UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
JULY 31, 2018
Date of report (Date of earliest event reported)
NUVERA COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
| Minnesota | 0-3024 | 41-0440990 |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
27 North Minnesota Street
New Ulm, Minnesota 56073
(Address of principal executive offices, including zip code)
(507) 354-4111
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
As previously reported on July 31, 2018, Nuvera Communications, Inc. ("Nuvera") completed its acquisition of Scott-Rice Telephone Co. from Allstream Business U.S., LLC, an affiliate of Zayo Group Holdings, Inc. for approximately $42 million in cash pursuant to the terms of the Stock Purchase Agreement dated as of February 22, 2018. The acquisition has resulted in a combined company that provides phone, video and internet services with approximately 66,000 connections.
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT; ITEM 2.03. CREATION OF DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT.
In connection with the acquisition of Scott-Rice on July 31, 2018, Nuvera, Western Telephone Company, Peoples Telephone Company, Hutchinson Telephone Company, Hutchinson Cellular, Inc., Hutchinson Telecommunications, Inc. Sleepy Eye Telephone Company, Tech Trends, Inc. and Scott-Rice (collectively Nuvera and its “Subsidiaries”) entered into an amended credit facility with CoBank, ACB (“CoBank”). Under the amended credit facility, Nuvera and Subsidiaries entered into a Second Amended and Restated Master Loan Agreement (“Second MLA”) pursuant to which Nuvera paid off approximately $25.75 million in existing indebtedness to CoBank, and used the remainder to partially finance the Scott-Rice acquisition. Nuvera also entered into (i) a Fourth Supplement to the Second MLA in connection with a $64.55 million term promissory note; and (ii) a Fifth Supplement to the Second MLA in connection with a $10.0 million revolver promissory note.
$64.55 million Term Promissory Note.
The terms of the $64.55 million term promissory note include:
·
Interest payable monthly;
·
Interest quarterly principal payments of $1,152,600, commencing September 30, 2018 through July 31, 2025; and
·
Final maturity on July 31, 2025.
$10.0 million Revolver Promissory Note.
The terms of the $10.0 million revolver promissory note include:
·
Interest payable monthly; and
·
Final maturity on July 31, 2023.
Interest Rate.
Interest under the $64.55 million term promissory note and the $10.0 million revolver promissory note will be determined based on one or more of the following:
(a) One-month London Interbank Offered Rate (“LIBOR), adjusted weekly, plus a Applicable Margin (as defined below);
(b) A Fixed Rate LIBOR Option Rate, adjusted periodically, plus Applicable Margin; and
(c) A fixed rate quoted by CoBank for a minimum of 180 days, with fixed increments of $100,000.
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The “Applicable Margin” is determined in accordance with the following chart based on the Nuvera’s Total Leverage Ratio as of the end of each quarter:
| Total Leverage Ratio | Applicable Margin for Portions of the Loan bearing interest at the LIBOR Option or the Variable Rate Option |
|
|
|
| Greater than or equal to 2.50:1.00 | 3.25% |
| Less than 2.50:1.00 and greater than or equal to 2.00:1.00 | 3.00% |
| Less than 2.00:1.00 | 2.25%
|
Second Amended and Restated Pledge and Security Agreement
Nuvera has also entered into a Second Amended and Restated Pledge and Security Agreement under which substantially all the assets of Nuvera and Subsidiaries have been pledged to CoBank as security for the credit facilities. In addition, the Subsidiaries have guaranteed all the obligations under the credit facility.
ITEM 9.01
FINANCIAL STATEMENTS AND EXHIBITS.
| (d) Exhibits | |
| 2.1 | Stock Purchase Agreement By and Among New Ulm Telecom, Inc. (now known as Nuvera Communications, Inc.), Scott-Rice Telephone Co., and Allstream Business US, LLC.* |
| 10.1 | Second Amended and Restated Master Loan Agreement between Nuvera Communications, Inc. (“Nuvera”) and CoBank, ACD (“CoBank”). |
| 10.2 | Fourth Supplement to the Second Amended and Restated Master Loan Agreement between Nuvera and CoBank. |
| 10.3 | Revolver Promissory Note for $10.0 million from Nuvera to CoBank. |
| 10.4 | Fifth Supplement to the Second Amended and Restated Master Loan Agreement. |
| 10.5 | Term Promissory Note for $64.55 million from Nuvera to CoBank. |
| 10.6 | Second Amended and Restated Continuing Guarantee from Nuvera and Subsidiaries to CoBank. |
| 10.7 | Second Amended and Restated Pledge and Security Agreement from Nuvera and Subsidiaries to CoBank. |
*Incorporated by reference to Exhibit 10.16 to Form 10-K filed on March 15, 2018.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
| Nuvera Communications, Inc. |
|
| |
| Date: August 2, 2018 | By: /s/Bill Otis Bill Otis President and Chief Executive Officer |
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EXHITIT 10.1
EXECUTION VERSION
SECOND AMENDED AND RESTATED MASTER LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED MASTER LOAN AGREEMENT (this “Agreement”), dated as of July 31, 2018, is between COBANK, ACB (“CoBank”) and NUVERA COMMUNICATIONS, INC., a Minnesota corporation (the “Borrower”) and amends and restates in its entirety the Amended and Restated Master Loan Agreement, dated as of December 31, 2014, between CoBank and the Borrower, as it previously may have been amended (the “Prior Agreement”).
NOW, THEREFORE, in consideration of the foregoing, intending to be legally bound hereby, and in consideration of CoBank making one or more loans to the Borrower, CoBank and the Borrower agree, and hereby amend and restate the Prior Agreement, as follows:
Section 1. Supplements. In the event the Borrower desires to borrow from CoBank and CoBank is willing to lend to the Borrower, or in the event CoBank and the Borrower desire to consolidate any existing loans hereunder, the parties will enter into a supplement to this Agreement (each, a “Supplement” and, collectively, the “Supplements”). Each Supplement will set forth CoBank’s commitment to make a loan or loans (each, a “Loan” and, collectively, the “Loans”) to the Borrower, the amount of the Loan(s), the purpose of the Loan(s), the interest rate or rate options applicable to the Loan(s), the repayment terms of the Loan(s), and any other terms and conditions applicable to the Loan(s). Each Loan will be governed by the terms and conditions contained in this Agreement and in the Supplement and the Note (as hereinafter defined in Section 3) relating to that Loan.
Section 2. Availability. Advances under the Loans will be made available on any day on which CoBank and the Federal Reserve Banks are open for business (a “Business Day”) upon the telephonic or written request of an authorized employee of the Borrower. Requests for advances under the Loans must be received no later than 11:00 a.m. Mountain time on the date the advance is desired or at such earlier date and time as may be specified in the relevant Supplement. Advances under the Loans will be made available by wire transfer of immediately available funds. Wire transfers will be made to such account or accounts as may be designated in writing by the Borrower. 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 (as hereinafter defined in Subsection 25(E)) identifying himself or herself as one of the persons designated in writing by the Borrower to request advances under a Master Agreement for Cash Management and Transaction Services with CoBank, so long as any funds advanced are wired to an account previously designated in writing by the Borrower.
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“Interest Rate Agreement” means any interest rate swap, hedge, cap, collar or similar agreement or arrangement, in form and content acceptable to CoBank, designed to protect the Borrower against fluctuations in interest rates.
Section 4. Mandatory Repayments; Application. (A) Repayments from Asset Dispositions. The Borrower shall repay the Loans in an amount equal to all Net Proceeds (as hereinafter defined in this Subsection 4(A)) received by any Loan Party or any Subsidiary of any Loan Party (as such terms are hereinafter defined in this Subsection 4(A)) that are from any Asset Disposition (as hereinafter defined in this Subsection 4(A)) in excess of $500,000 to the extent that such Net Proceeds are not reinvested in equipment or other assets that are used or useful in the business of a Loan Party or such Subsidiary within 180 days of receipt by such Loan Party or Subsidiary of such Net Proceeds, or if any Loan Party shall enter into a contract within such 180-day period pursuant to which such Loan Party agrees to use such Net Proceeds to purchase equipment or other assets that are used or useful in the business of such Loan Party or such Subsidiary, then the Net Proceeds must be reinvested in equipment or other assets that are used or useful in the business of a Loan Party or such Subsidiary within 360 days of receipt by such Loan Party or Subsidiary of such Net Proceeds. All such repayments shall be applied in accordance with Subsection 4(E). 2 “Asset Disposition” means the disposition, whether by sale, lease, transfer, loss, damage, destruction, condemnation or otherwise, by any Loan Party or any Subsidiary of a Loan Party of any or all of such Loan Party’s or such Subsidiary’s assets other than dispositions of assets permitted under clause (i) - (iii) of Subsection 9(E). “Loan Party” or “Loan Parties” means the Borrower and any of its wholly-owned Subsidiaries. “Net Proceeds” means the cash proceeds received by any Loan Party or any Subsidiary of a Loan Party from any Asset Disposition, debt or equity issuance (including insurance proceeds, awards of condemnation, and payments under notes or other debt securities received in connection with any Asset Disposition), net of (i) the reasonable costs of such sale, lease, transfer, issuance or other disposition (including taxes attributable to such sale, lease, transfer, issuance or other disposition), (ii) amounts applied to repayment of Indebtedness (as hereinafter defined in Subsection 8(I)(1)), other than Indebtedness outstanding hereunder, secured by a lien on the asset or property disposed, and (iii) for Subsidiaries not wholly-owned by a Loan Party, the percentage equal to the ownership interests of Persons other than such Loan Party (by way of example, if a Loan Party owns a Subsidiary 95%, who in turn owns another Subsidiary 80%, and an Asset Disposition occurs at the other Subsidiary, only 76% (95% of 80%) of the proceeds thereof that would otherwise have constituted Net Proceeds will constitute Net Proceeds). “Subsidiary” or “Subsidiaries” means, with respect to any Person of which more than 50% of the total voting power of shares of stock (or equivalent ownership or controlling interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or any combination thereof. (B) Mandatory Repayments from Equity Issuances. Immediately upon receipt of proceeds from the issuance of any ownership interests in any Loan Party (excluding Investments among Loan Parties as permitted by Subsection 9(F)) or any Subsidiary of any Loan Party, or any rights to purchase any such interest, in each case as permitted by CoBank, the Borrower shall repay the Loans in an amount equal to the amount of the Net Proceeds received in connection with such equity issuance. All such repayments shall be applied in accordance with Subsection 4(E). (C) Mandatory Repayments from Debt Incurrence. Immediately upon receipt of proceeds from the incurrence of any additional Indebtedness by any Loan Party or any Subsidiary of any Loan Party, except Indebtedness expressly permitted pursuant to Subsection 9(A), the Borrower shall repay the Loans in an amount equal to the amount of the Net Proceeds received in connection with such debt incurrence. All such repayments shall be applied in accordance with Subsection 4(E).
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(D)
Mandatory Repayments from Aggregate Outstanding Amount. If at any time the aggregate outstanding amount of advances under any revolving Loan exceeds such revolving Loan commitment, Borrower shall repay promptly such revolving Loan in an amount at least sufficient to reduce the aggregate principal balance of such revolving Loan then outstanding to the amount of the revolving Loan commitment and until such repayment is made CoBank shall not be obligated to make any additional advances under any Loan.
(E)
Application of Repayments; Related Interest and Surcharge Payments. Unless otherwise provided in any Supplement, all repayments made pursuant to Section 4(A) through (D) will be applied first pro rata to all term Loans, based upon the principal amount then outstanding, and then pro rata to all revolving Loans, based upon the principal amount of the Commitments (as defined in the Supplements evidencing the revolving Loans). All term Loan repayments made pursuant to Section 4(A) through (D) will be applied to principal installments in the inverse order of their maturity and to such portions or Portions (as defined in the Supplements evidencing the term Loans) of the term Loans as the Borrower specifies in writing or, in the absence of such direction, as CoBank specifies, and all repayments on revolving Loans will be applied to such Portions (as defined in the Supplements evidencing the revolving Loans) of the revolving Loans as the Borrower specifies in writing or, in the absence of such direction, as CoBank specifies. All term Loan repayments made pursuant to Section 4(F) will be applied to principal installments in the inverse order of their maturity and to such portions or Portions (as defined in the Supplements evidencing the term Loans) of the term Loans as the Borrower specifies in writing, and all repayments on revolving Loans pursuant to Section 4(F) will be applied to such Portions (as defined in the Supplements evidencing the revolving Loans) of the revolving Loans as the Borrower specifies in writing. The Commitments (as defined in the Supplements evidencing the revolving Loans) also will be permanently reduced to the extent and in the amount that the Borrower is required, pursuant to this Section 4, to apply mandatory repayments to be made pursuant to this Section 4 (whether or not any advances are then outstanding and available to be repaid thereunder) to revolving Loans, in the inverse order of the Commitment Adjustment Dates (as defined in the Supplements evidencing the revolving Loans). If any revolving Loan does not have a Commitment Adjustment Date, the Maturity Date (as defined in such Supplement) of such revolving Loan shall be deemed its Commitment Adjustment Date for the purpose of the proceeding sentence. All reductions provided for in this Section 4 will be in addition to any voluntary reductions and all scheduled reductions and, accordingly, may result in the termination of the Commitments prior to the Maturity Dates (as such terms are defined in the Supplements evidencing the revolving Loans). All repayments required under this Section 4 are to be accompanied by payment of all applicable Surcharges (as defined in the Supplements evidencing the Loans) and accrued interest on the amount repaid.
(F)
Prepayment and Surcharge. The Borrower may (i) on one Business Day’s prior written notice prepay in full or in part any Portion of the Loan accruing interest at a variable rate of interest and (ii) on three Business Days’ prior, irrevocable written notice, prepay in full or in part any Portion of the Loan accruing interest at a fixed rate option. Notwithstanding the foregoing, in connection with the Borrower repaying or prepaying any amount accruing interest pursuant to a fixed rate option (whether such payment is made voluntarily, as a result of an acceleration, or otherwise), the Borrower must also pay a Surcharge as defined in the Supplements evidencing the Loans.
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(G)
Increased Costs.
(1)
Increased Costs Generally. If any change in Law occurring after the date hereof shall (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by CoBank; (ii) subject CoBank to any taxes on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or (iii) impose on CoBank or the London interbank market any other condition, cost or expense (other than taxes) affecting this Agreement or any Loan; and the result of any of the foregoing shall be to increase the cost to CoBank of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan or to reduce the amount of any sum received or receivable by CoBank hereunder (whether of principal, interest or any other amount) then, upon request of CoBank, the Borrower will pay to CoBank such additional amount or amounts as will compensate CoBank for such additional costs incurred or reduction suffered; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in Law”, regardless of the date enacted, adopted or issued.
(2)
Capital Requirements. If CoBank determines that any change in Law affecting CoBank or any lending office of CoBank, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on CoBank’s capital as a consequence of this Agreement, any Commitment (as defined in the Supplements evidencing the revolving Loans) or the Loans made by CoBank, to a level below that which CoBank could have achieved but for such change in Law (taking into consideration CoBank’s policies with respect to capital adequacy), then from time to time the Borrower will pay to CoBank such additional amount or amounts as will compensate CoBank for any such reduction suffered; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in Law”, regardless of the date enacted, adopted or issued.
(3)
Certificates for Reimbursement. A certificate of CoBank setting forth the amount or amounts necessary to compensate CoBank as specified in clauses (1) and (2) of this Subsection 4(G) and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay CoBank the amount shown as due on any such certificate within ten days after receipt thereof.
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(4)
Delay in Requests. Failure or delay on the part of CoBank to demand compensation pursuant to this Subsection 4(G) shall not constitute a waiver of CoBank’s right to demand such compensation; provided that the Borrowers shall not be required to compensate CoBank pursuant to this Subsection 4(G) for any increased costs incurred or reductions suffered more than six months prior to the date that CoBank notifies the Borrower of the change in Law giving rise to such increased costs or reductions, and of CoBank’s intention to claim compensation therefor (except that, if the change in Law giving rise to such increased costs or reductions is retroactive, then the six month period referred to above shall be extended to include the period of retroactive effect thereof).
(H)
Additional Provisions Regarding LIBOR Options.
(1)
Unavailability. If, prior to the first day of any Interest Period (as defined in the Supplements evidencing the Loans) for any Loan bearing interest at a fixed rate option calculated on the basis of LIBOR (as defined in the Supplements evidencing the Loans), CoBank shall have determined, in its sole discretion, that (i) adequate and reasonable means do not exist for ascertaining LIBOR for such Interest Period, or (ii) CoBank’s cost to fund balances bearing interest at such fixed rate option (as determined by CoBank in its reasonable discretion) increases beyond any corresponding increase in LIBOR or decreases less than any corresponding decrease in LIBOR, CoBank shall, as soon as practicable thereafter, give notice of such determination to the Borrower. In the event of any such determination under the foregoing clauses (i) or (ii), until CoBank shall have advised the Borrower that the circumstances giving rise to such notice no longer exist, (a) any request by the Borrower for Loans bearing interest at any such fixed rate option shall be deemed to be a request for a Loan bearing interest at a variable rate option, (b) any request by the Borrower for a Loan to be converted into or continued as a Loan bearing interest at such fixed rate option shall be deemed to be a request for such Loan to be converted into or continued as a Loan bearing interest at a variable rate option, and (c) any Loans that were to be converted into or continued as Loans bearing interest at such fixed rate option on the first day of an Interest Period shall be converted into or continued as Loans bearing interest at a variable rate option. Until such notice has been withdrawn by CoBank, no further Loans bearing interest at any such fixed rate option shall be made or continued as such, nor shall the Borrower have the right to convert any Loan bearing interest at a variable rate option or at a fixed rate option not calculate on the basis of LIBOR to a Loan bearing interest at such a fixed rate option.
(2)
Illegality. Notwithstanding any other provision of this Agreement, in the event that on or after the date of this Agreement any change in Law shall make it unlawful for CoBank to make or maintain the Loans bearing interest at a fixed rate option calculated on the basis of LIBOR, then CoBank shall promptly notify the Borrower thereof, following which (i) the ability of the Borrower to elect such fixed rate option shall be suspended until such time as CoBank may again make and maintain the Loans bearing interest at such fixed rate option and (ii) if such Law shall so mandate, the Loans bearing interest at such fixed rate option shall be converted to Loans bearing interest at a variable rate option by the Borrower on or before such date as shall be mandated by such Law, and the Borrower shall pay any accrued and unpaid interest and any prepayment surcharges as described in Subsection 4(F) and the Supplements evidencing the Loans.
Section 5. Security.
(A)
The Borrower’s obligations under this Agreement, the Notes, the Supplements, any Interest Rate Agreements provided by CoBank and the other Loan Documents are secured by a statutory first lien on all equity which the Borrower may now own or hereafter acquire or be allocated in CoBank.
(B)
In addition, except as otherwise provided in the Supplements, the Borrower’s obligations and the other Loan Parties’ obligations under this Agreement, the Notes, the Supplements, any Interest Rate Agreement with CoBank and the other Loan Documents are guaranteed by that certain Second Amended and Restated Continuing Guaranty (the “Continuing Guaranty”), dated as of even date herewith, made by the Borrower, Western Telephone Company (“WTC”), Peoples Telephone Company (“PTC”), Hutchinson Telephone, Hutchinson Cellular, Inc. (“Hutchinson Cellular”), Hutchinson Telecommunications, Inc. (“Hutchinson Telecom”), Sleepy Eye Telephone Company (“Sleepy Eye”), Tech Trends, Inc. (“Tech Trends”), Scott-Rice Telephone Co. (“SRT”) and each additional Subsidiary of the Borrower which hereafter becomes a party thereto (collectively, the “Guarantors”) in favor of CoBank.
(C)
Furthermore, except as otherwise provided in the Supplements, the Borrower’s obligations under this Agreement, the Note, any Interest Rate Agreement with CoBank and the other Loan Documents and the Guarantors’ obligations under the Continuing Guaranty and the other Loan Documents are secured by that certain Second Amended and Restated Pledge and Security Agreement (the “Pledge and Security Agreement”), dated as of even date herewith, made by the Borrower and the Guarantors in favor of CoBank, pursuant to which the Loan Parties party thereto have granted to CoBank a first priority security interest in substantially all of their now owned or hereafter acquired tangible and intangible personal property.
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(D)
In addition, except as otherwise provided in the Supplements, the Borrower’s obligations under this Agreement, the Notes, the Supplements, the Interest Rate Agreements provided by CoBank and the other Loan Documents are secured by (i) that certain Second Amended and Restated Real Estate Mortgage, Assignment of Rents and Profits, Security Agreement and Fixture Financing Statement, dated as of the date hereof, by the Borrower in favor of CoBank, to be recorded in Brown, Nicollet and Redwood Counties, Minnesota (as the same may be amended, modified, supplemented, extended or restated from time to time, the “Borrower Mortgage”), (ii) that certain Second Amended and Restated Real Estate Mortgage, Assignment of Rents and Profits, Security Agreement and Fixture Financing Statement, dated as of the date hereof, by WTC in favor of CoBank, to be recorded in Brown and Redwood Counties, Minnesota (as the same may be amended, modified, supplemented, extended or restated from time to time, the “WTC Mortgage”), (iii) that certain Second Amended and Restated Real Estate Mortgage and Security Agreement, dated as of the date hereof, by PTC in favor of CoBank, to be recorded in Cherokee County, Iowa (as the same may be amended, modified, supplemented, extended or restated from time to time, the “PTC Mortgage”), (iv) that certain Second Amended and Restated Real Estate Mortgage, Assignment of Rents and Profits, Security Agreement and Fixture Financing Statement, dated as of the date hereof, by Hutchinson Telephone in favor of CoBank, to be recorded in McLeod County, Minnesota (as the same may be amended, modified, supplemented, extended or restated from time to time, the “Hutchinson Telephone Mortgage”), (v) that certain Second Amended and Restated Real Estate Mortgage, Assignment of Rents and Profits, Security Agreement and Fixture Financing Statement, dated as of the date hereof, by Hutchinson Telecom in favor of CoBank, to be recorded in Meeker County, Minnesota (as the same may be amended, modified, supplemented, extended or restated from time to time, the “Hutchinson Telecom Mortgage”), (vi) that certain Second Amended and Restated Real Estate Mortgage, Assignment of Rents and Profits, Security Agreement and Fixture Financing Statement, dated as of the date hereof, by Sleepy Eye in favor of CoBank, to be recorded in Brown County, Minnesota (as the same may be amended, modified, supplemented, extended or restated from time to time, the “Sleepy Eye Mortgage”), and (vii) that certain Real Estate Mortgage, Assignment of Rents and Profits, Security Agreement and Fixture Financing Statement, dated the date hereof, by SRT in favor of CoBank, to be recorded in Scott and Rice Counties, Minnesota (as the same may be amended, modified, supplemented, extended or restated from time to time, the “SRT Mortgage”; the Borrower Mortgage, WTC Mortgage, PTC Mortgage, the Hutchinson Telephone Mortgage, the Hutchinson Telecom Mortgage, the Sleepy Eye Mortgage, the SRT Mortgage and any other mortgage, deed of trust or similar instrument granted by any Loan Party in favor of CoBank to secure the obligations of the Loan Parties under the Loan Documents, collectively, the “Mortgages”), pursuant to which the applicable Loan Party has granted CoBank a first priority security interest in certain real property.
(E)
The Borrower agrees, and agrees to cause each other Loan Party (including any Person which becomes a direct or indirect, wholly-owned Subsidiary of any Loan Party after the date hereof), to take such steps, including the execution and filing and recordation of a joinder to the Continuing Guaranty and the Pledge and Security Agreement (or if such wholly-owned Subsidiary is prohibited by any applicable PUC (as hereinafter defined in Subsection 12(C)) from joining the Continuing Guaranty and/or the Pledge and Security Agreement, a negative pledge agreement), other continuing guarantees, security agreements, financing statements, irrevocable stock powers, collateral assignments and deposit account control agreements, and amendments to any of the foregoing, and such other instruments and documents as CoBank may from time to time reasonably require to enable CoBank to obtain, perfect and maintain its security interests in such property and the payment of any applicable documentary stamp or similar taxes. Furthermore, the Borrower agrees, and agrees to cause each other Loan Party (including any Person which becomes a direct or indirect, wholly-owned Subsidiary of any Loan Party after the date hereof) to take such steps, including the execution and recordation and filing of any mortgages, mortgage agreements, or any fixture filings, and amendments to the foregoing, and such other instruments and documents as CoBank may reasonably request from time to time to enable CoBank to obtain, perfect, and maintain a lien on any real property interests of such Person as CoBank shall determine in its reasonable discretion, and the payment of any applicable mortgage recording tax, documentary stamp taxes or similar taxes.
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Section 6. Conditions Precedent.
(A)
Conditions to Initial Supplement. CoBank’s obligation to extend credit under the initial Supplement is subject to the condition precedent that CoBank receives, in form and substance satisfactory to CoBank, each of the following:
(1)
This Agreement, Etc. A duly executed original of this Agreement and all instruments and documents contemplated hereby.
(2)
Cash Management Agreement. A duly completed and executed original of a CoBank Master Agreement for Cash Management and Transaction Services.
(3)
Security. (i) A duly executed original of each of the security documents required by Section 5, and (ii) such evidence as CoBank shall require that all steps required by CoBank to enable CoBank to obtain and perfect its lien on the security have been taken and that such lien has the priority contemplated by this Agreement.
(4)
Corporate Structure. Evidence of satisfactory corporate and capital structure of the Loan Parties and their respective Subsidiaries, to be determined in CoBank’s reasonable discretion.
(5)
Perfection and Diligence Certificate. A duly completed and executed Perfection and Diligence Certificate, dated as of the date hereof, executed by the Loan Parties in favor of CoBank, in form and content approved by CoBank.
(6)
Closing of Acquisition. Evidence satisfactory to CoBank that (i) the Acquisition has been, or immediately following the disbursement of the proceeds of the Loans on the Closing Date (as defined in that certain Fourth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of even date herewith, between the Borrower and CoBank (the “Fourth Supplement”)) will be, consummated in accordance with the terms and conditions of the Acquisition Agreement in the form certified to under Subsection 8(B) of the Fourth Supplement and (ii) all consents and approvals of any Governmental Authority which are necessary for, or required as a condition of, the closing of the Acquisition have been obtained and are in full force and effect.
“Acquisition” means the acquisition by the Borrower of all the issued and outstanding capital stock of Scott-Rice Telephone Co. (“SRT”) pursuant to the terms of the Acquisition Agreement.
“Acquisition Agreement” means that certain Stock Purchase Agreement, dated as of February 22, 2018, by and among the Borrower, SRT and Allstream Business US, LLC.
(7)
Termination of Other Existing Indebtedness. Evidence satisfactory to CoBank that (A) all outstanding Indebtedness of the Loan Parties, including any Indebtedness in connection with the Acquisition, has been, or immediately following the disbursement of the proceeds of the Loan under the Fourth Supplement on the Closing Date will be, fully paid, satisfied and discharged, other than Indebtedness permitted pursuant to Subsection 9(A), and (B) any and all mortgages, deeds of trust, pledges, liens (including the lien of an attachment, judgment, or execution), security interests, or other encumbrances of any kind upon any of such Loan Party’s property, real or personal, have been, or immediately following the disbursement of the proceeds of the Loan under the Fourth Supplement on the Closing Date will be, terminated, other than as permitted pursuant to Subsection 9(B).
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(8)
Real Estate Deliverables. (i) legal descriptions of each parcel of real property subject to a Mortgage; (ii) an ALTA title insurance policy insuring CoBank (including such endorsements as CoBank may reasonably require), insuring each Mortgage as a valid first priority lien upon the property subject to such Mortgage, subject only to liens permitted pursuant to Subsection 9(B) which have first priority by operation of law; (iii) to the extent requested by CoBank, completed environmental questionnaires in the form provided by CoBank, or acceptable Phase I environmental audits; and (iv) evidence that the Loan Parties have taken all actions required under the Laws applicable to properties subject to a Mortgage and located in a “special flood hazard area” as defined by the Federal Emergency Management Area and/or requested by CoBank to assist in ensuring that CoBank is in compliance with such Laws applicable to such properties.
(9)
Solvency Certificate. That CoBank receives a certificate as to the compliance of each Loan Party with the representations and warranties set forth in Subsection 7(X).
(B)
Conditions to Each Supplement. CoBank’s obligations, if any, to extend credit under each Supplement, including the initial Supplement, is subject to the conditions precedent that CoBank receive, in form and content reasonably satisfactory to CoBank, each of the following:
(1)
Supplement. A duly executed original of such Supplement and all other instruments and documents contemplated by such Supplement.
(2)
Evidence of Authority. Such certified board, member, manager or partner resolutions, evidence of incumbency, and other evidence that CoBank may require that such Supplement and all other instruments and documents executed in connection therewith, and, in the case of the initial Supplement, this Agreement and all instruments and documents executed in connection herewith, have been duly authorized and executed.
(3)
Consents and Approvals. Such evidence as CoBank may reasonably require that all required consents and approvals of any Governmental Authority (as hereinafter defined in Subsection 7(D)) or third-party which are necessary for the validity or enforceability of any of the Loan Documents or for the consummation of any of the transactions contemplated thereby have been obtained and are in full force and effect.
10
(4)
License, Etc. Such evidence as CoBank may reasonably require that all franchises, licenses, certificates, permits, orders, consents, authorizations, approvals and the like, including all Telecommunications Licenses (as hereinafter defined in Subsection 7(R)) (collectively, the “Licenses”) which are necessary for the operation of the business of each of the Loan Parties and their respective Subsidiaries have been obtained and are in full force and effect, which if not obtained and maintained, could reasonably be expected to have a Material Adverse Effect.
(5)
Fees and Other Charges. Payment of all fees and other charges provided for herein or in such Supplement which are due.
(6)
Insurance. Such evidence as CoBank may require that the Loan Parties and their Subsidiaries are in compliance with Subsection 8(D).
(7)
Evidence of Perfection. Such evidence as CoBank may require that CoBank has a duly perfected first-priority security interest in all collateral contemplated by this Agreement and such Supplement.
(8)
Opinions of Counsel. Opinions of counsel (who shall be acceptable to CoBank) to the Borrower and any other party to the Loan Documents (other than CoBank) relating to such Supplement acceptable to CoBank.
(9)
Additional Security and Guaranties. A duly executed copy of any additional security documents or guaranties required by Section 5 or by such Supplement.
(C)
Conditions to Each Advance. CoBank’s obligation under each Supplement to make any Loan or advance to the Borrower thereunder is subject to the further conditions set forth in such Supplement and the following conditions precedent:
(1)
Representations and Warranties. That the representations and warranties of the Borrower, the other Loan Parties and any other party to any Loan Document (other than CoBank) contained in this Agreement, any Supplement and any other Loan Document be true and correct in all material respects on and as of the date of such advance, as though made on and as of such date (and the request (regardless of form) for each Loan or advance shall be deemed a remaking of such representations and warranties as of such date by such parties).
(2)
Events of Default. That no Event of Default (as hereinafter defined in Section 10) or event which solely with the giving of notice and/or the passage of time could reasonably be expected to become an Event of Default hereunder (a “Potential Default”), shall have occurred and be continuing.
(3)
Material Adverse Effect. Since December 31, 2017, there shall not have occurred any event or condition affecting the Loan Parties or any of their respective Subsidiaries, which individually or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect.
11
(4)
Other Information. That CoBank receive such other information regarding the condition, financial or otherwise, and operations of the Borrower, the other Loan Parties, any Subsidiary of any Loan Party and any other party to any Loan Document (other than CoBank) as CoBank shall request and such other opinions, certificates or documents as CoBank shall request.
Section 7. Representations and Warranties. The execution by the Borrower of each Supplement and each request for an advance thereunder constitutes a representation and warranty to CoBank that:
(A)
Application. Each representation and warranty and all other information set forth in any application, any Loan Document or other document submitted in connection with, or to induce CoBank to enter into, such Supplement is correct in all material respects as of the date of the Supplement or request for advance, except for representations and warranties that are date-specific, which shall be correct in all material respects as of the reference date.
(B)
Disclosure. No representation or warranty of the Borrower contained in this Agreement, the financial statements referred to in Subsection 7(F), any other document, certificate or written statement furnished to CoBank by or on behalf of any Loan Party or any Subsidiary of any Loan Party for use in connection with the Loan Documents contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made.
(C)
Organization; Powers; Etc. Each Loan Party and each Subsidiary of any Loan Party (i) is duly incorporated, organized, or formed (as applicable), validly existing, and in good standing under the Laws (as hereinafter defined in this Subsection 7(C)) of its state of incorporation, organization or formation (as applicable); (ii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of its properties or the nature of its business requires such qualification, except where failure to be so qualified could not reasonably be expected to have a Material Adverse Effect (as hereinafter defined in this Subsection 7(C)); (iii) has all requisite legal and corporate, partnership or limited liability company power (as applicable) to own and operate its assets and to carry on its business and to enter into and perform its obligations under the Loan Documents to which it is a party; and (iv) has duly and lawfully obtained and maintained all Licenses which are necessary in the conduct of its business, or which may be otherwise required by Law, which if not obtained and maintained, could reasonably be expected to have a Material Adverse Effect.
“Laws” means any applicable law (including common law), constitution, statute, treaty, regulation, enabling legislation, rule, ordinance, ruling, order (including executive and judicial), injunction, writ, decree, bond, judgment, authorization or approval, lien or award by or settlement agreement with any Governmental Authority applicable to any Person or the properties of any Person (including the Licenses).
12
“Material Adverse Effect” means a material adverse effect upon (a) the condition (financial or otherwise), operations, properties or business of any Loan Party, any Subsidiary of any Loan Party, or any guarantor of the Borrower’s obligations hereunder, (b) the ability of any Loan Party to perform its obligations under the Loan Documents or any guarantor of the Borrower’s obligations hereunder to which it is a party, (c) the rights and remedies of CoBank under the Loan Documents, or (d) the enforceability, validity or priority of the liens and security interests granted to CoBank pursuant to the terms of the Loan Documents.
(D)
Due Authorization; No Violations; Etc. The execution and delivery by each Loan Party of, and the performance by each Loan Party of its obligations under, the Loan Documents to which it is a party have been duly authorized by all requisite corporate, partnership or limited liability company action (as applicable) and do not and will not (i) violate its articles or certificate of incorporation, articles or certificate of organization or articles or certificate of formation (as applicable), its bylaws, partnership agreement or operating agreement (as applicable), any provision of any Law of any Governmental Authority (as hereinafter defined in this Subsection 7(D)), any agreement or any indenture, mortgage, or other instrument to which any Loan Party is a party or by which any Loan Party, any Subsidiary of any Loan Party, or its respective properties are bound, or (ii) be in conflict with, result in a breach of, or constitute with the giving of notice or lapse of time, or both, a default under any such agreement, indenture, mortgage, or other instrument. All actions on the part of the shareholders, partners, managers or members (as applicable) of each Loan Party necessary in connection with the execution and delivery by such Loan Party of, and the performance by each Loan Party of its obligations under, the Loan Documents to which it is a party have been taken and remain in full force and effect.
“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, including the Securities and Exchange Commission, FCC and PUC. “FCC” means the Federal Communications Commission. “PUC” means any state, provincial or other local public utility commission, local franchising authority, or similar regulatory agency or body that exercises jurisdiction over the rates or services or the ownership, construction or operation of any Communications System (and its related facilities) or over any Persons who own, construct or operate a Communications System, in each case by reason of the nature or type of the business subject to regulation and not pursuant to Laws of general applicability to Persons conducting business in any such jurisdiction. “Communications System” means a system or business providing voice, data or video transport, connection, monitoring services, or other communications and/or information services (including cable television), through any means or medium, and the provision of facilities, marketing, management, technical and financial (including call rating) or other services to companies providing such transport, connection or monitoring services or constructing, creating, developing or marketing communications-related network equipment, software and other devices for use in the business described above.
13
(E)
Binding Agreement. Each of the Loan Documents to which each Loan Party is a party is, or when executed and delivered will be, the legal, valid, and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, subject only to limitations on enforceability imposed by (i) applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting creditors’ rights generally, and (ii) general equitable principles.
(F)
Financial Statements, Budgets, Projections, Etc. All financial statements of any Person submitted to CoBank in connection with, or to induce CoBank to enter into, this Agreement or any Supplement or any other Loan Document fairly and fully present the financial condition of such Person in all material respects and the results of such Person’s operations for the periods covered thereby, and are prepared in accordance with generally accepted accounting principles (“GAAP”) consistently applied, except, in the case of any unaudited financial statements, the omission of footnotes and, in the case of any interim financial statements, normal year-end adjustments. As of the date of such financial statements, there were no material liabilities of such Person, fixed or contingent, not reflected in such financial statements or the notes thereto. Since the date of such financial statements, there has been no material adverse change in the financial condition or operations of such Person. All budgets, projections, feasibility studies, and other documentation submitted by any Loan Party, any Subsidiary of any Loan Party, or any guarantor of the Borrower’s obligations hereunder to CoBank in connection with, or to induce CoBank to enter into, or make, this Agreement, any Supplement, any other Loan Document or any advance are based upon assumptions that are reasonable and realistic, and as of the date of this Agreement, such Supplement, such other Loan Document or such request for advance, no fact has come to light, and no event or transaction has occurred, which would cause any such assumption not to be reasonable or realistic.
(G)
Consents and Approvals. Except as contemplated in Section 19, no License of any Governmental Authority or of any party to any agreement to which any Loan Party is a party or by which it, any of its Subsidiaries or any of its respective property may be bound or affected, is necessary at the time this representation is being made or remade in connection with the project, acquisition or other activity being financed by such Supplement, the execution, delivery, performance or enforcement of the Loan Documents or the creation and perfection of the liens and security interests granted thereby, except as such have been obtained and are in full force and effect or which are required in connection with the enforcement of or exercise of remedies under any Loan Document.
(H)
Compliance. Each Loan Party is in compliance with all of the terms of the Loan Documents to which it is a party and no Event of Default or Potential Default exists.
(I)
Compliance with Laws. Each Loan Party and each Subsidiary of any Loan Party is in compliance in all material respects with all Laws, the failure to comply with which could reasonably be expected to have a Material Adverse Effect.
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(J)
Environmental Compliance. Without limiting the provisions of Subsection 7(I):
(1)
all property owned by any Loan Party or any Subsidiary of any Loan Party and all operations conducted by any Loan Party or any Subsidiary of any Loan Party are in compliance in all material respects with all Environmental Laws (as hereinafter defined in this Subsection 7(J));
(2)
to the Borrower’s knowledge, no Hazardous Substance (as hereinafter defined in this Subsection 7(J)) has been released onto or disposed of or is otherwise present in, on, under, over, at, about or from any property owned by any Loan Party or any Subsidiary of any Loan Party;
(3)
no investigations, inquiries, orders, hearings, liens, claims, actions or other proceedings by or before any Governmental Authority or third-party claims are pending or threatened in connection with any violation of Environmental Laws with respect to any property owned by any Loan Party or any Subsidiary of any Loan Party; and
(4)
other than as described in Schedule 7(J), there are no underground storage tanks of any kind or character, whether empty or containing substances or any nature, located on or under any property owned by any Loan Party or any Subsidiary of any Loan Party and any and all aboveground storage tanks located on any property owned by any Loan Party or any Subsidiary of any Loan Party are in compliance with all Environmental Laws, and to Borrower's knowledge after due investigation, all underground storage tanks that have ever been located on or under any such property have been removed in compliance with Environmental Laws existing at the time of removal.
“Environmental Laws” means any and all laws, statutes, regulations, ordinances, rules, codes, judgments, decrees, orders, guidance documents, or other legally enforceable requirements now or hereafter in effect of any federal, state, municipal or local Governmental Authority relating to (i) pollution or protection of human health or the environment, including the air, water, land, or natural resources; (ii) exposure of persons or property to Hazardous Substances; or (iii) the generation, use, handling, treatment, storage, disposal, arrangement for disposal, and transportation of harmful and deleterious substances.
“Hazardous Substance” means (i) any petroleum or petroleum products, natural gas, or natural gas products, radioactive materials, asbestos, lead, urea formaldehyde foam insulation, transformers or other equipment that contains dielectric fluid containing levels of polychlorinated biphenyls (PCBs) and radon gas; (ii) any chemical, material, waste or substance defined, listed, classified or described as “hazardous substance,” “hazardous waste,” “regulated substance,” “solid waste,” “hazardous material,” “extremely hazardous waste,” “restricted hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” under any Environmental Laws; and (iii) any material, waste or substance which is in any way regulated as hazardous or toxic or actually or potentially causing damage or injury to human health or the environment by any Governmental Authority.
15
(K)
Litigation. There is no pending legal, arbitration, or governmental action or proceeding to which any Loan Party is a party or to which any of its respective Subsidiaries or its respective properties are subject which, if adversely determined, could reasonably be expected to have a Material Adverse Effect, and to the best of the Borrower’s knowledge, no such action or proceeding is threatened or contemplated.
(L)
Principal Place of Business; Records. The principal place of business and chief executive office of the Borrower and the place where the records required by Subsection 8(F) are kept is at the address of the Borrower shown in Section 15.
(M)
Employee Benefit Plans. Each Benefit Plan is maintained and operated in compliance in all material respects with its terms and applicable Law, and each of the Loan Parties and each of the Subsidiaries of the Loan Parties is in compliance in all material respects with the terms of each Benefit Plan and applicable Law, the failure to comply with which could reasonably be expected to have a Material Adverse Effect.
“Benefit Plan” means any plan, agreement, policy or other arrangement providing employee or fringe benefits to any current or former director, officer, employee, leased employee or independent contractor with respect to which any of the Loan Parties, any Subsidiary of the Loan Parties or any other guarantor of the Borrower’s obligations hereunder has or could have any liability.
(N)
Taxes. Each Loan Party and each Subsidiary of any Loan Party has filed or caused to be filed prior to delinquency all federal, state and local tax returns that are required to be filed, and has paid and shall continue to pay when due all taxes as shown on such returns, and has paid and shall continue to pay when due all other taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable, except where the payment of such tax, assessment, government charge or levy is being contested in good faith and by appropriate proceedings and adequate reserves in compliance with GAAP have been set aside on such Loan Party’s or such Subsidiary’s books therefor.
(O)
Investment Company Act. No Loan Party and no Subsidiary of any Loan Party is an “investment company” as that term is defined in, or is otherwise subject to regulation under, the Investment Company Act of 1940, as amended.
(P)
Use of Proceeds. The funds to be borrowed under this Agreement and each Supplement will be used only as contemplated thereby. No part of such funds will be used to purchase any “margin securities” or otherwise in violation of the regulations of the Federal Reserve System or in violation of any other Law.
(Q)
Subsidiaries; Investments. Each of the Loan Parties and each of the Subsidiaries of the Loan Parties has no Subsidiaries other than as set forth on Schedule 7(Q) and Annex A to the Pledge and Security Agreement and no Investments (as hereinafter defined in Subsection 9(F)) other than as permitted in Subsection 9(F). Each of the Loan Parties and each of the Subsidiaries of any Loan Party is the registered and beneficial owner of the specified percentage of the shares of issued and outstanding capital stock or other equity interests of each of its Subsidiaries as set forth on Schedule 7(Q) and Annex A to the Pledge and Security Agreement, which stock and other equity interests are owned free and clear of all liens (other than liens and security interests permitted by Subsection 9(B)), warrants, options, rights to purchase, rights of first refusal and other interests of any Person other than CoBank. The stock or other equity interests of each Loan Party and each Subsidiary of any Loan Party has been duly authorized and validly issued and is fully paid and non-assessable.
16
(R)
Licenses; Permits; Etc. Each Loan Party and each Subsidiary of any Loan Party is the valid holder of all Licenses which are material to the conduct of its business or which may be required by Law, including all Telecommunications Licenses (as hereinafter defined in this Subsection 7(R)), and all such Licenses are in full force and effect.
“Telecommunications Licenses” means any cable television franchise or any landline telephone, or cellular telephone, microwave, personal communications or other telecommunications or similar license, authorization, registration, certificate, waiver, certificate of compliance, franchise, approval, material filing, exemption, order, or permit now or hereafter granted or issued by the FCC or any applicable PUC or other Governmental Authority.
(S)
Indebtedness, Etc. No Loan Party and no Subsidiary of any Loan Party has incurred, assumed or allowed to exist, directly or indirectly, any indebtedness or liabilities except as permitted pursuant to Subsection 9(A) or any guaranty, surety or other contingent obligation except as permitted pursuant to Subsection 9(C).
(T)
Title to Properties. Each Loan Party and each Subsidiary of any Loan Party has such title or leasehold interest in and to the real property owned or leased by it as is necessary or desirable to the conduct of its business and valid and legal title or leasehold interest in and to all of its personal property, including those reflected on the financial statements of the Borrower delivered pursuant to Subsection 8(H), except those which have been disposed of by such Loan Party or such Subsidiary subsequent to the date of such delivered financial statements which dispositions have been in the ordinary course of business or as otherwise expressly permitted hereunder.
(U)
Material Contracts. Each Loan Party and each Subsidiary of any Loan Party has performed all of its material obligations under all Material Contracts and, to the best knowledge of the Borrower, each other party thereto is in compliance with each such Material Contract (as hereinafter defined in this Subsection 7(U)). Each such Material Contract is in full force and effect in accordance with the terms thereof.
“Material Contract” means (a) any contract or any other agreement, written or oral, of any Loan Party or any Subsidiary of any Loan Party involving monetary liability of or to any such Person in an amount in excess of $1,000,000 per annum, (b) any IRU or any other contract or agreement, written or oral, of any of the Loan Parties or any of the Subsidiaries of the Loan Parties involving fiber or equipment related thereto, and (c) any other contract, grant, easement or other agreement, written or oral, of any Loan Party or any Subsidiary of any Loan Party the failure to comply with which could reasonably be expected to have a Material Adverse Effect; provided, however, that any contract or agreement which is terminable by a party other than any Loan Party or any Subsidiary of a Loan Party without cause upon notice of 90 days or less shall not be considered a Material Contract.
17
(V)
Intellectual Property. Each Loan Party and each Subsidiary of any Loan Party owns, or possesses through valid licensing arrangements, the right to use all patents, copyrights, trademarks, trade names, service marks, technology know-how and processes used in or necessary for the conduct of its business as currently or anticipated to be conducted (collectively, the “Intellectual Property Rights”) without infringing upon any validly asserted rights of others. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights. No Loan Party and no Subsidiary of any Loan Party has been threatened with any litigation regarding Intellectual Property Rights that would present a material impediment to the business of any such Person.
(W)
Liens. The property of each Loan Party and each Subsidiary of any Loan Party is subject to no lien, security interest or other encumbrance except as permitted pursuant to Subsection 9(B).
(X)
Solvency. Each of the Loan Parties, consolidated with its respective Subsidiaries: (i) owns and will own assets the present fair saleable value of which are (a) greater than the total amount of liabilities (including contingent liabilities) of such Loan Party and its respective Subsidiaries, and (b) greater than the amount that will be required to pay the probable liabilities of such Loan Party’s and its respective Subsidiaries’ then existing debts and liabilities as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Loan Party and its respective Subsidiaries; (ii) has capital that is not unreasonably small in relation to its respective business as presently conducted or after giving effect to any contemplated transaction; and (iii) does not intend to incur and does not believe that it will incur debts and liabilities beyond its respective ability to pay such debts and liabilities as they become due. None of the Loan Parties have incurred or will incur any obligation under this Agreement or any other Loan Document or made or will make any conveyance pursuant to or in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of any of the Loan Parties.
(Y)
Anti-Corruption; Anti-Terrorism; Sanctions. (i) Each of the Loan Parties and their respective Subsidiaries, Affiliates, officers, directors, and, to their knowledge, employees and agents are in compliance, in all respects, with all applicable Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions. (ii) None of the Loan Parties or their respective Subsidiaries, Affiliates, officers, directors, employees or agents are Sanctioned Persons or have engaged in, or are now engaged in, or will engage in, any dealings or transactions with any Sanctioned Person. (iii) No use of proceeds or other transaction contemplated by this Agreement will violate any applicable Anti-Corruption Laws, Anti-Terrorism Laws or Sanctions. (iv) The Loan Parties have provided to CoBank all information requested by CoBank regarding the Loan Parties and their respective Subsidiaries, Affiliates, officers, directors, employees and agents that is necessary for CoBank to collect to comply with applicable Anti-Corruption Laws, Anti-Terrorism Laws, Sanctions and other Laws.
“Anti-Corruption Laws” means any Laws of any Governmental Authority concerning or relating to bribery or corruption.
“Anti-Terrorism Laws” means any Laws of any Governmental Authority concerning or relating to financing terrorism, “know your customer” or money laundering.
18
“Sanctions” means any economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by any Governmental Authority.
“Sanctioned Country” means, at any time, a country, territory or sector that is, or whose government is, the subject or target of any Sanctions or that is, or whose government is, the subject of any list-based or territorial or sectorial Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by any Governmental Authority, (b) any Person operating, organized or resident in a Sanctioned Country, (c) any Person that is otherwise subject to any Sanctions, or (d) any Person, directly or indirectly, 50% or more in the aggregate owned by, otherwise controlled by, or acting for the benefit or on behalf of, any Person or Persons described in clause (a), (b) or (c) of this definition.
(Z)
Qualified ECP Guarantor. The Borrower is a Qualified ECP Guarantor (as defined in Section 28.)
Section 8. Affirmative Covenants. Unless otherwise agreed to in writing by CoBank, while this Agreement is in effect, the Borrower will, and will cause each other Loan Party and each Subsidiary of any Loan Party to:
(A)
Existence, Licenses. Etc. (i) Preserve and maintain in full force and effect its existence and good standing in the jurisdiction of its incorporation, organization or formation (as applicable); (ii) qualify and remain qualified to transact business in all jurisdictions where such qualification is required by applicable Laws, except where failure to be so qualified could not reasonably be expected to have a Material Adverse Effect; and (iii) obtain and maintain all Licenses, which if not obtained and maintained could reasonably be expected to have a Material Adverse Effect.
(B)
Compliance with Laws and Agreements. Comply in all material respects with (i) all Laws, the failure to comply with which could reasonably be expected to have a Material Adverse Effect, and (ii) all agreements, indentures, mortgages, and other instruments to which any Loan Party or any Subsidiary of any Loan Party is a party or by which it or any of its respective property is bound, the failure to comply with which could reasonably be expected to have a Material Adverse Effect.
(C)
Compliance with Environmental Laws; Anti-Corruption, Anti-Terrorism, Sanctions. Without limiting the provisions of Subsection 8(B), (i) comply in all material respects, and cause all Persons occupying or present on any properties owned or leased by it to comply in all material respects, with all applicable Environmental Laws, (ii) comply, and cause all of its Subsidiaries, Affiliates, officers, directors, employees and agents to comply, with all applicable Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions; and (iii) implement and maintain in effect policies and procedures designed to ensure compliance by the Loan Parties and their respective Subsidiaries, Affiliates, officers, directors, employees and agents with all applicable Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions.
19
(D)
Insurance. Maintain insurance with insurance companies or associations acceptable to CoBank in such amounts and covering such risks as are usually carried by companies engaged in the same business and similarly situated, and make such increases in the type or amount of coverage as CoBank may reasonably request. If any part of any real property collateral for the Loan Parties’ obligations to CoBank lies within a “special flood hazard area” as defined and specified by the Federal Emergency Management Agency (or other appropriate Governmental Authority) pursuant to the FDPA, and CoBank determines that flood insurance is required to be obtained in order for CoBank to comply with the FDPA, the Loan Parties shall obtain and maintain such flood insurance policies as CoBank reasonably requests so that CoBank will be deemed in compliance with the FDPA and shall deliver evidence thereof to CoBank. The Loan Parties will, and will cause their respective Subsidiaries, to name CoBank, pursuant to endorsements and assignments in form and substance reasonably satisfactory to CoBank, (i) as a lender loss payee and mortgagee, if applicable, in the case of any casualty insurance, (ii) as an additional insured in the case of all liability insurance, and (iii) as an additional insured in the case of any flood insurance, in each case, with respect to any collateral for the Borrower’s obligations to CoBank. Upon CoBank’s request, all insurance policies required hereunder shall include effective waivers by the insurer of subrogation. Unless CoBank otherwise agrees, Borrower shall obtain for all insurance policies endorsements providing that each such insurance policy is non-cancelable and not subject to material change as to CoBank except upon 30 days’ (and 10 days’ for non-payment of premiums) prior written notice given by the insurer to CoBank. Proceeds of such insurance policies shall be applied, to the extent applicable, as provided in the Loan Documents. At CoBank's request, the Borrower agrees to deliver to CoBank such proof of compliance with this Subsection 8(D) as CoBank may require.
(E)
Property Maintenance. Maintain and preserve all of its property and each and every part and parcel thereof that is necessary to or useful in the ordinary conduct of its business in good repair, working order, and condition, ordinary wear and tear excepted, and in compliance in all material respects with all applicable Laws, and make all alterations, replacements, and improvements thereto as may from time to time be necessary in order to ensure that its properties remain in good working order and condition and compliance. The Borrower agrees that upon the occurrence and continuing existence of an Event of Default, at CoBank’s request, the Borrower will furnish to CoBank a report on the condition of any Loan Party’s and any Loan Party’s Subsidiary’s property prepared by a professional engineer reasonably satisfactory to CoBank.
(F)
Books and Records. Keep adequate records and books of account in which complete and accurate entries will be made in accordance with GAAP consistently applied.
(G)
Inspection. Permit CoBank or its representatives, upon reasonable notice and during normal business hours or at such other times as the parties may agree, to examine any Loan Party’s properties, books, and records, and to discuss any Loan Party’s or any Loan Party’s Subsidiary’s affairs, finances, and accounts, with any Loan Party’s or any Loan Party’s Subsidiary’s officers, directors, employees, and independent certified public accountants; provided, however, that upon the occurrence and continuing existence of an Event of Default, CoBank or its representatives may conduct such visits and inspections and engage in such discussions at the expense of the Borrower, and as frequently as it may reasonably specify.
20
(H)
Reports and Notices. Furnish, or cause to be furnished, to CoBank:
(1)
Annual Financial Statements. As soon as available, but in no event later than 120 days after the end of each fiscal year of the Borrower occurring during the term hereof, annual, audited, consolidated and consolidating financial statements of the Borrower, the other Loan Parties and their respective Subsidiaries, prepared in accordance with GAAP consistently applied and in a format that demonstrates any accounting or formatting change that may be required by the various jurisdictions in which the business of the Borrower, any Loan Party and any of their respective Subsidiaries is conducted (to the extent not inconsistent with GAAP). Such financial statements shall: (i) be audited by nationally or regionally recognized, independent certified public accountants selected by the Borrower and reasonably acceptable to CoBank; (ii) be accompanied by a report of such accountants containing an unqualified opinion thereon reasonably acceptable to CoBank; (iii) be prepared in reasonable detail, and in comparative form; and (iv) include a balance sheet, a statement of income, a statement of stockholders’, members’ or partners’ equity, as applicable, a statement of cash flows and all notes and schedules relating thereto.
(2)
Quarterly Financial Statements. As soon as available but in no event later than 60 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower occurring during the term hereof, unaudited quarterly consolidated financial statements of the Borrower, the other Loan Parties and their respective Subsidiaries, prepared in accordance with GAAP consistently applied (except for the omission of footnotes and for the effect of normal year-end audit adjustments) and in a format that demonstrates any accounting or formatting change that may be required by various jurisdictions in which the business of the of the Borrower, any Loan Party and any of their respective Subsidiaries is conducted (to the extent not inconsistent with GAAP). Each of such financial statements shall (i) be prepared in reasonable detail and in comparative form, including a comparison of actual performance to the budget for such quarter and year-to-date, delivered to CoBank under Subsection 8(H)(3), and (ii) include a balance sheet, a statement of income for such quarter and for the period year-to-date, and such other quarterly statements as CoBank may specifically request which quarterly statements shall include any and all supplements thereto.
(3)
Budget. As soon as reasonably available, but in no event later than 60 days after the first day of each fiscal year of the Borrower occurring during the term hereof, Board and management approved operating and capital assets budgets and long-term financial forecasts of the Borrower, the other Loan Parties and their respective Subsidiaries for such fiscal year.
(4)
Notice of Default. Promptly after becoming aware thereof, notice of (i) the occurrence of any Potential Default or Event of Default under any of the Loan Documents; and (ii) the occurrence of any breach, default, event of default, or other event or occurrence of any other condition which with the giving of notice or lapse of time, or both, could become a breach, default, or event of default under any agreement, indenture, mortgage, or other instrument (other than the Loan Documents) to which it is a party or by which it or any of its property is bound or affected; provided, however, that the failure to give such notice shall not affect the right and power of CoBank to exercise any and all of the remedies specified herein.
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(5)
Notice of Non-Environmental Litigation. Promptly after the commencement thereof, notice of the commencement of all actions, suits, or proceedings before any Governmental Authority affecting any Loan Party or any Subsidiary of any Loan Party which, if determined adversely, could reasonably be expected to have a Material Adverse Effect.
(6)
Notice of Environmental Matters. Without limiting the provisions of Subsection 8(H)(5), promptly after receipt thereof, notice of the receipt of all pleadings, inquiries, proceedings, demands, claims, liens, actions, orders, complaints, indictments, or any other communication alleging a condition that may require any Loan Party or any Subsidiary of any Loan Party to undertake or to contribute to a cleanup or other response under any Environmental Laws, or which seeks penalties, damages, injunctive relief, criminal sanctions or other relief related to alleged violations of such Environmental Laws, or which claims personal injury or property damage to any Person as a result of environmental factors or conditions.
(7)
Regulatory and Other Notices. Promptly after filing, receipt or becoming aware thereof, copies of any filings or communications sent to and notices or other communications received by any Loan Party or any Subsidiary of any Loan Party from any Governmental Authority relating to any material noncompliance by such Loan Party or such Subsidiary with any Laws or with respect to any matter or proceeding the effect of which, if adversely determined, could reasonably be expected to have a Material Adverse Effect.
(8)
Material Adverse Change. Promptly after becoming aware thereof, notice of any matter which has had or could reasonably be expected to have a Material Adverse Effect.
(9)
Compliance Certificates. Concurrently with each statement required to be furnished pursuant to Subsection 8(H)(1) or Subsection 8(H)(2), a compliance certificate in the form attached hereto as Exhibit A.
(10)
Management Letters. Promptly after receipt thereof, a copy of any management letters submitted to any Loan Party or any Subsidiary of any Loan Party by its independent certified public accountants.
(11)
Benefit Plan Events. No later than thirty (30) days after it becomes or should have become aware of (a) the occurrence of any Reportable Event (as defined in Section 4043 of the Employee Retirement Income Security Act of 1974 (“ERISA”) with respect to any Benefit Plan, (b) any failure to make all contributions to any Benefit Plan as required by its terms or applicable Law, (c) the existence of conditions that result in or could reasonably be expected to have a material adverse effect with respect to any Benefit Plan, a statement describing such event and the actions it proposes to take in response to such event.
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(12)
Anti-Corruption, Anti-Terrorism, Sanctions. Promptly following a request by CoBank, provide all documentation and other information that CoBank requests in order to comply with its ongoing obligations under applicable Anti-Corruption Laws, Anti-Terrorism Laws and Sanctions.
(13)
Periodic Environmental Reports. At CoBank’s request upon receipt of any information indicating a breach of any warranties, representations or covenants in this Agreement pertaining to compliance with Environmental Laws, the Borrower shall, at its sole expense, retain the services of a licensed and qualified environmental consultant to prepare a report which shall determine (a) the extent to which any Hazardous Substance is existing upon, in, under, over, at, from or about any property owned or leased by any Loan Party or any Subsidiary of any Loan Party; and (b) the Loan Parties’ and their Subsidiaries’ compliance with all applicable Environmental Laws and, as necessary, recommendations and procedures for the containment, removal or cleanup of any Hazardous Substance in a manner consistent with all applicable Environmental Laws. The Borrower shall, at its sole expense, promptly comply with all requirements and procedures contained in the environmental consultant’s report and as required by applicable Environmental Laws and shall promptly present evidence satisfactory to CoBank of such compliance. The Borrower shall promptly provide copies of any and all environmental reports, data, sampling results, analysis and other documentation prepared by any environmental consultant and any correspondence with Governmental Authorities regarding the environmental condition of any property owned or leased by any Loan Party or any Subsidiary. If, except as allowed by and in compliance with Environmental Laws, any release of Hazardous Substances should exist or occur at any property of any Loan Party or any Subsidiary of a Loan Party or if any Loan Party and/or its Subsidiaries should be ordered or directed by any Governmental Authority or any other Person to undertake Remediation (as defined herein) of any Hazardous Substances or take any other action to satisfy requirements of Environmental Law, the Loan Parties and/or its Subsidiaries, at no cost or expense to the CoBank, shall comply with all Environmental Laws, conduct and complete all required sampling, testing and monitoring and undertake such Remediation promptly upon discovery or notice thereof and thereafter diligently and continuously pursue such Remediation, completing each element, phase or stage of it within each applicable period established by any person, agency or bureau empowered to enforce any applicable Environmental Law (or if no such period or schedule is established, in accordance with a reasonable schedule consistent with prudent business practice taking into account potentially adverse effects to the environment and individuals’ health and safety). If any Loan Party and/or its Subsidiaries undertakes any Remediation, or causes it to be undertaken, Borrower and/or its Subsidiaries shall conduct and complete such Remediation (i) in compliance with requirements of Environmental Laws, (ii) in accordance with the directives and orders of all appropriate Governmental Authorities and (iii) in accordance with sound business practice taking into account potentially adverse effects to the environment and individuals’ health and safety. The Borrower shall notify CoBank within 10 days after receipt of any correspondence from a Governmental Authority indicating no further action is warranted or other evidence of completion of Remediation pursuant to applicable Environmental Laws regarding any property owned or leased by any Loan Party or any Subsidiary and, if requested by CoBank, shall execute, deliver and record or cause to be executed, delivered and recorded, a mortgage in form and substance reasonably acceptable to CoBank, which grants to CoBank a first priority perfected security interest in such real property.
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“Remediation” means any action necessary to ensure compliance with the requirements of Environmental Law including (i) the removal and disposal or containment (if containment is practical under the circumstances and is permissible within Requirements of Environmental Laws), investigation, or monitoring of any and all Hazardous Substances; (ii) the taking of reasonably necessary precautions to protect against the release or threatened release of Hazardous Substances at, on, in, about, under, within or near the air, soil, surface water, groundwater or soil vapor at any property, site or location; (iii) any action necessary to mitigate the usurpation of wetlands, pinelands or other protected land or reclaim the same or to protect and preserve wildlife species; (iv) any action necessary to meet the requirements of any Permit required under Environmental Law, or (v) any other action reasonably required to satisfy requirements of Environmental Law imposed upon Borrower, or any of its Subsidiaries, or any of their respective property, and/or any operation conducted thereon or in connection therewith.
(14)
Organizational Documents. Within thirty (30) days of any such amendment, any material amendment to the articles or certificate of incorporation, articles or certificate of organization, articles or certificate of formation (as applicable), bylaws, partnership agreement or operating agreement (as applicable) of any Loan Party or any Subsidiary of any Loan Party.
(15)
Material Contracts. Any material amendment, supplement, waiver or other modification to any of the Material Contracts, or any notice of default or of termination, cancellation or revocation (in each case, prior to any scheduled date of termination) delivered thereunder.
(16)
Erroneous Financial Information. Immediately in the event that any Loan Party or its accountants conclude or advise that any previously issued financial statement, audit report or interim review should no longer be relied upon or that disclosure should be made or action should be taken to prevent future reliance.
(17)
Other Information. Such other information regarding the condition, financial or otherwise, or operations of any Loan Party or any Subsidiary of any Loan Party or any guarantor of the Borrower’s obligations hereunder as CoBank may, from time to time, request.
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(I)
Financial Covenants. All of the following financial covenants shall, except as expressly provided otherwise, be determined on a consolidated basis and in accordance with GAAP consistently applied:
(1)
Total Leverage Ratio.
The Borrower shall maintain at all times, measured and reported as of the last day of each fiscal quarter of the Borrower (each, a “Quarterly Date”), and maintained through the next Quarterly Date, a Total Leverage Ratio (as hereinafter defined in this Subsection 8(I)(1)) of not more than the ratio set forth below opposite such period:
| Period | Total Leverage Ratio |
| Closing Date through December 31, 2019 | 3.00:1.00 |
| January 1, 2020 and thereafter | 2.50:1.00 |
“Total Leverage Ratio” means the ratio derived by dividing (i) Indebtedness (as hereinafter defined in this Subsection 8(I)(1)) on the date of the calculation by (ii) EBITDA (as hereinafter defined in this Subsection 8(I)(1)) for the then most recently completed four fiscal quarters.
“Indebtedness” means the sum of (i) obligations for borrowed money, including the principal amount of any outstanding Loans, (ii) obligations representing the deferred purchase price of property or services other than accounts payable arising in connection with the purchase of goods or services on terms customary in the trade and not outstanding more than 90 days unless contested in good faith, (iii) obligations, whether or not assumed, secured by liens or a pledge of or an encumbrance on the proceeds or production from property now or hereafter owned or acquired, (iv) obligations which are evidenced by notes, bonds, debentures, acceptances or other instruments, (v) net termination obligations under Interest Rate Agreements not hedging the Borrower’s interest rate under the Loans, calculated as of any date of calculation as if such agreements or arrangements were terminated as of such date, (vi) that portion of any obligation with respect to leases of real or personal property which is required to be capitalized under GAAP or which is treated as operating leases under regulations applicable to them but which otherwise would be required to be capitalized under GAAP (each a “Capital Lease”), (vii) the net present value of future extraordinary executive compensation, and (viii) obligations with respect to principal under guarantees and other contingent obligations with respect to the payment of money, whether or not due and payable.
“EBITDA” means the sum of (i) consolidated net income, or deficit, as the case may be (after taxes and after eliminating any gain or loss on sale of assets or other extraordinary gain or loss), plus (ii) the following items, to the extent deducted in determining consolidated net income: (a) total interest expense (including non-cash interest), (b) provision of income taxes or benefits, as the case may be, (c) depreciation and amortization expenses, (d) unrealized losses on financial derivatives recognized in accordance with SFAS No. 133, (e) extraordinary executive compensation, minus (iii) the following items, to the extent included in determining consolidated net income: (x) unrealized gains on financial derivatives recognized in accordance with SFAS No. 133, (y) interest income, dividends and patronage income, and (z) income from unconsolidated subsidiaries, partnerships and joint ventures. EBITDA shall be measured for the then most recently completed four fiscal quarters, adjusted to give effect to any acquisition, sale or other disposition, directly or through a subsidiary, of any operation or business (or any portion thereof) during the period of calculation as if such acquisition, sale or other disposition occurred on the first day of such period of calculation.
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(2)
Equity to Asset Ratio.
The Borrower shall maintain at all times, measured and reported as of each Quarterly Date, and maintained through the next Quarterly Date, an Equity to Assets Ratio (as hereinafter defined in this Subsection 8(I)(2)) of not less than the ratio set forth below opposite such period:
| Period | Equity to Asset Ratio |
| Closing Date through December 31, 2019 | 35% |
| January 1, 2020 and thereafter | 40% |
“Equity to Asset Ratio” means the ratio derived by dividing (i) the result of (a) total assets minus (b) total liabilities by (ii) total assets, each as of the date of calculation.
(3)
Debt Service Coverage Ratio. The Borrower shall maintain at all times, measured and reported as of each Quarterly Date, and maintained through the next Quarterly Date, a Debt Service Coverage Ratio (as hereinafter defined in this Subsection 8(I)(3)) of greater than 2.00:1.00.
“Debt Service Coverage Ratio” means the ratio derived by dividing (i) the result of (a) EBITDA plus (b) cash interest, dividends and patronage income minus (c) cash income taxes and dividends and distributions for the then most recently completed four fiscal quarters by (ii) Debt Service.
“Debt Service” means the sum of: (a) all principal payments scheduled (as opposed to mandatory repayments pursuant to Section 4 or any voluntary prepayments) to be made on Indebtedness (or scheduled reductions in commitments on lines of credit to the extent such reductions would cause the repayment of principal amounts then outstanding under such lines) plus (b) cash interest expense, each for the then most recently completed four fiscal quarters.
(4)
Maximum Capital Expenditures. Capital expenditures of the Loan Parties, measured and reported on a consolidated basis, shall not exceed $14,500,000 (the “Maximum Annual Aggregate Capital Expenditures”) in the aggregate during any fiscal year; provided, however, for any fiscal year in which the Loan Parties and their Subsidiaries do not make capital expenditures in the full amount of the Maximum Annual Aggregate Capital Expenditures for such fiscal year, then during the immediately succeeding fiscal year, and only in such immediately succeeding fiscal year, the Loan Parties and their Subsidiaries may make capital expenditures in an amount not to exceed the Maximum Annual Aggregate Capital Expenditures plus 100% of the unused portion of the Maximum Annual Aggregate Capital Expenditures for such immediately preceding fiscal year; provided, further, that, the Loan Parties may make capital expenditures in any amount in any fiscal year if the Borrower’s Total Leverage Ratio for the fiscal quarter in which the capital expenditure is made, and in each succeeding fiscal quarter of the fiscal year in which the capital expenditure is made on a pro forma basis is less than 2.00:1.00.
26
(J)
Capital. Acquire equity in CoBank in such amounts and at such times as CoBank may from time to time require in accordance with its Bylaws and Capital Plan, except that the maximum amount of equity that the Borrower may be required to purchase in connection with a Loan may not exceed the maximum amount permitted by the Bylaws at the time the Note and Supplement relating to such Loan is entered into or such Loan is renewed or refinanced by CoBank. The rights and obligations of the parties with respect to such equity and any patronage or other distributions made by CoBank shall be governed by CoBank’s Bylaws and Capital Plan.
(K)
Taxes. File or caused to be filed prior to delinquency all federal, state and local tax returns that are required to be filed, and pay when due all taxes as shown on such returns, any pay when due all other taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable, except where the payment of such tax, assessment, government charge or levy is being contested in good faith and by appropriate proceedings and adequate reserves in compliance with GAAP have been set aside on such Loan Party’s or such Subsidiary’s books therefor.
(L)
Use of Proceeds. The funds to be borrowed under this Agreement and each Supplement will be used only as contemplated hereby and thereby. No part of such funds will be used to purchase any “margin securities” or otherwise in violation of the regulations of the Federal Reserve System or in violation of any other Law.
Section 9. Negative Covenants. Unless otherwise agreed to in writing by CoBank, while this Agreement is in effect the Borrower will not, will cause the other Loan Parties not to, and will cause any Subsidiary of any Loan Party not to:
(A)
Borrowings. Create, incur, assume, or allow to exist, directly or indirectly, any Indebtedness except for (i) Indebtedness to CoBank, (ii) Indebtedness under purchase money security agreements and Capital Leases and other unsecured Indebtedness, the aggregate principal amount of which shall not exceed $500,000 at any one time, (iii) Indebtedness among the Loan Parties, (iv) Indebtedness in respect of reimbursement obligations to officers, directors and employees of any Loan Party or any Subsidiary of any Loan Party arising in the ordinary course of business, and (v) Indebtedness of the Loan Parties existing as of the date hereof and described on part (i) of Schedule 7(S).
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(B)
Liens. Create, incur, assume, or allow to exist any mortgage, deed of trust, pledge, lien (including the lien of an attachment, judgment, or execution), security interest, or other encumbrance of any kind upon any of its property, real or personal. The foregoing restrictions shall not apply to (i) liens in favor of CoBank; (ii) liens for taxes, assessments, or governmental charges that are not past due, unless the same are being contested in good faith and by appropriate proceedings and then only if and to the extent reserves required by GAAP have been set aside therefor; (iii) liens, pledges, and deposits under workers’ compensation, unemployment insurance, social security and similar Laws; (iv) liens, deposits, and pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), and like obligations arising in the ordinary course of its business; (v) liens imposed by Law in favor of mechanics, materialmen, warehousemen, lessors and like Persons that secure obligations that are not past due, unless the same are being contested in good faith and by appropriate proceedings and then only if and to the extent reserves required by GAAP have been set aside therefor; (vi) liens constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property of any Loan Party or any Subsidiary of any Loan Party that, in the reasonable judgment of CoBank, do not materially detract from the value of such real property or impair the use thereof in such Loan Party’s or such Subsidiary’s business; (vii) judgment liens, provided enforcement thereof is effectively stayed and the claims secured thereby are being contested in good faith by appropriate proceedings and for which reserves have been established in accordance with GAAP; (viii) purchase money security interests and Capital Leases securing Indebtedness permitted under Subsection 9(A)(ii) in an amount not to exceed the cost incurred to acquire or lease such property, provided further that such security interests and leases do not encumber any property other than the items purchased with the proceeds thereof or leased thereby; (ix) liens securing guarantees in effect on or prior to the date hereof and described on part (ii) of Schedule 7(S); (x) liens in favor of Rural Telephone Finance Cooperative (“RTFC”), provided such liens only encumber Hutchinson’s patronage capital in RTFC; and (xi) customary offset rights arising in the ordinary course of business of brokers and depository banks arising under applicable Law or the terms of a Loan Party’s deposit agreement with such entity.
(C)
Contingent Liabilities. Assume, guarantee, become liable as a surety, endorse, contingently agree to purchase, or otherwise be or become liable, directly or indirectly (including, but not limited to, by means of a maintenance agreement, an asset or stock purchase agreement, or any other agreement designed to ensure any creditor against loss), for or on account of the obligation of any Person or Persons, except (i) for indebtedness permitted by this Agreement, (ii) pursuant to those Continuing Guaranties required by Section 5, (iii) those certain guarantees existing as of the date hereof and described on part (iii) of Schedule 7(S), (iv) other unsecured guarantees of Indebtedness of FiberComm, LC related to the purchase and renovation of 713 Nebraska Street, Sioux City, Iowa in an amount not to exceed $400,000 at any one time, (v) for other Indebtedness the aggregate principal amount of which shall not exceed $500,000 at any one time, and (vi) by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of a Loan Party's or a Loan Party’s Subsidiary’s business.
(D)
Fundamental Changes. (i) Amend, modify or waive any provision of its articles or certificate of incorporation, articles or certificate of organization, articles or certificate of formation (as applicable), bylaws, partnership agreement or operating agreement (as applicable) in any manner that is adverse to the interest of CoBank or otherwise inconsistent with any provision of the Pledge and Security Agreement or any other Loan Document, (ii) merge or consolidate with any other Person or acquire all or substantially all of the assets of any Person, provided that, (x) the Borrower may enter into the Acquisition and perform the transactions contemplated thereby and (y) upon 30 days prior written notice to CoBank of its intention to do so and delivery to CoBank of any documents, instruments, financial statements and opinions that CoBank may reasonably request, any Loan Party may (A) merge or consolidate with or dissolve into the Borrower if the Borrower is the surviving entity, or (B) merge or consolidate with or dissolve into any Loan Party other than the Borrower, (iii) form, create or acquire any Subsidiary, or (iv) commence operations under any other name (without providing CoBank 30 days’ prior written notice thereof), organization, or Person, including any joint venture.
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(E)
Transfer of Assets. Sell (including pursuant to a sale and leaseback transaction) transfer, lease as lessor (including pursuant to a lease and leaseback transaction), enter into any contract for the sale, transfer or lease of, or otherwise dispose of, any of its assets, except (i) bona fide sales of inventory in the ordinary course of business, (ii) dispositions of obsolete equipment not used or useful in the business of such Loan Party or such Subsidiary in the ordinary course of business, (iii) sales of Investments described in Subsection 9(F)(ii) through (vii) and (ix), and which are marketable, for fair value, (iv) dispositions among Loan Parties, (v) distributions permitted by Subsection 9(I) and (vi) other sales, transfers, leases or other dispositions of any of its assets not in excess of $500,000 in the aggregate in each fiscal year.
(F)
Loans and Investments. Own or make any loan or advance to, own or invest in, purchase or make any commitment to purchase any stock, bonds, notes, or other securities of any Person (each, whether made directly or indirectly, an “Investment”) other than (i) stock or other securities of, or guarantee, assume, or otherwise become obligated or liable with respect to the obligations of, or investments in CoBank or CoBank investment services or programs, (ii) marketable direct obligations issued or unconditionally guaranteed by the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof, (iii) commercial paper maturing no more than one year from the date issued and, at the time of acquisition, having a rating of at least A- from Standard & Poor’s Rating Service or at least A3 from Moody’s Investors Service, Inc.; (iv) certificates of deposit or bankers’ acceptances maturing within 1 year from the date of issuance thereof issued by, or overnight reverse repurchase agreements from, any commercial bank organized under the Laws of the United States of America or any state thereof or the District of Columbia having combined capital and surplus of not less than $500,000,000; (v) time deposits maturing no more than 30 days from the date of creation thereof with commercial banks having membership in the Federal Deposit Insurance Corporation in amounts at any one such institution not exceeding the lesser of $100,000 or the maximum amount of insurance applicable to the aggregate amount of Borrower’s deposits at such institution; (vi) Investments existing as of the date hereof and set forth on Schedule 9(F) or Annex A to the Pledge and Security Agreement, which Investments may be increased by an amount not to exceed $500,000 in the aggregate (based upon original purchase price or principal amount); (vii) Investments among Loan Parties; (viii) the Acquisition; and (ix) other Investments not to exceed $250,000 in the aggregate (based upon original purchase price or principal amount).
(G)
Change in Business. Engage in any business activity or operation different from or unrelated to such Loan Party’s or such Subsidiary’s present business activities and operations.
(H)
Disposition of Licenses. Sell, assign, transfer or otherwise dispose of, or attempt to dispose of, in any way, any License which may be required by Law or which is material to the conduct of its business, the disposition of which could reasonably be expected to have a Material Adverse Effect.
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(I)
Dividends and Other Distributions. Directly or indirectly declare, order, pay, make or set apart any sum for any dividend or any other distribution of assets or retire, redeem, purchase or otherwise acquire for value any capital stock or other ownership interest except for any dividend or any other distribution to any Loan Party and for any retirement, redemption, purchase or other acquisition of the ownership interest of any Loan Party by any Loan Party; provided, however, if no Potential Default or Event of Default then exists or will result in the succeeding 12 months after such distribution or stock repurchase, based in each case upon the budgets delivered to CoBank pursuant to Subsection 8(H)(3) of this Agreement and reasonably acceptable to CoBank, the Borrower may declare or pay lawful distributions or purchase or acquire its capital stock (a) in an aggregate amount of up to $2,700,000 in any fiscal year and (b) in any amount in any fiscal year if the Borrower’s Total Leverage Ratio for the fiscal quarter in which the dividend or distribution is made and each remaining succeeding fiscal quarter of the fiscal year in which the dividend or distribution is made on a pro forma basis is less than 2.00:1.00.
(J)
Transactions with Affiliates. Other than as set forth on Schedule 9(J), directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate (as hereinafter defined in this Subsection 9(J)) or with any director, officer or employee of any Loan Party or any Affiliate of any Loan Party or any of its Subsidiaries, except (i) transactions among the Loan Parties, (ii) transactions in the ordinary course of and pursuant to the reasonable requirements of the business of such Loan Party or such Subsidiary of any Loan Party and upon fair and reasonable terms which are fully disclosed to CoBank and are no less favorable to such Loan Party or such Subsidiary than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate, (iii) deferred extraordinary executive compensation as set forth on Schedule 9(J), (iv) payment of compensation to directors, officers and employees in the ordinary course of business for services actually rendered in their capacities as directors, officers and employees, provided such compensation is reasonable and comparable with compensation paid by companies of like nature and similarly situated, and (v) guarantees of Indebtedness of FiberComm, LC permitted pursuant to Subsection 9(C). Notwithstanding the foregoing, upon the election of CoBank, no payments may be made with respect to any items set forth in clauses (iii) through (v) of the preceding sentence upon the occurrence and during the continuation of a Potential Default or an Event of Default.
“Affiliate” means any Person: (i) directly or indirectly controlling, controlled by, or under common control with, any Loan Party or any Subsidiary of any Loan Party; (ii) directly or indirectly owning or holding 5% or more of any equity interest in any Loan Party or any Subsidiary of any Loan Party; or (iii) 5% or more of whose voting stock or other equity interest is directly or indirectly owned or held by any Loan Party or any Subsidiary of any Loan Party, provided that the beneficial, and not the legal, holder of title to any equity interest in any Loan Party or any Subsidiary of any Loan Party shall be deemed an Affiliate. For purposes of this definition, “control” (including with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”) means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or by contract or otherwise.
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(K)
Management Fees. Directly or indirectly pay any management, consulting or other similar fees to any Person, except (i) any management, consulting or other similar fees paid to any Loan Party and (ii) legal or consulting fees paid to Persons that are not Affiliates of any Loan Party or any Subsidiary of any Loan Party for services actually rendered and in amounts typically paid by entities engaged in a Loan Party’s or a Subsidiary’s business.
(L)
Negative Pledge to Other Persons. Grant a negative pledge upon any of its property, real or personal, in favor of any other creditor of any Loan Party or any Subsidiary of any Loan Party, except in connection with Indebtedness under purchase money security agreements and Capital Leases permitted under Subsection 9(A)(ii), provided that such negative pledge only relates to items purchased with the proceeds thereof or leased thereby.
(M)
Deposit Accounts. Open, acquire, or own any Deposit Account (as such term is defined in the Loan Documents) or securities account without giving 10 days prior written notice of such account to CoBank, other than those accounts described on the schedules to the Loan Documents.
(N)
Accounting. Make any changes to any Loan Party or any Subsidiary of any Loan Party’s method of accounting except as required by GAAP or by new accounting pronouncements, or calculation of such Loan Party or such Subsidiary of such Loan Party’s fiscal year.
(O)
Anti-Corruption, Anti-Terrorism, Sanctions. (i) Engage, or permit any of their respective Affiliates, officers, directors, employees or agents to engage, in any dealings or transactions with any Sanctioned Person or in violation of any applicable Anti-Corruption Laws, Anti-Terrorism Laws or Sanctions; or (ii) fund, or permit any of their respective Affiliates, officers, directors, employees or agents to fund, all or any part of any payment under this Agreement or any other Loan Document out of proceeds derived from transactions that violate Anti-Corruption Laws, Anti-Terrorism Laws or Sanctions.
Section 10. Events of Default. Each of the following shall constitute an “Event of Default” under this Agreement.
(A)
Payment Default. The Borrower should fail to make any payment to CoBank when due hereunder, under any Note, any Supplement, any Interest Rate Agreement provided by CoBank or any other Loan Document to which it is a party, or should fail to make any investment in CoBank required to be made hereunder when due.
(B)
Representations and Warranties. Any opinion, certificate or like document furnished to CoBank by or on behalf of any Loan Party or any Subsidiary of any Loan Party, or any representation or warranty made herein, in any Note, any Supplement or in any other Loan Document shall prove to have been false or misleading on or as of the date made or deemed made (i) as stated if such representation or warranty contains an express materiality qualification or (ii) in any material respect if such representation or warranty does not contain such qualification.
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(C)
Certain Affirmative Covenants. Any Loan Party or any Subsidiary of any Loan Party should fail to perform or comply with any covenant set forth in Section 8 (other than Subsection 8(D), Subsection 8(H)), Subsection 8(I) and Subsection 8(L)) and such failure continues for 30 days after written notice thereof shall have been delivered by CoBank to the Borrower.
(D)
Other Covenants and Agreements. Any Loan Party or any Subsidiary of any Loan Party should fail to perform or comply with Subsection 8(D), Subsection 8(H), Subsection 8(I), Subsection 8(L) or any other covenant or agreement contained in this Agreement or in any other Loan Document or should use the proceeds of any Loan for an unauthorized purpose.
(E)
Cross-Default. (i) The occurrence of a breach, default or event of default under any other Loan Document, (ii) the failure, after any applicable grace period, on the part of any Loan Party, any Subsidiary of any Loan Party or any other Person that is a party to any other Loan Document to observe, keep or perform any covenant or agreement contained in such other Loan Document, or (iii) the failure, after any applicable grace period, on the part of any Loan Party, any Subsidiary of any Loan Party or any other Person that is a party to any other Loan Document to observe, keep or perform any covenant or agreement contained in any agreement (other than the Loan Documents) between such Person and CoBank or any affiliate of CoBank (including Farm Credit Leasing Services Corporation), including any guaranty, loan agreement, lease, security agreement, subordination agreement, mortgage, deed to secure debt, or deed of trust.
(F)
Other Indebtedness. Any Loan Party, any Subsidiary of any Loan Party or any other guarantor of the Borrower’s obligations hereunder should fail to pay when due any Indebtedness beyond any cure period applicable thereto under the relevant agreement or instrument, or any other event occurs which, under any agreement or instrument relating to any Indebtedness, has the effect of accelerating or permitting the acceleration of such Indebtedness, whether or not such Indebtedness is actually accelerated or the right to accelerate is conditioned on the giving of notice, the passage of time, or otherwise, or such Person commences the exercise of any remedies against such Loan Party, such Subsidiary of any Loan party or other guarantor of the Borrower’s obligations hereunder or its respective properties, and the aggregate amount of all such Indebtedness exceeds $500,000.
(G)
Judgments. A judgment, decree, or order for the payment of money in the aggregate amount of all such judgments, decrees or orders in excess of $500,000 should be rendered against any Loan Party, any Subsidiary of any Loan Party or any other guarantor of the Borrower’s obligations hereunder and either: (i) enforcement proceedings should have been commenced; (ii) a lien prohibited under Subsection 9(B) shall have been obtained; or (iii) such judgment, decree, or order should continue unsatisfied and in effect for a period of 30 consecutive days without being vacated, discharged, satisfied, or stayed pending appeal.
(H)
Insolvency, Etc. Any Loan Party, any Subsidiary of any Loan Party or any other guarantor of the Borrower’s obligations hereunder should: (i) become insolvent or should generally not, or should be unable to, or should admit in writing its inability to, pay its debts as they come due; or (ii) suspend its business operations or a material part thereof or make an assignment for the benefit of creditors; or (iii) apply for, consent to, or acquiesce in the appointment of a trustee, receiver, or other custodian for it or any of its property or, in the absence of such application, consent, or acquiescence, a trustee, receiver, or other custodian is so appointed; or (iv) commence or have commenced against it any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or liquidation Law of any jurisdiction, which, in the case of a proceeding commenced against any Loan Party, any Subsidiary of any Loan Party or any other guarantor of the Borrower’s obligations hereunder, is not dismissed within 45 days.
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(I)
Material Adverse Change. Any event, change or condition not referred to elsewhere in this Section 10 should occur which results in a Material Adverse Effect.
(J)
Guarantees, Etc. Any guarantee, suretyship, subordination agreement, maintenance agreement, pledge agreement or other agreement furnished in connection with the Borrower’s or any other Loan Party’s obligations hereunder or under any other Loan Document shall, at any time, cease to be in full force and effect, or shall be revoked or declared null and void, or the validity or enforceability thereof shall be contested by the guarantor, pledgor, surety or other maker thereof (individually or collectively, the “Surety”), or the Surety shall deny any further liability or obligation thereunder, or shall fail to perform its obligations thereunder, or any representation or warranty set forth therein shall be breached, or the Surety shall breach or be in default under the terms of any other agreement with CoBank (including any loan agreement or security agreement), or a default set forth in Subsection 10(F) through Subsection 10(I) shall occur with respect to the Surety or the Surety shall die, be determined to be legally incompetent, or merger, consolidate or dissolve into another Person (except as expressly permitted pursuant to the terms of this Agreement).
(K)
Security. Any pledge agreement, security agreement or other agreement executed by any of the Loan Parties, any Subsidiary of any Loan Party, any other guarantor of the Borrower’s obligations hereunder or under any other Loan Document, or any other Surety intended to create a valid and perfected lien, security interest or security title in property as described herein or in a Supplement or any other Loan Document shall for any reason (other than upon payment in full of the obligations secured thereby) fail (i) to create a valid and perfected lien, security interest, or security title (subject only to such exceptions as are therein permitted) as contemplated herein or by the Supplement or any other Loan Document, (ii) to secure thereunder the obligations purported to be secured thereby, or (iii) to have the intended priority as contemplated by the Loan Documents.
(L)
ERISA Pension Plans. (i) Any Loan Party, any Subsidiary of any Loan Party, any other guarantor of the Borrower’s obligations hereunder, or any other Surety fails to make full payment when due of all amounts which, under the provisions of any Benefit Plan or applicable Law, are required to be paid, and such failure results in or could reasonably be expected to have a Material Adverse Effect; (ii) an accumulated funding deficiency occurs or exists whether or not waived, with respect to any Benefit Plan; or (iii) any Benefit Plan hereunder loses or could reasonably be expected to lose its status as a qualified plan under the Internal Revenue Code, and such loss results in or could reasonably be expected to have a Material Adverse Effect.
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(M)
Licenses and Permits. (i) The loss, suspension or revocation of, or failure to renew, any License now held or hereafter acquired by any Loan Party, any Subsidiary of any Loan Party, or any other guarantor of the Borrower’s obligations hereunder, if such loss, suspension, revocation or failure to renew could reasonably be expected to have a Material Adverse Effect or (ii) any regulatory or other Governmental Authority replaces the management of any Loan Party, any Subsidiary of any Loan Party, or any other guarantor of the Borrower’s obligations hereunder or assumes control over any Loan Party, any Subsidiary of any Loan Party, or any other guarantor of the Borrower’s obligations hereunder.
(N)
Material Contracts. Any Loan Party or any Subsidiary of any Loan Party should breach or be in default under a Material Contract in any material respect.
(O)
Change in Control or Management. (a) During any period of up to 24 consecutive months, commencing after the date of this Agreement, a majority of the board of directors of the Borrower shall cease to consist of either Continuing Directors or individuals whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group; (b) the occurrence of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Borrower; (c) the occurrence of any consolidation or merger of the Borrower in which the Borrower is not the continuing or surviving corporation or pursuant to which common shares of the Borrower will be converted into cash, securities or other property, or (d) other than pursuant to a transaction permitted by this Agreement, the Borrower shall cease to control, hold or own, directly or indirectly, the voting power or beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934) of all Voting Interests of any of the other Loan Parties (or other securities convertible into such Voting Interests). “Continuing Directors” means the directors of the Borrower on the Amendment Date and each other director if, in each case, such other director’s nomination for election to the board of directors of the Borrower is recommended by at least a majority of the then Continuing Directors. “Voting Interests” means shares of capital stock issued by a corporation, or equivalent equity interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.
Section 11. Remedies. Upon the occurrence and during the continuance of an Event of Default or any Potential Default, CoBank shall have no obligation to continue to extend credit to the Borrower under any Note or any Supplement or any other Loan Document and may discontinue doing so at any time without prior notice. Upon the occurrence of an Event of Default under Subsection 10(H), the entire unpaid principal balance of the Loans, all accrued interest thereon, and all other amounts payable under this Agreement, all Notes, all Supplements and all other Loan Documents and all other agreements between CoBank and the Borrower shall become immediately due and payable without protest, presentment, demand or further notice of any kind, all of which are hereby expressly waived by the Borrower. In addition, upon the occurrence and during the continuance of any Event of Default, CoBank may:
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(A)
Termination and Acceleration. Terminate any commitment and declare the entire unpaid principal balance of the Loans, all accrued interest thereon, and all other amounts payable under this Agreement, all Notes and Supplements, and the other Loan Documents to be immediately due and payable. Upon such a declaration, the unpaid principal balance of the Loans and all such other amounts shall become immediately due and payable, without protest, presentment, demand, or further notice of any kind, all of which are hereby expressly waived by the Borrower.
(B)
Enforcement. Proceed to protect, exercise, and enforce such rights and remedies as may be provided by this Agreement, any other Loan Document or under applicable Laws. Each and every one of such rights and remedies shall be cumulative and may be exercised from time to time, and no failure on the part of CoBank to exercise, and no delay in exercising, any right or remedy shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude any other or future exercise thereof, or the exercise of any other right. Without limiting the foregoing, CoBank may hold and/or set off and apply against the Borrower’s obligations to CoBank the proceeds of any equity in CoBank, any cash collateral held by CoBank, or any balances held by CoBank for the Borrower’s account (whether or not such balances are then due).
(C)
Application of Funds. Apply all payments received by it to the Borrower’s obligations to CoBank in such order and manner as CoBank may elect in its sole discretion; provided that any payments received from any guarantor or other Surety or from any disposition of any collateral provided by such guarantor or such other Surety shall only be applied against obligations guaranteed or secured by such guarantor or other Surety. For the avoidance of doubt, no payment received from any guarantor or other Surety or from any disposition of any collateral provided by such guarantor or such other Surety shall be applied to any obligations that comprise Excluded Swap Obligations of such guarantor or such other Surety.
(D)
Default Rate of Interest. In addition to the rights and remedies set forth above and notwithstanding any Note or Supplement, upon the occurrence and during the continuance of an Event of Default, at CoBank’s option in each instance, the unpaid balances of the Loans shall bear interest from the date of the Event of Default or such other later date as CoBank shall elect at 2.00% per annum in excess of the rate(s) of interest that would otherwise be in effect on the Loans under the terms of this Agreement, the Notes and Supplements (provided that, if the Borrower fails to make any payment to CoBank when due (including any purchase of equity of CoBank when required), then at CoBank’s option in such instance, such obligation or payment shall bear interest from the date due to the date paid at the CoBank Base Rate plus the highest Applicable Margin (as defined in the Supplements evidencing the Loans), plus 2.00%). All interest provided for herein shall be payable on demand and shall be calculated from the date any such payment was due to the date paid on the basis of a year consisting of 360 days. “CoBank Base Rate” shall mean the rate of interest established by CoBank from time to time as its CoBank Base Rate, which rate is intended by CoBank to be a reference rate and not its lowest rate.
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Section 12. Complete Agreement; Amendments. This Agreement, the Notes, the Supplements and the other Loan Documents are intended by the parties to be a complete and final expression of their agreement. No amendment, modification, or waiver of any provision of this Agreement or the other Loan Documents, and no consent to any departure by any Loan Party or any Subsidiary of any Loan Party or any other party (other than CoBank) herefrom or therefrom, shall be effective unless approved by CoBank and contained in a writing signed by or on behalf of CoBank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In the event this Agreement is amended or restated, each such amendment or restatement shall be applicable to all Notes and all Supplements hereto. Each Note and each Supplement shall be deemed to incorporate all of the terms and conditions of this Agreement as if fully set forth therein. Without limiting the foregoing, any capitalized term utilized in any Note or any Supplement (or in any amendment to this Agreement or any Note or any Supplement) and not otherwise defined in the Note or the Supplement (or amendment) shall have the meaning set forth herein.
Section 13. Other Types of Credit. From time to time, CoBank may issue letters of credit or extend other types of credit to or for the account of the Borrower. In the event the parties desire to do so under the terms of this Agreement, such extensions of credit may be set forth in a Note or a Supplement and this Agreement shall be applicable thereto.
Section 14. Applicable Law. Without giving effect to the principles of conflict of laws and except to the extent governed by federal law, the Laws of the State of Colorado, without reference to choice of law doctrine, shall govern this Agreement, each Note and Supplement and any other Loan Document for which Colorado is specified as the applicable law, and all disputes and matters between the parties to this Agreement, including all disputes and matters whatsoever arising under, in connection with or incident to the lending and/or leasing or other business relationship between the parties, and the rights and obligations of the parties to this Agreement or any other Loan Document by and between the parties for which Colorado is specified as the applicable law.
Section 15. Notices. All notices hereunder or under any Note or any Supplement shall be in writing and shall be deemed to be duly given upon delivery if personally delivered or sent by facsimile transmission (electronic confirmation received), or three days after mailing if sent by express, certified or registered mail, to the parties at the following addresses (or such other address for a party as shall be specified by like notice):
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| If to CoBank, as follows: CoBank, ACB 6340 S. Fiddlers Green Circle Greenwood Village, Colorado 80111 Attn: Credit Information Services Fax No.: 303-224-6101 | If to the Borrower (or any other Loan Party), as follows: If to the Borrower, as follows: Nuvera Communications, Inc. 400 Second Street North P.O. Box 697 New Ulm, Minnesota 56073-0697 Attn: Manager Fax No.: 507-354-1982 with a copy to: Ballard Spahr LLP 2000 IDS Center 80 South Eighth Street Minneapolis, Minnesota 55402 Attn: Thomas Lovett, IV Fax No.: 612-371-3207 |
Section 16. Costs, Expenses and Taxes. To the extent allowed by Law, the Borrower agrees to pay all reasonable out-of-pocket costs and expenses (including the fees and expenses of counsel retained or employed by CoBank) incurred by CoBank in connection with the origination, negotiation, documentation, administration, amendment, waiver, extension, collection, and enforcement of this Agreement and the other Loan Documents, including all costs and expenses incurred in obtaining, perfecting, maintaining, determining the priority of, releasing and inspecting any security for the Borrower’s or any other Loan Party’s obligations to CoBank, and any stamp, intangible, transfer, or like tax payable in connection with this Agreement or any other Loan Document or the recording hereof or thereof.
Section 17. Indemnities. The Borrower agrees to, and agrees to cause each Loan Party to, indemnify, pay, and hold CoBank, its affiliates and the respective officers, directors, employees, agents, and attorneys of CoBank and its affiliates (the “Indemnitees”) harmless from and against any and all liabilities, obligations, losses (including reasonable fees of attorneys and consultants), damages, penalties, actions, judgments, suits and claims of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Indemnitee as a result of CoBank being a party to this Agreement or otherwise in connection with this Agreement, any of the other Loan Documents or any of the transactions contemplated hereby or thereby or the occurrence of any violation of Environmental Laws in connection with any property owned or leased by any Loan Party or any Subsidiary of any Loan Party; provided, that the Loan Parties shall have no obligation to an Indemnitee hereunder with respect to liabilities arising from the gross negligence or willful misconduct of that Indemnitee, in each such case as determined by a final non appealable judgment of a court of competent jurisdiction. The foregoing indemnity is in no way conditioned upon fault on the part of any Loan Party or on any other event, occurrence, matter or circumstance, except as specifically set forth above in this section.
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Section 18.Effectiveness and Severability. This Agreement shall continue in effect until: (A) all indebtedness and obligations of the Borrower under this Agreement, all Notes, all Supplements and all other Loan Documents shall have been paid or satisfied; (B) CoBank has no commitment to extend credit to or for the account of the Borrower under any Note or any Supplement; and (C) either party sends written notice to the other terminating this Agreement. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof.
Section 19. Regulatory Approvals. Upon any action by CoBank to commence the exercise of remedies hereunder, or under the Note, the Supplements or other Loan Documents, the Borrower hereby undertakes and agrees on behalf of itself, the other Loan Parties, and the Subsidiaries of any Loan Party to cooperate and join with CoBank and cause the Loan Party and the Subsidiaries of any Loan Party to cooperate and join with CoBank in any application to any Governmental Authority with respect thereto and to provide such assistance in connection therewith as CoBank may request, including the preparation of, consenting to or joining in of filings and appearances of officers and employees of the Borrower, the Loan Parties, or the Subsidiaries of any Loan Party before such Governmental Authority, in each case in support of any such application made by CoBank, and none of the Borrower, the other Loan Parties, or the Subsidiaries of any Loan Party shall directly or indirectly, oppose any such action by CoBank before any such Governmental Authority. The obligation of the Borrower to make all payments required to be made under this Agreement, any Notes, any Supplements and the other Loan Documents shall be absolute and unconditional and independent of any action by the PUC or the FCC with respect to rates and/or disallowance of debt.
Section 20. Successors and Assigns. This Agreement, each Note, each Supplement, and the other Loan Documents shall be binding upon and inure to the benefit of the Borrower and CoBank and their respective successors and assigns, except that the Borrower may not assign or transfer its rights or obligations under this Agreement, any Note, any Supplement or any other Loan Document without the prior written consent of CoBank.
Section 21. Consent to Jurisdiction. To the maximum extent permitted by Law, the Borrower agrees that any legal action or proceeding with respect to this Agreement or any of the other Loan Documents may be brought in the courts of the United States of America for the District of Colorado, all as CoBank may elect. By execution of this Agreement, the Borrower hereby irrevocably submits to each such jurisdiction, expressly waiving any objection it may have to the laying of venue by reason of its present or future domicile. Nothing contained herein shall affect the right of CoBank to commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction or to serve process in any manner permitted or required by Law.
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Section 22. Waiver of Jury Trial. THE BORROWER AND COBANK HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY NOTE, ANY SUPPLEMENT, ANY OTHER LOAN DOCUMENT, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE BORROWER AND COBANK ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE BORROWER AND COBANK FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. THE BORROWER AND COBANK ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF COBANK.
Section 23. Counterparts. This Agreement, each Note, each Supplement and any other Loan Document may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original and shall be binding upon all parties and their respective permitted successors and assigns, and all of which taken together shall constitute one and the same agreement.
Section 24. Participations, Etc. From time to time, CoBank may sell to one or more banks, financial institutions or other lenders a participation in one or more of the loans or other extensions of credit made pursuant to this Agreement, any Note or any Supplement. However, no such participation shall relieve CoBank of any commitment made to the Borrower hereunder or thereunder. In connection with the foregoing, CoBank may disclose information concerning the Borrower and its Subsidiaries and Investments, if any, to any participant or prospective participant, provided that such participant or prospective participant agrees to keep such information confidential. Patronage distributions in the event of a sale of a participation interest shall be governed by CoBank’s Bylaws and Capital Plan (as each may be amended from time to time). A sale of a participation interest may include certain voting rights of the participants regarding the Loans or other extensions of credit made hereunder or under the other Loan Documents (including, without limitation, the administration, servicing and enforcement thereof). CoBank agrees to give written notification to the Borrower of any sale of a participation interest. CoBank reserves the right to sell, assign and/or participate the Loans or other extensions of credit made pursuant to this Agreement on a non-patronage basis.
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Section 25. Rules of Construction. The following rules of construction shall be applicable for all purposes of this Agreement and all amendments and supplements hereto except as otherwise expressly provided or unless the context otherwise requires: (A) the terms used herein shall, unless the context otherwise requires, include the plural as well as the singular, and vice versa; (B) terms importing any gender shall include the other gender; (C) all references in this Agreement to designated sections, subsections, paragraphs, clauses, other subdivisions, schedules, exhibits and other attachments are to the designated sections, subsections, paragraphs, clauses, subdivisions, schedules, exhibits and attachments of this Agreement, unless otherwise specifically provided; (D) the terms “hereof,” “herein,” “hereto,” “hereunder” and the like mean and refer to this Agreement as a whole and not merely to the specific section, subsection, article, paragraph, clause or other subdivision in which the respective term appears; (E) the term “Person” includes natural persons, corporations, limited liability companies, limited partnerships, limited liability partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person); (F) the term “writing” shall include printing, typing, lithography and other means of reproducing words in a tangible visible form; (G) references to agreements, including any Loan Document, together with the schedules and exhibits hereto or thereto, and other contractual instruments shall be deemed to include subsequent amendments, assignments, extensions, renewals, reaffirmations, supplements, refinancings, refundings, and other modifications thereto, but only to the extent such amendments, assignments, extensions, renewals, reaffirmations, supplements, refinancings, refundings, and other modifications are not prohibited by the terms of this Agreement or any other Loan Document; (H) all references to statutes, related regulations and other Laws shall include any amendments, supplements, renewals, extensions or other modifications of the same, any successor Laws, any replacement Laws, and any other Laws promulgated thereunder or substantially related thereto; and (I) the terms “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation.”
Section 26. Accounting Changes. In the event of an Accounting Change (as defined below) that results in a change in any calculations required by Subsection 8(I) of this Agreement that would not have resulted had such Accounting Change not occurred, the parties hereto agree to enter into negotiations in good faith in order to amend such provisions so as to equitably reflect such Accounting Change such that the criteria for evaluating compliance with such covenants shall be the same after such Accounting Change as if such Accounting Change had not been made; provided, however, that no change in GAAP that would affect a calculation that measures compliance with Subsections 8(I), 9(A) and 9(D) of this Agreement shall be given effect until such provisions are amended to reflect such change in GAAP.
“Accounting Change” means any change in accounting principles that is required or permitted hereafter by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto) and such change is adopted by any Loan Party and its respective Subsidiaries with the agreement of its accountants.
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Section 27. Effect of Amendment; No Novation. The amendment and restatement of the Prior Agreement pursuant to this Agreement shall be effective as of the Closing Date. All obligations and rights of the Borrower and CoBank arising out of or relating to the period commencing on the Closing Date shall be governed by the terms and provisions of this Agreement; the obligations of and rights of the Borrower and CoBank arising out of or relating to the period prior to the Closing Date shall continue to be governed by the Prior Agreement without giving effect to the amendment and restatements provided for herein. This Agreement shall not constitute a novation or termination of Borrower’s obligations under the Prior Agreement or any Supplement or any Note or any other Loan Document executed or delivered in connection therewith, but shall constitute effective on the date hereof an amendment and restatement of the obligations and covenants of Borrower under such Loan Documents (and Borrower hereby reaffirms all such obligations and covenants, as hereby amended).
Section 28. ECP; Keepwell.
(A)
Each Loan Party hereby represents and warrants as of the date hereof and at any time as the Borrower may enter into any Interest Rate Agreement that such Loan Party is a Qualified ECP Guarantor (as defined in this Subsection 28(A)).
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Qualified ECP Guarantor” means, in respect of any Swap Obligation (as defined in this Subsection 28(A)), each Loan Party (a) that has total assets exceeding $10,000,000 at the time of such Swap Obligation or any guaranty of or any granting of a security interest to secure obligations under such Swap Obligation becomes effective or (b) that otherwise constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Swap Obligation” means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act (as defined in this Subsection 28(A)).
(B)
Each Loan Party constituting a Qualified ECP Guarantor hereby jointly and severally and absolutely and irrevocably undertakes to provide and guarantees such funds or other support to each other Loan Party as may be needed by such Loan Party from time to time to honor all of its obligations under any Loan Document including obligations with respect to Swap Obligations that would, in the absence of the agreement in this Subsection 28(B), otherwise constitute Excluded Swap Obligations (as defined in this Subsection 28(B)) otherwise constitute Excluded Swap Obligations as to such other Loan Party (but in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Subsection 28(B) or otherwise under this Agreement or any other Loan Document, as it relates to such other Loan Parties, voidable under applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The guarantees, obligations and undertakings of the Loan Parties constituting Qualified ECP Guarantors under this Subsection 28(B) shall remain in full force and effect until all obligations under any Loan Document have been indefeasibly paid and performed in full and all Commitments have expired or been terminated. The Loan Parties intend that this Section 30 constitute, and this Subsection 28(B) shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each other Loan Party for all purposes of the Commodity Exchange Act.
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“Excluded Swap Obligation” means, with respect to any Loan Party providing a guaranty of or granting a security interest to secure any Swap Obligation of another Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the guaranty of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to Subsection 28(B) and any other “keepwell, support or other agreements” for the benefit of such Loan Party) at the time the guaranty of or grant of such security interest by such Loan Party becomes effective with respect to such related Swap Obligation. For the avoidance of doubt, if a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guaranty or grant of security interest is or becomes illegal.
(C)
The Loan Parties hereby agree that they will not, and will not permit their respective Subsidiaries to, engage in, guaranty or grant a security interest to secure any Swap Obligation if at such time such Loan Party or Subsidiary of a Loan Party does not constitute an “eligible contract participant” as defined in the Commodity Exchange Act.
(D)
The parties hereto agree that any Excluded Swap Obligations of any Loan Party or other Surety shall be excluded from the secured or guaranteed obligations owing to CoBank by such Loan Party or other Surety.
(E)
The parties hereto agree that any payments received from any Loan Party or other Surety or from any disposition of any collateral provided by such Loan Party or such other Surety shall not be applied to any obligations that comprise Excluded Swap Obligations of such Loan Party or Surety.
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IN WITNESS WHEREOF, the Borrower has caused this Agreement to be executed and delivered, and CoBank has caused this Agreement to be executed and delivered, each by its duly authorized officer as of the date first shown above.
NUVERA COMMUNICATIONS, INC.
By: /s/ Bill D. Otis
Bill D. Otis
President and Chief Executive Officer
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COBANK, ACB
By: /s/ Jacqueline Bove
Jacqueline Bove
Managing Director
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[Signatures Continued From Previous Page.]
Each of the undersigned hereby acknowledges receipt of a copy of the Second Amended and Restated Master Loan Agreement, dated as of July 31, 2018, and agrees to the terms of Section 28.
PEOPLES TELEPHONE COMPANY
WESTERN TELEPHONE COMPANY
HUTCHINSON TELEPHONE COMPANY
HUTCHINSON TELECOMMUNICATIONS, INC.
HUTCHINSON CELLULAR, INC.
TECH TRENDS, INC.
SLEEPY EYE TELEPHONE COMPANY
SCOTT-RICE TELEPHONE CO.,
each as a Guarantor
By: /s/ Bill D. Otis
Bill D. Otis
President and Chief Executive Officer
45
Schedule 7(J)
to
Master Loan Agreement
MLA No. RX0583
ENVIRONMENTAL COMPLIANCE
46
Schedule 7(Q)
to
Master Loan Agreement
MLA No. RX0583
SUBSIDIARIES
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Schedule 7(S)
to
Master Loan Agreement
MLA No. RX0583
INDEBTEDNESS, LIENS AND CONTINGENT LIABILITIES
48
Schedule 9(F)
to
Master Loan Agreement
MLA No. RX0583
EXISTING INVESTMENTS
49
Schedule 9(J)
to
Master Loan Agreement
MLA No. RX0583
TRANSACTIONS WITH AFFILIATES
| Affiliate Name and Nature of Transaction | Dollar Amount |
50
EXHIBIT A
FORM OF COMPLIANCE CERTIFICATE
MLA No. RX0583(A)
THIS COMPLIANCE CERTIFICATE is given by __________________ and _______________, the [president/chief executive officer and chief financial officer], respectively, of Nuvera Communications, Inc. (the “Borrower”) pursuant to Subsection 8(H)(9) of that certain Second Amended and Restated Master Loan Agreement, dated as of July 31, 2018 (as such agreement may hereafter be amended, modified or supplemented, the “MLA”), between the Borrower and CoBank, ACB (“CoBank”). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the MLA.
We hereby certify as follows:
1.
We are the [president/chief executive officer or chief financial officer] of the Borrower, and as such possess the knowledge and authority to certify to the matters set forth in this Compliance Certificate, and hereby certify that the matters set forth below are true and accurate to the best of our present knowledge, information and belief after due inquiry;
2.
Attached hereto as Annex A are the [audited/unaudited] [annual/quarterly] consolidated [and consolidating] financial statements of the Borrower, for the fiscal [year/quarter] ended ______________, as required by [Subsection 8(H)(1)/Subsection 8(H)(2)] of the MLA. Such financial statements were prepared in accordance with GAAP consistently applied (except, with respect to quarterly financial statements, for the omission of footnotes and for the effect of normal year-end audit adjustments, or as otherwise expressly provided in the MLA), fairly present the condition of the Borrower in all material respects during the periods covered thereby and as of the dates thereof, and are in a format that demonstrates any accounting or formatting changes that may be required by various jurisdictions in which the businesses of the Borrower are conducted (to the extent not inconsistent with GAAP);
3.
As of the date of such financial statements, the Borrower is in compliance with the covenants set forth in Subsection 8(I) of the MLA. Attached hereto as Annex B are calculations which demonstrate the compliance by the Borrower with such covenants. Based on the calculation of the [Total Leverage Ratio] set forth in Annex B, on the [insert Adjustment Date], the applicable margin shall [be increased to [____][be decreased to [_____]][remain unchanged]];
4.
The representations and warranties contained in Section 7 of the MLA and in the other Loan Documents are true and correct in all material aspects of the date of this Certificate, except as disclosed on Annex C hereto;
5.
We have reviewed the activities of the Loan Parties, and consulted with appropriate representatives of the Loan Parties and all other parties to the Loan Documents during the fiscal [year/quarter] ended ______________, and reviewed the MLA and the other Loan Documents. As of the date of this Compliance Certificate, there is no condition, event or act which constitutes a Potential Default or an Event of Default under the MLA, except as disclosed on Annex D hereto; and
6.
[Attached as Annex E hereto is a list of all real property purchased or leased by any Loan Party [not previously disclosed to CoBank in writing][since the date of the last Compliance Certificate submitted pursuant to the MLA], including a summary statement of the use, estimated value and legal description of each such property; and
7.
Attached as Annex F hereto is a list of all deposit and security accounts acquired or established by any Loan Party since the [not previously disclosed to CoBank in writing][date of the last Compliance Certificate submitted pursuant to the MLA], including the name and address of the account provider, account number, type of account, estimated average daily balance and description and estimated market value of items in account (if an investment account), for each such accounts.]
8.
[Attached hereto as Annex E [is a][are] supplement[s] to Annex[es] [A(Pledged Equity Interests)/D(Copyrights, Copyright Licenses and Applications)/E(Patents, Patent Licenses, and Applications)/F(Trademarks, Trademark Licenses and Applications)/G(Domain Names and Domain Name Licenses)/H(Deposit and Securities Accounts)/I(Commercial Tort Claims)/J(Owned and Leased Real Property)] of the Pledge and Security Agreement.]
IN WITNESS WHEREOF, we have executed this Compliance Certificate as of _____________, _____.
[president/chief executive officer]
__________________________________
[chief financial officer]
__________________________________
51
ANNEX A
Annual (audited) or Quarterly (unaudited)
Financial Statements
52
ANNEX B
Financial Covenant Compliance Worksheet
53
COVENANT 8(I)(1)
Total Leverage Ratio
As of the fiscal quarter ended __________, ____________.
(A) Indebtedness (calculated as of the date of calculation)
the sum of (i) obligations for borrowed money, including the principal amount of any outstanding Loans, (ii) obligations representing the deferred purchase price of property or services other than accounts payable arising in connection with the purchase of goods or services on terms customary in the trade and not outstanding more than 90 days unless contested in good faith, (iii) obligations, whether or not assumed, secured by liens or a pledge of or an encumbrance on the proceeds or production from property now or hereafter owned or acquired, (iv) obligations which are evidenced by notes, bonds, debentures, acceptances or other instruments, (v) net termination obligations under Interest Rate Agreements not hedging Borrower’s interest rate under the Loans, calculated as of any date of calculation as if such agreements or arrangements were terminated as of such date, (vi) that portion of any obligation with respect to leases of real or personal property which is required to be capitalized under GAAP or which is treated as operating leases under regulations applicable to them but which otherwise would be required to be capitalized under GAAP, (vii) the net present value of future extraordinary executive compensation, and (viii) obligations with respect to principal under guarantees and other contingent obligations with respect to the payment of money, whether or not due and payable. $_____________
(B)
EBITDA (Calculated for the then most recently
completed four fiscal quarters)1
1.
the sum of
| $_____________ | |
| (ii) total interest expense (including non-cash interest) | $_____________ |
| (iii) provision of income taxes or benefits | $_____________ |
| (iv) depreciation expenses | $_____________ |
| (v) amortization expenses | $_____________ |
| (vi) unrealized losses on financial derivatives recognized in accordance with SFAS No. 133 | $_____________ |
| (vii) extraordinary executive compensation | $_____________ |
| Result of (i) plus(ii), (iii), (iv), (v), (vi) and (vii) | $_____________ |
2.
the sum of
| (i) unrealized gains on financial derivatives recognized in accordance with SFAS No. 133 | $_____________ |
| (ii) interest income, dividends and patronage income | $_____________ |
| (iii) income from unconsolidated subsidiaries, partnerships and joint ventures | $_____________ |
| Result of (i) plus(ii) and (iii) | $_____________ |
3.
Result of 1 – 2 = EBITDA $_____________
Indebtedness to EBITDA = (A) ÷ (B)(3)
=
:1.00
Compliance:
Yes
No
2 After taxes and after eliminating any gain or loss on sale of assets or other extraordinary gain or loss.
54
COVENANT 8(I)(2)
Equity to Asset Ratio
As of the fiscal quarter ended ______________, __________.
(Calculated for the then most recently completed four quarters)
(A)
Equity
1.
Total assets
$
2.
Total liabilities
$
Result of 1 minus 2:
$
Equity to Assets Ratio = ((A)(1) – (A)(2)) ÷ (A)(1)
>
Compliance:
Yes
No
55
COVENANT 8(I)(3)
Debt Service Coverage Ratio
As of the fiscal quarter ended ______________, __________.
(Calculated for the then most recently completed four fiscal quarters)
(A) The result of:
1.
EBITDA plus
$ ____________
2.
Cash interest, dividends and patronage income minus
$ ____________
3.
Cash income taxes
$ ____________
Result of 1 plus 2 minus 3:
$ ____________
(B)
The sum of:
1.
Scheduled principal payments required to be made on Indebtedness (or scheduled reductions in commitments on lines of credit to the extent such reductions would cause the repayment of principal amounts then outstanding under such lines) plus $
2.
Cash interest expense
$_____________
Sum of 1 and 2:
$_____________
Debt Service Coverage Ratio = (A) ÷ (B)
=
:1.00
Minimum Debt Service Coverage Ratio
2.00:1.00
Compliance:
Yes
No
56
COVENANT 8(I)(4)
Capital Expenditures
As of the fiscal quarter ended ______________, __________.
(A)
Capital Expenditures
$ _____________
(B)
The sum of:
1.
Maximum Annual Aggregate Capital Expenditures plus
$ 14,500,000
2.
Prior fiscal year capital expenditure carryover amount
$ ____________
Sum of 1 plus 2:
$ ____________
Compliance:
Yes
No
57
ANNEX C
Disclosure for Representations and Warranties
58
ANNEX D
Disclosure of Defaults
59
ANNEX E
[New owned or leased real estate] [UPDATED ANNEXES TO PLEDGE AND SECURITY AGREEMENT]
60
ANNEX F
[New deposit or security accounts]
61
EXHIBIT 10.2
EXECUTION VERSION
Loan No. RX0583(A)-T4
FOURTH SUPPLEMENT
TO THE SECOND AMENDED AND RESTATED MASTER LOAN AGREEMENT
THIS FOURTH SUPPLEMENT TO THE SECOND AMENDED AND RESTATED MASTER LOAN AGREEMENT (as the same may be amended, modified, supplemented, extended or restated from time to time, this “Fourth Supplement”), dated as of July 31, 2018 (the “Amendment Date”), is made between CoBANK, ACB (“CoBank”) and NUVERA COMMUNICATIONS, INC. (the “Borrower”), a Minnesota corporation, 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 Fourth Supplement have the meanings assigned to them in the MLA.
SECTION 1. The Term Loan. On the terms and conditions set forth in the MLA and this Fourth Supplement, CoBank agrees to make a loan to the Borrower (the “Loan”), by means of a single advance on the Closing Date (as defined in Section 3 of this Fourth Supplement) in a principal amount not to exceed $64,550,000. Under the Loan, amounts borrowed and later repaid or prepaid may not be reborrowed.
SECTION 2. Purpose. The purposes for which the Loan may be used are (i) to repay the outstanding amount, including principal and accrued interest, if any, of the indebtedness of Borrower to CoBank under CoBank Loan No. RX0583-T2A and CoBank Loan No. RX 0583-T3A in the approximate aggregate amount of $25,754,308.85; (ii) to finance the Acquisition, and (iii) to pay the fees, costs and expenses in connection with documenting and closing the Acquisition, the Loan and the credit facilities provided hereunder and pursuant to that certain Fifth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of the date hereof, between the Borrower and CoBank (the “Fifth Supplement”). 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 and the other conditions set forth in the MLA, the Loan will be advanced in a single advance on the date on which all conditions precedent to this Supplement and the Loan are satisfied (the “Closing Date”).
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
(1) One-Month LIBOR Index Rate (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) or 4(A)(3) of this Fourth Supplement, is hereinafter referred to as a “Portion” of the Loan), interest shall accrue pursuant to this variable rate option at a rate (rounded upward to the nearest 1/100th and adjusted for reserves required on Eurocurrency Liabilities (as hereinafter defined in this Subsection 4(A)(1)) for banks subject to FRB Regulation D (as hereinafter defined in this Subsection 4(A)(1)) or required by any other federal law or regulation) per annum (the “Variable Rate”) equal at all times to the annual rate reported by Bloomberg Information Services (or any successor or substitute service providing rate quotations comparable to those currently provided by such service, as determined by CoBank from time to time in its sole discretion, for the purpose of providing quotations of interest rates applicable to dollar deposits in the London interbank markets) at 11:00 a.m. London time for the offering of one (1) month U.S. dollar deposits, as quoted on the first Banking Day (as hereinafter defined in this Subsection 4(A)(1)) in each week, with such rate to change weekly on such day (the “One-Month LIBOR Rate”) plus a margin (the “Applicable Margin”) equal to the percentage determined from time to time in accordance with Subsection 4(B) of this Fourth Supplement; provided that, if CoBank determines in its sole discretion that the One-Month LIBOR Rate is not available, an alternative rate shall be substituted as CoBank may select in its sole discretion; provided, further, that in no event shall the One-Month LIBOR Rate be less than 0%. The rate shall be reset automatically, without the necessity of notice being provided to the Borrower or any other party, on the first Banking Day of each succeeding week, and each change in the rate shall be applicable to all balances subject to this option. Information about the then-current rate shall be made available upon telephonic request. “Banking Day” shall mean 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. “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.
(2) LIBOR Option. As to any Portion or Portions of the Loan selected by the Borrower, interest will accrue pursuant to this LIBOR option at a fixed rate per annum equal to LIBOR (as hereinafter defined in this Subsection 4(A)(2)) plus the Applicable Margin. Under this option: (i) rates may be fixed for Interest Periods (as hereinafter defined in this Subsection 4(A)(2)) of one, two, three or six months as selected by the Borrower; (ii) amounts fixed shall be in a principal amount equal to $100,000 or any whole multiple of $100,000 in excess thereof; and (iii) rates may only be fixed on a Banking Day on three Banking Days’ prior written notice. “LIBOR” means the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on Eurocurrency Liabilities for banks subject to FRB Regulation D or required by any other federal law or regulation) reported 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 Borrower by Bloomberg Information Services (or any successor or substitute service providing rate quotations comparable to those currently provided by such service, as determined by CoBank from time to time, for the purpose of proving quotations of interest rates applicable to dollar deposits in the London interbank market); provided that if CoBank determines in its sole discretion that LIBOR is not available, an alternative rate shall be substituted as CoBank may select in its sole discretion; provided, further, that in no event shall LIBOR be less than 0%. “Interest Period” shall mean the time period chosen by the Borrower during which a fixed rate is to apply to a Portion of the Loan, which period commences on the day a rate is fixed under Subsection 4(A)(2) or 4(A)(3) of this Fourth Supplement. The Interest Period for Portions accruing interest at the LIBOR option shall end on the day in the next calendar month or in the month that is 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 shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (b) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month. No Interest Period shall extend beyond the Maturity Date (as defined in Subsection 6(A) of this Fourth Supplement).
2
Upon the occurrence and during the continuance of an Event of Default, as the Interest Periods for Portions of the Loan accruing interest at a LIBOR option expire, at CoBank’s option, such Portions of the Loan shall be converted to the Variable Rate option, and the LIBOR option will not be available to the Borrower until all Events of Default are no longer continuing or have been waived.
(3) Quoted Fixed Rate Option. As to any Portion or Portions of the Loan selected by Borrower, interest will 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. Under this option, the interest rate on such Portion or Portions of the Loan may be fixed for such time periods chosen by Borrower during which the Quoted Rate is to apply to a Portion of the Loan as may be agreeable to CoBank in its sole and absolute discretion in each instance; provided, however, that (i) the minimum Interest Period is 365 days, (ii) the minimum amount that may be fixed is $100,000, (iii) such Interest Period may not extend beyond the Maturity Date, and (iv) such Interest Period may only expire on a Business Day.
Upon the occurrence and during the continuance of an Event of Default, as the Interest Periods for Portions of the Loan accruing interest at a Quoted Rate option expire, at CoBank’s option, such Portions of the Loan shall be converted to the Variable Rate option, and the Quoted Rate option will not be available to Borrower until all Events of Default are no longer continuing or have been waived.
(4) Rate Combinations. Notwithstanding the foregoing, at any one time there may be no more than an aggregate of five Portions of the Loan accruing interest pursuant to the LIBOR option or the Quoted Rate option.
(5) Selection and Changes of Rates. Borrower shall select the rate option or options applicable to the Loan at the time it requests the Loan. Thereafter, on any Business Day with respect to Portions of the Loan accruing interest at the Variable Rate option or on the last day of any Interest Period, Borrower may, subject to Subsections 4(A)(2), 4(A)(3) and 4(A)(4) of this Fourth Supplement, elect to fix the interest rate accruing on such Portion or any part thereof pursuant to one of the fixed rate options. In the absence of any election, interest shall automatically accrue at the Variable Rate option. From time to time and subject to the payment of a Surcharge as defined in and as calculated pursuant to Subsection 6(B), 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, 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) and 4(A)(4) of this Fourth 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 Borrower and must be received by CoBank by 12:00 noon, Mountain Time, on the relevant day. In taking actions upon telephonic requests, CoBank shall be entitled to rely on (and shall incur no liability to Borrower in acting upon) any request made by a person identifying himself or herself as one of the persons authorized in writing by Borrower to request the Loan or select interest rates hereunder so long as any funds advanced are wired to an account previously designated by Borrower; provided, however, that in the case of Portions of the Loan bearing interest at the Quoted Rate option or the LIBOR option, all such elections must be confirmed in writing upon CoBank’s request. Notwithstanding the foregoing, rates may not be fixed in such a manner as to cause Borrower to have to break any fixed rate balance in order to pay any installment of principal.
3
(6) 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 Borrower elects to re-fix the interest rate on any Portion of the Loan accruing interest pursuant to one of the fixed rate options pursuant to Subsection 4(A)(5) of this Fourth 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 from and including the last day of such Interest Period. If Borrower elects to convert from a fixed rate option to the Variable Rate option pursuant to Subsection 4(A)(5) of this Fourth Supplement, interest at the applicable fixed rate shall accrue through the day before such conversion and either (i) the first day of any new Interest Period shall be the date of such conversion, or (ii) interest at the Variable Rate shall accrue on the Portion of the Loan so converted from and including the date of conversion.
(B)
Margins. Initially, and continuing through the day immediately preceding the first Adjustment Date (as hereinafter defined in this Subsection 4(B)) occurring on or after September 30, 2018 on which the Borrower demonstrates that a change in the Applicable Margin is warranted and requests such change, the Applicable Margin shall be 3.25%. Commencing on such Adjustment Date, the Applicable Margin shall be determined based on the Borrower’s Total Leverage Ratio, determined in accordance with Subsection 8(I)(1) of the MLA, as of the last day of each fiscal quarter of the Borrower, as set forth in the following table:
| Total Leverage Ratio | Applicable Margin for Portions of the Loan bearing interest at the LIBOR Option or the Variable Rate Option |
|
|
|
| Greater than or equal to 2.50:1.00 | 3.25% |
| Less than 2.50:1.00 and greater than or equal to 2.00:1.00 | 3.00% |
| Less than 2.00:1.00 | 2.25% |
4
The Applicable Margin shall be (i) increased, if warranted, beginning on the date which is the fifth Business Day following CoBank’s receipt of the financial statements required pursuant to Subsections 8(H)(1) and 8(H)(2) of the MLA, and the compliance certificate required pursuant to Subsection 8(H)(9) of the MLA and (ii) decreased, if warranted, beginning on the date which is the fifth Business Day following CoBank’s receipt of such financial statements and compliance certificate and Borrower’s written request to decrease such margins (each such effective date described in clauses (i) and (ii), an “Adjustment Date”). In the event that CoBank shall not receive when due such financial statements and compliance certificate, then from such due date and until the fifth Business Day following CoBank’s receipt of such overdue financial statements and compliance certificate (and in the event a decrease in the applicable margin is then warranted, receipt of Borrower’s written request to decrease such margin), or upon the occurrence of any Event of Default, then at the option of CoBank the Applicable Margin shall be 3.25%. Upon the occurrence of any Event of Default the Obligations are also subject to the default rate of interest in Section 11(D) of the MLA.
(C)
Payment and Calculation. The Borrower shall pay interest on the Loan quarterly in arrears on the last day (or such other day as CoBank shall elect in writing) of each September, December, March and June occurring after the Closing Date, upon any prepayment of any Portion (whether due to acceleration or otherwise) and on the Maturity Date; provided, however, with respect to the Portions accruing interest under the LIBOR option or the Quoted Rate option, interest shall be payable at the maturity of an Interest Period, or, if such Interest Period exceeds three months, in arrears on each three-month anniversary of the beginning date of such Interest Period and at the maturity of such Portion. 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. 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. If any date for the payment of interest is not a Business Day, then the interest payment then due shall be paid on the next Business Day.
(D)
Interest Rate Protection. Within 90 days after the Closing Date, Borrower will enter into Interest Rate Agreements in form and substance reasonably satisfactory to CoBank (and thereafter shall maintain such fixes or agreements through the Maturity Date) so as to fix or limit interest rates payable by Borrower at all times as to at least 25% of the outstanding principal balance of the Loan.
SECTION 5. Prepayment. The Borrower may prepay in full or in part any Portion of the Loan as provided in Subsection 4(F) of the MLA. Unless otherwise agreed, all mandatory and voluntary repayments and prepayments pursuant to Section 4 of the MLA will be applied to principal installments in the inverse order of their maturity and to such Portions of the Loan as the Borrower specifies in writing or, in the absence of such direction, as CoBank shall specify. Notwithstanding the foregoing, in connection with the Borrower repaying or prepaying any amount accruing interest pursuant to the LIBOR option (whether such payment is made voluntarily, as a result of an acceleration or a mandatory prepayment or otherwise), the Borrower must also pay a Surcharge (as defined in, and calculated pursuant to, Subsection 6(B).
SECTION 6. Repayment of the Loan.
(A)
Scheduled Repayments. Commencing on September 30, 2018, and on each December 31, March 31, June 30 and September 30 occurring thereafter (each such date, a “Payment Date”) through July 31, 2025 (the “Maturity Date”), the outstanding principal balance of the Loan shall be repaid in equal consecutive quarterly principal payments on each such date in the amount of $1,152,600 (any such repayments will be cumulative and will be in addition to any other repayments pursuant to Section 4 of the MLA). On the Maturity Date, the amount of the then unpaid principal balance of the Loan, if any, and any and all other amounts due and owing hereunder or under any other Loan Document relating to this Loan shall be due and payable. If any Payment Date is not a Business Day, then the installment then due shall be paid on the next Business Day and shall continue to accrue interest until paid.
5
(B)
Application of Repayments; Related Interest and Surcharge Payments. All repayments made pursuant to this Section 6 will be applied to such Portions of the Loan as the Borrower directs in writing or, in the absence of such direction, as CoBank specifies. At the time of each repayment pursuant to this Section 6 or Section 4 of the MLA, the Borrower must pay any applicable surcharge (“Surcharge”) in an amount equal to the greater of (a) the present value of any funding losses incurred or imputed by CoBank to have been incurred as a result of such repayments, prepayment or conversion for the period such amount was scheduled to have been outstanding at such fixed rate (which, if less than $0, shall be deemed to be $0) and (b) $300. Such Surcharge, including the amount of any funding losses incurred by CoBank, shall be determined and calculated in accordance with methodology established by CoBank.
SECTION 7. Security. The Borrower’s obligations hereunder and, to the extent related thereto, the MLA, shall be secured as provided in Section 5 of the MLA.
SECTION 8. Additional Conditions Precedent. In addition to the conditions precedent set forth in the MLA, CoBank’s obligation to make the Loan is subject to the satisfaction of each of the following conditions precedent on or before the Closing Date:
(A)
Origination Fee. That Borrower shall pay to CoBank a non-refundable upfront origination fee in the amount set forth in that certain Fee Letter, dated as of February 7, 2018, between the Borrower and CoBank, which shall be due upon the Closing Date.
(B)
Closing of Revolving Loan. That all conditions precedent to the Fifth Supplement have been satisfied;
(C)
Opinion. That CoBank receive, in form and content acceptable to CoBank, an opinion or opinions of counsel (who shall be acceptable to CoBank) for each Loan Party;
(D)
No Material Adverse Change. That from December 31, 2017, to the date of the Loan there has not occurred any event which has had or could reasonably be expected to have a Material Adverse Effect on the business or prospects of any Loan Party;
(E)
Representations and Warranties. That the representations and warranties of each Loan Party contained in the MLA, this Fourth Supplement and any other Loan Document to which they are party be true and correct in all material respects on and as of the date of the Loan, as though made on and as of such date;
(F)
Closing Certificate. That CoBank receive a certificate, in the form of Exhibit A hereto, executed by the chief executive officer or president of the Borrower as to, among other things, (i) the continuing truth and accuracy of the representations and warranties of each Loan Party under the Loan Documents to which such Loan Party is a party, (ii) the satisfaction of each of the conditions applicable to the making of the Loan and to the occurrence of the Closing Date; (iii) certifying that the Acquisition has been consummated on terms and conditions consistent with the Acquisition Agreement and attaching a copy of the Acquisition Agreement thereto; and (iv) setting forth a pro forma calculation of the Borrower’s Total Leverage Ratio, after giving effect to the Acquisition, the making of the Loan hereunder, and the making of the Revolving Loan under the Fifth Supplement, as of the Closing Date;
(G)
Pay Proceeds Letter. That CoBank receives a pay proceeds letter, in form and substance reasonably satisfactory to CoBank, directing the disposition of the funds advanced under the Fifth Supplement on the Closing Date (if any);
(H)
Other Information. That CoBank receive such other information regarding the condition, financial or otherwise, and operations of each Loan Party as CoBank shall request and such other opinions, certificates or documents as CoBank shall reasonably request.
[Signatures commence on the following page.]
6
IN WITNESS WHEREOF, the Borrower and CoBank each have caused this Fourth Supplement to be executed and delivered by its duly authorized officer as of the date first shown above.
NUVERA COMMUNICATIONS, INC.
By: /s/Bill D. Otis
Bill D. Otis
President and Chief Executive Officer
[Signatures continue on next page.]
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[Signatures continued from previous page.]
COBANK, ACB
By:
/s/ Jacqueline Bove
Jacqueline Bove
Managing Director
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Exhibit A
CLOSING CERTIFICATE -- LOAN NO. RX0583-T4
THIS CERTIFICATE is given by [Name], the [chief executive officer/chief financial officer] of NUVERA COMMUNICATIONS, INC. (the “Borrower”), pursuant to Section 6(C) of that certain Second Amended and Restated Master Loan Agreement, dated as of July 31, 2018 (as the same may be amended, modified, supplemented, extended or restated from time to time, the “MLA”), pursuant to Section 8(F) of that certain Fourth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of July 31, 2018 (as the same may be amended, modified, supplemented, extended or restated from time to time, the “Fourth Supplement”), and pursuant to Section 9 of that certain Fifth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of July 31, 2018 (as the same may be amended, modified, supplemented, extended or restated from time to time, the “Fifth 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, in the Fourth Supplement and in the Fifth Supplement.
The undersigned hereby certifies as follows:
1.
I am the [chief executive officer/chief financial officer] 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, 2017, no event has occurred which has had or could have a Material Adverse Effect on the Borrower or any of its Subsidiaries.
3.
All representations and warranties of each of the Loan Parties 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 advance with respect to which this Certificate is delivered; and
5.
Each of the conditions specified in Section 6 of the MLA, in Section 8 of the Fourth Supplement and in Section 9 of the Fifth Supplement required to be satisfied on or prior to the date of the making of an advance under the Revolving Loan has been fulfilled as of the date hereof.
6.
Attached hereto as Exhibit A is a true and complete copy of the Acquisition Agreement, together with all schedules, exhibits, appendices, attachments and amendments thereto, as in effect on the Closing Date. The Acquisition has been consummated in accordance with the terms of the Acquisition Agreement, in the form delivered to CoBank on or about February 22, 2018.
7.
Attached hereto as Exhibit B is evidence that, after giving effect to (i) the funding of (x) the Loan under the Fourth Supplement and (y) the Revolving Loan under the Fifth Supplement on the Closing Date and (ii) the closing of the Acquisition, the pro forma Total Leverage Ratio of the Borrower is [_______]:1.00.
8.
[Attached hereto as Exhibit C are true, correct and complete copies of all consents and approvals of any Governmental Authority required in connection with the Acquisition.]
IN WITNESS WHEREOF, we have executed this Certificate as of ______ ___, 20__.
[chief executive officer/chief financial officer], Nuvera Communications, Inc.
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EXHIBIT 10.3
Loan No. RX0583(A)-T5
PROMISSORY NOTE
(REVOLVER)
NUVERA COMMUNICATIONS, INC.
$10,000,000 Dated: July 31, 2018
FOR VALUE RECEIVED, the undersigned unconditionally promises to pay to COBANK, ACB (the “Payee”), or its order, at the times and in the manner set forth in that certain Second Amended and Restated Master Loan Agreement, dated as of the date hereof, among the undersigned and Payee, as it may be amended, modified, supplemented, extended or restated from time to time (the “MLA”), and in that certain Fifth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of the date hereof, and as it otherwise has been may further be amended, modified, supplemented, extended or restated from time to time (the “Fifth Supplement”; and together with the MLA, collectively, the “Loan Agreement”), the principal sum of TEN MILLION UNITED STATES DOLLARS ($10,000,000) or such lesser principal amount as may be advanced and/or readvanced from and be outstanding from time to time hereunder, together with interest on the unpaid principal balance hereof at the rate or rates provided for in the Loan Agreement.
This note is given for one or more advances to be made by the Payee to the undersigned pursuant to the Loan Agreement, all of the terms and provisions of which (including, without limitation, provisions regarding acceleration of the maturity hereof and application of default interest and of a surcharge to payments hereunder) are hereby incorporated by reference. Advances, accrued interest and payments shall be posted by the Payee upon an appropriate accounting record, which record (and all computer printouts thereof) shall constitute prima facie evidence of the outstanding principal and interest on the advances. The total of such advances may exceed the face amount of this note, but the unpaid principal balance shall not at any time exceed such face amount. Any amount of principal hereof which is not paid when due, whether at stated maturity, by acceleration or otherwise, shall bear interest from the date when due until said principal amount is paid in full, payable on demand, at a rate per annum set forth in Section 11(D) of the MLA.
The makers or endorsers hereof hereby waive presentment for payment, demand, protest, and notice of dishonor and nonpayment of this note, and all defenses on the ground of delay or of any extension of time for the payment hereof which may be hereafter given by the holder or holders hereof to them or either of them or to anyone who has assumed the payment of this note, and it is specifically agreed that the obligations of said makers or endorsers shall not be in anywise affected or altered to the prejudice of the holder or holders hereof by reason of the assumption of payment of the same by any other person or entity.
Should this note be placed in the hands of an attorney for collection or the services of any attorney become necessary in connection with enforcing its provisions, the undersigned agrees to pay reasonable attorneys’ fees, together with all costs and expenses incident thereto, to the extent allowed by law. Except to the extent governed by applicable federal law, this note shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to choice of law doctrine. Whenever possible, each provision of this note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this note. Whenever in this note reference is made to the Payee or the undersigned, such reference shall be deemed to include, as applicable, a reference to their respective successors and assigns. The provisions of this note shall be binding upon and shall inure to the benefit of such successors and assigns. The undersigned’s successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for the undersigned.
[Signature appears on following page]
IN WITNESS WHEREOF, the undersigned has caused this note to be executed and delivered by its duly authorized officer, as of the date first shown above.
NUVERA COMMUNICATIONS, INC.
By: /s/ Bill D. Otis
Bill D. Otis
President and Chief Executive Officer
EXHIBIT 10.4
EXECUTION VERSION
Loan No. RX0583(A)-T5
FIFTH SUPPLEMENT
TO THE SECOND AMENDED AND RESTATED MASTER LOAN AGREEMENT
THIS FIFTH SUPPLEMENT TO THE SECOND AMENDED AND RESTATED MASTER LOAN AGREEMENT (as the same may be amended, modified, supplemented, extended or restated from time to time, this “Fifth Supplement”), dated as of December 31, 2014 (the “Amendment Date”), is made between COBANK, ACB (“CoBank”) and NUVERA COMMUNICATIONS, INC. (the “Borrower”), a Minnesota corporation, and supplements that certain Second Amended and Restated Master Loan Agreement, dated as of the date hereof, 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 Second Supplement shall have the meanings assigned to them in the MLA.
SECTION 1. The Revolving Loan Commitment. On the terms and conditions set forth in the MLA and this Fifth Supplement, CoBank agrees to make one or more advances (collectively, the “Revolving Loan”) to the Borrower during the Availability Period (as hereinafter defined in Section 4 of this Fifth Supplement) in an aggregate principal amount outstanding at any one time not to exceed $10,000,000 (the “Revolving Loan Commitment” or the “Commitment”), as the Revolving Loan Commitment shall be reduced pursuant to Section 7 of this Fifth Supplement and Section 4 of the MLA. The Revolving Loan Commitment shall expire at 12:00 noon Mountain time on July 31, 2023, or such later date as CoBank in its sole discretion shall provide in writing (the “Maturity Date”). Under the Revolving Loan Commitment, amounts borrowed and later prepaid may be reborrowed.
SECTION 2. Purpose. The proceeds of the Revolving Loan shall be used (or have been used) by the Borrower (i) for capital expenditures and general corporate purposes of the Borrower and its Subsidiaries, (ii) to finance a portion of the purchase price of the Acquisition, and (iii) to pay fees and expenses associated with the Acquisition, the Revolving Loan and the credit facility provided pursuant to the Fourth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of even date herewith, between the Borrower and CoBank (the “Fourth Supplement”). The Borrower agrees that the proceeds of the Revolving Loan are to be used only for the purposes set forth in this Section 2.
SECTION 3. Availability. Subject to Sections 2 and 6 of the MLA and Section 10 of this Fifth Supplement, during the period commencing on the date on which all conditions precedent to the initial advance under the Revolving Loan are satisfied and ending on the Business Day immediately preceding the Maturity Date (the “Availability Period”), advances under the Revolving Loan shall be made as provided in the MLA.
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SECTION 4. Interest on the Revolving Loan.
(A)
Rate Options; Etc. The Borrower agrees to pay interest on the unpaid principal balance of the Revolving Loan in accordance with one or more of the following interest rate options, as selected by the Borrower:
(1) One-Month LIBOR Index Rate (Variable Rate Option). As to any portion of the unpaid principal balance of the Revolving Loan selected by the Borrower (any such portion, and any portion selected pursuant to Subsections 4(A)(2) or 4(A)(3) of this Fifth Supplement, is hereinafter referred to as a “Portion” of the Revolving Loan), interest shall accrue pursuant to this variable rate option at a rate (rounded upward to the nearest 1/100th and adjusted for reserves required on Eurocurrency Liabilities (as hereinafter defined in this Subsection 4(A)(1)) for banks subject to FRB Regulation D (as hereinafter defined in this Subsection 4(A)(1)) or required by any other federal law or regulation) per annum (the “Variable Rate”) equal at all times to the annual rate reported by Bloomberg Information Services (or any successor or substitute service providing rate quotations comparable to those currently provided by such service, as determined by CoBank from time to time in its sole discretion, for the purpose of providing quotations of interest rates applicable to dollar deposits in the London interbank markets) at 11:00 a.m. London time for the offering of one (1) month U.S. dollar deposits, as quoted on the first Banking Day (as hereinafter defined in this Subsection 4(A)(1)) in each week, with such rate to change weekly on such day (the “One-Month LIBOR Rate”) plus a margin (the “Applicable Margin”) equal to the percentage determined from time to time in accordance with Subsection 4(B) of this Fifth Supplement; provided that, if CoBank determines in its sole discretion that the One-Month LIBOR Rate is not available, an alternative rate shall be substituted as CoBank may select in its sole discretion; provided, further, that in no event shall the One-Month LIBOR Rate be less than 0%. The rate shall be reset automatically, without the necessity of notice being provided to the Borrower or any other party, on the first Banking Day of each succeeding week, and each change in the rate shall be applicable to all balances subject to this option. Information about the then-current rate shall be made available upon telephonic request. “Banking Day” shall mean 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. “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.
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(2) LIBOR Option. As to any Portion or Portions of the Revolving Loan selected by the Borrower, interest will accrue pursuant to this LIBOR option at a fixed rate per annum equal to LIBOR (as hereinafter defined in this Subsection 4(A)(2)) plus the Applicable Margin. Under this option: (i) rates may be fixed for Interest Periods (as hereinafter defined in this Subsection 4(A)(2)) of one, two, three or six months as selected by the Borrower; (ii) amounts fixed shall be in a principal amount equal to $100,000 or any whole multiple of $100,000 in excess thereof; and (iii) rates may only be fixed on a Banking Day on three Banking Days’ prior written notice. “LIBOR” means the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on Eurocurrency Liabilities for banks subject to FRB Regulation D or required by any other federal law or regulation) reported 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 Borrower by Bloomberg Information Services (or any successor or substitute service providing rate quotations comparable to those currently provided by such service, as determined by CoBank from time to time, for the purpose of proving quotations of interest rates applicable to dollar deposits in the London interbank market); provided that if CoBank determines in its sole discretion that LIBOR is not available, an alternative rate shall be substituted as CoBank may select in its sole discretion; provided, further, that in no event shall LIBOR be less than 0%. “Interest Period” shall mean the time period chosen by the Borrower during which a fixed rate is to apply to a Portion of the Revolving Loan, which period commences on the day a rate is fixed under Subsection 4(A)(2) or 4(A)(3) of this Fifth Supplement. The Interest Period for Portions accruing interest at the LIBOR option shall end on the day in the next calendar month or in the month that is 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 shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (b) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month. No Interest Period shall extend beyond the Maturity Date (as defined in Subsection 6(A) of this Fifth Supplement).
Upon the occurrence and during the continuance of an Event of Default, as the Interest Periods for Portions of the Revolving Loan accruing interest at a LIBOR option expire, at CoBank’s option, such Portions of the Revolving Loan shall be converted to the Variable Rate option, and the LIBOR option will not be available to the Borrower until all Events of Default are no longer continuing or have been waived.
(3) Quoted Fixed Rate Option. As to any Portion or Portions of the Revolving Loan selected by Borrower, interest will 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. Under this option, the interest rate on such Portion or Portions of the Revolving Loan may be fixed for such time periods chosen by Borrower during which the Quoted Rate is to apply to a Portion of the Revolving Loan as may be agreeable to CoBank in its sole and absolute discretion in each instance; provided, however, that (i) the minimum Interest Period is 365 days, (ii) the minimum amount that may be fixed is $100,000, (iii) such Interest Period may not extend beyond the Maturity Date, and (iv) such Interest Period may only expire on a Business Day.
Upon the occurrence and during the continuance of an Event of Default, as the Interest Periods for Portions of the Revolving Loan accruing interest at a Quoted Rate option expire, at CoBank’s option, such Portions of the Revolving Loan shall be converted to the Variable Rate option, and the Quoted Rate option will not be available to Borrower until all Events of Default are no longer continuing or have been waived.
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(4) Rate Combinations. Notwithstanding the foregoing, at any one time there may be no more than an aggregate of five Portions of the Revolving Loan accruing interest pursuant to the LIBOR option or the Quoted Rate option.
(5) Selection and Changes of Rates. Borrower shall select the rate option or options applicable to the Revolving Loan at the time it requests an advance on the Revolving Loan. Thereafter, on any Business Day with respect to Portions of the Revolving Loan accruing interest at the Variable Rate option or on the last day of any Interest Period, Borrower may, subject to Subsections 4(A)(2), 4(A)(3) and 4(A)(4) of this Fifth Supplement, elect to fix the interest rate accruing on such Portion or any part thereof pursuant to one of the fixed rate options. In the absence of any election, interest shall automatically accrue at the Variable Rate option. From time to time and subject to the payment of a Surcharge as defined in and as calculated pursuant to Subsection 6, Borrower may elect, on a Business Day prior to the expiration of the Interest Period for any Portion of the Revolving Loan accruing interest pursuant to a fixed rate option, to convert all, but not part, of such Portion of the Revolving 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) and 4(A)(4) of this Fifth 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 Borrower and must be received by CoBank by 12:00 noon, Mountain Time, on the relevant day. In taking actions upon telephonic requests, CoBank shall be entitled to rely on (and shall incur no liability to Borrower in acting upon) any request made by a person identifying himself or herself as one of the persons authorized in writing by Borrower to request the Revolving Loan or select interest rates hereunder so long as any funds advanced are wired to an account previously designated by Borrower; provided, however, that in the case of Portions of the Revolving Loan bearing interest at the LIBOR option or the Quoted Rate option, all such elections must be confirmed in writing upon CoBank’s request. Notwithstanding the foregoing, rates may not be fixed in such a manner as to cause Borrower to have to break any fixed rate balance in order to pay any installment of principal.
(6) 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 Borrower elects to re-fix the interest rate on any Portion of the Revolving Loan accruing interest pursuant to one of the fixed rate options pursuant to Subsection 4(A)(5) of this Fifth 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 from and including the last day of such Interest Period. If Borrower elects to convert from a fixed rate option to the Variable Rate option pursuant to Subsection 4(A)(5) of this Fifth Supplement, interest at the applicable fixed rate shall accrue through the day before such conversion and either (i) the first day of any new Interest Period shall be the date of such conversion, or (ii) interest at the Variable Rate shall accrue on the Portion of the Revolving Loan so converted from and including the date of conversion.
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(B)
Margins. Initially, and continuing through the day immediately preceding the first Adjustment Date (as hereinafter defined in this Subsection 4(B)) occurring on or after September 30, 2018 on which the Borrower demonstrates that a change in the Applicable Margin is warranted and requests such change, the Applicable Margin shall be 3.25%. Commencing on such Adjustment Date, the Applicable Margin shall be determined based on the Borrower’s Total Leverage Ratio, determined in accordance with Subsection 8(I)(1) of the MLA, as of the last day of each fiscal quarter of the Borrower, as set forth in the following table:
| Total Leverage Ratio | Applicable Margin for Portions of the Revolving Loan bearing interest at the LIBOR Option or the Variable Rate Option |
|
|
|
| Greater than or equal to 2.50:1.00 | 3.25% |
| Less than 2.50:1.00 and greater than or equal to 2.00:1.00 | 3.00% |
| Less than 2.00:1.00 | 2.25%
|
(C)
The Applicable Margin shall be (i) increased, if warranted, beginning on the date which is the fifth Business Day following CoBank’s receipt of the financial statements required pursuant to Subsections 8(H)(1) and 8(H)(2) of the MLA, and the compliance certificate required pursuant to Subsection 8(H)(9) of the MLA and (ii) decreased, if warranted, beginning on the date which is the fifth Business Day following CoBank’s receipt of such financial statements and compliance certificate and Borrower’s written request to decrease such margins (each such effective date described in clauses (i) and (ii), an “Adjustment Date”). In the event that CoBank shall not receive when due such financial statements and compliance certificate, then from such due date and until the fifth Business Day following CoBank’s receipt of such overdue financial statements and compliance certificate (and in the event a decrease in the applicable margin is then warranted, receipt of Borrower’s written request to decrease such margin), or upon the occurrence of any Event of Default, then at the option of CoBank the Applicable Margin shall be 3.25%. Upon the occurrence of any Event of Default the Obligations are also subject to the default rate of interest in Section 11(D) of the MLA.
(D)
Payment and Calculation. The Borrower shall pay interest on the Revolving Loan quarterly in arrears on the last day (or such other day as CoBank shall elect in writing) of each September, December, March and June occurring after the Closing Date, upon any prepayment of any Portion (whether due to acceleration or otherwise) and on the Maturity Date; provided, however, with respect to the Portions accruing interest under the LIBOR option or the Quoted Rate option, interest shall be payable at the maturity of an Interest Period, or, if such Interest Period exceeds three months, in arrears on each three-month anniversary of the beginning date of such Interest Period and at the maturity of such Portion. Interest shall be calculated on the actual number of days the Revolving Loan, or any part thereof, is outstanding on the basis of a year consisting of 360 days. In calculating accrued interest, the date the Revolving Loan is made shall be included and the date any principal amount of the Revolving Loan is repaid or prepaid shall be excluded as to such amount. If any date for the payment of interest is not a Business Day, then the interest payment then due shall be paid on the next Business Day.
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SECTION 5. Fees. In consideration of the Revolving Loan Commitment, the Borrower agrees to pay to CoBank a commitment fee in an amount equal to (A) the Revolving Loan Commitment less the sum of (i) the average daily outstanding balance of the Revolving Loan during the preceding calendar quarter, multiplied by (B) 0.25% per annum, calculated on a 360-day basis for the actual number of days elapsed, payable quarterly in arrears on the last day (or such other day as CoBank shall elect in writing) of each calendar quarter and upon the Maturity Date. Such fee is payable for each quarter (or portion thereof) occurring during the original or any extended term of the Revolving Loan Commitment.
SECTION 6. Prepayment. The Borrower may prepay in full or in part any portion of any Loan as provided in Subsection 4(F) of the MLA. Unless otherwise agreed, all mandatory and voluntary repayments and prepayments pursuant to Section 4 of the MLA will be applied to principal installments in the inverse order of their maturity and to such Portions of the Revolving Loan as the Borrower specifies in writing or, in the absence of such direction, as CoBank shall specify. Notwithstanding the foregoing, in connection with the Borrower repaying or prepaying any amount accruing interest pursuant to the LIBOR option (whether such payment is made voluntarily, as a result of an acceleration or a mandatory prepayment or otherwise), the Borrower must pay any applicable surcharge (“Surcharge”) in an amount equal to the greater of (a) the present value of any funding losses incurred or imputed by CoBank to have been incurred as a result of such repayments, prepayment or conversion for the period such amount was scheduled to have been outstanding at such fixed rate (which, if less than $0, shall be deemed to be $0) and (b) $300. Such Surcharge, including the amount of any funding losses incurred by CoBank, shall be determined and calculated in accordance with methodology established by CoBank.
SECTION 7. Termination of Commitments; Repayment of the Revolving Loan. The Revolving Loan Commitment will terminate in full on the Maturity Date. If not sooner required to be repaid, all advances under the Revolving Loan and all other amounts due and owing hereunder and under the Loan Documents relating to the Revolving Loan shall be due and payable on the Maturity Date.
SECTION 8. Security. The Borrower’s obligations hereunder and, to the extent related thereto, the MLA, shall be secured as provided in Section 5 of the MLA.
SECTION 9. Additional Conditions Precedent. In addition to the conditions precedent set forth in the MLA and in the Fourth Supplement, CoBank’s obligation to make any advance, including the initial advance, under the Revolving Loan under the Revolving Loan Commitment, is subject to the satisfaction of each of the following conditions precedent on or before the date of such advance:
(A)
Advance Certificate. Except with respect to any advance made on the Closing Date, with respect to which advance (if any) CoBank shall receive the certificate required pursuant to Subsection 8(F) of the Fourth Supplement, that CoBank receive a certificate, in the form of Exhibit A hereto, executed by the chief executive officer or president of the Borrower as to, among other things, (i) the continuing truth and accuracy of the representations and warranties of each Loan Party under the Loan Documents to which such Loan Party is a party, and (ii) the satisfaction of each of the conditions applicable to the making of such Revolving Loan;
(B)
No Material Adverse Change. That from December 31, 2013, 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 business or prospects of any Loan Party; and
(C)
Revolving Note. That CoBank receive, in form and content acceptable to CoBank, an amended and restated promissory note of even date herewith evidencing the Borrower’s obligation to repay the Revolving Loan.
[Signatures follow on next page.]
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IN WITNESS WHEREOF, the Borrower and CoBank each have caused this Fifth Supplement to be executed and delivered by its duly authorized officer as of the date first shown above.
NUVERA COMMUNICATIONS, INC.
By: /s/ Bill D. Otis
Bill D. Otis
President and Chief Executive Officer
[Signatures continue on next page.]
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[Signatures continued from previous page.]
COBANK, ACB
By:
/s/Jacqueline Bove
Jacqueline Bove
Managing Director
8
Exhibit A
ADVANCE CERTIFICATE -- LOAN NO. RX0583-T2A
THIS CERTIFICATE is given by [Name], the [chief executive officer/chief financial officer] of NUVERA COMMUNICATIONS, INC. (the “Borrower”), pursuant to Section 6(C) of that certain Second Amended and Restated Master Loan Agreement, dated as of July 31, 2018 (as the same may be amended, modified, supplemented, extended or restated from time to time, the “MLA”), pursuant to Section 8(G) of that certain Fourth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of July 31, 2018 (as the same may be amended, modified, supplemented, extended or restated from time to time, the “Fourth Supplement”), and pursuant to Section 9(B) of that certain Fifth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of July 31, 2018 (as the same may be amended, modified, supplemented, extended or restated from time to time, the “Fifth 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, in the Fourth Supplement and in the Fifth Supplement.
The undersigned hereby certifies as follows:
1.
I am the [chief executive officer/chief financial officer] 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, 2017, no event has occurred which has had or could have a Material Adverse Effect on the Borrower or any of its Subsidiaries.
3.
All representations and warranties of each of the Loan Parties 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 advance with respect to which this Certificate is delivered; and
5.
Each of the conditions specified in Section 6 of the MLA, in Section 8 of the Fourth Supplement and in Section 9 of the Fifth Supplement required to be satisfied on or prior to the date of the making of an advance under the Revolving Loan has been fulfilled as of the date hereof.
IN WITNESS WHEREOF, we have executed this Certificate as of ______ ___, 20__.
[chief executive officer/chief financial officer], Nuvera Communications, Inc.
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EXHIBIT 10.5
Loan No. RX0583(A)-T4
PROMISSORY NOTE
(TERM)
NUVERA COMMUNICATIONS, INC.
$64,550,000 Dated: July 31, 2018
FOR VALUE RECEIVED, the undersigned unconditionally promises to pay to COBANK, ACB (the “Payee”), or its order, at the times and in the manner set forth in that certain Second Amended and Restated Master Loan Agreement, dated as of the date hereof, among the undersigned and Payee, as it may be amended, modified, supplemented, extended or restated from time to time (the “MLA”), and in that certain Fourth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of the date hereof, among the undersigned and Payee, as it may be amended, modified, supplemented, extended or restated from time to time (the “Fourth Supplement”; and together with the MLA, collectively, the “Loan Agreement”), the principal sum of SIXTY FOUR MILLION FIVE HUNDRED FIFTY THOUSAND UNITED STATES DOLLARS ($64,550,000) or such lesser amount as may be advanced hereunder, together with interest on the unpaid principal balance hereof at the rate or rates set forth in the Loan Agreement.
This note is given for the loan to be made by the Payee to the undersigned pursuant to the Loan Agreement, all of the terms and provisions of which (including, without limitation, provisions regarding acceleration of the maturity hereof and application of default interest and of a surcharge to payments hereunder) are hereby incorporated by reference. Accrued interest and payments shall be posted by the Payee upon an appropriate accounting record, which record (and all computer printouts thereof) shall constitute prima facie evidence of the outstanding principal and interest on the loan. Any amount of principal hereof which is not paid when due, whether at stated maturity, by acceleration or otherwise, shall bear interest from the date when due until said principal amount is paid in full, payable on demand, at a rate per annum set forth in Section 11(D) of the MLA.
The makers or endorsers hereof hereby waive presentment for payment, demand, protest, and notice of dishonor and nonpayment of this note, and all defenses on the ground of delay or of any extension of time for the payment hereof which may be hereafter given by the holder or holders hereof to them or either of them or to anyone who has assumed the payment of this note, and it is specifically agreed that the obligations of said makers or endorsers shall not be in anywise affected or altered to the prejudice of the holder or holders hereof by reason of the assumption of payment of the same by any other person or entity.
Should this note be placed in the hands of an attorney for collection or the services of any attorney become necessary in connection with enforcing its provisions, the undersigned agrees to pay reasonable attorneys’ fees, together with all costs and expenses incident thereto, to the extent allowed by law. Except to the extent governed by applicable federal law, this note shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to choice of law doctrine. Whenever possible, each provision of this note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this note. Whenever in this note reference is made to the Payee or the undersigned, such reference shall be deemed to include, as applicable, a reference to their respective successors and assigns. The provisions of this note shall be binding upon and shall inure to the benefit of such successors and assigns. The undersigned’s successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for the undersigned.
IN WITNESS WHEREOF, the undersigned has caused this note to be executed and delivered by its duly authorized officer as of the date first shown above.
NUVERA COMMUNICATIONS, INC.
By: /s/ Bill D. Otis
Bill D. Otis
President and Chief Executive Officer
EXHITBIT 10.6
EXECUTION VERSION
Loan No. RX0583(A)
SECOND AMENDED AND RESTATED CONTINUING GUARANTY
This SECOND AMENDED AND RESTATED CONTINUING GUARANTY (this “Continuing Guaranty”) is jointly and severally made and entered into as of July 31, 2018, by NUVERA COMMUNICATIONS, INC., a Minnesota corporation (the “Borrower”), each of the signatories listed on the signature pages hereto as Guarantors and each of the other Persons that becomes a party hereto pursuant to Section 14 (the “Guarantors” and individually, a “Guarantor”), in favor of and for the benefit of COBANK, ACB, a federally chartered instrumentality of the United States of America (“CoBank”). This Continuing Guaranty amends and restates in its entirety that certain Amended and Restated Continuing Guaranty, dated as of December 31, 2014, made by the Borrower, Hutchinson Telephone Company, New Ulm Long Distance, Inc., New Ulm Cellular #9, Inc., New Ulm Phonery, Inc., Peoples Telephone Company, Western Telephone Company, Hutchinson Telecommunications, Inc., Hutchinson Cellular, Inc., Sleepy Eye Telephone Company, Tech Trends, Inc., and New Ulm Exchange, LLC, in favor of CoBank (the “Prior Guaranty”).
R E C I T A L S:
WHEREAS, CoBank and the Borrower have entered into that certain Second Amended and Restated Master Loan Agreement, dated as of the date hereof (the “MLA”), that certain Fourth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of the date hereof (the “Fourth Supplement”), and that certain Fifth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of the date hereof (the “Fifth Supplement”; and together with the MLA and the Fourth Supplement, collectively, the “Loan Agreement”), providing for the availability of certain credit facilities to the Borrower upon the terms and subject to the conditions set forth therein;
WHEREAS, each Guarantor is a direct or indirect subsidiary of the Borrower;
WHEREAS, each Guarantor acknowledges that it will derive substantial direct and indirect benefit from the making of the advances provided for by the Loan Agreement to the Borrower; and
WHEREAS, as an inducement to CoBank to enter into the Loan Agreement and make the advances provided for therein, each Guarantor has agreed to guarantee the obligations of the Borrower to CoBank, all on the terms and conditions set forth in this Continuing Guaranty.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, each Guarantor and the Borrower hereby agree, jointly and severally, and hereby amend and restate the Prior Guaranty as follows:
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SECTION 1.
Rules of Construction. The following rules of construction shall be applicable for all purposes of this Continuing Guaranty and all amendments and supplements hereto except as otherwise expressly provided or unless the context otherwise requires:
(A)
Capitalized terms used in this Continuing Guaranty, unless otherwise defined herein, shall have the meanings assigned to them in the Loan Agreement;
(B)
The terms used herein shall, unless the context otherwise requires, include the plural as well as the singular, and vice versa; and terms importing any gender shall include the other gender;
(C)
All references in this Continuing Guaranty to designated sections, paragraphs, other subdivisions, schedules, exhibits and other attachments are to the designated sections, paragraphs, subdivisions, schedules, exhibits and attachments of this Continuing Guaranty, unless otherwise specifically provided;
(D)
The terms “hereof,” “herein,” “hereto,” “hereunder” and the like mean and refer to this Continuing Guaranty as a whole and not merely to the specific section, article, paragraph or clause in which the respective term appears;
(E)
The term “Person” includes natural persons, corporations, limited liability companies, limited partnerships, limited liability partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person);
(F)
The term “writing” shall include printing, typing, lithography and other means of reproducing words in a tangible visible form;
(G)
References to agreements and other contractual instruments shall be deemed to include subsequent amendments, assignments, extensions, renewals, and other modifications thereto, but only to the extent such amendments, assignments, extensions, renewals and other modifications are not prohibited by the terms of this the Loan Agreement or any other Loan Document;
(H)
All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations;
(I)
The terms “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation”;
(J)
The term “Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” or any applicable bankruptcy, insolvency or other similar federal or state law now or hereafter in effect and all rules and regulations promulgated thereunder; and
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(K)
The term “Other Debtor Relief Law” means, collectively, any law, statute or regulation other than the Bankruptcy Code relating to dissolution, liquidation, conservatorship, bankruptcy, moratorium, readjustment of debt, compromise, rearrangement, receivership, insolvency, reorganization or similar debtor relief from time to time in effect affecting the rights of creditors generally.
SECTION 2.
Obligations. “Obligations” shall mean, collectively, (A) all obligations, liabilities and indebtedness of every nature of Borrower and all other Loan Parties under the Loan Documents (including any Interest Rate Agreement provided by CoBank) from time to time owed to CoBank or any Indemnitee and (B) all other obligations, liabilities and indebtedness of every nature of Borrower from time to time owed to CoBank regardless of how they arise or by what agreement or instrument they may be evidenced (including any Interest Rate Agreement provided by CoBank), including, in each case, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all indemnities, fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, acquired directly or by assignment or otherwise, heretofore, now or from time to time hereafter owing, due or payable, or any combination thereof, whether before or after the filing of a proceeding under the Bankruptcy Code or any Other Debtor Relief Law (whether or not allowed in such proceeding) by or against any Loan Party or any of the Subsidiaries of any Loan Party; provided that, Excluded Swap Obligations of any Guarantor shall in any event be excluded from “Obligations” owing by such Guarantor.
SECTION 3.
The Guaranty.
(A)
Each of the Guarantors hereby, jointly and severally, absolutely, unconditionally, irrevocably, completely and immediately, as primary obligor and not merely as surety, guarantees to CoBank the full and prompt payment and performance when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) of the Obligations. Upon failure by the Borrower or any other Loan Party to pay in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) any of the Obligations, each of the Guarantors, jointly and severally, agrees that it will promptly pay the same without set-off or counterclaim at the place and in the manner specified in the Loan Documents, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal;
(B)
Each Guarantor further hereby, jointly and severally, agrees to pay to CoBank, upon demand, any and all losses and expenses, including reasonable attorneys’ fees and expenses, paid or incurred by CoBank in enforcing or attempting to enforce or collecting or attempting to collect, or obtaining advice of counsel with respect of, any right with respect to, any or all of the Obligation or any Loan Document, including this Continuing Guaranty, or in attempting to protect or preserve any property, personal or real, securing the Obligations or pledged under any Loan Document;
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(C)
Each Guarantor hereby, jointly and severally, guarantees any sum or sums which become due and owing to CoBank as a result of any order of a bankruptcy court which requires CoBank to turn over moneys paid by the Borrower, any Guarantor or any other Person to CoBank on account of the Obligations. Each Guarantor agrees that this Continuing Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment by the Borrower, any Guarantor or any other Person to CoBank on account of the Obligations is rescinded or must otherwise be returned or restored upon the insolvency or bankruptcy of the Borrower, any Guarantor, or any other obligor, guarantor, endorser or surety of the Obligations, all as though such payment had not been made; and
(D)
Notwithstanding any provision to the contrary contained herein or in any other Loan Document, the maximum liability of any Guarantor hereunder and under the other Loan Documents shall in no event exceed the aggregate amount that would render the guaranty of such Guarantor subject to avoidance under any applicable Law.
SECTION 4.
The Guaranty Unconditional.
(A)
Each Guarantor hereby agrees that this is a guaranty of payment and performance and not of collection only. The liability of each Guarantor under this Continuing Guaranty shall be absolute, unconditional, direct, complete and immediate and shall not be contingent upon the pursuit of any remedies against the Borrower, any Guarantor or any other Person, nor against any security or lien available to CoBank, its successors, successors-in-title, endorsees or assigns. Each Guarantor waives any right to require that an action be brought against the Borrower, any Guarantor or any other Person or to require that resort be had to any security. In the occurrence of a breach, default, or event of default under any of the Loan Documents, CoBank shall have the right to enforce its rights, powers and remedies under any of the Loan Documents, in any order, and all rights, powers and remedies available to CoBank in such event shall be nonexclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. Accordingly, each Guarantor hereby authorizes and empowers CoBank upon acceleration of the maturity of any of the Notes or any other Obligation, at its sole discretion, and without notice to such Guarantor, to exercise any right or remedy which CoBank may have or any right or remedy hereinafter granted which CoBank may have as to any security. Each Guarantor expressly waives any right to require any action on the part of CoBank to proceed to collect amounts due under any Loan Document;
(B)
Each Guarantor assents to all terms and agreements heretofore or hereafter made by the Borrower, any of its Subsidiaries, any Guarantor, or any other guarantor of the Obligations with CoBank;
(C)
Each Guarantor hereby consents to the following and agrees that its liability will not be affected or impaired by (i) the exchange, release or surrender of any collateral to the Borrower, any Guarantor or any other Person, or the waiver, release or subordination of any security interest, in whole or in part; (ii) the waiver or delay in the exercise of any of CoBank’s rights or remedies against the Borrower, any Guarantor or any other Person; (iii) the release of the Borrower, any Guarantor or any other Person including any Person guaranteeing any portion of the Obligations; (iv) the renewal, extension or modification of the terms of any of the Obligations or any instrument or agreement evidencing the same, including an increase in the principal amount of any of the Notes or any other Obligation; and (v) the acceptance by CoBank of other guaranties. To the extent permitted under applicable Law, each Guarantor also waives any other circumstance which might otherwise constitute a defense on the basis of suretyship;
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(D)
Each Guarantor irrevocably waives acceptance hereof, notice of acceptance hereof, and notice of acceleration of and intention to accelerate the Obligations, and waives the benefit of any statutes of limitations, presentment, demand or action on delinquency, protest, notice of dishonor, notice of default, notice of nonpayment or protest in relation to any instrument evidencing any of the Obligations, and, to the fullest extent permitted by law, any other demands or notices required by Law;
(E)
Each Guarantor hereby authorizes CoBank, without notice to such Guarantor, to apply all payments and credits received from the Borrower, from any Guarantor, or from any other Person or realized from any security in such manner and in such priority as CoBank in its sole judgment shall see fit to the Obligations which are the subject of this Continuing Guaranty;
(F)
The liability of each Guarantor under this Continuing Guaranty shall not in any manner be affected by reason of any action taken or not taken by CoBank, which action or inaction is consented and agreed to by such Guarantor, nor by the partial or complete unenforceability or invalidity of any other guaranty or surety agreement, pledge, assignment, or other security for any of the Obligations. No delay in making demand on any Guarantor for satisfaction of its liability hereunder shall prejudice CoBank’s right to enforce such satisfaction. All of CoBank’s rights and remedies shall be cumulative and any failure of CoBank to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other right at any time, and from time to time, thereafter;
(G)
This Continuing Guaranty shall be a continuing one and shall be binding upon each Guarantor regardless of how long before or after the date hereof the Obligations are incurred until this Continuing Guaranty is terminated as provided in this Continuing Guaranty, or until, to the extent provided by applicable law to the extent it cannot be waived, is revoked by a Guarantor prospectively as to future transactions, by written notice actually received by CoBank, and such revocation shall not be effective as to any indebtedness existing or committed for under the Loan Agreement or the other Loan Documents at the time of actual receipt of such notice by CoBank, or as to any renewals, extensions or refinancings thereof. Accordingly, so long as this Guaranty is not revoked prospectively in accordance with this Subsection 4(G), CoBank may rely conclusively on a continuing warranty, hereby made, that each Guarantor continues to be benefited by this Continuing Guaranty and CoBank shall have no duty to inquire into or confirm that the receipt of any such benefits, and this Continuing Guaranty shall be effective and enforceable by CoBank without regard to the receipt, nature or value of any such benefits;
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(H)
Each Guarantor hereby subordinates any and all indebtedness of any Loan Party, including any other Guarantor now or hereafter owed to such Guarantor to the Obligations of the Borrower and the other Loan Parties to CoBank, and agrees with CoBank that, from and after the occurrence of a breach, default or event of default under any of the Loan Documents and for so long as such breach, default or event of default exists, such Guarantor shall not demand or accept any payment of principal or interest from any Loan Party, including any other Guarantor, shall not claim any offset or other reduction of such Guarantor’s liability hereunder because of any such indebtedness and shall not take any action to obtain any of the security for the Obligations; provided, however, that, if CoBank so requests, and so long as such breach, default or event of default exists, such indebtedness shall be collected, enforced and received by such Guarantor as trustee for CoBank and be paid over to CoBank on account of the Obligations of the Borrower or any other Loan Party to CoBank, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Continuing Guaranty; and
(I)
Until the Obligations are paid finally and in full and this Continuing Guaranty is released as provided herein, each Guarantor hereby irrevocably waives any and all rights it may have to enforce any of CoBank’s rights or remedies or participate in any security now or hereafter held by CoBank, and any and all such other rights of subrogation, reimbursement, contribution or indemnification against the Borrower, any Guarantor or any other Person having any manner of liability for the Obligations to CoBank, whether or not arising hereunder, under any other agreement, at law or in equity.
SECTION 5.
Rights of Contribution. The Guarantors hereby agree as among themselves that, in connection with payments made hereunder, each Guarantor shall have a right of contribution from each other Guarantor in accordance with applicable Law. Each Guarantor’s rights of contribution shall be subject to the terms and conditions of Section 4 hereof. This Section 5 shall in no respect limit the obligations and liability of any Guarantor to CoBank, and each Guarantor shall remain liable to CoBank up to the maximum liability of such Guarantor hereunder.
SECTION 6.
Security. Each of the Guarantors acknowledges and agrees that its obligations hereunder are secured in accordance with the terms of the Loan Documents to which it is a party and that CoBank may exercise its remedies thereunder in accordance with the terms thereof.
SECTION 7.
Representations and Warranties. Each Guarantor represents and warrants to CoBank, on the date hereof and on the date any advance under the Loan Agreement is made, converted or continued, as follows:
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(A)
Organization, Powers, Existence, Etc. Such Guarantor (i) is duly organized or formed, validly existing, and in good standing under the laws of its jurisdiction of incorporation, organization or formation (as applicable); (ii) is duly qualified to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary unless the failure to so qualify will not have a Material Adverse Effect; (iii) has all requisite corporate, limited liability company or partnership (as applicable) and legal power to own and operate its assets and to carry on its business and to enter into and perform its obligations under the Loan Documents to which it is a party; and (iv) has duly and lawfully obtained and maintained all Licenses, including all Telecommunications Licenses, which are material to the conduct of its business or which may be otherwise required by Law.
(B)
Due Authorization; No Violations; Etc. The execution and delivery by such Guarantor of, and the performance by such Guarantor of its obligations under, this Continuing Guaranty and the other Loan Documents to which it is a party have been duly authorized by all requisite corporate, limited liability company or partnership (as applicable) action on the part of such Guarantor and do not and will not (i) violate any provision of any Law of any Governmental Authority, the articles of incorporation or organization (as applicable) or bylaws, operating agreement or partnership agreement (as applicable) of such Guarantor, or any material agreement, indenture, mortgage, or other instrument to which such Guarantor is a party or by which such Guarantor or any of its properties is bound or (ii) be in conflict with, result in a breach of, or constitute with the giving of notice or lapse of time, or both, a default or event of default under any such agreement, indenture, mortgage, or other instrument. No action on the part of any shareholder, member, manager or partner (as applicable) of such Guarantor is necessary in connection with the execution and delivery by such Guarantor of, and the performance by such Guarantor of its obligations under, this Continuing Guaranty or any other Loan Document to which it is a party, except for such actions as have been taken prior to or concurrently to the date hereof, all of which remain in full force and effect.
(C)
Governmental Approval. No License of any Governmental Authority is necessary in connection with the execution, delivery, performance, or enforcement of this Continuing Guaranty or any other Loan Documents to which such Guarantor is a party, except such as have been obtained and are in full force and effect or which are required in connection with the enforcement of or the exercise of remedies under any Loan Document.
(D)
Binding Agreement. Each of the Loan Documents to which such Guarantor is a party is, or when executed and delivered will be, the legal, valid, and binding obligation of such Guarantor, enforceable in accordance with its terms, subject only to limitations on enforceability imposed by the Bankruptcy Code or Other Debtor Relief Law.
(E)
Financial Condition. Such Guarantor represents and warrants that the liability and obligations of such Guarantor incurred or arising under this Continuing Guaranty and of the Loan Parties incurred or arising under the Loan Agreement may reasonably be expected to benefit substantially such Guarantor directly or indirectly, and such Guarantor’s board of directors, managers, members or general partner(s), as applicable, have made that determination. Such Guarantor represents and warrants that it has full and complete access to all of the Loan Documents and other documents relating to the Obligations, has reviewed them and is fully aware of the meaning and effect of their contents. Such Guarantor is fully informed of the financial condition of the Loan Parties, including of the other Guarantors, and of all other circumstances that bear upon the risks of executing this Continuing Guaranty which a diligent inquiry would reveal. Such Guarantor agrees that CoBank will have no obligation to advise or notify such Guarantor of or provide such Guarantor with any data or information.
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(F)
Incorporated Representations and Warranties. Such Guarantor represents and warrants that the representations and warrants set forth in the Loan Agreement and in the other Loan Documents are true and correct in all material respects as they relate to such Guarantor, each of which is hereby incorporated herein by reference, are true and correct in all material respects as of the date hereof (except where such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects as of such earlier date), and CoBank is entitled to rely on each of them as if they were fully set forth herein.
SECTION 8.
Covenants. Each Guarantor covenants and agrees with CoBank that so long as this Continuing Guaranty remains in effect or the Obligations have not been fully paid or otherwise satisfied, such Guarantor will take, or will refrain from taking, as the case may be, all actions necessary to be taken or not taken so that no violation of any provision, covenant or agreement contained in the Loan Agreement or in the other Loan Documents, each of which is hereby incorporated herein by reference, is caused by any act or failure to act of such Guarantor or any of its Subsidiaries.
SECTION 9.
Events of Default. The occurrence of any of the following shall constitute an “Event of Default” hereunder:
(A)
Representations and Warranties. Any representation or warranty made by any Guarantor herein or in any Loan Document to which it is a party shall prove to have been false or misleading in any material respect on or as of the date made or deemed made; or
(B)
Payment Default. Any Guarantor should fail to make any payment to CoBank when due hereunder or under any other Loan Document to which it is a party.
(C)
Cross-Default. The occurrence of an Event of Default under, or the failure, after any applicable grace period, on the part of the Borrower, any Guarantor or any other party (other than CoBank) to observe, keep or perform any covenant or agreement contained in, any Loan Document other than this Continuing Guaranty; or
(D)
Covenants and Agreements. Any Guarantor should fail to perform or comply with any other covenant or agreement contained herein, and such failure shall continue for a period of thirty (30) days.
provided, that any breach of the terms of this Continuing Guaranty which shall also constitute a breach of the Loan Agreement or any other Loan Document shall be subject to the same notice and cure right applicable to such breach under the Loan Agreement or such other Loan Document.
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SECTION 10.
Right of Set-off. In addition to any rights and remedies of CoBank provided by Law or the Loan Documents, each Guarantor hereby irrevocably authorizes CoBank at any time and from time to time during the continuation of an Event of Default, without notice to any Guarantor and regardless of the acceptance of any security or collateral for the payment hereof, appropriate and apply toward payment of all or any part of the Obligations (A) any indebtedness due or to become due from CoBank to any Guarantor, and (B) any moneys, credits or other property belonging to any Guarantor, at any time held by or coming into the possession of CoBank or any of its affiliates.
SECTION 11.
Miscellaneous.
(A)
Governing Law. Without giving effect to the principles of conflict of laws and except to the extent governed by federal law, the Laws of the State of Colorado, without reference to choice of law doctrine, shall govern this Continuing Guaranty and any other Loan Document for which Colorado is specified as the applicable law, and all disputes and matters between the parties to this Continuing Guaranty, including all disputes and matters whatsoever arising under, in connection with or incident to the guaranty or other business relationship between the parties, and the rights and obligations of the parties to this Continuing Guaranty or any other Loan Document by and between the parties for which Colorado is specified as the applicable law. To the extent Minnesota Statutes Chapter 582.30 is applicable, each Guarantor waives to the extent permitted by applicable Law Minnesota Statutes Chapter 582.30 and acknowledges that it remains liable for any deficiency.
(B)
Binding Effect. This Continuing Guaranty shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns, including any holder or owner of any of the Notes or the other Loan Documents. None of the Guarantors or the Borrower may assign any of its rights or obligations hereunder without the prior written consent of CoBank. No notice to or demand on any Guarantor or the Borrower shall entitle any Guarantor or the Borrower to any other or further notice or demand in the same, similar or other circumstances.
(C)
Severability. To the extent any provision of this Continuing Guaranty is prohibited by or invalid under the applicable Law of any jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity and only in such jurisdiction, without prohibiting or invalidating such provision in any other jurisdiction or the remaining provisions of this Continuing Guaranty in any jurisdiction.
(D)
Non-Waiver; Modification; Election of Remedies. The failure of any party to insist, in any one or more instances, upon a strict performance of any of the terms and conditions of this Continuing Guaranty, or to exercise or fail to exercise any option or right contained herein, shall not be construed as a waiver or a relinquishment for the future of such right or option, but the same shall continue and remain in full force and effect. The continued performance by any party of this Continuing Guaranty with knowledge of the breach of any term or condition hereof shall not be deemed a waiver of such breach, and no waiver by any party of any provision hereof shall be deemed to have been made, or operate as an estoppel, unless expressed in writing and signed by such party. No enforcement of any remedy shall constitute an election of remedies.
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(E)
Notices. All notices and other communications provided for hereunder to CoBank shall be given in the manner and at the notice address provided in or pursuant to Section 15 of the MLA. All notices and other communications provided for hereunder to any Guarantor shall be given in the manner provided in Section 15 of the MLA and in the care of the Borrower at the Borrower’s notice address provided in or pursuant to Section 15 of the MLA.
(F)
Counterparts. This Continuing Guaranty may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original and shall be binding upon all parties and their respective permitted successors and assigns, and all of which taken together shall constitute one and the same agreement.
(G)
Headings. The headings of the various sections, subsections and other subparts of this Continuing Guaranty have been inserted for convenience only and shall not in any way affect the meaning or construction of any of the provisions hereof.
(H)
Merger; Amendment. This Continuing Guaranty represents the final agreement of each of the parties hereto with respect to the matters contained herein and may not be contradicted by evidence of prior or contemporaneous agreements, or subsequent oral agreements, between the parties. No amendment, modification, waiver, discharge or termination of any provision hereof, nor any consent to any departure by any Guarantor from, any provision of this Continuing Guaranty, shall be effective unless approved by CoBank and contained in a writing executed and delivered by CoBank and (in the case of amendments) the Guarantors, and then the same shall be effective only in the specific instance and for the specific purpose for which given.
(I)
Regulatory Approvals. Upon any action by CoBank to commence the exercise of remedies hereunder or under any of the other Loan Documents, each Guarantor and the Borrower hereby undertake and agree to cooperate and join with CoBank in any application to any Governmental Authority with respect thereto and to provide such assistance in connection therewith as CoBank may reasonably request, including the preparation of, consent to or joining in of filings and appearances of officers and employees of such Guarantor or the Borrower before any Governmental Authority, in each case in support of any such application made by CoBank, and such Guarantor or the Borrower, as applicable, shall not, directly or indirectly, oppose any such action by CoBank before any such Governmental Authority.
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SECTION 12.
Consent to Jurisdiction. To the maximum extent permitted by Law, the Guarantors and the Borrower agree that any legal action or proceeding with respect to this Continuing Guaranty or any of the other Loan Documents may be brought in the courts of the United States of America for the District of Colorado, all as CoBank may elect. By execution of this Continuing Guaranty, the Guarantors and the Borrower hereby irrevocably submit to each such jurisdiction, expressly waiving any objection it may have to the laying of venue by reason of its present or future domicile. Nothing contained herein shall affect the right of CoBank to commence legal proceedings or otherwise proceed against any Guarantor or the Borrower in any other jurisdiction or to serve process in any manner permitted or required by Law.
SECTION 13.
Waiver of Jury Trial. EACH GUARANTOR, THE BORROWER AND COBANK HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS CONTINUING GUARANTY, ANY OTHER LOAN DOCUMENT, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS CONTINUING GUARANTY, AND THE SURETY RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS CONTINUING GUARANTY, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH GUARANTOR, THE BORROWER AND COBANK ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS CONTINUING GUARANTY AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH GUARANTOR, THE BORROWER AND COBANK FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE LOAN DOCUMENTS, THIS CONTINUING GUARANTY OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS CONTINUING GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. EACH GUARANTOR, THE BORROWER AND COBANK ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF COBANK.
SECTION 14.
Additional Guarantors. Any now existing or hereafter formed or acquired Subsidiary of the Borrower will (unless such Subsidiary is prohibited from doing so by any applicable PUC or unless such Subsidiary is a Foreign Subsidiary or Foreign Subsidiary Holding Company (as such terms are defined in the Pledge and Security Agreement) or unless such requirement is waived by CoBank in its sole discretion) execute and deliver to CoBank a joinder agreement to this Continuing Guaranty in form and substance acceptable to CoBank in its sole discretion and will thereby become a Guarantor, with the same force and effect as if originally named as a Guarantor herein for all purposes of this Continuing Guaranty. The execution and delivery of any instrument adding an additional Guarantor as a party to this Continuing Guaranty shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Continuing Guaranty.
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SECTION 15.
Termination; Reinstatement. This Continuing Guaranty shall remain in full force and effect until (A) the payment in full of the Obligations (other than contingent liabilities that, by their nature, may survive after principal and interest on the Loans have been repaid in full), (B) the termination of the Commitments, and (C) any preference period applicable to payments made on or security given for the Obligations has expired under applicable Law, at which time any Guarantor may request a written instrument of termination be executed and delivered by a duly authorized officer of CoBank. This Continuing Guaranty and each Guarantor’s and the Borrower’s obligations hereunder shall be automatically reinstated if at any time after this Continuing Guaranty has been terminated payment in whole or in part of any of the Obligations is rescinded or restored to any Guarantor or the Borrower or other payor or guarantor of the Obligations, or must be paid to any other Person, upon the insolvency, bankruptcy, liquidation, dissolution or reorganization of any Guarantor or the Borrower or other payor or guarantor of the Obligations, all as though such payment had not been made.
SECTION 16.
Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely and irrevocably undertakes to provide such funds or other support to each other Loan Party as may be needed by such Loan Party from time to time to honor all of its obligations under the guaranty provided herein and under the other Loan Documents including Obligations with respect to Swap Obligations that would, in the absence of the agreement in this Section 16 otherwise constitute Excluded Swap Obligations (but in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 16 or otherwise under this Continuing Guaranty or any Loan Document, as it relates to such other Loan Parties, voidable under applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of the Qualified ECP Guarantors under this Section 16 shall remain in full force and effect until all Obligations have been indefeasibly paid and performed in full. The Loan Parties intend that this Section 16 constitute, and this Section 16 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of the Commodity Exchange Act.
SECTION 17.
Effect of Amendment; No Novation. The amendment and restatement of the Prior Guaranty pursuant to this Continuing Guaranty shall be effective as of the Closing Date (as defined in the Fourth Supplement). All obligations and rights of the Guarantors, the Borrower and CoBank arising out of or relating to the period commencing on the Closing Date shall be governed by the terms and provisions of this Continuing Guaranty; the obligations of and rights of the Guarantors, the Borrower and CoBank arising out of or relating to the period prior to the Closing Date shall continue to be governed by the Prior Guaranty without giving effect to the amendment and restatements provided for herein. This Continuing Guaranty shall not constitute a novation or termination of the Guarantors’ obligations under the Prior Guaranty or any other Loan Document executed or delivered in connection therewith, but shall constitute effective on the date hereof an amendment and restatement of the obligations and covenants of each Guarantor and the Borrower under such Loan Documents (and each Guarantor and the Borrower hereby reaffirm all such obligations and covenants, as hereby amended).
[Signatures commence on following page]
12
IN WITNESS WHEREOF, each of the Borrower and the Guarantors, intending to be legally bound hereby, has caused this Continuing Guaranty to be executed and delivered by its duly authorized officer as of the day and year first above written.
NUVERA COMMUNICATIONS, INC.,
as the Borrower
By: /s/ Bill D. Otis
Bill D. Otis
President and Chief Executive Officer
HUTCHINSON TELEPHONE COMPANY
PEOPLES TELEPHONE COMPANY
WESTERN TELEPHONE COMPANY
HUTCHINSON TELECOMMUNICATIONS, INC.
HUTCHINSON CELLULAR, INC.
SLEEPY EYE TELEPHONE COMPANY
TECH TRENDS, INC.
SCOTT-RICE TELEPHONE CO.,
each as a Guarantor
By: /s/ Bill D. Otis
Bill D. Otis
President and Chief Executive Officer
[Signatures Continue on Following Page]
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[Signatures Continued from Previous Page]
ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN:
COBANK, ACB
By: /s/ Jacqueline Bove
Jacqueline Bove
Managing Director
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EXHIBIT 10.7
EXECUTION VERSION
Loan No. RX0583(A)
SECOND AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
This SECOND AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT, dated as of July 31, 2018 (this “Agreement”), is made and entered into by (a) NUVERA COMMUNICATIONS, INC. (the “Borrower”), (b) WESTERN TELEPHONE COMPANY (“WTC”), PEOPLES TELEPHONE COMPANY (“PTC”), HUTCHINSON TELEPHONE COMPANY (“Hutchinson Telephone”), HUTCHINSON CELLULAR, INC. (“Hutchinson Cellular”), HUTCHINSON TELECOMMUNICATIONS, INC. (“Hutchinson Telecom”), SLEEPY EYE TELEPHONE COMPANY (“Sleepy Eye”), TECH TRENDS, INC. (“Tech Trends”), SCOTT-RICE TELEPHONE CO. (“SRT”) and each additional Subsidiary of the Borrower which hereafter becomes a party to the Continuing Guaranty (as hereinafter defined) as a guarantor of the Obligations described in such Continuing Guaranty (individually, a “Guarantor” and, collectively, the “Guarantors”; and, together with the Borrower, individually, a “Grantor” and, collectively, the “Grantors”), in favor of COBANK, ACB (“CoBank”). This Agreement amends and restates in its entirety that certain Amended and Restated Pledge and Security Agreement, dated as of December 31, 2014, among the Grantors and CoBank (the “Prior Security Document”).
CoBank and the Borrower have entered into that certain Second Amended and Restated Master Loan Agreement, dated as of the date hereof (the “MLA”), that certain Fourth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of the date hereof (the “Fourth Supplement”), and that certain Fifth Supplement to the Second Amended and Restated Master Loan Agreement, dated as of the date hereof (the “Fifth Supplement”; and together with the MLA, the Fourth Supplement and the Fifth Supplement, collectively, the “Loan Agreement”), providing for the availability of certain credit facilities to the Borrower upon the terms and subject to the conditions set forth therein;
It is a condition to the extension of credit to the Borrower under the Loan Agreement that the Grantors shall have agreed, by executing and delivering this Agreement, to secure the full and prompt payment and performance of the Secured Obligations (as hereinafter defined). CoBank is relying on this Agreement in its decision to extend credit to the Borrower under the Loan Agreement, and would not enter into the Loan Agreement without the execution and delivery of this Agreement by the Grantors.
Each Grantor will obtain benefits as a result of the extension of credit to the Borrower under the Loan Agreement, which benefits are hereby acknowledged, and, accordingly, desire to execute and deliver this Agreement.
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STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, to induce CoBank to enter into the Loan Agreement and to induce CoBank to extend credit to the Borrower thereunder, each Grantor hereby agrees, and amends and restates the Prior Security Document, as follows:
ARTICLE I
DEFINITIONS
1.1
Defined Terms. For purposes of this Agreement, in addition to the terms defined elsewhere herein, the following terms shall have the meanings set forth below:
“Accounts” shall mean, collectively, all of each Grantor’s accounts as defined in Article 9 of the Uniform Commercial Code, together with all accounts in which any Grantor is deemed by Law to have rights or the power to convey rights.
“Collateral” shall have the meaning given to such term in Section .
“Collateral Accounts” shall have the meaning given to such term in Section .
“Commercial Tort Claims” shall mean, collectively, all of each Grantor’s commercial tort claims, as defined in Article 9 of the Uniform Commercial Code.
“Continuing Guaranty” shall mean that certain Continuing Guaranty, dated as of the date hereof, by the Guarantors in favor of CoBank.
“Contracts” shall mean, collectively, all rights of each Grantor under all contracts and agreements to which such Grantor is a party, including all rights, privileges and powers under Investment Agreements and IP Licenses and all rights of such Grantor to receive monies due or to become due thereunder or pursuant thereto and to amend, modify, terminate or exercise rights under such contracts and agreements.
“Copyrights” shall mean, collectively, all of each Grantor’s copyrights, copyright registrations and applications for copyright registration, whether under the Laws of the United States or any other country or jurisdiction, including all recordings, supplemental registrations and derivative or collective work registrations, and all renewals and extensions thereof.
“Copyright Collateral” shall mean, collectively, all Copyrights and Copyright Licenses to which any Grantor is a party and all other General Intangibles embodying, incorporating or evidencing any Copyright or Copyright License.
“Copyright License” shall mean any agreement (A) under which a Grantor grants any right to any other Person under any Copyright owned by any Grantor or which any Grantor otherwise has the right to license to any other person, or (B) granting any right to any Grantor under any property of the type described in the definition of Copyright owned by any other Person (other than the purchase of one or more copies of a work without the right to copy, modify or create derivative works), and all rights of any Grantor under any such agreement.
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“Deposit Accounts” shall mean, collectively, all of each Grantor’s deposit accounts, as defined in Article 9 of the UCC, and all of each Grantor’s deposit accounts maintained with CoBank or any other bank or depository institution, including any such accounts described on Annex H and any Collateral Accounts, together with all funds held therein and all certificates and instruments representing, evidencing or deposited into such accounts.
“Documents” shall mean, collectively, all of each Grantor’s documents, as defined in Article 9 of the Uniform Commercial Code.
“Domain Name” shall mean, collectively, all of each Grantor’s Internet domain names and associated URL addresses and all goodwill associated therewith or symbolized thereby.
“Domain Name Collateral” shall mean, collectively, all Domain Names and Domain Name Licenses to which any Grantor is a party and all other General Intangibles embodying, incorporating or evidencing any Domain Name or Domain Name License.
“Domain Name License” shall mean any agreement (A) under which a Grantor grants any right to any other Person under any Domain Name owned by any Grantor or which any Grantor otherwise has the right to license to any other person, or (B) granting any right to any Grantor under any property of the type described in the definition of Domain Name owned by any other person, and all rights of any Grantor under any such agreement.
“Equipment” shall mean, collectively, all of each Grantor’s equipment, as defined in Article 9 of the Uniform Commercial Code.
“Equity Interests” shall mean, collectively, (A) all securities, whether certificated or uncertificated, (B) all of the issued and outstanding shares, interests or other equivalents of capital stock of any corporation (including, any corporation that is a Subsidiary of such Grantor or a Minority Investment), whether voting or non-voting and whether common or preferred, (C) all partnership, joint venture, limited liability company or other equity interests in any Person not a corporation (including, any such Person that is a Subsidiary of such Grantor or a Minority Investment), (D) all options, warrants and other rights to acquire, and all securities convertible into, any of the foregoing, (E) all rights to receive interest, income, dividends, distributions, returns of capital and other amounts (whether in cash, securities, property, or a combination thereof), (F) all additional stock, warrants, options, securities, interests and other property, paid or payable or distributed or distributable, with respect to any of the foregoing (but subject to the provisions of Section ), (G) all rights of access to the books and records of any such Person, and (H) all other rights, powers, privileges, interests, claims and other property in any manner arising out of or relating to any of the foregoing, of whatever kind or character (including any tangible or intangible property or interests therein), and whether provided by contract or granted or available under applicable Law in connection therewith, including, such Grantor’s right to vote and to manage and administer the business of any such Person pursuant to any applicable Investment Agreement, together with all certificates, instruments and entries upon the books of financial intermediaries evidencing any of the foregoing.
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“Financial Asset” has the meaning given in Article 8 of the Uniform Commercial Code.
“Fixtures” shall mean, collectively, all of each Grantor’s fixtures, as defined in Article 9 of the Uniform Commercial Code.
“Foreign Subsidiary” means any Subsidiary of Borrower that is a “controlled foreign corporation” under Section 956 of the IRC.
“Foreign Subsidiary Holding Company” means any direct or indirect domestic Subsidiary that is treated as a disregarded entity for federal income tax purposes and substantially all of the assets of which include the Equity Interests of one or more Foreign Subsidiaries.
“General Intangibles” shall mean, collectively, all of each Grantor’s general intangibles, as defined in Article 9 of the Uniform Commercial Code.
“Goods” shall mean, collectively, all of each Grantor’s goods, as defined in Article 9 of the Uniform Commercial Code.
“Instruments” shall mean, collectively, all of each Grantor’s instruments, chattel paper, electronic chattel paper or documents, each as defined in Article 9 of the Uniform Commercial Code, together with all chattel paper and electronic chattel paper in which any Grantor is deemed by Law to have rights or the power to convey rights.
“Intercompany Obligations” shall mean, collectively, all indebtedness, obligations and other amounts owing to any Grantor from any Loan Party or any Subsidiary of any Loan Party.
“Inventory” shall mean, collectively, all of each Grantor’s inventory, as defined in Article 9 of the Uniform Commercial Code, together with all goods currently or hereafter consigned to any Grantor.
“Investment Agreement” shall mean any partnership agreement, joint venture agreement, limited liability company operating agreement, stockholders agreement or other agreement creating, governing or evidencing any Equity Interests and to which any Grantor is a party.
“Investment Property” shall mean, collectively, all of each Grantor’s investment property, as defined in Article 9 of the Uniform Commercial Code.
“IP License” shall mean any Copyright License, Patent License, Trademark License or Domain Name License.
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“Letter-of-Credit Rights” shall mean, collectively, all of each Grantor’s letter-of-credit rights, as defined in Article 9 of the Uniform Commercial Code.
“Letters of Credit” shall mean, collectively, all of each Grantor’s letters of credit, as defined in Article 5 of the Uniform Commercial Code.
“Licenses” shall have the meaning given to the term “Licenses” in the Loan Agreement.
“Lien” shall mean any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary (including any conditional sale or other title retention agreement and any lease in the nature thereof), and any agreement to give any lien, mortgage, pledge, security interest, charge or encumbrance.
“Material Disclosure” shall mean a notification or disclosure required by Sections , , , , or of this Agreement which involves the acquisition or creation of any asset (i) the loss of which would result in a Material Adverse Effect or (ii) with a value of more than $500,000 or a group of assets governed by the same Section of this Agreement with an aggregate value of more than $1,000,000.
“Minority Investment” shall mean, collectively, any Person in whom any Loan Party owns any Equity Interests provided that such Person is not a Subsidiary of a Loan Party.
“Mobile Goods” shall mean, collectively, all of each Grantor’s motor vehicles, tractors, trailers, aircraft, rolling stock and other like property, whether or not the title thereto is governed by a certificate of title or ownership.
“Partner Obligations” shall have the meaning given to such term in Section .
“Patent Collateral” shall mean, collectively, all Patents and all Patent Licenses to which any Grantor is a party and all other General Intangibles embodying, incorporating or evidencing any Patent or Patent License.
“Patent License” shall mean any agreement (A) under which a Grantor grants to any other Person any right to make, use or sell any invention covered by a Patent that is owned by any Grantor or which any Grantor otherwise has the right to license to any other person, or (B) granting to any Grantor any right to make, use or sell any invention covered by a Patent owned by any other person, and all rights of any Grantor under any such agreement (other than the right to use an invention covered by a patent conveyed upon purchase of such invention under the exhaustion doctrine). For purposes of this definition, “covered by a Patent” shall mean that without a valid license under such Patent a Person making, using or selling such invention would otherwise be infringing such Patent.
“Patents” shall mean, collectively, all of each Grantor’s letters patent, whether under the Laws of the United States or any other country or jurisdiction, all recordings and registrations thereof and applications therefor, including the inventions described therein, all reissues, continuations, divisions, renewals, extensions, or continuations-in-part thereof.
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“Proceeds” shall mean, collectively, all proceeds, as defined in Article 9 of the Uniform Commercial Code, and, in any event, shall include, but not be limited to, (A) all products, rents and profits of or from any of the Collateral and (B) to the extent not otherwise included in the foregoing, (i) all interest, cash, instruments and other property received, receivable or otherwise distributed with respect to or in exchange for any or all of any Intercompany Obligations, (ii) all payments under any insurance (whether or not CoBank is the lenders loss payee or loss payee thereunder), indemnity, warranty or guaranty with respect to any of the Collateral, (iii) all payments in connection with any requisition, condemnation, seizure or forfeiture with respect to any of the Collateral, (iv) all claims and rights to recover for any past, present or future infringement or dilution of or injury to any Copyright Collateral, Patent Collateral, Trademark Collateral or Domain Name Collateral, and (v) all other amounts from time to time paid or payable under or with respect to any of the Collateral. For purposes of this Agreement, the term “Proceeds” includes whatever is receivable or received when Collateral or Proceeds are sold, exchanged, collected or otherwise disposed of, whether voluntarily or involuntarily.
“Promptly” shall mean (A) with respect to Material Disclosures, within 10 days but no later than with the Borrower’s next submission of a Compliance Certificate and (B) with respect to all other disclosures required by Sections , , , , or of this Agreement, unless otherwise provided by any Loan Document, not later than with the Borrower’s next submission of a Compliance Certificate; provided that, in each case, if an Event of Default has occurred and is continuing, “Promptly” shall mean immediately or within such other period of time as CoBank shall designate in writing in its sole discretion.
“Secured Obligations” shall have the meaning given to the term “Obligations” in the Continuing Guaranty.
“Securities Account” shall mean, collectively, all of each Grantor’s securities accounts, as defined in Article 8 of the Uniform Commercial Code.
“Securities Act” shall have the meaning given to such term in Section .
“Securities Entitlement” shall have the meaning given to such term in Article 8 of the Uniform Commercial Code.
“Securities Intermediary” shall have the meaning given to such term in Article 8 of the Uniform Commercial Code.
“Specified Contracts” shall have the meaning given to such term in Section .
“Supporting Obligations” shall mean, collectively, all of each Grantor’s supporting obligations, as defined in Article 9 of the Uniform Commercial Code.
“Termination Requirements” shall mean (A) the payment in full of the Secured Obligations (other than contingent liabilities that, by their nature, may survive after principal and interest on the Loan have been repaid in full), (B) the termination of all Commitments, and (C) any preference period applicable to payments made on or security given for the Secured Obligations has expired under applicable Law.
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“Trademark Collateral” shall mean, collectively, all Trademarks and Trademark Licenses to which any Grantor is a party and all other General Intangibles embodying, incorporating or evidencing any Trademark or Trademark License.
“Trademark License” shall mean an agreement (A) under which a Grantor grants any right to any other Person under any Trademark owned by any Grantor or which any Grantor otherwise has the right to license to any other person, or (B) granting any right to any Grantor under any property of the type described in the definition of Trademark owned by any other person, and all rights of any Grantor under any such agreement.
“Trademarks” shall mean, collectively, all of each Grantor’s trademarks, service marks, trade names, corporate and company names, business names, logos, trade dress, trade styles, other source of business identifiers, designs, Domain Names (to the extent such Domain Name constitutes a trade name, corporate or company name, business name, logo, trade dress, trade style, other source of business identifier or design), and General Intangibles of a similar nature, whether under the Laws of the United States or any other country or jurisdiction, all recordings and registrations thereof and applications therefor, all renewals and extensions thereof, all rights corresponding thereto, and all goodwill associated therewith or symbolized thereby.
“Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as the same may be in effect from time to time in the State of Colorado; provided that if, by reason of applicable Law, the validity or perfection of any security interest in any Collateral granted under this Agreement is governed by the Uniform Commercial Code as in effect in a jurisdiction other than Colorado, then as to the validity or perfection, as the case may be, of such security interest. “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect from time to time in such other jurisdictions.
1.2
Other Terms. Capitalized terms used herein without definition shall have the meanings given to them in the Loan Agreement. Unless otherwise defined herein or in the Loan Agreement, any terms in this Agreement which are defined in the Uniform Commercial Code shall have the meaning provided in the Uniform Commercial Code, as amended and in effect from time to time. For avoidance of doubt, it is expressly understood and agreed that, to the extent the Uniform Commercial Code is revised subsequent to the date hereof such that the definition of any of the terms included in the description of Collateral is changed, the parties hereto desire that any property which is included in such changed definitions which would not otherwise be included in such grant on the date hereof, be included in such grant immediately upon the effective date of such revision, to the extent a security interest in such personal property may be granted under such revised Uniform Commercial Code (and, to the extent effective under applicable Law, such security interest will attach immediately without further action).
References to “Sections,” “Articles,” “Exhibits,” “Annexes” and “Schedules” shall be to Sections, Articles, Exhibits, Annexes and Schedules, respectively, of this Agreement unless otherwise specifically provided. Any of the terms defined in Section may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Agreement, “hereof,” “herein,” “hereto,” “hereunder” and the like mean and refer to this Agreement as a whole and not merely to the specific section, article, paragraph or clause in which the respective word appears; words importing any gender include the other gender; references to “writing” include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation”; references to agreements and other contractual instruments shall be deemed to include subsequent amendments, assignments, extensions, renewals, and other modifications thereto, but only to the extent such amendments, assignments, extensions, renewals and other modifications are not prohibited by the terms of this Agreement or any other Loan Document; and all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.
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ARTICLE II
CREATION OF SECURITY INTEREST
2.1
Pledge and Grant of Security Interest. Each Grantor hereby grants, pledges, assigns and delivers to CoBank a Lien upon and security interest in, all of such Grantor’s right, title and interest in and to the following, in each case whether now existing or hereafter arising (collectively, the “Collateral”):
(i)
all Accounts, Letters of Credit, Letter-of-Credit Rights, and Supporting Obligations;
(ii)
all Contracts;
(iii)
all Deposit Accounts;
(iv)
all Goods, including all Equipment and Inventory;
(v)
all Fixtures;
(vi)
all oil, gas or other minerals before extraction;
(vii)
all Commercial Tort Claims listed in Annex I hereto;
(viii)
all Equity Interests and all Investment Property;
(ix)
all General Intangibles (including all Licenses to the fullest extent permitted by Law and all Proceeds from the sale, transfer, lease, assignment or other disposition of the Licenses);
(x)
all monies and cash equivalents;
(xi)
all Instruments;
(xii)
all Documents;
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(xiii)
to the extent not covered and not specifically excluded by clauses (i) through (xii) above, all of such Grantor’s other personal property; and
(xiv)
all Proceeds of the foregoing.
2.2
Security for Secured Obligations. This Agreement and the Collateral secure the full and prompt payment and performance of the Secured Obligations.
2.3
Excluded Collateral. Notwithstanding anything to the contrary contained herein, as and to the extent provided in this Section , the Collateral shall not include, and the Lien of this Agreement shall not attach to, the following:
(A)
“intent to use” Trademark applications, in each case, only until such time as such Grantor begins to use such Trademarks (the security interest provided herein in such Trademark shall be deemed granted by such Grantor at such time and will attach immediately without further action);
(B)
the Equity Interests of any Grantor in (i) any Foreign Subsidiary (1) that represents in excess of 65% of the outstanding voting stock of such Foreign Subsidiary or (2) that is not a “First Tier” Foreign Subsidiary owned by any Grantor, (ii) any domestic Subsidiary that is a Subsidiary of a Foreign Subsidiary, and (iii) any Foreign Subsidiary Holding Company;
(C)
any item of real or personal, tangible or intangible, property (including Licenses issued by the FCC and any applicable PUC) to the extent and only for so long as the creation, attachment or perfection of the security interest granted herein by any Grantor in its right, title and interest in such item of property is prohibited by applicable Law or is permitted only with the consent (that has not been obtained) of a Governmental Authority (including the FCC and any applicable PUC);
(D)
any property subject to a Lien permitted under Subsection 9(B)(ii) of the MLA to the extent and only for so long as the applicable purchase money security agreement, Capital Lease or other applicable documentation contains a term that restricts, prohibits, or requires a consent (that has not been obtained) of a Person (other than such Grantor or any other Loan Party) to, the creation, attachment or perfection of the security interest granted herein and such restriction, prohibition and/or requirement of consent is not rendered ineffective by applicable Law (including pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC);
(E)
any item of real or personal, tangible or intangible, property (other than any Equity Interests owned by any Grantor) to the extent and only for so long as the creation, attachment or perfection of the security interest granted herein by any Grantor in its right, title and interest in such item of property (i) would give any other Person (other than such Grantor or any other Loan Party) the right to terminate its obligations with respect to such item of property, or (ii) would cause such property to become void or voidable if a security interest therein was created, attached or perfected;
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(F)
any item of real or personal, tangible or intangible, property (other than any Equity Interests owned by any Grantor) to the extent and only for so long as such property is subject to a Contract that contains a term that restricts, prohibits, or requires a consent (that has not been obtained) of a Person (other than such Grantor or any other Loan Party) to, the creation, attachment or perfection of the security interest granted herein and any such restriction, prohibition and/or requirement of consent is not rendered ineffective by applicable Law (including pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC);
(G)
the Equity Interests in any Minority Investment (other than any Minority Investment in which the Grantors own in the aggregate 25% or more of the Equity Interests) to the extent that the governance or similar documents of such Minority Investment contain a term that restricts, prohibits, or requires a consent (that has not been obtained) of a Person (other than such Grantor or any other Loan Party) to, the creation, attachment or perfection of the security interest granted herein and such restriction, prohibition and/or requirement of consent is not rendered ineffective by applicable Law (including pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC).
If at any time the creation, attachment or perfection of the security interest granted herein in any of property subject to clauses (C) through (G) of this Section shall be permitted or consent in respect thereof shall have been obtained, then the applicable Grantor shall at such time be deemed to have granted a security interest in such property (and such security interest will attach immediately without further action). Notwithstanding anything to the contrary set forth above, the rights to receive, and any interest in, all Proceeds of, or monies or other consideration received or receivable from or attributable to the sale, transfer, lease, assignment or other disposition of, any of the property subject to this Section (to the extent a direct security interest in such property or Proceeds from the sale, transfer, lease, assignment or other disposition of such property shall not have already been granted) shall attach immediately and be subject to the security interest granted pursuant to Section .
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Grantor hereby represents and warrants to CoBank on the date hereof, on the date of any Supplement, on the date of any request for any advance on any Loan, and on the date any such advance is funded that the following statements are true, correct and complete:
3.1
Ownership of Collateral. Each Grantor owns, or has valid rights as a lessee or licensee with respect to, all Collateral purported to be pledged by it hereunder, free and clear of any Liens except for the Liens granted hereunder and except for other Liens permitted by the Loan Agreement. No security agreement, financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any government or public office, and no Grantor has filed or consented to the filing of any such statement or notice, except (A) Uniform Commercial Code financing statements naming CoBank as secured party, (B) security instruments filed in the U.S. Copyright Office or the U.S. Patent and Trademark Office naming CoBank as secured party and (C) as may be otherwise permitted by the Loan Agreement.
10
3.2
Security Interests; Filings. This Agreement, together with (A) the filing of duly completed Uniform Commercial Code financing statements (i) naming each Grantor as debtor, (ii) naming CoBank as secured party, and (iii) indicating the Collateral, in the jurisdictions set forth with respect to such Grantor in Annex B hereto, (B) the filing of duly completed and executed grants of security interest with the U.S. Copyright Office or the U.S. Patent and Trademark Office, with regard to federally registered Copyright Collateral, Patent Collateral, and Trademark Collateral of each Grantor, as the case may be, (C) the execution by the issuer, securities intermediary or commodity intermediary of a control agreement satisfying the requirements of Sections 9-106 and 8-106 (or its successor provision) of the Uniform Commercial Code with regard to Investment Property, (D) the notation of CoBank’s Lien on the applicable certificates of title or ownership with regard to Mobile Goods covered by a certificate of title or ownership, and (E) the delivery to CoBank of all stock or other certificates evidencing Equity Interests and Instruments included in the Collateral, together with undated stock powers or other instruments of assignment, as applicable, duly executed in blank (and assuming continued possession thereof by CoBank and that CoBank has acquired its security interest and taken possession of such stock or other certificates evidencing Equity Interests and Instruments without notice of any adverse claim), creates and at all times shall constitute a valid and perfected security interest in and Lien upon the Collateral in favor of CoBank, to the extent a security interest therein can be perfected by such filings, possession or control, as applicable, superior and prior to the rights of all other Persons therein (except for Liens permitted under the Loan Agreement which by operation of applicable Law or contract would have first priority), and no other or additional filings, registrations, recordings or actions are or shall be necessary or appropriate in order to maintain the perfection and priority of such Lien and security interest, other than actions required with respect to Collateral of the types excluded from Article 9 of the Uniform Commercial Code or from the filing requirements under such Article 9 by reason of Section 9-109 or 9-311 of the Uniform Commercial Code and other than continuation statements required under the Uniform Commercial Code.
3.3
Locations. Annex C lists, as to each Grantor, (A) its exact legal name, (B) the jurisdiction of its incorporation or organization and its organizational identification number (if any), (C) its federal tax identification number, (D) its mailing address and (E) the address of its chief executive office. No Grantor presently conducts business under any prior or other corporate or company name or under any trade or fictitious names, except as indicated beneath its name on Annex C, and no Grantor has entered into any contract or granted any Lien within the past five years from the date hereof under any name other than its legal corporate name or a trade or fictitious name indicated on Annex C.
3.4
Authorization; Consent. No authorization, consent or approval of, or declaration or filing with, any Governmental Authority (including any notice filing with state tax or revenue authorities required to be made by account creditors in order to enforce any Accounts in any jurisdiction) is required for the valid execution, delivery and performance by any Grantor of this Agreement, the grant by it of the Lien and security interest in favor of CoBank provided for herein, except for (A) the filings described in Section , (B) in the case of Accounts owing from any federal governmental agency or authority, the filing by CoBank of a notice of assignment in accordance with the Federal Assignment of Claims Act of 1940, (C) in the case of Equity Interests, such filings and approvals as may be required in connection with a disposition of any such Collateral by laws affecting the offering and sale of securities generally, and (D) any assignment or transfer of control of any License required in connection with the exercise of the remedies set forth in Article VI.
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3.5
Accounts. Each Account is, or at the time it arises, will be: (A) a bona fide, valid and legally enforceable indebtedness of the account debtor according to its terms, arising out of or in connection with the sale, lease or performance of goods or services by the Grantors or any of them, (B) subject to no material offsets, discounts, counterclaims, contra accounts or any other defense of any kind and character, other than warranties and discounts customarily given by the Grantors in the ordinary course of business and warranties or refunds provided by applicable Law, and (C) not evidenced by any chattel paper or other Instrument; or if so, any such chattel paper or other Instrument (other than invoices and related correspondence and supporting documentation) relating to Accounts in excess of $250,000 in the aggregate at any time shall promptly be duly endorsed to the order of CoBank and delivered to CoBank to be held as Collateral hereunder.
3.6
Equity Interests. As of the date hereof, the Equity Interests required to be pledged hereunder by each Grantor that owns any Equity Interests (excluding pledges of interests in Equity Interests solely permitted as a result of Sections 9-406, 9-407, 9-408 or 9-409 of the UCC) consist of the number and type of shares of capital stock (in the case of issuers that are corporations) or the percentage and type of other Equity Interests (in the case of issuers other than corporations) described beneath such Grantor’s name in Annex A. All of the Equity Interests of any Subsidiary of any Grantor have been duly and validly issued and are fully paid and nonassessable (or, in the case of partnership, limited liability company or similar Equity Interests, not subject to any capital call or other additional capital requirement) and not subject to any preemptive rights, warrants, options or similar rights or restrictions in favor of third parties or any contractual (except as set forth in Section ) or other restrictions upon transfer other than Laws affecting the transfer of securities generally.
3.7
Specified Contracts. Except in each case as would not reasonably be expected to have a Material Adverse Effect, as to (A) each Investment Agreement and (B) each Material Contract to which any Grantor is a party (the foregoing, collectively, “Specified Contracts”), (i) such Grantor is not in default under such Specified Contract, and to the knowledge of such Grantor, none of the other parties to such Specified Contract is in default thereunder (except as shall have been disclosed in writing to CoBank), (ii) such Specified Contract is, or at the time of execution will be, the legal, valid and binding obligation of the Grantors party thereto, enforceable against such Grantor in accordance with the respective terms thereof, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally, and no defense, offset, deduction or counterclaim will exist thereunder in favor of any such party, and (iii) the performance by such Grantor of its obligations under such Specified Contract in accordance with its terms will not contravene any requirement of Law or any contractual restriction binding on or affecting such Grantor or any of its properties, and will not result in or require the creation of any Lien upon or with respect to any of its properties (except for Liens permitted by the Loan Agreement). Each Grantor, promptly upon the request of CoBank, will furnish CoBank with a correct and complete copy of each Specified Contract to which it is a party as then in effect.
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3.8
Intellectual Property.
(A)
The Grantors have registered, or are taking all commercially reasonable steps to register, all material Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, and Trademark Licenses with the U.S. Copyright Office, the U.S. Patent and Trademark Office or any applicable office or agency in any other country or political subdivision. Annexes D, E, and F correctly set forth all material Copyrights, Copyright Licenses (other than non-exclusive licenses for commercially available software), Patents, Patent Licenses (other than non-exclusive licenses for commercially available software), Trademarks, and Trademark Licenses (including, in each case, all applications for registrations thereof) as of the date hereof that are used or proposed to be used in any Grantor’s business. Except to the extent such failure could not reasonably be expected to have a Material Adverse Effect, (i) the Grantors own all of the Copyrights, Patents, and Trademarks and possess the valid right to use all of the licensed copyrights, patents and trademarks subject to and in accordance with the Copyright Licenses, Patent Licenses and Trademark Licenses; (ii) all registrations of such Copyrights, Patents, or Trademarks have been validly issued under applicable Law and are in full force and effect; (iii) all applicable maintenance fees, affidavits and other filings or payments are current; (iv) to the knowledge of such Grantor, no claim has been made in writing that any of such Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, or Trademark Licenses are invalid or unenforceable; and (v) to the knowledge of such Grantor, no other Person is presently infringing upon the rights of such Grantor with regard to any of such Copyrights, Patents, or Trademarks, or infringing the underlying intellectual property of the Copyright Licenses, Patent Licenses or Trademark Licenses.
(B)
Annex G correctly sets forth all material Domain Names and Domain Name Licenses as of the date hereof that are used or proposed to be used by any Grantors in its business (other than any Domain Name or Domain Name License disclosed under Annex F). Except to the extent such failure could not reasonably be expected to have a Material Adverse Effect, (i) each Grantor is the sole and exclusive owner of all of its Domain Names and has the authority to transfer all of its Domain Names; (ii) the Grantors possess the valid right to use all of the domain names subject to the Domain Name Licenses; (iii) all registrations of Domain Names with the applicable domain name registry and with any domain name registrars are in full force and effect; (iv) all applicable maintenance fees, affidavits and other filings or payments are current; and (v) to the knowledge of such Grantor, no claim has been made in writing that any of its Domain Names are not validly owned by such Grantor.
3.9
Documents of Title. As of the date hereof, no bill of lading, warehouse receipt or other document or instrument of title is outstanding with respect to any Collateral other than Mobile Goods and Inventory in transit in the ordinary course of business to a location set forth in Annex C or to a customer of a Grantor.
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3.10
Real Property. All real property leased by each Grantor as of the date hereof, a description of the use of such property, and the name of the lessor of such real property are set forth in Annex J. The leases of each Grantor are valid, enforceable and in full force and effect, and have not been modified or amended, except as otherwise set forth in Annex J. The Grantors are the sole holders of the lessee’s interests under such leases, and have the right to pledge, mortgage, assign and sublet the same, and no consents to any such pledge, mortgage, assignment or sublease are necessary, except as set forth in Annex J. No Grantor has made any pledge, mortgage, assignment or sublease of any of its rights under such leases except pursuant to the Loan Documents and as set forth in Annex J and, there is no default or condition which, with the passage of time or the giving of notice, or both, would constitute a default on the part of any party under such leases that would permit any party to terminate such lease or which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect, and the Grantors have paid all rents and other charges due and payable under such leases. If any Grantor shall receive any notice of default, such Grantor shall promptly forward notice of the same to CoBank. All real property owned by each Grantor as of the date hereof, together with the estimated value of such property and a description of the use of such property, is set forth in Annex J. Each Grantor owns good and marketable fee simple title to all of its owned real property, and none of its respective owned real property is subject to any Liens, except as permitted under the Loan Agreement. Except as set forth in Annex J, no Grantor owns or holds, or is obligated under or a party to, any option, right of first refusal or any other contractual right to purchase, acquire, sell, assign or dispose of any real property owned or leased by it.
3.11
Deposit Accounts and Securities Accounts. All Deposit Accounts and Securities Accounts owned by any Grantor as of the date hereof are set forth in Annex H, including, with respect to each such account: (A) the name and address of the bank, depository institution, or Securities Intermediary, (B) the account name and number, (C) the type of account, (D) a description of the assets in such account, if applicable, and (E) the estimated average daily balance of such account or estimated market value of the assets in such account, as applicable.
3.12
Commercial Tort Claims. Annex I lists all Commercial Tort Claims of any Grantor, as of the date hereof, that are known to any Grantor (such that an officer of any Grantor has actual knowledge of the existence of a tort cause of action and not merely of the existence of the facts giving rise to such cause of action).
ARTICLE IV
COVENANTS
Each Grantor hereby covenants and agrees that so long as this Agreement is in effect and until the occurrence of the Termination Requirements, such Grantor shall perform and comply, and shall cause each of its respective Subsidiaries which is a Grantor to perform and comply, with all covenants in this Article IV.
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4.1
Use and Disposition of Collateral. So long as no Event of Default shall have occurred and be continuing, each Grantor may, in any lawful manner not prohibited by the provisions of this Agreement and the other Loan Documents, use, control and manage the Collateral in the operation of its business, and receive and use the income, revenue and profits arising therefrom and the Proceeds thereof, in the same manner and with the same effect as if this Agreement had not been made; provided, however, that no Grantor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge, grant any Lien with respect to or otherwise encumber any of the Collateral or any interest therein, except for the security interest created in favor of CoBank hereunder and except as may be otherwise expressly permitted in accordance with the terms of this Agreement or the Loan Agreement (including any applicable provisions therein regarding delivery of Proceeds of sale or disposition to CoBank) or as required by applicable Law.
4.2
Change of Name, etc. No Grantor will (A) change its name, identity, corporate structure or type of legal entity, (B) change its mailing address, (C) change its chief executive office, or (D) change the jurisdiction of its incorporation or organization (whether by merger or otherwise), in each case, from that listed in Annex C, unless, in each case, (i) such change is not prohibited by the Loan Agreement or any other Loan Documents, (ii) such Grantor has given 30 days’ prior written notice to CoBank of its intention to do so, together with such information in connection with such proposed action as CoBank thereafter may reasonably request, and (iii) such Grantor has delivered to CoBank 30 days prior to any such change such documents, instruments and financing statements as may be reasonably required by CoBank, all in form and substance reasonably satisfactory to CoBank, paid all necessary filing and recording fees and taxes, and taken all other actions reasonably requested by CoBank (including, at the reasonable request of CoBank, delivery of opinions of counsel reasonably satisfactory to CoBank), in order to perfect and maintain the Lien upon and security interest in the Collateral provided for herein in accordance with the provisions of Section .
4.3
Records; Inspection.
(A)
Each Grantor will keep and maintain at its own cost and expense satisfactory and complete records of the Accounts and all other Collateral, including records of all payments received, all credits granted thereon, all merchandise returned and all other documentation relating thereto, and will furnish to CoBank from time to time such statements, schedules and reports (including accounts receivable aging schedules) with regard to the Collateral as CoBank may reasonably request.
(B)
At the request of CoBank following the occurrence and during the continuation of an Event of Default, each Grantor will legend, in form and manner reasonably satisfactory to CoBank, the books, records and materials evidencing or relating to the Collateral with an appropriate reference to the fact that the Collateral has been assigned to CoBank and that CoBank has a security interest therein. During the period in which an Event of Default shall have occurred and be continuing, CoBank shall have the right to make test verifications of Accounts in any reasonable manner and through any reasonable medium, and each Grantor agrees to furnish all such reasonable assistance and information as CoBank may reasonably require in connection therewith.
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(C)
CoBank shall have inspection rights as set forth in Subsection 8(G) of the MLA and as set forth in any other Loan Document, including any mortgage or similar document.
4.4
Accounts. Unless notified otherwise by CoBank in accordance with the terms hereof, each Grantor shall endeavor to the extent commercially reasonable to collect its Accounts and all amounts owing to it thereunder in the ordinary course of business and shall apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balances thereof, and in connection therewith shall, if an Event of Default has occurred and is continuing, at the request of CoBank, take such action as CoBank may deem necessary or advisable (within applicable Laws) to enforce such collection. Each Grantor shall promptly inform CoBank of any disputes with any account debtor or obligor and of any claimed offset and counterclaim that may be asserted with respect thereto involving, in each case or in the aggregate, $250,000 or more, where such Grantor reasonably believes that the likelihood of payment by such account debtor is materially impaired, indicating in detail the reason for the dispute, all claims relating thereto and the amount in controversy.
4.5
Instruments. Each Grantor agrees that if any Intercompany Obligations, Accounts or other Collateral shall at any time be evidenced by a promissory note, chattel paper, electronic chattel paper or other Instrument, any such promissory note, chattel paper, electronic chattel paper or other Instrument shall be in form suitable for transfer by delivery (or the granting of “control”) and, to the extent amounts thereof exceed in the aggregate $250,000 at any one time, shall be promptly delivered to CoBank to be held as Collateral hereunder, together with appropriate endorsements or other necessary instruments of registration, transfer or assignment, duly executed and in form and substance reasonably satisfactory to CoBank, and in each case together with such other instruments or documents as CoBank may reasonably request from time to time.
4.6
Inventory. Each Grantor will, in accordance with sound business practice, use commercially reasonable efforts to maintain all Inventory held by it or on its behalf in reasonable saleable or useable condition. Unless notified otherwise by CoBank in accordance with the terms hereof, each Grantor may, in any lawful manner not prohibited by the provisions of this Agreement and the other Loan Documents, process, use and, in the ordinary course of business and as permitted under the Loan Agreement, but not otherwise, sell its Inventory. Without limiting the generality of the foregoing, each Grantor agrees that it shall not permit an amount of Inventory or other Collateral exceeding $250,000 to be in the possession of any bailee, warehouseman, agent or processor at any time unless such bailee, warehouseman, agent or processor shall have been notified of the security interest created by this Agreement and such Grantor shall have exercised commercially reasonable efforts to obtain, at such Grantor’s sole cost and expense, a written agreement to hold such Inventory subject to the security interest created by this Agreement and the reasonable instructions of CoBank and to waive and release any Lien (whether arising by operation of law or otherwise) it may have with respect to such Inventory, such agreement to be in form and substance satisfactory to CoBank.
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4.7
Contracts. Except to an extent that would not reasonably be expected to have a Material Adverse Effect, each Grantor (A) will, at its expense, at all times perform and comply with all terms and provisions of each Specified Contract to which it is or hereafter becomes a party required to be performed or complied with by it and enforce the terms and provisions thereof in accordance with its terms, and (B) will not waive, amend or modify any provision thereof in any manner other than in the ordinary course of business of such Grantor (provided that in no event may any waiver, amendment or modification be made that would materially adversely affect the interests of CoBank under the Loan Documents or that is prohibited by any Loan Document). With regard to all Contracts that are excluded from the definition of the term “Collateral,” each Grantor covenants and agrees to exercise all of its material rights and remedies under such Contracts to which it is a party in a commercially reasonable manner consistent with the interests of CoBank and not to take any action thereunder in contravention of the terms and provisions of the Loan Documents. Each Grantor will use commercially reasonable efforts not to enter into any Specified Contract (including leases and IP Licenses) that by its terms prohibits the assignment of such Grantor’s rights and interest thereunder in the manner contemplated by this Agreement. As to all real estate leased by each Grantor after the date hereof that is the chief executive office of any Grantor or where any books and records relating to Collateral are kept, located in a jurisdiction which provides for liens of landlords imposed by statute, such Grantor shall use commercially reasonable efforts to obtain waivers from the landlords of all such real estate, in form and content reasonably acceptable to CoBank. Each Grantor will notify CoBank promptly in writing upon written notice of (i) any termination of any Specified Contract, in whole or in part, prior to its stated date of maturity or (ii) any material breach, default or event of default by any party thereunder, in each case, if any of the foregoing would reasonably be expected to have a Material Adverse Effect.
4.8
Taxes. Each Grantor will pay and discharge (A) all taxes, assessments and governmental charges or levies imposed upon it, upon its income or profits or upon any of its properties, prior to the date on which penalties would attach thereto, and (B) all lawful claims that, if unpaid, might become a Lien upon any of its properties; provided, however, that no Grantor shall be required to pay any such tax, assessment, charge, levy or claim that is being contested in good faith and by proper proceedings and as to which such Grantor has maintained adequate reserves with respect thereto in accordance with GAAP unless and until any Lien resulting therefrom attaches to any material part of the Collateral.
4.9
Insurance.
(A)
If any Grantor fails to obtain and maintain any of the policies of insurance required to be maintained pursuant to the terms of the Loan Agreement or to pay any premium in whole or in part, CoBank may, without waiving or releasing any obligation or Potential Default, at the Grantors’ expense, but without any obligation to do so, procure such policies or pay such premiums. All sums so disbursed by CoBank, including reasonable attorneys’ fees, court costs, expenses and other charges related thereto, shall be payable by the Grantors to CoBank on demand and shall be additional Secured Obligations hereunder, secured by the Collateral.
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(B)
Each Grantor will deliver to CoBank, promptly as rendered, true copies of all material claims and reports made in any reporting forms to insurance companies with respect to claims in which CoBank is entitled to participate in the adjustment process pursuant to the terms of the Loan Agreement. Not less than 30 days prior to the expiration date of the insurance policies required to be maintained by any Grantor pursuant to the terms of the Loan Agreement, such Grantor will deliver to CoBank one or more certificates of insurance evidencing renewal of the insurance coverage required hereunder plus such other evidence of payment of premiums therefor as CoBank may reasonably request. Upon the request of CoBank from time to time, each Grantor will deliver to CoBank evidence that the insurance required to be maintained pursuant to this Section is in effect.
4.10
Intellectual Property.
(A)
(i) Each Grantor will, at its own expense, execute and deliver upon the request of CoBank, fully completed grants of security interests, in form and substance acceptable to CoBank in its sole discretion, in the U.S. Copyright Office or the U.S. Patent and Trademark Office pursuant to 35 U.S.C. §261, 15 U.S.C. §1060 or 17 U.S.C. §205, as applicable, with regard to any registered United States Copyright, Patent, or Trademark, as the case may be, described in Annexes D, E, and F hereto. In the event that after the date hereof any Grantor shall acquire any material registered Copyright, Copyright License, Patent, Patent License, Trademark, or Trademark License or effect any registration of any Copyright, Copyright License, Patent, Patent License, Trademark, or Trademark License (including, in each case, any application for registration thereof), whether within the United States or any other country or jurisdiction, such Grantor shall Promptly furnish written notice thereof to CoBank, together with an amended Annex D, E, or F hereto, to include any such Copyright, Copyright License, Patent, Patent License, Trademark, or Trademark License that becomes part of the Collateral under this Agreement, and upon request of CoBank, such Grantor shall additionally, at its own expense, execute and deliver with regard to any registered United States Copyrights, Patents, and Trademarks, fully completed grants of security interest, in form and substance acceptable to CoBank in its sole discretion, together in all instances with any other agreements, instruments and documents that CoBank may reasonably request from time to time to further effect and/or confirm the assignment and grant of security interest created by this Agreement in such Copyright, Patent or Trademark, and, to the extent permitted by applicable Law, each Grantor hereby appoints CoBank its attorney-in-fact to execute, deliver and record any and all such agreements, instruments and documents for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed and such power, being coupled with an interest, shall be irrevocable for so long as this Agreement shall be in effect with respect to such Grantor.
(ii)
Unless disclosed under Section , in the event that after the date hereof any Grantor shall acquire any material registered Domain Name or Domain Name License or effect any registration of any material Domain Name, or file any application for registration thereof with any domain name registry or registrar, such Grantor shall Promptly furnish written notice thereof to CoBank, together with an amended Annex G hereto to include any such Domain Name or Domain Name License that becomes part of the Collateral under this Agreement, and upon request of CoBank, such Grantor shall additionally, at its own expense, execute and deliver any agreements, instruments and documents that CoBank may reasonably request from time to time to further effect and/or confirm the assignment and grant of security interest created by this Agreement in such Domain Name or Domain Name License, and, to the extent permitted by applicable Law, each Grantor hereby appoints CoBank its attorney-in-fact to execute, deliver and record any and all such agreements, instruments and documents for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed and such power, being coupled with an interest, shall be irrevocable for so long as this Agreement shall be in effect with respect to such Grantor.
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(B)
Except in each case as would not reasonably be expected to result in a Material Adverse Effect, each Grantor (either itself or through its licensees or its sublicensees) will, for any material Trademark used in the conduct of its business, use commercially reasonable efforts to (i) maintain such Trademark in full force and effect, free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of federal registration to the extent required by applicable Law, (iv) take all commercially reasonable steps to police and defend such Trademark and prevent or arrest infringement, dilution or other harm to such Trademark and (v) not knowingly use or knowingly permit the use of such Trademark in violation of any third-party rights.
(C)
Each Grantor (either itself or through its licensees or sublicensees) will refrain from committing any act, or omitting any act, whereby any material Patent used in the conduct of such Grantor’s business would reasonably be expected to become invalidated or dedicated to the public, and shall continue to mark any products covered by any such Patent with the relevant patent number as required by applicable patent Laws.
(D)
Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by any material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as required under applicable copyright Laws.
(E)
Each Grantor shall notify CoBank immediately if it knows or has reason to know that any material Copyright, Patent or Trademark used in the conduct of its business may become abandoned or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the U.S. Copyright Office, U.S. Patent and Trademark Office or any court) regarding (i) such Grantor’s ownership of any material Copyright, Patent, or Trademark, its right to register the same, or to keep and maintain or license the same or (ii) the underlying intellectual property of such Grantor’s material Copyright Licenses, Patent Licenses, or Trademark Licenses (other than under licenses of commercially available software).
(F)
Except in each case as would not reasonably be expected to result in a Material Adverse Effect, each Grantor will take all commercially reasonable steps in any proceeding before the U.S. Copyright Office, U.S. Patent and Trademark Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, or, in the case of any Domain Name, any domain name register or domain name registrar, to maintain and pursue each application relating to any material Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses or Domain Names useful for its business or otherwise of material commercial value (and to obtain the relevant grant or registration) and to maintain each registration of any material Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses and Domain Names useful for its business or otherwise of material commercial value, including the filing of applications for renewal, affidavits of use, affidavits of incontestability and maintenance fees, and, if consistent with sound business judgment, to initiate opposition, interference and cancellation proceedings against third parties.
(G)
Except for any Asset Disposition permitted by the Loan Agreement, no Grantor will permit any material Copyright, Patent, Trademark, or Domain Name useful for its business or otherwise of material commercial value to be owned or held by or held in the name of any Person who is not a Grantor, and no Grantor will assign or transfer its rights and interests in any material Copyright License, Patent License, Trademark License or Domain Name License to any Person who is not a Grantor (in each case, other than CoBank in connection with any collateral arrangement pursuant hereto).
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(H)
In the event that any Collateral, useful in the conduct of any Grantor’s business or otherwise of material commercial value, consisting of any material Copyright or Patent is believed infringed, consisting of any material Trademark is believed infringed or diluted, or consisting of any material Domain Name is believed misappropriated, such Grantor shall notify CoBank promptly after it learns thereof and shall, if consistent with sound business judgment, promptly sue for infringement, misappropriation or dilution, as the case may be, and to recover any and all damages for such infringement, misappropriation or dilution, as the case may be, and take such other actions as are appropriate under the circumstances to protect such Collateral.
(I)
Upon request of CoBank, each Grantor shall use commercially reasonable efforts to obtain all requisite consents or approvals from the licensor of each material IP License included within the Copyright Collateral, Patent Collateral, Trademark Collateral or Domain Name Collateral useful in such Grantor’s business or otherwise of material commercial value to effect the collateral assignment of all of such Grantor’s right, title and interest thereunder to CoBank or its designee.
(J)
If an Event of Default has occurred and is continuing, upon the request of CoBank, each Grantor shall promptly make all necessary or appropriate arrangements to complete and effectuate the transfer to CoBank or its designee of all of its right, title and interest in and to any Domain Name, including obtaining and promptly providing to CoBank or its designee relevant domain name transfer authorization codes and providing CoBank or its designee with access to and control of such Grantor’s domain name management account for such Domain Name. If the relevant domain name registrar allows for the electronic transfer of the Domain Name, then such Grantor shall perform all steps necessary to transfer the Domain Name to CoBank or its designee electronically with the registrar.
(K)
Each Grantor for its material Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses, Domain Names and Domain Name Licenses shall keep current all applicable maintenance fees, affidavits and other filings or payments.
4.11
Collateral in Possession of Third Party; Delivery of Collateral. Without limiting the generality of any other provision of this Agreement, each Grantor agrees that it shall not permit any Collateral valued in excess of $250,000 to be in the possession of any bailee, warehouseman, agent, processor or other third party at any time unless such bailee or other Person shall have been notified of the security interest created by this Agreement (or, if required under applicable Law in order to perfect CoBank’s security interest in such Collateral, such bailee or other Person shall have acknowledged to CoBank in writing that it is holding such Collateral for the benefit of CoBank and subject to such security interest and to the instructions of CoBank) and such Grantor shall have exercised commercially reasonable efforts to obtain from such bailee or other person, at the Grantor’s sole cost and expense, the written acknowledgement described above (if not already required by applicable Law to perfect CoBank’s security interest) and to waive and release any Lien (whether arising by operation of law or otherwise) it may have with respect to such Collateral, such agreement to be in form and substance reasonably satisfactory to CoBank to the extent that the same can be achieved through the exercise of commercially reasonable efforts of such Grantor. All certificates or instruments representing or evidencing any Accounts and Intercompany Obligations (to the extent required by Section ), Equity Interests pledged hereunder or other Collateral shall be delivered to and held by or on behalf of CoBank pursuant hereto, shall be in form suitable for transfer by delivery and shall be delivered together with undated stock powers duly or other instruments of assignment, as applicable, executed in blank, appropriate endorsements or other necessary instruments of registration, transfer or assignment, duly executed and in form and substance reasonably satisfactory to CoBank, and in each case such other instruments or documents as CoBank reasonably may request.
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4.12
Mobile Goods. Upon the reasonable request of CoBank, if a Potential Default or Event of Default has occurred and is continuing, each Grantor will deliver to CoBank originals of the certificates of title or ownership for all Mobile Goods owned by it (in excess of $250,000 in value in the aggregate), together (in the case of motor vehicles) with the manufacturer’s statement of origin with CoBank listed as lienholder and odometer statements and together in all other cases with appropriate instruments or certificates of transfer and delivery, duly completed and executed, and will take such other reasonable action as CoBank may deem reasonably necessary to perfect the security interest created by this Agreement in all such Mobile Goods.
4.13
Deposit and Collection Procedures. Each Grantor will execute all documents and agreements, and take all actions as are reasonably necessary to ensure that (A) all Proceeds of Accounts or other Collateral remitted to or otherwise received by it are deposited, promptly upon its receipt thereof, directly into a Deposit Account maintained by or for the benefit of such Grantor, and (B) the applicable Grantor executes and delivers to CoBank a duly completed and executed control agreement, sufficient to perfect CoBank’s security interest under the Uniform Commercial Code and otherwise in form and substance reasonably satisfactory to CoBank, covering each Deposit Account requested by CoBank (if any) on or before the Closing Date. Unless such Deposit Account is subject to CoBank’s cash management system on the date of determination, each Grantor will execute all documents and agreements, and take all actions as are reasonably necessary to ensure that (A) the applicable Grantor Promptly furnishes CoBank written notice of any Deposit Account (other than Deposit Accounts exclusively used for payroll, payroll taxes or employee benefits) for which the average daily balance in such Deposit Account (determined on a trailing six month basis counting the actual number of days elapsed) exceeds $250,000 a calendar month for two consecutive calendar months at any time after the Closing Date, together with an amended Annex H reflecting the same, and (B) the applicable Grantor executes and delivers to CoBank a duly completed and executed control agreement, sufficient to perfect CoBank’s security interest under the Uniform Commercial Code and otherwise in form and substance reasonably satisfactory to CoBank, covering each such Deposit Account within 30 days (or such later date as determined by CoBank in writing in its sole discretion) of meeting such threshold. Each Grantor will provide each bank or depository institution at which any Deposit Account subject to a control agreement is maintained from time to time with such transfer instructions and other information as such bank or depository institution may reasonably require in order to permit such Grantor to comply with the provisions of this Section . All costs and expenses incurred in connection with the establishment and maintenance of such Deposit Accounts and the control agreements and the transfers of funds therefrom and thereto as described in this Section shall be for the account of the Grantors. So long as no Event of Default shall have occurred and be continuing and CoBank shall not have delivered notice to the contrary to the applicable bank or depository institution, Grantors shall have the right to collect, withdraw and direct the disposition of funds on deposit in the Deposit Accounts covered by the control agreements in a manner not in violation of the provisions of this Agreement, such control agreements or any of the other Loan Documents; provided, however, that upon the occurrence and during the continuance of an Event of Default and after notice from CoBank to the applicable banks or depository institutions, CoBank shall have exclusive dominion and control over all such Deposit Accounts, with the powers and rights granted herein and in the applicable control agreement with respect thereto, and no Grantor shall have any right to collect, withdraw or direct the disposition of funds on deposit in such Deposit Accounts or to take any action to effect the same.
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4.14
Control Agreements. Each Grantor will cooperate with CoBank in obtaining a control agreement sufficient to perfect CoBank’s security interest under the Uniform Commercial Code and otherwise in form and substance reasonably satisfactory to CoBank, and in taking such other reasonable actions as may be requested by CoBank from time to time with respect to any Collateral in which a security interest may be perfected by control under the Uniform Commercial Code and with respect to which control agreements are required under Sections or .
4.15
Securities Intermediary. Each Grantor will execute all documents and agreements, and take all actions as are reasonably necessary to ensure that CoBank has control of any Securities Account requested by CoBank (if any) on or before the Closing Date, including delivering to CoBank a duly completed control agreement covering such Securities Account, and such Securities Entitlements, Financial Assets and funds as are held therein. Unless such Securities Account is subject to CoBank’s cash management system on the date of determination, each Grantor will execute all documents and agreements, and take all actions as are reasonably necessary to ensure that (A) the applicable Grantor Promptly furnishes CoBank with written notice of any Security Accounts with assets having an average daily value (determined on a trailing six month basis, counting the actual number of days elapsed) exceeding $750,000 for two (2) consecutive calendar months at any time after the Closing Date, together with an amended Annex H reflecting the same, and (B) the applicable Grantor executes and delivers to CoBank a duly completed and executed control agreement, sufficient to perfect CoBank’s security interest under the Uniform Commercial Code and otherwise in form and substance reasonably satisfactory to CoBank, covering each such Securities Account and such Securities Entitlements, Financial Assets and funds as are held therein within 30 days (or such later date as determined by CoBank in writing in its sole discretion) of meeting such threshold. Each Grantor will provide each Securities Intermediary at which any Securities Account subject to a control agreement is maintained from time to time with such transfer instructions and other information as such Securities Intermediary may reasonably require in order to permit such Grantor to comply with the provisions of this Section . All costs and expenses incurred in connection with the establishment and maintenance of such Securities Accounts and the control agreements and the transfers of Collateral therefrom and thereto as described in this Section shall be for the account of the Grantors.
4.16
Protection of Security Interest. Each Grantor agrees that it will, at its own cost and expense, take any and all actions necessary to warrant and defend the right, title and interest of CoBank in and to the Collateral against the claims and demands of all other Persons other than Liens permitted under the Loan Agreement.
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4.17
No Fixtures. It is the intention of the parties hereto that (except for Collateral located on real estate owned in fee simple by Grantors that is mortgaged to CoBank pursuant to a mortgage, deed of trust or other security instrument, if any, or Collateral located on real estate for which a leasehold mortgage, deed of trust or other security instrument is given, if any, and the landlord with respect thereto executes and delivers to CoBank a landlord waiver and consent in form and content reasonably acceptable to CoBank) none of the Collateral shall become Fixtures, and the Grantors will take all such reasonable action or actions as may be reasonably necessary to prevent any of the Collateral from becoming Fixtures, which actions may include, Grantors’ obtaining waivers of liens, in form satisfactory to CoBank, from each lessor of real property on which any of the Collateral is or is to be located to the extent reasonably requested by CoBank.
4.18
Commercial Tort Claims. If any Grantor shall at any time obtain knowledge (determined as specified in Section ), such Grantor shall Promptly furnish written notice thereof to CoBank, together with an amended Annex I including any such Commercial Tort Claim. Such Grantor shall additionally, at its own expense, execute and deliver, in form and substance reasonably satisfactory to CoBank, a grant of a security interest in such Commercial Tort Claim and the Proceeds thereof, together with any other agreements, instruments and documents that CoBank may reasonably request from time to time to further effect and/or confirm the assignment and grant of the security interest created by this Agreement in such Commercial Tort Claim and the Proceeds thereof.
4.19
Creation or Acquisition of Subsidiaries. Concurrently with (and in any event within 30 days thereafter) the creation or direct or indirect acquisition by a Grantor of any new wholly owned Subsidiary (if such new Subsidiary is not a Foreign Subsidiary, is not a Foreign Subsidiary Holding Company and is not prohibited from complying with this Section by the applicable Law of any applicable PUC), each such new Subsidiary will execute and deliver to CoBank (unless such requirement is waived in writing by CoBank in its sole discretion) a joinder agreement, in form and substance acceptable to CoBank in its sole discretion, pursuant to which such new Subsidiary (A) shall become a party to the Continuing Guaranty as a “Guarantor,” (B) shall become a party to the Loan Agreement as a “Loan Party” and (C) shall become a party hereto as a “Grantor” and shall deliver to CoBank all such other instruments, documents and agreements providing collateral security with respect to the Secured Obligations as CoBank shall reasonably request, and shall grant to CoBank a first priority Lien upon and security interest in its Collateral (subject to Liens permitted under the Loan Agreement), to the extent provided herein and in such instruments, documents and agreements, for the Secured Obligations.
As promptly as reasonably possible, the Grantors and their respective Subsidiaries will deliver any such other documents, certificates and opinions (including opinions of local counsel in the jurisdiction of organization of each such new Subsidiary and updated annexes to this Agreement), in form and substance reasonably satisfactory to CoBank, as CoBank may reasonably request in connection therewith and will take such other action as CoBank may reasonably request to create in favor of CoBank a perfected security interest on a first-priority basis in the Collateral being pledged pursuant to the documents described above.
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4.20
Real Property. Each Grantor agrees to Promptly notify CoBank of the acquisition of any parcel of real property, whether owned in fee or acquired by leasehold, and to deliver an amended Annex J including such real property. Within 30 days (or such later date as determined by CoBank in writing in its sole discretion) after the request of CoBank, each Grantor will furnish CoBank with a mortgage or its equivalent under applicable Law covering any parcel of real property owned or acquired by it, together with environmental audits, mortgagee title insurance commitment, real property survey, local counsel opinion(s), supplemental casualty insurance and flood insurance, and such other documents, instruments or agreements, in each case, as reasonably requested by CoBank and in form and substance reasonably satisfactory to CoBank.
ARTICLE V
CERTAIN PROVISIONS RELATING TO EQUITY INTERESTS
5.1
Ownership; After-Acquired Equity Interests.
(A)
Except as provided in Section , each Grantor will cause the Equity Interests pledged by it hereunder to constitute at all times 100% of the Equity Interests in each issuer held by such Grantor.
(B)
Subject to Section , if any Grantor shall, at any time and from time to time after the date hereof, acquire any additional Equity Interests in any person, the same shall be automatically deemed to be Equity Interests, and to be pledged to CoBank pursuant to Section , and such Grantor will forthwith pledge and deposit the same with CoBank (or deposit the same in a Securities Account subject to a control agreement pursuant to Section ) and deliver to CoBank any certificates or instruments evidencing the same, together with the endorsement of such Grantor (in the case of any promissory notes or other Instruments), undated stock powers (in the case of Equity Interests evidenced by certificates) or other necessary instruments of transfer or assignment, duly executed in blank and in form and substance reasonably satisfactory to CoBank, together with such other certificates and instruments as CoBank may reasonably request (including Uniform Commercial Code financing statements or appropriate amendments thereto), and will Promptly deliver to CoBank an amended Annex A, a fully completed and duly executed amendment to this Agreement or a joinder to this Agreement and the Continuing Guaranty, as applicable (in each case, in form and substance acceptable to CoBank in its sole discretion), in respect thereof. Each Grantor hereby authorizes CoBank to attach each such amendment or joinder agreement to this Agreement, and agrees that all such Collateral listed on any such amendment or joinder agreement shall for all purposes be deemed Collateral hereunder and shall be subject to the provisions hereof; provided that the failure of any Grantor to execute and deliver any such amendment or joinder agreement with respect to any such additional Collateral as required hereinabove shall not impair the security interest of CoBank in such Collateral or otherwise adversely affect the rights and remedies of CoBank hereunder with respect thereto.
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(C)
If any Equity Interests included in the Collateral constitutes “uncertificated securities” within the meaning of the Uniform Commercial Code or is otherwise not evidenced by any certificate or Instrument, each applicable Grantor will Promptly notify CoBank thereof and will promptly take and cause to be taken, and will (if the issuer of such uncertificated securities is a Person other than Grantor or a Subsidiary of a Grantor) use commercially reasonable efforts to cause the issuer to take, all actions required under Articles 8 and 9 of the Uniform Commercial Code and any other applicable Law, to enable CoBank to acquire “control” of such uncertificated securities (within the meaning of such term under Section 8-106 (or its successor provision) of the Uniform Commercial Code) and as may be otherwise necessary or deemed appropriate by CoBank to perfect the security interest of CoBank therein.
5.2
Voting Rights. So long as no Event of Default shall have occurred and be continuing and except as CoBank shall otherwise notify each Grantor during the existence and continuation of an Event of Default, each Grantor shall be entitled to exercise all voting and other consensual rights pertaining to its Equity Interests (subject to its obligations under Section ), and for that purpose CoBank will execute and deliver or cause to be executed and delivered to each applicable Grantor all such proxies and other instruments as such Grantor may reasonably request in writing to enable the Grantor to exercise such voting and other consensual rights; provided, however, that no Grantor will cast any vote, give any consent, waiver or ratification, or take or fail to take any action, in any manner that would, or could reasonably be expected to, violate any of the terms of this Agreement, the Loan Agreement or any other Loan Document, or would reasonably be expected to have the effect of materially impairing the value of any of the Collateral or CoBank’s interests therein.
5.3
Dividends and Other Distributions. So long as no Event of Default shall have occurred and be continuing (or would occur as a result thereof) and except as CoBank shall otherwise notify each Grantor during the existence and continuation of an Event of Default and as provided otherwise herein, all interest, income, dividends, distributions and other amounts payable in cash with respect to the Equity Interests owned by any Grantor may be paid to and retained by the Grantors; provided, however, that all such interest, income, dividends, distributions and other amounts shall, at all times after the occurrence and during the continuance of an Event of Default be paid to CoBank and retained by it as part of the Collateral (except to the extent applied upon receipt to the repayment of the Secured Obligations). All interest, income, dividends, distributions or other amounts that are received by any Grantor in violation of the provisions of this Section shall be received in trust for the benefit of CoBank, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to CoBank as Collateral in the same form as so received (with any necessary endorsements).
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5.4
Consents, Waivers and Agreements. Each Grantor hereby (A) approves the terms and acknowledges receipt of a copy of this Agreement, (B) waives any rights or requirement at any time hereafter to receive a copy of this Agreement in connection with the registration of any Equity Interests issued by such Grantor, any other Grantor, any Subsidiary of any Grantor or any Minority Investment in the name of CoBank or its nominee or the exercise of voting rights by CoBank and (C) agrees promptly to note on its books and records the grant of the security interest to CoBank in the Equity Interests issued or owned by such Grantor. Each Grantor consents to the execution and delivery of this Agreement, the security interests created hereby, all rights and remedies of CoBank provided herein (including all rights to sell, assign, transfer, exchange or otherwise transfer all or any part of the Equity Interests issued by such Grantor, any other Grantor, any Subsidiary of any Grantor or any Minority Investment to CoBank, its assignee or its designee as and to the extent such rights are provided in this Agreement) and absolutely subordinates any and all rights to a lien on the Equity Interests issued by such Grantor, any other Grantor, any Subsidiary of any Grantor, or any Minority Investment or dividends or distributions declared on the Equity Interests issued by such Grantor, any other Grantor, any Subsidiary of any Grantor, or any Minority Investment to the rights of CoBank with respect to the Equity Interests issued by such Grantor, any other Grantor, any Subsidiary of any Grantor, or any Minority Investment hereunder. Each Grantor hereby waives any and all provisions of its articles of incorporation, articles of formation, articles of organization, bylaws, Investment Agreements or similar organic or governing document of such Grantor, any other Grantor, any Subsidiary of any Grantor, or any Minority Investment which prohibit, restrict, limit or place conditions on CoBank’s rights and remedies hereunder or grant Grantor, in any capacity, a right of first refusal or similar right with respect to any of the Equity Interests pledged hereunder and, notwithstanding any provisions of the articles of incorporation, articles of formation, articles of organization, bylaws, Investment Agreements or similar organic or governing document of such Grantor, any other Grantor, the Subsidiary of any Grantor or Minority Investment, expressly agrees that it is bound to recognize CoBank’s security interest and other rights and interests in the Equity Interests pledged hereunder. Each Grantor agrees that it will comply with all instructions from CoBank with respect to transfers of all or any part of the Equity Interests issued by such Grantor, any other Grantor, the Subsidiary of any Grantor, or any Minority Investment, whether by sale or otherwise, without further consent from such Grantor, any other Grantor, any Subsidiary of any Grantor or any Minority Investment and with all instructions from CoBank with respect to any modification to the articles of incorporation, articles of formation, articles of organization, bylaws, Investment Agreements or similar organic or governing document of such Grantor, any other Grantor, any Subsidiary of any Grantor, or any registered owner of any Minority Investment. Each Grantor confirms to CoBank that the execution and delivery of this Agreement does not cause such Grantor, any other Grantor, any Subsidiary of any Grantor or any Minority Investment to dissolve. Each Grantor acknowledges that, in providing the financial accommodations under the Loan Agreement, CoBank is relying on this Agreement and on the Grantors’ agreements herein. Should CoBank exercise its rights or remedies under this Agreement, each Grantor agrees to assist CoBank in such actions or exercise, including registering CoBank or its nominee as the owner of the Equity Interests pledged hereunder, and agrees that should CoBank or its nominee become the owner of any Equity Interests pledged hereunder, they shall be treated by each Grantor as the owner thereof for all purposes and rights under the operative documents governing such Equity Interests.
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ARTICLE VI
REMEDIES
6.1
Remedies. If an Event of Default shall have occurred and be continuing, CoBank shall be entitled to exercise with respect to the Collateral all of its rights, powers and remedies provided for herein or otherwise available to it under any other Loan Document, by law, in equity or otherwise, including all rights and remedies of a secured party under the Uniform Commercial Code, and shall be entitled in particular, but without limitation of the foregoing, to exercise the following rights, which each Grantor agrees to be commercially reasonable:
(A)
To notify any or all account debtors or obligors under any Accounts, Contracts or other Collateral of the security interest in favor of CoBank created hereby and to direct all such Persons to make payments of all amounts due thereon or thereunder directly to CoBank or to an account designated by CoBank; and in such instance and from and after such notice, all amounts and Proceeds (including wire transfers, checks and other instruments) received by any Grantor with respect to any Accounts, Contracts or other Collateral shall be received in trust for the benefit of CoBank hereunder, shall be segregated from the other funds of such Grantor and shall be forthwith deposited into a segregated Account or paid over or delivered to CoBank in the same form as so received (with any necessary endorsements or assignments), to be held as Collateral and applied to the Secured Obligations as provided herein; and by this provision, each Grantor irrevocably authorizes and directs each Person who is or shall be a party to or liable for the performance of any Contract, upon receipt of notice from CoBank to the effect that an Event of Default has occurred and is continuing, to attorn to or otherwise recognize CoBank as entitled to exercise the rights of the owner under such Contract and to pay, observe and otherwise perform the obligations under such Contract to or for CoBank or CoBank’s designee as though CoBank or such designee were such Grantor named therein, and to do so until otherwise notified by CoBank;
(B)
To take possession of, receive, endorse, assign and deliver, in its own name or in the name of any Grantor, all checks, notes, drafts and other instruments relating to any Collateral, including receiving, opening and properly disposing of all mail addressed to any Grantor concerning Accounts and other Collateral and to notify the appropriate postal authority to change the mailing or delivery address of such mail; to verify with account debtors or other contract parties the validity, amount or any other matter relating to any Accounts or other Collateral, in its own name or in the name of any Grantor; to accelerate any indebtedness or other obligation constituting Collateral that may be accelerated in accordance with its terms; to take or bring all actions and suits deemed reasonably necessary or appropriate to effect collections and to enforce payment of any Accounts or other Collateral; to settle, compromise or release in whole or in part any amounts owing on Accounts or other Collateral; and to extend the time of payment of any and all Accounts or other amounts owing under any Collateral and to make allowances and adjustments with respect thereto, all in the same manner and to the same extent as any Grantor might have done;
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(C)
To notify any or all banks, depository institutions and Securities Intermediaries with which any Deposit Accounts or Securities Accounts are maintained to remit and transfer all monies, securities and other property on deposit in or held in such Deposit Accounts or Securities Accounts or deposited or received for deposit or held thereafter to CoBank, for deposit in or transfer to a Collateral Account or such other accounts as may be designated by CoBank, for application to the Secured Obligations as provided herein;
(D)
To transfer to or register in its name or the name of any of its agents or nominees all or any part of the Collateral, without notice to any Grantor and with or without disclosing that such Collateral is subject to the security interest created hereunder;
(E)
To require any Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of CoBank forthwith, assemble all or any part of the Collateral as directed by CoBank and make it available to CoBank at a place designated by CoBank;
(F)
To enter and remain upon the premises of any Grantor, subject to the terms of any lease in the case of premises leased by a Grantor, and take possession of all or any part of the Collateral, with or without judicial process; to use the materials, services, books and records of any Grantor for the purpose of liquidating or collecting the Collateral, whether by foreclosure, auction or otherwise; and to remove the same to the premises of CoBank or any designated agent for such time as CoBank may desire, in order to effectively collect or liquidate the Collateral;
(G)
To exercise (i) all voting, consensual and other rights and powers pertaining to the Equity Interests constituting part of the Collateral (whether or not transferred into the name of CoBank), at any meeting of shareholders, partners, members or otherwise, and (ii) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such Equity Interests as if it were the absolute owner thereof (including the right to exchange at its discretion any and all of such Equity Interests upon the merger, consolidation, reorganization, reclassification, combination of shares or interests, similar rearrangement or other similar fundamental change in the structure of the applicable issuer, or upon the exercise by any Grantor or CoBank of any right, privilege or option pertaining to such Equity Interests), and in connection therewith, the right to deposit and deliver any and all of such Equity Interests with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as CoBank may determine, and give all consents, waivers and ratifications with respect to such Equity Interests, all without liability except to account for any property actually received by it, but CoBank shall have no duty to exercise any such right, privilege or option or give any such consent, waiver or ratification and shall not be responsible for any failure to do so or delay in so doing; and for the foregoing purposes each Grantor will promptly execute and deliver or cause to be executed and delivered to CoBank, upon request, all such proxies and other instruments as CoBank may request to enable CoBank to exercise such rights and powers; AND IN FURTHERANCE OF THE FOREGOING AND WITHOUT LIMITATION THEREOF, TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS COBANK AS THE TRUE AND LAWFUL PROXY AND ATTORNEY-IN-FACT OF SUCH GRANTOR, WITH FULL POWER OF SUBSTITUTION IN THE PREMISES, TO EXERCISE ALL SUCH VOTING, CONSENSUAL AND OTHER RIGHTS AND POWERS TO WHICH ANY HOLDER OF ANY INVESTMENT PROPERTY OR EQUITY INTERESTS CONSTITUTING PART OF THE COLLATERAL WOULD BE ENTITLED BY VIRTUE OF HOLDING THE SAME, WHICH PROXY AND POWER OF ATTORNEY, BEING COUPLED WITH AN INTEREST, IS IRREVOCABLE AND SHALL BE EFFECTIVE FOR SO LONG AS THIS AGREEMENT SHALL BE IN EFFECT;
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(H)
To sell, resell, assign and deliver, in its sole discretion, all or any of the Collateral, in one or more parcels, on any securities exchange on which any Equity Interests constituting part of the Collateral may be listed, at public or private sale, at any of CoBank’s offices or elsewhere, for cash, upon credit or for future delivery, at such time or times and at such price or prices and upon such other terms as CoBank may deem satisfactory. If any of the Collateral is sold by CoBank upon credit or for future delivery, CoBank shall not be liable for the failure of the purchaser to purchase or pay for the same and, in the event of any such failure, CoBank may resell such Collateral. In no event shall any Grantor be credited with any part of the Proceeds of sale of any Collateral until and to the extent cash payment in respect thereof has actually been received by CoBank. Each purchaser at any such sale shall hold the property sold absolutely, free from any claim or right of whatsoever kind, including, any equity or right of redemption of any Grantor, and each Grantor hereby expressly waives all rights of redemption, stay or appraisal, and all rights to require CoBank to marshal any assets in favor of such Grantor or any other party or against or in payment of any or all of the Secured Obligations, that it has or may have under any Law now existing or hereafter adopted. No demand, presentment, protest, advertisement or notice of any kind (except any notice required by law, as referred to below), all of which are hereby expressly waived by each Grantor, shall be required in connection with any sale or other disposition of any part of the Collateral. If any notice of a proposed sale or other disposition of any part of the Collateral shall be required under applicable Law, CoBank shall give the applicable Grantor at least ten (10) days’ prior notice of the time and place of any public sale and of the time after which any private sale or other disposition is to be made, which notice each Grantor agrees is commercially reasonable. CoBank shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale may have been given. CoBank may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Upon each public sale and, to the extent permitted by applicable Law, upon each private sale, CoBank may purchase all or any of the Collateral being sold, free from any equity, right of redemption or other claim or demand, and may make payment therefor by endorsement and application (without recourse) of the Secured Obligations in lieu of cash as a credit on account of the purchase price for such Collateral;
(I)
To appoint a receiver for the properties and assets of any or all of the Grantors. Each Grantor hereby (w) consents to CoBank having the right to appoint a receiver, (x) to such appointment, (y) waives any objection such Grantor may have thereto, and (z) waives the right to have a bond or other security posted by CoBank or any other Person in connection therewith.
Notwithstanding anything to the contrary in this Agreement, (i) CoBank will not take any action pursuant to this Agreement that would constitute or result in any assignment or transfer of control of any License if such assignment or transfer of control would require under then existing Law (including the written rules, regulations and policies of the FCC or any PUC) the prior approval of the FCC or any PUC, without first obtaining such approval; and (ii) CoBank agrees that, unless CoBank elects to proceed under Section 9-620 of the Uniform Commercial Code following such Event of Default and neither any Grantor nor any other Person having standing to object thereto gives proper notice of its objection to such notice, there will be either a private or public sale of the Equity Interests pledged hereunder; and (iii) prior to the exercise of voting rights by the purchaser at any such sale, the prior consent of the FCC or any PUC will be obtained if required by Law.
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6.2
Application of Proceeds
(A)
All Proceeds collected by CoBank upon any sale, other disposition of or realization upon any of the Collateral, together with all other monies received by CoBank hereunder, shall be applied as set forth in Subsection 11(C) of the MLA.
(B)
Each Grantor shall remain liable to the extent of any deficiency between the amount of all Proceeds realized upon sale or other disposition of the Collateral pursuant to this Agreement which are applied in repayment of the Secured Obligations and the aggregate amount of the sums referred to in Section . Upon any sale of any Collateral hereunder by CoBank (whether by virtue of the power of sale herein granted, pursuant to judicial proceeding, or otherwise), the receipt of CoBank or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to CoBank or such officer or be answerable in any way for the misapplication thereof.
6.3
Collateral Accounts. Upon the occurrence and during the continuance of an Event of Default, CoBank shall have the right to cause to be established and maintained, at its principal office or such other location or locations as it may establish from time to time in its discretion, one or more accounts (collectively, “Collateral Accounts”) for the collection of cash Proceeds of the Collateral. Such Proceeds, when deposited, shall continue to constitute Collateral for the Secured Obligations and shall not constitute payment thereof until applied as herein provided. CoBank shall have sole dominion and control over all funds deposited in any Collateral Account, and such funds may be withdrawn therefrom only by CoBank. Upon the occurrence and during the continuance of an Event of Default, CoBank shall have the right to apply amounts held in the Collateral Accounts in payment of the Secured Obligations in the manner provided for in Section .
6.4
Grant of IP License. Each Grantor hereby grants to CoBank (subject to the terms of any underlying licenses) an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to any Grantor) to use, license or sublicense any Copyright Collateral, Patent Collateral, Trademark Collateral or Domain Name Collateral now owned or licensed or hereafter acquired or licensed by such Grantor, wherever the same may be located throughout the world, for such term or terms, on such conditions and in such manner as CoBank shall determine, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license or sublicense by CoBank shall be exercised, at the option of CoBank and only upon the occurrence and during the continuation of an Event of Default; provided that any license, sublicense or other transaction entered into by CoBank in accordance herewith shall be binding upon each applicable Grantor notwithstanding any subsequent cure of an Event of Default.
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6.5
Registration; Private Sales.
(A)
If, at any time after the occurrence and during the continuance of an Event of Default, any Grantor shall have received from CoBank a written request or requests that such Grantor cause any registration, qualification or compliance under any federal or state securities Law or Laws to be effected with respect to all or any part of such Equity Interests pledged hereunder, such Grantor will, as soon as practicable and at its expense, use commercially reasonable efforts to cause such registration to be effected and be kept effective and will use commercially reasonable efforts to cause such qualification and compliance to be effected and be kept effective as may be so requested and as would permit or facilitate the sale and distribution of such Equity Interests, including, registration under the Securities Act of 1933 (the “Securities Act”), appropriate qualifications under applicable “blue sky” or other state securities Laws and appropriate compliance with any other applicable requirements of Governmental Authorities; provided, that CoBank shall furnish to such Grantor such information regarding CoBank as such Grantor may reasonably request in writing and as shall be required in connection with any such registration, qualification or compliance. Such Grantor will cause CoBank to be kept advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to CoBank such number of prospectuses, offering circulars or other documents incident thereto as CoBank from time to time may request, and will indemnify CoBank and all others participating in the distribution of such Equity Interests against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to such Grantor by CoBank expressly for use therein.
(B)
Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities Laws as in effect from time to time, CoBank may be compelled, with respect to any sale of all or any part of the Equity Interests pledged hereunder conducted without registration or qualification under the Securities Act and such state securities Laws, to limit purchasers to any one or more Persons who will represent and agree, among other things, to acquire such Equity Interests for their own account, for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges that any such private sales may be made in such manner and under such circumstances as CoBank may deem reasonably necessary or advisable, including at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and agrees that CoBank shall have no obligation to conduct any public sales and no obligation to delay the sale of any Equity Interests pledged hereunder for the period of time necessary to permit its registration for public sale under the Securities Act and applicable state securities Laws, and shall not have any responsibility or liability as a result of its election so not to conduct any such public sales or delay the sale of any Equity Interests pledged hereunder, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after such registration. Each Grantor hereby waives any claims against CoBank arising by reason of the fact that the price at which any Equity Interests pledged hereunder may have been sold at any private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if CoBank accepts the first offer received and does not offer such Equity Interests to more than one offeree.
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(C)
Each Grantor agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to CoBank, that CoBank has no adequate remedy at law with respect to such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Grantors.
6.6
Grantors Remain Liable. Notwithstanding anything herein to the contrary, (A) each Grantor shall remain liable under all Contracts to which it is a party included within the Collateral (including all Investment Agreements) to perform all of its obligations thereunder to the same extent as if this Agreement had not been executed, (B) the exercise by CoBank of any of its rights or remedies hereunder shall not release any Grantor from any of its obligations under any of such Contracts, and (C) except as specifically provided for hereinbelow, CoBank shall not have any obligation or liability by reason of this Agreement under any of such Contracts, nor shall CoBank be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. This Agreement shall not in any way be deemed to obligate CoBank or any purchaser at a foreclosure sale under this Agreement to assume any of a Grantor’s obligations, duties or liabilities under any Investment Agreement, including any Grantor’s obligations, if any, to manage the business and affairs of the applicable partnership, joint venture, limited liability company or other issuer (collectively, the “Partner Obligations”), unless CoBank or purchaser otherwise agrees in writing to assume any or all of such Partner Obligations. In the event of foreclosure by CoBank hereunder, then except as provided in the preceding sentence, each applicable Grantor shall remain bound and obligated to perform its Partner Obligations and CoBank shall not be deemed to have assumed any Partner Obligations. In the event CoBank or any purchaser at a foreclosure sale elects to become a substitute partner or member in place of a Grantor, the party making such election shall adopt in writing such Investment Agreement and agree to be bound by the terms and provisions thereof; and subject to the execution of such written agreement, each Grantor hereby irrevocably consents in advance to the admission of CoBank or any such purchaser as a substitute partner or member to the extent of the Equity Interests pledged hereunder acquired pursuant to such sale, and agrees to execute any documents or instruments and take any other action as may be reasonably necessary or as may be reasonably requested in connection therewith. The powers, rights and remedies conferred on CoBank hereunder are solely to protect its interest and privilege in such Contracts, as Collateral, and shall not impose any duty upon it to exercise any such powers, rights or remedies.
6.7
Waivers. Each Grantor, to the greatest extent not prohibited by applicable Law, hereby (A) agrees that it will not invoke, claim or assert the benefit of any Law now or hereafter in effect (including any right to prior notice or judicial hearing in connection with CoBank’s possession, custody or disposition of any Collateral or any appraisal, valuation, stay, extension, moratorium or redemption law), or take or omit to take any other action, that would or could reasonably be expected to have the effect of delaying, impeding or preventing the exercise of any rights and remedies with respect to the Collateral, the absolute sale of any of the Collateral or the possession thereof by any purchaser at any sale thereof, and waives the benefit of all such Laws and further agrees that it will not hinder, delay or impede the execution of any power granted hereunder to CoBank, but that it will permit the execution of every such power as though no such laws were in effect, (B) waives all rights that it has or may have under any Law now existing or hereafter adopted to require CoBank to marshal any Collateral or other assets in favor of such Grantor or any other party or against or in payment of any or all of the Secured Obligations, and (C) waives all rights that it has or may have under any Law now existing or hereafter adopted to demand, presentment, protest, advertisement or notice of any kind (except notices expressly provided for herein).
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6.8
Restoration of Parties. In the event CoBank shall have proceeded to enforce any right or remedy under this Agreement, and such proceedings are discontinued or abandoned for any reason, then the Grantors and CoBank shall immediately be restored to their former positions and rights hereunder, and all rights, powers and remedies of CoBank shall continue as if no such proceeding had taken place.
ARTICLE VII
STANDARD OF CARE; FURTHER ASSURANCES
7.1
Standard of Care. Except for treatment of the Collateral in its possession in a manner substantially equivalent to that which CoBank accords its own property of a similar nature, and the accounting for monies actually received by it hereunder, CoBank shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to the Collateral. CoBank shall not be liable to any Grantor (A) for any loss or damage sustained by such Grantor, or (B) for any loss, damage, depreciation or other diminution in the value of any of the Collateral that may occur as a result of or in connection with or that is in any way related to any exercise by CoBank of any right or remedy under this Agreement, any failure to demand, collect or realize upon any of the Collateral or any delay in doing so, or any other act or failure to act on the part of CoBank, except to the extent that the same is caused by its own gross negligence or willful misconduct as determined by the final, non-appealable judgment of a court of competent jurisdiction (subject to the standard of care imposed upon CoBank in the immediately preceding sentence for Collateral in its possession).
7.2
Further Assurances; Attorney-in-Fact.
(A)
Each Grantor agrees that it will join with CoBank to file and refile under the Uniform Commercial Code, at the Grantors’ expense, such financing statements, continuation statements and other documents and instruments in such offices as CoBank may deem necessary or appropriate, and wherever required or permitted by Law, in order to perfect and preserve CoBank’s security interest in the Collateral, and hereby authorizes CoBank to file security agreements, financing statements and amendments thereto relating to all or any part of the Collateral (including authorization to describe the Collateral as “all personal property,” “all assets” or words of similar meaning) and agrees to do such further acts and things (including making any notice filings with state tax or revenue authorities required to be made by account creditors in order to enforce any Accounts in such state) and to execute and deliver to CoBank, and authorizes CoBank to file such additional conveyances, assignments, agreements and instruments as CoBank may require or deem advisable to perfect, establish, confirm and maintain the security interest and Lien provided for herein, to carry out the purposes of this Agreement or to further assure and confirm unto CoBank its rights, powers and remedies hereunder.
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(B)
To the extent permitted by applicable Law, each Grantor hereby irrevocably appoints CoBank its lawful attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor, CoBank or otherwise, and with full power of substitution in the premises (which power of attorney, being coupled with an interest, is irrevocable for so long as this Agreement shall be in effect), from time to time in CoBank’s discretion after the occurrence and during the continuance of an Event of Default to take any action and to execute any instruments that CoBank may deem reasonably necessary or advisable to accomplish the purpose of this Agreement, including:
(i)
to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for monies due and to become due under or with respect to any of the Collateral;
(ii)
to receive, endorse and collect any checks, drafts, instruments, chattel paper, electronic chattel paper and other orders for the payment of money made payable to such Grantor representing any interest, income, dividend, distribution or other amount payable with respect to any of the Collateral and to give full discharge for the same;
(iii)
to obtain, maintain and adjust any property or casualty insurance required to be maintained by such Grantor under Section and direct the payment of Proceeds thereof to CoBank;
(iv)
to pay or discharge taxes, Liens or other encumbrances levied or placed on or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by CoBank in its sole discretion, any such payments made by CoBank to become Secured Obligations of the Grantors to CoBank, due and payable immediately and without demand;
(v)
to file any claims or take any action or institute any proceedings that CoBank may deem reasonably necessary or advisable for the collection of any of the Collateral or otherwise to enforce the rights of CoBank with respect to any of the Collateral; and
(vi)
to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with any and all of the Collateral as fully and completely as though CoBank were the absolute owner of the Collateral for all purposes, and to do from time to time, at CoBank’s option and the Grantors’ expense, all other acts and things deemed reasonably necessary by CoBank to protect, preserve or realize upon the Collateral and to more completely carry out the purposes of this Agreement.
(C)
Each Grantor agrees that it will, at such Grantor’s own cost and expense, use its best efforts to cooperate with CoBank and assist in obtaining the approval of the FCC or any PUC for any action or transaction contemplated by this Agreement which is required by Law, and specifically, without limitation, upon request following the occurrence and continuation of any Event of Default, prepare, sign, deliver and/or file (or cause to be prepared, signed, delivered and/or filed) all relevant applications, passwords, certificates, instruments, post-transaction notices and other documents or information required to: (i) assign or transfer control of any License and take any other actions necessary or appropriate under applicable Law for approval of any sale or transfer of any of the Equity Interests issued by any Grantor or assets of any Grantor or any transfer of control over any License or (ii) to obtain any required consent from the FCC or any PUC for CoBank, through any receiver, trustee or otherwise, to operate the business of such Grantor pending the sale or other disposition of the Grantor or any License held by such Grantor.
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If any such Grantor fails to execute and deliver any such applications, certificates, instruments, agreements or other documents, then, in addition to any remedies that CoBank may have at law or in equity, the Grantors agree that on the order of any court or other forum of competent jurisdiction, the clerk of the court (or officer of any other such forum) which has jurisdiction may execute any such applications, certificates, instruments, agreements or other documents on behalf of such Grantor. Each Grantor acknowledges and agrees that each License is a unique asset which (or the control of which) may have to be transferred to a Person in order for CoBank to adequately realize the full amount of the Secured Obligations from the Collateral and that the breach of this Section by any Grantor would result in irreparable harm to CoBank for which monetary damages are not readily ascertainable and which might not adequately compensate CoBank. Therefore in addition to any remedy which CoBank may have at law or in equity, CoBank shall have the remedy of specific performance by the Grantors of the provisions of this Section , and each Grantor hereby waives, and agrees to waive, any claim or defense that CoBank would have an adequate remedy at Law for the breach by it of this Section and any requirement for posting of a bond or other certificate. In connection with taking any action pursuant to this Agreement (including determining whether an approval of the FCC or any applicable PUC is required in connection therewith), CoBank shall be entitled to rely on the advice of regulatory counsel experienced in giving such advice selected by CoBank (whether or not the advice rendered is ultimately determined to be accurate).
(D)
If an Event of Default shall have occurred and be continuing, each Grantor shall take any action which CoBank may reasonably request in order to transfer or assign, or both, to CoBank, or to such one or more third parties as CoBank may designate, or to a combination of the foregoing, any License held or utilized by such Grantor, subject to the prior approval of the FCC or any PUC, if required. Alternatively, CoBank is empowered, to the extent permitted by Applicable Law, to request the appointment of a receiver from any court of competent jurisdiction. Such receiver may be instructed by CoBank to seek from the FCC or the PUC consent to an involuntary transfer of control of any Grantor or assignment, or both, of each such License for the purpose of seeking a bona fide purchaser to whom control of assets used in the provision of Communications System related services will ultimately be transferred or assigned. Each Grantor hereby agrees to authorize such an involuntary transfer of control or assignment, or both, upon the request of the receiver so appointed and, if any Grantor shall refuse to authorize the transfer, its approval may be required by the court.
(E)
If any Grantor fails to perform any covenant or agreement contained in this Agreement after written request to do so by CoBank (provided that no such request shall be necessary at any time after the occurrence and during the continuance of an Event of Default), CoBank may itself perform, or cause the performance of, such covenant or agreement and may take any other action that it deems reasonably necessary and appropriate for the maintenance and preservation of the Collateral or its security interest therein, and the expenses so incurred in connection therewith shall be payable by the Grantors under Section.
35
ARTICLE VIII
MISCELLANEOUS
8.1
Indemnity and Expenses. The Grantors shall indemnify the Indemnitees and pay expenses in accordance with Sections 16 and 17 of the MLA.
8.2
No Waiver. The rights and remedies of CoBank expressly set forth in this Agreement and the other Loan Documents are cumulative and in addition to, and not exclusive of, all other rights and remedies available at law, in equity or otherwise. No failure or delay on the part of CoBank in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or be construed to be a waiver of any Potential Default or Event of Default. No course of dealing between the Grantors and CoBank or their agents or employees shall be effective to amend, modify or discharge any provision of this Agreement or any other Loan Document or to constitute a waiver of any Potential Default or Event of Default. No notice to or demand upon any Grantor in any case shall entitle such Grantor or any other Grantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of CoBank to exercise any right or remedy or take any other or further action in any circumstances without notice or demand.
8.3
Grantors’ Obligations Absolute. Each Grantor agrees that its obligations hereunder, and the security interest granted to and all rights, remedies and powers of CoBank hereunder, are irrevocable, absolute and unconditional and shall not be discharged, limited or otherwise affected by reason of any of the following, whether or not such Grantor has knowledge thereof:
(A)
any change in the time, manner or place of payment of, or in any other term of, any Secured Obligations, or any amendment, modification or supplement to, restatement of, or consent to any rescission or waiver of or departure from, any provisions of the Loan Agreement, any other Loan Document or any agreement or instrument delivered pursuant to any of the foregoing;
(B)
the invalidity or unenforceability of any Secured Obligations or any provisions of the Loan Agreement, any other Loan Document or any agreement or instrument delivered pursuant to any of the foregoing;
(C)
the addition or release of the Grantors hereunder or the taking, acceptance or release of any Secured Obligations or additional Collateral or other security therefor;
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(D)
any sale, exchange, release, substitution, compromise, nonperfection or other action or inaction with respect to any Collateral or other direct or indirect security for any Secured Obligations, or any discharge, modification, settlement, compromise or other action or inaction with respect to any Secured Obligations;
(E)
any agreement not to pursue or enforce or any failure to pursue or enforce (whether voluntarily or involuntarily as a result of operation of Law) any right or remedy with respect to any Secured Obligations or any Collateral or other security therefor, or any failure to create, protect, perfect, secure, insure, continue or maintain any Liens in any such Collateral or other security;
(F)
the exercise of any right or remedy available under the Loan Documents, at law, in equity or otherwise with respect to any Collateral or other security for any Secured Obligations, in any order and by any manner thereby permitted, including foreclosure on any such Collateral or other security by any manner of sale thereby permitted, whether or not every aspect of such sale is commercially reasonable;
(G)
any bankruptcy, reorganization, arrangement, liquidation, insolvency, dissolution, termination, reorganization or like change in the corporate structure or existence of any Grantor or any other Person directly or indirectly liable for any Secured Obligations;
(H)
any manner of application of any payments by or amounts received or collected from any person, by whomsoever paid and howsoever realized, whether in reduction of any Secured Obligations or any other obligations of the Grantors or any other Person directly or indirectly liable for any Secured Obligations, regardless of what Secured Obligations may remain unpaid after any such application; or
(I)
any other circumstance that might otherwise constitute a legal or equitable discharge of, or a defense, set-off or counterclaim available to, any Grantor or a surety or guarantor generally, other than the occurrence of the Termination Requirements.
8.4
Complete Agreement; Amendments, Waivers, etc. This Agreement represents the final agreement of the parties hereto with respect to the matters contained herein and may not be contradicted by evidence of prior or contemporaneous agreements, or subsequent oral agreements, between the parties. No amendment, modification, waiver, discharge or termination of any provision hereof, nor any consent to any departure by any Grantor from, any provision of this Agreement, shall be effective unless approved by CoBank and contained in a writing executed and delivered by CoBank and (in the case of amendments) the Grantors, and then the same shall be effective only in the specific instance and for the specific purpose for which given; provided that the Grantors may from time to time provide CoBank with updated Annexes hereto, which updated Annexes shall upon delivery be deemed to replace the then existing Annexes, and each such delivery shall constitute a representation by the Grantors of the accuracy and completeness of such updated Annexes to the extent the same is required with respect to such Annexes. Delivery of such updated Annexes shall not be deemed to waive any Potential Default or Event of Default relating thereto (if any) unless the sole Potential Default or Event of Default results from the failure of the Grantors to notify CoBank of an event or condition disclosed on such updated Annex and such event or condition is otherwise permitted under the Loan Documents. In the absence of the preparation and delivery of an updated Annex H reflecting such new Deposit Account, any description in any notice of any newly acquired or opened Deposit Account delivered by Borrower to CoBank pursuant to the Loan Agreement or otherwise shall be deemed incorporated by reference into Annex H.
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8.5
Continuing Security Interest; Term; Successors and Assigns; Assignment; Termination and Release; Survival. This Agreement shall create a continuing security interest in the Collateral and shall secure the payment and performance of all of the Secured Obligations as the same may arise and be outstanding at any time and from time to time from and after the date hereof, and shall (A) remain in full force and effect until the occurrence of the Termination Requirements, (B) be binding upon and enforceable against each Grantor and its successors and assigns (provided, however, that no Grantor may sell, assign or transfer any of its rights, interests, duties or obligations hereunder without the prior written consent of CoBank as provided in the Loan Agreement) and (C) inure to the benefit of and be enforceable by CoBank and its successors and assigns, subject to the limitations on assignment in the Loan Agreement. Upon any sale or other disposition by any Grantor of any Collateral in a transaction permitted hereunder or under or pursuant to the Loan Agreement, or any amendment or waiver thereof, or any other applicable Loan Document, the Lien and security interest created by this Agreement in and upon such Collateral shall be automatically released, and upon the satisfaction of all of the Termination Requirements, this Agreement and the Lien and security interest created hereby shall terminate; and in connection with any such release or termination, CoBank, at the request and expense of the applicable Grantor, will execute and deliver to such Grantor such documents and instruments evidencing such release or termination as such Grantor may reasonably request and will assign, transfer and deliver to such Grantor, without recourse and without representation or warranty, such of the Collateral as may then be in the possession of CoBank (or, in the case of any partial release of Collateral, such of the Collateral so being released as may be in its possession). All representations, warranties, covenants and agreements herein shall survive the execution and delivery of this Agreement and any amendment to this Agreement or joinder agreement to this Agreement and the Continuing Guaranty.
8.6
Notices. All notices and other communications provided for hereunder to CoBank shall be given in the manner and at the notice address provided in or pursuant to Section 15 of the MLA. All notices and other communications provided for hereunder to any Grantor shall be given in the manner provided in Section 15 of the MLA and in the care of the Borrower at the Borrower’s notice address provided in or pursuant to Section 15 of the MLA.
8.7
Additional Grantors. Each Grantor recognizes that the provisions of the Loan Agreement may require Persons that become Subsidiaries of any Grantor, and that are not already parties hereto, to execute and deliver a joinder agreement, in form and substance acceptable to CoBank in its sole discretion, whereupon each such Person shall become a Grantor hereunder with the same force and effect as if originally a Grantor hereunder on the date hereof, and agrees that its obligations hereunder shall not be discharged, limited or otherwise affected by reason of the same, or by reason of CoBank’s actions in effecting the same or in releasing any Grantor hereunder, in each case without the necessity of giving notice to or obtaining the consent of such Grantor or any other Grantor.
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8.8
Governing Law. Without giving effect to the principles of conflict of laws and except to the extent governed by federal law and except to the extent that the Uniform Commercial Code provides that the perfection of the security interest hereunder, or remedies hereunder, with respect to any particular Collateral, are governed by the Laws of a jurisdiction other than the State of Colorado, the Laws of the State of Colorado, without reference to choice of law doctrine, shall govern this Agreement and any other Loan Document for which Colorado is specified as the applicable law, and all disputes and matters between the parties to this Agreement, including all disputes and matters whatsoever arising under, in connection with or incident to the lending and/or leasing or other business relationship between the parties, and the rights and obligations of the parties to this Agreement or any other Loan Document by and between the parties for which Colorado is specified as the applicable law.
8.9
Severability. To the extent any provision of this Agreement is prohibited by or invalid under the applicable Law of any jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity and only in such jurisdiction, without prohibiting or invalidating such provision in any other jurisdiction or the remaining provisions of this Agreement in any jurisdiction.
8.10
Headings. The headings of the various sections, subsections and other subparts of this Agreement have been inserted for convenience only and shall not in any way affect the meaning or construction of any of the provisions hereof.
8.11
Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns, including any holder or owner of any of the Notes or the other Loan Documents. No Grantor may assign or transfer its rights or obligations hereunder without the prior written consent of CoBank. No notice to or demand on any Grantor shall entitle any Grantor to any other or further notice or demand in the same, similar or other circumstances.
8.12
Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original and shall be binding upon all parties and their respective permitted successors and assigns, and all of which taken together shall constitute one and the same agreement.
8.13
Effect of Amendment; No Novation. The amendment and restatement of the Prior Security Document pursuant to this Agreement shall be effective as of the Closing Date (as defined in the Fourth Supplement). All obligations and rights of the Grantors and CoBank arising out of or relating to the period commencing on the Closing Date shall be governed by the terms and provisions of this Agreement; the obligations of and rights of the Grantors and CoBank arising out of or relating to the period prior to the Closing Date shall continue to be governed by the Prior Security Document without giving effect to the amendment and restatements provided for herein. This Agreement shall not constitute a novation or termination of the Grantors’ obligations under the Prior Security Document or any other Loan Document executed or delivered in connection therewith, but shall constitute effective on the date hereof an amendment and restatement of the obligations and covenants of each Grantor under such Loan Documents (and each Grantor hereby reaffirms all such obligations and covenants, as hereby amended).
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first above written.
NUVERA COMMUNICATIONS, INC.
HUTCHINSON TELEPHONE COMPANY
PEOPLES TELEPHONE COMPANY
WESTERN TELEPHONE COMPANY
HUTCHINSON TELECOMMUNICATIONS, INC.
HUTCHINSON CELLULAR, INC.
SLEEPY EYE TELEPHONE COMPANY
TECH TRENDS, INC.
SCOTT-RICE TELEPHONE CO.,
each as a Grantor
By: /s/ Bill D. Otis
Bill D. Otis
President and Chief Executive Officer
[Signatures Continue on Following Page]
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[Signatures Continued from Previous Page.]
ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN:
COBANK, ACB
By: /s/ Jacqueline Bove__________
Jacqueline Bove
Managing Director
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ANNEX A
PLEDGED EQUITY INTERESTS
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Grantor |
Name of Issuer |
Type of Interests |
Certificate Number, if Applicable | No. of Shares/Units, if Applicable | Percentage of Outstanding Interests |
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Ann. A-1
ANNEX B
FILING LOCATIONS
| Grantor | Jurisdiction |
Ann. B-1
ANNEX C
LEGAL NAME, JURISDICTION OF ORGANIZATION, FEDERAL TAX IDENTIFICATION NUMBER, ORGANIZATIONAL IDENTIFICATION NUMBER, MAILING ADDRESS, LOCATIONS OF CHIEF EXECUTIVE OFFICES, RECORDS RELATING TO COLLATERAL, AND EQUIPMENT AND INVENTORY
[Borrower]
1.
Exact legal name:
2.
Jurisdiction of its incorporation or organization:
3.
Organizational identification number:
4.
Federal tax identification number:
5.
Mailing address:
6.
Chief executive office:
7.
Trade/fictitious or prior corporate names (last five years):
[Each Guarantor]
1.
Exact legal name:
2.
Jurisdiction of its incorporation or organization:
3.
Organizational identification number:
4.
Federal tax identification number:
5.
Mailing address:
6.
Chief executive office:
7.
Trade/fictitious or prior corporate names (last five years):
Ann. C-1
ANNEX D
COPYRIGHTS, COPYRIGHT LICENSES AND APPLICATIONS
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Ann. D-1
ANNEX E
PATENTS, PATENT LICENSES AND APPLICATIONS
| Grantor | Application or Registration No. | Country | Inventor | Issue or Filing Date |
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Ann. E-1
TRADEMARKS, TRADEMARK LICENSES AND APPLICATIONS
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Ann. G-1
ANNEX G
DOMAIN NAMES AND DOMAIN NAME LICENSES
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Ann. C-2
ANNEX H
DEPOSIT AND SECURITIES ACCOUNTS
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Ann. H-1
ANNEX I
COMMERCIAL TORT CLAIMS
Ann. I-1
ANNEX J
REAL PROPERTY
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Annex J-1