Exhibit 10.44
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NOTE PURCHASE AGREEMENT
by and among
THE CHILLICOTHE TELEPHONE COMPANY
and
AMERICAN UNITED LIFE INSURANCE COMPANY
and
THE STATE LIFE INSURANCE COMPANY
Dated as of June 1, 1998
The Chillicothe Telephone Company
$12,000,000 6.62% Senior Notes
Due June 1, 2018
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TABLE OF CONTENTS
SECTION 1. PURCHASE AND SALE OF NOTES.........................................1
(a) The Notes........................................................1
(b) Purchases to Be Several..........................................1
(c) Late Payments....................................................2
(d) Manner of Payment................................................2
(e) Payment on Non-Business Days.....................................2
SECTION 2. PREPAYMENTS OF THE NOTES...........................................2
(a) Voluntary Payments with Premium..................................2
(b) Manner of Effecting Voluntary Prepayment.........................2
SECTION 3. REPRESENTATIONS AND WARRANTIES.....................................3
(a) Corporate Organization...........................................3
(b) Conflicting Agreements and Other Matters.........................3
(c) Due Authorization, etc...........................................3
(d) Legal Proceedings; Compliance With Law...........................3
(e) Financial Statements.............................................4
(f) Title to Assets..................................................4
(g) Securities Matters...............................................4
(h) Licenses and Permits.............................................5
(i) No Defaults on Indebtedness......................................5
(j) Tax Returns......................................................5
(k) No Margin Stock..................................................5
(l) ERISA Matters....................................................5
(m) Brokers and Finders..............................................6
(n) Use of Proceeds..................................................6
(o) Investment Company Act...........................................6
(p) Public Utility...................................................6
(q) Full Disclosure..................................................6
(r) Regulatory Approval..............................................6
(s) Existing Debt and Restricted Investments.........................7
SECTION 4. AFFIRMATIVE COVENANTS..............................................7
(a) Payment..........................................................7
(b) Maintenance of Books and Records.................................7
(c) Inspection of Books and Records..................................7
(d) Financial Information............................................7
(e) Quarterly Financial Statements...................................7
(f) Annual Financial Statements......................................8
(g) Financial Certification..........................................9
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(h) Copies of Management Letters, etc................................9
(i) Copies of Regulatory Reports.....................................9
(j) Corporate Existence..............................................9
(k) Payment of Taxes and Claims......................................9
(l) Maintenance of Properties and Licenses..........................10
(m) Insurance.......................................................10
(n) Net Worth.......................................................10
(o) Notice of Default...............................................10
(p) Exchange of Notes...............................................10
(q) Qualified Retirement Plans......................................11
SECTION 5. NEGATIVE COVENANTS................................................11
(a) Limitations on Funded Debt......................................11
(b) Limitations on Funded Debt of Subsidiaries......................11
(c) Subordination of Claims.........................................11
(d) Sale of Assets..................................................11
(e) Merger and Consolidation........................................12
(f) Maintenance of Present Business.................................12
(g) Transactions with Affiliates....................................12
(h) Permitted Liens.................................................12
(i) Restricted Payments and Restricted Investments..................14
(j) Fixed Charges...................................................14
(k) Sale of Accounts................................................15
(l) Guaranties; Etc.................................................15
SECTION 6. CONDITIONS PRECEDENT..............................................15
SECTION 7. DEFAULTS..........................................................16
SECTION 8. PAYMENTS ON AND REGISTRATION AND TRANSFER OF NOTES................18
SECTION 9. EXPENSES..........................................................18
SECTION 10. DELIVERY OF DOCUMENTS; PRO RATA PAYMENTS;
AMENDMENTS AND CONSENTS...........................................19
(a) Delivery of Documents...........................................19
(b) Pro Rata Payments...............................................19
(c) Amendments and Consents.........................................19
SECTION 11. INVESTMENT PURPOSE................................................19
SECTION 12. DEFINITIONS.......................................................19
SECTION 13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................25
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SECTION 14. SUCCESSORS AND ASSIGNS............................................25
SECTION 15. NOTICES...........................................................25
SECTION 16. GOVERNING LAW.....................................................25
SECTION 17. COUNTERPARTS......................................................25
SECTION 18. CAPTIONS..........................................................26
Appendix I Purchasers, Note Allocations and Wire Instructions
Schedule 3(d) Legal Proceedings
Exhibit A Form of Note
Exhibit B Subsidiaries
Exhibit C Existing Debts and Liens
Exhibit D Existing Restricted Investments
Exhibit E-1 Form of Opinion of Counsel to the Company
Exhibit E-2 Form of Opinion of Purchasers' Special Counsel
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NOTE PURCHASE AGREEMENT
Re: The Chillicothe Telephone Company
$12,000,000 6.62% Senior Notes
Due June 1, 2018
Dated as of June 1, 1998
TO THE PURCHASERS NAMED IN APPENDIX I HERETO:
Dear Sirs:
The undersigned, The Chillicothe Telephone Company, an Ohio corporation
(herein called the "Company"), hereby confirms its agreements set forth below
with the parties listed on Appendix I hereto (herein called the "Purchasers").
Reference is made to Section 12 hereof for definitions of capitalized terms used
herein and not otherwise defined.
SECTION 1. PURCHASE AND SALE OF NOTES.
(a) The Notes. Subject to the terms and conditions, herein, the
Company will sell to each of the Purchasers on such date on June 23, 1998,
or such later date as may be fixed by the Purchasers on at least three
days' prior written notice to the Company, or as may be mutually agreed
upon with the Purchasers (the date of sale being herein called the "Closing
Date"), and each of the Purchasers will purchase from the Company on the
Closing Date, at 100% of the principal amount thereof, a promissory note of
the Company (which, together with any note or notes issued in substitution
therefor, are herein collectively called the "Notes" and individually a
"Note"), in the principal amount specified on Appendix I hereto, dated the
Closing Date. The principal amount of the Notes shall be due in ten
consecutive equal annual installments, each in an aggregate amount equal to
$1,200,000 payable on the lst day of June in each of the years 2009 through
2018, inclusive. The Notes shall bear interest from the Closing Date until
payment in full of the principal amount thereof at the rate of 6.62% per
annum (provided that solely for the purpose of determining the portion of
annual interest allocable to any interest payment period, it shall be
assumed that a year is comprised of 360 days and twelve 30-day months),
payable semi-annually on the 1st day of June and December, commencing
December 1, 1998, and continuing until payment in full of the principal
amount of the Notes. The Notes shall be subject to optional and mandatory
prepayment as herein provided, shall in all respects be subject to the
terms of this Agreement, and shall be substantially in the form of Exhibit
A hereto.
(b) Purchases to Be Several. The purchase of each of the Notes by the
respective Purchasers shall be separate and several, but the purchase of
each Note shall be a condition concurrent to the purchase of each other
Note.
(c) Late Payments. Any payment of principal or (to the extent
permitted by applicable law) interest on the Notes not paid when due,
whether at stated maturity, by acceleration or otherwise, shall thereafter
bear interest at a rate per annum equal to 8.62% (provided that in no event
shall such rate exceed the maximum rate permitted by law).
(d) Manner of Payment. The Purchasers will pay the purchase price of
the Notes by wire transfer of immediately available Federal funds to such
accounts as shall be specified by the Company, or in such other funds or in
such other manner as may be mutually agreed upon by the Purchasers and the
Company, against delivery of the Notes to Purchasers special counsel,
Chapman and Cutler, which will be made at the offices of Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603 at 10:00 A.M.,
Chicago, Illinois time on the Closing Date.
(e) Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a Saturday,
Sunday or holiday for banks under the laws of the States of New York,
Indiana or Ohio, such payment may be made on the next succeeding business
day.
SECTION 2. PREPAYMENTS OF THE NOTES.
(a) Voluntary Payments with Premium. The Company may, at its option,
at any time, prepay the Notes in whole or in part (but if in part only in
the aggregate amount of $1,000,000 or integral multiples thereof), upon 30
days' prior written notice to the holders of the Notes, and upon payment of
a prepayment premium equal to the excess, if any, of (i) the amount equal
to the present value of all installments of principal and interest which
are avoided by such prepayment, determined by discounting such payments of
principal and interest at a rate per annum equal to .25% plus the Treasury
Yield Percentage, over (ii) the principal amount to be prepaid. In no event
shall such prepayment premium be less than zero.
(b) Manner of Effecting Voluntary Prepayment. In the event the Company
shall give notice of any prepayment in accordance with Section 2(a) above,
such notice shall specify the principal amount of the Notes to be prepaid,
the Section pursuant to which prepayment is being made, and the date of
proposed prepayment, and thereupon such principal amount, together with
accrued and unpaid interest thereon to the prepayment date and together
with the applicable premium, if any, shall become due and payable on the
prepayment date. In the event any prepayment pursuant to Section 2(a) shall
be less than the entire unpaid principal amount of the Notes, the amounts
of the prepayments (and the payment at maturity) required by Section l(a)
shall be reduced by an amount which is the same percentage of such required
prepayment or payment as the percentage that the principal amount of Notes
prepaid pursuant to Section 2(a) is of the aggregate principal amount of
outstanding Notes immediately prior to such prepayment.
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SECTION 3. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Purchasers as follows:
(a) Corporate Organization. The Company and its Subsidiaries are
corporations organized and existing and in good standing under the laws of
the State of Ohio, and are duly qualified to do business and are in good
standing under the laws of each state where the nature of the business done
or property owned require such qualification. The Company is organized
under the laws of the State of Ohio. Exhibit B hereto correctly sets forth
the name of each Subsidiary, its state of incorporation and the percentage
of the outstanding capital stock of such Subsidiary owned by the Company or
another Subsidiary. The Company does not own, directly or indirectly, more
than 1% of the total outstanding capital stock of any class of any other
corporation except for the capital stock of ComNet, Inc. of which the
Company owns approximately 5% of the outstanding capital stock thereof.
(b) Conflicting Agreements and Other Matters. Neither the execution
and delivery by the Company of this Agreement and the Notes, nor the
performance or observance by the Company or any Subsidiary of any of the
terms or conditions of this Agreement or the Notes, will (i) conflict with,
or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company or
any Subsidiary pursuant to, the Certificate of Incorporation or Code of
Regulations of the Company or any Subsidiary, any award of any arbitrator,
or any indenture, contract or agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any Subsidiary is subject, or (ii)
require any registration or filing with, or any consent or approval of, any
Federal, state or local governmental agency or authority, except for the
Application for Consent and Authority to issue and sell $12,000,000 of
Senior Unsecured Notes to the Public Utilities Commission of Ohio (the
"Commission") which was filed April 24, 1998 (the "Application") and the
approval thereof by the Commission which was obtained by the Company on
June 2, 1998.
(c) Due Authorization, etc. The sale of the Notes and the execution
and delivery of this Agreement and the Notes are within the corporate
powers of the Company and have been duly authorized by all necessary action
of the Company and its Subsidiaries. The Notes and this Agreement have been
duly executed and delivered by the Company and constitute the legal, valid
and binding obligations, contracts and agreements of the Company
enforceable in accordance with their respective terms.
(d) Legal Proceedings; Compliance With Law. Except as listed on
Schedule 3(d) hereto, there are no actions, suits, or proceedings pending
or, to the knowledge of the Company, threatened against the Company or any
of its Subsidiaries or any property of the Company or any of its
Subsidiaries in any court or before any federal, state, municipal or other
governmental agency, which, if decided adversely to the Company or any of
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its Subsidiaries, would have a materially adverse effect upon the Company
or any of its Subsidiaries or upon the business or properties of the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is in default with respect to any order of any court or
governmental agency.
Neither the Company nor any Subsidiary (1) is in violation of any law,
ordinance, franchise, governmental rule or regulation to which it is
subject; or (2) has failed to obtain any license, permit, franchise or
other governmental authorization necessary to the ownership of its property
or to the conduct of its business, which violation or failure to obtain
would materially affect adversely the business, prospects, profits,
properties or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, or impair the ability of the Company to
perform its obligations contained in this Agreement or the Notes.
(e) Financial Statements. The Company has furnished to the Purchasers
a consolidated balance sheet, statement of income and retained earnings and
statement of cash flows of the Company and its Subsidiaries for each of the
fiscal years ended December 31, 1994, December 31, 1995, December 31, 1996
and December 31, 1997, respectively, each certified by Arthur Andersen &
Co., independent certified public accountants, and unaudited consolidated
and consolidating balance sheets, statements of income and retained
earnings of the Company and its Subsidiaries for the three months ended
March 31, 1998. Said financial statements fairly present the financial
condition of the Company and its Subsidiaries at the date(s) thereof and
the results of operations of the Company and its Subsidiaries for the
period(s) indicated, all in conformity with generally accepted accounting
principles consistently followed through the period(s) involved. There have
been no material adverse changes in the condition, financial or otherwise,
of the Company and its Subsidiaries since December 31, 1997.
(f) Title to Assets. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good title to all
personal property they purport to own, including (except as they have been
affected by transactions in the ordinary course of business) all properties
and assets reflected in the most recent balance sheet referred to in
Section 3(e) hereof. In the case of property used in their trades or
businesses but not owned by them, the Company and its Subsidiaries have a
valid, binding and enforceable right to use such property pursuant to a
written lease, license or other agreement. All of the assets of the Company
and its Subsidiaries are free and clear of all Liens (other than Liens
permitted by Section 5(h) hereof).
(g) Securities Matters. Neither the Company nor any of its
Subsidiaries nor any agent acting on the behalf of the Company or any of
its Subsidiaries has offered the Notes or any part thereof, or any similar
obligation for sale to, or solicited any offers to buy such Notes, or any
part thereof, or any similar obligation from, any Person or Persons so as
to bring the issue or sale of the Notes within the provisions of Section 5
4
of the Securities Act of 1933, as amended, and neither the Company nor any
of its Subsidiaries will sell or offer for sale any note or any similar
obligation of the Company or any Subsidiary to, or solicit any offer to buy
any similar obligation of the Company or any Subsidiary from, any Person or
Persons so as to bring the issue or sale of the Notes within the provisions
of Section 5 of the Securities Act of 1933, as amended.
(h) Licenses and Permits. The Company and its Subsidiaries have
procured and are now in possession of all licenses or permits required by
federal, state or local laws for the operation of the business of the
Company and its Subsidiaries in each jurisdiction wherein the Company or
any Subsidiary is now conducting or proposes to conduct business.
(i) No Defaults on Indebtedness. Neither the Company nor any of its
Subsidiaries is in default in the payment of the principal of or interest
on any indebtedness for borrowed money nor is in default under any
instrument or agreement under and subject to which any indebtedness for
borrowed money has been issued, and no event has occurred under the
provisions of any such instrument or agreement which with or without the
passing of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.
(j) Tax Returns. The Company and its Subsidiaries have filed all
federal and state income tax returns which, to the knowledge of the
officers of the Company, are required to be filed, and have paid all taxes
shown on said returns and all assessments received by them to the extent
that they have become due. The federal income tax returns of the Company
have been finally determined by the Internal Revenue Service to be
satisfactory (or have been closed by the applicable statute of limitations)
for all years prior to and including the year ended 1994. No claims have
been asserted against the Company in respect of Federal income tax returns
for any subsequent year.
(k) No Margin Stock. Neither the Company nor any of its Subsidiaries
owns any Margin Stock and none of the proceeds received by the Company or
any Subsidiary from the sale of the Notes will be used for the purpose of
purchasing or carrying a Margin Stock or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase a
Margin Stock or for any other purpose not permitted by Regulation U (12 CFR
Part 207) of the Board of Governors of the Federal Reserve System, as
amended from time to time.
(l) ERISA Matters. Each Plan of the Company and each ERISA Affiliate
in which any employees of the Company or any ERISA Affiliate participate
that is subject to any provisions of ERISA is being administered in
accordance with the documents and instruments governing such Plan, and such
documents and instruments are consistent with those provisions of ERISA and
the Internal Revenue Code which have become effective and operative with
respect to such Plan as of the date of this Agreement. No such Plan has
incurred any material accumulated funding deficiency within the meaning of
Section 302 of ERISA (whether or not waived), and neither the Company nor
any ERISA Affiliate has incurred any material liability (including any
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material contingent liability) to the PBGC in connection with any such
Plan. No such Plan nor any trust created thereunder nor any trustee or
administrator thereof has engaged in a "prohibited transaction" within the
meaning of ERISA or Section 4975 of the Internal Revenue Code and the
issuance and sale of the Notes as contemplated hereby will not constitute a
"prohibited transaction". No such Plan nor any trust created thereunder has
been terminated, nor have there been any "reportable events" within the
meaning of Section 4043 of ERISA with respect to any such Plan. Neither the
Company nor any ERISA Affiliate contributes to or has any employees who are
covered by any "multiemployer plan," as such term is defined in Section
3(37) of ERISA, and neither the Company nor any ERISA Affiliate has
incurred any withdrawal liability with respect to any such multiemployer
plan.
(m) Brokers and Finders. Neither the Company, any agent acting on its
behalf nor any Person controlling, controlled by or under common control
with the Company has taken any action the effect of which would be to cause
the Purchasers to be liable for any broker's, finder's or agent's fee or
commission in connection with the placement of the Notes or any other
transactions contemplated by this Agreement. The Company has retained
NatCity Investments, Inc. as its agent for placement of the Notes and is
solely responsible for any fees and expenses payable to such agent.
(n) Use of Proceeds. The Company will use the net proceeds from the
sale of the Notes (i) to retire short term debt, and (ii) for general
corporate purposes.
(o) Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended).
(p) Public Utility. The Company is an operating public utility subject
to the jurisdiction of the Public Utilities Commission of Ohio and the
Federal Communications Commission.
(q) Full Disclosure. Neither this Agreement, the financial statements
referred to in Section 3(e) hereof, the Information Memorandum dated March
1998 and prepared by NatCity Investments, Inc., nor any other document,
certificate or instrument delivered to the Purchasers on behalf of the
Company or any of its Subsidiaries in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained therein not misleading.
(r) Regulatory Approval. The issue and sale of the Notes have, to the
extent required by law, been duly authorized by the Public Utilities
Commission of Ohio which authorization is not subject to any appeal or
modification which could affect the validity or terms of the Notes, and no
other consent, exemption, approval or authorization by any other
governmental authority is required in connection with the execution and
delivery of this Agreement or the issue and sale of the Notes.
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(s) Existing Debt and Restricted Investments. Exhibit C hereto
correctly describes all Debt of the Company and Liens securing any such
Debt as of June 1, 1998. Exhibit D hereto correctly describes the
Restricted Investments of the Company as of March 31, 1998, all of which
were made prior to January 1, 1998.
SECTION 4. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that, so long as any amount shall remain
unpaid on any of the Notes, it will:
(a) Payment. Duly and punctually pay or cause to be paid the principal
of and interest on the Notes and will duly and punctually perform or cause
to be performed all things on its part or on the part of any Subsidiary to
be done or performed under this Agreement and the Notes.
(b) Maintenance of Books and Records. At all times keep and cause each
Subsidiary to keep proper books of record and account in which full, true
and correct entries will be made of their transactions in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
(c) Inspection of Books and Records. At all reasonable times permit
and cause each Subsidiary to permit the holders of the Notes and their
representatives to inspect its books and records and to make extracts
therefrom and to inspect its properties and operations.
(d) Financial Information. From time to time furnish and cause each
Subsidiary to furnish the holders of the Notes with such information and
statements as the holders of the Notes may reasonably request concerning
performance by it of the covenants and agreements contained in this
Agreement and the Notes, and with copies of all financial statements and
reports that it shall send or make available to its stockholders; and in
the event that an Event of Default has occurred, and the Company shall have
notified the holders of the Notes that such Event of Default has been
corrected, the Company shall, upon request of the holders of at least
66-2/3% of the unpaid principal amount of the Notes at the time
outstanding, for the purpose of showing that such Event of Default has been
corrected, furnish to the holders of the Notes a signed copy of an audit
report or, if such matter may be covered in a special report, a special
report prepared and certified by an independent certified public accountant
selected by the Company and satisfactory to the holders of the Notes,
confirming that such Event of Default has been corrected. All expenses
incurred in connection with such report shall be borne by the Company.
Nothing in this Section 4(d), however, shall diminish, defer, postpone or
otherwise limit the right of the holders of the Notes to take any action
permitted by Section 7 hereof.
(e) Quarterly Financial Statements. Furnish to the holders of the
Notes, within 60 days after the close of each quarterly accounting period
in each fiscal year of the Company and its Subsidiaries, (i) a consolidated
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balance sheet and consolidated statement of income and retained earnings
reflecting the financial condition of the Company and its Subsidiaries at
the end of each such quarterly period and the results of operations during
such period, all in reasonable detail, and setting forth comparable figures
for the same accounting period in the preceding fiscal year, and (ii) a
separate balance sheet, statement of income and retained earnings for each
Subsidiary reflecting the financial condition of each Subsidiary at the end
of such quarterly period and the results of operation during such period,
all in reasonable detail, and setting forth comparable figures for the same
accounting period in the preceding fiscal year.
The Company shall also furnish to the holders of the Notes, within 60
days after the close of each quarterly accounting period in each fiscal
year of Telcom, a consolidated balance sheet and consolidated statement of
income and retained earnings reflecting the financial condition of Telcom
and its subsidiaries at the end of each quarterly period and the results of
operations during such period, all in reasonable detail, and setting forth
comparable figures for the same accounting period in the preceding fiscal
year.
(f) Annual Financial Statements. Furnish to the holders of the Notes,
as soon as available, but in any event within 120 days after the close of
each fiscal year of the Company, duplicate signed copies of an audit report
prepared and certified (without qualification as to the scope of the audit)
by Arthur Andersen & Company or another firm of independent certified
public accountants of national standing selected by the Company and
satisfactory to the holders of the Notes, which report shall include a
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as at the end of such year, consolidated and consolidating
statements of income and retained earnings of the Company and its
Subsidiaries and consolidated and consolidating statements of cash flows of
the Company and its Subsidiaries reflecting the operations during said
year, all in reasonable detail and setting forth comparable figures for the
preceding fiscal year, which report shall be accompanied by a statement by
such accounting firm certifying that in making the examination upon which
such report was based, no information came to its attention which to its
knowledge indicated a default under this Agreement had occurred or
specifying any such default.
The Company shall also furnish to the holders of the Notes, as soon as
available, but in any event within 120 days after the close of each fiscal
year of Telcom, duplicate signed copies of an audit report prepared and
certified (without qualification as to the scope of the audit) by Arthur
Andersen & Company or another firm of independent certified public
accountants of national standing selected by Telcom and satisfactory to the
holders of the Notes, which report shall include a consolidated and
accompanying supplementary consolidating balance sheet of Telcom and its
subsidiaries as at the end of such year, consolidated and accompanying
supplementary consolidating statements of income and retained earnings of
Telcom and its subsidiaries and consolidated and accompanying supplementary
consolidating statements of cash flows of Telcom and its subsidiaries
reflecting the operations during said year, all in reasonable detail and
setting forth comparable figures for the preceding fiscal year.
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(g) Financial Certification. At the time of the delivery to the
holders of the Notes of the reports referred to in Sections 4(e) and 4(f)
hereof, deliver to the holders of the Notes a certificate signed by its
chief financial officer, certifying that (s)he has reviewed the provisions
of this Agreement and stating, in his or her opinion, if such be the fact,
that the Company and its Subsidiaries have not been and are not in default
as to any of the provisions contained in this Agreement, or, in the event
the Company or its Subsidiaries is or was in default, setting forth the
details of such default. Such certificate shall set forth the computations
upon which such officer based the conclusion that the Company and its
Subsidiaries are and have been in compliance with Sections 4(n) and 5(a),
(b), (d), (h), (i) and (j) hereof.
(h) Copies of Management Letters, etc. Furnish to the holders of the
Notes, promptly after the receipt thereof by the Company, copies of all
management letters or similar documents submitted to the Company by
independent certified public accountants in connection with each annual and
any interim audit of the accounts of the Company or its Subsidiaries.
(i) Copies of Regulatory Reports. Furnish to the holders of the Notes,
promptly after transmittal or filing thereof by the Company, copies of all
proxy statements, notices and reports as it shall send to its stockholders,
copies of all registration statements (without exhibits) and all reports
which it files with the Securities and Exchange Commission or any other
regulatory agency, other than routine reports filed with respect to
employee benefit plans (excepting those annual reports with respect to each
such plan requested by the holders of the Notes in writing pursuant to
Section 4(q) hereof).
(j) Corporate Existence. Maintain and cause each Subsidiary to
maintain its corporate existence in good standing (except that the
corporate existence of any Subsidiary may be terminated pursuant to a
merger or consolidation permitted under Section 5(e) of this Agreement) and
comply with all applicable laws and regulations of the United States and of
each state thereof and of each political subdivision thereof and of any and
all other governmental authorities.
(k) Payment of Taxes and Claims. Pay and cause each Subsidiary to pay
before they become delinquent (a) all taxes, assessments and governmental
charges or levies imposed on the Company, any Subsidiary or upon the
property of the Company or any Subsidiary, (b) all claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like
persons which, if unpaid, might result in the creation of a Lien or charge
upon any property of the Company or any Subsidiary; and (c) all claims,
assessments or levies required to be paid by the Company or any Subsidiary
pursuant to any agreement, contract, law, ordinance or governmental rule or
regulation governing any pension, retirement, profit-sharing or any similar
plan of the Company or any Subsidiary, provided that the Company or such
Subsidiary shall have the right to contest in good faith, by appropriate
proceedings promptly initiated and diligently conducted which will prevent
the forfeiture or sale of any property of the Company or such Subsidiary or
9
any material interference with the use thereof by the Company or such
Subsidiary, the validity, amount or imposition of any of the foregoing
items and upon such good faith contest to delay or refuse payment thereof,
if such reserve or other appropriate provision, if any, as shall be
required by generally accepted accounting principles shall have been made
therefor.
(l) Maintenance of Properties and Licenses. Maintain and cause its
Subsidiary to maintain and keep its properties in good repair, working
order and condition, and from time to time make all needful and proper
repairs, renewals and replacements so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times. The Company will do or cause to be done all things necessary to
preserve, renew and keep in full force and effect the rights, licenses,
permits, agency agreements, and trade names material to the conduct of its
business and maintain and operate such business properly and efficiently
and in substantially the manner in which it is presently conducted and
operated.
(m) Insurance. Maintain and cause each Subsidiary to maintain, in
financially sound insurance companies of recognized standing, insurance of
types and in amounts usually maintained by similar companies in similar
businesses.
(n) Net Worth. At all times during each twelve-month period ending on
March 31 in each year, commencing with the twelve-month period ending on
March 31, 1999, maintain Consolidated Adjusted Net Worth in an amount at
least equal to $20,000,000, plus 25% of Consolidated Net Income, if any,
determined on a cumulative basis for each fiscal year of the Company ending
on or after December 31, 1997 and prior to the twelve-month period for
which such determination is being made (without reduction for any
Consolidated Net Loss incurred in any such fiscal year).
(o) Notice of Default. Give the holders of Notes prompt notice in
writing of any condition or event which constitutes an Event of Default
under Section 7 hereof, or which, after notice or lapse of time, or both,
would constitute such an Event of Default.
(p) Exchange of Notes. At any time, at its expense upon written
request of the holder of a Note and surrender of the Note for such purpose,
issue new Notes in exchange therefor in such denominations of at least
$1,000,000 (or such smaller amount equal to the then outstanding principal
amount of such Note) as shall be specified by the holder of such Note, in
an aggregate principal amount equal to the then unpaid principal amount of
the Note surrendered and substantially in the form of Exhibit A, with
appropriate insertions and variations, and bearing interest from the date
to which interest has been paid on the Note surrendered.
(q) Qualified Retirement Plans. Cause each Plan of the Company and any
ERISA Affiliate in which any employees of the Company or any ERISA
Affiliate participate that is subject to any provisions of ERISA and the
documents and instruments governing each such Plan to be conformed to when
necessary, and to be administered in a manner consistent with those
10
provisions of ERISA and the Internal Revenue Code which may, from time to
time, become effective and operative with respect to such Plans; and if
requested by the holders of the Notes in writing from time to time, furnish
to the holders of the Notes a copy of any annual report with respect to
each such plan that the Company files with the Internal Revenue Service
pursuant to ERISA. The Company will not, and will not permit any ERISA
Affiliate to (i) engage in any "prohibited transaction," (ii) incur any
"accumulated funding deficiency," whether or not waived (iii) terminate any
Plan in a manner which could result in the imposition of a Lien on any
property of the Company or any ERISA Affiliate, or (iv) incur any
withdrawal liability in connection with any "multiemployer plan."
SECTION 5. NEGATIVE COVENANTS.
The Company covenants and agrees that so long as any amount shall remain
unpaid on the Notes, it will not and will not permit any Subsidiary to:
(a) Limitations on Funded Debt. Create, assume, incur, guarantee or
otherwise become liable in respect of any Funded Debt other than (i) the
Notes, (ii) Funded Debt existing on the Closing Date and listed on Exhibit
C hereto, and (iii) Funded Debt of the Company to any Subsidiary or Funded
Debt of any Subsidiary to the Company or to another Subsidiary, unless at
the time such Funded Debt is incurred, and after giving effect thereto and
application of the proceeds thereof, Consolidated Funded Debt would not
exceed 55% of Consolidated Total Capitalization.
(b) Limitations on Funded Debt of Subsidiaries. In the case of any
Subsidiary, create, assume, incur, guarantee or otherwise become liable in
respect of any Funded Debt (other than Funded Debt to the Company or
another Subsidiary), unless at the time such Funded Debt is incurred, and
after giving effect thereto and the application of the proceeds thereof,
the aggregate amount of all such Funded Debt of Subsidiaries, plus the
aggregate amount of all other Debt secured by Liens permitted by Section
5(h)(ix) hereof, would not exceed 20% of Consolidated Adjusted Net Worth.
(c) Subordination of Claims. Subordinate or permit to be subordinated
any claim against, or obligation of another Person held or owned by it to
any other claim against, or obligation of, such other Person.
(d) Sale of Assets. Sell, lease, transfer or otherwise dispose of
(collectively, a "Disposition"), all or any part of its assets (other than
sales or dispositions in the ordinary course of business) if either (i) the
aggregate amount of all Dispositions in any fiscal year exceeds 10% of
Consolidated Total Assets determined as of the end of the immediately
preceding fiscal year, or (ii) the aggregate amount of all Dispositions
from and after the date of this Agreement exceed 25% of Consolidated Total
Assets determined as of the end of the immediately preceding fiscal year (a
11
Disposition of assets described in clause (i) or (ii) above is referred to
herein as a "substantial part"), except: (i) any Subsidiary may sell, lease
or otherwise dispose of, all or a substantial part of its assets to the
Company or a Subsidiary; (ii) the Company may sell, lease, transfer or
otherwise dispose of, all or a substantial part of its assets if the net
proceeds of such sales are used to purchase other property of a similar
nature of at least equivalent value within one year of such sale; and (iii)
the Company may sell, lease, transfer or otherwise dispose of all or a
substantial part of its assets if the net proceeds of such sale are used to
prepay Senior Debt (including the Notes) on a pro rata basis; provided that
any prepayment of the Notes must be in accordance with the terms of and
with the premium specified in Sections 2(a) and (b) hereof.
(e) Merger and Consolidation. Merge or consolidate with any
corporation provided that (i) any Subsidiary may be merged or consolidated
with the Company (if the Company is the surviving corporation) or with
another Subsidiary and (ii) the Company may merge or consolidate with
another corporation if (A) the surviving corporation would be organized
under the laws of the United States or any state thereof, (B) the surviving
corporation expressly assumes the obligations of the Company under this
Agreement and the Notes, and (C) immediately following the merger or
consolidation and after giving effect thereto (1) no event or condition
would exist which, with or without the lapse of time or the giving of
notice, or both, would constitute an Event of Default, (2) the Company and
its Subsidiaries would be permitted pursuant to Section 5(a) hereof to
incur at least $1.00 of additional Funded Debt, and (3) the Consolidated
Adjusted Net Worth of the Company and its Subsidiaries would be no less
than the Consolidated Adjusted Net Worth of the Company and its
Subsidiaries immediately prior to the merger or consolidation.
(f) Maintenance of Present Business. Engage in any business other than
Existing Lines of Business, nor purchase or invest, directly or indirectly,
in any substantial amount of assets or property other than assets or
property useful and to be used in Existing Lines of Business.
(g) Transactions with Affiliates. Enter into or be a party to any
transaction or arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the business of
the Company or its Subsidiaries and upon fair and reasonable terms no less
favorable to the Company or any of its Subsidiaries than would be obtained
in a comparable arm's-length transaction with a Person other than an
Affiliate.
(h) Permitted Liens. Create, assume, or suffer to exist any Liens upon
any of its property or assets, whether now owned or hereafter acquired,
except:
(i) Liens for taxes or assessments or other governmental charges
or levies not yet due or which are being contested in good faith by
appropriate proceedings promptly initiated and diligently conducted,
if such reserve or other appropriate provision, if any, as shall be
12
required by generally accepted accounting principles shall have been
made therefor;
(ii) other Liens incidental to the conduct of their business or
the ownership of their respective properties which were not incurred
in connection with borrowing of money or the obtaining of advances or
credit and which do not in the aggregate materially detract from the
value of their properties or materially impair the use thereof in the
operation of the business;
(iii) Liens on assets of any Subsidiary securing Debt of such
Subsidiary to the Company;
(iv) Liens (i) on property of the Company or any Subsidiary
securing all or any part of the purchase price or cost of construction
of such property created contemporaneously with, or within 270 days
after, the acquisition or completion of construction, (ii) on any
property existing at the time of acquisition thereof by the Company or
any Subsidiary, and (iii) existing on the property of any Person at
the time such Person is acquired (whether by purchase of stock or
assets, by merger or consolidation, or otherwise) by the Company or
any Subsidiary; provided that (A) none of such Liens shall encumber
any other property or assets of the Company and its Subsidiaries, and
(B) the principal amount of the Debt secured by any such Lien shall
not exceed 100% of the fair market value of the property subject
thereto at the time such Lien was created;
(v) presently existing Liens described in Exhibit C hereto
securing existing Debt described in Exhibit C, and any replacements,
extensions or renewals of such Debt; provided that no such
replacement, extension or renewal shall increase the principal amount
thereof;
(vi) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Subsidiary shall at
any time in good faith be prosecuting an appeal or proceeding for a
review and in respect of which a stay of execution pending such appeal
or proceeding for review shall have been secured;
(vii) Liens incurred in connection with obtaining or perform.
government contracts;
(viii) Liens on any property of the Company; provided that the
Company shall have granted to the holders of the Notes a pari passu
Lien on the same property, and the holders of any such Lien and the
holders of the Notes shall have entered into an intercreditor
agreement in form and substance reasonably satisfactory to the holders
of the Notes providing for such pari passu ranking; and
13
(ix) Liens in addition to those permitted by clauses (i) through
(viii) above, securing Debt of the Company or any Subsidiary, provided
that at the time of the incurrence of any such Lien the sum of (i) the
aggregate principal amount of all Debt secured by Liens permitted by
this clause (ix), plus (ii) the aggregate amount of Funded Debt of
Subsidiaries incurred within the limitations of Section 5(b), shall
not exceed 20% of Consolidated Adjusted Net Worth.
(i) Restricted Payments and Restricted Investments.
(1) Declare or make, or incur any liability to make any
Restricted Payments or Restricted Investments, except:
(A) a Subsidiary may pay dividends to the Company; and
(B) subject to the limitations in clauses (2) and (3) below,
the Company and its Subsidiaries may make Restricted Payments and
Restricted Investments, provided that immediately after giving
effect to any such Restricted Payment or Restricted Investment,
(x) no Event of Default or event which with the passing of time
or the giving of notice, or both, would constitute an Event of
Default shall exist, (y) the Company would be able to incur at
least $1.00 of additional Funded Debt pursuant to Section 5(a),
and (z) the aggregate amount of all Restricted Payments and
Restricted Investments made on or after January 1, 1998 to and
including the date of such Restricted Payment or Restricted
Investment would not exceed the sum of (i) $3,000,000, plus (ii)
60% of any Cumulative Consolidated Net Income, minus (iii) 100%
of any Cumulative Consolidated Net Loss, plus (iv) the net
proceeds to the Company from any issuance of capital stock from
and after January 1, 1998;
(2) In addition to the limitations contained in clause (1) above,
from January 1, 1997 through December 31, 1998, the Company shall not
increase the aggregate quarterly dividend on its common stock above
$710,000; and
(3) In addition to the limitations contained in clause (1) above,
the aggregate amount of all Restricted Investments of the Company and
its Subsidiaries outstanding at any time on or after January 1, 1998
shall not exceed $2,500,000.
In valuing any Investments for the purpose of applying the limitations set
forth in this Section 5(i), Investments shall be taken at the original cost
thereof, without allowance for any subsequent write-offs or appreciation or
depreciation therein, but less any amount repaid or recovered in cash on account
of capital or principal.
14
(j) Fixed Charges. Permit, as of the end of each fiscal quarter,
Consolidated Net Income Available for Fixed Charges for the immediately
preceding twelve-month period to be less than 250% of Fixed Charges for
such twelve-month period.
(k) Sale of Accounts. Sell with recourse, discount or otherwise sell
to an Affiliate any notes receivable or accounts receivable for an amount
less than the face amount thereof, less a reserve factor for credit losses
adjusted from time to time to reflect actual credit loss experience.
(l) Guaranties; Etc. Be or become liable in respect of any Guaranty of
any obligation of any Affiliate, or grant any security interest in or
otherwise pledge any of its assets to secure any obligation of any
Affiliate.
SECTION 6. CONDITIONS PRECEDENT.
The obligations of the Purchasers to purchase the Notes, as provided in
Section I hereof, shall be subject to the satisfaction, on or before the Closing
Date, of the following conditions.
(a) The representations and warranties contained in Section 3 hereof
shall be true and correct as of the Closing Date; the Company shall not be
in default with respect to any of the provisions hereof, and there shall
exist no event which, with the passage of time or the giving of notice, or
both, would constitute such a default; and the Company shall have delivered
to the Purchasers a certificate signed by a responsible officer of the
Company to such effects.
(b) The Purchasers shall have received from Squire, Sanders & Dempsey,
counsel for the Company, a favorable opinion in form and substance
satisfactory to the Purchasers as to all matters specified in Exhibit E-1
hereto and such other matters incident to the transaction herein
contemplated as the Purchasers may reasonably request.
(c) The Purchasers shall have received from their special counsel,
Chapman and Cutler, a favorable opinion in form and substance satisfactory
to the Purchasers, as to all matters specified in Exhibit E-2 hereto and as
to such other matters incident to the transaction herein contemplated as
the Purchasers may reasonably request.
(d) The Purchasers shall have received a Uniform Commercial Code
Search and judgment and tax lien searches against the Company and each
Subsidiary from the States of Ohio and every other state as the Purchasers
may reasonably request, dated as of a date no more than fifteen days prior
to the Closing Date, certified by a reporting service satisfactory to the
Purchasers, and disclosing no Liens other than those permitted under
Section 5(h) of this Agreement.
(e) The Company shall have provided the Purchasers with copies of all
approvals from the Public Utilities Commission of Ohio and any other state
15
or federal governmental agency or agencies from whom regulatory approvals
are necessary for the consummation of all of the transactions contemplated
hereby and which approvals are not subject to appeal or modification which
could affect the validity or terms of the Notes.
(f) Neither the Company nor any Subsidiary shall have suffered a
material adverse change in financial condition, nor shall there exist any
material action, suit or proceeding pending, or to the knowledge of the
Company threatened, against the Company nor any Subsidiary which, if
decided adversely to the Company or any Subsidiary, would have a materially
adverse effect upon the Company or any Subsidiary or upon any of their
businesses or properties.
(g) All proceedings to be taken in connection with the transaction
contemplated by this Agreement and all documents incident thereto shall be
satisfactory in form and substance to the Purchasers and their counsel and
the Purchasers shall have received copies of all documents which the
Purchasers may reasonably request.
SECTION 7. DEFAULTS.
If one or more Events of Default shall occur, that is to say, if
(a) default shall be made in the punctual payment of the principal of
or premium, if any, on any of the Notes when due, whether by regular
installment, upon prepayment, by acceleration, at maturity or otherwise; or
(b) default shall have been made in the punctual payment of any
interest on any of the Notes when due, whether by regular installment, upon
prepayment, by acceleration at maturity or otherwise, and such default
shall have continued for a period of five days; or
(c) the Company or any Subsidiary defaults in any payment of principal
of or interest on any other obligation for borrowed money beyond any period
of grace provided with respect thereto or in the performance of any other
agreement, term or condition contained in any agreement under which any
such obligation is created if the effect of such default is to cause, or
permit the holder or holders of any obligation of the Company or any
Subsidiary in excess of $1,000,000 (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due prior to its stated
maturity; or
(d) an order for relief shall be entered in any Federal Bankruptcy
proceeding in which the Company or any Subsidiary is the debtor; or
bankruptcy, receivership, insolvency, reorganization, relief, dissolution,
liquidation or other similar proceedings shall be instituted by or against
the Company or any Subsidiary or all or any part of the property of the
Company or any Subsidiary under the Federal Bankruptcy Code or any other
law of the United States or any bankruptcy or competent jurisdiction; or
16
(e) the Company or any Subsidiary shall have become insolvent or
unable to pay its debts as they mature, cease doing business as a going
concern, make an assignment for the benefit of creditors, admit in writing
its inability to pay its debts as they become due, or if a trustee,
receiver or liquidator shall be appointed for the Company or any Subsidiary
or for any substantial portion of the assets of the Company or any
Subsidiary; or
(f) default shall be made in the performance or observance of any
covenant contained in Section 5 of this Agreement; or
(g) default shall be made in the performance or observance of any
other of the terms, covenants or conditions of this Agreement and such
default shall continue for a period of thirty days after written notice
thereof shall have been given by the holders of Notes to the Company; or
(h) final judgments or orders for the payment of money in excess of
$1,000,000 in the aggregate shall be rendered against the Company or any
Subsidiary and such judgments or orders shall remain unsatisfied, unstayed
and unbonded for a period of 30 days after the date such judgments or
orders are required to be paid; or
(i) if any representation or warranty contained in this Agreement or
in any other document supplied to the holders of Notes by the Company or
its Subsidiary in connection with this transaction proves to be false as of
the time this Agreement was made (provided that, if the Company shall have
given the holders of the Notes written notice that any such representation
or warranty was false at the time this Agreement was made, which notice
shall describe the facts giving rise to the breach of any such
representation or warranty, and the holders or the Notes shall not have
declared an Event of Default under this clause (I) based on the information
contained in the notice from the Company within sixty (60) days of such
notice, then the holders of the Notes shall be deemed to have waived any
Event of Default under this clause (I) based on the information contained
in the notice from the Company),
then the holder of the Note if only one Note shall be outstanding, or the
holders of at least two-thirds of the principal amount of the Notes, if more
than one Note shall be outstanding, may at its or their option, by notice in
writing to the Company, declare the Note or all of the Notes, as the case may
be, to be forthwith due and payable and thereupon the Note, or all of the Notes,
shall be and become due and payable, together with interest accrued thereon and
the premium specified in Section 2(a) (provided that if an Event of Default
results from the filing of a voluntary or involuntary petition in any bankruptcy
proceeding in which the Company or any Subsidiary is the debtor, the Notes
thereupon shall immediately become due and payable, with interest accrued
thereon and the premium specified in Section 2(a) hereof (whether or not
prepayment would then be permitted by said Section 2(a), without any notice from
the holders of the Notes or otherwise), and the holder or holders of the Note or
17
Notes may take any action or proceeding at law or in equity which it or they
deem advisable for the protection of its or their interests to collect and
enforce payment, and the Company shall pay all expenses, court costs and
reasonable attorneys' fees incurred in connection with or arising out of any
default hereunder.
SECTION 8. PAYMENTS ON AND REGISTRATION AND TRANSFER OF NOTES.
The Company agrees that it will make payment of the principal of, premium,
if any and interest on the Notes by wire transfer of immediately available
federal funds with sufficient information to identify the source and application
of funds to each of the Purchasers in accordance with the wire transfer
instructions set forth in Appendix I hereto, or to such other accounts or in
such other manner as may from time to time be designated by the holder of a
Note, without presentment of the Notes and without the rendering of any bills
therefor. The Company shall keep at its principal office a register in which the
Company shall provide for the registration of the Notes and of transfers of the
Notes (the "Note Register"). Upon surrender of any Note for transfer at the
office of the Company, the Company shall execute and deliver, in the name of the
designated transferee a new Note in a principal amount equal to the unpaid
principal amount of, and dated the date to which interest has been paid on, the
Note so surrendered. When a Note shall be presented or surrendered for transfer
it shall be duly endorsed, or be accompanied by a written instrument of transfer
duly executed, by the holder thereof or his attorney duly authorized in writing.
The Company may treat the Person in whose name the Note is registered on the
Note Register as the owner of the Note for the purpose of receiving payment of
principal of and interest on the Note and for all other purposes and the Company
shall not be affected by notice to the contrary.
SECTION 9. EXPENSES.
The Company agrees, whether or not the purchase of the Notes herein
contemplated shall be consummated, to pay and save the Purchasers harmless
against liability for the payment of all out-of-pocket expenses arising in
connection with this transaction including any documentary stamp taxes (and
including interest and penalties, if any), which may be determined to be due and
payable with respect to the execution and delivery of the Notes, and the
reasonable fees and expenses of counsel to the Purchasers. The Company also
agrees to pay, and to save the Purchasers harmless against liability for the
payment of, the reasonable fees and expenses of counsel to the Purchasers in
connection with any documentation and related services arising after the Closing
Date in connection with the preparation of waivers or amendments of any
provisions of this Agreement and the Notes. In addition, the Company agrees to
pay, and to save the holders of the Notes harmless against, all brokerage or
finders fees incurred in the transaction contemplated by this Agreement.
18
SECTION 10. DELIVERY OF DOCUMENTS; PRO RATA PAYMENTS; AMENDMENTS AND CONSENTS.
(a) Delivery of Documents. All notices, certificates, requests,
statements and other documents required or permitted to be delivered to the
Purchasers or the holders of Notes by any provision hereof shall also be
delivered to each holder of a Note.
(b) Pro Rata Payments. All interest payments and payments or
prepayments of principal shall be made and applied pro rata on all Notes
outstanding in accordance with the respective unpaid principal amounts
thereof.
(c) Amendments and Consents. The registered holder or holders of at
least two-thirds of the unpaid principal amount of the Notes at the time
outstanding may by agreement with the Company amend this Agreement, and any
consent, notice, request or demand required or permitted to be given by the
Purchasers or the holders of the Notes by any provision hereof shall be
sufficient if given by the holder or holders of at least two-thirds of the
unpaid principal amount of Notes at the time outstanding except that,
without the written consent of the holders of all Notes at the time
outstanding, no amendment to this Agreement shall extend the maturity of
any Note, or alter the rate of interest or any premium payable with respect
to any Note, or affect the amount of any required prepayments, or reduce
the proportion of the principal amount of the Notes required with respect
to any consent.
SECTION 11. INVESTMENT PURPOSE.
Each Purchaser represents that its acquisition of the Notes by it will be
for investment and not with a view to resale in connection with any distribution
thereof, it being understood, however, that the disposition of the property of
each Purchaser shall at all times be within its control.
SECTION 12. DEFINITIONS.
For purposes of this Agreement the following terms shall have the following
meanings:
"Additional Funded Debt" of any Person shall mean the lowest average amount
of Current Debt of such Person outstanding during any period of 30 consecutive
days which occurs during the 365-day period immediately preceding any date of
determination thereof.
"Affiliate" shall mean any Person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under common
control with, the Company, (ii) which beneficially owns or holds 5% or more of
any class of the voting stock of the Company, (iii) 5% or more of any class of
the voting stock (or in the case of a Person which is not a corporation, 5% or
more of the equity interest) of which is beneficially owned or held by the
Company or a Subsidiary, (iv) any director, officer of employee of the Company
or any Subsidiary or other Person described in clauses (i), (ii) and (iii)
19
hereof, and (v) any spouse, lineal descendant or ascendant, brother or sister,
by blood, adoption or marriage, of any Person listed in clauses (i) through (iv)
hereof, and spouses of such ascendants, descendants, brothers and sisters. The
term "control" means the possession, directly or indirectly, of the power or
cause the direction of the management and policies of a Person, whether through
the ownership of voting stock, by contract or otherwise.
"Capital Lease" shall mean any lease of property which in accordance with
generally accepted accounting principles should be capitalized on the lessee's
balance sheet or for which the amount of the asset and liability thereunder as
if so capitalized should be disclosed in a note to such balance sheet.
"Capitalized Lease Obligations" shall mean lease payment obligations under
Capital Leases.
"Closing Date" shall have the meaning set forth in Section l(a).
"Consolidated Adjusted Net Worth" shall mean Consolidated Stockholders'
Equity less (i) goodwill and other intangible assets created after the Closing
Date, and (ii) all Investments in Affiliates.
"Consolidated Funded Debt" shall mean, as of any date, the aggregate amount
of all Funded Debt of the Company and its Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting principles
consistent with those followed in preparation of the financial statements
referred to in Section 3(e).
"Consolidated Net Income (Net Loss)" shall mean, for any period, the net
after-tax income (or net loss) of the Company and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles consistent with those followed in preparation of the financial
statements referred to in Section 3(e), excluding (i) extraordinary gains and
losses and (ii) any equity interest of the Company in the unremitted earnings of
any corporation which is not a Subsidiary.
"Consolidated Net Income Available for Fixed Charges" shall mean, for any
period, Consolidated Net Income for such period, plus (i) all deductions for
taxes levied in respect of income deducted in computing Consolidated Net Income
for such period, and (ii) Fixed Charges deducted in computing Consolidated Net
Income for such period.
"Consolidated Stockholders' Equity" shall mean Consolidated Stockholders'
Equity of the Company and its Subsidiaries determined in accordance with
generally accepted accounting principles.
"Consolidated Total Assets" shall mean, as of any date, the total amount of
all assets of the Company and its Subsidiaries determined on a consolidated
basis in accordance with generally accept accounting principles consistent with
those followed in preparation of the financial statements referred to in Section
3(e).
20
"Consolidated Total Capitalization" shall mean the sum of Consolidated
Adjusted Net Worth and Consolidated Funded Debt.
"Cumulative Consolidated Net Income" shall mean the excess, if any, of:
(i) the sum of (A) Consolidated Net Income, if any, for each
completed fiscal year of the Company commencing on or after January 1,
1998 and (B) Consolidated Net Income, if any, for each completed
quarter ending after the end of the most recently completed fiscal
year of the Company; over
(ii) the sum of (A) Consolidated Net Loss, if any, for each
completed fiscal year of the Company commencing on or after January 1,
1998 and (B) Consolidated Net Loss, if any, for each completed quarter
ending after the end of the most recently completed fiscal year of the
Company.
"Cumulative Consolidated Net Loss" shall mean the excess, if any, of:
(i) the sum of (A) Consolidated Net Loss, if any, for each
completed fiscal year of the Company commencing on or after January 1,
1998 and (B) Consolidated Net Loss, if any, for each completed quarter
ending after the end of the most recently completed fiscal year of the
Company; over
(ii) the sum of (A) Consolidated Net Income, if any, for each
completed fiscal year of the Company commencing on or after January 1,
1998 and (B) Consolidated Net Income, if any, for each completed
quarter ending after the end of the most recently completed fiscal
year of the Company.
"Current Debt" of any Person shall mean all Debt of such Person other than
Funded Debt.
"Debt" shall mean (i) indebtedness for borrowed money or for the deferred
purchase price of property or services, including without limitation Capitalized
Lease Obligations, but excluding trade accounts payable and accrued liabilities
arising in the ordinary course of business, (ii) any other indebtedness
evidenced by a promissory note or other instrument, (iii) the face amount of all
letters of credit issued for the account of any Person and, without duplication
all drafts drawn thereunder, (iv) any indebtedness for borrowed money or the
deferred purchase price of property or services secured by a Lien on any
property of any Person, whether or not such indebtedness has been assumed, and
(v) Guaranties or other contingent obligations for any indebtedness described in
clauses (i) through (iv).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 and
the regulations adopted pursuant thereto.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which, together with the Company, would be deemed to be a single
employer within the meaning of Section 4001(b)(1) of ERISA.
21
"Event of Default" shall have the meaning set forth in Section 7.
"Existing Lines of Business" shall mean operations in the voice, video and
data communications industry.
"Fixed Charges" shall mean, for any period, all consolidated interest
expense on all Debt and all rental expense on all operating leases deducted in
computing Consolidated Net Income for such period, determined in accordance with
generally accepted accounting principles consistent with those followed in
preparation of the financial statements referred to in Section 3(e).
"Funded Debt" shall mean any Debt payable more than one year from the date
of its creation (or which is renewable at the option of the obligor to a date
more than one year from the date of its creation), including the current portion
thereof, which under generally accepted accounting principles is shown on the
balance sheet as a liability, including but not limited to the Notes, any Debt
outstanding under a revolving credit or similar agreement providing for
borrowings (and renewables and extensions thereof) over a period of more than
one year notwithstanding that any such Debt may be payable on demand or within
one year after the creation thereof, any Capitalized Lease Obligations, any
Additional Funded Debt and any Guaranty with respect to Funded Debt of another
Person.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such indebtedness or obligation or (y)
to maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such indebtedness
or obligation, (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of payment of the indebtedness or
obligation, or (iv) otherwise to assure the owner of the indebtedness or
obligation of the primary obligor against loss in respect thereof.
"Investments" shall mean with respect to any Person all investments by such
Person, in cash or by delivery of property, made directly or indirectly in any
property or assets or in any other Person, whether by acquisition of shares of
capital stock, Debt or other obligations or by loan, advance, capital
contribution or otherwise; provided, that "Investments" shall not mean or
include (i) investments by such Person in property to be used or consumed in the
ordinary course of business, (ii) receivables arising from the sale of goods and
services in the ordinary course of business, and (iii) the billing or collection
of the accounts receivable of such Person by another on behalf of such Person.
"Liens" shall mean as to any Person, any mortgage, lien, pledge, adverse
claim, charge, security interest or other encumbrance of any kind whether
22
presently effective or springing in or on, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under
conditional sale or other title retention agreement or Capital Lease with
respect to, any property or asset of such Person, or the signing or filing of a
financing statement which names such Person as debtor, or the signing of any
security agreement authorizing any other party as the secured party thereunder
to file any financing statement.
"Margin Stock" shall have the meaning ascribed to that term in Section
207.2(i) of Regulation U (12 CFR Part 207) of the Board of Governors of the
Federal Reserve Board.
"Note" or "Notes" shall have the meaning set forth in Section l(a).
"Note Register" shall have the meaning set forth in Section 8.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Permitted Investments" shall mean (i) Investments in direct obligations of
the United States government maturing within one year from the date of purchase
thereof; (ii) certificates of deposit, repurchase agreements, and bankers
acceptances with final maturities of one year or less issued by U.S. commercial
banks having capital and surplus aggregating not less than $100,000,000; (iii)
if so permitted by law, savings deposits in national banks and federal savings
and loan associations having capital stock and surplus aggregating not less than
$100,000,000, provided that the aggregate of all such savings deposits at any
one bank or savings and loan association shall not exceed $150,000 at any time;
(iv) commercial paper rated A-1 or P-1 by recognized rating services; (v) money
market preferred stock rated "A" or above by recognized rating services; (vi)
tax exempt, floating rate option tender bonds, backed by a letter of credit
issued by a bank rated AA by Standard & Poor's or Aa by Moody's Investors
Service; (vii) loans by the Company to Subsidiaries engaged in businesses
similar to the Company's Existing Lines of Business constituting general
obligations of such Subsidiaries, provided such obligations shall not be
subordinated to any other obligations of any Subsidiaries; (viii) loans by any
Subsidiary to the Company; (ix) equity Investments in Subsidiaries engaged in
businesses similar to the Company's Existing Lines of Business; and (x) travel
and expense advances of the Company and its Subsidiaries to their respective
officers and employees in the ordinary course of business.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit or other plan within the
meaning of Section 3(2) of ERISA that is subject to Title IV of ERISA, other
than any "multiemployer plan" within the meaning of Section 3(37) of ERISA.
"Prohibited Transaction" shall have the meaning set forth in Section 2(b).
23
"Purchaser" or "Purchasers" shall have the meaning set forth in the
preamble.
"Restricted Investments" shall mean all Investments other than Permitted
Investments.
"Restricted Payments" shall mean (i) payment or declaration of any dividend
or any other distribution on account of any class of stock (including in the
term "stock" any warrant or option or other right to purchase such stock of the
Company or any Subsidiary) of the Company or any Subsidiary excluding any
distribution which may be payable solely in common stock of the corporation
making the distribution, (ii) direct or indirect redemptions, purchases, or
other acquisitions of shares of stock of the Company, and (iii) any optional
prepayment by the Company or any Subsidiary of any Subordinated Debt of the
Company or any Subsidiary.
"Senior Debt" shall mean all Funded Debt which does not constitute
Subordinated Debt.
"Subordinated Debt" shall mean all Debt which is expressly subordinate in
right of payment pursuant to its terms to the Notes, whether or not it is
subordinated to other indebtedness of the Company.
"Subsidiary" or "Subsidiaries" shall mean the corporations listed on
Exhibit B hereto, and any other corporation or corporations more than 50% of the
outstanding capital stock of every class of which is hereafter owned, directly
or indirectly, by the Company.
"Telcom" shall mean Horizon Telcom, Inc., an Ohio corporation and corporate
parent of the Company.
"Total Capitalization" shall mean, as of any date, the sum of Consolidated
Adjusted Net Worth and Funded Debt.
"Treasury Yield Percentage" shall mean, as of any date, (i) the most recent
weekly average yield on actively traded U.S. Treasury obligations having a
constant maturity equal to the average life of the payments of principal and
interest that are avoided by any prepayment as determined by reference to the
week-ending figures published in the most recent Statistical Release which shall
have become available at least two business days prior to the date fixed for
prepayment, or (ii) if a Statistical Release is not then published, the
arithmetic average (rounded to the nearest .01%) of the per annum yields to
maturity for each business day during the week ending at least two business days
prior to the date as of which such determination is made, of all the issues of
actively traded marketable United States Treasury fixed interest rate securities
with a constant maturity equal to the average life of the payments of principal
and interest that are avoided by any prepayment (excluding all such securities
which can be surrendered at the option of the holder at face value in payment of
any Federal estate tax, which provide for tax benefits to the holder or which
were issued at substantial discount) as published in The Wall Street Journal or,
if The Wall Street Journal shall cease such publication, based on average asked
prices (or yields) as quoted by each of three United States government
securities dealers of recognized national standing selected by the holders of
24
the Notes. If the average life of the payments of principal and interest that
are avoided by any prepayment is not equal to the constant maturity of a U.S.
Treasury obligation for which a weekly average yield is published or quoted, the
Treasury Yield Percentage shall be calculated by linear interpolation (to the
nearest one-twelfth of a year) from the most recent weekly average yields of
actively traded U.S. Treasury obligations for which such yields are published or
quoted for the two maturities most closely corresponding to such average life;
provided, however, that if the average life of the payments of principal and
interest that are avoided by any prepayment is less than one year, the Treasury
Yield Percentage shall equal the most recent weekly average yield published or
quoted on actively traded U.S. Treasury obligations with a constant maturity of
one year.
"Voting Stock" shall mean capital stock of any class or classes of a
corporation having power under ordinary circumstances to vote for election of
members of the board of directors of such corporation, or persons performing
similar functions.
SECTION 13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained herein or made in writing by
the Company in connection herewith shall survive the execution and delivery of
this Agreement and of the Notes.
SECTION 14. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement contained by or on behalf of
any of the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
SECTION 15. NOTICES.
All communications provided for hereunder shall be sent by first class mail
and, if to the Purchasers, addressed to the Purchasers at the notice address
listed on Appendix I hereto, and if to the Company, addressed to The Chillicothe
Telephone Company, P.O. Box 480, 68 East Main Street, Chillicothe, Ohio 45601,
Attention: Mr. Jack E. Thompson, or to such other address with respect to any
party as such shall notify the other parties in writing.
SECTION 16. GOVERNING LAW.
This Agreement is being delivered and is intended to be performed in the
State of Ohio, and shall be construed and enforced in accordance with the laws
of such State.
SECTION 17. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be an original, but all of which shall constitute but one
agreement.
25
SECTION 18. CAPTIONS.
The captions in this Agreement are for convenience only and shall not be
considered in the interpretation of any of the provisions hereof.
THE BALANCE OF THIS PAGE
INTENTIONALLY LEFT BLANK
26
If the Purchasers are in agreement with the foregoing, please sign the form
of acceptance on the enclosed counterpart of this letter and return the same to
the undersigned. Upon acceptance by all the Purchasers, this letter shall become
a binding agreement between the Purchasers and the undersigned.
Very truly yours,
THE CHILLICOTHE TELEPHONE COMPANY
By /s/ Thomas McKell
------------------------------------------
Its President
--------------------------------------
The foregoing Agreement is accepted
as of the date first above written
AMERICAN UNITED LIFE INSURANCE COMPANY
By
-----------------------------------
Its
-------------------------------
THE STATE LIFE INSURANCE COMPANY
By
-----------------------------------
Its
-------------------------------
27
If the Purchasers are in agreement with the foregoing, please sign the form
of acceptance on the enclosed counterpart of this letter and return the same to
the undersigned. Upon acceptance by all the Purchasers, this letter shall become
a binding agreement between the Purchasers and the undersigned.
Very truly yours,
THE CHILLICOTHE TELEPHONE COMPANY
By:
-------------------------------------
Its:
--------------------------------
The foregoing Agreement is accepted
as of the date first above written
AMERICAN UNITED LIFE INSURANCE COMPANY
By: /s/ G. David Sapp (G. David Sapp)
----------------------------------
Its: Senior Vice President
---------------------------
THE STATE LIFE INSURANCE COMPANY
By: /s/ G. David Sapp (G. David Sapp)
----------------------------------
Its: Senior Vice President of American
----------------------------------
United Life Insurance Company as
Agent for State Life Insurance Company
27
APPENDIX I
NAME AND ADDRESS OF PURCHASER PRINCIPAL AMOUNT OF
NOTES TO BE PURCHASED
AMERICAN UNITED LIFE INSURANCE COMPANY $11,000,000
One American Square consisting of one (1) Note for
Post Office Box 368 $2,000,000 and three (3)
Indianapolis, Indiana 46206 Notes for $3,000,000 each
Attention: Securities Department
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "The
Chillicothe Telephone Company, 6.62% Senior Notes due 2018, PPN 169240 B#4" and
identifying the breakdown of principal, premium and interest and the payment
date) to:
Bank of New York (ABA #021000018)
One Wall Street, 3rd Floor
New York, New York 10286
Window A
for credit to: American United Life Insurance Company
Account Number 186683/AUL
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 35-0145825
NAME AND ADDRESS OF PURCHASER PRINCIPAL AMOUNT OF
NOTES TO BE PURCHASED
AMERICAN UNITED LIFE INSURANCE COMPANY $1,000,000
One American Square
Post Office Box 368
Indianapolis, Indiana 46206
Attention: Securities Department
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "The
Chillicothe Telephone Company, 6.62% Senior Notes due 2018, PPN 169240 B#4" and
identifying the breakdown of principal, premium and interest and the payment
date) to:
Bank of New York (ABA #021000018)
One Wall Street, 3rd Floor
New York, New York 10286
Window A
for credit to: The State Life Insurance Company
Account Number 343761/State Life c/o AUL
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 35-0684263
I-2
SCHEDULE 3(d)
LEGAL PROCEEDINGS
On January 3, 1989, the Company received a "PRP" notice letter from the
U.S. EPA under Section 104(e) of CERCLA requesting information regarding the
United Scrap Lead Site in Troy, Ohio (the "Site"). The Company's response
indicated that its only indirect involvement with the Site was that it had sold
a small amount of scrap material to an identified scrap dealer over a several
year period. The Company is aware that in July, 1991, the U.S. EPA filed a suit
to recover response costs at the Site against ten PRPs. The Company was not
named as a defendant and has not received any further notices or requests for
information from the U.S. EPA since 1989.
In 1997, the Company was contacted by representatives of the Members of
the United Scrap Lead Respondent Group (the "Respondent Group") threatening to
assert claims against the Company for participation in the clean up costs agreed
to by the Respondent Group in the "PRP Group Agreement (Phase I) and/or
Respondent Agreement (Phase II)." In order to settle all known and existing
claims respecting this matter, the Company, on February 26, 1998, entered into a
Settlement Agreement by and among the Members of the United Scrap Lead
Respondent Group and the Company whereby the Company agreed to pay $11,450 to
the Respondent Group in exchange for a covenant not to sue for "covered matters"
as set forth in the Agreement. The Agreement specifically reserves the
Respondent Group's rights against the Company respecting: (i) future clean up
costs not specifically covered by the Agreement; (ii) claims for damages or for
injury to or destruction of natural resources; (iii) claims for damages or for
injury to persons or property; (iv) claims arising out of acts, releases or
conditions occurring at locations off the Site; (v) claims between or among
persons or entities regarding storage, transportation, handling or disposition
of hazardous wastes or materials from the Site at or to locations other than the
Site; (vi) claims based upon criminal liability; and (vii) remedial actions on
private property other than the Site.
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE
WITH SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
THE CHILLICOTHE TELEPHONE COMPANY
6.62% SENIOR NOTE
$________________ ___________, 19__
FOR VALUE RECEIVED, the undersigned, THE CHILLICOTHE TELEPHONE COMPANY, an
Ohio corporation (the "Company"), hereby promises to pay to _______________
_______________________ or registered assigns by wire transfer of immediately
available Federal funds to the account specified on Appendix I to the Agreement
(hereinafter defined) with sufficient information to identify the source and
application of funds, or to such other account or in such other manner as the
holder of this Note shall specify by notice in writing to the Company, in lawful
money of the United States, the principal sum of ___________________________
DOLLARS ($___________) in ten consecutive equal annual installments in the
amount of $____________ each on the lst day of June in each of the years 2009
through 2018, inclusive, and to pay interest in like money on the unpaid
principal balance hereof at the rate of 6.62% per annum (provided that solely
for the purpose of determining the portion of annual interest allocable to any
interest payment period, it shall be assumed that a year is comprised of 360
days and twelve 30-day months) from the date hereof, payable semi-annually on
the 1st day of June and December in each year, commencing December 1, 1998, and
continuing until payment in full of the principal amount of this Note.
Any payment of principal or (to the extent permitted by applicable law)
interest on this Note not paid when due, whether at stated maturity, by
acceleration or otherwise, shall thereafter bear interest at a rate per annum
equal to 8.62% (provided that in no event shall such rate exceed the maximum
rate permitted by law).
This Note is issued pursuant to a Note Purchase Agreement (the "Agreement")
entered into among the Company, American United Life Insurance Company and The
State Life Insurance Company dated as of June 1, 1998 and is subject to optional
and mandatory prepayment, in whole or in part, in the amounts, upon the notice,
with the premium, and subject to the conditions specified in the Agreement.
As provided in the Agreement, this Note is transferable only on the Note
Register of the Company, upon surrender of this Note for transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed by
the registered holder hereof or his attorney duly authorized in writing. The
Company may treat the Person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
In case an Event of Default, as defined in the Agreement, shall occur, the
principal of this Note may be declared due and payable in the manner and with
the effect provided in the Agreement.
This Note shall be governed by and construed in accordance with the laws of
the State of Ohio.
THE CHILLICOTHE TELEPHONE COMPANY
By:
-----------------------------------
Its:
-------------------------------
2
EXHIBIT B
SUBSIDIARIES
NONE
EXHIBIT C
EXISTING DEBT AND LIENS
AS OF JUNE 1, 1998
$10,000,000 - 6.72% Senior Notes due November 1, 2005 owned by Northern Life
Insurance Company and Northwestern National Life Insurance
Company
$10,500,000 Outstanding unsecured line of credit with National City Bank
evidenced by demand promissory note (to be repaid with
Proceeds of Notes)
EXHIBIT D
EXISTING RESTRICTED INVESTMENTS
MADE PRIOR TO JANUARY 1, 1998
AS OF MARCH 31, 1998
Independent Telecommunications Network $250,000 equity Investment
ComNet, Inc. $18,500 equity Investment
Guarantee of Chillicothe Long Distance Debt $55,000 Contingent obligation
to MCI, Inc.
Intercompany Advances from the Company $779,847
To Horizon PCS, Inc. (formerly Horizon Infotech) Intercompany Receivable
Intercompany Advances from the Company $168,244
To United Communications, Inc. Intercompany Receivable
1352901