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LOAN AND SECURITY AGREEMENT
DATED AS OF DECEMBER 22, 1998
AMONG
KMC TELECOM INC.,
KMC TELECOM II, INC.,
KMC TELECOM OF VIRGINIA, INC.,
KMC TELECOM LEASING I LLC,
AND
KMC TELECOM LEASING II LLC
AS BORROWERS,
THE FINANCIAL INSTITUTIONS FROM TIME TO
TIME PARTIES HERETO,
AS LENDERS,
AND
FIRST UNION NATIONAL BANK
AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND
AT&T COMMERCIAL FINANCE CORPORATION
AS COLLATERAL AGENT FOR THE LENDERS
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS...........................................................1
SECTION 1.01. Definitions............................................1
SECTION 1.02. Accounting Terms......................................21
SECTION 1.03. Others Defined in New York Uniform Commercial Code....21
ARTICLE II
LOANS AND LETTERS OF CREDIT..........................................22
SECTION 2.01. Agreement to Lend.....................................22
SECTION 2.02. Loans.................................................22
SECTION 2.03. Procedure for Loan Request and Borrowing Commitment...23
SECTION 2.04. The Notes.............................................24
SECTION 2.05. Interest on Loans.....................................25
SECTION 2.06. Conversion or Continuation.............................25
SECTION 2.07. Special Provisions Governing LIBOR Loans..............26
SECTION 2.08. Payments..............................................29
SECTION 2.09. Optional and Mandatory Prepayment of Loans;
Optional and Mandatory Reduction of Revolving
Loan Commitment Amount................................30
SECTION 2.10. Letters of Credit....................................32
SECTION 2.11. Fees..................................................37
SECTION 2.12. Manner of Payment; Special Tax Considerations.........38
SECTION 2.13. Maximum Lawful Interest Rate..........................41
SECTION 2.14. Funding Issues........................................42
SECTION 2.15. Joint and Several Liability; Contribution.............43
ARTICLE III
REPRESENTATIONS AND WARRANTIES.......................................44
SECTION 3.01. Organization; Powers..................................44
SECTION 3.02. Corporate Authorization...............................44
SECTION 3.03. Financial Statements..................................45
SECTION 3.04. No Material Adverse Change............................45
SECTION 3.05. Litigation............................................45
SECTION 3.06. Tax Returns...........................................45
SECTION 3.07. No Defaults...........................................45
SECTION 3.08. Properties............................................45
SECTION 3.09. Licenses, Material Agreements, Intellectual
Property..............................................45
SECTION 3.10. Compliance With Laws..................................46
SECTION 3.11. ERISA.................................................46
SECTION 3.12. Investment Company Act; Public Utility
Holding Company Act...................................47
SECTION 3.13. Federal Reserve Regulations...........................47
SECTION 3.14. Collateral............................................47
SECTION 3.15. Chief Place of Business...............................48
SECTION 3.16. Other Corporate Names.................................48
i
SECTION 3.17. Insurance.............................................48
SECTION 3.18. Milestone Plan........................................48
SECTION 3.19. Capitalization and Subsidiaries.......................48
SECTION 3.20. Real Property, Leases and Easements...................49
SECTION 3.21. Solvency..............................................49
SECTION 3.22. Brokers, etc..........................................49
SECTION 3.23. No Material Misstatements.............................49
SECTION 3.24. Year 2000 Problems....................................49
ARTICLE IV
CONDITIONS FOR LOANS.................................................49
SECTION 4.01. Conditions Precedent to Initial Loan on or
after the Closing Date................................50
SECTION 4.02. Conditions Precedent to All Loans.....................54
ARTICLE V
AFFIRMATIVE COVENANTS................................................56
SECTION 5.01. Corporate and Franchise Existence.....................56
SECTION 5.02. Compliance with Laws, Etc.............................56
SECTION 5.03. Maintenance of Properties.............................56
SECTION 5.04. Insurance.............................................56
SECTION 5.05. Obligations and Taxes.................................62
SECTION 5.06. Financial Statements, Reports, etc....................62
SECTION 5.07. Litigation and Other Notices..........................64
SECTION 5.08. Mortgages; Landlord Consents; Licenses
and Other Agreements..................................64
SECTION 5.09. ERISA.................................................65
SECTION 5.10. Access to Premises and Records........................65
SECTION 5.11. Design and Construction...............................66
SECTION 5.12. Environmental Notices.................................66
SECTION 5.13. Amendment of Organizational Documents.................66
SECTION 5.14. Third Party Agreements and Delivery
and Acceptance Certificates............................66
SECTION 5.15. Accounts Payable......................................67
SECTION 5.16. Intellectual Property.................................67
SECTION 5.17. Fiscal Year...........................................67
SECTION 5.18. Completed Systems.....................................67
SECTION 5.19. Year 2000 Problems.....................................67
SECTION 5.20. Subsidiary Guarantees and Pledges.....................67
SECTION 5.21. Accounting............................................67
SECTION 5.22. Further Assurances....................................67
ARTICLE VI
NEGATIVE COVENANTS...................................................68
SECTION 6.01. Liens, etc............................................68
SECTION 6.02. Use of Proceeds.......................................69
SECTION 6.03. Sale of Assets, Consolidation, Merger, etc............69
SECTION 6.04. Dividends and Distributions; Sale of
Equity Interests......................................69
ii
SECTION 6.05. Management Fees and Permitted Corporate Overhead......69
SECTION 6.06. Guarantees; Third Party Sales and Leases..............70
SECTION 6.07. Investments...........................................70
SECTION 6.08. Subsidiaries..........................................70
SECTION 6.09. Permitted Activities..................................70
SECTION 6.10. Disposition of Licenses, etc..........................70
SECTION 6.11. Transactions with Affiliates..........................70
SECTION 6.12. ERISA.................................................71
SECTION 6.13. Indebtedness..........................................71
SECTION 6.14. Prepayment and Debt Documents.........................72
SECTION 6.15. Sale and Leaseback Transactions.......................72
SECTION 6.16. Margin Regulation.....................................72
SECTION 6.17. Management and Tax Sharing Agreements.................72
ARTICLE VII
FINANCIAL COVENANTS..................................................73
SECTION 7.01. Financial Covenants Prior to Achieving
Positive EBITDA.......................................73
SECTION 7.02. Financial Covenants After Achieving
Positive EBITDA.......................................74
ARTICLE VIII
COLLATERAL SECURITY..................................................75
SECTION 8.01. Collateral Security...................................75
SECTION 8.02. Preservation of Collateral and Perfection
of Security Interests Therein.........................76
SECTION 8.03. Appointment of the Collateral Agent as the
Borrowers' Attorney-in-Fact...........................76
SECTION 8.04. Collection of Accounts and Restricted
Account Arrangements..................................77
SECTION 8.05. Cure Rights...........................................78
ARTICLE IX
EVENTS OF DEFAULT; REMEDIES..........................................78
SECTION 9.01. Events of Default.....................................78
SECTION 9.02. Termination of Commitment; Acceleration...............81
SECTION 9.03. Waivers...............................................81
SECTION 9.04. Rights and Remedies Generally.........................81
SECTION 9.05. Entry Upon Premises and Access to Information.........82
SECTION 9.06. Sale or Other Disposition of Collateral by the
Agent.................................................82
SECTION 9.07. Governmental Approvals................................82
SECTION 9.08. Appointment of Receiver or Trustee....................83
SECTION 9.09. Right of Setoff.......................................83
ARTICLE X
THE AGENT AND THE COLLATERAL AGENT...................................84
SECTION 10.01. Appointment of Agent..................................84
731574
iii
SECTION 10.02. Agent's Reliance, Etc................................85
SECTION 10.03. FUNB and Affiliates..................................86
SECTION 10.04. Lender Credit Decision...............................86
SECTION 10.05. Indemnification......................................86
SECTION 10.06. Successor Agent......................................87
SECTION 10.07. Payments; Non-Funding Lenders; Information;
Actions in Concert...................................87
SECTION 10.08. Collateral Matters...................................89
SECTION 10.09. Agency for Perfection................................90
SECTION 10.10. Concerning the Collateral and the Related Loan
Documents and the Collateral Agent...................90
ARTICLE XI
MISCELLANEOUS ......................................................90
SECTION 11.01. Notices; Action on Notices, etc......................90
SECTION 11.02. No Waivers; Amendments...............................91
SECTION 11.03. Governing Law and Jurisdiction.......................92
SECTION 11.04. Expenses.............................................92
SECTION 11.05. Equitable Relief.....................................92
SECTION 11.06. Indemnification; Limitation of Liability.............93
SECTION 11.07. Survival of Representations and Warranties, etc......93
SECTION 11.08. Successors and Assigns; Assignments; Participations..94
SECTION 11.09. Severability.........................................96
SECTION 11.10. Cover Page, Table of Contents and Section Headings...96
SECTION 11.11. Counterparts.........................................96
SECTION 11.12. Application of Payments..............................97
SECTION 11.13. Marshalling; Payments Set Aside......................97
SECTION 11.14. SERVICE OF PROCESS...................................97
SECTION 11.15. WAIVER OF JURY TRIAL, ETC............................97
SECTION 11.16. Confidentiality......................................98
SECTION 11.17. Entire Agreement, etc................................98
SECTION 11.18. No Strict Construction...............................98
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EXHIBITS
EXHIBIT A Milestone Plan
EXHIBIT B Form of Collateral Assignment of Leases
EXHIBIT C Form of Collateral Assignment of Licenses
EXHIBIT D Form of Landlord Waiver
EXHIBIT E-1 Form of Revolving Loan Note
EXHIBIT E-2 Form of Term Loan Note
EXHIBIT F Form of Periodic Reporting Certificate
EXHIBIT G Form of Guaranty
EXHIBIT H-1 Form of Notice of Borrowing
EXHIBIT H-2 Form of Notice of Continuation/Conversion
EXHIBIT I Financials
EXHIBIT J-1 Form of Secretary's Certificate of Borrower
EXHIBIT J-2 Form of Secretary's Certificate of KMC Holdings
EXHIBIT K-1 Form of Opinion of Borrowers' Special Counsel
EXHIBIT K-2 Form of Opinion of Borrowers' Regulatory Counsel
EXHIBIT K-3 Form of Opinion of Borrowers' Local Counsel
EXHIBIT L Form of Pledge Agreement
EXHIBIT M Form of Loss Payable Endorsement
EXHIBIT N Form of Restricted Account Agreement
EXHIBIT O Form of Assignment Agreement
EXHIBIT P Form of Accession Agreement
EXHIBIT Q Form of Contribution Agreement
EXHIBIT R Form of Delivery and Acceptance Certificate
EXHIBIT S Form of Trademark Security Agreement
v
SCHEDULES
SCHEDULE 1.01(a) Applicable Margin
SCHEDULE 3.02 Consents
SCHEDULE 3.05 Litigation
SCHEDULE 3.09(a) Governmental Authorizations and Approvals
SCHEDULE 3.09(b) Material Agreements
SCHEDULE 3.09(c) Intellectual Property
SCHEDULE 3.10 Environmental Matters
SCHEDULE 3.11 Plans
SCHEDULE 3.14 Filing Offices
SCHEDULE 3.16 Corporate and Fictitious Names
SCHEDULE 3.17 Insurance
SCHEDULE 3.19 Capitalization and Subsidiaries
SCHEDULE 3.20 Real Property, Leased Real Property and Easements
SCHEDULE 6.11 Transactions With Affiliates
SCHEDULE 8.04 Collection Accounts
ANNEXES
ANNEX A - Commitment Amounts
ANNEX B - Financial Covenant Information
ANNEX C - Revolving Loan Commitment Reductions
vi
LOAN AND SECURITY AGREEMENT ("Agreement") dated as of December 22,
1998 among KMC TELECOM INC., a Delaware corporation ("KMC"), KMC TELECOM II,
INC., a Delaware corporation ("KMC II"), KMC TELECOM OF VIRGINIA, INC., a
Virginia public service company ("KMC Virginia"), KMC TELECOM LEASING I LLC, a
Delaware limited liability company ("Leasing I"), KMC TELECOM LEASING II, LLC, a
Delaware limited liability company ("Leasing II"), the Additional Borrowers from
time to time parties hereto (KMC, KMC II, KMC Virginia, Leasing I, Leasing II
and any Additional Borrowers being collectively referred to hereinafter as the
"Borrowers" and sometimes individually as a "Borrower"), the financial
institutions signatory hereto from time to time, as "Lenders", FIRST UNION
NATIONAL BANK, as administrative agent for the Lenders (in such capacity, the
"Agent") and AT&T COMMERCIAL FINANCIAL CORPORATION, as collateral agent for the
Lenders (in such capacity, the "Collateral Agent").
WHEREAS, the Borrowers have requested the Lenders to extend credit to
the Borrowers;
WHEREAS, the Lenders are willing to extend such credit to the
Borrowers subject to, and on the terms and conditions of, this Agreement; and
WHEREAS, the initial extension of credit hereunder will, inter alia,
refinance and refund the loans made to KMC and Leasing I pursuant to that
Amended and Restated Loan and Security Agreement dated as of September 22, 1997
among KMC, Leasing I and AT&T Commercial Finance Corporation;
Accordingly, in consideration of the mutual promises contained herein,
the Borrowers, the Agent, the Collateral Agent and the Lenders agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Agreement, the following
words and terms shall have the meanings specified below:
"Access Lines" shall mean the total number of installed business lines
that provide service to a business customer of a Borrower including "resale",
"on-net" and "unbundled network element"; provided, that resale shall constitute
no more than twenty-five percent (25%) of the total Access Lines.
"Accounts" shall mean all present and future rights of any Borrower to
payment for goods sold or leased or for services rendered which are not
evidenced by instruments or chattel paper, and whether or not they have been
earned by performance.
1
"Additional Borrower" shall mean any Subsidiary of KMC Holdings, KMC,
KMC II, KMC Virginia, Leasing I or Leasing II that enters into an accession
agreement substantially in the form of Exhibit P hereto, is acceptable to the
Requisite Lenders, and the outstanding Equity Interests of which are pledged to
the Agent pursuant to a pledge agreement substantially in the form of Exhibit L
attached hereto.
"Additional Purchase Agreement" shall mean a purchase agreement
between any Borrower and an Additional Vendor relating to the purchase of
Telecommunications Equipment on terms and conditions reasonably satisfactory to
the Agents, if such purchase agreement contemplates Telecommunications Equipment
purchases in excess of $5,000,000 in any one year or $15,000,000 in the
aggregate, otherwise on the terms and conditions reasonably satisfactory to the
Collateral Agent.
"Additional Vendor" shall mean a vendor of Telecommunications
Equipment other than Lucent, which Additional Vendor shall be reasonably
satisfactory to the Agents if the Additional Purchase Agreement the Additional
Vendor is a party to contemplates Telecommunications Equipment purchases in
excess of $5,000,000 in any one year or $15,000,000 in the aggregate, otherwise
on the terms and conditions reasonably satisfactory to the Collateral Agent.
"Affiliate" shall mean any Person other than any Lender directly or
indirectly controlling, controlled by or under common control with any Borrower
and any officer or shareholder of such Person or any Borrower, which shareholder
beneficially owns at least ten percent (10%) of the Equity Interests of such
Person or any Borrower. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by",
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of at least 10% of the Equity Interests of a Person
shall be deemed to constitute control.
"Aged Equipment" shall mean Telecommunications Equipment, which has
been in commercial operation for more than twelve months.
"Agents" shall mean collectively, the Agent, the Collateral Agent, the
Documentation Agent and the Syndication Agent.
"Applicable Margin" shall mean with respect to (i) each Loan bearing
interest based upon the Base Rate, the margin determined in accordance with the
criteria set forth on Schedule 1.01(a) hereto, and (ii) each Loan bearing
interest based upon the LIBO Rate, the margin determined in accordance with the
criteria set forth on Schedule 1.01(a) hereto, which margins shall be calculated
based upon the financial statements provided pursuant to Section 5.06, with any
readjustments being effective five Business Days following the Agent's receipt
thereof.
2
"Assignment Agreement" shall mean an assignment agreement entered into
in connection with an assignment pursuant to Section 11.08 hereof substantially
in the form of Exhibit O hereof.
"Base LIBO Rate" shall mean, during any Interest Period, the rate of
interest per annum (rounded upward to the nearest whole multiple of 1/16 of
1.0%, if such rate is not such a multiple) equal to the rate of interest
notified to the Agent by the Reference Bank at which Dollar deposits in the
approximate amount of the Loans to be made or continued as, or converted into,
LIBOR Loans for such Interest Period and having a maturity comparable to such
Interest Period would be offered by the London lending office of the Reference
Bank in the London interbank market at approximately 11:00 a.m. (London time)
two (2) Business Days prior to the commencement of such Interest Period.
"Base Rate" shall mean the higher of (i) a rate per annum equal to the
corporate base rate, prime rate or base rate of interest, as applicable,
announced by the Reference Bank from time to time, changing when and as such
rate changes, it being understood that such rate of interest is not necessarily
the lowest or best rate charged by the Reference Bank to its customers, and (ii)
the sum of the Federal Funds Effective Rate plus one-half percent (0.50%) per
annum.
"Base Rate Loan" shall mean a Loan, or portion thereof, during any
period in which it bears interest at a rate based upon the Base Rate.
"Base Rate Revolving Loan" shall mean a Revolving Loan during
any period for which it is a Base Rate Loan.
"Base Rate Term Loan" shall mean any portion of the Term Loans during
any period for which such portion is a Base Rate Loan.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which any
Borrower or any ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Borrower" shall mean any of KMC, KMC II, KMC Virginia, Leasing I,
Leasing II and any Additional Borrower.
"Borrowing Base" shall mean at any time the aggregate cost of
Telecommunications Equipment financed under this Agreement, minus any reserves
established by the Collateral Agent with respect to Aged Equipment.
"Business" shall mean with respect to (i) each of KMC, KMC II and KMC
Virginia, the business of constructing, operating and maintaining the Systems
owned by them and all operations related thereto or in support thereof, and (ii)
each of Leasing I and Leasing II, the business of owning and leasing Switch
Equipment.
3
"Business Day" shall mean (a) any day not a Saturday, Sunday or legal
holiday in the State of New York or New Jersey, on which banks are open for
business in New York and New Jersey and (b) with respect to all notices,
determinations, fundings and payments in connection with the LIBO Rate or LIBOR
Loans, any day that is a Business Day pursuant to clause (a) above and that is
also a day on which trading is carried on by and between banks in the London
interbank market.
"Capitalization" shall mean funded equity capitalization of KMC
Holdings.
"Capitalized Lease Obligations" shall mean Debt represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Debt shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Change of Control" shall mean (A) Harold N. Kamine ceases to have
senior management responsibilities with respect to the Borrowers or KMC
Holdings, (B) KMC Holdings no longer beneficially owns all of the outstanding
Equity Interests of each Borrower, (C) a "person" or "group" (within the meaning
of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the ultimate
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 35% of the total voting power of the Voting Stock of KMC Holdings on a
fully diluted basis and such ownership represents a greater percentage of the
total voting power of the Voting Stock of KMC Holdings, on a fully diluted
basis, than is held by the Existing Stockholders on such date, or (D)
individuals who on the Closing Date constitute the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination by the Board of Directors for election by KMC Holdings' stockholders
was approved by a vote of at least a majority of the members of the Board of
Directors then in office who either were members of the Board of Directors on
the Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
Board of Directors then in office.
"Closing Date" shall mean the date on which this Agreement is executed
and delivered by the parties hereto.
"Collateral" shall mean, all property and interests in property now
owned or hereafter acquired by any Borrower in or upon which a security
interest, lien or mortgage is granted to the Collateral Agent by any Borrower,
whether under this Agreement or the other Loan Documents.
"Collateral Assignment of Leases" shall mean the Collateral Assignment
of Leases in the form of Exhibit B attached hereto, to be executed and delivered
pursuant to Section 4.01 hereof.
4
"Collateral Assignment of Licenses" shall mean the Collateral
Assignment of Licenses in the form of Exhibit C attached hereto, to be executed
and delivered pursuant to Section 4.01 hereof.
"Collection Accounts" and "Collection Agent" shall have the meanings
given to such terms in Section 8.04 hereof.
"Commitment" shall mean Lenders' commitment to lend as set forth in
Section 2.01 hereof.
"Commitment Amount" shall mean (a) as to any Lender, the aggregate of
such Lender's Revolving Loan Commitment Amount and Term Loan Commitment Amount
as set forth opposite such Lender's name on Annex A to this Agreement or in the
most recent Assignment Agreement executed by such Lender and (b) as to all
Lenders, the aggregate of all Lenders' Revolving Loan Commitment Amounts and
Term Loan Commitment Amounts, which aggregate commitment shall be Two Hundred
Fifty Million Dollars ($250,000,000) on the Closing Date, as such amount may be
adjusted from time to time in accordance with this Agreement
"Common Stock" shall mean with respect to any Person, all Equity
Interests of such Person that are generally entitled to (i) vote in the election
of directors of such Person or (ii) if such Person is not a corporation, vote or
otherwise participate in the selection of the governing body, partners, managers
or others that will control the management and policies of such Person.
"Completed System" shall mean any System which is fully operational,
which if contemplated by the Milestone Plan, shall have a Lucent 5-ESS Switch
Equipment or other comparable Switch Equipment deployed, which shall be
switching paid traffic on its owned Telecommunications Equipment, and which
shall have sales, customer service and billing systems operational to the
satisfaction of the Collateral Agent and consistent with the then current
operating Systems of any Borrower, with switching capabilities, encompasses at
least twenty route miles, and with respect to which all Governmental Approvals
have been obtained and connectivity to at least one major interexchange carrier
point-of-presence has been achieved.
"Consolidated" or "consolidated" refers, with respect to any Person,
to the consolidation of the accounts of such Person and its Subsidiaries, if
any, in accordance with GAAP; provided, that with respect to KMC Holdings,
unless otherwise indicated, its Subsidiaries shall not include any Excluded
Subsidiaries.
"Consolidated Debt" shall mean, with respect to KMC Holdings on a
consolidated basis, at any date, the sum of the following determined on a
consolidated basis, without duplication, in accordance with GAAP: (a) all
liabilities, obligations and indebtedness for borrowed money, including, but not
limited to, obligations evidenced by bonds, debentures, notes or other similar
instruments of any Borrower or KMC Holdings, (b) all obligations to pay the
deferred purchase price of property or services of any Borrower or KMC Holdings
5
(exclusive of rent for real property under leases that would not be capitalized
in accordance with GAAP), including, but not limited to, all obligations under
noncompetition agreements, except trade payables arising in the ordinary course
of business not more than ninety (90) days past due, (c) all obligations of any
Borrower or KMC Holdings as lessee under capital leases (exclusive of the
interest component thereof), (d) all Debt of any other Person secured by a Lien
on any asset of any such Borrower or KMC Holdings, (e) all guaranty obligations
of any Borrower or KMC Holdings, (f) all obligations, contingent or otherwise,
of any Borrower or KMC Holdings relative to the face amount of letters of
credit, whether or not drawn, and banker's acceptances issued for the account of
any Borrower or KMC Holdings, (g) all obligations to redeem, repurchase,
exchange, defease or otherwise make payments in respect of capital stock or
other securities of any Borrower or KMC Holdings at any time prior to the third
annual anniversary of the Term Loan Termination Date, and (h) all termination
payments which would be due and payable by any Borrower or KMC Holdings pursuant
to any hedging agreement. "Consolidated Debt" shall not include any intercompany
Debt between the Borrowers or between any Borrower and KMC Holdings.
"Contaminant" shall mean any pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum derived
substance or waste, or any constituent of any such substance or waste.
"Contributed Capital" shall mean, with respect to the Borrowers, at
any date of determination, all contributed capital to such Borrowers including
all funded equity and all Qualified Intercompany Loans.
"Contribution Agreement" shall mean the Contribution Agreement among
the Borrowers of even date herewith substantially in the form of Exhibit Q.
"Counsel" shall mean Sidley & Austin or such successor counsel
selected by the Collateral Agent.
"Credit Support" shall have the meaning given to such term in Section
2.10.
"Debt" shall mean, with respect to any Person, (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations which have been incurred in connection
with the acquisition of property or services (including, without limitation,
obligations to pay the deferred purchase price of property or services),
excluding trade payables and accrued expenses incurred in the ordinary course of
business, (iv) obligations as lessee under leases which shall have been or
should be, in accordance with GAAP, recorded as capital or operating leases, (v)
all Guarantees of such Person, including without limitation, all debt of any
other Person secured by a Lien on property of such Person, (vi) all
reimbursement obligations, contingent or otherwise, with respect to letters of
credit or banker's acceptances issued for the account of any Borrower, and (vii)
all indebtedness, obligations or other liabilities in respect of any Interest
Rate Agreement, provided that Debt shall not include any liability for Federal,
state, local or other taxes, and provided, further, that the amount outstanding
at any time of any Debt issued with original issue discount is the principal
amount of such Debt less the remaining unamortized portion of the original issue
discount of such Debt at such time as determined in conformity with GAAP, and
that with respect to any high-yield Debt, the amount thereof shall not include
fees incurred in raising such Debt or overfunded amounts set aside solely to pay
interest.. Notwithstanding any other provision of the foregoing definition, any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business shall not be deemed to be "Debt" of
any Borrower for purposes of this definition. Furthermore, guarantees of (or
obligations with respect to letters of credit supporting) Debt otherwise
included in the determination of such amount shall not be included.
6
"Default" shall mean any event which but for the passage of time or
giving of notice would constitute an Event of Default.
"Documentation Agent" shall mean General Electric Capital Corporation.
"Dollars" or "$" shall mean lawful money of the United States of
America.
"Easements" shall have the meaning given to such term in Section 3.20
hereof.
"EBITDA" shall mean, with respect to any Person, for any period, an
amount equal to (i) Net Income plus (ii) the sum of the following, to the extent
deducted in determining Net Income: (A) income and franchise taxes, (B) interest
expense, (C) amortization, depreciation and other non-cash charges, minus (iii)
the sum of interest income plus extraordinary gains, as determined in accordance
with GAAP as calculated at the end of such period.
"Environmental Laws" shall mean all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidance, orders and consent
decrees or other binding determination of any Governmental Authority relating to
protection of the environment, the handling, disposal or Release of Contaminants
and occupational safety and health. Such laws and regulations include but are
not limited to the Resource Conservation and Recovery Act, 33 U.S.C. ss. 6901 et
seq., as amended; the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601 et seq., as amended; the Toxic Substances
Control Act, 15 U.S.C. ss. 2601 et seq., as amended; the Clean Water Act, 33
U.S.C. ss. 1251 et seq., as amended; the Clean Air Act, 42 U.S.C. ss. 7401 et
seq., as amended; state and federal environmental lien and environmental cleanup
programs; the Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq.; and
U.S. Department of Transportation regulations related to the transportation of
hazardous materials, each as from time to time hereafter in effect.
"Equity Affiliate" shall mean, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Equity Interest" shall mean, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, membership
units, partnership interests or any other participation right or other interest
in the nature of an equity interest in such Person or any option, warrant or
other security convertible into any of the foregoing.
7
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean (i) any corporation which is a member of
the same controlled group of corporations (within the meaning of Section 414(b)
of the IRC) as any Borrower, (ii) any partnership or other trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the IRC) with any Borrower and (iii) any member of the same
affiliated service group (within the meaning of Section 414(m) of the IRC) as
any Borrower, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Eurocurrency Liabilities" shall have the meaning assigned to that
term in Regulation D of the Federal Reserve Board, as in effect from time to
time.
"Event of Default" shall have the meaning given to such term in
Article IX hereof.
"Event of Loss" shall mean, with respect to any item of Collateral,
the actual or constructive loss of such item of Collateral or the use thereof,
due to theft, destruction, damage beyond repair or damage from any reason
whatsoever which is not reimbursable by insurance, to an extent which makes
repair uneconomical, or rendition thereof unfit for normal use, or the
condemnation, confiscation or seizure of, or requisition of title to or use of,
such item of Collateral by any Governmental Authority or any other Person,
acting under or deemed to be acting under color of any Governmental Authority.
"Excess Operating Cash Flow" shall mean for any fiscal quarter, Net
Income of the Borrowers plus non-cash interest expense, depreciation and
amortization and any other non-cash items of the Borrowers, minus scheduled
principal payments of the Borrowers to Lenders, lease payments and capital
expenditures of the Borrowers, plus or minus changes in working capital of the
Borrowers, as appropriate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Excluded Letters of Credit" shall have the meaning ascribed to such
term in Section 6.13(viii).
"Excluded Subsidiary" shall mean (a) any Subsidiary of KMC Holdings
which is neither a Borrower under this Agreement nor a Person which directly or
indirectly beneficially owns Equity Interests in any Borrower, provided that (i)
at the time such other Subsidiary was created or acquired, no Default or Event
of Default shall have occurred and be continuing before or after giving effect
to the creation or acquisition of such Subsidiary, and (ii) no portion of the
Required Contributions or the Revolving Loan Commitment Amount shall have been
or shall be used to fund the acquisition or operations of such Subsidiary, and
the Guarantor has external sources of funding (other than the Required
Contributions and the Revolving Loan Commitment Amount) to finance the
acquisition and operations of such Subsidiary, (b) KMC International, and KMC
Telecom III, Inc., a Delaware corporation or (c) any other Subsidiary of the
8
Guarantor which the Guarantor or any Borrower requests the Lenders to designate
as such, and which designation is agreed to by the Required Lenders.
"Existing Stockholders" shall mean Harold N. Kamine, his Equity
Affiliates, Nassau Capital Partners L.P., NAS Partners I L.L.C. or their
respective successors, and their Equity Affiliates.
"FCC" shall mean the Federal Communications Commission or any
successor commission or agency of the United States of America having
jurisdiction over any Borrower or any System.
"Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate per annum equal for each day during such period to (a)
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 for such day (or if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Government Securities; or (b) if such rate is not so
published for any day which is a Business Day, the average of the quotations at
approximately 10:30 a.m. (New York time) for such day on such transactions
received by the Reference Bank from three federal funds brokers of recognized
standing selected by it.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
"Fee Letters" shall mean (i) that certain letter agreement dated
September 25, 1998 among the Borrowers, KMC Holdings, the Collateral Agent,
Capital Syndications Corporation ("CSC"), General Electric Capital Corporation
("GECC"), GECC Capital Market Groups, Inc. ("GECG"), the Agent, First Union
Capital Markets, a Division of Wheat First Securities, Inc. ("FUCM") and
Canadian Imperial Bank of Commerce ("CIBC"), (ii) that certain letter agreement
dated September 25, 1998 among the Borrowers, KMC Holdings, the Collateral
Agent, CSC, GECC, GECG, the Agent and FUCM, and (iii) that certain letter
agreement dated December 22, 1998 among the Borrowers, KMC Holdings, the
Collateral Agent, CSC, GECC, GECG, the Agent, FUCM and CIBC.
"Financials" shall have the meaning given to such term in Section
3.03.
"First Eight Cities" shall mean the following eight cities where
Systems have been or will be constructed in accordance with the Milestone Plan:
Huntsville, Alabama; Melbourne, Florida (including the actual switch site
located in Palm Bay, Florida); Augusta, Georgia; Savannah, Georgia; Baton Rouge,
Louisiana; Shreveport, Louisiana; Corpus Christi, Texas; and Madison, Wisconsin.
9
"Fixed Charges" shall mean with respect to any period for the
Borrowers on a combined basis, the sum of the following amounts calculated at
the end of such period with respect to such period without duplication and in
accordance with GAAP:
(i) the product of two multiplied by scheduled principal and
interest payments with respect to Debt for the six month period then
ending, (ii) capital expenditures for the four quarter period then
ending, (iii) the product of two multiplied by income tax payments for
the six month period then ending, and (iv) the product of two
multiplied by cash dividend payments for the six month period then
ending.
"Fixed Charge Coverage Ratio" shall have the meaning assigned to such
term in Section 7.02(c).
"FUNB" shall mean First Union National Bank, a national banking
association.
"Governmental Approval" shall mean, with respect to any Borrower, any
license, permit, franchise or certificate of public convenience and necessity
issued to any Borrower by the FCC, any PUC or any other Governmental Authority
in connection with any System.
"Governmental Authority" shall mean any federal, state, local or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee" shall mean any obligation, contingent or otherwise, of any
Person 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, (i) 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; (ii) to purchase property, securities or services for the
purpose of assuring the owner of such indebtedness of the payment of such
indebtedness; or (iii) to maintain working capital, equity capital or other
financial statement condition of the Primary Obligor so as to enable the Primary
Obligor to pay such indebtedness.
"Indenture" shall mean that certain Indenture dated as of January 29,
1998 between KMC Holdings, as Issuer and The Chase Manhattan Bank, as Trustee,
relating to KMC Holdings' 12 1/2 percent Senior Discount Notes due 2008.
"Initial Funding Date" shall mean the date upon which, subject to the
satisfaction of all conditions precedent contained in Sections 4.01 and 4.02, or
the waiver thereof by the Agent and the Requisite Lenders, the initial Loans are
made on or after the Closing Date.
"Intellectual Property Documents" shall mean (i) the Trademark
Security Agreement of even date herewith, in the form of Exhibit S attached
hereto, executed by the Borrowers in favor of the Collateral Agent for the
benefit of the Agents and the Lenders, as amended, restated or otherwise
modified from time to time and (ii) any other trademark, patent or copyright
security agreement executed pursuant to Section 5.16 by any Borrower.
10
"Interest Expense" shall mean for any period, the total interest
expense (including, without limitation, interest expense attributable to capital
leases) determined on a combined basis, without duplication, for the Borrowers
in accordance with GAAP.
"Interest Period" shall mean, with respect to each LIBOR Loan, the
interest period applicable to such LIBOR Loan as set forth in the applicable
Notice of Borrowing or Notice of Conversion or Continuation.
"Interest Rate Agreement" shall mean for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investment" shall mean, as applied to any Person, any direct or
indirect purchase or other acquisition by that Person of securities, or of a
beneficial interest in securities, of any other Person, and any direct or
indirect loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, advances to employees,
officers and directors and similar items, each made or incurred in the ordinary
course of business), or capital contribution by that Person to any other Person,
including all Debt of such other Person to that Person, but excluding accounts
owed by that other Person in the ordinary course of business. Investments shall
exclude (i) extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices and (ii) the repurchase of securities of
any Person by such Person. The amount of any Investment shall be determined in
conformity with GAAP.
"IRC" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder, and any
successor statutes or rules and regulations.
"IRS" shall mean the Internal Revenue Service or any successor agency.
"KMC Holdings" shall mean KMC Telecom Holdings, Inc., a Delaware
corporation.
"KMC Holdings Guaranty" shall mean that certain unlimited guaranty of
KMC Holdings in the form of Exhibit G hereto.
"KMC International" shall mean KMC Telecom International, Inc., a
corporation to be formed under the laws of Delaware.
"Lending Office" shall mean, with respect to a Lender or Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
11
"Letter of Credit" shall mean a letter of credit issued or caused to
be issued for the account of a Borrower or with respect to which Credit Support
is provided, in any case pursuant to Section 2.10.
"Letter of Credit Obligations" shall mean without duplication, the sum
of the aggregate maximum undrawn face amount of all outstanding Letters of
Credit and unpaid reimbursement obligations with respect to all Letters of
Credit.
"LIBO Rate" shall mean, for any Interest Period with respect to LIBOR
Loans comprising part of the same borrowing, the rate of interest per annum
equal to the per annum rate of interest displayed on the Dow Jones Market Screen
Page 3750, as being the one-month, two-month, three-month or six-month, as
applicable, reserve adjusted "London Interbank Offered Rate", provided, however,
that if such rate is not displayed or published, then the rate of interest per
annum (rounded upward to the nearest whole multiple of 1/16 of 1.0%, if such
rate is not such a multiple) determined by the Agent as follows:
LIBO Rate = Base LIBO Rate
-------------------------------
1.00 - LIBOR Reserve Percentage
"LIBOR Interest Payment Date" shall mean, with respect to a LIBOR
Loan, the last day of each Interest Period applicable to such Loan, and, if such
Interest Period has a duration of more than three months, on each day which
occurs during such Interest Period every three months from the first day of such
Interest Period.
"LIBOR Interest Rate Determination Date" shall mean each date of
calculating the LIBO Rate for purposes of determining the interest rate with
respect to an Interest Period. The LIBOR Interest Rate Determination Date for
any LIBOR Loan shall be the second Business Day prior to the first day of the
related Interest Period for such LIBOR Loan.
"LIBOR Loan" shall mean a Loan, or portion thereof, during any period
in which it bears interest at a rate based upon the LIBO Rate.
"LIBOR Reserve Percentage" shall mean for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1.0%) in effect on such day (whether or not applicable to
any Lender) for United States domestic banks under regulations issued from time
to time by the Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency Liabilities having a term comparable
to such Interest Period.
"LIBOR Revolving Loan" shall mean a Revolving Loan during any period
for which it is a LIBOR Loan.
"LIBOR Term Loan" shall mean any portion of the Term Loans during any
period for which such portion is a LIBOR Loan.
12
"Lien" shall mean any mortgage, pledge, deed of trust, assignment,
lien, charge, encumbrance or security interest of any kind, or the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement, but excluding easements, rights of way or similar
encumbrances on real property which are in the ordinary course and which do not
materially affect the value, use and insurability of title of such real
property.
"Loan" shall mean a Revolving Loan or a Term Loan.
"Loan Documents" shall mean all agreements, instruments and documents,
including, without limitation, security agreements, loan agreements, notes,
guarantees, mortgages, deeds of trust, subordination agreements, pledges, powers
of attorney, consents, assignments, contracts, notices, leases, financing
statements, Interest Rate Agreements between any Borrower and the Agent, the
Collateral Agent, or the Lenders and all other written matter whether
heretofore, now, or hereafter executed by or on behalf of any Borrower or any
other Person in connection with the transactions contemplated hereby and
delivered to the Agent, the Collateral Agent or the Lenders, together with all
agreements and documents referred to therein or contemplated thereby; provided,
however, that the documents executed in connection with the purchase by Newcourt
Communications Finance Corporation (formerly known as AT&T Credit Corporation)
or any Lender of Equity Interests in KMC or KMC Holdings shall not constitute
Loan Documents.
"Lucent" shall mean Lucent Technologies Inc.
"Lucent Purchase Agreement" shall mean an agreement between any
Borrower and Lucent for the purchase of Telecommunications Equipment, on terms
and conditions satisfactory to the Agents.
"Management Agreement" shall mean that certain Management Agreement
dated as of December 18, 1998 among KMC Holdings, the Borrowers, KMC
International and KMC Telecom III, Inc.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect upon the condition (financial or otherwise), operations
or properties of such Person, or upon the ability of such Person to perform
under the Loan Documents.
"Maximum Rate" shall have the meaning given to such term in Section
2.13 hereof.
"Milestone Plan" shall mean the Milestone Plan of the Borrowers
attached as Exhibit A hereto, as such Milestone Plan may be amended from time to
time with the prior written consent of the Requisite Lenders.
"Mortgages" shall mean mortgages or deeds of trust in favor of the
Collateral Agent, with respect to any Borrower's (i) owned Real Property and
(ii) other interests in those items of real property and Easements, as specified
by the Collateral Agent, which mortgages and deeds of trust shall be in form and
substance satisfactory to the Collateral Agent.
13
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by any Borrower or an ERISA Affiliate.
"Net Income" shall mean, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"Note" shall mean any Revolving Loan Note or any Term Loan Note.
"Notice of Borrowing" shall mean a notice substantially in the form of
Exhibit H-1 attached hereto.
"Notice of Conversion/Continuation" shall have the meaning given to
such term in Section 2.06(b).
"Obligations" shall mean all the obligations of any Borrower now or
hereafter existing under this Agreement or any other Loan Document to which any
Borrower is a party, whether for principal, interest, fees, expenses,
reimbursement, indemnification or otherwise. Obligations shall include, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements, and paralegals' fees which accrue after the commencement of any
case or proceeding in bankruptcy after the insolvency of, or for the
reorganization of any Borrower, whether or not allowed in such proceeding, and
Obligations shall not include any reimbursement obligations with respect to
Excluded Letters of Credit.
"Payment Account" shall mean the Agent's account at First Union
National Bank, ABA No. 053000219, Account # 5000000016905, KMC reference:
Payment Account.
"Payment Date" shall mean the first day of January, April, July and
October in each calendar year, but if any such date is not a Business Day, the
next succeeding Business Day, commencing January 4, 1999.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA.
"Periodic Reporting Certificate" shall mean a periodic reporting
certificate in the form of Exhibit F attached hereto.
"Permitted Liens" shall have the meaning set forth in Section 6.01
hereof.
"Person" shall mean any natural person, corporation, division of a
corporation, business trust, joint venture, association, company, partnership,
unincorporated organization or other legal entity, or a government or any agency
or political subdivision thereof.
14
"Plan" shall mean any employee benefit plan as defined in Section 3(3)
of ERISA (other than a Multiemployer Plan) in respect of which any Borrower or
any ERISA Affiliate is, or within the immediately preceding six (6) years was,
an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean a pledge agreement substantially in the
form of Exhibit L attached hereto.
"Prepayment Premium" shall mean (A) for the Revolving Loans, (i) with
respect to the period commencing on the Closing Date and ending on the first
annual anniversary thereof, two and one-half percent (2.5%) of the amount
prepaid, (ii) with respect to the period commencing thereafter and ending on the
second annual anniversary of the Closing Date, one and one-half percent (1.5%)
of the amount prepaid, (iii) with respect to the period commencing thereafter
and ending on the third anniversary of the Closing Date, one-half percent (0.5%)
of the amount prepaid, and (iv) at all times thereafter, $0, and (B) for the
Term Loans, (i) with respect to the period commencing on the Closing Date and
ending on the first annual anniversary thereof, three percent (3.0%) of the
amount prepaid, (ii) with respect to the period commencing thereafter and ending
on the second annual anniversary of the Closing Date, two percent (2.0%) of the
amount prepaid, (iii) with respect to the period commencing thereafter and
ending on the third annual anniversary of the Closing Date, one percent (1.0%)
of the amount prepaid, and (iv) at all times thereafter, $0.
"Principal Payments" shall mean, for any period, total required Debt
amortization (including, without limitation, the principal payments attributable
to capital leases) determined on a combined basis, without duplication, for the
Borrowers in accordance with GAAP.
"Pro Rata Share" shall mean with respect to all matters relating to
any Lender (a) with respect to the Revolving Loans and the Letters of Credit,
the percentage obtained by dividing (1) at any time prior to the Revolving
Credit Commitment Termination Date, the Revolving Loan Commitment Amount of such
Lender by the aggregate Revolving Loan Commitment Amount of all Lenders, and (2)
at any time after the Revolving Credit Commitment Termination Date, the
aggregate outstanding principal balance of the sum of the Revolving Loans held
by that Lender plus the Letters of Credit Obligations incurred by such Lender by
the sum of the aggregate outstanding principal balance of the Revolving Loans
held by all Lenders plus the aggregate Letter of Credit Obligations incurred by
all the Lenders, and (b) with respect to the Term Loans, the percentage obtained
by dividing (1) at any time prior to the date on which the Term Loans are
funded, the Term Loan Commitment Amount of that Lender by the Term Loan
Commitment Amount of all Lenders, and (2) on and after the date on which the
Term Loans are funded, the aggregate outstanding principal balance of the Term
Loans held by that Lender, by the aggregate outstanding principal balance of the
Term Loans held by all Lenders.
"PUC" shall mean any state Governmental Authority having utility or
telecommunications regulatory authority over any Borrower or any System.
"Purchase Debt" shall have the meaning given to such term in Section
6.13(iv).
15
"Qualified Intercompany Loan" shall mean a loan to a Borrower from KMC
Holdings, which loan is expressly subordinated to the Obligations on terms and
conditions satisfactory to the Agents, has a maturity date occurring on or after
the third annual anniversary of the Term Loan Termination Date, and requires no
cash payment of principal or interest prior to the scheduled maturity date of
such loan.
"Real Property" shall have the meaning given to such term in Section
3.20 hereof.
"Reference Bank" shall mean First Union National Bank.
"Register" shall have the meaning given to such term in Section
11.08(c)(iii).
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or
property.
"Remedial Action" shall mean actions required to (1) clean up, remove,
treat or in any other way address Contaminants in the environment; (2) prevent
the Release or threat of Release or prevent or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the environment; or (3) perform preremedial studies and
investigations and postremedial monitoring and care.
"Reportable Event" shall mean any reportable event as defined in
Section 4043 of ERISA unless the reporting requirement with respect to such
reportable event has been waived by the PBGC or other appropriate Governmental
Authority.
"Required Contribution" shall have the meaning assigned to such term
in the KMC Holdings Guaranty.
"Requisite Lenders" shall mean (a) prior to the date on which the Term
Loans are made, Lenders having at least sixty-six and two-thirds percent (66
2/3%) of the aggregate Commitment Amount of all Lenders, (b) on and after the
date on which the Term Loans are made and prior to the date on which all
Lenders' Commitment to make Revolving Loans has been terminated, Lenders holding
at least sixty-six and two-thirds percent (66 2/3%) of the sum of (i) the
aggregate outstanding amount of the Term Loans and (ii) the Revolving Loan
Commitment Amount of all the Lenders, or (c) on and after the date on which all
Lenders' Commitment to make Revolving Loans has been terminated, at least
sixty-six and two-thirds percent (66 2/3%) of the aggregate outstanding amount
of the sum of all Loans plus Letter of Credit Obligations incurred by all the
Lenders.
"Requisite Revolving Lenders" shall mean (a) Lenders having at least
sixty-six and two-thirds percent (66 2/3%) of the aggregate Revolving Loan
Commitment Amount of all Lenders, or (b) if the Revolving Loan Commitment has
been terminated, at least sixty-six and two-thirds percent (66 2/3%) of the
aggregate outstanding amount of the sum of all Revolving Loans plus Letter of
Credit Obligations incurred by all the Lenders.
16
"Revolving Credit Commitment Termination Date" shall mean the eighth
annual anniversary of the Closing Date.
"Revolving Lenders" shall mean, as of any date of determination on or
prior to the Revolving Credit Commitment Termination Date, Lenders having a
Revolving Loan Commitment Amount, and thereafter Lenders having outstanding
Revolving Loans or Letter of Credit Obligations.
"Revolving Loan" shall mean any loan made to the Borrower pursuant to
the provisions of Section 2.01(b) below.
"Revolving Loan Commitment Amount" shall mean (a) as to any Revolving
Lender, the aggregate commitment of such Revolving Lender to make Revolving
Loans and/or incur Letter of Credit Obligations as set forth opposite such
Revolving Lender's name on Annex A to this Agreement or in the most recent
Assignment Agreement executed by such Revolving Lender and (b) as to all
Revolving Lenders, the aggregate commitment of all Revolving Lenders to make
Revolving Loans and/or incur Letter of Credit Obligations, which aggregate
commitment shall be One Hundred Seventy-Five Million Dollars ($175,000,000) on
the Closing Date, as such amount may be adjusted from time to time in accordance
with this Agreement.
"Revolving Loan Note" shall mean a promissory note of the Borrower
substantially in the form of Exhibit E-1 attached hereto.
"Solvent" shall mean, at any time of determination, with respect to
any Person:
(i) the assets of such Person, at a fair valuation, are in excess
of the total amount of its debts (including, without limitation,
contingent liabilities); and
(ii) the present fair saleable value of its assets is greater
than its probable liability on its existing debts as such debts become
absolute and matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other
commitments) as they mature; and
(iv) it has capital sufficient to carry on its business as
conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or mature liability.
17
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Equity Interests
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, officers or trustees thereof is held by such Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the such Person for
financial statement purposes.
"Supporting Letter of Credit" shall have the meaning given to such in
Section 2.10(j).
"Switch Equipment" shall mean telecommunications switches and
associated electronics.
"Syndication Agent" shall mean Canadian Imperial Bank of Commerce.
"System" shall mean each telephone, telecommunications or information
system (including, without limitation, any voice, video transmission, data or
Internet services) and any related, ancillary or complementary services, as
described in the Milestone Plan, and all replacements, enhancements or additions
thereto.
"Tax Sharing Agreement" shall mean that certain Tax Allocation
Agreement dated as of December 18, 1998 among KMC Holdings, the Borrowers, KMC
International and KMC Telecom III, Inc.
"Taxes" shall mean any and all license, documentation, recording and
registration fees, and all taxes, including, without limitation, income (other
than net income taxes, franchise taxes and capital taxes imposed on the Lenders,
the Agent or the Collateral Agent other than by withholding), gross receipts,
sales, value-added, use, excise, personal property (tangible and intangible),
real estate and stamp, documentary, transfer or recording taxes, levies,
imposts, deductions, duties, assessments, fees, charges, and withholdings of any
nature whatsoever, whether or not presently in existence, together with any
penalties, fines, additions to tax, or interest thereon, imposed by any taxing
authority or other Governmental Authority.
"Telecommunications Equipment" shall mean fiber optic cable, Lucent
5-ESS Switch Equipment or other comparable Switch Equipment, transmission
equipment and other ancillary equipment necessary for the installation and
operation of a switch room or central office and co-location with other
telecommunications providers that will enable a Borrower to offer telephony
services, as well as all software and hardware associated with the network
operating center and back office systems (including operations support systems,
billing systems and data services), together with all related support,
construction and installation costs associated with an operational system,
provided that such costs are capitalized in accordance with GAAP.
18
"Temporary Cash Investments" shall mean (i) Investments in marketable,
direct obligations issued or guaranteed by the United States of America, or of
any governmental agency or political subdivision thereof, maturing within 365
days of the date of purchase; (ii) Investments in certificates of deposit issued
by a bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500,000,000 and rated at least A by
Standard & Poor's Ratings Service and A-2 by Moody's Investors Service, Inc.
maturing within 365 days of purchase; or (iii) Investments not exceeding 365
days in duration in money market funds that invest substantially all of such
funds' assets in the Investments described in the preceding clauses (i) and
(ii).
"Term Lenders" shall mean those Lenders having Term Loan Commitment
Amounts or who have made Term Loans.
"Term Loan" shall mean any loan made to the Borrower pursuant to
Section 2.01(a) below.
"Term Loan Commitment Amount" shall mean (a) as to any Lender, the
commitment of such Lender to make a Term Loan as set forth opposite such
Lender's name on Annex A to this Agreement and (b) as to all Lenders, the
aggregate commitment of all Lenders to make Term Loans, which aggregate
commitment shall be Seventy-Five Million Dollars ($75,000,000) on the Closing
Date.
"Term Loan Funding Date", shall mean the date upon which, subject to
the satisfaction of all conditions precedent contained in Section 4.02, the Term
Loans are made, which date shall be the earlier of (i) January 30, 1999 and (ii)
the date on which the general syndication of the Loans is completed.
"Term Loan Note" shall mean a promissory note of a Borrower
substantially in the form of Exhibit E-2 attached hereto.
"Term Loan Termination Date" shall mean July 1, 2007.
"Termination Event" shall mean (i) a Reportable Event with respect to
a Benefit Plan; (ii) the withdrawal of any Borrower or any ERISA Affiliate from
a Benefit Plan during a plan year in which any Borrower or such ERISA Affiliate
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii)
the imposition of an obligation on any Borrower or any ERISA Affiliate under
Section 4041 of ERISA to provide affected parties written notice of intent to
terminate a Benefit Plan in a distress termination described in Section 4041(c)
of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Benefit
Plan; (v) any event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan; or (vi) the partial or complete withdrawal of any
Borrower or any ERISA Affiliate from a Multiemployer Plan.
19
"Third Party Interactives" shall mean all Persons with whom any
Borrower exchanges data electronically in the ordinary course of business,
including without limitation, customers, suppliers, third-party vendors,
subcontractors, processors-converters, shippers and warehousemen.
"Total Debt" shall mean, with respect to the Borrowers, at any date,
the sum of the following determined on a combined basis, without duplication:
(a) all liabilities, obligations and indebtedness for borrowed money, including,
but not limited to, obligations evidenced by bonds, debentures, notes or other
similar instruments, (b) all obligations to pay the deferred purchase price of
property or services (exclusive of any rent for real property pursuant to a
lease that would not be capitalized in accordance with GAAP), including, but not
limited to, all obligations under non-competition agreements, except trade
payables arising in the ordinary course of business not more than ninety (90)
days past due, (c) all obligations as lessee under capital leases (exclusive of
the interest component thereof), (d) all Debt of any other Person secured by a
Lien on any asset of any Borrower, (e) all guaranty obligations, (f) all
obligations, contingent or otherwise, relative to the face amount of letters of
credit, whether or not drawn and banker's acceptances issued for the account of
any Borrower, (g) all obligations to redeem, repurchase, exchange, defease or
otherwise make payments in respect of capital stock or other securities at any
time prior to the third annual anniversary of the Term Loan Termination Date,
and (h) all termination payments which would be due and payable by any Borrower
thereof pursuant to any Interest Rate Agreement or hedging agreement. "Total
Debt" shall not include any intercompany Debt between the Borrowers or between
any Borrower and KMC Holdings.
"Total Leverage Ratio" shall mean the ratio of (i) Total Debt as of
the last day of any fiscal quarter, to (ii) the product of (A) two multiplied by
(B) EBITDA of the Borrowers on a combined basis, for the most recently ended six
month period.
"Trigger Date" shall mean the date on which KMC, KMC II and KMC
Virginia shall have sixteen Completed Systems.
"Unused Letter of Credit Subfacility" shall mean an amount equal to
the lesser of (i) $5,000,000 minus the Letter of Credit Obligations, and (ii)
the undrawn portion of the Revolving Loan Commitment Amount of all Lenders.
"Voting Stock" shall mean securities of any class or classes of a
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"Year 2000 Corrective Actions" shall mean, as to each Borrower, all
actions necessary to eliminate such Person's Year 2000 Problems, including,
without limitation, computer code enhancements and revisions, upgrades and
replacements of Year 2000 Date-Sensitive Systems/Components, and coordination of
such enhancements, revisions, upgrades and replacements with Third Party
Interactives.
20
"Year 2000 Corrective Plan" shall mean, with respect to each Borrower,
a comprehensive plan to eliminate all of its Year 2000 Problems on or before
September 30, 1999, including without limitations (i) computer code enhancements
or revisions, (ii) upgrades or replacements of Year 2000 Date-Sensitive
Systems/Components, (iii) test and validation procedures, (iv) an implementation
time line and budget and (v) designation of specific employees who will be
responsible for planning, coordinating and implementing each phase or subpart of
the Year 2000 Corrective Plan.
"Year 2000 Date-Sensitive System/Component" shall mean, as to any
Person, any system software, network software, applications software, database,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar-related
data accurately; such systems and components shall include, without limitation,
mainframe computers, file server/client system, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.
"Year 2000 Implementation Testing" shall mean, as to each Borrower,
(i) the performance of test and validation procedures regarding Year 2000
Corrective Actions on a unit basis and a system wide basis, (ii) the performance
of test and validation procedures regarding data exchanges among the Borrowers'
Year 2000 Date-Sensitive Systems/Components and data exchanges with Third Party
Interactives, and (iii) the design and implementation of additional Corrective
Actions, the need for which has been demonstrated by test and validation
procedures.
"Year 2000 Problems" shall mean, with respect to each Borrower,
limitations on the capacity or readiness of any such Borrower's Year 2000
Date-Sensitive Systems/Components to accurately accept, create, manipulate,
sort, sequence, calculate, compare or output calendar date information with
respect to calendar year 1999 or any subsequent calendar year beginning on or
after January 1, 2000 (including leap year computations), including, without
limitation, exchanges of information among Year 2000 Date-Sensitive
Systems/Components of the Borrowers and exchanges of information among the
Borrowers and Year 2000 Date-Sensitive Systems/Components of Third Party
Interactives and functionality of peripheral interfaces, firmware and embedded
microchips.
SECTION 1.02. Accounting Terms. Except as otherwise herein
specifically provided, each accounting term used herein shall have the meaning
given to it under generally accepted accounting principles ("GAAP") applied on a
consistent basis.
SECTION 1.03. Others Defined in New York Uniform Commercial Code. All
other terms contained in this Agreement (and which are not otherwise
specifically defined herein) shall have the meanings provided by the Uniform
Commercial Code of the State of New York (the "Code") to the extent the same are
used or defined therein.
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ARTICLE II
LOANS AND LETTERS OF CREDIT
SECTION 2.01. Agreement to Lend. (a) Each Term Lender severally
agrees, on the terms and conditions hereinafter set forth, to make on the Term
Loan Funding Date a Term Loan in the amount of such Lender's Term Loan
Commitment Amount.
(b) Each Revolving Lender severally agrees, on the terms and
conditions hereinafter set forth, to make on and after the Initial Funding Date
and until but not including the Revolving Credit Commitment Termination Date,
one or more Revolving Loans to the Borrowers in an amount not to exceed the
Revolving Loan Commitment Amount of such Revolving Lender less such Lender's Pro
Rata Share of the Letter of Credit Obligations.
(c) At any time that the Total Leverage Ratio is greater than 6:1 as
determined by reference to the financial statements delivered pursuant to
Section 5.06, the maximum amount of Revolving Loans that may be borrowed from
all Revolving Lenders shall not exceed the Borrowing Base and transaction costs
incurred in connection with the execution and delivery of the Loan Documents,
minus, if the Term Loans have not yet been made, the Term Loan Commitment
Amounts of all Term Lenders, and otherwise, the outstanding principal balance of
the Term Loans.
(d) Term Loans which are repaid or prepaid may not be reborrowed.
Revolving Loans which are repaid or prepaid may be reborrowed.
SECTION 2.02. Loans. (a) The proceeds of the Loans shall be used by
the Borrowers to purchase Telecommunications Equipment, to pay transaction costs
incurred in connection with the execution, delivery and performance of the Loan
Documents, and for working capital and other general corporate purposes, all as
specified in the Notice of Borrowing and in accordance with the Milestone Plan;
provided, however, that at any time that the Total Leverage Ratio is greater
than 6:1 as determined by reference to the financial statements delivered
pursuant to Section 5.06, proceeds of Loans may be used only to pay transaction
costs incurred in connection with the execution and delivery of the Loan
Documents and to purchase Telecommunications Equipment. Loans with respect to
Telecommunications Equipment purchases may not be made to finance (i) soft costs
(including installation, delivery and engineering costs) in excess of fifteen
percent (15%) of the invoiced price for the related Switch Equipment or (ii) any
support or installation costs associated with an operational system that would
not be capitalized in accordance with GAAP.
(b) Each Base Rate Loan shall be in a minimum principal amount of
$1,000,000 and increments of $250,000 in excess thereof. Each LIBOR Loan shall
be in a minimum principal amount of $5,000,000 and increments of $1,000,000 in
excess thereof.
(c) In any calendar month not more than six (6) Revolving Loans may be
requested.
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SECTION 2.03. Procedure for Loan Request and Borrowing Commitment. (a)
A Borrower requesting a Loan shall deliver to the Agent a Notice of Borrowing
substantially in the form of Exhibit H-1 attached hereto on or before 11:00 a.m.
(New York time) at least five (5) Business Days prior to the date on which such
Loan is requested to be made if such Loan is requested to be a LIBOR Loan and at
least two (2) Business Days prior to the date on which such Loan is requested to
be made if such Loan is requested to be a Base Rate Loan, which notice, once
given, shall be irrevocable. The Revolving Loans made on the Initial Funding
Date shall be Base Rate Loans and thereafter may be continued as Base Rate Loans
or converted into LIBOR Loans in the manner provided in Section 2.06 and subject
to the other conditions and limitations therein set forth and set forth in this
Article II. In the case of a Loan the proceeds of which will be used to purchase
or reimburse any Borrower for Telecommunications Equipment (including any
Telecommunications Equipment being purchased or reimbursed under the Lucent
Purchase Agreement), the Notice of Borrowing will include a schedule supporting
one hundred percent (100%) of Telecommunications Equipment requested to be
funded. Such schedule will detail all invoices for equipment, third party labor,
permits, other third party costs and all capitalized internal costs of the
Borrowers with respect to such Telecommunications Equipment permitted under
GAAP. All invoices over $25,000 will be attached to such schedule and when
combined with the above described capitalized internal costs will support at
least seventy percent (70%) of the total requested funding. In addition, if the
Telecommunications Equipment is being purchased or reimbursed under the Lucent
Purchase Agreement, a certificate of delivery and acceptance in the form of
Exhibit R shall be attached to the Notice of Borrowing. In the case of a Loan
the proceeds of which will be used to pay or reimburse any Borrower for
transaction costs, the Notice of Borrowing will include a copy of the invoice
from the provider of the service or other appropriate supporting documentation.
In the case of a Loan, the proceeds of which will be used for working capital or
other general corporate purposes, the Notice of Borrowing will contain a
certification that the making of such Loan does not violate any provision of the
Indenture. The Notice of Borrowing shall, with respect to any Loans requested,
specify whether such requested Loans are to be Base Rate Loans or LIBOR Loans,
and if such requested Loans are to be LIBOR Loans, the requested Interest Period
for such Loans.
(b) The Agent agrees, promptly upon receipt of a Notice of Borrowing,
to notify each Revolving or Term Lender of the date and amount of the Loan
proposed thereunder and the amount of such Lender's Pro Rata Share therein. So
long as no Event of Default has occurred and is continuing and upon fulfillment
of the applicable conditions set forth in Article IV, each such Lender severally
agrees, on or before 12:00 P.M. (New York time) on the date of each proposed
Loan, to pay into the Payment Account, an amount equal to such Lender's Pro Rata
Share of such Loan in dollars and in same day funds. After the Agent's receipt
of such Lender's Loan proceeds, the Agent shall make available such proceeds to
the Borrower requesting the Loan or the Person entitled to payment thereof at
the bank account(s) specified in the Notice of Borrowing on the date specified
in such Notice of Borrowing in Dollars in immediately available funds.
(c) Unless the Agent has received written notice from a Lender prior
to the date of any proposed Loan that such Lender will not make available to the
Agent such Lender's Pro Rata Share of such Loan, the Agent may, but is not
obligated to, assume that such Lender has made its Pro Rata Share of such Loan
available to the Agent on the date of such Loan in accordance with paragraph (b)
above, and the Lenders may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If such Pro Rata Share is not,
23
in fact, paid to Agent by such Lender when due, the Agent will be entitled to
recover such amount on demand from such Lender or the Borrower which received
the proceeds of such Loan without set-off, counterclaim or deduction of any
kind, together with interest thereon, for each day from the date such amount is
made available to such Borrower until the date such amount is repaid to the
Agent either by such Borrower or such Lender, at, (1) in the case of such
Borrower, the interest rate applicable to such Loan, and (2) in the case of such
Lender, the Federal Funds Effective Rate. Nothing in this Section 2.03(c) or
elsewhere in this Agreement or the other Loan Documents shall be deemed to
require Agent to advance funds on behalf of any Lender or to relieve any Lender
from its obligation to fulfill its Commitment hereunder or to prejudice any
rights that the Borrower may have against any Lender as a result of any default
by such Lender hereunder. Without limiting the foregoing, with respect to any
Lender which for any reason fails to make timely payment to the Agent of its Pro
Rata Share of any Loan, the Agent, in addition to other rights and remedies
which it may have, shall be entitled to withhold or set off from any payments
due to such Lender hereunder, an amount equal to the Pro Rata Share required to
have been paid by such Lender plus interest as described above, and to withhold
from such Lender any right of consent provided to such Lender by Article V or VI
of this Agreement and to bring an action or suit against such Lender in a court
of competent jurisdiction to recover such Pro Rata Share thereof and any related
interest thereon. If such Lender shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Lender's applicable Pro Rata
Share of such Loan for purposes of this Agreement. If both such Lender and such
Borrower shall have repaid the corresponding amount, the Agent shall promptly
return to such Borrower its corresponding amount.
(d) The Borrowers commit to the Lenders to request Loans to be made
(1) on a date not later than the Term Loan Funding Date, of at least $75,000,000
in the aggregate, the initial $75,000,000 of which shall constitute Term Loans;
provided, that the Borrowers shall not be permitted to request Loans in excess
of $75,000,000 until they have provided each item required to be delivered with
respect to Systems located outside of the First Eight Cities, including, without
limitation, the mortgages and third party agreements required pursuant to
Section 4.02(k), as further described in Section 5.08, (2) during calendar year
1999 in an aggregate amount of at least $80,000,000, (3) during calendar year
2000 in an aggregate amount of at least $80,000,000, and (4) during calendar
year 2001 in an aggregate amount equal to the undrawn portion of the Revolving
Loan Commitment Amount.
SECTION 2.04. The Notes. Each Borrower shall execute and deliver to
each Revolving Lender a Revolving Loan Note and to each Term Lender a Term Loan
Note to evidence the Commitment of that Lender. Each Revolving Loan Note shall
be in the principal amount of the Revolving Loan Commitment Amount of the
applicable Lender, dated the Initial Funding Date, stated to mature on the
Revolving Credit Commitment Termination Date and substantially in the form of
Exhibit E-1. Each Term Loan Note shall be in the principal amount of the Term
Loan Commitment Amount of the applicable Term Lender, dated the Initial Funding
Date, stated to mature on the Term Loan Termination Date and substantially in
24
the form of Exhibit E-2. The Notes payable to a Lender shall represent the
obligation of such Borrower to pay the amount of each Lender's Revolving Loan
Commitment Amount or Term Loan Commitment Amount or, if less, the applicable
Lender's Pro Rata Share of the aggregate unpaid principal amount of all Loans to
such Borrower and Letter of Credit Obligations incurred by such Lender together
with interest thereon as prescribed in Section 2.05. The aggregate principal
amount of all the Notes shall not exceed the aggregate Commitments of all the
Lenders. The Agent is hereby authorized by such Borrower to record in the
Register the date and amount of each Revolving Loan or Term Loan made to such
Borrower, as applicable, and to record therein the date and amount of each
payment on each Loan made to such Borrower, and such recordations shall be
conclusive evidence against such Borrower of the amounts owing to the Lenders
with respect to the Loans in the absence of manifest error; provided, however,
that the failure of the Agent to register any such information on such schedule
shall not in any manner affect the obligation of such Borrower to repay the
Loans made to such Borrower in accordance with the terms of this Agreement.
SECTION 2.05. Interest on Loans. (a) General. Subject to the
provisions of Sections 2.05(b), 2.06 and 2.07, each Loan shall bear interest at
the rate per annum equal to (i) the Base Rate plus the Applicable Margin,
computed on the basis of a 365 or 366 day year, as applicable, or (ii) the LIBO
Rate plus the Applicable Margin, computed on the basis of a 360 day year, as
selected by the Borrowers in the Notices of Borrowing and the Notices of
Continuation/Conversion.
(b) Default Interest. If any Borrower shall default in the payment of
the principal of or interest on any Loan or any other amount becoming due
hereunder on its due date and such default shall continue uncured for three
days, then the Borrowers shall, on demand, from the Agent, thereafter pay
interest on all Loans at a rate that is four percent (4.00%) per annum above the
rates of interest otherwise payable on all the Loans from the date such payment
is due to the date such payment default is either cured or waived in writing by
the Requisite Lenders. If any other Event of Default shall occur and be
continuing and shall be declared by the Agent upon the direction of the
Requisite Lenders, then the Borrowers shall, on demand, thereafter pay interest
on all the Loans at a rate that is two percent (2.00%) per annum above the rates
of interest otherwise payable on the Loans from the date of the occurrence of
such Event of Default until the date such Event of Default has been cured or
waived in writing by the Requisite Lenders; provided, that if an Event of
Default described in the first sentence of this clause (b) shall occur at any
time that an Event of Default described in this second sentence has occurred and
is continuing, then the rate of interest described in the first sentence of this
clause (b) shall apply. After the occurrence and during the continuance of any
Event of Default, the Borrowers shall be subject to the limitations on
borrowings of, conversions into and continuations as LIBOR Loans set forth in
Section 2.07(g).
SECTION 2.06. Conversion or Continuation. (a) Subject to the
provisions of Section 2.07, each Borrower shall have the option (i) to convert
(A) all or any part of its outstanding Term Loans or (B) all or any part of its
outstanding Revolving Loans, in a minimum amount of $5,000,000 and integral
multiples of $1,000,000 in excess of that amount, from a Term Loan or Revolving
Loans that are Base Rate Loans to LIBOR Term Loans or LIBOR Revolving Loans, as
25
the case may be; (ii) to convert (A) all or any part of its outstanding Term
Loan or (B) all or any part of its outstanding Revolving Loans from LIBOR Loans
to Base Rate Loans on the expiration of the Interest Period applicable thereto;
and (iii) upon the expiration of any Interest Period applicable to its
outstanding LIBOR Term Loan or any outstanding LIBOR Revolving Loan, to continue
(A) all of such LIBOR Term Loan or (B) all or any portion of such LIBOR
Revolving Loan equal to $5,000,000 and integral multiples of $1,000,000 in
excess of that amount as a LIBOR Term Loan or LIBOR Revolving Loan, as
applicable; provided, however, that no outstanding Loans may be converted into,
or continued as, LIBOR Loans when any Default or Event of Default has occurred
and is continuing. Any conversion or continuation made with respect to less than
the entire outstanding balance of a Borrower's Revolving Loans or Term Loans
must be applied pro rata to such Borrower's Revolving Loans or Term Loans, as
applicable, according to the outstanding principal balance of such Revolving
Loans or Term Loans.
(b) Whenever a Borrower elects to convert or continue Loans under this
Section 2.06, such Borrower shall deliver to the Agent a written notice
substantially in the form of that attached hereto as Exhibit H-2 (a "Notice of
Conversion/ Continuation"), signed by an authorized officer of such Borrower (i)
no later than 10:00 a.m. (New York time) two (2) Business Days in advance of the
requested conversion date, in the case of a conversion into Base Rate Loans, and
(ii) no later than 10:00 a.m (New York time) three (3) Business Days in advance
of the requested conversion or continuation date, in the case of a conversion
into, or continuation of, LIBOR Loans. The Notice of Conversion/Continuation
shall specify (1) the conversion or continuation date (which shall be a Business
Day), (2) the amount and type of the Loans to be converted or continued, (3) the
nature of the requested conversion or continuation, and (4) in the case of a
conversion into, or continuation of, LIBOR Loans, the requested Interest Period.
Promptly after receipt of a Notice of Conversion/Continuation pursuant to this
Section 2.06(b), the Agent shall notify the Revolving Lenders or the Term
Lenders, as applicable, by telecopy, telephone or other similar form of
transmission, of the requested conversion or continuation. In the event that a
Borrower should fail to provide a Notice of Conversion/Continuation with respect
to any LIBOR Loans as provided above, such Loans shall, on the last day of the
Interest Period with respect to such Loans, convert to Base Rate Loans.
(c) Any Notice of Conversion/Continuation for conversion to, or
continuation of, Loans made pursuant to this Section 2.06 shall be irrevocable
and the applicable Borrower shall be bound to convert or continue in accordance
therewith.
SECTION 2.07. Special Provisions Governing LIBOR Loans.
Notwithstanding any other provisions to the contrary contained in this
Agreement, the following provisions shall govern with respect to LIBOR Loans as
to the matters covered:
(a) Amount of LIBOR Loans. Each continuation of or conversion to LIBOR
Term Loans, and each election of, continuation of or conversion to LIBOR
Revolving Loans, shall be in a minimum amount of $5,000,000 and in integral
multiples of $1,000,000 in excess of that amount.
26
(b) Determination of Interest Period. By giving notice as set forth in
Section 2.06(b), a Borrower shall have the option, subject to the other
provisions of this Section 2.07, to specify whether the Interest Period for such
LIBOR Loan shall be a one, two, three or six month period. The determination of
Interest Periods shall be subject to the following provisions:
(i) In the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the
preceding Interest Period expires.
(ii) If any Interest Period would otherwise expire on a day which
is not a Business Day, the Interest Period shall be extended to expire
on the next succeeding Business Day; provided, however, that if the
next succeeding Business Day occurs in the following calendar month,
then such Interest Period shall expire on the immediately preceding
Business Day.
(iii) A Borrower may not select an Interest Period for any LIBOR
Loan, which Interest Period expires later than the maturity date of
such Loan.
(iv) A Borrower may not select an Interest Period with respect to
any portion of such Borrower's Term Loans which extends beyond an
installment payment date for such Term Loans unless, after giving
effect to such selection, the portion of such Term Loans not subject
to Interest Periods ending after such installment payment date is
equal to or greater than the principal due on such installment payment
date.
(v) A Borrower may not select an Interest Period with respect to
any portion of such Borrower's Revolving Loans which extends beyond
any date on which the Revolving Loan Commitment Amounts are scheduled
to be reduced unless, after giving effect to such selection, the
portion of the Revolving Loans not subject to Interest Periods ending
after any such date is equal to or greater than any amount of the
Revolving Loans required to be prepaid as a result of any such
reduction.
(vi) There shall be no more than eight (8) Interest Periods in
effect at any one time.
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(c) Determination of Interest Rate. As soon as practicable after 10:00
a.m. (New York time) on the LIBOR Interest Rate Determination Date, the Agent
shall determine (which determination shall, absent manifest error, be
presumptively correct) the interest rate for the LIBOR Loans for which an
interest rate is then being determined and shall promptly give notice thereof
(in writing or by telephone confirmed in writing) to the applicable Borrower. In
the event that on any LIBOR Interest Rate Determination Date the Agent shall
have determined (which determination shall, absent manifest error, be
presumptively correct and binding upon all parties) that:
(i) adequate and fair means do not exist for ascertaining the
applicable interest rates by reference to which the LIBO Rate then
being determined is to be fixed; or
(ii) the LIBO Rate plus the Applicable Margin for any Interest
Period for such Loans will not adequately reflect the cost to any
Lender of making, funding or maintaining its LIBOR Loan for such
Interest Period, the Agent shall forthwith so notify the applicable
Borrower and the Lender, whereupon:
(A) each LIBOR Loan will automatically, on the last day of
the then existing Interest Period therefor, convert
into a Base Rate Loan; and
(B) the obligation of the Lenders to make, or to convert
Loans into, LIBOR Loans shall be suspended until the
Agent shall notify the applicable Borrower and the
Lenders that the circumstances causing such suspension
no longer exist.
(d) Illegality. Notwithstanding any other provision of this Agreement,
if any Lender shall notify the Agent that the introduction of or any change in
or in the interpretation of any law or regulation makes it unlawful, or any
central bank or other Governmental Authority asserts that it is unlawful, for
any Lender to perform its obligations hereunder to make LIBOR Loans or to fund
or maintain LIBOR Loans hereunder, (i) the obligation of the Lenders to make, or
to convert Loans into or to continue Loans as, LIBOR Loans shall be suspended
until the Agent shall notify the Borrowers and the Lenders that the
circumstances causing such suspension no longer exist and (ii) the Borrowers
shall on the termination of the Interest Period then applicable thereto, or on
such earlier date required by law, prepay in full all LIBOR Loans then
outstanding together with accrued interest thereon, or convert all such LIBOR
Loans into Base Rate Loans in accordance with Section 2.06.
(e) Compensation. In addition to such amounts as are required to be
paid by the Borrowers pursuant to the other Sections of this Article II, the
Borrowers agree to compensate any Lender for all losses, expenses and
liabilities, including, without limitation, any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund or maintain such Lender's LIBOR Loans (including the
Applicable Margin component thereof) to the Borrowers, which such Lender may
sustain (i) if for any reason a funding of any LIBOR Loans does not occur on a
date specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation, or a successive Interest Period does not commence after
notice therefor is given pursuant to Section 2.06 as a result of any act or
omission of any Borrower, (ii) if any voluntary or mandatory prepayment of any
LIBOR Loans occurs for any reason on a date which is not the last scheduled day
of an Interest Period, (iii) as a consequence of any required conversion of
LIBOR Loans to Base Rate Loans as a result of any of the events indicated in
Section 2.07(d), or (iv) as a consequence of any other failure by a Borrower to
repay LIBOR Loans when required by the terms of this Agreement.
28
(f) Booking of LIBOR Loans. The Lenders may make, carry or transfer
LIBOR Loans at, to, or for the account of, any of their respective branch
offices or the office of any of their respective affiliates.
(g) LIBOR Loans After Event of Default. Unless the Requisite Lenders
shall otherwise agree, after the occurrence of and during the continuance of any
Event of Default, the Borrowers may not borrow Revolving Loans as LIBOR Loans or
elect to have any Loans continued as, or converted to, LIBOR Loans after the
expiration of any Interest Period then in effect for such Loans.
SECTION 2.08. Payments. (a) Interest on each LIBOR Loan shall be
payable in arrears on each LIBOR Interest Payment Date and, if such LIBOR Loan
is paid in full other than on such LIBOR Interest Payment date, on such other
date. Interest on each Base Rate Loan will be payable in arrears on each Payment
Date and, if such Base Rate Loan is paid in full other than on such Payment
Date, on such other date.
(b) Subject to the provisions of Sections 2.09 and 9.02, the
outstanding principal balance of the Term Loans made to the Borrowers shall be
payable in twenty consecutive quarterly installments of $187,500 each beginning
on the fourteenth Payment Date (i.e. the Payment Date occurring on April 1,
2002) and continuing on each Payment Date thereafter through and including the
thirty-third Payment Date (i.e. the Payment Date occurring on January 1, 2007)
and two final installments of $35,625,000 on April 1, 2007 and on the Term Loan
Termination Date. Subject to the provisions of Sections 2.09 and 9.02, the
outstanding principal balance of the Revolving Loans made to the Borrowers shall
be payable on the Revolving Credit Commitment Termination Date.
(c) Payments made with respect to the Loans by each Borrower shall be
applied by the Agent first to unpaid and accrued fees and interest and then to
the outstanding unpaid principal balance of the Loans of such Borrower;
provided, however, that upon the occurrence and during the continuance of an
Event of Default, all payments and prepayments with respect to the Obligations
and all proceeds of Collateral shall be applied in the following order by the
Agent; provided, further, that the order of priority set forth in the following
clauses may be altered upon direction from the Requisite Lenders to the Agent:
(1) first, to pay Obligations in respect of any expenses then due and
payable by the Borrowers to the Agents, the Lenders or any Person
which is not a Lender that has issued a Letter of Credit;
(2) second, to pay Obligations in respect of any reimbursement or
indemnities then due and payable to the Agents, the Lenders or any
Person which is not a Lender that has issued a Letter of Credit
(excluding any reimbursement obligations with respect to any Letters
of Credit);
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(3) third, to pay Obligations in respect of any fees due and owing to
the Agent, the Collateral Agent or any Person which is not a Lender
that has issued a Letter of Credit;
(4) fourth, to pay Obligations in respect of the commitment fee and
any other fees and commissions then due and owing to the Agents, the
Lenders or any Person which is not a Lender that has issued a Letter
of Credit;
(5) fifth, to pay Obligations in respect of any accrued and unpaid
interest due in respect of Loans and Letter of Credit Obligations;
(6) sixth, to pay termination payments due and payable pursuant to any
Interest Rate Agreement or hedging agreement;
(7) to the ratable payment or prepayment of principal of any
outstanding Loans and reimbursement obligations with respect to
Letters of Credit;
(8) to provide required cash collateral, if required pursuant to
Section 2.10(j); and
(9) to the ratable payment of all other Obligations.
SECTION 2.09. Optional and Mandatory Prepayment of Loans; Optional and
Mandatory Reduction of Revolving Loan Commitment Amount. (a) Provided that no
Event of Default has occurred and is continuing, the Borrowers shall have the
right upon the provision of sixty (60) days' prior written notice to the Agent,
which notice, once given, shall be irrevocable, on any Payment Date with respect
to any Base Rate Term Loans and on the last day of the applicable Interest
Period with respect to any LIBOR Term Loans, to prepay the outstanding principal
of the Base Rate Term Loans in a minimum principal amount of $1,000,000 and
increments of $250,000 in excess thereof, or the outstanding principal of the
LIBOR Term Loans in a minimum principal amount of $5,000,000 and increments of
$1,000,000 in excess thereof, multiple thereof, together in each case with
accrued interest thereon and the aggregate Prepayment Premium applicable
thereto. The amount of principal so prepaid shall be applied to the remaining
principal payments of the type of Loans prepaid (i.e. Base Rate Term Loans or
LIBOR Term Loans) in the inverse order of maturity.
(b) Upon the occurrence of any Event of Loss in excess of $1,000,000
with respect to any item of Collateral that is not repaired or replaced, or any
Events of Loss which, in the aggregate, exceed $5,000,000 with respect to any
item or items of Collateral that are not repaired or replaced (in each case,
other than an item of Collateral no longer used or useful in the Business) such
that after such repair or replacement it has a value at least equal to its value
prior to the occurrence of such Event of Loss, the Borrower which suffered such
Event of Loss shall make a principal prepayment within thirty (30) days of such
Event of Loss in an amount equal to the replacement value of the item of
Collateral which suffered such Event of Loss, together with accrued interest
thereon (but without the Prepayment Premium) with such principal payment to be
applied, pro rata, to outstanding principal balance of the Revolving Loans and
the Term Loans.
30
(c) In the event that any Borrower finances any Telecommunications
Equipment (exclusive of soft costs that exceed fifteen percent (15%) of the
invoiced price of the related Telecommunications Equipment) with a financing
source other than a Loan pursuant to this Agreement, then thirty (30) days
following such financing the Revolving Loan Commitment Amounts of all the
Revolving Lenders shall be reduced by the actual or imputed principal amount of
any such financing, and any prepayments of the Revolving Loans required by the
provisions of clause (h) below shall be accompanied by any applicable Prepayment
Premium thereon.
(d) The Borrowers shall prepay the Revolving Loans and the Term Loans
on a pro rata basis in a principal amount equal to (i) all of the net proceeds
of any sales of assets of any Borrower other than sales in the ordinary course
of business, which proceeds are not reinvested within 270 days after receipt
thereof in replacement assets, plus the applicable Prepayment Premium, and (ii)
the proceeds of insurance policies paid to any Borrower and not applied within
270 days after any such payment to replacing, rebuilding or restoring the
Collateral which was the subject of insurance loss, without any Prepayment
Premium, in each case, within five (5) days after the expiration of the
applicable 270 day period.
(e) On the first Payment Date of each year, commencing in 2002, the
Revolving Loan Commitment Amounts of all the Lenders shall be reduced by an
amount equal to fifty percent (50%) of Excess Operating Cash Flow for the
preceding fiscal year until the Borrowers have achieved and maintained for at
least two consecutive fiscal quarters, a Total Leverage Ratio of less than 5:1,
as determined by reference to the financial statements delivered pursuant to
Section 5.06.
(f) Provided that no Event of Default has occurred and is continuing,
commencing January 1, 2002, the Borrowers shall have the right upon the
provision of thirty days' prior written notice to the Agent, which notice, once
given, shall be irrevocable, on any Payment Date, to reduce the Revolving Loan
Commitment Amount of all the Lenders. Each such reduction shall be in a minimum
principal amount of $1,000,000 and increments of $250,000 in excess thereof. Any
Revolving Loans that must be prepaid in connection with such reduction in the
Revolving Loan Commitment Amount pursuant to clause (h) below, shall be
accompanied by any applicable Prepayment Premium thereon.
(g) The Revolving Loan Commitment Amount of all the Lenders shall be
reduced on each Payment Date beginning April 1, 2002 as set forth on Annex C
hereto. In addition, in the event that at any time more than fifteen percent
(15.0%) of the average outstanding principal balance of Revolving Loans during
the immediately preceding 90-day period is repaid and is not reborrowed within
120 days after such repayment, then on such date, the Revolving Loan Commitment
Amount of all the Lenders shall be reduced by an amount equal to such amount
that was not reborrowed. Any Revolving Loans that must be prepaid in connection
with such reduction in the Revolving Loan Commitment Amount pursuant to Section
2.09(h) below, shall be accompanied by any applicable Prepayment Premium.
(h) On each date that the Revolving Loan Commitment Amount is reduced,
the Borrowers shall prepay first, the Revolving Loans, and second, provide to
the Agent cash collateral with respect to the Letter of Credit Obligations in
such amounts such that the sum of the outstanding principal balance of the
31
Revolving Loans plus the Letter of Credit Obligations does not exceed the
Revolving Loan Commitment Amount of all the Revolving Lenders after giving
effect to the reduction thereof effective on such date, together with any
applicable Prepayment Premium thereon. Any reduction in the Revolving Loan
Commitment Amount of all the Lenders shall be allocated to each Revolving Lender
based on its Pro Rata Share. All prepayments of principal shall be applied to
the remaining principal payments of the type of Loans prepaid in the inverse
order of maturity. The Letter of Credit Obligations shall be reduced on a
dollar-for-dollar basis by the cash collateral.
SECTION 2.10. Letters of Credit.
(a) Agreement to Cause Issuance. Subject to the terms and conditions
of this Agreement, and in reliance upon the representations and warranties of
the Borrowers herein set forth, the Agent agrees to (1) cause Letters of Credit
to be issued by Lenders who are willing to do so or (2) provide credit support
or enhancement or otherwise confirm payment (any such credit support,
enhancement or payment confirmation being referred to as "Credit Support") to
banks other than Lenders, which banks are acceptable to the Agent, which issue
Letters of Credit for the respective accounts of the Borrowers in accordance
with this Section 2.10 from time to time during the term of this Agreement.
(b) Amounts; Outside Expiration Date. The Agent shall not have any
obligation to cause any Letter of Credit to be issued by a Lender or to provide
Credit Support for any Letter of Credit at any time if: (1) the maximum undrawn
face amount of the Letter of Credit is greater than the Unused Letter of Credit
Subfacility; or (2) such Letter of Credit has an expiration date later than
thirty (30) days prior to the Revolving Credit Commitment Termination Date, or
more than one (1) year from the date of issuance.
(c) Other Conditions. In addition to being subject to the satisfaction
of the applicable conditions precedent contained in Article IV, the obligation
of the Agent to cause any Letter of Credit to be issued by a Lender or to
provide Credit Support for any Letter of Credit is subject to the following
conditions precedent having been satisfied in a manner satisfactory to the
Agent:
(1) the applicable Borrower shall have delivered to the proposed
issuer of such Letter of Credit, at such times and in such manner as
such proposed issuer may prescribe, an application in form and
substance satisfactory to such proposed issuer for the issuance of the
Letter of Credit and such other documents as may be required pursuant
to the terms thereof, and the form and terms of the proposed Letter of
Credit shall be satisfactory to the Agent and such proposed issuer;
and
(2) as of the date of issuance, no order of any court, arbitrator
or Governmental Authority shall purport by its terms to enjoin or
restrain money center banks generally from issuing letters of credit
of the type and in the amount of the proposed Letter of Credit, and no
32
law, rule or regulation applicable to money center banks generally and
no request or directive (whether or not having the force of law) from
any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed issuer of such
Letter of Credit refrain from, the issuance of letters of credit
generally or the issuance of such Letters of Credit.
(d) Issuance of Letters of Credit.
(1) Request for Letter of Credit. The applicable Borrower shall
give the Agent five (5) Business Days' prior written notice,
containing the original signature of an authorized officer of such
Borrower, of such Borrower's request for the issuance of a Letter of
Credit or the provision of Credit Support for a Letter of Credit. Such
notice shall be irrevocable and shall specify the original face amount
of the Letter of Credit, the effective date (which date shall be a
Business Day) of issuance of such proposed Letter of Credit, whether
such Letter of Credit may be drawn in a single or in partial draws,
the date on which such proposed Letter of Credit is to expire (which
date shall be a Business Day), the purpose for which such Letter of
Credit is to be issued, and the beneficiary of such Letter of Credit.
The applicable Borrower shall attach to such notice the form of the
proposed Letter of Credit.
(2) Responsibilities of the Agent; Issuance. The Agent shall
determine, as of the Business Day immediately preceding the requested
effective date of issuance of the Letter of Credit set forth in the
notice from the applicable Borrower pursuant to Section 2.10(d)(1),
the amount of the applicable Unused Letter of Credit Subfacility. If
(A) the undrawn face amount of the proposed Letter of Credit is not
greater than the applicable Unused Letter of Credit Subfacility, and
(B) the Agent has received a certificate from such Borrower stating
that the applicable conditions set forth in Article IV have been
satisfied, the Agent shall cause such Letter of Credit to be issued on
such proposed effective date of issuance.
(3) Notice of Issuance. The Agent shall promptly give each Lender
written notice of the issuance of each Letter of Credit.
(4) No Extensions or Amendment. No Letter of Credit shall be
extended or amended unless the requirements of this Section 2.10(d)
are met as though a new Letter of Credit were being requested and
issued.
(e) Payments Pursuant to Letters of Credit.
(1) Payment of Letter of Credit Obligations. The Borrowers agree
to reimburse the issuer for any draw under any Letter of Credit, and
the Agent, for the account of the Lenders, upon any payment pursuant
to any Credit Support, immediately upon demand, and to pay the issuer
of the Letter of Credit the amount of all other Obligations and other
amounts payable to such issuer under or in connection with any Letter
of Credit immediately when due, irrespective of any claim, set-off,
defense or other right which a Borrower may have at any time against
such issuer or any other Person.
33
(2) Revolving Loans to Satisfy Reimbursement Obligations. In the
event that the issuer of any Letter of Credit honors a draw under such
Letter of Credit, or the Agent shall have made any payment pursuant to
any Credit Support, and the Borrowers shall not have repaid such
amount to the issuer of such Letter of Credit or the Agent, as
applicable, pursuant to Section 2.10(e)(1), the Agent shall, upon
receiving notice of such failure, notify each Revolving Lender of such
failure, and each Revolving Lender shall unconditionally pay to the
Agent, for the account of such issuer or the Agent, as applicable, as
and when provided hereinbelow, an amount equal to such Revolving
Lender's Pro Rata Share of the amount of such payment in Dollars and
in same day funds. If the Agent so notifies the Revolving Lenders
prior to 12:00 p.m. (New York time) on any Business Day, each
Revolving Lender shall make available to the Agent the amount of such
payment, as provided in the immediately preceding sentence, on such
Business Day. Such amounts paid by the Revolving Lenders to the Agent
shall constitute Revolving Loans which shall be deemed to have been
requested by the applicable Borrower pursuant to Section 2.03.
(f) Participations.
(1) Purchase of Participations. Immediately upon issuance of any
Letter of Credit in accordance with Section 2.10(d), each Revolving
Lender shall be deemed to have irrevocably and unconditionally
purchased and received without recourse or warranty, an undivided
interest and participation in such Letter of Credit (if issued by a
Revolving Lender) or the Credit Support provided through the Agent to
such issuer in connection with the issuance of such Letter of Credit,
as applicable, equal to such Revolving Lender's Pro Rata Share of the
face amount of such Letter of Credit or the amount of such Credit
Support (including, without limitation, all obligations of the
Borrowers with respect thereto, and any security therefor or guaranty
pertaining thereto).
(2) Sharing of Reimbursement Obligation Payments. Whenever the
Agent receives a payment from a Borrower on account of reimbursement
obligations in respect of a Letter of Credit or Credit Support as to
which the Agent has previously received for the account of the issuer
thereof payment from a Revolving Lender pursuant to this Section
2.10(f)(2), the Agent shall promptly pay to such Lender such Revolving
Lender's Pro Rata Share of such payment from such Borrower in Dollars.
Each such payment shall be made by the Agent on the Business Day on
which the Agent receives immediately available funds paid to such
Person pursuant to the immediately preceding sentence, if received
prior to 11:00 a.m. (New York time) on such Business Day and otherwise
on the next succeeding Business Day.
(3) Documentation. Upon the request of any Revolving Lender, the
Agent shall furnish to such Revolving Lender copies of any Letter of
Credit, reimbursement agreement executed in connection therewith,
application for any Letter of Credit and Credit Support provided
through the Agent in connection with the issuance of any Letter of
Credit, and such other documentation as may reasonably be requested by
such Revolving Lender.
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(4) Obligations Irrevocable. The obligations of each Revolving
Lender to make payments to the Agent with respect to any Letter of
Credit or with respect to any Credit Support provided through the
Agent with respect to a Letter of Credit, and the obligations of the
Borrowers to make payments to the Agent, for the account of the
Revolving Lenders, shall be irrevocable, not subject to any
qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement (assuming, in the case
of the obligations of the Revolving Lenders to make such payments,
that the Agent has provided Credit Support for such Letter of Credit
in accordance with the terms of Section 2.10(d)), including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense or other
right which a Borrower may have at any time against a beneficiary
named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be
acting), any Lender, the Agent, the Collateral Agent, the issuer
of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions
(including any underlying transactions between a Borrower or any
other Person and the beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other document presented
under the 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;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents; or
(v) the occurrence of any Default or Event of Default.
(g) Recovery or Avoidance of Payments. In the event any payment by or
on behalf of a Borrower received by the Agent with respect to a Letter of Credit
or Credit Support provided for any Letter of Credit (or any guaranty by a
Borrower or reimbursement obligation of a Borrower relating thereto) and
distributed by the Agent to the Revolving Lenders on account of their respective
participations therein, is thereafter set aside, avoided or recovered from the
Agent in connection with any receivership, liquidation or bankruptcy proceeding,
the Revolving Lenders shall, upon demand by the Agent, pay to the Agent their
respective Pro Rata Shares of such amount set aside, avoided or recovered,
together with interest at the rate required to be paid by the Agent upon the
amount required to be repaid by it.
(h) Compensation for Letters of Credit.
The Borrowers agree to pay the fees set forth in Section 2.11 with
respect to any Letters of Credit.
35
(i) Indemnification; Exoneration.
(1) Indemnification. In addition to amounts payable as elsewhere
provided in this Section 2.10, the Borrowers hereby agree to protect,
indemnify, pay and save the Lenders and the Agent harmless from and
against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees)
which any Lender or the Agent may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of
Credit or the provision of any Credit Support in connection therewith.
The agreements contained in this Section 2.10(i)(1) shall survive the
payment in full of the Obligations.
(2) Assumption of Risk by the Borrowers. As among the Borrowers,
the Lenders and the Agent, each Borrower assumes all risks of the acts
and omissions of, or misuse of any of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit. In furtherance and
not in limitation of the foregoing, the Lenders and the Agent shall
not be responsible for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any Person in
connection with the application for and issuance of and presentation
of drafts with respect to any of the Letters of Credit, even if it
should prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid
or ineffective for any reason; (C) the failure of the beneficiary of
any Letter of Credit to comply duly with conditions required in order
to draw upon such Letter of Credit; (D) errors, omissions,
interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (E) errors in interpretation of technical terms; (F) any
loss or delay in the transmission or otherwise of any document
required in order make a drawing under any Letter of Credit or of the
proceeds thereof; (G) the misapplication by the beneficiary of any
Letter of Credit of the proceeds of any drawing under such Letter of
Credit; or (H) any consequences arising from causes beyond the control
of the Lenders or the Agent, including, without limitation, any act or
omission, whether rightful or wrongful, of any present or future de
jure or de facto Governmental Authority. None of the foregoing shall
affect, impair or prevent the vesting of any rights or powers of the
Agent or any Lender under this Section 2.10(i).
(3) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action
taken or omitted by the Agent or any Lender under or in connection
with any of the Letters of Credit or any related certificates, if
taken or omitted in good faith, shall not put the Agent or any Lender
under any resulting liability to any Borrower or relieve any Borrower
of any of its obligations hereunder to any such Person.
36
(j) Supporting Letter of Credit; Cash Collateral. If, notwithstanding
the provisions of Section 2.10(b), any Letter of Credit is outstanding upon the
termination of this Agreement, then upon such termination the Borrowers shall
cause the termination of such Letter of Credit. If, at the Agent's election, any
such Letter of Credit remains outstanding, then the Borrowers shall deposit with
the Agent, for the ratable benefit of the Agent and the Revolving Lenders, with
respect to each Letter of Credit then outstanding, as the Agent shall specify,
either (A) a standby letter of credit (a "Supporting Letter of Credit") in form
and substance satisfactory to the Required Revolving Lenders, issued by an
issuer satisfactory to the Agent in an amount equal to the greatest amount for
which such Letter of Credit may be drawn, plus any fees and expenses associated
with such Letter of Credit, under which Supporting Letter of Credit the Agent is
entitled to draw amounts necessary to reimburse the Agent and the Revolving
Lenders for payments made by the Agent and the Revolving Lenders under such
Letter of Credit or under any Credit Support provided through the Agent with
respect thereto and any fees and expenses associated with such Letter of Credit,
or (B) cash in amounts necessary to reimburse the Agent and the Revolving
Lenders for payments made by the Agent or the Revolving Lenders under such
Letter of Credit or under any Credit Support provided through the Agent with
respect thereto, and any fees and expenses associated with such Letter of
Credit. Such Supporting Letter of Credit or deposit of cash shall be held by the
Agent, for the ratable benefit of the Agent and the Revolving Lenders, as
security for, and to provide for the payment of, the aggregate undrawn face
amount of such Letters of Credit remaining outstanding.
SECTION 2.11. Fees. (a) The Borrowers shall pay and the Borrowers
shall be jointly and severally liable to the Agent for the account of the
Revolving Lenders for payment of a nonutilization fee calculated on a per annum
basis and equal to the percentage corresponding to the criteria set forth below
of the average of the unused Revolving Loan Commitment Amount for the quarterly
period preceding a Payment Date, which fee shall be payable on each Payment Date
following such last day of a quarter beginning on the Payment Date following the
Initial Funding Date until and including the Payment Date following the
Revolving Credit Commitment Termination Date:
Drawn Portion of
Revolving Loan Commitment
Amount as of the
Last Day of each Quarter Preceding
a Payment Date Percentage
---------------------------------- ----------
Less than or equal to
$58,333,333 1.25%
Greater than $58,333,333 and
less than or equal to $116,666,666 1.00%
Greater than $116,666,666 and
less than or equal to $175,000,000 0.75%
37
In the event that at any time the Borrowers fail to comply with the requirements
of Section 2.03(d) for any calendar year, each of the above described
nonutilization fees shall be increased by 100 basis points for the entire such
calender year with payment of such increment in the nonutilization fee being due
and payable not later than the last Business Day of such calendar year.
(b) The Borrowers shall pay the Agent and the Collateral Agent and
shall be jointly and severally liable to the Agent and the Collateral Agent,
respectively, for payment of an annual administration fee and a collateral
monitoring fee at the times and in the amounts set forth in the Fee Letters.
(c) The Borrowers shall on the Closing Date pay the Agent the
underwriting fee and the structuring fee referred to in the Fee Letters.
(d) The Borrowers shall pay and the Borrowers shall be jointly and
severally liable to the Agent (i) for the account of the Revolving Lenders for
payment in arrears on each Payment Date of a fee equal to equal to the product
of the Applicable Margin in effect with respect to LIBOR Loans for the preceding
calendar quarter on an annualized basis, multiplied by the average Letter of
Credit Obligations outstanding during such calendar quarter, and (ii) for the
account of any Person which issues any Letter of Credit, for payment in arrears
on each Payment Date of a fee equal to (A) the product of one-eighth percent
(0.125%) per annum multiplied by the average face amount of Letters of Credit
issued by such Person and outstanding during the preceding calendar quarter, and
(B) if such Person is not a Lender, any additional fees as may be charged by
such Person in connection with the issuance or maintenance of such Letter of
Credit.
(e) All fees once paid shall be nonrefundable.
SECTION 2.12. Manner of Payment; Special Tax Considerations. (a) All
payments by the Borrowers hereunder and under the Notes shall be made to the
Agent by wire transfer or other electronic payment method to the Payment Account
or to such bank account as the Agent may designate, for the account of the
Lenders in Dollars in immediately available funds by 11:00 a.m., New York time,
on the date on which such payment shall be due. The Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or other fees ratably (other than amounts payable pursuant
to Section 2.14) to each Lender in accordance with Section 10.07 hereof.
Interest in respect of any Loan hereunder shall accrue from the day such Loan is
made up to and including the day prior to the date on which such Loan is paid in
full. Payments received after 12:00 p.m. shall not be given credit until the
next Business Day, and the Borrowers shall be liable for interest, if any,
accruing on such payment until the next Business Day.
(b) (1) Any and all payments by each Borrower hereunder shall be made
free and clear of and without deduction for any and all Taxes. If any Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under the other Loan Documents to any Lender or Agent, (A)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
38
under this Section 2.12) such Lender or Agent receives an amount equal to the
sum it would have received had no such deductions been made, (B) such Borrower
shall make such deductions, and (C) such Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law. If a withholding tax of the United States of America or any
other Governmental Authority shall be or become applicable (y) after the date of
this Agreement, to the payments by any Borrower made to the Lending Office or
any other office that a Lender may claim as its Lending Office, or (z) after
such Lender's selection and designation of any other Lending Office, to such
payments made to such other Lending Office, such Lender shall use reasonable
efforts to make, fund and maintain its Loans through another Lending Office of
such Lender in another jurisdiction so as to reduce, but not increase, the
applicable Borrower's liability hereunder, if the making, funding or maintenance
of such Loans through such other Lending Office of such Lender does not, in the
judgment of such Lender, otherwise materially adversely affect such Loans, such
Lender's obligations under its Commitment or such Lender. Notwithstanding
anything to the contrary hereunder, if a Person becomes a Lender under this
Agreement pursuant to Section 11.08 hereof, the Borrowers shall in no event be
required to increase any payment pursuant to paragraph (b) of this Section 2.12
by an amount that would exceed the amount of any increase that would be required
to be made under paragraph (b) of this Section 2.12 to the assigning Lender.
(2) The Borrowers will jointly and severally indemnify each Lender and
the Agents and hold them harmless for the full amount of Taxes (including,
without limitation, any Taxes imposed by any Governmental Authority on amounts
payable under this Section 2.12 or any other documentary taxes, assessments or
charges made by any Governmental Authority by reason of the execution and
delivery of this Agreement or any other Loan Document) paid by such Lender or
the Agent (as the case may be) and any liability (including penalties, interest,
and expenses) arising therefrom or with respect thereto. This indemnification
shall be made within thirty (30) days after the date such Lender or the Agent
(as the case may be) makes written demand therefor. A certificate as to any
additional amount payable to any Lender or the Agent under this Section 2.12
submitted to the Borrowers and the Agent (if a Lender is so submitting) by such
Lender or the Agent shall show in reasonable detail the amount payable and the
calculations used to determine such amount. With respect to such deduction or
withholding for or on account of any Taxes and to confirm that all such Taxes
have been paid to the appropriate Governmental Authorities, the applicable
Borrower shall promptly (and in any event not later than thirty (30) days after
receipt) furnish to each Lender and the Agent such certificates, receipts and
other documents as may be required (in the judgment of such Lender or the Agent)
to establish any tax credit to which such Lender or the Agent may be entitled.
(3) Within thirty (30) days after the date of any payment of Taxes on
amounts payable hereunder by any Borrower, such Borrower will furnish to the
Agent, at its address referred to in Section 11.01, the original or a certified
copy of a receipt evidencing payment thereof.
(4) Without prejudice to the survival of any other agreement of any
Borrower hereunder, the agreements and obligations of such Borrower contained in
this Section 2.12 shall survive the payment in full of principal and interest
hereunder and the termination of this Agreement.
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(5) Without limiting the obligations of the Borrowers under this
Section 2.12, each Lender that is not created or organized under the laws of the
United States of America or a political subdivision thereof shall deliver to the
Borrowers and the Agent on or before the effective date hereof, or, if later,
the date on which such Lender becomes a Lender pursuant to Section 11.08 hereof,
a true and accurate certificate executed in duplicate by a duly authorized
officer of such Lender, in a form satisfactory to the Borrowers and the Agent,
to the effect that such Lender is capable under the provisions of an applicable
tax treaty concluded by the United States of America (in which case the
certificate shall be accompanied by two original, executed copies of Form 1001
of the IRS) or under Section 1442 of the IRC (in which case the certificate
shall be accompanied by two original, executed copies of Form 4224 of the IRS)
of receiving payments of interest hereunder exempt from or at a reduced
deduction or withholding of United States federal income tax or that such Lender
is not a bank described in Section 881(c)(3)(A) of the IRC (in which case the
certificate should be accompanied by two original, executed copies of Form W-8
or W-9 of the IRC). Each such Lender further agrees to deliver to the Borrowers
and the Agent from time to time a true and accurate certificate executed in
duplicate by a duly authorized officer of such Lender substantially in a form
satisfactory to the Borrowers and the Agent, before or promptly upon the
occurrence of any event requiring a change in the most recent certificate
previously delivered by it to the Borrowers and the Agent pursuant to this
Section 2.12(b)(5). Further, each Lender which delivers a certificate
accompanied by Form 1001 of the IRS covenants and agrees to deliver to the
Borrowers and the Agent within fifteen (15) days prior to January 1, 1999, and
every third anniversary of such date thereafter, on which this Agreement is
still in effect, another such certificate and two accurate and complete original
signed copies of Form 1001 (or any successor form or forms required under the
IRC or the applicable regulations promulgated thereunder), and each Lender that
delivers a certificate accompanied by Form 4224 of the IRS covenants and agrees
to deliver to the Borrowers and the Agent within fifteen (15) days prior to the
beginning of each subsequent taxable year of such Lender during which this
Agreement is still in effect, another such certificate and two accurate and
complete original signed copies of IRS Form 4224 (or any successor form or forms
required under the IRC or the applicable regulations promulgated thereunder).
Each such certificate shall certify as to one of the following:
(a) that such Lender is capable of receiving payments of interest
hereunder exempt from or at a reduced deduction or withholding of
United States of America federal income tax;
(b) that such Lender is not capable of receiving payments of
interest hereunder exempt from or at a reduced deduction or
withholding of United States of America federal income tax as
specified therein but is capable of recovering the full amount of any
such deduction or withholding from a source other than the Borrowers
and will not seek any such recovery from the Borrowers; or
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(c) that, as a result of the adoption of or any change in any
law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or any change in the interpretation or
application thereof by a Governmental Authority after the date such
Lender became a party hereto, such Lender is not capable of receiving
payments of interest hereunder without deduction or withholding of
United States of America federal income tax as specified therein and
that it is not capable of recovering the full amount of the same from
a source other than the Borrowers.
Each Lender shall promptly furnish to the Borrowers and the Agent such
additional documents as may be reasonably required by the Borrowers or the Agent
to establish any exemption from or reduction of any Taxes required to be
deducted or withheld and which may be obtained without undue expense to such
Lender
(6) For a period with respect to which a Lender has failed to provide
the Agent and the Borrowers with the appropriate form described in this Section
2.12(b)(5) (other than if such failure is due to a change in law occurring
subsequent to the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under this Section 2.12
with respect to Taxes imposed by the United States by reason of such failure;
provided, however, that should a Lender become subject to Taxes because of its
failure to deliver a form required hereunder, the Borrowers shall take such
steps as such Lender shall reasonably request to assist such Lender to recover
such Taxes.
(c)(1) If a Borrower pays any additional amount under this Section
2.12 and, as a result, any Lender, together with the Agent, subsequently, in
their sole discretion and based on their own interpretation of any relevant laws
(but acting in good faith) receive or are granted a final and non-appealable
credit against or deduction from or in respect of any tax payable by such
Lender, or obtain any other final and non-appealable relief in respect of any
tax, which in the opinion of such Lender and the Agent, acting in good faith, is
both reasonably identifiable and quantifiable by them without requiring any
Lender, the Agent or their professional advisers to expend a material amount of
time or incur a material cost in so identifying or quantifying (any of the
foregoing, to the extent so reasonably identifiable and quantifiable, being
referred to as a "Saving"), such Lender shall, to the extent that it can do so
without prejudice to the retention of the Saving, reimburse such Borrower
promptly after such identification and quantification with the amount of such
Saving; provided, however, that any such Saving shall be reduced by any costs
incurred by such Lender or the Agent in obtaining such Saving.
(2) Nothing in this Section 2.12(c) shall require any Lender to
disclose to any Person any information regarding its tax affairs or to arrange
its tax and other affairs in any particular manner.
SECTION 2.13. Maximum Lawful Interest Rate. Notwithstanding any
provision contained herein, the total liability of the Borrowers for payment of
interest pursuant hereto and the Notes, including any other charges or other
amounts, to the extent such charges and other amounts are deemed to be interest,
shall not exceed the maximum amount of such interest permitted by law to be
charged, collected, or received from the Borrowers (the "Maximum Rate"). If any
payments by any Borrower for the account of any Lender include interest in
excess of the Maximum Rate, such Lender shall apply such excess to the reduction
of the unpaid principal amount owing by such Borrower, or if none is due, such
excess shall be returned to such Borrower.
41
SECTION 2.14. Funding Issues. (a) Increased Costs. If, due to either
(i) the introduction after the date hereof of, or any change after the date
hereof in or in the interpretation of, any applicable law, rule or regulation by
any Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof or (ii) compliance by any Lender after
the date hereof with any final request or final directive issued after the date
hereof (whether or not having the force of law) by any such Governmental
Authority, central bank or comparable agency, and, as a result of any of the
events set forth in the above clauses (i) and (ii), (x) there shall be any
increase in the cost to such Lender in maintaining its Commitment under this
Agreement or funding or maintaining its Pro Rata Share of the Loans under this
Agreement, or (y) any Lender is subjected to any charge or withholding on its
obligations hereunder, or changes in the basis of taxation of payments to any
Lender in connection with any of the foregoing (except for changes in the rate
of tax on overall net income of any Lender) (collectively, "Increased Costs"),
then the Borrowers shall, from time to time, pay, to the Agent for the benefit
of such Lender within 15 days after such Lender shall have provided notice to
the Agent (and the Agent shall have provided notice to the Borrowers) of such
Increased Cost, an amount sufficient to compensate such Lender for such
Increased Cost, as provided herein. A certificate setting forth in reasonable
detail the computation of the amount of such Increased Cost (which increase in
cost shall be determined by such Lender's reasonable allocation of the aggregate
of such cost increases resulting from such event), submitted to the Borrowers by
such Lender, shall be conclusive and binding for all purposes, absent manifest
error.
(b) Increased Capital. If any Lender which is subject to minimum
capital requirements determines that compliance by such Lender, with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by such Lender, or any corporation
controlling such Lender, and such Lender reasonably determines that the amount
of such capital is increased by or based upon any commitment to lend hereunder
or making or maintaining Loans, its commitment to participate (as provided for
in Section 2.10(f)) in any Letter of Credit or any Credit Support provided
through the Agent in connection with the issuance of any Letter of Credit, or
other commitments of this type, then, upon demand by such Person, the Borrowers
agree to, within five (5) days of such demand, pay to such Person, from time to
time as specified by such Person, additional amounts sufficient to compensate
such Person in the light of such circumstances, to the extent that such Person
reasonably determines such increase in capital to be allocable to such Person's
commitment or maintenance of Loans hereunder or such Person's commitment to
participate in any Letter of Credit or Credit Support. A certificate as to the
amount of such increased cost, submitted to the Borrowers by the applicable
Person shall, absent manifest error, be conclusive and binding on the Borrowers
for all purposes.
42
(c) Replacement of Lender. If any Borrower, as a result of the
requirements of either Section 2.14(a) or Section 2.14(b), shall be required to
pay any particular Lender (an "Affected Lender") the additional amounts referred
to in such Section, which costs are not imposed by the other Lenders, and such
additional amounts are material, then such Borrower shall be entitled to find a
replacement Lender, reasonably acceptable to the Agents (the Agents' consent to
such replacement Lender not to be unreasonably withheld), to replace the
Affected Lender. The Affected Lender and the replacement Lender shall execute an
Assignment Agreement with respect to all of the Affected Lender's Commitments
and all Loans owing to the Affected Lender and comply with the other provisions
of Section 11.08(c). Upon the payment by the replacement Lender to the Affected
Lender of the then outstanding principal amount of Loans owing to the Affected
Lender, together with accrued interest thereon, and the payment by the Borrower
to the Affected Lender of any compensation required with respect to LIBOR Loans
pursuant to Section 2.07(e), the replacement Lender shall succeed to all of the
Affected Lender's rights and obligations under this Agreement and the other Loan
Documents.
SECTION 2.15. Joint and Several Liability; Contribution. (a)
Notwithstanding anything to the contrary in this Agreement or the other Loan
Documents, all payment and performance Obligations arising under this Agreement
and the other Loan Documents shall be joint and several obligations of each
Borrower secured by all the Borrowers' Collateral. The Agent and the Collateral
Agent may apply any portion of any Borrower's Collateral to satisfy any of the
Obligations of any other Borrower.
(b) Contribution and Indemnification between the Borrowers. To the
extent that any Borrower shall, as a result of the operation of Section 2.15,
pay any Obligation of any other Borrower under the Loan Documents (such payment
being referred to as an "Accommodation Payment"), then such Borrower shall be
entitled to contribution and indemnification from, and be reimbursed by such
other Borrower, as set forth in the Contribution Agreement. Each Borrower agrees
that any extension, forbearance or amendment, or any acceptance, release or
substitution of security, or any impairment or suspension of Lender's remedies
or rights against any other Borrower or the cessation of the liability of any
other Borrower for any reason other than full and indefeasible satisfaction of
all Obligations shall not in any way affect the liability of such Borrower. Each
Borrower has provided itself of the means of remaining informed of the financial
condition of each other Borrower, and waives any right to require Lender to keep
it informed of the financial condition of any other Borrower. The provisions of
this section shall, to the extent expressly inconsistent with any provision in
any Loan Document, supersede such inconsistent provision.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to the Agent, the Collateral
Agent and the Lenders that:
SECTION 3.01. Organization; Powers. (a) Such Borrower (i) is a
corporation or limited liability company duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and (ii) is
qualified to do business in the jurisdiction in which its principal place of
business is located and in every other jurisdiction where such qualification is
necessary;
(b) such Borrower has the power and authority to own its properties,
to carry on its business as now conducted; and
(c) such Borrower has the power and authority to execute and deliver
and perform this Agreement and the other Loan Documents to which it is a party,
to borrow hereunder, and will have the power to execute and deliver any
Mortgages and Collateral Assignments of Leases or other instruments to be
delivered by it subsequent to the date hereof.
SECTION 3.02. Corporate Authorization. The execution, delivery and
performance of this Agreement and the other Loan Documents to which such
Borrower is a party, and the Loans hereunder:
(a) have been duly authorized by such Borrower's Board of Directors or
managers and, if necessary, such Borrower's stockholders or members;
(b) (1) do not violate (i) any existing provision of law applicable to
such Borrower and not immaterial to its business, (ii) such Borrower's
Certificate or Articles of Incorporation or other organizational documents, as
the case may be, or (iii) any applicable order of any court or other
governmental agency, and (2) do not conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
indenture, agreement for borrowed money, bond, note or other similar instrument
or any other material agreement to which such Borrower is a party or by which
such Borrower or any of such Borrower's property is bound;
(c) do not result in the creation or imposition of any Lien of any
nature whatsoever upon any property or assets of such Borrower other than the
Liens granted pursuant to this Loan Agreement or the other Loan Documents;
(d) constitute legal, valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their respective terms; and
(e) do not, as of the date of execution hereof, require any
governmental consent, filing, registration or approval except as set forth on
Schedule 3.02.
44
SECTION 3.03. Financial Statements. The Borrowers have furnished to
the Agent and the Lenders the audited consolidated financial statements of KMC
Holdings dated as of December 31, 1997, and the unaudited consolidated financial
statements for the fiscal quarter ended September 30, 1998 and for the period
ended October 31, 1998, which statements are attached hereto as Exhibit I
(collectively, the "Financials"). The Financials have been prepared in
accordance with GAAP applied on a basis consistent with that of preceding
periods and are complete and correct in all material respects. As of the date of
the Financials, (a) the Financials fairly represent KMC Holdings' financial
position and results of operations; and (b) there are no omissions from the
Financials or any other facts or circumstances not reflected in the Financials
which are or may be material according to GAAP.
SECTION 3.04. No Material Adverse Change. There has been no material
adverse change in the condition (financial or otherwise), operations or
properties of such Borrower since the date of the Financials.
SECTION 3.05. Litigation. Except as set forth on Schedule 3.05, there
are no actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of such Borrower against
or affecting such Borrower or any property or rights of such Borrower as to
which there is a reasonable possibility of an adverse determination and which,
if adversely determined, would individually or in the aggregate materially
impair the right of any Borrower to carry on business substantially as now being
conducted or as presently contemplated or would result in any Material Adverse
Effect.
SECTION 3.06. Tax Returns. Such Borrower has filed or caused to be
filed all Federal, state and local tax returns which are required to be filed
and has paid or caused to be paid all taxes as shown on such returns or on any
assessment received by it to the extent that such taxes have become due, except
such taxes the amount, applicability or validity of which are being contested in
good faith by appropriate proceedings and with respect to which such Borrower
shall have set aside on its books adequate reserves with respect to such taxes
as are required by GAAP.
SECTION 3.07. No Defaults. Such Borrower is not in default (i) with
respect to any judgment, writ, injunction, decree, rule or regulation of any
Governmental Authority which is likely to have a Material Adverse Effect, or
(ii) in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any material agreement or instrument to
which such Borrower is a party or by which any of its assets are bound, which is
likely to have a Material Adverse Effect.
SECTION 3.08. Properties. Such Borrower has good and marketable title
to all its material properties and assets and all Collateral of such Borrower is
free and clear of all Liens of any nature whatsoever, except Permitted Liens.
SECTION 3.09. Licenses, Material Agreements, Intellectual Property.
(a) Such Borrower has obtained all Governmental Approvals and approvals of any
Governmental Authority having jurisdiction over such Borrower, which
Governmental Approvals and approvals are necessary or appropriate for the
construction and operation of the Systems as are presently operating, as
contemplated in the Milestone Plan, other than immaterial municipal business
45
permits. Such Governmental Approvals and approvals are correctly listed on
Schedule 3.09(a) and constitute the only material licenses, permits or
franchises or other Governmental Approvals of any Governmental Authority
required in connection with the Systems as are presently operating. All
Governmental Approvals of such Borrower are in full force and effect, are duly
issued in the name of, or validly assigned to, such Borrower and such Borrower
has the power and authority to operate thereunder.
(b) Schedule 3.09(b) accurately and completely lists all material
agreements to which such Borrower is a party, including, without limitation, all
purchase agreements, construction contracts, right of way or right of occupancy
agreements, lease agreements, consulting, employment, management and related
agreements. All of the foregoing agreements are valid, subsisting and in full
force and effect and none of such Borrower, or, to the best of such Borrower's
knowledge and belief, any other parties, are in material default thereunder.
Such Borrower has given true and complete copies of all such agreements to the
Agent and the Lenders.
(c) Such Borrower owns or possesses all the patents, trademarks,
service marks, trade names, copyrights and licenses, and all rights with respect
to the foregoing (the "Intellectual Property"), necessary for the conduct of its
business as presently conducted without any known conflict with the rights of
others. Schedule 3.09(c) accurately and completely lists all Intellectual
Property owned or possessed by or licensed to such Borrower. Such Borrower has
entered into Intellectual Property Documents with respect to its Intellectual
Property, as requested by the Collateral Agent.
SECTION 3.10. Compliance With Laws. Except as disclosed on Schedule
3.10, the operations of such Borrower comply in all material respects with all
applicable federal, state or local laws and regulations, including Environmental
Laws. Except as disclosed on Schedule 3.10, none of the operations of such
Borrower is subject to any judicial or administrative proceeding alleging the
violation of any Environmental Laws. Except as disclosed on Schedule 3.10, such
Borrower neither knows nor reasonably should know that any of the operations of
such Borrower is the subject of federal or state investigation evaluating
whether any Remedial Action is needed to respond to a Release. Except as
disclosed on Schedule 3.10, such Borrower has not filed any notice under any
federal or state law indicating past or present treatment, storage or disposal
of a hazardous waste or reporting a Release. Except as disclosed on Schedule
3.10, such Borrower has no contingent liability of which such Borrower has
knowledge or reasonably should have knowledge in connection with any Release.
SECTION 3.11. ERISA. None of such Borrower or any ERISA Affiliate of
such Borrower maintains or contributes to any Plan other than a Plan listed on
Schedule 3.11 hereto. Each Plan which is intended to be qualified under Section
401(a) of the IRC has been determined by the IRS to be so qualified, and each
trust related to any such Plan has been determined to be exempt from federal
income tax under Section 501(a) of the IRC. Except as disclosed on Schedule
3.11, none of such Borrower or any ERISA Affiliate maintains or contributes to
any employee welfare benefit plan within the meaning of Section 3(1) of ERISA
46
which provides benefits to employees after termination of employment other than
as required by Section 601 of ERISA. None of such Borrower or any ERISA
Affiliate has breached any of the responsibilities, obligations or duties
imposed on it by ERISA or regulations promulgated thereunder with respect to any
Plan which breach could result in a Material Adverse Effect. No Plan has
incurred any accumulated funding deficiency (as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the IRC), whether waived or not waived. None of such
Borrower or any ERISA Affiliate nor any fiduciary of any Plan which is not a
Multiemployer Plan (i) has engaged in a nonexempt "prohibited transaction"
described in Section 406 of ERISA or Section 4975 of the IRC or (ii) has taken
or failed to take any action which would constitute or result in a Termination
Event. None of such Borrower or any ERISA Affiliate has incurred any liability
to the PBGC which remains outstanding and which could result in a Material
Adverse Effect, other than the payment of premiums, and there are no premium
payments which have become due which are unpaid. Schedule B to the most recent
annual report filed with the IRS with respect to each Plan is complete and
accurate. Since the date of each such Schedule B, there has been no adverse
change in the funding status or financial condition of the Plan relating to such
Schedule B. None of such Borrower or any ERISA Affiliate has (i) failed to make
a required contribution or payment to a Multiemployer Plan or (ii) made a
complete or partial withdrawal under Sections 4203 or 4205 of ERISA from a
Multiemployer Plan. None of such Borrower or any ERISA Affiliate has failed to
make a required installment or any other required payment under Section 412 of
the IRC on or before the due date for such installment or other payment. None of
such Borrower or any ERISA Affiliate is required to provide security to a Plan
under Section 401(a)(29) of the IRC due to a Plan amendment that results in an
increase in current liability for the plan year.
SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act. Such Borrower is not an "investment company" as that term is defined in,
and is not otherwise subject to regulation under, the Investment Company Act of
1940. Such Borrower is not a "holding company" as that term is defined in, and
is not otherwise subject to regulation under, the Public Utility Holding Company
Act of 1935.
SECTION 3.13. Federal Reserve Regulations. Such Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System of the United States), and no part of the proceeds of the Loans
made to such Borrower will be used to purchase or carry any such margin stock or
to extend credit to others for the purpose of purchasing or carrying any such
margin stock or for any purpose that violates, or is inconsistent with, the
provisions of Regulation T, U or X of said Board of Governors.
SECTION 3.14. Collateral. The security interests granted by Article
VIII hereof, and accompanying financing statements, when duly filed in the
offices and jurisdictions set forth on Schedule 3.14 hereof, create valid and
perfected first priority Liens in and to the Collateral of such Borrower,
enforceable against other Persons in all jurisdictions securing the payment, as
applicable, of the Obligations hereunder. Upon filing such financing statements,
to the extent that the filing of a financing statement is sufficient to perfect
47
a security interest, no further action is required to perfect the Liens of the
Collateral Agent in favor of the Lenders in the Collateral of such Borrower
described in Section 8.01.
SECTION 3.15. Chief Place of Business. As of the Closing Date, the
chief executive office and principal place of business address of such Borrower
is 1545 Route 206, Bedminster, New Jersey 07921. If any change in any such
location occurs, such Borrower shall notify the Agent and the Collateral Agent
thereof not later than ten days after the occurrence thereof. As of the date of
execution hereof, the books and records of such Borrower and all chattel paper
and all records of account are located at the principal place of business or
chief executive office of such Borrower and if any change in such location
occurs, such Borrower shall notify the Agent and the Collateral Agent thereof
not later than ten days after the occurrence thereof.
SECTION 3.16. Other Corporate Names. Except as set forth on Schedule
3.16, such Borrower has not used and does not now use and will not use any
corporate or fictitious name.
SECTION 3.17. Insurance. Schedule 3.17 contains a description of all
insurance which such Borrower maintains or has maintained on its behalf. All of
such insurance is in full force and effect.
SECTION 3.18. Milestone Plan. The Milestone Plan represents good faith
projections of future financial performance of the Borrowers for the periods set
forth therein. Such document has been prepared on the basis of the assumptions
set forth therein, which the Borrowers believe are reasonable in light of
current and reasonably foreseeable business conditions.
SECTION 3.19. Capitalization and Subsidiaries. The classes of Equity
Interests, number of authorized shares, number of outstanding shares and par
values or other designations of the Equity Interests or other equity securities
or beneficial interests of such Borrower are correctly set forth on Schedule
3.19. All the outstanding shares of Equity Interests or other equity securities
or beneficial interests of such Borrower are duly and validly issued, fully paid
and nonassessable, and none of such issued and outstanding shares, equity
securities or beneficial interests has been issued in violation of, or is
subject to, any preemptive or subscription rights. Except as set forth on
Schedule 3.19, there are no: (A) outstanding shares of Equity Interests or other
equity securities or beneficial interests or other securities convertible into
or exchangeable for shares of Equity Interests or other equity securities or
other beneficial interests of such Borrower, (B) outstanding rights of
subscription, warrants, calls, options, contracts or other agreements of any
kind, issued, made or granted to or with any Person under which such Borrower
may be obligated to issue, sell, purchase, retire or redeem or otherwise acquire
or dispose of any shares of Equity Interests or other equity securities or
beneficial interests of such Borrower, or (C) Subsidiaries of such Borrower. KMC
Holdings beneficially owns, directly or indirectly, all of the Equity Interests
of such Borrower.
48
SECTION 3.20. Real Property, Leases and Easements. Such Borrower
leases or owns the real property described on Schedule 3.20. Set forth on
Schedule 3.20 is a list of (i) all real property leased or owned by such
Borrower (the "Real Property") and (ii) all easements, rights of way, rights of
occupancy, licenses and similar rights with respect to real property granted to
such Borrower not otherwise disclosed to the Collateral Agent and the Lenders on
a title report delivered to the Collateral Agent and the Lenders pursuant to the
terms hereof (together with all easements, rights of way, rights of occupancy,
licenses and similar rights with respect to real property granted to such
Borrower which are so disclosed, collectively, the "Easements"). Also set forth
on Schedule 3.20 is a street address of the Real Property locations described
above, including a description of such properties' current use. Except as set
forth in Schedule 3.20, such Borrower's interests in the Real Property and the
Easements are sufficient in order for such Borrower to conduct its business and
operations as presently conducted.
SECTION 3.21. Solvency. After giving effect to any Loans made to such
Borrower hereunder, the disbursement of the proceeds of such Loans pursuant to
such Borrower's instructions and the execution, delivery and performance of each
of the Loan Documents and transactions contemplated thereby, such Borrower is
Solvent and is not contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation of all or a
substantial portion of its property, and has no knowledge of any Person
contemplating the filing of any such petition against such Borrower.
SECTION 3.22. Brokers, etc. Such Borrower has not dealt with any
broker, finder, commission agent or other similar Person in connection with the
Loans or the transactions being effected contemporaneously with this Agreement,
and such Borrower covenants and agrees to indemnify and hold harmless the Agent,
the Collateral Agent and the Lenders from and against, any broker's fee,
finder's fee or commission in connection with such transactions.
SECTION 3.23. No Material Misstatements. Neither any report, financial
statement, exhibit or schedule furnished by or on behalf of such Borrower to the
Agent, the Collateral Agent or any Lender in connection with the negotiation of
this Agreement and the other Loan Documents or included herein or therein, nor
any other information required to be furnished pursuant to the provisions of
Article V hereof, contains any material misstatement of fact or omits to state
any material fact necessary to make the statements therein not materially
misleading.
SECTION 3.24. Year 2000 Problems. Each Borrower has made a full and
complete assessment of the Year 2000 Problems and has a realistic and achievable
program for remediating the Year 2000 Problems on a timely basis. Based on such
assessment and program, such Borrower does not reasonably anticipate that Year
2000 Problems will have a Material Adverse Effect.
49
ARTICLE IV
CONDITIONS FOR LOANS
The obligations of each Lender to make Loans hereunder are subject to
the accuracy, as of the Initial Funding Date and as of the date of making of
each of the Loans after the Initial Funding Date, of the representations and
warranties contained in Article III (except that any representations or
warranties that relate to a specified date shall only be reaffirmed as of such
date) and the other Loan Documents, to the performance by each Borrower of its
obligations to be performed hereunder on or before the date of such Loan and to
the satisfaction of the following further conditions:
SECTION 4.01. Conditions Precedent to Initial Loan on or after the
Closing Date. In the case of the Loans to be made on the Initial Funding Date
and Letters of Credit to be issued or Credit Support for any Letters of Credit
to be incurred on the Initial Funding Date:
(a) All then applicable legal matters incident to this Agreement and
the other Loan Documents shall be reasonably satisfactory to Counsel.
(b) The Agent and the Collateral Agent , as applicable, shall have
received payment in full of the fees set forth in the Fee Letters, and all the
other documented out-of-pocket costs and expenses of the Agent and the Lenders
incurred on or prior to the Initial Funding Date, including, without limitation,
reasonable attorneys' and paralegals' fees and expenses and the fees and
expenses incurred in connection with preparation of any environmental audits;
provided, however, that any such attorneys' and paralegals' fees shall be
limited to those of Counsel and to those permitted in those certain letter
agreements dated September 25, 1998 between KMC Holdings and the Agent, and KMC
Holdings and the Documentation Agent with respect to the fees and expenses of
counsel for the Agent and the Documentation Agent.
(c) (1) The Agent and the Collateral Agent shall have received the
following items, in each case in form and substance satisfactory to the Agent
and the Collateral Agent:
(i) the Financials;
(ii) the Milestone Plan showing in reasonable detail and
specifying any material underlying assumptions, for the
subsequent nine (9) year period, the Borrower's anticipated
revenues and expenses and projected statements of cash flow
and information with respect to projected capital
expenditures and changes in working capital over such
period, and a detailed Systems construction and buildout
schedule;
(iii)certificates substantially in the form of Exhibits J-1 and
J-2 hereto, dated the Initial Funding Date or dated the
Closing Date and a reaffirmation of such certificate dated
the Initial Funding Date, of the secretaries or assistant
secretaries of each of the Borrowers or the sole members of
the Borrowers, as applicable, and KMC Holdings, certifying
(1) the names and true signatures of the officers authorized
to sign each Loan Document to which any Borrower or KMC
50
Holdings is a party, (2) the resolutions of the Board of
Directors of any Borrower or KMC Holdings approving the
transactions contemplated by the Loan Documents to which
each is a party, (3) each Borrower's or KMC Holdings'
bylaws, and only with respect to the certificate of KMC
Holdings, (4) a true and correct copy of the Indenture, (5)
true and correct copies of the Management Agreement and the
Tax Sharing Agreement and (5) that KMC Holdings has made the
Required Contributions to the Borrowers;
(iv) the written opinions of special, regulatory and local
counsel for the Borrowers and KMC Holdings, dated the
Initial Funding Date, addressed to the Agent, the Collateral
Agent and the Lenders satisfactory to (and containing only
such qualifications and limitations as are satisfactory to)
Counsel, which opinions shall be substantially in the forms
set forth in Exhibits K-1, K-2 and K-3, respectively,
attached hereto;
(v) certificates of appropriate public officials dated not more
than 30 days prior to the Initial Funding Date, as to the
legal existence or qualification, and good standing of each
Borrower and KMC Holdings from such Person's jurisdiction of
organization and from the jurisdiction in which such Person
has its principal place of business;
(vi) each Borrower's and KMC Holdings' Certificate or Articles of
Incorporation, as amended, modified or supplemented on or
prior to the Initial Funding Date, each certified to be
true, correct and complete by the Secretary of State of the
state in which such Person is organized;
(vii)completed Year 2000 questionnaires executed by each
Borrower;
(viii) the Notes duly executed and delivered by the Borrowers;
and
(ix) this Agreement duly executed and delivered by the Borrowers.
(2) The Collateral Agent shall have received the following items in
each case in form and substance satisfactory to the Collateral Agent:
(i) Pledge Agreements duly executed by (A) KMC Holdings with
respect to the Equity Interests of KMC and KMC II, (B) KMC
with respect to the Equity Interests of KMC Virginia and
Leasing I, and (C) KMC II with respect to the Equity
Interests of Leasing II, together with, in each case, for
51
all such Equity Interests which are certificated, stock
certificates and undated stock powers executed in blank in
form and substance satisfactory to the Collateral Agent and
for all such Equity Interests which are limited liability
company interests, pledge instructions and initial
transaction statements in form and substance satisfactory to
the Collateral Agent;
(ii) the KMC Holdings Guaranty, duly executed by KMC Holdings;
(iii)loss payable endorsements substantially in the form of
Exhibit M attached hereto with respect to each Borrower's
insurance policies relating to the Collateral, and insurance
certificates required by Section 5.04(g) from nationally
recognized insurance brokers with respect to each Borrower's
insurance policies;
(iv) with respect to each Borrower's then existing Collection
Accounts, Restricted Account Agreements substantially in the
form of Exhibit N attached hereto, duly executed by the
applicable Borrower and the financial institutions
maintaining the Collection Accounts;
(v) a duly executed Collateral Assignment of Licenses by each
Borrower, together with consents to assignment of licenses
and rights from Persons designated by the Collateral Agent
duly executed by such Persons, including agreements as to
default notices, cure rights, waiver of lien rights,
conveyance of nondisturbance rights and other terms
satisfactory to the Collateral Agent (provided the Borrowers
shall have the post-closing period provided for in Section
5.08 with respect to obtaining the consents to Collateral
Assignment of Licenses required pursuant to such Section);
(vi) a duly executed Collateral Assignment of Leases by each
Borrower, together with consents to assignment, duly
executed by the appropriate Persons, including agreements as
to default notices, cure rights, waiver of lien rights,
conveyance of nondisturbance rights and other terms
satisfactory to the Collateral Agent with respect to those
leased properties specified by the Collateral Agent,
together with landlord waivers in the form of Exhibit D
hereto executed by the appropriate landlord with respect to
those leased properties specified by the Collateral Agent;
(vii)completed environmental questionnaires and indemnity
agreement executed by each Borrower and Phase I
Environmental Reports with respect to premises described on
Schedule 3.10 (if any);
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(viii) an Access Agreement executed and delivered by Cogeneration
Services, Inc. with respect to each Borrower's premises
located at 1545 Route 206, Suite 300, Bedminster, New Jersey
in form and substance satisfactory to the Collateral Agent;
(ix) the Contribution Agreement duly executed and delivered by
the Borrowers; and
(x) a Trademark Security Agreement in the form of Exhibit S
hereto, executed and delivered by the Borrowers.
(d) The Agents or the Collateral Agent, as applicable, shall have
satisfactorily completed their review of any Lucent Purchase Agreement, any
Additional Purchase Agreements, construction and maintenance contracts, right of
way agreements and interconnection agreements related to the Systems being
financed with the Loans made on the Initial Funding Date.
(e) The Collateral Agent shall have received evidence satisfactory to
the Collateral Agent that the Collateral Agent's security interests in the
Collateral have been properly perfected and constitute first and prior security
interests subject only to Permitted Liens, including by (i) filing Mortgages,
the Collateral Assignment of Licenses, the Collateral Assignment of Leases,
leasehold mortgages and UCC-1 financing statements in certain filing and
recording offices, (ii) filing the Trademark Security Agreement in the United
States Patent and Trademark Office, (iii) obtaining consents to the Collateral
Assignments of Licenses and the Collateral Assignments of Leases (provided the
Borrowers shall have the post-closing period provided for in Section 5.08 with
respect to obtaining the consents to certain Collateral Assignments of Licenses
required pursuant to such Section) and (iv) taking possession of stock
certificates and other instruments, in each case, as requested by the Collateral
Agent.
(f) The Collateral Agent shall have received evidence satisfactory to
the Collateral Agent, including the results of searches conducted in the
mortgage recording, UCC, tax Lien and judgment filing records in each
appropriate filing office or jurisdiction, that there are no Liens against the
Collateral except Permitted Liens.
(g) The Agent shall have received evidence satisfactory to the Agent
that no Borrower has any Debt other than as described in Section 6.13 and that
the holders of any such Debt described in clauses (v) and (vii) of Section 6.13
have executed subordination and standstill agreements satisfactory to the Agent.
(h) The Collateral Agent, as it may require, shall have obtained or
waived in writing with respect to each real estate and material equipment lease
and each mortgage of any Borrower relating to the Systems being financed with
the initial Loan made after the Closing Date (i) the right from the applicable
lessors and mortgagees to cure all payment defaults under such leases and
mortgages by making payment directly to the applicable lessors and mortgagees
and (ii) landlord waivers and consents, as the Collateral Agent may require,
with respect to each leased facility.
53
(i) The Agents shall have satisfactorily completed their due diligence
investigation of the Borrowers and the Systems and the Borrowers' other assets,
and their respective officers and directors including, without limitation,
environmental reviews, engineering reviews, review of material agreements of the
Borrowers and review of easement matters.
(j) All right of way agreements with respect to each System under
construction shall be sufficient to allow full operation of such System and
shall, upon request of the Collateral Agent, be assignable to the Collateral
Agent or its designee.
(k) Lucent shall have executed and delivered to the Collateral Agent,
in form and substance satisfactory to the Agents, a consent to collateral
assignment of the Lucent Purchase Agreement.
(l) KMC Holdings shall have, by either the making of capital
contributions or Qualified Intercompany Loans, contributed or loaned cash to the
Borrowers in an aggregate amount equal to at least $260,000,000.
SECTION 4.02. Conditions Precedent to All Loans. In the case of each
Loan hereunder, including, without limitation, the Loans made on the Term Loan
Funding Date, and the obligation to issue Letters of Credit or provide Credit
Support therefor:
(a) The representations and warranties of each Borrower set forth in
Article III or in any other Loan Document shall be true and correct in all
material respects on and as of the date of such Loan with the same effect as
though such representations and warranties had been made on and as of such date,
except that any representations or warranties that relate to a specified date
shall only be reaffirmed as of such date.
(b) At the time of each such Loan, and after giving effect to such
Loan, each Borrower shall be in compliance with all the terms and provisions set
forth herein on its part to be observed or performed, and no Event of Default or
Default shall have occurred and be continuing.
(c) At the time of each such Loan and after giving effect to each such
Loan, there shall have been no material adverse change in the condition
(financial or otherwise), operations, properties or prospects of any Borrower
since the date of the Financials.
(d) Such Loan, when combined with Loans previously made to the
Borrowers, shall not exceed the Commitment Amount.
(e) All legal matters incident to such Loan and the Loan Documents
shall be satisfactory to Counsel.
(f) The Agent shall have received a Notice of Borrowing for the Loan
and acceptance certificate and invoices required by Section 2.03.
54
(g) The Collateral Agent shall have first priority Liens on all
personal and real property assets that comprise or relate to each System to be
funded by such Loan, shall have received collateral assignments of all material
third party agreements relating to such Systems, consented to by the applicable
third parties, as requested by the Collateral Agent, and shall have received
evidence that all necessary Governmental Approvals for such System have been
obtained.
(h) The Collateral Agent shall have received copies of such lien
waivers and other acknowledgments from Persons constructing the Systems, any
subcontractors or vendors (including Lucent or each Additional Vendor) with
respect to the construction of the Systems as the Collateral Agent may
reasonably request.
(i) All fees and expenses which are due and payable to the Agent on or
prior to the date of the advance of such Loan shall have been paid.
(j) The Agents or the Collateral Agent, as applicable, shall have
satisfactorily completed their review of any Additional Purchase Agreements,
construction and maintenance contracts related to the Systems being financed
with such Loan and the interconnection agreements for each System being financed
with such Loan.
(k) The Collateral Agent shall have obtained or waived in writing with
respect to each real estate and material equipment lease, each mortgage, and
each material third party agreement relating to the Systems being financed with
such Loan (i) the right from the applicable lessors and mortgagees to cure all
payment defaults under such leases and mortgages by making payments directly to
the applicable lessors and mortgagees, as the Collateral Agent may request, (ii)
landlord waivers and consents, as the Collateral Agent may require, with respect
to each leased facility, and (iii) consents to collateral assignment, as the
Collateral Agent may require, with respect to each such material third party
agreement.
(l) There shall not have occurred in the opinion of the Agents, any
material adverse change in any two of the three members of Borrower's or KMC
Holdings' senior management team, which shall comprise its Chief Executive
Officer, Chief Financial Officer and Executive Vice President - Field Sales and
Operations.
(m) If a Loan is requested to finance Aged Equipment, the Collateral
Agent, if it so elects, shall have obtained an appraisal of such Aged Equipment
from an appraiser selected by the Collateral Agent, which appraisal shall be
satisfactory to the Collateral Agent and the cost of which shall be borne by
such Borrower.
55
ARTICLE V
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that so long as this Agreement
shall remain in effect, any Commitment hereunder shall be outstanding or any
Obligations hereunder or under any of the other Loan Documents are unpaid,
unless the Requisite Lenders shall have otherwise given prior written consent:
SECTION 5.01. Corporate and Franchise Existence. Such Borrower shall
preserve and maintain its corporate existence, rights, franchises, licenses and
privileges in its jurisdiction of its organization, and in all other
jurisdictions in which such qualification is necessary in view of its business
and operations and property and preserve, protect and keep in full force and
effect its material rights and its Governmental Approvals.
SECTION 5.02. Compliance with Laws, Etc. Such Borrower shall comply in
all material respects with all laws and regulations applicable to it, including,
without limitation, Environmental Laws, regulations promulgated by the FCC and
any PUC, and other telecommunications laws and regulations, and all material
contractual obligations applicable to it.
SECTION 5.03. Maintenance of Properties. Such Borrower shall at all
times maintain in good repair, working order and condition, excepting ordinary
wear and tear, all of its properties material to its operations and make all
appropriate repairs, replacements and renewals thereof, in each case consistent
with prudent industry practices and sound business judgment and with respect to
the maintenance of machinery and equipment, in compliance with applicable
government regulations, manufacturers' warranty requests and any licensing
requirements.
SECTION 5.04. Insurance.
(a) Coverage. Without limiting any of the other obligations or
liabilities of such Borrower under this Agreement, such Borrower shall carry and
maintain, and require each contractor retained in connection with the
construction of any System to carry and maintain, each at its own expense, at
least the minimum insurance coverage set forth in this Section 5.04. Such
Borrower shall also carry and maintain any other insurance that the Collateral
Agent may reasonably require from time to time. All insurance carried pursuant
to this Section 5.04 shall be placed with such insurers that have an A.M. Best
rating of A:X or better, or as may be acceptable to the Collateral Agent. Such
coverage shall be in such form, with terms, conditions, limits and deductibles
as shall be acceptable to the Collateral Agent.
(b) Construction Period. During the period from, and including the
commencement of construction of any System, to and including the completion of
construction of any System, such Borrower shall maintain in full force and
effect, pay all premiums when due in respect of, and comply with all terms and
conditions of the following coverages:
(i) All Risk Builder's Risk. Such Borrower shall maintain all
risk builder's risk insurance covering physical loss or damage to such
System including, but not limited to, fire and extended coverage,
collapse, flood, earth movement, and comprehensive boiler and
machinery coverage (including electrical malfunction and mechanical
breakdown). Such insurance shall cover all property during
56
construction and testing, as well as any and all materials, equipment
and machinery intended for such System during off-site storage and
inland transit and, if necessary, during ocean and air transit. All
transit coverage shall be on a "warehouse to warehouse" basis. The all
risk builder's risk policy shall be written on a replacement cost
basis for the full construction cost of such System or in an amount
acceptable to the Collateral Agent and shall contain an agreed amount
endorsement waiving any coinsurance penalty. Coverage shall not
exclude resultant damage caused by faulty workmanship, design or
materials nor shall it exclude machinery and equipment under guarantee
or warranty; and
(ii) Delay in Start-Up. As an extension of the coverage required
under subsection (b)(i) or as a separate policy, such Borrower shall
maintain delay in start-up insurance covering net profits (if any),
continuing expenses and debt service payments resulting from delays in
achieving the completion date for the construction of any System
caused by (i) physical loss or damage to such System during
construction or testing, (ii) loss or damage to equipment while in
ocean, air or inland transit or (iii) loss or damage to equipment
while in storage away from the site. Contingent delay in start-up
coverage shall also be included to cover delay caused by damage to
critical path items while under manufacture or at the supplier's
premise. Such extension or separate policy shall have a period of
indemnity of not less than twelve (12) months with an agreed amount
limit not less than $1,400,000 per System and shall contain an agreed
amount endorsement waiving any coinsurance penalty. Such extension or
separate policy shall also cover expediting expenses in an amount not
less than $1,000,000. Deductibles may not exceed thirty (30) days; and
(iii) Comprehensive or Commercial General Liability. Such
Borrower shall maintain comprehensive general liability insurance
written on an occurrence basis with a limit of liability not less than
$1,000,000. Coverage shall include, but not be limited to,
premises/operations, explosion, collapse, and underground hazards,
broad form contractual, independent contractors products/completed
operations, broad form property damage, and personal injury liability.
Such insurance shall not exclude coverage for punitive or exemplary
damages where insurable by law; and
(iv) Workers' Compensation/Employer's Liability. Such Borrower
shall maintain workers' compensation insurance in accordance with
statutory provisions covering accidental injury, illness or death of
an employee of such Borrower while at work or in the scope of his or
her employment with such Borrower and employer's liability insurance
in an amount not less than $1,000,000. Such coverage shall not contain
any occupational disease exclusions; and
(v) Automobile Liability. Such Borrower shall maintain automobile
liability insurance covering owned, non-owned, leased, hired or
borrowed vehicles against bodily injury or property damage. Such
coverage shall have a limit of not less than $1,000,000; and
57
(vi) Excess/Umbrella Liability. Such Borrower shall maintain
excess or umbrella liability insurance in an amount not less than
$25,000,000 written on an occurrence basis providing coverage limits
in excess of the insurance limits required under Section 5.04(b)(iii),
(b)(iv) (employer's liability only), and (b)(v). Such insurance shall
follow from the primary insurances and drop down in case of exhaustion
of underlying limits and/or aggregates. Such insurance shall not
exclude coverage for punitive or exemplary damages where insurable by
law.
(c) Contractor Insurance Coverage. Such Borrower shall cause each
contractor retained in connection with the construction of any System to carry
and maintain, in full force and effect, such insurance and such bonds as such
contractor is required to maintain pursuant to the following:
(i) Bond. Such Contractor shall maintain performance and payment
bonds written in a form and by a surety acceptable to the Collateral
Agent. Such bonds shall cover all payments, performance, material and
other obligations of such contractor and all subcontractors. The
applicable performance and payment bonds shall, at all times, be in an
amount equal to the full value of the construction contracts. Each
bond shall cover the faithful performance of the construction
contract. Such Borrower and the Collateral Agent shall be named as
obligees under each bond; and
(ii) Comprehensive or Commercial General Liability. Such
contractor shall maintain comprehensive general liability insurance
covering the construction of such System written on an occurrence
basis with a limit of liability not less than $25,000,000. Coverage
shall include, but not be limited to, premises/operations, explosion,
collapse, and underground hazards, sudden and accidental pollution,
broad form contractual, independent contractors, products/completed
operations, broad form property damage, and personal injury liability.
Such insurance may be written in any combination of primary and
excess/umbrella forms. The products completed operations coverage
shall be extended to cover such System for two years after completion
of such System. Such insurance shall not exclude coverage for punitive
or exemplary damages where insurable by law; and
(iii) Workers' Compensation/Employer's Liability. Such contractor
shall maintain workers' compensation insurance in accordance with
statutory provisions covering accidental injury, illness or death of
an employee of such contractor while at work or in the scope of his or
her employment with such contractor and employer's liability insurance
in an amount not less than $25,000,000 written in any combination of
primary and excess/umbrella policies, and
58
(iv) Automobile Liability. Such contractor shall maintain
automobile liability insurance covering owned, non-owned, leased,
hired or borrowed vehicles against bodily injury or property damage.
Such coverage shall have a limit of not less than $25,000,000 written
in any combination of primary and excess/umbrella policies.
(d) Operations Period. Beginning on the completion date of each
System, such Borrower shall maintain in full force and effect, pay all premiums
when due in respect of, and comply with all terms and conditions of the
following insurance coverages for each System.
(i) All Risk Property Insurance. Such Borrower shall maintain all
risk property insurance covering such System against physical loss or
damage, including but not limited to fire and extended coverage,
collapse, flood, earth movement and comprehensive boiler and machinery
coverage (including electrical malfunction and mechanical breakdown).
Such insurance shall cover each and every component of such System and
shall not contain any exclusion for resultant damage caused by faulty
workmanship, design or materials. Coverage shall be written on a
replacement cost basis in an amount acceptable to the Collateral
Agent. Such insurance policy shall contain an agreed amount
endorsement waiving any coinsurance penalty; and
(ii) Business Interruption. As an extension of the coverage
required under Section 5.04(d)(i), such Borrower shall maintain
business interruption insurance in an agreed amount equal to twelve
(12) months projected loss of net profits, continuing expenses and
debt service payments of such System and shall contain an agreed
amount endorsement waiving any coinsurance penalty. Contingent
business interruption insurance shall also be included to cover the
major suppliers and customers of the Borrowers. Coverage shall be
included for expediting expenses in an amount not less than
$1,000,000. Such insurance shall also cover service interruption.
Deductibles shall not exceed thirty (30) days; and
(iii) Comprehensive or Commercial General Liability Insurance.
Such Borrower shall maintain comprehensive general liability insurance
written on an occurrence basis with a limit of not less than
$1,000,000. Such coverage shall include, but not be limited to,
premises/operations, explosion, collapse, underground hazards,
contractual liability, independent contractors, products, completed
operations, property damage and personal injury liability. Such
insurance shall not exclude coverage for punitive or exemplary damages
where insurable by law; and
(iv) Workers' Compensation/Employer's Liability. Such Borrower
shall maintain workers' compensation insurance in accordance with
statutory provisions covering accidental injury, illness or death of
an employee of such Borrower while at work or in the scope of his or
her employment with such Borrower and employer's liability insurance
in an amount not less than $1,000,000. Such coverage shall not contain
any occupational disease exclusions; and
(v) Automobile Liability. Such Borrower shall maintain automobile
liability insurance covering owned, non-owned, leased, hired or
borrowed vehicles against bodily injury or property damage. Such
coverage shall have a limit of not less than $1,000,000; and
59
(vi) Excess/Umbrella Liability. Such Borrower shall maintain
excess or umbrella liability insurance in an amount not less than
$25,000,000 written on an occurrence basis providing coverage limits
in excess of the insurance limits required under Sections
5.04(d)(iii), (d)(iv) (employer's liability only), and (d)(v). Such
insurance shall follow from the primary insurances and drop down in
case of exhaustion of underlying limits and/or aggregates. Such
insurance shall not exclude coverage for punitive or exemplary damages
where insurable by law.
(e) Endorsements. Such Borrower shall cause all insurance carried and
maintained in accordance with this Section 5.04 to be endorsed as follows:
(i) Such Borrower shall be the named insured and the Collateral
Agent shall be an additional named insured and loss payee with respect
to policies described in Section 5.04(b)(i), (b)(ii), (d)(i) and
(d)(ii). Such Borrower shall be the named insured and the Collateral
Agent shall be an additional insured with respect to policies
described in Section 5.04(b)(iii), (b)(iv) (to the extent allowed by
law), (b)(v), (b)(vi), (d)(iii), (d)(iv) (to the extent allowed by
law), (d)(v) and (d)(vi). Such Borrower and the Collateral Agent shall
be additional insureds under all insurances carried by contractors
under Section 5.04(c) to the extent allowed by law. All policies shall
provide that any obligation imposed upon such Borrower and/or any
contractor, including but not limited to the obligation to pay
premiums, shall be the sole obligation of such Borrower and/or the
contractor and not that of the Agent, the Collateral Agent or any
Lender; and
(ii) with respect to policies described in Section 5.04(b)(i) and
(b)(ii), and (d)(i) and (d)(ii), the interests of the Collateral Agent
shall not be invalidated by any action or inaction of such Borrower,
or any other Person, and shall insure the Collateral Agent regardless
of any breach or violation by such Borrower, any contractor or any
other Person, of any warranties, declarations or conditions of such
policies, and
(iii) inasmuch as the liability policies are written to cover
more than one insured, all terms, conditions, insuring agreements and
endorsements, with the exception of the limits of liability, shall
operate in the same manner as if there were a separate policy covering
such insured; and
(iv) the insurers thereunder shall waive all rights of
subrogation against the Agent, the Collateral Agent or the Lenders,
any right of setoff or counterclaim and any other right to deduction,
whether by attachment or otherwise; and
(v) such insurance shall be primary without right of contribution
of any other insurance carried by or on behalf of the Agent, the
Collateral Agent or the Lenders with respect to their interests as
such in such System; and
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(vi) if such insurance is canceled for any reason whatsoever,
including nonpayment of premium, or any changes are initiated by such
Borrower or carrier which affect the interests of the Collateral Agent,
such cancellation or change shall not be effective as to the Collateral
Agent until thirty (30) days, except in the case of non-payment of
premium which shall be ten (10) days, after receipt by the Collateral
Agent of written notice sent by registered mail from such insurer.
(f) Certifications. On the Initial Funding Date, and at each policy
renewal, but not less than annually, such Borrower shall provide to the
Collateral Agent approved certification from each insurer or by an authorized
representative of each insurer. Such certification shall identify the
underwriters, the type of insurance, the limits, deductibles, and term thereof
and shall specifically list the special provisions delineated for such insurance
required for this Section 5.04.
(g) Insurance Report. Concurrently with the furnishing of all
certificates referred to in this Section 5.04, such Borrower shall furnish the
Collateral Agent with an opinion from an independent insurance broker,
acceptable to the Collateral Agent, stating that all premiums then due have been
paid and that, in the opinion of such broker, the insurance then maintained by
such Borrower is in accordance with this section. Furthermore, upon its first
knowledge, such broker shall advise the Collateral Agent promptly in writing of
any default in the payment of any premiums or any other act or omission, on the
part of any Person, which might invalidate or render unenforceable, in whole or
in part, any insurance provided by such Borrower hereunder.
(h) Application of Payments. All payments received by such Borrower
from any insurance referred in Section 5.04(b)(i), (b)(ii), (d)(i) and (d)(ii)
shall be promptly delivered directly to the Collateral Agent, which amounts
shall be applied by the Collateral Agent, upon request by such Borrower and
provision to the Collateral Agent of detailed information, including a
construction schedule and cost estimates, which establish to the reasonable
satisfaction of the Collateral Agent that the amounts available and the proposed
schedule are adequate to restore, replace or rebuild the property subject to
insurance payments in a timely manner, to such restoration, replacement or
rebuilding unless an Event of Default or Default shall have occurred and be
continuing or such Borrower shall have failed to make such request within thirty
(30) days after receipt of such amounts by Collateral Agent, in which case such
amounts shall be applied in the Requisite Lenders' sole discretion to the
repayment of the Obligations or such restoration, replacement or rebuilding.
(i) General. The Collateral Agent shall be entitled, upon reasonable
advance notice, to review and/or receive copies of such Borrower's (or other
appropriate party's) books and records regarding all insurance policies carried
and maintained with respect to each System and such Borrower's obligations under
this Section 5.04. Notwithstanding anything to the contrary herein, no provision
of this Agreement or any other Loan Document shall impose on the Collateral
Agent, the Agent or any Lender any duty or obligation to verify the existence or
adequacy of the insurance coverage maintained by such Borrower, nor shall the
Collateral Agent, the Agent or any Lender be responsible for any representations
or warranties made by or on behalf of such Borrower to any insurance broker,
company or underwriter. The Collateral Agent or the Agent, at its sole option,
61
may obtain such insurance if not provided by such Borrower; in such event, such
Borrower shall reimburse the Collateral Agent or the Agent upon demand for the
cost thereof together with interest, and such costs shall constitute Obligations
secured by the Collateral.
SECTION 5.05. Obligations and Taxes. Such Borrower shall pay all of
its indebtedness and obligations promptly and in accordance with their terms and
pay and discharge promptly 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 in default, as well as all lawful claims
for labor, materials and supplies or otherwise which, if unpaid, might become a
Lien upon such properties or any part thereof; provided, however, that such
Borrower shall not be required to pay and discharge or to cause to be paid and
discharged 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 diligently pursued, and such Borrower shall set aside on its books
such reserves as are required by GAAP with respect to any such tax, assessment,
charge, levy or claim so contested.
SECTION 5.06. Financial Statements, Reports, etc. Such Borrower shall
furnish to the Agent and the Lenders (except as otherwise provided herein):
(a) within one hundred twenty (120) days after the end of each fiscal
year of such Borrower, two sets of annual consolidated and consolidating
financial statements for KMC Holdings (one excluding Excluded Subsidiaries and
one including Excluded Subsidiaries), and combined financial statements for the
Borrowers, including the balance sheets and statements of operations, income,
stockholders' equity and cash flows, for such fiscal year, prepared in
accordance with GAAP, which consolidated financial statements and other above
described financial information shall have been audited by a nationally
recognized independent certified public accounting firm satisfactory to the
Agent, and accompanied by such independent certified public accounting firm's
unqualified opinion;
(b) within forty-five (45) days after the end of each month and each
fiscal quarter during each fiscal year of such Borrower, consolidated and
consolidating unaudited balance sheets and statements of operations for KMC
Holdings, and combined unaudited balance sheets and statements of operations for
the Borrowers and consolidated and consolidating statements of stockholders'
equity and cash flows of KMC Holdings, and combined consolidated statements of
stockholders' equity and cash flows of the Borrowers as of the end of each such
month or fiscal quarter, as applicable, and for the then elapsed portion of the
fiscal year; provided, that with respect to the consolidated and consolidating
unaudited balance sheets and statements of operations for KMC Holdings and
statements of stockholders' equity and cash flows of KMC Holdings delivered as
of the end of each fiscal quarter, such Borrower shall provide two sets of such
statements (one excluding Excluded Subsidiaries and one including Excluded
Subsidiaries); provided, further, that such Borrower shall not be required to
deliver the items described in this Section 5.06(b) on a monthly basis at any
time that, and only for so long as, the Borrowers have achieved positive EBITDA;
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(c) concurrently with provision of the financial statements referred
to in clauses (a) and (b) above, a certificate of KMC Holdings' independent
certified public accountant or KMC Holdings' chief financial officer, as
applicable, to the effect that the financial statements referred to in clause
(a) or (b) above, present fairly the financial position and results of
operations of KMC Holdings, and the Borrowers and as having been prepared in
accordance with GAAP consistently applied, in each case subject to normal year
end audit adjustments except for the statements referred to in clause (a) above;
(d) concurrently with (a) above, and any statements delivered pursuant
to (b) above in respect of the month of March and the period ending March 31,
the month of June and the period ending June 30 or the month of September and
the period ending September 30, a Periodic Reporting Certificate of the chief
financial officer of KMC Holdings setting forth the calculations contemplated in
Article VII hereof, the number of Completed Systems and certifying as to the
fact that such Person has examined the provisions of this Agreement and that no
Event of Default or any Default, shall have occurred and be continuing or if
such an event has occurred, a statement explaining its nature and extent and
setting forth the steps the Borrowers propose to take to cure such Event of
Default;
(e) (i) not later than December 1 of each calendar year, consolidating
and consolidated projected and annual revenue and income statements, including
detailed revenue and expense statements, balance sheets and cash flow statements
for KMC Holdings for the succeeding fiscal year, such statements to be
reasonably acceptable to the Agents, and (ii) not later than January 15, 1999,
an annual operating budget on a monthly basis for such calendar year and not
later than January 15 of each calendar year beginning January 15, 2000, an
annual operating budget on a quarterly basis for such calendar year, with each
such budget to be in compliance with the Milestone Plan;
(f) to the Collateral Agent, all material agreements or licenses
affecting the Governmental Approvals of any Borrower or any System promptly
after any execution, or material amendment thereto;
(g) to the Collateral Agent, promptly upon their becoming available,
copies of any material periodic or special documents, statements or other
information filed by any Borrower with the FCC, PUC or other Governmental
Authority in connection with the construction and/or operation of any System or
with respect to the transactions contemplated by any of the Loan Documents, and
copies of any material notices and other material communications from the FCC,
PUC or from any other Governmental Authority;
(h) immediately upon any officer of any Borrower obtaining knowledge
of any condition or event (i) which either constitutes an Event of Default or a
Default, (ii) which renders any representation or warranty contained herein
materially false or misleading, or when made, renders any document materially
false or misleading, or (iii) which would result in any financial results for
any fiscal year to materially deviate from the financial results projected for
such fiscal year in the Milestone Plan or the financial projections described in
clause (e) above, a certificate signed by an authorized officer of such Borrower
specifying in reasonable detail the nature and period of existence thereof and
what corrective action such Borrower has taken or proposes to take with respect
thereto;
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(i) within thirty (30) days after the end of each fiscal year of such
Borrower, a certificate signed by an authorized officer of such Borrower (x)
setting forth all the Real Property, Easements, licenses, rights of way and
other similar interests in real property acquired by such Borrower in the
preceding year and (y) confirming that no Default or Event of Default has
occurred and is continuing;
(j) evidence in the manner set forth in Section 5.04(e) of insurance
complying with Section 5.04;
(k) following the written request of the Agent, not later than
forty-five (45) days after the end of each fiscal month, reports on accounts
receivable and accounts payable of such Borrower in such detail and format as
may be reasonably requested by the Agent;
(l) promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which such
Borrower or KMC Holdings files with the Securities and Exchange Commission; and
(m) promptly from time to time such other information regarding the
operations (including, without limitation, construction budgeting and System
completion), business affairs and condition (financial or otherwise) of such
Borrower or KMC Holdings as the Agent may reasonably request.
SECTION 5.07. Litigation and Other Notices. Such Borrower shall give
the Agent prompt written notice upon obtaining knowledge of the following: (a)
all Events of Default or Defaults and all events of default or any event that
would become an event of default upon notice or lapse of time or both under any
of the terms or provisions of any note, or of any other evidence of indebtedness
or agreement or contract governing the borrowing of money in excess of $250,000
in the aggregate, of such Borrower; (b) any levy, attachment, execution or other
process against any of the property or assets, real or personal, of such
Borrower in an amount in excess of $250,000; (c) the filing or commencement of
any action, suit or proceeding by or before any court or any Governmental
Authority which, if adversely determined against such Borrower, would result in
a Material Adverse Effect; (d) any material adverse notice, letter or other
correspondence of any kind from the FCC or the PUC relating to the Governmental
Approvals or any System; (e) any default under any other material license,
agreement or contract to which such Borrower is a party; and (f) any matter
which has resulted in, or which such Borrower reasonably believes will result
in, a Material Adverse Effect on such Borrower.
SECTION 5.08. Mortgages; Landlord Consents; Licenses and Other
Agreements. As security for the Obligations, such Borrower shall with respect to
each Completed System, and each System which is not a Completed System but which
is requested to be financed with the proceeds of Loans (a) promptly execute and
deliver to the Collateral Agent (1) Mortgages in favor of and satisfactory to
the Collateral Agent with respect to any real property purchased by such
Borrower on which a switch or network operating center is located, and at the
request of the Collateral Agent, with respect to any other real property
purchased by such Borrower, together with lender's title policies for any such
real property satisfactory to the Collateral Agent, if requested by the
Collateral Agent, (2) leasehold mortgages or collateral assignments of leases,
landlord waivers or consents, and appropriate Uniform Commercial Code fixture
financing statements, in each case satisfactory to the Collateral Agent with
respect to any real property leased by such Borrower and on which Switch
Equipment or a network operating center is located, and at the request of the
Collateral Agent, with respect to any other leased real property of such
Borrower, (3) Mortgages or collateral assignments and consents satisfactory to
the Collateral Agent with respect to such Borrower's Easements and rights of
way, as requested by the Collateral Agent, (4) collateral assignments of leases
and lessor consents, satisfactory to and as requested by the Collateral Agent,
with respect to any long-haul fiber leased by such Borrower and (5) with respect
to the First Eight Cities, on or before the Closing Date, and with respect to
each other Completed System or System, at all times from and after the earlier
of (i) the date on which any Borrower requests funding for such other Completed
System or System and (ii) the date that is forty-five (45) days after the
Closing Date, collateral assignments and consents to such assignments from the
applicable third Persons, for each other material lease, license, contract or
other agreement or instrument entered into by such Borrower after the date
hereof, as required by the Collateral Agent and (b) (1) update Schedule 1 to the
Collateral Assignment of Licenses to cover all Governmental Approvals obtained
by such Borrower after the Closing Date and agreements entered into by such
Borrower after the Closing Date with third Persons, (2) obtain consents to
collateral assignments from the licensors granting the Governmental Approvals
referred to in clause (b)(1) above and from those third Persons referred to in
clause (b)(1) above that are specified by the Collateral Agent, such consents to
collateral assignment to be in form and substance satisfactory to the Collateral
Agent and (3) update Schedule 1 to the Collateral Assignment of Leases to cover
all leases referred to in clause (a)(2) above.
SECTION 5.09. ERISA. Such Borrower shall comply in all material
respects with the applicable provisions of ERISA and furnish to the Agent, (i)
as soon as possible, and in any event within thirty (30) days after such
Borrower or any officer of such Borrower knows or has reason to know that any
Reportable Event with respect to any Plan has occurred or any Termination Event
has occurred, a statement of an officer of such Borrower setting forth details
as to such Reportable Event or Termination Event and the corrective action that
such Borrower proposes to take with respect thereto, together with a copy of the
notice of any such Reportable Event given to the PBGC, and (ii) promptly after
receipt thereof, a copy of any notice such Borrower may receive from the PBGC
relating to the intention of the PBGC to terminate any Plan or to appoint a
trustee to administer any such Plan.
SECTION 5.10. Access to Premises and Records. Such Borrower shall
permit representatives of the Agents to have access to such Borrower's books and
records and to the Collateral and the premises of such Borrower at reasonable
times upon reasonable notice and to make such excerpts from such records as such
representatives deem necessary and to inspect the Collateral.
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SECTION 5.11. Design and Construction. Such Borrower shall design,
construct, equip and operate its Systems substantially as previously disclosed
to Lenders in the Milestone Plan and in accordance with prudent industry
standards.
SECTION 5.12. Environmental Notices. If such Borrower shall (a)
receive written notice that any violation of any Environmental Law may have been
committed or is about to be committed by such Borrower, (b) receive written
notice that any administrative or judicial complaint or order has been filed or
is about to be filed against such Borrower alleging violations of any
Environmental Law or requiring such Borrower to take any action in connection
with any Release of any Contaminant into the environment, or (c) receive any
written notice from a Governmental Authority or private party alleging that such
Borrower may be liable or responsible for costs associated with a response to or
cleanup of a Release or any damages caused thereby, such Borrower shall provide
the Agent with a copy of such notice within twenty (20) Business Days of such
Borrower's receipt thereof.
SECTION 5.13. Amendment of Organizational Documents. Such Borrower
shall notify the Agent and the Collateral Agent of any amendment to its
Certificate or Articles of Incorporation or other organizational documents
within ten (10) days of the occurrence of any such event, and provide the Agent
with copies of any amendments certified by the secretary of such Borrower and of
all other relevant documentation. Such Borrower shall promptly deliver to the
Collateral Agent such financing statements executed by such Borrower which the
Collateral Agent may request as a result of any such event.
SECTION 5.14. Third Party Agreements and Delivery and Acceptance
Certificates. Such Borrower shall provide the Collateral Agent with (i) copies
of all interconnection agreements, right of way agreements, easement agreements,
real property leases, construction agreements, equipment purchase agreements,
fiber leases, telephone line leases, state and local franchise agreements and
other agreements with municipalities, that in each case relate to each System of
such Borrower, promptly after execution of each such agreement; provided,
however, that with respect to certain of the foregoing categories of agreements
specified by the Collateral Agent, such Borrower shall be permitted to provide
the Collateral Agent with inventories of the particular types of agreements in
lieu of delivering copies of the agreements, which inventories shall be (x) in
form and substance satisfactory to the Collateral Agent and (y) updated by the
applicable Borrower promptly following the execution of any additional agreement
of the type inventoried; provided, further, however, that nothing in the
foregoing proviso shall limit the Collateral Agent's ability to, at any time,
request and receive a copy of any third party agreement from the applicable
Borrower, and (ii) (A) if the Lenders are funding a Completed System, a delivery
and acceptance certificate substantially in the form of Exhibit R hereto with
respect to such Completed System and (B) otherwise, copies of delivery and
acceptance certificates substantially in the form of Exhibit R hereto with
respect to each item of Telecommunications Equipment with an invoiced purchase
price in excess of $250,000, in each case, where such certificates are not
required to be delivered to the Agent pursuant to Section 2.03(a), promptly
after completion of such System or acceptance of such item of Equipment, as
applicable.
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SECTION 5.15. Accounts Payable. Such Borrower shall pay each of its
accounts payable in accordance with its practices as of the Closing Date but in
any event no later than sixty (60) days after the due date, provided, however,
that such Borrower shall not be required to pay any account payable as long as
the validity thereof shall be contested in good faith by appropriate protest or
proceedings and such Borrower shall have set aside adequate reserves with
respect thereto in accordance with GAAP.
SECTION 5.16. Intellectual Property. Such Borrower shall enter into
Intellectual Property Documents, in form and substance satisfactory to the
Collateral Agent, with respect to all of the Intellectual Property owned by such
Borrower.
SECTION 5.17. Fiscal Year. Such Borrower shall maintain a fiscal year
ending on December 31.
SECTION 5.18. Completed Systems. On or prior to June 30, 1999, the
Borrowers shall have, on a combined basis, Completed Systems in twenty-one (21)
cities. On or prior to September 30, 1999, the Borrowers shall have, on a
combined basis, Completed Systems in twenty-three (23) cities.
SECTION 5.19. Year 2000 Problems. On or prior to March 31, 1999, each
Borrower shall complete and deliver to the Agent a Year 2000 Corrective Plan. On
or prior to April 30, 1999, each Borrower shall implement Year 2000 Corrective
Actions. On or prior to June 30, 1999, each Borrower shall complete Year 2000
Corrective Actions and Year 2000 Implementation Testing. On or prior to
September 30, 1999, each Borrower shall eliminate all Year 2000 Problems, except
where the failure to correct the same could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate.
SECTION 5.20. Subsidiary Guarantees and Pledges. Such Borrower shall
(i) cause each Person which becomes a Subsidiary of such Borrower and does not
become a Borrower under this Agreement to execute a guaranty of the Obligations
substantially in the form of Exhibit G hereto, but exclusive of any financial
covenants, and (ii) execute a Pledge Agreement pursuant to which all of the
Equity Interests in such Person will be pledged to the Collateral Agent,
provided, that in the event such Person is an indirect Subsidiary of such
Borrower, such Borrower shall cause each applicable Subsidiary of such Borrower
to pledge all of the Equity Interests in such Person to the Collateral Agent.
SECTION 5.21. Accounting; Maintenance of Records. Such Borrower shall
maintain a system of accounting established and administered in accordance with
GAAP. Such Borrower shall keep and maintain, and cause each of its Subsidiaries
to keep and maintain, in all material respects, proper books of record and
account in which entries in conformity with GAAP shall be made of all dealings
and transactions in relation to their respective businesses and activities.
SECTION 5.22. Further Assurances. Such Borrower agrees to do such
further acts and things and to execute and deliver to the Agent or the
Collateral Agent such additional assignments, agreements, powers and
instruments, at such Borrower's expense, as the Agent or the Collateral Agent
may reasonably require or deem advisable to carry into effect the purposes of
this Agreement and the other Loan Documents or to better assure and confirm unto
the Agent or the Collateral Agent its rights, powers and remedies hereunder and
thereunder.
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ARTICLE VI
NEGATIVE COVENANTS
Each Borrower covenants and agrees with the Agent, the Collateral
Agent and the Lenders that as long as this Agreement shall remain in effect, any
Commitment hereunder shall be outstanding or any Obligations hereunder or under
any of the Loan Documents shall be unpaid, unless the Requisite Lenders shall
have otherwise given prior written consent:
SECTION 6.01. Liens, etc. Such Borrower shall not create, incur,
assume or suffer to exist, directly or indirectly, any Lien upon or with respect
to any of its properties or the Collateral, now owned or hereafter acquired, or
upon any proceeds, products, issues, income or profits therefrom except for the
following ("Permitted Liens"):
(i) Liens granted pursuant to the Loan Documents;
(ii) Liens securing any Purchase Debt to the extent that the
Liens cover only the subject assets purchased with such Purchase Debt;
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(iii) Liens for taxes, assessments or governmental charges or
levies on such Borrower's property if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are being
diligently contested in good faith and by appropriate proceedings and
for which such Borrower shall have set aside reserves on its books as
required by GAAP;
(iv) Liens imposed by law, such as landlord's, carrier's,
warehousemen's and mechanic's liens, which liens shall be waived in
writing to the extent waivable, and with respect to obligations not
yet due or being contested in good faith by appropriate proceedings
and in either case for which such Borrower shall have set aside
reserves on its books as required by GAAP;
(v) Liens arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security benefits other than any Lien imposed by ERISA;
(vi) Liens incurred or deposits made in the ordinary course of
business to secure surety bonds provided that such Liens shall extend
only to cash collateral for such surety bonds; or
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(vii) Liens on cash securing the reimbursement obligations under
the Excluded Letters of Credit.
SECTION 6.02. Use of Proceeds. Such Borrower shall not use the
proceeds of any Loan for any purpose other than as provided in Section 2.02
hereof.
SECTION 6.03. Sale of Assets, Consolidation, Merger, etc. Such
Borrower shall not consolidate with or merge into any other Person, or without
the prior written consent of the Requisite Lenders, sell, lease, transfer or
otherwise dispose of any Collateral, except for (a) sales of inventory in the
ordinary course of business, and (b) any sale, lease, transfer or other
disposition of assets no longer used or useful in the conduct of the Business
for the fair market value thereof not to exceed $250,000 in the aggregate;
provided, however, that if no Event of Default has then occurred or is
continuing or would result therefrom, any Borrower, upon provision of thirty
days prior written notice to the Agent and upon compliance with Section 8.02,
may merge with another Borrower.
SECTION 6.04. Dividends and Distributions; Sale of Equity Interests.
(a) Such Borrower shall not purchase, redeem or otherwise acquire any interest
of such Borrower, declare or make or pay any dividends in any fiscal year of
such Borrower on any class or classes of stock, return capital of such Borrower
to its shareholders, make any other distribution on or in respect of any shares
of any class of capital stock of such Borrower or make other payments to any
shareholder of such Borrower (including in the form of compensation, loan,
expense reimbursement or management fee); provided, however, that provided no
Event of Default or Default has occurred and is continuing or would result
therefrom, (i) such Borrower may make payments of fees or compensation for
services which are in the nature of management, corporate overhead or
administrative services to the extent permitted by Section 6.05 hereof, (ii)
provided further, that (A) during the previous four fiscal quarters of the
Borrowers, EBITDA equaled at least eighty-five percent (85%) of "Estimated
EBITDA" (as defined below) and such Estimated EBITDA is a positive number, (B)
during the previous four fiscal quarters of the Borrowers, the Borrowers
maintained a Fixed Charge Coverage Ratio of at least 1.10 to 1.00, (C) with
respect to the next four fiscal quarters of the Borrowers, EBITDA for the
Borrowers, as projected in the most recent financial information furnished
pursuant to Section 5.06(e), is projected to equal at least eighty-five percent
(85%) of Estimated EBITDA for such fiscal quarters and such Estimated EBITDA is
a positive number, and (D) with respect to the next four fiscal quarters of the
Borrowers, the Fixed Charge Coverage Ratio as projected in the most recent
financial information submitted to the Agent and the Lenders pursuant to Section
5.06(e), is projected to equal at least 1.10 to 1.00, the Borrowers may pay to
KMC Holdings dividends in the amount necessary to make scheduled principal and
interest payments under the Indenture, and any other amounts due under the
Indenture (including Sections 4.14 and 7.07 thereunder). Estimated EBITDA shall
mean "EBITDA" as calculated in the Milestone Plan.
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(b) Such Borrower shall not sell or issue any additional Equity
Interests.
SECTION 6.05. Management Fees and Permitted Corporate Overhead. Such
Borrower shall not pay or enter into any arrangement to pay any fee or
compensation, or reimburse expenses of, an Affiliate or any other Person for
services which are in the nature of management, corporate overhead or
administrative services except to the extent provided for in the Milestone Plan,
the Management Agreement or as described on Schedule 6.11 attached hereto.
SECTION 6.06. Guarantees; Third Party Sales and Leases. Such
Borrower shall not directly or indirectly, (i) assume any obligation or
indebtedness of another Person, (ii) make or assume any Guarantee, or (iii)
finance any third party sales or leases, other than its obligations under
Section 2.15.
SECTION 6.07. Investments. Such Borrower shall not, directly or
indirectly, make any Investments except:
(i) Temporary Cash Investments;
(ii) Investments in certificates of deposit, repurchase
agreements, money market or other cash management accounts, bankers
acceptances and short term Eurodollar time deposits with financial
institutions having a long term deposit rating of at least A+ from
Moody's Investors Service, Inc. or Standard & Poor's Ratings Group,
respectively;
(iii) Investments in commercial paper rated P1 or A1 by
Moody's Investors Service, Inc. or Standard & Poor's Ratings Group
respectively; and
(iv) until March 15, 1999 an Investment in a corporate bond of
Associates Corporation North America in the principal amount of
$3,650,000 and maturing March 15, 1999.
SECTION 6.08. Subsidiaries. Such Borrower shall not create or acquire
any Subsidiary other than with the prior written consent of the Requisite
Lenders.
SECTION 6.09. Permitted Activities. Such Borrower shall not
engage in any business or activity other than the operation of its Business in
accordance with the Milestone Plan without the prior written consent of the
Requisite Lenders.
SECTION 6.10. Disposition of Licenses, etc. Such Borrower
shall not sell, assign, transfer or otherwise dispose or attempt to dispose of
in any way any Governmental Approval or any other licenses, permits or approvals
(i) prior to the Trigger Date, material, in each case, to the operation of any
System in accordance with the Milestone Plan and (ii) on or after the Trigger
Date, the assignment, transfer or disposal of which would result in a Material
Adverse Effect, without the prior written consent of the Requisite Lenders.
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SECTION 6.11. Transactions with Affiliates. Except for the Management
Agreement, the Tax Sharing Agreement, or as set forth on Schedule 6.11, such
Borrower shall not directly or indirectly, enter into any transaction,
including, without limitation, leases or other agreements for the purchase or
use of any goods or services, with any Affiliate, except in the ordinary course
of and pursuant to reasonable requirements of such Borrower's business upon fair
and reasonable terms no less favorable to such Borrower than it would obtain in
a comparable arm's length transaction with an unaffiliated Person.
SECTION 6.12. ERISA. Such Borrower shall not:
(A) engage, or permit any ERISA Affiliate to engage, in any prohibited
transaction described in Section 406 of ERISA or 4975 of the IRC for which a
statutory or class exemption is not available or a private exemption has not
been previously obtained from the United States Department of Labor;
(B) permit to exist any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the IRC), whether or not waived;
(C) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
(D) terminate, or permit any ERISA Affiliate to terminate, any Benefit
Plan which would result in any material liability of such Borrower under Title
IV of ERISA;
(E) fail to make any contribution or payment to any Multiemployer Plan
which such Borrower or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining thereto;
(F) amend, or permit any ERISA Affiliate to amend, a Plan resulting in
an increase in current liability for the plan year such that such Borrower is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or
(G) fail, or permit any ERISA Affiliate to fail, to pay any required
installment under Section 412 of the IRC on or before the due date for such
installment or other payment.
SECTION 6.13. Indebtedness. Such Borrower shall not create or suffer
to exist any Debt or any other obligations for the deferred purchase price of
property or services except:
(i) the Obligations;
(ii) the obligations arising under any Loan Document;
(iii) obligations under leases contemplated in the Milestone Plan and
the Schedules to this Agreement;
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(iv) obligations under Capitalized Leases, financing leases or loan
agreements or similar debt documents with respect to the financing and
contemplated purchase of office equipment, vehicles and non-essential
telecommunications equipment, not to exceed an aggregate amount for the
Borrowers of $5,000,000 at any time ("Purchase Debt");
(v) additional unsecured Debt subordinate to the payment of the
Obligations on terms and conditions approved by the Agents but in no event to
exceed an aggregate amount for the Borrowers of $1,000,000 in principal amount
outstanding at any time;
(vi) performance bonds executed solely in connection with the
construction of Systems in the ordinary course of business;
(vii) Qualified Intercompany Loans; and
(viii) Debt to the Agent consisting of reimbursement obligations for
letters of credit in an aggregate outstanding amount not to exceed $250,000 at
any one time for the account of the Borrower and not issued pursuant to Section
2.10 (the "Excluded Letters of Credit").
SECTION 6.14. Prepayment and Debt Documents. (a) Such Borrower shall
not voluntarily prepay any Debt, except the Obligations in accordance with the
terms hereof.
(b) Such Borrower shall not amend any agreement relating to Debt other
than the Obligations in any manner which would increase the amount of principal,
interest or fees on such debt, or accelerate any payments of such Debt.
SECTION 6.15. Sale and Leaseback Transactions. Such Borrower shall
not, directly or indirectly, enter into any arrangement with any Person
providing for such Borrower to lease or rent property that any Borrower or KMC
Holdings has sold or will sell or otherwise transfer to such Person.
SECTION 6.16. Margin Regulation. Such Borrower shall not use or permit
any other Person to use any portion of the proceeds of any credit extended under
this Agreement in any manner which might cause the extension of credit made by
any Lender or the application of such proceeds to violate the Securities Act of
1933 or Securities Exchange Act of 1934 (each as amended from time to time, and
any successor statute) or to violate Regulation G, Regulation U, or Regulation
X, or any other regulation of the Federal Reserve Board, in each case as in
effect on the date or dates of such extension of credit and such use of
proceeds.
SECTION 6.17. Management and Tax Sharing Agreements. Such Borrower
shall not amend the Management Agreement or the Tax Sharing Agreement in any
manner that would have a material adverse effect on the Lenders, the Borrowers
or the transactions contemplated hereby.
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ARTICLE VII
FINANCIAL COVENANTS
Each Borrower covenants and agrees with the Agent and the Lenders that
as long as this Agreement shall remain in effect, any Commitment hereunder shall
be outstanding or the Obligations hereunder or under any of the Loan Documents
shall be unpaid, unless the Requisite Lenders shall have otherwise given prior
written consent:
SECTION 7.01. Financial Covenants Prior to Achieving Positive EBITDA.
Until the earlier to occur of (i) June 29, 2001 and (ii) the date on which the
Borrowers shall have achieved positive EBITDA for all the Borrowers on a
combined basis for two consecutive fiscal quarters as determined by reference to
the financial statements submitted pursuant to Section 5.06:
(a) Total Debt to Contributed Capital. The Borrowers shall not at any
time permit the ratio of the Total Debt to Contributed Capital to exceed 1.00 to
1.00.
(b) Minimum Revenues. As of the last day of each fiscal quarter, the
Borrowers shall on a combined basis have revenues at least equal to 85% of the
amount projected for such date in the Milestone Plan, which amount is set forth
in item 1 on Annex B attached hereto.
(c) EBITDA.
(i) As of the last day of each fiscal quarter occurring on or
after the Closing Date and on or prior to September 30, 2000, the
Borrowers shall not permit the EBITDA losses for all the Borrowers on
a combined basis for the two fiscal quarters then ending to exceed the
greater of (A) 115% of such losses projected for each such date in the
Milestone Plan, which amount is set forth in item 2 on Annex B
attached hereto and (B) $5,000,000 less than the aggregate amount of
EBITDA projected for each such date in the Milestone Plan, which
amount is set forth in item 2 on Annex B attached hereto.
(ii) As of the last day of each fiscal quarter thereafter, the
Borrowers shall not permit EBITDA for all the Borrowers on a combined
basis for the two fiscal quarters then ending to be less than the
greater of (A) 85% of the amount of EBITDA projected for each such
date in the Milestone Plan, which amount is set forth in item 3 on
Annex B attached hereto and (B) $5,000,000 less than the aggregate
amount of EBITDA projected for each such date in the Milestone Plan,
which amount is set forth as item 3 on Annex B attached hereto.
(d) Capital Expenditures. As of the last day of each fiscal quarter,
the Borrowers shall not permit capital expenditures on a combined, cumulative
basis beginning on the Closing Date to exceed the amounts set forth in item 4 on
Annex B attached hereto.
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(e) Minimum Access Lines. As of the last day of each fiscal quarter
beginning March 31, 2000, the Borrowers shall have in place at least
seventy-five percent (75%) of the Access Lines projected for each such date in
the Milestone Plan, which amounts are set forth in item 6 on Annex B attached
hereto.
SECTION 7.02. Financial Covenants After Achieving Positive EBITDA. On
and after the earlier of (i) June 30, 2001, and (ii) the date on which the
Borrowers have achieved positive EBITDA on a combined basis for two consecutive
fiscal quarters as determined by reference to the financial statements submitted
pursuant to Section 5.06:
(a) Maximum Total Leverage Ratio. As of the last day of each fiscal
quarter, the Borrowers shall not permit the Total Leverage Ratio to be greater
than the following:
Maximum Total
Fiscal Quarter Ending Leverage Ratio
- - --------------------- --------------
On or Prior to June 30, 2001 8.0 to 1.0
September 30, 2001 6.0 to 1.0
December 31, 2001 4.0 to 1.0
March 30, 2002 3.0 to 1.0
June 30, 2002 3.0 to 1.0
September 30, 2002 3.0 to 1.0
December 31, 2002 3.0 to 1.0
Last Day of each 2.0 to 1.0
Fiscal Quarter Thereafter
(b) Minimum Debt Service Coverage Ratio. As of the last day of each
fiscal quarter, the Borrowers shall not permit the ratio of (1) EBITDA for the
Borrowers on a combined basis for the most recently ended six month period, to
(2) Interest Expense for the most recently ended six month period plus Principal
Payments required during the most recently ended six month period to be less
than the following:
Minimum Debt Service
Fiscal Quarter Ending Coverage Ratio
- - --------------------- --------------
On or prior to December 31, 2001 1.5 to 1.0
Last Day of each Fiscal 2.0 to 1.0
Quarter Thereafter
(c) Minimum Fixed Charge Coverage Ratio. As of the last day of any
fiscal quarter, the Borrowers shall not permit the ratio of (1) the product of
two times the EBITDA for the Borrowers on a combined basis for the most recently
ended six month period to (2) Fixed Charges for the Borrowers (such ratio being
referred to as the "Fixed Charge Coverage Ratio") to be less than the following:
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Minimum Fixed Charge
Fiscal Quarter Ending Coverage Ratio
- - --------------------- --------------
On or prior to June 30, 2001 0.5 to 1.0
September 30, 2001 1.0 to 1.0
December 31, 2001 1.0 to 1.0
Last Day of each Fiscal 1.1 to 1.0
Quarter Thereafter
(d) Maximum Consolidated Leverage Ratio. As of the last day of any
fiscal quarter, the Borrowers shall not permit the ratio of (1) Consolidated
Debt to (2) the product of two times the sum of EBITDA for KMC Holdings and its
Subsidiaries (excluding its Excluded Subsidiaries) on a consolidated basis for
the most recently ended six month period to be greater than the following:
Maximum Total
Fiscal Quarter Ending Leverage Ratio
- - --------------------- --------------
On or Prior to June 30, 2001 20.0 to 1.0
September 30, 2001 15.0 to 1.0
December 31, 2001 11.0 to 1.0
March 31, 2002 10.0 to 1.0
June 30, 2002 10.0 to 1.0
September 30, 2002 10.0 to 1.0
December 31, 2002 10.0 to 1.0
March 31, 2003 8.0 to 1.0
June 30, 2003 8.0 to 1.0
September 30, 2003 8.0 to 1.0
December 31, 2003 8.0 to 1.0
Last Day of Each Fiscal 6.0 to 1.0
Quarter Thereafter
ARTICLE VIII
COLLATERAL SECURITY
SECTION 8.01. Collateral Security. (a) To secure payment and
performance of all of the Obligations, each of the Borrowers hereby grants to
the Collateral Agent for the benefit of the Collateral Agent, the Agent and the
Lenders, to the extent permitted by law, a right of setoff against and a
continuing security interest in and to all of such Borrower's tangible and
intangible personal property, fixtures and real property leasehold and easement
interests, whether now owned or existing, or hereafter acquired or arising,
wheresoever located, including, without limitation, all of the following
property, or interests in property: (a) all machinery, equipment,
Telecommunications Equipment and fixtures, including without limitation, fiber
optic and other cables, transmission and switching equipment, transmission
facilities, connection equipment, conduit, carrier pipes, junctions,
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regenerators, power sources, alarm systems, electronics, structures and shelters
and cable laying equipment; (b) all Accounts, accounts receivable, other
receivables, contract rights, leases, chattel paper, investment property, and
general intangibles of such Borrower (including, without limitation, goodwill,
going concern value, patents, trademarks, trade names, service marks,
blueprints, designs, product lines and research and development), including,
without limitation, all of such Borrower's rights under all present and future
Governmental Approvals, permits, licenses and franchises heretofore or hereafter
granted to such Borrower for the operation and ownership of its Systems
(excluding licenses and permits issued by the FCC, any PUC or any other
Governmental Authority to the extent, and only to the extent, it is unlawful to
grant a security interest in such licenses and permits, but including, to the
maximum extent permitted by law, all rights incident or appurtenant to such
licenses and permits, including, without limitation, the right to receive all
proceeds derived from or in connection with the sale, assignment or transfer of
such licenses and permits), whether now owned or hereafter acquired by such
Borrower, or in which such Borrower may now have or hereafter acquire an
interest; (c) all instruments, letters of credit, documents of title, policies
and certificates of insurance, securities, bank deposits, deposit accounts
(including such Borrower's Collection Accounts), checking accounts and cash now
or hereafter owned by such Borrower, or in which such Borrower may now have or
hereafter acquire an interest; (d) all inventory, including all merchandise, raw
materials, work in process, finished goods and supplies, now or hereafter owned
by such Borrower or in which such Borrower may now have or hereafter acquire an
interest; (e) all of such Borrower's leasehold interest in any real property,
all of such Borrower's licenses, easements and rights of way with respect to
real property; (f) all accessions, additions or improvements to, substitutions
for and all proceeds and products of, all of the foregoing, including proceeds
of insurance; and (g) all books, records, documents, computer tapes and discs
relating to all of the foregoing.
SECTION 8.02. Preservation of Collateral and Perfection of Security
Interests Therein. Such Borrower shall execute and deliver to the Collateral
Agent for the benefit of the Collateral Agent, the Agent and the Lenders, prior
to the Initial Funding Date, and at any time or times thereafter at the request
of the Collateral Agent, all financing statements or other documents (and pay
the cost of filing or recording the same in all public offices deemed necessary
by the Collateral Agent), as the Collateral Agent may request, in a form
satisfactory to the Collateral Agent, to perfect and keep perfected the security
interest in the Collateral granted by such Borrower to the Collateral Agent or
to otherwise protect and preserve the Collateral and the Collateral Agent's
security interest therein or to enforce the Collateral Agent's security interest
in the Collateral. Should such Borrower fail to do so, the Collateral Agent is
authorized to sign any such financing statements as such Borrower's agent. Such
Borrower further agrees that a carbon, photographic or other reproduction of
this Agreement or of a financing statement is sufficient as a financing
statement.
SECTION 8.03. Appointment of the Collateral Agent as the Borrowers'
Attorney-in-Fact. Such Borrower hereby irrevocably designates, makes,
constitutes and appoints the Collateral Agent (and all persons designated by the
Collateral Agent) as such Borrower's true and lawful attorney-in-fact, and
authorizes the Collateral Agent, in such Borrower's or the Collateral Agent's
name, to, following the occurrence and during the continuance of an Event of
Default: (i) demand payment of such Borrower's Accounts; (ii) enforce payment of
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such Borrower's Accounts by legal proceedings or otherwise; (iii) exercise all
of such Borrower's rights and remedies with respect to proceedings brought to
collect an Account; (iv) sell or assign any Account upon such terms, for such
amount and at such time or times as the Collateral Agent deems advisable; (v)
settle, adjust, compromise, extend or renew an Account; (vi) discharge and
release any Account; (vii) prepare, file and sign such Borrower's name on any
proof of claim in bankruptcy or other similar document against an account debtor
of such Borrower; (viii) notify the post office authorities to change the
address for delivery of such Borrower's mail to an address designated by the
Collateral Agent, and open and deal with all mail addressed to such Borrower;
(ix) do all acts and things which are necessary, in the Collateral Agent's sole
discretion, to fulfill such Borrower's obligations under this Agreement; (x)
take control in any manner of any item of payment or proceeds thereof; (xi) have
access to any lockbox or postal box into which such Borrower's mail is
deposited; (xii) endorse such Borrower's name upon any items of payment or
proceeds thereof and deposit the same in the Collateral Agent's account on
account of the Obligations; (xiii) endorse such Borrower's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto; and (xiv) sign such Borrower's
name on any verification of Accounts and notices thereof to account debtors.
SECTION 8.04. Collection of Accounts and Restricted Account
Arrangements. Such Borrower hereby represents and warrants that each depository
account ("Collection Account") now maintained by such Borrower at any bank
("Collection Agent") for the collection of checks and cash constituting proceeds
of Accounts and sales of other personal property which are part of the
Collateral is identified on Schedule 8.04 attached hereto and made a part
hereof. With respect to each Collection Account, such Borrower shall, no later
than the Initial Funding Date, deliver to the Collateral Agent, a "Restricted
Account Agreement" substantially in the form of Exhibit N attached hereto and
made a part hereof, duly executed and delivered by such Borrower and the
applicable Collection Agent, authorizing and directing such Collection Agent,
upon receipt of written notice from the Collateral Agent that an Event of
Default has occurred and is continuing, to deposit all checks and cash received
into a restricted account (a "Restricted Account") and remit all amounts
deposited in such Restricted Account to the Collateral Agent's account specified
in such Restricted Account Agreement until such time as the Collection Agent
receives written notice from the Collateral Agent rescinding such instruction.
Such Borrower shall, following the occurrence and during the continuance of an
Event of Default and any subsequent request by the Collateral Agent therefor,
take such further action as the Collateral Agent may reasonably deem desirable
to effect the transfer of exclusive ownership and control of the Restricted
Accounts and all Collection Accounts to the Collateral Agent. Until all of the
Obligations have been indefeasibly paid in full, such Borrower agrees not to
enter into any agreement or execute and deliver any direction which would
modify, impair or adversely affect the rights and benefits of the Collateral
Agent under any Restricted Account Agreement. Such Borrower shall not open,
establish or maintain any Collection Account (other than those identified on
Schedule 8.04 hereto) without first having delivered to the Collateral Agent a
duly executed and delivered Restricted Account Agreement with respect to such
Collection Account. Such Borrower shall notify the Collateral Agent in writing
not less than five (5) days prior to the date it shall open or establish any
Collection Account other than an account described on Schedule 8.04 hereto.
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SECTION 8.05. Cure Rights. Such Borrower expressly authorizes the
Collateral Agent, and the Collateral Agent may, but shall not be required to, at
any time and from time to time, to take any and all action that it reasonably
determines to be necessary or desirable to cure any default or violation
(including a payment default) of such Borrower in connection with any real
estate lease, license agreement, Governmental Approval or any other material
lease, agreement or contract entered into with respect to the Systems.
ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
SECTION 9.01. Events of Default. The following events shall each
constitute an "Event of Default":
(a) Any Borrower shall fail to pay the principal of or interest on its
Notes or any other amounts payable hereunder or under any of the other Loan
Documents when due, whether as scheduled, at a date fixed for prepayment, by
acceleration or otherwise, and five (5) Business Days shall have elapsed; or
(b) Any Borrower shall fail to observe or perform any other covenant,
condition or agreement to be observed or performed by such Borrower in any of
the Loan Documents, and such Borrower fails to cure such breach within ten (10)
Business Days after written notice thereof unless the breach relates to a
covenant contained in Sections 5.04, or Article VI (other than Section 6.05 or
Section 6.07) or VII, in which case no notice or grace period shall apply, or
unless the breach relates to Section 5.06, in which case an Event of Default
shall occur on the thirtieth day following the breach without any notice
requirement, unless the breach shall have been cured before such date; or
(c) Any representation or warranty made by any Borrower or KMC
Holdings in connection with this Agreement or any other Loan Document, or the
Loans or any statement or representation made in any report, certificate,
financial statement or other instrument furnished by or on behalf of such
Borrower or KMC Holdings pursuant to this Agreement or any other Loan Document,
shall prove to have been false or misleading in any material respect when made
or delivered or when deemed made in accordance with the terms hereof or thereof;
or
(d) Any Borrower or KMC Holdings shall fail to make any payment due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) on any other obligation for borrowed money in excess of $250,000 with
respect to any Borrower or in excess of $1,000,000 with respect to KMC Holdings,
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such indebtedness; or any
other default or event under any agreement or instrument relating to any
indebtedness for borrowed money in excess of $250,000 with respect to any
Borrower or in excess of $1,000,000 with respect to KMC Holdings, or any other
event, shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument if the effect of such default or event
is to accelerate, or to permit the acceleration of, the maturity of such
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indebtedness in excess of $250,000 with respect to any Borrower or in excess of
$1,000,000 with respect to KMC Holdings; or any such indebtedness in excess of
$250,000 with respect to any Borrower or in excess of $1,000,000 with respect to
KMC Holdings shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled required prepayment) prior to the stated
maturity thereof; or
(e) Any Borrower or KMC Holdings shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator or similar official
for such Borrower or KMC Holdings or for a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) become
unable, or admit in writing its inability, to pay its debts as they become due,
(iv) voluntarily or involuntarily dissolve, liquidate or wind up its affairs, or
(v) take action for the purpose of effecting any of the foregoing; or
(f) a proceeding under any bankruptcy, reorganization, arrangement of
debts, insolvency or receivership law is filed by or against any Borrower or KMC
Holdings, or any Borrower or KMC Holdings takes any action to authorize any of
the foregoing matters, and in the case of any such proceeding instituted against
any Borrower or KMC Holdings (but not instituted by any Borrower or KMC
Holdings), either such proceeding shall remain undismissed or unstayed for a
period of 60 days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the appointment
of a receiver, trustee or other similar official for any Borrower or KMC
Holdings or any substantial part of its property) shall be granted or shall
occur; or
(g) a Termination Event occurs which the Requisite Lenders in good
faith believe would subject any Borrower to a material liability; or
(h) the plan administrator of any Plan applies under Section 412(d) of
the IRC for a waiver of the minimum funding standards of Section 412(a) of the
IRC and the Requisite Lenders in good faith believe that the approval of such
waiver could subject any Borrower or any ERISA Affiliate to material liability;
or
(i) any of the Governmental Approvals or any other license,
Governmental Approval or other governmental consent or approval necessary for
the continuing operation of any Borrower or any System or any other material
Governmental Approval or approval of or material filing with the FCC, any PUC or
any other Governmental Authority with respect to the conduct by any Borrower of
its business and operations, including its Business, shall not be obtained or
shall cease to be in full force and effect, which in respect of any of the
Governmental Approvals shall, in the case of an order of the FCC, any PUC or
other Governmental Authority having jurisdiction with respect thereto, revoking,
or deciding not to renew, any such Governmental Approval, occur upon the
issuance of such order, and, in the case of any other order revoking or
terminating any of the Governmental Approvals or deciding not to renew such
Governmental Approvals prior to the termination thereof, occur when such order
becomes final, and in each case, with respect to any such event occurring on or
after the Trigger Date, such event is also reasonably likely to result in a
Material Adverse Effect; or
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(j) the FCC, any PUC or any other Governmental Authority, by final
order, determines that the existence or performance of this Agreement or any
other Loan Document will result in a revocation, suspension or material adverse
modification of any of the Governmental Approvals for any System, and with
respect to any such event occurring on and after the Trigger Date, such
determination is reasonably likely to result in a Material Adverse Effect; or
(k) for any reason any Loan Document shall not be in full force and
effect or shall not be enforceable in accordance with its terms, or any security
interest or lien granted pursuant thereto with respect to Collateral having an
aggregate value of $500,000 or greater shall fail to be perfected or to have its
intended priority, or any Borrower or any Affiliate thereof shall contest the
validity of any Lien granted under, or shall disaffirm its obligations under any
Loan Document; or
(l) any Borrower shall default under any Lucent Purchase Agreement or
Additional Purchase Agreement, which default shall not have been cured or waived
within the applicable grace period thereunder unless such Borrower is contesting
such default in good faith by appropriate protest or proceedings and shall have
set aside adequate reserves in accordance with GAAP; or
(m) for any reason, any Borrower ceases to operate any System or
ceases to own any of its Governmental Approvals necessary for the continuing
operation of any System, and with respect to any such event occurring on or
after the Trigger Date, such cessation is reasonably likely to result in a
Material Adverse Effect; or
(n) a judgment or judgments for the payment of money in excess of
$250,000 individually or $500,000 in the aggregate at any one time shall have
been rendered against any Borrower and the same shall have remained unsatisfied
and in effect for any period of sixty (60) days during which no stay of
execution shall have been obtained; or
(o) any Borrower is enjoined, restrained or in any way prevented by
the order of any court or administrative or regulatory agency from conducting
its business in any material respect with respect to any one or more of its
Systems and with respect to any such event occurring on or after the Trigger
Date, such event is reasonably likely to result in a Material Adverse Effect; or
(p) any Borrower becomes subject to any liabilities, costs, expenses,
damages, fines or penalties which could reasonably be expected to have a
Material Adverse Effect arising out of or related to (i) any Remedial Action in
response to a Release or threatened Release at any location of any Contaminant
into the indoor or outdoor environment or (ii) any material violation of any
Environmental Law; or
(q) a Change of Control shall occur; or
(r) KMC Holdings shall fail to observe or perform any covenant,
condition or agreement to be observed or performed by KMC Holdings in the KMC
Holdings Guaranty; or
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(s) any Borrower shall fail to observe or perform any covenant,
condition or agreement to be observed or performed by such Borrower in any
material agreement (other than a Loan Document or an agreement referred to in
Section 9.01(d)), such Borrower fails to cure such breach within ten (10)
Business Days after written notice thereof, and with respect to any such failure
occurring on or after the Trigger Date, such failure is reasonably likely to
result in a Material Adverse Effect, unless such Borrower is contesting such
covenant, condition or agreement by appropriate protest or proceedings and shall
have set aside adequate reserves in accordance with GAAP.
SECTION 9.02. Termination of Commitment; Acceleration. Upon the
occurrence and at any time during the continuance of any Event of Default, the
Agent shall upon direction from the Requisite Lenders:
(a) by notice to the Borrowers, terminate Lenders' Commitment to make
Loans hereunder; or
(b) by notice to the Borrowers, declare the Obligations to be
immediately due and payable, whereupon all the Obligations shall be immediately
due and payable without further notice of any kind, provided, however, that if
an Event of Default described in Section 9.01(f) shall exist or occur, all of
the Obligations shall automatically, without declaration or notice of any kind,
be immediately due and payable and the Commitment shall be automatically
terminated.
SECTION 9.03. Waivers. Demand, presentment, protest and notices of
nonpayment, protest, dishonor and acceptance are hereby waived by each Borrower.
Each Borrower also waives the benefit of all valuation, appraisal and exemption
laws and the posting of any bond required of the Collateral Agent, the Agent or
any Lender in connection with any judicial process to realize on the Collateral,
to enforce any judgment or other court order entered in favor of the Collateral
Agent, the Agent or any Lender or to enforce by specific performance, temporary
restraining order, or preliminary or permanent injunction, this Agreement or any
other Loan Documents. Each Borrower waives the right, if any, to the benefit of,
or to direct the application of, any Collateral. Each Borrower hereby
acknowledges that none of the Collateral Agent, the Agent or any Lender has any
obligation to resort to any Collateral or make claim against any other Person
before seeking payment or performance from any Borrower.
SECTION 9.04. Rights and Remedies Generally. If an Event of Default
occurs and is continuing, the Agent and the Collateral Agent shall have, in
addition to any other rights and remedies contained in this Agreement or in any
of the other Loan Documents, all of the rights and remedies of a secured party
under the Code or other applicable laws, all of which rights and remedies shall
be cumulative, and none exclusive, to the extent permitted by law. In addition
to all such rights and remedies, the sale, lease or other disposition of the
Collateral, or any part thereof, by the Collateral Agent or the Agent after the
occurrence of an Event of Default may be for cash, credit or any combination
thereof, and the Collateral Agent or the Agent may purchase all or any part of
the Collateral at public or, if permitted by law, private sale, and in lieu of
actual payment of such purchase price, may set off the amount of such purchase
price against the Obligations then owing. Any sales of the Collateral may be
adjourned from time to time with or without notice. The Agent or the Collateral
81
Agent, may, in its sole discretion, cause the Collateral to remain on the
premises of any Borrower, at the expense of the Borrowers, pending sale or other
disposition of the Collateral. The Agent or the Collateral Agent shall have the
right to conduct such sales on the premises of any Borrower, at the expense of
the Borrowers, or elsewhere, on such occasion or occasions as it may see fit.
SECTION 9.05. Entry Upon Premises and Access to Information. If an
Event of Default occurs and is continuing, the Agent and the Collateral Agent
shall have the right to enter upon the premises of any Borrower where any
Collateral is located (or is believed to be located) without any obligation to
pay rent to such Borrower, or any other place or places where the Collateral is
believed to be located and kept, and render the Collateral unusable or remove
the Collateral therefrom to the premises of the Agent or the Collateral Agent or
any agent of the Agent or the Collateral Agent, for such time as the Agent or
the Collateral Agent may desire, in order effectively to collect or liquidate
the Collateral, and/or the Agent or the Collateral Agent may require any
Borrower to assemble the Collateral and make it available to the Agent or the
Collateral Agent at a place or places to be designated by the Agent or the
Collateral Agent. If an Event of Default occurs and is continuing, the Agent or
the Collateral Agent shall have the right to obtain access to any Borrower's
data processing equipment, computer hardware and software relating to the
Collateral and to use all of the foregoing and the information contained therein
in any manner the Agent or the Collateral Agent deems appropriate.
SECTION 9.06. Sale or Other Disposition of Collateral by the Agent.
Any notice required to be given by the Agent or the Collateral Agent of a sale,
lease or other disposition or other intended action by the Agent or the
Collateral Agent with respect to any of the Collateral which is deposited in the
United States mails, registered or certified, postage prepaid and duly addressed
to the Borrowers at the address specified in Section 11.01 below, at least ten
days prior to such proposed action shall constitute fair and reasonable notice
to the Borrowers of any such action. The net proceeds realized by the Agent or
the Collateral Agent upon any such sale or other disposition, after deduction
for the expense of retaking, holding, preparing for sale, selling or the like
and the reasonable attorneys' fees and legal expenses incurred by the Agent or
the Collateral Agent in connection therewith, shall be applied as provided
herein toward satisfaction of the Obligations. The Agent or the Collateral
Agent, as applicable, shall account to the Borrowers for any surplus realized
upon such sale or other disposition, and the Borrowers shall remain liable for
any deficiency. The commencement of any action, legal or equitable, or the
rendering of any judgment or decree for any deficiency shall not affect the
Collateral Agent's security interest in the Collateral. The Borrowers agree that
the Collateral Agent has no obligation to preserve rights to the Collateral
against any other parties. The Agent and the Collateral Agent are hereby granted
a license or other right to use, without charge, the Borrowers' labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, and the Borrowers' rights under all licenses and all
franchise agreements shall inure to the Agent's and the Collateral Agent's
benefit until the Obligations are paid in full.
SECTION 9.07. Governmental Approvals. In connection with the
enforcement by the Agent or the Collateral Agent of any remedies available to it
as a result of any Event of Default, each Borrower agrees that it shall join and
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cooperate fully with, at the request of the Agent or the Collateral Agent, any
receiver referred to below and/or the successful bidder or bidders at any
foreclosure sale in a filing of an application (and furnishing any additional
information that may be required in connection with such application or which
the Agent or the Collateral Agent may believe relevant to such application) with
the FCC, any PUC and all other applicable Governmental Authorities, requesting
their prior approval of (i) the operation or abandonment of all or the portion
of any System and/or (ii) the transfer of control of such Borrower or assignment
of all licenses, certificates, Governmental Approvals, approvals and permits,
issued to such Borrower by the FCC, any PUC or any such Governmental Authorities
with respect to any System and the operation thereof, to the Agent or the
Collateral Agent, the receiver or to the successful bidder or bidders. In
connection with the foregoing, each Borrower shall take such further actions,
and execute all such instruments, as the Agent or the Collateral Agent
reasonably deems necessary or desirable. Each Borrower agrees that the Agent or
the Collateral Agent may enforce any obligation of such Borrower as set forth in
this section by an action for specific performance. In addition, each Borrower
hereby irrevocably constitutes and appoints the Agent and the Collateral Agent
and any agent or officer thereof (which appointment is coupled with an interest)
as its true and lawful attorney-in-fact with full irrevocable power and
authority and in the place and stead of such Borrower and in the name of such
Borrower or in its own name, from time to time in its discretion after the
occurrence and during the continuance of an Event of Default and in connection
with the foregoing, for the purpose of executing on behalf and in the name of
such Borrower any and all of the above-referenced instruments and to take any
and all appropriate action in furtherance of the foregoing. THE EXERCISE OF ANY
RIGHTS OR REMEDIES HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT BY ANY LENDER, THE
AGENT OR THE COLLATERAL AGENT THAT MAY REQUIRE FCC, ANY PUC OR ANY OTHER
GOVERNMENTAL AUTHORITY APPROVAL SHALL BE SUBJECT TO OBTAINING SUCH APPROVAL.
PENDING THE RECEIPT OF ANY FCC, ANY PUC OR ANY OTHER GOVERNMENTAL AUTHORITY
APPROVAL, NO BORROWER SHALL DO ANYTHING TO DELAY, HINDER, INTERFERE OR OBSTRUCT
THE EXERCISE OF THE AGENT'S OR THE COLLATERAL AGENT'S RIGHTS OR REMEDIES
HEREUNDER IN OBTAINING SUCH APPROVALS.
SECTION 9.08. Appointment of Receiver or Trustee. In connection with
the exercise of its remedies under this Agreement, the Agent or the Collateral
Agent may, upon the occurrence of an Event of Default, obtain the appointment of
a receiver or trustee to assume, upon receipt of all necessary judicial, FCC,
any PUC or other Governmental Authority consents or approvals, control of or
ownership of any of the Governmental Approvals. Such receiver or trustee shall
have all rights and powers provided to it by law or by court order or provided
to the Agent or the Collateral Agent under this Agreement. Upon the appointment
of such trustee or receiver, the Borrowers agree to cooperate, to the extent
necessary or appropriate, in the expeditious preparation, execution and filing
of an application to the FCC, any PUC or any other Governmental Authority or for
consent to the transfer of control or assignment of any Borrower's Governmental
Approvals to the receiver or trustee.
SECTION 9.09. Right of Setoff. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender and each holder of any Note is hereby authorized at any time or from
time to time, without notice to any Borrower or to any other Person, any such
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notice being hereby expressly waived, to set off and to appropriate and to apply
any and all balances held by it at any of its offices for the account of any
Borrower (regardless of whether such balances are then due to such Borrower) and
any other properties or assets any time held or owing by that Lender or that
holder to or for the credit or for the account of any Borrower against and on
account of any of the Obligations which are not paid when due. Any Lender or
holder of any Note exercising a right to set off or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participation in each such other Lender's or holder's Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
set off or otherwise received with each other Lender or holder in accordance
with their respective Pro Rata Shares. Each Borrower agrees, to the fullest
extent permitted by law, that (a) any Lender or holder may exercise its right to
set off with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amount so set off to other
Lenders and holders and (b) any Lender or holder so purchasing a participation
in the Loans made or other Obligations held by other Lenders or holders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other Obligations in the amount of such
participation. Notwithstanding the foregoing, if all or any portion of the
set-off amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of set-off, the purchase of participations
by that Lender shall be rescinded and the purchase price restored without
interest. Each Borrower hereby agrees that the foregoing provisions are intended
to be construed so as to satisfy the requirements of Section 553 of the Federal
Bankruptcy Code or amendments thereto (including any requirement of mutuality of
obligations therein).
ARTICLE X
THE AGENT AND THE COLLATERAL AGENT
SECTION 10.01. Appointment of Agent. (a) First Union National Bank is
hereby appointed to act as contractual representative on behalf of all Lenders
under this Agreement and the other Loan Documents. The Agent agrees to act as
such contractual representative upon the express conditions contained in this
Article X. The provisions of this Section 10.01 are solely for the benefit of
the Agent and the Lenders and no Borrower or any other Person shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement and the other Loan
Documents, the Agent shall act solely as an agent of the Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Borrower or any other Person.
The Agent shall have no duties or responsibilities except for those expressly
set forth in this Agreement and the other Loan Documents. Notwithstanding the
use of the defined term "Agent", it is expressly understood and agreed that the
Agent shall not have any fiduciary responsibilities to any Lender by reason of
this Agreement and that the Agent is merely acting as the representative of the
Lenders with only those duties as are expressly set forth in this Agreement and
the other Loan Documents. In its capacity as the Lenders' contractual
representative, the Agent (i) does not assume any fiduciary duties to any of the
Lenders, (ii) is a "representative" of the Lenders within the meaning of Section
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9-105 of the UCC and (iii) is acting as an independent contractor, the rights
and duties of which are limited to those expressly set forth in this Agreement
and the other Loan Documents. Each of the Lenders agrees to assert no claim
against the Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Lender waives. Neither the
Agent nor any of its Affiliates nor any of their respective officers, directors,
employees, agents or representatives shall be liable to any Lender for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document, or in connection herewith or therewith, except for damages caused by
its or their own gross negligence or willful misconduct.
(b) If the Agent shall request instructions from all Lenders,
Requisite Lenders, Requisite Revolving Lenders or all affected Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Loan Document, then the Agent shall be entitled to
refrain from such act or taking such action unless and until the Agent shall
have received instructions from all Lenders, Requisite Lenders, Requisite
Revolving Lenders or all affected Lenders, as the case may be, and the Agent
shall not incur liability to any Person by reason of so refraining. The Agent
shall be fully justified in failing or refusing to take any action hereunder or
under any other Loan Document (a) if such action would, in the opinion of the
Agent, be contrary to law or the terms of this Agreement or any other Loan
Document, (b) if such action would, in the opinion of the Agent, expose the
Agent to liabilities beyond the limits of this Agreement or (c) if the Agent
shall not first be indemnified to its satisfaction against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. Without limiting the foregoing, no Lender shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder or under any other Loan Document in accordance
with the instructions of all Lenders, Requisite Lenders, Requisite Revolving
Lenders or all affected Lenders, as applicable.
SECTION 10.02. Agent's Reliance, Etc. Neither the Agent nor any of its
Affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the other Loan Documents, except for
damages caused by its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (a) may treat
the payee of any Note as the holder thereof until the Agent receives written
notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (b) may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of any
Borrower or to inspect the Collateral (including the books and records); (e)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
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Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 10.03. FUNB and Affiliates. With respect to its Commitments
hereunder, FUNB shall have the same rights and powers under this Agreement and
the other Loan Documents as any other Lender and may exercise the same as though
it were not the Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include FUNB in its individual capacity. FUNB and
its Affiliates may lend money to, invest in, and generally engage in any kind of
business with, any Borrower, any of its Affiliates and any Person who may do
business with or own securities of any Borrower or any such Affiliate, all as if
FUNB were not the Agent and without any duty to account therefor to Lenders.
FUNB and its Affiliates may accept fees and other consideration from any
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to Lenders. FUNB may also purchase or hold Equity
Interests or warrants in KMC Holdings or any Borrower and make subordinated
loans to any Borrower. Each Lender acknowledges the potential conflict of
interest between FUNB as a Lender holding disproportionate interests in the
Loans, FUNB as a member or subordinated debt holder, of the Borrower and FUNB as
Agent.
SECTION 10.04. Lender Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon the Agent or any other Lender
and based on the financial information given it by the Borrowers and such other
documents and information as it has deemed appropriate, made its own credit and
financial analysis of the Borrowers and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
SECTION 10.05. Indemnification. Each of the Lenders agrees to
indemnify the Agent (to the extent not reimbursed by the Borrowers and without
limiting the obligations of Borrowers hereunder), ratably according to their
respective Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of this Agreement or any other Loan Document or any action taken or omitted
by the Agent in connection therewith; provided, however, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct. Without limiting the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including counsel fees)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
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rights or responsibilities under, this Agreement and each other Loan Document,
to the extent that the Agent is not reimbursed for such expenses by the
Borrowers.
SECTION 10.06. Successor Agent. The Agent may resign at any time by
giving not less than thirty (30) days' prior written notice thereof to Lenders
and the Borrowers. Upon any such resignation, the Requisite Lenders shall have
the right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within 30 days after the resigning Agent's giving notice of resignation, then
the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary of
a commercial bank or financial institution if such commercial bank or financial
institution is organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, by the 30th day after the date such notice of resignation was given
by the resigning Agent, such resignation shall become effective and the
Requisite Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above. Any successor Agent appointed by the Requisite Lenders hereunder
shall be subject to the approval of Borrowers, such approval not to be
unreasonably withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default shall have occurred and be
continuing. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent. Upon the
earlier of the acceptance of any appointment as Agent hereunder by a successor
Agent or the effective date of the resigning Agent's resignation, the resigning
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents, except that any indemnity rights or other rights
in favor of such resigning Agent shall continue. After any resigning Agent's
resignation hereunder, the provisions of this Section 10.06 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
SECTION 10.07. Payments; Non-Funding Lenders; Information; Actions in
Concert.
(a) Loans; Payments. Whenever the Agent receives a payment of
principal, interest, fee or premium (if any) or other payment, or whenever the
Agent makes an application of funds, in connection with the Loans or the Notes
(including, without limitation, any payment or application from any Collateral),
the Agent will on the date such payment is received or applied, if on or prior
to 11:00 a.m. (Eastern time) on such date, or otherwise on the next Business
Day, pay over to each Lender as instructed by such Lender in writing, an amount
equal to such Lender's Pro Rata Share of such payment provided that such Lender
has funded all Loans required to be made by it and has purchased all
participation required to be purchased by it under this Agreement and the other
Loan Documents as of such date. To the extent that any Lender (a "Non-Funding
Lender") has failed to fund all such payments and Loans or failed to fund the
purchase of all such participation, the Agent shall be entitled to set off the
funding short-fall against that Non-Funding Lender's Pro Rata Share of all
payments received from the Borrowers. All payments by Agent shall be made by
wire transfer to such Lender's account (as specified by such Lender) not later
than 2:00 p.m. (Eastern time) on the applicable Business Day.
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(b) Return of Payments. (i) If Agent pays an amount to a Lender under
this Agreement in the belief or expectation that a related payment has been or
will be received by the Agent from the Borrowers and such related payment is not
received by Agent, then the Agent will be entitled to recover such amount from
such Lender on demand without set-off, counterclaim or deduction of any kind.
(ii) If the Agent determines at any time that any amount received
by the Agent under this Agreement must be returned to any Borrower or
paid to any other Person pursuant to any insolvency law or otherwise,
then, notwithstanding any other term or condition of this Agreement or
any other Loan Document, the Agent will not be required to distribute
any portion thereof to any Lender. In addition, each Lender will repay
to Agent on demand any portion of such amount that the Agent has
distributed to such Lender, together with interest at such rate, if
any, as the Agent is required to pay to any Borrower or such other
Person, without set-off, counterclaim or deduction of any kind.
(c) Non-Funding Lenders. The failure of any Non-Funding Lender to make
any portion of its Loans or any payment required by it hereunder on the date
specified therefor shall not relieve any other Lender (each such other Lender,
an "Other Lender") of its obligations to make any such Loan on such date, but
neither any Other Lender nor the Agent shall be responsible for the failure of
any Non-Funding Lender to make any Loan. Notwithstanding anything set forth
herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a
"Lender" (or be included in the calculation of "Requisite Lenders" or "Requisite
Revolving Lenders" hereunder) for any voting or consent rights under or with
respect to any Loan Document.
(d) Dissemination of Information. The Agent will use reasonable
efforts to provide Lenders with any notice of Default or Event of Default
received by the Agent from, or delivered by the Agent to, the Borrowers, with
notice of any Event of Default of which the Agent has actually become aware and
with notice of any action taken by the Agent following any Event of Default;
provided, however, that the Agent shall not be liable to any Lender for any
failure to do so, except to the extent that such failure is attributable to the
Agent's gross negligence or willful misconduct. Lenders acknowledge that the
Borrowers are required to provide financial statements and other documents to
Lenders pursuant to this Agreement and agree that the Agent shall have no duty
to provide the same to Lenders.
(e) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of set-off) without
first obtaining the prior written consent of the Agent and Requisite Lenders, it
being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Notes shall be taken in concert and at the
direction or with the consent of Agent.
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SECTION 10.08. Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Collateral Agent, at
its option and in its reasonable business judgment, to release any Lien upon any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction of all Loans and all other Obligations and which the Collateral
Agent has been notified in writing are then due and payable; (ii) constituting
property being sold or disposed of if the applicable Borrower certifies to the
Collateral Agent that the sale or disposition is made in compliance with Section
6.03 (and the Collateral Agent may rely conclusively on any such certificate,
without further inquiry); or (iii) constituting property leased to the
applicable Borrower under a lease which has expired or been terminated in a
transaction permitted under this Agreement or which will expire imminently and
which has not been, and is not intended by such Borrower to be, renewed or
extended and with respect to which such Borrower has not exercised any purchase
option. Except as provided above, the Collateral Agent will not release any of
the Liens without the prior written authorization of the Requisite Lenders;
provided that the Collateral Agent may not release the Liens on Collateral
valued in the aggregate in excess of $500,000 without the prior written
authorization of the Requisite Lenders and may not release all or substantially
all of the Collateral without the consent of the Lenders. Upon request by the
Collateral Agent or the Borrowers at any time, the Lenders will confirm in
writing the Collateral Agent's authority to release any Liens upon particular
types or items of Collateral pursuant to this Section 10.08(a).
(b) Upon receipt by the Collateral Agent of any authorization required
pursuant to Section 10.08(a) from the Requisite Lenders or Lenders, as
applicable, of the Collateral Agent's authority to release any Liens upon
particular types or items of Collateral, and upon at least five (5) Business
Days' prior written request by the applicable Borrower, and provided that no
Event of Default has occurred and is then continuing, the Collateral Agent shall
(and is hereby irre vocably authorized by the Lenders to) execute such documents
as may be necessary to evidence the release of the Liens upon such Collateral;
provided, however, that (i) the Collateral Agent shall not be required to
execute any such document on terms which, in the Collateral Agent's opinion,
would expose the Collateral Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens (other than those expressly being released)
upon (or obligations of the applicable Borrower in respect of) all interests
retained by the applicable Borrower, including (without limitation) the proceeds
of any sale, all of which shall continue to constitute part of the Collateral.
(c) The Collateral Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by any Borrower or
is cared for, protected or insured or has been encumbered, or, other than a duty
to act without recklessness, willful misconduct or gross (but not mere)
negligence, that the Liens have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular
priority, or to exercise at all or in any particular manner or under any duty of
care, disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the pursuant to this Section
10.08 or pursuant to any of the Loan Documents, it being understood and agreed
that in respect of the Collateral, or any act, omission or event related
thereto, the Collateral Agent may act in any manner it may deem appropriate, in
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its reasonable business judgment, given the Collateral Agent's own interest in
the Collateral in its capacity as one of the Lenders and that the Collateral
Agent shall have no other duty or liability whatsoever to any Lender as to any
of the foregoing.
SECTION 10.09. Agency for Perfection. Each Lender hereby appoints each
other Lender as agent for the purpose of perfecting the Lenders' security
interest in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession. Should any Lender (other than the Collateral
Agent) obtain possession of any such Collateral, such Lender shall notify the
Collateral Agent thereof, and, promptly upon the Collateral Agent's request
therefor shall deliver such Collateral to the Collateral Agent.
SECTION 10.10. Concerning the Collateral and the Related Loan
Documents and the Collateral Agent. (a) Each Lender authorizes and directs the
Collateral Agent to enter into this Agreement and the other Loan Documents
relating to the Collateral, for the ratable benefit of the Lenders. Each Lender
agrees that any action taken by the Collateral Agent or Requisite Lenders in
accordance with the terms of this Agreement or the other Loan Documents relating
to the Collateral, and the exercise by the Collateral Agent or the Requisite
Lenders of their respective powers set forth therein or herein, together with
such other powers that are reasonably incidental thereto, shall be binding upon
all of the Lenders.
(b) The Collateral Agent with respect to the administration of the
Collateral shall have the same rights, obligations and status as the Agent as
are set forth in Section 10.01, 10.02, 10.03, 10.04, 10.05, and 10.06 above.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices; Action on Notices, etc. (a) Notices and other
communications provided for herein shall be in writing and shall be delivered by
a courier service of recognized standing (specifying one (1) day delivery), or
by registered or certified mail, postage prepaid, return receipt requested (or,
if by telecopy communications equipment of the sending party, delivered by such
equipment) addressed, if to the Borrowers, at KMC Telecom Inc., 1545 Route 206,
Suite 300, Bedminster, NJ 07921; Attention: President; (telecopy no. (908)
719-8775, confirmation no. (908) 470-2200) with a copy to Alan M. Epstein Esq.,
Kelley Drye & Warren LLP, 101 Park Avenue, New York, NY 10178; (telecopy no.
(212) 808-7897, confirmation no. (212) 808-7800), if to the Agent, at First
Union National Bank, Communications/Media Finance-PA4829, 1339 Chestnut Street,
Philadelphia, PA 19107, Attention: Elizabeth Elmore (telecopy no. (215)
786-7721, confirmation no. (215) 786-4321), and if to the Collateral Agent, at
AT&T Commercial Finance, Two Gatehall Drive, Parsippany, NJ 07054, Attention:
Media and Communications, (telecopy no. (973) 355-7644, confirmation no. (973)
355-7630). All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given (a) five Business Days after mailing when sent by registered or certified
mail, postage prepaid, return receipt requested, or (b) upon receipt, if by
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courier service or any telecopy communications equipment of the sender, in each
case addressed to such party as provided in this Section or in accordance with
the latest unrevoked direction from such party.
(b) Each Borrower agrees that the Agent or the Collateral Agent may
act upon any notice, consent, certificate, cable, telex or other instrument or
writing believed by the Agent or the Collateral Agent to be genuine, that the
Agent or the Collateral Agent may consult with legal counsel, selected by the
Agent or the Collateral Agent and shall not be liable to any Borrower for any
action taken or omitted to be taken in good faith by Lender in accordance with
the advice of such counsel.
SECTION 11.02. No Waivers; Amendments. (a) No failure or delay of the
Agent, the Collateral Agent or any Lender to exercise any right hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, preclude any other or further
exercise thereof or the exercise of any other right. No waiver of any provision
of this Agreement or any other Loan Document nor consent to any departure by any
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by the Agent and the Requisite Lenders, 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 Borrower in any case shall entitle
any Borrower to any other or further notice or demand in similar or other
circumstances.
(b) Subject to the provisions of this Section 11.02(b), the Requisite
Lenders (or the Agent with the consent in writing of the Requisite Lenders) and
the Borrowers may enter into agreements supplemental hereto for the purpose of
adding or modifying any provisions to the Loan Documents or changing in any
manner the rights of the Lenders or the Borrowers hereunder or waiving any Event
of Default or Default hereunder; provided, however, that no such supplemental
agreement shall, without the consent of each Lender affected thereby:
(i) Postpone or extend the Revolving Credit Commitment
Termination Date, the maturity date for the loans or any other date
fixed for any payment of principal of, or interest on, the Loans or
any fees or other amounts payable to such Lender except with respect
to (A) any modifications of the provisions relating to prepayments of
Loans and other Obligations and (B) a waiver of the application of the
default rate of interest pursuant to Section 2.05(b) hereof.
(ii) Reduce the principal amount of any Loans, or reduce the rate
or extend the time of payment of interest or fees thereon.
(iii) Reduce the percentage specified in the definition of
Requisite Lenders or Requisite Revolving Lenders or any other
percentage of Lenders specified to be the applicable percentage in
this Agreement to act on specified matters or amend the definition of
"Pro Rata Share".
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(iv) Increase the amount of any Commitment of any Lender
hereunder or increase any Lender's Pro Rata Share.
(v) Permit any Borrower to assign its rights under this
Agreement.
(vi) Release all or substantially all of the Collateral.
(vii) Amend this Section 11.02(b).
No amendment of any provision of this Agreement relating to the Agent or the
Collateral Agent shall be effective without the written consent of the Agent or
the Collateral Agent, as applicable.
SECTION 11.03. GOVERNING LAW AND JURISDICTION. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CONFLICTS OF
LAWS PRINCIPLES. THE BORROWERS, THE AGENT, THE COLLATERAL AGENT AND THE LENDERS
CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN THE
CITY AND STATE OF NEW YORK AND WAIVE ANY OBJECTION RELATING TO IMPROPER VENUE OR
FORUM NON CONVENIENCE TO THE CONDUCT OF ANY PROCEEDING BY SUCH COURT.
SECTION 11.04. Expenses. The Borrowers will pay, and have joint and
several liability for, all documented out-of-pocket third-party expenses
(including in each case all reasonable attorneys' and paralegals' fees and
related expenses and costs), (i) incurred by the Agent, the Collateral Agent and
the Documentation Agent in connection with the negotiation, preparation and
execution of the Loan Documents (whether or not the transactions contemplated
hereby shall be consummated), subject, however, to the limitations set in those
certain letters dated September 25, 1998 between KMC Holdings and the Agent, and
KMC Holdings and the Documentation Agent, with respect to the fees and expenses
of counsel for the Agent and the Documentation Agent, (ii) incurred by the
Agents, in connection with the administration of the Loan Documents, and the
creation, perfection, priority and protection of the Liens in the Collateral,
and (iii) incurred by any Agent or any Lender in connection with the enforcement
of the rights of any Agent or any Lender in connection with this Agreement, any
other Loan Documents or the Collateral, or any restructuring or workout of this
Agreement or the other Loan Documents.
SECTION 11.05. Equitable Relief. Each Borrower recognizes that, in the
event such Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, or any other Loan Document, any
remedy at law may prove to be inadequate relief to the Agent, the Collateral
Agent and the Lenders; therefore, such Borrower agrees that the Agent or the
Collateral Agent, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
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SECTION 11.06. Indemnification; Limitation of Liability. (a) The
Borrowers jointly and severally agree to protect, indemnify and hold harmless
the Agent, the Collateral Agent each Lender and each of their respective
officers, affiliates, directors, employees, attorneys, accountants, consultants,
representatives and agents (collectively called the "Indemnitees") from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements (including,
without limitation, payment by the Agent, the Collateral Agent or any Lender of
any obligations due or past due under any contract or agreement to which any
Borrower is or becomes a party) of any kind or nature whatsoever (including,
without limitation, the fees and disbursements of counsel for and consultants of
such Indemnitees in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto), which may be imposed on, incurred by, or asserted against such
Indemnitees (whether direct, indirect, or consequential and whether based on any
federal or state laws or other statutory regulations, including, without
limitation, securities, environmental and commercial laws and regulations, under
common law or at equitable cause or on contract or otherwise) in any manner
relating to or arising out of this Agreement or any of the other Loan Documents,
or any act, event or transaction related or attendant thereto, the agreements of
the Agent, the Collateral Agent or the Lenders contained herein, the making of
Loans, the management of such Loans or the Collateral (including any liability
under Environmental Laws) or the use or intended use of the proceeds of such
Loans hereunder (collectively, the "Indemnified Matters"); provided that the
Borrowers shall not have any obligation to any Indemnitee hereunder with respect
to Indemnified Matters caused by or resulting from the willful misconduct or
gross negligence of such Indemnitee; provided, further that no Borrower shall
have any obligation to any Indemnitee hereunder with respect to taxes that are
imposed on the net income of any Indemnitee or any franchise or doing business
taxes imposed on any Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrowers
shall contribute the maximum portion which they are permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees.
(b) To the extent permitted by applicable law, no claim may be made by
the Borrowers or any other Person against the Agent, the Collateral Agent, any
Lender or any of their respective affiliates, directors, officers, employees,
agents, attorneys, accountants, representatives or consultants for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by any of the Loan Documents or any act, omission or
event occurring in connection therewith; and the Borrowers hereby waive, release
and agree not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
SECTION 11.07. Survival of Representations and Warranties, etc. All
warranties and representations made by any Borrower in any Loan Document shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Obligations. The confidentiality
obligations of each Borrower in Section 11.16, the indemnification obligations
of each Borrower in Section 11.06, and to the extent the second sentence of
Section 11.13 is applicable, all covenants of each Borrower, survive the
repayment of the Obligations.
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SECTION 11.08. Successors and Assigns; Assignments; Participations.
(a) General. The terms and provisions of the Loan Documents shall be
binding upon and inure to the benefit of the Borrowers, the Agent, the
Collateral Agent and the Lenders and their respective successors and assigns,
except that (i) no Borrower shall have any right to assign its rights or
obligations under the Loan Documents and (ii) any assignment by any Lender must
be made in compliance with subsection (c) below. With respect to any Borrower,
successors and assigns shall include, without limitation, any receiver, trustee
or debtor-in-possession of or for such Borrower. Notwithstanding the foregoing,
any Lender may at any time, without the consent of the Borrowers or the Agent,
assign all or any portion of its rights under this Agreement and its Notes to a
Federal Reserve Bank or to an affiliate of such Lender; provided, however, that
no such assignment shall release the transferor Lender from its obligations
hereunder. The Agent shall be entitled to utilize its Register to determine the
payee of any Note for all purposes hereof. Any request, authority or consent of
any Person, who at the time of making such request or giving such authority or
consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
(b) Participations.
(i) Subject to the terms set forth in this Section 11.08(b), any
Lender may, in the ordinary course of its business and in accordance
with applicable law, at any time sell to one or more banks or other
entities ("Participants") participating interests in any Loan owing to
such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender under the Loan Documents
on a pro rata or non-pro rata basis in an aggregate principal amount
of at least $5,000,000. Notice of such participation to the Agent
shall be required prior to any participation becoming effective with
respect to a Participant which is not a Lender or an Affiliate
thereof. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under the Loan
Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the holder of any such Note for
all purposes under the Loan Documents, such Lender shall be solely
responsible for any withholding taxes or any filing or reporting
requirements in connection therewith relating to such Participant, all
amounts payable by the Borrowers under this Agreement shall be
determined as if such Lender had not sold such participating
interests, and the Borrowers and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under the Loan Documents except that, for
purposes of Section 2.13 hereof, the Participants shall be entitled to
the same rights as if they were Lenders, provided that no Participant
shall be entitled to receive any greater amount pursuant to Section
2.13 than such Lender would have been entitled to receive in respect
of the amount of the participation transferred to such Participant had
no transfer occurred.
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(ii) Each Lender shall retain the sole right to approve, without
the consent of any Participant, any amendment, modification or waiver
of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan or Commitment in which
such Participant has an interest which forgives principal, interest or
fees or reduces the interest rate or fees payable pursuant to the
terms of this Agreement with respect to any such Loan or Commitment,
postpones any date fixed for any regularly-scheduled payment of
principal of, or interest or fees on, any such Loan or Commitment, or
releases all or substantially all of the Collateral, if any, securing
any such Loan.
(iii) The Borrowers agree that each Participant shall be deemed
to have the right of setoff provided in Section 9.09 hereof in respect
to its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan
Documents, provided that each Lender shall retain the right of setoff
provided in Section 9.09 hereof with respect to the amount of
participating interests sold to each Participant except to the extent
such Participant exercises its right of setoff. The Lenders agree to
share with each Participant, and each Participant, by exercising the
right of setoff provided in Section 9.09 hereof, agrees to share with
each Lender, any amount received pursuant to the exercise of its right
of setoff, such amounts to be shared in accordance with Section 9.09
as if each Participant were a Lender.
(c) Assignments.
(i) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more
banks or other entities ("Purchasers") all or a portion of its rights
and obligations under this Agreement (including, without limitation,
its Commitment and the Loans owing to it hereunder) in accordance with
the provisions of this Section 11.08(c). Each assignment shall be of a
constant, and not a varying, ratable percentage of all of the
assigning Lender's rights and obligations under this Agreement. Such
assignment shall be evidenced by an Assignment Agreement in form and
substance reasonably satisfactory to the Agent and shall not be
permitted hereunder unless such assignment is either for all of such
Lender's rights and obligations under the Loan Documents or, for Loans
and Commitments in an aggregate principal amount equal to the lesser
of $5,000,000 (which minimum amount may be waived by the Requisite
Lenders after the occurrence of a Default) and such Lender's
Commitment Amount.
(ii) Upon (i) delivery to the Agent of a notice of assignment (a
"Notice of Assignment"), together with any consent required hereunder,
and (ii) payment of a $3,500 processing fee to the Agent for
processing such assignment if such assignment is to a Person which is
not an affiliate of the assigning Lender, such assignment shall become
effective on the effective date specified in such Notice of
Assignment. The assigning Lender shall be obligated to reimburse the
95
Agent for all other costs and expenses associated with the preparation
and execution of such assignment (including reasonable attorneys' fees
arising out of such preparation and execution of such assignment). The
Notice of Assignment shall contain a representation by the Purchaser
to the effect that none of the consideration used to make the purchase
of the Commitment and Loans under the applicable assignment agreement
are "plan assets" as defined under ERISA and that the rights and
interests of the Purchaser in and under the Loan Documents will not be
"plan assets" under ERISA. On and after the effective date of such
assignment, such Purchaser, if not already a Lender, shall for all
purposes be a Lender party to this Agreement and any other Loan
Documents executed by the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent
as if it were an original party hereto, and no further consent or
action by the Borrowers, the Lenders or the Agent shall be required to
release the transferor Lender with respect to the percentage of the
aggregate Commitment and Loans assigned to such Purchaser. Upon the
consummation of any assignment to a Purchaser pursuant to this Section
11.08(c)(ii), the transferor Lender, the Agent and the Borrowers shall
make appropriate arrangements so that replacement Notes are issued to
such transferor Lender and new Notes or, as appropriate, replacement
Notes, are issued to such Purchaser, in each case in principal amounts
reflecting their Commitment and their Loans, as adjusted pursuant to
such assignment.
(iii) The Agent shall maintain at its address referred to in
Section 11.01 a copy of each assignment delivered to and accepted by
it pursuant to this Section 11.08 and a register (the "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
from time to time and whether such Lender is an original Lender or the
assignee of another Lender pursuant to an assignment under this
Section 11.08. The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrowers,
the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the
Borrowers or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
SECTION 11.09. Severability. In case any one or more of the provisions
contained in this Agreement or any other Loan Document shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby.
SECTION 11.10. Cover Page, Table of Contents and Section Headings. The
cover page, Table of Contents and section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of or be taken into consideration in interpreting this
Agreement.
SECTION 11.11. Counterparts. This Agreement may be signed in
counterparts with the same effect as if the signatures thereof and hereto were
upon the same instrument.
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SECTION 11.12. Application of Payments. Notwithstanding any contrary
provision contained in this Agreement or in any of the other Loan Documents,
upon the occurrence and during the continuance of any Event of Default, each
Borrower irrevocably waives the right to direct the application of any and all
payments at any time or times hereafter received by the Agent or any Lender from
such Borrower or with respect to any of the Collateral, and such Borrower does
hereby irrevocably agree that the Agent or any Lender shall have the continuing
exclusive right to apply and reapply any and all payments received at any time
or times hereafter, whether with respect to the Collateral or otherwise, against
the Obligations in such manner as the Agent or any Lender may deem advisable,
notwithstanding any entry by the Agent or any Lender upon any of its books and
records, subject, however, to the provisions of Section 2.08(c).
SECTION 11.13. Marshalling; Payments Set Aside. Neither the Agent nor
the Collateral Agent shall be under any obligation to marshall any assets in
favor of any Borrower or any other party or against or in payment of any or all
of the Obligations. To the extent that any Borrower makes a payment or payments
to any Agent or any Lender or the Agent, the Collateral Agent or any Lender
enforces its security interests or exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
SECTION 11.14. SERVICE OF PROCESS. EACH BORROWER WAIVES PERSONAL
SERVICE OF ANY PROCESS UPON IT AND, CONSENTS THAT ALL SERVICE OF PROCESS SHALL
BE MADE BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO SUCH BORROWER
AT THE ADDRESS INDICATED IN SECTION 11.01 AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED FIVE (5) BUSINESS DAYS AFTER SAME SHALL HAVE BEEN POSTED AS
AFORESAID.
SECTION 11.15. WAIVER OF JURY TRIAL, ETC. EACH OF THE BORROWERS, THE
AGENT, THE COLLATERAL AGENT AND THE LENDERS WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN THE AGENT, THE COLLATERAL AGENT OR ANY LENDER AND ANY
BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO. EACH OF
THE BORROWERS, THE AGENT, THE COLLATERAL AGENT AND THE LENDERS HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT ANY OF THEM MAY FILE AS AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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SECTION 11.16. Confidentiality. No Borrower shall at any time before
or after payment in full and satisfaction of all of the Obligations, reveal,
divulge or make known, or knowingly permit to be so revealed, divulged or made
known, to any Person (including Persons within its own organization who do not
have a definite need to know for the purpose of performance of this Agreement),
the terms or conditions of the Fee Letters; provided that the foregoing shall
not apply to information required to be disclosed by order of a court of
competent jurisdiction or in connection with any governmental investigation (in
each case to the extent disclosure is required, but no further) so long as such
Borrower notifies the Agent in writing of any circumstances of which such
Borrower is aware that may lead to such a requirement or order, so as to allow
the Agent to take steps to contest such order or investigation; provided,
further, that the foregoing shall not apply to information which is required to
be disclosed by such Borrower or information which in the reasonable
determination of such Borrower is desirable for such Borrower to disclose,
pursuant to federal or state securities laws, pursuant to the rules or
regulations of the FCC, any PUC or other applicable Governmental Authority, or
to Persons who are consultants, advisors (including but not limited to attorneys
and auditors), officers, directors or employees of such Borrower, provided that
each such Person is required by such Borrower to keep such information
confidential.
SECTION 11.17. Entire Agreement, etc. This Agreement (including all
schedules and exhibits referred to herein), the Notes, the Fee Letters and all
other Loan Documents constitute the entire contract between the parties hereto
with respect to the subject matter hereof and thereof and shall supersede and
take the place of any other instrument purporting to be an agreement of the
parties hereto relating to such subject matter.
SECTION 11.18. No Strict Construction. The parties hereto have
participated, jointly in the negotiation and drafting of this Agreement. In the
event of any ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of authorship of any provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers as of the day and year first
above written.
KMC TELECOM INC., as a Borrower
By:/S/CYNTHIA WORTHMAN
-------------------------------------
Name: Cynthia Worthman
Title: Vice President & Chief
Financial Officer
KMC TELECOM II, INC., as a Borrower
By:/S/CYNTHIA WORTHMAN
-------------------------------------
Name: Cynthia Worthman
Title: Vice President & Chief
Financial Officer
KMC TELECOM OF VIRGINIA, INC., as a
Borrower
By:/S/CYNTHIA WORTHMAN
-------------------------------------
Name: Cynthia Worthman
Title: Vice President & Chief
Financial Officer
KMC TELECOM LEASING I LLC, as a Borrower
BY: KMC TELECOM INC., as Sole Member
By:/S/CYNTHIA WORTHMAN
-------------------------------------
Name: Cynthia Worthman
Title: Vice President & Chief
Financial Officer
KMC TELECOM LEASING II LLC, as a Borrower
BY: KMC TELECOM II, INC., as Sole Member
By:/S/CYNTHIA WORTHMAN
-------------------------------------
Name: Cynthia Worthman
Title: Vice President & Chief
Financial Officer
AT&T COMMERCIAL FINANCE CORPORATION, as a
Lender and as Collateral Agent
By:/S/MICHAEL V. MONAHAN
-------------------------------------
Name: Michael V. Monahan
Title: Vice President
FIRST UNION NATIONAL BANK, as a Lender
and as Administrative Agent
By:/S/MARK M. HARDEN
-------------------------------------
Name: Mark M. Harden
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL CORPORATION, as
a Lender
By:/S/MOLLY S. FERGUSON
-------------------------------------
Name: Molly S. Ferguson
Title: Manager - Operations
CANADIAN IMPERIAL BANK OF COMMERCE, as a
Lender
By:/S/ELLEN E. MARSHALL
-------------------------------------
Name: Ellen B. Marshall
Title: Managing Director
ANNEX A
COMMITMENT AMOUNTS
REVOLVING LOANS
Revolving Loan
Lender Commitment Amount
- - ------ -----------------
AT&T Commercial Finance $43,750,000
Canadian Imperial Bank of Commerce $43,750,000
First Union National Bank $43,750,000
General Electric Capital Corporation $43,750,000
------------
TOTAL $175,000,000
TERM LOANS
Term Loan
Lender Commitment Amount
- - ------ -----------------
AT&T Commercial Finance $18,750,000
Canadian Imperial Bank of Commerce $18,750,000
First Union National Bank $18,750,000
General Electric Capital Corporation $18,750,000
-----------
TOTAL $75,000,000
------------
TOTAL COMMITMENTS $250,000,000
------------
ANNEX B
FINANCIAL COVENANT INFORMATION
ANNEX C
REVOLVING LOAN COMMITMENT REDUCTIONS
Payment Date Percentage Reduction
April 1, 2002 2.5%
July 1, 2002 2.5%
October 1, 2002 2.5%
January 1, 2003 2.5%
July 1, 200
April 1, 2003 5.0%
July 1, 2003 5.0%
October 1, 2003 5.0%
January 1, 2004 5.0%
July 1, 200
April 1, 2004 5.0%
July 1, 2004 5.0%
October 1, 2004 5.0%
January 1, 2005 5.0%
July 1, 200
April 1, 2005 5.0%
July 1, 2005 5.0%
October 1, 2005 5.0%
January 1, 2006 5.0%
July 1, 200
April 1, 2006 7.5%
July 1, 2006 7.5%
October 1, 2006 7.5%
Revolving Loan Termination Date 7.5%
SCHEDULE 1.01(A)
APPLICABLE MARGIN FOR REVOLVING LOANS
Applicable Applicable
Margin for Margin for
Base Rate LIBOR
Loans Loans
----- -----
The Borrowers have fewer than 12 Completed Cities 3.00% 4.00%
The Borrowers have 12 or more Completed Cities and the 2.75% 3.75%
Total Leverage Ratio > = 12.0x
The Total Leverage Ratio > = 10.0x and < 12.0x 2.50% 3.50%
The Total Leverage Ratio > = 8.0x and < 10.0x 2.25% 3.25%
The Total Leverage Ratio > = 6.0x and < 8.0x 2.00% 3.00%
The Total Leverage Ratio < 6.0x 1.75% 2.75%
APPLICABLE MARGIN FOR TERM LOANS
Applicable Applicable
Margin for Margin for
Base Rate LIBOR
Loans Loans
----- -----
The Borrowers have fewer than 12 Completed Cities 3.25% 4.25%
The Borrowers have 12 or more Completed Cities and the 3.00% 4.00%
Total Leverage Ratio > = 12.0x
The Total Leverage Ratio > = 10.0x and < 12.0x 2.75% 3.75%
The Total Leverage Ratio > = 8.0x and < 10.0x 2.50% 3.50%
The Total Leverage Ratio > = 6.0x and < 8.0x 2.25% 3.25%
The Total Leverage Ratio < 6.0x 2.00% 3.00%