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CREDIT FACILITY AGREEMENT
BY AND AMONG
TALK.COM HOLDING CORP.
AND
ACCESS ONE COMMUNICATIONS CORP.
AND
CERTAIN OF THEIR AFFILIATES AND DIRECT AND INDIRECT SUBSIDIARIES
AND
MCG FINANCE CORPORATION
(AS AGENT FOR ITSELF AND THE OTHER LENDERS)
Executed and Effective as of October 20, 2000
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TABLE OF CONTENTS
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ARTICLE 1: THE CREDIT FACILITIES..............................................1
1.1. Term Loan Facility...............................................1
1.1.1. Establishment of Credit Facility.......................1
1.1.2. Facility Maturity......................................1
1.1.3. Use of Proceeds........................................2
1.1.4. Term Loan Notes........................................2
1.1.5. Interest...............................................3
1.1.5.1. Reserved....................................3
1.1.5.2. Establishment of Portions...................3
1.1.5.3. Interest Rate Determination.................3
1.1.5.4. Selection of Rate Index.....................3
1.1.5.5. Applicable Rate Margins.....................3
1.1.5.6. Calculation of Interest.....................4
1.1.5.7. Special LIBO Rate Provisions................4
1.1.6. Repayment and Prepayment...............................5
1.1.6.1. Interest Payments...........................6
1.2.6.2. Principal Payments..........................6
1.1.6.3. Reserved....................................6
1.1.6.4. Payments at Maturity........................6
1.1.6.5. Prepayments.................................6
1.1.6.6. Availability for Reborrowing................8
1.2. Line of Credit Facility..........................................7
1.2.1. Establishment of Credit Facility.......................7
1.2.2. Facility Maturity......................................8
1.2.3. Use of Proceeds........................................8
1.2.4. Line of Credit Notes...................................8
1.2.5. Interest...............................................9
1.2.5.1. Reserved....................................9
1.2.5.2. Establishment of Portions...................9
1.2.5.3. Interest Rate Determination.................9
1.2.5.4. Selection of Rate Index.....................9
1.2.5.5. Applicable Rate Margins....................10
1.2.5.6. Calculation of Interest....................10
1.2.5.7. Special LIBO Rate Provisions...............10
1.2.6. Repayment and Prepayment..............................12
1.2.6.1. Interest Payments..........................12
1.2.6.2. Reserved...................................12
1.2.6.3. Reserved...................................12
1.2.6.4. Payments at Maturity.......................12
1.2.6.5. Prepayments................................12
1.2.6.6. Availability for Reborrowing...............13
1.3. Determination of Commitment Amounts and Available Credit
Portion.........................................................13
1.3.1. Initial Commitments...................................14
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1.3.2. Available Credit Portion for Line of Credit...........14
1.3.3. Voluntary Reduction of Commitment.....................14
1.4. Advances........................................................14
1.4.1. Requesting Advances...................................14
1.4.2. Funding Advances......................................15
1.4.3. Indemnification for Revocation or Failure to Satisfy
Conditions............................................15
1.4.4. Obligation to Advance.................................15
1.5. Payments in General.............................................15
1.5.1. Manner and Place of Payments..........................15
1.5.2. Special Payment Timing Issues.........................15
1.5.3. Application of Payments...............................16
1.5.4. LIBO Rate Payments Not at End of Interest Period......16
1.5.5. Capital Adequacy, Taxes and Other Adjustments.........16
1.5.6. Payment of Expenses, Indemnities and Protective
Advances..............................................17
1.5.7. Payments upon Termination.............................17
1.5.8. Late Payments.........................................17
1.5.9. Default Interest......................................17
1.5.10. Usury Savings Provision..............................17
1.6. Release of Security.............................................18
1.7. Fees and Other Compensation.....................................18
1.7.1. Structuring Fee.......................................18
1.7.2. Origination Fee for Term Facility.....................18
1.7.3. Origination Fee for Line of Credit Facility...........18
1.7.4. Periodic Unused Fee...................................18
1.7.5. Issuance of Warrants upon Establishment of Line
Facility..............................................18
1.7.6. Issuance of Warrants Associated with EBITDA Shortfall.19
1.7.7. AoL Disbursement Fee..................................19
1.7.8. Other Fees............................................20
ARTICLE 2: CONDITIONS PRECEDENT..............................................20
2.1. Closing Conditions..............................................20
2.1.1. Compliance............................................20
2.1.2. Documents.............................................20
2.2. Effectiveness of Line of Credit Facility........................22
2.3. All Line Advances...............................................23
ARTICLE 3: REPRESENTATIONS AND WARRANTIES....................................23
3.1. Organization and Good Standing..................................23
3.2. Power and Authority.............................................24
3.3. Validity and Legal Effect.......................................24
3.4. No Violation of Laws or Agreements..............................24
3.5. Title to Assets; Existing Encumbrances; Identification of
Intellectual and Real Property..................................24
3.6. Capital Structure and Equity Ownership..........................25
3.7. Subsidiaries, Affiliates and Investments........................25
3.8. Material Contracts..............................................25
3.9. Licenses and Authorizations.....................................25
3.10. Taxes and Assessments...........................................26
</TABLE>
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3.11. Litigation and Legal Proceedings................................26
3.12. Accuracy of Financial Information...............................26
3.13. Accuracy of Other Information...................................26
3.14. Compliance with Laws Generally..................................26
3.15. ERISA Compliance................................................26
3.16. Environmental Compliance........................................26
3.17. Margin Rule Compliance..........................................27
3.18. Fees and Commissions............................................27
3.19. Solvency........................................................27
3.20. Reserved........................................................27
ARTICLE 4: AFFIRMATIVE COVENANTS.............................................27
4.1. Financial Covenants and Ratios..................................27
4.1.1. Minimum Revenue by Subscriber Type....................27
4.1.2. Maximum Subscriber Acquisition Costs..................27
4.1.3. Minimum Gross Profit Margin...........................27
4.1.4. Interest Coverage Ratio...............................27
4.1.5. Total Charge Coverage Ratio...........................27
4.1.6. Funded Debt-Revenue Leverage Covenants................27
4.1.7. Funded Debt-OCF Leverage Covenants....................27
4.1.8. Liquidity Covenant Prior to Line Effective Date.......27
4.2. Periodic Financial Statements and Compliance Certificates.......27
4.2.1. Quarterly Financial Statements........................27
4.2.2. Annual Financial Statements...........................28
4.3. Other Financial and Specialized Reports.........................28
4.3.1. Reserved..............................................28
4.3.2. SEC Filings, Shareholder Communications and Press
Releases..............................................28
4.4. Reserved........................................................29
4.5. Books and Records; Maintenance of Properties....................29
4.6. Existence and Good Standing.....................................29
4.7. Deposit Accounts................................................29
4.8. Insurance; Disaster Contingency.................................29
4.8.1. General Insurance Provisions..........................29
4.8.2. Disaster Recovery and Contingency Program.............30
4.9. Loan Purpose....................................................30
4.10. Taxes...........................................................30
4.11. Reserved........................................................30
4.12. Litigation and Administrative Proceedings.......................30
4.13. Monitoring Compliance; Occurrence of Certain Events.............30
4.14. Compliance with Laws............................................30
4.15. Further Actions.................................................31
4.15.1. Additional Collateral................................31
4.15.2. Further Assurances...................................31
4.15.3. Estoppel Certificates................................31
4.15.4. Waivers and Consents.................................32
4.15.5. Access and Audits....................................32
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4.15.6. Updating of Loan Document Schedules..................32
4.16. Costs and Expenses..............................................32
4.17. Other Information...............................................33
4.18. Reserved........................................................33
4.19. Post-Closing Items..............................................33
ARTICLE 5: NEGATIVE COVENANTS................................................35
5.1. Capital Expenditures............................................35
5.2. Additional Indebtedness.........................................35
5.3. Guaranties......................................................35
5.4. Reserved........................................................35
5.5. Liens and Encumbrances; Negative Pledge.........................35
5.6. Transfer of Assets..............................................37
5.7. Acquisitions and Investments....................................37
5.8. New Ventures; Mergers...........................................39
5.9. Transactions with Affiliates....................................39
5.10. Distributions or Dividends......................................39
5.11. Payment of Subordinated Indebtedness............................40
5.12. Reserved........................................................40
5.13. Issuance of Additional Equity...................................40
5.14. Removal of Assets...............................................40
5.15. Modifications to Organic Documents..............................41
5.16. Terms of and Modifications to Material Relationships............41
5.17. Margin Stock Restrictions; Other Federal Statutes...............41
ARTICLE 6: ADDITIONAL COLLATERAL AND RIGHT OF SET OFF........................41
6.1. Additional Collateral...........................................41
6.2. Right of Set-Off................................................41
6.3. Additional Rights...............................................42
ARTICLE 7: DEFAULT AND REMEDIES..............................................42
7.1. Events of Default...............................................42
7.1.1. Payment Obligations...................................42
7.1.2. Representations and Warranties........................42
7.1.3. Financial Covenants...................................42
7.1.4. Other Covenants in Loan Documents.....................42
7.1.5. Default Under Other Agreements with Administrative
Agent or Lenders......................................43
7.1.6. Default Under Material Agreements with Other Parties..43
7.1.7. Security Interest.....................................43
7.1.8. Change of Control.....................................44
7.1.9. Government Action.....................................44
7.1.10. Insolvency...........................................45
7.1.11. Additional Liabilities...............................45
7.1.12. Reserved.............................................45
7.1.13. FCC and Other Regulatory-Action Defaults.............45
7.1.14. Loss or Revocation of Guaranty.......................45
7.2. Remedies........................................................45
7.2.1. Acceleration, Termination and Pursuit of Collateral...45
7.2.2. Mandatory Partial Prepayments.........................46
7.2.3. Other Remedies........................................46
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7.2.4. Special Regulatory-Related Remedies...................46
ARTICLE 8: RELATIONSHIP AMONG LENDERS........................................47
8.1. Appointment, Authorization and Grant of Authority...............47
8.2. Acceptance of Appointment.......................................48
8.3. Administrative Agent's Relationship with Borrowers..............48
8.4. Non-Reliance on Administrative Agent and Other Lenders..........48
8.5. Reliance by Administrative Agent................................49
8.6. Delegation of Duties; Additional Reliance by Administrative
Agent...........................................................49
8.7. Acting on Instructions of Lenders...............................49
8.8. Actions Upon Occurrence of Default or Event of Default..........50
8.9. Administrative Agent's Rights as Lender in Individual Capacity..50
8.10. Advances By Administrative Agent................................50
8.11. Payments to Lenders.............................................51
8.12. Pro-Rata Sharing of Setoff Proceeds.............................51
8.13. Limitation on Liability of Administrative Agent.................51
8.14. Indemnification.................................................51
8.15. Resignation; Successor Administrative Agent.....................52
ARTICLE 9: DEFINITIONS AND RULES OF CONSTRUCTION.............................52
9.1. Definitions.....................................................52
9.2. Rules of Interpretation and Construction........................65
9.2.1. Plural; Gender........................................65
9.2.2. Section and Schedule References.......................66
9.2.3. Titles and Headings...................................66
9.2.4. Including and Among Other References..................66
9.2.5. Shall, Will, Must, Can, May References................66
9.2.6. Time of Day References................................66
9.2.7. Knowledge of a Person.................................66
9.2.8. Successors and Assigns................................66
9.2.9. Modifications to Documents............................67
9.2.10. References to Laws and Regulations...................67
9.2.11. Financial and Accounting Terms.......................67
9.2.12. Conflicts Among Loan Documents.......................67
9.2.13. Independence of Covenants and Defaults...............67
9.2.14. Administrative Agent.................................67
ARTICLE 10: MISCELLANEOUS....................................................67
10.1. Indemnification, Reliance and Assumption of Risk................67
10.2. Assignments and Participations..................................68
10.3. No Waiver; Delay................................................69
10.4. Modifications and Amendments....................................69
10.5. Disclosure of Information to Third Parties......................70
10.6. Binding Effect and Governing Law................................71
10.7. Notices.........................................................71
10.8. Relationship with Prior Agreements..............................72
10.9. Severability....................................................72
10.10. Termination and Survival........................................72
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10.11. Reinstatement...................................................73
10.12. Counterparts....................................................73
10.13. Waiver of Suretyship Defenses...................................73
10.14. WAIVER OF LIABILITY.............................................73
10.15. FORUM SELECTION; CONSENT TO JURISDICTION........................74
10.16. WAIVER OF JURY TRIAL............................................74
</TABLE>
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SCHEDULES:
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Schedule A List of Borrowers
Schedule 3.1 Good Standing / Foreign Qualification Jurisdictions
Schedule 3.2 Missing Consents
Schedule 3.5A Intellectual Property
Schedule 3.5B Real Property Interests
Schedule 3.5C Operating Names / Trade Names
Schedule 3.6 Capital Structure / Equity Ownership
Schedule 3.7 Subsidiaries, Affiliates & Investments
Schedule 3.8 Material Contracts
Schedule 3.9 Licenses and Authorizations
Schedule 3.10 Taxes and Assessments
Schedule 3.11 Material Litigation
Schedule 3.18 Fees and Commissions
Schedule 4.7 Existing Deposit Accounts
Schedule 5.2 Permitted Additional Indebtedness
Schedule 5.3 Permitted Additional Guaranties
Schedule 5.5 Permitted Additional Liens
Schedule 5.7 Permitted Additional Investments
EXHIBITS:
Exhibit 1.7.6 Form of EBITDA Shortfall Warrant
Exhibit 1.4.1 Form of Advance Request
Exhibit 4.2 Form of Borrowing Base and Periodic Compliance Certificate
Exhibit 10.2 Form of Assignment and Assumption Agreement
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CREDIT FACILITY AGREEMENT
THIS CREDIT FACILITY AGREEMENT (as defined in Article 9, along with all
other defined terms, this "Agreement") is made and effective as of October 20,
2000, by and among TALK.COM HOLDING CORP. ("Talk Holding"), and ACCESS ONE
COMMUNICATIONS CORP. ("Access One") and CERTAIN AFFILIATES AND DIRECT AND
INDIRECT SUBSIDIARIES OF TALK HOLDING AND ACCESS ONE (WHICH EITHER ARE LISTED ON
SCHEDULE A AS OF THE EFFECTIVE DATE HEREOF OR ARE HEREAFTER ADDED AS BORROWING
SUBSIDIARIES PURSUANT TO THE TERMS HEREOF) (as more fully defined in Article 9,
Talk Holding, Access One and each such other borrower are referred to
individually as a "Borrower" and collectively as the "Borrowers"), and EACH
FINANCIAL INSTITUTION THAT FROM TIME TO TIME IS A "LENDER" HEREUNDER (as more
fully defined in Article 9, each, a "Lender"; collectively, the "Lenders"), and
MCG FINANCE CORPORATION (as more fully defined in Article 9, "MCG" or
"Administrative Agent").
R E C I T A L S
WHEREAS, Borrowers desire and have applied to Lenders for a credit
facility (to be administered by Administrative Agent) consisting of a term loan
facility pursuant to which up to $20 million can be borrowed on the Closing Date
on a senior secured basis and a line of credit arrangement pursuant to which
(upon successful syndication thereof by Administrative Agent) up to $30 million
can be borrowed from time to time on a senior secured basis; and
WHEREAS, Lenders and Administrative Agent are each willing to
accommodate the request for credit upon and subject to the terms, conditions and
provisions of the Loan Documents;
NOW, THEREFORE, for good and valuable consideration (receipt and
sufficiency of which are hereby acknowledged), and intending to be legally bound
hereby, Borrowers (jointly and severally), each Lender and Administrative Agent
each hereby agrees as follows:
ARTICLE 1: THE CREDIT FACILITIES
1.1. Term Loan Facility.
1.1.1. Establishment of Credit Facility. Subject to the terms
and conditions of and in reliance upon the representations and warranties in the
Loan Documents, each Term Lender (severally and on a Pro Rata basis with the
other Term Lenders) will lend funds to Borrowers on a senior secured basis on
the Closing Date in an aggregate principal amount advanced not to exceed the
Term Loan Commitment (as determined in accordance with Section 1.3).
1.1.2. Facility Maturity. The Term Loan Facility will mature
on June 30, 2001 (as may be extended from time to time as set forth in this
Section 1.1.2 or otherwise in the sole and absolute discretion of the Term
Lenders, "Term Loan Maturity Date"). Notwithstanding the foregoing, Borrowers
(upon delivery of written notice to Administrative Agent at any time prior to
the
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then effective Term Loan Maturity Date) shall be entitled (a) to extend any such
Term Loan Maturity Date from time to time for additional successive periods not
to exceed 364 calendar days from the date of such notice but in no event beyond
June 30, 2005 and/or (b) to extend the then effective Term Loan Maturity Date
until June 30, 2005 upon delivery to Administrative Agent of written evidence
satisfactory to Administrative Agent that Borrowers have obtained all necessary
regulatory approvals (in final, non-appealable form) for the incurrence of
indebtedness as set forth in this Agreement and having a term with such a
requested Term Loan Maturity Date.
1.1.3. Use of Proceeds. The funds advanced under this Term
Loan Facility may be used exclusively as follows:
a. $4 million, to fund and/or reimburse Borrowers for
various costs, fees, expenses and other payments made in connection with the
Access One Merger, and
b. $15.25 million, to satisfy and refinance the
indebtedness owed by one or more Borrowers to the various Persons separately
disclosed to Administrative Agent in writing on the Closing Date (which
disclosure shall identify each payee, the corresponding amounts being satisfied,
and the purpose for which such indebtedness being satisfied was initially
incurred), and
c. To fund the purchase of specific property, plant
and equipment separately disclosed to Administrative Agent in writing on the
Closing Date, and
d. Up to $750,000 to pay for services and materials
associated with a Borrower's marketing activities (as to which, upon reasonable
request of Administrative Agent, Borrowers shall provide supporting descriptive
information), and
e. The balance of the Term Loan Commitment (if any)
to pay (i) for fees and expenses associated with consummating and documenting
the transactions contemplated by this Agreement, and (ii) for such other
purposes as specifically authorized hereunder or in writing by the Term Lenders
and the Required Lenders (in their sole and absolute discretion).
1.1.4. Term Loan Notes. The indebtedness under the Term Loan
Facility and the corresponding (joint and several) obligation of Borrowers to
repay each Term Lender with interest in accordance with the terms hereof will be
evidenced by one or more Term Loan Notes (as amended, restated, replaced,
supplemented, extended or renewed from time to time, each, a "Term Loan Note";
collectively, the "Term Loan Notes") payable to the order of each Term Lender.
The outstanding indebtedness evidenced by the Term Loan Notes will be due and
payable in full on the Term Loan Maturity Date. The aggregate stated principal
amount of the Term Loan Notes will be the Term Loan Commitment established as of
the Closing Date pursuant to Section 1.3; provided, however, that the maximum
liability under such Term Loan Notes will be limited at all times to the actual
amount of indebtedness (including principal, interest, fees, expenses and
indemnities) then outstanding under the Term Loan Facility. Each Term Lender is
authorized to note or endorse the date and amount of each Advance and each
payment under the Term Loan Facility on a schedule annexed to and constituting a
part of the Term Loan Notes. Such notations or endorsements (if made) will
constitute prima facie evidence of the information noted or endorsed on such
schedule, but the absence of any such notation
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or endorsement will not limit or otherwise affect the obligations or liabilities
of Borrowers thereunder and hereunder.
1.1.5. Interest. Interest under the Term Loan Facility (and
with respect to any other amounts advanced to or on behalf of Borrowers or
otherwise outstanding under the Loan Documents) will be determined and imposed
in accordance with the following provisions (and, as applicable, Sections 1.5
and 1.7):
1.1.5.1. Reserved.
1.1.5.2. Establishment of Portions. For purposes of
determining interest, Borrowers may designate and subdivide the outstanding
balance under the Term Loan Facility (including any other amounts advanced to or
on behalf of Borrowers under the Loan Documents) into a maximum of 6 Portions at
an Adjusted LIBO Rate and 1 Portion at a Prime Rate (inclusive of the number of
Portions permitted under the Line of Credit Facility). No Portion accruing
interest at an Adjusted LIBO Rate may be less than $500,000, and all Portions
under the Term Loan Facility collectively must total the outstanding balance
under the Term Loan Facility.
1.1.5.3. Interest Rate Determination. The outstanding
principal balance under each Portion under the Term Loan Facility will bear
interest (computed daily until paid in immediately available funds, whether
prior to or after the Term Loan Maturity Date) at the applicable Rate Index (as
determined in accordance with Section 1.1.5.4) plus the applicable Rate Margin
(as determined in accordance with Section 1.1.5.5). If the Prime Rate is the
applicable Rate Index for a Portion, then the interest rate on such Portion will
change when and as the Prime Rate or Rate Margin changes; and if an Adjusted
LIBO Rate is the applicable Rate Index for a Portion, then the interest rate on
such Portion will be established on the first day of each Interest Period for
such Portion and will not change during such Interest Period (except as
otherwise permitted under Section 1.1.5). Notwithstanding the foregoing, the
applicable interest rate for the outstanding balance under the Term Loan
Facility from the Closing Date until the first date on which the Rate Index or
Rate Margin may be changed will be 10.76% per annum (i.e., the Adjusted LIBO
Rate applicable for a 3-month period as of the Closing Date (6.76%) plus a Rate
Margin of 4.0% per annum).
1.1.5.4. Selection of Rate Index. The applicable Rate
Index for each Portion under the Term Loan Facility will be either the Prime
Rate or an Adjusted LIBO Rate. The applicable Rate Index for each Portion may be
changed by Borrowers as of the first calendar day after the end of the
applicable Interest Period for such Portion. At least 3 Business Days (but not
more than 10 Business Days) before any day on which the Rate Index may be
changed, Borrowers must notify Administrative Agent in writing of (a) the dollar
amount of each Portion (if more than one exists) and (b) the selected Rate Index
for each Portion during the subsequent rate period (including, if applicable,
the selected length of the Interest Period for balances accruing interest at an
Adjusted LIBO Rate). If Administrative Agent does not timely receive such
written notification as to any Portion, then the then-current Rate Index will be
the applicable Rate Index for the outstanding balance of such unspecified
Portion during the subsequent Interest Period.
1.1.5.5. Applicable Rate Margins. From the Closing
Date through the date after December 31, 2000 on which Administrative Agent
receives the first periodic compliance
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certificate and consolidated financial statements delivered in accordance with
Section 4.2 that provides a certified calculation of the Leverage Ratio (the
"Term Facility Fixed Rate Margin Period"), the Rate Margin applicable to the
Term Loan Facility will be 4.0% for Portions accruing interest at an Adjusted
LIBO Rate and 2.5% for Portions accruing interest at the Prime Rate. Thereafter,
the Rate Margin will be based upon the Leverage Ratio of (a) Funded Debt as of
the date of establishment of such Rate Margin to (b) TTM-OCF as of the last day
of the fiscal quarter reflected on the most recent quarterly financial
statements delivered to Administrative Agent in accordance with Section 4.2, and
will be determined according to the following schedule:
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Prime Rate Adjusted LIBO
Leverage Ratio Margin Rate Margin
-------------- ---------- -------------
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<2.5 2.00% 3.50%
>2.5 2.50% 4.00%
-
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The Rate Margin applicable to the Term Loan Facility will be established on the
calendar day immediately following the end of the Term Facility Fixed Rate
Margin Period and thereafter will be established as of the first calendar day of
each Interest Period after the date that Administrative Agent receives the most
recent periodic compliance certificate and financial statements delivered in
accordance with Section 4.2. Even though the pricing schedule above may
contemplate Rate Margins for Leverage Ratios in excess of the Leverage Ratios
from time to time permitted under Section 4.1: (1) the existence of such pricing
in the above schedule (or the effectiveness thereof) does not amend any of the
requirements under Section 4.1 or waive any Default or Event of Default caused
by any non-compliance therewith from time to time and (2) Administrative Agent
and Lenders may nevertheless exercise from time to time during the occurrence of
an Event of Default any and all rights and remedies that are permitted by any
Loan Document or applicable law.
1.1.5.6. Calculation of Interest. Interest under the
Term Loan Facility will be calculated, accrued, imposed and payable on the basis
of a 360-day year for the actual number of days elapsed. Interest will begin to
accrue on any amounts advanced to or on behalf of Borrowers under the Loan
Documents on and as of the date such funds are advanced.
1.1.5.7. Special LIBO Rate Provisions. The following
provisions apply with respect to Adjusted LIBO Rates (notwithstanding any other
provision hereof).
a. Change in Adjusted LIBO Rate. Any
Adjusted LIBO Rate may be prospectively adjusted by a particular Lender from
time to time to account for any additional or increased cost of maintaining any
necessary reserves for Eurodollar deposits (including any increase in the
Reserve Percentage) or any increased costs due to changes in the applicable law
occurring subsequent to the commencement of the then-applicable Interest Period.
Such Lender will give Administrative Agent notice of any such determination and
adjustment within a reasonable period of time thereafter. Upon receipt of such
notice, Administrative Agent will provide a copy thereof to Borrowers, and (upon
written request) such Lender will furnish a statement to Administrative Agent
and Borrowers setting forth the basis and the method for determining the amount
of such adjustment. A determination by any Lender hereunder will be conclusive
absent manifest error. If any Lender provides any such notice of adjustment,
then Borrowers may elect to change the then-applicable Rate
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Index (using the same Rate Margin category) to the Prime Rate for any Portion
then subject to an Adjusted LIBO Rate. Such election to change the Rate Index
must be made by providing Administrative Agent written notice thereof at any
time within 10 Business Days after receipt of such notice of adjustment
(notwithstanding any restriction hereunder limiting Rate Index changes to
certain dates, but subject to the requirement to pay all associated costs
therewith). Upon Administrative Agent's receipt of any such written election,
the identified Portion will thereupon begin to accrue interest at the Prime Rate
plus the Rate Margin (as applicable for the same Leverage Ratio as previously
was applicable for the Adjusted LIBO Rate) for the remainder of the then-current
Interest Period for such Portion.
b. Unavailability of Eurodollar Funds. An
Adjusted LIBO Rate will not be available for the Term Loan Facility if a
particular Lender at any time determines or reasonably believes that (1)
Eurodollar deposits equal to the amount of principal under the Term Loan
Facility for the applicable Interest Period are unavailable, or (2) an Adjusted
LIBO Rate will not adequately and fairly reflect the cost of maintaining
balances under the Term Loan Facility, or (3) by reason of circumstances
affecting Eurodollar markets, adequate and reasonable means do not then exist
for ascertaining an Adjusted LIBO Rate. Such Lender will give Administrative
Agent notice of any such determination and adjustment within a reasonable period
of time thereafter. Upon receipt of such notice, Administrative Agent will
provide a copy thereof to Borrowers, and (upon written request) such Lender will
furnish to Administrative Agent and Borrowers a statement setting forth the
basis for such determination or reasonable belief. A determination or belief by
any Lender hereunder will be conclusive absent manifest error.
c. Illegality. An Adjusted LIBO Rate also
will not be available under the Term Loan Facility if a particular Lender at any
time determines or reasonably believes that it is unlawful or impossible to fund
or maintain sufficient Eurodollar liabilities for the Term Loan Facility under
an Adjusted LIBO Rate. Such Lender will give Administrative Agent notice of any
such determination and adjustment within a reasonable period of time thereafter.
Upon receipt of such notice, Administrative Agent will provide a copy thereof to
Borrowers, and (upon written request) such Lender will furnish to Administrative
Agent and Borrowers a statement setting forth the basis for such determination
or reasonable belief. A determination or belief by any Lender hereunder will be
conclusive absent manifest error.
d. Continuance of a Default. An Adjusted
LIBO Rate, unless Required Lenders otherwise consent, also will not be available
under the Term Loan Facility during the existence of any Default or Event of
Default under the Loan Documents.
e. Alternative Rate. During the occurrence
of any event described in either Clauses "b," "c" or "d" of this Subsection,
each Term Lender's obligation hereunder to fund or maintain balances under an
Adjusted LIBO Rate will be suspended, and during such period, the outstanding
balance under the Term Loan Facility will bear interest at the Prime Rate plus
the appropriate Rate Margin (determined in accordance with Section 1.1.5.5).
1.1.6. Repayment and Prepayment. Each Borrower (jointly and
severally) hereby promises to pay Administrative Agent (for the ratable benefit
of the Term Lenders) the aggregate
5
<PAGE>
indebtedness under the Term Loan Facility (and other Loan Documents) in
accordance with the following provisions (and, as applicable, Sections 1.3, 1.5
and 1.7):
1.1.6.1. Interest Payments. Interest accrued under
the Term Loan Facility is due and payable monthly in arrears on the last
calendar day of each month and also, at the option of the Term Lenders, on the
last calendar day of each Interest Period for any Portion accruing interest at
an Adjusted LIBO Rate. Such payments shall commence on the first such date after
the Closing Date. Upon prior written notice of at least 30 calendar days from
Administrative Agent to Borrowers, Administrative Agent (with the consent of the
Term Lenders, but not more than once prior to the Term Loan Maturity Date) may
change the date during a month on which such payments are due and payable.
1.1.6.2. Principal Payments. On the last calendar day
of each fiscal quarter, COMMENCING AS OF SEPTEMBER 30, 2001, a payment of
principal equal to $1,250,000.00 of the principal balance outstanding under the
Term Loan Facility is due and payable in its entirety. Upon prior written notice
of at least 180 calendar days from Administrative Agent to Borrowers,
Administrative Agent (with the consent of the Term Lenders, but not more than
once prior to the Term Loan Maturity Date) may change the date during a quarter
on which such payments are due and payable.
1.1.6.3. Reserved.
1.1.6.4. Payments at Maturity. The outstanding
indebtedness under the Term Loan Facility (including all principal, interest,
fees, expenses and indemnities) is due and payable in its entirety on the Term
Loan Maturity Date.
1.1.6.5. Prepayments.
a. Voluntary Prepayments. At any time, upon
prior written notice to Administrative Agent of at least 5 Business Days, the
outstanding principal balance under the Term Loan Facility may be prepaid in
whole or in part. In connection with any such voluntary prepayment prior to
August 31, 2001, and in addition to any amounts due under Section 1.5.4,
Borrowers shall concurrently therewith pay Administrative Agent (for the ratable
benefit of the Term Lenders) a prepayment fee in the amount of 2% of such
prepayment. In connection with any such voluntary prepayment on or after August
31, 2001 but prior to August 31, 2002, and in addition to any amounts due under
Section 1.5.4, Borrowers shall concurrently therewith pay Administrative Agent
(for the ratable benefit of the Term Lenders) a prepayment fee in the amount of
1% of such prepayment. As of and after August 31, 2002, Borrowers may make such
prepayments without premium or penalty except as provided in Section 1.5.4. Any
voluntary partial prepayment must be in an amount of not less than $500,000 or
in multiples of $10,000 in excess thereof.
b. Mandatory Prepayments -- Excessive
Balance. If the outstanding indebtedness under the Term Loan Facility at any
time exceeds the Term Loan Commitment as determined in accordance with Section
1.3, then such excess amount outstanding must be re-paid to Administrative Agent
in its entirety (for the ratable benefit of the Term Lenders)
6
<PAGE>
immediately upon the earlier of (1) awareness by Borrowers of the advance or
incurrence thereof or (2) demand by Administrative Agent for payment thereof.
c. Mandatory Prepayments -- Asset Sales. If
Borrowers collectively sell, lease, license on an exclusive basis (without
retaining Borrowers' absolute right to use on a royalty-free basis), transfer or
otherwise dispose of any assets (other than inventory or other assets either
sold in the ordinary course of business with the proceeds thereof reinvested
within 180 calendar days thereafter in similar or other tangible assets or sold
to another Borrower) exceeding an aggregate fair market value of $2,500,000 in
any 12 consecutive calendar months, then a prepayment must be immediately made
on the outstanding indebtedness under the Term Loan Facility, unless the Term
Lenders otherwise consent. The amount of any such mandatory prepayment
(inclusive of the prepayment required under the Line of Credit Facility as set
forth in Section 1.2.6.5.c, which amounts shall be ratably allocated among the
Facilities based upon the then-current outstanding balances under such
Facilities) will be the cash proceeds of any such asset dispositions (or, with
respect to any non-cash proceeds, the cash proceeds thereof as and when received
by a Borrower) net of (1) reasonable commissions and expenses actually paid to
unrelated third parties in connection with such transactions and (2) taxes
payable as a direct result of such transactions (as such taxes are estimated and
certified to Administrative Agent by an acceptable certified public accountant
or Borrowers' chief financial officer).
d. Mandatory Prepayments - Maximum
Outstandings During Event of Default. Upon the occurrence and during the
continuance of any Event of Default, unless the Lenders otherwise consent, a
prepayment must be made immediately and from time to time on the outstanding
indebtedness under the Loan Documents to the extent that the aggregate
outstanding indebtedness of Borrowers under the Loan Documents exceeds the sum
of the following: (i) 100% of the aggregate accounts receivable of Borrowers for
the provision of telecommunications services to unrelated third party
Subscribers that are 60 calendar days or less past the initial due date therefor
(including unbilled usage or accounts receivable that are less than 30 days old)
and (ii) deposits of immediately available unencumbered funds held in accounts
that are legally titled and beneficially owned solely by one or more Borrowers
and/or Guarantor and that are encumbered with a first priority lien in favor of
Administrative Agent (for the ratable benefit of Lenders) pursuant to a security
agreement and a control agreement that are in form and substance acceptable to
Administrative Agent (in its commercially reasonable discretion). Any such
prepayment by Borrowers shall be allocated ratably among the Facilities and
Lenders based upon the then-current outstanding balances under such Facilities.
e. In General. Any prepayments under the
Term Loan Facility must include all accrued but unpaid interest under the Term
Loan Facility allocable to the amount prepaid through the date of such
prepayment.
1.1.6.6. Availability for Reborrowing. Principal
amounts repaid or prepaid under the Term Loan Facility prior to the Term Loan
Maturity Date will not be available for reborrowing hereunder. ---- ---
1.2. Line of Credit Facility.
7
<PAGE>
1.2.1. Establishment of Credit Facility. From and after the
Line Effective Date, but subject to the terms and conditions of and in reliance
upon the representations and warranties in the Loan Documents, each Line Lender
(severally and on a Pro Rata basis with the other Line Lenders) will lend funds
to Borrowers on a senior secured basis through Advances from time to time in an
aggregate principal amount advanced not to exceed the Available Credit Portion
(as determined in accordance with Section 1.3).
1.2.2. Facility Maturity. The Line of Credit Facility will
mature on June 30, 2001 (as may be extended from time to time as set forth in
this Section 1.2.2 or otherwise in the sole and absolute discretion of the Line
Lenders, "Line of Credit Maturity Date"). Notwithstanding the foregoing,
Borrowers (upon delivery of written notice to Administrative Agent at any time
prior to the then effective Line of Credit Maturity Date) shall be entitled (a)
to extend any such Line of Credit Maturity Date from time to time for additional
successive periods not to exceed 364 calendar days from the date of such notice
but in no event beyond June 30, 2003 and/or (b) to extend the then effective
Line of Credit Maturity Date until June 30, 2003 upon delivery to Administrative
Agent of written evidence satisfactory to Administrative Agent that Borrowers
have obtained all necessary regulatory approvals (in final, non-appealable form)
for the incurrence of indebtedness as set forth in this Agreement and having a
term with such a requested Line of Credit Maturity Date.
1.2.3. Use of Proceeds. The funds advanced under this Line of
Credit Facility may be used exclusively as follows:
a. To fund the purchase of specific property, plant,
equipment and other capital expenditures as separately identified to the Line
Lenders concurrent with any such Advance of funds, and ---
b. To fund marketing activities, working capital, and
other legitimate corporate expenditures of Borrowers, and ---
c. To pay dividends to TALK.COM INC. from time to
time if and to the extent permitted under Section 5.10, and
d. The balance of the Line of Credit Commitment (if
any) to pay (i) for fees and expenses associated with consummating and
documenting the transactions contemplated by this Agreement, and (ii) for such
other purposes as specifically authorized hereunder or in writing by the Line
Lenders and Required Lenders (in their sole and absolute discretion).
1.2.4. Line of Credit Notes. The indebtedness under the Line
of Credit Facility and the corresponding (joint and several) obligation of
Borrowers to repay each Line Lender with interest in accordance with the terms
hereof will be evidenced by one or more Line of Credit Notes (as amended,
restated, replaced, supplemented, extended or renewed from time to time, each, a
"Line of Credit Note"; collectively, the "Line of Credit Notes") payable to the
order of each Line Lender. The outstanding indebtedness evidenced by the Line of
Credit Notes will be due and payable in full on the Line of Credit Maturity
Date. The aggregate stated principal amount of the Line of Credit Notes will be
the Line of Credit Commitment established pursuant to Section 1.3; provided,
however, that the maximum liability under such Line of Credit Notes will be
limited at all times to the actual amount of
8
<PAGE>
indebtedness (including principal, interest, fees, expenses and indemnities)
then outstanding under the Line of Credit Facility. Each Line Lender is
authorized to note or endorse the date and amount of each Advance and each
payment under the Line of Credit Facility on a schedule annexed to and
constituting a part of the Line of Credit Notes. Such notations or endorsements,
if made, will constitute prima facie evidence of the information noted or
endorsed on such schedule, but the absence of any such notation or endorsement
will not limit or otherwise affect the obligations or liabilities of Borrowers
thereunder and hereunder.
1.2.5. Interest. Interest under the Line of Credit Facility
(and with respect to any other amounts advanced to or on behalf of Borrowers or
otherwise outstanding under the Loan Documents) will be determined and imposed
in accordance with the following provisions (and, as applicable, Sections 1.5
and 1.7):
1.2.5.1. Reserved.
1.2.5.2. Establishment of Portions. For purposes of
determining interest, Borrowers may designate and subdivide the outstanding
balance under the Line of Credit Facility (including any other amounts advanced
to or on behalf of Borrowers under the Loan Documents) into a maximum of 6
Portions at an Adjusted LIBO Rate and 1 Portion at a Prime Rate (inclusive of
the number of Portions permitted under the Term Loan Facility). No Portion
accruing interest at an Adjusted LIBO Rate may be less than $500,000, and all
Portions under the Line of Credit Facility collectively must total the
outstanding balance under the Line of Credit Facility.
1.2.5.3. Interest Rate Determination. The outstanding
\rincipal balance under each Portion of the Line of Credit Facility will bear
interest (computed daily until paid in immediately available funds, whether
prior to or after the Line of Credit Maturity Date) at the applicable Rate Index
(as determined in accordance with Section 1.2.5.4) plus the applicable Rate
Margin (as determined in accordance with Section 1.2.5.5). If the Prime Rate is
the applicable Rate Index for a Portion, then the interest rate on such Portion
will change when and as the Prime Rate or Rate Margin changes; and if an
Adjusted LIBO Rate is the applicable Rate Index for a Portion, then the interest
rate on such Portion will be established on the first day of each Interest
Period for such Portion and will not change during such Interest Period (except
as otherwise permitted under Section 1.2.5).
1.2.5.4. Selection of Rate Index. The applicable Rate
Index for each Portion under the Line of Credit Facility will be either the
Prime Rate or an Adjusted LIBO Rate. The applicable Rate Index for each Portion
may be changed by Borrowers as of the first calendar day after the end of the
applicable Interest Period for such Portion. At least 3 Business Days (but not
more than 10 Business Days) before any day on which the Rate Index may be
changed, Borrowers must notify Administrative Agent in writing of (a) the dollar
amount of each Portion (if more than one exists) and (b) the selected Rate Index
for each Portion during the subsequent rate period (including, if applicable,
the selected length of the Interest Period for balances accruing interest at an
Adjusted LIBO Rate). If Administrative Agent does not timely receive such
written notification as to any Portion, then the then-current Rate Index will be
the applicable Rate Index for the outstanding balance of such unspecified
Portion during the subsequent Interest Period. With respect to the proceeds of
each Advance under the Line of Credit Facility, unless Borrowers request a
particular
9
<PAGE>
Rate Index at the time of such Advance, then the Prime Rate shall be the
applicable Rate Index from the corresponding Settlement Date for such Advance
until the next date on which the Rate Index may be changed hereunder.
1.2.5.5. Applicable Rate Margins. From the date of
the initial Advance under the Line of Credit Facility through the date after
December 31, 2000 on which Administrative Agent receives the first periodic
compliance certificate and consolidated financial statements delivered in
accordance with Section 4.2 that provides a certified calculation of the
Leverage Ratio (the "Line Facility Fixed Rate Margin Period"), the Rate Margin
applicable to the Line of Credit Facility will be 4.0% for Portions accruing
interest at an Adjusted LIBO Rate and 2.5% for Portions accruing interest at the
Prime Rate. Thereafter, the Rate Margin will be based upon the Leverage Ratio of
(a) Funded Debt as of the date of establishment of such Rate Margin to (b)
TTM-OCF as of the last day of the fiscal quarter reflected on the most recent
quarterly financial statements delivered to Administrative Agent in accordance
with Section 4.2, and will be determined according to the following schedule:
<TABLE>
<CAPTION>
Prime Rate Adjusted LIBO
Leverage Ratio Margin Rate Margin
-------------- ---------- -------------
<S> <C> <C>
<2.5 2.00% 3.50%
>2.5 2.50% 4.00%
-
</TABLE>
The Rate Margin applicable to the Line of Credit Facility will be established on
the calendar day immediately following the end of the Line Facility Fixed Rate
Margin Period and thereafter will be established as of the first calendar day of
each Interest Period after the date that Administrative Agent receives the most
recent periodic compliance certificate and financial statements delivered in
accordance with Section 4.2. Upon the funding of any Advance under this
Agreement after the Closing Date in excess of $500,000, then Lenders (in the
sole and absolute discretion of Required Lenders) may elect to prospectively
adjust the Rate Margin applicable to each Portion to reflect the additional
amount of Funded Debt thereby outstanding. Even though the pricing schedule
above may contemplate Rate Margins for Leverage Ratios in excess of the Leverage
Ratios from time to time permitted under Section 4.1: (1) the existence of such
pricing in the above schedule (or the effectiveness thereof) does not amend any
of the requirements under Section 4.1 or waive any Default or Event of Default
caused by any non-compliance therewith from time to time and (2) Administrative
Agent and Lenders may nevertheless exercise from time to time during the
occurrence of an Event of Default any and all rights and remedies that are
permitted by any Loan Document or applicable law.
1.2.5.6. Calculation of Interest. Interest under the
Line of Credit Facility will be calculated, accrued, imposed and payable on the
basis of a 360-day year for the actual number of days elapsed. Interest will
begin to accrue on any amounts advanced to or on behalf of Borrowers under the
Loan Documents on and as of the date such funds are advanced.
1.2.5.7. Special LIBO Rate Provisions. The following
provisions apply with respect to Adjusted LIBO Rates (notwithstanding any other
provision hereof).
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<PAGE>
a. Change in Adjusted LIBO Rate. Any
Adjusted LIBO Rate may be prospectively adjusted by a particular Lender from
time to time to account for any additional or increased cost of maintaining any
necessary reserves for Eurodollar deposits (including any increase in the
Reserve Percentage) or any increased costs due to changes in the applicable law
occurring subsequent to the commencement of the then-applicable Interest Period.
Such Lender will give Administrative Agent notice of any such determination and
adjustment within a reasonable period of time thereafter. Upon receipt of such
notice, Administrative Agent will provide a copy thereof to Borrowers, and (upon
written request) such Lender will furnish a statement to Administrative Agent
and Borrowers setting forth the basis and the method for determining the amount
of such adjustment. A determination by any Lender hereunder will be conclusive
absent manifest error. If any Lender provides any such notice of adjustment,
then Borrowers may elect to change the then-applicable Rate Index (using the
same Rate Margin category) to the Prime Rate for any Portion then subject to an
Adjusted LIBO Rate. Such election to change the Rate Index must be made by
providing Administrative Agent written notice thereof at any time within 10
Business Days after receipt of such notice of adjustment (notwithstanding any
restriction hereunder limiting Rate Index changes to certain dates, but subject
to the requirement to pay all associated costs therewith). Upon Administrative
Agent's receipt of any such written election, the identified Portion will
thereupon begin to accrue interest at the Prime Rate plus the Rate Margin (as
applicable for the same Leverage Ratio as previously was applicable for the
Adjusted LIBO Rate) for the remainder of the then-current Interest Period for
such Portion.
b. Unavailability of Eurodollar Funds. An
Adjusted LIBO Rate will not be available for the Line of Credit Facility if a
particular Lender at any time determines or reasonably believes that (1)
Eurodollar deposits equal to the amount of principal under the Line of Credit
Facility for the applicable Interest Period are unavailable, or (2) an Adjusted
LIBO Rate will not adequately and fairly reflect the cost of maintaining
balances under the Line of Credit Facility, or (3) by reason of circumstances
affecting Eurodollar markets, adequate and reasonable means do not then exist
for ascertaining an Adjusted LIBO Rate. Such Lender will give Administrative
Agent notice of any such determination and adjustment within a reasonable period
of time thereafter. Upon receipt of such notice, Administrative Agent will
provide a copy thereof to Borrowers, and (upon written request) such Lender will
furnish to Administrative Agent and Borrowers a statement setting forth the
basis for such determination or reasonable belief. A determination or belief by
any Lender hereunder will be conclusive absent manifest error.
c. Illegality. An Adjusted LIBO Rate also
will not be available under the Line of Credit Facility if a particular Lender
at any time determines or reasonably believes that it is unlawful or impossible
to fund or maintain sufficient Eurodollar liabilities for the Line of Credit
Facility under an Adjusted LIBO Rate. Such Lender will give Administrative Agent
notice of any such determination and adjustment within a reasonable period of
time thereafter. Upon receipt of such notice, Administrative Agent will provide
a copy thereof to Borrowers, and (upon written request) such Lender will furnish
to Administrative Agent and Borrowers a statement setting forth the basis for
such determination or reasonable belief. A determination or belief by any Lender
hereunder will be conclusive absent manifest error.
11
<PAGE>
d. Continuance of a Default. An Adjusted
LIBO Rate, unless Required Lenders otherwise consent, also will not be available
under the Line of Credit Facility during the existence of any Default or Event
of Default under the Loan Documents.
e. Alternative Rate. During the occurrence
of any event described in either Clauses "b," "c" or "d" of this Subsection,
each Line Lender's obligation hereunder to fund or maintain balances under an
Adjusted LIBO Rate will be suspended, and during such period, the outstanding
balance under the Line of Credit Facility will bear interest at the Prime Rate
plus the appropriate Rate Margin (determined in accordance with Section
1.2.5.5).
1.2.6. Repayment and Prepayment. Each Borrower (jointly and
severally) hereby promises to pay Administrative Agent (for the ratable benefit
of the Line Lenders, except to the extent otherwise agreed among the Line
Lenders and Administrative Agent) the aggregate indebtedness under the Line of
Credit Facility (and other Loan Documents) in accordance with the following
provisions (and, as applicable, Sections 1.3, 1.5 and 1.7):
1.2.6.1. Interest Payments. Interest accrued under
the Line of Credit Facility is due and payable monthly in arrears on the last
calendar day of each month and also, at the option of the Line Lenders, on the
last calendar day of each Interest Period for any Portion accruing interest at
an Adjusted LIBO Rate. Such payments shall commence on the first such date after
the initial Advance under the Line of Credit Facility. Upon prior written notice
of at least 30 calendar days from Administrative Agent to Borrowers,
Administrative Agent (with the consent of the Line Lenders, but not more than
once prior to the Line of Credit Maturity Date) may change the date during a
month on which such payments are due and payable.
1.2.6.2. Reserved.
1.2.6.3. Reserved.
1.2.6.4. Payments at Maturity. The outstanding
indebtedness under the Line of Credit Facility (including all principal,
interest, fees, expenses and indemnities) is due and payable in its entirety on
the Line of Credit Maturity Date.
1.2.6.5. Prepayments.
a. Voluntary Prepayments. At any time, upon
prior written notice to Administrative Agent of at least 3 Business Days, the
outstanding principal balance under the Line of Credit Facility may be prepaid
in whole or in part without premium or penalty, except as provided in Section
1.5.4. Notwithstanding the foregoing, Borrowers may not make more than 4 such
prepayments under the Line of Credit Facility per calendar month without the
prior consent of the Administrative Agent and the Line Lenders. Any voluntary
partial prepayment must be in an amount of not less than $500,000 or in
multiples of $10,000 in excess thereof.
b. Mandatory Prepayments -- Excessive
Balance. If the outstanding indebtedness under the Line of Credit Facility at
any time exceeds the Available Credit Portion as determined in accordance with
Section 1.3, then such excess amount outstanding must be re-paid to
Administrative Agent (for the ratable benefit of the Line Lenders) in its
entirety
12
<PAGE>
immediately upon the earlier of (1) awareness by Borrowers of the advance or
incurrence thereof or (2) demand by Administrative Agent for payment thereof.
c. Mandatory Prepayments -- Asset Sales. If
Borrowers collectively sell, lease, license on an exclusive basis (without
retaining Borrowers' absolute right to use on a royalty-free basis), transfer or
otherwise dispose of any assets (other than inventory or other assets either
sold in the ordinary course of business with the proceeds thereof reinvested
within 180 calendar days thereafter in similar or other tangible assets or sold
to another Borrower) exceeding an aggregate fair market value of $2,500,000 in
any 12 consecutive calendar months, then a prepayment must be immediately made
on the outstanding indebtedness under the Line of Credit Facility, unless the
Line Lenders otherwise consent. The amount of any such mandatory prepayment
(inclusive of the prepayment required under the Term Loan Facility as set forth
in Section 1.1.6.5.c, which amounts shall be ratably allocated among the
Facilities based upon the then-current outstanding balances under such
Facilities) will be the cash proceeds of any such asset dispositions (or, with
respect to any non-cash proceeds, the cash proceeds thereof as and when received
by a Borrower) net of (1) reasonable commissions and expenses actually paid to
unrelated third parties in connection with such transactions and (2) taxes
payable as a direct result of such transactions (as such taxes are estimated and
certified to Administrative Agent by an acceptable certified public accountant
or Borrowers' chief financial officer).
d. Mandatory Prepayments - Maximum
Outstandings During Event of Default. Upon the occurrence and during the
continuance of any Event of Default, unless the Lenders otherwise consent, a
prepayment must be made immediately and from time to time on the outstanding
indebtedness under the Loan Documents to the extent that the aggregate
outstanding indebtedness of Borrowers under the Loan Documents exceeds the sum
of the following: (i) 100% of the aggregate accounts receivable of Borrowers for
the provision of telecommunications services to unrelated third party
Subscribers that are 60 calendar days or less past the initial due date
therefore (including unbilled usage or accounts receivable that are less than 30
days old) and (ii) deposits of immediately available unencumbered funds held in
accounts that are legally titled and beneficially owned solely by one or more
Borrowers and/or Guarantor and that are encumbered with a first priority lien in
favor of Administrative Agent (for the ratable benefit of Lenders) pursuant to a
security agreement and a control agreement that are in form and substance
acceptable to Administrative Agent (in its commercially reasonable discretion).
Any such prepayment by Borrowers shall be allocated ratably among the Facilities
and Lenders based upon the then-current outstanding balances under such
Facilities.
e. In General. Any prepayments under the
Line of Credit Facility must include all accrued but unpaid interest under the
Line of Credit Facility allocable to the amount prepaid through the date of such
prepayment.
1.2.6.6. Availability for Reborrowing. Principal
amounts paid under the Line of Credit Facility prior to the Line of Credit
Maturity Date will be available for re-borrowing in accordance with the terms
hereof up to the Available Credit Portion.
1.3. Determination of Commitment Amounts and Available Credit
Portion.
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<PAGE>
1.3.1. Initial Commitments. Upon the execution of this
Agreement and satisfaction or written waiver of the conditions precedent set
forth in Section 2.1, the Term Loan Commitment established hereunder will be $20
million ("Term Loan Commitment"). In addition, upon the execution of this
Agreement and satisfaction or written waiver of the conditions precedent set
forth in Sections 2.1 and 2.2, then the Line of Credit Commitment established
hereunder will be $30 million ("Line of Credit Commitment").
1.3.2. Available Credit Portion for Line of Credit.
Notwithstanding the foregoing, the maximum amount of credit available at any
time under the Line of Credit Facility may not exceed the amount resulting from
the following formula:
a. The Line of Credit Commitment,
b. Minus, the then-aggregate amount of all
prepayments relating to asset sales required to have been paid since the Closing
Date under Section 1.2.6.5.c, unless (i) such aggregate amount does not exceed
$10 million or (ii) the Line Lenders otherwise consent to such amount not being
excluded, and
c. Minus the aggregate amount of all
voluntary commitment reductions requested under Section 1.3.3.
The amount resulting from the equation under categories "a" through "c" above is
referred to herein as the "Available Credit Portion"; provided, however, that
prior to the Line Effective Date, the "Available Credit Portion" shall be $0.00.
On the effective date of any such reduction in the Available Credit Portion, a
prepayment must be made to the extent required under Section 1.2.6.5.b.
1.3.3. Voluntary Reduction of Commitment. Upon giving
Administrative Agent and each Line Lender prior written notice of at least 5
Business Days, Borrowers at any time and from time to time may reduce the Line
of Credit Commitment in multiples of $500,000. On the effective date of any such
reduction, a prepayment must be made to the extent required under Section
1.2.6.5.b. Any such reduction in the Line of Credit Commitment will be
permanent, and such Commitment cannot thereafter be increased without the
written consent of Administrative Agent and Lenders.
1.4. Advances.
1.4.1. Requesting Advances. To request an Advance (other than
the initial Advances on the Closing Date) under the Line of Credit Facility,
Borrowers must give Administrative Agent written notice (or verbal notice by
telephone with immediate written confirmation to follow) at least 3 Business
Days (but not more than 10 Business Days) prior to the requested Settlement Date
for such Advance (such notice, an "Advance Request"). Such Advance Request,
together with certain certifications, must be substantially in the form of
Exhibit 1.4.1 or such other form as Administrative Agent may reasonably request.
Each Advance under the Line of Credit Facility pursuant to an Advance Request
(unless Administrative Agent and Line Lenders otherwise consent) must be in an
amount of at least $500,000 and may not be greater than the un-borrowed balance
of the Available Credit Portion. Unless Administrative Agent and Line Lenders
otherwise consent, Borrowers may only request up to 4 Advances per calendar
month after the Closing Date.
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<PAGE>
1.4.2. Funding Advances. Subject to the satisfaction of and
compliance with the terms and conditions hereof (including, as applicable, the
conditions precedent specified in Article 2), Administrative Agent will make
each Lender's Pro Rata portion of each requested Advance (to the extent such
funds are received by Administrative Agent) available by such means as
Administrative Agent may consider reasonable. At the written request and expense
of Borrowers, Administrative Agent will wire transfer all or any portion of an
Advance in accordance with such written instructions therefor. By executing this
Agreement, each Borrower (jointly and severally) hereby requests Administrative
Agent and each Lender to make and fund the initial Advances (to the extent that
Administrative Agent receives each Lender's Pro Rata portion of the initial
Advances) in accordance with the Advance Request separately delivered to
Administrative Agent as of the Closing Date.
1.4.3. Indemnification for Revocation or Failure to Satisfy
Conditions. Each Borrower (jointly and severally) will indemnify each Lender and
Administrative Agent against all losses and costs reasonably incurred by such
Lender and/or Administrative Agent as a result of any revocation of any
requested Advance or any failure to fulfill the applicable conditions precedent
to such Advance on or before the requested Settlement Date specified in an
Advance Request. Such indemnification will include (among other things) all
losses and costs incurred by reason of the liquidation or reemployment of funds
required by such Lender or Administrative Agent to fund the Advance when such
Advance, as a result of such failure, is not made on the requested Settlement
Date. Such Lender's or Administrative Agent's (as applicable) calculation of
such losses and costs will be conclusive absent manifest error.
1.4.4. Obligation to Advance. No Lender will be obligated to
make any Advance under the following circumstances: (a) if the principal amount
of such Advance plus the aggregate amount outstanding under the applicable
Facility would exceed the applicable Commitment or the Available Credit Portion,
or (b) during the existence of a Default or an Event of Default hereunder, or
(c) if such Advance would cause a Default or Event of Default hereunder, or (d)
after the applicable Maturity Date. In addition, neither Administrative Agent
nor any Line Lender shall have any obligation or commitment to advance funds
under the Line of Credit Facility unless and until the conditions precedent
under Sections 2.1 and 2.2 have been satisfied by Borrowers or waived in writing
by Administrative Agent (at the direction of Line Lenders).
1.5. Payments in General.
1.5.1. Manner and Place of Payments. All payments of
principal, interest, fees, expenses, indemnities and other amounts due under the
Loan Documents must be received by Administrative Agent by wire transfer (unless
Administrative Agent otherwise consents) in immediately available funds in U.S.
dollars (and without any deduction, offset, netting, reservation of rights or
counterclaim) on or before Two O'clock (2:00) p.m. Eastern Time ("ET") on the
due date therefor at the principal office of Administrative Agent set forth in
Notice Section hereof or at such other place as Administrative Agent may
designate from time to time.
1.5.2. Special Payment Timing Issues. Whenever any payment to
be made under any Loan Document is due on a day that is not a Business Day, then
such payment may be made on the next succeeding Business Day, and such extension
of time will be included in the computation of
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interest under such Loan Document. Any funds received by Administrative Agent
after 2:00 p.m. ET on any day will be deemed to be received on the next
succeeding Business Day.
1.5.3. Application of Payments. All payments and other funds
received by Administrative Agent under the Loan Documents will be applied in the
following order: (a) first to the payment of any fees and charges due under the
Loan Documents, and (b) then to any obligations for the payment of expenses,
costs and indemnities due under the Loan Documents, and (c) then to the payment
of interest due and owing under the Loan Documents (pro rata among the
Facilities), and (d) then to the principal indebtedness due under the Term Loan
Facility, and (e) then to principal outstanding (but not yet due) under the Line
of Credit Facility and the Term Loan Facility, and (f) then to any other
interest accrued under the Loan Documents. Notwithstanding the foregoing,
payments allocable to principal (other than scheduled periodic payments) will be
applied as follows: (1) to reduce future scheduled principal payments in the
inverse order of maturity and (2) with respect to the application of payments
within Clause "(e)", (except to the extent Borrowers otherwise request in
writing concurrently with such payment) first to principal balances under the
Line of Credit Facility and then to principal balances under the Term Loan
Facility.
1.5.4. LIBO Rate Payments Not at End of Interest Period. Upon
payment of any amount accruing interest based upon an Adjusted LIBO Rate on any
day other than the last day of the corresponding Interest Period (whether such
payment is voluntary, mandatory, by demand, acceleration or otherwise), then
Borrowers must pay Administrative Agent (for the benefit of Lenders) the greater
of (a) $500 or (b) all costs and losses (including funding costs and any losses
associated with the re-deployment of such funds for the balance of such Interest
Period) that may arise or be incurred as a result of or in connection with such
payment (as such costs and losses may be calculated by Lenders). Upon written
request, Lenders (through Administrative Agent) will furnish a statement setting
forth the basis for such calculation. A determination or calculation by any
Lender hereunder will be conclusive absent manifest error.
1.5.5. Capital Adequacy, Taxes and Other Adjustments. If any
Lender determines that (a) the adoption, implementation or interpretation after
the Closing Date of any law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline, directive, policy or order regarding capital adequacy,
reserve requirements, taxes or similar requirements, or (b) compliance by such
Lender or any entity controlling or funding the operations of such Lender with
any request or directive regarding capital adequacy, reserve requirements, taxes
or similar requirements (whether or not having the force of law and whether or
not failure to comply therewith would be unlawful) from any central bank,
governmental agency, controlling entity, funding source or body having
jurisdiction would, in either instance, have the effect of increasing the amount
of capital, reserves, taxes (other than income taxes of Administrative Agent or
any Lender), funding costs or other funds required to be maintained or paid by
such Lender and thereby reducing the rate of return on such Lender's capital as
a consequence of its obligations under the Loan Documents, then Borrowers must
pay to such Lender additional amounts sufficient to compensate such Lender for
such reduction. Such Lender will give Administrative Agent notice of any such
determination and payment amount within a reasonable period of time thereafter.
Upon receipt of such notice, Administrative Agent will provide a copy thereof to
Borrowers, and (upon written request) such Lender will furnish a statement to
Administrative Agent and Borrowers setting forth the basis and the method for
determining the
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amount of such payment. A determination by any Lender hereunder will be
conclusive absent manifest error.
1.5.6. Payment of Expenses, Indemnities and Protective
Advances. If any funds are advanced or costs are incurred by Administrative
Agent or any Lender to or on behalf of Borrowers or otherwise as permitted under
the Loan Documents (including as protective advances), other than Advances
pursuant to Section 1.4, then such advances or costs must be re-paid to
Administrative Agent (to the extent applicable, for the benefit of Lenders) in
their entirety immediately upon the earlier of (a) awareness by Borrowers of the
advance or incurrence thereof or (b) demand by Administrative Agent for payment
thereof.
1.5.7. Payments upon Termination. Notwithstanding any other
provision hereof, the entire outstanding indebtedness under each Facility
(including all principal, interest, fees, expenses and indemnities) is due and
payable in its entirety upon any termination of such Facility, the corresponding
Commitment therefor, or this Agreement.
1.5.8. Late Payments. If any payment (of principal, interest,
fees, expenses, indemnities or other amounts) due under any Loan Document is not
received by Administrative Agent in immediately available funds on or before the
7th calendar day after the due date therefor, then each Borrower (jointly and
severally) hereby agrees (to the maximum extent not prohibited by applicable
law) to pay to the applicable Lenders (through Administrative Agent and upon
Administrative Agent's request) a late payment charge equal to 5% of the amount
of such late payment. The late payment charges due under this Section are in
addition to any other interest, fees, charges, expenses or indemnities due or
imposable under the Loan Documents and/or any other remedies available under the
Loan Documents.
1.5.9. Default Interest. During the existence of a Default or
an Event of Default hereunder, each Borrower (jointly and severally) hereby
agrees (to the maximum extent not prohibited by applicable law) to pay to
Lenders (through Administrative Agent and upon Administrative Agent's request
but commencing as of the date of occurrence of such Default or Event of Default)
interest on any indebtedness outstanding hereunder at the rate of THREE PERCENT
(3%) per annum in excess of the rate then otherwise applicable to such
indebtedness. Notwithstanding the foregoing, if the relevant Default is under
Section 7.1.10, then such rate increase (to the maximum extent not prohibited by
applicable law) will occur automatically without any request by Administrative
Agent.
1.5.10. Usury Savings Provision. Notwithstanding any provision
of any Loan Document, Borrowers (individually and collectively) are not and will
not be required to pay interest at a rate or any fee or charge in an amount
prohibited by applicable law. If interest or any fee or charge payable on any
date would be in a prohibited amount, then such interest, fee or charge will be
automatically reduced to the maximum amount that is not prohibited, and any
interest, fee or charge for subsequent periods (to the extent not prohibited by
applicable law) will be increased accordingly until Administrative Agent and
each Lender receives payment of the full amount of each such reduction. To the
extent that any prohibited amount is actually received by Administrative Agent
or any Lender, then such amount will be automatically deemed to constitute a
repayment of principal indebtedness hereunder.
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1.6. Release of Security. Upon termination of the Loan Documents in
accordance with Section 10.10, then Administrative Agent (at the written request
and expense of Borrowers) (i) will release the Obligors and the property serving
as Collateral under the Loan Documents (without representation, warranty,
recourse, liability or indemnification of any kind by or to Administrative Agent
or any Lender), and (ii) will execute and deliver such UCC termination
statements, mortgage releases, deed of trust releases, and other documentation
and instruments (all in form and substance reasonably acceptable to
Administrative Agent) as may be reasonably requested and provided to
Administrative Agent to effect such releases and terminations, and (iii) will
terminate and cancel all Commitments and all Facilities under the Loan
Documents.
1.7. Fees and Other Compensation.
1.7.1. Structuring Fee. On the Closing Date, Borrowers will
pay Administrative Agent (for the sole and exclusive benefit of Administrative
Agent) a Structuring Fee in the amount of $100,000, which amount is treated as
prepaid non-refundable interest.
1.7.2. Origination Fee for Term Facility. On the Closing Date,
Borrowers will pay Administrative Agent (for the ratable benefit of the Term
Lenders) an Origination Fee in the amount of $400,000, which amount is treated
as prepaid non-refundable interest.
1.7.3. Origination Fee for Line of Credit Facility. On the
Line Effectiveness Notification Date (provided such date occurs prior to March
31, 2001), Borrowers will pay Administrative Agent (for the benefit of itself
and the Line Lenders in such proportions as Administrative Agent may determine)
an Origination Fee in the amount of $750,000, which amount is treated as prepaid
non-refundable interest. Notwithstanding the foregoing, if Borrowers satisfy the
conditions for an Advance under the Line of Credit Facility and a Line Lender
breaches its obligation to advance such funds under the Line of Credit Facility
in accordance with the terms hereof for a period of more than 5 Business Days
after written demand by Borrowers, then such Line Lender shall return to
Borrowers its portion of the Origination Fee earned by such Line Lender under
this Section 1.7.3. To the extent that such breaching Line Lender did not
receive a pro rata portion of the Origination Fee under this Section 1.7.3
because Administrative Agent retained some of the fee, then upon the occurrence
of any such uncured breach Administrative Agent shall also return to Borrowers a
portion of the Origination Fee retained by Administrative Agent equal to the
balance of the actual pro rata portion of the Origination Fee that is
represented by such breaching Line Lender's percentage of the actual Commitments
under the Line of Credit Facility.
1.7.4. Periodic Unused Fee. Borrowers will pay Administrative
Agent (for the ratable benefit of the Line Lenders) a Periodic Unused Fee at the
rate of ONE AND ONE-QUARTER OF ONE PERCENT (1.25%) per annum on the average
daily un-borrowed portion of the Available Credit Portion under the Line of
Credit Facility. Such fee will be calculated by Administrative Agent and will be
due and payable monthly in arrears on the last calendar day of each month.
1.7.5. Issuance of Warrants upon Establishment of Line
Facility. On the Line of Effectiveness Notification Date (provided such date
occurs prior to March 31, 2001), TALK.COM INC. will issue and grant to
Administrative Agent (or, to the extent so designated by Administrative Agent at
such time, to one or more of the Lenders) warrants exercisable for 300,000
shares of common stock
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of TALK.COM INC. (par value $0.01 per share and as in effect on the Closing
Date). Such warrants shall contain customary, commercially reasonable and
mutually acceptable terms, conditions, rights and protections and shall be
substantially similar to the form thereof attached as Exhibit 1.7. Without
limiting the foregoing, such warrants (a) shall be immediately exercisable upon
issuance, (b) shall be effective for a period of 7 years from the date of
issuance, (c) shall provide for a cashless exercise alternative, and (d) shall
have an exercise price equal to 115% of the average closing price of such common
stock as reported on the NASDAQ during the 20 consecutive trading sessions
ending two trading sessions prior to the Line Effectiveness Notification Date.
Such warrants shall be fully earned for all purposes as of the date of issuance.
Such warrants shall be treated as additional compensation for the cost and risk
incurred associated with underwriting, syndicating and establishing of the Line
of Credit Facility, but shall in no way affect or relieve any Borrower or
Talk.com Inc. of any of its obligations to fully and timely perform and to repay
the entire indebtedness due under the Loan Documents. Notwithstanding the
foregoing, if Borrowers satisfy the conditions for an Advance under the Line of
Credit Facility and a Line Lender breaches its obligation to advance such funds
under the Line of Credit Facility in accordance with the terms hereof for a
period of more than 5 Business Days after written demand by Borrowers, then such
Line Lender shall return to Borrowers or otherwise forfeit its pro rata portion
of the Warrants earned by such Line Lender under this Section 1.7.5. To the
extent that such breaching Line Lender did not receive a pro rata portion of the
warrants earned under this Section 1.7.5 because Administrative Agent retained
some of the warrants, then upon the occurrence of any such uncured breach
Administrative Agent shall also return to Borrowers or otherwise forfeit a
portion of such warrants retained by Administrative Agent equal to the balance
of the actual pro rata portion of the warrants earned under this Section 1.7.5
that is represented by such breaching Line Lender's percentage of the actual
Commitments under the Line of Credit Facility.
1.7.6. Issuance of Warrants Associated with EBITDA Shortfall.
On the Closing Date, TALK.COM INC. will issue and grant to Lenders (ratably
based upon each such Lender's Commitment) warrants exercisable for 300,000
shares of common stock of TALK.COM INC. (par value $0.01 per share and as in
effect on the Closing Date). Such warrants shall have the terms and conditions
as set forth in Exhibit 1.7.6. Such warrants shall be treated as additional
compensation for the cost and risk incurred associated with underwriting,
syndicating and establishing of the Credit Facilities, but shall in no way
affect or relieve any Borrower or TALK.COM INC. of any of its obligations to
fully and timely perform and to repay the entire indebtedness due under the Loan
Documents.
1.7.7. AoL Disbursement Fee. If at any time after the first
Advance under the Line of Credit Facility and prior to September 1, 2001,
TALK.COM INC. makes any "make whole" or repurchase payment to AoL relating to
AoL's stock of TALK.COM INC. under or as described in Article V of the AoL
Investment Agreement or under any similar provisions of any related documents,
then Borrowers concurrently therewith will pay Administrative Agent (for the
ratable benefit of the Lenders) an AoL Disbursement Fee in the amount of
$500,000. If any such payment is made by TALK.COM INC. prior to the first
Advance under the Line of Credit Facility, then concurrent with such first
Advance, Borrowers shall pay Administrative Agent (for the ratable benefit of
the Lenders) the AoL Disbursement Fee as described in the preceding sentence.
Notwithstanding the foregoing, the fee required under this Section 1.7.7 shall
not apply with respect to make whole payments relating to
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warrant shares by TALK.COM INC. under Section 6.5 of the AoL Investment
Agreement (as existing as of the Closing Date) that in the aggregate do not
exceed $5 million.
1.7.8. Other Fees. Other fees and charges may be imposed by
Administrative Agent or any Lender for services rendered under and in accordance
with agreements (other than the Loan Documents) with Administrative Agent or
such Lender.
ARTICLE 2: CONDITIONS PRECEDENT
2.1. Closing Conditions. The obligation of Administrative Agent or
any Lender to execute and perform under the Loan Documents, and to establish the
Facilities, and to fund the Advances are subject to the following conditions
precedent (unless and except to the extent expressly waived by Administrative
Agent and each Lender in their sole and absolute discretion):
2.1.1. Compliance.
2.1.1.1. Fees and Expenses. Borrowers must have paid
(or made acceptable arrangements with Administrative Agent to pay) all fees and
expenses due and payable hereunder, including all fees due and payable under
Section 1.7 and the reasonable fees and expenses of Administrative Agent's and
each Lender's attorneys and in-house documentation personnel with respect to the
preparation, negotiation and execution of the Loan Documents.
2.1.1.2. Representations. Each, and all,
representations and warranties contained in this Agreement (including those in
Article 3) and in each other Loan Document, certificate or other writing
delivered to Administrative Agent or any Lender pursuant hereto or thereto on or
prior to the Closing Date must be true, correct and complete in all material
respects on and as of the Closing Date, except for such deviations disclosed in
writing and acceptable to Administrative Agent and each Lender.
2.1.1.3. No Default. There must not be any Default or
Event of Default hereunder or any default under any other Loan Document on the
Closing Date, and there must not be any such Default or Event of Default
occurring as a result of executing or advancing funds under the Loan Documents,
except for such defaults disclosed in writing and acceptable to Administrative
Agent and each Lender.
2.1.1.4. No Material Change. There must not have been
(in Administrative Agent's or any Lender's reasonable opinion) any Material
Adverse Change between the date for the most recent financial statements
delivered to Administrative Agent and the Closing Date.
2.1.2. Documents. Administrative Agent must have received the
following documents, agreements and certificates (together with all exhibits and
schedules thereto), each duly executed, in form, substance and amount
satisfactory to Administrative Agent and, when applicable, recorded or filed in
the appropriate public office:
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2.1.2.1. Credit Agreement. This Agreement.
2.1.2.2. Promissory Notes. The Term Loan Notes as
described in Section 1.1.4.
2.1.2.3. Security Agreement, Collateral Assignment
and Pledge. A master security agreement, collateral assignment and pledge by
EACH BORROWER in favor of Administrative Agent granting Administrative Agent
(for the benefit of Lenders) a security interest in and collaterally assigning
to Administrative Agent (for the benefit of Lenders) all of such grantor's
tangible and intangible personal property assets (including fixtures), whether
now owned or hereafter acquired, and the proceeds and products thereof, as
collateral security for the indebtedness and obligations hereunder, together
with all necessary financing statements and termination statements (each as
filed), stock certificates and powers executed in blank, waivers and consents,
and evidence of any other recordations required by applicable law or by
Administrative Agent to perfect such security interests in a manner that will be
subject only to Permitted Liens.
2.1.2.4. Intellectual Property Security Agreements.
One or more separate intellectual property security agreements by EACH BORROWER
in favor of Administrative Agent (for the benefit of Lenders) encumbering all of
such grantor's copyrights, patents, trade names, trademarks, service names,
service marks and other intellectual property (including any and all
applications and licenses therefor), all as now owned or hereafter acquired, and
the proceeds and goodwill thereof, together with all appropriate financing
statements and termination statements (each as filed), waivers and consents, and
any other documents or recordations required by applicable law or by Lender to
perfect such interests.
2.1.2.5. Guaranty. A guaranty agreement by TALK.COM
INC. in favor of Administrative Agent (for the benefit of enders) absolutely and
unconditionally guaranteeing (a) the payment of all indebtedness hereunder and
under the other Loan Documents and (b) the performance of all other obligations
hereunder and under the other Loan Documents.
2.1.2.6. Insurance. Current proof of insurance with
an indication of loss payee and additional insured endorsements in favor of
Administrative Agent with respect to all of the coverages required under Section
4.8. Such proof of insurance must be indicated pursuant to one or more
certificates on (a) an ACORD 27 form (3/93) for property-related insurance
coverages and (b) a modified version of an ACORD 25-S form (3/93), in each
instance permitting reliance by Administrative Agent and requiring cancellation
notification.
2.1.2.7. Compliance Certificates. A certificate from
an Authorized Officer of each Borrower and Guarantor dated as of the Closing
Date and certifying as to compliance with the matters described under Section
2.1.1.
2.1.2.8. Opinions of Counsel. One or more written
opinions from legal counsel to Borrowers addressed to Administrative Agent and
each Lender and dated as of the Closing Date opining as to such matters as
Administrative Agent may reasonably request.
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2.1.2.9. Authorization Documents. A certificate of an
Authorized Officer of EACH BORROWER and TALK.COM INC. delivering true, accurate
and complete versions of (a) its Articles of Incorporation and all amendments
thereto, and (b) its Bylaws and all amendments thereto, and (c) the resolutions
authorizing its execution, delivery and full performance of the Loan Documents
and all other documents, certificates and actions required hereunder or in
connection herewith, and (d) an incumbency certificate setting forth its
officers (together with the corresponding signatures), and (e) a long-form good
standing and qualification certificate (issued within 30 calendar days before
the Closing Date) with respect to its jurisdiction of organization and each
jurisdiction listed on Schedule 3.1 in which it has substantial operations.
2.1.2.10. Other Documents. Administrative Agent must
have received any additional agreements, documents and certificates as
Administrative Agent or its counsel may reasonably request.
2.2. Effectiveness of Line of Credit Facility. The obligation of
Administrative Agent and each Line Lender to perform under the Line of Credit
Facility is subject to the following additional conditions precedent (unless and
except to the extent expressly waived by Administrative Agent in its sole and
absolute discretion, but with the concurrence of each Line Lender):
2.2.1. Line Effectiveness Notification. Administrative Agent
shall have provided Borrowers with written confirmation that the Line of Credit
Facility has been syndicated and will become available as set forth in Section
1.2 upon satisfaction by Borrowers or written waiver by Administrative Agent (at
the direction of Line Lenders) of the conditions precedent under this Section
2.2.
2.2.2. Promissory Notes. Administrative Agent must have
received the Line of Credit Notes as described in Section 1.2.4. Each such Note
shall be duly executed, and in form and substance satisfactory to Administrative
Agent.
2.2.3. Additional Warrants. Administrative Agent must have
received one or more separate warrant agreements by TALK.COM INC. issuing and
granting to Administrative Agent (or its designees the warrants as described in
Section 1.7.5, together with all underlying warrant certificates and evidence of
necessary actions by TALK.COM INC. to authorize and issue such warrants and
related warrant shares. Each such document shall be each duly executed, and in
form and substance satisfactory to Administrative Agent.
2.2.4. Line of Credit Origination Fee. Borrowers must have
paid (or made acceptable arrangements with Administrative Agent to pay) the Line
of Credit Origination Fee as described in Section 1.7.3. -----
2.2.5. Other Documents. Administrative Agent must have
received such additional documents and certificates as Administrative Agent has
determined (in its reasonable judgment) are necessary or appropriate to evidence
the effectiveness of the Line of Credit Commitment.
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2.3. All Line Advances. The obligation of Administrative Agent to
perform and each Line Lender to fund any request for an Advance under the Line
of Credit Facility is subject to the following additional conditions precedent
(unless and except to the extent expressly waived by Administrative Agent in its
sole and absolute discretion, but with the concurrence of each Line Lender):
2.3.1. Advance Request. Administrative Agent must have
received an Advance Request under and in accordance with Section 1.4.1.
2.3.2. Compliance.
2.3.2.1. Fees and Expenses. Borrowers must have paid
(or made acceptable arrangements with Administrative Agent to pay) all fees and
expenses due and payable hereunder, including all reasonable expenses incurred
in connection with or as a result of reviewing and funding such Advance Request.
2.3.2.2. Representations. Each, and all,
representations and warranties contained in the Loan Documents (including those
in Article 3) and in each other certificate or other writing delivered to
Administrative Agent pursuant hereto or thereto on or prior to the Settlement
Date must be true, correct and complete in all material respects on and as of
the Settlement Date, except for such deviations disclosed in writing and
acceptable to Administrative Agent and each Lender (which disclosure will not
constitute Lenders' waiver or acceptance thereof).
2.3.2.3. No Default. There must not be any Default or
Event of Default hereunder or any default under any other Loan Document on the
Settlement Date, and there must not be any such Default or Event of Default
occurring as a result of funding such Advance, except for such defaults
disclosed in writing and acceptable to Administrative Agent and each Lender
(which disclosure will not constitute Lenders' waiver or acceptance thereof).
2.3.2.4. No Material Change. There must not have been
(in Administrative Agent's or any Line Lender's reasonable opinion) any Material
Adverse Change between the Closing Date and the Settlement Date.
ARTICLE 3: REPRESENTATIONS AND WARRANTIES
Each Borrower, as of the Closing Date and the Settlement Date for each
Advance hereunder, hereby (jointly and severally) represents and warrants as
follows:
3.1. Organization and Good Standing. Each Borrower and Guarantor
(a) is duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and (b) has all requisite power and authority
to own its properties and to conduct its business as now conducted and as
currently proposed to be conducted, and (c) is duly qualified to conduct
business as a foreign organization and is currently in good standing in each
state and jurisdiction in which it conducts business, except where failure to be
duly qualified and in good standing could not have a Material
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Adverse Effect. Each state and jurisdiction in which any Borrower or Guarantor
is organized or is (or should be) qualified to conduct business under applicable
law is listed on Schedule 3.1.
3.2. Power and Authority. Each Borrower and Guarantor has all
requisite power and authority under applicable law and under its Organic
Documents, Authorizations and Licenses to execute, deliver and perform the
obligations under the Loan Documents to which it is a party. Except as disclosed
on Schedule 3.2, all actions, waivers and consents (corporate, regulatory and
otherwise) necessary or appropriate for any Borrower or Guarantor to execute,
deliver and perform the Loan Documents to which it is a party have been taken
and/or received.
3.3. Validity and Legal Effect. This Agreement constitutes, and the
other Loan Documents to which any Borrower or Guarantor is a party constitute
(or will constitute when executed and delivered), the legal, valid and binding
obligations of each Borrower (jointly and severally) and, as applicable,
Guarantor enforceable against each such Person in accordance with the terms
thereof, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally and by equitable principles (regardless of whether
enforcement is sought in a proceeding in equity or at law).
3.4. No Violation of Laws or Agreements. The execution, delivery
and performance of the Loan Documents (a) will not violate or contravene in any
material respect any material law, rule, regulation, administrative order or
judicial decree (federal, state or local), and (b) will not violate or
contravene any provision of the Organic Documents of any Borrower or Guarantor,
and (c) will not result in any material breach or violation of (or constitute a
material default under) any material agreement or instrument by which any
Borrower or Guarantor or any of property of any Borrower or Guarantor may be
bound, and (d) will not result in or require the creation of any Lien (other
than pursuant to the Loan Documents) upon or with respect to any properties of
any Borrower, whether such properties are now owned or hereafter acquired.
3.5. Title to Assets; Existing Encumbrances; Identification of
Intellectual and Real Property.
3.5.1. Each Borrower has good and marketable title to all of
its owned real and personal property assets and the right to possess and use all
of its leased or licensed real and personal property assets. All such property
interests are free and clear of any Liens, except for Permitted Liens (as
defined in Section 5.5). Each such property and asset owned, leased or licensed
by any Borrower is titled, leased or licensed in the current legal name of such
Borrower.
3.5.2. Intellectual Property -- Schedule 3.5A lists (as of the
Closing Date or as of the date of any update to such Schedule) each trademark,
service mark, copyright, patent, database, customized application software and
systems integration software, trade secret and other intellectual property
owned, licensed, leased, controlled or applied for by any Borrower, whether or
not such intellectual property is recorded with the Copyright Office or the
Patent and Trademark Office, together with relevant identifying information with
respect to such intellectual property describing (among other things) the date
of creation, the method of protection against adverse claims and the
registration number.
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3.5.3. Real Property -- Schedule 3.5B lists (as of the Closing
Date or as of the date of any update to such Schedule) each real property
interest owned, leased or otherwise used by any Borrower, together with relevant
identifying information describing (among other things) the use of each such
real property interest, the location and mailing address for each such real
property, a legal description for each such real property (if requested by
Administrative Agent), an indication of whether such interest is owned or leased
(and, if leased, the lessor and record owner thereof), and the estimated value
thereof. Each such property and asset is in good order and repair (ordinary wear
and tear excepted) and is fully covered by the insurance required under Section
4.8.
3.5.4. Schedule 3.5C identifies each legal, operating and
trade name that any Borrower has used (or permitted the filing of a UCC
financing statement under) at any time during the 5 consecutive calendar years
immediately preceding the Closing Date.
3.6. Capital Structure and Equity Ownership. Schedule 3.6
accurately and completely discloses (as of the Closing Date or as of the date of
any update to such Schedule) (a) the number of shares and classes of equity
ownership rights and interests of each Borrower authorized and/or outstanding
(including warrants, options and other instruments convertible into such
equity), and (b) with respect to each Borrower, the ownership thereof. All such
shares and interests are validly issued and existing, fully paid and
non-assessable.
3.7. Subsidiaries, Affiliates and Investments. Schedule 3.7
accurately and completely discloses (as of the Closing Date or as of the date of
any update to such Schedule) (a) each Subsidiary and Affiliate of each Borrower
and Guarantor (other than its officers and directors) and (b) each investment in
or loan to any other Person by any Borrower in excess of $2.5 million.
3.8. Material Contracts. Schedule 3.8 lists (as of the Closing Date
or as of the date of any update to such Schedule) each "material contract"
(within the meaning of Item 601(b)(10) of Regulation S-K under the Securities
Exchange Act of 1934, as amended) to which any Borrower is a party, by which any
Borrower or the property of any Borrower is bound or to which any Borrower or
any such property is subject (collectively, "Material Contracts"). No Borrower
has committed any unwaived material breach or default under any Material
Contract (whether or not listed on Schedule 3.8), and after due inquiry and
investigation, no Borrower has any knowledge or reason to believe that any other
party to any such Material Contract (whether or not listed on Schedule 3.8) has
or might have committed any unwaived material breach or default thereof.
3.9. Licenses and Authorizations. Each Borrower possesses all
material Licenses and other Authorizations necessary or required in the conduct
of its businesses and/or the operation of its properties. Each material
Authorization is valid, binding and enforceable on, against and by such
Borrower. Each material Authorization is subsisting without any defaults
thereunder or enforceable adverse limitations thereon, and no such Authorization
is subject to any proceedings or claims opposing the issuance, continuance,
renewal, development or use thereof or contesting the validity or seeking the
revocation thereof. Schedule 3.9 accurately and completely lists (as of the
Closing Date or as of the date of any update to such Schedule) each material
Authorization of each Borrower, together with relevant identifying information
describing such Authorizations. For purposes of this Section 3.9, each
Authorization issued by the FCC or any State PUC will be deemed to be
"material".
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3.10. Taxes and Assessments. Except as disclosed on Schedule 3.10,
each Borrower (a) has timely filed all United States Federal income tax returns
and all other material tax returns that it is required to file and (b) has paid
all taxes due pursuant to any tax returns or pursuant to any assessment received
by such Borrower. The charges, accruals and reserves on the books of each
Borrower in respect of taxes or other governmental charges are adequate.
3.11. Litigation and Legal Proceedings. Except as disclosed on
Schedule 3.11, or as otherwise disclosed to Administrative Agent and Lenders,
there is no litigation, claim, investigation, administrative proceeding, labor
controversy or similar action that is pending or (to the best of each Borrower's
knowledge and information after due inquiry) threatened against any Borrower or
its properties that, if adversely resolved, could reasonably be expected to have
or cause a Material Adverse Effect.
3.12. Accuracy of Financial Information. All financial statements
previously furnished to Administrative Agent or any Lender concerning the
financial condition and operations of any one or more Borrowers (a) have been
prepared in accordance with GAAP consistently applied, and (b) fairly present
the financial condition of the organization covered thereby as of the dates and
for the periods covered thereby (but, with respect to interim periodic financial
statements, subject to normal and customary year end audit adjustments), and (c)
disclose all material liabilities (contingent and otherwise) of each Borrower.
In addition, all written information previously furnished to Administrative
Agent or any Lender concerning the financial condition and operations of any
Borrower are true, accurate and complete in all material respects.
3.13. Accuracy of Other Information. All written information
contained in any application, schedule, report, certificate, or any other
document furnished to Administrative Agent or any Lender by any Borrower or any
other Person (on behalf of any Borrower) in connection with the Loan Documents
is in all material respects true, accurate and complete, and no such Person
(including Borrowers) has omitted to state therein (or failed to include in any
such document) any material fact or any fact necessary to make such information
not materially misleading. All written projections furnished to Administrative
Agent or any Lender by any Borrower or any other Person on behalf of any
Borrower have been prepared with a reasonable basis and in good faith, making
use of such information as was available at the date such projection was made.
3.14. Compliance with Laws Generally. Each Borrower is in compliance
in all material respects with all material laws, rules, regulations,
administrative orders and judicial decrees (federal, state, local and otherwise)
applicable to it, its operations and its properties.
3.15. ERISA Compliance. Each Borrower is in compliance in all
material respects with all applicable provisions of ERISA.
3.16. Environmental Compliance. Each Borrower has received all
permits and filed all notifications necessary under and is otherwise in
compliance with the Environmental Control Statutes, except to the extent that
such non-compliance (individually or in the aggregate) could not reasonably be
expected to have a Material Adverse Effect.
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3.17. Margin Rule Compliance. No Borrower owns or has any present
intention of acquiring any "Margin Stock" within the meaning of the following
Margin Regulations of the FRB: Regulation T at 12 C.F.R. Pt. 220, and Regulation
U at 12 --- C.F.R. Pt. 221, and Regulation X at 12 C.F.R. Pt. 224. The credit
extended under this Agreement does not constitute --- "Purpose Credit" within
the meaning of the FRB's Margin Regulations.
3.18. Fees and Commissions. Except as disclosed on Schedule 3.18 or
as required by Section 1.7, no Borrower owes any fees or commissions of any kind
in connection with this Agreement or the transactions contemplated hereby, and
no Borrower knows of any claim (or any basis for any claim) for any fees or
commissions in connection with this Agreement or the transactions contemplated
hereby.
3.19. Solvency. No Borrower is "insolvent," as such term is defined
in Section 101(32) of the Bankruptcy Code (11 U.S.C. ss. 101(32)). No Borrower,
by virtue of its obligations and actions in connection with the Loan Documents,
has engaged or is engaging in any transaction that constitutes a fraudulent
transfer or fraudulent conveyance under applicable federal or state law
(including under Section 548 of the Bankruptcy Code or under the Uniform
Fraudulent Transfer Act or the Uniform Fraudulent Conveyance Act).
3.20. Reserved.
ARTICLE 4: AFFIRMATIVE COVENANTS
Each Borrower (jointly and severally) hereby covenants and agrees that,
so long as any indebtedness remains outstanding hereunder, each Borrower will
comply with the following affirmative covenants:
4.1 Financial and Operating Covenants and Ratios. As of the end of each
fiscal quarter, as and to the extent provided below, Borrowers must satisfy each
of the following financial and operating ratios and characteristics, each of
which will be determined (as applicable) using GAAP consistently applied, except
as otherwise expressly provided:
4.1.1 Minimum Revenue by Subscriber Type. Bundled Services
Revenue and LD Only Services Revenue for the fiscal quarter then ended of at
least the following amounts during the identified periods between the Closing
Date and December 31, 2001:
***
4.1.2 Maximum Subscriber Acquisition Costs. Subscriber
Acquisition Costs for Bundled Subscribers and for LD Only Subscribers during the
fiscal quarter then ended not to exceed the following during the identified
periods between the Closing Date and December 31, 2001:
***
4.1.3 Minimum Gross Profit Margin. Prior to the Line Effective
Date, a Gross Profit Margin of not less than 36.0% during any two consecutive
fiscal quarters beginning with fiscal quarter ending December 31, 2000 and
continuing through fiscal quarter ending December 31, 2001, and as of and after
the Line Effective Date, a Gross Profit Margin of not less than 37.5% during any
two consecutive fiscal quarters beginning with fiscal quarter ending December
31, 2000 and continuing through fiscal quarter ending December 31, 2001.
4.1.4 Interest Coverage Ratio. A ratio of TTM-OCF to Interest
Expense of not less than the following:
a. 2.0-to-1.0, for fiscal quarter ending
December 31, 2001; and
b. 3.0-to-1.0, for each fiscal quarter ending
after December 31, 2001.
4.1.5 Total Charge Coverage Ratio. A ratio of TTM-OCF to Total
Charges of n |
