EX-10.17 3 d61519_ex10-17.txt THIRD SUPPLEMENT TO THE MASTER LOAN AGREEMENT Exhibit 10.17 Loan No. ML0743-T3 THIRD SUPPLEMENT TO THE MASTER LOAN AGREEMENT THIS THIRD SUPPLEMENT TO THE MASTER LOAN AGREEMENT (this "Third Supplement"), entered into as of November 30, 2004, is between COBANK, ACB ("CoBank") and SHENANDOAH TELECOMMUNICATIONS COMPANY (the "Borrower"), and supplements that certain Second Amended and Restated Master Loan Agreement, dated as of even date herewith, between CoBank and the Borrower (as the same may be amended, modified, supplemented, extended or restated from time to time, the "MLA"). Capitalized terms used and not otherwise defined in this Third Supplement have the meanings assigned to them in the MLA. SECTION 1. Reducing Revolving Loan Commitment. On the terms and conditions set forth in the MLA and this Third Supplement, CoBank agrees to make one or more advances (collectively, the "Loan") to the Borrower during the period beginning as of the Closing Date (as defined in Section 3 of this Third Supplement) and ending on the Business Day immediately preceding the Maturity Date (as defined herein in this Section) (the "Termination Date") in an aggregate principal amount outstanding at any one time not to exceed $15,000,000 (the "Commitment"). The Commitment will be reduced from time to time as provided in Sections 6 and 8 of this Third Supplement, and will expire at 12:00 noon Eastern time on December 31, 2016 (the "Maturity Date"). Subject to Sections 6 and 8 of this Third Supplement, under the Commitment amounts borrowed and repaid may be reborrowed at any time prior to and including the Termination Date. SECTION 2. Purpose. The purposes for which advances under the Commitment may be used are (i) to refinance existing debt and other obligations of NTC Communications, LLC ("NTC") of approximately $8,000,000 (collectively, the "Existing Debt") in connection with the purchase by the Borrower or one of its wholly owned subsidiaries of all outstanding membership interests in NTC not currently owned by the Borrower (the "NTC Acquisition"), and (ii) for general corporate purposes of the Borrower and/or its Subsidiaries, including closing costs and fees associated with the Loan. The Borrower agrees that the proceeds of the Loan are to be used only for the purposes set forth in this Section 2. SECTION 3. Availability. Subject to Section 2 of the MLA, Section 10 of this Third Supplement and the other conditions set forth in the MLA, during the period commencing on the date on which all conditions precedent to the Loan are satisfied (the "Closing Date") and ending on the Termination Date, advances under the Loan will be made as provided in the MLA; provided, however, that with respect to any advance to be subject to a fixed rate option (Subsections 4(A)(2) and 4(A)(3) of this Third Supplement), a request for such advance must be received no later than 12:00 noon Eastern time three Business Days or Banking Days (as defined in Subsection 4(A)(2) of this Third Supplement), as applicable, prior to the day such advance is desired; and provided, further, that the Closing Date must occur on or prior to December 31, 2004. Third Supplement/Shenandoah Telecommunications Company Loan No. ML0743-T3 SECTION 4. Interest. (A) Rate Options; Etc. The Borrower agrees to pay interest on the unpaid principal balance of the Loan in accordance with one or more of the following interest rate options, as selected by the Borrower: (1) Variable Rate Option. As to any portion of the unpaid principal balance of the Loan selected by the Borrower (any such portion, and any portion selected pursuant to Subsections 4(A)(2) and 4(A)(3) below, is hereinafter referred to as a "Portion" of the Loan), interest will accrue pursuant to this variable rate option at a variable annual interest rate (the "Variable Rate") equal at all times to the rate of interest established for the Borrower by CoBank in its sole and absolute discretion on the first Business Day of each week. The rate of interest so established by CoBank shall be effective from and including the first Business Day of each week to and excluding the first Business Day of the next week. Each change in the Variable Rate will be applicable to the Portion of the Loan subject to this option and information about the then current Variable Rate shall be made available to the Borrower upon telephonic request. (2) LIBOR Option. As to any Portion or Portions of the Loan selected by the Borrower, interest shall accrue pursuant to this LIBOR option at a margin (the "LIBOR Margin") equal to the percentage determined from time to time in accordance with Subsection 4(A)(5) of this Third Supplement. Under this option: (i) rates may be fixed for Interest Periods (as hereinafter defined) of one, two, three, or six months, as selected by the Borrower; (ii) amounts fixed must be in increments of $100,000 or multiples thereof; and (iii) rates may only be fixed on a Banking Day (as hereinafter defined) on three Banking Days' prior written notice; provided, however, that the LIBOR option is not available with respect to new advances during the continuance of any Event of Default. "LIBOR" means the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on Eurocurrency Liabilities (as hereinafter defined) for banks subject to FRB Regulation D (as hereinafter defined) or required by any other federal law or regulation) quoted by the British Bankers Association (the "BBA") at 11:00 a.m. London time two Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company, as published by Bloomberg or another major information vendor listed on BBA's official website. "Banking Day" means a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England. "Interest Period" means the time period chosen by the Borrower during which the chosen fixed rate is to apply to a Portion of the Loan, which period commences on the day a rate fixed under this Subsection 4(A)(2) or Subsection 4(A)(3) of this Third Supplement becomes effective. The Interest Period for Portions accruing interest at the LIBOR option rate will end on the day in the next calendar month or in the month that is one, two, three, or six months thereafter which corresponds numerically with the day the Interest Period commences; provided, however, that: (a) in the event such ending day is not a Banking Day, such period will be extended to the 2 Third Supplement/Shenandoah Telecommunications Company Loan No. ML0743-T3 next Banking Day unless such next Banking Day falls in the next calendar month, in which case it will end on the preceding Banking Day; and (b) if there is no numerically corresponding day in the month, then such period will end on the last Banking Day in the relevant month. No Interest Period shall extend beyond the Maturity Date. "Eurocurrency Liabilities" has the meaning as set forth in FRB Regulation D. "FRB Regulation D" means Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended from time to time. (3) Quoted Rate Option. As to any Portion or Portions of the Loan selected by the Borrower, interest shall accrue pursuant to this quoted rate option at a fixed annual interest rate (the "Quoted Rate") to be quoted by CoBank in its sole and absolute discretion in each instance. Under this option, the interest rate on such Portion or Portions of the Loan may be fixed for such Interest Periods as may be agreeable to CoBank in its sole and absolute discretion in each instance; provided, however, that (i) such Interest Period shall not extend beyond the Maturity Date and such Interest Period may only expire on a Business Day, (ii) the minimum fixed period shall be 30 days, (iii) amounts fixed must be in increments of $100,000 or multiples thereof, and (iv) the Quoted Rate option is not be available with respect to new advances during the continuance of any Event of Default. (4) Rate Combinations. Notwithstanding the foregoing, at any one time there may be no more than five Portions of the Loan in the aggregate accruing interest pursuant to any fixed rate option. (5) Applicable Margin. The LIBOR Margin will be determined based on the Borrower's consolidated Total Leverage Ratio on the last day of each fiscal quarter of the Borrower, as set forth in the following table:
LIBOR Margin during any period the Borrower is using CoBank's cash Total Leverage Ratio LIBOR Margin management services -------------------- ------------ ------------------- Greater than 1.50:1.00 1.60% 1.50% Greater than 1.00:1.00 and less than or equal to 1.50:1.00 1.35% 1.25% Less than or equal to 1.00:1.00 1.10% 1.00%
The LIBOR Margin shall be (i) increased, if warranted, beginning the 5th Business Day following CoBank's receipt of the financial statements required pursuant to Subsections 7(I)(1) and 7(I)(2) of the MLA and the compliance certificate required 3 Third Supplement/Shenandoah Telecommunications Company Loan No. ML0743-T3 pursuant to Subsection 7(I)(8) of the MLA and (ii) decreased, if warranted, beginning the 5th Business Day following CoBank's receipt of such financial statements and compliance certificate and the Borrower's written request to decrease such margin. In the event that (a) an Event of Default occurs or (b) CoBank shall not receive when due such financial statements and compliance certificate, then from such due date and until the 5th Business Day following CoBank's receipt of such overdue financial statements and compliance certificate (and in the event a decrease in the LIBOR Margin is then warranted, receipt of the Borrower's written request to decrease such margin), the LIBOR Margin shall be 1.60% (or 1.50%, if applicable). (6) Selection and Changes of Rates. The Borrower shall select the rate option or options applicable to the Loan at the time it requests an advance under the Loan. Thereafter, with respect to Portions of the Loan accruing interest at the Variable Rate Option, the Borrower may, on any Business Day, subject to Subsections 4(A)(2), 4(A)(3) and 4(A)(4) of this Third Supplement, elect to have one of the fixed rate options apply to such Portion. In addition, with respect to any Portion of the Loan accruing interest pursuant to a fixed rate option, the Borrower may, subject to Subsections 4(A)(2), 4(A)(3) and 4(A)(4) of this Third Supplement, on the last day of the Interest Period for such Portion, elect to fix the interest rate accruing on such Portion for another Interest Period pursuant to one of the fixed rate options. From time to time the Borrower may elect, on a Business Day prior to the expiration of the Interest Period for any Portion of the Loan accruing interest pursuant to a fixed rate option, and upon payment of the applicable Surcharge (as defined in, and calculated pursuant to, Section 7 of this Third Supplement) to convert all, but not part, of such Portion of the Loan so that it accrues interest at the Variable Rate option or a combination of the Variable Rate option and a fixed rate option, for a new Interest Period or Interest Periods selected in accordance with Subsections 4(A)(2), 4(A)(3) or 4(A)(4) of this Third Supplement. Except for the initial selection, all interest rate selections provided for herein shall be made by electronic (if applicable), telephonic or written request of an authorized employee of the Borrower and must be received by CoBank by 12:00 noon, Eastern time, on the relevant day. In taking actions upon telephonic requests, CoBank shall be entitled to rely on (and shall incur no liability to the Borrower in acting upon) any request made by a person identifying himself or herself as one of the persons authorized by the Borrower to select interest rates hereunder; provided, however, that in the case of LIBOR rate loans, all such selections must be confirmed in writing upon CoBank's request. Notwithstanding the foregoing, rates may not be fixed in such a manner as to cause the Borrower to have to break any fixed rate balance in order to pay any installment of principal. (7) Accrual of Interest. Interest shall accrue pursuant to the fixed rate options from and including the first day of the applicable Interest Period to but excluding the last day of the Interest Period. If the Borrower elects to refix the interest rate on any Portion of the Loan accruing interest pursuant to one of the fixed rate options pursuant to Subsection 4(A)(6) of this Third Supplement, the first day of the new Interest Period shall be the last day of the preceding Interest Period. In the absence of any such election, interest shall accrue on such Portion at the Variable Rate Option from and including the 4 Third Supplement/Shenandoah Telecommunications Company Loan No. ML0743-T3 last day of such Interest Period. If the Borrower elects to convert from a fixed rate option to the Variable Rate Option pursuant to Subsection 4(A)(6) of this Third Supplement upon payment of the applicable Surcharge as provided in Section 7 of this Third Supplement, interest at the applicable fixed rate shall accrue through the day before such conversion and interest at the Variable Rate Option shall accrue on the Portion of the Loan so converted from and including the date of conversion. (B) Payment and Calculation. The Borrower shall pay interest on the Loan (i) monthly in arrears on the 20th day of the following month (or on such other day in such month as CoBank shall require in a written notice to the Borrower); provided, however, in the event the Borrower elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above, at CoBank's option upon written notice to the Borrower, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than 3 months, interest on that Portion shall be payable quarterly in arrears on each three-month anniversary of the commencement date of such Interest Period, and at maturity of such Interest Period, (ii) upon any prepayment (whether due to acceleration or otherwise) and (iii) on the Maturity Date. Interest shall be calculated on the actual number of days the Loan, or any part thereof, is outstanding on the basis of a year consisting of 360 days or 365 days in the case of any Portion accruing interest at the Variable Rate Option. In calculating accrued interest, the date the Loan is made shall be included and the date any principal amount of the Loan is repaid or prepaid shall be excluded as to such amount. SECTION 5. Fees. (A) Loan Origination Fee. In consideration of the Commitment, the Borrower agrees to pay to CoBank on the Closing Date a non-refundable origination fee in the amount of $37,500. (B) Commitment Fee. In consideration of the Commitment, the Borrower agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of 0.375% per annum (the rate will be 0.25% per annum during any period the Borrower is using CoBank's cash management services), payable quarterly in arrears by the 20th day of the month following each calendar quarter, or such other day as CoBank may require in a written notice to the Borrower. Such fee is payable for each quarter (or portion thereof) occurring during the original or any extended term of the Commitment. SECTION 6. Reductions of Commitment; Repayments of the Loan. (A) Scheduled Reductions of the Commitment. Commencing on March 31, 2005, and on each June 30, September 30, December 31 and March 31 occurring thereafter through December 31, 2016, the Commitment shall be permanently reduced on each such date (each such reduction, a "Commitment Reduction") in the amount of $312,500 (such reductions shall be cumulative and subject to modification pursuant to Section 8 of this Third Supplement). At the time of each Commitment reduction provided for in this Section 6, the Borrower shall repay the Loan in an amount sufficient to reduce the aggregate principal balance of the Loan then outstanding to the amount of the Commitment as so reduced. If not sooner required to be repaid, 5 Third Supplement/Shenandoah Telecommunications Company Loan No. ML0743-T3 all advances under the Loan and all other amounts due and owing hereunder and under the other Loan Documents relating to the Loan shall be due and payable on the Maturity Date. All repayments made pursuant to this Section 6 shall be applied to such portions of the Loan as the Borrower shall direct in writing or, in the absence of such direction, as the Borrower and CoBank shall agree. At the time of each repayment pursuant to this Section 6, the Borrower shall pay all accrued and unpaid interest on the amount repaid, and any Surcharge due pursuant to Section 7 of this Third Supplement in connection with such payment. (B) Repayments from Insurance Proceeds. If an Event of Default with respect to Section 7(J), (K) or (L) of the MLA has occurred and is continuing or is anticipated to occur within the next twelve (12) months after taking into account on a pro forma basis the proposed use of all Net Insurance Proceeds (as hereinafter defined in this Subsection 6(B)) received by the Borrower during any fiscal year in excess of $1,000,000 (and the Borrower hereby covenants to cause such Net Insurance Proceeds to be used as so proposed), the Borrower shall repay the Loan in an amount equal to the amount of such Net Insurance Proceeds which are not reinvested in equipment or other assets that are used or useful in the business of the Borrower within 180 days of receipt by the Borrower of such Net Insurance Proceeds. All such repayments shall be applied in accordance with Subsection 6(D) of this Third Supplement. "Net Insurance Proceeds" means cash proceeds received by the Borrower or any Pledged Subsidiary from any insurer under any casualty insurance policy, business interruption policy or similar insurance policy with respect to any loss, damage or destruction of any asset or property owned by it, net of (i) the costs of recovery of such insurance proceeds and (ii) amounts applied to repayment of Indebtedness (other than to CoBank) secured by a lien on the related asset or property. (C) Repayments from Asset Dispositions. The Borrower shall repay the Loan within 180 days of receipt by the Borrower or any Pledged Subsidiary of Net Proceeds (as hereinafter defined in this Subsection 6(C)) from any Asset Disposition (as hereinafter defined in this Subsection 6(C)) in an amount equal to such Net Proceeds, unless such Net Proceeds have been reinvested in equipment or other assets that are used or useful in the business of the Borrower or its Pledged Subsidiaries within such 180-day period. All such repayments shall be applied in accordance with Subsection 6(D) of this Third Supplement. "Asset Disposition" means the disposition, whether by sale, lease, transfer, or otherwise (other than as a result of loss, damage or destruction), by the Borrower, of any or all of its assets, other than (a) bona fide sales of inventory to customers for fair value in the ordinary course of business, (b) dispositions of obsolete equipment not used or useful in the business of the Borrower or its Pledged Subsidiaries, (c) sales of Investments for fair value; and (d) dispositions of assets for which the aggregate market value of assets sold in any one transaction or series of related transactions for any calendar year does not exceed $1,000,000 for the Borrower and its Pledged Subsidiaries. "Net Proceeds" means cash proceeds (other than insurance proceeds) received by the Borrower or any Pledged Subsidiary from any Asset Disposition (including payments under 6 Third Supplement/Shenandoah Telecommunications Company Loan No. ML0743-T3 notes or other debt securities received in connection with any Asset Disposition), net of (i) the costs of such sale, lease, transfer or other disposition (including taxes attributable to such sale, lease or transfer) and (ii) amounts applied to repayment of Indebtedness (other than to CoBank) secured by a lien on the asset or property disposed. (D) Application of Mandatory Repayments; Related Interest and Surcharge Payments. All mandatory repayments made pursuant to Subsections 6(B) and 6(C) of this Third Supplement shall be applied to the remaining Commitment Reductions in the inverse order of their maturity (such that the Commitment may terminate prior to the Maturity Date) and to such portions of the Loan as the Borrower shall direct in writing or, in the absence of such direction, as the Borrower and CoBank shall agree. At the time of each such mandatory repayment, the Borrower shall pay all accrued and unpaid interest on the amount repaid and any Surcharge due pursuant to Section 7 of this Third Supplement in connection with such payment. As between mandatory repayments required pursuant to this Section 6 and Section 6 of that certain Term Supplement, dated as of June 22, 2001, between CoBank and the Borrower (CoBank Loan No. ML0743-T2), the Borrower shall first make mandatory repayments under this Section 6. SECTION 7. Prepayment and Surcharge. The Borrower may, on three Business Day's prior written notice, prepay in full or in part, in minimum amounts of $100,000, any portion of the Loan. Notwithstanding the foregoing, the Borrower's right to pay any portion of the Loan subject to a fixed rate option (whether such payment is made voluntarily, as a result of an acceleration, mandatory repayment or scheduled repayment or otherwise, including for purposes of this Section 7 any conversion under Subsection 4(A)(6) of this Third Supplement) shall be conditioned upon the payment of, on the date of such prepayment (or conversion), a surcharge ("Surcharge"), determined and calculated as follows: (A) Determine the difference between: (i) the rate estimated by CoBank on the date the rate was originally fixed to be its cost to fund the Loan in the manner set forth in its then current methodology; minus (ii) the rate estimated by CoBank on the date the Surcharge is calculated to be its cost, less dealer concessions and other issuance costs, to fund a new fixed rate loan in accordance with its then current methodology having the same fixed rate period and repayment characteristics as the balance being repaid. If such difference is negative, then for purposes of the remaining calculations, such difference shall be deemed to be zero. (B) Divide the result determined in (A) above by the number of times interest is payable during the year. (C) For each interest payment period (or portion thereof) during which interest was scheduled to accrue at the fixed rate, multiply the amount determined in (B) above by the principal balance scheduled to have been outstanding during such period (such that there is a calculation for each interest payment period during which the amount repaid was scheduled to have been outstanding at the fixed rate). (D) Determine the present value of each calculation made under (C) above based upon the scheduled time that interest on the amount repaid would have been payable and a discount rate equal to the rate set forth in (A)(ii) above. 7 Third Supplement/Shenandoah Telecommunications Company Loan No. ML0743-T3 (E) Add all of the calculations made under (D) above. The result is the Surcharge. SECTION 8. Voluntary Reduction of Commitment. The Borrower has the right, from to time upon at least three Business Days' prior notice, to permanently reduce the Commitment in increments of $1,000,000. Each reduction will be applied to reduce pro rata the then remaining Commitment Reductions. No Commitment reduction under this Section 8 will be permitted if, after giving effect to such reduction and any simultaneous payment to CoBank, the aggregate outstanding principal amount of the Loan would exceed the Commitment as so reduced. SECTION 9. Security. The Loan is secured by the Second Amended and Restated Pledge Agreement, dated as of even date herewith, between the Borrower and CoBank (as the same may be amended, modified, supplemented, extended or restated from time to time, the "Pledge Agreement") and the Membership Interests Pledge Agreements, each dated as of even date herewith, between the Borrower and CoBank and Shentel Converged Services, Inc. ("Converged") and CoBank (as the same may be amended, modified, supplemented, extended or restated from time to time, collectively, the "LLC Pledge Agreements"), pursuant to which each of the Borrower and Convergent has granted to CoBank a first-priority lien and security interest in all of its now owned or hereafter acquired capital stock or other voting securities in NTC. SECTION 10. Additional Conditions Precedent. In addition to the conditions precedent set forth in the MLA, CoBank's obligation to make any advance under the Loan, including the initial advance, is subject to the satisfaction of each of the following conditions precedent on or before the date of such advance: (A) No Material Adverse Change. That from December 31, 2003 to the date of such advance, there has not occurred any event which has had or could reasonably be expected to have a Material Adverse Effect on the Borrower or any of its subsidiaries; (B) Closing Certificate. That CoBank receive on the date of the initial advance a certificate, in the form of Exhibit A attached hereto, from the President of the Borrower as to, among other things, the continuing truth and accuracy of the representations and warranties of each of the Borrower and its Subsidiaries under the Loan Documents to which it is a party and the satisfaction of each of the conditions applicable to the making of the initial advance; (C) Consummation of NTC Acquisition. That CoBank receive evidence satisfactory to it that the NTC Acquisition has closed on terms substantially similar to those set forth in that certain Interest Purchase Agreement, dated as of November 30, 2004, among Converged, NTC and the other interest holders named therein; and (D) Pledge of NTC Interests. That CoBank receive a first-priority, perfected pledge, satisfactory to CoBank in all respects, of all membership interests of the Borrower and Converged in NTC, pursuant to the LLC Pledge Agreements. [Signatures commence on following page.] 8 Third Supplement/Shenandoah Telecommunications Company Loan No. ML0743-T3 IN WITNESS WHEREOF, the parties have caused this Third Supplement to be executed by their duly authorized officers as of the date shown above. SHENANDOAH TELECOMMUNICATIONS COMPANY By:__________________________________ Name:_____________________________ Title:____________________________ [Signatures continue on next page.] 9 Third Supplement/Shenandoah Telecommunications Company Loan No. ML0743-T3 [Signatures continue from previous page.] CoBANK, ACB By:______________________________________ John P. Cole, Vice President 10 EXHIBIT A CLOSING CERTIFICATE -- LOAN NO. ML0743-T3 THIS CLOSING CERTIFICATE is given by ________________, President of SHENANDOAH TELECOMMUNICATIONS COMPANY (the "Borrower"), pursuant to Section 5(C) of that certain Master Loan Agreement, dated as of November 30, 2004 (the "MLA"), and pursuant to Section 10(B) of that certain Third Supplement to the MLA, dated as of November 30, 2004 (the "Third Supplement"), each between CoBank, ACB ("CoBank") and the Borrower. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the MLA and in the Third Supplement. The undersigned hereby certifies as follows: 1. I am the President of the Borrower and as such possess the knowledge and authority to certify to the matters herein set forth, and the matters herein set forth are true and accurate to the best of my present knowledge, information and belief after due inquiry; 2. Since December 31, 2003, no event has occurred which has had or could have a Material Adverse Effect on any of the Borrower or its subsidiaries; 3. All representations and warranties of each of the Borrower and its subsidiaries contained in the Loan Documents to which it is a party are true and correct in all material respects on and as of the date hereof; 4. No Potential Default or Event of Default exists as of the date hereof or will result from the making of the initial advance with respect to which this Certificate is delivered; and 5. Each of the conditions specified in Section 5 of the MLA and in Section 10 of the Third Supplement required to be satisfied on or prior to the date of the making of the initial advance under the Loan has been fulfilled as of the date hereof. IN WITNESS WHEREOF, I have executed this Advance Certificate as of ______________. ____________________________________________ President, Shenandoah Telecommunications Company