, and the outstanding Shared Technologies Common Stock (the "STF Common")
would be converted into such number of shares of the Company's Common Stock as
equals the quotient (the "Exchange Ratio") of (a) $11.25 plus the product of (x)
.3 times (y) the amount, if any, by which the average closing price per share of
the Company's Common Stock on the Nasdaq National Market for the fifteen
consecutive trading days ending on the trading day three trading days
immediately preceding the date of the closing of the Shared Technologies Merger
(the "Closing Date Market Price") exceeds $20, divided by (b) the Closing Date
Market Price, provided that the Exchange Ratio shall not exceed 1.125. As of
August 13, 1996, there were approximately 16.8 million shares of STF Common
outstanding and approximately 8.4 million shares of STF Common Stock reserved
for issuance upon exercise of outstanding Shared Technologies convertible
preferred stock, warrants and stock options. The consummation of the Shared
Technologies Merger is subject to the approval of the stockholders of both the
Company and Shared Technologies, as well as other conditions, including
termination of all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act, applicable federal and state regulatory approvals
and consents, the Shared Technologies Merger's qualifying as a pooling of
interests transaction for accounting purposes, the consent of the banks under
Shared Technologies's credit facility (the "STF Credit Facility") or the
refinancing of such Facility, the absence of injunctions or other legal
restraints preventing the consummation of the Shared Technologies Merger and
other closing conditions. There can be no assurance that the Shared Technologies
Merger will be consummated.
As of June 30, 1997, Shared Technologies and its consolidated subsidiaries
had outstanding approximately $125 million under the STF Credit Facility and
approximately $164 million aggregate face amount of 12-1/4% Senior Subordinated
Discount Notes due 2006 (the "STF Notes"). As of August 27, 1997, the Company
had purchased, in separate, privately negotiated transactions, approximately
$150 million aggregate face amount of the STF Notes. Such purchases were
financed by borrowings under a $150 million Credit Agreement (the "Salomon
Credit Facility"), dated as of August 25, 1997, between the Company and Salomon
Brothers Holding Company Inc, as well as with internal funds. The Salomon Credit
Facility has a 364-day term, provides for loans up to $150 million to finance
the purchase of the STF Notes and working capital purposes and is secured by a
pledge of substantially all of the assets of the Company and its subsidiaries
and by a pledge of the Common Stock of Mr. Daniel Borislow, Chairman and Chief
Executive Officer of the Company. The Company did not purchase the STF Notes
pursuant to any agreement with Shared Technologies and, should the Shared
Technologies Merger not be consummated, the Company would continue as the holder
of these STF Notes.
While the Company's management expects to realize operating synergies and
cost savings as a result of the Shared Technologies Merger, there can be no
assurance that the Company will achieve all of the benefits that management
expects to realize in connection with the Shared Technologies Merger or that
such benefits will occur within the time frame contemplated. Realization of
operating synergies and cost savings could be affected by a number of factors
beyond the Company's control, such as general economic conditions, increased
operating costs, the response of competitors or customers, regulatory
developments and delays in implementation. In addition, certain benefits are
dependent upon the Company's taking certain actions that will result in one-time
charges or expenses.
The Shared Technologies Merger contemplates the integration of the
administrative, finance, sales and marketing organizations of Shared
Technologies and the Company. Shared Technologies is a significantly larger
company, in terms of employees and facilities managed and operated, than the
Company and is engaged in a number of businesses that are different than those
in which the Company has historically engaged. In addition, Shared Technologies
and its predecessors have also been
<PAGE>
involved in a number of acquisitions in recent years, including the acquisition,
in March, 1996, of Fairchild Industries, Inc., the operations and management of
which are still being integrated by Shared Technologies. The integration of the
businesses of the Company and Shared Technologies will require substantial
attention from the Company's management team, which will include Shared
Technologies employees who have not previously worked with the Company. The
retention of certain key Shared Technologies personnel will be important for the
management of the Shared Technologies business. Also, both Shared Technologies's
and the Company's customers will need to be reassured that their services will
continue uninterrupted. All of these efforts will place significant pressure on
the Company's existing management, staff and other resources (see "- Recent
Rapid Growth; Ability to Manage Growth", below). Moreover, integration of Shared
Technologies will require the Company's senior management to oversee business
areas in which they have limited or no direct experience. The diversion of
management attention, inability to satisfy the foregoing needs and any other
difficulties encountered in the transition process could have an adverse effect
on the Company's business, operating results and financial condition.
DEPENDENCE ON AT&T AND LUCENT
The design for the Company's telecommunications network, which is known as
"OBN," "One Better Net" or "One Better Network," relies upon AT&T Corp. ("AT&T")
transmission facilities, international long distance services and operator
services. If AT&T were to terminate the Company's use of AT&T's transmission
facilities, international long distance services or operator services, the
Company would seek to enter into similar arrangements with other long distance
providers. There can be no assurance that the terms of such agreements would be
favorable to the Company. The Company's current operations and strategy with OBN
emphasize the quality and functionality of the AT&T (now Lucent Technologies,
Inc., hereinafter "Lucent") manufactured equipment, AT&T-provided transmission
facilities and billing services, and AT&T operator services. Loss of the ability
to market OBN emphasizing the quality of these AT&T and Lucent-based services
could have a material adverse effect on the Company's results of operations and
financial conditions.
The Company also will continue to depend on AT&T to provide the AT&T
telecommunications services that the Company resells directly to end users and
to independent long distance and marketing companies known as "partitions,"
which in turn resell the services on the AT&T network to end users. The
Company's ability to resell such services on the AT&T network depends upon
whether the Company can continue to maintain a favorable relationship with AT&T.
AT&T may terminate the provision of services under its tariffs for limited
reasons, including for nonpayment by the Company, for national defense purposes
or if the provision of services to the Company were to have a substantial
adverse impact on AT&T's network. While AT&T's policy historically has been to
provide 30-day notice prior to termination of services, there are no specific
notice requirements with respect to such termination. Although the Company has
no specific contingency arrangements in place to provide service to end users if
AT&T were to discontinue its service to the Company, based upon discussions that
the Company has had with other long distance providers and based upon such
providers' published tariffs, the Company believes that it could negotiate and
obtain contracts with other long distance providers to resell long distance
services at rates comparable to its current contract tariffs with AT&T. If the
Company were to enter into contracts with another provider, however, the Company
believes it would take approximately 14 to 28 days to switch end users to that
provider. Although the Company believes it may have the right to switch end
users without their consent to such other providers, end users have the right to
discontinue such service at any time. Accordingly, the termination or
non-renewal of the Company's contract tariffs with AT&T or the loss of
telecommunication services from AT&T likely would have a material adverse effect
on the Company's results of operations and financial condition.
The Company uses billing services provided by AT&T and AT&T's College and
University Systems ("ACUS"). There can be no assurance that either AT&T or ACUS
will continue to offer billing services to the Company on terms acceptable to
the Company. AT&T has removed its name on bills for which it provides billing
services and could further obscure its role in providing billing services or
cease providing billing services altogether. Loss of the AT&T and ACUS billing
services or decreased awareness of the AT&T name could have a material adverse
effect on the Company's marketing strategy and reten-
<PAGE>
tion of existing partitions and end users. The Company is developing its own
information systems in order to have its own billing capacity, including in
connection with its anticipated services under the AOL Agreement discussed
below, although the Company has not provided such direct billing services to end
users in the past.
AOL AGREEMENT
The Company entered into a Telecommunications Marketing Agreement (the "AOL
Agreement"), dated as of February 22, 1997 and effective as of February 25,
1997, with America Online, Inc. ("AOL"), under which the Company will provide
long distance telecommunications services to be marketed by AOL to all of the
subscribers of AOL's online network. The Company made an initial payment of $100
million to AOL at signing and agreed to provide marketing payments to AOL based
on a percentage of the Company's profits from the services (between 50% and 70%
depending on the level of revenues from the services). The AOL Agreement
provides that $43 million of the initial payment will be offset and recoverable
by the Company through reduction of such profit-based marketing payments during
the initial term of the AOL Agreement or, subject to certain monthly reductions
of the amount thereof, directly by AOL upon certain earlier terminations of the
AOL Agreement. The $57 million balance of the initial payment is solely
recoverable by offset against a percentage of such profit-based marketing
payments made after the first five years of the AOL Agreement (when extended
beyond the initial term) and by offset against a percentage of AOL's share of
the profits from the services after termination or expiration of the AOL
Agreement. Any portion of the $43 million not previously repaid or reduced in
amount would be added to the $57 million and would be recoverable similarly.
Also under the AOL Agreement, the Company issued to AOL at signing two
warrants to purchase shares of the Company's Common Stock at a premium over the
market value of such stock on the issuance date. One warrant is for 5 million
shares, at an exercise price of $15.50 per share, one-half of which shares will
vest at the time the service is first made generally available to AOL online
network subscribers in accordance with the AOL Agreement or the first
anniversary of the warrant issuance, whichever is earlier, and the balance of
which will vest on the first anniversary of issuance if the AOL Agreement has
not terminated. The other warrant is for up to 7 million shares, at an exercise
price of $14.00 per share, which will vest, commencing December 31, 1997, based
on the number of subscribers to the services and would vest fully if there are
at least 3.5 million such subscribers at any one time. The Company also agreed
to issue to AOL an additional warrant to purchase 1 million shares of the
Company's Common Stock, at market value at the time of issuance, upon each of
the first two annual extensions by AOL of the term of the AOL Agreement, which
warrants also will vest based on the number of subscribers to the services.
The profitability of the AOL Agreement for the Company depends on the
Company's ability to develop in a timely fashion online ordering, call detail,
billing and customer services for the AOL members, which will require, among
other things, the ability to identify and employ sufficient personnel qualified
to provide the necessary programming; the ability of the Company and AOL to work
together effectively to develop jointly the online marketing contemplated by the
AOL Agreement; a rapid response rate to online promotions to AOL's online
subscribers, most of whom are expected to be potential residential customers
rather than business customers to which the Company has marketed historically;
the Company's ability to expand OBN to accommodate increased traffic levels; and
AOL's ability to execute successfully its publicly stated business plan and
implement its announced network changes to improve member access to its online
service. Since the $100 million payment is recoverable only through the profits
from the services, to the extent that the AOL Agreement is unsuccessful, such
amount is subject to potential non-recovery or limited recovery by the Company.
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.
RECENT RAPID GROWTH; ABILITY TO MANAGE GROWTH
The Company began operations in 1989 (as Tel-Save, Inc.) as a reseller of
AT&T services . Over the past eight years, the Company has grown dramatically,
becoming a public company in 1995 with revenues in 1996 of $232 million and
approximately 390 employees. Although the Company has expe-
<PAGE>
rienced significant growth in a relatively short period of time, there can be no
assurance that the growth experienced by the Company will continue or that the
Company will be able to achieve the growth contemplated by its business
strategy. This strategy reflects significant changes from the Company's
historical business and includes the Company's operation of its own network, One
Better Net or OBN, which has changed the Company from a pure reseller of AT&T
services to a switch-based provider (see "- Risks Related to OBN"); the AOL
Agreement, for which the Company made a significant payment (see "- AOL
Agreement") and that will require, among other things, additional personnel, new
billing capacity, a new marketing orientation to residential customers and
potential expansion of OBN capacity; the pending merger with Shared
Technologies, which involves the acquisition by the Company of a company that,
in terms of numbers of employees and facilities, is significantly larger than
the Company and that engages in a number of businesses in which the Company has
no experience (see "- Proposed Shared Technologies Fairchild Merger"). The
Company's strategy has also resulted in significant recent changes to its
balance sheet composition, including significant debt incurred, which has
increased financial management requirements.
Implementation of the Company's strategy, including maintaining (and, as
appropriate, expanding) OBN, maintaining and supporting the existing business
with partitions, launching the AOL marketing approach and managing customer
accounts over the AOL online service and integrating the Shared Technologies
business into the Company's, is placing and will continue to place significant
demands on the Company's management, operational, financial and other resources
and will require the Company to enhance further its operations, management,
financial and information systems and controls and to expand, train and manage
its employee base in certain areas, including customer service support and
financial and marketing and administrative resources. Success in this regard
depends, among other things, on the Company's ability to fund or finance
significant investments of resources for OBN expansion and to manage, attract
and retain qualified personnel (competition for whom is intense). There can be
no assurance that the Company will successfully manage its expanding operations
and, if the Company's management is unable to manage growth effectively, the
Company's business, operating results and financial condition would be
materially and adversely affected.
SOME POTENTIAL FUTURE CHARGES
Of the $100 million payment to AOL (plus the value of the 5 million share
AOL warrant, which is valued, subject to possible change, at $9.1 million, and
$.6 million of AOL Agreement-related costs), the Company anticipates that, if
the commercial launch of the Tel-Save service takes place in September 1997, as
anticipated, an aggregate of approximately $46 million will be charged to
expense in the third and fourth quarters of 1997 (an aggregate of $14.4 million
was so charged in the first and second quarters of 1997). The balance will be
recognized ratably over the balance of the term of the AOL Agreement, the
initial term of which expires on June 30, 2000, as advertising services are
received. The AOL warrant for up to 7 million shares will be valued and charged
to expense as and when subscribers to the Company's services under the AOL
Agreement sign-up and the shares under such warrant vest. The amount of such
charges, which could be significant, will be based on the extent to which such
warrant vests and the market prices of the Common Stock at the time of vesting
and therefore such charges are not currently determinable. Generally, the higher
the market price of the Common Stock at the time of vesting, the larger the
amount of the charge will be. If the AOL Agreement should prove unsuccessful,
any remaining amount of the total value paid under the AOL Agreement could be
written off earlier.
The Company granted an option to an executive officer to purchase 800,000
shares of the Company's Common Stock at an exercise price of $11.125 per share.
The option granted is subject to the approval of the Company's stockholders, and
will be submitted for approval at the next stockholders meeting, anticipated to
be held in the fourth quarter of 1997. Approval of the option grant will result
in compensation expense equal to the difference between the exercise price and
the market value of the Company's Common Stock on the date of such approval.
As indicated above under "- Proposed Shared Technologies Fairchild Merger,"
above, various expenses are anticipated to be incurred in realizing some of the
benefits of the Shared Technologies Merger.
<PAGE>
COMPETITION
The long distance telecommunications industry is highly competitive and
affected by the introduction of new services by, and the market activities of,
major industry participants. Competition in the long distance business is based
upon pricing, customer service, billing services and perceived quality. The
Company competes against various national and regional long distance carriers
and competes against the numerous companies in the long distance
telecommunications market that offer essentially the same services as the
Company. Several of the Company's competitors are substantially larger and have
greater financial, technical and marketing resources than the Company. The
Company's competitors that resell non-AT&T services do so at prices below that
which the Company can provide as an AT&T switchless reseller, although the
deployment of OBN enables the Company to be price competitive with non-AT&T
resellers at current industry pricing levels. The ability of the Company to
compete effectively in the telecommunications industry will depend upon the
Company's continued ability to provide high quality services at prices generally
competitive with, or lower than, those charged by its competitors. Although the
Company believes that gross margins will improve as more customers are
provisioned on OBN, revenues could decline if competition for long distance
service forced the Company to offer services at greater discounts.
Changes in the regulation of the telecommunications industry may impact the
Company's competitive position. The Telecommunications Act of 1996 (the
"Telecommunications Act") effectively opens up the long distance market to
competition from the Bell Operating Companies and Regional Holding Companies
(collectively, "RBOCs"). The entry of these well-capitalized and well-known
entities into the long distance market could significantly alter the competitive
environment in which the Company operates because of the established
relationship the RBOCs have with their local service customers (and the
likelihood that the RBOCs will take advantage of those relationships), as well
as the possibility of interpretations of the Telecommunications Act favorable to
the RBOCs, which may make it more difficult for other providers, such as the
Company, to compete to provide long distance services. Consolidation and
alliances across geographic regions (e.g., Bell Atlantic/Nynex and SBC
Communications Inc./Pacific Telesis Group domestically and BT/MCI and France
Telecom/Deutsche Telekom/Sprint internationally) and across industry segments
(e.g., WorldCom/MFS/UUNet) may also impact competition in the telecommunications
market and the position of the Company.
Although the basic rates of the three largest long distance carriers-AT&T,
MCI Communications Corp. and Sprint Corporation-have historically increased,
AT&T and other carriers have announced new price plans and significant
simplified rate structures aimed at residential customers (the Company's primary
target audience under the AOL contract), 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 to medium-sized
businesses that the Company serves. AT&T and other carriers have also passed
through to customers reductions in the access charges they pass to local
telephone companies. 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 profitability.
MAINTENANCE OF END USER BASE
End users are not obligated to purchase any minimum usage amount and can
discontinue service, without penalty, at any time. There can be no assurance
that end users will continue to buy their long distance telephone service
through the Company or through "partitions," independent carriers and marketing
companies that purchase services from the Company. In the event that a
significant portion of the Company's end users decides to purchase long distance
service from another long distance service provider, there can be no assurance
that the Company will be able to replace its end user base from other sources.
Loss of a significant portion of the Company's end users would have a material
adverse effect on the Company's results of operations and financial condition.
A high level of customer attrition is inherent in the long distance
industry, and the Company's revenues are affected by such attrition. Attrition
is attributable to a variety of factors, including termina-
<PAGE>
tion of customers by the Company for non-payment and the initiatives of existing
and new competitors as they engage in, among other things, national advertising
campaigns, telemarketing programs and the issuance of cash or other forms of
incentives.
DIRECT MARKETING RISKS
In 1996, the Company began to market its long distance service directly to
small and medium-sized businesses. In the second quarter of 1997, the Company
determined to change its business practice and deemphasize the use of direct
telemarketing to solicit customers for the Company as the carrier. Both federal
and state officials are tightening the rules governing the telemarketing of
telecommunications services and the requirements imposed on carriers acquiring
customers in that manner. Customer complaints of "unauthorized conversion" or
"slamming" are widespread in the long distance industry and are beginning to
occur with respect to newly-competitive local services. While the Company's
changed strategy should reduce its exposure to customer complaints and federal
or state enforcement actions with respect to telemarketing practices, certain
state officials have made inquiries with respect to the marketing of the
Company's services and there is the risk of enforcement actions by virtue of its
direct marketing efforts and its ongoing support of its customer/partitions.
RELIANCE ON INDEPENDENT CARRIER AND MARKETING COMPANIES;
LACK OF CONTROL OVER MARKETING ACTIVITIES
Historically, the Company has marketed its services primarily through
partitions, which generally have entered into non-exclusive agreements with the
Company. Most partitions to date have made no minimum use or revenue commitments
to the Company under these agreements. If the Company were to lose access to
services on the AT&T network or billing services or experience difficulties with
OBN, the Company's agreements with partitions could be adversely affected.
Certain marketing practices, including the methods and means to convert a
customer's long distance telephone service from one carrier to another, have
recently been subject to increased regulatory review at both the federal and
state levels. Provisions in the Company's partition agreements mandate
compliance by the partitions with applicable state and federal regulations.
However, the Company's partitions are independent carriers and marketing
companies, and, therefore, the Company is unable to control such partitions'
activities. The Company is unable to predict the extent of its partitions'
compliance with applicable regulations or the effect of such increased
regulatory review. This increased regulatory review could also affect possible
future acquisitions of new business from new partitions or other resellers.
GOVERNMENT REGULATION
The Company is subject to regulation by the Federal Communications
Commission (the "FCC") and by various state public service and public utility
commissions as a non-dominant provider of long distance services. Under an FCC
order adopted on October 29, 1996, effectiveness of which has been suspended as
of the date hereof by a court order, the Company, its partitions and all other
non-dominant interexchange carriers would after nine months be required to
withdraw their tariffs for interstate service with the FCC. The Company and its
partitions, however, are still required to file tariffs for international
service with the FCC and to obtain authority and file tariffs for intrastate
service provided in most of the states in which they market long distance
services. Changes in existing policies or regulations in any state or by the FCC
could materially adversely affect the Company's results of operations,
particularly if those policies make it more difficult to obtain service from
AT&T or other long distance companies at competitive rates, or otherwise
increase the cost and regulatory burdens of providing services. There can be no
assurance that the regulatory authorities in one or more states or the FCC will
not take action having an adverse effect on the business or financial condition
or results of operations of the Company. Regulatory action by the FCC or the
states also could adversely affect the partitions, or otherwise increase the
partitions' cost and regulatory burdens of providing long distance services. The
Company will also be subject to applicable regulatory standards for marketing
activities, and the increased FCC and state attention to certain marketing
practices could be significant to the Company.
<PAGE>
Shared Technologies' business is subject to specific regulations in several
states. Within various states, such regulations may include limitations on the
number of lines or PBX switches per system, limitations of shared
telecommunications systems to single buildings or building complexes,
requirements that such building complexes be under common ownership or common
ownership, management and control and the imposition of local exchange access
rates that may be higher than those for similar single-user PBX systems. Shared
Technologies's systems business is generally exempt from governmental regulation
with respect to marketing and sales. However, various regulatory bodies,
including the FCC, require that manufacturers of equipment obtain certain
certifications. The Shared Technologies Merger will require permissions or
consents from certain state regulatory agencies. There can be no assurance that
the Company and Shared Technologies can obtain such permissions or consents, or
if they can be obtained, that the process can be completed on a timely basis.
ADVERSE EFFECT OF RAPID CHANGE IN TECHNOLOGY AND SERVICE
The telecommunications industry has been characterized by rapid
technological change, frequent new service introductions and evolving industry
standards. The Company believes that its future success will depend on its
ability to anticipate such changes and to offer on a timely basis services that
meet these evolving standards. There can be no assurance that the Company will
have sufficient resources to make necessary investments or to introduce new
services that would satisfy an expanded range of partition and end user needs.
RISKS RELATED TO OBN
In early 1997, the Company deployed its own nationwide telecommunications
network, One Better Net, or OBN. OBN currently provides services to
approximately 150,000 of the over 500,000 current end users of the Company's
services. Prior to the deployment of OBN, the Company marketed services by
emphasizing its use of AT&T's transmission facilities and switches ("AT&T
network") and billing services. Although such marketing can continue for
services on the AT&T network that the Company resells, the Company has had to
reduce its emphasis on AT&T in marketing OBN, which makes less use of the AT&T
network. There can be no assurance that the Company will be able to continue to
market OBN successfully, even though OBN uses Company-owned, AT&T (now Lucent)
manufactured switching equipment and AT&T transmission facilities and employs
the billing services of AT&T and ACUS. Failure to continue to market OBN
successfully would have a material adverse effect on the Company's financial
condition and results of operations.
Additionally, there can be no assurance that the Company will be able to
maintain or secure future AT&T contract tariffs or contracts for transmission at
cost-effective rates. Further, to the extent that the Company, rather than AT&T,
is responsible for providing the Company's telecommunications services, the
Company's potential liability increases if such services are not provided.
OBN utilizes AT&T (now Lucent) manufactured 5ESS-2000 switching equipment,
which employs the new Digital Networking Unit-SONET (Synchronous Optical
Network) technology and initially utilized the 5E10 software, which was recently
upgraded to 5E11 software. While the 5ESS-2000 switches have operated
successfully in the local environment, the Digital Networking Unit-S0NET and
5E11 software offer new technologies that have not been used extensively, and
there can be no assurance that the switches will continue to function
effectively.
Additional management personnel and information systems are required to
support OBN, the costs of which have increased the Company's overhead. In order
for the Company to provide service over the OBN, the Company must operate and be
responsible for the maintenance of its own switching equipment. While the
Company has hired additional personnel with experience in operating a
switch-based provider, there can be no assurance that the Company will be
successful in operating as a switch-based provider. Moreover, the Company must
be able to expand OBN to add capacity as needed, which may require significant
expenditures for hardware and software.
Operation as a switch-based provider subjects the Company to risk of
significant interruption in the provision of services on OBN in the event of
damage to the Company's facilities (switching equipment or connections to AT&T
transmission facilities) such as could be caused by fire or natural disaster.
Such interruptions or other difficulties in operating OBN could have a material
adverse effect on the Company's financial condition and results of operations.
DEPENDENCE UPON KEY PERSONNEL
The success of the Company's operations during the foreseeable future will
depend largely upon the continued services of Daniel Borislow, the Company's
Chairman and Chief Executive Officer. Mr. Borislow has entered into an
employment agreement with the Company that contains non-competition covenants
that extend for a period of up to 18 months following termination of employment.
<PAGE>
ABSENCE OF DIVIDENDS
The Company has not paid cash dividends since inception. The Company
currently intends to retain all future earnings for use in the operation of its
business and, therefore, does not anticipate paying any cash dividends in the
foreseeable future. Furthermore, the Company's existing bank credit facility
restricts the payment of dividends on the Common Stock.
CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER CONSIDERATIONS
As of August 30, 1997, Mr. Borislow owns beneficially approximately 37.9%
of the outstanding Common Stock. Accordingly, Mr. Borislow may have the ability
to control the election of all of the members of the Company's Board of
Directors and the outcome of corporate actions requiring majority stockholder
approval. Even as to corporate transactions in which super-majority approval may
be required, such as certain fundamental corporate transactions, Mr. Borislow
may have the ability to control the outcome of such actions.
The Company also has an authorized class of 5,000,000 shares of preferred
stock that may be issued by the Board of Directors on such terms and with such
rights, preferences and designations as the Board may determine. Issuance of
such preferred stock, depending upon the rights, preferences and designations
thereof, may have the effect of delaying, deterring or preventing a change in
control of the Company. In addition, the Delaware General Corporation Law and
other provisions of the Company's Amended and Restated Certificate of
Incorporation, including the provision of the Amended and Restated Certificate
that provides that the Board of Directors be divided into three classes each of
which is elected for three years, and the Bylaws contain provisions that may
have the effect of delaying or preventing a change in control of the Company.
Such anti-takeover effects may deter a third party from acquiring the
Company or engaging in a similar transaction affecting control of the Company in
which the Company's stockholders might receive a premium for their shares over
the then-current market value.
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of the Company's Common Stock could
adversely affect the market price of the Common Stock. As of August 30, 1997,
Mr. Borislow owns of record or has dispositive power with respect to 23.3% of
the outstanding Common Stock and a decision by Mr. Borislow to sell his shares
could adversely affect the market price of the Common Stock. Of the Company's
65,368,823 outstanding shares of Common Stock, 39,087,283 shares are freely
tradeable. Of the remaining 26,281,540 outstanding shares of Common Stock,
24,669,000 are eligible for resale pursuant to the timing and volume
restrictions of Rule 144 under the Securities Act and the balance will be
eligible for resale pursuant to such restrictions at various dates beginning in
December 1997.
There are outstanding options to purchase 8,598,800 shares of Common Stock
held by employees, former employees or directors of the Company. In addition,
there are warrants to purchase up to 13,100,000 shares of Common Stock, which
includes warrants to purchase up to 12,000,000 shares of America Online, Inc.
Paul Rosenberg, the holder of 7,440,000 shares of Common Stock, has the
right, under certain conditions, to participate in future registrations of
Common Stock and to cause the Company to register certain shares of Common Stock
owned by him. Holders of warrants also have registration rights under certain
conditions.
Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales could occur, may adversely affect the market price of
the Common Stock.
